New DIU Program Creates Pathway For Nontraditional Contractors To Obtain Facility Clearances

Key Takeaways

• CLASS ACT may provide an earlier pathway into the classified defense market. Traditionally, a company needs a classified requirement and sponsorship before the Defense Counterintelligence and Security Agency will process it for a facility clearance. CLASS ACT is intended to allow selected nontraditional contractors to begin that process earlier.
• The initial opportunity is targeted. DIU’s first technology topic focuses on sensors and effectors for countering unmanned systems in maritime environments, while a separate pathway targets private capital firms investing in relevant technologies. Responses to both are due October 13, 2026.
• Participation could lead to more than a clearance. DIU may award prototype Other Transaction Agreements (OTAs) to selected participants, and successful prototypes may qualify for follow-on production awards without additional competitive procedures.
• Companies should evaluate their security posture before applying. An FCL can open access to classified opportunities, but it also brings continuing obligations involving ownership, management personnel, foreign influence, information security and compliance with the National Industrial Security Program.

The Department of War’s (DOW) Defense Innovation Unit (DIU) recently launched a new pilot program designed to address one of the longstanding barriers facing commercial companies seeking to enter the classified defense market: obtaining a facility security clearance before they have a specific classified contract to perform.

On September 24, DIU opened the Classified Access to Address Critical Technology (CLASS ACT) program, a 36-month pilot intended to expand the number of nontraditional defense contractors capable of competing for classified work. Under the program, selected companies can be sponsored for a Top Secret facility clearance (FCL) before they are tied to a specific classified contracting requirement. The program is part of DIU’s broader effort to reduce structural barriers that can prevent commercial technology companies from transitioning into defense programs.

Addressing the Facility Clearance “Catch-22”

For commercial technology companies, especially those that have historically operated outside the traditional defense industrial base, access to classified work can present a difficult sequencing problem. Companies generally cannot access classified information simply because they want to pursue classified government work. The Defense Counterintelligence and Security Agency grants an FCL after determining that an entity has a legitimate need for access to classified information and after reviewing, among other things, the company’s ownership; business structure; key management personnel; and potential foreign ownership, control or influence (FOCI).

That framework can create a practical “catch-22” for newer defense technology companies. A company may need access to classified threat information, mission requirements or operational data to understand what the government needs and demonstrate that its technology can address those needs. At the same time, it may be difficult to obtain the necessary facility clearance until a classified requirement already exists.

That dynamic can favor incumbent defense contractors that already have cleared facilities, cleared personnel and established security infrastructure. Commercial companies entering the defense market, by contrast, may have a promising technology but little ability to access the classified information necessary to refine or demonstrate that technology for government use.

CLASS ACT is designed to narrow that gap. DIU states that the program is intended to expand the pool of Top Secret-cleared nontraditional entities available to DOW and allow companies to better understand classified operational challenges so they can adapt commercial technologies to government requirements.

Part of a Broader Effort to Expand Commercial Participation

CLASS ACT sits within DIU’s broader Bridge Program, which focuses on barriers that can prevent commercial technology companies from moving from successful demonstrations into sustained defense programs. DIU has identified challenges involving access to classified facilities, testing infrastructure, technology accreditation, security requirements and other government processes that may be unfamiliar to companies that primarily serve commercial customers.

The CLASS ACT pilot reflects a broader policy goal of expanding the pool of companies able to support classified defense missions rather than relying only on contractors that already possess the necessary security infrastructure.

That effort may be particularly significant for emerging technology sectors in which the most advanced commercial capabilities are increasingly developed outside the traditional defense industrial base. By helping qualifying companies obtain clearances earlier, the government may be able to expose those companies to classified mission problems sooner and create additional pathways for commercial technologies to transition into operational use.

Who Can Participate in the CLASS ACT Program?

The first CLASS ACT technology topic is relatively narrow. DIU is seeking companies offering sensors or effectors relevant to countering unmanned systems in maritime environments.

Applicants must satisfy a number of eligibility requirements, including but not limited to:

• Having no current or previously held FCL
• Qualifying as a nontraditional defense contractor
• Offering a sensor or effector relevant to the stated counter-unmanned-system mission
• Having technology at or above Technology Readiness Level 7
• Having raised at least $10 million in equity financing
• Having at least $2 million in booked annual revenue
• Not being backed by adversarial capital
• Having U.S.-citizen key management personnel

DIU also established a separate CLASS ACT pathway for qualifying private capital firms with experience investing in technologies relevant to the same mission area. According to DIU, that track seeks to align private capital with classified priorities, so that investors can serve as a financial bridge for promising companies during the roughly two-year gap before acquisition funding becomes available. Eligible firms must have at least $100 million in available capital from non-adversarial sources and an average investment size of at least $5 million in companies that enable U.S. national security.

What Are the Compliance Obligations for Maintaining a Facility Clearance?

For eligible companies, CLASS ACT could provide an important opportunity to overcome a barrier that has historically made entry into the classified defense market difficult. But companies should consider the long-term compliance implications of obtaining an FCL, not simply the potential business opportunity.

Obtaining and maintaining an FCL brings continuing compliance obligations under the National Industrial Security Program. Those obligations may affect corporate governance, ownership structures, investment activity, key management personnel and internal security procedures. Companies with foreign investors, foreign directors, overseas affiliates or other international ties should pay particular attention to potential FOCI issues.

Companies should also assess whether they have the internal resources necessary to support a cleared environment. Depending on the company’s activities, this can include establishing security policies, appointing security personnel, maintaining required records, training employees and implementing procedures governing access to classified information.

For venture-backed technology companies, those requirements may also affect future financing or investment decisions. A company that obtains an FCL may need to consider how future foreign investment, board composition or changes in ownership could affect its clearance eligibility.

What CLASS ACT Could Mean for the Future of Defense Contracting?

The initial CLASS ACT topics are relatively narrow, but the pilot may extend well beyond counter-unmanned-system technologies. DIU has indicated that the 36-month program will periodically introduce additional priority topic areas. If the pilot succeeds, it could provide a repeatable mechanism for bringing commercial technology companies into classified defense programs earlier in the acquisition process and expanding the pool of cleared companies available to DOW components.

For nontraditional contractors interested in classified work, the program is worth watching closely. Companies should consider whether future CLASS ACT topics align with their technologies and, before applying, evaluate their ownership structures, financing arrangements, management personnel and readiness to comply with the obligations that come with an FCL.