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DEFENSE AND OTHER GOVERNMENT CONTRACTSQ: What are the two categories of restrictions on foreign participation in government procurement?A: Restrictions on procurement from foreign nationals or U.S. entities controlled by foreign nationals or governments, and restrictions on procurement of supplies and materials made in foreign countries. Q: What are the restrictions on companies controlled by foreign entities? A: Neither the Department of Energy (DOE) nor the Department of Defense (DOD) can contract for a national security program with a company "controlled" by a foreign government if the performance of that contract would require access to classified, top secret or special access program (SAP) information. Q: What does "controlled by" a foreign government mean? A: An entity is controlled by a foreign government when that government has the power, either directly or indirectly, to exercise influence over the election of a majority of the board of directors or other controlling body. Q: Does the foreign government or the home country of the foreign entity make a difference? A: Yes, if the foreign government is one that supports international terrorism and has at least a 5% interest in the firm's securities or owns at least 10% of the firm's assets, the agency that awards the contract (DOD or DOE) must submit a report to Congress if it waives the prohibition based on national security issues. Q: If DOD or DOE waives any of these prohibitions, does Congress keep track of these companies and contracts? A: Yes, Congress requires both DOD and DOE to maintain a database of information concerning any companies controlled by "foreign persons" that they contract with. Q: Are there any provisions that require DOD and/or DOE to give preference to American corporations over foreign competitors? A: Yes, both the Bayh Amendment and the Buy American Act express preferences for domestic firms. Q: What does the Bayh Amendment require? A: The Bayh Amendment prohibits DOD from spending funds Congress appropriates for military research and development contracts with any foreign corporation, organization, person or other entity when an equally competent American contractor is willing to do the work at a lower cost. Q: What does the Buy American Act do? A: The Buy American Act generally prohibits government contractors from procuring foreign items. Unmanufactured articles must be mined or produced in the U.S., and manufactured articles must be domestically manufactured from components and material that are substantially produced or manufactured in the U.S. Q: Are there any exceptions to these general prohibitions? A: Yes, the restrictions do not apply when:
A: Yes, the Berry Amendment prohibits the use of funds Congress appropriates to DOD for procurement of food, clothing, various fabrics, hand or measuring tools, and specialty metals whose components or materials come from foreign countries. Q: What other restrictions does the U.S. government place on foreign investment in government contracting? A: The National Industrial Security Program applies to all government contractors that perform contracts which require access to classified information by the contractor or its employees. The program's operating manual (NISPOM) puts more strenuous restrictions on acquisitions, mergers or takeovers by any organization having foreign ownership, control or influence (FOCI). Q: Is there any way to mitigate FOCI concerns? A: Yes, several.
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