Foreign-Owned Contractors, FOCI Mitigation, and Where $43 Billion in Federal Work Really Goes

For many federal contractors, “foreign-owned” still sounds like a disqualifying label. The reality is more nuanced. Recent data from USASpending indicates that in 2024 the U.S. government obligated roughly US$43.1 billion in contracts to foreign suppliers, against total contract obligations of about US$755 billion. That single data point forces a more careful look at where foreign-linked entities fit in the procurement ecosystem, and how national security risks are managed around them.

The starting point is simple but often overlooked: there is no blanket prohibition on foreign suppliers doing business with the federal government. The Federal Acquisition Regulation, particularly its foreign acquisition rules, implements domestic preference and trade-agreement policies largely through evaluation preferences and sourcing rules rather than categorical bans, while layering on specific statutory bars in narrow situations. Within that framework, foreign suppliers can and do compete for unclassified work, especially where performance occurs overseas or the industrial base is global by design.

Classified work is different. Under the National Industrial Security Program, a company that needs access to classified information must hold a facility security clearance, and to be eligible it must be organized under U.S. law and located in the United States. When a foreign parent establishes a U.S. subsidiary to pursue classified contracts, that entity must show that it is sufficiently free from foreign ownership, control, or influence—FOCI in security shorthand—or that any such influence has been acceptably mitigated. (Fed Contract Pros™) FOCI mitigation is not a single form or checkbox but a spectrum of instruments. At the low end, where foreign interests hold a minority stake without effective control, the government may accept mechanisms such as security control agreements that wall off classified programs while preserving basic investor rights. As foreign ownership and voting control increase, mitigation shifts toward more intrusive structures such as special security agreements, or proxy and voting trust arrangements in which cleared U.S. citizen directors or trustees exercise independent governance authority while the foreign owner’s role approaches that of an economic beneficiary rather than an active governor. (Fed Contract Pros™)

Seen through that lens, the US$43.1 billion figure is less surprising. Much of this work likely involves unclassified products and services, or classified work performed by U.S.-organized, FOCI-mitigated subsidiaries where the government has concluded that mission needs and alliance relationships justify engaging foreign-linked entities. The United States is buying from a global industrial base, but doing so through a security architecture that deliberately separates national-security decision-making from foreign commercial leverage.

For foreign companies trying to decide whether and how to enter this space, FedContractPros has already laid important groundwork. Our article “Navigating the U.S. Federal Government Market: What Foreign Companies Need to Know” walks through the core issues: understanding the FAR framework, registering in SAM, structuring teaming and subcontracting relationships with U.S. partners, and meeting compliance and reporting obligations, including anti-corruption, cybersecurity, and trade-agreement requirements. (Fed Contract Pros™) That piece is deliberately written as a first roadmap for non-U.S. firms that see the federal market as a strategic expansion rather than a one-off experiment.

We then go deeper in our book Winning Federal Contracts: The Ultimate Playbook for U.S. and International Businesses, which is paired with the free G.R.I.D.S. Federal Contracting Planner Tool. (Fed Contract Pros™) The book is designed for both U.S. and foreign enterprises and explains, in a structured way, how to move from basic education about the market to building the infrastructure, relationships, proposals, and execution capabilities needed to compete credibly. For international companies, the combination is particularly valuable: the text demystifies rules on foreign ownership, security, and eligibility, while the planner translates those concepts into concrete tasks and checkpoints that can be embedded in global compliance and governance systems.

The headline, then, is that “foreign-owned” does not mean “shut out.” It means operating within a layered regime of domestic preference rules, sanctions and export controls, and FOCI mitigation tools intended to reconcile an international industrial base with U.S. national security interests. For federal contractors—U.S. and non-U.S. alike—understanding where that US$43.1 billion in foreign-directed work fits into the broader contracting landscape is less about outrage and more about strategy. The role of FedContractPros, through our blog series and Winning Federal Contracts, is to equip both domestic and international firms with the knowledge and tools to make those strategic choices with eyes open.

Disclaimer: This blog post is for informational purposes only and does not constitute legal, financial, or professional advice. It does not create an attorney–client relationship. Contractors should consult qualified counsel or other appropriate professionals regarding their specific circumstances.