The US Department of Defense (DoD) spent $439.4 billion on contracts for products and services in 2020. That’s billions of tax dollars awarded to hundreds, if not thousands of companies contributing to US national defense. To get involved in this lucrative industry, contractors must abide by Defense Federal Acquisition Regulations Supplement (DFARS) requirements, such as limiting offshore acquisitions to organizations located in DFARS-compliant countries. Read on to review the list of DFARS-compliant countries (2021) and the safeguards that organizations must demonstrate to secure DoD contracts.
DFARS Compliant Countries: What You Need to Know
Understanding what countries you can acquire materials and services for, for current and prospective DoD contracts, is a complex task. You need to account for three primary factors:
- What countries are currently included on the list of DFARS-compliant countries (2021)?
- What factors make countries eligible for inclusion on the DFARS list?
- Are there changes coming to the DFARS-compliant country list in the future?
Below, we’ll walk through these factors, along with other DFARS compliance considerations.
Current List of DFARS Compliant Countries (2021)
The list of DFARS compliant countries changes annually; here are the current inclusions:
- Czech Republic
- The Netherlands
- The UK
Note that changes to this document may be published, via official memo, throughout the year; you should establish a solid line of contact and be prepared to adjust—mid-contract if needed.
How Does a Country Qualify as DFARS Compliant?
A qualifying country is a nation that has a reciprocal defense procurement (RDP) memorandum of understanding or international agreement with the United States. Both countries must agree to remove barriers to purchasing goods, materials, or services performed by sources in the other.
Suppose a Contractor certifies in its contract that products offered to the DoD are qualifying country end products (even if containing parts from outside the qualifying country). In that case, the products must come from a qualifying country, or the contractor may choose to provide domestic products.
There are two primary requirements pertinent to DFARS Compliant Countries:
- Restriction on the Acquisition of Special Metals
- Safeguarding Covered Defense Information
Restriction on the Acquisition of Special Metals
The following must be true of a DoD contract in a DFARS-compliant country to maintain status:
- Alloys, single or multiple, must contain 50 percent of the named metals.
- Steel means an iron alloy that has between .02 and 2 percent carbon and may include other elements.
- Special metals provided under contract must be melted or produced within the United States. This restriction applies to:
- Missile and space systems
- Tanks or automotive items
- Weapon systems
Safeguarding Covered Defense Information
The following must also be true of any contractual elements involving the country:
- Manufacturing and handling abide by the protections for safeguarding Covered Defense Information (CDI) and reporting any incidents impacting its security.
- Also, the following functions for Covered Technical Information (CTI) are restricted:
- In addition, all contractors and subcontractors in the country and domestically must:
- Protect covered defense information stored on or transiting through covered contractor information systems.
- Report all cyber incidents within 72 hours of discovery.
As a contractor seeking a DoD contract, consider having your information systems evaluated for NIST 800-171 compliance to increase your chances for contract award.
Will The List of DFARS Compliant Countries (2021) Change?
At present, there are 27 DFAR Compliant Countries. The DoD is considering negotiations to enter a Reciprocal Defense Procurement agreement with the Ministry of National Defence for the Republic of Lithuania. The RDP would make Lithuania the 28th qualifying country, fostering rationalization, standardization, and interoperability of defense equipment with DoD contractors.
General language in an RDP states that both parties agree to the following procedures:
- Public notices of proposed purchases
- Availability of solicitations for proposed purchases
- Notice of each unsuccessful offeror
- Upon request, provide feedback to the unsuccessful offeror with the reasons they were not allowed to participate or denied a contract.
- Provisions to hear and review complaints in connection with the procurement process to ensure equitable and timely resolution
The RDP agreement offers the following benefits to a qualifying country on behalf of the US:
- Qualifying country end products are not subject to price differentials as required by the Buy American statute and the Balance of Payments Program.
- Chemical warfare protection clothing and special metal restrictions do not apply to products made in the qualifying country.
- Qualifying country end products and defense procurement components are not subject to customs, taxes, or duties.
The opportunity to work on DoD contracts with companies from Lithuania is on the horizon; now is a great time to explore your capacity to comply with the information security requirements for DFARS. Furthermore, these benefits suggest that stakeholders in other presently non-listed countries will likely seek out similar agreements soon—opportunities abound for all.
DFARS Compliance and Data Protection
A potentially new qualifying country, the Republic of Lithuania, is currently negotiating with the United States. Their pending addition to the 27 DFARS-compliant countries provides even more opportunity for contractors. First, however, contractors must ensure DFARS-compliant operations to reap the benefits.
Stay prepared, compliant, and ready to work with any qualifying country on the list of DFARS compliant countries (2021).
To optimize your compliance, contact RSI Security today!