The U.S. government contracts market is the largest and most sophisticated public procurement system in the world, with annual spending exceeding hundreds of billions of dollars across defense, civilian agencies, infrastructure, IT, healthcare, and professional services. For foreign companies, the market offers substantial opportunity — but it also presents unique legal, regulatory, and practical challenges that differ significantly from commercial contracting or public procurement regimes in other countries.

This article provides an overview of the key issues foreign companies should understand before pursuing contracts with the U.S. government.

Eligibility: Can Foreign Companies Contract with the U.S. Government?

As a general matter, foreign-owned companies are not categorically barred from contracting with the U.S. government. Many federal agencies routinely award contracts to companies with foreign parents or operations. However, eligibility depends on several factors, including:

• Country of origin of the company and its products or services
• Nature of the procurement (defense vs. civilian; supply vs. services)
• National security considerations
• Statutory and regulatory restrictions, including domestic preference laws and trade agreements

In practice, foreign companies often enter the market through:

• A U.S. subsidiary organized under U.S. law
• A joint venture or teaming arrangement with a U.S. contractor
• Acting as a subcontractor to a prime contractor

Each structure carries different compliance obligations and risk profiles.

Domestic Preference Laws and Trade Agreements

1. Buy American and Trade Agreements Act

U.S. procurement is governed by multiple domestic preference regimes — most notably:

• The Buy American Act (BAA), which favors U.S.-made end products and construction materials
• The Trade Agreements Act (TAA), which permits procurement of products from designated countries under qualifying trade agreements

Foreign companies must carefully analyze:

• Whether a procurement is subject to the BAA or the TAA
• Whether their country qualifies as a TAA-designated country
• How the government defines the country of origin for their products
• Their products supply chain

Noncompliance can result in bid rejection, contract termination, negative past performance reviews, suspension/debarment, or even False Claims Act exposure.

2. Executive Orders and Policy Shifts

Domestic preference rules are politically sensitive and subject to change through executive action. Foreign companies must stay alert to evolving interpretations, waiver policies, and enforcement priorities.

National Security and Foreign Ownership Concerns

1. Foreign Ownership, Control, or Influence (FOCI)

For defense and sensitive civilian contracts, foreign ownership can trigger scrutiny under FOCI rules. Companies that will access classified information or perform sensitive work may need to:

• Mitigate foreign ownership through proxy agreements, voting trusts, or special security agreements
• Undergo extensive security reviews
• Limit access to certain programs or data

2. CFIUS Considerations

Foreign investment in U.S. government contractors may also implicate review by the Committee on Foreign Investment in the United States (CFIUS). Transactions that provide access to sensitive technologies, data, or infrastructure can be delayed, conditioned, or blocked. Early assessment of CFIUS risk is critical when structuring market entry.

Compliance with the Federal Acquisition Regulation (FAR)

The FAR governs nearly every aspect of U.S. government contracting. For foreign companies, the FAR can be unfamiliar and unforgiving. Key compliance areas include:

• Representations and certifications, many of which are made under penalty of law
• Cost accounting and pricing rules, especially for cost-reimbursement contracts
• Mandatory disclosure obligations for certain violations
• Ethics and compliance program requirements

Misunderstanding FAR obligations — as well as agency-specific FAR supplements — is one of the most common pitfalls for new entrants to the market.

1. False Claims Act (FCA) Risk

The FCA is one of the U.S. government’s most powerful enforcement tools. Liability can arise not only from billing misconduct, but also from:

• Noncompliance with material contract requirements
• Misrepresentations in proposals or certifications
• Failure to comply with domestic sourcing or cybersecurity requirements

Cases are frequently driven by whistleblowers, as there are financial incentives for qui tam referral plaintiffs, and FCA damages can be trebled. Foreign companies should generally implement robust compliance systems before submitting bids — not after award.

2. Cybersecurity and Data Protection Obligations

Many U.S. government contracts impose strict cybersecurity and data-handling requirements, including:

• Compliance with government-specific security frameworks
• Restrictions on foreign access to certain data
• Flow-down obligations to subcontractors and affiliates

Failure to meet these requirements can lead to breach findings, suspension, or debarment.

3. Suspension, Debarment, and Responsibility Determinations

To receive a federal contract, a company must be deemed “responsible.” Past performance, integrity, compliance history, and internal controls all factor into this determination.

Foreign companies should be aware that:

• Responsibility determinations are discretionary and highly fact-specific
• Compliance failures — anywhere in the corporate family — can affect eligibility
• Suspension or debarment can be imposed based on conduct that occurred outside the United States

Proactive engagement and transparency are often critical when issues arise.

4. Practical Market Entry Strategies

Foreign companies seeking to enter the U.S. government market often benefit from a phased approach:

• Start as a subcontractor to gain experience with FAR compliance and develop past performance
• Partner with experienced U.S. contractors through teaming agreements
• Establish a U.S. presence to streamline contracting and compliance
• Invest early in compliance infrastructure, including training and internal controls

Success in this market is rarely immediate, but it can be durable and lucrative for companies that navigate the rules effectively.

Conclusion

The U.S. government contracts market offers significant opportunity for foreign companies — but it is not a market that rewards casual entry. Domestic preference laws, national security concerns, complex regulations, and aggressive enforcement make careful planning essential.

Foreign companies that invest early in legal strategy, compliance systems, and informed market entry structures are best positioned to compete successfully and sustainably in this highly regulated environment.

If you have questions about entering the U.S. government contracts market or structuring foreign participation in federal procurements, please do not hesitate to contact Aron Beezley or Nathaniel Greeson.