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February 24, 2015

By: Chris Griner, Shannon Reaves

The U.S. Department of Defense has released new guidance for the approval of national interest determinations ("NID"). Foreign-controlled companies holding facility security clearances and operating under special security agreements ("SSA") must obtain NIDs to perform on contracts that require access to proscribed information. An NID requires a determination by the government that the contractor’s access to proscribed information is consistent with the national security interests of the United States. Historically, NIDs have been so time-consuming that some companies prefer to forego the advantages of SSAs (e.g., shareholder representation) and pursue proxy agreements, which do not require NIDs, but also do not permit the level of shareholder involvement that SSAs allow. The new policy, effective as of Feb. 11, 2015, gives the DOD Defense Security Service ("DSS") more control of the NID process. DTM 15-002 appears to be a move in the right direction, as discussed below, though it may not fully resolve the issues that have plagued the NID process.

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