Defense contractors would map supply chains and favor domestic sources

Starting January 1, 2027, military officials must stop issuing certain waivers unless a contractor submits and officials accept a detailed mitigation plan. This applies to waivers for covered materials under 10 U.S.C. 4872 and to prime contractors and subcontractors seeking those waivers. The plan must identify the noncompliant material’s source, document efforts to find compliant material, describe how the material will be removed, and set a firm completion schedule. A contractor’s failure to qualify a domestic source usually will not show that compliant material was unavailable, unless the contractor is actively and adequately funding efforts to qualify one. Officials may take contractual action and refer possible fraud or knowing noncompliance for investigation. The waiver limits begin January 1, 2027. The Secretary must provide a remedies list within 180 days of July 20, 2026.

The Secretary must develop guidance and propose regulations requiring covered contractors to trace supply chains, screen suppliers, report serious risks, and fix identified problems. The requirements would cover prime contractors and subcontractors at every tier for Department of War acquisitions tied to national security, as determined by the Secretary. Contractors would trace components, software, equipment, and materials back to raw materials and screen suppliers for financial, foreign-control, and manufacturing risks. Proposed rules would generally prohibit covered materials from unreliable foreign suppliers, subject to the order’s exceptions for certain U.S.-supported projects and transactions. Rules must avoid undue burdens on small businesses, new defense companies, and nontraditional defense companies, and must follow existing sourcing laws. Guidance is due within 180 days of July 20, 2026. Implementing regulations are due within 90 days after the guidance is completed.

The Secretary must begin regulatory action requiring contractors to qualify and use alternative sources when unreliable foreign suppliers are in covered supply chains. This applies to Department of War acquisitions that the Secretary identifies as supporting, affecting, or relating to national security. An alternative source is not required when none is available or when using one would conflict with law, safety, mission needs, or existing contract terms. Failure to qualify an alternative source may support suspending or ending task orders, declining contract options, or terminating contracts. The order also directs a strategy for faster source testing and qualification, including new software, testing procedures, and qualification methods. Regulatory action must begin within 180 days of July 20, 2026. The faster-qualification strategy is due within 90 days of that date.

The Secretary must send progress reports to the President’s national security adviser every six months. Reports must cover waiver use, accepted mitigation plans, contractor progress, and implementation of the order’s supply-chain regulations. A classified attachment may be included when the Secretary decides national security requires it. Implementation remains subject to existing law and available appropriations. Reports begin six months after July 20, 2026, and continue every six months through January 1, 2028.