On May 11, 2016, the Defense Security Service (DSS) released a new guide on mitigating and managing affiliate operations for entities bound by a Foreign Ownership, Control, or Influence (FOCI) mitigation agreement. The guide, titled Navigating the Affiliated Operations Plan: A Guide for Industry, outlines how companies can identify whether they are engaging in affiliated operations, submit an Affiliated Operations Plan (AOP), and ensure that they are properly mitigating potential risks. In compiling an AOP, a company is expected to describe all operations and services it intends to share with affiliates, as well as the potential risks of the collaboration and how those risks will be mitigated. The guide emphasizes that, unless there are special circumstances, an AOP must be provided before a company can start leveraging any affiliated operations.
Affiliated operations are cooperative administrative, commercial or operational endeavors between a mitigated company and an affiliate. Sharing human resources, disclosing financials and accounting data, permitting audits, engaging in business development, collaborating in marketing, sharing personnel, and sharing legal counsel are all considered affiliate operations that must be approved by DSS. According to DSS, such services can potentially permit an affiliate entity to exert undue influence and undermine the managerial and operational independence of a mitigated company. Another concern is the potential disclosure of confidential and operational security information as a result of access to a mitigated company's records. To alleviate the risk of a breach in security, the guide recommends transparency through close collaboration with DSS, the Government Security Committee (GSC) and Facility Security Officers (FSOs). The guide encourages GSC review of the type of information disclosed to the affiliate, as well as the method and format of the disclosure. To protect operational independence, the guide mandates that mitigated companies reserve the ultimate decision-making authority for themselves. A mitigated company should demonstrate that it is not dependent on an affiliate and has alternative means for obtaining a shared service.
To continue reading the content in this article on the firm's Government Contracts & International Trade blog, please click here to view the post.
Bass, Berry & Sims' Government Contracts & International Trade blog features news, commentary and insight on the demanding and ever-changing regulatory environment of contracting with federal, state and local governments, and international trade issues when conducting a global business.