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Prohibits the Secretary of Defense from entering into, renewing, or extending contracts for software source code with persons that have specified connections to a ‘‘covered country.’’ Covered connections include ownership or material interest in AI research facilities in a covered country, allowing a covered country access that could enable reverse engineering of source code, or operating data centers in a covered country. The Secretary may grant a waiver if doing so is in the national security interest, and the prohibition applies only to contracts entered into, renewed, or extended within three years after enactment.
The bill strengthens protections for DoD source code to reduce espionage and reverse-engineering risks, but it restricts which firms can compete, potentially shrinking the vendor pool, raising costs, and creating compliance uncertainty.
DOD contractors, federal employees, and taxpayers: reduces the chance that defense-related source code and data are stored or processed in facilities/data centers in covered countries, lowering risks of espionage and reverse engineering of sensitive systems.
Federal acquisition officials and national-security decisionmakers: provides the Secretary an explicit waiver for exceptional cases so necessary contracts can proceed when doing so is in the U.S. national-security interest.
Companies with operations or affiliates in covered countries and their workers: could be barred from DOD source-code contracts for three years, cutting business opportunities, disrupting multi-year supplier planning and contracts, and risking job losses.
Department of Defense and taxpayers: the rule could narrow the pool of qualified vendors, reducing competition and potentially delaying procurement or increasing costs for the DoD.
Companies seeking DoD contracts: broad, Secretary-determined terms (like 'primary purpose' and 'material interest') create uncertainty about eligibility and compliance, raising legal and administrative burdens for vendors.
Introduced June 12, 2025 by Pat Fallon · Last progress June 12, 2025