Will DCSA Interpret the Newly Codified NISPOM to Exclude National Security and Defense Entrepreneurs?

Published: June 6, 2023

Intelligence and defense contractors co-exist in a common national security sector of the American and global economies. But that marketplace is bounded and defined by dual systems of security: personnel and industrial. It is a business and legal environment requiring advice and assistance across many practice areas: personnel and industrial security, corporate restructuring, privacy and data security, political law, global ethics and compliance, Executive Branch and congressional investigations, and white-collar criminal defense.

In all these areas of law, the fundamentals of corporate organization are critical to the success of the federal and private sector partnership in advancing national defense.

It is the policy of the United States Government to “provide maximum practicable opportunities in its acquisitions to small business…concerns. Such concerns must also have the maximum practicable opportunity to participate as subcontractors in the contracts awarded by any executive agency….” Federal Acquisition Regulation, Part 19.201. Moreover, the Small Business Administration (SBA) and the Executive Branch itself are likewise concerned with affording “an equitable opportunity to compete for all contracts that they can perform to the extent consistent with the Government’s interest.”

However, the smaller solo-incorporated consulting firms engaged in defense work will find themselves under scrutiny from a Defense Counterintelligence and Security Agency (“DCSA”) inappropriately deciding that small businesses are holding personnel clearances for their subcontracted personnel in violation of the recent 2021 NISPOM amendment, codified in the Code of Federal Regulations under Part 32, Section 117.

As such, the prudent small business executive needs to ask whether the revenant provisions now at 32 C.F.R.

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