Overview
- The Defense Department is on a 30‑day clock to identify underperforming contractors for critical weapons, supplies, and equipment, with initial designations expected in early February.
- Once notified, contractors will have 15 days to submit a board‑approved remediation plan detailing fixes to delivery, capacity, and investment shortcomings.
- Within 60 days, new contract clauses must begin to prohibit buybacks and dividends during underperformance, link executive incentives to on‑time delivery and output, and allow temporary caps on base salaries for underperforming firms.
- If remediation is deemed insufficient, the secretary may deploy Defense Production Act authorities, FAR/DFARS enforcement, and pause advocacy in Foreign Military Sales or Direct Commercial Sales, while the SEC chair is asked to consider limiting Rule 10b‑18 buyback safe‑harbor access.
- Key thresholds and definitions—such as what constitutes underperformance or insufficient production speed—remain unsettled, prompting contractors to conduct rapid performance reviews, prepare remediation playbooks, and tighten supplier oversight as capital‑return practices draw scrutiny.