Government to Block Shady Semiconductors in Defense Contracts
Published Date: 2/17/2026
Proposed Rule
Summary
Starting December 23, 2027, federal agencies like the DoD, NASA, and others won’t be allowed to buy certain semiconductor products or services that don’t meet new rules. This change affects companies selling tech parts to the government and aims to boost national security. If you’re involved, get ready to adjust your contracts and plans before the deadline, and don’t forget to share your thoughts by April 20, 2026!
Analyzed Economic Effects
6 provisions identified: 2 benefits, 3 costs, 1 mixed.
Contractors must check and certify chips
If you sell electronic parts, products, or services to the federal government, you must perform a reasonable inquiry before you submit an offer and certify you will not provide covered semiconductor products or services. Offerors must also disclose any known covered semiconductors in their offers and prime contractors must flow the prohibition clause into subcontracts (FAR 52.240-XX and FAR 52.240-YY). These requirements apply to contractors and subcontractors and the certification requirement applies to both primes and subcontractors.
Broad prohibition affects many government suppliers
Beginning December 23, 2027, federal agencies are prohibited from procuring electronic products or services that include covered semiconductor products or services, and from acquiring electronic products for use in critical systems that use such covered semiconductors. The prohibition applies to all acquisitions, including micro-purchases and commercial IT and telecommunications services, with a limited exception for commercial products or services with no alternative until December 23, 2028.
Paperwork and compliance costs quantified
The rule adds a new information collection and the Regulatory Impact Analysis estimates total public costs of about $1,798 million (undiscounted) over 10 years and total public and Government net present value costs of about $1,859 million. Year 1 public costs are estimated at $530 million, with later years lower.
Fast 72-hour reporting and legal safe harbor
On or after December 23, 2027, contractors must report in writing within 72 hours if they identify or suspect a covered semiconductor product or service in items delivered to the Government. If a contractor or lower-tier supplier provides timely disclosure, they are protected from civil liability and will not automatically be found not responsible, provided they follow the rule's documentation and removal efforts.
Temporary waivers can allow continued sales
Agency heads may waive the prohibition for up to renewable two-year periods if, after consultation with the Secretary of Commerce and other national security officials, no compliant product is available at U.S. market prices or the waiver will not compromise critical national security interests. The Secretary of Defense and the Director of National Intelligence also have waiver authorities for critical national security interests.
Commerce lists and disclosures boost buyer visibility
The Department of Commerce will host a list of entities determined to be covered and may host a list of organizations that certify their products or services do not contain prohibited semiconductors; contractors may reasonably rely on those Commerce certifications. Contractors are also required to disclose inclusion of covered semiconductors to non‑Federal customers, which increases transparency for non‑Federal buyers.
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Key Dates
Department and Agencies
Related Federal Register Documents
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2026-20126, Submission for OMB Review; Certain Federal Acquisition Regulation Part 28 Requirements
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