Lobbying push to nix Pentagon defense contractor share buyback ban

Lobbying to lift a proposed ban on some defense contractors buying back their own stock is heating up as the House of Representatives begins passing legislation this week.

The ban, a version of which is included in the Senate’s version of the National Defense Authorization Act for fiscal year 2027, was proposed as a proposal. change That’s something the House Rules Committee should consider when it debates the legislation Monday night.

If the bill is included in final legislation, it could upend the way the Pentagon does business with tens of thousands of contractors. Boeing’s, LockheedMartin And Northrop Grumman.

Rep. Chris Deluzio, D-Pa. and John Garamendi, D-Calif., are proposing changes in the House, which is likely to vote on the NDAA later this week.

Ahead of the rules committee’s meeting, industry groups led by the Chamber of Commerce sent a letter to the committee urging it to reject the change. Signatories include the Chamber, the Aerospace Industries Association and the Business Roundtable.

The ban on buybacks and paying dividends “raises serious concerns about the unprecedented expansion of the federal government’s role in constraining statutory corporate governance and capital allocation decisions made by businesses,” the groups wrote in the letter shared with CNBC.

“Prohibiting covered defense contractors from making statutory dividends, stock buybacks, and other capital distributions unless they receive exemptions from the DoW sets a troubling precedent in which Washington effectively dictates how businesses manage capital allocation decisions, which have traditionally remained the responsibility of corporate leaders and shareholders,” the letter said.

The amendment being considered in Parliament would ban the Department of Defense from contracting with a company unless the contractor agrees not to buy its own shares. The ban may be lifted at the Pentagon’s discretion.

This is similar to the provision that was bipartisanly added to the bill in the Senate’s version of the NDAA, which also prohibits contractors from paying dividends. Both seek to codify President Donald Trump’s executive order to implement the ban, and including the provision in the Senate Armed Services Committee-approved bill greatly increases its chances of becoming law.

Supporters say the provision is intended to force contractors to deliver before being paid. Critics of defense contracting have long argued that companies are deceiving the federal government with cost overruns and delayed products.

Sen. Elizabeth Warren, D-Mass., the Senate incumbent, argued to CNBC earlier this month that it was intended to “bring a small amount of discipline to defense contractors who have been running amok for years.”

Industry groups are pushing back hard against the measure, warning it would be counterproductive if approved.

“Creating a framework that prohibits companies from making ordinary capital allocation decisions unless they receive waivers from the government sends the opposite signal and risks discouraging the kind of innovative and non-traditional market participants that policymakers are actively trying to attract,” the letter said. The statement was included.

Deluzio and Garamendi’s amendment is one of more than 1,300 proposed before the House Rules Committee.