Foreign ownership, control or influence (FOCI): A Comprehensive Guide

I. Introduction

What Is Foreign ownership, control or influence (FOCI), and Why Does It Matter?

• Purpose:

  Foreign ownership, control or influence (FOCI) refers to the potential risks that arise when a foreign entity has ownership or control over a company that is engaged in government contracting. This evaluation is crucial for determining whether such ownership could compromise national security or sensitive information, and bidders must submit documentation to demonstrate compliance with security requirements.

• Context:

  In Canadian government contracting, understanding FOCI is essential for departments such as CanadaBuys and Public Services and Procurement Canada to ensure that foreign interests do not undermine national security or procurement integrity.

• Overview:

  This guide breaks down the core elements of FOCI, explains its role in meeting security policies issued by the Treasury Board of Canada Secretariat and highlights how modern tools like AI-driven data analytics streamline risk assessments.

II. Definition

A. Clear and Concise Definition

• What it is:

  Foreign ownership, control or influence (FOCI) refers to the potential risks that arise when a foreign entity has ownership or control over a company that is engaged in government contracting. This evaluation is crucial for determining whether such ownership could compromise national security or sensitive information, and bidders must submit documentation to demonstrate compliance with security requirements.

• Key Terms:FOCI, national security, security plan and ownership declaration.

B. Breakdown of Key Components

1. Ownership assessment:Evaluation of equity structure, identifying foreign shareholders and their level of control to determine potential risks.

2. Security plan validation:Review of mitigation measures such as internal policies and information protection protocols required by the Treasury Board Policy on Government Security.

3. Mitigation agreements:Formal documents such as proxy agreements or security undertakings that limit foreign influence and maintain compliance throughout the contract lifecycle.

C. Illustrative Examples

• Example 1:A bid submitted to Public Services and Procurement Canada for an infrastructure project includes a detailed FOCI disclosure and a security profile, allowing the department to approve the proposal without additional review.

• Example 2:A small supplier in Ontario working on a Statement of Work (SOW) under a Standing Offer (SO) must submit its governance documents to demonstrate low foreign influence before receiving purchase orders via e-procurement.

III. Importance

A. Practical Applications

Foreign ownership, control or influence (FOCI) plays a key role in Canadian procurement by guiding how departments assess risk during the RFx process. For example, in CanadaBuys events, security officers use FOCI criteria to flag suppliers whose ownership structure requires additional screening.

B. Relevant Laws, Regulations, or Policies

• Treasury Board Policy on Government Security

• National Defence Act and related regulations

• Canadian Security Intelligence Service Act

• Final trade agreement coverage under CETA and other international procurement treaties

C. Implications

By enforcing FOCI assessments, government stakeholders reduce national security risks, maintain procurement transparency and protect sensitive information. Organizations leveraging AI analytics gain a competitive edge by automating continuous monitoring of ownership changes.

IV. Frequently Asked Questions (FAQs)

A. Common Questions

1. Q: What does Foreign ownership, control or influence (FOCI) mean? A: It identifies and manages potential risks from foreign interests in government contracts.

2. Q: Why is FOCI important? A: It ensures compliance with Canadian security policies and safeguards national interests.

3. Q: How is FOCI used in practice? A: See examples above where RFx events include FOCI evaluations as part of supplier assessments.

4. Q: Who performs FOCI evaluation? A: Typically the security office within Public Services and Procurement Canada or departmental security authorities.

5. Q: What documentation supports a FOCI assessment? A: Ownership charts, board minutes, share certificates and corporate security plans.

B. Clarifications of Misconceptions

• Misconception 1: "FOCI is complicated." Truth: Clear guidelines and template agreements simplify the review process.

• Misconception 2: "FOCI only applies to large contractors." Truth: Any entity bidding on government work with foreign ties must comply, regardless of size.

V. Conclusion

A. Recap

This guide has outlined how Foreign ownership, control or influence (FOCI) helps maintain security, compliance and fairness in Canadian government contracting.

B. Encouragement

Organizations are encouraged to integrate FOCI assessments into their procurement workflows to stay competitive and secure.

C. Suggested Next Steps

For further guidance, review Treasury Board Secretariat materials, consult HACCP standards, explore new standards, specifications or listings and consider Province or Territory of Origin requirements for cross-jurisdictional work.