WASHINGTON, D.C. — The Senate Armed Services Committee approved the National Defense Authorization Act to include a provision that would prohibit Pentagon contractors from engaging in stock buybacks or paying dividends unless specific defense investment requirements are met. The committee voted 18-9 to approve the bill during a closed-door meeting.

The provision, identified as Section 815, mandates that the Pentagon cannot enter contracts unless the contractor agrees in writing not to purchase listed equity securities or pay dividends. This restriction is scheduled to become effective on June 15, 2027.

The defense secretary has the authority to waive this limitation if a contractor submits a qualifying defense investment plan. However, contractors who receive a waiver and subsequently underperform in terms of prioritization, investment, or production could be found in violation of the provision. Violations could result in penalties such as the suspension of contract payments or loss of eligibility for contracts and competitive grants. The bill also requires the department to initiate a process to review contractors engaging in stock buybacks or dividend payments without a waiver.

U.S. Senator Elizabeth Warren helped secure the measure's inclusion in the committee's bill. Warren said, "Bring a small amount of discipline to these defense contractors who have been running wild for years." She added that giant defense contractors buy back their own stock for the sole purpose of plumping up the stock price and improving the pay of the corporate executives. She noted the restriction prevents companies not performing on government contracts from engaging in such activities.

Senator Jack Reed stated the provision was included in the bill on a bipartisan basis. Reed said, "It was generally bipartisan. We establish contractual requirements and when they can't meet them, to then turn around and buy back stock rather than reinvesting in their production facilities and other aspects is wrong." He emphasized that signed contracts are expected to be fulfilled.

Senator Rick Scott also supports the stock buyback restriction provision. Scott said contractors making money off the federal government should not give shareholders a return before government work is completed. Senator Tim Sheehy responded with a thumbs up when asked about the provision. The provision's text is drawn from the Prioritizing the Warfighter in Defense Contract Act, which Senator Warren introduced, with Senators Hawley and Lee as co-sponsors.

The House of Representatives' version of the bill did not include this stock buyback and dividend provision. Representative Chris DeLuzio withdrew an amendment that aimed to add the provision to the House version, citing procedural issues encountered during committee review. Earlier this year, President Donald Trump signed an executive order that barred defense contractors from conducting stock buybacks or paying dividends.