Defense industry presses to block Pentagon contractor buyback curbs in U.S. House bill

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Defense industry buyback curbs

Highlights

U.S. defense industry trade groups urge the House Rules Committee to reject a proposed NDAA amendment banning share buybacks by Pentagon contractors including Boeing and Lockheed Martin.
The Senate's fiscal 2027 NDAA already includes a bipartisan provision barring buybacks and dividends, increasing the chances that some restriction could become law.
Industry groups warn the buyback ban could discourage investment and deter innovative suppliers, while proponents say it would address cost overruns and increase contractor accountability.

House amendment faces industry resistance

As first reported by CNBC, trade groups led by the Chamber of Commerce are urging the House Rules Committee to reject an amendment that would restrict share buybacks by defense contractors as lawmakers debate the National Defense Authorization Act on Monday night.

The House proposal from Reps. Chris Deluzio of Pennsylvania and John Garamendi of California would bar the Department of Defense from entering into a contract with a company unless the contractor agrees not to repurchase its own stock. The restriction would apply to companies such as Boeing, Lockheed Martin and Northrop Grumman, although the Pentagon could waive the prohibition at its discretion.

Signatories to the letter include the Chamber of Commerce, the Aerospace Industries Association and Business Roundtable. In the letter shared with CNBC, the groups argue that limiting buybacks and dividend payments would mark an unprecedented expansion of the federal government's role in corporate governance and capital allocation decisions.

Senate momentum raises stakes for contractors

A similar provision is already included in the Senate's version of the fiscal 2027 NDAA, where it is added on a bipartisan basis and also bars contractors from paying dividends. Both the House amendment and the Senate language seek to codify President Donald Trump's executive order aimed at imposing the restriction, increasing the possibility that some version could become law.

Supporters say the measure is designed to force contractors to prioritize performance before returning cash to shareholders, amid longstanding criticism over cost overruns and delayed defense programs. Sen. Elizabeth Warren, who is leading the push in the Senate, says earlier this month that the effort is meant to bring discipline to contractors she argues have operated without enough accountability for years.

Industry groups contend the policy would instead discourage investment and deter innovative or non-traditional suppliers that policymakers want to attract into the defense market. The Deluzio-Garamendi measure is one of more than 1,300 amendments proposed before the House Rules Committee, underscoring how contested the broader defense bill remains.

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