WASHINGTON — A bipartisan duo of senators are seeking to codify President Donald Trump’s limitations on poorly performing defense contractors, introducing new legislation today that would restrict companies’ ability to conduct share buybacks, issue dividends and raise executive compensation.
The bipartisan bill — titled Prioritizing the Warfighter in Defense Contracting Act of 2026 and cosponsored by Sens. Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo. — would make the restrictions laid out by Trump’s January executive order the default unless the Pentagon submits a waiver stating that the company is meeting schedule and performance requirements.
Specifically, it would forbid defense contractors from paying dividends or buying back stock, as well as instating a $5 million dollar annual cap on executive competition, unless contractors meet specific performance thresholds on a yearly basis.
If the bill was made law, the Defense Department would be responsible for reviewing all companies with department-related revenue greater than $250 million to determine waiver eligibility. To get a waiver, the department’s review must find that, at least 80 percent of the time, the contractor met schedule requirements for delivery dates, contract readiness requirements, performance metrics, and responded on time to requests for cost data.
That process appears to be more stringent than the directive laid out in Trump’s executive order from January, which called for the department to identify “underperforming” contractors, but did not set specific parameters for identifying those companies.
Further, any contractors who engage in stock buybacks or dividends — or raise executive compensation past the cap — without having a waiver in place, could face penalties, the bill states. Those actions could include withholding payments, ending the company’s eligibility to receive progress payments, or terminating the contract.
Under the bill’s terms, offending contractors can present a remediation plan to fix issues and get back into the Pentagon’s good graces.
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Warren and Hawley’s bill comes amid concerns that defense contractors are prioritizing returning money to shareholders rather than investing in research and development and capital infrastructure.
“It makes no sense for the federal government to fork over billions in taxpayer dollars to giant military contractors while their executives buy back their own company’s stock instead of investing in our national defense,” Warren said in a statement. “This bipartisan bill will stop defense contractors from abusing the system at taxpayer expense and put our national security over Wall Street profits.”
Hawley criticized defense contractors for spending big on stock buybacks, dividends and executive pay instead using that money to finance the weapons ramp up.
“America’s defense contractors should be focused on expanding production, not padding their bottom lines,” Hawley said.
In response to Trump’s executive order, defense primes have laid out plans to increase capital expenditures in 2026, with many pledging to hold off on share buybacks in the short term. However, most companies have reaffirmed their commitment to paying dividends.
Lawmakers, including the typically free-market Republicans, have been broadly supportive of the executive order. However, Sen. Jack Reed, the Senate Armed Services Committee’s top Democrat, has speculated that the EO’s provisions may need to be enshrined in law in order to stand up to legal challenges.
The Aerospace Industries Association, a trade group that represents defense and commercial aerospace companies, said in a statement to Breaking Defense that the bill “goes far beyond” the president’s executive order, calling it “broad, blunt government overreach.”
“The Warren-Hawley bill does not prioritize the warfighter or strengthen the industrial base. Instead, it would stifle investment across the entire ecosystem — including new entrants, small businesses, and trusted primes; undermine our ability to replenish our stockpiles; and stall delivery of critical technologies to our troops,” the group stated.
John Ferrari, a nonresident senior fellow at the American Enterprise Institute, suggested that it may be preferable to wait to pass legislation until the Pentagon sees whether the EO is resulting in the desired outcomes.
“Defense procurement is very complicated and it is often time hard to determine if delayed programs are the fault of the contractor or government,” he said in an email to Breaking Defense, adding that “the EO is more flexible to change as we learn.”
Seth Seifman, a defense analyst with JP Morgan, previously told Breaking Defense that a halt on dividends would cause “a fair amount of disruption” in the shareholder base of the largest defense contractors.
“For large blue chip companies like the big defense primes, to step back from their dividends is a very big deal because of what it signals to their investors,” he said in February. “Some of the investors that are their shareholders are specifically dividend funds, or they might have a guideline around the way that they invest that says ‘We’ll only invest in companies that pay dividends.’”
Updated 3/27/26 at 10:10 am ET with comment from the Aerospace Industries Association.