The Pentagon issued a “letter of concern” to Microsoft documenting a “breach of trust” over the company’s use of China-based engineers to maintain sensitive government computer systems, Defense Secretary Pete Hegseth announced this week. At the same time, the Defense Department is opening an investigation into whether any of those employees have compromised national security.
The actions came in response to a recent ProPublica investigation that exposed Microsoft’s “digital escort” system, in which U.S. personnel with security clearances supervise foreign engineers, including those in China. ProPublica found that the escorts often lack the expertise needed to effectively supervise engineers with far more advanced technical skills.
The tech giant developed the arrangement as a work-around to a Defense Department requirement that people handling sensitive data be U.S. citizens or permanent residents.
“The program was designed to comply with contracting rules, but it exposed the department to unacceptable risk,” Hegseth said in a video announcement posted on X. “If you’re thinking America first and common sense, this doesn’t pass either of those tests.”
The letter serves as a warning to Microsoft, which has said in earnings reports that it receives “substantial revenue from government contracts.” It is less serious than a “cure notice,” which could lead to termination of Microsoft contracts if problems are not fixed. The department did not release the letter publicly, and it did not reply to ProPublica’s request for a copy of it.
