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New DoD Rule: Navigating Restrictions on Consulting Work for Both the Pentagon and Foreign Entities
The Department of Defense (DoD) recently issued a significant Final Rule that will impact government contractors providing consulting services. Effective October 24, 2025, this new rule implements Section 812 of the National Defense Authorization Act (NDAA) for Fiscal Year 2024, introducing new restrictions on simultaneous consulting work for the DoD and certain foreign entities.
What Does the New Rule Do?
The Final Rule prohibits the DoD from awarding new contracts for “consulting services” to any contractor that cannot certify they and their affiliates are not also performing such services for “covered foreign entities.” If a contractor cannot make this certification, they must maintain an auditable conflict-of-interest mitigation plan to be considered for a DoD award. This prohibition will be implemented through a new solicitation provision, DFARS 252.209-7012.
Who is Affected?
These restrictions specifically target contracts for “consulting services” under North American Industry Classification System (NAICS) code 5416 (e.g., management, scientific, and technical consulting services). It’s important to note that this rule applies to the acquisition of commercial services but does not apply to the acquisition of commercial products, including COTS (Commercial Off-The-Shelf) items.
“Consulting services” are defined broadly as advisory and assistance services, with specific exclusions for:
- Compliance with legal, audit, accounting, tax, reporting, or other requirements of laws and standards.
- Participation in judicial, legal, or equitable dispute resolution proceedings.
The rule also explicitly covers both contracts and subcontracts for consulting services with covered foreign entities.
Defining “Covered Foreign Entities”
Understanding who qualifies as a “covered foreign entity” is crucial for compliance. These largely include:
- The Government of the People’s Republic of China, the Chinese Communist Party, the People’s Liberation Army, the Ministry of State Security, or other security or intelligence agencies of the PRC.
- The Government of the Russian Federation or any entity sanctioned by the Secretary of the Treasury under Executive Order 13662 related to the situation in Ukraine.
- Governments of countries designated by the Secretary of State as repeatedly providing support for acts of international terrorism.
- Entities included on various Department of Commerce lists, such as the Entity List, Denied Persons List, Unverified List, and Military End User List.
- Entities on the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List) maintained by the Office of Foreign Assets Control (OFAC) under Executive Order 14032.
Conflict-of-Interest Mitigation Plans: The Details
If a contractor cannot certify non-involvement, they must implement an auditable conflict-of-interest mitigation plan. These plans require:
- Identification of any covered contracts with a covered foreign entity, where not prohibited by law.
- Written analysis and a course of action to avoid, neutralize, or mitigate actual or potential conflicts of interest with DoD contracts.
- A description of procedures to ensure individuals performing a DoD contract will not, for its duration, also provide consulting services to any covered foreign entity.
These plans must be auditable by a “contract oversight entity,” which includes the Contracting Officer (CO), Contracting Officer’s Representative (COR), Defense Contract Management Agency (DCMA), Defense Contract Audit Agency (DCAA), DoD Office of Inspector General (OIG), or the Government Accountability Office (GAO). The contracting officer must approve the final plan and incorporate it into the contract.
Waivers and Award Withholding
The statute does permit the DoD to waive the prohibition, but this requires notice to Congress with specific information about the contractor’s work for covered foreign entities.
In instances where a contracting officer considers withholding an award due to a conflict of interest under Section 812, the company must be notified of the reasons and allowed 10 days to respond before a final determination is made.
This Final Rule represents a critical update for government contractors, emphasizing transparency and mitigating potential conflicts of interest in sensitive consulting work. Contractors should review their current operations and affiliations to ensure compliance well before the October 24, 2025 effective date.
DoD, Government Contracts, Consulting Services, NAICS 5416, Covered Foreign Entities, Conflict of Interest, Mitigation Plan, National Defense Authorization Act, DFARS, Contracting, MarketUS