Final Rule Implements Restrictions on Simultaneous Consulting Work for DOD and Covered Foreign Entities

On August 25, 2025, the Department of Defense (DoD) issued the Final Rule implementing Section 812 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2024 (P.L. 118-31).  The Final Rule will take effect on October 24, 2025 via a new solicitation provision, DFARS 252.209-7012 (Prohibition Relating to Conflicts of Interest in Consulting Services – Certification).

As background, Section 812 prohibits DoD from contracting for “consulting services” under a North American Industry Classification System (NAICS) code beginning with 5416 (e.g., management, scientific, and technical consulting services) with any contractor that cannot either certify that it and its affiliates are not also performing those services for “covered foreign entities”—largely Chinese government and government-controlled entities, the Russian government, sanctioned parties, and companies on other identified lists maintained by the federal government—or (if it can’t so certify) maintain an auditable conflict-of-interest mitigation plan. The statute also permits DoD to waive the prohibition, with notice to Congress that includes specific information about the contractor’s work for covered foreign entities.

The proposed rule, issued in September 2024, provided key details about how contracting officers would apply the prohibition and withhold any awards, but reflected a broader interpretation of the Section 812 prohibition than the statute. The Final Rule is similar, with three notable refinements.

First, under the Final Rule, DoD is prohibited from awarding new contracts for “consulting services” under a NAICS code beginning with 5416 to any contractor that (1) cannot certify that it and its affiliates do not have any contracts or subcontracts for consulting services with a covered foreign entity, and (2) does not maintain an auditable “conflict-of-interest mitigation plan.”

Second, in the event that DoD seeks to award a contract to a contractor that must maintain a conflict-of-interest mitigation plan, the contracting officer must approve the plan and incorporate it into the contract. Unlike the proposed rule, the Final Rule suggests that the contracting officer’s approval will occur between the proposal submission and certification and the awarded contract. However, the Final Rule does not provide any criteria for the contracting officer’s consideration of a contractor’s conflict-of-interest mitigation plan.

Third, the certification involving consulting services with covered foreign entities now explicitly covers contracts and subcontracts. The Final Rule otherwise does not address commenters’ concerns about the breadth of the application to affiliates.

• Key Definitions:

  • Covered contract means a DoD contract “involving consulting services.” 
    • Note that the requirements apply to the acquisition of commercial services (assigned a NAICS code beginning with 5416) but do not apply to acquisition of commercial products including COTS items.
  • Consulting services means “advisory and assistance services, except that ‘consulting services’ does not include the provision of products or services related to – (i) Compliance with legal, audit, accounting, tax, reporting, or other requirements of the laws and standards of countries; or (ii) Participation in a judicial, legal, or equitable dispute resolution proceeding.”
  • Covered foreign entity means:
    • 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 service or intelligence agency of the People’s Republic of China.
    • The Government of the Russian Federation or any entity sanctioned by the Secretary of the Treasury under Executive Order 13662, Blocking Property of Additional Persons Contributing to the Situation in Ukraine. 
    • The Government of any country if the Secretary of State determines that such government has repeatedly provided support for acts of international terrorism pursuant to any of the following: (i) Section 1754(c)(1)(A) of the Export Control Reform Act of 2018 (50 U.S.C. § 4318(c)(1)(A)), (ii) Section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. § 2371), (iii) Section 40 of the Arms Export Control Act (22 U.S.C. § 2780), or (iv) Any other provision of law.
    • Any entity included on any of the following lists maintained by the Department of Commerce: (i) The Entity List set forth in Supplement No. 4 to part 744 of the Export Administration Regulations, (ii) The Denied Persons List as described in section 764.3(a)(2) of the Export Administration Regulations,  (iii) The Unverified List set forth in Supplement No. 6 to part 744 of the Export Administration Regulations, (iv) The Military End User List set forth in Supplement No. 7 to part 744 of the Export Administration Regulations.
    • Any entity identified by the Secretary of Defense pursuant to section 1237(b) of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Public Law 105–261; 50 U.S.C. 1701 note).    
      • Note that the Final Rule references FY 1999 NDAA’s 1237(b) list, but the 1237(b) list was vacated, and all entities on it were instead listed on the FY 2021 NDAA’s 1260H list. The Final Rules does not reference 1260H.
    • Any entity on the Non-SDN Chinese Military-Industrial Complex Companies List (“NS–CMIC List”) maintained by the Office of Foreign Assets Control of the Department of the Treasury under Executive Order 14032 relating to addressing the threat from securities investments that finance certain companies of the People’s Republic of China), or any successor order.

• Conflict-of-interest mitigation plans:

  • A conflict-of-interest mitigation plan requires:
    • An identification, where such identification is not otherwise prohibited by law or regulation, of any covered contracts with a covered foreign entity. 
    • Written analysis, including a course of action for avoiding, neutralizing, or mitigating the actual or potential conflict of interest of such a covered contract with the Department of Defense.
    • Description of the procedures adopted by an entity to ensure that individuals who will be performing a covered contract will not, for the duration of such contract, also provide any consulting services to any covered foreign entity.
  • A conflict-of-interest mitigation plan must be auditable by a “contract oversight entity,” i.e., the CO and contracting officer’s representative; the Defense Contract Management Agency; the Defense Contract Audit Agency; the DoD Office of Inspector General or any subcomponent of that office; or the Government Accountability Office.
  • The contracting officer must approve the final plan and incorporate it into the contract.

 

• Withholding award: Before determining to withhold an award of a covered contract based on a conflict of interest under Section 812, the contracting officer must notify the company of the reasons for such withholding and allow the company 10 days to respond.