New Requirements for DOD Consulting Contractors

Bottom Line Up Front

The Department of Defense (DOD) Defense Federal Acquisition Regulation Supplement (DFARS) Case 2024-D007 (the final rule), which amends the DFARS to address national security concerns that may arise when a company provides consulting services to both the DOD and a foreign adversary, is in effect today, October 24, 2025. Going forward, a company providing or seeking to provide management, scientific, and technical consulting services to the DOD must certify that neither it nor its affiliates or subsidiaries are providing consulting services to covered foreign entities. If they cannot make this certification, to be awarded a DOD contract, the company will need an approved conflict-of-interest mitigation plan. The final rule and DFARS amendment are intended to ensure that contractors advising the DOD are not simultaneously involved in activities that could negatively impact US national security interests. 

Covered Foreign Entities

The final rule implements section 812 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2024, which prohibits the DOD from awarding covered contracts to entities with existing consulting agreements with covered foreign entities. Section 812 was drafted to address the growing concern that foreign adversaries could access and compromise sensitive US defense and national security information when companies and/or their affiliates are working for both the DOD and certain foreign adversaries. Section 812 defines a “covered foreign entity” as:

1. 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.
2. The Government of the Russian Federation or any entity sanctioned by the Secretary of the Treasury under Executive Order 13662 titled “Blocking Property of Additional Persons Contributing to the Situation in Ukraine.”
3. The government of any country if the Secretary of State determines that such government has repeatedly provided support for acts of international terrorism.
4. Any entity included on one of the Department of Commerce’s lists (e.g., the Entity List, the Denied Persons List, the Unverified List).
5. Any entity identified by the Secretary of Defense as Communist Chinese Military Companies under section 1237(b) of the Strom Thurmond National Defense Authorization Act for FY 1999.
6. Any entity on the Non-Specially Designated Nationals Chinese Military-Industrial Complex Companies List maintained by the Office of Foreign Assets Control. (NDAA FY 2024)

Notably, the list of covered foreign entities is likely to grow as the secretaries of state and defense have broad discretion to add to the list.

Covered Contracts

Covered contracts are those awarded by the DOD involving consulting services. In the final rule, “consulting services” is defined as “advisory and assistance services.” Notably, “consulting services” does not include “the provision of products or services related to […] compliance with legal, audit, accounting, tax, reporting, or other requirements of the laws and standards of countries.” It also does not include services that involve participating in “a judicial, legal, or equitable dispute resolution proceeding.”

Covered contracts are those for the acquisition of commercial services but not for the acquisition of commercial products including commercial off-the-shelf items. Also, covered contracts will be those awarded under the North American Industry Classification System 5416 industry group, which relates to providing advice and assistance to businesses and other organizations on management, environmental, scientific, and technical issues.

Conflict-of-Interest Mitigation Plan

A company that finds it cannot certify that it (and its affiliates and subsidiaries) is not providing consulting services to a covered foreign entity must develop a detailed conflict-of-interest mitigation plan. The mitigation plan must be auditable to a “contract oversight entity” such as the contracting officer, Defense Contract Management Agency, DOD Office of Inspector General, or the Government Accountability Office. The mitigation plan must contain:

1. A list of all consulting contracts with a covered foreign entity.
2. “A written analysis, including a course of action for avoiding, neutralizing, or mitigating the actual or potential conflict of interest” presented by the performance of consulting contracts with covered foreign entities.
3. The specific procedures implemented by the company that are designed to ensure that the employees performing a covered contract for the DOD will not also provide any consulting services to covered foreign entities.
4. The protocol for submitting to the DOD a notice of an unmitigated conflict of interest with respect to a covered contract within 15 days of identifying such a conflict.

A company should expect to work with the contracting officer concerned to develop the mitigation plan and have it approved. Once the plan is approved, it will be incorporated into the resulting contract.

Takeaways

Companies providing consulting work to entities globally and the DOD need to be aware of these new requirements and ensure they are making accurate certifications or executing approved conflict-of-interest mitigation plans. To ensure compliance, companies that are part of a larger corporate family will need to conduct due diligence on the consulting work their affiliated companies are doing. Entities looking to invest in or acquire a company that is providing consulting services to the DOD should conduct due diligence to determine whether the target company has the required certification in place or, if it is providing consulting services to covered foreign entities, an approved mitigation plan.

Goodwin’s Government Contracts & Grants team has significant experience counseling clients on doing business internationally and navigating changing regulations and requirements. Please contact the authors of this alert or the Goodwin lawyer you work with regularly if you have questions.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.