The Department of Defense (DoD) has finalized a rule that will significantly impact contractors providing management, scientific, and technical consulting services. Published in the Federal Register on August 25, 2025, and effective October 24, 2025, the rule (DFARS Case 2024-D007) implements section 812 of the FY 2024 National Defense Authorization Act (NDAA). Under the new requirement, contracting officers cannot award contracts assigned to NAICS codes beginning with 5416 if the offeror, or its subsidiaries or affiliates, holds a contract for consulting services with certain covered foreign entities, unless an approved conflict-of-interest mitigation plan is in place.
Why Did DoD Issue This Rule?
Congress and DoD are increasingly concerned about the risk of sensitive information being accessed by adversaries through consulting arrangements with foreign entities. By tightening restrictions under DFARS, DoD seeks to ensure that contractors providing advisory and assistance services are not simultaneously engaged with covered foreign governments, sanctioned entities, or affiliates that pose a national security concern.
This prohibition reinforces existing conflict-of-interest requirements while expanding the scope of contractor certifications and introducing stricter compliance expectations for consulting services contracts.
Key Requirements Under the Final Rule
Contractors bidding on solicitations with NAICS codes beginning in 5416 must:
- Certify whether they or their subsidiaries/affiliates hold consulting contracts with covered foreign entities.
- Demonstrate that a conflict-of-interest mitigation plan is in place if such contracts exist.
- Ensure that mitigation plans are auditable by a contract oversight entity and formally approved by the contracting officer.
- Incorporate the approved mitigation plan into the awarded contract.
- Report unmitigated conflicts within 15 days of identifying them.
Covered foreign entities include governments and affiliates of countries such as China and Russia, as well as entities designated by the Secretary of State as state sponsors of terrorism, and those on Commerce or Treasury restricted lists.
What About Exceptions or Waivers?
The rule does not create exceptions for nonprofit organizations or research institutions, despite public comments requesting such an exception. Waivers may be granted on a case-by-case basis only when the Secretary of Defense or certain senior DoD officials determine it is necessary for national security. Any use of this authority must be reported to Congress.
Applicability
The final rule has broad implications for contractors providing management, scientific, and technical consulting services. By applying to both prime contracts and subcontracts, as well as to awards below the Simplified Acquisition Threshold, DoD has signaled that the conflict-of-interest risk is significant enough to warrant attention across all contract sizes. While commercial products are excluded, the rule extends to commercial services, ensuring that consulting arrangements are covered regardless of contract type.
Contractors operating under NAICS codes beginning with 5416 should carefully evaluate their current and planned engagements to determine if existing relationships with covered foreign entities could create a compliance concern.
Key Takeaways for Government Contractors
This rule creates several new compliance expectations that contractors must be prepared to address:
- Stronger Certification Obligations: Contractors must now certify not only for themselves but also for subsidiaries and affiliates.
- Mandatory Mitigation Plans: If conflicts exist, mitigation plans must meet specific requirements and withstand oversight review.
- Expanded Compliance Risk: The rule closes gaps around consulting services that might otherwise create vulnerabilities.
- Limited Waiver Path: Relief is possible, but only at the highest levels and only in the national security interest.
How Redstone GCI Can Help
Redstone Government Consulting supports contractors in understanding and adapting to new DFARS requirements, such as this rule on conflicts of interest in consulting services. Our team assists with reviewing policies and procedures to ensure they address emerging compliance risks, conducting gap assessments to identify areas that require clarification, and providing training so that your staff can apply new requirements effectively. We also guide contractors in preparing for potential audit inquiries related to evolving DFARS standards. As DoD continues to refine and enforce acquisition rules, Redstone GCI provides the expertise and resources government contractors need to stay compliant and well-prepared.
