Under a newly enacted law, beginning June 30, 2026, defense contractors risk losing all future contracts with the Defense Department if they engage outside consultants that lobby for certain Chinese companies. On December 23, 2024, President Biden signed the National Defense Authorization Act (“NDAA”) for Fiscal Year (“FY”) 2025, which sets annual spending and policy for the Pentagon. While media coverage has largely focused on other provisions of the FY 2025 NDAA, buried within its 794 pages is a short provision governing defense contractors’ use of outside consultants.
Section 851 of the bill, titled “Prohibition on Contracting with Covered Entities that Contract with Lobbyists for Chinese Military Companies,” appears to establish a future ban on the Defense Department from contracting with any company (or its subsidiaries or parent company) that contracts with a person that engages in lobbying activities on behalf of certain Chinese military companies. This prohibition, which will be codified in a new 10 U.S.C. § 4663(a), appears to be missing a key word or phrase. Specifically, it states that absent a waiver, “the Secretary of Defense may not enter into a contract with an entity, a parent company of such entity, or a subsidiary of such entity is a party to a contract with a covered lobbyist.” Given the title, Congress may have intended for the provision to read as follows: “the Secretary of Defense may not enter into a contract with an entity, [if the entity,] a parent company of such entity, or a subsidiary of such entity is a party to a contract with a covered lobbyist.” Or perhaps Congress intended for the missing words to be placed later in the sentence, slightly changing the provision’s meaning: “the Secretary of Defense may not enter into a contract with an entity, a parent company of such entity, or a subsidiary of such entity, [if the entity] is a party to a contract with a covered lobbyist.” The absence of these words in the statute itself creates some ambiguity as to the scope of disqualifying activities. Thankfully, there is time for Congress and the Defense Department to resolve this ambiguity, as the prohibition does not take effect until June 30, 2026.
What is clear is that Section 851 ties its lobbying related definitions to the Lobbying Disclosure Act of 1995 (“LDA”), meaning defense contractors will need to conduct additional due diligence to ensure their outside consultants are not engaged in federal lobbying activities on behalf of specifically listed People’s Republic of China (“PRC”) military companies (even where those lobbying activities are entirely unrelated to the defense contractor).
Relevant Provisions and Definitions
The new prohibition will apply to Defense Department contractors that retain a “covered lobbyist,” defined as any entity that engages in federal lobbying activities on behalf of entities listed by the Pentagon as PRC military companies. The list of PRC military companies is updated annually, in accordance with a provision first passed as section 1260H of the FY 2021 NDAA, and it currently includes over 50 parent companies and dozens of subsidiaries. The most recent version of the list, released in January 2025, can be found here.
The term “lobbying activities” is given the same meaning as in 10 U.S.C. § 971 note prec. (added by the FY 2018 NDAA), which defines “lobbying activities” as having “the meaning given such term[] in section 3” of the LDA, found in 2 U.S.C. § 1602. The LDA in turn defines lobbying activities as “lobbying contacts and efforts in support of such contacts, including preparation and planning activities, research and other background work that is intended, at the time it is performed, for use in contacts, and coordination with the lobbying activities of others.” The term “lobbying contact” means any oral or written communication (including an electronic communication) to a covered federal executive branch official or legislative branch official that is made on behalf of a client with regard to influencing federal legislation, rules, regulations, procurement, executive orders, nominations and confirmations, “or any other program, policy, or position of the United States Government.” Under the LDA, covered legislative branch officials include members of Congress and their staff, while covered executive branch officials include the President and Vice President, Executive Schedule I-V officials, Schedule C political appointees, employees in the Executive Office of the President, and certain senior military officials.
Suggested Due Diligence for Defense Contractors
Notably, the language of Section 851 creates a safe harbor, specifically stating that the prohibition shall not apply to defense contractors “that made reasonable inquiries regarding the lobbying activities of another entity and determined such entity was not a covered lobbyist.” Given these broad definitions and provisions, defense contractors should begin evaluating their outside lobbyists and other consulting firms, at some point in advance of the June 2026 effective date, to ensure they do not engage covered lobbyists. Otherwise, absent a waiver, contractors risk imperiling future business with the Defense Department.
Presumably the Defense Department will implement the Section 851 prohibition and safe harbor through a new Defense Federal Acquisition Regulation Supplement clause in the coming months. In anticipation of the prohibition taking effect in June 2026, defense contractors should take steps to review the LDA and Foreign Agents Registration Act (“FARA”) disclosures (if any), along with other publicly available information, of both current and prospective outside lobbyists, lobbying firms, and consultants to ensure their clients do not include listed PRC military companies.
In some circumstances, an outside consultant may be engaged in behind-the-scenes lobbying activities for PRC military companies and yet not be registered under the FARA or LDA. Thus, a search of the FARA or LDA databases for the name of the outside consultant, while prudent before the new provision takes effect in 2026, may not be sufficient. Also, particularly with respect to FARA, some consultants may not be registered even though they should be registered.
Prior to the effective date of the new provision, companies interested in doing business with the Defense Department should consider requiring outside lobbyists and other consultants to certify in their contracts that they are not engaging, and will not engage, in lobbying activities for a Chinese military company on the 1260H list.
If you have any questions concerning the material discussed in this client alert, please contact the members of our Election and Political Law and Government Contracts practices.
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