Over the last month, we have issued multiple client alerts outlining developments related to the Chinese military company covered lobbyist prohibition enacted by Section 851 of the National Defense Authorization Act (“NDAA”) for Fiscal Year (“FY”) 2025, codified at 10 U.S.C. § 4663. This is a follow-up to those prior alerts to address recent guidance posted by the Department of Defense.
The Department of Defense has now published a two-page guidance document, titled “PROJECT CLEAR Contractor Lobbying Evaluation for Adversarial Relationships,” and a webpage concerning the enforcement of the Section 851 covered lobbyist prohibition. Notably, the guidance document focuses on relationships with Chinese military companies appearing on the Department’s 1260H list, as opposed to the broader definition of Chinese military companies included in a few sections of the class deviation that the Department issued to implement the prohibition in the Defense Federal Acquisition Regulation Supplement (“DFARS”). The focus on 1260H-listed companies mirrors the statutory language covered in our June client alert and the implementing regulation’s applicable definition of a “covered lobbyist,” explained in our most recent client alert. This further confirms that contractors should focus on the 1260H list when evaluating compliance with Section 851.
As we noted in our previous client alerts, the statute and implementing regulations are silent on the treatment of contract renewals, extensions, or modifications under the Section 851 covered lobbyist prohibition. The Department of Defense website indicates that “Section 851 prohibits the Department of War from entering into, renewing, or extending certain contracts when a contractor, its parent company, or subsidiary has a relationship with a covered lobbyist.” (Emphasis added.) This implies that an existing contract would not be revoked if a defense contractor were to engage a covered lobbyist. But according to the webpage, such an engagement might prevent extensions of the contract and any new contracts with the Department, despite the absence of statutory support for this.
The webpage also focuses on contractors retaining lobbying firms that have 1260H-listed companies as clients, stating: “[a] covered lobbyist is a lobbying firm that represents both: [a] Department of War contractor (or its parent or subsidiary), and [a] company identified on the Department’s 1260H List.” (Emphasis added.) This definition, limited to “lobbying firm[s],” is narrower than that found in the statute and implementing DFARS class deviation, though the use of the term “represents” acknowledges that a covered lobbyist does not need to be registered as a lobbyist to trigger the Section 851 prohibition. Section 851 does not define “lobbying firm,” but the term generally means an entity that primarily engages in lobbying activities for clients, or an entity that has triggered registration under some lobbying regime.
This webpage may signal the Department’s intent to prioritize the screening of relationships between lobbying firms and defense contractors. Despite the narrowed focus of the webpage, the statute covers contracts with any “entity that engages in lobbying activities,” without limiting the definition to lobbying firms. Defense contractors should therefore still include other consultants and advisors, including but not limited to law firms or public relations agencies, in their Section 851-related diligence. These additional types of entities might still engage in covered “lobbying activities” even if they are not registered as lobbying firms under the Lobbying Disclosure Act.
Finally, the webpage does not include much information on the “reasonable inquiry” safe harbor under Section 851. The guidance instructs defense contractors to “[c]onfirm [their] lobbying relationships” and “[a]ssess and document [their] reasonable inquiry.” The accompanying guidance document also suggests that defense contractors “[r]eview PROJECT CLEAR guidance and respond as appropriate.” This implies that the Department’s webpage may be updated from time to time.
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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