In recent years, investigators in Congress have ramped up scrutiny of government contractors and other recipients of federal funds. This trend has only accelerated in the current Congress, with Republican-led committees pursuing expansive inquiries targeting a wide variety of federal contractors and grantees. Along with familiar allegations of waste or misuse of federal funds, these recent investigations have largely been driven by the political and policy priorities of the Republican majority. But with Democratic congressional leaders signaling their own intention to prioritize oversight of private parties doing business with the government, this trend is poised to continue regardless of the outcome of November’s midterm elections.
Even for large contractors with decades-long relationships with federal agencies, politically driven congressional investigations can be a disorienting mix of the familiar and the foreign. For small and growing businesses, which may be new to government contracting, an inquiry from Congress can quickly expose compliance policies and practices that may lag behind those of more established peers. Against this backdrop, government contractors of all sizes should expect congressional investigations to remain a central and evolving risk. In this client alert, we highlight unique challenges posed by congressional investigations targeting government contractors, as well as particular risk areas likely to attract scrutiny on Capitol Hill in the current Congress and beyond.
While a congressional investigation can be a disruptive moment for any company, investigators targeting government contractors are able to draw on additional tools to obtain sensitive information and compel compliance with requests for documents or testimony. These tools, the most significant of which are described below, present increased risks for government contractors.
Freedom of Information Act (FOIA) requests. Federal and state public records laws offer an alternative avenue for investigators—and the broader public—to obtain communications between contractors and their government counterparts. At the federal level, FOIA allows the public to request records from federal government agencies, with only limited exemptions protecting such records from disclosure. States have their own “sunshine” laws, some of which are more expansive than the federal regime. Reporters, watchdog organizations, and other stakeholders can obtain sensitive information about government contractors through this process, including contractor communications with agency officials and materials that are required under the Federal Acquisition Regulation (FAR) and agency-specific rules. The possibility of a public records release brings added complexity when contractors are responding to congressional document requests.
Production requests directed to agencies. Generally, when investigating private entities, Congress demands documents or testimony from the private party itself. For government contractors, however, lawmakers have another option for accessing key materials: they can request or demand records from the contracting agency. When a committee requests records from a contractor, the subsequent revelation of additional records by a federal agency can lead investigators to question whether the contractor improperly withheld responsive materials in the first instance.
Document retention obligations. As a general matter, federal contractors are obligated to retain all contract-related records for three years after final payment, with longer retention periods sometimes required under the terms of a given contract. As we have elsewhere explored, congressional investigators—including members of the minority who expect to soon wield the power to compel the production of sought-after documents—often scrutinize a target’s document retention practices, and any perceived gaps in those practices can prolong and complicate an investigation. With this in mind, government contractors should remain attentive to any applicable document preservation requirements in responding to an inquiry from Congress.
Overlapping investigative prerogatives. Multiple government agencies can—and do—conduct overlapping investigations or audits into government contractors. Both the Government Accountability Office, a nonpartisan agency of Congress, and the contracting agencies themselves have their own audit procedures, while criminal and civil inquiries may be launched by agency Inspectors General and investigative branches, the Department of Justice (DOJ), or state attorneys general. Government contractors facing parallel inquiries should develop a comprehensive strategy for managing such oversight with the assistance of counsel.
Downstream risks. Congressional oversight, including document requests, hearings, and committee reports, can itself serve as the basis for follow-on litigation and investigations. For example, high-profile congressional investigations have been known to spark bid protests, referrals to agency Suspension and Debarment Officials, or, in some cases, referrals to the DOJ.
Power of the purse. As Congress appropriates funds to agencies, including funds that ultimately flow to contractors, congressional investigations can present bet-the-company risks for contractors.
Though allegations of waste, fraud, and abuse have always been central to Congress’s oversight agenda, government contractors both large and small should be aware of emerging risk areas in either a Democratic or Republican Congress. The most noteworthy areas of potential scrutiny for government contractors are described below.
Lobbying. The use of appropriated funds for lobbying on contracts is prohibited under the Byrd Amendment, 31 U.S.C. § 1352. The Administration has cited this as an enforcement priority, particularly in the context of “political and legislative advocacy,” and investigators in Congress may review whether government contractors overlooked by the Administration are in compliance.
Conflicts of interest. Organizational and personal conflicts of interest are another near-certain theme of future congressional oversight of government contractors, particularly as the Administration has deemphasized its own enforcement in this area. Democrats have recently sent document preservation letters to companies and organizations, indicating that they will move quickly if they win control of either chamber. Lawmakers will closely scrutinize sole-source contract awards, competitive awards to contractors with personal relationships to Administration officials or their family members, or other contracts that may have the appearance of impropriety. Additionally, contractors should consult with counsel regarding the employment of former government officials or temporary government secondments.
Pay-to-play restrictions. Federal and state pay-to-play laws regulate political spending for government contractors, their employees, and sometimes employees’ family members, more stringently than do generally applicable campaign-finance laws. Watchdog organizations methodically track compliance and elevate violations to investigators.
Overbilling. Often a liability for healthcare contractors, overbilling is a highly likely area of scrutiny focused on promoting affordability and cutting government waste. We suspect that technology contractors are likely to face scrutiny over their billing practices, particularly as related to frontier technologies. Similarly, the growing prevalence of fixed-price contracts, even for development projects, presents another likely topic of interest on Capitol Hill. This increased scrutiny may arrive in the midst of significant changes to contractor cost accounting and pricing disclosure requirements set in motion by the current Congress.
False claims. Allegations of false claims are a perennial risk area for government contractors, and congressional investigators consider their oversight of federal spending to include assessing compliance with the False Claims Act (FCA). Although the DOJ has focused primarily on FCA enforcement in the healthcare sector, committees of Congress can and may refer contractors in any sector to the DOJ for FCA investigation. Moreover, whistleblowers are the principal sources of FCA actions.
Data privacy. Data privacy is another likely risk area for government contractors. Legislators on both sides of the aisle have expressed concern about the collection of personally identifiable information, including through the reported use of emerging technologies. Contractors providing technology, data, analytics, detention, transportation, and support services may face heightened scrutiny.
Antitrust and consolidation. With competition issues taking on a more bipartisan tenor, congressional investigators will likely continue to prioritize market concentration and downstream effects on pricing, innovation, and labor—especially in defense, health, and tech-adjacent services. Lawmakers may view some teaming structures, reselling arrangements, and long-term government commitments through the lens of existing “affordability” and “competition” concerns.
Government cybersecurity compliance. Cybersecurity is another area where government contractors should expect increased scrutiny. The Department of Defense’s (DoD’s) Cybersecurity Maturity Model Certification program, or CMMC (overviewed in more detail in our CMMC Toolkit), has accelerated the focus on this area by tying cybersecurity requirements more directly to eligibility for DoD contract awards. More generally, investigations and enforcement actions are becoming increasingly focused on whether cybersecurity representations are supported by appropriate technical controls and documentation, and whether these controls and processes are kept current over time.
Supply chain security and responsible sourcing. Contractors should expect greater scrutiny of supply-chain due diligence, subcontractor controls, country-of-origin representations, and whether primes are effectively flowing down compliance and auditing to suppliers—especially those implicating national security and human-rights concerns.
Contracted services. Democratic lawmakers in particular have emphasized concerns that reduced staffing levels—due to layoffs, attrition, or early retirements—are impairing agencies’ ability to perform core functions and threatening services. If Democrats gain control of either chamber of Congress, contractors can expect these concerns to translate into hearings on insourcing vs. outsourcing decisions, scrutiny of service contracts that replace eliminated civil servants, and a renewed emphasis on inherently governmental functions.
Lobbying relationships involving Section 1260H companies. Defense contractors also should consider whether their outside consultants, law firms, and government affairs advisers are engaged in lobbying activities for companies on DoD’s Section 1260H List of Chinese military companies in a manner that could make those outside parties “covered lobbyists.” As we have discussed in more detail elsewhere, beginning June 30, 2026, DoD will be prohibited from entering into a contract with an entity if that entity, or its parent or subsidiary, is party to a contract with a covered lobbyist. As a result, relationships with outside advisers could draw attention on Capitol Hill and affect a contractor’s eligibility for DoD work.
Government contractors should assess their risk and take mitigating steps, including by reviewing internal ethics policies and procedures, including those pertaining to lobbying, FAR and DFARS compliance, and political giving; assessing discoverable materials in the context of congressional investigations (which may differ from materials discoverable in litigation); and seeking the advice of counsel to identify and advise on potential risks.
We are pleased to share that Covington is the only law firm in the nation ranked Band 1 by Chambers USA in both Congressional Investigations and Government Contracts, reflecting the market-leading strength and depth of our practices. If you have any questions regarding the issues discussed in this alert, or would like assistance preparing for potential congressional inquiries, please contact any member of our congressional investigations or government contracts practices listed below.
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