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, took effect on June 30, 2026. Just before that date, the Department of Defense took steps to implement the prohibition in the Defense Federal Acquisition Regulation Supplement (“DFARS”) with a class deviation issued as part of the ongoing Revolutionary FAR Overhaul (“RFO”). Unfortunately, the class deviation does not contain many details related to the covered lobbyist prohibition beyond the legislative text, leaving defense contractors with open questions as they work to ensure compliance with the prohibition.
Last month, we issued a client alert concerning the Section 851 covered lobbyist prohibition, recommending defense contractors undertake precautionary due diligence in anticipation of the prohibition taking effect on June 30. In that alert, we explained the Department of Defense had initiated a DFARS case (No. 2025-D0007) to implement the new prohibition in Part 225 of the DFARS, but that rulemaking had been delayed multiple times, most recently to mid-July.
In a reversal of course, the Department’s July 10, 2026 Open DFARS Cases Report indicated that the Department is no longer proceeding with a formal rulemaking implementing the prohibition in Part 225, instead addressing the prohibition as part of the RFO. Accordingly, the prohibition has been implemented, at least for the time being, through a class deviation. The class deviation, which was issued on June 29, 2026 and further revised on July 16, 2026, simultaneously implements multiple restrictions on defense contractors related to various supply chain security requirements, including the Section 851 lobbying prohibition. As explained below, this approach has created some ambiguity regarding applicable definitions, and it does not provide any guidance on a key safe harbor provision.
As noted in our previous client alert, Section 851 of the FY 2025 NDAA bars the Department of Defense from contracting with companies who engage with “covered lobbyists” that have engaged in lobbying activities (as defined in the Lobbying Disclosure Act of 1995 at 2 U.S.C. §1602) on behalf of Chinese military companies listed in accordance with section 1260H of the NDAA for FY 2021 (Pub. L. 116-283).
The class deviation implements the Section 851 covered lobbyist prohibition in DFARS 240.7003-2(d), which prohibits agencies from contracting with an entity that is party to a contract with a covered lobbyist, and DFARS 252.240-7995, which requires contractors to represent by submission of an offer that they are not party to a contract with a covered lobbyist. The definitions applicable to these provisions (see DFARS 240.7003-1 and DFARS 252.240-7995(a)) track the statutory definitions of the Section 851 covered lobbyist prohibition, which is triggered by being party to a contract with a “covered lobbyist.” The definition of “covered lobbyist,” in the statute and within the class deviation, speaks to “an entity that engages in lobbying activities for any entity determined to be a Chinese military company listed in accordance with section 1260H of the NDAA for FY 2021 (Pub. L. 116-283).” (Emphasis added.)
The class deviation also includes a separate, broader definition of Chinese military companies that extends beyond the 1260H list, which has created some confusion regarding its applicability to the Section 851 covered lobbyist provision. We do not read this broader definition as applicable to the Section 851 covered lobbyist prohibition. Rather, the broader Chinese military company definition appears intended to implement a series of NDAA provisions dating as far back as 2006, that together prohibit the Department of Defense from procuring products and services through a contract or subcontract with Chinese military companies designated to several different national security screening lists. As noted above, the applicability of the covered lobbyist prohibition is cabined by the definition of a “covered lobbyist,” which is explicitly limited to Chinese military companies on the 1260H list.
Section 851 creates a safe harbor, specifically stating that the covered lobbyist 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.” The class deviation includes that same safe harbor; however, it fails to provide any guidance on what constitutes a “reasonable inquiry.”
By implementing Section 851 through a class deviation tied to the ongoing RFO, the Department of Defense has effectively side stepped the notice and comment rulemaking process through which defense contractors might have received some clarity on what sort of inquiry is considered “reasonable” under the safe harbor provision. Given this latest development, we expect that the Department will eventually address the Section 851 lobbying restrictions again as part of an omnibus rulemaking that it issues to revise the DFARS formally to implement the various class deviations it has promulgated through the RFO. It is possible that the Department will eventually use this process to provide some commentary to inform the steps required to conduct a reasonable inquiry, but this is by no means guaranteed and in any event it is likely to take some time.
DFARS 240.7003-2(d) of the class deviation provides that, “[e]ffective June 30, 2026,” the Government may not “award a contract with an entity, a parent company of such entity, or a subsidiary of such entity that is a party to a contract with a covered lobbyist.” That language mirrors the Section 851 statutory text prohibiting the Government from “enter[ing] into a contract” on or after June 30, 2026. Though certain members of Congress have argued in favor of applying the Section 851 covered lobbyist prohibition to existing contracts, the plain language of the statutory text and implementing regulation do not support a view that the ban applies to contracts in effect prior to June 30, 2026.
The key question is whether Department of Defense action on or after June 30, 2026, to modify, extend, or renew a contract that was originally entered into before that date constitutes “entering into a contract” within the meaning of the prohibition. The statutory text of Section 851 does not directly address that question. Its silence regarding contracts that are modified, extended, or renewed is significant, particularly because Congress expressly addressed such actions in Section 805 of the NDAA for FY 2024—another procurement ban implemented through this same class deviation. In Section 805(a)(3)(B), Congress exempted contracts entered into before June 30, 2026, from a procurement ban, even if they are modified, extended, or renewed on or after that date. The omission of comparable language from Section 851 may suggest that Congress intended the two provisions to operate differently.
It is possible that the Department of Defense—in the face of congressional pressure—could take further action to expand application of the Section 851 prohibition, but such action would not be grounded in the statutory text and could also present significant operational issues for the Department were the performance of existing contracts put at risk. The treatment of contract renewals, extensions, and modifications under Section 851 will be an issue to follow closely.
DFARS 252.240-7995 of the class deviation sets out the representation that a defense contractor makes when submitting an offer of a contract:
(b) Representation. The Offeror represents by submission of its offer that it is not an entity, a parent company of such entity, or a subsidiary of such entity that is a party to a contract with a covered lobbyist.
This provision defines “covered lobbyist” and “lobbying activities” consistently with Section 851 and the DFARS provisions discussed above. Although DFARS 252.240-7995 requires contractors only to represent their compliance with the Section 851 prohibition concerning covered lobbyists, it also—without explanation or any apparent operative purpose—recites the broader definition of “Chinese military company.” The inclusion of that broader definition conflicts with the narrower definition of “covered lobbyist,” which focuses only on designation to the 1260H list.
Despite this drafting choice, its seems prudent for defense contractors to take some action to evaluate their outside lobbyists and other consultants against the 1260H list—not the broader set of national security screening lists incorporated into the definition of “Chinese military companies”—and to maintain records of this due diligence, as covered in our previous client alert. Defense contractors should also consider collecting written certifications or other artifacts from their consultants and prospective consultants confirming that those outside consultants do not engage in lobbying activities for any Chinese military companies appearing on the 1260H list.
If you have any questions concerning the material discussed in this client alert, please contact these members of our Election and Political Law and Government Contracts practices.
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