“Time to Choose”: Why DoD’s New DFARS Conflict-of-Interest Rule Matters for Consulting Contractors

In an interview for Federal News Network, host Terry Gerton and Venable partner Diz Locaria unpack a final Defense Federal Acquisition Regulation Supplement (DFARS) rule that tightens award eligibility for consulting firms with foreign government ties. The rule implements Section 812 of the FY 2024 NDAA and takes effect October 24, 2025. In essence, DoD may not award contracts assigned a NAICS code beginning with 5416 (management, scientific, and technical consulting services) to an offeror that is simultaneously providing consulting services to certain “covered foreign entities,” unless the offeror can meet demanding certification and mitigation requirements. The discussion highlights both the breadth of the policy and the practical ambiguities that contractors must grapple with as agencies begin to enforce it. (Federal News Network)

The Federal Register notice makes the stakes explicit: Section 812 directs DoD to prohibit awards for consulting services under NAICS 5416 where an offeror (including subsidiaries and affiliates) holds contracts involving consulting services with covered foreign entities, absent an acceptable, auditable conflict-of-interest (COI) mitigation plan. DoD implements this via a new DFARS provision and clause—DFARS 252.209-7012—requiring an offeror’s certification and, where applicable, a mitigation plan. The final rule’s compliance architecture therefore reaches beyond a U.S. operating company to its global network of affiliates—posing acute diligence, governance, and information-barrier challenges for multinational firms. (Federal Register)

The interview underscores several grey areas that will shape early implementation. First, although the rule includes carve-outs (e.g., legal, audit, tax, and participation in judicial or similar proceedings), their application is not mechanical. Multidisciplinary firms often deliver interlocking service lines, and contracting officers will still assess whether activities outside the carve-outs create disqualifying conflicts; overflow between affiliates or business units can defeat a narrow reading of the exceptions. Second, the mitigation path is real but demanding: plans must identify covered relationships and explain how conflicts will be prevented—potentially using firewalls, data-segmentation, staffing and IT separations, and continuous monitoring. The expectation that such plans be “auditable” heightens the need for durable, evidence-ready controls rather than aspirational policies. Third, contractors should anticipate inconsistent treatment across buying offices until DoD issues more granular guidance; those inconsistencies are fertile ground for bid protests, a risk the interview expressly flags. (Federal News Network)

For federal contractors outside NAICS 5416, this rule is still a signal. It aligns with a broader government focus on organizational conflicts of interest and on limiting simultaneous work for U.S. agencies and foreign governments in sensitive domains. In January 2025, the FAR Council proposed a government-wide OCI framework that would formalize mitigation plans and limitations on future contracting; while distinct from DFARS Section 812, the trajectories are complementary, suggesting increasing scrutiny of cross-border influence and knowledge transfer risks across the procurement system. (Federal Register)

Practically, consulting firms competing for DoD work should act now. First, map the enterprise: inventory all consulting engagements with state-linked entities in covered countries across subsidiaries and affiliates; confirm beneficial ownership and control to identify “affiliates” under the rule. Second, design controls that can withstand an audit: define role-based access, separate networks or tenants where appropriate, implement conflict checks at intake, and document procedures to avoid cross-pollination of insights between foreign and U.S. public-sector teams. Third, prepare for procurement variance: tailor mitigation submissions to the program and mission risk profile, yet maintain a central governance playbook to drive consistency across competitions. Finally, recognize the competitive dynamic the interview highlights: firms without foreign ties may market themselves as “clean” alternatives; firms with ties must raise the evidentiary bar with rigorous, tested mitigation. (Federal News Network)

Credit: Reporting and interview by Terry Gerton with guest Diz Locaria, Federal News Network. For the governing text and effective date, see the DFARS final rule and practitioner summaries. (Federal News Network)

Disclaimer: This article is for informational purposes only, reflects a good-faith summary of public sources at the time of writing, and does not constitute legal advice. Contractors should consult qualified counsel for advice tailored to their specific facts and solicitations.