DoD Guidance Narrows Section 851 Ban to 1260H List
The guidance diverges from the broader definition in the DFARS class deviation, contractors get a narrower compliance target but face two standards that don't align.
TL;DR
DoD published guidance interpreting the Section 851 NDAA FY2025 prohibition on defense contractors retaining consultants tied to Chinese military companies. The guidance ties the ban specifically to entities on DoD's 1260H list, rather than the broader "Chinese military company" definition found in the DFARS class deviation that implemented the prohibition. For contractors, that means vetting consultants against a known list rather than an open-ended category, but the mismatch means both standards are arguably in play, and satisfying one doesn't guarantee satisfying the other.
DoD's new guidance, titled "PROJECT CLEAR Contractor Lobbying Evaluation for Adversarial Relationships," directs contractors to evaluate consultant relationships specifically against the Department's 1260H list, the roster of companies DoD has determined are Chinese military companies operating directly or indirectly in the United States. That's a narrower scope than what appeared in the DFARS class deviation issued June 29 and revised July 16, which carried a broader "Chinese military company" definition drawn from the statutory text of Section 851.
The mismatch matters. The class deviation defines "Chinese military company" expansively, covering entities the Secretary of Defense determines meet the criteria in 10 U.S.C. § 4663, without limiting the determination to the 1260H list. The guidance, by contrast, treats the 1260H list as the operative compliance checklist. A contractor vetting consultants against the guidance alone could clear a firm that has no 1260H-listed ties but nonetheless falls within the deviation's broader definition. Which standard would survive a contract termination or debarment proceeding is an open question, and that uncertainty is itself a compliance problem.
Due diligence in the dark
For the general counsel or compliance director who has to operationalize this by Monday, the guidance offers a starting point (screen consultants against the public 1260H list) but stops well short of a safe harbor. It doesn't address whether a consultant's mere business presence in China triggers concern, or where to draw the line on indirect affiliations. The guidance also gives no weight to whether the consulting work relates to the consultant's China connections at all, which means the prohibition is effectively a status-based bar rather than a conduct-based one.
Contractors with existing consultant relationships face the hardest call. Terminating a consultant because they appear on the 1260H list is straightforward. The harder case is the consultant who has no listed ties but whose corporate structure, client base, or ownership touches China in ways the deviation's broader language might capture. In that scenario, the guidance says one thing and the deviation says something else, and the contractor bears the risk of guessing wrong.
Published ·Deep Fathom