Three ways the proposed NDAA could change the way contractors do business

When Congress returns from the August recess and tackles the job of reconciling the House and Senate versions of the fiscal 2024 National Defense Authorization Act, companies doing business with the Defense Department will be watching several issues that could impact how they do business.

Several sections of the bill address oversight and accountability, including language limiting how soon government employees can go work for companies that do business with DoD.

An amendment in the Senate version of the NDAA would increase the length of time a former Pentagon official would have to wait before working for a company related to what the individual did at the Pentagon. The waiting period would last four years before the former employee could “[participate] in matters that affect the financial interests of their former employer, former clients, or former direct competitors,” said Sen. Elizabeth Warren (D-Mass.), who sponsored the amendment, in a statement.

The House version of the NDAA also has language offering more restrictions on industry employment after leaving civilian or uniformed DoD positions.

David Berteau, president of the Professional Services Council, an industry association, said plenty of those types of restrictions are already in place.

“The reality is that it’s actually quite useful for the government to have a better understanding of industries by having people who know how industry works serving in the government. And it’s useful for industry to have a better idea of how the government works by having people who come from the government working in industry,” Berteau said.

He pointed to AUKUS, the agreement between the U.S. and Australia, where Australia would buy U.S. submarines and other technology as an example of the benefits of former military personnel acting as consultants.

“That deal had, as one of the key elements of its success, former U.S. Navy officers — admirals, helping the Australians understand what was in the realm of the possible and crafting acceptance and enthusiasm for this across all sides,” Berteau said.

Both versions of the NDAA seek to put more restrictions on how and when defense contractors do business with foreign countries, focusing specifically on China and Russia.

The House NDAA specifically prohibits defense contractors and consultants who work with DoD from doing business with Russia, China or other banned state entities such as those on terrorist lists. Under the proposed legislation, contractors must either certify that neither they nor their subcontractors have had any dealings with foreign countries on the banned list or the contractor has to provide a “conflict of interest mitigation surveillance plan that is updated annually and shall be provided to applicable contract oversight entities upon request,” the bill said.

Companies would also have to show no involvement with the list of banned countries reaching back for five years.

“This means that you could have been doing business with somebody who was not on those lists five years ago or four years ago or three, but now is, and you can be as a company banned from doing business with DoD because of something that was perfectly acceptable, legal and in fact probably warranted in the past,” Berteau said. “Both the intent of that language and its implementation could cause a lot of serious problems depending on how it’s done.”

Another area where defense contractors could see changes in the way they do business is with protests. A provision in the House NDAA would require any contractor who is denied a protest bid to pay the costs of the protest. A summary of the proposed bill said it contained language that “Curtails wasteful contract disputes by establishing a loser pays pilot program to reimburse the taxpayer for costs incurred from contract award protests denied by the [Government Accountability Office (GAO)]”

Berteau said Congress attempted to pass similar legislation in the past but has never been successful, in part because the question of “who gets paid and how much?” never gets specifically answered.

“The benefits of a protest is it is one of the few tools that companies have to hold the government accountable for following its own procedures and regulations. You don’t want to remove that tool, because it is a great check on government not doing what it’s supposed to do,” he said.

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