Senators push for stricter rules on companies advising the U.S. and adversaries like China and Russia

A bipartisan group of senators wants to impose stricter rules on consultant companies seeking federal contracts, requiring them to disclose if they are carrying out work advising foreign adversaries including China and Russia.

The senators are proposing legislation that would mark a new approach in Washington after years of minimal regulation of firms that advise the Pentagon or other federal agencies on national security-related contracts, according to government watchdog groups.

“It seems entirely reasonable that we would want to know whether the companies that have the privilege of working with the United States government and receiving taxpayers’ money are doing business with autocracies like China or Russia,” said Scott Greytak, director of advocacy at Transparency International U.S., a nonprofit promoting efforts to fight corruption.

The bill, which was introduced Wednesday, calls for new regulations that would help government agencies identify potential conflicts of interest within consulting firms or other government contractors and, if necessary, deny the firms from being awarded national security-related contracts.

“America’s adversaries, like China and Russia, are aggressively working against our national security interests, so why then would we allow government contractors closely tied to these adversaries to advise our military and Pentagon officials?” said Republican Sen. Joni Ernst of Iowa, one of the sponsors of the bill. 

“At the very least, this is a clear conflict of interest, but more seriously, it could pose a threat to our national security,” Ernst told NBC News.

Congressional aides said the bill was prompted by reporting by NBC News and The New York Times about American consulting firm McKinsey & Co.’s work advising state-owned companies in China and Russia as well as the Pentagon and U.S. intelligence agencies. 

NBC News has reported that McKinsey’s consulting contracts with the federal government give it an insider’s view of U.S. military planning, intelligence and high-tech weapons programs. But the firm has also advised Chinese state-run enterprises that have supported Beijing’s naval buildup in the Pacific, and Russia’s main weapons manufacturer, Rostec, which supplies many of the missiles and other weapons now being used in the invasion of Ukraine.

The proposed legislation does not name McKinsey, which did not immediately respond to a request for comment.

McKinsey has said it does not see its recent work in Russia or in China as posing a conflict with its consulting for the Pentagon and other federal agencies. A company spokesperson, Neil Grace, previously told NBC News that McKinsey has strict rules and firewalls to safeguard against conflicts of interest, and that its work abroad is walled off from its work in Washington.

“As we have stated previously, McKinsey complies with all applicable U.S. contracting laws, including those regarding conflicts of interest,” Grace said. “When we serve the U.S. government, we do so through a separate legal entity with separate operational structures and separate information technology where required.”

After Russia’s invasion of Ukraine in February, McKinsey — along with hundreds of other corporations — halted its operations in Russia indefinitely. McKinsey continues to operate in China though it does not disclose details about its clients and consulting, citing the need for confidentiality.

There is no evidence or allegation that McKinsey has damaged U.S. national security, and U.S. authorities have not charged the firm with violating federal contracting laws related to its work with Chinese clients.

Sen. Gary Peters, D-Mich., chairman of the Senate Homeland Security and Governmental Affairs Committee, sponsored the bill – called the CONSULT Act, or Combating Obstructive National Security Underreporting of Legitimate Threats – along with Ernst and Sen. Maggie Hassan, D-New Hampshire.

“Contractors that do business with the U.S. government and the governments of foreign adversaries like Russia and China can create unacceptable conflicts of interest that present serious national security risks,” Peters said.

The “bill will ensure that taxpayer dollars are being used to serve the American people — and not foreign entities that threaten the safety of our country.” 

The legislation would require consulting firms to disclose any potential conflict of interest with foreign governments or entities deemed adversaries of the United States, including China, Russia, Iran and North Korea. The consulting firms would have to reveal active contracts, contracts held within the last five years, and any other relevant information linked to foreign adversaries, according to a draft text of the bill.

Under the proposed legislation, government officials could deny a federal contract to a company with conflicts of interest, and if a firm failed to disclose relevant information, it would be suspended or debarred from working on federal government contracts.

The CONSULT Act would reverse a yearslong trend that has seen regulations on conflicts of interest watered down, according to Scott Amey of the Project on Government Oversight (POGO), a nonprofit watchdog that investigates corruption and abuse in government.

Current law states that federal contracting officers trying to identify possible conflicts of interest “should avoid creating unnecessary delays, burdensome information requirements, and excessive documentation.”

Amey said the new bill represents “a congressional effort to put some more teeth in the rules, especially when it comes to foreign adversaries.” 

The U.S. government “frequently pays private businesses millions of taxpayer dollars to take on high-value national security projects,” said Noah Bookbinder, president of the nonprofit Citizens for Responsibility and Ethics in Washington. “In order to ensure the integrity of the services these businesses provide to our country, it is critical that we protect these contractual relationships from the reality or even the appearance of conflicts of interest,” he said.

Hassan last month called for a pause in all federal government contracts with McKinsey given the company’s past role advising both opioid-manufacturers and government regulators of medications at the Food and Drug Administration.