Honesty in Military Contracts Act of 1985

Honesty in Military Contracts Act of 1985 - Requires the Secretary of Defense, within 90 days after enactment of this Act, to issue proposed regulations to amend provisions of the Department of Defense Supplement to the Federal Acquisition Regulation dealing with the unallowability of contractor indirect costs.

Requires that such regulations must specify that certain costs are unallowable including: (1) advertising; (2) club dues; (3) automobiles for personal use; (4) commuting expenses; (5) use of corporate aircraft; (6) contributions or donations; (7) entertainment costs; (8) certain hotel expenses; (9) certain meal expenses; (10) fines and penalties; (11) lobbying costs; (12) first class air travel; (13) defense of fraud proceedings; and (14) gifts.

Authorizes the Secretary to make disallowances and to assess a penalty that may not exceed one-fourth of the amount of all general and administrative expenses for which reimbursement is sought if there is clear and convincing evidence that such expense is disallowable.

Treats as a false claim specifically punishable under specified Federal law an expense submitted by a contractor for reimbursement that was not actually incurred.