Section 889 is a significant change to Federal procurement, and it could impact almost every contractor doing business with the Government. Essentially, Section 889 aims to protect National Security by limiting the government’s access to “covered” equipment or services manufactured or provided by certain companies or their subsidiaries or affiliates with known ties to the People’s Republic of China.
Specifically, Section 889, the Prohibition on Certain Telecommunications and Video Surveillance Services or Equipment, of the 2019 National Defense Authorization Act prohibits the Federal Government from obtaining or extending a contract to obtain “any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.” This rule was put into place to prevent cyber-attacks and efforts to exfiltrate information and intellectual property by foreign adversaries which pose risks for the U.S. government and industry.
Covered technology prohibited under Section 889 includes telecommunication equipment and services produced by Huawei, ZTE Corporation, or any subsidiary/affiliate of either of these entities. In addition, covered technology includes video surveillance and telecommunication equipment and services produced Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, Dahua Technology Company, or any of their subsidiaries/affiliates. The statute also allows for the Secretary of Defense, in consultation with the Director of National Intelligence or the Director of the FBI, to add to this list.
Contractors should be aware that Section 889 does not have an exemption for commercial item contracting, and that the prohibition applies to all purchases regardless of the size of the contract or order (including purchases below the Micro-purchase and Simplified Acquisition Thresholds). There are two parts of Section 889.
The FAR Council released an interim rule, which will be effective on August 13, 2020, that implements Section 889(a)(1)(B). This interim rule requires contractors to provide a representation, after conducting a “reasonable inquiry,” regarding their use of covered telecommunications equipment or services when submitting an offer. The interim rule applies to acquisitions of commercial items, including COTS items, and to purchases at or below the simplified acquisition threshold. Contracts, task orders, delivery orders, blanket purchase agreements, and basic ordering agreements must contain a clause that requires reporting if use of covered telecommunications equipment or services is discovered during performance of the contract.
The rule’s revisions to 52.204-25 (the Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment discussed further below) define “reasonable inquiry” as
an inquiry designed to uncover any information in the entity’s possession about the identity of the producer or provider of covered telecommunications equipment or services used by the entity that excludes the need to include an internal or third-party audit. [Emphasis added.]
It is important to note that, unlike the case regarding the prohibition under Section 889(a)(1)(A), which flows down to all subcontractors, the Section 889(a)(1)(B) prohibition
will not flow down because the prime contractor is the only ‘entity’ that the agency ‘enters into a contract’ with, and an agency does not directly ‘enter into a contract’ with any subcontractors, at any tier. [Emphasis added.]
There are two exceptions in the interim rule.
It is important to recognize the context here. The law speaks to “telecommunications equipment that cannot route or redirect user data traffic or [cannot] permit visibility into any user data or packets that such equipment transmits or otherwise handles.” (889(a)(2)(B))).
Agency heads may grant contractors a one-time waiver if the contractor shows a compelling reason for needing extra time to implement Section 889 requirements. An offeror will represent its status with a proposal. The CO will decide whether a waiver is needed for award and then require the offeror to provide the aforementioned compelling justification; the “laydown” of the presence of covered equipment or services in the offeror’s supply chain; and a “phase-out plan” to eliminate that covered equipment or services from the offeror’s systems. An offeror is not precluded from submitting such information in advance with its offer, apparently to expedite matters.
Separate emergency waiver provisions appear in the statute, but otherwise, a number of procedural steps have been added to the waiver process. Before the head of an agency can authorize a waiver, the agency must designate a senior supply chain risk management official; participate in Federal Acquisition Security Council (FASC) activities when required by that council; inform and consult with the Office of the Director of National Intelligence (ODNI) on the waiver; and, 15-days before granting the waiver, inform FASC and ODNI.
See Section 889 Law and Regulations to find the FAR Clauses that are required for all solicitations, contracts, contract extensions, and task/delivery orders.
The FAR Council released an interim rule, which became effective on August 13, 2019, that implemented Section 889(a)(1)(A). This interim rule prohibited agencies from procuring covered telecommunications equipment or services of the firms identified in the above section if they are a substantial or essential component of any system or used as a critical technology as part of any system, including, for the “purpose of public safety, security of Government facilities, physical security surveillance of critical infrastructure, and other national security purposes, video surveillance and telecommunications equipment.” A substantial or essential component is defined as “any component necessary for the proper function or performance of a piece of equipment, system, or service.”
There are two exceptions in the interim rule.
Agency heads may grant contractors a one-time waiver if the contractor shows a compelling reason for needing extra time to implement Section 889 requirements and identifies the equipment or services, and the agency head reports the waiver to the appropriate committees of Congress, along with an identification of the situation and a plan for redress.
See Section 889 Law and Regulations to find the FAR Clauses that are required for all solicitations, contracts, contract extensions, and task/delivery orders.
GSA developed a class deviation from the Federal Acquisition Regulation (FAR) that includes three actions:
The deviation changes the applicability of FAR 4.2105, under which contractors are required to represent at both the contract and order level whether they will provide telecommunications equipment or services to the government. For certain medium and low-risk GSA contracts, for which there is a reduced likelihood of covered telecommunications equipment or service being utilized, representation will only be required at the contract level. The deviation establishes GSA-specific implementation timelines for new solicitations, pending awards, and existing contracts.
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