Since August 13, 2019, the government has been prohibited from procuring equipment or services using “covered telecommunications equipment or services” as a substantial or essential component of any system according to the implementation of Section 889(a)(1)(A) of the National Defense Authorization Act for Fiscal Year 2019 (FY19 NDAA).
Beginning on August 13, 2020, according to the implementation of Section 889(a)(1)(B), the government is prohibited from contracting with an entity that uses any equipment or services using “covered telecommunications equipment or services” as a substantial or essential component of any system or as critical technology as part of any system. This applies regardless of whether the use of the prohibited equipment or services is in the performance of work under a government contract.
Steps for Compliance
The interim rule implementing Section 889(a)(1)(B) provides government-recommended steps to take for compliance, including the following:
- Regulatory familiarization.
- Corporate enterprise tracking (including reviewing subcontractor and supplier relationships).
- Cost of removal.
- Representations to the government.
- Phase-out plan and waiver information.
Updates and Changes
The interim rule also provides some important updates and changes to what was anticipated and/or currently applies for Section 889(a)(1)(A) compliance:
- Exceptions: Contractors are not prohibited from providing (1) a service that connects to facilities of a third party, such as backhaul, roaming, or interconnection arrangements; or (2) telecommunications equipment that cannot route or redirect user data traffic or permit visibility into any user data or packets that such equipment transmits or otherwise handles.
- Waivers: Contractors may seek a one-time waiver on a case-by-case basis that will expire no later than August 13, 2022. Contractors will remain eligible to submit a bid or proposal for the time being—the waiver process is initiated by the offeror’s representation that it does use covered telecommunications equipment or services. The contracting officer will then determine whether a waiver is necessary and will seek additional information from the contractor to begin the formal waiver request. A waiver is agency-specific and the agency may determine that it must make an award to an offeror that does not need a waiver in the interest of time.
- Affiliates: As of now, the prohibition only applies to the contracting entity and not its affiliates or subsidiaries. The FAR Council is considering expanding the prohibition to “the offeror and any affiliates, parents, and subsidiaries of the offeror that are domestic concerns.” If expanded, the FAR Council expects this will become effective no later than August 13, 2021.
- Representations: Although the prohibition does not currently apply to affiliates or subsidiaries, contractors should carefully consider their unique system before making representations to the government. For example, the contracting entity itself may not use prohibited equipment or services “as a substantial or essential component of any system, or as critical technology as part of any system” but if an affiliate does and they share a system, the contractor’s representation may not be accurate if it does not consider that affiliate’s impact on its system.
- Subcontractors: While the prohibition at Section 889(a)(1)(A) applies to subcontractors, the prohibition at Section 889(a)(1)(B) applies at the prime contractor level, meaning a prime contractor may subcontract with an entity that uses such equipment or services (provided those equipment or services are not used in the performance of the contract).
When Will the New Clauses Apply?
These new clauses are effective August 13, 2020, and are required to be incorporated into the following:
- Solicitations issued on or after this date.
- Contracts awarded on or after this date.
- Solicitation issued before this date where the contract will be awarded after this date.
- New orders under existing IDIQ contracts.
- Existing contracts when an option is exercised.
- Existing contracts when modified to extend the period of performance.
If you have any questions about the interim rule or compliance with the prohibition on certain telecommunications and video surveillance services or equipment, please contact the authors or any member of our Government Contracts Practice Group.