What Federal Contractors Need to Know about Section 889

What is Considered Prohibited Technology?

Section 889 Part A

Interim Rule

Class Deviation

Section 889 Part B

Interim Rule

Section 889 Laws and Regulations

Coalition Resources on Section 889

Member Resources on Section 889

Additional Government Resources

 

 

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.

 

​What is Considered Prohibited Technology?

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.

 

Section 889 (a)(1)(B)

  • The government cannot enter, renew, or extend a contract with a company that uses any equipment, system, or service that uses covered technology
  • Extends to all sectors: e. banking, healthcare, information technology, higher education, travel and transportation, professional services, etc.
  • Applies to both Federal AND commercial business
  • Applies to both domestic and overseas locations
  • Applies to technology used when employees are working from home
  • Applies to technology used to developing software
  • Effective August 2020

 

Interim Rule

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.

  1. Telecommunications equipment does not access or interact with the data it touches.
  2. If a service connects to the facilities of a third-party, such as backhaul, roaming, or interconnection arrangements.

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.

 

Section 889(a)(1)(A)

  • The government cannot procure or obtain products that use the prohibited covered technology as a substantial or essential component of any system, or as critical technology as part of any system.
  • Effective August 2019

 

Interim Rule

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.

  1. Telecommunications equipment does not access or interact with the data it touches.
  2. If a service connects to the facilities of a third-party, such as backhaul, roaming, or interconnection arrangements

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 Class Deviation

GSA developed a class deviation from the Federal Acquisition Regulation (FAR) that includes three actions:

  • The deviation creates a new GSAR clause which requires annual representation for all GSA contracts, commercial solution opening procurements (CSOs), and lease acquisitions.

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.

 

Section 889 Law and Regulations

  1. Section 889 of the FY2019 National Defense Authorization Act
  2. Interim Rule: Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment
  3. FAR Subpart 4.21 Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment
  4. FAR 52.204-24 Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment
  5. FAR 52.204-25 Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment
  6. GSAR Class Deviation
  7. GSA Mass Modification
  8. DoD Memo: Implementation of the Sectio 889(a)(1)(B) Prohibition on Contracting with Entities Using Certain Telecommunications and Video Surveillance Services or Equipment
  9. FAR and GSAR Class Deviation – Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment
  10. FAR Council – Information Collection; Prohibition on Contracting with Entities Using Certain Telecommunications and Video Surveillance Services or Equipment
  11. ODNI – DoD Request for Waiver of Section 889 of Fiscal Year 2019 NDAA 

 

 

Coalition Resources on 889

  1.  Section 889, Update on Interim Rule – Crowell & Moring (08/11/20)
  2. Webinar: Interim FAR Rule covering Part B of Section 889 (members can sign-in to access this webinar. Fees range from complimentary to $50 depending on membership tier.)
  3. Blog: “Section 889” ZTE and Huawei Prohibitions for All Federal Contractors to Consider
  4. Webinar: What Every Federal Contractor Needs to Know About NDAA Section 889— The New Supply Chain Rule Regarding Selling and Using Chinese Products and Components.
  5. Slides from Section 889 Webinar
  6. Comments on GSA Bilateral Modification to Implement Section 889
  7. Blog: Section 889: Continuing Coalition Member Engagement
  8. Blog: Section 889 Meets Section 846 – Challenges Remain, But So Do Opportunities

 

 

Member Resources on 889

  1. Blank Rome’s Government Contracts Navigator blog posts on Section 889
  2. August 13, 2020, Deadline for Healthcare Providers and Life Sciences Federal Contractors: Ban on Use of Certain Chinese Telecommunications Equipment and Services – McDermott, Will & Emery (07/29/20)
  3. Part B Interim Rule Bans Contractors from Using Covered Technology Starting August 13th: 5 Steps for Meeting the Compliance Deadline – Blank Rome (7/28/20)
  4. Part B of Section 889 Legislation Goes Into Effect on August 13, 2020 – Centre Law & Consulting (07/24/20)
  5. “Section 889” Prohibition on “Use” of Covered Telecommunications Equipment by Federal Contractors Released as an Interim Rule – Covington & Burling (07/24/20)
  6. Interim Rule Implements Section 889 Ban on Contractors Using Technologies from Certain China-Based Companies – Steptoe & Johnson (07/16/20)
  7. FAR Council Publishes 2019 NDAA Section 889(a)(1)(B) Interim Rule Further Prohibiting Use of Huawei, ZTE, and Others’ Telecommunications Technology by Contractors – Crowell & Moring (07/14/20)
  8. Newly Released Interim Rule Implementing Part B of Section 889 – Blank Rome (07/13/20)
  9. S Government Releases Awaited “Section 889” Rule on Prohibition on “Use” of Covered Telecommunications Equipment by Federal Contractors – Covington & Burling (07/13/20)
  10. Long-Awaited Regulations Banning Use of Chinese Technologies Will be Effective August 13, Unless Congress Saves the Day – Miller & Chevalier (07/13/20)
  11. Contractors: Are you Prepared for the Statutory Ban on Using Chinese Telecommunications Equipment and Services? – Miller & Chevalier (3/10/20)
  12. Law 360 – Broad Defense Policy Restrictions Put Higher Ed at Legal Risk – Jonathan Aronie (01/30/20)
  13. Why the Health Care Industry Should Be Concerned About Section 889 of the 2019 National Defense Authorization Act – Sheppard Mullin (1/20/20)
  14. The Long Reach of Section 889 (aka the Anti-Huawei Rule) – Jonathan Aronie, Townsend Bourne, and Scott Maberry (12/6/19)
  15. 5 Tips for Complying with New Section 889 Supply Chain Regulations – Blank Rome (10/7/19)
  16. GSA Implements Restrictions on Certain Chinese-Made Telecommunications Services and Equipment – Sheppard Mullin (9/27/19)
  17. Section 889 Ban on Select China-Based Products: Solutions for Overcoming Regulatory Disruption – Baker Tilly (9/24/19)
  18. Know Your Supplier: Effective August 13, 2019, Certain Chinese Telecoms Prohibited From Federal Procurement – McCarter & English (08/12/19)

Any member law firms who like to submit their resources for inclusion on this page, please email Michael Hanafin at mhanafin@thecgp.org.

 

Additional Government Resources

  1. GSA FAS 889 Part B Contract Vehicle Modification Tracking Dashboard
  2. GSA SmartPay Bulletin – Card Management Implications and Information for Agency Consideration in Relation to the Section 889 Prohibition on Acquiring Certain Telecommunications and Video Surveillance Equipment
  3. GSA SmartPay Bulletin – Interim Federal Acquistion Regulation (FAR) Rule Prohibiting Acquiring Certain Telecommunications and Video Surveillance Equipment or Services
  4. Governmentwide Commercial Purchase Card Guidance related to Implementation of the Section 889(a)(1)(B) Prohibition on Contracting with Entities Using Certain Telecommunications and Video Surveillance Services or Equipment
  5. Workforce Guidance on FY2019 NDAA Section 889 “Part B”
  6. DoD Section 889 Part B Compliance Memo
  7. GSA Section 889 Q&A
  8. 2019 National Defense Authorization Act
  9. GSA Guidance on Section 889 FAR Rule
  10. 889 GSA Class Deviation FAQs
  11. Final Slides Section 889 GSA Industry Day Presentation (11/6/19)