Frequent readers of this blog will recognize that the Coalition has been engaged in connection with the implementation of Section 889 of the John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115-232). Recall, Section 889(a)(1)(A) prohibits agency heads from procuring, extending, or renewing a contract for equipment or a system or service that uses telecommunications equipment or services of certain Chinese entities “as a substantial or essential component of any system, or as critical technology as part of any system… .” Those entities include, among other companies, Huawei Technologies Company and ZTE Corporation. In addition, Section 889(a)(1)(B) prohibits agency heads from entering into or extending or renewing a contract “with an entity that uses any equipment, system, or service that uses telecommunications equipment or services of certain Chinese covered entities “as a substantial or essential component of any system, or as critical technology as part of any system.”
Members should be aware that Section 889 is one of the most consequential changes to the procurement system in recent years. Indeed, it could impact almost every company that sells products or services to the Federal Government.
On August 8, 2019, the FAR Council issued an interim rule, “Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment,” implementing the prohibition of section 889(a)(1)(A), and that rule provided no exceptions for commercial items or for purchases below the micro purchase and simplified acquisition threshold. The Coalition filed comments in response to this interim rule the following October. Draft rules implementing section 889(a)(1)(B) are expected shortly, and final rules are due to be effective in August 2020. The Coalition anticipates participating in that regulatory activity, as well.
GSA also issued a class deviation on August 13, 2019 addressing Section 889 implementation for GSA contracts. For all existing and new GSA contracts, a representation is required as to whether a contractor “will [or] will not provide covered telecommunications equipment or services to the Government in the performance of any contract, subcontract or other contractual instrument.” The deviation takes a “risk-based” approach to applying the representation requirements, with the deviation applicable as the risk of use of covered equipment and services decreases.
The implementation of Section 889 is important to all stakeholders in the government market. Recognizing the importance of this issue going forward, the Coalition will establish a Section 889 resource page on our website. There, members will be able to follow relevant documents as they become available and utilize them as they see fit. In addition, on February 5th, the Coalition will host a special one-hour webinar, “What Every Federal Contractor Needs to Know about NDAA Section 889.” The program will feature Sheppard Mullin’s Jonathan Aronie and GSA’s Michael Thompson. The webinar will provide an overview of the rule, explain its scope, and suggest compliance best practices. The presenters also address frequently asked questions including questions regarding the application of the rule to overseas affiliates, the reach of the rule to parents and subsidiaries, the usefulness of vendor certifications, and the scope of the August 2020 “use” prohibition.
As demonstrated by the foregoing, the Coalition remains committed to informing the implementation of Section 889. To that end, we ask that members continuing providing their feedback as the statute’s implementation unfolds. It is our hope that the final rules provide a workable construct that safeguards the nation and permit continued collaboration between the government and its partner/suppliers.