Government Contracts & Investigations

Another (Minor) Step in the Evolution of Section 889(a)(1)(B) Obligations

By | August 27, 2020

In the latest development relating to the implementation of Section 889 of the National Defense Authorization Act for FY 2019, a second interim rule was issued on August 27, 2020. We previously reported on the Federal Acquisition Regulation (FAR) Interim Final Rule on Section 889(a)(1)(B)’s aspects of the ban, which applies to government contractors whether or not their use is for government contracts, and was scheduled to go into effect on August 13, 2020. More recently, we noted an “after the bell” reprieve granted to the Department of Defense (DoD) in the form of permission to use a temporary waiver for “procurement of goods and services in support of DoD’s statutory mission” pending assessment of a broader waiver request.

The new rule comes as no surprise, since the Interim Final Rule explained that the DoD, General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) were working on updates to the System for Award Management (SAM) to allow contractors to make Section 889(a)(1)(B) representations annually—instead of in connection with each proposal or offer—in order to reduce the information collection burden on contractors. This approach echoes the approach taken in connection with Section 889(a)(1)(A) through an interim rule issued December 13, 2019.

The rule becomes effective October 26, 2020 and is prescribed for use in all solicitations. It adds an annual representation at paragraph (c)(2) of FAR 52.204-26, Covered Telecommunications Equipment or Services, that requires an offeror to represent, after conducting a reasonable inquiry, whether it “does” or “does not” use covered telecommunications equipment or services, or any equipment, system or service that uses covered telecommunications equipment or services. The commercial item equivalent is now at paragraph (v)(2)(ii) of FAR 52.212-3, Offeror Representations and Certifications—Commercial Items. Both of these updated FAR clauses will be included among the SAM representations and certifications.

If an offeror represents it “does not,” it need not make offer-by-offer representations. In contrast, and consistent with the preliminary guidance in the Interim Final Rule, the new rule makes clear that an offeror representing it “does,” or not making any representation in FAR 52.204-26(c)(2) or 52.212-3(v)(2)(ii), must make the representation of additional information about the covered telecommunications equipment or services in question, as required by FAR 52.204-24(d)(2). The (d)(2) representation, which differs somewhat depending on the nature of the equipment or services at issue, essentially requires the submission of detailed information about: (i) the covered telecommunications equipment or services the offeror uses; (ii) the entity that manufactures and/or distributes such equipment or services; (iii) an explanation of the proposed use of the equipment or services; and (iv) any factors relevant to determining if such use would be permissible under the prohibition in paragraph (b)(2) of this provision. Such factors are then to be used by contracting officers (COs) to determine whether the covered telecommunications equipment or services are used as a substantial or essential component of, or as critical technology as part of, any system, and whether they fall within one of the exceptions established in paragraph (b)(2). These factors would likely also be taken into account by COs and other government personnel when considering to grant temporary waivers under the Interim Final Rule.

The new interim rule does not explain exactly how, or to whom, the (d)(2) representation must be made. But given the fact that the representation is for use by the CO, its submission is presumably to be made to the CO to whom the offer or proposal is addressed—likely in the offer or proposal itself. Hopefully, the FAR Council or individual agencies will soon provide more detailed procedures, but for now offerors will need to make a good faith effort to provide the (d)(2) representation and information to every CO to whom they send an offer.

At the end of the day, the latest interim rule implementing Section 889(a)(1)(B) essentially does precisely what the Interim Final Rule promised it would and adds the requisite representations to the clauses that will allow some offerors (those representing “does not” in paragraph (c)(2)) to avoid offer-by-offer representations. But it provides no relief to any offeror that represents it “does” and must, therefore, submit additional information to the CO with each of its offers. Contractors who find themselves in the latter situation should prepare a standard submission containing all relevant data. They should also identify steps to eliminate their use of covered telecommunications equipment or services, as an individual CO’s decision is limited to the procurement in question and even the waivers potentially available under the Interim Final Rule are only temporary.

Public comments on the interim rule must be submitted by October 26, 2020. We will continue to monitor and report on Section 889 developments.

Contact Eric Whytsell for more information.