FAR Council Implements Interim FAR Rule Prohibiting Contractor Use of Chinese Telecom Products

The FAR Council recently moved forward with implementing provisions of Section 889(a)(1)(B) of the 2019 NDAA through an interim rule. This rule, effective August 13, 2020, furthers the work begun previously of separating the federal government and its contractors from certain Chinese telecom and video surveillance companies.

Last year, the FAR Council issued a rule to implement Section 889(a)(1)(A) of the 2019 NDAA. In that rule, the FAR Council amended the FAR to prohibit agencies from procuring or obtaining equipment or services that used telecom equipment produced or provided by certain Chinese companies. It required contractors to represent whether they would provide covered telecom equipment or services, and it gave contractors a single business day to report covered telecom equipment or services discovered during contract performance.

But Section 889(a)(1) of the 2019 NDAA did not just prohibit agencies from procuring equipment or services from certain Chinese telecom companies. It also prohibited, under Section 889(a)(1)(B), federal executive agencies from from initiating, renewing, or extending a contract with a contractor that uses any equipment, system, or service that uses covered telecom equipment as a substantial or essential component of any system. The statute covers telecom equipment and services produced or provided by Huawei Technologies Company or ZTE Corporation (or their subsidiaries or affiliates) and video surveillance or telecom products produced or provided by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any of their subsidiaries or affiliates). The prohibition is designed to avoid disruptions to the operations of the federal government and its contractors and the exfiltration of sensitive data from contractor systems, which could harm important governmental, privacy, and business interests.

So under the new rule, “[c]ontracting officers shall include the provision at FAR 52.204-24, Representation Regarding Certain Telecommunications and Video Surveillance Equipment and clause at FAR 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment as prescribed–[i]n solicitations issued on or after August 13, 2020, and resultant contracts; and [i]n solicitations issued before August 13, 2020, provided award of the resulting contract(s) occurs on or after August 13, 2020.” It also requires contracting officers to modify existing indefinite delivery contracts to include the appropriate FAR clause on future orders. In exercising options or modifying existing contracts or task orders to extend the period of performance, contracting officers should also include the pertinent clause. To assist implementing this new rule, DoD issued a memorandum with some additional guidance.

The rule does allow for the head of an executive agency to grant a one-time waiver from 889(a)(1)(B) on a case-by-case basis that will expire no later than August 13, 2022. Agencies will grant waivers through market research and feedback from offerors during the acquisition process. In fact, offeror representations about the equipment it intends to use will play a large role in determining whether an agency might issue a waiver. Overall, however, the waiver process is intentionally designed to be difficult. So don’t plan on waivers becoming a routine practice.

At this point, the federal government is getting very serious about enforcing the prohibitions on certain Chinese telecom products and services. It doesn’t even want its contractors using those products. Be on the look out, in new solicitations and otherwise, for FAR 52.204-24 and FAR 52.204-25 and their required representations.

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