Expired: United States Department of Defense Waiver of Section 889 Part B Prohibiting Certain Telecommunications and Video Surveillance Services or Devices | Perspectives & Events

September 30, 2022 is the end of the US Department of Defense (“DoD”) two-year deadline waiver expired in relation to prohibitions on entering into contracts pursuant to Section 889(a)(1)(B) of the National Defense Authorization Act for Fiscal Year 2019.

As of fiscal 2019, agencies are legally prohibited from entering into contracts with companies that use certain corporate telecommunications equipment or services – Huawei Technologies being the most widely discussed example1– that Congress determined that they posed significant security risks to the United States and its manufacturing base. Government agencies were allowed to grant exceptions to these restrictions for two years, but that potential grace period has expired. On the other hand, the Director of National Intelligence (DNI) has a waiver power that is not subject to an expiration date. All contractors doing business with the government must comply with these essential restrictions.

Section 889(a)(1)(B) prohibits federal agencies from “entry[ing] into a contract (or[ing] or renew[ing] a contract) with a company that Used any device, system or service that covered telecommunications equipment or services as an essential or essential component of a system, or as a critical technology as part of a system” (emphasis added).

On September 29, 2020, the DNI granted at the request of the Under Secretary of Defense for Acquisition and Sustainment and after determining that the waiver was in the interest of United States national security. The DNI based its decision on information provided by the DoD. The waiver “allowed the DoD to continue to conduct procurement activities for certain Product Service Codes (PSC). [that were] classified as low risk [and also were] necessary to carry out the DoD mission”, including for food, clothing and transportation.

Section 889(d) granted heads of federal agencies exceptional powers once and on request, but that power expired on August 13, 2022. As a result, going forward, unless the DoD requires and the DNI approves an additional waiver, the DoD must comply with the prohibition of Section 889(a)(1)(B) and cease selling goods and services from DoD Obtain from contractors using covered telecommunications equipment or services. For example, if Contractor X has an office in Thailand using Huawei equipment, federal agencies cannot enter into a contract with Contractor X, regardless of whether Contractor X is otherwise compliant.

Contractors are reminded that they are required to declare, after conducting a reasonable investigation, that they use or do not use covered telecommunications equipment or services. These representations are contained in solicitations and contracts as part of FAR clauses 52.204-24 and 52.204-26.

Importantly, FAR 52.204-25(d) requires contractors to report accurately if they later discover use of covered telecommunications equipment or services during contract performance. In particular, the clause obliges a contractor – within one business day after discovery— to report this information. This FAR clause clarifies that “[i]n in the event that, during the performance of the contractor, the contractor identifies telecommunications equipment or services used as an essential or essential component of a system or as critical technology as part of a system, or the contractor by a subcontractor at any level or through any other source will be notified” the disclosure must be made within one day. Therefore, contractors remain obligated to assess whether they are using the Covered Equipment or Services during performance of the Contract and to prepare the required report.

The 2020 transitional arrangement2 The FAR Clauses’ implementation of Part B of Section 889(a)(1) warns that failure to provide an accurate representation “is a breach of contract, which may result in termination, cancellation and financial consequences.” Other risks include the possibility of making false claims due to failure to provide an accurate representation. As the transitional rule states, contractors should “develop a compliance plan and process that will enable them to determine compliance and provide accurate explanations to the government throughout the course of their bids.”

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