FAR’s New Interim Rule Regarding the Banning of Certain Chinese Telecommunications Services or Equipment | Holland & Knight LLP

On Friday, December 13, the FAR Board issued a second interim rule implementing Section 899(a)(1)(A) of the National Defense Authorization Act of 2019. The interim rule adds annual representations to SAM.gov regarding particular Chinese manufacturers of telecommunications services or equipment.

As you may recall from our previous posts on the subject, Section 899(a)(1)(A) prohibits agencies from “procuring or obtaining, or extending or renewing an agreement to procure or 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”, unless an exception applies or a waiver n These prohibitions became effective August 13, 2019, through the issuance of FAR Circular 2019-05, which created FAR Subpart 4.21 and the corresponding Solicitation Provision and Contract Clause at FAR 52.204. -24 and FAR 52.204-25.

To recap, the provision of FAR 52.204-24 requires a bidder to declare, bid by bid, whether or not it will provide “covered telecommunications equipment or services to the government in performance of any contract, subcontract, contract or other contractual instrument resulting from this solicitation.” If an Offeror declares that it will be provide covered telecommunications equipment or services, the Offeror must provide certain additional information.

“Covered telecommunications equipment or services” is defined as including:

  • (1) Telecommunications Equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities);
  • (2) For purposes of public security, government facility security, physical security monitoring of critical infrastructure and other national security purposes, CCTV and telecommunications equipment produced by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company or Dahua Technology Company (or any subsidiary or affiliate of these entities);
  • (3) Telecommunications or video surveillance services provided by such entities or using such equipment; Where
  • (4) Telecommunications or video surveillance equipment or services produced or provided by an entity that the Secretary of Defense, in consultation with the Director of National Intelligence or the Director of the Federal Bureau of Investigation, reasonably believes to be an entity owned or controlled by , or otherwise related to the government of a covered foreign country.

Notably, the definition includes “any subsidiary or affiliate” of the five named Chinese entities, without naming the subsidiaries or affiliates of the entities. It also includes yet-to-be-identified entities that the Secretary of Defense, after consultation, reasonably believes to be related to the Chinese government. This will, of course, require contractors to continuously monitor the government’s identification of new entities and the impact this has on its supply chain.1

The portion of the original interim rule recorded in FAR 52.204-24 that required recertification in each offering was apparently found to be unduly burdensome. Instead, the new interim rule aims to reduce the burden on the contracting community by allowing an offeror to declare annually, via SAM.gov, whether it is providing covered telecommunications equipment or services. The new Annual Representation, FAR 52.204-26, requires an Offeror to declare whether it Is it that Where does not “provide covered telecommunications equipment or services as part of its products or services offered to the government in performance of any contract, subcontract or other contractual instrument.”

If an Offeror declares that it does not provide covered telecommunications equipment or services to the government in response to FAR 52.204-26, or in the new paragraph (v) added to FAR 52.212-3, it is not necessary to complete the declarations of FAR 52.204 -24. If the offeror declares that he Is it that provide covered telecommunications equipment or services, or has made no representations in FAR 52.204-26 or FAR 52.212-3(v), it must still complete the representations required by FAR 52.204-24. The objective is to require only those offerors who To do provide covered telecommunications equipment or services to the government to supplement FAR 52.204-24.

The interim rule states that the government will add prohibited entities to SAM.gov’s list of excluded parties, “with appropriate notation to identify that the prohibition is limited to certain products and services – the entity itself is not not excluded”. The representation to FAR 52.204-26 requires that an Offeror review the list of excluded parties on SAM.gov and confirm whether the equipment or services it provides to the government are from one of these entities. Notably, the amendment adding paragraph (d) to FAR 4.2102 provides that the government will list prohibited entities, “including known subsidiaries or affiliates,” in SAM.gov. The definition of “covered telecommunications equipment or services”, to include any subsidiary or affiliate of the five named Chinese entities, however, remains unchanged.

The interim rule also sets out the procedures in FAR 4.2103 that contracting officers must follow. The procedures provide that a procurement officer “may rely” on a contractor’s representation in response to FAR 52.204-24, FAR 52.204-26, or FAR 52.212-3(v), “unless the procurement officer has reason to question the representation.” So, while the definition of “covered telecommunications equipment or services” is not as definitive as it could be, it seems that an Offeror’s review of entities listed in SAM.gov (including any known subsidiaries or affiliates) and the statement that it does not provide equipment or services covered by these entities, should be used to satisfy government requests.

The interim rule will reduce the burden on offerors who do not provide covered telecommunications equipment or services by eliminating the need to complete FAR 52.204-24 in response to each offer. Comments on the interim rule are due by February 11, 2020.


Remarks

1 It will also be interesting to see if the government will use the process it has established and use the newly formed Federal Acquisition Security Council to identify new entities. One of the Council’s main tasks is to identify suppliers and products/services that should be removed from the government supply chain.

Sean B. Jackson