GSA’s Take on Implementation of Section 889
On September 10, 2020, the General Services Administration (“GSA”) hosted a webinar related to its implementation of Section 889 of the 2019 NDAA – the ban relating to certain Chinese telecom companies – and associated updated FAR clauses. (We previously have written about Section 889 here, here, here, and here). Below we provide highlights from the meeting. Slides presented at the meeting also are available here.
GSA began by clarifying what it cannot do – GSA is not able to provide contractors with a comprehensive list of subsidiaries and affiliates of the Chinese companies (the U.S. government has not released such a list), and it is not in a position to provide more insight into the definition of “use” under the rules. (We hope more clarity on these issues will be provided in response to comments submitted on the FAR interim rule).
The substantive portion of the webinar began with an overview of Section 889 Part A (the supply chain prohibition) and Part B (the “use” prohibition). For more detail on Part A and Part B, see our blog here. Specific topics of discussion included:
Contractor “Reasonable Inquiry”
As part of compliance with the Part B “use” prohibition, a prime contractor must conduct a “reasonable inquiry” to identify its use of any covered telecommunications equipment or services. In accordance with the interim rule updating the relevant FAR clauses, GSA explained that the reasonable inquiry review should include services/equipment owned by the prime contractor as well as services/equipment provided to the contractor by other companies (but the review need not extend beyond information in the prime contractor’s possession). Currently, when conducting this review, geographical location of the equipment or services used by the prime contractor does not matter. (As a reminder, reasonable inquiry is defined as “an inquiry designed to uncover any information in the entity’s possession about the identity of the producer or provider of covered telecommunications equipment or services used by the entity. A reasonable inquiry need not include an internal or third-party audit.”).
FAR Reporting Requirement
GSA noted the difference in the threshold for disclosure set forth in the FAR representation provision (FAR 52.204-24), which is broader than the FAR reporting requirement (FAR 52.204-25(d)). Prior to award, the contractor is required to make a representation regardless of whether an exception applies. However, during contract performance, the contractor is to report the identification only of covered services/equipment being “used as a substantial or essential component of any system, or as critical technology as part of any system.” Thus, reporting is not required if one of the stated exceptions applies (e.g., the services/equipment are not “substantial or essential.”). For the reporting requirement, the contractor is allowed to make a judgment on whether an exception applies.
In accordance with FAR 52.204-26, beginning October 26, 2020, all contractors that represent they do not provide or use covered services/equipment will be allowed to make an annual SAM representation going forward, rather than making a separate representation with each proposal submission.
Section 889 allows two types of waivers: (1) a waiver from the Office of the Director of National Intelligence (“ODNI”), which may exempt contractors from the rules for “national security interests,” and (2) an agency waiver, which can be made on a one-time basis, is valid for a maximum of two years, and functions more like delayed implementation of the rule rather than as a true waiver.
GSA announced it will seek waivers only as a “last resort,” and only in two circumstances: (1) for new procurements, where there are no other means to make an award in time to avoid government mission failure, and (2) for existing orders, where there are no other means to replace a contractor in a timely manner to avoid government mission failure. In either case, the bar is high.
Multiple Award Schedule (MAS) Contract Updates
GSA clarified that modifications to existing GSA contracts are coming out incrementally. Contractors will have 90 days to accept a modification, but are highly encouraged to do so sooner. GSA warned the contracting officer may opt not to exercise options or extend the period of performance in cases where contractors do not accept a modification. GSA is tracking contractor acceptance of MAS updates, and reported that most contractors (over 75%) have accepted the contract modifications to implement Section 889 requirements. GSA has even developed a dashboard to track the status of the Section 889 Part B contract vehicle modifications.
GSA encourages timely compliance with Section 889 requirements and advised contractors that they should be continuously reviewing their supply chains to ensure and maintain compliance with the requirements.