Part B of Section 889 Legislation Goes Into Effect on August 13, 2020
by Victoria Tollossa
Section 889 legislation initially introduced as a part of the Fiscal Year (FY) 2019 National Defense Authorization Act (NDAA) has now been released in Part A and Part B. Both parts have been incorporated into the Federal Acquisition Regulation (FAR) as FAR subpart 4.21 to combat national security and intellectual property threats against the United States. This legislation will impact any company doing business that uses equipment or services in their day-to-day operations from five specifically named companies, as they will no longer be able to sell any products or services to the U.S. government without obtaining a U.S. government waiver. Primary technologies impacted include telecommunications equipment, mobile devices (including smartphones), surveillance equipment, and cameras.
Part A of Section 889 went into effect August 13, 2019 as GSA MASS Modification A808: Prohibition on Contracting for Certain Telecommunications and Video Surveillance. This prohibits the government from buying certain prohibited telecommunications and video surveillance equipment and services produced by the below entities and their subsidiaries and affiliates:
- Huawei Technologies Company
- ATE Corporation
- Hytera Communications Corporation
- Hangzhou Hikvision Digital Technology Company
- Dahua Technology Company
The regulation allows for this listing of companies to be expanded as determined by Congress.
Part B goes into effect on August 13, 2020. This will prohibit the government from contracting with any entity that uses certain prohibited telecommunications and video surveillance equipment or services produced by the entities and subsidiaries listed in Part A of Section 889. This is regardless of whether that usage is in performance of work under a government contract. This will apply to all contracts for all dollar amounts.
Effective August 13, 2020 companies will not be awarded contracts or be able to exercise an option renewal on current contracts, until firms represent, they do not use any of the prohibited equipment or services anywhere within its business. To make this certification, companies will need to conduct internal reviews to its technologies to be compliant with Part B of section 889. The Subsection 889(a)(1)(B) Interim Rule seeks for contractors to conduct a “reasonable inquiry” – not just in an annual certification, but rather every time they submit an offer. The rule defines “reasonable inquiry” as an effort to uncover any information a business has about the identity of the producer or provider used by the entity – but it expressly excludes the need to include an internal or third-party audit. Once such a review is completed, if offending products or services are identified, contractors will need to enact a mitigation plan to remove any prohibited products and services found.
The regulation does not specifically identify how this will impact current awards, but when those awards come up for for consideration to renew the option, firms must provide the certification statement at that time or seek a waiver. Since FAR subpart 4.21 does not specifically direct contractors to adjust existing awards that may include offending products or services, the government customer is not financially responsible for any changes business must to make to be compliant. This means changes to overhead costs, price changes due to product adjustments, etc. may not be reimbursed by the government. If the waiver is not granted, the rule does not allow for a redetermination of pricing, nor does it put any responsibility on the GSA to issue additional funding modifications to offset the replacement and mitigation costs prime contractors may inherit due to this requirement once effective on August 13, 2020.
There are two avenues contractors can use to request waivers for Section 889: either via the Director of National Intelligence or via the General Services Administration (GSA). The requirements for both avenues are extremely strict and difficult to get accepted. While Congress did not include a requirement for agencies to conduct a national security analysis before granting waivers in the statute, the current administration has said this will be apart of executive implementation of the rule. Any waivers granted cannot extend beyond August 13, 2022.
It is reasonable to assume that vendors will need to include this certification when making updates to SAM.gov, and possibly during routine modifications as well. Contractors should also consider the internal review time needed for the certification internal review when bidding on work as they manage their proposal process. This regulation has not been determined to be a mandatory flow down. It is not expected that Prime contractors would flow down this requirement down to subcontractors because the contracted effort is between the prime and the government, presenting further risk to prime contractors. With the implementation of Section 889, government contractors must seek to education internal procurement, proposal, and IT teams within its organization, track product purchases through the life of such investments, absorb the cost of removal and remediations needs, and implement a dependable internal review process that is consistently applied.
If your firm would like further advisement regarding Section 889, or other aspects of GSA contract management, please reach out to anyone on our GSA team.