[Federal Register Volume 85, Number 135 (Tuesday, July 14, 2020)]
[Rules and Regulations]
[Pages 42665-42679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15293]
[[Page 42665]]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 4, 13, 39, and 52
[FAC 2020-08; FAR Case 2019-009; Docket No. FAR-2019-0009, Sequence No.
1]
RIN 9000-AN92
Federal Acquisition Regulation: Prohibition on Contracting With
Entities Using Certain Telecommunications and Video Surveillance
Services or Equipment
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule.
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SUMMARY: DoD, GSA, and NASA are amending the Federal Acquisition
Regulation (FAR) to implement section 889(a)(1)(B) of the John S.
McCain National Defense Authorization Act (NDAA) for Fiscal Year (FY)
2019 (Pub. L. 115-232).
DATES:
Effective: August 13, 2020.
Applicability: Contracting officers shall include the provision at
FAR 52.204-24, Representation Regarding Certain Telecommunications and
Video Surveillance Services or Equipment and clause at FAR 52.204-25,
Prohibition on Contracting for Certain Telecommunications and Video
Surveillance Services or Equipment as prescribed--
In solicitations issued on or after August 13, 2020, and
resultant contracts; and
In solicitations issued before August 13, 2020, provided
award of the resulting contract(s) occurs on or after August 13, 2020.
Contracting officers shall modify, in accordance with FAR 1.108(d),
existing indefinite delivery contracts to include the FAR clause for
future orders, prior to placing any future orders.
If exercising an option or modifying an existing contract or task
or delivery order to extend the period of performance, contracting
officers shall include the clause. When exercising an option, agencies
should consider modifying the existing contract to add the clause in a
sufficient amount of time to both provide notice for exercising the
option and to provide contractors with adequate time to comply with the
clause.
The contracting officer shall include the provision at 52.204-24,
Representation Regarding Certain Telecommunications and Video
Surveillance Services or Equipment, in all solicitations for an order,
or notices of intent to place an order, including those issued before
the effective date of this rule, under an existing indefinite delivery
contract.
Comment date: Interested parties should submit written comments to
the Regulatory Secretariat Division at one of the addresses shown below
on or before September 14, 2020 to be considered in the formation of
the final rule.
ADDRESSES: Submit comments in response to FAR Case 2019-009 via the
Federal eRulemaking portal at Regulations.gov by searching for ``FAR
Case 2019-009''. Select the link ``Comment Now'' that corresponds with
FAR Case 2019-009. Follow the instructions provided at the ``Comment
Now'' screen. Please include your name, company name (if any), and
``FAR Case 2019-009'' on your attached document. If your comment cannot
be submitted using https://www.regulations.gov, call or email the
points of contact in the FOR FURTHER INFORMATION CONTACT section of
this document for alternate instructions.
Instructions: Please submit comments only and cite FAR Case 2019-
009, in all correspondence related to this case. Comments received
generally will be posted without change to http://www.regulations.gov,
including any personal and/or business confidential information
provided. To confirm receipt of your comment(s), please check
www.regulations.gov, approximately two to three days after submission
to verify posting.
All filers using the portal should use the name of the person or
entity submitting comments as the name of their files, in accordance
with the instructions below. Anyone submitting business confidential
information should clearly identify the business confidential portion
at the time of submission, file a statement justifying nondisclosure
and referencing the specific legal authority claimed, and provide a
non-confidential version of the submission.
Any business confidential information should be in an uploaded file
that has a file name beginning with the characters ``BC.'' Any page
containing business confidential information must be clearly marked
``BUSINESS CONFIDENTIAL'' on the top of that page. The corresponding
non-confidential version of those comments must be clearly marked
``PUBLIC.'' The file name of the non-confidential version should begin
with the character ``P.'' The ``BC'' and ``P'' should be followed by
the name of the person or entity submitting the comments or rebuttal
comments. All filers should name their files using the name of the
person or entity submitting the comments. Any submissions with file
names that do not begin with a ``BC'' or ``P'' will be assumed to be
public and will be made publicly available through http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: [email protected] or call 202-969-
4075. Please cite ``FAR Case 2019-009.''
SUPPLEMENTARY INFORMATION:
I. Background
Section 889(a)(1)(B) of the John S. McCain National Defense
Authorization Act (NDAA) for Fiscal Year 2019 (Pub. L. 115-232)
prohibits executive agencies from entering into, or extending or
renewing, a contract with an entity that uses 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. The provision goes into effect August
13, 2020.
The statute covers certain telecommunications equipment and
services produced or provided by Huawei Technologies Company or ZTE
Corporation (or any subsidiary or affiliate of those entities) and
certain video surveillance products or telecommunications equipment and
services produced or provided by Hytera Communications Corporation,
Hangzhou Hikvision Digital Technology Company, or Dahua Technology
Company (or any subsidiary or affiliate of those entities). The statute
is not limited to contracting with entities that use end-products
produced by those companies; it also covers the use of 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.
Section 889 has two key sections, Section 889(a)(1)(A) and
Section(a)(1)(B). Section (a)(1)(A) went into effect via FAR Case 2018-
017 at 84 FR 40216 on August 13, 2019. The 889(a)(1)(A) rule does the
following:
It amends the FAR to include the 889(a)(1)(A) prohibition,
which prohibits agencies from procuring or obtaining equipment or
services that use covered telecommunications equipment or services as a
substantial or essential component or critical technology. (FAR 52.204-
25)
It requires every offeror to represent prior to award
whether or not it will
[[Page 42666]]
provide covered telecommunications equipment or services and, if so, to
furnish additional information about the covered telecommunications
equipment or services. (FAR 52.204-24)
It mandates that contractors report (within one business
day) any covered telecommunications equipment or services discovered
during the course of contract performance. (FAR 52.204-25)
In order to decrease the burden on contractors, the FAR Council
published a second interim rule for 889(a)(1)(A), at 84 FR 68314 on
December 13, 2019. This rule allows an offeror that represents ``does
not'' in the annual representation at FAR 52.204-26 to skip the offer-
by-offer representation within the provision at FAR 52.204-24.
The FAR Council will address the public comments received on both
previous interim rules in a subsequent rulemaking. In addition, each
agency has the opportunity under 889(a)(1)(A) to issue agency-specific
procedures (as they do for any acquisition-related requirement). For
example, GSA issued a FAR deviation \1\ where GSA categorized risk to
eliminate the representations for low and medium risk GSA-funded orders
placed under GSA indefinite-delivery contracts. For agency-specific
procedures, please consult with the requiring agency.
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\1\ https://www.acquisition.gov/gsa-deviation/supply-chain-aug13.
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This rule implements 889(a)(1)(B) and requires submission of a
representation with each offer that will require all offerors to
represent, after conducting a reasonable inquiry, whether covered
telecommunications equipment or services are used by the offeror. DoD,
GSA, and NASA recognize that some agencies may need to tailor the
approach to the information collected based on the unique mission and
supply chain risks for their agency.
In order to reduce the information collection burden imposed on
offerors subject to the rule, DoD, GSA, and NASA are currently working
on updates to the System for Award Management (SAM) to allow offerors
to represent annually after conducting a reasonable inquiry. Only
offerors that provide an affirmative response to the annual
representation would be required to provide the offer-by-offer
representation in their offers for contracts and for task or delivery
orders under indefinite-delivery contracts. Similar to the initial rule
for section 889(a)(1)(A), that was published as an interim rule on
August 13, 2019 and was followed by a second interim rule on December
13, 2019 to update the System for Award Management, the FAR Council
intends to publish a subsequent rulemaking once the updates are ready
in SAM.
Overview of the Rule
This rule implements section 889 (a)(1)(B) and applies to Federal
contractors' use of covered telecommunications equipment or services as
a substantial or essential component of any system, or as critical
technology as part of any system. The rule seeks to avoid the
disruption of Federal contractor systems and operations that could in
turn disrupt the operations of the Federal Government, which relies on
contractors to provide a range of support and services. The
exfiltration of sensitive data from contractor systems arising from
contractors' use of covered telecommunications equipment or services
could also harm important governmental, privacy, and business
interests. Accordingly, due to the privacy and security risks
associated with using covered telecommunications equipment or services
as a substantial or essential component or critical technology of any
system, the prohibition applies to any use that meets the threshold
described above.
It amends the following sections of the FAR:
FAR subpart 4.21, Prohibition on Contracting for Certain
Telecommunications and Video Surveillance Services or Equipment.
The provision at 52.204-24, Representation Regarding
Certain Telecommunications and Video Surveillance Services or
Equipment.
The contract clause at 52.204-25, Prohibition on
Contracting for Certain Telecommunications and Video Surveillance
Services or Equipment.
Definitions Discussed in This Rule
This rule does not change the definition adopted in the first
interim rule of ``critical technology,'' which was included in the
Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA)
(Section 1703 of Title XVII of the NDAA for FY 2019, Pub. L. 115-232,
50 U.S.C. 4565(a)(6)(A)). The rule does not change the definitions of
``Covered foreign country,'' ``Covered telecommunications equipment or
services,'' and ``Substantial or essential component.'' The term
offeror will continue to refer to only the entity that executes the
contract.
This rule also adds new definitions for ``backhaul,''
``interconnection arrangements,'' ``reasonable inquiry,'' and
``roaming,'' to provide clarity regarding when an exception to the
prohibition applies. These terms are not currently defined in Section
889 or within the FAR. These definitions were developed based on
consultation with subject matter experts as well as analyzing existing
telecommunications regulations and case law.\2\
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\2\ See FiberTower Spectrum Holdings, LLC v. F.C.C., 782 F.3d
692, 695 (D.C. Cir. 2015); Worldcall Interconnect, Inc. v. Fed.
Commc'ns Comm'n, 907 F.3d 810, 814 (Nov. 15, 2018).
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The FAR Council is considering as part of finalization of this
rulemaking with an effective date no later than August 13, 2021, to
expand the scope to require that the prohibition at 52.204-24(b)(2) and
52.204-25(b)(2) applies to the offeror and any affiliates, parents, and
subsidiaries of the offeror that are domestic concerns, and expand the
representation at 52.204-24(d)(2) so that the offeror represents on
behalf of itself and any affiliates, parents, and subsidiaries of the
offeror that are domestic concerns, as to whether they use covered
telecommunications equipment or services. Section IV of this rule is
requesting specific feedback regarding the impact of this potential
change, as well as other pertinent policy questions of interest, in
order to inform finalization of this and potential future subsequent
rulemakings.
II. Discussion and Analysis
To implement section 889(a)(1)(B), the contract clause at 52.204-25
was amended to prohibit agencies ``from entering into a contract, or
extending or renewing a contract, with an entity that uses 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 is granted. This prohibition applies at
the prime contract level to an entity that uses any equipment, system,
or service that itself uses covered telecommunications equipment or
services as a substantial or essential component of any system, or as
critical technology as part of any system, regardless of whether that
usage is in performance of work under a Federal contract.
The 52.204-25 prohibition under section 889(a)(1)(A) will continue
to flow down to all subcontractors; however, as required by statute the
prohibition for section 889(a)(1)(B) will not flow down because the
prime contractor is the only ``entity'' that the agency ``enters into a
contract'' with, and an agency does not directly ``enter into a
contract'' with any subcontractors, at any tier.
The rule also adds text in subpart 13.2, Actions at or Below the
Micro-
[[Page 42667]]
Purchase Threshold, to address section 889(a)(1)(B) with regard to
micro-purchases. The prohibition will apply to all FAR contracts,
including micro-purchase contracts.
Representation Requirements
Representations and Certifications are requirements that anyone
wishing to apply for Federal contracts must complete. They require
entities to represent or certify to a variety of statements ranging
from environmental rules compliance to entity size representation.
Similar to the previous rule for section 889(a)(1)(A), that was
published as an interim rule on August 13, 2019, and was followed by a
second interim rule on December 13, 2019, that updated the System for
Award Management (SAM), the FAR Council is in the process of making
updates to SAM requiring offerors to represent whether they use covered
telecommunications equipment or services, or use any equipment, system,
or service that uses covered telecommunications equipment or services
within the meaning of this rule. This rule will add a new OMB Control
Number to the list at FAR 1.106 of OMB approvals under the Paperwork
Reduction Act. Offerors will consult SAM to validate whether they use
equipment or services listed in the definition of ``covered
telecommunications equipment or services'' (see FAR 4.2101).
An entity may represent that it does not use covered
telecommunications equipment or services, or use any equipment, system,
or service that uses covered telecommunications equipment or services
within the meaning of this rule, if a reasonable inquiry by the entity
does not reveal or identify any such use. A reasonable inquiry is 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.
Grants
Grants are not part of this FAR based regulation and are handled
separately. Please note guidance on Section 889 for grants, which are
not covered by this rule, was posted for comment at https://www.federalregister.gov/documents/2020/01/22/2019-28524/guidance-for-grants-and-agreements.
Agency Waiver Process
Under certain circumstances, section 889(d)(1) allows 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.
Executive agencies must comply with the prohibition once the waiver
expires. The executive agency will decide whether or not to initiate
the formal waiver process based on market research and feedback from
Government contractors during the acquisition process, in concert with
other internal factors. The submission of an offer will mean the
offeror is seeking a waiver if the offeror makes a representation that
it uses covered telecommunications equipment or services as a
substantial or essential component of a system, or as critical
technology as part of any system and no exception applies. Once an
offeror submits its offer, the contracting officer will first have to
decide if a waiver is necessary to make an award and then request the
offeror to provide: (1) A compelling justification for the additional
time to implement the requirements under 889(a)(1)(B), for
consideration by the head of the executive agency in determining
whether to grant a waiver; (2) a full and complete laydown of the
presences of covered telecommunications or video surveillance equipment
or services in the entity's supply chain; and (3) a phase-out plan to
eliminate such covered telecommunications equipment or services from
the entity's systems. This does not preclude an offeror from submitting
this information with their offer, in advance of a contracting officer
decision to initiate the formal waiver request through the head of the
executive agency.
Since the formal waiver is initiated by an executive agency and the
executive agency may not know if covered telecommunications equipment
or service will be used as part of the supply chain until offers are
received, a determination of whether a waiver should be considered may
not be possible until offers are received and the executive agency
analyzes the representations from the offerors.
Given the extent of information necessary for requesting a waiver,
the FAR Council anticipates that any waiver would likely take at least
a few weeks to obtain. Where mission needs do not permit time to obtain
a waiver, agencies may reasonably choose not to initiate one and to
move forward and make award to an offeror that does not require a
waiver.
Currently, FAR 4.2104 directs contracting officers to follow agency
procedures for initiating a waiver request. Since a waiver is based on
the agency's judgment concerning particular uses of covered
telecommunications equipment or services, a waiver granted for one
agency will not necessarily shed light on whether a waiver is warranted
in a different procurement with a separate agency. This agency waiver
process would be the same for both new and existing contracts. If a
waiver is granted, with respect to particular use of covered
telecommunications equipment or services, the contractor will still be
required to report any additional use of covered telecommunications
equipment or services discovered or identified during contract
performance in accordance with 52.204-25(d).
Before granting a waiver, the agency must: (1) Have designated a
senior agency official for supply chain risk management, responsible
for ensuring the agency effectively carries out the supply chain risk
management functions and responsibilities described in law, regulation,
and policy; additionally this senior agency official will serve as the
primary liaison with the Federal Acquisition Security Council (FASC);
(2) establish participation in an information-sharing environment when
and as required by the FASC to facilitate interagency sharing of
relevant supply chain risk information; and (3) notify and consult with
the Office of the Director of National Intelligence (ODNI) on the issue
of the waiver request: The agency may only grant the waiver request
after consulting with ODNI and confirming that ODNI does not have
existing information suggesting that the waiver would present a
material increase in risk to U.S. national security. Agencies may
satisfy the consultation requirement by making use of one or more of
the following methods as made available to agencies by ODNI (as
appropriate): Guidance, briefings, best practices, or direct inquiry.
If the agency has met the three conditions enumerated above and intends
to grant the waiver requested, the agency must notify the ODNI and the
FASC 15 days prior to granting the waiver, and provide notice to the
appropriate Congressional committees within 30 days of granting the
waiver. The notice must include:
(1) An attestation by the agency that granting of the waiver would
not, to the agency's knowledge having conducted the necessary due
diligence as directed by statute and regulation, present a material
increase in risk to U.S. national security; and
(2) The required full and complete laydown of the presences of
covered telecommunications or video surveillance equipment or services
in the entity's supply chain; and
[[Page 42668]]
(3) The required phase-out plan to eliminate covered
telecommunications or video surveillance equipment or services from the
entity's systems.
The laydown described above must include a description of each
category of covered telecommunications or video surveillance equipment
or services discovered after a reasonable inquiry, as well as each
category of equipment, system, or service used by the entity in which
such covered technology is found after such an inquiry.
In the case of an emergency, including a declaration of major
disaster, in which prior notice and consultation with the ODNI and
prior notice to the FASC is impracticable and would severely jeopardize
performance of mission-critical functions, the head of an agency may
grant a waiver without meeting the notice and consultation requirements
to enable effective mission critical functions or emergency response
and recovery. In the case of a waiver granted in response to an
emergency, the head of an agency granting the waiver must make a
determination that the notice and consultation requirements are
impracticable due to an emergency condition, and within 30 days of
award, notify the ODNI, the FASC, and Congress of the waiver issued
under emergency circumstances.
The provision of a waiver does not alter or amend any other
requirements of U.S. law, including any U.S. export control laws and
regulations or protections for sensitive sources and methods. In
particular, any waiver issued pursuant to these regulations is not
authorization by the U.S. Government to export, reexport, or transfer
(in-country) items subject to the Export Administration or
International Traffic in Arms Regulations (15 CFR 730-774 and 22 CFR
120-130, respectively).
Director of National Intelligence Waiver
The statute also permits the Director of National Intelligence
(DNI) to provide a waiver if the Director determines one is in the
national security interests of the United States.\3\ The statute does
not include an expiration date for the DNI waiver. This authority is
separate and distinct from that granted to an agency head as outlined
above.
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\3\ Sec. 889(d)(2).
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ODNI Categorical Scenarios
Additionally, the ODNI, in consultation with the FASC, will issue
on an ongoing basis, for use in informing agency waiver decisions,
guidance describing categorical uses or commonly-occurring use
scenarios where presence of covered telecommunications equipment or
services is likely or unlikely to pose a national security risk.
Other Technical Changes
The solicitation provision at 52.204-24 has two representations,
one for 889(a)(1)(A) and one for 889(a)(1)(B). This rule adds the
representation for 889(a)(1)(B). The solicitation provision at 52.204-
24 also has two disclosure sections, one for 889(a)(1)(A) and one for
889(a)(1)(B). This rule adds the disclosure section for 889(a)(1)(B)
with separate reporting elements depending on whether the procurement
is for equipment, services related to item maintenance, or services not
associated with item maintenance. The reporting elements within the
disclosure are different for each category because the information
needed to identify whether the prohibition applies varies for these
three types of procurements. This rule also administratively renumbers
the paragraphs under the disclosure section. Finally, this rule will
add cross-references in FAR parts 39, Acquisition of Information
Technology, and to the coverage of the section 889 prohibition at FAR
subpart 4.21.
Expected Impact of This Rule
The FAR Council recognizes that this rule could impact the
operations of Federal contractors in a range of industries--including
in the health-care, education, automotive, aviation, and aerospace
industries; manufacturers that provide commercially available off-the-
shelf (COTS) items; and contractors that provide building management,
billing and accounting, and freight services. The rule seeks to
minimize disruption to the mission of Federal agencies and contractors
to the maximum extent possible, consistent with the Federal
Government's ability to ensure effective implementation and enforcement
of the national security measures imposed by Section 889. As set forth
in Section III.C below, the FAR Council recognizes the substantial
benefits that will result from this rule.
To date, there is limited information on the extent to which the
various industries will be impacted by this rule implementing the
statutory requirements of section 889. To better understand the
potential impact of section 889 (a)(1)(B), DoD hosted a public meeting
on March 2, 2020 (See 85 FR 7735) to facilitate the Department's
planning for the implementation of Section 889(a)(1)(B).
NASA also hosted a Section 889 industry engagement event on January
30, 2020, to obtain additional information on the impact this
prohibition will have on NASA contractors' operations and their ability
to support NASA's mission.
In addition, the FAR Council hosted a public meeting on July 19,
2019, and GSA hosted an industry engagement event on November 6, 2019
(https://interact.gsa.gov/FY19NDAASection889) to gather additional
information on how section 889 could affect GSA's business and supply
chain. The presentations are located at https://interact.gsa.gov/FY19NDAASection889.
Please note presentations and comments from the public meetings are
not considered public comments on this rule.
The FAR Council notes this rule is one of a series of actions with
regard to section 889 and the impact and costs to all industry sectors,
including COTS items manufacturers, resellers, consultants, etc. is not
well understood and is still being assessed. For example, in a filing
to the Federal Communications Commission, the Rural Wireless
Association estimated that at least 25% of its carriers would be
impacted.\4\
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\4\ https://ecfsapi.fcc.gov/file/12080817518045/FY%202019%20NDAA%20Reply%20Comments%20-%20FINAL.pdf.
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In addition, while the rule will be effective as of August 13,
2020, the FAR Council is seeking public comment, including, as
indicated below, on the potential impact of the rule on the affected
industries. After considering the comments received, a final rule will
be issued, taking into account and addressing the public comments. See
41 U.S.C. 1707.
Industry Costs for New Representation and Scope of Section 889(a)(1)(B)
The statute includes two exceptions at 889 (a)(2)(A) and (B). The
exception at 889(a)(2)(A) allows the head of executive agency to
procure with an entity ``to provide a service that connects to the
facilities of a third-party, such as backhaul, roaming, or
interconnection arrangements.'' The exception at 889(a)(2)(B) allows an
entity to procure ``telecommunications equipment that cannot route or
redirect user data traffic or [cannot] permit visibility into any user
data or packets that such equipment transmits or otherwise handles.''
The exception allowing for procurement of services that connect to the
facilities of a third-party, such as backhaul, roaming, or
interconnection arrangements applies only to a Government agency that
is contracting with an entity to provide a service. Therefore, the
exception does
[[Page 42669]]
not apply to a contractor's use of a service that connects to the
facilities of a third-party, such as backhaul, roaming, or
interconnection arrangements. As a result, the Federal Government is
prohibited from contracting with a contractor that uses covered
telecommunications equipment or services to obtain backhaul services
from an internet service provider, unless a waiver is granted.
III. Regulatory Impact Analysis Pursuant to Executive Orders 12866 and
13563
The costs and transfer impacts of section 889(a)(1)(B) are
discussed in the analysis below. This analysis was developed by the FAR
Council in consultation with agency procurement officials and OMB. We
request public comment on the costs, benefits, and transfers generated
by this rule.
A. Risks to Industry of Not Complying With 889
As a strictly contractual matter, an organization's failure to
submit an accurate representation to the Government constitutes a
breach of contract that can lead to cancellation, termination, and
financial consequences.
Therefore, it is important for contractors to develop a compliance
plan that will allow them to submit accurate representations to the
Government in the course of their offers.
B. Contractor Actions Needed for Compliance
Adopting a robust, risk-based compliance approach will help reduce
the likelihood of noncompliance. During the first year that
889(a)(1)(B) is in effect, contractors and subcontractors will need to
learn about the provision and its requirements as well as develop a
compliance plan. The FAR Council assumes the following steps would most
likely be part of the compliance plan developed by any entity.
1. Regulatory Familiarization. Read and understand the rule and
necessary actions for compliance.
2. Corporate Enterprise Tracking. The entity must determine through
a reasonable inquiry whether the entity itself uses ``covered
telecommunications'' equipment or services as a substantial or
essential component of any system, or as critical technology as part of
any system. This includes examining relationships with any
subcontractor or supplier for which the prime contractor has a Federal
contract and uses the supplier or subcontractor's ``covered
telecommunications'' equipment or services as a substantial or
essential component of any system. A reasonable inquiry is an inquiry
designed to uncover any information in the entity's possession--
primarily documentation or other records--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.
3. Education. Educate the entity's purchasing/procurement, and
materials management professionals to ensure they are familiar with the
entity's compliance plan.
4. Cost of Removal (if the entity independently decides to). Once
use of covered equipment and services is identified, implement
procedures if the entity decides to replace existing covered
telecommunications equipment or services and ensure new equipment and
services acquired for use by the entity are compliant.
5. Representation. Provide representation to the Government
regarding whether the entity uses covered telecommunications equipment
and services and alert the Government if use is discovered during
contract performance.
6. Cost to Develop a Phase-out Plan and Submit Waiver Information.
For entities for which a waiver will be requested, (1) develop a phase-
out plan to phase-out existing covered telecommunications equipment or
services, and (2) provide waiver information to the Government to
include the phase-out plan and the complete laydown of the presence of
the covered telecommunications equipment or services.
C. Benefits
This rule provides significant national security benefits to the
general public. According to the White House article ``A New National
Security Strategy for a New Era'', the four pillars of the National
Security Strategy (NSS) are to protect the homeland, promote American
prosperity, preserve peace through strength, and advance American
influence.\5\ The purpose of this rule is to align with the NSS pillar
to protect the homeland, by protecting the homeland from the impact of
Federal contractors using covered telecommunications equipment or
services that present a national security concern.
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\5\ https://www.whitehouse.gov/articles/new-national-security-strategy-new-era/.
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The United States faces an expanding array of foreign intelligence
threats by adversaries who are using increasingly sophisticated methods
to harm the Nation.\6\ Threats to the United States posed by foreign
intelligence entities are becoming more complex and harmful to U.S.
interests.\7\ Foreign intelligence actors are employing innovative
combinations of traditional spying, economic espionage, and supply
chain and cyber operations to gain access to critical infrastructure,
and steal sensitive information and industrial secrets.\8\ The
exploitation of key supply chains by foreign adversaries represents a
complex and growing threat to strategically important U.S. economic
sectors and critical infrastructure.\9\ The increasing reliance on
foreign-owned or controlled telecommunications equipment, such as
hardware or software, and services, as well as the proliferation of
networking technologies may create vulnerabilities in our nation's
supply chains.\10\ The evolving technology landscape is likely to
accelerate these trends, threatening the security and economic well-
being of the American people.\11\
---------------------------------------------------------------------------
\6\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\7\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\8\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\9\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\10\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\11\ National Counterintelligence Strategy of the United States
of America 2020-2022.
---------------------------------------------------------------------------
Since the People's Republic of China possesses advanced cyber
capabilities that it actively uses against the United States, a
proactive cyber approach is needed to degrade or deny these threats
before they reach our nation's networks, including those of the Federal
Government and its contractors. China is increasingly asserting itself
by stealing U.S. technology and intellectual property in an effort to
erode the United States' economic and military superiority.\12\ Chinese
companies, including the companies identified in this rule, are legally
required to cooperate with their intelligence services.\13\ China's
reputation for persistent industrial espionage and close collaboration
between its government and industry in order to amass technological
secrets presents additional threats for U.S. Government
contractors.\14\ Therefore, there is a risk
[[Page 42670]]
that Government contractors using 5th generation wireless
communications (5G) and other telecommunications technology from the
companies covered by this rule could introduce a reliance on equipment
that may be controlled by the Chinese intelligence services and the
military in both peacetime and crisis.\15\
---------------------------------------------------------------------------
\12\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\13\ NATO Cooperative Cyber Defense Center of Excellence Report
on Huawei, 5G and China as a Security Threat.
\14\ NATO Cooperative Cyber Defense Center of Excellence Report
on Huawei, 5G and China as a Security Threat.
\15\ NATO Cooperative Cyber Defense Center of Excellence Report
on Huawei, 5G and China as a Security Threat.
---------------------------------------------------------------------------
The 2019 Worldwide Threat Assessment of the Intelligence Community
\16\ highlights additional threats regarding China's cyber espionage
against the U.S. Government, corporations, and allies. The U.S.-China
Economic and Security Review Commission Staff Annual Reports \17\
provide additional details regarding the United States' national
security interests in China's extensive engagement in the U.S.
telecommunications sector. In addition, the U.S. Senate Select
Committee on Intelligence Open Hearing on Worldwide Threats \18\
further elaborates on China's approach to gain access to the United
States' sensitive technologies and intellectual property. The U.S.
House of Representatives Investigative Report on the U.S. National
Security Issues Posed by Chinese Telecommunications Companies Huawei
and ZTE \19\ further identifies how the risks associated with Huawei's
and ZTE's provision of equipment to U.S. critical infrastructure could
undermine core U.S. national-security interests.
---------------------------------------------------------------------------
\16\ https://www.dni.gov/files/ODNI/documents/2019-ATA-SFR_-
SSCI.pdf.
\17\ https://www.uscc.gov/annual-reports/archives.
\18\ https://www.intelligence.senate.gov/sites/default/files/hearings/CHRG-115shrg28947.pdf.
\19\ https://intelligence.house.gov/news/documentsingle.aspx?DocumentID=96.
---------------------------------------------------------------------------
Currently, Government contractors may not consider broad national
security interests of the general public when they make decisions. This
rule ensures that Government contractors keep public national security
interests in mind when making decisions, by ensuring that, pursuant to
statute, they do not use covered telecommunications equipment or
services that present national security concerns. This rule will also
assist contractors in mitigating supply chain risks (e.g. potential
theft of trade secrets and intellectual property) due to the use of
covered telecommunications equipment or services.
D. Public Costs
During the first year after publication of the rule, contractors
will need to learn about the provisions and its requirements. The DOD,
GSA, and NASA (collectively referred to here as the Signatory Agencies)
estimate this cost by multiplying the time required to review the
regulations and guidance implementing the rule by the estimated
compensation of a general manager.
To estimate the burden to Federal offerors associated with
complying with the rule, the percentage of Federal contractors that
will be impacted was pulled from Federal databases. According to data
from the System for Award Management (SAM), as of February 2020, there
were 387,967 unique vendors registered in SAM. As of September 2019,
about 74% of all SAM entities registered for all awards were awarded to
entities with the primary NAICS code as small; therefore, it is assumed
that out of the 387,967 unique vendors registered in SAM in February
2020, 287,096 entities are unique small entities. According to data
from the Federal Procurement Data System (FPDS), as of February 2020,
there was an average of 102,792 unique Federal awardees for FY16-FY19,
of which 73%, 75,112, are unique small entities. Based on data in SAM
for FY16-FY19, the Signatory Agencies anticipates there will be an
average of 79,319 \20\ new entities registering annually in SAM, of
which 74%, 57,956, are anticipated to be small businesses.
---------------------------------------------------------------------------
\20\ This value is based on data on new registrants in SAM.gov
on average for FY16, FY17, FY18, and FY19.
---------------------------------------------------------------------------
We estimate that this rule will also affect businesses which become
Federal contractors in the future. As stated above, we estimate that
there are 79,319 \21\ new entrants per year.
---------------------------------------------------------------------------
\21\ This value is based on data on new registrants in SAM.gov
for FY19 and FY20.
---------------------------------------------------------------------------
1. Time To Review the Rule
Below is a list of compliance activities related to regulatory
familiarization that the Signatory Agencies anticipate will occur after
issuance of the rule:
a. Familiarization with FAR 52.204-24, Representation Regarding
Certain Telecommunications and Video Surveillance Services or
Equipment. The Signatory Agencies assume that it will take all vendors
who plan to submit an offer for a Federal award 20 \22\ hours to
familiarize themselves with the amendment to the offer-by-offer
representation at 52.204-24, Representation Regarding Certain
Telecommunications and Video Surveillance Services or Equipment. The
Signatory Agencies assume that all entities registered in SAM, or
387,967 \23\ entities, plan to submit an offer for a Federal award,
since there is no data available on number of offerors for Federal
awards. Therefore, the Signatory Agencies calculated the total
estimated cost for this part of the rule to be $735 million (= 20 hours
x $94.76 \24\ per hour x 387,967). Of the 387,967 entities impacted by
this part of the rule, it is assumed that 74% \25\ or 287,096 entities
are unique small entities.
---------------------------------------------------------------------------
\22\ The 20 hours are an assumption based on historical
familiarization hours and subject matter expert judgment.
\23\ According to data from the System for Award Management
(SAM), as of February 2020, there were 387,967 unique vendors
registered in SAM.
\24\ The rate of $94.76 assumes an FY19 GS 13 Step 5 salary
(after applying a 100% burden to the base rate) based on subject
matter judgment.
\25\ As of September 2019, about 74% of all SAM entities
registered for all awards were awarded to entities with the primary
NAICS code as small.
---------------------------------------------------------------------------
In subsequent years, these costs will be incurred by 79,319 \26\
new entrants each year. Therefore, the Signatory Agencies calculated
the total estimated cost for this part of the rule to be $150 million
(= 20 hours x $94.76 per hour x 79,319) per year in subsequent years.
---------------------------------------------------------------------------
\26\ This value is based on data on new registrants in SAM.gov
on average for FY16, FY17, FY18, and FY19.
---------------------------------------------------------------------------
b. Familiarization with FAR 52.204-25, Prohibition on Contracting
for Certain Telecommunications and Video Surveillance Services or
Equipment. The Signatory Agencies estimate that it will take all
vendors who plan to submit an offer for a Federal award 8 \27\ hours to
familiarize themselves with the amendment to the clause at 52.204-25,
Prohibition on Contracting for Certain Telecommunications and Video
Surveillance Services or Equipment. The average number of unique
awardees for FY16-FY19, or 102,792 \28\ entities, will be impacted by
this part of the rule, assuming all entities awarded Federal contracts
would have to familiarize themselves with the clause. Therefore, the
Signatory Agencies calculated the total estimated cost for this part of
the rule to be $78 million (= 8 hours x $94.76 per hour x 102,792). Of
the 102,792 unique Federal awardees assumed to be impacted by this part
of the rule, 73% or 75,038, are unique small entities.
---------------------------------------------------------------------------
\27\ The 8 hours is an assumption based on historical
familiarization hours and subject matter expert judgment.
\28\ As of February 2020, there was an average of 102,792 unique
Federal awardees for FY16-FY19.
---------------------------------------------------------------------------
In subsequent years, these costs are estimated will be incurred by
26% \29\ of new entrants, or 20,623 entities because it is assumed that
26% of new entrants will be awarded a Federal contract and will be
required to familiarize
[[Page 42671]]
themselves with the clause. Therefore, the Signatory Agencies
calculated the total estimated cost for this part of the rule to be
$15.6 million (= 8 hours x $94.76 per hour x 20,623) per year in
subsequent years.
---------------------------------------------------------------------------
\29\ The percentage of 26% is the percentage of active entities
registered in SAM.gov in FY20 that were awarded contracts.
---------------------------------------------------------------------------
The total cost estimated to review the amendments to the provision
and the clause is estimated to be $813 million in the first year after
publication. In subsequent years, this cost is estimated to be $166
million annually. The FAR Council acknowledges that there is
substantial uncertainty underlying these estimates.
2. Time To Establish a Corporate Enterprise Tracking Tool and Verify
Covered Telecom Is Not Used Within the Corporation or by the
Corporation and Ensure There Are No Future Buys
In order to complete the representation, the entity must determine,
by conducting a reasonable inquiry whether the entity itself uses
``covered telecommunications'' equipment or services. This includes a
relationship with any subcontractor or supplier in which the prime
contractor has a Federal contract and uses the supplier or
subcontractor's ``covered telecommunications equipment or services''
regardless of whether that usage is in performance of work under a
Federal contract. The Signatory Agencies do not have reliable data to
form an estimate as to the processes vendors will adopt to conduct a
reasonable inquiry or the costs, in time and other resources, for
conducting such an inquiry. The Signatory Agencies intend to evaluate
any information on this topic in the comments submitted by the public.
3. Time To Complete Corporate-Wide Training on Compliance Plan
The Signatory Agencies estimate that most entities have already
begun to understand the impact of Section 889 (a)(1)(A) and have
already educated the appropriate personnel to that part of the
prohibition. Section 889 (a)(1)(B) requires a more robust training of
the organization's compliance plan, which include business partners
that are outside of the typical ``covered telecommunications equipment
or services'' purchases; such as day-day office supplies. The Signatory
Agencies estimate that it will take all vendors at least 4 \30\ hours
of training to ensure personnel understand the organization's
compliance plan for tracking partners that procure ``covered
telecommunications equipment and services'' that may be indirectly
related to their respective business activities. Therefore, the
Signatory Agencies calculated the total estimated cost for this part of
the rule to be $147 million (= 4 hours x $94.76 per hour x 387,967).
---------------------------------------------------------------------------
\30\ The hours are an assumption based on subject matter expert
judgment.
---------------------------------------------------------------------------
Of the 387,967 \31\ entities impacted by this part of the rule, it
is assumed that 74% or 287,096 entities are unique small entities.
---------------------------------------------------------------------------
\31\ According to data from the System for Award Management
(SAM), as of February 2020, there were 387,967 unique vendors
registered in SAM.
---------------------------------------------------------------------------
In subsequent years, we assume that 50% \32\ of the 79,319 \33\ new
entrants will incur these costs. Therefore, the Signatory Agencies
calculated the total estimated cost for this part of the rule to be $15
million (= 4 hours x $94.76 per hourx 50% x 79,319) per year in
subsequent years. The FAR Council acknowledges that there is
substantial uncertainty underlying these estimates.
---------------------------------------------------------------------------
\32\ The 50% value is an assumption based on subject matter
expert judgment. In the absence, to be conservative, it assumes that
50% of new entrants will decide to perform corporate-wide training.
\33\ This value is based on data on new registrants in SAM.gov
on average for FY16, FY17, FY18, and FY19.
---------------------------------------------------------------------------
4. Time To Remove and Replace Existing Equipment or Services (if
Contractor Decides to) in Order To Be Eligible for a Federal Contract
Data on the extent of the presence of the covered
telecommunications equipment and services in the global supply chain is
extremely limited, as is information as to the costs of removing and
replacing covered equipment or services where it does exist.
Furthermore, no data exists as to how many entities will receive a 2-
year waiver from executive agency heads or a non-time-limited waiver
from the ODNI. Accordingly, the Signatory Agencies are unable to form
any estimate of the costs of this rule with regard to removing and
replacing existing equipment and services. The Signatory Agencies
intend to evaluate any information provided on this topic in comments
submitted by the public.
5. Time To Complete the Representation
52.204-24
For the offer-by-offer representation at FAR 52.204-24 the
Signatory Agencies assumed the cost for this portion of the rule to be
$11 billion (= 3 \34\ hours x $94.76 per hour x 102,792 unique entities
x 378 \35\ responses per entity).
---------------------------------------------------------------------------
\34\ The hours are an assumption based on subject matter expert
judgment.
\35\ The responses per entity is calculated by dividing the
average number of annual awards in FY16-19 by the average number of
unique entities awarded a contract (38,854,291 awards/102,792 unique
awardees = 378).
---------------------------------------------------------------------------
In subsequent years, we assume that 26% \36\ of new entrants will
complete an offer and need to complete the offer-by-offer
representation. Therefore, these costs will be incurred by 26% of the
79,319 \37\ new entrants each year. Therefore, the Signatory Agencies
calculated the total estimated cost for this part of the rule to be
$2.2 billion (= 3 hours x $94.76 per hour x 26% x 79,319 x 378
responses per entity) per year in subsequent years.
---------------------------------------------------------------------------
\36\ The percentage of 26% is the percentage of active entities
registered in SAM.gov in FY20 that were awarded contracts.
\37\ This value is based on data on new registrants in SAM.gov
on average for FY16, FY17, FY18, and FY19.
---------------------------------------------------------------------------
The FAR Council notes that these costs are based on offer-by-offer
representations; upon completion of the updates to SAM, offerors will
be able to make annual representations, which is anticipated to reduce
the burden.
52.204-25
FAR 52.204-25 requires a written report in cases where a contractor
(or subcontractor to whom the clause has been flowed down) identifies
or receives notification from any source that an entity in the supply
chain uses any covered telecommunications equipment or services. The
signatory agencies estimate that 5% \38\ of the unique entities awarded
a contract (5,140) will submit approximately 5 \39\ written reports
annually pursuant to FAR 52.204-25. Therefore, the Signatory Agencies
calculated the total estimated cost for this part of the rule to be
$7.3 million (= 3 hours x $94.76 per hour x 5,140 entities x 5
responses per entity) per year in subsequent years.
---------------------------------------------------------------------------
\38\ The 5% value was derived from subject matter expert
judgment.
\39\ The 5 reports value was derived from subject matter expert
judgment.
---------------------------------------------------------------------------
In subsequent years, we assume that half of the entities impacted
in year 1 will incur these costs for 52.204-25. Therefore, the
Signatory Agencies calculated the total estimated cost for this part of
the rule to be $3.6 million (= 3 hours x $94.76 per hours 2,570
entities x 5 responses per entity) per year in subsequent years.
The total estimated burden for the representation and the clause
for year one is $11 billion. The total annual cost for both
representations in subsequent years is calculated as: $2.2 billion. The
FAR Council acknowledges that there is substantial uncertainty
underlying these estimates.
[[Page 42672]]
6. Time To Develop a Full and Complete Laydown and Phase-Out Plan To
Support Waiver Requests
The calculation at #2 above captures the time to develop a full and
complete laydown. There is no way to accurately estimate the time
required for offerors to develop a phase-out plan or the number of
offerors for which a waiver will be requested.
The total cost of the above Public Cost Estimate in Year 1 is at
least: $12 billion.
The total cost of the above Cost Estimate in Year 2 is at least:
$2.4 billion.
The total cost estimate per year in subsequent years is at least:
$2.4 billion.
The following is a summary of the estimated costs calculated in
perpetuity at a 3 and 7-percent discount rate:
------------------------------------------------------------------------
Total
Summary (billions) costs
------------------------------------------------------------------------
Present Value (3%)........................................... $89
Annualized Costs (3%)........................................ 2.7
Present Value (7%)........................................... 43
Annualized Costs (7%)........................................ 3
------------------------------------------------------------------------
The FAR Council acknowledges that there is substantial uncertainty
underlying these estimates, including elements for which an estimate is
unavailable given inadequate information. As more information becomes
available, including through comment in response to this notice, the
FAR Council will seek to update these estimates which could very likely
increase the estimated costs.
E. Government Cost Analysis
The FAR Council anticipates significant impact to the Government as
a result of this rule. These impacts will appear as higher costs,
reduced competition, and inability to meet some mission needs. These
costs are justified in light of the compelling national security
objective that this rule will advance.
The primary cost to the Government will be to review the
representations and to process the waiver request. The cost to review
the representations uses the same variables as the cost to the public
to fill out the representation resulting in a total cost to the
Government of $11 billion as the hourly rate, hours to review, and
number of representations are the same as the industry calculations.
The other cost to the Government, is the cost to review the written
reports required by the clause and the calculation uses the same
variables as the cost to the public to complete the report, resulting
in a total cost to the Government of $7.3 million.
Higher Costs and Reduced Competition: It is anticipated that at
least three factors will each lead to the Government paying higher
prices for services and products it buys: (1) Contractors will pass
along some of the new costs of compliance; (2) due to anticipated
compliance costs, some contractors will choose to exit the Federal
market, particularly for commercial services and products and a reduced
level of competition would increase prices; and (3) the risk of
commercial firms choosing not to do business with the Government may be
heightened in areas of high technological innovation such as digital
services. In recent years, DoD and GSA, among other Departments and
agencies, have placed particular emphasis on recruiting non-traditional
contractors to provide emerging tech services and this rule could
discourage innovative technology firms from competing on Federal
Government contracts.
It is also anticipated that many Federal contractors may need to
hire or contract for consultants to aid them in reviewing and updating
their supply chains. Market principles suggest that this may increase
the costs for such experts, making it more difficult for small
businesses to afford them.
Inability to Meet Mission Needs: The Government uses Competition in
Contracting Act exceptions (FAR subpart 6.3) to use sole source
acquisitions to meet agency needs. These acquisitions would be impacted
as offerors will also be subject to the section 889 requirements. There
are industries where the Government makes up a small portion of the
total market. There may be markets where the vendors will choose to no
longer do business with the Government; leaving no sources to meet
those specific requirements for the Government. This will reduce
agencies' abilities to satisfy some mission needs.
The total cost of the above Government Cost Estimate in Year 1 is:
$11 billion.
The total cost of the above Cost Estimate in Year 2 is: $2.2
billion.
The total cost estimate per year in subsequent years is: $2.2
billion.
The following is a summary of the estimated costs calculated in
perpetuity at a 3 and 7-percent discount rate:
------------------------------------------------------------------------
Total
Summary (billions) costs
------------------------------------------------------------------------
Present Value (3%)........................................... $82.5
Annualized Costs (3%)........................................ 2.5
Present Value (7%)........................................... 40
Annualized Costs (7%)........................................ 2.8
------------------------------------------------------------------------
F. Analysis of Alternatives
Alternative 1: The FAR Council could take no regulatory action to
implement this statute. However, this alternative would not provide any
implementation and enforcement of the important national security
measures imposed by the law. Moreover, the general public would not
experience the benefits of improved national security resulting from
the rule as detailed above in Section C. As a result, we reject this
alternative.
Alternative 2: The FAR Council could provide uniform procedures for
how agency waivers must be initiated and processed. The statute
provides this waiver authority to the head of each executive agency.
Each executive agency operates a range of programs that have unique
mission needs as well as unique security concerns and vulnerabilities.
Since the waiver approval process will be based on each agency's
judgment concerning particular use cases, standardizing the waiver
process across agencies is not feasible. We believe that this
alternative would not be able to best serve the public, as it would
lead to inefficient waiver determinations at agencies whose ideal
waiver process differs from the best possible uniform approach. As a
result, we reject this alternative.
IV. Specific Questions for Comment
To understand the exact scope of this impact and how this impact
could be affected in subsequent rulemaking, DoD, GSA, and NASA welcome
input on the following questions regarding anticipated impact on
affected parties.
To what extent do you currently use any equipment, system,
or service that itself uses covered telecommunications equipment or
services as a substantial or essential component of any system, or as
critical technology as part of any system?
[cir] The FAR Council is considering as part of finalization of
this rulemaking to expand the scope to require that the prohibition at
52.204-24(b)(2) and 52.204-25(b)(2) applies to the offeror and any
affiliates, parents, and subsidiaries of the offeror that are domestic
concerns, and expand the representation at 52.204-24(d)(2) so that the
offeror represents on behalf of itself and any affiliates, parents, and
subsidiaries of the offeror that are domestic concerns, as to represent
whether they use covered telecommunications equipment or services. If
the scope of rule was extended to cover affiliates, parents, and
subsidiaries of the offeror that are domestic concerns, how would that
[[Page 42673]]
impact your ability to comply with the prohibition?
To the extent you use any equipment, system or service
that uses covered telecommunications equipment or services, how much do
you estimate it would cost if you decide to cease such use to come into
compliance with the rule?
To what extent do you have insight into existing systems
and their components?
What equipment and services need to be checked to
determine whether they include any covered telecommunications equipment
or services?
[cir] What are the best processes and technology to use to identify
covered telecommunications equipment or services?
[cir] Are there automated solutions?
What are the challenges involved in identifying uses of
covered telecommunications equipment or services (domestic, foreign and
transnational) that would be prohibited by the rule?
Do you anticipate use of any products or services that are
unrelated to a service provided to the Federal Government and connects
to the facilities of a third-party (e.g. backhaul, roaming, or
interconnection arrangements) that uses covered telecommunications
equipment or services?
To what extent do you currently have direct control over
existing equipment, systems, or services in use (e.g., physical
security systems) and their components, as contrasted with contracting
for equipment, systems, or services that are used by you within meaning
of the statute yet provided by a separate entity (e.g., landlords)? How
long will it take if you decide to remove and replace covered
telecommunications equipment or services that your company uses?
When a company identifies covered telecommunications
equipment or services, what are the steps to take if you decide to
replace the equipment or services?
[cir] What do companies do if their factory or office is located in
foreign country where covered telecommunications equipment or services
are prevalent and alternative solutions may be unavailable?
[cir] What are some best practices (e.g., sourcing strategies) or
technologies that can assist companies with replacing covered
telecommunications equipment or services?
Are there specific use cases in the supply chain where it
would not be feasible to cease use of equipment, system(s), or services
that use covered telecommunications equipment and services? Please be
specific in explaining why cessation of use is not feasible.
[cir] Will the requirement to comply with this rule impact your
willingness to offer goods and services to the Federal Government?
Please be specific in describing the impact (e.g., what types of
products or services may no longer be offered, or offered in a modified
form, and why)
[cir] The FAR Council recognizes there could be further costs
associated with this rule (e.g. lost business opportunities, having to
relocate a building in foreign country where there is no market
alternative). What are they?
[cir] What additional information or guidance do you view as
necessary to effectively comply with this rule?
[cir] What other challenges do you anticipate facing in effectively
complying with this rule?
Do you have data on the extent of the presence of covered
telecommunications equipment or services? If so, please provide that
data.
Do you have data on the fully burdened cost to remove and
replace covered telecommunications equipment or services, if that is a
decision that you decide to make? If so, please provide that data and
identify how you would revise the estimated costs in the cost analysis.
V. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Items, Including Commercially
Available Off-the-Shelf (COTS) Items
This rule does not add any new provisions or clauses. The rule does
not change the applicability of existing provisions or clauses to
contracts at or below the SAT and contracts for the acquisition of
commercial items, including COTS items. The rule is updating the
provision at FAR 52.204-24 and the clause at FAR 52.204-25 to implement
section 889(a)(1)(B).
A. Applicability to Contracts at or Below the Simplified Acquisition
Threshold
41 U.S.C. 1905 governs the applicability of laws to acquisitions at
or below the simplified acquisition threshold (SAT). Section 1905
generally limits the applicability of new laws when agencies are making
acquisitions at or below the SAT, but provides that such acquisitions
will not be exempt from a provision of law under certain circumstances,
including when, as in this case, the FAR Council makes a written
determination and finding that it would not be in the best interest of
the Federal Government to exempt contracts and subcontracts in amounts
not greater than the SAT from the provision of law.
B. Applicability to Contracts for the Acquisition of Commercial Items,
Including Commercially Available Off-the-Shelf Items
41 U.S.C. 1906 governs the applicability of laws to contracts for
the acquisition of commercial items, and is intended to limit the
applicability of laws to contracts for the acquisition of commercial
items. Section 1906 provides that if the FAR Council makes a written
determination that it is not in the best interest of the Federal
Government to exempt commercial item contracts, the provision of law
will apply to contracts for the acquisition of commercial items.
Finally, 41 U.S.C. 1907 states that acquisitions of commercially
available off-the-shelf (COTS) items will be exempt from a provision of
law unless certain circumstances apply, including if the Administrator
for Federal Procurement Policy makes a written determination and
finding that it would not be in the best interest of the Federal
Government to exempt contracts for the procurement of COTS items from
the provision of law.
C. Determinations
The FAR Council has determined that it is in the best interest of
the Government to apply the rule to contracts at or below the SAT and
for the acquisition of commercial items. The Administrator for Federal
Procurement Policy has determined that it is in the best interest of
the Government to apply this rule to contracts for the acquisition of
COTS items.
While the law does not specifically address acquisitions of
commercial items, including COTS items, there is an unacceptable level
of risk for the Government in contracting with entities that use
equipment, systems, or services that use covered telecommunications
equipment or services as a substantial or essential component of any
system, or as critical technology as part of any system. This level of
risk is not alleviated by the fact that the equipment or service being
acquired has been sold or offered for sale to the general public,
either in the same form or a modified form as sold to the Government
(i.e., that it is a commercial item or COTS item), nor by the small
size of the purchase (i.e., at or below the SAT).
[[Page 42674]]
VI. Interim Rule Determination and Executive Orders 12866, 13563, and
13771
A determination has been made under the authority of the Secretary
of Defense (DoD), Administrator of General Services (GSA), and the
Administrator of the National Aeronautics and Space Administration
(NASA) that urgent and compelling circumstances necessitate that this
interim rule go into effect earlier than 60 days after its publication
date.
Since Section 889 of the NDAA was signed on August 13, 2018, the
FAR Council has been working diligently to implement the statute, which
has multiple effective dates embedded in Section 889. Like many
countries, the United States has increasingly relied on a global
industrial supply chain. As threats have increased, so has the
Government's scrutiny of its contractors and their suppliers.
Underlying these efforts is the concern a foreign government will be
able to expropriate valuable technologies, engage in espionage with
regard to sensitive U.S. Government information, and/or exploit
vulnerabilities in products or services. It is worth noting this rule
follows a succession of other FAR and DOD rules dealing with supply
chain and cybersecurity.
Government agencies are already authorized to exclude certain
contractors and products from specified countries. For example, Section
515 of the Consolidated Appropriations Act of 2014 required certain
non-DoD agencies to conduct a supply chain risk assessment before
acquiring high- or-moderate-impact information systems. The relevant
agencies are required to conduct the supply chain risk assessments in
conjunction with the FBI to determine whether any cyber-espionage or
sabotage risk associated with the acquisition of these information
systems exist, with a focus on cyber threats from companies ``owned,
directed, or subsidized by the People's Republic of China.''
More recently, U.S. intelligence agencies raised concerns that
Kaspersky Lab executives were closely tied to the Russian government,
and that a Russian cybersecurity law would compel Kaspersky to help
Russian intelligence agencies conduct espionage. As a result, DHS
issued a Binding Operational Directive effectively barring civilian
Government agencies from using the software. In the FY 2018 NDAA,
Congress prohibited the entire U.S. Government from using products and
services from Kaspersky or related entities. In June 2018, this
prohibition was implemented as an interim rule across the U.S.
Government by FAR 52.204-23.
Section 889 differs from the previous efforts in substantial ways.
Unlike the blanket prohibition on agency use of goods and services from
Kaspersky Labs, the prohibitions in Section 889 apply to multiple
companies, and apply with slightly different characterizations to
products and services from the various named companies. Additionally,
section 889 contains carve-outs under which the prohibitions do not
apply, further complicating interpretation and implementation of
rulemaking. Finally, section 889 contains distinct prohibitions related
to contracting, with the first applying to products and services
purchased for use by the Government, and the second applying to use of
the covered telecommunications equipment or services by contractors.
Given the various provisions of Section 889, including the focus in the
(a)(1)(A) prohibition on addressing risk to the Government's own use of
covered telecommunications equipment and services and the shorter time
period available to implement that prohibition, the FAR Council first
developed and published at 84 FR 40216 on August 13, 2019, FAR Case
2018-017 to implement that prohibition. As discussed in the background
section of this rule, that rule focused on products and services sold
to the Government (directly or indirectly through a prime contract).
Changes necessary to the System for Award Management to reduce the
burden of the rule were not available by the effective date of the
first rule, so in order to decrease the burden on contractors from this
first rule, the FAR Council published a second interim rule on Section
889(a)(1)(A) at 84 FR 68314 on December 13, 2019. After the publication
of this second rule, the FAR Council accelerated its ongoing work on
the provisions of Section 889(a)(1)(B). Section 889(a)(1)(B) focuses on
the Federal Government's ability to contract with companies that use
the covered products or services at the requisite threshold.
Given the expansiveness and complexity of Section 889(a)(1)(B),
this rule required substantial up-front analysis. As described
elsewhere in the rule, all three signatory agencies held public
meetings to hear directly from industry on concerns with this rule,
with the first occurring in July of 2019 and the most recent occurring
in March of 2020. The rule was prepared in part in the spring of 2020
as the nation began shutdown due to the COVID-19 pandemic and work
across the Government was diverted to respond to the national
emergency; the concentration of all available resources on the response
to the pandemic very significantly delayed the Government's ability to
finish the rule. These factors have left the FAR Council with
insufficient time to publish the rule with 60 days before the
legislatively established effective date of August 13, 2020, or to
complete full public notice and comment before the rule becomes
effective. As noted, however, the agencies are seeking public comment
on this interim rule and will consider and address those comments.
Having an implementing regulation in place by the effective date is
critically important to avoid confusion, uncertainty, and potentially
substantial legal consequences for agencies and the vendor community.
The statute requires contractors to identify the use of covered
telecommunications equipment and services in their operations and the
prohibitions will take effect on August 13, 2020. If they did so
without an implementing regulation in place, contractors would have no
guidance as to how to comply with the requirements of Section
889(a)(1)(B), leading to situations where contractors could refuse to
contract with the Government over fears that lack of compliance could
yield claims for breach of contract, or claims under the False Claims
Act. Concerns of this sort were expressed during the outreach conducted
by the FAR Council, with contractors expressing confusion as to the
scope of the statutory prohibition, and asking for explicit guidance
regarding what is required to comply with the requirement; this
guidance is provided by the rule in the form of instructions regarding
a reasonable inquiry and what must be represented to the Government.
Absent coverage in the FAR to implement these requirements in a uniform
manner as of the effective date, agencies would also be forced to
implement the statute on their own, absent that unifying guidance,
leading to rapidly divergent implementation paths, and creating
substantial additional confusion and duplicative costs for the
regulated contracting community. Publication of a proposed rule under
these circumstances, while providing some indication of the direction
the Government intended to take, would not provide sufficient clarity
or certainty to avoid these consequences, given the complexity of the
subject rule.
For the foregoing reasons, pursuant to 41 U.S.C. 1707(d), the FAR
Council finds that urgent and compelling circumstances make compliance
with
[[Page 42675]]
the notice and comment and delayed effective date requirements of 41
U.S.C. 1707(a) and (b) impracticable, and invokes the exception to
those requirements under 1707(d). While a public comment process will
not be completed prior to the rule's effective date, the FAR Council
has incorporated feedback solicited through extensive outreach already
undertaken, including through public meetings conducted over the course
of nine months, and the feedback received through the two rulemakings
associated with Section 889(a)(1)(A). The FAR Council will also
consider comments submitted in response to this interim rule in issuing
a subsequent rulemaking.
This interim rule is economically significant for the purposes of
Executive Orders 12866 and 13563. This rule is not subject to the
requirements of E.O. 13771 (82 FR 9339, February 3, 2017) because the
benefit-cost analysis demonstrates that the regulation is anticipated
to improve national security as its primary direct benefit. This rule
is meant to mitigate risks across the supply chains that provide
hardware, software, and services to the U.S. Government and further
integrate national security considerations into the acquisition
process.
The Office of Information and Regulatory Affairs (OIRA) has
determined that this is a major rule under the Congressional Review Act
(CRA) (5 U.S.C. 804(2)). Under the CRA (5 U.S.C. 801(a)(3)), a major
rule generally may not take effect until 60 days after a report on the
rule is received by Congress. As a result of the factors identified
above, the FAR Council has insufficient time to prepare and complete a
full public notice and comment rulemaking proceeding and to timely
complete a final rule prior to the effective date of August 13, 2020.
Because of the substantial additional impact to the regulated community
if the rule is not in place on the effective date, the FAR Council has
found good cause to forego notice and public procedure, the Council
also determines, pursuant to 5 U.S.C. 808(2), that this interim rule
will take effect on August 13, 2020.
Pursuant to 41 U.S.C. 1707 and FAR 1.501-3(b), DoD, GSA, and NASA
will consider public comments received in response to this interim rule
in the formation of the final rule.
VII. Regulatory Flexibility Act
DoD, GSA, and NASA expect that this rule may have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. An
Initial Regulatory Flexibility Analysis (IRFA) has been performed, and
is summarized as follows:
The reason for this interim rule is to implement section
889(a)(1)(B) of the John S. McCain National Defense Authorization
Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115-232).
The objective of the rule is to provide an information
collection mechanism that relies on an offer-by-offer representation
that is required to enable agencies to determine and ensure that
they are complying with section 889(a)(1)(B).
The legal basis for the rule is section 889(a)(1)(B) of the NDAA
for FY 2019, which prohibits the Government from entering into, or
extending or renewing, a contract with an entity that uses 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, on or after
August 13, 2020, unless an exception applies or a waiver has been
granted. This prohibition applies to an entity that uses at the
prime contractor level 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, regardless of whether that usage is in performance of
work under a Federal contract. This prohibition does not flow-down
to subcontractors.
This collection includes a burden for requiring an offeror to
represent if it ``does'' or ``does not'' use any equipment, system,
or service that uses covered telecommunications equipment or
services.
The representation requirement being added to the FAR provision
at 52.204-24 will be included in all solicitations, including
solicitations for contracts with small entities and is an offer-by-
offer representation. A data set was generated from the Federal
Procurement Data System (FPDS) for FY 2016, 2017, 2018 and 2019 for
use in estimating the number of small entities affected by this
rule.
The FPDS data indicates that the Government awarded contracts to
an average of 102,792 unique entities, of which 75,112 (73 percent)
were small entities. DoD, GSA, and NASA estimate that the
representation at 52.204-24 will impact all unique entities awarded
Government contracts, of which 75,112 are small entities.
This rule amends the solicitation provision at 52.204-24 to
require all vendors to represent on an offer-by-offer basis, that it
``does'' or ``does not'' use any covered telecommunications
equipment or services, or any equipment, system, or service that
uses covered telecommunications equipment or services and if it does
to provide an additional disclosure.
If the offeror selects ``does'' in the representation at 52.204-
24(d)(2), the offeror is required to further disclose, per paragraph
(e), substantial detail regarding the basis for selecting ``does''
in the representation.
This rule will impact some small businesses and their ability to
provide Government services at the prime contract level, since some
small entities lack the resources to efficiently update their supply
chain and information systems, which may be useful to comply with
the prohibition.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
The FAR Council intends to publish a subsequent rulemaking to
allow offerors, including small entities, to represent annually in
the System for Award Management (SAM) after conducting a reasonable
inquiry. Only offerors that provide an affirmative response to the
annual representation would be required to provide the offer-by-
offer representation at 52.204-24(d)(2). The annual representation
is anticipated to reduce the burden on small entities.
The Regulatory Secretariat Division has submitted a copy of the
IRFA to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the IRFA may be obtained from the Regulatory
Secretariat Division. DoD, GSA, and NASA invite comments from small
business concerns and other interested parties on the expected impact
of this rule on small entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 610 (FAR Case 2019-009) in
correspondence.
VIII. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA)
provides that an agency generally cannot conduct or sponsor a
collection of information, and no person is required to respond to nor
be subject to a penalty for failure to comply with a collection of
information, unless that collection has obtained OMB approval and
displays a currently valid OMB Control Number.
DoD, GSA, and NASA requested, and OMB authorized, emergency
processing of the collection of information involved in this rule,
consistent with 5 CFR 1320.13. DoD, GSA, and NASA have determined the
following conditions have been met:
a. The collection of information is needed prior to the expiration
of time periods normally associated with a routine submission for
review under the provisions of the PRA, because the prohibition in
section 889(a)(1)(B) goes into effect on August 13, 2020.
b. The collection of information is essential to the mission of the
agencies to ensure the Federal Government complies with section
889(a)(1)(B) on the statute's effective date in order to protect the
Government supply chain
[[Page 42676]]
from risks posed by covered telecommunications equipment or services.
c. Moreover, DoD, GSA, and NASA cannot comply with the normal
clearance procedures because public harm is reasonably likely to result
if current clearance procedures are followed. Authorizing collection of
this information on the effective date will ensure that agencies do not
enter into, extend, or renew contracts with any entity that uses
equipment, systems, or services that use telecommunications equipment
or services from certain named companies as a substantial or essential
component or critical technology as part of any system in violation of
the prohibition in section 889(a)(1)(B).
DoD, GSA, and NASA intend to provide a separate 60-day notice in
the Federal Register requesting public comment on the information
collections contained within this rule under OMB Control Number 9000-
0201.
The annual public reporting burden for this collection of
information is estimated as follows:
Agency: DoD, GSA, and NASA.
Type of Information Collection: New Collection.
Title of Collection: Representation Regarding Certain
Telecommunications and Video Surveillance Services or Equipment.
FAR Clause: 52.204-24.
Affected Public: Private Sector--Business.
Total Estimated Number of Respondents: 102,792.
Average Responses per Respondents: 378.
Total Estimated Number of Responses: 38,854,291.
Average Time (for both positive and negative representations)
per Response: 3 hours.
Total Annual Time Burden: 116,562,873.
Agency: DoD, GSA, and NASA.
Type of Information Collection: New Collection.
Title of Collection: Prohibition on Contracting for Certain
Telecommunications and Video Surveillance Services or Equipment.
FAR Clause: 52.204-25.
Affected Public: Private Sector--Business.
Total Estimated Number of Respondents: 5,140.
Average Responses per Respondents: 5.
Total Estimated Number of Responses: 25,700.
Average Time per Response: 3 hours.
Total Annual Time Burden: 77,100.
Agency: DoD, GSA, and NASA.
Type of Information Collection: New Collection.
Title of Collection: Waiver from Prohibition on Contracting for
Certain Telecommunications and Video Surveillance Services or
Equipment.
FAR Clause: 52.204-25.
Affected Public: Private Sector--Business.
Total Estimated Number of Respondents: 20,000.
Average Responses per Respondents: 1.
Total Estimated Number of Responses: 20,000.
Average Time per Response: 160 hours.
Total Annual Time Burden: 3,200,000.
The public reporting burden for this collection of information
consists of a representation to identify whether an offeror uses
covered telecommunications equipment or services for each offer as
required by 52.204-24 and reports of identified use of covered
telecommunications equipment or services as required by 52.204-25. The
representation at 52.204-24 is estimated to average 3 hours per
response to review the prohibitions, research the source of the product
or service, and complete the additional detailed disclosure, if
applicable. Reports required by 52.204-25 are estimated to average 3
hours per response, including the time for reviewing definitions,
searching existing data sources, gathering and maintaining the data
needed, and completing and reviewing the report.
If the Government seeks a waiver from the prohibition, the offeror
will be required to provide a full and complete laydown of the
presences of covered telecommunications or video surveillance equipment
or services in the entity's supply chain and a phase-out plan to
eliminate such covered telecommunications equipment or services from
the offeror's systems. There is no way to estimate the total number of
waivers at this time. For the purposes of complying with the PRA
analysis, the FAR Council estimates 20,000 waivers; however there is no
data for the basis of this estimate. This estimate may be higher or
lower once the rule is in effect.
The subsequent 60-day notice to be published by DoD, GSA, and NASA
will invite public comments.
List of Subjects in 48 CFR Parts 1, 4, 13, 39, and 52
Government procurement.
William F. Clark,
Director, Office of Governmentwide Acquisition Policy, Office of
Acquisition Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA are amending 48 CFR parts 1, 4, 13,
39, and 52 as set forth below:
0
1. The authority citation for 48 CFR parts 1, 4, 13, 39, and 52
continues to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM
0
2. In section 1.106 amend the table by revising the entries for
``4.21'', ``52.204-24'' and ``52.204-25'' to read as follows:
1.106 OMB approval under the Paperwork Reduction Act.
* * * * *
------------------------------------------------------------------------
FAR segment OMB control No.
------------------------------------------------------------------------
* * * * *
4.21...................................... 9000-0199 and 9000-0201.
* * * * *
52.204-24................................. 9000-0199 and 9000-0201.
52.204-25................................. 9000-0199 and 9000-0201
* * * * *
------------------------------------------------------------------------
PART 4--ADMINISTRATIVE AND INFORMATION MATTERS
4.2100 [Amended]
0
3. Amend section 4.2100 by removing ``paragraph (a)(1)(A)'' and adding
``paragraphs (a)(1)(A) and (a)(1)(B)'' in its place.
0
4. Amend section 4.2101 by adding in alphabetical order the definitions
``Backhaul'', ``Interconnection arrangements'', ``Reasonable inquiry''
and ``Roaming'' to read as follows:
4.2101 Definitions.
* * * * *
Backhaul means intermediate links between the core network, or
backbone network, and the small subnetworks at the edge of the network
(e.g., connecting cell phones/towers to the core telephone network).
Backhaul can be wireless (e.g., microwave) or wired (e.g., fiber optic,
coaxial cable, Ethernet).
* * * * *
Interconnection arrangements means arrangements governing the
physical connection of two or more networks to allow the use of
another's network to hand off traffic where it is ultimately delivered
(e.g., connection of a customer of telephone provider A to a customer
of telephone company B) or sharing data and other information
resources.
Reasonable inquiry means 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 that excludes the need to include an
internal or third-party audit.
Roaming means cellular communications services (e.g., voice,
[[Page 42677]]
video, data) received from a visited network when unable to connect to
the facilities of the home network either because signal coverage is
too weak or because traffic is too high.
* * * * *
0
5. Amend section 4.2102 by revising paragraphs (a) and (c) to read as
follows:
4.2102 Prohibition.
(a) Prohibited equipment, systems, or services.
(1) On or after August 13, 2019, agencies are prohibited from
procuring or obtaining, or extending or renewing a contract 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 at paragraph (b) of this section applies or
the covered telecommunications equipment or services are covered by a
waiver described in 4.2104.
(2) On or after August 13, 2020, agencies are prohibited from
entering into a contract, or extending or renewing a contract, with an
entity that uses 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 at paragraph (b) of this section applies or
the covered telecommunications equipment or services are covered by a
waiver described in 4.2104. This prohibition applies to the use of
covered telecommunications equipment or services, regardless of whether
that use is in performance of work under a Federal contract.
* * * * *
(c) Contracting Officers. Unless an exception at paragraph (b) of
this section applies or the covered telecommunications equipment or
service is covered by a waiver described in 4.2104, Contracting
Officers shall not--
(1) Procure or obtain, or extend or renew a contract (e.g.,
exercise an option) 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; or
(2) Enter into a contract, or extend or renew a contract, with an
entity that uses 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.
* * * * *
0
6. Amend section 4.2103 by revising paragraph (a)(2) to read as
follows:
4.2103 Procedures.
(a) * * *
(2)(i) If the offeror selects ``will not'' in paragraph (d)(1) of
the provision at 52.204-24 or ``does not'' in paragraph (d)(2) of the
provision at 52.204-24, the contracting officer may rely on the
representations, unless the contracting officer has reason to question
the representations. If the contracting officer has a reason to
question the representations, the contracting officer shall follow
agency procedures.
(ii) If an offeror selects ``will'' in paragraph (d)(1) of the
provision at 52.204-24, the offeror must provide the information
required by paragraph (e)(1) of the provision at 52.204-24, and the
contracting officer shall follow agency procedures.
(iii) If an offeror selects ``does'' in paragraph (d)(2) of the
provision at 52.204-24, the offeror must complete the disclosure at
paragraph (e)(2) of the provision at 52.204-24, and the contracting
officer shall follow agency procedures.
* * * * *
0
7. Amend section 4.2104 by revising paragraphs (a)(1) introductory text
and (a)(2), and adding paragraphs (a)(3) and (4) to read as follows:
4.2104 Waivers.
(a) * * *
(1) Waiver. The waiver may be provided, for a period not to extend
beyond August 13, 2021 for the prohibition at 4.2102(a)(1), or beyond
August 13, 2022 for the prohibition at 4.2102(a)(2), if the Government
official, on behalf of the entity, seeking the waiver submits to the
head of the executive agency--
* * * * *
(2) Executive agency waiver requirements for the prohibition at
4.2102(a)(2). Before the head of an executive agency can grant a waiver
to the prohibition at 4.2102(a)(2), the agency must--
(i) Have designated a senior agency official for supply chain risk
management, responsible for ensuring the agency effectively carries out
the supply chain risk management functions and responsibilities
described in law, regulation, and policy;
(ii) Establish participation in an information-sharing environment
when and as required by the Federal Acquisition Security Council (FASC)
to facilitate interagency sharing of relevant acquisition supply chain
risk information;
(iii) Notify and consult with the Office of the Director of
National Intelligence (ODNI) on the waiver request using ODNI guidance,
briefings, best practices, or direct inquiry, as appropriate; and
(iv) Notify the ODNI and the FASC 15 days prior to granting the
waiver that it intends to grant the waiver.
(3) Waivers for emergency acquisitions.
(i) In the case of an emergency, including a declaration of major
disaster, in which prior notice and consultation with the ODNI and
prior notice to the FASC is impracticable and would severely jeopardize
performance of mission-critical functions, the head of an agency may
grant a waiver without meeting the notice and consultation requirements
under 4.2104(a)(2)(iii) and 4.2104(a)(2)(iv) to enable effective
mission critical functions or emergency response and recovery.
(ii) In the case of a waiver granted in response to an emergency,
the head of an agency granting the waiver must--
(A) Make a determination that the notice and consultation
requirements are impracticable due to an emergency condition; and
(B) Within 30 days of award, notify the ODNI and the FASC of the
waiver issued under emergency conditions in addition to the waiver
notice to Congress under 4.2104(a)(4).
(4) Waiver notice.
(i) For waivers to the prohibition at 4.2102(a)(1), the head of the
executive agency shall, not later than 30 days after approval--
(A) Submit in accordance with agency procedures to the appropriate
congressional committees the full and complete laydown of the presences
of covered telecommunications or video surveillance equipment or
services in the relevant supply chain; and
(B) The phase-out plan to eliminate such covered telecommunications
or video surveillance equipment or services from the relevant systems.
(ii) For waivers to the prohibition at 4.2102(a)(2), the head of
the executive agency shall, not later than 30 days after approval
submit in accordance with agency procedures to the appropriate
congressional committees--
(A) An attestation by the agency that granting of the waiver would
not, to the agency's knowledge having conducted the necessary due
diligence as directed by statute and regulation, present a material
increase in risk to U.S. national security;
(B) The full and complete laydown of the presences of covered
[[Page 42678]]
telecommunications or video surveillance equipment or services in the
relevant supply chain, to include a description of each category of
covered technology equipment or services discovered after a reasonable
inquiry, as well as each category of equipment, system, or service used
by the entity in which such covered technology is found after
conducting a reasonable inquiry; and
(C) The phase-out plan to eliminate such covered telecommunications
or video surveillance equipment or services from the relevant systems.
* * * * *
PART 13--SIMPLIFIED ACQUISITION PROCEDURES
0
8. Amend section 13.201 by redesignating paragraph (j) as (j)(1) and
adding paragraph (j)(2) to read as follows:
13.201 General.
* * * * *
(j)(1) * * *
(2) On or after August 13, 2020, agencies are prohibited from
entering into a contract, or extending or renewing a contract, with an
entity that uses 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 is granted (see subpart
4.21). This prohibition applies to the use of covered
telecommunications equipment or services, regardless of whether that
use is in performance of work under a Federal contract.
PART 39--ACQUISITION OF INFORMATION TECHNOLOGY
0
9. Amend section 39.101 by redesignating paragraph (f) as (f)(1) and
adding paragraph (f)(2) to read as follows:
39.101 Policy.
* * * * *
(f)(1) * * *
(2) On or after August 13, 2020, agencies are prohibited from
entering into a contract, or extending or renewing a contract, with an
entity that uses 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 is granted (see subpart
4.21). This prohibition applies to the use of covered
telecommunications equipment or services, regardless of whether that
use is in performance of work under a Federal contract.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
10. Revise section 52.204-24 to read as follows:
52.204-24 Representation Regarding Certain Telecommunications and
Video Surveillance Services or Equipment.
As prescribed in 4.2105(a), insert the following provision:
Representation Regarding Certain Telecommunications and Video
Surveillance Services or Equipment (AUG 2020)
The Offeror shall not complete the representation at paragraph
(d)(1) of this provision if the Offeror has represented that it
``does not provide covered telecommunications equipment or services
as a part of its offered products or services to the Government in
the performance of any contract, subcontract, or other contractual
instrument'' in the provision at 52.204-26, Covered
Telecommunications Equipment or Services--Representation, or in
paragraph (v) of the provision at 52.212-3, Offeror Representations
and Certifications-Commercial Items.
(a) Definitions. As used in this provision-
Backhaul, covered telecommunications equipment or services,
critical technology, interconnection arrangements, reasonable
inquiry, roaming, and substantial or essential component have the
meanings provided in the clause 52.204-25, Prohibition on
Contracting for Certain Telecommunications and Video Surveillance
Services or Equipment.
(b) Prohibition. (1) Section 889(a)(1)(A) of the John S. McCain
National Defense Authorization Act for Fiscal Year 2019 (Pub. L.
115-232) prohibits the head of an executive agency on or after
August 13, 2019, from procuring or obtaining, or extending or
renewing a contract 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. Nothing in the
prohibition shall be construed to--
(i) Prohibit the head of an executive agency from procuring with
an entity to provide a service that connects to the facilities of a
third-party, such as backhaul, roaming, or interconnection
arrangements; or
(ii) Cover telecommunications equipment that cannot route or
redirect user data traffic or cannot permit visibility into any user
data or packets that such equipment transmits or otherwise handles.
(2) Section 889(a)(1)(B) of the John S. McCain National Defense
Authorization Act for Fiscal Year 2019 (Pub. L. 115-232) prohibits
the head of an executive agency on or after August 13, 2020, from
entering into a contract or extending or renewing a contract with an
entity that uses 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. This prohibition applies to the use of covered
telecommunications equipment or services, regardless of whether that
use is in performance of work under a Federal contract. Nothing in
the prohibition shall be construed to--
(i) Prohibit the head of an executive agency from procuring with
an entity to provide a service that connects to the facilities of a
third-party, such as backhaul, roaming, or interconnection
arrangements; or
(ii) Cover telecommunications equipment that cannot route or
redirect user data traffic or cannot permit visibility into any user
data or packets that such equipment transmits or otherwise handles.
(c) Procedures. The Offeror shall review the list of excluded
parties in the System for Award Management (SAM) (https://www.sam.gov) for entities excluded from receiving federal awards for
``covered telecommunications equipment or services.''
(d) Representations. The Offeror represents that--
(1) It [ ] will, [ ] will not provide covered telecommunications
equipment or services to the Government in the performance of any
contract, subcontract or other contractual instrument resulting from
this solicitation. The Offeror shall provide the additional
disclosure information required at paragraph (e)(1) of this section
if the Offeror responds ``will'' in paragraph (d)(1) of this
section; and
(2) After conducting a reasonable inquiry, for purposes of this
representation, the Offeror represents that--
It [ ] does, [ ] does not use covered telecommunications
equipment or services, or use any equipment, system, or service that
uses covered telecommunications equipment or services. The Offeror
shall provide the additional disclosure information required at
paragraph (e)(2) of this section if the Offeror responds ``does'' in
paragraph (d)(2) of this section.
(e) Disclosures. (1) Disclosure for the representation in
paragraph (d)(1) of this provision. If the Offeror has responded
``will'' in the representation in paragraph (d)(1) of this
provision, the Offeror shall provide the following information as
part of the offer:
(i) For covered equipment--
(A) The entity that produced the covered telecommunications
equipment (include entity name, unique entity identifier, CAGE code,
and whether the entity was the original equipment manufacturer (OEM)
or a distributor, if known);
(B) A description of all covered telecommunications equipment
offered (include brand; model number, such as OEM number,
manufacturer part number, or wholesaler number; and item
description, as applicable); and
(C) Explanation of the proposed use of covered
telecommunications equipment and any factors relevant to determining
if such use would be permissible under the prohibition in paragraph
(b)(1) of this provision.
(ii) For covered services--
(A) If the service is related to item maintenance: A description
of all covered
[[Page 42679]]
telecommunications services offered (include on the item being
maintained: Brand; model number, such as OEM number, manufacturer
part number, or wholesaler number; and item description, as
applicable); or
(B) If not associated with maintenance, the Product Service Code
(PSC) of the service being provided; and explanation of the proposed
use of covered telecommunications services and any factors relevant
to determining if such use would be permissible under the
prohibition in paragraph (b)(1) of this provision.
(2) Disclosure for the representation in paragraph (d)(2) of
this provision. If the Offeror has responded ``does'' in the
representation in paragraph (d)(2) of this provision, the Offeror
shall provide the following information as part of the offer:
(i) For covered equipment--
(A) The entity that produced the covered telecommunications
equipment (include entity name, unique entity identifier, CAGE code,
and whether the entity was the OEM or a distributor, if known);
(B) A description of all covered telecommunications equipment
offered (include brand; model number, such as OEM number,
manufacturer part number, or wholesaler number; and item
description, as applicable); and
(C) Explanation of the proposed use of covered
telecommunications equipment and any factors relevant to determining
if such use would be permissible under the prohibition in paragraph
(b)(2) of this provision.
(ii) For covered services--
(A) If the service is related to item maintenance: A description
of all covered telecommunications services offered (include on the
item being maintained: Brand; model number, such as OEM number,
manufacturer part number, or wholesaler number; and item
description, as applicable); or
(B) If not associated with maintenance, the PSC of the service
being provided; and explanation of the proposed use of covered
telecommunications services and any factors relevant to determining
if such use would be permissible under the prohibition in paragraph
(b)(2) of this provision.
(End of provision)
0
11. Amend section 52.204-25 by--
0
a. Revising the date of the clause;
0
b. In paragraph (a), adding in alphabetical order the definitions
``Backhaul'', ``Interconnection arrangements'', ``Reasonable inquiry''
and ``Roaming'';
0
c. Revising paragraph (b); and
0
d. Removing from paragraph (e) ``this paragraph (e)'' and adding ``this
paragraph (e) and excluding paragraph (b)(2)'' in its place.
The revisions read as follows:
52.204-25 Prohibition on Contracting for Certain Telecommunications
and Video Surveillance Services or Equipment.
* * * * *
Prohibition on Contracting for Certain Telecommunications and Video
Surveillance Services or Equipment (AUG 2020)
(a) * * *
Backhaul means intermediate links between the core network, or
backbone network, and the small subnetworks at the edge of the
network (e.g., connecting cell phones/towers to the core telephone
network). Backhaul can be wireless (e.g., microwave) or wired (e.g.,
fiber optic, coaxial cable, Ethernet).
* * * * *
Interconnection arrangements means arrangements governing the
physical connection of two or more networks to allow the use of
another's network to hand off traffic where it is ultimately
delivered (e.g., connection of a customer of telephone provider A to
a customer of telephone company B) or sharing data and other
information resources.
Reasonable inquiry means 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 that excludes the need to include an
internal or third-party audit.
Roaming means cellular communications services (e.g., voice,
video, data) received from a visited network when unable to connect
to the facilities of the home network either because signal coverage
is too weak or because traffic is too high.
* * * * *
(b) Prohibition. (1) Section 889(a)(1)(A) of the John S. McCain
National Defense Authorization Act for Fiscal Year 2019 (Pub. L.
115-232) prohibits the head of an executive agency on or after
August 13, 2019, from procuring or obtaining, or extending or
renewing a contract 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. The Contractor is
prohibited from providing to the Government 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 at
paragraph (c) of this clause applies or the covered
telecommunication equipment or services are covered by a waiver
described in FAR 4.2104.
(2) Section 889(a)(1)(B) of the John S. McCain National Defense
Authorization Act for Fiscal Year 2019 (Pub. L. 115-232) prohibits
the head of an executive agency on or after August 13, 2020, from
entering into a contract, or extending or renewing a contract, with
an entity that uses 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 at paragraph (c) of this clause
applies or the covered telecommunication equipment or services are
covered by a waiver described in FAR 4.2104. This prohibition
applies to the use of covered telecommunications equipment or
services, regardless of whether that use is in performance of work
under a Federal contract.
* * * * *
0
12. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Removing from paragraphs (a)(3) and (e)(1)(iv) ``AUG 2019'' and
adding ``AUG 2020'' in their places, respectively;
0
c. Revising the date of Alternate II; and
0
d. In Alternate II, amend paragraph (e)(1)(ii)(D) by removing ``AUG
2019'' and adding ``AUG 2020'' in its place.
The revisions read as follows:
52.212-5 Contract Terms and Conditions Required To Implement Statutes
or Executive Orders--Commercial Items.
* * * * *
Contract Terms and Conditions Required To Implement Statutes or
Executive Orders--Commercial Items (AUG 2020)
* * * * *
Alternate II (AUG 2020). * * *
* * * * *
0
13. Amend section 52.213-4 by--
0
a. Revising the date of the clause;
0
b. Removing from paragraph (a)(1)(iii) ``AUG 2019'' and adding ``AUG
2020'' in its place; and
0
c. Removing from paragraph (a)(2)(viii) ``JUN 2020'' and adding ``AUG
2020'' in its place.
The revision reads as follows:
52.213-4 Terms and Conditions--Simplified Acquisitions (Other Than
Commercial Items).
* * * * *
Terms and Conditions--Simplified Acquisitions (Other Than Commercial
Items) (AUG 2020)
* * * * *
0
14. Amend section 52.244-6 by--
0
a. Revising the date of the clause; and
0
b. Removing from paragraph (c)(1)(vi) ``AUG 2019'' and adding ``AUG
2020'' in its place.
The revision reads as follows:
52.244-6 Subcontracts for Commercial Items.
* * * * *
Subcontracts for Commercial Items (AUG 2020)
* * * * *
[FR Doc. 2020-15293 Filed 7-13-20; 8:45 am]
BILLING CODE 6820-EP-P