An interim rule is expected to be published in today’s Federal Register implementing Section 889 Part B of the 2018 Defense Authorization Act.  This provision prohibits the government, “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,” (new language in FAR 52.204-25) unless an exception applies or a waiver is granted.  Exceptions will be granted on a case-by-case basis and will only serve to delay the requirement to comply, not do away with it.  Contractors should closely examine the rule, the draft of which was 86 pages, and ensure compliance.  The interim rule is effective August 13, 2020Key features include:

  • The rule applies only to prime contracts, not sub-contracts due to the way the statute was worded.
  • The government shall insert the new clause into any new contract or existing contract upon modification, extension, or renewal.
  • Contractors must make a “reasonable inquiry” inside their company to discover whether or not covered IT and telecommunications equipment is used.
  • “Covered equipment” includes products from Huawei, ZTE, Hytera, Hangzho Hikvision Digital, Dahua and their affiliates.
  • The prohibition on using prohibited equipment extends company-wide and is NOT limited to those parts of the company that contract with the federal government.
  • Contractors that discover non-compliant equipment are expected to remove it and have one business day to notify the government that such equipment has been discovered.

The FAR Council acknowledges that the cost to comply with the standard will run into the billions of dollars.  Contractors are encouraged to submit comments on the interim rule during the 60-day comment period, indicating that this is considered a major rule making.  This interim rule has been anticipated for nearly a full year.  Companies should already have been taking steps to comply.  See the interim rule here for more and make sure you understand how it applies to your business.