Federal Acquisition Regulation: Prohibition on Contracting With Entities Using Certain Telecommunications and Video Surveillance Services or Equipment, 42665-42679 [2020-15293]

Download as PDF Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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 Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Interim rule. AGENCY: 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. SUMMARY: VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 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 https:// 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- PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 42665 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 https://www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Farpolicy@gsa.gov 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 E:\FR\FM\14JYR5.SGM 14JYR5 42666 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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. 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 indefinitedelivery 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 1 https://www.acquisition.gov/gsa-deviation/ supply-chain-aug13. VerDate Sep<11>2014 20:52 Jul 13, 2020 Jkt 250001 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 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 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 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 Micro2 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). E:\FR\FM\14JYR5.SGM 14JYR5 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations Purchase Threshold, to address section 889(a)(1)(B) with regard to micropurchases. The prohibition will apply to all FAR contracts, including micropurchase 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-forgrants-and-agreements. Agency Waiver Process Under certain circumstances, section 889(d)(1) allows the head of an executive agency to grant a one-time VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 waiver from 889(a)(1)(B) on a case-bycase 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 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 42667 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 E:\FR\FM\14JYR5.SGM 14JYR5 42668 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations (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 missioncritical 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. 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 3 Sec. 889(d)(2). VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 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 crossreferences 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-theshelf (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 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 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 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 thirdparty, 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 4 https://ecfsapi.fcc.gov/file/12080817518045/ FY%202019%20NDAA%20Reply%20Comments %20-%20FINAL.pdf. E:\FR\FM\14JYR5.SGM 14JYR5 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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 VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 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. The United States faces an expanding array of foreign intelligence threats by adversaries who are using increasingly 5 https://www.whitehouse.gov/articles/newnational-security-strategy-new-era/. PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 42669 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 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 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. 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. E:\FR\FM\14JYR5.SGM 14JYR5 42670 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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 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. nationalsecurity interests. 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 15 NATO Cooperative Cyber Defense Center of Excellence Report on Huawei, 5G and China as a Security Threat. 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. VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 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. 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. 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 20 This value is based on data on new registrants in SAM.gov on average for FY16, FY17, FY18, and FY19. 21 This value is based on data on new registrants in SAM.gov for FY19 and FY20. 22 The 20 hours are an assumption based on historical familiarization hours and subject matter expert judgment. PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 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 × $94.76 24 per hour × 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. 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 × $94.76 per hour × 79,319) per year in subsequent years. 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 × $94.76 per hour × 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. 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 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. 26 This value is based on data on new registrants in SAM.gov on average for FY16, FY17, FY18, and FY19. 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. 29 The percentage of 26% is the percentage of active entities registered in SAM.gov in FY20 that were awarded contracts. E:\FR\FM\14JYR5.SGM 14JYR5 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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 × $94.76 per hour × 20,623) per year in subsequent years. 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 30 The hours are an assumption based on subject matter expert judgment. VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 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 × $94.76 per hour × 387,967). 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. 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 × $94.76 per hour× 50% × 79,319) per year in subsequent years. The FAR Council acknowledges that there is substantial uncertainty underlying these estimates. 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 × $94.76 per hour × 102,792 unique entities × 378 35 responses per entity). 31 According to data from the System for Award Management (SAM), as of February 2020, there were 387,967 unique vendors registered in SAM. 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. 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). PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 42671 In subsequent years, we assume that 26% 36 of new entrants will complete an offer and need to complete the offer-byoffer 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 × $94.76 per hour × 26% × 79,319 × 378 responses per entity) per year in subsequent years. 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 × $94.76 per hour × 5,140 entities × 5 responses per entity) per year in subsequent years. 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 × $94.76 per hours 2,570 entities × 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. 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. 38 The 5% value was derived from subject matter expert judgment. 39 The 5 reports value was derived from subject matter expert judgment. E:\FR\FM\14JYR5.SGM 14JYR5 42672 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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 Summary Total technology firms from competing on (billions) costs Federal Government contracts. Present Value (3%) ...................... $89 It is also anticipated that many Annualized Costs (3%) ................. 2.7 Federal contractors may need to hire or Present Value (7%) ...................... 43 contract for consultants to aid them in Annualized Costs (7%) ................. 3 reviewing and updating their supply chains. Market principles suggest that The FAR Council acknowledges that this may increase the costs for such there is substantial uncertainty experts, making it more difficult for underlying these estimates, including small businesses to afford them. elements for which an estimate is unavailable given inadequate Inability to Meet Mission Needs: The information. As more information Government uses Competition in becomes available, including through Contracting Act exceptions (FAR comment in response to this notice, the subpart 6.3) to use sole source FAR Council will seek to update these acquisitions to meet agency needs. estimates which could very likely These acquisitions would be impacted increase the estimated costs. as offerors will also be subject to the section 889 requirements. There are E. Government Cost Analysis industries where the Government makes The FAR Council anticipates up a small portion of the total market. significant impact to the Government as There may be markets where the a result of this rule. These impacts will vendors will choose to no longer do appear as higher costs, reduced business with the Government; leaving competition, and inability to meet some no sources to meet those specific mission needs. These costs are justified requirements for the Government. This in light of the compelling national will reduce agencies’ abilities to satisfy security objective that this rule will some mission needs. advance. The total cost of the above The primary cost to the Government Government Cost Estimate in Year 1 is: will be to review the representations $11 billion. and to process the waiver request. The cost to review the representations uses The total cost of the above Cost the same variables as the cost to the Estimate in Year 2 is: $2.2 billion. public to fill out the representation The total cost estimate per year in resulting in a total cost to the subsequent years is: $2.2 billion. Government of $11 billion as the hourly The following is a summary of the rate, hours to review, and number of estimated costs calculated in perpetuity representations are the same as the at a 3 and 7-percent discount rate: industry calculations. The other cost to the Government, is the cost to review Summary Total the written reports required by the (billions) costs clause and the calculation uses the same variables as the cost to the public to Present Value (3%) ...................... $82.5 complete the report, resulting in a total Annualized Costs (3%) ................. 2.5 cost to the Government of $7.3 million. Present Value (7%) ...................... 40 Higher Costs and Reduced Annualized Costs (7%) ................. 2.8 Competition: It is anticipated that at 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: VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 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? Æ 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 E:\FR\FM\14JYR5.SGM 14JYR5 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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? Æ What are the best processes and technology to use to identify covered telecommunications equipment or services? Æ 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? Æ 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? Æ 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, VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 42673 system(s), or services that use covered telecommunications equipment and services? Please be specific in explaining why cessation of use is not feasible. Æ 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) Æ 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? Æ What additional information or guidance do you view as necessary to effectively comply with this rule? Æ 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. Federal Government to exempt contracts and subcontracts in amounts not greater than the SAT from the provision of law. 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). 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). 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 PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 B. Applicability to Contracts for the Acquisition of Commercial Items, Including Commercially Available Offthe-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 E:\FR\FM\14JYR5.SGM 14JYR5 42674 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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- ormoderate-impact information systems. The relevant agencies are required to conduct the supply chain risk assessments in conjunction with the FBI to determine whether any cyberespionage 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 VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 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 PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 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 E:\FR\FM\14JYR5.SGM 14JYR5 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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, VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 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 PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 42675 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 E:\FR\FM\14JYR5.SGM 14JYR5 42676 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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. VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 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 phaseout 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: 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. PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 PART 1—FEDERAL ACQUISITION REGULATIONS SYSTEM 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] 3. Amend section 4.2100 by removing ‘‘paragraph (a)(1)(A)’’ and adding ‘‘paragraphs (a)(1)(A) and (a)(1)(B)’’ in its place. ■ 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, E:\FR\FM\14JYR5.SGM 14JYR5 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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. * * * * * ■ 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 VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 as critical technology as part of any system. * * * * * ■ 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. * * * * * ■ 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 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 42677 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 E:\FR\FM\14JYR5.SGM 14JYR5 42678 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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 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 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 VerDate Sep<11>2014 19:39 Jul 13, 2020 Jkt 250001 use is in performance of work under a Federal contract. PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 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 provisionBackhaul, 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 PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 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 E:\FR\FM\14JYR5.SGM 14JYR5 Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules and Regulations 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) 11. Amend section 52.204–25 by— a. Revising the date of the clause; ■ b. In paragraph (a), adding in alphabetical order the definitions ‘‘Backhaul’’, ‘‘Interconnection arrangements’’, ‘‘Reasonable inquiry’’ and ‘‘Roaming’’; ■ c. Revising paragraph (b); and ■ 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. * * * VerDate Sep<11>2014 * * 19:39 Jul 13, 2020 Jkt 250001 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 PO 00000 Frm 00017 Fmt 4701 Sfmt 9990 42679 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. * * * * * 12. Amend section 52.212–5 by— ■ a. Revising the date of the clause; ■ b. Removing from paragraphs (a)(3) and (e)(1)(iv) ‘‘AUG 2019’’ and adding ‘‘AUG 2020’’ in their places, respectively; ■ c. Revising the date of Alternate II; and ■ 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). * * * * * * * * 13. Amend section 52.213–4 by— ■ a. Revising the date of the clause; ■ b. Removing from paragraph (a)(1)(iii) ‘‘AUG 2019’’ and adding ‘‘AUG 2020’’ in its place; and ■ 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) * * * * * 14. Amend section 52.244–6 by— ■ a. Revising the date of the clause; and ■ b. Removing from paragraph (c)(1)(vi) ‘‘AUG 2019’’ and adding ‘‘AUG 2020’’ in its place. The revision reads as follows: ■ 52.244–6 Items. * * Subcontracts for Commercial * * * Subcontracts for Commercial Items (AUG 2020) * * * * * [FR Doc. 2020–15293 Filed 7–13–20; 8:45 am] BILLING CODE 6820–EP–P E:\FR\FM\14JYR5.SGM 14JYR5

Agencies

[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.

-----------------------------------------------------------------------

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 https://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 https://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.
---------------------------------------------------------------------------

    \1\ https://www.acquisition.gov/gsa-deviation/supply-chain-aug13.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \3\ Sec. 889(d)(2).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \5\ https://www.whitehouse.gov/articles/new-national-security-strategy-new-era/.
---------------------------------------------------------------------------

    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

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