At the end of 2019, the Department of Defense (“DoD”) took another step to limit the potential cyber risks posed by telecommunications equipment manufactured by Chinese companies (and potentially Russian ones too). We previously have blogged on this topic here, here, here, here, here, and here, noting developments both in terms of general, government-wide regulations through the FAR Council, and those specifically emanating from DoD. On December 31, 2019, DoD issued a Defense Federal Acquisition Regulation Supplement (DFARS) interim rule to further implement parts of the 2018 and 2019 National Defense Authorization Acts (“NDAA”).
Specifically, the interim rule implements § 1656 of the FY 2018 National Defense Authorization Act and § 889(a)(1)(A) of the FY 2019 National Defense Authorization Act. The new rule prohibits the procurement of any equipment, system, or service used in nuclear deterrence or homeland defense that uses “covered telecommunications equipment or services” as a substantial or essential component of any system, or as a critical technology as a part of any system. “Covered telecommunications equipment or services” include such products offered by Huawei Technologies Co., ZTE Corp., or any of their subsidiaries or affiliates, as well as any other entities that the Secretary of Defense reasonably believes to be owned, controlled by, or otherwise connected to, the governments of Russia or China.
The interim rule operates under a two-tier representation structure. At least once a year, contractors will need to represent in the System for Award Management (SAM.gov) whether they provide any covered defense telecommunications equipment or services. Those that do will have to provide offer-by-offer representations and make certain disclosures to allow DoD to determine whether it is prohibited from making an award to the contractor and/or whether a waiver may be in order. This two-tier structure reduces the burden on contractors that do not use covered equipment, by only requiring a representation from them once a year, rather than accompanying every offer.
As an interim rule, this rule took effect immediately, but is still open for comments, which are due to DoD March 2, 2020. DoD will consider all comments and modify the rule if it deems such a modification appropriate. Either way, the DoD likely will issue a final rule later this year.