The Story

Federal Acquisition Regulations and Uniform Guidance regulations prohibit federal government agencies from purchasing certain Chinese telecommunications and video surveillance equipment.

Regulations even prohibit the federal government from working with contractors who use banned Chinese telecommunications or video surveillance equipment – even if the contractor doesn’t use the equipment to perform the federal government contract.

A CNN report provided some scoop on why the feds have taken this stance.  And – it’s the stuff of spy novels.

As with any good spy story, there are exotic locations.  As CNN reported we have two in this spy story.

The first exotic location, the National Arboretum in Washington D.C. is located about two miles from the U.S. Capital.   It has all sorts of exotic and native trees and plants, well worth a visit.   It is located on a hill which makes it one of the highest points in Washington D.C.

According to CNN, in 2017 the Chinese government offered to build a pagoda at the National Arboretum. D.C. was thrilled.  It went south when the Chinese planned to ship the materials for the pagoda to the US in diplomatic pouches, which US Customs officials are barred from examining.  A curious ask indeed especially when you consider that the pagoda would have been two miles from the Capital situated at a high point.  It does not take James Bond to figure out this may have been an attempt at a listening post.   So, the offer for the pagoda was rejected.

The second exotic location in this spy story is the U.S. Midwest.  According to CNN in the Midwest the Chinese were:

  • Purchasing land near critical infrastructure
  • Providing Huawei telecommunications equipment to small towns in the Midwest to support cellular communications

U.S. counterintelligence folks think these were efforts to plant listening devices near sensitive military and government facilities.

What’s the U.S. Government To Do?

Pass some laws and regulations – and the U.S. Government did. The 2019 National Defense Authorization Act, Section 889 for reasons of public safety, security of Government facilities, security of critical infrastructure, and other national security reasons prohibited Government agencies from:

  1. Buying or obtaining any telecommunication equipment, systems, or services to be part of a substantial or essential part of federal government systems it was from a banned Chinese company.
  2. Working with contractors using banned Chinese telecommunication equipment, systems, or services as a substantial or essential part of their systems.
  3. Providing loans, grants, or enter cooperative agreements if the funds provided will be used to buy or obtain telecommunication equipment, systems, or services from banned Chinese companies.

The FAR and Uniform Guidance implemented the ban by prohibiting contractors and subcontractors from selling to the Federal Government and from even using telecommunications equipment, video surveillance equipment or services from the following entities:

    • Huawei Technologies Company
    • ZTE Corporation
    • Hytera Communications Corporation
    • Hangzhou Hikvision Digital Technology Company
    • Dahua Technology Company
    • Any subsidiary or affiliate of these companies
    • Any entity as designated by the federal government

What’s a Government Contractor To Do?

Contractors and subcontractors need to comply with the ban by making “reasonable inquiry” to determine if they are using equipment or services from banned companies in their operations, even those with operations in China.

“Reasonable inquiry” is a legal term.  In plain English it means contractors need to undertake diligent review across their organization to determine if banned telecommunication, video surveillance equipment or services are being used.  Regulations explain that “reasonable inquiry” does not require an internal or third-party audit.  So, contractors can use their own folks to conduct the inquiry.

Exceptions in the regulations allow contractors or subcontractors to:

  • Use banned equipment if it is only for connecting third party facility’s such as backhaul, roaming, or interconnection arrangements;
  • Use banned equipment if it cannot route or redirect user data traffic or permit visibility into any user data or packets that such equipment transmits or otherwise handles;
  • Seek a waiver from the federal government if using the banned equipment and services.

In RFPs, contracts and in SAM, contractors and subcontractors must:

  • Disclose whether they will or will not provide banned telecommunications or video surveillance equipment or services to the government in performing the contract or subcontract.
  • Certify they do not use banned telecommunications or video surveillance equipment or services in their systems.

If contractors discover they are selling or using banned telecommunications equipment or services, then within one day of the discovery, contractors must disclose the following information to the federal government:

  • A description of the equipment or services
  • The manufacturer
  • The brand
  • The model number
  • Explanation of the proposed use of the equipment including all factors that should be considered in determining why the use should be allowed (the government does allow waivers at times)
  • Steps being taken to mitigate the use of the banned equipment, systems or services.

Within ten business days of submitting any disclosure, an offending contractor must provide additional information it learned as it further evaluated its use along with steps taken to prevent future use of the banned stuff and to prevent submitting the banned stuff to the government.

What should you do?

  1. Check your System for Award Management registration for the most updated list of the banned companies.
  2. Undertake an internal review to see if you are using the banned stuff.
  3. Make sure you are not selling the banned stuff to the government.
  4. Document your internal review process.
  5. If you find you are using, you need to disclose, and do so fast.
  6. If you are using it, assess whether it’s appropriate to seek a waiver from the government.If so, apply for the waiver and wait to see if you get approval.
  7. If not, develop plans to quit using it and/or to quit selling it to the government; and let the government know of your plans.

One thing you don’t need to do – read your contract or subcontract to see if the FAR clauses on banned telecom and surveillance equipment and services are in your contract because… the FAR clause is pretty much in every federal government contract, grant, loan, cooperative agreement; and subs, your primes are required to flow it down to you.

A word to the wise.

James Comey:  “The fact of the matter is that the United States faces real threats from criminals, terrorists, spies, and malicious cyber actors.”

Stay alert all you contractors out there!

For those all those who love reading the FAR access the “Huawei Ban” cites here:

  • FAR Subpart 4.21
  • FAR 52.204-25 Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment.
  • FAR 52.204-24 Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment.
  • FAR 52.204-26 Covered Telecommunications Equipment or Services-Representation.
  • Uniform Guidance at 2 CFR 200.216

©2022 Cassidy Law PLLC. All rights reserved.
Site by Boom Creative

logo-footer