New Cybersecurity Requirements for Federal Contractors

Prohibits Use of Certain Chinese Telecommunications Components

On July 10, the Federal Acquisition Regulatory Council released the draft Interim Final Rule (IFR) to implement section 889(a)(I)(B) of the 2019 National Defense Authorization Act. The rule, often referred to as “Section 889 Part B,”  prohibits federal agencies from entering into, extending, or renewing, a contract with a contractor that uses any equipment, system, or service, using certain Chinese companies’ telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system beginning August 13, 2020 – unless an exception applies or a waiver is granted. AGC has communicated the difficulty many contractors have had implementing these new requirements and the challenges that the rule brings. On July 1 and July 15, AGC of America, along with a coalition of stakeholders, has asked Congress to extend the date of implementation and to make key changes to the rule. AGC will continue to update members on the progress of Section 889 Part B and legislative efforts to delay the implementation of this rule.

In brief, Section 889 Part B prohibits contractors from using certain telecommunications equipment – mainly from Chinese companies – such as Huawei or ZTE. The language in the IFR is sweepingly broad and will be difficult for federal prime contractors to know if they, subcontractors on the project, and suppliers are in full compliance. The IFR states that the prohibited “use” of the covered technology applies “regardless of whether the usage is in performance of work under a Federal contract.” The IFR is certain to expand the scope of this prohibition to apply to affiliates, parents, and subsidiaries of the prime contractors.

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