Helping individuals, companies, and organizations understand key legal and practical considerations for promoting compliance and making better business decisions in these types of federal, state, and local government contracting matters MORE

In the latest development relating to the implementation of Section 889 of the National Defense Authorization Act for FY 2019, a second interim rule was issued on August 27, 2020. We previously reported on the Federal Acquisition Regulation (FAR) Interim Final Rule on Section 889(a)(1)(B)’s aspects of the ban, which applies to government contractors whether or not their use is for government contracts, and was scheduled to go into effect on August 13, 2020. More recently, we noted an “after the bell” reprieve granted to the Department of Defense (DoD) in the form of permission to use a temporary waiver for “procurement of goods and services in support of DoD’s statutory mission” pending assessment of a broader waiver request.

The new rule comes as no surprise, since the Interim Final Rule explained that the DoD, General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) were working on updates to the System for Award Management (SAM) to allow contractors to make Section 889(a)(1)(B) representations annually—instead of in connection with each proposal or offer—in order to reduce the information collection burden on contractors. This approach echoes the approach taken in connection with Section 889(a)(1)(A) through an interim rule issued December 13, 2019.

The rule becomes effective October 26, 2020 and is prescribed for use in all solicitations. It adds an annual representation at paragraph (c)(2) of FAR 52.204-26, Covered Telecommunications Equipment or Services, that requires an offeror to represent, after conducting a reasonable inquiry, whether it “does” or “does not” use covered telecommunications equipment or services, or any equipment, system or service that uses covered telecommunications equipment or services. The commercial item equivalent is now at paragraph (v)(2)(ii) of FAR 52.212-3, Offeror Representations and Certifications—Commercial Items. Both of these updated FAR clauses will be included among the SAM representations and certifications.

If an offeror represents it “does not,” it need not make offer-by-offer representations. In contrast, and consistent with the preliminary guidance in the Interim Final Rule, the new rule makes clear that an offeror representing it “does,” or not making any representation in FAR 52.204-26(c)(2) or 52.212-3(v)(2)(ii), must make the representation of additional information about the covered telecommunications equipment or services in question, as required by FAR 52.204-24(d)(2). The (d)(2) representation, which differs somewhat depending on the nature of the equipment or services at issue, essentially requires the submission of detailed information about: (i) the covered telecommunications equipment or services the offeror uses; (ii) the entity that manufactures and/or distributes such equipment or services; (iii) an explanation of the proposed use of the equipment or services; and (iv) any factors relevant to determining if such use would be permissible under the prohibition in paragraph (b)(2) of this provision. Such factors are then to be used by contracting officers (COs) to determine whether the covered telecommunications equipment or services are used as a substantial or essential component of, or as critical technology as part of, any system, and whether they fall within one of the exceptions established in paragraph (b)(2). These factors would likely also be taken into account by COs and other government personnel when considering to grant temporary waivers under the Interim Final Rule.

The new interim rule does not explain exactly how, or to whom, the (d)(2) representation must be made. But given the fact that the representation is for use by the CO, its submission is presumably to be made to the CO to whom the offer or proposal is addressed—likely in the offer or proposal itself. Hopefully, the FAR Council or individual agencies will soon provide more detailed procedures, but for now offerors will need to make a good faith effort to provide the (d)(2) representation and information to every CO to whom they send an offer.

At the end of the day, the latest interim rule implementing Section 889(a)(1)(B) essentially does precisely what the Interim Final Rule promised it would and adds the requisite representations to the clauses that will allow some offerors (those representing “does not” in paragraph (c)(2)) to avoid offer-by-offer representations. But it provides no relief to any offeror that represents it “does” and must, therefore, submit additional information to the CO with each of its offers. Contractors who find themselves in the latter situation should prepare a standard submission containing all relevant data. They should also identify steps to eliminate their use of covered telecommunications equipment or services, as an individual CO’s decision is limited to the procurement in question and even the waivers potentially available under the Interim Final Rule are only temporary.

Public comments on the interim rule must be submitted by October 26, 2020. We will continue to monitor and report on Section 889 developments.

Government contractors have been closely watching developments in the implementation of Section 889 of the National Defense Authorization Act for FY 2019, which bans government contractors’ use and provision of telecommunications and video surveillance products and services from Huawei, ZTE, and other identified Chinese companies. The Administration has previously determined that the equipment and services provided by these companies poses an espionage threat to U.S. national security interests.

We previously reported that implementation of the Federal Acquisition Regulation (FAR) Interim Final Rule on Section 889(a)(1)(B)’s aspects of the ban, which applies to government contractors whether or not their use is for government contracts, was scheduled to go into effect on August 13, 2020.

Apparently in response to industry-identified problems in complying with the ban by the deadline, the Director of National Intelligence has reportedly granted DoD a temporary waiver for “procurement of goods and services in support of DoD’s statutory mission” pending assessment of a broader waiver request.

This waiver comes at the 25th hour – after the date that the Interim Final Rule was set to take effect.

A quick search of the DoD and DNI websites did not locate the waiver. However, stay tuned. We are watching matters closely and will follow up once we learn more about the reported waiver. Contact the authors if you have questions about this alert, Section 889 implementation matters, or other government contracting matters.

Stinson LLP Partner Susan Warshaw Ebner begins her term as Section Chair of the American Bar Association’s (ABA) Public Contract Law Section this August.

This position is the culmination of years of leadership in the Public Contract Law Section, the preeminent professional association of lawyers engaged in public contracting, including federal, state, local government contracting, research and development, grants, and agreements, as well as contingency, battlefield and host nation contracting. The section includes lawyers from all segments of the public contracting community.

The primary focuses of Ebner’s term will include improving public procurement and grant law at the federal, state and local levels; promoting cybersecurity and supply chain integrity; as well as driving membership, diversity, and inclusion throughout the public contracting community.

“Susan has been a leader with the ABA for many years now, and she will be exceptional in this role,” said Deputy Managing Partner Allison Murdock. “Susan embraces new challenges and works hard to help shape the government contracting industry, ensuring an inclusive and forward-thinking approach to the law.”

Ebner has been involved with the Public Contract Law Section for more than 35 years, serving as section secretary, vice chair, and chair-elect, on the Section Council, as well as Procurement Division co-chair, chair of the Task Force on Counterfeit Parts, Publications Board co-chair, co-chair and vice chair of various Section Committees, including co-chair of the Acquisition Reform and Emerging Issues Committee. She also serves on the ABA Section Officers’ Council Executive Committee.

In her practice, Ebner represents small and large businesses and nonprofits on a broad spectrum of government contracting and compliance matters, including bid protests, cyber security and supply chain risk, compliance program development and training, audits, investigations, and litigation. She also counsels clients on federal research and development-related matters, including small business innovation research, other transactions and agreements, contingency, battlefield, and USAID/host nation contracting. Ebner co-chairs Stinson’s Government Contracts and Investigations practice group and is a member of the firm’s Coronavirus Task Force.

Just as in golf swings, your follow-through in Government Accountability Office (GAO) protests can mean the difference between success and failure. And if you don’t have a solid argument to bolster your protest grounds, you might want to rethink bringing them in the first place. The recent GAO decision in U.S. Electrodynamics, Inc., B-418574.2; B-418574.4 (June 23, 2020) serves as a reminder of one of the primary dangers of poor protest follow-through: an insufficient response to the agency’s report can lead to dismissal due to abandonment of the argument in question.

The protest involved a challenge by U.S. Electrodynamics, Inc. (USEI) to an award of a contract for enterprise satellite communications services by the Department of Veterans Affairs (VA). The underlying request for proposals (RFP) made clear that, among other things, only proposals rated acceptable or above under the technical factor would be considered for award. The agency received ten proposals and seven were rated unacceptable, including that of USEI.

When it learned of this rating at its debriefing, USEI filed the protest, in part on the ground that the VA had not properly evaluated USEI’s proposal under the technical factor. More particularly, USEI asserted that the VA improperly assigned it a deficiency based on an erroneous finding that USEI’s proposal lacked necessary detail about its planned transition from the agency’s old equipment to USEI’s proposed new equipment.

In response to this protest ground, the agency provided a detailed response, explaining at length the basis for its finding of a deficiency, and identifying—and quoting—specific portions of the record in support of its position.

According to the GAO, USEI did not meaningfully respond to the agency’s position because it did nothing more than restate verbatim its initial protest claim and then suggest–through a misleading, incomplete quotation of the evaluation record–that the agency’s legal memorandum and contracting officer’s statement mischaracterized the evaluation record. USEI attempted to claim that the VA evaluators actually found its proposed technical approach acceptable, arguing that the agency’s “post-protest after the fact rationales” ignored the evaluators’ conclusion that “USEI ‘gives detailed tasks and their related transition time frames in figure 2.3.1-1 of the proposal.'”

GAO noted, however, that the argument mischaracterized the record and ignored what the technical evaluation actually said: “Although the offeror gives detailed tasks and their related transition timeframes in figure 2.3.1-1 of the proposal, they failed to identify the technical steps on how they would transition the teleports and the remote terminals.” The evaluation went on to explain that this failure amounted to a deficiency because the lack of technical detail increases the risk to the VA of an unsuccessful transition to the new equipment.

Reading the complete, unedited record, the GAO found that the evaluators identified a deficiency in USEI’s proposal that rendered it unacceptable, as represented by the agency in its report. Because USEI failed to offer any substantive response to the agency’s position other than the misleading quote, the GAO concluded that USEI had abandoned this portion of its protest and dismissed the contention for that reason.

As is often the case with GAO decisions, we will probably never discover exactly what the pleadings contained—or have the opportunity to decide whether we agree with the GAO’s reasoning. But one thing is clear: if you are not prepared to present strong protest arguments in support of each ground based on a reasonable interpretation of the complete record, you will not be able to prevail on those grounds. Contractors considering protests should carefully consider their potential arguments and limit their protest to grounds that it is prepared to back up. Contractors who don’t will likely face the same fate as USEI.

On August 3, 2020, the president issued Executive Order No. 13940 on Aligning Federal Contracting and Hiring Practices with the Interests of American Workers. As indicated by the title of the order, the purported underlying policy is to create opportunities, particularly in light of the COVID-19 pandemic, for American workers to compete for federal contracting jobs.

In furtherance of this policy, the order directs the head of each federal executive department and agency to review their federal contracts, including subcontracts, awarded by the agency and assess a number of issues including:

  • Whether and how temporary foreign labor was used to perform contracts in the U.S.; whether opportunities for U.S. workers were affected by such hiring; and any potential national security implications of such hiring; and
  • Whether contractors, including subcontractors, performed services in foreign countries that were previously performed in the U.S.; whether opportunities for U.S. workers were affected by such offshoring; and any potential national security implications of such offshoring.

The order also requires agency heads (i) to propose necessary and appropriate actions to improve the economy and efficiency of federal procurement and to protect national security and (ii) to review employment policies to assess compliance with Executive Order 11935 and Section 704 of the Consolidated Appropriations Act of 2020.

Within 45 days of the issuance of this order, the Secretaries of Labor and Homeland Security must take appropriate action to protect American workers from unfavorable effects, such as adverse working conditions and wages, caused by the employment of H-1B visa holders at job sites, including third party locations. Both direct federal employers and secondary employers (federal contractors) who place H-1B workers at federal agencies are subject to the executive order.

Finally, within 120 days of the issuance of this order, each agency must submit a report to the Director of the Office of Management and Budget summarizing its assessments and other efforts pursuant to this order, including corrective actions that may be appropriate and the timeframe in which such actions will be implemented.

For federal contractors, this order expresses a preference for U.S. workers and worksites and signifies another potential hurdle to engaging foreign labor or offshoring. The effects of this Executive Order will remain largely unclear until agencies publish their reports in the next six months. We will track these reports and their implications for government contractors closely.