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

Continuing threats to the supply chain pose increasing risks to our national security. The new interim Federal Acquisition Regulation (FAR) rule published on August 13, 2019, seeks to address certain of these threats by imposing new representation and reporting requirements on contractors and their subcontractors (herein “contractors”) in the new FAR 52.204-24 Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment and the new FAR 52.204-25, Prohibition on Contracting for Certain Telecommunications clause. These new requirements implement Section 889(a)(1)(A) of the National Defense Authorization Act for FY 2019.

The interim rule requires contractors to engage in appropriate due diligence activities in order to accurately represent and disclose whether or not, in the performance of their Government contracts, they procure, use or provide 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.” An affirmative response requires the contractor to provide a report to the Contracting Officer detailing the contract(s) affected and the equipment, systems, or services using such covered telecommunications equipment or services as a substantial or essential component or as critical technology, within 1 business day of making the representation or providing the information.

In addition, the interim rule affirmatively requires the reporting contractor to report on “any readily available information about mitigation actions undertaken or recommended.” The interim rule requires additional reporting within 10 business days, on the “efforts … [the contractor] undertook to prevent use or submission of covered telecommunications equipment or services, and any additional efforts that will be incorporated to prevent future use or submission of covered telecommunications equipment or services.”

The interim rule allows the Government entity to seek a waiver on a one-time basis with regard to the prohibition on “procuring or obtaining, or extending or renewing a contract” from a contractor that answers in the affirmative. That waiver is only for a limited period and is not to extend beyond August 13, 2021. However, the rule does not guarantee that all such requests will be granted. The requesting Government entity must submit a “compelling justification for the additional time to implement” the prohibition requirements.

The interim rule covers contracts, including those that provide Commercial Items, including Commercial Off-The-Shelf (COTS) items. Under the new rule, Contracting Officers must include the new FAR representation in currently pending and new procurements. In addition, Contracting Officers are required to include the new FAR clause in current contracts, task or delivery orders as part of a contract modification or option exercise.

The new rule raises a number of questions about the intended scope and coverage of the prohibition and the contractor’s requirements to comply, report, and disclose under the rule:

  • The interim rule broadly defines which equipment and services are covered by the prohibition and reporting requirements. It states that “covered telecommunications equipment or services” includes (1) telecommunications equipment “produced by Huawei Technologies Company or ZTE Corporation, (or any subsidiary or affiliate of such entities);” (2) video surveillance and telecommunications equipment “produced by Hytera Communications Corporation, Hanzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of such entities;” (3) telecommunications or video surveillance services provided by such entities or using such equipment.” Thus, the rule imposes a duty on the contractor to vet its supply chain to determine whether such equipment or services are being provided or used directly or through another party in the supply chain. Because companies may change names, merge, or operate under alternative business identities, this task may pose considerable risk for the contractor with responsibility to represent, comply, report and take action.
  • Additionally, the interim rule defines covered equipment and services to include other as yet unidentified entities — “Telecommunications or video surveillance equipment or services produced or provided by an entity that the Secretary of Defense, in consultation with the Director of National Intelligence or the Director of the Federal Bureau of Investigation, reasonably believes to be an entity owned or controlled by, or otherwise connected to, the government of a covered foreign country.” “Covered foreign country” is defined as “The People’s Republic of China.” However, the rule does not explain how contractors at any tier will know the names or identities of such entities so that they can ensure their compliance. As a result, the scope of coverage may become a moving target for contractors at all tiers.
  • The interim rule applies to the situation where the component, product, or service constitutes “critical technology” or “substantial or essential” components of systems. The definition of “critical technology” refers to multiple regimes, including the United States Munitions List, the Commerce Control List, and the nuclear, biologic and emerging and foundational technologies lists. Given the plethora of possible permutations of what will be considered a covered product, component, or service, a contractor may encounter difficulties in assessing whether an item or service is potentially exempt from coverage. The rule does not define what are considered “substantial or essential” components of systems. Thus, in assessing coverage and compliance, is the test going to be based on dollar value, percentage of cost, functionality, or all of the above? Again, contractors will have to think carefully about coverage issues here.
  • The rule also provides certain exceptions. It does not prohibit agencies from procuring or contractors from providing either “A service that connects to the facilities of a third-party, such as backhaul, roaming, or interconnection arrangements,” or “Telecommunications equipment that cannot route or redirect user data traffic or permit visibility into any user data or packets that such equipment transmits or otherwise handles.” Presumably these exceptions are intended to cover commercial backbone telecommunications or cloud services. However, it is unclear how contractors that do not focus on telecommunications matters will be able to know for sure whether the services, product, or component is covered by one of these exceptions. Due diligence will be needed. Recent developments involving the security of 5G networks and cloud infrastructure and services raise questions about whether these functions will continue to be permitted as an exception or if this is merely a temporary reprieve to kickstart implementation of these types of restrictions.
  • The interim rule requires Contracting Officers to insert the certification and clause in pending procurements, and in new procurements, including those for commercial items and COTS items. It also requires that Contracting Officers insert the clause in current contracts. Contractors should always consider the costs and risks of compliance in preparing bids and proposals, and entering into contracts. Where the clause is to be included in an existing contract, it must be accomplished through a bilateral contract modification. The contractor may want to consider the costs and risks of compliance in negotiation of a bilateral contract modification that addresses those matters.
  • Last, and quite significantly, the interim rule requires that contractors flow down the clause to “all subcontracts and other contractual instruments, including subcontracts for the acquisition of commercial items.” Absent a specific definition in the interim rule for these types of arrangements, the contractor must assess which agreements are covered and ensure that it obtains the information it needs for its representations, reporting, compliance, follow-up, as well as flowdown requirements to these entities.

The interim rule is intended to be broad and inclusive. Whether or not it is determined to suffer from such breadth and inclusiveness, contractors and their supply chain should examine their products, equipment, services, and supply chain to determine how to accurately represent, disclose and comply with their requirements. As always, the devil is in the details.

The interim rule was issued on August 13 and permits the public to submit comments within 60 days, by October 12, 2019. If you have questions about the interim rule, or other government contracting matters, contact Susan Warshaw Ebner, or the Stinson counsel with whom you normally work.

The recent guilty plea of a furniture company sales executive provides a timely reminder that contractors continue to engage in procurement shenanigans–and continue to get caught. In such circumstances, crime definitely does not pay.

On June 10, 2019, the Department of Justice announced that Steven Anstine of Overland Park, Kansas, pled guilty in federal District Court in South Carolina to one count of illegally obtaining contractor bid and proposal information in an effort to win a State Department contract to provide furniture to a U.S. embassy abroad.

According to Mr. Anstine’s admissions made in connection with his plea, his company pursued a furniture contract with the State Department for a new embassy under construction abroad in late 2016. Between approximately December 2016 and March 2017, Mr. Anstine knowingly obtained the bid prices and design plans of at least three of his and his company’s competitors from two State Department employees involved in the process of soliciting bids for the procurement of furniture for the new embassy’s offices. The disclosure of this competition sensitive information and resulting competitive advantage allowed Mr. Anstine and his company to win the contract with a bid of approximately $1,569,000.

Mr. Anstine also admitted to making intentionally false statements to agents investigating his conduct. In addition to falsely telling State Department Office of Inspector General special agents that he did not knowingly receive competitor’s bid information from the two State Department employees, he lied about his relationship with one of the State Department employees. More particularly, Mr. Anstine claimed that the State Department employee paid her share of the expenses when they went together to events, restaurants and bars when, in fact, he paid for at least a portion of her expenses when they attended, among other events, a September 2016 concert in Washington, D.C.; a December 2015 ballet performance in Washington, D.C.; and a summer 2015 golf tournament in Gainesville, Virginia.

The plea does not appear to have ended Mr. Anstine’s and his company’s problems, as the State Department’s Office of Inspector General is continuing to investigate the case while Mr. Anstine awaits sentencing.

On July 15, 2019, President Trump signed his third Executive Order on the topic of buying American, “Executive Order on Maximizing Use of American-Made Goods, Products, and Materials.” This latest Executive Order seeks to sharpen the teeth of the Buy American Act’s rules on buying preferences to be afforded goods, products and materials that qualify as produced or manufactured in the United States. An earlier Executive Order concerning the Act is discussed here.

Under the Buy American Act, Congress enacted a statutory buying preference for the Federal government to acquire domestic end products. Regulations implementing the Buy American Act provide a two-part test to determine whether a product is a domestic end product: (1) the product is manufactured in the United States and (2) the cost of domestic components exceeds fifty percent of the cost of all the components of the product.

Federal Acquisition Regulatory Council

In his new Executive Order, President Trump directs the Federal Acquisition Regulatory Council (FAR Council) to consider amending the regulation to increase the thresholds in the test to determine whether a product meets the domestic end product standard.  Specifically, for iron and steel end products, the Executive Order would change the rule to provide that where 5 percent of more of the cost of all products in the end product is from foreign iron and steel, then the end product would not be considered a domestic end product. Additionally, for all other end products, the Executive Order would change the rule to provide that where 45 percent or more of the cost of all products of the end product is from foreign products, then the end product would not be considered a domestic end product.

The rule would still be permit application of exceptions to the Buy American Act where the bidder/offeror could establish the applicability of the Non-availability or Public Interest exception.


The ramifications of making changes to the test for domestic end product under the Buy American Act are significant. These changes can make the difference between having a product considered a foreign end product, and therefore subject to price adders that could impact the calculation of whether that bid or offer is lower than the domestic offer and eligible for acquisition. Given the direction of the President’s three Executive Orders on this subject, Contractors at all tiers should consider assessing their supply chains to identify potential areas of vulnerability.  If the rule is changed in the manner contemplated, certain products may not meet Buy American Act requirements applicable to an acquisition unless an exception applies.

It is hoped that the FAR Council will hold hearings and seek public comment in crafting any rule change to implement the Executive Order.  We will be watching developments in this area closely.  Stay tuned.

If you have questions regarding Buy American Act matters, contact Susan Warshaw Ebner or your Stinson counsel.

In Hejran Hejrat Co. LTD, v. United States Army Corps of Engineers, No. 2018-2206, 2019 WL 3210172 (Fed. Cir. July 17, 2019), the United States Court of Appeals for the Federal Circuit reversed an Armed Services Board of Contract Appeals (“ASBCA”) decision dismissing the contractor’s claim for lack of jurisdiction.  The ASBCA based its dismissal on its finding that the contractor, Herjan Hejrat Co. LTD (“HH”), had failed to expressly request a final decision from the contracting officer in its requests for equitable adjustment. The contract related to transportation services provided to the United States Army Corps of Engineers (“USACE”). Following the expiration of the contract, HH, requested additional compensation from the USACE arising from alleged violations of the contract: suspension of work, changes to the contract requirements and termination of the original contract.

After the parties had engaged in some preliminary discussions, HH submitted a “Request for Equitable Adjustment” (“REA”) seeking $4,137,964 in additional compensation. The REA included a sworn statement from HH’s Deputy Management Director who possessed “full management [authority]” to close out the contract and specifically included a statement indicating it should be “treated as a[n] REA.” Shortly thereafter, the contracting officer denied HH’s request in what was characterized as the “Government’s final determination in this matter.” (emphasis added). HH ultimately appealed the contracting officer’s decision to the ASBCA, but the Board dismissed the action finding “at no point, in six years of communication with the [USACE did HH] request[] a contracting officer’s final decision.”

On appeal, the Federal Circuit reversed the dismissal, finding the submitted REA was sufficient to constitute a valid claim under the Contract Disputes Act (“CDA”). First, the Federal Circuit noted that an REA can constitute a claim under the CDA so long as it complies with the requirements set forth in FAR 52.233-1. Second, the Federal Circuit found that the submitted REA sufficiently requested “a final decision” from the contracting officer. The Federal Circuit noted: (1) HH “requested that the contracting officer provide specific amounts of compensation for each of the alleged grounds,” and (2) that HH provided a sworn statement attesting to the truth of the REA and included detailed support for its alleged losses and claimed a sum certain in compensation. Based on these facts, the Federal Circuit found that the REA:

[bore] all of the hallmarks of a request for a final decision on a claim . . . and [that the court would be] loathe to believe that in this case a reasonable contractor would submit to the contracting officer a letter containing a payment request after a dispute had arisen solely for the contracting officer’s information and without at the very least an implied request that the contracting officer make a decision as to entitlement. Any other finding offends logic.

The Federal Circuit was also persuaded that HH certified the REA, which it noted triggered potential fraudulent claim liability and was designed to “discourage” the submissions of “unwarranted claims.” Finally, the Appeals Court also relied on the contracting officer’s characterization of the denial as a “final determination” in reaching its decision. Based on the foregoing, the Federal Circuit reversed the dismissal and remanded HH’s claim to move forward before the ASBCA.

While the contractor was successful in reversing the dismissal of its claim here, it spent a significant amount of money winning that fight. The most efficient and cost-effective way to avoid facing these types of issues is for contractors to ensure that any submission they intend to rely upon as a “claim” under the CDA strictly complies with FAR 52.233-1(c) and specifically requests the contracting officer to render a final decision on the claim.

When solicitations require proposals to address numerous factors in a limited number of pages, offerors must find a way to adequately cover all the issues in as few words as possible. Faced with this situation, contractors may be tempted to use shorthand methods of presenting information. As the recent US Government Accountability Office (GAO) decision in 8 Consulting, LLC, B-417471 (July 9, 2019) makes clear, however, offerors should avoid relying on general references and bald assertions to establish compliance with solicitation requirements. Evaluators will generally require more.

The subject protest involved 8 Consulting, LLC‘s challenge to an agency’s evaluation of its quotation as unacceptable. The request for quotations (RFQ) was issued by the Defense Information Systems Agency (DISA) for implementation functionality services under Federal Supply Service Information Technology Schedule 70. The RFQ anticipated an award to the vendor submitting the lowest-priced, technically acceptable quotation based on two factors: technical/management approach and price. The technical/management approach factor consisted of three equally weighted subfactors: minimum qualifications matrix, implementation support, and engineering support. The RFQ also explained that each subfactor would be evaluated individually and would be assigned a rating of acceptable or unacceptable, based on whether the quote met the solicitation requirements for that subfactor.

DISA received quotations from four vendors, including 8 Consulting and the ultimate awardee, Creative IT. During the technical evaluation of vendor proposals, the agency determined that the lowest and next lowest proposals were technically unacceptable. It then turned to the quotation from 8 Consulting, which proposed the third-lowest price—and found that it was unacceptable under all three subfactors.

When DISA notified 8 Consulting that its quotation had not been accepted, the company protested, arguing that the agency had unreasonably misread or ignored responsive material in its quotation. The GAO disagreed, noting that vendors have an obligation to submit an adequately written quotation for the agency to evaluate—and that simply restating the requirements of the RFQ does not meet that burden. According to the GAO, 8 Consulting’s quotation did not meet the solicitation requirements, essentially because it repeatedly gave short shrift to explaining how it met them.

For example, the implementation support subfactor required vendors to demonstrate their ability to perform eight specific elements. DISA evaluated 8 Consulting’s quotation as unacceptable for failing to establish two of the eight: (i) the ability to coordinate the testing, troubleshooting and problem resolution (TTPR) for mission partner and internal DISA related software; and (ii) the ability to understand and ensure project compliance with all DISA technical standards and concepts.

With respect to the TTPR element, 8 Consulting’s quotation had only briefly mentioned the requirement and, rather than attempting to describe a methodology or the process to be used, only stated that the company would perform the task. DISA’s evaluators concluded that this did not demonstrate an ability to coordinate testing, troubleshooting, and problem resolution.” 8 Consulting argued that the agency had unreasonably ignored the surrounding information in its quotation, asserting that such information related to the company’s methodology for managing a number of tasks–including testing, troubleshooting and problem resolution. GAO rejected that argument, observing that “8 Consulting’s quotation appears to simply restate the bulleted requirements of [the] statement of work subtask.

The GAO found the quotation’s approach to the project compliance element similarly lacking. Again the evaluators found that 8 Consulting’s quotation merely stated that the company would perform certain tasks in compliance with applicable regulations and promised it would conduct compliance reviews and did not “provide any description on how the work will be performed.” Despite 8 Consulting’s citations to a number of statements referencing compliance “interwoven throughout its quotation,” the GAO found the agency’s evaluation to be reasonable because “none of these statements provides any additional detail or explanation regarding how 8 Consulting will understand and ensure project compliance with all DISA technical standards and concepts, as required by the RFQ.”

Because it concluded that the agency reasonably found that 8 Consulting’s quotation failed to meet this requirement under the implementation support subfactor, and therefore, reasonably evaluated 8 Consulting’s quotation as unacceptable, the GAO found no basis to sustain the protest.

Offerors attempting to ensure quotations or proposals meet agency-imposed page limitations must steer clear of the temptation to address solicitation requirements with shorthand comments instead of meaningful statements that clearly respond to those requirements. One way to do this is to constantly remind yourself that the fundamental purpose of your solicitation response is to persuade the agency that your proposed solution is the best option. As 8 Consulting learned, it can be very difficult if not impossible to win if you don’t provide more than a top-level explanation of how you meet the requirements and deserve the award.