SECNAV: Awaiting response from digital modeling vendor that has joint venture with Huawei

The Navy is still awaiting a response from a prime contractor that is responsible for digital modeling software for Military Sealift Command ships after the government discovered the division was part of Chinese telecommunications firm Huawei.

Navy Secretary Richard Spencer told the Senate Appropriations defense subcommittee April 24 the digital modeling software is used to predict preventive maintenance for MSC vessels.

"What we're finding when we drill down -- if you go two and three layers [down] of holding companies -- all of a sudden China Inc. is the owner and we have to start paying attention to this, and we are," he said.

Inside Defense reported last week that Spencer wanted the Pentagon to develop an institutional algorithm for scrubbing contracts so that U.S. adversaries do not have access to sensitive information.

He described how the Navy was about to award a contract to the digital modeling prime contractor but discovered the vendor's Huawei ties.

"We turned around and said, 'Whoa, stop the horses, we'd like to know what this means,'" he said. The prime contractor reassured the Navy the company would not use any of the assets from Huawei. However, when Spencer requested governance documents of the joint venture the conversation became "frosty," he said.

Spencer told reporters April 19 the Navy inserted "prophylactic language" in the contract that outlined what the service's limits were for Huawei.

"There was not too much wiggle room at all -- we'll see how the company reacts," he said.

The next step for the Navy will be to begin working with the Office of Commercial Economic Analysis, which is funded by both the Air Force and Navy. Delegating work to OCEA will not add another administrative burden to the service's contracting office, Spencer said.

"I bring this up as an example: It's not just the South China Sea; it's across the full spectrum that China is coming at us," Spencer said.