The Pentagon has issued a second interim rule on how contractors who want to do business with the federal government need to provide details on Huawei and ZTE equipment and services in their systems.
The first interim rule took effect on Aug. 13 with a limited exemption authorized by the Office of the Director of National Intelligence for DOD on "low risk, high volume items." ODNI's waiver lasts until Sept. 30.
A ban on equipment and services from Huawei and ZTE was required by Section 889 of the Fiscal Year 2019 National Defense Authorization Act. The new rule is intended to reduce the "burden on the public by allowing an offeror that represents 'does not' in a new annual representation at FAR 52.204-26(c)(2), Covered Telecommunications Equipment or Services -- Representation, or in paragraph (v)(2)(ii) of FAR 52.212-3, Offeror Representations and Certifications-Commercial Items, to skip the offer-by-offer representation within the provision at FAR 52.204-24(d)(2), Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment," according to a notice to be published in the Federal Register Aug. 27.
The interim rule notice was issued by DOD, NASA and the General Services Administration. The NDAA banned the use of IT and video surveillance equipment from Huawei, ZTE and several other China-based tech companies and required DOD, NASA and GSA to develop rules for implementation.
The notice says, "Updates to the System for Award Management (SAM) were necessary to add this new annual representation and require offerors to represent annually, after conducting a reasonable inquiry, whether it uses covered telecommunications equipment or services, or any equipment, system, or service that uses covered telecommunications equipment or services. These updates to SAM to reduce the burden of the first interim rule were not available by the effective date of the first interim rule; therefore, these updates are being made in this interim rule."
The first interim rule was issued in July and gave industry one month to get into compliance. The Information Technology Industry Council and National Defense Industry Association have raised concerns about the strict timeline and are working to help their members reach compliance.
"The purpose of this change is to limit the requirement to represent at FAR 52.204-24(d)(2) to only offerors that use covered telecommunication equipment or services, or use any equipment, system, or service that uses covered telecommunications equipment or services," the second rule notice says.
In a regulatory impact analysis, the notice says, "The total cost estimated to review the amendments to the provision and the clause is estimated to be $294 million in the first year after publication. In subsequent years, this cost is estimated to be $60 million annually. The FAR Council acknowledges that there is substantial uncertainty underlying these estimates."
DOD and other agencies are accepting comments on the second rule over the next 60 days. The rule will go into effect directly after the comment period ends.