On August 13, a federal prohibition on the use of certain telecommunications components took effect. The new Interim Final Rule (IFR), 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 that utilizes certain Chinese companies’ telecommunications equipment or services as a component or critical technology of any system, unless an exception applies or a waiver is granted. The Department of Defense issued a memo on this measure, explaining that federal contractors should expect change orders or other required affirmations of a contractor’s compliance with this prohibition. On July 1 and July 15, AGC, along with a coalition of stakeholders, called on Congress to extend the date of implementation and to make key changes to the 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. AGC has communicated the difficulty many contractors have had implementing these new requirements and the challenges that the rule brings.
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