2020’s biggest supply chain compliance challenge just hit the gym, and it’s looking both leaner and meaner for some government contractors.
What is Section 889 Part B?
Section 889 Part B of the 2019 National Defense Authorization Act (NDAA) explicitly prohibits government agencies from contracting with companies who use telecommunications equipment from 5 Chinese companies including Huawei and ZTE. The rule went into effect earlier this year on August 13th. On October 26th the government issued an addendum which removed the requirement for contractors to certify compliance on an offer-by-offer basis, instead allowing them to recertify once annually via the System for Award Management (SAM).
However, changes to the language in the SAM representation have left some contractors feeling that compliance may not be possible. Unlike the original language included in the NDAA provision, which limited the scope of the law to “substantial or essential component[s]” or a “critical technology,” the new SAM representation specifies no limit to its applicability. This new language could prevent contractors from certifying their compliance if they only use the prohibited technology outside of their government work, and it applies regardless of how many tiers/parties away the technology sits in a contractor’s supply chain.
It remains to be seen if the government will amend or clarify the language in SAM to more closely reflect the narrower scope of the 2019 NDAA, or if this broad interpretation will be fully enforced. For the time being, contractors seeking an annual certification will have to play it on the safe side and either request a waiver, or invest in supply chain management solutions that can assess their vendor ecosystem for compliance, continuously, across every tier. Interos’ own estimates suggest there are several hundred subsidiaries and affiliates that fall under current Section 889 guidelines.
Interos CEO Jennifer Bisceglie, in an interview with NextGov, stated that “the challenge is that we want something that industry can actually accomplish,” Bisceglie said. “And right now, there’s just no way to accomplish it as it’s written.”
Many contractors have echoed Bisceglie’s sentiments. Others have also advocated for a more case-by-case, system by-system approach to risk management that enables companies to exempt specific uses of covered technologies in cases where there may be limited exposure to government systems or the given technology is used in such a way that presents limited risk. Contractors have also argued that the current language will, due to its broad scope, effectively mandate audits, something the government explicitly said they would not do for Section 889.
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Of course, the challenges posed by Section 889 aren’t new to this particular revision. As we indicated in our whitepaper “The Top 5 Things You Don’t Know About Section 889,” there are plenty of concerns for contractors, including connected ESG issues and the difficulty in ensuring that excised companies don’t slip back into your supply chain through a third party vendor.
To learn more about how Interos can help track Section 889 compliance, click here.