Contractors providing video surveillance, networking or telecommunications products and services to the federal government will have fewer equipment options as of September 30, when implementation rules are slated to go into effect as part of the new interim Federal Acquisition Regulation (FAR) Part B, published by the Department of Defense (DOD), General Services Administration and NASA. (A last-minute waiver issued by the DOD extended the original deadline of August 13.)  Aimed at federal contractors doing business with the U.S. government, the broad language of the rules carries potential points of confusion, including the definition of “use” and whether commercial projects unrelated to federal work may also be impacted.

In July the U.S. government began the prohibition of the procurement of products from Hikvision, Dahua, Huawei, ZTE Corporation and Hytera Technologies as cited in section 889 of the National Defense Authorization Act (NDAA) of 2019. FAR Part B of the NDAA blocks federal agencies from “entering into, extending or renewing a contract with an entity that uses 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 the system.”

Part A, issued in 2018, prohibits the heads of federal agencies from contracting with entities that would directly provide products from any of those five firms, with Part B firming up specifics. Security integrators and contractors handling federal government jobs must eliminate technologies from these companies as of the August date or may apply for a one-time, two-year waiver to expire no later than August 13, 2022.

The ruling applies to video surveillance equipment produced by the five aforementioned Chinese firms for “public safety, security of government facilities, physical security surveillance of critical infrastructure and other national security purposes.”

As of August, new contracts issued with the federal government require entities to provide self-certification and follow a reasonable inquiry standard that attests that they do not use these products.  

Because the term “use” is not strictly defined, contracting organizations have questions on whether reselling this specific equipment constitutes use and whether the contracting company using technology or components from those banned companies is also included. The interim FAR rule may also apply to more than the primary contractor’s role in providing government related work, with the document stating that it applies to the entity’s use of these products regardless of whether that usage is in performance of work under a federal contract, with this explanation:

“The exfiltration of sensitive data from contractor systems arising from contractors’ use of covered telecommunications equipment or services could also harm important governmental, privacy and business interests. Accordingly, due to the privacy and security risks associated with using covered telecommunications equipment or services as a substantial or essential component or critical technology of any system, the prohibition applies to any use that meets the threshold described above.”

According to the Security Industry Association (SIA), Silver Spring, Md.: “due to its applicability to uses by entities with federal contracts even unrelated to their federal work, this broad interpretation is expected to have widespread impact on the contracting  community across many sectors, as covered video surveillance equipment is some of the most commonly used in the commercial sector of the U.S.”

In addition, private OEM labeling is common in the physical security industry and manufacturing firms often assemble solutions with equipment from other producers, which may include these prohibited firms.

“This will create difficulties and limit choices for contractors with federal contracts,” said Dismas Locaria, a partner with the law firm Venable LLP, Baltimore. Locaria was a presenter in a SIA webinar discussing the new rules along with Lynn de Seve, president, GSA Schedules Inc., Annapolis, Md., and Jake Parker, SIA’s senior director of government relations.

“This is one of the more unique regulatory changes we’ve seen with wide-ranging impact,” Locaria said. “For example, what about the ancillary or indirect equipment used on your network or system? It’s up to interpretation by the government and contractors are struggling to find out what equipment is prohibited and how it might apply to parent and subsidiary companies.”

De Seve said GSA contract holders will receive notifications to accept the modification to rules before they can take orders for federal contracting jobs or work on jobs approved prior.

“It’s onerous and concerning, especially for small business contractors who have not had time to research and get answers. For example, do the sales of equipment constitute use for those who are merely reselling and not actively using it? It’s all for the government to decide. It will be a challenging time in the next months to implement and comply,” de Seve said.

A public comment period available at regulations.gov is open until Oct. 16, 2020, with the possibility for adjustments to the ruling’s final version.