Morrison Foerster’s Government Contracts Insights provides our in-depth analysis of developments and trends impacting government contracting. Through Insights, our attorneys offer a real-time assessment of the statutory, regulatory, legal, and business-related developments and trends that are shaping the industry. We also examine a full array of non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Morrison Foerster’s nationally recognized Government Contracts and Public Procurement practice represents the world’s leading companies in the aerospace and defense, intelligence, cybersecurity, information technology, financial and professional services, education, healthcare, infrastructure, and logistics support sectors. We are enlisted to address our clients’ most complex and important legal issues. Our work includes contract and subcontract negotiation and other transactional matters, business and regulatory compliance counseling, internal investigations, bid protests, and a wide array of enforcement and litigation matters. Our clients range from Fortune 50 companies to small and medium-sized companies just entering the public sector. We advise both U.S. and non-U.S. companies involved in municipal, state, federal, and non-U.S. procurement matters.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Tina is Co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmaceutical companies, with a focus on general contract counseling and compliance, particularly concerning intellectual property, and cybersecurity matters and federal grant funding.Tina counsels contractors on compliance with federal, state and local acquisition and ethics regulations and with the evolving myriad of requirements pertaining to data security and cybersecurity. She has been involved with numerous internal investigations and compliance reviews, and with mandatory and voluntary disclosures to agencies, and litigation of False Claims Act matters.Tina routinely advises clients concerning:<ul><li>Prime-subcontractor relationships</li><li>Sources of supply and country of origin requirements</li><li>Price reductions and price reporting issues</li><li>Organizational conflicts of interest</li><li>Safeguarding of intellectual property and other proprietary interests</li><li>Licensing and data rights issues</li><li>Handling of classified materials and controlled unclassified information</li><li>Agency suspension and debarment proceedings</li></ul>She also assists clients with due diligence and other activities related to the acquisition of government contracting concerns, and with the drafting and negotiation of teaming agreements, subcontracts, licensing agreements, and cooperative research and development agreements. She also assists clients applying for federal grants (including SBIR and STTR agreements), and those who seek to obtain other transactional authority agreements, as well as those competing for state and local government work.Tina’s litigation experience includes government contracts claims litigation in federal courts and before boards of contract appeals, bid protests before the Government Accountability Office and the Court of Federal Claims, and complex disputes in federal courts, including civil fraud and False Claims Act litigation and reverse Freedom of Information Act litigation.Prior to joining Morrison Foerster, Tina worked at another large national firm and as a trial attorney in the Office of the General Counsel of the Navy, Navy Litigation Office.<h4>Representative Experience</h4><ul><li>Negotiation of largest CHIPS Act federal funding agreement between multinational semiconductor corporation and U.S. Department of Commerce.</li><li>Negotiated prime contract and major subcontracts related to the Department of Energy’s next generation supercomputer program, including extensive IP rights negotiations and negotiation of associated patent rights waivers.</li><li>Negotiated series of other transaction authority agreements with DARPA and associated subcontracts with more than a dozen research universities on behalf of a firm biotech client, including complex IP rights allocations and material transfer agreements.</li><li>Assist clients with FedRAMP authorization process and with development of license agreements for software products sold to federal, state and local government agencies.</li><li>Cyber incident response counseling to some of the largest companies and organizations impacted by security incidents.</li><li>Advises clients on Bayh-Dole reporting of inventions and IP strategies for contracts and grants.</li><li>Conducts due diligence for major government contract mergers and acquisitions.</li></ul>

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Tina is co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She counsels a wide variety of government contractors on compliance with federal acquisition and ethics regulations. She drafts and negotiates contracts on their behalf and has been involved with numerous internal investigations and compliance reviews, and with bid protest, contract claims, and False Claims Act litigation. She also advises on M&A transactions involving government contractors.

Tina D. Reynolds

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters. He has represented both protesters and awardees in scores of protests before the Government Accountability Office, the Court of Federal Claims, and procuring agencies, in acquisitions ranging from small business procurements to multibillion-dollar contracts of global significance. His representative protest matters span the aerospace sector, the Intelligence Community, base operations and logistics, healthcare, nuclear and environmental work, and information technology and software acquisitions. His protests have included both classified and unclassified programs. In addition to prevailing in published decisions, Jim has also secured favorable corrective action on behalf of clients in a wide variety of protests that were resolved without a published decision.Jim’s work also focuses on disputes over cost allowability and compliance with the Cost Accounting Standards, and he has appeared before the Armed Services and Civilian Boards of Contract Appeals, in size and status protests before Small Business Administration (SBA) area offices, and appeals before the SBA Office of Hearings and Appeals. Jim regularly counsels clients on contract interpretation, organizational conflicts of interest, and small business compliance.Jim graduated with high honors from the George Washington University Law School, where he focused his studies on federal procurement law, was a member of the Law Review, and interned with the General Services Administration’s suspension and debarment office. Jim also holds a degree in theology magna cum laude from the Pontifical Gregorian University in Rome and a bachelor’s degree in classical languages and literature summa cum laude from the University of Kentucky, where he graduated Phi Beta Kappa.

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Jim maintains an active practice in bid protests before the Government Accountability Office and contracting agencies and counsels clients in contract disputes and compliance obligations.

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office. Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters.

James Tucker

<div style="margin-bottom: 15px;" class="videoWrapper"><iframe class="sticky-video" title="Meet Alex Ward, Government Contracts Practice Co-Chair" src="https://www.youtube-nocookie.com/embed/TkliwdSlTaQ?rel=0" frameborder="0" allow="autoplay; encrypted-media" allowfullscreen="1" title="iframe"></iframe></div>J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. His practice covers a full range of government contracts matters, including investigations, bid protests, claims, general litigation, corporate transactions, and counseling. Alex strives in all matters is to provide his clients the highest level of efficient and effective representation.Alex represents contractors in internal and external investigations, disclosures to the government, and qui tam litigation, with great success in reducing or eliminating his clients’ exposure through active engagement with the government. His work in this area includes obtaining numerous declinations and dismissals of False Claims Act cases in their earliest stages, sparing his clients the cost, risk, and exposure of litigation.He has also served as lead counsel in dozens of bid protests involving military and civilian agency procurements of a wide range of products and services, including all manner of pre- and post-award protests in the GAO, the U.S. Court of Federal Claims, and state tribunals, as well as appeals to the U.S. Court of Appeals for the Federal Circuit and size protest appeals before the SBA’s Office of Hearings and Appeals.Alex handles all aspects of the claims process, from the initial assessment and drafting of requests for equitable adjustment through litigation in the Boards of Contract Appeals and the Court of Federal Claims. Alex’s practice also covers the full gamut of other controversies confronting government contractors, including prime-sub, teaming partner, employer-employee, competitor, and indemnification disputes. His litigation work also includes a wide variety of pro bono engagements, in which he has represented both individual and institutional clients in matters ranging from immigration and criminal defense to sustainable procurement and protection of the environment.Prior to joining the firm, Alex served in the U.S. Army as a commissioned officer and an Assistant to the General Counsel of the Army responsible for civil works and international matters, and as a clerk for judges on the U.S. Courts of Appeals for the Armed Forces and the D.C. Circuit. He is a member of the Boards of the Morrison & Foerster Foundation and the Chesapeake Bay Foundation and of Law360’s Government Contracts Editorial Board.

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Alex is co-chair of Morrison Foerster’s Government Contracts and Public Procurement practice. His practice covers a full range of government contracts matters, including bid protests, claims, investigations, corporate transactions, and counseling.

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Morrison Foerster’s Government Contracts Insights blog provides an in-depth analysis of news, developments, and trends impacting government contracting and procurement. Through Insights, attorneys from our nationally recognized Government Contracts and Public Procurement practice will offer a real-time assessment of the statutory, regulatory, legal, and business-related developments that are shaping the industry. This blog will also examine a full array of U.S. and non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Read about our <a href="http://govcon.mofo.com/editors/">Authors</a>.Never miss a post. Subscribe to get real-time updates.

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The U.S. Department of the Treasury (Treasury) has released final regulations to implement the Foreign Investment Risk Review Modernization Act (FIRRMA), expanding the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS). As we discussed in previous alerts in this series, the regulations provide long-awaited answers to questions about how Treasury and the other CFIUS member agencies will conduct national security reviews of foreign investment under the “modernized” FIRRMA construct.Read our <a rel="noopener noreferrer" target="_blank" href="https://www.mofo.com/resources/insights/200116-cfius-rules-announced.html?utm_source=publication&utm_medium=email">client alert</a>.

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Charles Capito is a partner in both Morrison Foerster’s National Security and Government Contracts + Public Procurement practices.
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Foreign Investment 2020 (Part 5): Final CFIUS Rules Announced

Foreign Investment 2020 (Part 5): Final CFIUS Rules Announced

The U.S. Department of the Treasury (Treasury) has released final regulations to implement the Foreign Investment Risk Review Modernization Act (FIRRMA), expand

This is the fourth in our multipart series of alerts addressing proposed regulations published in the Federal Register on September 24, 2019, for the Committee on Foreign Investment in the United States (CFIUS) to implement the Foreign Investment Risk Review Modernization Act (FIRRMA).One of the most anticipated changes in FIRRMA is the concept of a “white list” of investors exempted from certain aspects of CFIUS’s foreign investment review jurisdiction. Another prominent feature of FIRRMA is the heightened CFIUS scrutiny on foreign government-owned investors, which left many wondering what this will mean for the viability of future investments in which a foreign government has an interest. The proposed regulations address both of these concepts and provide some initial answers, while raising several new questions for investors and U.S. businesses about which deals will get a green light in 2020, and which will need to hit the brakes.

Foreign Investment 2020 (Part 4): Who’s In, Who’s Out, and Why It Matters

This is the fourth in our multipart series of alerts addressing proposed regulations published in the Federal Register on September 24, 2019, for the Committee 

Foreign Investment 2020 (Part 4): Who’s In, Who’s Out, and Why It Matters

This is the third in our multipart series of alerts addressing proposed regulations published in the Federal Register on September 24, 2019, for the Committee on Foreign Investment in the United States (CFIUS) to implement the Foreign Investment Risk Review Modernization Act (FIRRMA).FIRRMA directed the U.S. Department of the Treasury (“Treasury”), as the chair of CFIUS, to issue regulations that, among other things, address national security concerns arising from foreign investment in U.S. businesses with critical technologies, critical infrastructure, and personal data (referred to in the proposed regulations as “TID U.S. businesses”). The proposed CFIUS regulations implement these provisions of FIRRMA by (i) defining what constitutes a TID U.S. business and (ii) expanding CFIUS’s jurisdiction to include not only transactions that result in control of a TID U.S. business, but also “covered investments” that give a foreign person certain rights with respect to a TID U.S. business (together referred to as “covered transactions”).

Foreign Investment 2020 (Part 3): CFIUS Spotlight on “TID” U.S. Businesses

This is the third in our multipart series of alerts addressing proposed regulations published in the Federal Register on September 24, 2019, for the Committee o

Foreign Investment 2020 (Part 3): CFIUS Spotlight on “TID” U.S. Businesses

This is the second in our multipart series of alerts addressing proposed regulations published in the Federal Register on September 24, 2019, for the Committee on Foreign Investment in the United States (CFIUS) to implement the Foreign Investment Risk Review Modernization Act (FIRRMA).One of FIRRMA’s many noteworthy changes was to expand the types of real estate transactions CFIUS can review beyond those that result in control of a U.S. business, to include leases, concessions, and acquisitions of real estate (developed and undeveloped) in proximity to military and other specified installations.  Under the regulations proposed by the U.S. Department of the Treasury in 31 C.F.R. Parts 800 and 802, real estate transactions could be subject to CFIUS review in several ways.

Foreign Investment 2020 (Part 2): Proposed Regulations Would Expand CFIUS Review of Real Estate Transactions

This is the second in our multipart series of alerts addressing proposed regulations published in the Federal Register on September 24, 2019, for the Committee 

Foreign Investment 2020 (Part 2): Proposed Regulations Would Expand CFIUS Review of Real Estate Transactions

After more than a year of anticipation, the U.S. Department of the Treasury has released <a rel="noopener noreferrer" target="_blank" href="https://home.treasury.gov/news/press-releases/sm779">proposed regulations</a> to implement the Foreign Investment Risk Review Modernization Act (FIRRMA). These proposed regulations follow an initial round of FIRRMA-implementing regulations issued in October 2018, which most notably included the Committee on Foreign Investment in the United States (CFIUS) critical technologies pilot program imposing mandatory CFIUS filing requirements on certain foreign investments in U.S. technology and life sciences companies.

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Foreign Investment 2020 (Part 1): Key Takeaways from the “Modernized” CFIUS Regulations

Five Peculiarities of Protests of Federal Supply Schedule Orders

After more than a year of anticipation, the U.S. Department of the Treasury has released proposed regulations to implement the Foreign Investment Risk Review Mo

Foreign Investment 2020 (Part 1): Key Takeaways from the “Modernized” CFIUS Regulations

Mark your calendars for MoFo’s third annual MoForward program, which will be held once again at the Ritz Carlton Tysons Corner, on November 5.Leading up to our event, we will post sneak peeks of our agenda. This week, we will cover the National Security + CFIUS session, New and Modernized Foreign Investment and Export Control Regime.MoFo Sr. National Security Advisor Joe Benkert and Of Counsel Charles Capito will discuss the robust new regulations implementing the Foreign Investment Risk Review Modernization Act (FIRRMA) and export control reform.  The new regulations are out and include new definitions and provisions that affect a wide range of transaction involving foreign capital.   Joe and Charles will also provide observations, updates, and pointers from their dealings with CFIUS over the past year.The landscape in this area is in a period of critical and near constant change.  Joe and Charles will provide up-to-the-minute developments on foreign investment and national security reviews.The National Security team’s recent publications on National Security, CFIUS, Sanctions + Export topics:<ul><li>CFIUS’s Axe to Grind: China’s Kunlun Reportedly Forced to Divest Grindr Amid Concerns Over Sensitive Personal Data (Morrison & Foerster Client Alert, 4/2/2019)</li><li>CFIUS Means Business, Unwinding Non-Notified Transactions and Penalizing Non-Compliance with Mitigation Agreements (Morrison & Foerster Client Alert, 4/15/2019)</li><li>Chinese Telecom Companies Under Fire: Commerce Moves to Cut Off Huawei From U.S. Technology, With More Restrictions Coming (Morrison & Foerster Client Alert, 5/16/2019)</li><li>Commerce Issues Narrow License for Certain Transactions with Huawei (Morrison & Foerster, 5/23/2019)</li><li>New Rule Implementing NDAA Prohibition: U.S. Agencies Cannot Enter Contracts That Use Chinese Telecom Technology (Morrison & Foerster Client Alert, 8/9/2019)</li></ul>

MoForward 2020 Sneak Peek: The New and Modernized Foreign Investment and Export Control Regimes

Mark your calendars for MoFo’s third annual MoForward program, which will be held once again at the Ritz Carlton Tysons Corner, on November 5. For more details 

MoForward 2020 Sneak Peek: The New and Modernized Foreign Investment and Export Control Regimes

The latest in a string of U.S. government (USG) actions restricting the use of Chinese technology in the U.S. supply chain is an interim rule issued by the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) implementing the first phase of Section 889 of the FY2019 <a rel="noopener noreferrer" target="_blank" href="https://www.congress.gov/115/bills/hr5515/BILLS-115hr5515enr.pdf">National Defense Authorization Act</a> (NDAA). This rule, which goes into effect on August 13, 2019, prohibits federal agencies from buying “covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system” from designated Chinese entities, including Huawei Technologies Company Ltd. (Huawei) and ZTE Corporation (ZTE), and several providers of video surveillance equipment and services. We detail this proscription below and summarize how the rule shifts the compliance burden to government contractors.Key Takeaways:1. The interim rule applies immediately to new solicitations as well as to procurements pending award. The rule is essentially immediate—at least, as of August 13, 2019—when Section 889(a)(1)(A) of the NDAA takes effect. However, because this is an interim rule, interested parties may still submit comments, which the agencies may consider before releasing a “final” rule. Notably, the prohibition applies not just to solicitations issued on or after August 13, but also to existing solicitations where the award will occur on or after August 13.2. The rule applies to commercial item acquisitions and even acquisitions below the simplified acquisition threshold. Commercial item acquisitions, including government purchases of commercially available off-the-shelf (COTS) items, and contracts with dollar amounts below the simplified acquisition threshold are exempt from many compliance‑related requirements, but not from this rule.3. The rule requires a representation from the contractor at award and imposes a significant reporting requirement during performance. If you identify prohibited equipment or services during performance, you have one business day to report it.4. Contractors must flow down the prohibition and requirements to subcontractors, even commercial item vendors.5. The rule adopts in full the NDAA’s definitions of “covered telecommunications equipment” and CFIUS’s definition of “critical technology.” The interim rule recycles the definition of “critical technologies” in the regulations implementing certain portions of the Foreign Investment Risk Review Modernization Act, which expanded the national security review authority of the Committee on Foreign Investment in the United States (CFIUS). In addition to the export control-based prongs of the definition, “critical technologies” includes “emerging and foundational technologies,” which are to be designated via an interagency notice and comment process led by the Commerce Department and new regulations to be issued on or before February 2020, but which may be issued sooner.6. More regulation is coming. A broader prohibition under Section 889 of the NDAA prohibits government agencies from entering contracts with entities that use covered equipment, services, or technology. This prohibition is effective August 13, 2020, subject to forthcoming regulations.A Prohibition Grounded in National Security ConcernsUnlike other initiatives driven by the Administration’s trade policy, this interim rule implements a congressional mandate to address national security concerns related to the integration of Chinese telecommunications technology in the USG supply chain. In contrast to the timing of Huawei’s designation on the Commerce Department’s Entity List, which suggested tactical pressure applied to China during deteriorating tariff negotiations, the NDAA established the timing. Congress enacted Section 889 in response to the threat of Chinese government espionage and surveillance against U.S. entities. At a February 2018 Senate Intelligence Committee hearing, the heads of six U.S. intelligence agencies <a rel="noopener noreferrer" target="_blank" href="https://www.cnbc.com/2018/02/13/chinas-hauwei-top-us-intelligence-chiefs-caution-americans-away.html">warned</a> that private citizens should not use products or services from Huawei or ZTE based on security concerns about companies “beholden to foreign governments.”Section 889 prohibits U.S. government agencies from:1. Procuring or renewing a contract for 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 any system”; or2. Entering into or renewing a contract with any entity that uses any such equipment, system, or service as a “substantial or essential components of any system, or as critical technology as part of any system.”The interim rule implements the first prong of Section 889. The rule adopts Section 889’s definition of “Covered telecommunications equipment,” which includes:<ul><li>Telecommunications equipment produced by Huawei or ZTE and their affiliates;</li><li>Video surveillance and telecommunications equipment produced by Hytera Communications Corporation (Hytera), Hangzhou Hikvision Digital Technology Company (Hikvision), Zhejiang Dahua Technology Co., Ltd. (Dahua), or their affiliates for the purpose of public safety, security of government facilities, physical security surveillance of critical infrastructure, and other national security purposes;</li><li>Telecommunications or video surveillance services provided by any of these entities or using any such equipment; and</li><li>Telecommunications or video surveillance equipment or services produced or provided by an entity that the Secretary of Defense, in consultation with the Director of National Intelligence or the Director of the Federal Bureau of Investigation, reasonably believes to be an entity owned or controlled by, or otherwise connected to, the Chinese government.</li></ul>The interim rule also includes one new definition by defining “substantial or essential component” somewhat circularly as “any component necessary for the proper function or performance of a piece of equipment, system, or service.”Notably, Section 889 does not prevent agencies from (1) contracting with an entity for services that connect to the facilities of a third party (such as backhaul, roaming, or interconnection arrangements) or (2) using “telecommunications equipment that cannot route or redirect user data traffic or permit visibility into any user data or packets that such equipment transmits or otherwise handles.” Section 889 also does not require USG agencies to terminate existing contracts as of the effective date of each provision, but it does prohibit agencies from extending or renewing such contracts.Practical Implications for All Contractors and SubcontractorsThe interim rule implements Section 889 by making several revisions to the Federal Acquisition Regulation (FAR).  Specifically, the rule:<ul><li>Incorporates the statute’s prohibitions and definitions under FAR Part 4; and</li><li>Modifies FAR Parts 12, 13, and 39 to require contracting officers to adhere to the prohibitions in acquisitions of commercial items, acquisitions below the simplified acquisition threshold, and acquisitions of information technology, respectively.</li></ul>The interim rule also adds two solicitation provisions and contract clauses under FAR Part 52. The first clause—FAR 52.204-24—requires the offeror to represent whether or not it will provide covered telecommunications equipment or services in the performance of the contract. In the event the offeror represents that it will provide covered equipment or services, the clause requires a detailed disclosure of: (i) the brand, model, and item description; (ii) the proposed use of the equipment or service, including relevant factors about whether the use is permissible under the prohibition; (iii) the entity providing any covered service; and (iv) the entity that produced any covered equipment.The interim rule states that DoD, GSA, and NASA are working to update the online System for Award Management (SAM) to allows contractors to represent annually whether they sell covered equipment or services. Only contractors that provide an affirmative representation in SAM will be required to provide offer-by-offer disclosures in their proposals for contracts or task orders. This option is not available yet, so contractors should expect to see the representation incorporated into solicitations starting August 13.The second clause—FAR 52.204-25—incorporates Section 889’s prohibitions and definitions into the contract and also imposes a significant reporting requirement on the contractor. The reporting requirement obligates the contractor to report through DIBNet if it identifies any activity prohibited by the rule during contract performance. Contractors must do so within one business day of identifying the activity, and then follow up within 10 business days with any additional information about mitigation actions undertaken or recommended.The new clauses will be incorporated into solicitations, contracts, and orders as follows:<ul><li>All solicitations for contracts or task orders issued on or after August 13, 2019;</li><li>All solicitations for contracts or task orders issued before August 13, 2019, where award is not made prior to August 13, 2019;</li><li>Indefinite delivery/indefinite quantity (IDIQ) contracts will include the new clauses prior to placing new orders; and</li><li>Existing contracts and task orders will include the clauses if or when the instrument is modified to extend the period of performance (including option exercises).</li></ul>The new clauses must be flowed down to subcontractors, even commercial item vendors.Future Restrictions Will Restrict Contractors’ “Use” of Covered TechnologyOn August 13, 2020, the prohibition’s scope will expand again. Section 889(a)(1)(B) of the NDAA will take effect, prohibiting USG agencies from entering into contracts with entities that use covered technology. A legislative proposal from the White House Office of Management and Budget (OMB) to amend Section 889 to delay the effective date has not been adopted.The contractor’s “use” of such equipment, systems, or services would presumably need to be in connection with the contractor’s performance of a federal government contract. After all, Section 889’s language requires that the equipment be used as “substantial or essential components of any system, or as critical technology as part of any system.” This interpretation would also dovetail with Section 889’s overall purpose of protecting U.S. government data from foreign exploitation.Nor are the restrictions on using Huawei and ZTE technology and services limited to the NDAA.  By October 14, 2019, the Secretary of Commerce must issue new restrictions implementing the May Executive Order declaring a national emergency over the influx of telecommunications technology developed by “foreign adversaries” and entities controlled by them.  Implementing regulations will identify covered entities and transactions, almost certainly targeting entities like Huawei and ZTE.Madeline Magnuson, a Summer Associate in Morrison & Foerster LLP’s Washington, D.C. office, contributed to this alert and is not admitted to the bar.

New Rule Implementing NDAA Prohibition: U.S. Agencies Cannot Enter Contracts That Use Chinese Telecom Technology

The latest in a string of U.S. government (USG) actions restricting the use of Chinese technology in the U.S. supply chain is an interim rule issued by the Depa

New Rule Implementing NDAA Prohibition: U.S. Agencies Cannot Enter Contracts That Use Chinese Telecom Technology

For years, United States security agencies have recognized a threat to government information technology systems posed by contractor supply chains. The Government has struggled, however, to balance national security assessments of a contractor’s supply chain (which may include classified or otherwise sensitive information) against policies that favor transparency and competition. In many cases, a potential supplier may be excluded from a procurement for a risk based only on an agency official’s cursory research and with little warning. The excluded bidder may seek relief through a bid protest, but federal agencies receive significant deference in deciding matters of national security, as was displayed in Iron Bow Technologies, LLC v. United States, 136 Fed. Cl. 519 (2018), in which the U.S. Court of Federal Claims upheld the Social Security Administration’s exclusion of desktop printers manufactured by Lexmark based solely on the company’s Chinese ownership and connections to the Chinese government.The Senate showed continued interest in this topic last year by unanimously passing the Federal Acquisition Supply Chain Security Act of 2018 (<a href="https://www.congress.gov/115/bills/s3085/BILLS-115s3085es.pdf">S. 3085</a>), a bill that would have stood up a Federal Acquisition Security Council and established procedures for federal agencies to exclude from competitive procurements certain items or offerors that pose a supply chain risk.The bill would have allowed an agency, for a single procurement or a class of procurements, to exclude a source from competition or deem a source unacceptable or not responsible on the basis of a perceived supply-chain risk upon determining (1) exclusion is necessary to protect national security, and (2) less intrusive measures are not reasonably available. Under the bill, a source could be excluded either based on explicit solicitation criteria (i.e., failing to meet qualification requirements or not achieving an acceptable rating under an evaluation factor) or as part of the source-selection authority’s overall responsibility determination. However, the authority to make an exclusion determination could not be delegated further than one level below the Deputy Secretary or Principal Deputy Director; would require the joint recommendation of the agency’s chief acquisition officer and chief information officer; and would require the agency to provide notice to Congress. The bill does not describe the sources of information on which an agency official may rely in reaching the conclusions underlying exclusion — including, apparently, unsubstantiated internet research. The proposed statute would, however, address some of the transparency and accountability issues that have dogged this area of procurement review, as before exercising this authority, the agency would be required to notify the source of its potential exclusion and allow it 30 days to respond, unless there are “urgent national security interests,” in which case the notice to the excluded source and notice to Congress could be delayed.Under the bill as written, an excluded source would be limited to seeking judicial relief directly in the U.S. Court of Appeals for the District of Columbia Circuit, which would adopt a standard of review similar to that in the Administrative Procedure Act, with the exception that a contractor may also seek remedies under the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101 et seq., to the extent they are available. This would preclude traditional bid protest remedies and cases like Iron Bow.The bill also would have established procedures for sources to be excluded more broadly by the Department of Homeland Security, Department of Defense, and the Director of National Intelligence from procurements by civilian, defense, or intelligence agencies, respectively, upon recommendation by the Federal Acquisition Security Council established by the bill. This Council — which would be chaired by a representative from the Office of Management and Budget (OMB) and would also include representatives from the General Services Administration (GSA), Department of Homeland Security (DHS), the Office of the Director of National Intelligence (ODNI), Department of Justice (DOJ), Department of Defense (DOD), and the National Institute of Standards and Technology (NIST) — would be charged with establishing criteria and procedures for such exclusions and exceptions to them.Additionally, the Council would be responsible for identifying and recommending supply chain risk management standards, guidelines, and practices for executive agencies (which NIST would develop), as well as establishing requirements for non-federal entities to share information about supply chain risk with federal agencies and identifying the best federal agencies to lead and facilitate this sharing.All in all, this bill, which may or may not be reintroduced in the new Congress, with its procedure for review and challenge prior to exclusion and its requirements for Congressional notifications, is a step in the right direction. But there still is room for improvement, particularly in establishing meaningful administrative oversight and standards for thorough and reliable research to guide agencies, who otherwise may cloak a careless decision under the veil of national security. Federal contractors will want to monitor these initiatives and the ongoing balance of national security with procurement transparency, as well as reviewing companies in their own supply chain for possible concerns.

Anser Advisory

ARKA

Arlington Capital

Battle Investment Group

Behrman Capital

Cadmus

Chainalysis

CollabraLink

Definitive Logic

Emmes

Enlightenment Capital

Grant Thornton

Griffon Corporation

eTelligent

L3Harris

Jacobs

LinQuest Corporation

Micross

Sagewind

Sedgwick

Sigma Defense

teKnoluxion

The Building People

VariQ

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Damien is a partner in the firm’s Government Contracts & Public Procurement practice. He represents clients in all facets of government contracts transactions, as well as regulatory counseling, subcon