In October 2020, we wrote about a memorandum issued by the Director of National Intelligence (DNI), John Ratcliffe, that waived the requirement that Department of Defense (DOD) contractors comply with Part B of Section 889 of the National Defense Authorization Act for Fiscal Year 2019 until September 30, 2022. Unless another waiver is granted, full compliance with Section 889, Parts A and B, will be required starting October 1^st for all DOD contracts.

Essentially, Section 889 is a broad prohibition of the use of any Chinese covered technology that poses a threat to U.S. cyber security and national security. For a quick overview, Section 889 is divided into two parts:

• Part A is established at Federal Acquisition Regulation (FAR) 52.204-24, -25, and -26. It prohibits the government from procuring telecommunications equipment or services where a substantial or essential component of those goods or services is sourced from Huawei Technologies Company, Hangzhou Hikvision Digital Technology Company, Hytera Communications Company, Dahua Technology Company, or ZTE Corporation.
• Part B, though referenced in the FAR sections above, still does not have final regulations that describe the full scope of the law’s applicability or the nuances of its application. Under Part B, no agency can enter a contract where a contractor is using the prohibited equipment or services in any aspect of its business, even if that use is unrelated to the company’s federal contracts.

Given how broad Part B is for the government contracting community, it is surprising that a final rule on the specifics of Part B’s application is now over a year late. Indeed, the Defense Acquisition Regulator Council originally tasked the Acquisition Technology & Information FAR team to review public comments and draft a final FAR rule for Part B by May 2021. That deadline was extended to November 2, 2022, due to the large number of comments that were submitted and the discovery of a vast number of unintended consequences that the sweeping application of Part B would entail.

Of note, under Section 889(d)(1), the head of an executive agency is authorized to grant one-time waivers to entities on a case-by-case basis, but only until August 13, 2022. As a result, any current agency-based waivers are, arguably, ineffective because Congress did not give the agency authority to grant such waivers. Only the DNI has authority to grant longer waivers. DNI has already granted a waiver in the cased of the United States Agency for International Development, which, through September 30, 2028, is allowed to utilize internet and phone services from covered Chinese companies, but only for overseas contracts that directly relate to the agency’s overseas missions where no other technology is available.

With the DNI’s waiver for DOD expiring on October 1^st, even though we are still awaiting the final regulations, Part B is in effect with limited exception. Agencies and contractors are expected to remain compliant and to continue avoiding the use of any covered technology associated with the prohibited Chinese companies.