Amidst the continuing pandemic one thing remains the same for all federal contractors– Section 889 implementation.

By Elizabeth Sullivan

Disclaimer: This is longer than our usual blog posts – the rule was 86 pages, so bear with me through this one.  

 

Section 889 – a name that does not mean much to the average person, but carries a lot of weight for contractors. This is a section in the FY2019 National Defense Authorization Act (NDAA) that seeks to eradicate Chinese telecom from the entire U.S. government supply chain. Why write about it now? The part that impacts federal contractors of all sizes (Part B) goes into effect in less than a month.

 

Earlier this year, the Department of Defense (DoD) held a public meeting to hear from industry. Of the salient points made, one resounding theme was that definitions will mean everything for implementation. However, industry hasn’t been able to share any definitional clarity because of the rule release delay. The FAR Council published their interim rule last week – Part B goes into effect before the comment period is over, which means contractors will have to comply with the rule starting on August 13, 2020. Public comments can be submitted until September 14. 

 

Here are the five key components for small/midsize business contractors to pay attention to.

 

You’ll have a new box to check in SAM. Contractors will need to annually check a box in SAM verifying that they do not use any covered telecommunications equipment or services. A contractor can choose to say yes, they do use some of these banned equipment/services, which would require an offer-by-offer representation for contracts and task/delivery orders under IDIQs. It is important to know this ban applies toany equipment, system, or service that uses the covered equipment or services as a substantial or essential component of any system, or as critical technology as part of any of a contractor’s systems. Think this rule does not apply to you? Think again – acquisitions of commercial items (including COTS) and contracts at or below the simplified acquisition threshold (SAT) must also adhere to this prohibition. 

 

Definitions are key. Definitions are critical to the implementation of this rule, which defines words such as “backhaul” and “roaming,” but leaves contractors with uncertainty over what constitutes a covered technology. FAR 4.2101 covers some of these definitions, however there was no further clarity in the rule regarding who is considered “any subsidiary or affiliate of such entities” of the five listed companies (Huawei, ZTE, Hytera, Hikvision and Dahua). It seems problematic that a small business contractor is expected to research all of the subsidiaries and affiliates of these companies to make sure they are not utilizing any prohibited components. Note to government: why not just provide a list? 

 

Another definitional bone I have to pick is the meaning of “reasonable inquiry.” The rule says that a company is compliant if a “reasonable inquiry” by the company does not show any use of the prohibited equipment or services. So, what exactly does that mean? According to the rule, a reasonable inquiry is something that is designed to uncover any use of these covered telecommunications equipment or services and does not need to be an internal or third-party audit. While I am not a lawyer, I can imagine that every procurement attorney would advise contractors to have some type of legitimate audit of systems in case compliance risks arise.

 

The waiver process is laborious. Although a waiver sounds reasonable and gives contractors added time to comply (until August 13, 2022), it doesn’t seem designed for small or midsize contractors. In order to get a one-time waiver, the head of an agency has to grant it. Before this happens, a senior agency official for supply chain risk management has to discuss the waiver with the Federal Acquisition Security Council (FASC). And consult with the Office of the Director of National Intelligence (ODNI) to make sure conditions are met. And provide notice to the ODNI and FASC 15 days before granting the waiver. And notify appropriate Congressional committees within 30 days. The FAR Council does acknowledge that this process could take a few weeks and advises to enter at your own risk because “agencies may reasonably choose not to initiate one and to move forward and make award to an offeror that does not require a waiver.” A quick data point: there are 387,967 companies registered is SAM, 74% of which are small. That would mean if every small company decided to submit an offer for a federal award and sought a waiver, that would be 287,096 waivers. 

 

Six contractor actions are necessary for compliance. A chunk of the rule outlines contractor compliance recommendations. After reading and re-reading these six actions in the rule, I’m left with the same feeling: small contractors need something more detailed than just general guidelines. Generalities like “read and understand the rule and necessary actions for compliance” and “corporate enterprise tracking” sound great, what exactly does that entail? During more normal times – let alone a pandemic – building out a compliance program can be complicated, not to mention costly. It is important contractors have the detailed information to get it right.

 

Finally, I see dollar signs. The rule completely underestimates the time it will take contractors to implement and remain compliant with this rule. A whole section is dedicated to this analysis – and quite a few estimates left me scratching my head (you can find these in Section III, Part D). Companies aware of the rule have been spending months trying to prepare and continue to evaluate the components in their government offerings. An important part of complying with the rule to highlight is that a company cannot use any of these prohibited systems/equipment, even if they are not used in its federal contracts. That means no split networks or having one system for U.S. federal business and a difference one for commercial or contracts with other countries. I see more dollar signs.

 

The FAR Council is seeking public comment on the rule – and federal contractors should respond. In Section IV of the rule you can find a list of questions the Council wants industry to answer, and it is worth taking a look at them. One that is also found in the beginning of the rule is whether an expansion of the prohibition should be made to include all company subsidiaries and affiliates. Feedback is also requested on subjects like challenges, costs and insight into existing systems.

 

One thing all contractors, regardless of size have in common – they want to be compliant so they can compete. Given the uphill battle small and midsize contractors face when it comes to compliance with Section 889 and many other contracting requirements, advocacy on this issue is critical. 

House Members Express Frustration About SBA’s EIDL Program

By Maya Shavit

MSGI Intern

 

Last week the House Small Business Committee heard from long-anticipated witness, James Rivera from the Small Business Association (SBA) Office of Disaster Assistance, testifying before Congress about the Economic Injury Disaster Loan Program (EIDL). The EIDL program is originally designed to provide economic relief to businesses experiencing difficult times. But in response to the hit many have felt from the COVID-19 pandemic, for the first-time small businesses nationally can apply for the relief. While in theory this seems like a surefire way to receive aid in this unprecedented time, business owners have faced tremendous frustration with the EIDL’s process and the little assistance they have received from the SBA. Throughout the hearing, the Committee Members highlighted the lack of transparency between the SBA and small business owners.

Every Member on the Committee was perplexed by SBA’s lack of communication. Chair Nydia Velázquez (D-NY) and Ranking Member Steve Chabot (R-OH) opened the hearing mentioning that small business owners were not updated on the progress of their loans. The EIDL portal used in the loan process confuses many business owners and its supposed “help centers” provide little to no support. Mr. Rivera contributed this flaw to the “angst to get it out” as the pandemic ramped up to injure businesses nationally and the SBA’s forced three stops through March and April. Of particular inconvenience was the sudden change by SBA to exclusively allow agricultural businesses to apply for the loans. Ranking Member Chabot later continued to address this point as he noted that the SBA should have run the decision by Congress, which Mr. Rivera agreed to. If Congress is left in the dark, the general public is even further removed and strained by a lack of information. Representative Angie Craig (D-MN) brought up a personal experience with the “lack of accountability” that her constituents experienced. After a constituent in her district was left with no response for weeks from the SBA about their loan, Representative Craig used the congressional “24hour” email line, where she also never received a response. If this was the response that she as a congressperson received, she could only sympathize with the upset of a small business owner waiting for weeks or months in the processing que.

Another issue highlighted by Representatives Judy Chu (D-CA) and Dwight Evans (D-PA) was that the program did not provide equal opportunity to minority-owned businesses. Congresswoman Chu indicated that while SBA has translated the EIDL program into 17 languages, this excludes many languages that the Asian American business owners with a lack of English proficiency can understand. Twenty-five million dollars was appropriated to the Agency specifically for program translation, yet no progress has been made. Additionally, Member Evans noted minority struggle as he asked Mr. Rivera to “rate the way African Americans have been given a chance,” to which Mr. Rivera could not answer his question. 

Concluding the hearing, Members of Congress asked Mr. Rivera how he thought the SBA was doing with EIDL. Representative Dan Bishop (R-NC) questioned why Mr. Rivera believed the 41-day average he noted to the Committee was more than adequate. He cited that while the “historically based” numbers are “much better” than they were in previous disasters, it is clear that the COVID-19 pandemic is not similar to previous national disasters and economic crises that the population has faced. SBA staff members focused on approving EIDL applications are allotted 15 minutes, far less than the hours spent before the COVID-19 pandemic. While there have been beneficial changes, there is no denying that there were many hurdles at the start of the new process and there still are many issues that the SBA is not fully aware of. 

While no members argued that those numbers were more satisfactory, the frustration in the room was not alleviated as, on both sides of the aisle, people were not excited by the answers provided. Ultimately, Mr. Rivera expressed that while EIDL had some difficulty getting off the ground, the SBA is proud of its progress, but it strives to do much better. Chair Velázquez concluded the discussion by noting that the SBA must do better, “Especially when it comes to the communication between the SBA, Congress, and the constituents.” The SBA must listen to the lost business owners and work with Congress members to improve the EIDL program.

Top Five Reasons to Support Advocacy Now More Than Ever

By Ann Sullivan | WIPP Works In Washington, July 2020

If you have been attending WIPP’s Monday webinars on all things COVID-19, it should be pretty obvious that WIPP is on top of Congressional and federal agency actions related to the pandemic that continues to plague us personally and professionally. Not as evident, perhaps, is the role of advocacy beyond reporting the latest news. We give you five reasons why your support for WIPP is important.

 

1.  There’s More to Come. The government isn’t finished providing assistance to businesses.  The Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) remain key to retaining employees and providing capital but expect another stimulus bill later this summer.

 

2.  If You’re Not at The Table, You’re on the Menu. In other words, there are consequences to sitting on the sidelines. If you aren’t represented in decision-making, you are vulnerable to adverse consequences—you are at risk. WIPP is at the table.

 

3.  Interpreting Federal Actions Requires Context. A perfect example of this are the actions the Small Business Administration (SBA) and the Department of Treasury issued on PPP. Much was made of an audit of loans over $2 million— Treasury guidance (see question #31) issued in response to high profile public companies who got the PPP loans. Unfortunately, small companies got scared of a government audit and returned money they needed and should have kept. This could have been avoided, had they understood the intent of the rule/Congress.

 

4.  Access to Decision-Makers Requires Consistent Attention. Advocacy requires constant communication with a consistent message. It is not all that different than a business relationship—you need to remind people who you are and what you offer. Cold calling during a crisis is unlikely to be effective. WIPP’s advocacy team keeps women business owners front and center so Congress turns to WIPP for its point of view during a crisis. Big difference.

 

5.  A Combined Voice is Far More Effective Than One Voice. The mission of WIPP is to provide a voice for women business owners. Its message resonates with policymakers because we represent women from all over the country, from different political views and every size of business. Your individual message to Congress is important. But as Helen Keller once said, “Alone we can do so little, but together we can do so much.”