BACKGROUND: On August 13, 2018, the President signed the FY 2019 National Defense Authorization Act (NDAA). Section 889(b) prohibits Federal agencies, after August 13, 2020, from obligating or expending financial assistance to obtain certain telecommunications and video surveillance services and equipment from specific producers.
On January 22,2020, the Office of Management and Budget (OMB) issued a Notice of Proposed Rulemaking that outlined revisions to 2 CFR 200, in part, to implement section 889 of the FY 2019 NDAA. Today, (August 13, 2020), the Federal Register Notice issued the Final Rule (attached) and states that the amendment to 2 CFR 200.216 is effective on August 13, 2020.
§ 200.216 Prohibition on certain telecommunications and video surveillance services or equipment.
a) Recipients and subrecipients are prohibited from obligating or expending loan or grant funds to:
1) Procure or obtain;
2) Extend or renew a contract to procure or obtain; or
3) Enter into a contract (or extend or renew a contract) to procure or obtain equipment, services, or systems 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. As described in Public Law 115–232, section 889, covered telecommunications equipment is telecommunications equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities).
i. For the purpose of public safety, security of government facilities, physical security surveillance of critical infrastructure, and other national security purposes, video surveillance and telecommunications equipment produced by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of such entities).
ii. Telecommunications or video surveillance services provided by such entities or using such equipment.
iii. Telecommunications or video surveillance equipment or services produced or provided by an entity that the Secretary of Defense, in consultation with the Director of the 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 government of a covered foreign country.
b) In implementing the prohibition under Public Law 115–232, section 889, subsection (f), paragraph (1), heads of executive agencies administering loan, grant, or subsidy programs shall prioritize available funding and technical support to assist affected businesses, institutions and organizations as is reasonably necessary for those affected entities to transition from covered communications equipment and services, to procure replacement equipment and services, and to ensure that communications service to users and customers is sustained.
c) See Public Law 115–232, section 889 for additional information.
d) See also § 200.471
The new 2 CFR 200.471 regulation provides clarity that the telecommunications and video surveillance costs associated with 2 CFR 200.216 are unallowable for services and equipment from these specific providers. OMB’s Federal Register Notice includes the new 2 CFR 200.216 and 2 CFR 200.471 regulations.
§ 200.471 Telecommunication costs and video surveillance costs
(a) Costs incurred for telecommunications and video surveillance services or equipment such as phones, internet, video surveillance, cloud servers are allowable except for the following circumstances:
(b) Obligating or expending covered telecommunications and video surveillance services or equipment or services as described in § 200.216 to:
1. Procure or obtain, extend or renew a contract to procure or obtain;
2. Enter into a contract (or extend or renew a contract) to procure; or
3. Obtain the equipment, services, or systems.
DISCUSSION: Effective today, (August 13, 2020), recipients and subrecipients are prohibited from obligating or expending loan or grant funds to 1) procure or obtain; 2) extend or renew a contract to procure or obtain, or; 3) or enter into a contract to procure or obtain telecommunication or video surveillance equipment, services, or systems produced by:
· Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities).
· Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of such entities).
NOTE: Additional information will be provided after FHWA analyzes the rule and determines additional implications on Federal-aid projects. While a significant portion of the rule is effective in November 2020, the portion of the rule that most significantly impacts Federal-aid projects is effective today, August 13, 2020.