Section 889 Compliance - Sole Source Contractor Refusal

What do you mean when you say your OGC has "no opinion"? Maybe you should ask them again? Ask them straight up if you can exercise the option -- it is a YES or NO question -- memorialize the answer in writing. Then, share the writing with your boss and seek his or her instructions -- hopefully, you have already engaged your boss.

Have you read FAR subpart 4.21? There are both exceptions and waivers that might be available to you. Your OGC attorneys should help you.

But, most importantly, what do you think based on your reading of FAR subpart 4.21? What is your opinion?

2FARGone said:

Has ANYONE run into this situation at their agencies? Any recommendations on how to proceed?

Not with respect to this particular issue.

Three recommendations:

1. change the contractor's mind (escalate, if necessary), or

2. change your mind --- obtain a waiver IAW FAR 4.2104, or

3. say goodbye to the contractor.

2FARGone said:

...the upcoming option exercise is necessary.

I would have expected that generally an option exercise retains the same terms and conditions as the base contract... is not a new contract...just new work being added to an existing base contract. Which would mean to me that I would not expect a clause or solicitation provision problem.

2FARGone said:

We have a sole source contractor that is refusing to explicitly fill out the representations related to Section 889 (i.e., FAR 52.204-24 or FAR 52.204-26) and that is unwilling to include the clause 52.204-25 in the contract.

I am confused by this statement.  The date of 52.204-25 is Oct 2020.  I have not checked to see if there was an earlier version, but if there was not, was your contract issued before the clause became effective?  If so, are you now trying to add the clause to the contract and the contractor is balking?

Neil and Retreadfed, please see 4.2102 Prohibitions. Applicable to options to extend contracts and to orders. Also discusses possible waivers - subject to conditions. The clause at 52.204-25 is required to be included.

https://www.acquisition.gov/far/subpart-4.21

Neil Roberts said:

I would have expected that generally an option exercise retains the same terms and conditions as the base contract... is not a new contract...just new work being added to an existing base contract. Which would mean to me that I would not expect a clause or solicitation provision problem.

Read FAR Subpart 4.21, especially 4.2102(c) and 4.2105(b).

Thanks, Vern and Joel. Tough situation. It is not clear if the OP, 2FarGone, or Agency can determine without input from the contractor, whether covered/prohibited telecom is or is not involved. Seems like that would help the waiver process.

Wouldn't it be funny if the contractor were refusing to complete the cert and accept the clause because it doesn't want the government to exercise the option?

Have been involved with something like that before. Good that you mention it as a possibility!

2 FAR, what is your contract for?  Is it for commercial items?  If so, is FAR 52.212-5 in the contract?  What version?

@Retreadfed Retread, I don't think it matters, because FAR 4.2105(b) says:

Quote

(b) The contracting officer shall insert the clause at 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, in all solicitations and contracts.

It does not exclude contracts for commercial items. And contracts for commercial items are not among the exceptions in FAR 4.2102(b).

@Retreadfed See 85 Fed. Reg. 42665, July 14, 2020, Interim Rule, Federal Acquisition Regulation: Prohibition on Contracting With Entities Using Certain Telecommunications and Video Surveillance Services or Equipment, at 42673:

Quote

The FAR Council has determined that it is in the best interest of the Government to apply the rule to contracts at or below the SAT and for the acquisition of commercial items. The Administrator for Federal Procurement Policy has determined that it is in the best interest of the Government to apply this rule to contracts for the acquisition of COTS items.

On 2/27/2021 at 4:02 PM, 2FARGone said:

The agency needs the products/services offered by this sole source contractor and cannot afford a lapse in service; the upcoming option exercise is necessary.

I just have to say as this thread continues to unwind...........really!   And my really is based on my experiences as a CO and full acknowledgement of FAR 6.302!

@C Culham 

C Culham said:

I just have to say as this thread continues to unwind...........really!   And my really is based on my experiences as a CO and full acknowledgement of FAR 6.302!

I apologize for being thick about this, but what are you saying?

Vern Edwards said:

Retread, I don't think it matters,

Vern, it may matter in the context of 2FARgone's question.  One of his/her concern's is the contractor's refusal to agree to accept 52.204-25 in the contract.  If the contract is for commercial items, the contract should contain FAR 52.212-5.  The Aug 2019 version of that clause contains the Aug 2019 version of 52.204-25.  If 52.212-5 is in the contract and included 52.204-25, there would be no reason to include 52.204-25 as a separate clause.  On the other hand, if the contract is not for commercial items, but was awarded prior to 52.204-25 becoming effective, we have the situation where the government is trying to add the clause to a contract already in existence.  This implicates FAR 1.108(d).

We don't know what the contract is for so we don't know if the prohibitions in 4.2102 apply to this particular contract.

As for 52.204-24 and -26, those are solicitation provisions.  I don't see where they come into play in regard to the exercise of an option.

In short, there are several relevant questions that we don't know the answer to.

Retread,

So if the contract is for commercial items the clause may already be in the contract. Okay, got it. And if not, then the clause must be added. Right?

Then you said: 

Retreadfed said:

On the other hand, if the contract is not for commercial items, but was awarded prior to 52.204-25 becoming effective, we have the situation where the government is trying to add the clause to a contract already in existence.  This implicates FAR 1.108(d).

I don't understand what you mean. What is the implication?

Retreadfed said:

...On the other hand, if the contract is not for commercial items, but was awarded prior to 52.204-25 becoming effective, we have the situation where the government is trying to add the clause to a contract already in existence.  This implicates FAR 1.108(d).

We don't know what the contract is for so we don't know if the prohibitions in 4.2102 apply to this particular contract.

As for 52.204-24 and -26, those are solicitation provisions.  I don't see where they come into play in regard to the exercise of an option.

In short, there are several relevant questions that we don't know the answer to.

Retreadfed, the original post regards an option. The statutory prohibitions implemented in 4.2102(a) apply to awarding extensions or options for additional services/supplies and/or time. If a contractor won’t agree to those terms and no exception applies, I read it as-  the government can’t extend the contract or order additional services/supplies.

As for 1.108(d), perhaps you overlooked “Unless otherwise specified-” :

      “ (d)  Application of FAR changes to solicitations and contracts. Unless otherwise specified-“

Vern Edwards said:

I apologize for being thick about this, but what are you saying?

Most everyone is tied up with regard to FAR Part 4.   What about FAR Part 6, most specifically 6.302-1 authority requires a contractor to be responsible.  What is the authority under which the sole source was justified?   I would even offer that the remaining authorities when read in concert with the FAR at Part 9 require a contractor to be responsible.    

My post was a apparent failed attempt ( thicker than you) to consider the contractors refusal with other parts of the FAR.   In my view "responsibility" could be questioned even though I have not researched the matter beyond  my thoughts.   I even wonder if the refusal could be considered a matter of responsiveness?

The OP asked if any of us has faced a situation similar to the one that he's facing. The closest that I've come is a situation in which a sole source refused to provide certified cost or pricing data. In that case, we got a a waiver.

Anybody else?

Vern Edwards said:

Anybody else?

Yes and no.  Yes in the 8(a) world where I spent 15 years.  Never sought a waiver but I hope all will understand why.   No, to my recollection, in the other 25 years of my career.

Vern Edwards said:

Anybody else?

My agency had a few similar experiences.  The facts of your action and your agency's position may dictate additional actions that you may need to take.

In our case, each of our experiences with contractor refusals concerned actions that were outside of the U.S., where the vendor is the telecommunications monopoly provider and directly owned/controlled by a foreign government.  In those cases, through the interventions of multiple people, we were finally able to obtain vendor representations in response to 52.204-24(d)(1) and (2), as well as sub-para. (e) supplemental disclosures sufficient to enable our requiring activities to conduct the analyses necessary to support Determinations to apply FAR 4.2102 exceptions (different from Waivers).

A vendor's reluctance to disclose information under the Section 889 related FAR provisions/clauses could be cultural barrier, if dealing with a foreign vendor.  Unfortunately, neither Section 889 nor its implementation in the FAR cares; and you cannot assume the vendor's response.  The fact is, you need to obtain their representation (whether affirmative or negative) to both what they are provided 889(a)(1)(A) and what they are using 889(a)(1)(B) or you cannot move forward with determining whether an affirmative response (will provide/does use) will impact the ability to award.  

Additionally, you need to check your agency's guidance on 889.  At DoD, there are a few DPC Memoranda relative to 889 (see e.g., DPC Memoranda from 13 Aug 2019 & 23 Jul 2020).  Additionally, your OGC or HCA office should be able to advise you if there are any current and applicable Director of National Intelligence Section 889 Memoranda relative to your action (e.g., class-type waivers).

@MBrown Now THAT was a useful post! 👏

On 2/28/2021 at 1:55 PM, Retreadfed said:

I am confused by this statement.  The date of 52.204-25 is Oct 2020.  I have not checked to see if there was an earlier version, but if there was not, was your contract issued before the clause became effective?  If so, are you now trying to add the clause to the contract and the contractor is balking?

There have been multiple versions of the section 889-related provisions/clauses since August 2019, when Section 889(a)(1)(A) (prohibition on acquiring covered equipment) went active.  The current versions of 52.204-24 (OCT 2020), 52.204-25 (AUG 2020), and 52.204-26 (OCT 2020), are merely the latest.  Depending on the Agency, incorporation of the current versions into existing contracts (e.g., prior to an option exercise) could be mandatory.  At DoD, the 23 Jul 2020 DPC Memorandum, Implementation of the Section 889(a)(1)(B) Prohibition on Contracting with Entities Using Certain Telecommunications and Video Surveillance Services or Equipment, specifically requires the modification of existing contracts to include these provisions/clauses for purposes of covering down on Section 889(a)(1)(B) (prohibition on contractor use of covered equipment) that went active in Aug 2020.

Vern Edwards said:

I don't understand what you mean. What is the implication?

FAR 1.108(d) says in part "Contracting officers may, at their discretion, include the changes in any existing contract with appropriate consideration."  If the contract was awarded before 52.204-25 became effective and the agency wants to add the clause now, it seems to me that the contractor may be entitled to receive "appropriate consideration."

@Retreadfed I don't think so. FAR says to include the clause in "all" contracts. I think that means what it says, regardless of the date of award.

I'm open to being wrong about that, but in light of statute and regulation I need some authoritative reference. As has already been pointed out, FAR 1.108(d) says, "Unless otherwise specified..."

joel hoffman said:

Retreadfed, the original post regards an option. The statutory prohibitions implemented in 4.2102(a) apply to awarding extensions or options for additional services/supplies and/or time. If a contractor won’t agree to those terms and no exception applies, I read it as-  the government can’t extend the contract or order additional services/supplies.

As for 1.108(d), perhaps you overlooked “Unless otherwise specified-” :

      “ (d)  Application of FAR changes to solicitations and contracts. Unless otherwise specified-“

Joel, the original post concerned the contractor's refusal to provide certain representations and to accept a clause being added to its contract.  These are different issues from whether the government can exercise the option.  To me, the government cannot exercise the option if the conditions in 4.2102 are present without a waiver regardless of whether the contractor makes the representations in 52.204-24 and -26, or if 52.204-25 is in the contract.

What point are you trying to make concerning "Unless otherwise specified"?

Retreadfed said:

it seems to me that the contractor may be entitled to receive "appropriate consideration."

They certainly could make such a request.  They could also argue that adding the clause creates some type of adhesion scenario.  I'll leave that up to the lawyers to decide.  At my agency, the guidance we received was clear.  Existing contracts that did not have 52.204-25 in them were to be modified to include the clause, and the representations for 52.204-24(d)(1) & (2) were to be obtained, or no options could be exercised (i.e., relationship ends without the clause), regardless of whether the contractor was the only source.

Here is the text from a DPC memo (emphasis added)...

Quote

Contracting officers shall, in accordance with FAR 1.108(d), modify—

• Existing indefinite delivery contracts to include the FAR clause for orders issued on or after August 13, 2020, prior to placing any such orders; and
• Existing contracts, task orders, and delivery orders to include the FAR clause if executing a modification to extend the period of performance, including exercising an option, on or after August 13, 2020.

Retreadfed,

Note that the DPC memo makes specific reference to FAR 1.108(d).  I'm not seeing a problem.

Vern Edwards said:

As has already been pointed out, FAR 1.108(d) says, "Unless otherwise specified..."

"Unless otherwise specified-     

           (3) Contracting officers may, at their discretion, include the changes in any existing contract with appropriate consideration."  What does unless otherwise specified apply to here?  In the context of 52.204-25 does it mean that contracting officers do not have discretion to add the clause but they must add it?  If that is what it means, does it follow that the clause must be added without consideration?  Nothing in the clause prescription at 4.2105 indicates that consideration is not required if the clause is added to a contract that was awarded before the clause became effective.  Therefore, I do not know of anything that specifies that consideration would not be required if the clause is added to a contract post award.

ji20874 said:

Note that the DPC memo makes specific reference to FAR 1.108(d).  I'm not seeing a problem.

We don't know if 2FARgone works for DoD so that this memo would apply in his/her case.  (S)he made an initial post then seems to have disappeared which is too bad because there are a lot of things we do not know about his/her situation.

Retreadfed said:

"Unless otherwise specified-     

           (3) Contracting officers may, at their discretion, include the changes in any existing contract with appropriate consideration."  What does unless otherwise specified apply to here?  In the context of 52.204-25 does it mean that contracting officers do not have discretion to add the clause but they must add it?  If that is what it means, does it follow that the clause must be added without consideration?  Nothing in the clause prescription at 4.2105 indicates that consideration is not required if the clause is added to a contract that was awarded before the clause became effective.  Therefore, I do not know of anything that specifies that consideration would not be required if the clause is added to a contract post award.

Absent a waiver, they don’t have the discretion to not include it. That was my point. There may be grounds for a waiver. 

I don’t know what would constitute reasonable consideration. Certainly, if the contractor’s cost would increase in order to comply, then that should be “taken into consideration”. If the parties can’t agree on “consideration” or other impacts, then it may not be in one or both of their interests to continue the contractual relationship.

Let's sort out the issue of consideration. If the parties to an executory contract are going to modify it in a way that is not already provided for by a contract clause, such as the Changes clause, then consideration is required by the common law of contracts. See Keeter Trading Co., Inc. v. U.S., 85 Fed. Cl. 613 (2009):

Quote

There must be some form of quid pro quo or, in government procurement parlance, there must be consideration. Numerous decisions of this court's predecessor, the United States Court of Claims, have echoed the above principle—that a contract modification must be supported by consideration. A lack of consideration will render the contract modification void, or without force or effect. See Vulcanite Portland Cement Co. v. United States, 74 Ct.Cl. 692, 705 (1931) (“It is equally well settled that where the provisions of a contract are changed by a subsequent agreement between the same parties such agreement has no force and effect unless there is*630 some consideration moving to the party adversely affected by such changes.”). The performance of a pre-existing legal duty is not consideration, American Red Ball Int'l, Inc. v. United States, 79 Fed.Cl. 474, 478 (2007) (citing Allen v. United States, 100 F.3d 133, 134 (Fed.Cir.1996)) (other citation omitted), and in the absence of express authority to do so, a government official may not pay gratuities for the performance of contractual duties which the contractor is obligated to perform. See Burke & James v. United States,63 Ct.Cl. 36, 57 (1927).

The parties would have to agree on what would constitute adequate consideration.

Retreadfed said:

"Unless otherwise specified-     

           (3) Contracting officers may, at their discretion, include the changes in any existing contract with appropriate consideration."  What does unless otherwise specified apply to here?  In the context of 52.204-25 does it mean that contracting officers do not have discretion to add the clause but they must add it?  If that is what it means, does it follow that the clause must be added without consideration?  Nothing in the clause prescription at 4.2105 indicates that consideration is not required if the clause is added to a contract that was awarded before the clause became effective.  Therefore, I do not know of anything that specifies that consideration would not be required if the clause is added to a contract post award.

The FAR does not impose a duty on the part of contractors to accept the clause. It imposes a duty on contracting officers to either (1) persuade contractors to accept the clause or (2) refrain from exercising an option to extend.

The common law of contracts imposes the requirement for consideration.

Vern Edwards said:

The FAR does not impose a duty on the part of contractors to accept the clause. It imposes a duty on contracting officers to either (1) persuade contractors to accept the clause or (2) refrain from exercising an option to extend.

The common law of contracts imposes the requirement for consideration.

Good answer!

To add to what @Retreadfed said, Sec. 889 requirement for incorporation of terms into an existing fully definitized extension/renewal option that pre-date 889, may be considered interference with the contract. See, https://nationalaglawcenter.org/wp-content/uploads/assets/crs/R42635.pdf.

Neil Roberts said:

To add to what @Retreadfed said, Sec. 889 requirement for incorporation of terms into an existing fully definitized extension/renewal option that pre-date 889, may be considered interference with the contract. See, https://nationalaglawcenter.org/wp-content/uploads/assets/crs/R42635.pdf.

Malarkey.

The CRS report is irrelevant. There is no "taking" issue. It is well established that a contractor has no right to the exercise of an option. See, e.g., Puget Sound Environmental Corp., ASBCA 58828, 16-1 BCA ¶ 56465:

Quote

In an option contract, the government has bargained for the right to exercise or not exercise the option at its discretion and a contractor cannot compel the government to exercise the option. Government Systems Advisors, Inc. v. United States, 847 F.2d 811,813 (Fed. Cir. 1988). The Board has recognized a limited exception to this rule if the contractor can prove bad faith, an abuse of discretion or that the contracting officer acted in an arbitrary or capricious manner. IMS Engineers-Architects, P.C, ASBCANo. 53471, 06-1 BCA ¶ 33,231 at 164,674, recon. denied, 07-1 BCA ¶ 33,467, aff'd, IMS Engineers-Architects, P.C. v. Geren, 274 F. App'x 898 (Fed. Cir. 2008). Similarly, the government has the right to terminate at will under the termination for convenience clause and, absent bad faith or a clear abuse of discretion, the contracting officer's decision is final. John Reiner & Co. v. United States, 325 F.2d 438, 442 (Ct. C1. 1963).

Does anyone think that Congress acted in bad faith when it enacted the law or that the FAR Councils act in bad faith when they promulgated the implementing regulations?

This is government contracting. Deal with it.

Vern Edwards said:

Malarkey.

The CRS report is irrelevant. There is no "taking" issue. It is well established that a contractor has no right to the exercise of an option. See, e.g., Puget Sound Environmental Corp., ASBCA 58828, 16-1 BCA ¶ 56465:

Does anyone think that Congress acted in bad faith when it enacted the law or that the FAR Councils act in bad faith when they promulgated the implementing regulations?

This is government contracting. Deal with it.

My thoughts and contentions are the FAR Council was over reaching when it inserted the word "option" as an example of an extension or renewal. I did not find that word in Section 889. In my mind, I think of an extension or renewal meant by the legislation as a negotiated bilateral agreement between the Government and Contractor where there was no option already included in the contract. And, I think that Congress should have or did know that including options would raise the potential of contract interference. 

I do not agree with your assertion that the content of the Legislative Research Service reference site is "Malarky" and/or "irrelevant" if that is what you were saying. Maybe you already knew all about this topic.

Vern Edwards said:

Malarkey.

The CRS report is irrelevant. There is no "taking" issue. It is well established that a contractor has no right to the exercise of an option. See, e.g., Puget Sound Environmental Corp., ASBCA 58828, 16-1 BCA ¶ 56465:

Does anyone think that Congress acted in bad faith when it enacted the law or that the FAR Councils act in bad faith when they promulgated the implementing regulations?

This is government contracting. Deal with it.

Agreed. This is implementation of Public Policy as expressed in Statute in what is (was?) the “Neo Cold War Era” (my term).

Temporarily deleted

Neil Roberts said:

My thoughts and contentions are the FAR Council was over reaching when it inserted the word "option" as an example of an extension or renewal. I did not find that word in Section 889. In my mind, I think of an extension or renewal meant by the legislation as a negotiated bilateral agreement between the Government and Contractor where there was no option already included in the contract. And, I think that Congress should have or did know that including options would raise the potential of contract interference. 

I do not agree with your assertion that the content of the Legislative Research Service reference site is "Malarky" and/or "irrelevant" if that is what you were saying. Maybe you already knew all about this topic.

Malarky continued. A prohibition is a PROHIBITION. See for instance :

https://www.gsa.gov/cdnstatic/Section 889 Provisions and Clause Implementation Tables (Updated).pdf

Pay particular attention to existing contracts . 

Exercising an option is a unilateral right of the government. If the law says don’t procure certain prohibited services or supplies and don’t procure them from XXX absent a waiver, then the government can’t procure them from existing  contract vehicles when it is time to extend the ordering periods. The contractor can’t require the government to award it the option.

@Neil Roberts 

Neil Roberts said:

I do not agree with your assertion that the content of the Legislative Research Service reference site is "Malarky" and/or "irrelevant" if that is what you were saying. Maybe you already knew all about this topic.

I didn't mean that the CRS report is malarkey. I meant that the following assertion is malarkey:

Neil Roberts said:

Sec. 889 requirement for incorporation of terms into an existing fully definitized extension/renewal option that pre-date 889, may be considered interference with the contract.

I sincerely apologize for "malarkey." I should just have said that I disagree. Here's why:

The law conditions the creation of new contractual relations and the voluntary extension of current contractual relations upon assent to certain terms. The relevant passage says: 

Quote

(a) PROHIBITION ON USE OR PROCUREMENT.—(1) The head of an executive agency may not—

(A) procure or obtain or extend or renew a contract to procure or obtain 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; or

(B) enter into a contract (or extend or renew 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 any system.

FAR 4.2104 states: 

Quote

(c) Contracting Officers. Unless an exception at paragraph (b) of this section applies or the covered telecommunications equipment or service is covered by a waiver described in 4.2104, Contracting Officers shall not—

           (1) Procure or obtain, or extend or renew a contract (e.g., exercise an option) to procure or obtain, 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; or

           (2) Enter into a contract, or extend or renew 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 any system.

According to the FAR councils, the law and the regulation are designed to protect citizen privacy and national security.

What I understand the statute and regulation to do is prohibit new and extended voluntary relations. New contracts and the exercise of options are voluntary undertakings. With respect to options, any party to a contract is free to seek changes to the terms of an option and to decline to exercise the option if the other party will not agree.

A contractor has no contractual right to expect a contract extension that is not contractually required, and neither the statute nor the regulation prohibits a CO from agreeing to an extension to which a contractor is entitled, such as an equitable time adjustment after a contract change or a time extension as compensation for a government breach, such as late GFP. 

Neither the statute nor the implementing regulation requires existing contractors to accept the new clause. They don't require the termination of a contract in case of refusal. Acceptance is entirely voluntary. Moreover, the statute provides for waivers.

I cannot see how the law or the regulation interferes with existing contractual rights. I don't see any breach of contract. I don't see any bad faith or unfair dealing. Do you, Neil?

But you might change my mind by making an argument instead of just dropping a 20-page maybe-this-maybe-that report in here and alluding to a vague possibility without explanation. If you think the CRS report points the way to particular possibilities in this matter with respect to contract interference, why don't you tell us about it? I'm eager to read what you have to say.

Vern Edwards said:

Neither the statute nor the implementing regulation requires existing contractors to accept the new clause. They don't require the termination of a contract in case of refusal. Acceptance is entirely voluntary. Moreover, the statute provides for waivers. I cannot see how the law or the regulation interferes with existing contractual rights. I don't see any breach of contract. I don't see any bad faith or unfair dealing. Do you?

Vern, Not sure what you mean regarding exercising an option on an existing contract.   

4.2102- Prohibitions

“(a)...  (2) On or after August 13, 2020, agencies are prohibited from entering into a contract, or 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 any system, unless an exception at paragraph (b) of this section applies or the covered telecommunications equipment or services are covered by a waiver described in 4.2104. This prohibition applies to the use of covered telecommunications equipment or services, regardless of whether that use is in performance of work under a Federal contract..”

“(c)...Contracting Officers shall not—

 (1) Procure or obtain, or extend or renew a contract (e.g., exercise an option) to procure or obtain, 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; or

            (2) Enter into a contract, or extend or renew 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 any system.”

4.2103 Procedures requires the contractor to certify 

“4.2105   Solicitation provisions and contract clause.

(a) The contracting officer shall insert the provision at 52.204-24, Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment—

...(2) Under indefinite delivery contracts, in all notices of intent to place an order, or solicitations for an order (e.g.,subpart 8.4 and 16.505).

(b) The contracting officer shall insert the clause at 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, in all  [...] contracts.”

I found the following July 13, 2020 Covington Alert:  

https://www.cov.com/en/news-and-insights/insights/2020/07/us-government-releases-awaited-section-889-rule-on-prohibition-on-use-of-covered-telecommunications-equipment-by-federal-contractors

See specifically: 

“II. Compliance Requirements
a. Application of the Rule
Contracting officers must include the updated clause when exercising options under any existing U.S. Government contract. Such an addition could present legal issues because the prohibition would not have existed in the contract at the time of contract execution, and the contractor may not have factored the impact of compliance into their prices for performance of those option periods. Absent a clause in the contract allowing the Government or prime contractor to unilaterally add new terms and conditions, such an addition to an existing contract/subcontract would ordinarily require a bilateral modification and consideration. In fact, the interim rule recognizes the need for consideration when it noted that modifications to existing U.S. Government IDIQ contracts must be done in accordance with FAR 1.108(d).
Nonetheless, the prohibition is a statutory mandate, so Government contractors may find themselves at an impasse if the parties cannot agree to the addition of the clause. Similarly, for General Service Administration and Veterans Affairs schedules and similar contracts, a failure to agree to the new clause could lead to the Government dropping a company’s products from the schedules with limited notice. Such an impasse could potentially be resolved by a waiver for additional time to comply, which we discuss in more detail later in this alert...”

Sorry, but I can’t use a boxed quote on my iPhone. Must use quotations. Not to say that it can’t be done- I just don’t know how. 

If the ID/IQ contractor won’t agree to the bilateral addition of the clause and the provision for an option to extend the contract, the KO can’t issue it.

Vern Edwards said:

With respect to options, any party to a contract is free to seek changes to the terms of an option and to decline to exercise the option if the other party will not agree.

In following this thread I wonder about this statement.  I agree any party (government or the contractor) can seek changes to the terms of an option but I do not think the other party (contractor) can decline  to exercise of an option if the other party (government) will not agree.   Example - Contractor seeks a change to the option, the government does not agree, yet the contractor must accept the option without the change must they not?

@C Culham 

C Culham said:

I agree any party (government or the contractor) can seek changes to the terms of an option but I do not think the other party (contractor) can decline  to exercise of an option if the other party (government) will not agree.   Example - Contractor seeks a change to the option, the government does not agree, yet the contractor must accept the option without the change must they not?

Yes. When I used the phrase "exercise the option" I was referring to the action of the party who has the right of exercise. In a government contract, that's usually the government, not the contractor. So if the government asks for a change to the terms of the contract as a condition of exercising its option, and if the contractor refuses, the government can still exercise the option as it is, and the contractor cannot decline.

@joel hoffman 

joel hoffman said:

Vern, Not sure what you mean regarding exercising an option on an existing contract.

Joel, I'm not sure what you want me to clarify. Please explain.

If you're talking about IDIQ contracts and the issuance of orders, once the government has bought the minimum the issuance of any further orders is voluntary. Orders are exercises of options to buy additional quantities. There are many reasons why the government might choose not to issue further orders to an IDIQ contractor: no requirement, poor past performance, suspension or debarment, some other disqualification, or some other reason. The contractor has no right to further orders.

To me the rules in FAR Subpart 4.21 seem very straightforward. I can understand why some contractors would not like them, but the government is not your ordinary customer and government contractors must be prepared for such things. None of this seems as shocking as an unexpected termination for convenience, but they are not at all uncommon. Nor is this the first time COs have been instructed to negotiate new clauses into existing contracts.

Why the strong reactions from some people? The issues seem to be mere practical matters. I stand by my earlier response to the OP:

1. change the contractor's mind, or

2. change your mind and seek a waiver, or

3. say goodbye to the contractor when the current contract ends.

Vern Edwards said:

@C Culham 

Yes. When I used the phrase "exercise the option" I was referring to the action of the party who has the right of exercise. In a government contract, that's usually the government, not the contractor. So if the government asks for a change to the terms of the contract as a condition of exercising its option, and if the contractor refuses, the government can still exercise the option as it is, and the contractor cannot decline.

In this case though, the government cannot exercise the option if the contractor won’t agree to the addition of the clause and the prescription that has to be included in any request for a task order proposal.

Vern Edwards said:

@joel hoffman 

Joel, I'm not sure what you want me to clarify. Please explain.

If you're talking about IDIQ contracts and the issuance of orders, once the government has bought the minimum the issuance of any further orders is voluntary. Orders are exercises of options to buy additional quantities. There are many reasons why the government might choose not to issue further orders to an IDIQ contractor: no requirement, poor past performance, suspension or debarment, some other disqualification, or some other reason. The contractor has no right to further orders.

To me the rules in FAR Subpart 4.21 seem very straightforward. I can understand why some contractors would not like them, but the government is not your ordinary customer and government contractors must be prepared for such things. None of this seems as shocking as an unexpected termination for convenience, but they are not at all uncommon. Nor is this the first time COs have been instructed to negotiate new clauses into existing contracts.

Why the strong reactions from some people? The issues seem to be mere practical matters. I stand by my earlier response to the OP:

1. change the contractor's mind, or

2. change your mind and seek a waiver, or

3. say goodbye to the contractor when the current contract ends.

Ok, I agree

joel hoffman said:

In this case though, the government cannot exercise the option if the contractor won’t agree to the addition of the clause

Correct, pursuant to FAR 4.2102(c).

Vern Edwards said:

@C Culham 

Yes. When I used the phrase "exercise the option" I was referring to the action of the party who has the right of exercise. In a government contract, that's usually the government, not the contractor. So if the government asks for a change to the terms of the contract as a condition of exercising its option, and if the contractor refuses, the government can still exercise the option as it is, and the contractor cannot decline.

Thanks for the clarification.

C Culham said:

Thanks for the clarification.

Except here, the government can’t exercise the option as it is.

On 2/27/2021 at 6:02 PM, 2FARGone said:

To begin, I have already engaged my agency’s OGC and they have no opinion on the matter at this time; we are exploring what other agencies are doing in possible similar situations.

2FARGone, can you say what your OGC are saying now?

Of course, we don’t know what your (?) agency’s procedures may be either.

You don’t have to answer if it is necessary to remain anonymous. Hopefully there is some food for thought here.

joel hoffman said:

You don’t have to answer if it is necessary to remain anonymous.

2FARGone doesn't have to answer in any case. 😆

Vern Edwards said:

@joel hoffman 

Why the strong reactions from some people? The issues seem to be mere practical matters. I stand by my earlier response to the OP:

1. change the contractor's mind, or

2. change your mind and seek a waiver, or

3. say goodbye to the contractor when the current contract ends.

I think your earlier response above is sound. Why my possible "strong reaction"- What has been missing to me, and appears to be missing in the original post, is that adding the 889 clause(s) to change the contractor's mind in this original posting of an option situation, should have included a written condition to negotiate and definitize consideration (i.e, an equitable adjustment) for impact of adding the clause(s). You, Joel and others have talked about consideration. I referred to the Congressional Research Service piece to emphasize and educate some to understand when there may or may not be contract interference when new laws are implemented in pre-dated contracts. Agency guidance regarding 889 implementation may not have been clear about this.

Peace.

Vern Edwards said:

2FARGone doesn't have to answer in any case. 😆

True enough.

I'm intentionally inserting a statement that does not directly address any questions or answers.

However, it is in keeping with one of the few logical statements of the FAR.

FAR 1.102(d)"...In exercising initiative, Government members of the Acquisition Team may assume if a specific strategy, practice, policy or procedure is in the best interests of the Government and is not addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, that the strategy, practice, policy or procedure is a permissible exercise of authority."

Every last CO should have immediately implemented actual sound business judgment in having the appropriate FAR Clause 52.204-24, 252.204-7016, and 252.204-7017 checked off by the quoter/offeror/vendor/contractor.  Then doing nothing more.

What a ridiculous burden the Government puts on small businesses.  It is not in keeping with sound free market business principles nor does it actually help small businesses in any way.  To audit your supply chains for yet another Government requirement makes no sense.  Does anyone think that if you ask your suppliers from the Asian region, "Hey does your widget violate Section 889?" that you will get an actionable/meaningful response?

We operate in good faith or we do not.  No clause on CTIP, 889, etc. will ever change that.

This is exactly the kind of thing that leads to a $2M dollar bathroom, https://www.hsgac.senate.gov/subcommittees/fso/media/flushing-away-tax-dollars!

For DoD, upload these two memorandums to your file if it's not an IT purchase.

http://thecgp.org/images/08-12-20_Memo_DNI-Response-to-DoD-Waiver-Request_20-00733_U-FOUO_SIGNED-....pdf; https://thecgp.org/images/Memo-20-00823_DoD-Request-for-Section-889-Waiver-2.pdf

Deleted due to duplicate posting somehow.