Supply Chain

New sourcing rules for China IT remain a work in progress

china flag

New rules intended to inhibit acquisitions from companies with ties to the Chinese government are giving affected agenices some trouble. (Stock image)

A cybersecurity provision tucked away in the continuing resolution that currently funds the government requires four agencies to take special measures before acquiring technology gear from companies with ties to the Chinese government. Two months after the continuing resolution was signed into law, however, it remains hard to measure the impact of the new rules.

Taken at face value, the appropriation for the Commerce and Justice departments, NASA and the National Science Foundation puts sharp restrictions on the ability of those agencies to use fiscal 2013 funding to acquire IT systems with Chinese components in their supply chain. Agency heads must assess the risk of such a system in consultation with the FBI or other federal agencies with cybersecurity expertise, and report acquisitions of such systems to the appropriation committees in Congress.

"All of the agencies should be in compliance," said Rep. Frank Wolf (R-Va.), chairman of the Appropriations subcommittee that funds the affected agencies, the architect of the new rules. "It's a law. There will be a price to pay in the budget if they're out of compliance."

Compliance is apparently taking some time. A Commerce Department spokesperson told FCW that the agency is, "in the process of developing a new risk management process for IT procurement in response to language in the FY13 congressional appropriation." None of the other agencies subject to the new rules provided responses about how they are implementing the new law by press time.

There are anecdotal reports that funding is being held up by some agencies as a result of uncertainty surrounding the new rules. "There are lots of questions and no answers right now," said Pamela Richardson Walker, who is watching this issue for the trade association TechAmerica, which strongly opposed the sourcing restrictions in the continuing resolution. While member companies would not go on the record to discuss the issue, Walker said that many are looking to the government to provide clarity and consistency about the implementation of the rules.

Wolf's rules found their way into the continuing resolution in large part due to bipartisan outrage about alleged intellectual property theft by Chinese firms Huawei and ZTE. However, the new rules do more than just exclude a few Chinese-owned firms with strong government ties – they potentially could put restrictions on equipment from American companies that include transistors, resistors, and other components sourced from Chinese firms.

As TechAmerica's senior vice president for global public sector Trey Hodgkins told FCW in March, "You'd be hard-pressed to find a technology product that isn't touched in some way by a company with a PRC presence. Government can't afford to buy technologies with a bulletproof supply chain. The commercial business model doesn't provide for it."

The measure doesn't appear to have shown up in contract solicitations yet, according to Nathaniel Kulyk, who covers NASA and the Justice Department as a research analyst at Deltek. There is contract language related to existing law forbidding bilateral programming between NASA and the China government or Chinese-owned companies. "It will be interesting to see if, in the coming weeks and months, whether there are additional contract clauses that relate to funding and restrictions with China, and what impact that will have on procurements," Kulyk said.

One place to look for the impact of the sourcing provisions in the continuing resolution is NASA's Solutions for Enterprise-Wide Procurement (SEWP), a government-wide procurement solicitation. The fifth version – SEWP-V -- is expected to be released in late June.

Nearly every government agency uses SEWP to procure computers, servers, software, network equipment, cloud storage and other components of IT systems, and vendors who are on the vehicle have the right to compete for billions of dollars in IT contracts. If NASA's take on the restrictions in the new law puts tight supply chain rules in place, companies will be faced with a stark choice – find a way to comply or potentially miss out on one of the most lucrative IT vehicles in the federal portfolio.

About the Author

Adam Mazmanian is executive editor of FCW.

Before joining the editing team, Mazmanian was an FCW staff writer covering Congress, government-wide technology policy, health IT and the Department of Veterans Affairs. Prior to joining FCW, Mr. Mazmanian was technology correspondent for National Journal and served in a variety of editorial roles at B2B news service SmartBrief. Mazmanian started his career as an arts reporter and critic, and has contributed reviews and articles to the Washington Post, the Washington City Paper, Newsday, Architect magazine, and other publications. He was an editorial assistant and staff writer at the now-defunct New York Press and arts editor at the About.com online network in the 1990s, and was a weekly contributor of music and film reviews to the Washington Times from 2007 to 2014.

Click here for previous articles by Mazmanian. Connect with him on Twitter at @thisismaz.


The Fed 100

Read the profiles of all this year's winners.

Featured

  • Then-presidential candidate Donald Trump at a 2016 campaign event. Image: Shutterstock

    'Buy American' order puts procurement in the spotlight

    Some IT contractors are worried that the "buy American" executive order from President Trump could squeeze key innovators out of the market.

  • OMB chief Mick Mulvaney, shown here in as a member of Congress in 2013. (Photo credit Gage Skidmore/Flickr)

    White House taps old policies for new government makeover

    New guidance from OMB advises agencies to use shared services, GWACs and federal schedules for acquisition, and to leverage IT wherever possible in restructuring plans.

  • Shutterstock image (by Everett Historical): aerial of the Pentagon.

    What DOD's next CIO will have to deal with

    It could be months before the Defense Department has a new CIO, and he or she will face a host of organizational and operational challenges from Day One

  • USAF Gen. John Hyten

    General: Cyber Command needs new platform before NSA split

    U.S. Cyber Command should be elevated to a full combatant command as soon as possible, the head of Strategic Command told Congress, but it cannot be separated from the NSA until it has its own cyber platform.

  • Image from Shutterstock.

    DLA goes virtual

    The Defense Logistics Agency is in the midst of an ambitious campaign to eliminate its IT infrastructure and transition to using exclusively shared, hosted and virtual services.

  • Fed 100 logo

    The 2017 Federal 100

    The women and men who make up this year's Fed 100 are proof positive of what one person can make possibile in federal IT. Read on to learn more about each and every winner's accomplishments.

Reader comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group