Smart Bulletin No. 033

Card Management Implications and Information for Agency Consideration in Relation to the Section 889 Prohibition on Acquiring Certain Telecommunications and Video Surveillance Equipment

UPDATE:

Effective Date

August 20, 2020

Business Line(s) Affected

Purchase, Travel, Fleet, and Integrated

Introduction

This Smart Bulletin, which augments Smart Bulletin 029 effective August 13, 2019, provides guidance to agencies implementing section 889(a)(1)(B) (“Part B”) of the John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115-232), which prohibits Federal agencies from purchasing products or services from entities that use covered equipment or services as a substantial or essential component of any system, or as critical technology as part of any system, regardless of whether that usage is in performance of work under Federal contract. This prohibition became effective on August 13, 2020. This prohibition applies to all contracts, regardless of dollar amount, including micro-purchases on charge cards as well as formal contracting actions. (The full text of the related Federal Acquisition Regulation (FAR) interim rule on section 889 can be viewed at: https://www.regulations.gov/document?D=FAR-2019-0009-0003.)

The “Part A” prohibition (Sec 889(a)(1)(A)), prohibiting the purchase of equipment/services containing covered technology, went into effect on August 13, 2019, and is discussed in Smart Bulletin 029. As of the date of this Smart Bulletin, “covered equipment/services” include those provided or produced by the following entities and their subsidiaries and affiliates:

• Dahua Technology Company
• Hangzhou Digital Hikvision Technology Company
• Huawei Technologies Company
• Hytera Communications Corp
• Kaspersky Lab
• ZTE Corporation

Agencies are required to develop policies regarding their use of charge cards in the context of both Section 889 prohibitions (Parts A and B). This Smart Bulletin provides operational guidance and information on issues agencies participating in the GSA SmartPay® program may desire to consider as they develop those policies, including section 889 implications for all business lines (purchase, travel, and fleet cards).

This Smart Bulletin uses summary language to address complex issues that may develop under certain purchasing circumstances. When such circumstances exist or are anticipated to arise related to a planned purchase, cardholders and card managers are encouraged to consult with agency acquisition, information technology, and/or supply chain risk management policy officials in accordance with agency policy.

This Smart Bulletin does not address section 889-related requirements related to formal contracting procedures. Instead, it focuses on section 889 implications with regard to purchase card micro-purchases, travel, and fleet card transactions. Because integrated cards combine these account types, they are not separately addressed.

Background

GSA SmartPay charge cards are used to obtain over $30 billion in products and services in support of agency missions through approximately 100 million purchase, travel, and fleet transactions each fiscal year. Approximately 86% of these transactions are conducted online. Most of these transitions are conducted by non-procurement personnel. In FY19, purchase card transactions alone totaled $22 billion, addressing a wide range of products and services. In that same year, approximately $1.2 billion of these purchases (5.7%) occurred in electronics-related Merchant Category Codes (MCCs). This information is meant to provide insight into the relative level of risk and does not capture the full scope of electronic purchases, nor does it capture purchases from merchants whose systems may use equipment/services that are now covered equipment/services. Furthermore, a review of charge card purchase data does not indicate any direct purchases from the five specific sources listed above. FY19 travel card spend totaled approximately $9 billion through 44 million transactions with a limited number of airlines and rental car agencies. Hotel spend is much more widespread. There are more than 3 million travel accounts. Fleet card FY19 spend was approximately $2 billion through almost 31 million transactions, most of which are for fuel for government vehicles. These fueling transactions take place through a large number of independent or franchised service stations.

Action

The Office of Management and Budget (OMB) Office of Federal Procurement Policy (OFPP) requires agencies to develop their own policies addressing charge card compliance with section 889 (Parts A and B). Attachment 1 to this Smart Bulletin provides information, by card type, that agencies may want to consider as they develop their card use policies in relation to section 889. Agency cardholder or card manager questions regarding the application of section 889 to a particular purchase should be directed to appropriate agency acquisition, information technology, and/or supply chain risk management staff.