Efficient June 2, 2023, all federal contracts and solicitations are required to incorporate a brand new Federal Acquisition Regulation (FAR) clause: FAR 52.204-27, Prohibition on a ByteDance Coated Software. This clause implements Part 102 of Division R of the Consolidated Appropriations Act of 2023, “No TikTok on Authorities Units Act.”
A earlier Holland & Knight alert detailed the doable interpretations of the brand new clause and compliance approaches that might reduce authorized danger for federal contractors and subcontractors. The authors really useful a broad interpretation and strategy that might reduce disputes with federal company contracting officers who interpret the clause as broadly making use of to any data know-how utilized by a contractor or its workers (together with workers’ private units) within the efficiency of a authorities contract.
Whereas that’s one strategy to compliance, it isn’t the one strategy, and the authors are cautious to keep away from suggesting that it’s legally required by FAR 52.204-27. It’s because FAR 52.204-27 has vital provisions limiting the data know-how to which it applies. The clause doesn’t prohibit the presence or use of TikTok on all data know-how utilized by a contractor or its workers in efficiency of a lined contract. As an alternative, Congress established a authorized definition of “data know-how” topic to the TikTok prohibition, which was carried into FAR 52.204-27, that limits the attain of the clause to data know-how “required” by an govt company, both expressly or to a major extent. As a result of present federal contracts usually don’t require using workers’ private units both expressly or to a major extent, such “non-obligatory” or “elective” data know-how falls exterior the scope of the clause. Thus, contractors retain discretion to undertake a compliance strategy that’s one thing lower than a blanket prohibition of TikTok on workers’ private units that they elect to make use of within the efficiency of the contractor’s federal contracts.
As defined beneath, FAR 52.204-27 doesn’t apply to all “data know-how” {that a} contractor may use in performing its authorities contracts. As an alternative, FAR 52.204-27 (monitoring the statutory language of Part 102) limits the scope of the “data know-how” lined by the prohibition to tools utilized by a contractor underneath an govt company that “requires the use” of the that tools, both particularly or “to a major extent within the efficiency of a service or the furnishing of a mission.” Congress thus positioned the burden on federal companies to specify data know-how necessities of their statements of labor or efficiency work statements, and the plain language of the prohibition doesn’t apply to any tools utilized by a contractor that’s discretionary moderately than required underneath the contract.
For a lot of federal contractors, particularly sellers of business merchandise or business providers, their contracts usually don’t require using particular data know-how tools, both expressly or to a major extent, within the efficiency of labor. As an alternative, the present stock of federal prime contracts usually contains performance-based specs resembling efficiency work statements, and leaves the query of what data know-how tools the contractor elects to make use of (or not use) solely as much as the contractor’s sole discretion. In such circumstances, the contractor’s obligations underneath FAR 52.204-27 are restricted to data know-how tools that’s required by an govt company contract (particularly, or to a major extent). When a contract is silent on the data know-how tools the contractor should use within the furnishing of its merchandise, the prohibition of FAR 52.204-27 doesn’t apply to data know-how tools the contractor elects to make use of at its discretion to carry out the contract.
This software of the prohibition of FAR 52.204-27 is in keeping with (even mandated by) the textual content of Part 102. In Part 102, Congress outlined the “data know-how” to which the TikTok ban would apply by incorporating by reference the definition of “data know-how” in 40 U.S.C. 11101. This definition contains tools or techniques “utilized by a contractor underneath a contract” that additionally meets the next requirement: the contract “requires the use– (i) of that tools; or (ii) of that tools to a major extent within the efficiency of a service or the furnishing of a product.” This definition of “data know-how” expressly excludes tools “acquired by a federal contractor incidental to a federal contract.” It’s a plain language corollary to the statutory textual content that “data know-how” likewise excludes tools a contractor makes use of within the efficiency of a federal contract that incorporates no said requirement for its use.
The Workplace of Administration and Finances (OMB) Memo expressly adopted the definition of “data know-how” at 40 U.S.C. 11101, because it was required to do by Part 102. Likewise, the FAR Council integrated this definition word-for-word within the textual content of the brand new clause at FAR 52.204-27.
Whereas the restricted interpretation above is objectively in keeping with the textual content of the Interim Rule and 40 U.S.C. 11101 by the use of Part 102, the FAR Council included language in the Federal Register Nfather asserting FAR 52.204-27 that might create fodder for an erroneously expansive view of the clause. There, the FAR Council’s evaluation mentioned:
This prohibition applies to units no matter whether or not the gadget is owned by the Authorities, the contractor, or the contractor’s workers (e.g., employee-owned units which can be used as a part of an employer convey your personal gadget (BYOD) program). A personally-owned cellular phone that’s not used within the efficiency of the contract isn’t topic to the prohibition.
This assertion raises questions on how particular person contracting officers may erroneously apply the clause for 2 causes:
- First, the FAR Council units a line for exclusion at “a personally-owned cellular phone that’s not used within the efficiency of the contract.“ A contracting officer who didn’t first apply the definition of “data know-how” may erroneously assert {that a} personally owned cellular phone that’s used within the efficiency of a contract, to any extent, could be topic to the prohibition underneath FAR 52.204-27.
- Second, the FAR Council’s reference to “worker convey your personal gadget” (BYOD) packages may create confusion that the clause reaches private units with out consideration of the definition of “data know-how.”
Nevertheless, such an expansive interpretation isn’t what Congress supposed or explicitly directed. The FAR Council has no authorized authority to increase the TikTok ban past the statutory textual content of Part 102, which expressly limits its software to “data know-how” as an outlined time period. For a private gadget or personally owned cellular phone to fall throughout the scope of the clause, it should meet the definition of “data know-how.” The definition of “data know-how” fairly clearly limits itself to tools required by an govt company contract. Thus, whereas Contractors have the choice of merely banning the presence of TikTok on all comply data know-how (together with workers’ private units) utilized in efficiency of a federal contract, such a coverage isn’t required by the plain language of FAR 52.204-27. As an alternative, much less intrusive or disruptive approaches exist.
One path is to concern steerage to related workers to evaluate present and new contracts to evaluate which data know-how is required both expressly or to a major extent. As famous above, the textual content of FAR 52.204-27 – particularly the authorized definition of “data know-how” – doesn’t prolong to any data know-how a contractor or worker might use within the efficiency of federal contracts. Thus, a contractor may concern steerage to related workers making them conscious of the brand new clause at FAR 52.204-27, stating the corporate’s coverage to conform, asking them to evaluate new and present contracts that embrace FAR 52.204-27 to search for any particular data know-how whose use is required expressly or to a major extent. If any contracts expressly require such data know-how, this may be reported to a centralized compliance authority (the corporate’s chief compliance officer, for instance) for coordination with the contractor’s data know-how perform to make sure any such required tools complies with the ban.
The “related workers” who ought to obtain such steerage would most likely embrace contract administration personnel chargeable for evaluate solicitations, requests for proposal, requests for citation and newly awarded contracts and orders underneath contracts that embrace FAR 52.204-27. It could additionally make sense to incorporate administration and related program personnel chargeable for efficiency of such contracts and orders, regardless that they might not be on the entrance line of reviewing contractual language.
The steerage to related workers to evaluate contracts and orders for data know-how tools necessities ought to intently monitor the definition of “data know-how” in FAR 52.204-27. Workers ought to be requested to rigorously evaluate contracts and orders that embrace FAR 52.204-27 to search for data know-how tools necessities. They need to be instructed to search for provisions of the contract that require using particular data know-how tools, both particularly or to a major extent within the efficiency of a service or the furnishing of a services or products.
As well as, workers ought to be reminded that data know-how tools that is perhaps expressly referred to as for in a contract features a vary of know-how, together with tools or interconnected system or subsystem of apparatus, used within the automated acquisition, storage, evaluation, analysis, manipulation, administration, motion, management, show, switching, interchange, transmission or reception of information or data by the manager company. This contains computer systems, ancillary tools (together with imaging peripherals, enter, output and storage units essential for safety and surveillance), peripheral tools designed to be managed by the central processing unit of a pc, software program, firmware and comparable procedures, providers (together with help providers) and associated sources.
The hot button is for workers to search for specific necessities within the contract or order – almost definitely (however not essentially completely) within the textual content of a press release of labor, product description, specification, efficiency work assertion or different “necessities” part of the contract or order. When an worker identifies such required data know-how tools, it ought to report the findings to the corporate’s present compliance authority for coordinated response to make sure the corporate prohibits the presence or use of lined functions on such tools.
The understanding and software of FAR 52.204-27 are nonetheless in its early phases. The foregoing weblog publish is predicated on presently accessible authorized sources and authorities steerage. The Interim Rule is topic to public remark and could also be clarified or modified within the issuance of a future Last Rule. This will lead to modifications to understanding the prohibition and its scope. As the sooner alert famous, additionally it is doable that some contracting professionals throughout the authorities have taken a extra expansive view of this requirement. When adopting a extra tailor-made strategy according to the authorized definition of “data know-how,” contractors ought to be ready to have interaction with and educate the federal government buyer relating to the restricted scope and attain of the clause to data know-how utilized by contractors and their workers.
