As the Senate approaches the end of its debate on the National Defense Authorization Act (NDAA) for Fiscal Year 2019, provisions of the bill regarding access to and review of information technology code deserve close attention. These sections, if enacted, would significantly impact Department of Defense contractors and also would affect matters associated with investments subject to review by U.S. national security agencies.
As drafted, the provisions could expose current and prospective contractors to intrusive scrutiny and significant risks. They lack clarity on key definitions, leaving the precise scope of those risks unclear. We summarize major issues and concerns below. We expect these provisions to receive scrutiny during the House-Senate conference on the NDAA over the summer.
Synopsis of the Proposed Legislation
Three sections of the Senate’s version of the NDAA, which passed the Senate Armed Services Committee in May, would establish new rules designed to mitigate “risks posed by providers of information technology with obligations to foreign governments.” Those risks involve the access that foreign governments may have to code in products or services that are offered to the Department of Defense. The provisions also impose new disclosure requirements on the efforts of a prospective vendor to obtain a license under the Export Administration Regulations (“EAR”) or the International Traffic in Arms Regulation (“ITAR”).
The pending legislation would require proactive disclosure of those matters, and would impose an ongoing duty to supplement those disclosures during the period of performance on the contract. The Secretary of Defense would be authorized to assess and mitigate any resulting national security risks through contractual provisions or other performance requirements.