On Sept. 19, 2018, the U.S. Department of Defense (DoD) issued a corrected Class Deviation 2018-O0020, to remove the sunset provision in DFARS 239.73, “Requirements for Information Relating to Supply Chain Risk,” that was due to expire on Sept. 30, 2018. The deviation is effective immediately.
This new deviation implements Section 881 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019. Section 881 made the requirements for supply chain risk management under DFARS 239.73 permanent by placing its authority under a statute (10 U.S.C. § 2239a). This reauthorization reflects the continual efforts by Congress and the DoD to increase oversight on contractors supply chain and use risk management as a metric for contract performance.
DFARS Subpart 239.73, along with its contract clauses DFARS 252.239-7017 and DFARS 252.239-7018, places a significant onus on contractors to investigate its own supply chain to minimize and mitigate any perceived security risks. Failure to meet the requirements of the regulations creates significant risk to a contractor.
- First, there is an explicit requirement in DFARS 252.239-7018 requiring contractors to actively mitigate supply chain risk during performance of the contract. However, the clause provides no additional information or standard to what is considered adequate mitigation.
- Second, there is an implicit incentive for contractors to ensure that their supply chain is risk-free because the contractor is not the only entity to investigate risks in its supply chain. DFARS 252.239-7018 provides the government with an incredible oversight capability by permitting it to consult both public and non-public information, including all-source intelligence, to determine whether a contractor’s supply chain creates a risk.
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