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DoD issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 1602 of the National Defense Authorization Act for Fiscal Year 2014, which prohibits award of a contract for commercial satellite services to a foreign entity if the Secretary of Defense believes that the foreign entity (1) is an entity in which the government of a covered foreign country has an ownership interest that enables the government to affect satellite operations; or (2) plans to, or is expected to, provide or use launch or other satellite services under the contract from a covered foreign country. This rule is not expected to have a significant economic impact on a substantial number of small entities.

Statement of Need:

This action is necessary because 10 U.S.C. 2279 as added by section 1602 of the National Defense Authorization Act for FY 2014 (Pub. L. 113-66) became effective upon enactment on December 26 2013. 10 U.S.C. 2279 restricts the acquisition of commercial satellite services from certain foreign entities. The statute prohibits the award of contracts for commercial satellite services to a foreign entity that (1) is an entity in which the government of a covered foreign country (i.e. the Peoples Republic of China, North Korea, Cuba, Iran, Sudan, or Syria) has an ownership interest that enables the government to affect satellite operations; or (2) plans to or is expected to provide or use launch or other satellite services under the contract from a covered foreign country.

Summary of the Legal Basis:

This rule is proposed under the authority of title 10 U.S.C. 2279 as added by section 1602 of the National Defense Authorization Act for FY 2014 (Pub. L. 113-66).

Alternatives:

DoD was not able to identify any alternatives that meet the statutory requirements of 10 U.S.C. 2279 and the objectives of this rule.

Anticipated Costs and Benefits:

Benefits associated with this rule outweigh the cost of compliance. The rule reduces the potential risk to national security by prohibiting the acquisition of commercial satellite services from certain foreign entities as in those case where the foreign entity is either (1) an entity in which the government of a covered foreign country has an ownership interest that enables the government to affect satellite operations; or (2) plans to or is expected to provide or use launch or other satellite services under the contract from a covered foreign country. The rule requires an annual representation as to whether the offeror is or is not a foreign entity subject to the prohibitions of the statute or is or is not offering commercial satellite services provided by such a foreign entity. DoD estimates that the total estimated annual public burden for the collection of this information is negligible (approximately $4275.00) based on Federal Procurement Data System data for FY 2013. There were 380 unique contractors that received contract or orders for PSC D304 (ADP Telecommunications and Transmission Services) of which commercial satellite services are a subset so 380 is an estimate at the highest end of the possible range of respondents. We estimate that these respondent will spend an average of 0.25 hours to complete and submit one response per year. Additionally DoD estimates that the rule will not have a significant impact on small entities unless they are offering commercial satellite services provided by a foreign entity that is subject to the restrictions of this rule. According to the FPDS data for fiscal year 2013, 111 small entities were awarded contracts or orders for services in PSC D304 (ADP Telecommunications and Transmission Services) of which commercial satellite services are a subset.

Risks:

Until this statute is implemented in the DFARS there is risk that contracting officers may acquire commercial satellite services in violation of the law increasing the risk to the U.S. military operations and lost opportunities for the U.S. industrial base.