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DoD is issuing an interim rule to amend the Defense Federal Acquisition Regulation Supplement to implement section 802 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2022 NDAA (Pub. L. 117-81).  Section 802 adds 10 U.S.C. 2533e which prohibits the acquisition of personal protective equipment and certain other items from non-allied foreign nations.  An exception applies if: (1) the Secretary of Defense determines that a covered item of satisfactory quality and quantity, in the required form, cannot be procured as and when needed from nations other than a covered country to meet requirements at a reasonable price; (2) a covered item is for use outside of the United States; or (3) if the procurement for a covered material is at or below $150,000.  A limitation provides that a proposed procurement in an amount greater than $150,000 may not be divided into several purchases or contracts for lesser amounts in order to qualify for an exception.

Statement of Need:

This rule is needed to implement section 802 of the National Defense Authorization Act for Fiscal Year 2022 (Pub. L. 117-81), which prohibits the acquisition of personal protective equipment related to healthcare and certain other healthcare-related items from non-allied foreign nations. The prohibition does not apply to items for use outside of the United States or if the procurement is valued at or below $150,000. In addition, the prohibition does not apply if the Secretary of Defense determines that a covered item of satisfactory quality and quantity, in the required form, cannot be procured as and when needed from nations other than non-allied nations to meet requirements at a reasonable price.

Summary of the Legal Basis:

The legal basis for this rule is 41 U.S.C. 1303 and section 802 of Public Law 117-81.

Alternatives:

There are no alternatives that would meet the requirements of section 802 of Public Law 117-81.

Anticipated Costs and Benefits:

Decreasing dependence on personal protective equipment and certain other items, as identified in section 802, originating in non-allied foreign countries is a matter of public health and national security especially during a declared public health emergency. The domestic supply chain for personal protective equipment and certain other items is critical. An adequate continued supply is vital to ensure domestic control with minimal disruption in production and to reduce U.S. dependence on non-allied foreign countries. This restriction is similar to other domestic sourcing restrictions required by 10 U.S.C. 2533 in effect to reduce dependence on non-allied foreign sources and to continue to promote growth in domestic capability.

This rule restricts the acquisition of covered items (personal protective equipment for use in preventing the spread of disease and certain other items) from non-allied foreign nations.  The restriction will not apply--

• To acquisitions of the covered items for use outside of the United States;
• For acquisitions at or below $150,000; or
• If it is determined that covered items of satisfactory quality and quantity, in the required form, cannot be procured as and when needed from nations other than the covered countries to meet the requirements at a reasonable price.

Estimated impacts to industry may include minor compliance costs to validate with suppliers the origin of covered items to comply with the prohibition. Based on data from the Federal Procurement Data System for fiscal years 2019, 2020, and 2021 for contracts awarded in Product Service Code 65 (Medical, Dental, and Veterinary Equipment and Supplies) in the United States valued at or above $150,000, DoD awarded an average of 1,677 such contracts to 192 unique entities, of which 105 were small businesses.  It is not known what percentage of these awards might involve personal protective equipment and other covered items from the covered countries.

Potential benefits of this rule will be the elimination of counterfeit covered items within the domestic supply chain and reduced dependence on foreign sources that are not allies of the United States.  In addition, this restriction will further promote growth in domestic capabilities and may provide additional opportunities to domestic small businesses for future procurement and manufacturing efforts, increasing domestic sourcing of personal protective equipment and other covered items.

Risks:

A shortage of supply of personal protective equipment and certain other items would put at risk public health and the safety and well-being of the general public. A shortage of these items also would hinder DoD’s mission readiness.