Overview
Subpart 25.7 implements federal policies and statutes that prohibit the U.S. government from contracting with entities or individuals from specific prohibited sources, primarily those subject to economic sanctions. It specifically addresses restrictions administered by the Office of Foreign Assets Control (OFAC) and targets restricted business operations in Sudan and the energy/technology sectors in Iran to protect national security and foreign policy interests.
Key Rules
- OFAC Compliance: Agencies and contractors are prohibited from acquiring supplies or services from countries or entities subject to Department of the Treasury sanctions (e.g., Cuba, Iran, North Korea, and Burma) unless authorized by OFAC.
- Sudan Restrictions: Offerors must certify they do not conduct "restricted business operations" in Sudan, specifically involving power production, mineral extraction, oil-related activities, or military equipment.
- Iran Sanctions Act: Offerors must certify that they (and any entities they own or control) do not engage in sanctioned activities related to Iran’s energy sector, weapons of mass destruction, or military capabilities.
- Iran Revolutionary Guard Corps (IRGC): Offerors must certify they do not knowingly engage in significant transactions (exceeding $15,000) with the IRGC or its affiliates.
- Sensitive Technology: The government is prohibited from contracting with entities that export "sensitive technology" to Iran—defined as hardware or software used to restrict the free flow of information or monitor/restrict speech.
- Trade Agreement Exceptions: Certification requirements for Iran sanctions may not apply if the acquisition is subject to trade agreements and the products offered are from "designated countries."
Responsibilities
- Offerors/Contractors:
- Must provide specific certifications and representations regarding business operations in Sudan and Iran.
- Must monitor their own corporate structures to ensure "owned or controlled" entities are also in compliance.
- Must ensure they do not procure supplies or services from prohibited sources via subcontractors.
- Contracting Officers (CO):
- Responsible for terminating contracts if a contractor is found to have submitted a false certification.
- Must initiate waiver requests through the Agency Head and OFPP when a prohibited source is the only available provider.
- Suspending and Debarring Official (SDO):
- Responsible for suspending or debarring contractors who provide false certifications (debarment is typically 3 years for Sudan-related violations and at least 2 years for Iran-related violations).
- Office of Federal Procurement Policy (OFPP) & The President:
- The OFPP reviews waiver requests and consults with the National Security Council and State Department.
- The President holds the authority to waive these prohibitions on a case-by-case basis if it is in the national interest.
Practical Implications
- Rigorous Due Diligence: Contractors must conduct deep-dive audits of their supply chains and corporate affiliations. Because the prohibition includes entities "owned or controlled" by the offeror, a subsidiary’s actions in Iran or Sudan can disqualify the entire parent corporation from federal contracting.
- SDN List Integration: Procurement teams must integrate the OFAC "Specially Designated Nationals and Blocked Persons List" into their vendor vetting processes. Relying solely on SAM.gov may not be sufficient for real-time compliance.
- Severe Penalties for Falsehoods: Unlike some administrative errors, a false certification under this subpart carries "mandatory" consideration for debarment, which can effectively end a company's ability to do business with the government.
- High Hurdle for Waivers: Obtaining a waiver for a prohibited source is an exhaustive process involving the White House and Congress; it is only feasible for mission-critical items where no other source exists globally.