[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]

[Rules and Regulations]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2011-12850]

Vol. 76

Tuesday,

No. 104

May 31, 2011

Part II

Department of Defense

General Services Administration

National Aeronautics and Space Administration

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48 CFR Chapter 1

7 CFR Part 319

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Federal Acquisition Regulation; Federal Acquisition Circular 2005-52;

Final Rules

Federal Register / Vol. 76 , No. 104 / Tuesday, May 31, 2011 / Rules and Regulations

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Chapter 1

[Docket FAR 2011-0076, Sequence 4]

Federal Acquisition Regulation; Federal Acquisition Circular 2005-52; Introduction

AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Summary presentation of final and interim rules.

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SUMMARY: This document summarizes the Federal Acquisition Regulation (FAR) rules agreed to by DoD, GSA, and NASA in this Federal Acquisition Circular (FAC) 2005-52. A companion document, the Small Entity Compliance Guide (SECG), follows this FAC. The FAC, including the SECG, is available via the Internet at http://www.regulations.gov.

DATES: For effective dates and comment dates, see separate documents, which follow.

FOR FURTHER INFORMATION CONTACT: The analyst whose name appears in the table below in relation to each FAR case. Please cite FAC 2005-52 and the specific FAR case numbers. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at (202) 501-4755.

List of Rules in FAC 2005-52

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Item Subject FAR case Analyst

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I............... Sustainable Acquisition 2010-001 Clark.

II.............. Contract Closeout...... 2008-020 McFadden.

III............. Prohibition on 2008-009 Davis.

Contracting with

Inverted Domestic

Corporations.

IV.............. Buy American Exemption 2009-039 Davis.

for Commercial

Information

Technology--Constructi

on Material.

V............... Oversight of Contractor 2010-017 Robinson.

Ethics Programs.

VI.............. Technical Amendments...

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SUPPLEMENTARY INFORMATION: Summaries for each FAR rule follow. For the actual revisions and/or amendments made by these FAR cases, refer to the specific item numbers and subject set forth in the documents following these item summaries. FAC 2005-52 amends the FAR as specified below:

Item I--Sustainable Acquisition (FAR Case 2010-001) (Interim)

This interim rule amends the FAR to implement Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic Performance, and Executive Order 13423, Strengthening Federal Environmental, Energy, and Transportation Management. It requires Federal agencies to leverage agency acquisitions to foster markets for sustainable technologies, materials, products, and services. Federal agencies are additionally required to implement high-performance sustainable building design, construction, renovation, repair, commissioning, operation and maintenance, management, and deconstruction practices in applicable acquisitions. Contractors will be required to support the goals of an agency's environmental management system.

Item II--Contract Closeout (FAR Case 2008-020)

This final rule amends the FAR procedures for closing out contracts. A proposed rule was published August 20, 2009. This rule revises procedures and sets forth a timeframe for clearing final patent reports; updates quick-closeout procedures, including applicable thresholds; sets forth a description of an adequate final indirect cost rate proposal and supporting data; and adds language for withholding fees to protect the Government's interest and encourage timely submissions of an adequate final indirect cost rate proposal. The rule does not impose any additional requirements on small businesses.

Item III--Prohibition on Contracting With Inverted Domestic Corporations (FAR Case 2008-009)

This final rule implements section 740 of Division C of the

Consolidated Appropriations Act, 2010 (Pub. L. 111-117) and similar restrictions in 2008 and 2009 appropriations acts, which prohibit the award of contracts using appropriated funds to any foreign incorporated entity that is treated as an inverted domestic corporation or to any subsidiary of one, except as permitted in specific exceptions as set forth in the rule. The rule does not impose any requirements on small businesses.

Item IV--Buy American Exemption for Commercial Information Technology--Construction Material (FAR Case 2009-039)

This rule adopts as final, without change, an interim rule. The interim rule amended the FAR to implement section 615 of Division C, Title VI, of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117). Section 615 authorizes exemption from the Buy American Act for acquisition of information technology that is a commercial item.

Item V--Oversight of Contractor Ethics Programs (FAR Case 2010-017) This final rule modifies FAR 42.302, Contract Administration Functions, to add to the list of contract administration functions, the function of ensuring that contractors have implemented FAR 52.203-13, Contractor Code of Business Ethics and Conduct.

Contracting officers may ask to see a contractor's code of ethics or a contractor's ethics program, but the contracting officer is not required to ask for a copy of any documents.

Item VI--Technical Amendments

Editorial changes are made at FAR 52.212-3, 53.301-1447, 53.301-1449, and 52.302-347.

Dated: May 18, 2011.

Millisa Gary,

Acting Director, Office of Governmentwide Acquisition Policy. Federal Acquisition Circular (FAC) 2005-52 is issued under the authority of the Secretary of Defense, the Administrator of General Services, and the Administrator for the National Aeronautics and Space Administration.

Unless otherwise specified, all Federal Acquisition Regulation (FAR) and other directive material contained in FAC 2005-52 is effective May 31, 2011, except for Items II and V which are effective June 30, 2011.

Dated: May 18, 2011.

Shay D. Assad,

Director, Defense Procurement and Acquisition Policy.

Dated: May 17, 2011.

Joseph A. Neurauter,

Senior Procurement Executive/Deputy CAO, Office of Acquisition Policy, U.S. General Services Administration.

Dated: May 17, 2011.

William P. McNally,

Assistant Administrator for Procurement, National Aeronautics and Space Administration.

[FR Doc. 2011-12850 Filed 5-27-11; 8:45 am]

BILLING CODE 6820-EP-P

[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]

[Rules and Regulations]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2011-12851]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 2, 4, 5, 7, 11, 12, 13, 23, 36, 37, 39, and 52

[FAC 2005-52; FAR Case 2010-001; Item I; Docket 2010-0001, Sequence 1]

RIN 9000-AL96

Federal Acquisition Regulation; Sustainable Acquisition

AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Interim rule.

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SUMMARY: DoD, GSA, and NASA are issuing an interim rule amending the Federal Acquisition Regulation (FAR) to implement Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic Performance, and Executive Order 13423, Strengthening Federal Environmental, Energy, and Transportation Management. This interim rule requires Federal agencies to leverage agency acquisitions to foster markets for sustainable technologies, materials, products, and services. Federal agencies are additionally required to implement high-performance sustainable building design, construction, renovation, repair, commissioning, operation and maintenance, management, and deconstruction practices in applicable acquisitions. Contractors will be required to support the goals of an agency's environmental management system.

DATES: Effective Date: May 31, 2011.

Comment Date: Interested parties should submit written comments to the Regulatory Secretariat on or before August 1, 2011 to be considered in the formulation of a final rule.

ADDRESSES: Submit comments identified by FAC 2005-52, FAR Case 2010-001, by any of the following methods:

Regulations.gov: http://www.regulations.gov. Submit

comments via the Federal eRulemaking portal by inputting ``FAR Case 2010-001'' under the heading ``Enter Keyword or ID'' and selecting ``Search.'' Select the link ``Submit a Comment'' that corresponds with ``FAR Case 2010-001.'' Follow the instructions provided at the ``Submit a Comment'' screen. Please include your name, company name (if any), and ``FAR Case 2010-001'' on your attached document.

Fax: (202) 501-4067.

Mail: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE., 7th Floor, Washington, DC 20417.

Instructions: Please submit comments only and cite FAC 2005-52, FAR Case 2010-001, in all correspondence related to this case. All comments received will be posted without change to http://www.regulations.gov, including any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT: Mr. William Clark, Procurement Analyst, at (202) 219-1813, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-52, FAR Case 2010-001.

SUPPLEMENTARY INFORMATION:

I. Background

In the face of changing environmental circumstances and our Nation's heightened energy demands, the Federal Government must lead by example to create a clean energy economy that will increase prosperity, promote energy security, protect the interests of taxpayers, and safeguard the health of our environment. Executive Order 13514 (E.O. 13514), Federal Leadership in Environmental, Energy, and Economic Performance, was signed on October 5, 2009 (74 FR 52117, October 8, 2009). It requires Federal agencies to leverage agency acquisitions to foster markets for sustainable technologies and materials, products, and services. The head of each agency shall advance sustainable acquisition by ensuring that 95 percent of new contract actions, including task and delivery orders, for products and services, with the exception of acquisition of weapon systems, are energy-efficient (Energy Star or Federal Energy Management Program (FEMP)-designated), water-efficient, biobased, environmentally preferable (e.g., Electronic Product Environmental Assessment Tool (EPEAT)-registered), non-ozone depleting, contain recycled content, or are non-toxic or less toxic alternatives, where such products and services meet agency performance requirements. Federal agencies are also required to design, construct, maintain and operate high-performance sustainable buildings in sustainable locations.

Similarly, recognizing the long-term impact that Federal environmental management can have on national health and security, Executive Order 13423 (E.O. 13423), Strengthening Federal Environmental, Energy, and Transportation Management, was signed on January 24, 2007 (72 FR 3919, January 26, 2007). E.O. 13423 establishes the policy that Federal agencies shall conduct their environmental, transportation, and energy-related activities in an environmentally, economically, and fiscally sound, integrated, continuously improving, efficient, and sustainable manner. The authorities throughout the applicable FAR parts are updated to include E.O. 13423 and E.O. 13514. Additionally, authorities throughout the applicable FAR parts are updated to delete references to E.O. 13101, E.O. 13123, and E.O. 13148, because the Executive orders were revoked by E.O. 13423.

Under FAR part 2, the definitions for ``renewable energy'' and ``United States'' are revised to reflect the latest definitions of the terms in E.O. 13514. A new definition for ``sustainable acquisition,'' derived from the definition of ``sustainable'' in E.O. 13514, is added to FAR part 2. The definition of ``water consumption intensity'' is also added to FAR part 2 from E.O. 13514.

FAR part 4 changes include revisions to the policy for contractor submission of paper documents to the Government and updating the general description of the Federal Procurement Data System (FPDS). In efforts to reduce or prevent waste and meet the intent of the agencies' requirement to purchase at least 30 percent postconsumer fiber content paper as directed in both E.O. 13423 and E.O. 13514, contractors are required, if not using electronic commerce methods, to submit paper documents to the Government on double-sided 30 percent post-consumer fiber paper, whenever practicable. This is a change from the current regulations that only encourage the submission of paper documents on recycled paper. The general description of FPDS is revised to reflect that the Web-based tool will be a means of collecting sustainable acquisition data.

FAR parts 5, 7, and 11 are revised to ensure agencies are including or considering sustainable acquisition requirements in their synopses, acquisition planning documents and functions, and descriptions of agency needs.

Conforming changes are made to FAR parts 12 and 13.

FAR part 23 is revised to ensure that the policy of ``leading by example'' is followed by Federal agencies. This includes fostering markets for sustainable technologies, materials, products, and services, as a goal of agency acquisitions.

FAR 23.001 is amended to add new definitions for ``environmental,'' ``greenhouse gases,'' and ``United States.'' All the definitions derive from E.O. 13514. FAR 23.002 is added to implement a policy, derived from E.O. 13423 sections 3(e) and (f), which requires that contracts for contractor operation of a Government-owned or -leased facility and contracts for support services at a Government-owned or -operated facility include provisions that obligate the contractor to comply with the requirements of the order to the same extent as the agency would be required to comply if the agency operated or supported the facility. Compliance includes developing programs to promote and implement cost-effective waste reduction.

A new FAR subpart 23.1, Sustainable Acquisition, is added to implement section 2(h) and section 18 of E.O. 13514. Federal agencies, with certain exceptions or exemptions, are required to advance sustainable acquisition by ensuring that 95 percent of new contract actions (including those for construction) contain requirements for products that are designated as energy-efficient, water-efficient, biobased, environmentally preferable (e.g., EPEAT-registered, non-toxic or less toxic alternatives), non-ozone depleting, or those that contain recovered materials. A new definition for ``contract action'' is added to the new FAR subpart 23.1.

Changes to FAR subpart 23.2, Energy and Water Efficiency and Renewable Energy, include updates to the authorities and policy. Sections (2)(d) and 14 of E.O. 13514, relating to the use and management of water through water-efficient means, are implemented in FAR subpart 23.2.

FAR 23.403 is revised to require agencies to purchase recycled content and biobased products or require them in the acquisition of services; the delivery, use, or furnishing of such products, which must meet, but may exceed, the minimum recycled or biobased content of an United States Environmental Protection Agency (EPA)- or United States Department of Agriculture-designated product.

Under FAR subpart 23.8, agencies are required to substitute safe alternatives to ozone-depleting substances. This subpart is revised to inform agencies that EPA's Significant New Alternatives Policy (SNAP) program (available at http://www.epa.gov/ozone/snap) has a list of safe alternatives to ozone-depleting substances.

DoD, GSA, and NASA deleted the content of FAR subpart 23.9, which required contractors to report to agencies compliance with the toxic chemical release reporting. E.O. 13148 required contractors to affirm compliance with toxic chemical release reporting requirements. E.O. 13148 was revoked by E.O. 13423. The associated clauses at FAR 52.223-13 and 52.223-14 are also deleted. Toxic chemical release reporting remains a requirement under environmental statutes and regulations, but the coverage in the FAR and the contract clauses are being deleted. FAR subpart 23.9 now requires contractor compliance with an agency's environmental management system. A new clause is prescribed to meet this requirement for contractor operation of Government-owned or -leased facilities in the United States, unless the agency head determines that use of the clause is in the interest of the facilities not located in the United States.

The requirement to implement high-performance sustainable building design, construction, renovation, repair, operation, and management stated in E.O. 13514 is included in FAR 36.104. In addition, new definitions are added at FAR 36.001, and a Web site is provided for accessing the ``Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings.''

This interim rule adds language at FAR 37.102 requiring agencies to ensure that service contracts that require the delivery, use, or furnishing of products are consistent with FAR part 23.

To promote electronics stewardship, the policy at FAR 39.101 implements provisions of section 2(i) of E.O. 13514 to require agencies to enable power management, double-sided printing, and other energy-efficient or environmentally preferable features on all agency electronic products. The policy also requires agencies to employ best management practices for energy-efficient management of servers and Federal data centers.

FAR part 52 is revised to incorporate the policies reflected in E.O. 13514 and E.O. 13423. The modified clauses include--

FAR 52.204-4, Printed or Copied Double-Sided Postconsumer Fiber Paper;

FAR 52.204-8, Annual Representations and Certifications; FAR 52.213-4, Terms and Conditions--Simplified Acquisitions (Other Than Commercial Items);

FAR 52.223-5, Pollution Prevention and Right-to-Know Information; and

FAR 52.223-10, Waste Reduction Program.

Additionally, DoD, GSA, and NASA added the clause at FAR 52.223-19 to address contractor compliance with environmental management systems.

II. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

III. Regulatory Flexibility Act

DoD, GSA, and NASA do not expect this interim rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because it is only emphasizing existing requirements. The majority of the requirements of E.O. 13423 and E.O. 13514 have been implemented through previous Executive orders, laws, and sustainable programs. DoD, GSA, and NASA recognize that the rule may have overall pluses that create opportunities for niche products for small businesses because agencies have to ensure that 95 percent of new contract actions advance sustainable acquisition, but the number of entities affected, and the extent to which they will be affected, is not expected to be significant. The clause requiring contractors to comply with an agency's environmental management system was required through E.O. 13148. DoD, GSA, and NASA believe that this requirement may affect small entities performing contracts for those agencies that have not fully implemented an environmental management system, but the number of entities affected, and the extent to which they will be affected, is not expected to be significant. Therefore, an Initial Regulatory Flexibility Analysis has not been performed.

DoD, GSA, and NASA invite comments from small business concerns and other interested parties on the expected impact of this rule on small entities.

DoD, GSA, and NASA will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (FAR Case 2010-001) in all correspondence.

IV. Paperwork Reduction Act

The Paperwork Reduction Act does apply because this interim rule removes the requirement that governed contractor compliance with toxic chemical release reporting. Provisions relevant to toxic chemical release reporting have been deleted from the FAR by deleting FAR clauses 52.223-13 and 52.223-14. A change notice will be submitted to cancel this requirement under OMB Clearance 9000-0139. The collection requirements remain unchanged for FAR clause 52.223-5, covered by OMB Clearance 9000-0137, Pollution Prevention and Right-to-Know Information.

V. Determination to Issue an Interim Rule

A determination has been made under the authority of the Secretary of Defense (DoD), the Administrator of General Services (GSA), and the Administrator of the National Aeronautics and Space Administration (NASA) that urgent and compelling reasons exist to promulgate this interim rule without prior opportunity for public comment. This action is necessary because this rule implements E.O. 13514 and E.O. 13423, already in effect. However, pursuant to 41 U.S.C. 1707 and FAR 1.501-3(b), DoD, GSA, and NASA will consider public comments received in response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 1, 2, 4, 5, 7, 11, 12, 13, 23, 36, 37, 39, and 52

Government procurement.

Dated: May 18, 2011.

Millisa Gary,

Acting Director, Office of Governmentwide Acquisition Policy.

Therefore, DoD, GSA, and NASA amend 48 CFR parts 1, 2, 4, 5, 7, 11, 12, 13, 23, 36, 37, 39, and 52 as set forth below:

1. The authority citation for 48 CFR parts 1, 2, 4, 5, 7, 11, 12, 13, 23, 36, 37, 39, and 52 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

1.106 [Amended]

2. Amend section 1.106, in the table following the introductory text, by removing FAR segments ``23.9'', ``52.223-13'', and ``52.223-14'' and their corresponding OMB Control Number ``9000-0139''.

PART 2--DEFINITIONS OF WORDS AND TERMS

3. Amend section 2.101 in paragraph (b)(2) by--

a. Revising the definition ``Renewable energy'';

b. Adding, in alphabetical order, the definition ``Sustainable acquisition'';

c. In the definition ``United States'' redesignating paragraphs (7), (8), and (9) as paragraphs (8), (9), and (10), respectively; and adding a new paragraph (7); and

d. Adding, in alphabetical order, the definition ``Water consumption intensity.''

The revised and added text reads as follows:

2.101 Definitions.

* * * * *

(b) * * *

(2) * * *

Renewable energy means energy produced by solar, wind, geothermal, biomass, landfill gas, ocean (including tidal, wave, current, and thermal), municipal solid waste, or new hydroelectric generation capacity achieved from increased efficiency or additions of new capacity at an existing hydroelectric project (Energy Policy Act of 2005, 42 U.S.C. 15852).

* * * * *

Sustainable acquisition means acquiring goods and services in order to create and maintain conditions--

(1) Under which humans and nature can exist in productive harmony; and

(2) That permit fulfilling the social, economic, and other requirements of present and future generations.

* * * * *

United States * * *

(7) For use in part 23, see definition at 23.001.

* * * * *

Water consumption intensity means water consumption per square foot of building space.

* * * * *

PART 4--ADMINISTRATIVE MATTERS

4. Revise section 4.302 to read as follows:

4.302 Policy.

(a) Section 3(a) of E.O. 13423, Strengthening Federal

Environmental, Energy, and Transportation Management, directs agencies to implement waste prevention. In addition, section 2(e) of E.O. 13514, Federal Leadership in Environmental, Energy, and Economic Performance, directs agencies to eliminate waste. Electronic commerce methods (see 4.502) and double-sided printing and copying are best practices for waste prevention.

(b) When electronic commerce methods (see 4.502) are not used, agencies shall require contractors to submit paper documents to the Government relating to an acquisition printed or copied double-sided on at least 30 percent postconsumer fiber paper whenever practicable. If the contractor cannot print or copy double-sided, it shall print or copy single-sided on at least 30 percent postconsumer fiber paper.

5. Amend section 4.602 by removing from paragraph (a)(2) ``contract; and'' and adding ``contract;'' in its place; redesignating paragraph (a)(3) as paragraph (a)(4); and adding a new paragraph (a)(3) to read as follows:

4.602 General.

(a) * * *

(3) A means of measuring and assessing the effect of Federal contracting for promoting sustainable technologies, materials, products, and high-performance sustainable buildings. This is accomplished by collecting and reporting agency data on sustainable acquisition, including types of products purchased, the purchase costs, and the exceptions used for other than sustainable acquisition; and

* * * * *

4.1202 [Amended]

6. Amend section 4.1202 by removing paragraph (u); and redesignating paragraphs (v) through (cc) as paragraphs (u) through (bb), respectively.

PART 5--PUBLICIZING CONTRACT ACTIONS

7. Amend section 5.207 by redesignating paragraphs (c)(11) through (c)(18) as paragraphs (c)(12) through (c)(19), respectively; and adding a new paragraph (c)(11) to read as follows:

5.207 Preparation and transmittal of synopses.

* * * * *

(c) * * *

(11) Sustainable acquisition requirements (or a description of high-performance sustainable building practices required, if for design, construction, renovation, repair, or deconstruction) (see parts 23 or 36).

* * * * *

PART 7--ACQUISITION PLANNING

8. Amend section 7.103 by revising paragraph (p) to read as follows:

7.103 Agency-head responsibilities.

* * * * *

(p) Ensuring that agency planners--

(1) Specify needs for printing and writing paper consistent with the 30 percent postconsumer fiber minimum content standards specified in section 2(d)(ii) of Executive Order 13423 of January 24, 2007, Strengthening Federal Environmental, Energy, and Transportation Management, and section 2(e)(iv) of Executive Order 13514 of October 5, 2009 (see 11.303);

(2) Comply with the policy in 11.002(d) regarding procurement of: biobased products, products containing recovered materials, environmentally preferable products and services (including Electronic Product Environmental Assessment Tool (EPEAT)-registered electronic products, nontoxic or low-toxic alternatives), ENERGY STAR[reg] and Federal Energy Management Program-designated products, renewable energy, water-efficient products, and non-ozone depleting products;

(3) Comply with the Guiding Principles for Federal Leadership in High-Performance and Sustainable Buildings (Guiding Principles), for the design, construction, renovation, repair, or deconstruction of Federal buildings. The Guiding Principles can be accessed at http://www.wbdg.org/pdfs/hpsb_guidance.pdf; and

(4) Require contractor compliance with Federal environmental requirements, when the contractor is operating Government-owned facilities or vehicles, to the same extent as the agency would be required to comply if the agency operated the facilities or vehicles.

* * * * *

7.105 [Amended]

9. Amend section 7.105 by removing from paragraph (b)(17) ``contracts.'' and adding ``contracts (see 11.002 and 11.303).'' in its place.

PART 11--DESCRIBING AGENCY NEEDS

10. Amend section 11.002 by revising paragraphs (d)(1) and (d)(2) introductory text to read as follows:

11.002 Policy.

* * * * *

(d)(1) When agencies acquire products and services, various statutes and executive orders (identified in part 23) require consideration of sustainable acquisition (see subpart 23.1) including--

(i) Energy-efficient and water-efficient services and products (including products containing energy-efficient standby power devices) (subpart 23.2);

(ii) Products and services that utilize renewable energy technologies (subpart 23.2);

(iii) Products containing recovered materials (subpart 23.4);

(iv) Biobased products (subpart 23.4);

(v) Environmentally preferable products and services, including EPEAT-registered electronic products and non-toxic or low-toxic alternatives (subpart 23.7); and

(vi) Non-ozone depleting substances (subpart 23.8).

(2) Unless an exception applies and is documented by the requiring activity, Executive agencies shall, to the maximum practicable, require the use of products and services listed in paragraph (d)(1) of this section when--

* * * * *

11. Revise section 11.303 to read as follows:

11.303 Special requirements for paper.

(a) The following applies when agencies acquire paper in the United States (as defined in 23.001):

(1) Section 2(d)(ii) of Executive Order 13423, Strengthening Federal Environmental, Energy, and Transportation Management, establishes a 30 percent postconsumer fiber content standards for agency paper use. Section 2(d)(ii) requires that an agency's paper products must meet or exceed the minimum content standard.

(2) Section 2(e)(iv) of Executive Order 13514 requires acquisition of uncoated printing and writing paper containing at least 30 percent postconsumer fiber.

(b) Exceptions. If paper under paragraphs (a)(1) or (a)(2) of this section containing at least 30 percent postconsumer fiber is not reasonably available, does not meet reasonable performance requirements, or is only available at an unreasonable price, then the agency must purchase--

(1) Printing and writing paper containing no less than 20 percent postconsumer fiber; or

(2) Paper, other than printing and writing paper, with the maximum practicable percentage of postconsumer fiber that is reasonably available at a reasonable price and that meets reasonable performance requirements.

PART 12--ACQUISITION OF COMMERCIAL ITEMS

12. Amend section 12.102 by revising paragraph (c) to read as follows:

12.102 Applicability.

* * * * *

(c) Contracts for the acquisition of commercial items are subject to the policies in other parts of the FAR. When a policy in another part of the FAR is inconsistent with a policy in this part, this part 12 shall take precedence for the acquisition of commercial items.

* * * * *

PART 13--SIMPLIFIED ACQUISITION PROCEDURES

13. Amend section 13.201 by revising paragraph (f) to read as follows:

13.201 General.

* * * * *

(f) The procurement requirements in subparts 23.1, 23.2, 23.4, and 23.7 apply to purchases at or below the micro-purchase threshold.* * * * *

PART 23--ENVIRONMENT, ENERGY AND WATER EFFICIENCY, RENEWABLE ENERGY TECHNOLOGIES, OCCUPATIONAL SAFETY, AND DRUG-FREE WORKPLACE

14. Revise section 23.000 to read as follows:

23.000 Scope.

This part prescribes acquisition policies and procedures supporting the Government's program for ensuring a drug-free workplace, for protecting and improving the quality of the environment, and to foster markets for sustainable technologies, materials, products, and services, and encouraging the safe operation of vehicles by--

(a) Reducing or preventing pollution;

(b) Managing efficiently and reducing energy and water use in Government facilities;

(c) Using renewable energy and renewable energy technologies;

(d) Acquiring energy-efficient and water-efficient products and services, environmentally preferable (including EPEAT-registered, and non-toxic and less toxic) products, products containing recovered materials, non-ozone depleting products, and biobased products;

(e) Requiring contractors to identify hazardous materials;

(f) Encouraging contractors to adopt and enforce policies that ban text messaging while driving; and

(g) Requiring contractors to comply with agency environmental management systems.

15. Revise section 23.001 to read as follows:

23.001 Definitions.

As used in this part--

Environmental means environmental aspects of internal agency operations and activities, including those aspects related to energy and transportation functions.

Greenhouse gases means carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Toxic chemical means a chemical or chemical category listed in 40 CFR 372.65.

United States, except as used in subpart 23.10, means--

(1) The fifty States;

(2) The District of Columbia;

(3) The commonwealths of Puerto Rico and the Northern Mariana Islands;

(4) The territories of Guam, American Samoa, and the United States Virgin Islands; and

(5) Associated territorial waters and airspace.

16. Add section 23.002 to read as follows:

23.002 Policy.

Executive Order 13423 sections 3(e) and (f) require that contracts for contractor operation of a Government-owned or -leased facility and contracts for support services at a Government-owned or -operated facility include provisions that obligate the contractor to comply with the requirements of the order to the same extent as the agency would be required to comply if the agency operated or supported the facility. Compliance includes developing programs to promote and implement cost-effective waste reduction.

17. Add subpart 23.1 to read as follows:

Subpart 23.1--Sustainable Acquisition Policy

Sec.

23.101 Definition.

23.102 Authorities.

23.103 Sustainable acquisitions.

23.104 Exceptions.

23.105 Exemption authority.

Subpart 23.1--Sustainable Acquisition Policy

23.101 Definition.

As used in this subpart--

Contract action means any oral or written action that results in the purchase, rent, or lease of supplies or equipment, services, or construction using appropriated dollars, including purchases below the micro-purchase threshold. Contract action does not include grants, cooperative agreements, other transactions, real property leases, requisitions from Federal stock, training authorizations, or other non-FAR based transactions.

23.102 Authorities.

(a) Executive Order 13423 of January 24, 2007, Strengthening Federal Environmental, Energy, and Transportation Management.

(b) Executive Order 13514 of October 5, 2009, Federal Leadership in Environmental, Energy, and Economic Performance.

(c) All of the authorities specified in subparts 23.2, 23.4, 23.7, 23.8, 23.9, and 23.10.

23.103 Sustainable acquisitions.

(a) Federal agencies shall advance sustainable acquisition by ensuring that 95 percent of new contract actions for the supply of products and for the acquisition of services (including construction) require that the products are--

(1) Energy-efficient (ENERGY STAR[reg] or Federal Energy Management Program (FEMP)-designated);

(2) Water-efficient;

(3) Biobased;

(4) Environmentally preferable (e.g., EPEAT-registered, or non-toxic or less toxic alternatives);

(5) Non-ozone depleting; or

(6) Made with recovered materials.

(b) The required products in the contract actions for services include products that are--

(1) Delivered to the Government during performance;

(2) Acquired by the contractor for use in performing services at a Federally-controlled facility; or

(3) Furnished by the contractor for use by the Government.

(c) The required products in the contract actions must meet agency performance requirements.

(d) For purposes of meeting the 95 percent sustainable acquisition requirement, the term ``contract actions'' includes new contracts (and task and delivery orders placed against them) and new task and delivery orders on existing contracts.

23.104 Exceptions.

This subpart does not apply to the following acquisitions:

(a) Contracts performed outside of the United States, unless the agency head determines that such application is in the interest of the United States.

(b) Weapon systems.

23.105 Exemption authority.

(a) The head of an agency may exempt--

(1) Intelligence activities of the United States, and related personnel, resources, and facilities, to the extent the Director of National Intelligence or agency head determines it necessary to protect intelligence sources and methods from unauthorized disclosure;

(2) Law enforcement activities of that agency and related personnel, resources, and facilities, to the extent the head of an agency determines it necessary to protect undercover operations from unauthorized disclosure;

(3) Law enforcement, protective, emergency response, or military tactical vehicle fleets of that agency; and

(4) Agency activities and facilities in the interest of national security.

(b) If the head of the agency issues an exemption under paragraph (a) of this section, the agency must notify the Chair of the Council on Environmental Quality in writing within 30 days of the issuance of the exemption.

(c) The agency head may submit through the Chair of the Council on Environmental Quality a request for exemption of an agency activity other than those activities listed in paragraph (a) of this section and related personnel, resources, and facilities.

18. Revise section 23.201 to read as follows:

23.201 Authorities.

(a) Energy Policy and Conservation Act (42 U.S.C. 6361(a)(1)) and Resource Conservation and Recovery Act of 1976 (42 U.S.C. 6901, et seq.).

(b) National Energy Conservation Policy Act (42 U.S.C. 8253, 8259b, 8262g, and 8287).

(c) Section 706 of Division D, Title VII of the Omnibus Appropriations Act, 2009 (Pub. L. 111-8).

(d) Title VI of the Clean Air Act, as amended (42 U.S.C. 7671, et seq.).

(e) Executive Order 11912 of April 13, 1976, Delegations of Authority under the Energy Policy and Conservation Act.

(f) Executive Order 13221 of July 31, 2001, Energy-Efficient Standby Power Devices.

(g) Executive Order 13423 of January 24, 2007, Strengthening Federal Environmental, Energy, and Transportation Management.

(h) Executive Order 13514 of October 5, 2009, Federal Leadership in Environmental, Energy, and Economic Performance.

19. Revise section 23.202 to read as follows:

23.202 Policy.

(a) Introduction. The Government's policy is to acquire supplies and services that promote a clean energy economy that increases our Nation's energy security, safeguards the health of our environment, and reduces greenhouse gas emissions from direct and indirect Federal activities. To implement this policy, Federal acquisitions will foster markets for sustainable technologies, products, and services. This policy extends to all acquisitions, including those below the simplified acquisition threshold and those at or below the micro-purchase threshold (including those made with a Government purchase card).

(b) Water-efficient. In accordance with Executive Order 13514, dated October 5, 2009, Federal Leadership in Environmental, Energy, and Economic Performance, it is the policy and objective of the Government to use and manage water through water-efficient means by--

(1) Reducing potable water consumption intensity to include low-flow fixtures and efficient cooling towers;

(2) Reducing agency, industry, landscaping, and agricultural water consumption; and

(3) Storm water management in accordance with section 438 of the Energy Independence and Security Act of 2007 (42 U.S.C. 17094) as implemented in http://www.epa.gov/nps/lid/section438.

20. Amend section 23.205 by revising paragraph (a) to read as follows:

23.205 Energy-savings performance contracts.

(a) Agencies should make maximum use of the authority provided in the National Energy Conservation Policy Act (42 U.S.C. 8287) to use an energy-savings performance contract (ESPC), when life-cycle cost-effective, to reduce energy use and cost in the agency's facilities and operations.

* * * * *

21. Amend section 23.402 by revising paragraphs (c) and (d) and adding paragraph (e) to read as follows:

23.402 Authorities.

* * * * *

(c) Executive Order 13423 of January 24, 2007, Strengthening Federal Environmental, Energy, and Transportation Management.

(d) The Energy Policy Act of 2005, Public Law 109-58.

(e) Executive Order 13514 of October 5, 2009, Federal Leadership in Environmental, Energy, and Economic Performance.

22. Revise section 23.403 to read as follows:

23.403 Policy.

Government policy on the use of products containing recovered materials and biobased products considers cost, availability of competition, and performance. Agencies shall purchase these products or require in the acquisition of services, the delivery, use, or furnishing (see 23.103(b)) of such products. Agency contracts should specify that these products are composed of the highest percent of recovered material or biobased content practicable, or at least meet, but may exceed, the minimum recovered materials or biobased content of an EPA- or USDA-designated product. Agencies shall purchase these products to the maximum extent practicable without jeopardizing the intended use of the product while maintaining a satisfactory level of competition at a reasonable price. Such products shall meet the reasonable performance standards of the agency and be acquired competitively, in a cost-effective manner. Except as provided at 23.404(b), virgin material shall not be required by the solicitation (see 11.302).

23. Amend section 23.702 by removing paragraphs (d), (e), and (f); redesignating paragraphs (g), (h), and (i) as paragraphs (d), (e), and (f), respectively; and adding a new paragraph (g) to read as follows:

23.702 Authorities.

* * * * *

(g) Executive Order 13514 of October 5, 2009, Federal Leadership in Environmental, Energy, and Economic Performance.

23.704 [Removed]

24. Remove section 23.704.

23.705 and 23.706 [Redesignated as 23.704 and 23.705]

25a. Redesignate sections 23.705 and 23.706 as sections 23.704 and 23.705, respectively.

23.705 [Amended]

25b. In newly redesignated section 23.705, remove from paragraph (b)(1) ``23.705(c)'' and add ``23.704(c)'' in its place.

26. Revise section 23.801 to read as follows:

23.801 Authorities.

(a) Title VI of the Clean Air Act (42 U.S.C. 7671, et seq.).

(b) Section 706 of Division D, Title VII of the Omnibus Appropriations Act, 2009 (Pub. L. 111-8).

(c) Executive Order 13423 of January 24, 2007, Strengthening Federal Environmental, Energy, and Transportation Management.

(d) Executive Order 13514 of October 5, 2009, Federal Leadership in Environmental, Energy, and Economic Performance.

(e) Environmental Protection Agency (EPA) regulations, Protection of Stratospheric Ozone (40 CFR Part 82).

27. Amend section 23.803 by revising paragraphs (b)(1) and (2) to read as follows:

23.803 Policy.

* * * * *

(b) * * *

(1) Comply with the requirements of Title VI of the Clean Air Act, Section 706 of Division D, Title VII of Public Law 111-8, Executive Order 13423, Executive Order 13514, and 40 CFR 82.84(a)(2), (3), (4), and (5); and

(2) Substitute safe alternatives to ozone-depleting substances, as identified under 42 U.S.C. 7671k, to the maximum extent practicable, as provided in 40 CFR 82.84(a)(1), except in the case of Class I substances being used for specified essential uses, as identified under 40 CFR 82.4(r). EPA's Significant New Alternatives Policy (SNAP) program (available at http://www.epa.gov/ozone/snap) has a list of safe alternatives to ozone-depleting substances.

28. Revise subpart 23.9 to read as follows:

Subpart 23.9--Contractor Compliance With Environmental Management Systems

Sec.

23.900 Scope.

23.901 Authority.

23.902 Policy.

23.903 Contract clause.

Subpart 23.9--Contractor Compliance With Environmental Management Systems

23.900 Scope.

This subpart implements the environmental management systems requirements for contractors.

23.901 Authority.

(a) Executive Order 13423 of January 24, 2007, Strengthening Federal Environmental, Energy, and Transportation Management.

(b) Executive Order 13514 of October 5, 2009, Federal Leadership in Environmental, Energy, and Economic Performance.

23.902 Policy.

(a) Agencies shall implement environmental management systems (EMS) at all appropriate organizational levels. Where contractor activities affect an agency's environmental management aspects, EMS requirements shall be included in contracts to ensure proper implementation and execution of EMS roles and responsibilities.

(b) The contracting officer shall--

(1) Specify the EMS directives with which the contractor must comply; and

(2) Ensure contractor compliance to the same extent as the agency would be required to comply, if the agency operated the facilities or vehicles.

23.903 Contract clause.

The contracting officer shall insert the clause at 52.223-19, Compliance With Environmental Management Systems, in all solicitations and contracts for contractor operation of Government-owned or -leased facilities or vehicles, located in the United States. For facilities located outside the United States, the agency head may determine that use of the clause is in the best interest of the Government.

29. Amend section 23.1001 by revising paragraph (c); and adding paragraph (d) to read as follows:

23.1001 Authorities.

* * * * *

(c) Executive Order 13423 of January 24, 2007, Strengthening Federal Environmental, Energy, and Transportation Management.

(d) Executive Order 13514 of October 5, 2009, Federal Leadership in Environmental, Energy, and Economic Performance.

23.1003 [Amended]

30. Amend section 23.1003 by removing the definition ``Priority chemical''.

31. Revise section 23.1004 to read as follows:

23.1004 Requirements.

(a) Federal facilities are required to comply with--

(1) The emergency planning and toxic release reporting requirements in EPCRA and PPA; and

(2) The toxic chemical, and hazardous substance release and use reduction goals of sections 2(e) and 3(a)(vi) of Executive Order 13423.

(b) Pursuant to EPCRA, PPA, E.O. 13423, and any agency implementing procedures, every new contract that provides for performance on a Federal facility shall require the contractor to provide information necessary for the Federal agency to comply with the--

(1) Requirements in paragraph (a) of this section; and

(2) Requirements for EMSs and FCAs if the place of performance is at a Federal facility designated by the agency.

PART 36--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

32. Add section 36.001 to read as follows:

36.001 Definitions.

As used in this part--

Construction and demolition materials and debris means materials and debris generated during construction, renovation, demolition, or dismantling of all structures and buildings and associated infrastructure.

Diverting means redirecting materials that might otherwise be placed in the waste stream to recycling or recovery, excluding diversion to waste-to-energy facilities.

33. Revise section 36.104 to read as follows:

36.104 Policy.

(a) Unless the traditional acquisition approach of design-bid-build established under the Brooks Architect-Engineers Act (40 U.S.C. 1101 et seq.) or another acquisition procedure authorized by law is used, the contracting officer shall use the two-phase selection procedures authorized by 10 U.S.C. 2305a or 41 U.S.C. 253m when entering into a contract for the design and construction of a public building, facility, or work, if the contracting officer makes a determination that the procedures are appropriate for use (see subpart 36.3). Other acquisition procedures authorized by law include the procedures established in this part and other parts of this chapter and, for DoD, the design-build process described in 10 U.S.C. 2862.

(b) Agencies shall implement high-performance sustainable building design, construction, renovation, repair, commissioning, operation and maintenance, management, and deconstruction practices so as to--

(1) Ensure that all new construction, major renovation, or repair and alteration of Federal buildings complies with the Guiding Principles for Federal Leadership in High-Performance and Sustainable Buildings (available at http://www.wbdg.org/pdfs/hpsb_guidance.pdf);

(2) Pursue cost-effective, innovative strategies, such as highly reflective and vegetated roofs, to minimize consumption of energy, water, and materials;

(3) Identify alternatives to renovation that reduce existing assets' deferred maintenance costs;

(4) Ensure that rehabilitation of Federally-owned historic buildings utilizes best practices and technologies in retrofitting to promote long-term viability of the buildings; and

(5) Ensure pollution prevention and eliminate waste by diverting at least 50 percent of construction and demolition materials and debris by the end of Fiscal Year 2015.

PART 37--SERVICE CONTRACTING

34. Amend section 37.102 by adding paragraph (i) to read as follows:

37.102 Policy.

* * * * *

(i) Agencies shall ensure that service contracts that require the delivery, use, or furnishing of products are consistent with part 23.

PART 39--ACQUISITION OF INFORMATION TECHNOLOGY

35. Amend section 39.101 by revising paragraph (b)(1) to read as follows:

39.101 Policy.

* * * * *

(b)(1) In acquiring information technology, agencies shall identify their requirements pursuant to--

(i) OMB Circular A-130, including consideration of security of resources, protection of privacy, national security and emergency preparedness, accommodations for individuals with disabilities, and energy efficiency;

(ii) Electronic Product Environmental Assessment Tool (EPEAT) standards (see 23.704);

(iii) Policies to enable power management, double-sided printing, and other energy-efficient or environmentally preferable features on all agency electronic products; and

(iv) Best management practices for energy-efficient management of servers and Federal data centers.

* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

36. Revise section 52.204-4 to read as follows:

52.204-4 Printed or Copied Double-Sided on Postconsumer Fiber Content Paper.

As prescribed in 4.303, insert the following clause:

Printed or Copied Double-Sided on Postconsumer Fiber Content Paper (May 2011)

(a) Definitions. As used in this clause--

Postconsumer fiber means--(1) Paper, paperboard, and fibrous materials from retail stores, office buildings, homes, and so forth, after they have passed through their end-usage as a consumer item, including: used corrugated boxes; old newspapers; old magazines; mixed waste paper; tabulating cards; and used cordage; or

(2) All paper, paperboard, and fibrous materials that enter and are collected from municipal solid waste; but not

(3) Fiber derived from printers' over-runs, converters' scrap, and over-issue publications.

(b) The Contractor is required to submit paper documents, such as offers, letters, or reports that are printed or copied double-sided on paper containing at least 30 percent postconsumer fiber, whenever practicable, when not using electronic commerce methods to submit information or data to the Government.

(End of clause)

37. Amend section 52.204-8 by revising the date of the provision; removing paragraph (c)(2)(vi); and redesignating paragraphs (c)(2)(vii) and (viii) as paragraphs (c)(2)(vi) and (vii), respectively.

The revised text reads as follows:

52.204-8 Annual Representations and Certifications.

* * * * *

Annual Representations and Certifications (May 2011)

* * * * *

38. Amend section 52.213-4 by revising the date of the clause and paragraph (b)(1)(vii) to read as follows:

52.213-4 Terms and Conditions--Simplified Acquisitions (Other Than Commercial Items).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial Items) (May 2011)

* * * * *

(b) * * *

(1) * * *

(vii) 52.223-5, Pollution Prevention and Right-to-Know Information (May 2011) (E.O. 13423) (Applies to services performed on Federal facilities).

* * * * *

39. Amend section 52.223-5 by--

a. Revising the date of the clause;

b. Removing from paragraph (a) the definition ``Priority chemical'';

c. Revising paragraphs (b) and (c)(6);

d. Revising the date of Alternate I and paragraph (c)(7); and

e. Revising the date of Alternate II and paragraph (c)(7).

The revised text reads as follows:

52.223-5 Pollution Prevention and Right-to-Know Information.

* * * * *

Pollution Prevention and Right-to-Know Information (May 2011)

* * * * *

(b) Federal facilities are required to comply with the provisions of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA) (42 U.S.C. 11001-11050), and the Pollution Prevention Act of 1990 (PPA) (42 U.S.C. 13101-13109).

(c) * * *

(6) The toxic chemical and hazardous substance release and use reduction goals of section 2(e) of Executive Order 13423 and of Executive Order 13514.

* * * * *

Alternate I (May 2011). * * *

(c)(7) The environmental management system as described in section 3(b) of E.O. 13423 and 2(j) of E.O. 13514.

Alternate II (May 2011). * * *

(c)(7) The facility compliance audits as described in section 3(c) of E.O. 13423.

40. Amend section 52.223-10 by revising the introductory paragraph, the date of the clause, and the first sentence of paragraph (b) to read as follows:

52.223-10 Waste Reduction Program.

As prescribed in 23.705(a), insert the following clause:

Waste Reduction Program (May 2011)

* * * * *

(b) Consistent with the requirements of section 3(e) of Executive Order 13423, the Contractor shall establish a program to promote cost-effective waste reduction in all operations and facilities covered by this contract. * * *

52.223-13 and 52.223-14 [Removed and Reserved]

41. Remove and reserve sections 52.223-13 and 52.223-14.

42. Amend section 52.223-16 by revising the introductory paragraph, and the introductory paragraph of Alternate I to read as follows:

52.223-16 IEEE 1680 Standard for the Environmental Assessment of Personal Computer Products.

As prescribed in 23.705(b)(1), insert the following clause:

* * * * *

Alternate I (Dec 2007). As prescribed in 23.705(b)(2), substitute the following paragraph (b) for paragraph (b) of the basic clause:

* * * * *

43. Add section 52.223-19 to read as follows:

52.223-19 Compliance with Environmental Management Systems.

As prescribed in 23.903, insert the following clause:

Compliance With Environmental Management Systems (May 2011)

The Contractor's work under this contract shall conform with all operational controls identified in the applicable agency or facility Environmental Management Systems and provide monitoring and measurement information necessary for the Government to address environmental performance relative to the goals of the Environmental Management Systems.

(End of clause)

[FR Doc. 2011-12851 Filed 5-27-11; 8:45 am]

BILLING CODE 6820-EP-P

[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]

[Rules and Regulations]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2011-12852]

-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 4, 42, and 52

[FAC 2005-52; FAR Case 2008-020; Item II; Docket 2009-0031, Sequence 1]

RIN 9000-AL43

Federal Acquisition Regulation; Contract Closeout

AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) procedures for closing out contract files. This case revises procedures for clearing final patent reports and quick-closeout procedure, and sets forth a description of an adequate final indirect cost rate proposal and supporting data.

DATES: Effective Date: June 30, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Clare McFadden, Procurement Analyst, at (202) 501-0044, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-52, FAR Case 2008-020.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA published a proposed rule in the Federal Register at 74 FR 42044 on August 20, 2009. Sixteen respondents provided comments. The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the comments in development of the final rule.

II. Discussion and Analysis of the Public Comments

Comments received were grouped under 13 general topics. A discussion of the comments and the changes made to the rule as a result of those comments are provided as follows:

A. ``Adequacy'' Definition

The final rule implements the changes published in the proposed rule, without further amendments in response to comments in this category.

Comment: One respondent recommends a new definition for ``adequacy'' at FAR 42.705-1. The respondent states that guidelines for determining adequacy should be established in order to provide a baseline against which the contracting officer can resolve differences of opinion on adequacy between the auditor and the contractor.

Response: A new definition is not necessary, as specific information has been provided in the clause to ensure uniformity, consistency, and fairness for all contractors. This assures that contractors are fully informed in advance of the Government's parameters for the content of an adequate final indirect cost rate proposal.

B. Adequacy Determination

The final rule implements the changes published in the proposed rule, without further amendments in response to comments in this category.

Comment: One respondent recommends the term ``adequate'' be replaced with ``complete'' or ``detailed'' at FAR 42.705-1(b). The respondent states that the phrase ``the contractor shall submit * * * an adequate indirect cost rate proposal'' is inappropriate, as the Defense Contract Audit Agency (DCAA) has historically interpreted the term ``adequate'' to mean identical to DCAA's incurred cost model.

Response: Use of the term ``adequate'' for describing the Government's requirements for submission of costs is more appropriate than utilizing the terms ``complete'' or ``detailed''. The FAR already required the submission of an adequate final indirect cost rate proposal (FAR 42.705-1(b)). This final rule establishes the content of an adequate submission.

C. Adequacy Determination and Roles

The final rule includes amendments to FAR 42.705-1(b) and 42.705-2(b) in response to comments in this category.

Comment: One respondent recommends that the granting of an extension to the contractor for submitting its indirect cost rate proposal by the contracting officer be made in writing at FAR 42.705-1(b)(1)(i).

Response: The language at FAR 42.705-1(b)(1)(ii) is revised accordingly. Comments: Five respondents question whether it is appropriate for DCAA to have sole responsibility to determine the adequacy of indirect cost rate proposals. One respondent believes a determination from the auditor exceeds the auditor's authority under law.

Three respondents state that any final determination regarding adequacy should be the responsibility of the contracting officer. One respondent states that the contracting officer/auditor relationship that is provided for in the audit process should be followed.

Response: The term ``determination'' in this case was not intended to shift the authority to make determinations from the contracting officer to the auditor; rather, the intent was for the auditor to offer advice to the contracting officer regarding adequacy of the proposal. The language in 42.705-1(b)(1)(iii), 42.705-1(b)(2), and 42.705-2(b) has been revised to remove the term ``determination'' and to clarify that the auditor reviews the proposal for adequacy and provides the findings of inadequacy to the contracting officer and contractor.

Comment: One respondent states that the proposed rule creates a review process within which there is little latitude for a contracting officer to resolve administrative disagreements between auditors and contractors.

Response: The rule does not diminish the latitude or the authority that contracting officers have to resolve any and all matters arising under the contract with respect to an indirect cost rate proposal. The current FAR already allows flexibility for the content based on the situation, e.g., complexity and size of the contractor.

Comment: One respondent states that the proposed changes at FAR 42.705-1(b)(1)(iv) and FAR 52.216-7(d) contradict FAR 42.705-1(b)(1)(i), which requires the parties to work together to make the proposal, audit, and negotiation process as efficient as possible. The proposed default choice requiring data in FAR 52.216-7(d)(2)(iii) will result in contractors trying to provide unrelated data to avoid an auditor's automatic ``checklist'' determination of inadequate proposals. Such rigid requirements will lead to an increase in disagreements about the adequacy of final indirect cost rate proposals.

Response: The process of reviewing the proposal for adequacy, performing the audit, and conducting negotiations has not changed. Also, no new requirement is imposed on contractors by this rule. The list of data (schedules) now included in FAR 52.216-7(d) requires the same information previously cited in FAR 42.705-1(b).

D. Adequacy of Indirect Cost Rate Proposal

The final rule includes amendments to FAR 52.216-7(d)(2)(iv) in response to comments in this category.

Comment: One respondent agrees with the proposed language at FAR 42.705-1 as positive changes.

Comment: One respondent states that the proposed rule was not clear as to whether the list of required data in FAR 52.216-7(d)(2)(iv) that ``may'' be submitted with the proposal will be considered in making a determination of the adequacy of the contractor's proposal. The respondent recommends clarification.

Response: The language at FAR 52.216-7(d)(2)(iv) has been revised by replacing ``will'' with ``may''; however, clarification of FAR 42.705-1(b)(1)(ii) is not necessary. The supplemental information listed in FAR 52.216-7(d)(2)(iv) is not required for a determination on the adequacy for the contractor's proposal for audit.

Comment: One respondent states that the proposed statement at FAR 42.705-1(b)(1)(iii) ``The proposal must be supported with adequate supporting data, which may be required subsequent to proposal submission'' is repetitious of FAR 52.216-7(d)(iv) and unnecessary. The respondent further states that the statement adds a level of subjectivity as contractors guess at what information ``may be required'' subsequent to submission.

Response: The contractor's requirements are located in the clause at FAR 52.216-7(d)(2)(iv). The FAR 42.705-1(b)(1)(iv) text is directed to the contracting officer, explaining the supplemental information that is required by contract clause, FAR clause 52.216-7, Allowable Cost and Payment. The language directed to the contracting officer and the contract clause serve different purposes; therefore, both are necessary.

Comment: One respondent recommends rescinding the proposed rule and revising the approach to determining adequacy. The respondent states that the approach taken to set forth a description of an adequate final indirect cost rate proposal and supporting data fails to improve the process and unnecessarily creates additional and very significant process and administrative problems.

Response: The rule will provide uniformity and consistency.

Further, the information is not new and should be readily available from the contractor's books, records, and systems.

E. Data Requirements

The final rule includes amendments to FAR 52.216-7(d)(2)(iv) in response to the comments in this category. Many respondents submitted comments regarding data requirements.

Comments: Three respondents submitted comments objecting to the volume of data required for determination of an adequate indirect cost rate proposal.

Response: The revisions to FAR 42.705-1 and FAR 52.216-7 are necessary to clarify the submission of an adequate indirect cost rate proposal. While the information required may be considered lengthy, it is not new, and it is essential information necessary for an adequate claim for cost.

Comments: Four respondents believe the proposed rule is overly prescriptive. One respondent specifically suggests the rule is a regulation to legitimize DCAA's longstanding insistence that an adequate final indirect cost rate proposal be inclusive of several mandatory schedules and supplemental information as represented by DCAA within its Model Incurred Cost Proposal rate as stipulated in DCAA Pamphlet No. 7641.90. This respondent further takes the position that use of the DCAA model schedule information eliminates any opportunity for further variation in proposal content.

Response: The information required from the contractor for an adequate indirect cost rate proposal is not new. No specific format is prescribed for the submission. This information is readily available in the contractor's books, records, and systems. DCAA has been the primary provider of information necessary for contracting officers to adequately perform their functions as stewards of public trust. Furthermore, the revised language ``shall include the following data, unless otherwise specified by the cognizant Federal agency official'' allows flexibility, depending on the circumstances of the contract (e.g., size, complexity).

Comments: Four respondents submitted four comments objecting to the inclusion of one or more schedule items and stated that some of the information proposed to be required for an adequate submission is not necessary for an adequate contractor rate submission.

Response: The information required in the schedules is the minimum standard for an adequate indirect cost rate proposal. For example, the information in FAR 52.216-7(d)(2)(iii) item G, reconciliation of books of account and claimed direct costs, is necessary for an adequate submission and different from the information requested for item H, which is a schedule of direct costs by contract/subcontract and indirect expenses applied. The rule language does not require the reconciliation to be presented in a single schedule. An updated schedule (as specified in FAR 52.216-7(d)(2)(v)) is necessary to ensure timely adjustments to amounts claimed and billed by a contractor for the period covered by the final indirect cost rate determination.

Comment: One respondent states that ``a requirement for the adequacy of an indirect cost rate submission that final direct costs must be submitted for audit is out of the scope of this clause'' at FAR 52.216-7(g).

Response: This rule does not amend paragraph (g) of the clause at FAR 52.216-7, which has no bearing on the adequacy of an indirect cost rate submission as required by FAR 52.216-7(d)(2)(iii). The Government has the right to audit any invoice or voucher and statements of cost prior to final payment pursuant to FAR 52.216-7.

Comments: Two respondents submitted comments in regard to formatting. One respondent states that DCAA's insistence that data be converted into other formats (such as spreadsheets using DCAA's ICE Model) is in direct contradiction of FAR 52.215-2(d)(2) that access to records ``may not be construed to require the contractor or subcontractor to create or maintain any record that the contractor or subcontractor does not maintain in the ordinary course of business or pursuant to a provision of law.'' The other respondent suggests that the proposed revision at FAR 42.705-1(b)(1) eliminates the suggestion in the current rule that contractors can use the DCAA model incurred cost rate proposal and supporting data for guidance on what constitutes an adequate final indirect cost rate proposal. According to the respondent, this proposed revision also refers the definition of adequacy to the revised clause at FAR 52.216-7(d)(2), which makes mandatory specific schedules and data requirements taken almost verbatim from the DCAA ICE Model.

Response: The information required from the contractor for an adequate indirect cost rate proposal is not new. No specific format is prescribed for the submission. This information should be readily available in the contractor's books, records, and systems.

Comment: One respondent states that the list of requirements proposed at FAR 52.216-7(d)(2) is contradictory to the definition of supporting documentation for final indirect cost rate proposals in the current FAR. According to FAR 31.201-2(d), supporting documentation means records necessary to demonstrate the costs claimed in the proposal have been incurred, are allocable to the contract, and comply with applicable cost principles. This makes clear the meaning of the current FAR 52.216-7(d), ``The contractor shall support its proposal with adequate supporting documentation.''

Response: The cost principles are not intended to set forth the submission requirements of an adequate indirect cost rate proposal.

Comment: One respondent states he does not believe that the proposed rule is in line with the FAR objective of achieving a timely settlement of final indirect rates. The rule delineates extensive requirements and supplemental data related to the description of an adequate final indirect cost rate proposal that are unnecessarily burdensome and largely irrelevant to indirect cost rate proposals. Levying requirements for the creation of new books and records as supporting documentation for costs is contradictory to existing provisions of FAR 52.215-2. The respondent is concerned that many of the proposed data requirements under the proposed rule have no connection to the indirect cost rates and may result in the unnecessary disclosure of proprietary information, e.g., schedules O and L.

Response: The revisions to FAR 42.705-1 and FAR 52.216-7 are necessary to clarify the submission of an adequate indirect cost rate proposal. The information required is necessary for an adequate claim for cost. The supplemental information, if applicable, is what auditors expect to review in support of an adequate claim for cost. The proposed language ``shall include the following data, unless otherwise specified by the cognizant Federal agency official'' allows flexibility depending on the circumstances of the contract (e.g. size, complexity). The nformation being requested should be readily available from the contractor's accounting system. The information is not new and the format of the information has not been designated for the contractor. The Government treats all audit information from contractors as confidential and protects it against all unauthorized disclosure.

Comment: One respondent states that the list of data required by FAR 52.216-7 (regardless of type of business, sector, or accounting system) is inconsistent and contradictory to FAR 42.705-1(b)(1)(i), which states that the ``required content of the proposal and supporting data will vary depending on such factors as business type, size, and accounting system capabilities.'' The final rule should afford contractors the flexibility to provide only that information necessary to support an indirect cost rate proposal.

Response: The information required from the contractor for an adequate indirect cost rate proposal is not new. No specific format is prescribed for the submission. This information is readily available in the contractor's books, records, and systems. DCAA has been the primary provider for information necessary for contracting officers to adequately perform their functions as stewards of the public trust.

Comment: One respondent takes exception to the statement in FAR 52.216-7(d)(2)(iv) that ``The following supplemental information which will be required during the audit process * * *'' and suggests it should be restated ``the following supplemental information may be required * * *.''

Response: The language has been revised to read ``the following supplemental information is not required to determine if a proposal is adequate, but may be required during the audit process.''

F. Indirect Cost Rate Proposal

The final rule implements the changes published in the proposed rule, without further amendments in response to the comments in this category.

Comment: One respondent states that the indirect cost rate proposal mandates at FAR 52.216-7 will result in an increase in proposal rejections, administrative costs and burden, and will significantly delay contract closeout.

Response: The information will provide uniformity, consistency, timeliness, and reduce the number of proposals being returned as inadequate.

Comment: One respondent agrees with the language to require a completion invoice to be submitted within 120 days after all rates have been settled for all years during a contract's period of performance and require inclusion of settled subcontract amounts and rates at FAR 52.216-7(d)(5) may assist in more timely completion of indirect cost audits and facilitate closeout. The respondent further agrees with the list set forth for an adequate indirect cost rate proposal.

Response: No response required.

Comment: One respondent states that timely closeout of subcontracts issued under a Government prime contract should be addressed and that contracting officers should be empowered and encouraged to unilaterally close out the prime contract, even if subcontracts have not been settled.

Response: The prime contractor is responsible for resolution of subcontract costs and rates prior to submission of final vouchers. FAR 52.216-7(d)(6)(i) allows the contracting officer to unilaterally close out a prime contract, when the contractor fails to submit a final voucher within 120 days.

G. Final Patent Report

The final rule implements the changes published in the proposed rule, without further amendments in response to the comments in this category.

Comment: One respondent states that if clearance by the contracting officer is not received within 60 days of receipt of the final patent report, the contract can be closed (FAR 4.804-5(a)(2)).

Two respondents recommend timelines be established (FAR 4.804-5). One respondent states that patent reports are seldom, if ever, cleared within 60 days and recommends timelines be established for both the contractor and legal community with finite time constraints to respond. The other respondent suggests establishing a time period for responding to the contracting officer's notification.

Response: The final rule provides for 60 days for the clearance of patent reports and allows for flexibility on a case-by-case basis. Any further clarification, if needed, should be provided in agency guidance.

Comment: One respondent suggests revising FAR 4.804-5(a)(2)(i) to read ``Final Patent Reports, where no contractor invention is disclosed should be cleared within 60 days of receipt.''

Response: The inclusion of the language ``where no contractor invention is disclosed'' is not necessary because the patent report may be cleared whether an invention is disclosed or not.

Comment: Two respondents concur with the proposed procedures for clearing final patent reports.

Response: Comment noted.

H. Payment Withhold

The final rule implements the changes published in the proposed rule, without further amendments in response to the comments in this category.

Comment: One respondent states that the rule, in regard to payment withholds, should allow the contracting officer to use their discretion regarding whether to withhold payment so that the provision is applied only when necessary.

Response: The institution of a uniform policy is more appropriate because the contracting officer will know what is required, as a minimum, for fee withholds for all contract types. This uniform policy will help to facilitate contract closeout by encouraging timely submission of final indirect cost rate proposals and final vouchers.

Comment: One respondent states that the retainage of a maximum of $100,000 is a good start, but for large contractors it is not much of a disincentive for the untimely submission of New Technology/Patent Reports and recommends the retainage be changed to 15 percent of the fee. This respondent also states that changes in the proposed rule may facilitate closeout; however, withholding of $100,000 in fee is insufficient to influence the actions of larger contractors.

Another respondent does not believe that the withhold changes in FAR 52.216-8, 52.216-9, and 52.216-10 are necessary; the changes should be rescinded; and, the current clauses remain in their current form.

Response: The intent of this FAR case is not to change the amount of the withholdings. The intent is to make the fee withholds mandatory, not optional, and to define an adequate indirect cost rate proposal.

Comments: Two respondents object to the allegedly arbitrary fee withholds that will negatively impact cash flow, harm the industrial base, and increase the amount of cancelled funds. Also, the other respondent states that the prescribed withholding of fee will result in contracting officers experiencing significant ongoing contract administration issues with expiring funds with no clear benefit.

Response: The intent of this FAR case is not to change the amount of the fee withholdings. The intent is to make the fee withholds mandatory, not optional, and to define an adequate indirect cost rate proposal. The proposed rule does not change the current procedures in regard to expiring funds.

Comment: One respondent objects to making the proposed fee withholds mandatory because there are existing FAR provisions that already provide for fee withholds so no change is necessary. The combined effect of adding an exhaustive, ill fitting list of requirements for an adequate indirect cost rate proposal with mandatory fee withholds for inadequacy means that inevitable differences in interpreting the new rule will punish contractors unfairly and unilaterally. It is contrary to FAR 42.705-1(b) and could result in increases in the amount of cancelled funds.

Response: It is in the Government's best interest to set a uniform policy to establish mandatory fee withholds and define an adequate indirect cost rate proposal.

I. Quick-Closeout

The final rule includes amendments to FAR 42.708(a), in response to comments in this category.

Five respondents provided comments in this category.

Comment: One respondent welcomes the change at FAR 42.708(a) through (d) but requests clarification of direct costs to be allocated to a cost contract as direct costs are normally assigned/charged rather than allocated to contracts.

Response: The language is revised in FAR 42.708(a)(2) to read ``unsettled direct costs and indirect costs to be allocated to the contract.''

Comment: One respondent states that setting the limitation at FAR 42.708(a)(2)(i) to 20 percent is inconsistent with the historical intent of the provision to settle only an ``insignificant'' portion of the costs in advance of determination of final costs and rates. The respondent recommends a percentage of 10 or less.

Response: This rule changes the criteria for use of quick-closeout procedures from unsettled indirect rates on the contract as a percentage of total unsettled indirect costs, to both unsettled direct and indirect contract costs as a percentage of total claimed contract costs. The Councils believe this change expands the number of contracting actions, which will meet the criteria for quick-closeout. The limitation has been lowered from the proposed 20 percent to 10 percent of the total unsettled direct and indirect costs to be allocated to any one contract. The coverage is also revised in FAR 42.708(a)(2) to state that ``Cost amounts will be considered relatively insignificant when the total unsettled direct costs and indirect costs to be allocated to any one contract, task order, or delivery order, do not exceed the lesser of (i) $1,000,000; or (ii) 10 percent of the total contract, task order, or delivery order amount.'' The Councils believe the percentage and monetary threshold should be lower because the lower percentage and dollar threshold will provide increased oversight and reduced risk to the government. The $1,000,000 threshold aligns with current inventories of physically-complete contracts that are amenable to use of quick-closeout procedures.

Comments: Three respondents comment that the proposed revisions limiting the use of quick-closeout procedures are counter-productive and will decrease their use. One respondent recommends adopting the Defense Contract Management Agency (DCMA) Class Deviation in FAR 42.703-1(b), 42.703-1(c)(2), and 42.708(a)(2) entitled ``use of quick-closeout procedures for cost-reimbursement, fixed-price incentive, fixed-price redeterminable, and time-and-material contracts.'' Another respondent recommends deletion of the phrase ``other concerns of the cognizant auditor'' at FAR 42.708(a)(2)(i) in the risk assessment verbiage. The respondent also recommends that unsettled direct costs be defined.

Response: Previously, the FAR limited the use of quick-closeout procedures to instances where only indirect cost rates remain unsettled. This final rule allows the contracting officer to close contracts with unaudited direct costs and unsettled indirect cost rates. The intent of the rule is to increase the use of quick-closeout procedures for instances involving relatively insignificant amounts of unaudited costs under certain circumstances. DCMA's deviation does not allow the contracting officer to close out contracts without audit of all direct costs. The contracting officer's risk assessment plan includes coordination with the cognizant auditor. There is no need for a definition of ``unsettled direct costs'' because unsettled direct costs are identified on a case-by-case basis.

J. Timelines for the Government

The final rule implements the changes published in the proposed rule, without further amendments in response to the comments in this category.

Comment: One respondent states that the ``provision at FAR 42.705-1(b)(ii) does not state a time limitation for the auditor to make a written determination of adequacy.'' Also, according to the respondent, time limitations should be established for completing audits.

Another respondent states that the Government needs to emphasize its role, including timely finalization of indirect rates, which includes DCAA completing audits of indirect costs proposals and administrative contracting officer's settling rates, signing off on reports, doing plant clearances, etc. Another respondent states that the rule does not define time requirements which all parties, not just contractors, must meet.

Response: Timelines should not be instituted for auditors to make a written determination of adequacy or for completion of audits, and for administrative contracting officers to settle rates, sign off on reports, do plant clearances, etc., in order to ensure quality and

allow flexibility, based on the size and complexity of each contract.

Comment: One respondent does not believe that the proposed rule will achieve any predictable reduction of time or resources associated with contract closeout.

Response: This rule clarifies the contract closeout process.

K. Regulatory Flexibility Act

Comments: One respondent questions the statement within the Regulatory Flexibility Act section of the preamble to the proposed rule that the rule is intended to ``clarify and streamline'' closeout procedures. The respondent further suggests that adoption of the DCAA Model Incurred Cost Proposal rate is not justified. Another respondent does not agree that the rule will not have a significant impact on a substantial number of small entities. The respondent believes that the numbers of schedules and the imposition of a six-month time constraint will have significant impact on small businesses. The third respondent also strongly disagrees with the conclusion that the proposed rule will not have a significant economic impact on a substantial number of small entities. Requiring preparation and submittal of DCAA's Model Indirect Cost Proposal rate and withholding fees, the proposed rule will have a significant economic impact on a substantial number of small entities. The respondent encourages the Councils to prepare and make available for public comment an initial regulatory flexibility analysis.

Response: Contractors are already required to support their indirect cost rate proposals with adequate supporting data. (See FAR 42.705-1(b).) No new requirement is imposed on contractors by this rule. The changes to FAR parts 4 and 42 clarify and streamline closeout procedures. The model for an adequate indirect cost rate proposal is contained in the DCAA Model Incurred Cost Proposal rate. The data required in this model is not new to contractors nor is there evidence of any effect on small businesses when this information is required. In fact, because the information required is not new and the format of the information has not been designated for the contractor, this should be helpful to small businesses. The information being requested should be readily available from the contractor's accounting system. The inclusion of this information list should improve consistency, efficiency, and timeliness in contractor submissions. The clauses at FAR 52.216-8, 52.216-9, and 52.216-10 are being changed to make the reserve mandatory. However, the reserve amount set aside in the proposed rule has not changed. No small businesses commented on the changes to the clauses at FAR 52.216-8, 52.216-9, and 52.216-10 as published in the proposed rule. Therefore, the Councils conclude that this change will not have a significant impact on small businesses.

L. Paperwork Reduction Act

Comments: Several respondents disagree with the preamble to the proposed rule, which stated that the proposed changes to the FAR would not impose additional information collection requirements to the paperwork burden previously approved by the Office of Management and Budget (OMB). According to one respondent, mandating preparation and submittal of DCAA's model indirect cost rate proposal for every contract that requires an indirect cost rate proposal will significantly increase the paperwork burdens.

Response: No new requirement is imposed on contractors by this proposed rule. The schedules now contained in FAR 52.216-7(d) require the same information previously cited in FAR 42.705-1(b). FAR 42.705-1(b) requires contractors to submit an adequate final indirect cost rate proposal to the contracting officer and auditor within the 6-month period following the expiration of each of its fiscal years. This requirement is contained in OMB Clearance 9000-0013. The clause at FAR 52.216-7, Allowable Cost and Payment, is covered by OMB Clearance 9000-0069. The clause at FAR 52.216-10, Incentive Fee, is covered by OMB Clearance 9000-0067.

M. General

There are no revisions to the FAR based on this comment category.

Comment: One respondent inquires as to why the FAR case and new clause are limited to DoD, GSA, and NASA and that other civilian agencies would benefit from the new streamlined procedures as well.

Response: By law, 41 U.S.C. 1302 (formerly 41 U.S.C. 421(b)), DoD, GSA, and NASA are the signatories of the FAR. GSA signs on behalf of all the other civilian agencies that are subject to the FAR except NASA. The final rule is applicable Government-wide to those executive agencies under the Federal Acquisition Regulations System.

Comment: One respondent recommends that ``contracting officers should be encouraged to unilaterally de-obligate cancelling funds as an administrative action without fear of violating anti-deficiency or other contracting protocols.''

Another respondent recommends that a timeframe should be targeted for the replacement of cancelled funds.

Response: These comments on funding are outside the scope of this case.

Comments: Two respondents question the application of this rule to the FAR guiding principles in FAR 1.102.

Response: This guidance helps to clarify the requirements of an adequate submission of an indirect cost rate proposal. The guidance for the proper submission of an adequate indirect cost rate proposal is provided to contractors in the clause at FAR 52.216-7. The inclusion of this list of information should help to provide consistency, efficiency, and more timely submission.

N. Summary of Changes

The Councils made the following changes to the FAR as a result of the public comments:

1. Revised FAR 42.705-1(b)(1) to be consistent with language at FAR 52.216-7(d)(2).

2. Revised FAR 42.705-1(b) and 42.705-2(b)(2) to clarify the role of the auditor.

The term ``determination'' was removed from proposed 42.705-1(b)(1)(ii);

FAR 42.705-1(b)(1)(iii), 42.705-1(b)(2), and 42.705-2(b) clarify that the auditor--

[cir] Reviews the proposal for adequacy and provides the findings of inadequacy to the contractor and contracting officer; and

[cir] Prepares an advisory audit report, after the proposal has been determined to be adequate for audit.

3. Revised FAR 42.708(a)(2) to lower the percentage limitation in the existing quick-closeout criteria. FAR 42.708 (a)(2)(i) dollar limitation reverts to $1,000,000, instead of $4,000,000 in the proposed rule. Renumbered FAR 42.708(a)(3) as FAR 42.708(a)(4) and added a new paragraph FAR 42.708(a)(3). Provided examples of other pertinent information at new paragraph FAR 42.708(a)(3)(iii).

4. Revised FAR 52.216-7(d)(2)(iii) to further illustrate the data.

5. Revised FAR 52.216-7(d)(2)(iv) to clarify that the supplemental information listed, although it may not be required for a determination on the adequacy of the contractor's proposal, may be required during the audit process.

6. Revised FAR 52.216-7(d)(2)(iii) and (d)(2)(iv) to clarify items provided for adequate final indirect cost rate proposal at FAR 52.216-7(d)(2)(i).

III. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

The Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration certify that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule does not impose any additional requirements on small businesses. The changes to FAR parts 4 and 42 clarify and streamline closeout procedures. The changes to the clauses at FAR 52.216-8, 52.216-9, and 52.216-10 allow for a reserve to be set-aside to protect the Government's interest. Contracting Officers already may set aside a reserve under current FAR procedures.

V. Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C. chapter 35) does apply; however these changes to the FAR do not impose additional information collection requirements to the paperwork burden previously approved under the following:

OMB Control Number 9000-0013, titled: Cost or Pricing Data Requirements Information Other Than Cost or Pricing Data;

OMB Control Number 9000-0067, titled: Incentive Contract; and

OMB Control Number 9000-0069, titled: Indirect Cost Rates.

List of Subjects in 48 CFR Parts 4, 42, and 52

Government procurement.

Dated: May 18, 2011.

Millisa Gary,

Acting Director, Office of Governmentwide Acquisition Policy.

Therefore, DoD, GSA, and NASA amend 48 CFR parts 4, 42, and 52 as set forth below:

1. The authority citation for 48 CFR parts 4, 42, and 52 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

PART 4--ADMINISTRATIVE MATTERS

2. Amend section 4.804-5 by revising paragraph (a)(2) to read as follows.

4.804-5 Procedures for closing out contract files.

(a) * * *

(2) Final patent report is cleared. If a final patent report is required, the contracting officer may proceed with contract closeout in accordance with the following procedures, or as otherwise prescribed by agency procedures:

(i) Final patent reports should be cleared within 60 days of receipt.

(ii) If the final patent report is not received, the contracting officer shall notify the contractor of the contractor's obligations and the Government's rights under the applicable patent rights clause, in accordance with 27.303. If the contractor fails to respond to this notification, the contracting officer may proceed with contract closeout upon consultation with the agency legal counsel responsible for patent matters regarding the contractor's failure to respond.* * * * *

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES

3. Amend section 42.705-1 by revising paragraphs (b)(1) and (b)(2) to read as follows:

42.705-1 Contracting officer determination procedure.

* * * * *

(b) Procedures. (1) In accordance with the Allowable Cost and Payment clause at 52.216-7, the contractor is required to submit an adequate final indirect cost rate proposal to the contracting officer (or cognizant Federal agency official) and to the cognizant auditor.

(i) The required content of the proposal and supporting data will vary depending on such factors as business type, size, and accounting system capabilities. The contractor, contracting officer, and auditor must work together to make the proposal, audit, and negotiation process as efficient as possible.

(ii) Each contractor is required to submit the final indirect cost rate proposal within the six-month period following the expiration of each of its fiscal years. The contracting officer may grant, in writing, reasonable extensions, for exceptional circumstances only, when requested in writing by the contractor.

(iii) Upon receipt of the proposal--

(A) The cognizant auditor will review the adequacy of the contractor's proposal for audit in support of negotiating final indirect cost rates and will provide a written description of any inadequacies to the contractor and contracting officer.

(B) If the auditor and contractor are unable to resolve the proposal's inadequacies identified by the auditor, the auditor will elevate the issue to the contracting office to resolve the inadequacies.

(iv) The proposal must be supported with adequate supporting data, some of which may be required subsequent to finding that the proposais adequate for audit in support of negotiating final indirect cost rates (e.g., during the course of the performance of the advisory audit). See the clause at 52.216-7(d)(2) for the description of an adequate final indirect cost rate proposal and supporting data.

(2) Once a proposal has been determined to be adequate for audit in support of negotiating final indirect cost rates, the auditor will audit the proposal and prepare an advisory audit report to the contracting officer (or cognizant Federal agency official), including a listing of any relevant advance agreements or restrictive terms of specific contracts.

* * * * *

4. Amend section 42.705-2 by--

a. Revising the introductory text of paragraph (b)(2) and (b)(2)(i); and

b. Redesignating paragraphs (b)(2)(ii) through (iv) as paragraphs (b)(2)(iii) through (v), respectively; and adding a new paragraph (b)(2)(ii) to read as follows:

42.705-2 Auditor determination procedure.

* * * * *

(b) * * *

(2) Once a proposal has been determined to be adequate for audit in support of negotiating final indirect cost rates, the auditor shall--

(i) Audit the proposal and prepare an advisory audit report, including a listing of any relevant advance agreements or restrictive terms of specific contracts; (ii) Seek agreement on indirect costs with the contractor;

* * * * *

5. Amend section 42.708 by revising paragraph (a) to read as follows:

42.708 Quick-closeout procedure.

(a) The contracting officer responsible for contract closeout shall negotiate the settlement of direct and indirect costs for a specific contract, task order, or delivery order to be closed, in advance of the determination of final direct costs and indirect rates set forth in 42.705, if--

(1) The contract, task order, or delivery order is physically complete;

(2) The amount of unsettled direct costs and indirect costs to be allocated to the contract, task order, or delivery order is relatively insignificant. Cost amounts will be considered relatively insignificant when the total unsettled direct costs and indirect costs to be allocated to any one contract, task order, or delivery order does not exceed the lesser of--

(i) $1,000,000; or

(ii) 10 percent of the total contract, task order, or delivery order amount;

(3) The contracting officer performs a risk assessment and determines that the use of the quick-closeout procedure is appropriate. The risk assessment shall include--

(i) Consideration of the contractor's accounting, estimating, and purchasing systems;

(ii) Other concerns of the cognizant contract auditors; and

(iii) Any other pertinent information, such as, documented history of Federal Government approved indirect cost rate agreements, changes to contractor's rate structure, volatility of rate fluctuations during affected periods, mergers or acquisitions, special contract provisions limiting contractor's recovery of otherwise allowable indirect costs under cost reimbursement or time-and-materials contracts; and

(4) Agreement can be reached on a reasonable estimate of allocable dollars.

* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

6. Amend section 52.216-7 by--

a. Revising the date of the clause;

b. Adding paragraphs (d)(2)(iii) through (d)(2)(v); and

c. Adding two sentences to the end of paragraph (d)(5) to read as follows:

52.216-7 Allowable Cost and Payment.

* * * * *

Allowable Cost and Payment (JUN 2011)

* * * * *

(d) * * *

(2) * * *

(iii) An adequate indirect cost rate proposal shall include the following data unless otherwise specified by the cognizant Federal agency official:

(A) Summary of all claimed indirect expense rates, including pool, base, and calculated indirect rate.

(B) General and Administrative expenses (final indirect cost pool). Schedule of claimed expenses by element of cost as identified in accounting records (Chart of Accounts).

(C) Overhead expenses (final indirect cost pool). Schedule of claimed expenses by element of cost as identified in accounting records (Chart of Accounts) for each final indirect cost pool.

(D) Occupancy expenses (intermediate indirect cost pool). Schedule of claimed expenses by element of cost as identified in accounting records (Chart of Accounts) and expense reallocation to final indirect cost pools.

(E) Claimed allocation bases, by element of cost, used to distribute indirect costs.

(F) Facilities capital cost of money factors computation.

(G) Reconciliation of books of account (i.e., General Ledger) and claimed direct costs by major cost element.

(H) Schedule of direct costs by contract and subcontract and indirect expense applied at claimed rates, as well as a subsidiary schedule of Government participation percentages in each of the allocation base amounts.

(I) Schedule of cumulative direct and indirect costs claimed and billed by contract and subcontract.

(J) Subcontract information. Listing of subcontracts awarded to companies for which the contractor is the prime or upper-tier contractor (include prime and subcontract numbers; subcontract value and award type; amount claimed during the fiscal year; and the subcontractor name, address, and point of contact information).

(K) Summary of each time-and-materials and labor-hour contract information, including labor categories, labor rates, hours, and amounts; direct materials; other direct costs; and, indirect expense applied at claimed rates.

(L) Reconciliation of total payroll per IRS form 941 to total labor costs distribution.

(M) Listing of decisions/agreements/approvals and description of accounting/organizational changes.

(N) Certificate of final indirect costs (see 52.242-4, Certification of Final Indirect Costs).

(O) Contract closing information for contracts physically completed in this fiscal year (include contract number, period of performance, contract ceiling amounts, contract fee computations, level of effort, and indicate if the contract is ready to close).

(iv) The following supplemental information is not required to determine if a proposal is adequate, but may be required during the audit process:

(A) Comparative analysis of indirect expense pools detailed by account to prior fiscal year and budgetary data.

(B) General Organizational information and Executive compensation for the five most highly compensated executives. See 31.205-6(p). Additional salary reference information is available at http://www.whitehouse.gov/omb/procurement_index_exec_comp/.

(C) Identification of prime contracts under which the contractor performs as a subcontractor.

(D) Description of accounting system (excludes contractors required to submit a CAS Disclosure Statement or contractors where the description of the accounting system has not changed from the previous year's submission).

(E) Procedures for identifying and excluding unallowable costs from the costs claimed and billed (excludes contractors where the procedures have not changed from the previous year's submission).

(F) Certified financial statements and other financial data (e.g., trial balance, compilation, review, etc.).

(G) Management letter from outside CPAs concerning any internal control weaknesses.

(H) Actions that have been and/or will be implemented to correct the weaknesses described in the management letter from subparagraph (G) of this section.

(I) List of all internal audit reports issued since the last disclosure of internal audit reports to the Government.

(J) Annual internal audit plan of scheduled audits to be performed in the fiscal year when the final indirect cost rate submission is made.

(K) Federal and State income tax returns.

(L) Securities and Exchange Commission 10-K annual report.

(M) Minutes from board of directors meetings.

(N) Listing of delay claims and termination claims submitted which contain costs relating to the subject fiscal year.

(O) Contract briefings, which generally include a synopsis of all pertinent contract provisions, such as: Contract type, contract amount, product or service(s) to be provided, contract performance period, rate ceilings, advance approval requirements, pre-contract cost allowability limitations, and billing limitations.

(v) The Contractor shall update the billings on all contracts to reflect the final settled rates and update the schedule of cumulative direct and indirect costs claimed and billed, as required in paragraph (d)(2)(iii)(I) of this section, within 60 days after settlement of final indirect cost rates.

* * * * *

(5) * * * The completion invoice or voucher shall include settled subcontract amounts and rates. The prime contractor is responsible for settling subcontractor amounts and rates included in the completion invoice or voucher and providing status of subcontractor audits to the contracting officer upon request.

* * * * *

7. Amend section 52.216-8 by revising the date of the clause and paragraph (b) to read as follows:

52.216-8 Fixed Fee.

* * * * *

Fixed Fee (JUN 2011)

* * * * *

(b) Payment of the fixed fee shall be made as specified in the Schedule; provided that the Contracting Officer withholds a reserve not to exceed 15 percent of the total fixed fee or $100,000, whichever is less, to protect the Government's interest. The Contracting Officer shall release 75 percent of all fee withholds under this contract after receipt of an adequate certified final indirect cost rate proposal covering the year of physical completion of this contract, provided the Contractor has satisfied all other contract terms and conditions, including the submission of the final patent and royalty reports, and is not delinquent in submitting final vouchers on prior years' settlements. The Contracting Officer may release up to 90 percent of the fee withholds under this contract based on the Contractor's past performance related to the submission and settlement of final indirect cost rate proposals.

* * * * *

8. Amend section 52.216-9 by revising the date of the clause and paragraph (c) to read as follows:

52.216-9 Fixed Fee--Construction.

* * * * *

Fixed Fee--Construction (JUN 2011)

* * * * *

(c) The Contracting Officer shall withhold a reserve not to exceed 15 percent of the total fixed fee or $100,000, whichever is less, to protect the Government's interest. The Contracting Officer shall release 75 percent of all fee withholds under this contract after receipt of an adequate certified final indirect cost rate proposal covering the year of physical completion of this contract, provided the Contractor has satisfied all other contract terms and conditions, including the submission of the final patent and royalty reports, and is not delinquent in submitting final vouchers on prior years' settlements. The Contracting Officer may release up to 90 percent of the fee withholds under this contract based on the Contractor's past performance related to the submission and settlement of final indirect cost rate proposals.

* * * * *

9. Amend section 52.216-10 by revising the date of the clause and paragraph (c) to read as follows:

52.216-10 Incentive Fee.

* * * * *

Incentive Fee (JUN 2011)

* * * * *

(c) Withholding of payment. (1) Normally, the Government shall pay the fee to the Contractor as specified in the Schedule. However, when the Contracting Officer considers that performance or cost indicates that the Contractor will not achieve target, the Government shall pay on the basis of an appropriate lesser fee. When the Contractor demonstrates that performance or cost clearly indicates that the Contractor will earn a fee significantly above the target fee, the Government may, at the sole discretion of the Contracting Officer, pay on the basis of an appropriate higher fee.

(2) Payment of the incentive fee shall be made as specified in the Schedule; provided that the Contracting Officer withholds a reserve not to exceed 15 percent of the total incentive fee or $100,000, whichever is less, to protect the Government's interest. The Contracting Officer shall release 75 percent of all fee withholds under this contract after receipt of an adequate certified final indirect cost rate proposal covering the year of physical completion of this contract, provided the Contractor has satisfied all other contract terms and conditions, including the submission of the final patent and royalty reports, and is not delinquent in submitting final vouchers on prior years' settlements. The Contracting Officer may release up to 90 percent of the fee withholds under this contract based on the Contractor's past performance related to the submission and settlement of final indirect cost rate proposals.

* * * * *

[FR Doc. 2011-12852 Filed 5-27-11; 8:45 am]

BILLING CODE 6820-EP-P

[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]

[Rules and Regulations]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2011-12853]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 4, 9, and 52

[FAC 2005-52; FAR Case 2008-009; Item III; Docket 2009-0020, Sequence 1]

RIN 9000-AL28

Federal Acquisition Regulation; Prohibition on Contracting With Inverted Domestic Corporations

AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA have adopted as final, with changes, the interim rule amending the Federal Acquisition Regulation (FAR) to implement section 743 of Division D of the Omnibus Appropriations Act, 2009. Section 743 of Division D of this Act prohibits the award of contracts using appropriated funds to any foreign incorporated entity that is treated as an inverted domestic corporation or to any subsidiary of one. For Fiscal Year (FY) 2010, the same restrictions were continued under section 740 of Division C of the Consolidated Appropriations Act, 2010.

DATES: Effective Date: May 31, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Cecelia L. Davis, Procurement Analyst, at (202) 219-0202, for clarification of content. Please cite FAC 2005-52, FAR Case 2008-009. For information pertaining to status or publication schedules, contact the FAR Secretariat at (202) 501-4755.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA published an interim rule in the Federal Register at 74 FR 31561 on July 1, 2009, to implement section 743 of the Division D of the Omnibus Appropriations Act, 2009 (Pub. L. 111-8). Section 743 of Division D of this Act prohibited the use of Federal appropriated funds for FY 2009 to contract with any inverted domestic corporation, as defined at section 835(b) of the Homeland Security Act of 2002 (Pub. L. 107-296, 6 U.S.C. 395(b)), or any subsidiary of such an entity. On December 16, 2009, section 740 of Division C of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117), also prohibited the use of Federal appropriated funds for FY 2010. Eight respondents submitted comments on the interim rule.

II. Discussion and Analysis of the Public Comments

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the public comments in the development of the final rule. A discussion of the comments and the changes made to the rule as a result of those comments are provided as follows:

A. Applicability to Fiscal Years (FY) 2006 and 2007 Funds Comment: Three respondents commented that the interim rule inaccurately applies the ban on contracting with inverted domestic corporations to funds appropriated in FY 2006 and FY 2007 on a Governmentwide basis. Section 743 of Division D of the Omnibus Appropriations Act, 2009, and section 745 of the Consolidated Appropriations Act, 2008, prohibit all Federal agencies from using appropriated funds on contracts with any foreign incorporated entity that is treated as an inverted domestic corporation or the subsidiary of such a corporation. In FY 2006 and FY 2007, the statutory prohibition was limited to agencies funded under the Treasury, Transportation and Housing Appropriation (Pub. L. 109-115, Pub. L. 109-289, Pub. L. 109-369, Pub. L. 109-383, and Pub. L. 110-5).

Response: The Councils agree with the respondents that the prohibition in the FY 2006 and FY 2007 appropriations bills only covers a limited number of agencies, whereas the FY 2008 and FY 2009 prohibition applies Governmentwide. The Councils therefore have revised FAR 9.108-3 to apply the prohibition to the use of FY 2008 and FY 2009 appropriated funds. The Councils recommend that each covered agency continue with its implementation of the FY 2006 and FY 2007 prohibitions because the required implementation has probably already occurred within the covered agencies.

B. Applicability to Task Orders

Comment: One respondent commented that the interim rule fails to reflect a statutory exception for funds expended on task orders issued under contracts entered into before December 26, 2007. Section 743(c) of Division D of the Omnibus Appropriations Act, 2009, and section 745(c) of Division D of Public Law 110-161 (the Consolidated Appropriations Act, 2008) each provide that ``This section shall not apply to any Federal Government contract entered into before the date of the enactment of this Act, or to any task order issued pursuant to such contract.''

Response: The Councils agree with the respondent. The Councils have revised FAR 9.108-2 to specify the exclusion of contracts entered into before December 26, 2007, (for FY 2008 funds); March 11, 2009, (for FY 2009 funds); and December 16, 2009, (for FY 2010 funds); and task orders issued under such contracts.

C. Definitions

1. Inverted Domestic Corporation

Comment: Three respondents opined that the incorporation of the Internal Revenue Code (IRC) definition of ``inverted domestic corporation'' broadened the definition of the term beyond the intent of Congress as the definitions are not the same. They stated rulemaking on inverted domestic corporations should be based on the definition in the Homeland Security Act of 2002 rather than the IRC as Congress did not incorporate the IRC definition into any contracting ban.

Response: The Homeland Security Act of 2002 and IRC definitions are not identical. To simplify and avoid complicating the application of the inverted domestic corporation prohibition, the Councils have--

Deleted FAR 9.108-2, Relationship with the Internal Revenue Code and Treasury regulations;

Added to the definition of ``inverted domestic

corporation;''

Changed the content of FAR 52.209-2(b), Relation to Internal Revenue Code; and

Changed FAR 52.212-3(n)(1), Relation to Internal Revenue Code.

Thus, the inverted domestic corporation prohibition will be implemented with the Homeland Security Act of 2002 definition stating explicitly that it is not the same as the IRC definition.

2. Subsidiary

Comment: One respondent stated that failure to define the term ``subsidiary'' will result in inconsistent application of the FAR rule. The respondent contended that this will cause problems for potential Government contractors as well as contracting officers.

The respondent first proposed that the legislative history suggests that Congress intended the prohibition to apply to ``wholly-owned subsidiaries.'' The respondent stated that the impetus for expanding the prohibition to cover subsidiaries was to ``plug a loophole'' that became apparent when an award was made to a wholly-owned subsidiary of a foreign entity.

Alternatively, as the less preferred option, the respondent made a case for defining subsidiary in accordance with the tax code. The respondent cites both 6 U.S.C. 395 and 26 U.S.C. 7874, because they both require 80 percent ownership of stock in the foreign entity by former shareholders of the domestic corporation in order for the foreign entity to be designated as an inverted domestic corporation.

Response: The Councils concur that the rule should provide a definition of the term ``subsidiary.'' In general terms, a subsidiary is an entity that is controlled by a separate entity, called the parent company. The most common way (but not the only way) that control of a subsidiary is achieved is through ownership of shares (or other form of ownership if not a corporation) in the subsidiary by the parent. Subsidiaries are separate distinct legal entities for the purposes of taxation and regulation.

The Councils do not agree with the respondent's request to have ``subsidiary'' defined as ``wholly-owned subsidiary.'' This position is not supported in any of the research or current IRC. The respondent provided no citation to substantiate their request of defining subsidiary to mean wholly-owned subsidiary. Further, the words ``wholly-owned,'' which denote a specific type of subsidiary, are not used in either of the two cited statutes. The fact that a particular instance involving a wholly-owned subsidiary occurred, does not mean that Congress intended to limit application to wholly-owned subsidiaries.

The Councils have defined ``Subsidiary,'' as used in this rule, to mean an entity (or corporation) in which more than 50 percent is owned--

(1) Directly by a parent company; or

(2) Through another subsidiary of a parent company.

The definition revolves around the idea of management control and the financial interests of the parent company. Any single entity that controls greater than 50 percent of the stock (or assets of a non-public company) would essentially be able to control and benefit from the operations of the second entity. This option interprets the legislation's intent as wanting to prevent inverted domestic corporations from receiving the revenue benefit from Federal contracts. With a greater than 50 percent ownership within a subsidiary, the inverted domestic corporation would receive the majority of the benefit. This interpretation has grounding in the current IRC. Section (c)(1) of 26 U.S.C. 7874 states that expanded affiliated groups (a corporation or chain of corporations which are connected to a parent corporation through stock ownership) of foreign surrogates need only own 50 percent of the stock of the company instead of the normal 80 percent.

The mention of stock ownership as the measuring criteria was replaced in favor of a broader term of overall ownership in order to cover private companies.

In making the case for the 80 percent ownership interpretation, the respondent cited both 6 U.S.C. 395 and 26 U.S.C. 7874. Both sections of the United States Code are meant to provide the thresholds for determining whether a corporation is an inverted domestic corporation and not whether a corporation is a subsidiary. The Councils did not agree that it is correct to use the threshold for determining an inverted domestic corporation as the threshold for determining a subsidiary as they are two separate and different determinations. The IRC (26 U.S.C. 1563) does describe parent-subsidiary relationships using the 80 percent threshold, but only for filing consolidated returns.

D. Trade Agreements

Comment: One respondent argued that the application of section 743 of Division D to products, services, or suppliers of a party to the World Trade Organization Government Procurement Agreement (WTO GPA) or a party to a U.S. free trade agreement would be inconsistent with the non-discrimination obligations in those agreements. This respondent proposed that the final rule should be changed so that it does not apply to inverted domestic corporations or U.S. subsidiaries of inverted domestic corporations that have relocated from the United States to countries that are parties to the WTO GPA or U.S. free trade agreements.

Response: The Councils have considered the respondent's arguments regarding the compatibility of section 743 with U.S. trade agreement obligations. The Councils do not consider that the application of section 743 to products, services, or suppliers of a party to the WTO GPA or a party to a U.S. free trade agreement, or to the U.S. subsidiaries of such suppliers, would be inconsistent with the non-discrimination obligations in those agreements. Furthermore, section 743 does not provide for drawing distinctions of the kind the respondent has proposed. Therefore, the Councils do not believe it is appropriate to make this revision.

E. Scope of the Representation

Comment: One respondent requested that the FAR Councils clarify the certification requirement set forth in FAR 52.209-2. Specifically, the comment requested that we clarify the following points:

(1) Whether a business that was previously an inverted domestic corporation, but no longer one at the time of initial offer, would be eligible for contract award; and

(2) Whether an awardee can become an inverted domestic corporation during performance of the contract.

The respondent stated that the Councils should not limit an awardees' ability to become an inverted domestic corporation during performance of the contract because it would be an overly broad interpretation and would unfairly punish the shareholders.

Response: The Councils agree that the representation (it is not a certification, but a representation) requires additional clarification. In addition, the Councils agree that a former inverted domestic corporation could be eligible for award of a contract if it is no longer an inverted domestic corporation at the time of initial offer. However, the statute prohibits the expenditure of funds to an awardee that becomes an inverted domestic corporation during contract performance.

Specifically, the public laws at issue in this rule state that ``None of the funds appropriated * * * may be used for any Federal Government contract with * * * an inverted domestic corporation * * *'' see Public Law 111-117, section 740. This would mean that a company could not be an inverted domestic corporation at the time of initial offer, contract award, or any time after. If a corporation receives a contract and during contract performance becomes an inverted domestic corporation, then payment using restricted funds may constitute a violation of the Anti-Deficiency Act. Consequently, the Councils have added a clause at FAR 52.209-10, Prohibition on Contracting with Inverted Domestic Corporations, to inform a contractor of the potential consequences if the contractor becomes an inverted domestic corporation or a subsidiary thereof at any time during the period of performance of the contract.

F. Procedures for Determining Status as an Inverted Domestic Corporation

Background: FAR 9.108-3(b) of the interim rule stated that contracting officers ``should rigorously examine circumstances known to them that would lead a reasonable business person to question the contractor self-certification, and after consultation with legal counsel, take appropriate action where questionable self-certification cannot be verified.''

Further, the Federal Register preamble to the interim rule states that ``the appropriation restriction applies to accountable Government officers, and if willfully and knowingly violated, may result in criminal penalties.''

Comments: Two respondents commented on the procedures for the

contracting officer to determine the validity of an offeror's representation regarding status as an inverted domestic corporation. These respondents have several concerns--that these procedures place undue burdens on contracting officers, that different contracting officers will reach inconsistent conclusions about a single offeror, and that the Federal Register preamble cites potential criminal penalties.

One respondent stated that the procedure is inefficient because it places the burden of determination on many contracting officers. The respondent stated that contracting officers are not in the best position to make the determination. Both respondents were concerned that many different contracting officers may reach multiple conclusions regarding a single contractor.

One respondent commented that it is an ``unusual step to identify potential criminal penalties for contracting officers to adequately review contractor's certifications.'' The other respondent stated that there is no basis for the threat of criminal penalties in the appropriations restrictions.

Response: The Councils concur with the comments on the first issue.

The Councils have revised FAR 9.108-3(b) as follows:

``The contracting officer may rely on an offeror's representation that it is not an inverted domestic corporation unless the contracting officer has reason to question the representation.''

This is a lesser standard than ``rigorously examine,'' but the contracting officer should not ignore information that provides a valid reason to question (including the challenge of an interested party). The provisions of the Anti-Deficiency Act would not allow contracting officers to rely solely on a representation in the face of contradictory evidence. The representation is to prevent violating restrictions on expenditure of funds which would trigger the Anti-Deficiency Act. This approach is similar to the direction to contracting officers with regard to the representation offerors make regarding small business status.

The Councils note that the basis for mention of criminal penalties in the Federal Register preamble was because knowing and willful violation of the Anti-Deficiency Act (31 U.S.C. 1341) is a criminal offense (31 U.S.C. 1350) subject to criminal penalties. The Federal Register did not state that there would be criminal penalties for failure to ``adequately review'' the offeror's representation but only cited potential criminal penalties if the appropriations act restriction is ``knowingly and willfully violated.''

G. Flowdown

Comments: Two respondents commented on the question of whether the prohibition against contracting with an inverted domestic corporation should be flowed down to subcontractors. The interim rule did not require flowdown and requested comments on the issue. One respondent commented that silence puts a prime contractor at risk of cost disallowances if a subcontractor is subsequently found to be an inverted domestic corporation, i.e., the Government might disallow subcontractors' expenditures of restricted fiscal years' monies.

On the other hand, a second respondent made a strong case that Congress would have specifically asked for flowdown in the statute if it wanted the requirement to apply to subcontractors. The absence of any mention of subcontractors in the statute, according to the respondent, means that Congress did not want the prohibition to apply to subcontractors.

Response: Given the plain wording of the statute and the comments received on this subject, the Councils have determined that it is not appropriate to include a flow down requirement in this rule.

H. Interim v. Proposed Rule

Comments: Four respondents commented on the decision to issue an interim rule, which is effective immediately, instead of a proposed rule, which does not have an immediate impact. The respondents generally posit that the mere fact that there is currently a prohibition in statute prohibiting contracting with inverted domestic corporations does not justify a claim of ``urgent and compelling circumstances.'' A respondent stated that the fact that the prohibitions had existed in appropriations laws for several years before the interim rule was issued did not justify the claimed urgency. This respondent cited Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd. Of Trade, 412 U.S. 800, 808 (1973), in which the Supreme Court stated that any grounds for departure from prior norms ``must be clearly set forth so that the reviewing court may understand the basis of the agency's action and so may judge the consistency of that action with the agency's mandate.'' This respondent claimed that the Councils did not make a reasonable explanation for why they did not initiate a rulemaking for identical or substantially similar statutory restrictions dating back several years.

The respondent quotes from the Office of Federal Procurement Policy Act section 418b(a) that ``no procurement policy, regulation, procedure, or form * * * may take effect until 60 days after (it) is published for comment in the Federal Register'' and then states that the 60-day notice may only be waived ``if urgent and compelling circumstances make compliance with such requirements impracticable.''

Another respondent suggested that an interim rule was improper because it risked harming shareholders who had no role in deciding to shift a company offshore and also risked contracting officers reaching disparate conclusions. For these reasons, and the reasons discussed above, the respondents requested suspension of the interim rule.

Response: The restrictions against contracting with inverted domestic corporations in Fiscal Years 2006 and 2007 were not applicable to all Government agencies. The FAR coverage was not required for the non-Governmentwide prohibition in those fiscal years. However, the inverted domestic corporation language in the Fiscal Years 2008, 2009, and 2010 appropriations law is applicable Governmentwide, thus making it an appropriate subject for FAR coverage. The Councils do not agree that the FAR Council lacked authority to issue the coverage as an interim rule; the rule implemented an existing restriction on appropriations about which contracting officers and ordering activities may have been unaware. The Councils cannot suspend the interim rule because it may harm shareholders. The Councils are obligated to implement the statutory restriction on contracting with inverted domestic corporations.

I. Permanent Response to Temporary Legislation

Comments: Two respondents claimed that a restriction included in an appropriations bill does not equate to a permanent restriction, whereas the Councils have responded with regulations that are permanent. The respondents believed that this ``permanent'' FAR language is not a proper reaction to statutes restricting use of appropriations in a given fiscal year, particularly because inevitable variations in future years' appropriations limitations on contracting with inverted domestic corporations are likely to make regulatory changes still more complicated.

Response: The Councils do not agree that this is in fact permanent coverage, because the prohibition is tied to the expenditure of specific year funds and is self-deleting over time. There is no other readily accessible means for this information to get to the contracting officers who must implement the contracting restriction.

J. Editorial Comments

Two respondents made several editorial comments, which have been incorporated as appropriate in the final rule.

III. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

The Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration certify that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because this rule will only impact an offeror that is an inverted domestic corporation and wants to do business with the Government. The number of entities impacted by this rule will be minimal because small business concerns are unlikely to have been incorporated in the United States and then reincorporated in a foreign country; the major players in these transactions are reportedly the very large multinational corporations. No comments were received relating to impact on small business concerns.

V. Paperwork Reduction Act

The final rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Parts 4, 9, and 52

Government procurement.

Dated: May 18, 2011.

Millisa Gary,

Acting Director, Office of Governmentwide Acquisition Policy.

Accordingly, the interim rule amending 48 CFR parts 4, 9, and 52, which was published in the Federal Register at 74 FR 31561 on July 1, 2009, is adopted as final with the following changes:

1. The authority citation for 48 CFR parts 4, 42, and 52 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

PART 4--ADMINISTRATIVE MATTERS

2. Amend section 4.1202 by removing paragraph (f); redesignating paragraph (e) as paragraph (f), and adding a new paragraph (e) to read as follows:

4.1202 Solicitation provision and contract clause.

* * * * *

(e) 52.209-2, Prohibition on Contracting with Inverted Domestic Corporations--Representation.

* * * * *

PART 9--CONTRACTOR QUALIFICATIONS

9.104-1 [Amended]

3. Amend section 9.104-1 by removing the word ``FAR'' from paragraph (g).

4. Revise sections 9.108-1 through 9.108-5 to read as follows:

9.108-1 Definitions.

As used in this section--

Inverted domestic corporation means a foreign incorporated entity which is treated as an inverted domestic corporation under 6 U.S.C. 395(b), i.e., a corporation that used to be incorporated in the United States, or used to be a partnership in the United States, but now is incorporated in a foreign country, or is a subsidiary whose parent corporation is incorporated in a foreign country, that meets the criteria specified in 6 U.S.C. 395(b), applied in accordance with the rules and definitions of 6 U.S.C. 395(c). An inverted domestic corporation as herein defined does not meet the definition of an inverted domestic corporation as defined by the Internal Revenue Code at 26 U.S.C. 7874.

Subsidiary means an entity in which more than 50 percent of the entity is owned--

(1) Directly by a parent corporation; or

(2) Through another subsidiary of a parent corporation.

9.108-2 Prohibition.

(a) Section 740 of Division C of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117) prohibits the use of 2010 appropriated funds for contracting with any foreign incorporated entity that is treated as an inverted domestic corporation, or with a subsidiary of such a corporation. The same Governmentwide restriction was also contained in the Fiscal Year 2008 and 2009 appropriations acts. Agency-specific restrictions on contracting with inverted domestic corporations also existed in FY 2006 and FY 2007 appropriations for United States Departments of Transportation and Treasury, Housing and Urban Development, the Judiciary and Independent Agencies (including Public Laws 109-115 and 109-289).

(b) This prohibition does not apply as follows:

(1) When using Fiscal Year 2008 funds for any contract entered into before December 26, 2007, or for any order issued pursuant to such contract.

(2) When using Fiscal Year 2009 funds for any contract entered into before March 11, 2009, or for any order issued pursuant to such contract.

(3) When using Fiscal Year 2010 funds for any contract entered into before December 16, 2009, or for any order issued pursuant to such contract.

9.108-3 Representation by the offeror.

(a) In order to be eligible for contract award when using Fiscal Year 2008 through Fiscal Year 2010 funds, an offeror must represent that it is not an inverted domestic corporation or subsidiary. Any offeror that cannot so represent is ineligible for award of a contract using such appropriated funds.

(b) The contracting officer may rely on an offeror's representation that it is not an inverted domestic corporation unless the contracting officer has reason to question the representation.

9.108-4 Waiver.

Any agency head may waive the prohibition in subsection 9.108-2 and the requirement of subsection 9.108-3 for a specific contract if the agency head determines in writing that the waiver is required in the interest of national security, documents the determination, and reports it to the Congress.

9.108-5 Solicitation Provision and Contract Clause.

When using funds appropriated in Fiscal Year 2008 through Fiscal Year 2010, unless waived in accordance with FAR 9.108-4, the contracting officer shall--

(a) Include the provision at 52.209-2, Prohibition on Contracting with Inverted Domestic Corporations--Representation, in each solicitation for the acquisition of products or services (including construction); and

(b) Include the clause at 52.209-10, Prohibition on Contracting with Inverted Domestic Corporations, in each solicitation and contract for the acquisition of products or services (including construction).

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

5. Amend section 52.204-8 by--

a. Revising the date of the provision; and

b. Redesignating paragraphs (c)(1)(v) through (xx) as paragraphs (c)(1)(vi) through (xxi), respectively; and adding a new paragraph (c)(1)(v) to read as follows:

52.204-8 Annual Representations and Certifications.

* * * * *

Annual Representations and Certifications (May 2011)

(c)(1) * * *

(v) 52.209-2, Prohibition on Contracting with Inverted Domestic Corporations--Representation. This provision applies to solicitations using funds appropriated in fiscal years 2008, 2009, or 2010.

* * * * *

6. Revise section 52.209-2 to read as follows:

52.209-2 Prohibition on Contracting With Inverted Domestic Corporations--Representation.

As prescribed in 9.108-5(a), insert the following provision:

Prohibition on Contracting With Inverted Domestic Corporations--Representation (May 2011)

(a) Definitions. Inverted domestic corporation and subsidiary have the meaning given in the clause of this contract entitled Prohibition on Contracting with Inverted Domestic Corporations (52.209-10).

(b) Relation to Internal Revenue Code. An inverted domestic corporation as herein defined does not meet the definition of an inverted domestic corporation as defined by the Internal Revenue Code at 26 U.S.C. 7874.

(c) Representation. By submission of its offer, the offeror represents that--

(1) It is not an inverted domestic corporation; and

(2) It is not a subsidiary of an inverted domestic corporation.

(End of provision)

7. Add section 52.209-10 to read as follows:

52.209-10 Prohibition on Contracting With Inverted Domestic Corporations.

As prescribed in 9.108-5(b), insert the following clause:

Prohibition on Contracting With Inverted Domestic Corporations (May 2011)

(a) Definitions. As used in this clause--

Inverted domestic corporation means a foreign incorporated entity which is treated as an inverted domestic corporation under 6 U.S.C. 395(b), i.e., a corporation that used to be incorporated in the United States, or used to be a partnership in the United States, but now is incorporated in a foreign country, or is a subsidiary whose parent corporation is incorporated in a foreign country, that meets the criteria specified in 6 U.S.C. 395(b), applied in accordance with the rules and definitions of 6 U.S.C. 395(c). An inverted domestic corporation as herein defined does not meet the definition of an inverted domestic corporation as defined by the Internal Revenue Code at 26 U.S.C. 7874.

Subsidiary means an entity in which more than 50 percent of the entity is owned--

(1) Directly by a parent corporation; or

(2) Through another subsidiary of a parent corporation.

(b) If the contractor reorganizes as an inverted domestic corporation or becomes a subsidiary of an inverted domestic corporation at any time during the period of performance of this contract, the Government may be prohibited from paying for Contractor activities performed after the date when it becomes an inverted domestic corporation or subsidiary. The Government may seek any available remedies in the event the Contractor fails to perform in accordance with the terms and conditions of the contract as a result of Government action under this clause.

(End of clause)

8. Amend section 52.212-3 by--

a. Revising the date of the provision;

b. In paragraph (a) revising the definition ``Inverted domestic corporation''; and adding, in alphabetical order, the definition ``Subsidiary''; and

c. Revising paragraph (n) to read as follows:

52.212-3 Offeror Representations and Certifications--Commercial Items.

* * * * *

Offeror Representations and Certifications--Commercial Items (May 2011)

* * * * *

(a) * * *

* * * * *

Inverted domestic corporation, as used in this section, means a foreign incorporated entity which is treated as an inverted domestic corporation under 6 U.S.C. 395(b), i.e., a corporation that used to be incorporated in the United States, or used to be a partnership in the United States, but now is incorporated in a foreign country, or is a subsidiary whose parent corporation is incorporated in a foreign country, that meets the criteria specified in 6 U.S.C. 395(b), applied in accordance with the rules and definitions of 6 U.S.C. 395(c). An inverted domestic corporation as herein defined does not meet the definition of an inverted domestic corporation as defined by the Internal Revenue Code at 26 U.S.C. 7874.

* * * * *

Subsidiary means an entity in which more than 50 percent of the entity is owned--

(1) Directly by a parent corporation; or

(2) Through another subsidiary of a parent corporation.

* * * * *

(n) Prohibition on Contracting with Inverted Domestic Corporations--(1) Relation to Internal Revenue Code. An inverted domestic corporation as herein defined does not meet the definition of an inverted domestic corporation as defined by the Internal Revenue Code 25 U.S.C. 7874.

(2) Representation. By submission of its offer, the offeror represents that--

(i) It is not an inverted domestic corporation; and

(ii) It is not a subsidiary of an inverted domestic corporation.

* * * * *

9. Amend section 52.212-5 by revising the date of the clause; redesignating paragraphs (b)(7) through (48) as (b)(8) through (49), respectively; and adding a new paragraph (b)(7) to read as follows:

52.212-5 Contract Terms and Conditions Required To Implement Statutes or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or Executive Orders--Commercial Items (May 2011)

* * * * *

(b) * * *

--(7) 52.209-10, Prohibition on Contracting with Inverted Domestic Corporations (section 740 of Division C of Public Law 111-117, section 743 of Division D of Public Law 111-8, and section 745 of Division D of Public Law 110-161)

* * * * *

[FR Doc. 2011-12853 Filed 5-27-11; 8:45 am]

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[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]

[Rules and Regulations]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2011-12854]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 25 and 52

[FAC 2005-52; FAR Case 2009-039; Item IV; Docket 2010-0104, Sequence 1]

RIN 9000-AL62

Federal Acquisition Regulation; Buy American Exemption for Commercial Information Technology--Construction Material

AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA have adopted as final, without change, an interim rule amending the Federal Acquisition Regulation (FAR) to implement section 615 of Division C, Title VI, of the Consolidated Appropriations Act, 2010, to authorize exemption from the Buy American Act for acquisition of information technology that is a commercial item.

DATES: Effective Date: May 31, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Cecelia L. Davis, Procurement Analyst, at (202) 219-0202 for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-52, FAR Case 2009-039.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA published an interim rule in the Federal Register at 75 FR 60266 on September 29, 2010, to implement section 615 of the Division C, Title VI, of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117). No comments were received by the close of the public comment period on November 29, 2010.

II. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

III. Regulatory Flexibility Act

The Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration certify that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule simplifies the treatment of construction material that is also a commercial information technology item, which constitutes a small percentage of the overall construction material in a project. This final rule does not affect small business set-asides to the prime contractor or the small business subcontracting goals. Construction contracts that exceed $7,804,000 and are subject to trade agreements already exempt designated country construction material from the Buy American Act.

IV. Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C. chapter 35) does apply; however, these changes to the FAR do not impose additional information collection requirements to the paperwork burden previously approved under OMB Control Number 9000-0141, titled: Buy America Act--Construction--FAR Sections Affected: Subpart 25.2; 52.225-9; and 52.225-11.

List of Subjects in 48 CFR Parts 25 and 52

Government procurement.

Dated: May 18, 2011.

Millisa Gary,

Acting Director, Office of Governmentwide Acquisition Policy.

Interim Rule Adopted as Final Without Change

Accordingly, the interim rule amending 48 CFR parts 25 and 52, which was published in the Federal Register at 75 FR 60266 on September 29, 2010, is adopted as final without change.

[FR Doc. 2011-12854 Filed 5-27-11; 8:45 am]

BILLING CODE 6820-EP-P

[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]

[Rules and Regulations]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2011-12855]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 42

[FAC 2005-52; FAR Case 2010-017; Item V; Docket 2010-0017, Sequence 1]

RIN 9000-AL92

Federal Acquisition Regulation; Oversight of Contractor Ethics Programs

AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to add to the list of contract administration functions, the function to ensure that contractors have implemented the mandatory contractor business ethics program requirements.

DATES: Effective Date: June 30, 2011.

FOR FURTHER INFORMATION CONTACT: Mr. Anthony Robinson, Procurement Analyst, at (202) 501-2658, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-52, FAR Case 2010-017.

SUPPLEMENTARY INFORMATION:

I. Background

This final rule amends the FAR in response to recommendations from the Government Accountability Office (GAO) Report GAO-09-591, Defense Contracting Integrity--Opportunities Exist to Improve DoD's Oversight of Contractor Ethics Programs. The ethics program requirement flows from FAR 52.203-13, Contractor Code of Business Ethics and Conduct.

This final rule modifies FAR 42.302, Contract Administration Functions, to add to the list of contract administration functions, the function to ensure that contractors have implemented the mandatory contractor business ethics program requirements of FAR 52.203-13.

II. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

III. Regulatory Flexibility Act

The Regulatory Flexibility Act does not apply to this rule because this final rule does not constitute a significant FAR revision within the meaning of FAR 1.501-1 and 41 U.S.C. 1707. However, DoD, GSA, and NASA will consider comments from small entities concerning the affected FAR part in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610, et seq. (FAC 2005-52, FAR Case 2010-017) in correspondence.

IV. Paperwork Reduction Act

The final rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Part 42

Government procurement.

Dated: May 18, 2011.

Millisa Gary,

Acting Director, Office of Governmentwide Acquisition Policy.

Therefore, DoD, GSA, and NASA amend 48 CFR part 42 as set forth below:

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES

1. The authority citation for 48 CFR part 42 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

2. Amend section 42.302 by adding paragraph (a)(71) to read as follows:

42.302 Contract administration functions.

(a) * * *

(71) Ensure that the contractor has implemented the requirements of 52.203-13, Contractor Code of Business Ethics and Conduct.

* * * * *

[FR Doc. 2011-12855 Filed 5-27-11; 8:45 am]

BILLING CODE 6820-EP-P

[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]

[Rules and Regulations]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2011-12856]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 52 and 53

[FAC 2005-52; Item VI; Docket 2011-0078; Sequence 2]

Federal Acquisition Regulation; Technical Amendments

AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: This document makes amendments to the Federal Acquisition Regulation in order to make editorial changes.

DATES: Effective Date: May 31, 2011.

FOR FURTHER INFORMATION CONTACT: The Regulatory Secretariat, 1275 First Street, NE., 7th Floor, Washington, DC 20417, (202) 501-4755, for information pertaining to status or publication schedules. Please cite FAC 2005-52, Technical Amendments.

SUPPLEMENTARY INFORMATION: In order to update certain elements in 48 CFR parts 52 and 53, this document makes editorial changes to the Federal Acquisition Regulation.

List of Subjects in 48 CFR Parts 52 and 53

Government procurement.

Dated: May 18, 2011.

Millisa Gary,

Acting Director, Office of Governmentwide Acquisition Policy.

Therefore, DoD, GSA, and NASA amend 48 CFR parts 52 and 53 as set forth below:

1. The authority citation for 48 CFR parts 52 and 53 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

52.212-3 [Amended]

2. Amend section 52.212-3 by--

a. Removing from paragraphs (c)(6)(i) and (ii), and (c)(7)(i) and (ii) ``It * is, * is not'' and adding ``It [square] is, [square] is not'' in their place; and

b. Removing from paragraph (c)(7)(ii) ``(c)(7)(ii)'' and adding ``(c)(7)(i)'' in its place.

PART 53--FORMS

3. Amend section 53.301-1447 by revising the form to read as follows:

53.301-1447 Solicitation/Contract.

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[GRAPHIC] [TIFF OMITTED] TR31MY11.000

[GRAPHIC] [TIFF OMITTED] TR31MY11.001

4. Amend section 53.301-1449 by revising the form to read as follows:

Sec. 53.301-1449 Solicitation/Contract/Order for Commercial Items.

[GRAPHIC] [TIFF OMITTED] TR31MY11.003

5. Amend section 53.302-347 by revising the form to read as follows:

Sec. 53.302-347 Order for Supplies or Services.

[GRAPHIC] [TIFF OMITTED] TR31MY11.004

[GRAPHIC] [TIFF OMITTED] TR31MY11.005

[FR Doc. 2011-12856 Filed 5-27-11; 8:45 am]

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[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]

[Rules and Regulations]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2011-12857]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Chapter 1

[Docket FAR 2011-0077, Sequence 4]

Federal Acquisition Regulation; Federal Acquisition Circular 2005-52; Small Entity Compliance Guide

AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Small Entity Compliance Guide.

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SUMMARY: This document is issued under the joint authority of DOD, GSA, and NASA. This Small Entity Compliance Guide has been prepared in accordance with section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996. It consists of a summary of rules appearing in Federal Acquisition Circular (FAC) 2005-52, which amend the Federal Acquisition Regulation (FAR). Interested parties may obtain further information regarding these rules by referring to FAC 2005-52, which precedes this document. These documents are also available via the Internet at http://www.regulations.gov.

DATES: For effective dates see separate documents, which follow.

FOR FURTHER INFORMATION CONTACT: The analyst whose name appears in the table below. Please cite FAC 2005-52 and the specific FAR case number. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at (202) 501-4755.

List of Rules in FAC 2005-52

------------------------------------------------------------------------

Item Subject FAR Case Analyst

------------------------------------------------------------------------

I................ Sustainable 2010-001 Clark.

Acquisition.

II............... Contract Closeout.... 2008-020 McFadden.

III.............. Prohibition on 2008-009 Davis.

Contracting with

Inverted Domestic

Corporations.

IV............... Buy American 2009-039 Davis.

Exemption for

Commercial

Information

Technology--Construc

tion Material.

V................ Oversight of 2010-017 Robinson.

Contractor Ethics

Programs.

VI............... Technical Amendments.

------------------------------------------------------------------------

SUPPLEMENTARY INFORMATION: Summaries for each FAR rule follow. For the actual revisions and/or amendments made by these FAR cases, refer to the specific item numbers and subject set forth in the documents following these item summaries. FAC 2005-52 amends the FAR as specified below:

Item I--Sustainable Acquisition (FAR Case 2010-001) (Interim)

This interim rule amends the FAR to implement Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic Performance, and Executive Order 13423, Strengthening Federal Environmental, Energy, and Transportation Management. It requires Federal agencies to leverage agency acquisitions to foster markets for sustainable technologies, materials, products, and services. Federal agencies are additionally required to implement high-performance sustainable building design, construction, renovation, repair, commissioning, operation and maintenance, management, and deconstruction practices in applicable acquisitions. Contractors will be required to support the goals of an agency's environmental management system.

Item II--Contract Closeout (FAR Case 2008-020)

This final rule amends the FAR procedures for closing out contracts. A proposed rule was published August 20, 2009. This rule revises procedures and sets forth a timeframe for clearing final patent reports; updates quick-closeout procedures, including applicable thresholds; sets forth a description of an adequate final indirect cost rate proposal and supporting data; and adds language for withholding fees to protect the Government's interest and encourage timely submissions of an adequate final indirect cost rate proposal. The rule does not impose any additional requirements on small businesses.

Item III--Prohibition on Contracting With Inverted Domestic Corporations (FAR Case 2008-009)

This final rule implements section 740 of Division C of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117) and similar restrictions in 2008 and 2009 appropriations acts, which prohibit the award of contracts using appropriated funds to any foreign incorporated entity that is treated as an inverted domestic corporation or to any subsidiary of one, except as permitted in specific exceptions as set forth in the rule. The rule does not impose any requirements on small businesses.

Item IV--Buy American Exemption for Commercial Information Technology--Construction Material (FAR Case 2009-039)

This rule adopts as final, without change, an interim rule. The interim rule amended the FAR to implement section 615 of Division C, Title VI, of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117). Section 615 authorizes exemption from the Buy American Act for acquisition of information technology that is a commercial item.

Item V--Oversight of Contractor Ethics Programs (FAR Case 2010-017)

This final rule modifies FAR 42.302, Contract Administration Functions, to add to the list of contract administration functions, the function of ensuring that contractors have implemented FAR 52.203-13, Contractor Code of Business Ethics and Conduct.

Contracting officers may ask to see a contractor's code of ethics or a contractor's ethics program, but the contracting officer is not required to ask for a copy of any documents.

Item VI--Technical Amendments

Editorial changes are made at FAR 52.212-3, 53.301-1447, 53.301-1449, and 52.302-347.

Dated: May 18, 2011.

Millisa Gary,

Acting Director, Office of Governmentwide Acquisition Policy.

[FR Doc. 2011-12857 Filed 5-27-11; 8:45 am]

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