[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]

[Rules and Regulations]

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

[FR Doc No: 2013-31147]

Vol. 78

Tuesday,

No. 251

December 31, 2013

Part III

Department of Defense

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General Services Administration

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National Aeronautics and Space Administration

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48 CFR Chapter 1

Federal Acquisition Regulation; Federal Acquisition Circular 2005-72; Introduction; Service Contracts Reporting Requirements; Prioritizing Sources of Supplies and Services for Use by the Government; Terms of Service and Open-Ended Indemnification and Unenforceability of Unauthorized Obligations; Trade Agreements Thresholds; Federal Acquisition Circular 2005-72; Small Entity Compliance Guide; Final Rules

Federal Register / Vol. 78 , No. 251 / Tuesday, December 31, 2013 / Rules and Regulations

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Chapter 1

[Docket No. FAR 2013-0076, Sequence No. 8]

Federal Acquisition Regulation; Federal Acquisition Circular 2005-72; Introduction

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

ACTION: Summary presentation of final rules.

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SUMMARY: This document summarizes the Federal Acquisition Regulation (FAR) rules agreed to by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) in this Federal Acquisition Circular (FAC) 2005-72. 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 the FAR case. Please cite FAC 2005-72 and the specific FAR case numbers. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755.

Rules Listed in FAC 2005-72

Item

Subject

FAR Case

Analyst

I

Service Contracts Reporting Requirements.

2010-010

Loeb.

II

Prioritizing Sources of Supplies and Services for Use by Government.

2009-024

Morgan.

III

Terms of Service and Open-Ended Indemnification, and Unenforceability of Unauthorized Obligations.

2013-005

Petrusek.

IV

Trade Agreements Thresholds.

2013-021

Davis.

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 subjects set forth in the documents following these item summaries. FAC 2005-72 amends the FAR as specified below:

Item I--Service Contracts Reporting Requirements (FAR Case 2010-010)

This final rule amends the FAR to implement section 743 of Division C of the Consolidated Appropriations Act, 2010. Section 743 calls for certain agencies, not including the Department of Defense, to submit annual inventories of service contracts. FAR subpart 4.17, Service Contracts Inventory, provides annual reporting requirements for agencies and contractors. Guidance for agencies is available at: http://www.whitehouse.gov/omb/procurement-service-contract-inventories. FAR clauses 52.204-14 and 52.204-15 provide contractors' annual reporting requirements. Prime and first-tier contractors will submit the information by October 31 at www.sam.gov, including total dollar amount invoiced for services performed in the prior Government fiscal year and total amount of labor hours for the previous Government fiscal year.

To lessen the burden on small and large business prime contractors, information is reported annually, reporting is phased in over three fiscal years, and only first-tier subcontracts are covered, not all tiers.

Contracting officers will verify that the clause is included in the contract or order. Agencies are responsible for reviewing contractor reported information to ensure it appears reasonable and consistent with available contract information. The agency is not required to address data for which the agency would not normally have supporting information. In the event the agency believes that revisions to the contractor reported information are warranted, the contractor is to be notified no later than November 15. By November 30, the contractor shall revise the report, or document its rationale for the agency for maintaining the information without change.

Item II--Prioritizing Sources of Supplies and Services for Use by Government (FAR Case 2009-024)

This final rule amends the FAR to update and clarify the priority of sources of supplies and services for use by the Government at FAR subpart 8.0. The final rule also includes a list of other existing Federal contract vehicles to consider for agency use, such as Governmentwide Acquisition Contracts (GWACs), Multi-Agency Contracts (MACs), and other procurement instruments intended for use by multiple agencies, including blanket purchase agreements under Federal Supply Service contracts. The policy at FAR 7.102(a) is also revised to conform with the amendments to FAR subpart 8.0.

Item III--Terms of Service and Open-Ended Indemnification, and Unenforceability of Unauthorized Obligations (FAR Case 2013-005)

This final rule adopts, without change, an interim rule which was published in the Federal Register at 78 FR 37686 on June 21, 2013. The interim rule amended the FAR to address concerns raised in an opinion from the U.S. Department of Justice Office of Legal Counsel that determined the Anti-Deficiency Act is violated when a Government contracting officer or other employee with the authority to bind the Government agrees, without statutory authorization or other exception, to an open-ended, unrestricted indemnification clause. This rule clarified for the public that an End User License Agreement, Term of Service, or similar agreement containing an indemnification provision, is unenforceable and nonbinding against the Government and Government-authorized end-users. The rule contained a new clause that applies to all solicitations and contracts and automatically applies to micro-purchases, including those made with the Governmentwide commercial purchase card.

Item IV--Trade Agreements Thresholds (FAR Case 2013-021)

This final rule amends the FAR to adjust the thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements as determined by the United States Trade Representative, according to a pre-determined formula under the agreements.

Dated: December 19, 2013.

William Clark,

Acting Director, Office of Government-Wide Acquisition Policy, Office of Acquisition Policy, Office of Government-Wide Policy.

Federal Acquisition Circular (FAC) 2005-72 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 2005-72 is effective December 31, 2013 except for items I and II, which are effective January 30, 2014.

Dated: December 20, 2013.

Richard Ginman,

Director, Defense Procurement and Acquisition Policy.

Dated: December 20, 2013.

Houston Taylor,

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

Dated: December 18, 2013.

William P. McNally,

Assistant Administrator for Procurement, National Aeronautics and Space Administration.

[FR Doc. 2013-31147 Filed 12-30-13; 8:45 am]

BILLING CODE 6820-EP-P

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[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]

[Rules and Regulations]

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

[FR Doc No: 2013-31148]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 4, 8, 17, 37, and 52

[FAC 2005-72; FAR Case 2010-010; Item I; Docket 2010-0010, Sequence 1]

RIN 9000-AM06

Federal Acquisition Regulation; Service Contracts Reporting Requirements

AGENCIES: 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 implement a section of the Consolidated Appropriations Act, 2010. This final rule amends the FAR to require service contractors for executive agencies, except where DoD has fully funded the contract or order, to submit information annually in support of agency-level inventories for service contracts.

DATES: Effective: January 30, 2014.

Applicability: The changes in this rule apply to solicitations issued and contracts awarded on or after January 30, 2014. Contracting officers will modify existing indefinite-delivery contracts, on a bilateral basis in accordance with FAR 1.108(d)(3), within six months of the effective date of the final rule, if the remaining period of performance extends beyond October 1, 2013, and $2.5 million or more remains to be obligated.

FOR FURTHER INFORMATION CONTACT: Mr. Edward Loeb, Procurement Analyst, at 202-501-0650, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755. Please cite FAC 2005-72, FAR Case 2010-010.

SUPPLEMENTARY INFORMATION:

I. Background

Section 743(a) of Division C of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117) requires executive agencies covered by the Federal Activities Inventory Reform (FAIR) Act (Pub. L. 105-270), except DoD, to submit to the Office of Management and Budget (OMB) annually an inventory of activities performed by service contractors. To allow review by the agency and any necessary correction by the contractor, Office of Federal Procurement Policy (OFPP) agreed to change the deadline for agencies to submit a service contract inventory to OMB from December 30 to January 15, even though section 743 of P.L. 111-117 establishes December. DoD is exempt from this reporting requirement because 10 U.S.C. 2462 and 10 U.S.C. 2330a(c) already require DoD to develop an annual service contract inventory.

Specifically, FAR 4.1703 establishes service contractor reporting requirements based on type of contract and dollar amount as stated below:

Contract types (e.g., cost-reimbursement, time-and-materials, and labor-hour contracts), which already require contractors to track labor hours closely in order to invoice the Government, will have lower dollar thresholds than fixed-price contracts. Contractors will now be required to report on all cost-reimbursement, time-and-materials, and labor-hour contracts and orders above the simplified acquisition threshold (SAT).

Contractors will be required to report on new fixed-price definite-delivery contracts at or above the following--

[cir] $2.5 million in Fiscal Year 2014;

[cir] 1 million in Fiscal Year 2015; and

[cir] $500,000 from Fiscal Year 2016 onwards.

For indefinite-delivery contracts including, but not

limited to, indefinite-delivery indefinite-quantity (IDIQ) contracts, Federal Supply Schedule (FSS) contracts, Governmentwide Acquisition contracts (GWACs), and multi-agency contracts, reporting requirements will be determined based on the expected dollar amount and type of the orders issued under the contracts.

First-tier subcontracts for services will be reported using the phase-in thresholds.

Existing indefinite-delivery contracts will be bilaterally modified within six months of the effective date of the final rule if sufficient time and value remain on the base contract, which is defined as--

(i) A performance period that extends beyond October 1, 2013; and

(ii) $2.5 million or more remaining to be obligated to the indefinite-delivery contract.

The threshold for existing indefinite-delivery contracts is consistent with the threshold for new fixed-price contracts. Agencies placing orders on these existing contracts after the effective date of this final rule will be required to report this information if the order meets the thresholds established in FAR 4.1703 (e.g., above the SAT for cost-reimbursement, time-and-materials, and labor-hour contracts, and fixed-price contracts at or above $2.5 million in Fiscal Year 2014 and phased-in thresholds thereafter).

DoD, GSA, and NASA published a proposed rule in the Federal Register at 76 FR 22070 on April 20, 2011, to implement section 743(a). The section of the preamble discussing coverage for existing contracts was included in the correction published in the Federal Register at 76 FR 24443 on May 2, 2011.

On June 20, 2011, the period for public comment ended. Twelve respondents submitted comments on the proposed rule.

II. Determinations

The Federal Acquisition Regulatory (FAR) Council has made the following determination with respect to the rule's applicability to contracts for the acquisition of commercial items.

Applicability to Contracts for the Acquisition of Commercial Items

Pursuant to 41 U.S.C. Sec. 1906, the FAR is required to include a list of provisions of law that are inapplicable to acquisitions of commercial items (other than acquisitions of commercially available off-the-shelf items, which are addressed in 41 U.S.C. Sec. 1907). Recently enacted laws that set forth policies, procedures, requirements, or restrictions for the acquisition of property or services by the Federal Government shall be included on the list, unless the law--

1. Provides for criminal or civil penalties;

2. Specifically refers to 41 U.S.C. Sec. 1906 and states that the law applies to acquisitions of commercial items; or

3. Is applicable because the FAR Council makes a written determination that it would not be in the best interest of the Federal Government to exempt acquisitions of commercial items from this law.

Given the requirements of section 743(a) of Division C of the Consolidated Appropriations Act, 2010, for service contract reporting, the FAR Council has determined the rule should apply to contracts for the acquisition of commercial items, as defined at FAR 2.101, in order to fulfill the intended result of the statutory requirement for increased visibility of contracted services to determine whether the agency has the right balance of contractor and in-house resources needed to accomplish its mission.

III. Discussion and Analysis

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the public comments in the development of the final rule.

The following changes from the proposed rule were made in the final rule:

The subpart has been renumbered from FAR 4.16 to 4.17.

The definition of ``first-tier subcontract'' has been modified slightly to conform to the definition at FAR 52.204-10, Reporting Executive Compensation and First-Tier Subcontract Awards. In addition, the definition of ``service contract'' has been deleted because the cross reference to the definition of service contract at FAR 37.101, did not include construction services, to which this rule is applicable.

FAR 4.1702 is modified to add ``as specified in 4.1705.'' This is done to clarify that the clauses at FAR 52.204-14 and 52.204-15 are not applicable to actions entirely funded by DoD.

The thresholds in FAR 4.1703(a)(2)(ii) are updated to begin in Fiscal Year 2014. This change results from internal review and the anticipated publication date for the final rule. The only existing contracts that are covered by this rule are existing indefinite-delivery contracts if sufficient time and value remain on the base contract. The stipulation ``for services'' was added at FAR 4.1703(a)(1) and 4.1703(a)(3) to clarify that first-tier subcontract for services reporting is only required for subcontractors that are primarily providing services.

FAR 4.1703(a)(3) was changed from the proposed rule to clarify that first-tier subcontract reporting thresholds are the same as the prime contract reporting thresholds in 4.1703(a)(2)(i) and 4.1703(a)(2)(ii).

FAR 4.1703(b). The responsibility of the agency for

reviewing the contractor reported data was changed as a result of internal review to provide for the respective agency to review the contractor's report for reasonableness and consistency and to advise the contractor of possible errors. The contractor is to revise the report, unless the contractor believes the report was accurate, and so advises the agency. These changes have been incorporated into the clauses that are included within this rule.

FAR 4.1705 is modified to add ``for actions entirely funded by DoD or''. This is done to clarify that the clauses at FAR 52.204-14 and 52.204-15 are not applicable to DoD funded actions.

A definition of ``first-tier subcontract'' has been added to FAR 52.204-14 and 52.204-15.

FAR 52.204-14(c) is renumbered as (d) and revised to remove ``[to] the online Service Contract Reporting Portal and will be publicly available at www.acquisition.gov''; information will be found and reporting will be made at www.sam.gov (See section 3.10 of the SAM User Guide at https://www.sam.gov/sam/SAM_Guide/SAM_User_Guide.htm. The reported information will be publicly available as required by section 743.

FAR 52.204-14(d)(1)(i) is renumbered, and revised to change ``Subcontractor DUNS number, or if DUNS number is unavailable, subcontractor name'' to ``subcontract number (including subcontractor name and DUNS number)'' because contracts at this threshold already require a DUNS number.

The stipulation ``providing services'' was added at FAR 52.204-14(f)(1) and 52.204-15(f)(1) to clarify that first-tier subcontract reporting is only required for subcontractors that are primarily providing services.

FAR 52.204-14, Alternate I is changed to ``52.204-15, Service Contract Reporting Requirements for Indefinite Delivery Contracts''. References in FAR subpart 4.17 were conformed. Paragraph (c) from FAR 52.204-14, now renumbered as (d), is added to the new clause at 52.204-15. FAR 52.204-14(d)(1)(i) is renumbered as (f)(1)(i), and the words ``Subcontractor DUNS number, or if DUNS number is unavailable, subcontract name'' are changed to ``subcontract number (including subcontractor name and DUNS number)'' because contracts at this threshold already require a DUNS number.

FAR 52.212-5 is added for applicability to commercial items for contractor reporting requirements.

A discussion of the comments and the changes made to the rule as a result of those comments are provided as follows:

A. Application to Fixed-Price Performance-Based Services

Comments: Three respondents commented that this requirement could cause contractors to change their internal accounting processes for firm-fixed-price contracts. Another respondent gave the example that in test scenarios, labor hours may not be easily assigned, since analysts work on batches of samples at a time, which may include samples for both Government and non-Governmental contracts. This respondent recommended clarifying whether the threshold applies to fixed unit prices on IDIQ services. Similarly, another respondent commented that the reporting does not take into account how software and maintenance fixed-price contract costs and labor can significantly fluctuate each year or how this type of labor can be comingled between government and non-government work on a contract. Lastly, another respondent stated that limiting the definition of ``service contracts'' to the FAR part 37 definition would exclude reporting and evaluation of billions of dollars of services that are included in supply, maintenance and repair, and construction contracts.

Response: Section 743(a) requires agencies to compile service contract inventories for all service contracts, regardless of contract type. Therefore, this rule requires contractors to submit the information for fixed price contracts as well as for other contract types. To alleviate the reporting burden, the case establishes higher reporting thresholds for fixed-price contracts, where the information may not be as readily available. The same thresholds apply at the contract and task order level. The rule does not mandate how contractors track labor hours, but simply requires the reporting of aggregated number of hours for each year of contract performance. The statute specifies that reporting is required for service contracts.

Comment: One respondent stated that ``requiring the disclosure of direct labor hours expended on the services performed is extremely concerning, particularly in a Firm Fixed Price scenario. Pricing data is exceptionally sensitive information . . . and is routinely protected under Exemption 4 under FOIA''.

Response: The statute requires the agency to report the number of contractor employees expressed as full-time equivalents for direct labor, compensated under the contract. To relieve burden on the contractor, the clause requires direct labor hours to be reported rather than the full-time equivalent. The statute also requires the reporting and that the agency's service contract inventory be publicly available. The number of hours is the total for the entire fiscal year and is not broken down by type of employee.

B. Type of Information Collected

Comments: One respondent commented that this rule would not provide agency officials with enough information to determine whether services are excessively costly and should be insourced, so more information should be required from the contractor. Five other respondents stated that the rule places additional burden on contractors, especially considering information is already reported in contractor proposals or invoices. One of these respondents recommended deleting FAR 52.204-14(b)(2) from the clause because the information is already collected.

Response: This rule requires the collection of information that will supplement existing data available to the Government in order to fulfill the requirements mandated in section 743(a) of Division C of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117). The statute requires reporting of incurred direct labor hours, not proposal information. While reporting of direct labor hours currently may be required for some payment processes, the information collected pursuant to this requirement is not required at the same level of detail for all contract types or submitted in the same format for all agencies. In other words, this rule requires contractors to report information that is not readily available to the Government.

C. Small Business Impact

Comments: Two respondents stated that the rule would impose additional reporting burden on small businesses, thereby increasing overhead rates and eventually passing the cost of implementation on to the Government.

Response: The rule attempts to minimize burden on small businesses by implementing contract value thresholds and phasing in the reporting requirement.

D. Increased Cost for Contractors and the Government

Comment: Two respondents questioned whether the value of this information will be worth the additional contract costs associated with collecting the information. Another respondent stated that even though DoD is exempt from section 743, it is required to compile service contract inventories, and DoD should be covered by this rule to avoid burdening contractors with separate reporting processes, definitions, and locations when they provide identical information for civilian and DoD contracts.

Response: This rule implements the requirements of section 743(a) of Division C of the Consolidated Appropriations Act, 2010, (Pub. L. 111-117), which specifically excludes DoD.

E. Subcontractor Data

Comments: Three respondents commented on subcontractor data. One respondent questioned why the data needs to be broken down to the subcontractor level, since the Government appears to be interested in the total dollars being expended for all non-Government performed work, not whether it is prime contractors or subcontractors. Another respondent stated that the exclusion of lower-tier subcontracts is an improper interpretation of the statute, which requires the reporting of all subcontractor employees, not just first-tier subcontractor employees. A third respondent recommended changing the word ``subcontract'' to ``subcontractor'' in FAR 52.204-14, Alternate I paragraph (d)(1)(i) since the work is being performed by subcontractors under the subcontract.

Response: Section 743(a) requires the reporting of both contractor and subcontractor labor hours, and the rule limits the reporting to first-tier subcontracts for services to alleviate the burden on contractors. The recommendation to change the text of the clauses to state `subcontractor name' instead of `subcontract name' has been incorporated into the final rule.

F. Reporting Direct Labor Hours Versus Full-Time Equivalent (FTE)

Comments: Two respondents questioned why direct labor hours are being collected instead of FTE. One of these respondents also stated that the rule should include a requirement for contractors to report the work location for each FTE. In addition, this respondent stated that the total dollar amount invoiced for services performed during the previous fiscal year may not always represent the number of direct labor hours expended on services performed during the previous fiscal years, so the Councils should consider changing the requirement to direct labor hours invoiced, instead of number of direct labor hours expended.

Response: The rule requires contractors to submit an aggregated number of hours for each year of contract performance. The Government will calculate FTEs based on the number of labor hours submitted, so contractors should not submit FTE information. The service contract inventories are utilizing the place of performance data currently available in the Federal Procurement Data System (FPDS), so this rule is not requiring contractors to submit that information. The rule will continue to capture direct labor hours expended, as required by section 743(a).

G. Reporting Time-Frame

Comments: Two respondents stated that reporting within 30-days after the end of the fiscal year is too tight a reporting timeframe. Response: Section 743(a) requires agencies submit inventories to OMB by December 30 annually. In order for agencies to be able to compile inventories and provide for a review and possible correction, contractors need to submit this information by the end of October. The Councils have determined that this reporting timeframe is adequate, but have modified the rule to allow up to November 30th of each year for review by the agency and any necessary corrections by the contractor.

H. Reporting Thresholds

Comments: Two respondents commented on reporting thresholds. One respondent recommends implementing the same thresholds for all contract types by the end of FY 2014 and aligning the thresholds with OFPP guidance on Service Contract Inventories. Another respondent commented that unsupported reporting thresholds were included in the proposed rule, which do not exist in section 743 and will exclude billions of dollars in service contracts annually.

Response: The rule minimizes the burden on contractors, especially for contract types that do not typically require this type of detailed reporting of labor hours, by implementing contract value thresholds and the phase-in of the reporting requirement. The thresholds for determining if a contract or order should include this clause have been revised to reflect the thresholds beginning as of FY 2014, since that is now when the reporting will begin.

I. Generic Data Universal Numbering System (DUNS)

Comment: One respondent cited to the proposed rule, which stated that contracts reported using the generic DUNS number allowed at FAR 4.605(c) will interfere with the contractor's ability to comply with this reporting requirement, because the data will not pre-populate from FPDS. The respondent recommended adding an Alternate II to FAR 52.204-14 for contractors using the generic DUNS number that identifies the additional data these contractors will have to provide manually.

Response: Contractors awarded a contract with a generic DUNS number will not be able to report information. Contracting officers should only use generic DUNS numbers under the very specific conditions in FAR 4.605(c).

J. OFPP Guidance

Comments: Two respondents raised issues that related to OFPP guidance. One respondent recommended consolidating the reporting requirements of section 743(a) and section 736 with OFPP guidance documents to simplify the reporting process for contractors and agencies. Another respondent stated that the rule does not establish whether functions performed by contractors will be determined based on Office of Personnel Management (OPM) job series codes, the GSA Product and Service Codes (PSC) Manual, or FAIR inventory function codes. The rule should adopt a services classification system that reflects the broad spectrum of occupational services recognized in the real world and that tailors that system to be compatible with the OPM classification system so that compensation standards can be compared across comparable service clusters.

Response: OFPP guidance supplements this rule, which implements section 743(a). This rule requires contractors to submit information that will supplement existing contract information, so it does not create a new classification system for services.

K. Failure To Report

Comment: One respondent recommended adding the following language to FAR 52.204-14(d)(2): ``The Contractor shall advise the subcontractor that the information reported, or the failure to report, will be made available to the public.'' The respondent also recommended adding the following to FAR 52.204-14(b)(4) (Alternate I): ``Data reported by subcontractors under paragraph (d) of this clause, and any failure of subcontractors to submit reports as required''.

Response: In the event that a contractor fails to comply with this reporting requirement, the contracting officer is required to document the failure in the contractor's performance evaluation (see FAR 4.1704 ``Contracting officer responsibilities''). This is the most appropriate enforcement tool for dealing with noncompliance.

L. Interagency Acquisitions

Comment: One respondent stated that the proposed FAR language is unclear as to whether the applicability is based on which agency is issuing the contract versus which agency is funding the action, especially if a contract is supporting multiple agencies.

Response: Applicability is based on the funding agency. FAR 4.1705 is modified to add ``for actions entirely funded by DoD or''. This is done to clarify that the clauses are not applicable to DoD-funded actions.

M. Definition of ``Classified Contracts''

Comment: One respondent questioned whether the use of the term ``classified contract'' in proposed FAR 4.1705 references the definition of the same from FAR part 2.

Response: Yes. FAR 1.108, ``FAR Conventions'' states that the definitions of words and terms used in part 2 apply throughout the FAR, unless specifically defined in another part, subpart, section, provision, or clause.

N. Effect on Competition

Comment: One respondent stated that the rule will create a significant barrier for commercial companies to participate in the Government market.

Response: While this rule might be one factor of a commercial contractor choosing not to participate in the Government market, the Councils have determined the rule's overall impact to be minimal, and do not consider that it will have a significant effect on such participation.

O. Public Burden

Comment: One respondent questioned the methodology used to calculate the hours needed to prepare responses and considered the reporting requirement estimates in the Paperwork Reduction Act submission to be grossly underestimated.

Response: Two hours is the estimated time to report per contract, one hour to calculate the data and one hour to enter the data at www.sam.gov. The burden estimate is based on the average burden experienced under all contract types, including cost-reimbursement, time-and-materials, and labor-hour contracts, which already require contractors to track labor hours closely in order to invoice the Government, and will therefore require less additional effort to meet this reporting requirement. This new paperwork burden is approved under OMB control number 9000-0179.

P. Existing Contracts

Comment: One respondent stated that the proposed rule contains no requirement to modify existing contracts or task orders to require reporting, meaning that more than 10 years could pass before these provisions are applicable to many contracts or task orders. The statute clearly states that the reporting requirements become effective at the exercise of an option year.

Response: The May 2, 2011, correction to the Federal Register at 76 FR 24443 states applicability to existing contracts in the preamble.

``Existing indefinite-delivery contracts will be bilaterally modified within six months of the effective date of the final rule if sufficient time and value remain on the base contract, which is defined as--

1. A performance period that extends beyond October 1, 2012; and

2. $5 million or more remaining to be obligated to the indefinite-delivery contract.''

This is repeated in the final rule, in the DATES section, updated to show the year as 2013 and the dollar threshold as $2.5 million.

IV. 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 Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

V. Regulatory Flexibility Act

DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as follows:

This rule amends the FAR to implement section 743(a) of Division C of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117). Section 743(a) requires agencies covered by the Federal Activities Inventory Reform (FAIR) Act, except for the Department of Defense (DoD), to submit annual agency inventories of their service contracts. DoD is exempt because DoD was already required to do annual service contract reporting under 10 U.S.C. 2462 and 10 U.S.C. 2330a(c). Section 743(a) calls for agencies to develop annually an inventory that reports, for each service contract, the following:

(1) A description of the services purchased by the executive agency and the role the services played in achieving objectives, regardless of whether such a purchase was made through a contract or task order.

(2) The organizational component of the executive agency administering the contract, and the organizational component of the agency whose requirements are being met through contractor performance of the service.

(3) The total dollar amount obligated for services under the contract and the funding source for the contract.

(4) The total dollar amount invoiced for services under the contract.

(5) The contract type and date of award.

(6) The name of the contractor and place of performance.

(7) The number and work location of contractor and subcontractor employees, expressed as full-time equivalents for direct labor, compensated under the contract.

(8) Whether the contract is a personal services contract.

(9) Whether the contract was awarded on a noncompetitive basis, regardless of date of award.

DoD, GSA, and NASA attempted to minimize the information-collection requirement for contractors by requiring agencies to obtain as much of the data as possible from existing sources, such as the FPDS. However, certain minimum data must be collected from service contractors in order for agencies to meet the annual statutory service contract inventory requirement.

Therefore, contractors will be required to report annually the following information on each service contract or order in accordance with the thresholds established, excluding actions entirely funded by DoD:

(1) Contract number and, as applicable, task order number.

(2) The total dollar amount invoiced for services performed during the previous Government fiscal year under the contract or order.

(3) The number of contractor direct labor hours expended on the services performed during the previous Government fiscal year.

(4) The number of first-tier subcontractor direct labor hours expended on the services performed during the previous Government fiscal year.

In order to invoice the Government, contractors track labor hours worked for cost-reimbursement, time-and-materials and labor-hour contracts. Therefore, a lower reporting threshold was established for these types of contracts. Contractors are not required to track or report labor hour information for fixed price contracts, so higher thresholds and a phased-in implementation schedule were developed to minimize the burden for contractors.

In addition, the final rule will require service contractor reporting to include first-tier subcontracts for services only. The same reporting thresholds will apply to both first-tier subcontracts and prime contracts. First-tier subcontract reporting of direct labor hours and amount invoiced will be done electronically by the prime contractor. Further lessening the reporting requirement, service contractors will not be asked to convert the number of direct labor hours into full-time equivalents.

Two comments were received stating that there would be an impact on small business, in addition to large businesses, but the two respondents did not include specific supporting data.

Each contractor will be required to report once annually on the services provided during the previous Government fiscal year. The information will be input to a Government-managed data system. There is no hard-copy reporting required, nor is there an agency certification or approval requirement.

When providing a proper invoice to the Government for cost-reimbursement, time-and-materials, and labor-hour contracts, the information on the number of direct labor hours worked is already compiled by contractors, so the information collected should be minimal for these types of contracts. Currently, the information on the number of employee hours worked must already be compiled by prime and subcontractors in order to (a) pay employees and (b) properly invoice for services provided.

There are no additional professional skills necessary in this area on the part of small businesses. If the small business has the personnel needed to account for and invoice the Government in compliance with preexisting financial data regulations and procedures, then compliance with the new reporting requirement should be transparent. In fact, the Contractors are already collecting the data. Therefore, since the data would already have been collected for paying employees and monthly invoicing, a reasonable average is that two additional hours of labor per contract per year is required. One hour has been allotted to adding the total labor hours for twelve monthly invoices and one hour to input the data.

Since both large and small entities already prepare monthly billing and collect and pay hourly wages as a standard business practice, it is not considered to be any greater burden for small entities. In fact, the cost is estimated to be primarily an additional two hour labor burden for an employee such as a payroll clerk at a cost of approximately $60/contract/year.

To minimize the burden on small businesses, the following alternatives were considered and included in the FAR rule:

Minimizing the inventory data elements collected by using existing systems, such as FPDS.

Minimizing the reporting to once a year.

Enabling electronic reporting by the contractor.

Requiring contractors to provide only the number of direct labor hours and developing the system to automatically generate the number of full-time equivalents.

Limiting the reporting requirement to first-tier subcontractors for services in lieu of all subcontractors.

Establishing a phased-in approach based on contract type and estimated total dollar amount, from 2014 to 2016.

Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat. The Regulatory Secretariat has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration.

VI. Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The rule contains information collection requirements. The Office of Management and Budget (OMB) has cleared this information collection requirement under OMB Control Number 9000-0179, titled: Service Contractor Reporting Requirements.

List of Subjects in 48 CFR Parts 1, 4, 8, 17, 37, and 52

Government procurement.

Dated: December 19, 2013.

William Clark,

Acting Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy.

Therefore, DoD, GSA, and NASA amend 48 CFR parts 1, 4, 8, 17, 37, and 52 as set forth below:

1. The authority citation for 48 CFR parts 1, 4, 8, and 17 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113.

PART 1--FEDERAL ACQUISITION REGULATION SYSTEM

1.106 [Amended]

2. Amend section 1.106 in the table following the introductory text, by adding in numerical sequence, FAR segments ``4.17'', ``52.204-14'', and ``52.204-15'' and their corresponding OMB Control Number ``9000-0179''.

PART 4--ADMINISTRATIVE MATTERS

3. Add subpart 4.17 to read as follows:

Subpart 4.17--Service Contracts InventorySec.

4.1700 Scope of subpart.

4.1701 Definitions.

4.1702 Applicability.

4.1703 Reporting requirements.

4.1704 Contracting officer responsibilities.

4.1705 Contract clauses.

Subpart 4.17--Service Contracts Inventory

4.1700 Scope of subpart.

This subpart implements section 743(a) of Division C of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117), which requires agencies to report annually to the Office of Management and Budget (OMB) on activities performed by service contractors. Section 743(a) applies to executive agencies, other than the Department of Defense (DoD), covered by the Federal Activities Inventory Reform Act (Pub. L. 105-270) (FAIR Act). The information reported in the inventory will be publicly accessible.

4.1701 Definitions.

As used in this subpart--

FAIR Act agencies means the agencies required under the FAIR Act to submit inventories annually of the activities performed by Government personnel.

First-tier subcontract means a subcontract awarded directly by the contractor for the purpose of acquiring supplies or services (including construction) for performance of a prime contract. It does not include the contractor's supplier agreements with vendors, such as long-term arrangements for materials or supplies that benefit multiple contracts and/or the costs of which are normally applied to a contractor's general and administrative expenses or indirect costs.

4.1702 Applicability.

(a) This subpart applies to--

(1) All FAIR Act agencies, except DoD as specified in 4.1705;

(2) Solicitations, contracts, and orders for services (including construction) that meet or exceed the thresholds at 4.1703; and

(3) Contractors and first-tier subcontractors.

(b) Procedures for compiling and submitting agency service contract inventories are governed by section 743(a)(3) of Division C of Pub. L. 111-117 and Office of Federal Procurement Policy (OFPP) guidance. The guidance is available at the following Web site: http://www.whitehouse.gov/omb/procurement-service-contract-inventories.

(c) This subpart addresses requirements for obtaining information from, and reporting by, agency service contractors.

4.1703 Reporting requirements.

(a) Thresholds. (1) Except as exempted by OFPP guidance, service contractor reporting shall be required for contracts and first-tier subcontracts for services based on type of contract and estimated total value. For indefinite-delivery contracts, reporting shall be determined based on the type and estimated total value of the orders issued under the contract. Indefinite-delivery contracts include, but are not limited to, contracts such as indefinite-delivery indefinite-quantity (IDIQ) contracts, Federal Supply Schedule contracts (FSSs), Governmentwide acquisition contracts (GWACs), and multi-agency contracts.

(2) Reporting is required according to the following thresholds:

(i) All cost-reimbursement, time-and-materials, and labor-hour service contracts and orders with an estimated total value above the simplified acquisition threshold.

(ii) All fixed-price service contracts awarded and orders issued according to the following thresholds:

(A) Awarded or issued in Fiscal Year 2014, with an estimated total value of $2.5 million or greater.

(B) Awarded or issued in Fiscal Year 2015, with an estimated total value of $1 million or greater.

(C) Awarded or issued in Fiscal Year 2016, and subsequent years, with an estimated total value of $500,000 or greater.

(3) Reporting is required for all first-tier subcontracts for services as prescribed in paragraphs (a)(2)(i) and (ii) of this section.

(b) Agency reporting responsibilities. (1) Agencies shall ensure that contractors comply with the reporting requirements of 52.204-14, Service Contract Reporting Requirements and 52.204-15, Service Contract Reporting Requirements for Indefinite-Delivery Contracts. Agencies shall review contractor reported information for reasonableness and consistency with available contract information. The agency is not required to address data for which the agency would not normally have supporting information. In the event the agency believes that revisions to the contractor reported information are warranted, the agency shall notify the contractor no later than November 15. By November 30, the contractor shall revise the report, or document its rationale for the agency. Authorized agency officials may review the reports at www.sam.gov.

(2) Agencies are required to compile annually an inventory of service contracts performed for, or on behalf of, the agency during the prior fiscal year in order to determine the extent of the agency's reliance on service contractors. Agencies shall submit a service contract inventory to OMB by January 15 annually. Then, each agency must post the inventory on its Web site and publish a Federal Register Notice of Availability by February 15 annually.

(3) Most of the required information is already collected in the Federal Procurement Data System (FPDS). Information not collected in FPDS will be provided by the contractor, as specified in 52.204-14, Service Contract Reporting Requirements and 52.204-15, Service Contract Reporting Requirements for Indefinite-Delivery Contracts.

4.1704 Contracting officer responsibilities.

(a) For other than indefinite-delivery contracts, the contracting officer shall ensure that 52.204-14, Service Reporting Requirement, is included in solicitations, contracts, and orders as prescribed at 4.1705. For indefinite-delivery contracts, the contracting officer who awarded the contract shall ensure that 52.204-15, Service Contract Reporting Requirements for Indefinite-Delivery Contracts, is included in solicitations and contracts as prescribed at 4.1705. The contracting officer at the order level shall verify the clause's inclusion in the contract.

(b) If the contractor fails to submit a report in a timely manner, the contracting officer shall exercise appropriate contractual remedies. In addition, the contracting officer shall make the contractor's failure to comply with the reporting requirements a part of the contractor's performance information under subpart 42.15.

4.1705 Contract clauses.

(a) The contracting officer shall insert the clause at 52.204-14, Service Contract Reporting Requirements, in solicitations and contracts for services (including construction) that meet or exceed the thresholds at 4.1703, except for indefinite-delivery contracts. This clause is not required for actions entirely funded by DoD, contracts awarded with a generic DUNS number, or in classified solicitations, contracts, or orders.

(b) The contracting officer shall insert the clause at 52.204-15, Service Contract Reporting Requirements for Indefinite-Delivery Contracts, in solicitations and indefinite-delivery contracts for services (including construction) where one or more orders issued thereunder are expected to each meet or exceed the thresholds at 4.1703. This clause is not required for actions entirely funded by DoD, contracts awarded with a generic DUNS number, or in classified solicitations, contracts, or orders.

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

4. Amend section 8.404 by adding paragraph (i) to read as follows:

8.404 Use of Federal Supply Schedules.

* * * * *

(i) Ensure that service contractor reporting requirements are met in accordance with subpart 4.17, Service Contracts Inventory.

PART 17--SPECIAL CONTRACTING METHODS

5. Revise section 17.504 to read as follows:

17.504 Reporting requirements.

(a) The senior procurement executive for each executive agency shall submit to the Director of OMB an annual report on interagency acquisitions, as directed by OMB.

(b) The contracting officer for the servicing agency shall ensure that service contractor reporting requirements are met in accordance with subpart 4.17, Service Contracts Inventory.

PART 37--SERVICE CONTRACTING

6. The authority citation for 48 CFR part 37 is revised to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113.

7. Amend section 37.103 by adding paragraph (e) to read as follows:

37.103 Contracting officer responsibility.

* * * * *

(e) Ensure that service contractor reporting requirements are met in accordance with subpart 4.17, Service Contracts Inventory.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

8. The authority citation for 48 CFR part 52 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113.

9. Add sections 52.204-14 and 52.204-15 to read as follows:

52.204-14 Service Contract Reporting Requirements.

As prescribed in 4.1705(a), insert the following clause:

Service Contract Reporting Requirements (Jan 2014)

(a) Definition.

First-tier subcontract means a subcontract awarded directly by the Contractor for the purpose of acquiring supplies or services (including construction) for performance of a prime contract. It does not include the Contractor's supplier agreements with vendors, such as long-term arrangements for materials or supplies that benefit multiple contracts and/or the costs of which are normally applied to a Contractor's general and administrative expenses or indirect costs.

(b) The Contractor shall report, in accordance with paragraphs (c) and (d) of this clause, annually by October 31, for services performed under this contract during the preceding Government fiscal year (October 1-September 30).

(c) The Contractor shall report the following information:

(1) Contract number and, as applicable, order number.

(2) The total dollar amount invoiced for services performed during the previous Government fiscal year under the contract.

(3) The number of Contractor direct labor hours expended on the services performed during the previous Government fiscal year.

(4) Data reported by subcontractors under paragraph (f) of this clause.

(d) The information required in paragraph (c) of this clause shall be submitted via the internet at www.sam.gov. (See SAM User Guide). If the Contractor fails to submit the report in a timely manner, the contracting officer will exercise appropriate contractual remedies. In addition, the Contracting Officer will make the Contractor's failure to comply with the reporting requirements a part of the Contractor's performance information under FAR subpart 42.15.

(e) Agencies will review Contractor reported information for reasonableness and consistency with available contract information. In the event the agency believes that revisions to the Contractor reported information are warranted, the agency will notify the Contractor no later than November 15. By November 30, the Contractor shall revise the report, or document its rationale for the agency.

(f)(1) The Contractor shall require each first-tier subcontractor providing services under this contract, with subcontract(s) each valued at or above the thresholds set forth in 4.1703(a)(2), to provide the following detailed information to the Contractor in sufficient time to submit the report:

(i) Subcontract number (including subcontractor name and DUNS number); and

(ii) The number of first-tier subcontractor direct-labor hours expended on the services performed during the previous Government fiscal year.

(2) The Contractor shall advise the subcontractor that the information will be made available to the public as required by section 743 of Division C of the Consolidated Appropriations Act, 2010.

(End of clause)

52.204-15 Service Contract Reporting Requirements for Indefinite-Delivery Contracts.

As prescribed in 4.1705(b), insert the following clause:

Service Contract Reporting Requirements for Indefinite-Delivery Contracts (January 30, 2014)

(a) Definition.

First-tier subcontract means a subcontract awarded directly by the Contractor for the purpose of acquiring supplies or services (including construction) for performance of a prime contract. It does not include the Contractor's supplier agreements with vendors, such as long-term arrangements for materials or supplies that benefit multiple contracts and/or the costs of which are normally applied to a Contractor's general and administrative expenses or indirect costs.

(b) The Contractor shall report, in accordance with paragraphs (c) and (d) of this clause, annually by October 31, for services performed during the preceding Government fiscal year (October 1-September 30) under this contract for orders that exceed the thresholds established in 4.1703(a)(2).

(c) The Contractor shall report the following information:

(1) Contract number and order number.

(2) The total dollar amount invoiced for services performed during the previous Government fiscal year under the order.

(3) The number of Contractor direct labor hours expended on the services performed during the previous Government fiscal year.

(4) Data reported by subcontractors under paragraph (f) of this clause.

(d) The information required in paragraph (c) of this clause shall be submitted via the internet at www.sam.gov. (See SAM User Guide). If the Contractor fails to submit the report in a timely manner, the Contracting Officer will exercise appropriate contractual remedies. In addition, the Contracting Officer will make the Contractor's failure to comply with the reporting requirements a part of the Contractor's performance information under FAR subpart 42.15.

(e) Agencies will review Contractor reported information for reasonableness and consistency with available contract information. In the event the agency believes that revisions to the Contractor reported information are warranted, the agency will notify the Contractor no later than November 15. By November 30, the Contractor Shall revise the report, or document its rationale for the agency.

(f)(1) The Contractor shall require each first-tier subcontractor providing services under this contract, with subcontract(s) each valued at or above the thresholds set forth in 4.1703(a)(2), to provide the following detailed information to the Contractor in sufficient time to submit the report:

(i) Subcontract number (including subcontractor name and DUNS number), and

(ii) The number of first-tier subcontractor direct-labor hours expended on the services performed during the previous Government fiscal year.

(2) The Contractor shall advise the subcontractor that the information will be made available to the public as required by section 743 of Division C of the Consolidated Appropriations Act, 2010.

(End of clause)

10. Amend section 52.212-5 by--

a. Revising the date of the clause;

b. Redesignating paragraphs (b)(6) through (b)(51) as paragraphs (b)(8) through (b)(53), respectively; and

c. Adding new paragraphs (b)(6) and (b)(7).

The revised and added text reads 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 (JAN 2014)

* * * * *

(b) * * *

---- (6) 52.204-14, Service Contract Reporting Requirements (JAN 2014) (Pub. L. 111-117, section 743 of Div. C).

---- (7) 52.204-15, Service Contract Reporting Requirements for Indefinite-Delivery Contracts (JAN 2014) (Pub. L. 111-117, section 743 of Div. C).

* * * * *

[FR Doc. 2013-31148 Filed 12-30-13; 8:45 am]

BILLING CODE 6820-EP-P

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[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]

[Rules and Regulations]

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

[FR Doc No: 2013-31149]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 7, 8, 9, and 52

[FAC 2005-72; FAR Case 2009-024; Item II; Docket No. 2011-0086, Sequence No. 1]

RIN 9000-AM07

Federal Acquisition Regulation; Prioritizing Sources of Supplies and Services for Use by the Government

AGENCIES: 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 update and clarify the priority of sources of supplies and services for use by the Government.

DATES: Effective: January 30, 2014.

FOR FURTHER INFORMATION CONTACT: Mr. Karlos Morgan, Procurement Analyst, at 202-501-2364, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755. Please cite FAC 2005-72, FAR Case 2009-024.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA published a proposed rule in the Federal Register at 76 FR 34634 on June 14, 2011, to amend the Federal Acquisition Regulation (FAR) to limit the section of the FAR addressing the priorities for use of Government supply sources to a discussion of the mandatory Government sources of supplies and services. Seventy-nine respondents submitted comments. Most respondents requested that an Initial Regulatory Flexibility Analysis (IRFA) be performed. Based on the comments, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) performed an IRFA after the initial publication of the proposed rule. The IRFA was published in the Federal Register at 77 FR 54872 on September 6, 2012. Six respondents submitted comments in response to the Notice of Correction.

II. Discussion and Analysis

The Councils reviewed the 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. Summary of Significant Changes

Language was added at FAR 7.102(a) to require consideration of existing contracts before creating new contracts.

FAR 8.002(a)(1)(i) was revised to read ``Inventories of the requiring agency'' for clarification.

FAR 8.003(d) has been revised to note that the Defense National Stockpile Center has been renamed ``DLA Strategic Materials''.

FAR 8.004 was revised to note that the sources listed in 8.004(a) are not listed in any order of priority.

A sentence was added to FAR 8.004 reminding users that when satisfying requirements from non-mandatory sources, they should refer to FAR 7.105(b) and part 19 regarding consideration of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including 8(a) participants), and women-owned small business concerns. Use of these sources can be counted towards an agency's small business contracting goals.

B. Analysis of Public Comments

1. Federal Strategic Sourcing Initiative (FSSI) Blanket Purchase Agreement (BPA) for Office Supplies

Comment: Most respondents believe the rule is both unnecessary and damaging to competition from small businesses throughout their industry. The FSSI program has curtailed their Federal market business which led to reduction in employees' hours.

Response: The purpose of the rule is to update and clarify the order of priority at FAR 8.002, and add a new section to encourage agencies to give consideration to using certain existing non-mandatory sources to leverage agency buying power and achieve administrative efficiencies that reduce costs and produce savings for our taxpayers. The rule does not change how agencies are purchasing supplies and/or services under Federal Supply Schedules.

No new mandatory sources are proposed for consideration, only existing sources were included for informational purposes. The existing non-mandatory sources are being listed prior to commercial sources, but agencies remain free to compete their requirements among commercial sources of supply, where it is in their best interest to meet their needs through open-market procurement.

2. Competition

Comment: Respondents indicated that the proposed rule would severely hamper competition in the Federal market place.

Response: This rule does not impede competition. No new mandatory sources are proposed for consideration under this rule. Existing sources were included for informational purposes, as a means of supporting market research, which is required by law (41 U.S.C. 3301(a)(2)) for the procurement of supplies and services. Competition in the open market will continue if it is in an agency's best interests to meet its needs through open-market procurement.

3. Federal Supply Schedule (FSS) Contracts

Comment: A respondent stated that the proposed rule is not clear about whether the contracting officer must check and use contracts under FSS if there is an FSS holder that can meet the agency's needs.

Response: The use of FSS is not required. However, under FAR 7.102(a)(4) of the final rule, agencies are encouraged to consider using FSS and other existing vehicles before considering sources in the open market.

4. The Murray Benjamin Electric Company Protest

Comment: One respondent indicated that use of FSS is mandatory if the schedule holder is able to meet the agency's needs. The respondent stated that the Murray Benjamin case is ambiguous and the Government interpretation is faulty.

Response: The final rule amends FAR part 8 to clarify that use of FSS is not mandatory. Rather, as part of good market research, agencies are encouraged to consider using FSS and other existing vehicles before considering sources in the open market.

5. FAR Case 2008-003

Comment: One respondent indicated that the proposed rule undermines the intent behind the rule change from FAR Case 2008-003. According to the respondent, 2008-003 final rule requires competition within the FSS for contracts over the simplified acquisition threshold. The respondent believed that the proposed rule requires competition to the open market, not just within FSS.

Response: Final rule 2008-003, ``Public Disclosure of Justification and Approval Documents for Noncompetitive Contracts,'' which required posting justification and approval documents for noncompetitive contracts, did not apply to placement of orders under the FSS. FAR Case 2007-012, ``Requirements for Acquisitions Pursuant to Multiple-Award Contracts,'' which implemented section 863 of the Duncan Hunter National Defense Act for Fiscal Year 2009, required posting of sole source task or delivery orders in excess of the simplified acquisition threshold that are placed against multiple award contracts. This rule is consistent with the intent of FAR Case 2007-012 to provide enhanced competition.

6. Other Requested Changes to FAR Part 8

Comment: A respondent indicated that the rule should not include Governmentwide Acquisition Contracts (GWACs) in FAR part 8 and give them the same level of priority as FSS contracts.

Response: The inclusion of GWACs in FAR part 8 is appropriate as they are existing contract vehicles available for use by multiple agencies. Agencies are encouraged to consider existing vehicles prior to awarding new contracts.

Comment: A respondent recommended that FAR 8.004 be revised to include text that explains that the enumerated contracts are not, as the preamble to the proposed rule notes, listed in any order of priority.

Response: The language of the final rule was revised to include this clarification.

7. Comments Submitted on the IRFA

Comment: Several respondents expressed their disappointment with the rule and suggested further study of the negative impacts of the rule.

Response: Because the rule reflects existing policy and practices, there is no need to conduct additional economic impact analysis and other research called for by the respondents.

Comment: Various respondents expressed dissatisfaction with FSSI, due to a perceived impediment to competition.

Response: The reference to FSSI agreements in FAR 8.004(a)(1) of the final rule is provided as an example of existing non-mandatory sources that agencies are encouraged to consider as part of their market research before considering open market sources.

Comment: One respondent recommended requiring documentation in the contract file to reflect why an existing source does not meet the Government's needs.

Response: This type of documentation may be appropriate as part of the market research process detailed in FAR part 10, Market Research, and, in many cases, is already required by agency supplements to FAR part 10.

Comment: One respondent recommended that the Government require agencies to consider the use of existing sources rather than merely encouraging them to do so.

Response: The final rule amends FAR 7.102(a) to require, as part of acquisition planning, appropriate consideration of the use of pre-existing contracting (including interagency and intra-agency contracts) to fulfill requirements before awarding new contracts.

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

DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as follows:

Considerable concern was expressed by small business entities with the concept and practice of strategic sourcing as evidenced through FSSI agreements. However, the rule itself only references FSSI agreements as an example of existing contract sources that agencies, as part of good market research, are encouraged to consider using before considering sources in the open market. After due consideration of pre-existing contracts, agencies remain free to compete their requirements among commercial sources of supply.

No significant changes were made from the proposed rule in response to comments on the IRFA.

No comments were submitted by the Chief Counsel for Advocacy of the Small Business Administration.

This rule deals with the order of preference for sources that must be considered, and to distinguish them from sources that should be considered where an agency is unable to satisfy requirements for supplies and services from mandatory sources. This rule will not affect how many small businesses are awarded this type of contract.

This rule does not add any new information collection requirements.

Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat. The Regulatory Secretariat has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration.

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 7, 8, 9, and 52

Government procurement.

Dated: December 19, 2013.

William Clark,

Acting Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy.

Therefore, DoD, GSA, and NASA amend 48 CFR parts 7, 8, 9, and 52 as set forth below:

1. The authority citation for 48 CFR parts 7, 8, 9, and 52 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113.

PART 7--ACQUISITION PLANNING

2. Amend section 7.102 by revising paragraph (a) to read as follows:

7.102 Policy.

(a) Agencies shall perform acquisition planning and conduct market research (see part 10) for all acquisitions in order to promote and provide for--

(1) Acquisition of commercial items or, to the extent that commercial items suitable to meet the agency's needs are not available, nondevelopmental items, to the maximum extent practicable (10 U.S.C. 2377 and 41 U.S.C. 251, et seq.);

(2) Full and open competition (see part 6) or, when full and open competition is not required in accordance with Part 6, to obtain competition to the maximum extent practicable, with due regard to the nature of the supplies or services to be acquired (10 U.S.C. 2301(a)(5) and 41 U.S.C. 253a(a)(1));

(3) Selection of appropriate contract type in accordance with part 16; and

(4) Appropriate consideration of the use of pre-existing contracts, including interagency and intra-agency contracts, to fulfill the requirement, before awarding new contracts. (See 8.002 through 8.004 and subpart 17.5).

* * * * *

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

3. Revise section 8.000 to read as follows:

8.000 Scope of part.

This part deals with prioritizing sources of supplies and services for use by the Government.

4. Revise section 8.002 to read as follows:

8.002 Priorities for use of mandatory Government sources. (a) Except as required by 8.003, or as otherwise provided by law, agencies shall satisfy requirements for supplies and services from or through the mandatory Government sources and publications listed below in descending order of priority:

(1) Supplies. (i) Inventories of the requiring agency.

(ii) Excess from other agencies (see subpart 8.1).

(iii) Federal Prison Industries, Inc. (see subpart 8.6).

(iv) Supplies that are on the Procurement List maintained by the Committee for Purchase From People Who Are Blind or Severely Disabled (see Subpart 8.7).

(v) Wholesale supply sources, such as stock programs of the General Services Administration (GSA) (see 41 CFR 101-26.3), the Defense Logistics Agency (see 41 CFR 101-26.6), the Department of Veterans Affairs (see 41 CFR 101-26.704), and military inventory control points.

(2) Services. Services that are on the Procurement List maintained by the Committee for Purchase From People Who Are Blind or Severely Disabled (see subpart 8.7).

(b) Sources other than those listed in paragraph (a) of this section may be used as prescribed in 41 CFR 101-26.301 and in an unusual and compelling urgency as prescribed in 6.302-2 and in 41 CFR 101-25.101-5.

(c) The statutory obligation for Government agencies to satisfy their requirements for supplies or services available from the Committee for Purchase From People Who Are Blind or Severely Disabled also applies when contractors purchase the supplies or services for Government use.

5. Revise section 8.003 to read as follows:

8.003 Use of other mandatory sources.

Agencies shall satisfy requirements for the following supplies or services from or through specified sources, as applicable:

(a) Public utility services (see part 41).

(b) Printing and related supplies (see subpart 8.8).

(c) Leased motor vehicles (see subpart 8.11).

(d) Strategic and critical materials (e.g., metals and ores) from inventories exceeding Defense National Stockpile requirements (detailed information is available from the DLA Strategic Materials, 8725 John J. Kingman Rd., Suite 3229, Fort Belvoir, VA 22060-6223.

(e) Helium (see subpart 8.5--Acquisition of Helium).

6. Redesignate section 8.004 as section 8.005; and add a new section 8.004 to read as follows:

8.004 Use of other sources.

If an agency is unable to satisfy requirements for supplies and services from the mandatory sources listed in 8.002 and 8.003, agencies are encouraged to consider satisfying requirements from or through the non-mandatory sources listed in paragraph (a) of this section (not listed in any order of priority) before considering the non-mandatory source listed in paragraph (b) of this section. When satisfying requirements from non-mandatory sources, see 7.105(b) and part 19 regarding consideration of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including 8(a) participants), and women-owned small business concerns.

(a)(1) Supplies. Federal Supply Schedules, Governmentwide acquisition contracts, multi-agency contracts, and any other procurement instruments intended for use by multiple agencies, including blanket purchase agreements (BPAs) under Federal Supply Schedule contracts (e.g., Federal Strategic Sourcing Initiative (FSSI) agreements accessible at http://www.gsa.gov/fssi (see also 5.601)).

(2) Services. Agencies are encouraged to consider Federal Prison Industries, Inc., as well as the sources listed in paragraph (a)(1) of this section (see subpart 8.6).

(b) Commercial sources (including educational and non-profit institutions) in the open market.

8.402 [Amended]

7. Amend section 8.402 by removing from paragraph (a) ``(see 8.002)'' and adding ``(see 8.004)'' in its place.

PART 9--CONTRACTOR QUALIFICATIONS

9.405-1 [Amended]

8. Amend section 9.405-1 by removing from paragraph (b)(2) ``optional use''.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

52.208-9 [Amended]

9. Amend section 52.208-9 by removing from the introductory paragraph ``8.004'' and adding ``8.005'' in its place.

[FR Doc. 2013-31149 Filed 12-30-13; 8:45 am]

BILLING CODE 6820-EP-P

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[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]

[Unknown Section]

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

[FR Doc No: 2013-31151]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 22, 25, and 52

[FAC 2005-72; FAR Case 2013-021; Item IV; Docket No. 2013-0021, Sequence No. 1]

RIN 9000-AM67

Federal Acquisition Regulation; Trade Agreements Thresholds

AGENCIES: 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 incorporate revised thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements, as determined by the United States Trade Representative.

DATES: Effective Date: January 1, 2014.

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 2005-72, FAR case 2013-021.

SUPPLEMENTARY INFORMATION:

I. Background

Every two years, the trade agreements thresholds are adjusted according to a pre-determined formula under the agreements. These thresholds become effective on January 1, 2014. On December 18, 2013 (78 FR 76700), the United States Trade Representative published new procurement thresholds. The United States Trade Representative has specified the following new thresholds:

Trade agreement

Supply contract (equal to or exceeding)

Service contract (equal to or exceeding)

Construction contract (equal to or exceeding)

WTO GPA

$204,000

$204,000

$7,864,000

FTAs

     

Australia FTA

79,507

79,507

7,864,000

Bahrain FTA

204,000

204,000

10,335,931

CAFTA-DR (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua)

79,507

79,507

7,864,000

Chile FTA

79,507

79,507

7,864,000

Colombia FTA

79,507

79,507

7,864,000

Korea FTA.

100,000

100,000

7,864,000

Morocco FTA

$204,000

$204,000

7,864,000

NAFTA

     

--Canada.

25,000

79,507

10,335,931

--Mexico

79,507

79,507

10,335,931

Oman FTA

$204,000

$204,000

10,335,931

Panama FTA

$204,000

$204,000

7,864,000

Peru FTA

$204,000

$204,000

7,864,000

Singapore FTA

79,507

79,507

7,864,000

Israeli Trade Act

50,000

   

II. Discussion and Analysis

This final rule implements the new thresholds in FAR subpart 25.4, Trade Agreements, and other sections in the FAR that include trade agreements thresholds (i.e., 22.1503, 25.202, 25.603, 25.1101, and 25.1102).

In addition, changes are required to the clauses 52.204-8, Annual Representations and Certifications, and 52.222-19, Child Labor--Cooperation with Authorities and Remedies, with conforming changes to the clause dates in 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders--Commercial Items, and 52.213-4, Terms and Conditions--Simplified Acquisitions (Other Than Commercial Items).

III. Publication of This Final Rule for Public Comment Is Not Required by Statute

``Publication of proposed regulations,'' 41 U.S.C. 1707, is the statute which applies to the publication of the Federal Acquisition Regulation. Paragraph (a)(1) of the statute requires that a procurement policy, regulation, procedure or form (including an amendment or modification thereof) must be published for public comment if it relates to the expenditure of appropriated funds, and has either a significant effect beyond the internal operating procedures of the agency issuing the policy, regulation, procedure or form, or has a significant cost or administrative impact on contractors or offerors. This final rule is not required to be published for public comment, because it only adjusts the thresholds according to pre-determined formula to adjust for changes in economic conditions, thus maintaining the status quo, without significant effect beyond the internal operating procedures of the Government.

IV. 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.

V. Regulatory Flexibility Act

The Regulatory Flexibility Act does not apply to this rule because this final rule does not constitute a significant FAR revision and 41 U.S.C. 1707 does not require publication for public comment.

VI. Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C. chapter 35) does apply, because the final rule affects the prescriptions for use of the certification and information collection requirements in the provisions at 52.225-4 (OMB Control No. 9000-0130, Buy American Act--Free Trade Agreement--Israeli Trade Certificate), and 52.225-6 (OMB Control No. 9000-0025, Trade Agreements Certificate), and the clauses at 52.225-9, 52.225-11, 52.225-21, and 52.225-23 (OMB Control No. 9000-0141, Buy American--Construction) respectively. However, there is no impact on the estimated burden hours, because the threshold changes are in line with inflation and maintain the status quo.

List of Subjects in 48 CFR Parts 22, 25, and 52

Government procurement.

Dated: December 19, 2013.

William Clark,

Acting Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy.

Therefore, DoD, GSA, and NASA amend 48 CFR parts 22, 25, and 52 as set forth below:

1. The authority citation for 48 CFR parts 22, 25, and 52 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113.

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

22.1503 [Amended]

2. Amend section 22.1503 by removing from paragraph (b)(1) ``Subpart'' and adding ``subpart'' in its place.

3. Amend section 22.1503 by removing from paragraph (b)(3) ``$77,494'' and ``Subpart'', and adding ``$79,507'' and ``subpart'' in its place, respectively.

4. Amend section 22.1503 by removing from paragraph (b)(4) ``$202,000'' and adding ``$204,000'' in its place.

PART 25--FOREIGN ACQUISITION

25.202 [Amended]

5. Amend section 25.202 by removing from paragraph (c) ``$7,777,000'' and ``Subpart'', and adding ``$7,864,000'' and ``subpart'' in its place, respectively.

6. Amend section 25.402 by revising the table in paragraph (b) to read as follows:

25.402 General.

* * * * *

(b) * * *

Trade agreement

Supply contract (equal to or exceeding)

Service contract (equal to or exceeding)

Construction contract (equal to or exceeding)

WTO GPA

$204,000

$204,000

$7,864,000

FTAs

     

Australia FTA

79,507

79,507

7,864,000

Bahrain FTA

204,000

204,000

10,335,931

CAFTA-DR (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua)

79,507

79,507

7,864,000

Chile FTA

79,507

79,507

7,864,000

Colombia FTA

79,507

79,507

7,864,000

Korea FTA.

100,000

100,000

7,864,000

Morocco FTA

$204,000

$204,000

7,864,000

NAFTA

     

--Canada.

25,000

79,507

10,335,931

--Mexico

79,507

79,507

10,335,931

Oman FTA

$204,000

$204,000

10,335,931

Panama FTA

$204,000

$204,000

7,864,000

Peru FTA

$204,000

$204,000

7,864,000

Singapore FTA

79,507

79,507

7,864,000

Israeli Trade Act

50,000

   

25.603 [Amended]

7. Amend section 25.603 by removing from paragraph (c)(1) ``$7,777,000'' and adding ``$7,864,000'' in its place.

25.1101 [Amended]

8. Amend section 25.1101 by--

a. Removing from paragraph (b)(1)(i)(A) ``$202,000'' and adding ``$204,000'' in its place;

b. Removing from paragraph (b)(1)(iii) ``$77,494'' and adding ``$79,507'' in its place;

c. Removing from paragraph (b)(1)(iv) ``$77,494'' and adding ``$79,507'' in its place;

d. Removing from paragraph (b)(2)(iii) ``$77,494'' and adding ``$79,507'' in its place;

e. Removing from paragraph (b)(2)(iv) ``$77,494'' and adding ``$79,507'' in its place;

f. Removing from paragraph (c)(1) ``$202,000'' and ``Subpart'', and adding ``$204,000'' and ``subpart'' in its place, respectively; and

g. Removing from paragraph (d) ``$202,000'' and adding ``$204,000'' in its place.

25.1102 [Amended]

9. Amend section 25.1102 by--

a. Removing from the introductory text of paragraph (a) ``$7,777,000'' and adding ``$7,864,000'' in its place;

b. Removing from the introductory text of paragraph (c) ``$7,777,000'' and adding ``$7,864,000'' in its place;

c. Removing from paragraph (c)(3) ``$7,777,000'' and ``$10,074,262'', and adding ``$7,864,000'' and ``$10,335,931'' in its place, respectively; and

d. Removing from paragraph (d)(3) ``$7,777,000'' and ``$10,074,262'', and adding ``$7,864,000'' and ``$10,335,931'' in its place, respectively.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

10. Amend section 52.204-8 by--

a. Revising the date of the clause;

b. Removing from paragraph (c)(1)(xvii)(C) ``$77,494'' and adding ``$79,507 in its place; and

c. Removing from (c)(1)(xvii)(D) ``$77,494'' and adding ``$79,507'' in its place.

The revised text reads as follows:

52.204-8 Annual Representations and Certifications.

* * * * *

Annual Representations and Certifications (DEC 2013)

* * * * *

11. Amend section 52.212-5 by revising the date of the clause and paragraph (b)(27) 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 (DEC 2013)

* * * * *

(b) * * *

--(27) 52.222-19, Child Labor--Cooperation with Authorities and Remedies (DEC 2013) ERT Abbreviated Month and Year of Publication in the Federal Register]) (E.O. 13126).

* * * * *

12. Amend section 52.213-4 by revising the date of the clause and paragraph (b)(1)(ii) 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) (DEC 2013)

* * * * *

(b) * * *

(1) * * *

(ii) 52.222-19, Child Labor--Cooperation with Authorities and Remedies (DEC 2013) (E.O. 13126). (Applies to contracts for supplies exceeding the micro-purchase threshold.)

* * * * *

13. Amend section 52.222-19 by--

a. Revising the date of the clause;

b. Removing from paragraph (a)(3) ``$77,494'' and adding ``$79,507'' in its place; and

c. Removing from paragraph (a)(4) ``$202,000'' and adding ``$204,000'' in its place.

The revised text reads as follows:

52.222-19 Child Labor--Cooperation With Authorities and Remedies.

* * * * *

Child Labor--Cooperation With Authorities and Remedies (DEC 2013)

* * * * *

[FR Doc. 2013-31151 Filed 12-30-13; 8:45 am]

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[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]

[Unknown Section]

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

[FR Doc No: 2013-31152]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Chapter 1

[Docket No. FAR 2013-0078, Sequence No. 8]

Federal Acquisition Regulation; Federal Acquisition Circular 2005-72; 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 the rules appearing in Federal Acquisition Circular (FAC) 2005-72, which amends the Federal Acquisition Regulation (FAR). An asterisk (*) next to a rule indicates that a regulatory flexibility analysis has been prepared. Interested parties may obtain further information regarding these rules by referring to FAC 2005-72, which precedes this document. These documents are also available via the Internet at http://www.regulations.gov.

DATES: December 31, 2013.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact the analyst whose name appears in the table below. Please cite FAC 2005-72 and the FAR case number. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755.

Rules Listed in FAC 2005-72

Item

Subject

FAR Case

Analyst

I

Service Contracts Reporting Requirements.

2010-010

Loeb.

II

Prioritizing Sources of Supplies and Services for Use by Government.

2009-024

Morgan.

III

Terms of Service and Open-Ended Indemnification, and Unenforceability of Unauthorized Obligations.

2013-005

Petrusek.

IV

Trade Agreements Thresholds.

2013-021

Davis.

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 subjects set forth in the documents following these item summaries. FAC 2005-72 amends the FAR as specified below:

Item I--Service Contracts Reporting Requirements (FAR Case 2010-010)

This final rule amends the FAR to implement section 743 of Division C of the Consolidated Appropriations Act, 2010. Section 743 calls for certain agencies, not including the Department of Defense, to submit annual inventories of service contracts. FAR subpart 4.17, Service Contracts Inventory, provides annual reporting requirements for agencies and contractors. Guidance for agencies is available at: http://www.whitehouse.gov/omb/procurement-service-contract-inventories. FAR clauses 52.204-14 and 52.204-15 provide contractors' annual reporting requirements. Prime and first-tier contractors will submit the information by October 31 at www.sam.gov, including total dollar amount invoiced for services performed in the prior Government fiscal year and total amount of labor hours for the previous Government fiscal year.

To lessen the burden on small and large business prime contractors, information is reported annually, reporting is phased in over three fiscal years, and only first-tier subcontracts are covered, not all tiers.

Contracting officers will verify that the clause is included in the contract or order. Agencies are responsible for reviewing contractor reported information to ensure it appears reasonable and consistent with available contract information. The agency is not required to address data for which the agency would not normally have supporting information. In the event the agency believes that revisions to the contractor reported information are warranted, the contractor is to be notified no later than November 15. By November 30, the contractor shall revise the report, or document its rationale for the agency for maintaining the information without change.

Item II--Prioritizing Sources of Supplies and Services for Use by Government (FAR Case 2009-024)

This final rule amends the FAR to update and clarify the priority of sources of supplies and services for use by the Government at FAR subpart 8.0. The final rule also includes a list of other existing Federal contract vehicles to consider for agency use, such as Governmentwide Acquisition Contracts (GWACs), Multi-Agency Contracts (MACs), and other procurement instruments intended for use by multiple agencies, including blanket purchase agreements under Federal Supply Service contracts. The policy at FAR 7.102(a) is also revised to conform with the amendments to FAR subpart 8.0.

Item III--Terms of Service and Open-Ended Indemnification, and Unenforceability of Unauthorized Obligations (FAR Case 2013-005)

This final rule adopts, without change, an interim rule which was published in the Federal Register at 78 FR 37686 on June 21, 2013. The interim rule amended the FAR to address concerns raised in an opinion from the U.S. Department of Justice Office of Legal Counsel that determined the Anti-Deficiency Act is violated when a Government contracting officer or other employee with the authority to bind the Government agrees, without statutory authorization or other exception, to an open-ended, unrestricted indemnification clause. This rule clarified for the public that an End User License Agreement, Term of Service, or similar agreement containing an indemnification provision, is unenforceable and nonbinding against the Government and Government-authorized end-users. The rule contained a new clause that applies to all solicitations and contracts and automatically applies to micro-purchases, including those made with the Governmentwide commercial purchase card.

Item IV--Trade Agreements Thresholds (FAR Case 2013-021)

This final rule amends the FAR to adjust the thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements as determined by the United States Trade Representative, according to a pre-determined formula under the agreements.

Dated: December 19, 2013.

William Clark,

Acting Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy.

[FR Doc. 2013-31152 Filed 12-30-13; 8:45 am]

BILLING CODE 6820-EP-P

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[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]

[Unknown Section]

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

[FR Doc No: 2013-31150]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 12, 13, 32, 43, and 52

[FAC 2005-72; FAR Case 2013-005; Item III; Docket 2013-0005, Sequence 1]

RIN 9000-AM45

Federal Acquisition Regulation; Terms of Service and Open-Ended Indemnification and Unenforceability of Unauthorized Obligations

AGENCIES: 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 address concerns raised in an opinion from the U.S. Department of Justice (DOJ) Office of Legal Counsel (OLC) involving the use of unrestricted, open-ended indemnification clauses in acquisitions for social media applications.

DATES: Effective: December 31, 2013.

FOR FURTHER INFORMATION CONTACT: Ms. Marissa Petrusek, Procurement Analyst, at 202-501-0136, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755. Please cite FAC 2005-72, FAR Case 2013-005.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA published an interim rule in the Federal Register at 78 FR 37686 on June 21, 2013, to implement a recent DOJ OLC opinion, entitled ``Memorandum for Barbara S. Fredericks, Assistant General Counsel for Administration, United States Department of Commerce,'' which noted that the Anti-Deficiency Act (ADA) (31 U.S.C. 1341) is violated when a Government contracting officer or other employee with authority to bind the Government agrees, without statutory authorization or other exception, to an open-ended, unrestricted indemnification clause. On April 4, 2013, the Office of Management and Budget (OMB) issued guidance outlining a series of management actions to ensure agencies act in compliance with the ADA and in accordance with OLC's opinion. See OMB Guidance M-13-10, Anti-deficiency Act Implications of Certain Online Terms of Service Agreements. The interim rule became effective on June 21, 2013. One respondent submitted comments on the interim rule.

II. Discussion and Analysis

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the comments in the development of the final rule. A discussion of the comments is provided as follows:

A. Summary of Significant Changes

No changes were made as a result of the public comments.

B. Analysis of Public Comments

1. Attachment of Clause to Licenses

Comment: The respondent believed that the clause does not reliably attach to licenses because of situations where an End User License Agreement (EULA) or Terms of Service (TOS) is passed through an intermediary contractor or subcontractor to the Government. The respondent recommended that the Government directly negotiate with major commercial software and service providers to ensure that the clause ``is included in those providers' EULAs or TOSs with the Government and that the interim rule make clear that commercial items and software can be accepted only where such an agreement has been made directly with the licensor''.

Response: The clause does attach to licenses. The clause is not limited to instances in which the Government has directly negotiated with the indemnitees. No change is made in the final rule.2. Unintended Consequences

Comment: The respondent expressed concern that this rule could lead commercial companies to forego doing business with the Government. Not all contractors may be able to accept the risk re-allocation effected by the interim rule, according to the respondent.

Response: The interim rule became effective on June 21, 2013. The objective of the rule is to clarify that the inclusion of an open-ended indemnification clause in a EULA, TOS, or other agreement, is not binding on the Government unless expressly authorized by statute and specifically authorized under applicable agency regulations and procedures, and shall be deemed to be stricken from the EULA, TOS, or similar legal instrument or agreement. Since the interim rule was published, the Councils have received no indications that the scenario envisioned by the respondent has come to pass. No change is made in the final rule.

3. Alternative Solutions To Address the ADA Concerns

Comment: The respondent suggested two alternatives. The first was for the Department of Justice to definitively indicate that agency disclosures are not required for (and contracting officers will not be prosecuted for) ADA violations stemming solely from open-ended indemnifications contained in commercial EULAs and TOSs so long as, once discovered, the Government negotiates with the licensor directly to limit the attendant open-ended risk. The other alternative was for the Government to retain the clause from the interim rule with a cap on licensors' liability at the amount of appropriated funds directed to the particular purchase.

Response: This type of additional guidance would not be included in the FAR. Development of this additional guidance is outside the purview of the Councils. No change is made in the final rule.

III. Executive Order 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

DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as follows:

This final rule is required to implement an opinion by the U.S. Department of Justice Office of Legal Counsel. The objective of the final rule is to clarify that the inclusion of an open-ended indemnification clause in a EULA, TOS, or other agreement, is not binding on the Government unless expressly authorized by statute and specifically authorized under applicable agency regulations and procedures, and shall be deemed to be stricken from the EULA, TOS, or similar legal instrument or agreement.

The Chief Counsel for Advocacy of the Small Business Administration did not submit any comments in response to the rule.

This rule will impact all small entities with a supply or service contract subject to a supplier license agreement. There may be a small beneficial impact on small entities because these revisions to the FAR will help save time and streamline processes since small entities will no longer have to individually renegotiate, on a prospective basis, a EULA, TOS, or similar agreement containing an indemnification provision. Further, clauses like open-ended, unrestricted indemnification clauses have generally been unenforceable against the Government, unless expressly authorized by statute, and the FAR is being revised to reflect this.

DoD, GSA and NASA estimate that this rule will impact approximately 3,538 small entities. Many supplies or services are acquired subject to supplier license agreements. These are particularly common in information technology acquisitions, but they may apply to any supply or service. DoD, GSA and NASA considered that the majority of the information technology purchases associated with this rule will be purchased through the GSA Information Technology Schedule 70 contracts. As such, DoD, GSA, and NASA used, as a basis for the estimate, the number of GSA Information-Technology Schedule 70 vendors, plus an estimate for contractors other than information technology acquisitions.

There are currently 4,988 GSA Information-Technology Schedule 70 vendors. DoD, GSA and NASA estimate that this rule will impact 75 percent, or 3,741, of those vendors because they have EULAs or TOS in their Government contracts. Of those affected entities, it is estimated that around 86 percent, or 3,217, will be small entities. DoD, GSA, and NASA estimate that there are approximately 10 percent, or 321, more small entities across the Government with information technology acquisitions and other than information-technology acquisition with Government contracts that include EULAs or TOS and therefore impacted. As a result, it is estimated that this rule will impact approximately 3,538 small entities.

DoD, GSA, and NASA do not anticipate an impact on small entities in acquisitions conducted through Government purchase cards. This is because the rule does not require entities to negotiate or change their agreement language.

There is no record keeping or reporting requirement for this rule. Steps have been taken in this interim rule to minimize the impact on small entities which help to save them time and streamline their processes; for example, this would greatly reduce the requirement to negotiate all EULAs, TOS, or similar arrangements on a case-by-case basis.

Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat. The Regulatory Secretariat has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration.

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 12, 13, 32, 43, and 52

Government procurement.

Dated: December 19, 2013.

William Clark,

Acting Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy.

Interim Rule Adopted as Final Without Change

Accordingly, the interim rule amending 48 CFR parts 12, 13, 32, 43, and 52, which was published in the Federal Register at 78 FR 37686 on June 21, 2013, is adopted as a final rule without change.

[FR Doc. 2013-31150 Filed 12-30-13; 8:45 am]

BILLING CODE 6820-EP-P