[Federal Register Volume 62, Number 192 (Friday, October 3, 1997)]
[Rules and Regulations]
[Pages 51800-51804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26280]


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DEPARTMENT OF ENERGY

48 CFR Parts 952 and 970


Acquisition Regulation, Classification, Security and 
Counterintelligence

AGENCY: Department of Energy.

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) is amending the Department of 
Energy Acquisition Regulation (DEAR) to revise its classification 
contract clause, revise its access authorization (security clearance) 
procedures for contractor personnel, and add new counterintelligence 
provisions. Specific material being revised or added is summarized in 
the ``Section-by-Section Analysis'' appearing later in this document.

EFFECTIVE DATE: This rule will be effective December 2, 1997.

FOR FURTHER INFORMATION CONTACT: Richard B. Langston, Office of 
Procurement and Assistance Policy (HR-51), Office of the Deputy 
Assistant Secretary for Procurement and Assistance Management, 
Department of Energy, 1000 Independence Avenue, SW., Washington, D.C. 
20585-0705, (202) 586-8247.

SUPPLEMENTARY INFORMATION:

I. Background
II. Disposition of Comments
III. Section-by-Section Analysis
IV. Procedural Requirements
    A. Review Under Executive Order 12612
    B. Review Under Executive Order 12866
    C. Review Under Executive Order 12988
    D. Review Under the National Environmental Policy Act
    E. Review Under the Paperwork Reduction Act
    F. Review Under the Regulatory Flexibility Act
    G. Review Under Small Business Regulatory Enforcement Fairness 
Act of 1996
    H. Review Under the Unfunded Mandates Reform Act of 1995

I. Background

    This final rule results from a notice of proposed Rulemaking 
published in the Federal Register on November 20, 1996, 61 FR 59072. 
This rule will accomplish three objectives.
    First, it will revise the classification contract clause to provide 
that only Federal Government employees may serve as ``original 
classifiers'' and that both Federal Government employees and contractor 
employees may serve as ``derivative classifiers.'' The clause is also 
changed to recognize that a balance is required between the 
Department's mission to protect the national security and prevent 
nuclear proliferation and its commitment to maximize the amount of 
information available to the public. As revised, the clause requires 
that information, documents or material originated or generated in 
classified or potentially classified subject areas be reviewed for 
classification by the appropriate officials using proper classification 
guidance provided by the Department. The clause also requires that 
documents containing information which is no longer classified by 
current classification guidance be systematically reviewed for 
declassification by a Derivative Declassifier. Only when both 
classification and declassification reviews are performed can the 
Department achieve its goal of protecting the national security while 
providing the public with access to as much Government information as 
possible. Definitions of certain terms are added. These changes are at 
item 2 of the final rule, subsection 952.204-70, the clause itself, and 
item 5 of the final rule, subsection 970.0404-4, paragraph (a)(1), a 
reference to the clause and its revised title.
    Second, it will provide a definition of ``counterintelligence'' 
consistent with E.O. 12333, a policy statement regarding DOE's 
counterintelligence program, and a new contract clause on 
counterintelligence applicable to certain DOE management and operating 
contractors and other contractors managing DOE-owned facilities. These 
changes appear at item 3 of the final rule, subsection 970.0404-1, a 
definition, item 4 of the final rule, subsection 970.0404-2, paragraph 
(e), a policy statement, item 5, subsection 970.0404-4, paragraph 
(a)(2), an instruction for use of the clause, and item 7, subsection 
970.5204-1, paragraph (b), the text of the clause.
    Third, it will revise the DEAR to be consistent with the 
recommendations of the General Accounting Office Report on Nuclear 
Security, RCED-93-183, as implemented by DOE Order 472.1B entitled 
``Personnel Security Activities.'' The GAO report stressed contractor 
responsibility for certifying preemployment checks conducted on 
prospective employees. Where DOE access authorization is required, the 
contractor must perform normal and prudent preemployment checks and the 
applicant's job qualifications and suitability must be established 
before a request is made to the Department for a security clearance. 
This revision is applicable to DOE management and operating contractors 
and other contractors managing DOE-owned facilities. Such contractors 
may, at their discretion, include this procedure in their subcontracts 
where subcontractor employees are required to hold a DOE access 
authorization in order to perform on-site duties, such as protective 
force operations. This change appears at item 6 of the final rule, 
section 970.2201, paragraph (b)(1)(ii).

[[Page 51801]]

II. Disposition of Comments

    Comments were received from 2 reviewers.
    The first reviewer registered general support for the amendment. 
The reviewer supported the Department's efforts to maximize information 
available to the public while ensuring the proper protection of 
sensitive national security and atomic energy information. The addition 
of the declassification reviews to DOE's security program was supported 
by this reviewer.
    The second reviewer offered four comments.
    First Comment. The reviewer notes that the rulemaking emphasizes 
the importance of a contractor's declassification activities. The 
reviewer suggests that the declassification activities of the 
contractor be formally recognized in the contract and states the 
opinion that such declassification activities may be substantially 
under funded until such action is taken.
    First Response. Including the Classification/Declassification 
clause in a contract constitutes formal recognition of these 
activities. Contracts do not specify the individual tasks involved in 
the work to such a specific level of work as classifying or 
declassifying a document. DOE policy emphasizes the importance of 
conducting declassification reviews. This policy has led, during each 
of the past three years, to the declassification of greater numbers of 
documents than have been classified. This suggests that our policy 
emphasis has been effective.
    Second Comment. The reviewer notes a statement in the ``Review 
Under the Regulatory Flexibility Act'' (item IV.F. of the preamble of 
the notice) which says that the security and counterintelligence 
requirements apply only to management and operating contractors and do 
not flow down to subcontractors. The reviewer asks for clarification 
regarding whether the requirements apply to subcontractors.
    Second Response. The statement has been revised to more 
specifically define what is meant by ``security requirements.'' The 
security requirements being revised, in this context, are those of 
970.2201 which discuss completion of preemployment background checks in 
relation to access authorizations. This specific section (i.e. 
970.2201(b)(1)(ii)) applies to DOE management and operating contractors 
and other contractors operating DOE facilities which require access 
authorizations. Section 970.2201 is a guiding principle, not a contract 
clause. It does not flow down to subcontracts. Management and operating 
contractors and other contractors operating DOE facilities may, at 
their discretion, include this guiding principle in their solicitations 
and subcontracts wherein subcontractor employees are required to hold a 
DOE access authorization in order to perform on-site duties, such as 
protective force operations. Possible applicability to subcontractors, 
in specific circumstances, was added based on our analysis of the 
comment. The Classification/Declassification clause does flow down to 
subcontracts if they require access to classified information. The 
counterintelligence requirements do not flowdown to subcontracts. 
Section IV.F. of the preamble has been revised to avoid any 
misunderstanding.
    Third Comment. The reviewer notes section IV.E. ``Review Under the 
Paperwork Reduction Act,'' of the preamble of the notice. The reviewer 
suggests that the declassification activity under the revised 
Classification/Declassification clause of the notice represents a 
tremendous record keeping and information burden.
    Third Response. The rulemaking makes no change in the amount of 
records or information. It is intended to move more records and 
information from the classified category to the declassified category.
    Fourth Comment. The reviewer expressed concern that the clause 
would require most classification decisions to be made by Federal 
classifiers even in situations where a major contractor operated 
security program was involved. The reviewer suggested that the lack of 
definition of the terms ``document,'' ``equipment,'' and 
``information'' made the intent of the clause unclear.
    Fourth Response. We agree with the comment and have added 
definitions of terms and revised the text of the clause for clarity.

III. Section-by-Section Analysis

    1. The authority citations for Parts 952 and 970 are restated.
    2. The classification clause at 952.204-70 is renamed 
classification/declassification. It is revised to emphasize 
declassification, add definitions, and differentiate the duties of 
original versus derivative classifiers.
    3. A definition of counterintelligence is added to subsection 
970.0404-1.
    4. A new paragraph is added to 970.0404-2 to describe DOE policy on 
counterintelligence.
    5. New instructions are added to 970.0404-4 to detail the security 
clause requirements for management and operating contractors and other 
contractors managing DOE-owned facilities which require access 
authorizations.
    6. Section 970.2201 is amended to describe the procedures for 
confirming to DOE the conduct and outcome of preemployment checks 
performed by management and operating contractors and other contractors 
managing DOE-owned facilities, when such contractors request that the 
DOE process an applicant for access authorization. Such contractors 
may, at their discretion, include this procedure in subcontracts 
wherein subcontractor employees are required to possess DOE access 
authorization in order to perform on-site duties, such as protective 
force operations.
    7. Section 970.5204-1 is amended to add a new clause entitled 
counterintelligence.

IV. Procedural Requirements

A. Review Under Executive Order 12612

    Executive Order 12612, entitled ``Federalism,'' 52 FR 41685 
(October 30, 1987), requires that regulations, rules, legislation, and 
any other policy actions be reviewed for any substantial direct effects 
on states, on the relationship between the Federal Government and the 
states, or in the distribution of power and responsibilities among 
various levels of government. If there are sufficient substantial 
direct effects, then the Executive Order requires preparation of a 
federalism assessment to be used in all decisions involved in 
promulgating and implementing a policy action. DOE has determined that 
this rulemaking will not have a substantial direct effect on the 
institutional interests or traditional functions of states.

B. Review Under Executive Order 12866

    Today's regulatory action has been determined not to be a 
``significant regulatory action'' under Executive Order 12866, 
``Regulatory Planning and Review,'' (58 FR 51735, October 4, 1993). 
Accordingly, this action was not subject to review, under that 
Executive Order, by the Office of Information and Regulatory Affairs of 
the Office of Management and Budget (OMB).

C. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write

[[Page 51802]]

regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. With regard to the review 
required by section 3(a), section 3(b) of Executive Order 12988 
specifically requires that Executive agencies make every reasonable 
effort to ensure that the regulation: (1) clearly specifies the 
preemptive effect, if any; (2) clearly specifies any effect on existing 
Federal law or regulation; (3) provides a clear legal standard for 
affected conduct while promoting simplification and burden reduction; 
(4) specifies the retroactive effect, if any; (5) adequately defines 
key terms; and (6) addresses other important issues affecting clarity 
and general draftsmanship under any guidelines issued by the Attorney 
General. Section 3(c) of Executive Order 12988 requires Executive 
agencies to review regulations in light of applicable standards in 
section 3(a) and section 3(b) to determine whether they are met or it 
is unreasonable to meet one or more of them. DOE has completed the 
required review and determined that, to the extent permitted by law, 
the final regulations meet the relevant standards of Executive Order 
12988.

D. Review Under the National Environmental Policy Act

    Pursuant to the Council on Environmental Quality Regulations (40 
CFR 1500-1508), the Department has established guidelines for its 
compliance with the provisions of the National Environmental Policy Act 
(NEPA) of 1969 (42 U.S.C. 4321 et seq.). Pursuant to Appendix A of 
Subpart D of 10 CFR Part 1021, National Environmental Policy Act 
Implementing Procedures (Categorical Exclusion A), DOE has determined 
that this rulemaking is categorically excluded from the need to prepare 
an environmental impact statement or environmental assessment.

E. Review Under the Paperwork Reduction Act

    This rulemaking imposes no new information collection or record 
keeping requirements. Accordingly, they require no OMB clearance under 
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).

F. Review Under the Regulatory Flexibility Act

    This rulemaking was reviewed under the Regulatory Flexibility Act 
of 1980, Public Law 96-354, 5 U.S.C. 601, et seq., which requires 
preparation of a regulatory flexibility analysis for any rule that is 
likely to have a significant economic impact on a substantial number of 
small entities. This rulemaking revises established classification and 
security requirements and adds counterintelligence requirements. The 
changes to the security requirements being made by this final rule 
(i.e., 970.2201 dealing with completion of preemployment background 
checks prior to requests for access authorizations) are applicable to 
management and operating contractors and other contractors managing 
DOE-owned facilities. Such contractors may, at their discretion, 
include this procedure in subcontracts wherein subcontractor employees 
will require DOE access authorization in order to perform on-site 
duties, such as protective force operations. The prime contractors 
operating DOE facilities are large businesses, large universities, or 
large not for profit entities. This part of the rulemaking could affect 
small entities only if they become subcontractors performing on-site 
services that require DOE access authorizations such as protective 
force operations. Even under such circumstances, there will not be a 
significant economic impact on a substantial number of small entities 
as the rulemaking does not require any unusual effort on the part of 
the small entity. The procedure merely provides that, before requesting 
that DOE undertake a review for employee access authorization, the 
employer complete normal preemployment background checks, i.e. police 
and credit checks, which are normal to the employment of personnel in 
sensitive type positions such as protective force operations. Moreover, 
the cost of the background checks are reimbursable.
    The new counterintelligence requirements are only applicable to 
management and operating contractors and other contractors managing DOE 
facilities. As noted above, such contractors are large businesses or 
universities, therefore, this rulemaking will have no significant 
impact on a substantial number of small entities. The change to the 
classification/declassification clause (i.e. 952.204-70) applies to all 
contracts and subcontracts but has no significant economic impact. The 
associated costs are estimated to be relatively small, and in any 
event, the contracts are likely to be of the cost reimbursement type.
    Based on the foregoing review, DOE certifies that this rulemaking 
will not have a significant economic impact on a substantial number of 
small entities and, therefore, no regulatory flexibility analysis has 
been prepared.

G. Review Under Small Business Regulatory Enforcement Fairness Act of 
1966

    As required by 5 U.S.C. 801, DOE will report to Congress 
promulgation of the rule prior to its effective date. The report will 
state that it has been determined that the rule is not a ``major rule'' 
as defined by 5 U.S.C. 804(3).

H. Review Under the Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally 
requires a Federal agency to perform a detailed assessment of costs and 
benefits of any rule imposing a Federal mandate with costs to State, 
local or tribal governments, or to the private sector, of $100 million 
or more. This rulemaking imposes no Federal mandates and does not have 
an impact of $100 million or more.

List of Subjects in 48 CFR Parts 952 and 970

    Government Procurement.

    Issued in Washington, D.C., on September 29, 1997.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.

    For the reasons set out in the preamble, Chapter 9 of Title 48 of 
the Code of Federal Regulations is amended as set forth below:
    1. The authority citation for Part 952 continues to read:

    Authority: 42 U.S.C. 7254; 40 U.S.C. 486(c); 42 U.S.C. 13524.

PART 952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


952.204-70   [Amended]

    2. Subsection 952.204-70 is amended by revising the section heading 
and revising the clause to read:


952.204-70   Classification/Declassification.

* * * * *

Classification/Declassification (Sep 1997)

    In the performance of work under this contract, the contractor 
or subcontractor shall comply with all provisions of the Department 
of Energy's regulations and mandatory DOE directives which apply to 
work involving the classification and declassification of 
information, documents, or material. In this section, 
``information'' means facts, data, or knowledge itself; ``document'' 
means the physical medium on or in which information is recorded; 
and ``material'' means a product or substance which contains or 
reveals information, regardless of its physical form or 
characteristics. Classified information is ``Restricted Data'' and 
``Formerly Restricted Data'' (classified under the Atomic Energy

[[Page 51803]]

Act of 1954, as amended) and ``National Security Information'' 
(classified under Executive Order 12958 or prior Executive Orders).
    The original decision to classify or declassify information is 
considered an inherently Governmental function. For this reason, 
only Government personnel may serve as original classifiers, i.e., 
Federal Government Original Classifiers. Other personnel (Government 
or contractor) may serve as derivative classifiers which involves 
making classification decisions based upon classification guidance 
which reflect decisions made by Federal Government Original 
Classifiers.
    The contractor or subcontractor shall ensure that any document 
or material that may contain classified information is reviewed by 
either a Federal Government or a Contractor Derivative Classifier in 
accordance with classification regulations including mandatory DOE 
directives and classification/declassification guidance furnished to 
the contractor by the Department of Energy to determine whether it 
contains classified information prior to dissemination. For 
information which is not addressed in classification/
declassification guidance, but whose sensitivity appears to warrant 
classification, the contractor or subcontractor shall ensure that 
such information is reviewed by a Federal Government Original 
Classifier.
    In addition, the contractor or subcontractor shall ensure that 
existing classified documents (containing either Restricted Data or 
Formerly Restricted Data or National Security Information) which are 
in its possession or under its control are periodically reviewed by 
a Federal Government or Contractor Derivative Declassifier in 
accordance with classification regulations, mandatory DOE directives 
and classification/declassification guidance furnished to the 
contractor by the Department of Energy to determine if the documents 
are no longer appropriately classified. Priorities for 
declassification review of classified documents shall be based on 
the degree of public and researcher interest and the likelihood of 
declassification upon review. Documents which no longer contain 
classified information are to be declassified. Declassified 
documents then shall be reviewed to determine if they are publicly 
releasable. Documents which are declassified and determined to be 
publicly releasable are to be made available to the public in order 
to maximize the public's access to as much Government information as 
possible while minimizing security costs.
    The contractor or subcontractor shall insert this clause in any 
subcontract which involves or may involve access to classified 
information.

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

    The authority citation for Part 970 continues to read:

    Authority: Sec. 161 of the Atomic Energy Act of 1954 (42 U.S.C. 
2201), and Sec. 644 of the Department of Energy Organization Act, 
Pub. L. 95-91 (42 U.S.C. 7254).

    3. Subsection 970.0404-1 is amended by adding in alphabetic order 
``counterintelligence'' as a new definition to read as follows:


970.0404-1   Definitions.

* * * * *
    Counterintelligence means information gathered and activities 
conducted to protect against espionage, other intelligence activities, 
sabotage, or assassinations conducted for or on behalf of foreign 
powers, organizations or persons, or international terrorist 
activities, but not including personnel, physical, document or 
communication security programs.
* * * * *
    4. Subsection 970.0404-2 is amended by adding paragraph (e) to read 
as follows:


970.0404-2   General.

* * * * *
    (e) Executive Order 12333, United States Intelligence Activities, 
provides for the organization and control of United States foreign 
intelligence and counterintelligence activities. In accordance with 
this Executive Order, DOE has established a counterintelligence program 
which is described in DOE Order 5670.3 (as amended). All DOE elements, 
including management and operating contractors and other contractors 
managing DOE-owned facilities which require access authorizations, 
should undertake the necessary precautions to ensure that DOE and 
covered contractor personnel, programs and resources are properly 
protected from foreign intelligence threats and activities.
    5. Subsection 970.0404-4 is amended by revising paragraph (a)(1) 
and by adding a new paragraph (a)(2) to read as follows:


970.0404-4   Contract clauses.

    (a) * * *
    (1) Security and Classification/Declassification, 970.5204-1(a). 
These clauses are required in all contracts which involve access to 
classified information, nuclear material, or access authorizations.
    (2) Counterintelligence, 970.5204-1(b). This clause is required in 
all management and operating contracts and other contracts for the 
management of DOE-owned facilities which include the security and 
classification/declassification clauses.
* * * * *
    6. Section 970.2201 is amended by revising paragraph (b)(1)(ii) to 
read as follows:


970.2201   Basic labor policies.

* * * * *
    (b) * * *
    (1) * * *
    (ii) The job qualifications and suitability of prospective 
employees should be established by the contractor prior to employment 
by careful personnel investigations. Such personnel investigations 
should include, as appropriate: a credit check; verification of high 
school degree/diploma or degree/diploma granted by an institution of 
higher learning within the last 5 years; contacts with listed personal 
references; contacts with listed employers for the past 3 years 
(excluding employment of less than 60 days duration, part-time 
employments, and craft/union employments); and local law enforcement 
checks when such checks are not prohibited by State or local law, 
statute, or regulation, and when the individual had resided in the 
jurisdiction where the contractor is located. When a DOE access 
authorization (security clearance) will be required, the aforementioned 
preemployment checks must be conducted and the applicant's job 
qualifications and suitability must be established before a request is 
made to the DOE to process the applicant for access authorization. 
Evidence must be furnished to the DOE with the applicant's security 
forms that specifies: the date each check was conducted, the entity 
contacted that provided information concerning the applicant, a 
synopsis of the information provided as a result of each contact, and a 
statement that all information available has been reviewed and 
favorably adjudicated in accordance with the contractor's personnel 
policies. When an applicant is being hired specifically for a position 
which requires a DOE access authorization, the applicant shall not be 
placed in that position prior to the access authorization being granted 
by the DOE unless an exception has been obtained from the Head of the 
Contracting Activity or designee. If an applicant is placed in that 
position prior to access authorization being granted by the DOE, the 
applicant may not be afforded access to classified matter or special 
nuclear materials (in categories requiring access authorization) until 
the DOE notifies the employer that access authorization has been 
granted. Management and operating contractors and other contractors 
operating DOE facilities may, at their discretion, include this 
language in solicitations and subcontracts (appropriately modified to 
identify the parties) wherein subcontract employees will be required to 
hold DOE access

[[Page 51804]]

authorization in order to perform on-site duties, such as protective 
force operations.
* * * * *
    7. Section 970.5204-1 is revised to read as follows:

Subpart 970.52--Contract Clauses for Management and Operating 
Contracts.


970.5204-1   Security.

    (a) As prescribed in 970.0404-4(a)(1), insert the Security clause 
found at 952.204-2 and the Classification/Declassification clause found 
at 952.204-70.
    (b) As prescribed in 970.0404-4(a)(2), insert the following 
Counterintelligence clause in contracts containing the security and 
classification/declassification clauses:

Counterintelligence (Sep 1997)

    (a) The contractor shall take all reasonable precautions in the 
work under this contract to protect DOE programs, facilities, 
technology, personnel, unclassified sensitive information and 
classified matter from foreign intelligence threats and activities 
conducted for governmental or industrial purposes, in accordance 
with DOE Order 5670.3, Counterintelligence Program; Executive Order 
12333, U.S. Intelligence Activities; and other pertinent national 
and Departmental Counterintelligence requirements.
    (b) The contractor shall appoint a qualified employee(s) to 
function as the Contractor Counterintelligence Officer. The 
Contractor Counterintelligence Officer will be responsible for 
conducting defensive Counterintelligence briefings and debriefings 
of employees traveling to foreign countries or interacting with 
foreign nationals; providing thoroughly documented written reports 
relative to targeting, suspicious activity and other matters of 
Counterintelligence interest; immediately reporting targeting, 
suspicious activity and other Counterintelligence concerns to the 
DOE Headquarters Counterintelligence Division; and providing 
assistance to other elements of the U.S. Intelligence Community as 
stated in the aforementioned Executive Order, the DOE 
Counterintelligence Order, and other pertinent national and 
Departmental Counterintelligence requirements.

[FR Doc. 97-26280 Filed 10-2-97; 8:45 am]
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