[Federal Register Volume 63, Number 59 (Friday, March 27, 1998)]
[Rules and Regulations]
[Pages 14836-14837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7707]


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DEPARTMENT OF DEFENSE

48 CFR Parts 209 and 252

[DFARS Case 97-D325]


Defense Federal Acquisition Regulation Supplement; List of Firms 
Not Eligible for Defense Contracts

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: The Director of Defense Procurement has issued an interim rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to implement Section 843 of the National Defense Authorization Act for 
Fiscal Year 1998. Section 843 requires that the Secretary of Defense 
maintain a list of all firms that the Secretary has identified as being 
subject to a prohibition on contract award due to ownership or control 
of the firm by the government of a terrorist country; and that DoD 
contractors be prohibited from entering into subcontracts with firms on 
the list unless there is a compelling reason to do so.

DATES: Effective date: March 27, 1998.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before May 11, 1998, to be 
considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulation Council, Attn: Mr. Michael Pelkey, PDUSD 
(A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington DC 20301-
3062. Telefax number (703) 602-0350.
    E-mail comments submitted over the Internet should be addressed to: 
[email protected]
    Please cite DFARS Case 97-D325 in all corresponding related to this 
issue. E-mail comments should cite DFARS Case 97-D325 in the subject 
line.

FOR FURTHER INFORMATION CONTACT: Michael Pelkey, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    10 U.S.C. 2327 contains a prohibition on contracting with a firm or 
a subsidiary of a firm that is owned or controlled by the government of 
a country that has repeatedly provided support for acts of 
international terrorism. Section 843 of the National Defense 
Authorization Act for Fiscal Year 1998 (Pub. L. 105-85) amended 10 
U.S.C. 2327 to require that the Secretary of Defense maintain a list of 
all firms that the Secretary has identified as being subject to the 
prohibition, and that DoD contractors be prohibited from entering into 
subcontracts with firms on the list unless there is a compelling reason 
to do so. This DFARS rule provides procedures to facilitate maintenance 
of the list and a contract clause that requires DoD approval of a 
proposed subcontract with a firm on the list.

B. Regulatory Flexibility Act

    The interim rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because few 
small entities are believed to subcontract with firms that are owned or 
controlled by the government of a terrority country. An initial 
regulatory flexibility analysis has therefore not been performed. 
Comments are invited from small businesses and other interested 
parties. Comments from small entities concerning the affected DFARS 
subparts also will be considered in accordance with 5 U.S.C. 610. Such 
comments should be submitted separately and should cite DFARS Case 97-
D325 in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply, because the interim 
rule does not impose any information collection requirements that 
require Office of Management and Budget approval under 44 U.S.C. 3501, 
et seq.

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to publish this 
interim rule prior to affording the public an opportunity to comment. 
This interim rule implements Section 843 of the National Defense 
Authorization Act for Fiscal Year 1998 (Pub. L. 105-85). Section 843 
requires that the Secretary of Defense maintain a list of all firms 
that the Secretary has identified as being subject to the prohibition 
at 10 U.S.C. 2327 due to ownership or control of the firm by the 
government of a terrorist country, and that DoD contractors be 
prohibited from entering into subcontracts with firms on the list 
unless there is a compelling reason to do so. Section 843 was effective 
upon enactment on November 18, 1997. Immediate implementation is 
necessary to prevent the award of contracts and subcontracts that are 
prohibited by Section 843. Commments received in response to the 
publication of this interim rule will be considered in formulating the 
final rule.

[[Page 14837]]

List of Subjects in 48 CFR Parts 209 and 252

    Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
    Therefore, 48 CFR Parts 209 and 252 are amended as follows:
    1. The authority citation for 48 CFR Parts 209 and 252 continues to 
read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 209--CONTRACTOR QUALIFICATIONS

    2. Section 209.104-1 is amended by revising paragraph (g)(i)(A) 
introductory text and paragraph (g)(i)(A)(1) to read as follows:

209.104-1 General standards.

* * * * *
    (g)(i) * * *
    (A) Under 10 U.S.C. 2327(b), a contracting officer shall not award 
a contract of $100,000 or more to a firm or to a subsidiary of a firm 
when a foreign government--
    (1) Either directly or indirectly, has a significant interest--
    (i) In the firm; or
    (ii) In the subsidiary or the firm that owns the subsidiary; and
* * * * *
    3. Section 209.104-70 is amended by revising paragraph (a) to read 
as follows:

209.104-70 Solicitation provisions.

    (a) Use the provision at 252.209-7001, Disclosure of Ownership or 
Control by the Government of a Terrorist Country, in all solicitations 
expected to result in contracts of $100,000 or more. Any disclosure 
that the government of a terrorist country has a significant interest 
in an offeror or a subsidiary of an offeror shall be forwarded through 
the head of the agency to the Director, Defense Procurement, ATTN: 
OUSD(A&T)DP/FC, 3060 Defense Pentagon, Washington, DC 20101-3060.
* * * * *
    4. Section 209.405-2 is added to read as follows:

209.405-2 Restrictions on subcontracting.

    (a) The contracting officer shall not consent to any subcontract 
with a firm, or a subsidiary of a firm, that is identified by the 
Secretary of Defense as being owned or controlled by the government of 
a terrorist country unless the agency head states in writing the 
compelling reasons for the subcontract.
    5. Section 209.409 is added to read as follows:

209.409 Solicitation provision and contract clause.

    Use the clause at 252.209-7004, Subcontracting with Firms That Are 
Owned or Controlled by the Government of a Terrorist Country, in 
solicitations and contracts with a value of $100,000 or more.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Section 252.209-7001 is amended by revising the clause date and 
paragraph (b) to read as follows:

252.209-7001 Disclosure of Ownership or Control by the Government of a 
Terrorist Country.

* * * * *

Disclosure of Ownership or Control by the Government of a Terrorist 
Country (Mar 1998)

* * * * *
    (b) Prohibition on award. In accordance with 10 U.S.C. 2327, no 
contract may be awarded to a firm or a subsidiary of a firm if the 
government of a terrorist country has a significant interest in the 
firm or subsidiary or, in the case of a subsidiary, the firm that 
owns the subsidiary, unless a waiver is granted by the Secretary of 
Defense.
* * * * *
    7. Section 252.209-7004 is added to read as follows:

252.209-7004 Subcontracting with Firms That Are Owned or Controlled by 
the Government of a Terrorist Country.

    As prescribed in 209.409, use the following clause:

Subcontracting with Firms that are Owned or Controlled by the 
Government of a Terrorist County (Mar 1998)

    (a) Unless the Government determines that there is a compelling 
reason to do so, the Contractor shall not enter into any subcontract 
in excess of $25,000 with a firm, or a subsidiary of a firm, that is 
identified, on the List of Parties Excluded from Federal Procurement 
and Nonprocurement Programs, as being ineligible for the award of 
Defense contracts or subcontracts because it is owned or controlled 
by the government of a terrorist country.
    (b) A corporate officer or a designee of the Contractor shall 
notify the Contracting Officer, in writing, before entering into a 
subcontract with a party that is identified, on the List of Parties 
Excluded from Federal Procurement and Nonprocurement Programs, as 
being ineligible for the award of Defense contracts or subcontracts 
because it is owned or controlled by the government of a terrorist 
country. The notice must include the name of the proposed 
subcontractor and the compelling reason(s) for doing business with 
the subcontractor notwithstanding its inclusion on the List of 
Parties Excluded From Federal Procurement and Nonprocurement 
Programs.

(End of clause)

[FR Doc. 98-7707 Filed 3-26-98; 8:45 am]
BILLING CODE 5000-04-M