[Federal Register Volume 63, Number 210 (Friday, October 30, 1998)]
[Rules and Regulations]
[Pages 58590-58594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28956]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 4, 5, 13, 14, and 32

[FAC 97-09; FAR Case 97-304; Item II]
RIN 9000-AI10


Federal Acquisition Regulation; Electronic Commerce in Federal 
Procurement

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

ACTION: Interim rule with request for comments.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed on an interim rule amending 
the Federal Acquisition Regulation (FAR) to implement Section 850 of 
the National Defense Authorization Act for Fiscal Year 1998 by removing 
Federal Acquisition Computer Network (FACNET) specific terms and 
requirements and replacing them with more flexible electronic commerce 
policies. This regulatory action was not subject to Office of 
Management and Budget review under Executive Order 12866, dated 
September 30, 1993, and is not a major rule under 5 U.S.C. 804.

EFFECTIVE DATE: October 30, 1998.
    Comment Date: Comments should be submitted to the FAR Secretariat 
at the address shown below on or before December 29, 1998, to be 
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVR), 1800 F Street, 
NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.
    E-Mail comments submitted over the Internet should be addressed to: 
[email protected]
    Please cite FAC 97-09, FAR case 97-304, in all correspondence 
related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC 20405, (202) 501-4755, for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ms. Linda K. Nelson, Procurement Analyst, at (202) 
501-1900. Please cite FAC 97-09, FAR case 97-304.

SUPPLEMENTARY INFORMATION:

[[Page 58591]]

A. Background

    This interim rule revises FAR Subpart 4.5 and makes associated 
changes to FAR Parts 2, 5, 13, 14, and 32 to implement Section 850 of 
the National Defense Authorization Act for Fiscal Year 1998 (Pub. L. 
105-85). Section 850 amends Titles 10, 15, 40, and 41 of the United 
States Code to eliminate the preference for electronic commerce within 
Federal agencies to be conducted on the Federal Acquisition Computer 
Network (FACNET) Architecture. Additionally, Section 850 provides a 
more flexible electronic commerce policy by promoting the use of cost-
effective procedures and processes that employ electronic commerce in 
the conduct and administration of Federal procurement systems and the 
use of nationally and internationally recognized standards that broaden 
interoperability and ease the electronic interchange of information. In 
order to facilitate access to Federal procurement opportunities, 
Section 850 mandates that a single, Governmentwide point of entry be 
used that will provide universal public access to procurement 
opportunities Governmentwide. In the report submitted to Congress by 
the President's Management Council Electronic Processes Initiatives 
Committee entitled ``Electronic Commerce For Buyers and Sellers,'' the 
Committee endorsed a World Wide Web-based electronic system that would 
provide the private sector direct access to Federal procurement 
opportunities at a single location.
    In an effort to distribute acquisition-related information to 
industry more quickly and economically, an electronic posting system is 
now being tested by several Federal agencies. This system will permit 
buyers to post solicitations and other pertinent information, in 
addition to notices, directly to the Internet, thus giving sellers 
access to this information through a single, Governmentwide point of 
entry. If testing demonstrates that this electronic posting system is 
capable of providing effective access to notices and solicitations 
through a single point of entry, consideration will be given by the 
Administrator of OFPP to designating it as the ``single, Governmentwide 
point of entry,'' and the FAR will be changed accordingly.
    In the meantime, FACNET is the Governmentwide system that provides 
universal user access, employs nationally and internationally 
recognized data formats, and allows the electronic data interchange of 
acquisition information between the private sector and the Federal 
Government. FACNET qualifies as the single, Governmentwide point of 
entry until the Administrator of the Office of Federal Procurement 
Policy designates the single, Governmentwide point of entry.

B. Regulatory Flexibility Act

    This interim rule is not expected to have a significant negative 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule 
is more flexible than the current FAR policy regarding the Federal 
electronic commerce architecture. It may be easier for some small 
entities to conduct business with the Federal Government over the World 
Wide Web, for instance, than using a value-added network to conduct 
business over FACNET. Since this may result in a positive impact on 
small entities, an Initial Regulatory Flexibility Analysis (IRFA) has 
been performed and is summarized as follows:

    The objectives of the rule are (1) to promote the use of cost-
effective procedures and processes that employ electronic commerce 
in the conduct and administration of Federal procurement systems, 
and (2) to apply nationally and internationally recognized standards 
that broaden interoperability and ease the electronic interchange of 
information. These objectives are stated in Section 850 of Public 
Law 105-85. The legal authority to use electronic commerce for 
Government contracting actions was confirmed in General Accounting 
Office (GAO) Advisory Opinion B-238449. The opinion concluded that 
electronic transactions can create legally binding contractual 
obligations in accordance with 31 U.S.C. 1501. The interim rule 
applies to all large and small entities that do business or are 
planning to do business with the Government. The ability to use 
electronic architectures other than FACNET, such as the World Wide 
Web, to conduct electronic commerce will increase competition by 
improving access to Federal contracting opportunities for the more 
than 72,995 vendors currently doing business with the Government, 
particularly small businesses, as well as many other vendors that 
find access to bidding opportunities difficult under the current 
system.

    A copy of the IRFA has been submitted to the Chief Counsel for 
Advocacy of the Small Business Administration and may be obtained from 
the FAR Secretariat. Comments are invited. Comments from small entities 
concerning the affected FAR subparts also will be considered in 
accordance with 5 U.S.C. 610. Such comments must be submitted 
separately and should cite 5 U.S.C. 601, et seq. (FAC 97-09, FAR Case 
97-304), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose recordkeeping requirements or collections of 
information from offerors, contractors, or members of the public that 
require the approval of the Office of Management and Budget 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 (DoD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary to implement Section 850 of Public Law 105-85, which 
eliminates the preference for electronic commerce within Federal 
agencies to be conducted on the Federal Acquisition Computer Network 
(FACNET) Architecture. Section 850 became effective on May 17, 1998. 
However, pursuant to Public Law 98-577 and FAR 1.501, public comments 
received in response to this interim rule will be considered in the 
formation of the final rule.

List of Subjects in 48 CFR Parts 2, 4, 5, 13, 14, and 32

    Government procurement.

    Dated: October 22, 1998.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
    Therefore, 48 CFR Parts 2, 4, 5, 13, 14, and 32 are amended as set 
forth below:
    1. The authority citation for 48 CFR Parts 2, 4, 5, 13, 14, and 32 
continues to read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

    2. Section 2.101 is amended by adding, in alphabetical order, the 
definition ``Electronic commerce''; revising the definition ``Federal 
Acquisition Computer Network (FACNET) Architecture''; and removing the 
definitions ``Full FACNET'', ``Governmentwide FACNET'', and ``Interim 
FACNET'' to read as follows:


2.101   Definitions.

* * * * *
    Electronic commerce means electronic techniques for accomplishing 
business transactions including electronic mail or

[[Page 58592]]

messaging, World Wide Web technology, electronic bulletin boards, 
purchase cards, electronic funds transfer, and electronic data 
interchange.
* * * * *
    Federal Acquisition Computer Network (FACNET) Architecture is a 
Governmentwide system that provides universal user access, employs 
nationally and internationally recognized data formats, and allows the 
electronic data interchange of acquisition information between the 
private sector and the Federal Government. FACNET qualifies as the 
single, Governmentwide point of entry pending designation by the 
Administrator of the Office of Federal Procurement Policy (OFPP).
* * * * *

PART 4--ADMINISTRATIVE MATTERS

    3. Subpart 4.5, consisting of sections 4.500 through 4.502, is 
revised to read as follows:

Subpart 4.5--Electronic Commerce in Contracting

Sec.
4.500  Scope of subpart.
4.501  Definitions.
4.502  Policy.

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).


4.500   Scope of subpart.

    This subpart provides policy and procedures for the establishment 
and use of electronic commerce in Federal acquisition as required by 
Section 30 of the Office of Federal Procurement Policy (OFPP) Act (41 
U.S.C. 426).


4.501   Definitions.

    Electronic data interchange (EDI), as used in this subpart, means a 
technique for electronically transferring and storing formatted 
information between computers utilizing established and published 
formats and codes, as authorized by the applicable Federal Information 
Processing Standards.
    Single, Governmentwide point of entry, as used in this subpart, 
means the one point of entry to be designated by the Administrator of 
OFPP that will allow the private sector to electronically access 
procurement opportunities Governmentwide.


4.502   Policy.

    (a) The Federal Government shall use electronic commerce whenever 
practicable or cost-effective. The use of terms commonly associated 
with paper transactions (e.g., ``copy,'' ``document,'' ``page,'' 
``printed,'' ``sealed envelope,'' and ``stamped'') shall not be 
interpreted to restrict the use of electronic commerce. Contracting 
officers may supplement electronic transactions by using other media to 
meet the requirements of any contract action governed by the FAR (e.g., 
transmit hard copy of drawings).
    (b) Agencies may exercise broad discretion in selecting the 
hardware and software that will be used in conducting electronic 
commerce. However, as required by Section 30 of the OFPP Act (41 U.S.C. 
426), the head of each agency, after consulting with the Administrator 
of OFPP, shall ensure that systems, technologies, procedures, and 
processes used by the agency to conduct electronic commerce--
    (1) Are implemented uniformly throughout the agency, to the maximum 
extent practicable;
    (2) Are implemented only after considering the full or partial use 
of existing infrastructures, (e.g., the Federal Acquisition Computer 
Network (FACNET));
    (3) Facilitate access to Government acquisition opportunities by 
small business concerns, small disadvantaged business concerns, and 
women-owned small business concerns;
    (4) Include a means of providing widespread public notice of 
acquisition opportunities through the single, Governmentwide point of 
entry and a means of responding to notices or solicitations 
electronically; and
    (5) Comply with nationally and internationally recognized standards 
that broaden interoperability and ease the electronic interchange of 
information, such as standards established by the National Institute of 
Standards and Technology.
    (c) Before using electronic commerce, the agency head shall ensure 
that the agency systems are capable of ensuring authentication and 
confidentiality commensurate with the risk and magnitude of the harm 
from loss, misuse, or unauthorized access to or modification of the 
information.

PART 5--PUBLICIZING CONTRACT ACTIONS

    4. Section 5.101 is amended by revising paragraph (a)(2)(ii) and 
the last sentence of (a)(2)(iv) to read as follows:


5.101   Methods of disseminating information.

* * * * *
    (a) * * *
    (2) * * *
    (ii) The contracting officer need not comply with the display 
requirements of this section when the exemptions at 5.202(a)(1), (a)(4) 
through (a)(9), or (a)(11) apply, when oral or FACNET solicitations are 
used, or when providing access to a notice of proposed contract action 
through the single, Governmentwide point of entry and the notice 
permits the public to respond to the solicitation electronically.
* * * * *
    (iv) * * * Contracting offices using electronic systems for public 
posting that are not accessible outside the installation shall 
periodically publicize the methods for accessing such information.
* * * * *
    5. Section 5.102 is amended by revising paragraphs (a)(2) and 
(a)(7) to read as follows:


5.102   Availability of solicitations.

    (a) * * *
    (2) Provide copies of a solicitation issued under other than full 
and open competition to firms requesting copies that were not initially 
solicited, but only after advising the requester of the determination 
to limit the solicitation to a specified firm or firms as authorized 
under Part 6 of the FAR;
* * * * *
    (7) If electronic commerce is employed in the solicitation process, 
availability of the solicitation may be limited to the electronic 
medium.
* * * * *
    6. Section 5.202 is amended by revising paragraph (a)(13), by 
removing (a)(14), and by redesignating (a)(15) as (a)(14). The revised 
text reads as follows:


5.202   Exceptions.

* * * * *
    (a) * * *
    (13) The proposed contract action--
    (i) Is for an amount not expected to exceed the simplified 
acquisition threshold;
    (ii) Will be made through FACNET or another means that provides 
access to the notice of proposed contract action through the single, 
Governmentwide point of entry; and
    (iii) Permits the public to respond to the solicitation 
electronically; or
* * * * *
    7. Section 5.203 is amended by revising paragraph (b) to read as 
follows:


5.203   Publicizing and response time.

* * * * *
    (b) The contracting officer shall establish a solicitation response 
time that will afford potential offerors a reasonable opportunity to 
respond to--each proposed contract action (including actions via FACNET 
or for which the notice of proposed contract action is accessible 
through the single,

[[Page 58593]]

Governmentwide point of entry), in an amount estimated to be greater 
than $25,000, but not greater than the simplified acquisition 
threshold; or each contract action for the acquisition of commercial 
items in an amount estimated to be greater than $25,000. The 
contracting officer should consider the circumstances of the individual 
acquisition, such as the complexity, commerciality, availability, and 
urgency, when establishing the solicitation response time.
* * * * *


5.202, 5.203, 5.205, 5.207  [Amended]

    8. In addition to the amendments set forth above, in Subpart 5.2, 
remove the term ``contract action'' or ``contract actions'' and add 
``proposed contract action'' or ``proposed contract actions'', 
respectively, in the following places:
    a. Section 5.202(a)(2), (a)(3), (a)(4), (a)(5), (a)(6), (a)(7), 
(a)(8) (twice), (a)(9), (a)(10), (a)(11) (twice), (a)(12) (4 times), 
and (a)(14);
    b. Section 5.203 introductory paragraph, (a) introductory text, 
(c), (d), (e) (twice), and (g);
    c. Section 5.205(d)(2);
    d. Section 5.207(c)(2)(xi), (e)(3) (twice), and (h).
    9. Section 5.301 is amended by revising paragraph (b)(7) to read as 
follows:


5.301  General.

* * * * *
    (b) * * *
    (7) The contract action--
    (i) Is for an amount not greater than the simplified acquisition 
threshold;
    (ii) Was conducted by using FACNET, or access to the notice of 
proposed contract action was provided through the single, 
Governmentwide point of entry; and
    (iii) Permitted the public to respond to the solicitation 
electronically; or
* * * * *
    10. Section 5.503 is amended by revising paragraph (a)(2) to read 
as follows:


5.503  Procedures.

    (a) * * *
    (2) The contracting officer shall use the SF 1449 for paper 
solicitations. The SF 1449 shall be used to make awards or place orders 
unless the award/order is made by using electronic commerce or by using 
the Governmentwide commercial purchase card for micropurchases.
* * * * *

PART 13--SIMPLIFIED ACQUISITION PROCEDURES

    11. Section 13.003 is amended by removing paragraph (c); 
redesignating paragraphs (d) through (i) as (c) through (h), 
respectively; and revising newly redesignated paragraphs (f) and (h)(3) 
to read as follows:


13.003  Policy.

* * * * *
    (f) Agencies shall maximize the use of electronic commerce when 
practicable and cost-effective (see Subpart 4.5). Drawings and lengthy 
specifications can be provided off-line in hard copy or through other 
appropriate means.
* * * * *
    (h) * * *
    (3) Consider all quotations or offers that are timely received. For 
evaluation of quotations or offers received electronically, see 13.106-
2(b)(3); and
* * * * *
    12. Section 13.102 is amended by revising the introductory text of 
paragraph (a) to read as follows:


13.102  Source list.

    (a) Each contracting office should maintain a source list (or 
lists, if more convenient). A list of new supply sources may be 
obtained from the Procurement Marketing and Access Network (PRO-Net) of 
the Small Business Administration. The list should identify the status 
of each source (when the status is made known to the contracting 
office) in the following categories:
* * * * *
    13. Section 13.104 is amended by revising the first sentence of 
paragraph (b) to read as follows:


13.104  Promoting competition.

* * * * *
    (b) If using simplified acquisition procedures and not using either 
FACNET or providing access to the notice of proposed contract action 
through the single, Governmentwide point of entry, maximum practicable 
competition ordinarily can be obtained by soliciting quotations or 
offers from sources within the local trade area. * * *
    14. Section 13.105 is amended by revising paragraph (a)(1) to read 
as follows:


13.105  Synopsis and posting requirements.

    (a) * * *
    (1)(i) FACNET is used for an acquisition at or below the simplified 
acquisition threshold; or
    (ii) The single, Governmentwide point of entry is used at or below 
the simplified acquisition threshold for providing widespread public 
notice of acquisition opportunities and offerors are provided a means 
of responding to the solicitation electronically; or
* * * * *
    15. Section 13.106-1 is amended by revising paragraphs (c)(1)(ii) 
and (f) to read as follows:


13.106-1  Soliciting competition.

* * * * *
    (c) * * *
    (1) * * *
    (ii) Oral solicitation is more efficient than soliciting through 
available electronic commerce alternatives; and
* * * * *
    (f) Inquiries. An agency should respond to inquiries received 
through any medium (including FACNET) if doing so would not interfere 
with the efficient conduct of the acquisition. For an acquisition 
conducted through FACNET, an agency must respond to telephonic or 
facsimile inquiries only if it is unable to receive inquiries through 
FACNET.
    16. Section 13.106-2 is amended by revising the introductory text 
of paragraph (b)(3) to read as follows:


13.106-2  Evaluation of quotations or offers.

* * * * *
    (b) * * *
    (3) For acquisitions conducted using FACNET or a method that 
permits electronic response to the solicitation, the contracting 
officer may--
* * * * *
    17. Section 13.106-3 is amended by revising paragraph (c) to read 
as follows:


13.106-3  Award and documentation.

* * * * *
    (c) Notification. For acquisitions that do not exceed the 
simplified acquisition threshold and for which automatic notification 
is not provided through FACNET or an electronic commerce method that 
employs widespread electronic public notice, notification to 
unsuccessful suppliers shall be given only if requested or required by 
5.301.
* * * * *


13.307  [Amended]

    18. Section 13.307 is amended in paragraph (b)(1) by removing 
``other electronic means,'' and inserting ``electronically,''.

PART 14--SEALED BIDDING

    19. Section 14.205-1 is amended by revising the second sentence of 
paragraph (a) to read as follows:

[[Page 58594]]

14.205-1  Establishment of lists.

    (a) * * * This rule need not be followed, however, when the 
requirements of the contracting office can be obtained through use of 
simplified acquisition procedures (see part 13); the requirements are 
nonrecurring; or electronic commerce methods are used that transmit 
solicitations or notices of procurement opportunities automatically to 
all interested sources. * * *
* * * * *


14.400  [Amended]

    20. Section 14.400 is amended by removing ``contract'' and 
inserting ``contracts''.

PART 32--CONTRACT FINANCING


32.1103  [Amended]

    21. Section 32.1103 is amended in paragraph (a) by removing 
``13.003(f)'' and inserting ``13.003(e)''.
[FR Doc. 98-28956 Filed 10-29-98; 8:45 am]
BILLING CODE 6820-EP-U