[Federal Register Volume 66, Number 221 (Thursday, November 15, 2001)]
[Rules and Regulations]
[Pages 57381-57384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27182]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 3

RIN 0790-AG79


Transactions Other Than Contracts, Grants, or Cooperative 
Agreements for Prototype Projects

AGENCY: Office of the Secretary, DoD.

ACTION: Final rule.

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SUMMARY: Representatives of the military departments, defense agencies 
and other DoD activities, have agreed on a final rule that amends the 
interim rule as a result of comments received and incorporates 
clarification enacted in fiscal year 2001 that limits Comptroller 
General access in certain situations. This final rule requires 
inclusion of a

[[Page 57382]]

clause as required by law, providing for Comptroller General access to 
records in transactions other than contracts, grants, or cooperative 
agreements for prototype projects that provide for total payments in 
excess of $5,000,000.

DATES: This rule is effective December 17, 2001. This final rule will 
apply for solicitations issued on or after December 17, 2001. This 
final rule may be used for new prototype awards that result from 
solicitations issued prior to that date.

INFORMATION CONTACT: Teresa Brooks, (703) 695-8567.

SUPPLEMENTARY INFORMATION:

Background and Purpose

    Section 845 of the National Defense Authorization Act for Fiscal 
Year 1994, Pub. L. 103-160, as amended, authorizes the Secretary of a 
Military Department, the Director of Defense Advanced Research Projects 
Agency and any other official designated by the Secretary of Defense, 
to enter into transactions other than contracts, grants or cooperative 
agreements in certain situations for prototype projects that are 
directly relevant to weapons or weapon systems proposed to be acquired 
or developed by the Department of Defense.
    Such transactions are commonly referred to as ``other transaction'' 
agreements for prototype projects and are generally not subject to 
statutes or regulations limited in applicability to procurement 
contracts.
    Section 801 of the National Defense Authorization Act for Fiscal 
Year 2000 establishes a requirement that an ``other transaction'' 
agreement for a prototype project that provides for payments in a total 
amount in excess of $5,000,000 include a clause that provides 
Comptroller General access to records. Section 804 of the Floyd D. 
Spence National Defense Authorization Act for Fiscal Year 2001 
clarified Comptroller General access when the only cooperative 
agreements or ``other transactions'' that the party, entity, or 
subordinate element entered into with government entities in the year 
prior to the date of that agreement are cooperative agreements or 
transactions that were entered into under 10 U.S.C. 2371 or Section 845 
of the National Defense Authorization Act for Fiscal Year 1994 (Pub. L. 
103-160; 10 U.S.C. 2371 note).
    An interim rule was published in the Federal Register for public 
comment on June 5, 2000. Comments on the Interim Rule were received 
from one respondent.

A. Manner of Implementation

    The respondent cited a September 13, 1999, Under Secretary of 
Defense for Acquisition and Technology letter stating that DoD was 
considering issuing guidance for prototype other transactions (OTs) in 
the form of a DoD Directive. The respondent expressed its understanding 
that the guidance may include changes regarding implementation of 
Section 801 of the National Defense Authorization Act of Fiscal Year 
2000. The respondent expressed concern that there may be multiple and 
potentially inconsistent guidance being promulgated regarding the 
inclusion of the Comptroller General access clauses in these OTs. The 
respondent urged DoD to consolidate guidance regarding these agreements 
to avoid redundant and potentially inconsistent guidance.
    Response: the DoD agrees that the guidance regarding these 
agreements should be consolidated. The DoD therefore plans for the Code 
of Federal Regulation coverage on Comptroller General Access to be 
incorporated in its entirety as an Appendix to internal DoD guidance, 
so that the Comptroller General requirements will not be redundant or 
inconsistent.

B. Revised Exclusion for Commercial Companies

    The respondent expressed concern that although the language of the 
interim rule appears to have been drafted to exclude coverage of 
commercial companies, under certain circumstances, a strict reading of 
the regulation would cause the Comptroller General access clause to 
apply to the very parties they believe the Congress intended to exempt. 
Two scenarios were identified where the respondent thought this could 
occur. First, if a commercial company as a member of a consortium with 
traditional defense companies entered into a prototype OT that includes 
the Comptroller General access clause, then the commercial company has 
now ``entered into'' an agreement that provides for audit access and; 
therefore, would no longer be excepted from the Comptroller General 
access requirement. The second scenario would involve an 
unsophisticated commercial company that unintentionally executes a 
prototype OT that provides for audit access, eliminating its future 
exemption. The respondent recommended specific language be added that 
excepted any entity that has entered into only OTs or FAR Part 12 
contracts.
    Response: The clause excludes parties or participating entities 
which have not allowed Government records access in the preceding year. 
The applicability of the records access clause to each participant in a 
``mixed'' consortium is required to be based on the plain language of 
the clause. Thus a commercial consortium member would not have entered 
into an agreement providing for government audit access since that 
clause would have been inapplicable to it in the transaction involving 
the consortium.
    We cannot agree with the respondent's proposed change excepting any 
entity that has entered into only OTs or FAR Part 12 contracts. FAR 
Part 12 contracts provide for Comptroller General audit access. In 
addition, previous OTs may have also provided for audit access by a 
government entity. By statute, the clause is required to be included in 
OTs with entities that have entered into such contracts or agreements. 
However, to assure that there is no misunderstanding regarding this 
requirement, the final rule clarifies that the presence of the clause 
is necessary to fully implement the law by insuring flow-down to 
participating entities which are not parties to the agreement. The 
final rule also clarifies that parties or participating entities which 
have not entered into a contract, grant, cooperative agreement or 
``other transaction'' that provides for audit access by a government 
entity in the year prior to the agreement are specifically excluded 
from coverage of the clause, as provided in the law.

Regulatory Evaluation

Executive Order 12866, ``Regulatory Planning and Review''

    It has been determined that this rule is not a significant rule as 
defined under section 3(f)(1) through 3(f)(4) of Executive Order 12866.

Unfunded Mandates Reform Act (Sec. 202, Pub. L. 104-4)

    It has been certified that this rule does not contain a Federal 
mandate that may result in the expenditure by State, local and tribal 
governments, in aggregate, or by the private sector, of $100 million or 
more in any one year.

Pub. L. 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)

    It has been certified that this part is not subject to the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) because it would not, 
if promulgated, have a significant economic impact on a substantial 
number of small entities. The rule requires only that the Comptroller 
General be provided access to records of certain projects. It does not

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require additional record keeping or other significant expense by 
project participants.

Pub. L. 96-511, ``Paperwork Reduction Act of 1995'' (44 U.S.C. 3501 et 
seq.)

    It has been certified that this rule does not impose any reporting 
or record keeping requirements under the Paperwork Reduction Act of 
1995.

Federalism (Executive Order 13132)

    It has been certified that this rule does not have federalism 
implications, as set forth in Executive Order 13132.

List of Subjects in 32 CFR Part 3

    (To be inserted by the Federal Register Liaison Officer.)

    Accordingly, part 3 is revised to read as follows:

PART 3--TRANSACTIONS OTHER THAN CONTRACTS, GRANTS, OR COOPERATIVE 
AGREEMENTS FOR PROTOTYPE PROJECTS

Sec.
3.1   Purpose.
3.2   Applicability.
3.3   Definitions.
3.4   Policy.

    Authority: Section 801 of the National Defense Authorization Act 
for Fiscal Year 2000 (Pub. L. 106-65) and Section 804 of the Floyd 
D. Spence National Defense Authorization Act for Fiscal Year 2001 
(Pub. L. 106-398).

PART 3--TRANSACTIONS OTHER THAN CONTRACTS, GRANTS, OR COOPERATIVE 
AGREEMENTS FOR PROTOTYPE PROJECTS


3.1  Purpose.

    This part implements section 801 of the National Defense 
Authorization Act for Fiscal Year 2000 (Pub. L. 106-65) and section 804 
of the Floyd D. Spence National Defense Authorization Act for Fiscal 
Year 2001 (Pub. L. 106-398). It establishes the requirement for the 
inclusion of a clause in transactions other than contracts, grants or 
cooperative agreements for prototype projects awarded under authority 
of 10 U.S.C. 2371 that provides Comptroller General access to records 
when payments total an amount in excess of $5,000,000.


3.2  Applicability.

    This part applies to the Secretary of a Military Department, the 
Directors of the Defense Agencies, and any other official designated by 
the Secretary of Defense to enter into transactions other than 
contracts, grants or cooperative agreements for prototype projects that 
are directly relevant to weapons or weapon systems proposed to be 
acquired or developed by the Department of Defense, under authority of 
10 U.S.C. 2371. Such transactions are commonly referred to as ``other 
transaction'' agreements and are hereafter referred to as agreements.


3.3  Definitions.

    Contracting activity. An element of an agency head and delegated 
broad authority regarding acquisition functions. It includes elements 
designated by the director of a defense agency which has been delegated 
contracting authority through its agency charter.
    Head of the contracting activity. The official who has overall 
responsibility for managing the contracting activity.


3.4  Policy.

    (a) A clause must be included in solicitations and agreements for 
prototype projects awarded under authority of 10 U.S.C. 2371, that 
provide for total government payments in excess of $5,000,000 to allow 
Comptroller General access to records that directly pertain to such 
agreements.
    (b) The clause referenced in paragraph (a) of this section will not 
apply with respect to a party or entity, or subordinate element of a 
party or entity, that has not entered into any other contract, grant, 
cooperative agreement or ``other transaction'' agreement that provides 
for audit access by a government entity in the year prior to the date 
of the agreement. The clause must be included in all agreements 
described in paragraph (a) of this section in order to fully implement 
the law by covering those participating entities and their subordinate 
elements which have entered into prior agreements providing for 
Government audit access, and are therefore not exempt. The presence of 
the clause in an agreement will not operate to require Comptroller 
General access to records from any party or participating entity, or 
subordinate element of a party or participating entity, or subordinate 
element of a party or participating entity, which is otherwise exempt 
under the terms of the clause and the law.
    (c)(1) The right provided to the Comptroller General in a clause of 
an agreement under paragraph (a) of this part, is limited as provided 
by subparagraph (c)(2) of this part in the case of a party to the 
agreement, an entity that participates in the performance of the 
agreement, or a subordinate element of that party or entity, if the 
only cooperative agreements or ``other transactions'' that the party, 
entity, or subordinate element entered into with government entities in 
the year prior to the date of that agreement are cooperative agreements 
or transactions that were entered into under 10 U.S.C. 2371 or Section 
845 of the National Defense Authorization Act for Fiscal Year 1994 
(Pub. L. 103-160; 10 U.S.C. 2371 note).
    (c)(2) The only records of a party, other entity, or subordinate 
element referred to in subparagraph (c)(1) of this part that the 
Comptroller General may examine in the exercise of the right referred 
to in that subparagraph, are records of the same type as the records 
that the government has had the right to examine under the audit access 
clauses of the previous cooperative agreements or transactions referred 
to in such subparagraph that were entered into by that particular 
party, entity, or subordinate element.
    (d) The head of the contracting activity (HCA) that is carrying out 
the agreement may waive the applicability of the Comptroller General 
access requirement if the HCA determines it would not be in the public 
interest to apply the requirement to the agreement. The waiver will be 
effective with respect to the agreement only if the HCA transmits a 
notification of the waiver to the Committees on Armed Services of the 
Senate and the House of Representatives, the Comptroller General, and 
the Director, Defense Procurement before entering into the agreement. 
The notification must include the rationale for the determination.
    (e) The HCA must notify the Director, Defense Procurement of 
situations where there is evidence that the Comptroller General Access 
requirement caused companies to refuse to participate or otherwise 
restricted the Department's access to companies that typically do not 
do business with the Department.
    (f) In no case will the requirement to examine records under the 
clause referenced in paragraph (a) of this section apply to an 
agreement where more than three years have passed after final payment 
is made by the government under such an agreement.
    (g) The clause referenced in paragraph (a) of this section, must 
provide for the following:
    (1) The Comptroller General of the United States, in the discretion 
of the Comptroller General, shall have access to and the right to 
examine records of any party to the agreement or any entity that 
participates in the performance of this agreement that directly pertain 
to, and involve transactions relating to, the agreement.
    (2) Excepted from the Comptroller General access requirement is any 
party

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to this agreement or any entity that participates in the performance of 
the agreement, or any subordinate element of such party or entity, 
that, in the year prior to the date of the agreement, has not entered 
into any other contract, grant, cooperative agreement, or ``other 
transaction'' agreement that provides for audit access to its records 
by a government entity.
    (3)(A) The right provided to the Comptroller General is limited as 
provided in subparagraph (B) in the case of a party to the agreement, 
any entity that participates in the performance of the agreement, or a 
subordinate element of that party or entity if the only cooperative 
agreements or ``other transactions'' that the party, entity, or 
subordinate element entered into with government entities in the year 
prior to the date of that agreement are cooperative agreements or 
transactions that were entered into under 10 U.S.C. 2371 or Section 845 
of the National Defense Authorization Act for Fiscal Year 1994 (Pub. L. 
103-160; 10 U.S.C. 2371 note).
    (B) The only records of a party, other entity, or subordinate 
element referred to in subparagraph (A) that the Comptroller General 
may examine in the exercise of the right referred to in that 
subparagraph are records of the same type as the records that the 
government has had the right to examine under the audit access clauses 
of the previous agreements or transactions referred to in such 
subparagraph that were entered into by that particular party, entity, 
or subordinate element.
    (4) This clause shall not be construed to require any party or 
entity, or any subordinate element of such party or entity, that 
participates in the performance of the agreement, to create or maintain 
any record that is not otherwise maintained in the ordinary course of 
business or pursuant to a provision of law.
    (5) The Comptroller General shall have access to the records 
described in this clause until three years after the date the final 
payment is made by the United States under this agreement.
    (6) The recipient of the agreement shall flow down this provision 
to any entity that participates in the performance of the agreement.

    Dated: October 23, 2001.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 01-27182 Filed 11-14-01; 8:45 am]
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