[Federal Register Volume 67, Number 54 (Wednesday, March 20, 2002)]
[Rules and Regulations]
[Pages 13057-13063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5823]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 3, 4, 9, 15, and 52

[FAC 2001-06; FAR Case 1998-024; Item IV]
RIN 9000-AI61


Federal Acquisition Regulation; Procurement Integrity Rewrite

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

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to rewrite 
procurement integrity coverage in plain language.

DATES: Effective Date: April 4, 2002.

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 Mr. Ralph De Stefano, Procurement Analyst, at (202) 
501-1758. Please cite FAC 2001-06, FAR case 1998-024.

SUPPLEMENTARY INFORMATION:   

A. Background

    Section 27 of the Office of Federal Procurement Policy Act (41 
U.S.C. 423) is more commonly referred to as the Procurement Integrity 
Act (hereinafter referred to as the Act). FAR 3.104 implements 
prohibitions, restrictions, and other requirements of the Act that are 
placed on certain agency officials that participate in Federal agency 
procurements.
    Other statutes and regulations also govern the conduct of 
Government employees. In particular, the Office of Government Ethics 
regulations provide interpretive guidance on the prohibitions in 18 
U.S.C. 207 and 208 that also apply to Government employees that 
participate in procurement activities during the conduct of a Federal 
agency procurement. While FAR 3.104 does not implement these other 
statutes and regulations, it is very important for agency employees to 
be aware, not only of the prohibitions and restrictions in the Act, but 
also those contained in other statutes and regulations that deal with 
the same or related prohibited conduct. Criminal and administrative 
penalties can result if an employee violates the restrictions or 
otherwise engages in prohibited conduct.
    It became apparent that we could improve FAR 3.104 by reorganizing 
and simplifying the text. Moreover, we clarify 3.104 to alert agency 
officials that even if their participation does not meet the definition 
in FAR 3.104 of participating personally and substantially, they are 
precluded from participating in a Federal agency procurement if they 
engage in certain conduct otherwise prohibited by other statutes and 
regulations. We added this guidance in FAR 3.104-2(b), 3.104-3(c), and 
3.104-5(a) to alert these agency officials that they should seek advice 
from agency ethics officials before engaging in certain activities that 
could have serious consequences, including

[[Page 13058]]

criminal prosecution. These revisions to FAR 3.104 do not change either 
the requirements of the Act or change, in any manner, who is covered 
by, or the activities covered in, Office of Government Ethics 
regulations interpreting conflict of interest statutes.
    To avoid possible violations of 18 U.S.C. 208, agency employees 
need to be aware that while their participation in a Federal agency 
procurement may not be considered ``participating personally and 
substantially in a Federal agency procurement'' for purposes of certain 
requirements in the Act, nevertheless, there will be instances where 
the employee will be considered to be participating personally and 
substantially for purposes of 18 U.S.C. 208. We have added these 
revisions to FAR 3.104 to alert agency officials that, while 
participating in a Federal agency procurement, they must be aware of 
and comply with the applicable disqualification requirements of 5 CFR 
2635.604 and 2635.606.
    These revisions also may assist agency ethics officials in advising 
agency officials participating in a Federal agency procurement. Certain 
conduct by an agency official during the conduct of a Federal agency 
procurement requires the official's disqualification from participation 
irrespective of whether or not the official's participation meets the 
definition of participating personally and substantially for purposes 
of the Act.
    A proposed rule was published in the Federal Register at 65 FR 
16758, March 29, 2000. Seven sources submitted comments in response to 
the proposed rule. All comments were considered in the development of 
the final rule. A summary of the substantive comments is provided.
     Comment: Additional clarification should be added that 
merely signing appointment letters for source selection evaluation 
panels, boards is not ``participating personally and substantially 
participation in a Federal agency procurement.''
    Response: Not accepted. The definition of ``participating 
personally and substantially in a Federal agency procurement'' is 
already quite detailed and more clarification is unnecessary.
     Comment: The standards identified in FAR 3.104-3(d) 
concerning prohibition on a former official's acceptance of 
compensation from a contractor that has been awarded a competitive or 
sole source contract, as an employee, officer, director, or consultant 
of the contractor should be made more restrictive.
    Response: Not accepted. The regulatory coverage tracks the 
statutory language.
     Comment: A definition of ``must'' should be added.
    Response: The definition of ``must'' was added to FAR 2.101 under 
another final rule and is currently in the FAR.
     Comment: Does the definition of ``source selection 
information'' include quotations in FAR Subpart 13.5, Test Program for 
Certain Commercial Items, that are over the simplified acquisition 
threshold, normally over $100,000.
    Response: No. Bids and proposals are addressed in the Act. Bids and 
proposals are terms of art to distinguish methods of contracting (bids 
under sealed bidding and proposals under negotiation). A quotation is 
not a bid or a proposal.
     Comment: The references to ``procurement'' in the rule 
should be changed to read ``acquisition.''
    Response: Not accepted. The Act and its implementation in FAR 3.104 
apply only to a ``Federal agency procurement.'' The term ``Federal 
agency procurement'' is defined in both the Act and FAR 3.104. The 
definition is different from the definition of ``acquisition'' in FAR 
2.101.
     Comment: Head of the contracting activity delegation 
restrictions in FAR 3.104-7(g) should be relaxed.
    Response: Not accepted. The issues being addressed are very 
significant, i.e., violations or possible violations of the Act; 
therefore, relaxation of the restriction is not appropriate.
     Comment: Informing acquisition employees that some post-
employment restrictions are not tied to ``personal and substantial 
participation'' should be added in the rule.
    Response: Accepted. See discussion under Supplementary Information, 
Background, above.
     Comment: Suggest retaining current FAR definition at FAR 
3.104-1, ``Participating personally and substantially in a Federal 
agency procurement,'' as applied to the OMB Circular A-76, paragraph 
(4). The proposed rule contains an expanded definition.
    Response: Accepted. The 1996 amendments to the Act limit the 
application of the post-employment restrictions to designated 
positions; therefore, the participation of most personnel in these 
activities would not place them at risk of losing any right of first 
refusal. See paragraph (4)(iv) of FAR 3.104-1, ``Participating 
substantially''.
     Comment: Clarify what constitutes a ``contact'' under the 
Act. Response: An explanation of ``contact'' was added to the rule at 
FAR 3.104-3(c)(2). The addition gives the suggested guidance.
     Comment: A clarification that employment contacts through 
agents are subject to disqualification needs to be added at FAR 3.104-
5(a).
    Response: Accepted. The added language makes a clear statement that 
an employment contact through agents is subject to disqualification 
under this final rule.
     Comment: The number of individuals required to receive the 
disqualification notice directly from the agency official disqualifying 
herself/himself should be reduced.
    Response: Partially accepted. The requirement for a notice of 
disqualification to the head of the contracting activity was deleted, 
but the requirements for notice to the contracting officer, source 
selection official, and immediate supervisor were retained. In an 
attempt to reduce the number of officials required to be notified, it 
was determined that the head of the contracting activity could be 
deleted. The Act places an affirmative responsibility on the agency 
official to disqualify herself/himself.
     Comment: Clarify that satisfying the requirement of 18 
U.S.C 208 does not automatically authorize the disqualified official to 
resume participation in the procurement.
    Response: The wording of the first sentence of 3.104-5(c) was 
revised to clarify that the conditions for resumption of participation 
in 3.104-3(c)(1)(ii) are statutorily mandated and that reinstatement is 
not necessarily automatic after those conditions have been met.
    This is not a significant regulatory action, and therefore, was not 
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.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not 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 the clarification only 
applies to individuals that are Government officials.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose information collection requirements that require 
the

[[Page 13059]]

approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

List of Subjects in 48 CFR Parts 2, 3, 4, 9, 15, and 52

    Government procurement.

    Dated: March 6, 2002.
Al Matera,
Director, Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 3, 4, 9, 15, 
and 52 as set forth below:
    1. The authority citation for 48 CFR parts 2, 3, 4, 9, 15, and 52 
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. Amend section 2.101 by adding, in alphabetical order, the 
definitions ``Offeror'' and ``Source selection information'' to read as 
follows:


2.101  Definitions.

* * * * *
    Offeror means offeror or bidder.
* * * * *
    Source selection information means any of the following information 
that is prepared for use by an agency for the purpose of evaluating a 
bid or proposal to enter into an agency procurement contract, if that 
information has not been previously made available to the public or 
disclosed publicly:
    (1) Bid prices submitted in response to an agency invitation for 
bids, or lists of those bid prices before bid opening.
    (2) Proposed costs or prices submitted in response to an agency 
solicitation, or lists of those proposed costs or prices.
    (3) Source selection plans.
    (4) Technical evaluation plans.
    (5) Technical evaluations of proposals.
    (6) Cost or price evaluations of proposals.
    (7) Competitive range determinations that identify proposals that 
have a reasonable chance of being selected for award of a contract.
    (8) Rankings of bids, proposals, or competitors.
    (9) Reports and evaluations of source selection panels, boards, or 
advisory councils.
    (10) Other information marked as ``Source Selection Information--
See FAR 2.101 and 3.104'' based on a case-by-case determination by the 
head of the agency or the contracting officer, that its disclosure 
would jeopardize the integrity or successful completion of the Federal 
agency procurement to which the information relates.
* * * * *

PART 3--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST

    3. Remove sections 3.104-10 and 3.104-11 and revise sections 3.104 
through 3.104-9 to read as follows:


3.104  Procurement integrity.


3.104-1  Definitions.

    As used in this section--
    Agency ethics official means the designated agency ethics official 
described in 5 CFR 2638.201 or other designated person, including--
    (1) Deputy ethics officials described in 5 CFR 2638.204, to whom 
authority under 3.104-6 has been delegated by the designated agency 
ethics official; and
    (2) Alternate designated agency ethics officials described in 5 CFR 
2638.202(b).
    Compensation means wages, salaries, honoraria, commissions, 
professional fees, and any other form of compensation, provided 
directly or indirectly for services rendered. Compensation is 
indirectly provided if it is paid to an entity other than the 
individual, specifically in exchange for services provided by the 
individual.
    Contractor bid or proposal information means any of the following 
information submitted to a Federal agency as part of or in connection 
with a bid or proposal to enter into a Federal agency procurement 
contract, if that information has not been previously made available to 
the public or disclosed publicly:
    (1) Cost or pricing data (as defined by 10 U.S.C. 2306a(h)) with 
respect to procurements subject to that section, and section 304A(h) of 
the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 
254b(h)), with respect to procurements subject to that section.
    (2) Indirect costs and direct labor rates.
    (3) Proprietary information about manufacturing processes, 
operations, or techniques marked by the contractor in accordance with 
applicable law or regulation.
    (4) Information marked by the contractor as ``contractor bid or 
proposal information'' in accordance with applicable law or regulation.
    (5) Information marked in accordance with 52.215-1(e).
    Decision to award a subcontract or modification of subcontract 
means a decision to designate award to a particular source.
    Federal agency procurement means the acquisition (by using 
competitive procedures and awarding a contract) of goods or services 
(including construction) from non-Federal sources by a Federal agency 
using appropriated funds. For broad agency announcements and small 
business innovative research programs, each proposal received by an 
agency constitutes a separate procurement for purposes of the Act.
    In excess of $10,000,000 means--
    (1) The value, or estimated value, at the time of award, of the 
contract, including all options;
    (2) The total estimated value at the time of award of all orders 
under an indefinite-delivery, indefinite-quantity, or requirements 
contract;
    (3) Any multiple award schedule contract, unless the contracting 
officer documents a lower estimate;
    (4) The value of a delivery order, task order, or an order under a 
Basic Ordering Agreement;
    (5) The amount paid or to be paid in settlement of a claim; or
    (6) The estimated monetary value of negotiated overhead or other 
rates when applied to the Government portion of the applicable 
allocation base.
    Official means--
    (1) An officer, as defined in 5 U.S.C. 2104;
    (2) An employee, as defined in 5 U.S.C. 2105;
    (3) A member of the uniformed services, as defined in 5 U.S.C. 
2101(3); or
    (4) A special Government employee, as defined in 18 U.S.C. 202.
    Participating personally and substantially in a Federal agency 
procurement means--
    (1) Active and significant involvement of an official in any of the 
following activities directly related to that procurement:
    (i) Drafting, reviewing, or approving the specification or 
statement of work for the procurement.
    (ii) Preparing or developing the solicitation.
    (iii) Evaluating bids or proposals, or selecting a source.
    (iv) Negotiating price or terms and conditions of the contract.
    (v) Reviewing and approving the award of the contract.
    (2) Participating personally means participating directly, and 
includes the direct and active supervision of a subordinate's 
participation in the matter.
    (3) Participating substantially means that the official's 
involvement is of significance to the matter. Substantial participation 
requires more than official responsibility, knowledge, perfunctory

[[Page 13060]]

involvement, or involvement on an administrative or peripheral issue. 
Participation may be substantial even though it is not determinative of 
the outcome of a particular matter. A finding of substantiality should 
be based not only on the effort devoted to a matter, but on the 
importance of the effort. While a series of peripheral involvements may 
be insubstantial, the single act of approving or participating in a 
critical step may be substantial. However, the review of procurement 
documents solely to determine compliance with regulatory, 
administrative, or budgetary procedures, does not constitute 
substantial participation in a procurement.
    (4) Generally, an official will not be considered to have 
participated personally and substantially in a procurement solely by 
participating in the following activities:
    (i) Agency-level boards, panels, or other advisory committees that 
review program milestones or evaluate and make recommendations 
regarding alternative technologies or approaches for satisfying broad 
agency-level missions or objectives.
    (ii) The performance of general, technical, engineering, or 
scientific effort having broad application not directly associated with 
a particular procurement, notwithstanding that such general, technical, 
engineering, or scientific effort subsequently may be incorporated into 
a particular procurement.
    (iii) Clerical functions supporting the conduct of a particular 
procurement.
    (iv) For procurements to be conducted under the procedures of OMB 
Circular A-76, participation in management studies, preparation of in-
house cost estimates, preparation of ``most efficient organization'' 
analyses, and furnishing of data or technical support to be used by 
others in the development of performance standards, statements of work, 
or specifications.
    Source selection evaluation board means any board, team, council, 
or other group that evaluates bids or proposals.


3.104-2  General.

    (a) This section implements section 27 of the Office of Federal 
Procurement Policy Act (the Procurement Integrity Act) (41 U.S.C. 423) 
referred to as ``the Act''). Agency supplementation of 3.104, including 
specific definitions to identify individuals who occupy positions 
specified in 3.104-3(d)(1)(ii), and any clauses required by 3.104 must 
be approved by the senior procurement executive of the agency, unless a 
law establishes a higher level of approval for that agency.
    (b) Agency officials are reminded that there are other statutes and 
regulations that deal with the same or related prohibited conduct, for 
example--
    (1) The offer or acceptance of a bribe or gratuity is prohibited by 
18 U.S.C. 201 and 10 U.S.C. 2207. The acceptance of a gift, under 
certain circumstances, is prohibited by 5 U.S.C. 7353 and 5 CFR part 
2635;
    (2) Contacts with an offeror during the conduct of an acquisition 
may constitute ``seeking employment,''(see subpart F of 5 CFR part 2636 
and 3.104-3(c)(2)). Government officers and employees (employees) are 
prohibited by 18 U.S.C. 208 and 5 CFR part 2635 from participating 
personally and substantially in any particular matter that would affect 
the financial interests of any person with whom the employee is seeking 
employment. An employee who engages in negotiations or is otherwise 
seeking employment with an offeror or who has an arrangement concerning 
future employment with an offeror must comply with the applicable 
disqualification requirements of 5 CFR 2635.604 and 2635.606. The 
statutory prohibition in 18 U.S.C. 208 also may require an employee's 
disqualification from participation in the acquisition even if the 
employee's duties may not be considered ``participating personally and 
substantially,'' as this term is defined in 3.104-1;
    (3) Post-employment restrictions are covered by 18 U.S.C. 207 and 5 
CFR parts 2637 and 2641, that prohibit certain activities by former 
Government employees, including representation of a contractor before 
the Government in relation to any contract or other particular matter 
involving specific parties on which the former employee participated 
personally and substantially while employed by the Government. 
Additional restrictions apply to certain senior Government employees 
and for particular matters under an employee's official responsibility;
    (4) Parts 14 and 15 place restrictions on the release of 
information related to procurements and other contractor information 
that must be protected under 18 U.S.C. 1905;
    (5) Release of information both before and after award (see 3.104-
4) may be prohibited by the Privacy Act (5 U.S.C. 552a), the Trade 
Secrets Act (18 U.S.C. 1905), and other laws; and
    (6) Using nonpublic information to further an employee's private 
interest or that of another and engaging in a financial transaction 
using nonpublic information are prohibited by 5 CFR 2635.703.


3.104-3  Statutory and related prohibitions, restrictions, and 
requirements.

    (a) Prohibition on disclosing procurement information (subsection 
27(a) of the Act). (1) A person described in paragraph (a)(2) of this 
subsection must not, other than as provided by law, knowingly disclose 
contractor bid or proposal information or source selection information 
before the award of a Federal agency procurement contract to which the 
information relates. (See 3.104-4(a).)
    (2) Paragraph (a)(1) of this subsection applies to any person who--
    (i) Is a present or former official of the United States, or a 
person who is acting or has acted for or on behalf of, or who is 
advising or has advised the United States with respect to, a Federal 
agency procurement; and
    (ii) By virtue of that office, employment, or relationship, has or 
had access to contractor bid or proposal information or source 
selection information.
    (b) Prohibition on obtaining procurement information (subsection 
27(b) of the Act). A person must not, other than as provided by law, 
knowingly obtain contractor bid or proposal information or source 
selection information before the award of a Federal agency procurement 
contract to which the information relates.
    (c) Actions required when an agency official contacts or is 
contacted by an offeror regarding non-Federal employment (subsection 
27(c) of the Act). (1) If an agency official, participating personally 
and substantially in a Federal agency procurement for a contract in 
excess of the simplified acquisition threshold, contacts or is 
contacted by a person who is an offeror in that Federal agency 
procurement regarding possible non-Federal employment for that 
official, the official must--
    (i) Promptly report the contact in writing to the official's 
supervisor and to the agency ethics official; and
    (ii) Either reject the possibility of non-Federal employment or 
disqualify himself or herself from further personal and substantial 
participation in that Federal agency procurement (see 3.104-5) until 
such time as the agency authorizes the official to resume participation 
in that procurement, in accordance with the requirements of 18 U.S.C. 
208 and applicable agency regulations, because--
    (A) The person is no longer an offeror in that Federal agency 
procurement; or

[[Page 13061]]

    (B) All discussions with the offeror regarding possible non-Federal 
employment have terminated without an agreement or arrangement for 
employment.
    (2) A contact is any of the actions included as ``seeking 
employment'' in 5 CFR 2635.603(b). In addition, unsolicited 
communications from offerors regarding possible employment are 
considered contacts.
    (3) Agencies must retain reports of employment contacts for 2 years 
from the date the report was submitted.
    (4) Conduct that complies with subsection 27(c) of the Act may be 
prohibited by other criminal statutes and the Standards of Ethical 
Conduct for Employees of the Executive Branch. See 3.104-2(b)(2).
    (d) Prohibition on former official's acceptance of compensation 
from a contractor (subsection 27(d) of the Act). (1) A former official 
of a Federal agency may not accept compensation from a contractor that 
has been awarded a competitive or sole source contract, as an employee, 
officer, director, or consultant of the contractor within a period of 1 
year after such former official--
    (i) Served, at the time of selection of the contractor or the award 
of a contract to that contractor, as the procuring contracting officer, 
the source selection authority, a member of a source selection 
evaluation board, or the chief of a financial or technical evaluation 
team in a procurement in which that contractor was selected for award 
of a contract in excess of $10,000,000;
    (ii) Served as the program manager, deputy program manager, or 
administrative contracting officer for a contract in excess of 
$10,000,000 awarded to that contractor; or
    (iii) Personally made for the Federal agency a decision to--
    (A) Award a contract, subcontract, modification of a contract or 
subcontract, or a task order or delivery order in excess of $10,000,000 
to that contractor;
    (B) Establish overhead or other rates applicable to a contract or 
contracts for that contractor that are valued in excess of $10,000,000;
    (C) Approve issuance of a contract payment or payments in excess of 
$10,000,000 to that contractor; or
    (D) Pay or settle a claim in excess of $10,000,000 with that 
contractor.
    (2) The 1-year prohibition begins on the date--
    (i) Of contract award for positions described in paragraph 
(d)(1)(i) of this subsection, or the date of contractor selection if 
the official was not serving in the position on the date of award;
    (ii) The official last served in one of the positions described in 
paragraph (d)(1)(ii) of this subsection; or
    (iii) The official made one of the decisions described in paragraph 
(d)(1)(iii) of this subsection.
    (3) Nothing in paragraph (d)(1) of this subsection may be construed 
to prohibit a former official of a Federal agency from accepting 
compensation from any division or affiliate of a contractor that does 
not produce the same or similar products or services as the entity of 
the contractor that is responsible for the contract referred to in 
paragraph (d)(1) of this subsection.


3.104-4  Disclosure, protection, and marking of contractor bid or 
proposal information and source selection information.

    (a) Except as specifically provided for in this subsection, no 
person or other entity may disclose contractor bid or proposal 
information or source selection information to any person other than a 
person authorized, in accordance with applicable agency regulations or 
procedures, by the agency head or the contracting officer to receive 
such information.
    (b) Contractor bid or proposal information and source selection 
information must be protected from unauthorized disclosure in 
accordance with 14.401, 15.207, applicable law, and agency regulations.
    (c) Individuals unsure if particular information is source 
selection information, as defined in 2.101, should consult with agency 
officials as necessary. Individuals responsible for preparing material 
that may be source selection information as described at paragraph (10) 
of the ``source selection information'' definition in 2.101 must mark 
the cover page and each page that the individual believes contains 
source selection information with the legend ``Source Selection 
Information--See FAR 2.101 and 3.104.'' Although the information in 
paragraphs (1) through (9) of the definition in 2.101 is considered to 
be source selection information whether or not marked, all reasonable 
efforts must be made to mark such material with the same legend.
    (d) Except as provided in paragraph (d)(3) of this subsection, the 
contracting officer must notify the contractor in writing if the 
contracting officer believes that proprietary information, contractor 
bid or proposal information, or information marked in accordance with 
52.215-1(e) has been inappropriately marked. The contractor that has 
affixed the marking must be given an opportunity to justify the 
marking.
    (1) If the contractor agrees that the marking is not justified, or 
does not respond within the time specified in the notice, the 
contracting officer may remove the marking and release the information.
    (2) If, after reviewing the contractor's justification, the 
contracting officer determines that the marking is not justified, the 
contracting officer must notify the contractor in writing before 
releasing the information.
    (3) For technical data marked as proprietary by a contractor, the 
contracting officer must follow the procedures in 27.404(h).
    (e) This section does not restrict or prohibit--
    (1) A contractor from disclosing its own bid or proposal 
information or the recipient from receiving that information;
    (2) The disclosure or receipt of information, not otherwise 
protected, relating to a Federal agency procurement after it has been 
canceled by the Federal agency, before contract award, unless the 
Federal agency plans to resume the procurement;
    (3) Individual meetings between a Federal agency official and an 
offeror or potential offeror for, or a recipient of, a contract or 
subcontract under a Federal agency procurement, provided that 
unauthorized disclosure or receipt of contractor bid or proposal 
information or source selection information does not occur; or
    (4) The Government's use of technical data in a manner consistent 
with the Government's rights in the data.
    (f) This section does not authorize--
    (1) The withholding of any information pursuant to a proper request 
from the Congress, any committee or subcommittee thereof, a Federal 
agency, the Comptroller General, or an Inspector General of a Federal 
agency, except as otherwise authorized by law or regulation. Any 
release containing contractor bid or proposal information or source 
selection information must clearly identify the information as 
contractor bid or proposal information or source selection information 
related to the conduct of a Federal agency procurement and notify the 
recipient that the disclosure of the information is restricted by 
section 27 of the Act;
    (2) The withholding of information from, or restricting its receipt 
by, the Comptroller General in the course of a protest against the 
award or proposed award of a Federal agency procurement contract;
    (3) The release of information after award of a contract or 
cancellation of a procurement if such information is

[[Page 13062]]

contractor bid or proposal information or source selection information 
that pertains to another procurement; or
    (4) The disclosure, solicitation, or receipt of bid or proposal 
information or source selection information after award if disclosure, 
solicitation, or receipt is prohibited by law. (See 3.104-2(b)(5) and 
subpart 24.2.)


3.104-5  Disqualification.

    (a) Contacts through agents or other intermediaries. Employment 
contacts between the employee and the offeror, that are conducted 
through agents, or other intermediaries, may require disqualification 
under 3.104-3(c)(1). These contacts may also require disqualification 
under other statutes and regulations. (See 3.104-2(b)(2).)
    (b) Disqualification notice. In addition to submitting the contact 
report required by 3.104-3(c)(1), an agency official who must 
disqualify himself or herself pursuant to 3.104-3(c)(1)(ii) must 
promptly submit written notice of disqualification from further 
participation in the procurement to the contracting officer, the source 
selection authority if other than the contracting officer, and the 
agency official's immediate supervisor. As a minimum, the notice must--
    (1) Identify the procurement;
    (2) Describe the nature of the agency official's participation in 
the procurement and specify the approximate dates or time period of 
participation; and
    (3) Identify the offeror and describe its interest in the 
procurement.
    (c) Resumption of participation in a procurement. (1) The official 
must remain disqualified until such time as the agency, at its sole and 
exclusive discretion, authorizes the official to resume participation 
in the procurement in accordance with 3.104-3(c)(1)(ii).
    (2) After the conditions of 3.104-3(c)(1)(ii)(A) or (B) have been 
met, the head of the contracting activity (HCA), after consultation 
with the agency ethics official, may authorize the disqualified 
official to resume participation in the procurement, or may determine 
that an additional disqualification period is necessary to protect the 
integrity of the procurement process. In determining the 
disqualification period, the HCA must consider any factors that create 
an appearance that the disqualified official acted without complete 
impartiality in the procurement. The HCA's reinstatement decision 
should be in writing.
    (3) Government officer or employee must also comply with the 
provisions of 18 U.S.C. 208 and 5 CFR part 2635 regarding any resumed 
participation in a procurement matter. Government officer or employee 
may not be reinstated to participate in a procurement matter affecting 
the financial interest of someone with whom the individual is seeking 
employment, unless the individual receives--
    (i) A waiver pursuant to 18 U.S.C. 208(b)(1) or (b)(3); or
    (ii) An authorization in accordance with the requirements of 
subpart F of 5 CFR part 2635.


3.104-6  Ethics advisory opinions regarding prohibitions on a former 
official's acceptance of compensation from a contractor.

    (a) An official or former official of a Federal agency who does not 
know whether he or she is or would be precluded by subsection 27(d) of 
the Act (see 3.104-3(d)) from accepting compensation from a particular 
contractor may request advice from the appropriate agency ethics 
official before accepting such compensation.
    (b) The request for an advisory opinion must be in writing, include 
all relevant information reasonably available to the official or former 
official, and be dated and signed. The request must include information 
about the--
    (1) Procurement(s), or decision(s) on matters under 3.104-
3(d)(1)(iii), involving the particular contractor, in which the 
individual was or is involved, including contract or solicitation 
numbers, dates of solicitation or award, a description of the supplies 
or services procured or to be procured, and contract amount;
    (2) Individual's participation in the procurement or decision, 
including the dates or time periods of that participation, and the 
nature of the individual's duties, responsibilities, or actions; and
    (3) Contractor, including a description of the products or services 
produced by the division or affiliate of the contractor from whom the 
individual proposes to accept compensation.
    (c) Within 30 days after receipt of a request containing complete 
information, or as soon thereafter as practicable, the agency ethics 
official should issue an opinion on whether the proposed conduct would 
violate subsection 27(d) of the Act.
    (d)(1) If complete information is not included in the request, the 
agency ethics official may ask the requester to provide more 
information or request information from other persons, including the 
source selection authority, the contracting officer, or the requester's 
immediate supervisor.
    (2) In issuing an opinion, the agency ethics official may rely upon 
the accuracy of information furnished by the requester or other agency 
sources, unless he or she has reason to believe that the information is 
fraudulent, misleading, or otherwise incorrect.
    (3) If the requester is advised in a written opinion by the agency 
ethics official that the requester may accept compensation from a 
particular contractor, and accepts such compensation in good faith 
reliance on that advisory opinion, then neither the requester nor the 
contractor will be found to have knowingly violated subsection 27(d) of 
the Act. If the requester or the contractor has actual knowledge or 
reason to believe that the opinion is based upon fraudulent, 
misleading, or otherwise incorrect information, their reliance upon the 
opinion will not be deemed to be in good faith.


3.104-7  Violations or possible violations.

    (a) A contracting officer who receives or obtains information of a 
violation or possible violation of subsection 27(a), (b), (c), or (d) 
of the Act (see 3.104-3) must determine if the reported violation or 
possible violation has any impact on the pending award or selection of 
the contractor.
    (1) If the contracting officer concludes that there is no impact on 
the procurement, the contracting officer must forward the information 
concerning the violation or possible violation and documentation 
supporting a determination that there is no impact on the procurement 
to an individual designated in accordance with agency procedures.
    (i) If that individual concurs, the contracting officer may proceed 
with the procurement.
    (ii) If that individual does not concur, the individual must 
promptly forward the information and documentation to the HCA and 
advise the contracting officer to withhold award.
    (2) If the contracting officer concludes that the violation or 
possible violation impacts the procurement, the contracting officer 
must promptly forward the information to the HCA.
    (b) The HCA must review all information available and, in 
accordance with agency procedures, take appropriate action, such as--
    (1) Advise the contracting officer to continue with the 
procurement;
    (2) Begin an investigation;
    (3) Refer the information disclosed to appropriate criminal 
investigative agencies;
    (4) Conclude that a violation occurred; or

[[Page 13063]]

    (5) Recommend that the agency head determine that the contractor, 
or someone acting for the contractor, has engaged in conduct 
constituting an offense punishable under subsection 27(e) of the Act, 
for the purpose of voiding or rescinding the contract.
    (c) Before concluding that an offeror, contractor, or person has 
violated the Act, the HCA may consider that the interests of the 
Government are best served by requesting information from appropriate 
parties regarding the violation or possible violation.
    (d) If the HCA concludes that section 27 of the Act has been 
violated, the HCA may direct the contracting officer to--
    (1) If a contract has not been awarded--
    (i) Cancel the procurement;
    (ii) Disqualify an offeror; or
    (iii) Take any other appropriate actions in the interests of the 
Government.
    (2) If a contract has been awarded--
    (i) Effect appropriate contractual remedies, including profit 
recapture under the clause at 52.203-10, Price or Fee Adjustment for 
Illegal or Improper Activity, or, if the contract has been rescinded 
under paragraph(d)(2)(ii) of this subsection, recovery of the amount 
expended under the contract;
    (ii) Void or rescind the contract with respect to which--
    (A) The contractor or someone acting for the contractor has been 
convicted for an offense where the conduct constitutes a violation of 
subsection 27(a) or (b) of the Act for the purpose of either--
    (1) Exchanging the information covered by the subsections for 
anything of value; or
    (2) Obtaining or giving anyone a competitive advantage in the award 
of a Federal agency procurement contract; or
    (B) The agency head has determined, based upon a preponderance of 
the evidence, that the contractor or someone acting for the contractor 
has engaged in conduct constituting an offense punishable under 
subsection 27(e)(1) of the Act; or
    (iii) Take any other appropriate actions in the best interests of 
the Government.
    (3) Refer the matter to the agency suspending or debarring 
official.
    (e) The HCA should recommend or direct an administrative or 
contractual remedy commensurate with the severity and effect of the 
violation.
    (f) If the HCA determines that urgent and compelling circumstances 
justify an award, or award is otherwise in the interests of the 
Government, the HCA, in accordance with agency procedures, may 
authorize the contracting officer to award the contract or execute the 
contract modification after notifying the agency head.
    (g) The HCA may delegate his or her authority under this subsection 
to an individual at least one organizational level above the 
contracting officer and of General Officer, Flag, Senior Executive 
Service, or equivalent rank.


3.104-8  Criminal and civil penalties, and further administrative 
remedies.

    Criminal and civil penalties, and administrative remedies, may 
apply to conduct that violates the Act (see 3.104-3). See 33.102(f) for 
special rules regarding bid protests. See 3.104-7 for administrative 
remedies relating to contracts.
    (a) An official who knowingly fails to comply with the requirements 
of 3.104-3 is subject to the penalties and administrative action set 
forth in subsection 27(e) of the Act.
    (b) An offeror who engages in employment discussion with an 
official subject to the restrictions of 3.104-3, knowing that the 
official has not complied with 3.104-3(c)(1), is subject to the 
criminal, civil, or administrative penalties set forth in subsection 
27(e) of the Act.
    (c) An official who refuses to terminate employment discussions 
(see 3.104-5) may be subject to agency administrative actions under 5 
CFR 2635.604(d) if the official's disqualification from participation 
in a particular procurement interferes substantially with the 
individual's ability to perform assigned duties.


3.104-9  Contract clauses.

    In solicitations and contracts for other than commercial items that 
exceed the simplified acquisition threshold, insert the clauses at--
    (a) 52.203-8, Cancellation, Rescission, and Recovery of Funds for 
Illegal or Improper Activity; and
    (b) 52.203-10, Price or Fee Adjustment for Illegal or Improper 
Activity.


3.704  [Amended]

    4. Amend section 3.704 in paragraph (c)(1) by removing ``3.104-10'' 
and adding ``3.104-7'' in its place.

PART 4--ADMINISTRATIVE MATTERS

    5. Amend section 4.802 in paragraphs (a)(1), (a)(2), and (a)(3) by 
removing ``, which shall document'' and adding ``that documents'' in 
their place; in the introductory text of paragraph (c) by removing 
``shall'' the first time it appears and adding ``must'' in its place, 
and removing ``shall'' the second time it appears; in the first 
sentence of paragraph (d) by removing ``shall'' and adding ``must'' in 
its place; and by revising paragraph (e) to read as follows:


4.802  Contract files.

* * * * *
    (e) Contents of contract files that are contractor bid or proposal 
information or source selection information as defined in 2.101 must be 
protected from disclosure to unauthorized persons (see 3.104-4).
* * * * *

PART 9--CONTRACTOR QUALIFICATIONS


9.105-3  [Amended]

    6. Amend section 9.105-3 in paragraph (c) by removing ``and/or'' 
and adding ``or'' in its place, and by removing ``3.104-3'' and adding 
``3.104-4'' in its place.


9.505  [Amended]

    7. Amend section 9.505 in paragraph (b)(2) by removing ``3.104-3'' 
and adding ``2.101'' in its place.

PART 15--CONTRACTING BY NEGOTIATION

    8. Amend section 15.404-2 by revising paragraph (a)(5) to read as 
follows:


15.404-2  Information to support proposal analysis.

    (a) * * *
    (5) Field pricing information and other reports may include 
proprietary or source selection information (see 2.101). This 
information must be appropriately identified and protected accordingly.
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


52.203-8  [Amended]

    9. Amend section 52.203-8 in the introductory paragraph by removing 
``in solicitations and contracts''.

[FR Doc. 02-5823 Filed 3-19-02; 8:45 am]
BILLING CODE 6820-EP-P