[Federal Register Volume 73, Number 88 (Tuesday, May 6, 2008)]
[Rules and Regulations]
[Pages 24881-24883]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9900]


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DEPARTMENT OF HOMELAND SECURITY

48 CFR Part 3036

[Docket No. DHS-2007-0024]
RIN 1601-AA44


Department of Homeland Security Acquisition Regulation; One-Step 
Turnkey Design-Build Contracts for United States Coast Guard (HSAR Case 
2007-002)

AGENCY: Department of Homeland Security.

ACTION: Final rule.

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SUMMARY: The Department of Homeland Security (DHS or Department) is 
amending the Homeland Security Acquisition Regulation (HSAR) to 
incorporate delegation of one-step turnkey design-build authority from 
the Secretary of Homeland Security to the United States Coast Guard 
(USCG or Coast Guard). This rule implements changes that result from 
the USCG Authorization Act for Fiscal Year 2006.

DATES: Effective May 6, 2008.

FOR FURTHER INFORMATION CONTACT: Kathy Strouss, Department of Homeland 
Security, Office of the Chief Procurement Officer, Acquisition Policy 
and Legislation, (202) 447-5300.

SUPPLEMENTARY INFORMATION: 

I. Background
II. Discussion of Public Comments
III. Regulatory Analyses
    A. Executive Order 12866 Assessment
    B. Regulatory Flexibility Act

I. Background

    Under the United States Coast Guard (USCG) Authorization Act for 
Fiscal Year 2006, the Secretary of Homeland Security was authorized to 
use one-step turnkey design-build procedures when entering into 
construction contracts. See Public Law 109-241, sec. 205. On July 13, 
2007, DHS published a proposed rule, which would amend the Department 
of Homeland Security Acquisition Regulation (HSAR) to incorporate the 
delegation of turnkey design-build authority from the Secretary of 
Homeland Security to the United States Coast Guard. See 72 FR 38548. 
DHS adopts the proposed rule as a final rule without change.

II. Discussion of Public Comments

    DHS received public comments from 6 sources on the proposed rule. 
The public comments received and the responses are summarized below:
    Comment: Several comments were opposed to this HSAR revision, which 
would incorporate the delegation of one-step turnkey design-build 
procedures authority from the Secretary of Homeland Security to the 
United States Coast Guard. Most commenters fully understood that DHS 
issued the proposed rule to implement changes enacted by Congress in 
section 205 of Public Law 109-241; however, the commenters still urged 
DHS not to adopt the proposed regulation, believing instead that the 
Department should continue to follow the two-phase design-build 
procedures laid out in the Federal Acquisition Reform Act (FARA) of 
1996.
    Response: DHS disagrees. The Coast Guard has studied the one-step 
turnkey design-build process and is fully convinced that it is in the 
best interest of both the Coast Guard and the government to adopt this 
streamlined acquisition method. The Coast Guard delegation of one-step 
turnkey design-build authority is consistent with section 205 of Public 
Law 109-241. Each construction acquisition is unique, and one-step 
turnkey design-build methods will be used where it is reasonable, 
prudent, and offers the best contracting strategy for the Coast Guard.
    Comment: Other comments fully supported the adoption of a universal 
design-build methodology for all federal design-build projects. The 
commenters wrote, however, that the adoption of a turnkey design-build 
(one-step) method would unnecessarily confuse the private sector with 
conflicting procurement methodologies.
    Response: DHS disagrees. The private sector is very familiar with 
one-step turnkey design-build and has been using the process for years. 
The private sector has gained experience with one-step design-build use 
at other federal agencies, such as the Department of Defense (DoD) and 
the Department of Transportation.
    Comment: One commenter reminded DHS that the Federal Acquisition 
Regulation (FAR) Part 36 governs the use of two-phase design-build

[[Page 24882]]

procedures for construction contracting and is the only design-build 
method that is currently allowed under the FAR. This commenter believes 
that any deviation from the current guidance in FAR part 36 is not 
authorized by Congress. The commenter requests that the USCG comply 
with the current laws and intent of Congress in this regard. Another 
commenter had concerns about the implications of the proposed rule. The 
commenter highlighted the fact that ``Unless the less complex 
facilities are truly less complex and do not require extensive designs, 
the costs to the small business of a one stage procedure could and 
would be more expensive and may limit competition from small 
business.'' The commenter also indicated that this proposed rule did 
not provide enough specificity as to provide adequate notice to the 
public regarding changes proposed. The commenter urged the Department 
to reissue a proposed rule with greater specificity (rather than issue 
a final rule) and to extend the comment period.
    Response: DHS does not believe one-step turnkey design-build will 
place an undue burden on small business. Since one purpose of the rule 
is to provide the Coast Guard with cost and time efficiencies for small 
construction projects, the rule should also afford small construction 
companies with an opportunity to successfully compete for such 
projects. DHS did not extend the comment period for this proposed rule, 
because DHS does not believe that any additional time is necessary. DHS 
believes that the comment period provided was sufficient.
    Comment: DHS received several comments regarding the type of 
projects to be completed under turnkey. Specifically, commenters wanted 
to know what constituted a ``complex facility'' versus a ``simple 
design'' and wanted DHS to elaborate further on the types and size of 
facilities to be included under the proposed turnkey acquisition 
methodology.
    Response: The Coast Guard will consider all types of facilities and 
projects under turnkey acquisition procedures. The final acquisition 
method for each project is not finalized until all acquisition planning 
is complete. The DHS advanced acquisition planning database (located at 
http://www.fido.gov) contains a complete listing of Coast Guard 
construction projects scheduled for each fiscal year. In addition, the 
Coast Guard will be developing internal guidelines to ensure that all 
of its construction offices follow standards in executing one-step 
turnkey design-build authority.
    Comment: DHS received a few comments regarding specific 
implementation policy of two-phase design-build process. Several 
commenters wrote that price should not enter into the evaluation until 
after the qualifications of the applicants have been fully evaluated 
and a shortlist of between three and five fully qualified firms are 
identified. They wrote that under the proposed rule's one-step 
selection procedure, price would be mingled with the qualifications. 
The commenters also believed that a one-step selection process carries 
numerous disadvantages for both the agency and for the contractors when 
compared with the existing two-step process. The commenters wrote that 
under a one-phase process, proposal costs would be escalated, because 
all of the applicants would have to go through the complete cost 
proposal process, unlike in two-step design-build process, where only 
the short-listed firms have to prepare a cost proposal. The commenters 
wrote that since cost proposals often require a significant pre-
contract design effort, there would be a need for the Coast Guard (like 
some federal agencies) to provide a stipend to the short-listed firms 
which would increase costs for the agency. In addition, the commenters 
thought that a one-phase design-build process would deny the Coast 
Guard the innovation and creativity that is fostered by the two-step 
selection process as competitors compete to provide the most ``value 
added'' to their proposals. The commenters indicated that with an 
unlimited number of competitors, relatively few firms will want to 
invest the effort to be innovative and creative--especially smaller 
firms with emerging talent.
    Response: A historical perspective of past Coast Guard construction 
projects shows that the majority of construction projects have gone to 
small businesses. The Coast Guard believes that, under one-step turnkey 
design-build authority, construction projects will continue to go to 
small businesses. Contract opportunities would still be available for 
companies that meet their socio-economic status as specified in federal 
statutes. This includes companies located in Historically Underutilized 
Business Zones (HUBZone), companies eligible to receive federal 
contracts under the Small Business Administration's 8(a) Business 
Development Program, companies eligible as Service-Disabled Veteran 
Owned Small Business (SDVOSB) concerns, and other certified Small 
Business (SB) concerns eligible for contract opportunities. The Coast 
Guard anticipates that many of its one-step design build projects will 
involve modest design efforts that will not substantially add to the 
cost of a contractor's bid or proposal. The Coast Guard does not intend 
to pay stipends related to costs for one-step turnkey design-build 
proposal development.
    Comment: DHS received several comments regarding contractor 
selection and qualifications. Commenters wrote that if the Coast Guard 
moves forward in implementing regulations on a one-phase design-build 
process, then DHS should modify source selection procedures.
    Response: If DHS were to follow the recommendation of these 
commenters, DHS would render the one-step turnkey design-build program 
into a two-step design-build program, thereby defeating the intent of 
Congress in granting DHS the option of delegating one-step turnkey 
design-build authority to the Coast Guard. The Coast Guard will base 
all contract awards under one-step turnkey design-build authority on 
Best Value Continuum Selection methods. In addition, the Coast Guard is 
in the process of developing internal guidelines to ensure that all its 
construction offices follow identical standards in executing one-step 
turnkey design-build contracts. The guidelines will allow for program 
standardization among all Coast Guard civil engineering units.
    Comment: Two commenters recommended that DHS should add a provision 
to the final rule to limit the use of the one-step design-build process 
to projects that are ``less complex projects requiring little or 
adaptive design with a maximum construction value of no more than $6 
million.''
    Response: The Coast Guard intends to utilize one-step turnkey 
design-build authority on a case-by-case basis. Detailed acquisition 
planning will determine the best procurement method to use for each 
project undertaken by various Coast Guard civil engineering units. The 
Coast Guard does not intend to limit one-step turnkey design-build 
procedures to procurements falling within predetermined dollar ranges. 
The Coast Guard will consider all projects regardless of dollar value.
    Comment: A few commenters remarked that the FAR provision 
implemented in ``Subpart 36.3--Two-Phase Design-Build Selection 
Procedures'' should be the only governing provision. They remarked that 
Congress has never authorized a waiver of or deviation from 
qualifications based selection (QBS) for architecture, engineering and 
related services and that Congress has

[[Page 24883]]

consistently endorsed and required use of this process (40 U.S.C. 1101 
et seq. and FAR part 36.6).
    Response: DHS disagrees. The USCG Authorization Act for Fiscal Year 
2006 specifically authorizes the Secretary to use one-step turnkey 
design-build procedures when entering into construction contracts. See 
Public Law 109-241 section 205. In addition, in the past, the one-step 
turn-key design-build procedures were authorized by Congress pursuant 
to 10 U.S.C. 2862. This law allows DoD service secretaries (the 
Secretary of the Army, the Secretary of the Air Force and the Secretary 
of the Navy) to use the one-step turnkey procedures for military 
construction contracts. The purpose of this rule is to delegate 
authority of the Secretary of Homeland Security under section 205 of 
Public Law 109-241 (14 U.S.C. 677) to the Coast Guard.
    Comment: A few comments took exception with the notion that the 
two-phrase design-build selection process required by the FAR (48 CFR 
36.6) results in a much longer process. They commented that the two-
phase design-build selection process is the most effective way to get 
the best results using design-build contracting and works well for 
large and small, simple and complex projects when used correctly. They 
also felt that the most effective way for an owner to communicate 
desired project outcomes is through the use of performance-based 
requirements, which describe the nature of the project in terms of 
desire performance outcomes and an owner's goals, challenges, and 
problems, rather than through restrictive design specifications. They 
felt that this approach maximizes an offeror's flexibility and allows 
an owner to evaluate design-build teams' innovation and creativity in 
providing optimum solutions. Moreover, they felt this approach would 
capture owner requirements more efficiently while dramatically reducing 
statement of work paperwork by more than 90 percent.
    Response: DHS disagrees. The Coast Guard has studied the one-step 
turnkey design-build process and believes it to be in the best interest 
of both the Coast Guard and the government to adopt this streamlined 
acquisition method. The potential spectrum of one-step design-build 
projects is broad and could involve a performance-based design that 
complements the efficiencies that a one-step approach can provide in 
certain situations.
    Comment: One commenter wrote that DHS should also encourage the 
U.S. Coast Guard to include recognition of designated Design-Build 
Professionals in the selection procedures in the acquisition process.
    Response: DHS agrees. The Coast Guard will include this 
recommendation in the guidance that it prepares on the one-step turnkey 
design build guidelines.

III. Regulatory Analyses

A. Executive Order 12866 Assessment

    DHS has determined that this final rule is neither a major rule 
under 5 U.S.C. 804 nor a significant regulatory action under Executive 
Order 12866, Regulatory Planning and Review. It therefore does not 
require an assessment of potential costs and benefits under section 
6(a)(3) of that Order, and the Office of Management and Budget has not 
reviewed it.

B. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), the term 
''small entities'' comprises small businesses, not-for-profit 
organizations that are independently owned and operated and are not 
dominant in their fields, and governmental jurisdictions with 
populations of less than 50,000. This final 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.

List of Subjects in 48 CFR Part 3036

    Government procurement.

0
Therefore, DHS amends 48 CFR part 3036 as set forth below:

PART 3036--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

0
1. The authority citation for 48 CFR part 3036 continues to read as 
follows:

     Authority: 41 U.S.C. 418(a) and (b).


0
2. Add subpart 3036.1 to read as follows:
Subpart 3036.1--General
Sec.
3036.104 Policy.
3036.104-90 Authority for one-step turn-key design-build contracting 
for the United States Coast Guard (USCG).

Subpart 3036.1--General


3036.104  Policy.


3036.104-90  Authority for one-step turn-key design-build contracting 
for the United States Coast Guard (USCG).

    The Head of the Contracting Activity (HCA) of the U.S. Coast Guard 
may use one-step turn-key selection procedures to enter into fixed-
price design-build contracts in accordance with 14 U.S.C. 677.

Thomas W. Essig,
Chief Procurement Officer, Department of Homeland Security.
[FR Doc. E8-9900 Filed 5-5-08; 8:45 am]
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