[Federal Register Volume 73, Number 114 (Thursday, June 12, 2008)]
[Proposed Rules]
[Pages 33374-33381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-13358]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 12, 22, and 52

[FAR Case 2007-013; Docket 2008-0001; Sequence 1]
RIN 9000-AK91


Federal Acquisition Regulation; FAR Case 2007-013, Employment 
Eligibility Verification

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

ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) to require certain contractors and 
subcontractors to use the U.S. Citizenship and Immigration Services' 
(USCIS) E-Verify system as the means of verifying that certain of their 
employees are eligible to work in the United States.

DATES: Interested parties should submit written comments to the FAR 
Secretariat on or before August 11, 2008 to be considered in the 
formulation of a final rule.

ADDRESSES: Submit comments identified by FAR case 2007-013 by any of 
the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by inputting ``FAR Case 
2007-013'' under the heading ``Comment or Submission''. Select the link 
``Send a Comment or Submission'' that corresponds with FAR Case 2007-
013. Follow the instructions provided to complete the ``Public Comment 
and Submission Form''. Please include your name, company name (if any), 
and ``FAR Case 2007-013'' on your attached document.

[[Page 33375]]

     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (VPR), 1800 F Street, NW., Room 4035, ATTN: Laurieann 
Duarte, Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR case 2007-
013 in all correspondence related to this case. All comments received 
will be posted without change to http://www.regulations.gov, including 
any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT: Meredith Murphy, Procurement Analyst, 
at (202) 208-6925 for clarification of content. For information 
pertaining to status or publication schedules, contact the FAR 
Secretariat at (202) 501-4755. Please cite FAR case 2007-013.

SUPPLEMENTARY INFORMATION: 

A. Background

    This rule proposes to amend the Federal Acquisition Regulation 
(FAR) to require that certain contracts contain a clause requiring that 
the contractor and certain subcontractors utilize the E-Verify System 
to verify employment eligibility of all newly hired employees of the 
contractor or subcontractor and all employees directly engaged in the 
performance of work in the United States under those contracts.
    The Government awards numerous contracts each fiscal year worth 
hundreds of billions of dollars. At the same time, one of the 
Government's primary responsibilities is the enforcement of the 
immigration laws of the United States. It is appropriate to ensure that 
Government contractors and subcontractors abide by the immigration laws 
that the Government enforces. In 1986, Congress amended the Immigration 
and Nationality Act (INA) to prohibit the hiring or continued 
employment of aliens, knowing that the aliens are unauthorized to work 
in the United States. Public Law 99-603, Title I, Sec.  101(a)(1), 100 
Stat. 3360, codified at 8 U.S.C. 1324a(a). Congress also established an 
employment verification system in 8 U.S.C. 1324a(b), and directed the 
President to evaluate that system's security and efficacy and implement 
necessary changes, subject to congressional oversight. 8 U.S.C. 
1324a(d). To assist in the development of such changes and additions to 
the system, Congress also authorized the President to establish 
demonstration projects designed to strengthen the employment 
verification system. 8 U.S.C. 1324a(d)(4). In 1992 the Immigration and 
Naturalization Service (INS) launched the Telephone Verification System 
(TVS) pilot program--an early form of what is now the E-Verify system--
as a demonstration project. 69 Interpreter Releases 702 (June 8, 1992); 
515 (Apr. 27, 1992). In 1996, Congress established the Basic Pilot 
program (now E-Verify) as part of the Illegal Immigration Reform and 
Immigrant Responsibility Act (IIRIRA). Public Law No. 104-208, 
Sec. Sec.  401-405, 110 Stat. 3009-655--3009-665 (1996) (8 U.S.C. 1324a 
note). The Basic Pilot statute instructs all departments of the 
Executive Branch to participate in E-Verify as part of their hiring 
process. IIRIRA Sec.  402(e)(1).
    This rule is authorized by an exercise of the President's authority 
under the Federal Property and Administrative Services Act of 1949 
(FPASA), to ``prescribe policies and directives'' governing procurement 
policy ``that the President considers necessary to carry out'' that Act 
and that are ``consistent'' with the Act's aim of ``provid[ing] the 
Federal Government with an economical and efficient'' procurement 
system. 40 U.S.C. 121, 101. The ``economy and efficiency'' benefits to 
Federal contracting that flow from ensuring that the Federal Government 
does not do business with contractors that hire or employ unauthorized 
aliens were first set forth in Executive Order 12989 (see 61 FR 6091, 
February 15, 1996). That order, which pre-dated Congress's creation of 
the Basic Pilot program (now E-Verify), noted that the presence of 
unauthorized aliens on a contractor's workforce rendered that 
contractor's workforce less stable and reliable than the workforces of 
contractors who do not employ unauthorized aliens. The executive order 
entitled ``Economy and Efficiency in Government Procurement Through 
Compliance with Certain Immigration and Nationality Act Provisions and 
Use of an Electronic Employment Eligibility Verification System'' of 
June 6, 2008, amends Executive Order 12989 and, together with the 
Designation by the Secretary of Homeland Security, directs Federal 
agencies, in light of the recent advances in the reliability, 
convenience, and accuracy of the E-Verify system, to use this powerful 
tool to avoid both the general inefficiencies that flow from 
contracting with employers burdened with unstable workforces as well as 
the direct costs of disruptions to Federal contract performance that 
result when unauthorized aliens are found in, and must be subsequently 
removed from, the Federal contract workforce.
    This proposed rule inserts a clause into Federal contracts 
committing Government contractors to use the United States Citizenship 
and Immigration Service (USCIS) E-Verify System to verify that all of 
the contractors' new hires, and all employees (existing and new) 
directly engaged in the performance of work under Federal contracts, 
are authorized to work in the United States. The E-Verify System is 
expected to help contractors avoid employment of unauthorized aliens 
and will assist Federal agencies to avoid contracting with companies 
that knowingly hire unauthorized aliens. This enhances the Government's 
ability to protect national security and ensure compliance with the 
nation's immigration laws--core aspects of the Government's mission 
that otherwise could be compromised by the presence of unauthorized 
aliens in Government facilities or by the employment of unauthorized 
aliens in the Government's supply chain. It also protects U.S. workers 
by creating another disincentive for companies to hire unauthorized 
aliens who may command lower wages.
    In summary, the proposed rule--
    1. Requires insertion of a clause into Government prime contracts 
that include work in the United States, other than those that do not 
exceed the micro-purchase threshold (generally $3,000), or that are for 
commercially available off-the-shelf (COTS) items or items that would 
be COTS items but for minor modifications (the rule adopts the 
statutory definition of COTS).
    2. Requires inclusion of the clause in subcontracts over $3,000 for 
services or for construction.
    3. Requires a contractor or subcontractor to enroll in the E-Verify 
program within 30 days of contract award, begin verifying the 
employment eligibility of all new employees of the contractor or 
subcontractor that are hired after enrollment in E-Verify, and continue 
to use the E-Verify program for the life of the contract.
    4. Requires contractors and subcontractors to use E-Verify to 
confirm the employment eligibility of all existing employees who are 
directly engaged in the performance of work under the covered contract.
    5. Applies to solicitations issued and contracts awarded after the 
effective date of the final rule in accordance with FAR 1.108(d). Under 
the final rule, Departments and agencies should, in accordance with FAR 
1.108(d)(3), amend existing indefinite-delivery/indefinite-quantity 
contracts to include the clause for future orders if the remaining 
period of performance extends at least six months after the effective 
date of the final rule and the amount of work or number of orders

[[Page 33376]]

expected under the remaining performance period is substantial.
    6. In exceptional circumstances, allows a head of the contracting 
activity to waive the requirement to include the clause. This authority 
is not delegable.
    The proposed rule applies only to employment in the United States 
as defined at section 101(a)(38) of the Immigration and Nationality Act 
(INA), 8 U.S.C. 1101 et seq. ``United States'' includes the fifty 
States and the District of Columbia, Guam, Puerto Rico, and the United 
States Virgin Islands. It does not currently include the United States 
territories of American Samoa and the Commonwealth of the Northern 
Mariana Islands. Under the Consolidated Natural Resources Act of 2008, 
Federal immigration law will begin to apply--through a phased process--
to the Commonwealth of the Northern Mariana Islands starting in mid-
2009. At this time, however, these two territories have their own 
immigration laws and are not covered by the employment verification 
requirements of INA section 274A, 8 U.S.C. 1324a (see Form I-9). The 
proposed rule also does not apply to any employment outside the United 
States, including work on United States embassies or military bases in 
foreign countries. Finally, the proposed rule does not apply to any 
employee hired prior to November 6, 1986, as these employees are not 
subject to employment verification under INA section 274A, 8 U.S.C. 
1324a.
    The Councils are attempting to balance competing needs in drafting 
this rule. It was written to apply the requirements in a manner to 
ensure effective compliance by the contractor community, but it exempts 
certain prime contracts and subcontracts when the cost of compliance 
would likely outweigh the benefits, e.g., COTS items. Comments are 
solicited with regard to how well this balance has been achieved.
    The E-Verify program is an internet-based system operated by USCIS, 
in partnership with the Social Security Administration (SSA), and 
requirements for obtaining access to E-Verify and procedures for the 
use of E-Verify are established by the Department of Homeland Security 
(DHS), USCIS's parent agency. Before an employer can participate in the 
E-Verify program, the employer must enter into a Memorandum of 
Understanding (MOU) with DHS and SSA. This MOU requires employers to 
agree to abide by current legal hiring procedures and to ensure that no 
employee will be unfairly discriminated against as a result of the E-
Verify program. Violation of the terms of this agreement by the 
employer is grounds for immediate termination of its participation in 
the program. Employers participating in E-Verify must still complete an 
Employment Eligibility Verification Form (Form I-9) for each newly 
hired employee, as required under current law. Following completion of 
the Form I-9, the employer must enter the worker's information into the 
E-Verify website, and that information is then checked against 
information contained in SSA and USCIS databases.
    SSA first verifies that the name, SSN, and date of birth are 
correct and, if the employee has stated that he or she is a U.S. 
citizen, confirms whether this is in fact the case through its 
databases. If the employee is a U.S. citizen, SSA establishes that the 
employee is employment-eligible. USCIS also verifies through database 
checks that any non-U.S. citizen employee is in an employment-
authorized immigration status.
    If the information provided by the worker matches the information 
in the SSA and USCIS records, no further action will generally be 
required, and the worker may continue employment. E-Verify procedures 
require only that the employer record on the I-9 form the verification 
ID number and result obtained from the E-Verify query, or print a copy 
of the transaction record and retain it with the I-9 form.
    If SSA is unable to verify information presented by the worker, the 
employer will receive an ``SSA Tentative Nonconfirmation'' notice. 
Similarly, if USCIS is unable to verify information presented by the 
worker, the employer will receive a ``DHS Tentative Nonconfirmation'' 
notice. Employers can receive a tentative nonconfirmation notice for a 
variety of reasons, including inaccurate entry of information into the 
E-Verify Web site, name changes, or changes in immigration status that 
are not reflected in the database. If the individual's information does 
not match the SSA or USCIS records, the employer must provide the 
employee with a written notice of the fact, called a ``Notice to 
Employee of Tentative Nonconfirmation.'' The worker must then indicate 
on the notice whether he or she contests or does not contest the 
tentative nonconfirmation, and both the worker and the employer must 
sign the notice.
    If the worker chooses to contest the tentative nonconfirmation, the 
employer must print a second notice, called a ``Referral Letter,'' 
which contains information about resolving the tentative 
nonconfirmation, as well as the contact information for SSA or USCIS, 
depending on which agency was the source of the tentative 
nonconfirmation. The worker then has eight Federal Government work days 
to visit an SSA office or call USCIS to try to resolve the discrepancy. 
Under the E-Verify MOU, if the worker contests the tentative 
nonconfirmation, the employer is prohibited from terminating or 
otherwise taking adverse action against the worker while he or she 
awaits a final resolution from the Federal Government agency. If the 
worker fails to contest the tentative nonconfirmation, or if SSA or 
USCIS was unable to resolve the discrepancy the employer will receive a 
notice of final nonconfirmation and the employee may be terminated.
    Participation in E-Verify does not exempt the employer from the 
responsibility to complete, retain, and make available for inspection 
Forms I-9 that relate to its employees, or from other requirements of 
applicable regulations or laws; however, the following modified 
requirements apply by reason of the employer's participation in E-
Verify: (1) Identity documents used for verification purposes must have 
photos; (2) if an employer obtains confirmation of the identity and 
employment eligibility of an individual in compliance with the terms 
and conditions of E-Verify, a rebuttable presumption is established 
that the employer has not violated section 274A(a)(1)(A) of the 
Immigration and Nationality Act (INA) with respect to the hiring of the 
individual; (3) the employer must notify DHS if it continues to employ 
any employee after receiving a final nonconfirmation, and is subject to 
a civil money penalty between $500 and $1,000 for each failure to 
notify DHS of continued employment following a final nonconfirmation; 
(4) if an employer continues to employ an employee after receiving a 
final nonconfirmation and that employee is subsequently found to be an 
unauthorized alien, the employer is subject to a rebuttable presumption 
that it has knowingly employed an unauthorized alien in violation of 
section 274A(a); and (5) no person or entity participating in E-Verify 
is civilly or criminally liable under any law for any action taken in 
good faith based on information provided through the confirmation 
system.
    Further information on registration for and use of E-Verify can be 
obtained via the internet at http://www.dhs.gov/E-Verify.
    This proposed rule differs in one significant respect from the 
requirements generally applicable to employers participating in E-
Verify; that is, current employees of Federal contractors that are 
assigned to work in

[[Page 33377]]

the United States on a covered Federal contract, as well as the 
contractor's new hires in the United States, must be verified under 
this rule. In the initial contract start-up phase, employees assigned 
to the contract must be verified within 30 days; thereafter, the 
proposed rule requires newly hired and newly assigned employees to be 
verified within 3 days. Requiring employment eligibility confirmation 
of all workers assigned to a new Government contract is mandated by the 
June 6, 2008, Executive Order amending Executive Order 12989, is most 
consistent with the Federal Government's own obligation to use E-Verify 
when hiring Federal employees, and will most effectively ensure that 
the Federal Government does not indirectly exploit an illegal labor 
force.
    USCIS is in the process of revising its MOU, program manual, 
training materials, Web site, and other E-Verify System materials to 
reflect the duties that Federal contractors will take on when they sign 
a contract containing the clause promulgated by this proposed rule. 
Those E-Verify System accommodations will make this proposed FAR 
amendment and the E-Verify System consistent for Federal contractors, 
but will not apply to E-Verify users who are not required to comply 
with the contract clause promulgated by this rule. Federal contractors' 
compliance with that revised MOU will be a performance requirement 
under the terms of the Federal contract or subcontract, and the 
contractor must consent to the release of information relating to 
compliance with its verification responsibilities to contracting 
officers or other officials authorized to review the Employer's 
compliance with Federal contracting requirements. A revised MOU 
reflecting the program participation requirements for Federal 
contractors has been placed in the docket for this rulemaking and will 
be available online at http://www.regulations.gov.

B. Executive Order 12866 Regulatory Planning and Review

    This is a significant regulatory action and, therefore, was subject 
to review under section 6(b) of Executive Order 12866, Regulatory 
Planning and Review, dated September 30, 1993. This rule is a major 
rule under 5 U.S.C. 804.
    A Regulatory Impact Analysis that more thoroughly explains the 
assumptions used to estimate the cost of this proposed rule is 
available in the docket. For access to the docket to read background 
documents or comments received, go to http://www.regulations.gov. A 
summary of the cost and benefits of the proposed rule follows:

    In the initial fiscal year, the rule is expected to be effective 
(2009), we estimate that there will be approximately 168,324 
contractors and subcontractors that will be required to enroll in E-
Verify due to this rule and there will be an additional 3.8 million 
employees vetted through E-Verify. In the initial year, the cost of 
the proposed rule at 7% net present value is approximately $107.0 
million and, over the ten-year period of analysis (2009-2018), the 
cost of the proposed rule is approximately $550.3 million. In the 
initial year, the cost of the proposed rule at 3% net present value 
is approximately $111.2 million and, over the ten-year period of 
analysis (2009-2018), the cost of the proposed rule is $668.9 
million. Compliance costs from participating in the E-Verify program 
fall into the following general categories and Table 1 below 
provides a summary of the costs:
     Startup Costs--Employers must register to use the E-
verify system and sign a Memorandum of Understanding with USCIS and 
SSA. A very small number of employers may need to purchase a 
computer and internet connection for their hiring site if that 
hiring site does not already have internet access.
     Training--Employees that use the E-Verify system are 
required to take an on-line tutorial. While USCIS does not charge a 
fee for this training, employers will incur the opportunity cost of 
the time the employee spends for this training, as the employee's 
time could have been spent on other activities.
     Employee Verification--Employers will incur the 
opportunity cost of the time spent entering data into E-Verify and, 
if the employee receives a tentative nonconfirmation, employers 
would inform the employee and spend time closing out the case after 
resolution of the tentative nonconfirmation. In addition, the 
employer would incur lost productivity when an employee would need 
to be away from work to visit SSA to correct his/her information. We 
believe the employee would bear the cost of driving to SSA.
     Employee Replacement (Turnover) Cost--There may be a 
small percentage of workers who are authorized to work in the U.S. 
and receive a tentative nonconfirmation, but choose not to take the 
steps necessary to resolve the tentative nonconfirmation (despite 
the strong economic incentives to resolve the issue). To the extent 
that the accompanying E-Verify rulemaking results in the termination 
of a worker authorized to work in the U.S., those costs could be 
considered to be a cost of the rule. However, the termination and 
replacement costs of unauthorized workers are not counted as a 
direct cost of this rule since current immigration law prohibits 
employers from hiring or continuing to employ aliens whom they know 
are not authorized to work in the U.S. The termination and 
replacement of unauthorized employees will impose a burden on 
employers, but INA section 274A(a)(1), (2), 8 U.S.C. 1324a(a)(1), 
(2), expressly prohibits employers from hiring or continuing to 
employ an alien whom they know is not authorized to work in the 
United States. Accordingly, costs that result from employers' 
knowledge of their workers' illegal status are attributable to the 
Immigration and Nationality Act, not to the Federal Acquisition 
Regulation requiring Employment Eligibility Verification for certain 
federal contractors and subcontractors.
     Federal Government Cost--The Government will incur 
operating costs from each query that an employer executes and will 
also incur costs from resolving tentative nonconfirmations.

                                                         Table 1.--10 Year Cost of Proposed Rule
                                                                   [7% Present value]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Employer                            Employee         Government
                                             ------------------------------------------------------------------------------------------
                    Year                                           Authorized                                                                 Total
                                                  Startup &         employee        Verification      Verification      Verification
                                               training costs   replacement cost        cost              cost              cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
2009........................................      $ 61,630,740       $18,980,895       $24,174,247          $677,403       $ 1,547,194      $107,010,479
2010........................................        28,859,143         9,840,872        12,533,427           351,208           802,161        52,386,811
2011........................................        28,319,789         9,656,932        12,299,159           344,643           787,167        51,407,690
2012........................................        27,790,462         9,476,427        12,069,267           338,201           772,454        50,446,811
2013........................................        28,040,474         9,299,296        11,843,671           331,880           758,015        50,273,336
2014........................................        27,516,328         9,125,478        11,622,295           325,676           743,847        49,333,625
2015........................................        27,002,030         8,954,912        11,405,060           319,589           729,944        48,411,535
2016........................................        26,497,248         8,787,531        11,191,882           313,615           716,300        47,506,576
2017........................................        26,589,062         8,623,278        10,982,689           307,753           702,911        47,205,693

[[Page 33378]]

 
2018........................................        26,092,101         8,462,096        10,777,406           302,001           689,773        46,323,377
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................       308,337,378       101,207,717       128,899,103         3,611,970         8,249,766       550,305,932
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Because illegal aliens are at risk of being apprehended in 
immigration enforcement actions, contractors who hire illegal aliens 
will necessarily have a more unstable workforce than contractors who 
do not hire unauthorized workers. Given the vulnerabilities in the 
I-9 system, many employers that do not knowingly employ illegal 
aliens nevertheless have unauthorized workers, undetected, on their 
workforce.
    This rule will promote economy and efficiency in Government 
procurement. Stability and dependability are important elements of 
economy and efficiency. A contractor whose workforce is less stable 
will be less likely to produce goods and services economically and 
efficiently than a contractor whose workforce is more stable. 
Because of the Executive Branch's obligation to enforce the 
immigration laws, including the detection and removal of illegal 
aliens identified through vigorous worksite enforcement, contractors 
that employ illegal aliens cannot rely on the continuing 
availability and service of those illegal workers, and such 
contractors inevitably will have a less stable and less dependable 
workforce than contractors that do not employ such persons. Where a 
contractor assigns illegal aliens to work on Federal contracts, the 
enforcement of Federal immigration laws imposes a direct risk of 
disruption, delay, and increased expense in Federal contracting. 
Such contractors are less dependable procurement sources, even if 
they do not knowingly hire or knowingly continue to employ 
unauthorized workers.
    Contractors that use E-Verify to confirm the employment 
eligibility of their workforce are much less likely to face 
immigration enforcement actions, and are generally more efficient 
and dependable procurement sources than contractors that do not use 
that system to verify the work eligibility of their workforce. 
Rigorous employment verification through E-Verify will also help 
contractors to confirm the identity of the persons working on 
Federal contracts, enhancing national security at less expense to 
the Government than it would cost for contractors to obtain more 
rigorous security clearances. This is likely to be particularly 
beneficial where contractors operate at sensitive national 
infrastructure sites.

B. Regulatory Flexibility Act

    The Councils expect this rule to impact nearly every small entity 
in the Federal contractor base. However, the direct cost this rule 
imposes does not appear to have a significant economic impact on a 
substantial number of small entities, within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. An Initial Regulatory 
Flexibility Analysis has been prepared and the results of the analysis 
show that the direct cost of this rule on an average cost per 
contractor basis does not appear to rise to the level of being 
economically significant; however, the Councils request comments on 
this finding. The Councils expect this rule to carry certain benefits 
to employers in that it provides an economical, Web-based method for 
performing verification of employment eligibility of employees, 
improving the reliability of the employment verification procedures 
employers are already required to perform. Federal contractors' 
participation in E-Verify is also expected to reduce the likelihood 
that contractors will discover long after the fact that they have hired 
unauthorized aliens, thereby sparing contractors the cost of 
terminating and replacing employees not authorized to work under 
Federal immigration law after resources have been expended on the 
training of those employees. An Initial Regulatory Flexibility Analysis 
has been prepared for public comment and is summarized as follows:

    The June 6, 2008 Executive Order, amending Executive Order 
12989, 61 FR 6091 (February 15, 1996), prohibits Federal agencies 
from contracting with companies that knowingly hire employees not 
eligible to work in the United States and instructs Federal agencies 
to contract with companies that agree to use an electronic 
employment verification system to confirm the employment eligibility 
of their workforce. The E-Verify System is the best available means 
for contractors and subcontractors to verify employment eligibility. 
Consequently, this proposed rule is being promulgated to institute a 
contractual requirement for contractors and subcontractors to 
utilize E-Verify as the means of verifying that all new hires of the 
contractor or subcontractor and all employees directly engaged in 
performing work under covered contracts or subcontracts are eligible 
to work in the United States. The proposed rule adds a new FAR 
Subpart 22.18 and a new clause.
    The prohibition against Federal agencies contracting with 
companies that knowingly hire employees not eligible to work in the 
United States has existed since 1996. Virtually all employers in the 
United States, including Federal Government contractors and 
subcontractors, are prohibited from hiring an individual without 
verifying his or her identity and authorization to work and from 
continuing to employ an alien whom they know is not authorized to 
work in the United States (section 274A(a) of the Immigration and 
Nationality Act of 1952, as amended (INA), 8 U.S.C. 1324a; 8 CFR 
part 274A). Many aliens, including lawful permanent residents, 
refugees, asylees, and temporary workers petitioned by a U.S. 
employer, are authorized to work in the United States (see 8 CFR 
274a.12, listing classes of work-authorized aliens).
    The new contractual requirement to use the E-Verify System will 
enhance the Government's ability to protect national security and 
ensure compliance with the nation's immigration laws--core aspects 
of the Government's mission that otherwise could be compromised by 
the presence of unauthorized aliens in Government facilities or by 
the employment of unauthorized aliens in the Government's supply 
chain.
    This rule will impact nearly every small entity in the Federal 
contractor base. Major exceptions are contractors providing 
commercially available off-the-shelf (COTS) items and COTS items 
with only minor modifications and subcontractors that provide 
supplies, not services or construction. In Fiscal Year 2006, there 
were over 100,000 small businesses that received direct Federal 
contracts. While there are no reliable numbers for subcontracts 
awarded to small businesses, the Dynamic Small Business database of 
the Central Contractor Registration--a database of basic business 
information for contractors that seek to do business with the 
Federal Government--gives a number of 324,250 small business 
profiles that are registered. Assuming that 50% of these small 
businesses contract with the Federal Government at either the prime 
or subcontract level, then that number is 162,125 small businesses.
    We have placed in the public docket a detailed Regulatory Impact 
Analysis of the compliance requirements of this rule. Generally, 
employers will incur opportunity cost of the time expenses for the 
time their employees will spend complying with the requirements of 
the regulation. Employees will need to be trained in order to be 
able to operate the E-Verify system, as well as spend time on 
processing employee verifications. Employers will incur start-up 
costs from enrolling in the E-Verify program. We believe a small 
number of employers may need to

[[Page 33379]]

purchase a computer and Internet connection for their hiring site. 
Certain employee replacement (turnover) costs may also be incurred 
due to this regulation.
    In order to further inform our understanding of the economic 
impact of this rule on small entities, we considered hypothetical 
contractors with 10, 50, 100, and 500 employees and estimated the 
economic impact of the rule on those four sizes of entities in their 
initial year of enrollment. The initial year a contractor enrolls in 
E-Verify is expected to be the year with the highest compliance 
cost, as the contractor is incurring both the start-up costs of 
enrolling in E-Verify as well as the costs of vetting employees 
through the E-Verify system.
    We estimate the average direct cost of this rule to a contractor 
with 10 employees to be $419 in the initial year; for a contractor 
with 50 employees, we estimate the average direct cost of 
participating in E-Verify to be $1,168 in the initial year; for a 
contractor with 100 employees we estimate an initial year impact of 
$2,102; while a contractor with 500 employees is expected to have an 
initial year impact of $8,964. This level of direct cost burden is 
well under 1% of the expected annual revenue of these four sizes of 
entities and does not appear to represent an economically 
significant impact on an average direct cost per contractor basis. 
To the extent that some small entities incur direct costs that are 
higher than the average estimated costs, those employers may 
reasonably be expected to face a significant economic impact.
    As discussed previously, we do not consider the cost of 
complying with preexisting immigration statutes to be a direct cost 
of this rulemaking. Thus, while some employers may find the costs 
incurred by replacing employees that are not authorized to work in 
the United States to be economically significant, those costs of 
complying with the Immigration and Nationality Act are not direct 
costs attributable to this rule.
    In addition, the requirement for entities (both large and small) 
to enroll in E-Verify only applies to contractors and subcontractors 
who choose to perform certain work for the Federal Government. If an 
entity does believe that participating in E-Verify would impose a 
significant economic impact on their operation, the entity would 
make a business decision whether the revenue generated by doing 
business with the Federal Government would provide a financial 
return sufficient to justify the cost of such participation in E-
Verify. Presumably, entities which do not receive the desired return 
on revenue to justify the expense of participating in E-Verify would 
choose not to be a Federal contractor or subcontractor.
    The Councils seek further comment on the actual costs or 
expenditures, if any, of registering for and using the E-Verify 
System and the extent to which these costs may differ or vary for 
small entities.
    The Councils are unaware of any duplicative, overlapping, or 
conflicting Federal rules. There are current requirements for all 
employers, not just Federal contractors and subcontractors, to 
verify the employment eligibility of their newly hired employees. 
These requirements have existed since 1986. Arguably related rules 
include DHS's ``No-Match'' rule, which provides guidance to 
employers on how best to respond to the Social Security 
Administration's (SSA) no-match letters, through which employers are 
alerted annually about their employees whose names and Social 
Security numbers submitted on tax forms do not match up to the 
information in the SSA's database. Although this ``No-Match'' rule 
concerns the SSA's letters generated from one of the data sources 
used by the E-Verify system, the ``No-Match'' rule is not associated 
with use of the E-Verify System. The two rules interact insofar as 
use of E-Verify--and the resulting strengthening of Federal 
contractors' employment verification processes--is expected to 
reduce the incidence of SSA ``No-Matches'' in the Federal contract 
workforce resulting from the employment of unauthorized alien 
workers. But the ``No-Match'' rule is designed to assist employers 
to ensure that their entire existing workforce remains work-
authorized, while this proposed amendment to the Federal Acquisition 
Regulation is designed to ensure that unauthorized aliens are not 
brought into the Federal Government's contractor workforce.
    The Councils considered the following alternatives in order to 
minimize the impact on small business concerns:
     Whether to require E-Verify participation as a preaward 
eligibility requirement or treat it as a postaward contract 
performance requirement. The proposed rule is distinct from the 
existing E-Verify program, in that it would require E-Verify queries 
to be performed on certain existing employees of a contractor, and 
the Councils believe that the obligations created by the rule should 
be codified as a post-award contract performance requirement.
     Whether the use of E-Verify should be required for 
existing employees of the contractor that are assigned to work under 
the Government contract, or should be limited only to the new hires 
of the contractor. The Councils decided that requiring employment 
eligibility confirmation of all workers assigned to a new Government 
contract was most consistent with the Federal Government's own 
obligation to use E-Verify when hiring Federal employees, and would 
most effectively ensure that the Federal Government does not 
indirectly exploit an illegal labor force.
     Whether to require contractors to use E-Verify only for 
new hires that would be assigned to work under a Government 
contract, and exclude all other new hires of the contractor from the 
E-Verify requirement. The Councils decided that requiring 
contractors to use the E-Verify program as part of their standard 
hiring practices would simplify employment verification, and better 
conforms with a principal goal of the rule to ensure that the 
Federal Government does business with companies that do not employ 
unauthorized aliens.
     Whether the use of E-Verify should be required for all 
prime contracts or only for those contracts that do not call for 
COTS items or items that would be COTS items but for minor 
modifications, as defined at FAR Part 2, containing the definition 
of a commercial item. Because COTS suppliers by definition do not 
specialize in serving the Federal Government, and because the 
Government might lose access to COTS suppliers if they determine the 
cost of complying with the rule outweighs their gains from 
Government business, the Councils decided not to require the use of 
E-Verify for COTS items and items that would be COTS but for minor 
modifications.
     Whether the requirements of the rule should flow down 
to all subcontracts or should be limited to subcontracts for 
services or construction. The Councils determined to apply the 
proposed rule only to subcontracts for commercial or noncommercial 
services, including construction. It does not apply to subcontracts 
for material or to subcontracts less than $3,000.

    The FAR Secretariat has submitted a copy of the IRFA to the Chief 
Counsel for Advocacy of the Small Business Administration. A copy of 
the IRFA may be obtained from the FAR Secretariat. The Councils will 
consider comments from small entities concerning the affected Subpart 
FAR 22.18 in accordance with 5 U.S.C. 610. Comments must be submitted 
separately and should cite 5 U.S.C 601, et seq. (FAR case 2007-013), in 
correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 104-13) applies because the 
proposed rule contains information collection requirements over and 
above the burden hours already approved for the E-Verify System. The 
OMB control number for the currently approved Information Collection 
Request is 1615-0092. The Privacy Impact Assessments and the System of 
Records Notice for the E-Verify program may be found at http://www.dhs.gov/xinfoshare/publications/editorial_0511.shtm#4 and at 73 FR 
10793. Although the E-Verify System has a currently approved Paperwork 
Reduction Act clearance, we are seeking an additional approval for this 
proposed amendment to the FAR because the proposed FAR rule will 
increase the number of E-Verify users. The OMB control number for the 
currently approved Information Collection Request is 1615-0092. This 
additional burden is created by the requirement in this rule to verify 
employment eligibility of certain current employees in each 
contractor's existing workforce. Also included in the additional burden 
estimate is the number of employers and employees that would not have 
utilized E-Verify but for the issuance of this rule. Accordingly, the 
Councils will forward a request for approval of a new

[[Page 33380]]

information collection requirement concerning this burden to the Office 
of Management and Budget under 44 U.S.C. 3501, et seq. Public comments 
concerning this request will be invited through a subsequent Federal 
Register notice.
    Annual Reporting Burden: The number of Respondents estimated below 
is the average number of covered contractors and subcontractors per 
year for the first three years the rule is in effect. The number of 
total annual responses is the sum of the MOUs that must be signed by 
each employer, the number of employer registrations, the number of 
employees that undergo training, and the average number of E-Verify 
queries per year for the first three years the rule is in effect. 
Public reporting burden for this collection of information is estimated 
to average .40 hours per response, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    The annual reporting burden is estimated as follows:
    Respondents: 177,196.
    Responses per respondent: 21.05.
    Total annual responses: 3,729,406.
    Preparation hours per response: .40 hrs.
    Total response burden hours: 1,500,357.

D. Request for Comments Regarding Paperwork Burden

    Submit comments, including suggestions for reducing this burden, 
not later than August 11, 2008 to: FAR Desk Officer, OMB, Room 10102, 
NEOB, Washington, DC 20503, and a copy to the General Services 
Administration, FAR Secretariat (VPR), 1800 F Street, NW., Room 4035, 
Washington, DC 20405.
    Public comments are particularly invited on: Whether this 
collection of information is necessary for the proper performance of 
functions of the FAR and will have practical utility; whether the above 
estimate of the public burden of this collection of information is 
accurate and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which the burden of the collection of 
information can be minimized on those who are to respond, through the 
use of appropriate technological collection techniques or other forms 
of information technology.
    Requester may obtain a copy of the justification from the General 
Services Administration, FAR Secretariat (VR), Room 4035, Washington, 
DC 20405, telephone (202) 501-4755. Please cite OMB Control Number 
9000-XXXX in all correspondence.

List of Subjects in 48 CFR Parts 2, 12, 22 and 52

    Government procurement.

    Dated: June 10, 2008.
Al Matera,
Director, Office of Acquisition Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 2, 12, 
22, and 52 as set forth below:
    1. The authority citation for 48 CFR parts 2, 12, 22, and 52 
continues to read as follows:

    Authority: 40 U.S.C. 121(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 in paragraph (b)(2), in the definition 
``United States,'' by redesignating paragraphs (5) through 8 as 
paragraphs (6) through 9, respectively, and adding a new paragraph (5) 
to read as follows:


2.101  Definitions.

* * * * *
    (b) * * *
    (2) * * *
* * * * *
    United States, * * *
* * * * *
    (5) For use in Subpart 22.18, see the definition at 22.1801.
* * * * *

PART 12--ACQUISITION OF COMMERCIAL ITEMS

    3. Amend section 12.301 by adding paragraph (d)(3) to read as 
follows:


12.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (d) * * *
    (3) Insert the clause at 52.222-XX, Employment Eligibility 
Verification, as prescribed in 22.1803.
* * * * *
    4. Amend section 22.102-1 by removing from the end of paragraph (g) 
the word ``and''; removing the period from the end of paragraph (h) and 
adding ``; and'' in its place; and adding paragraph (i) to read as 
follows:

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS


22.102-1  Policy.

* * * * *
    (i) Eligibility for employment under United States immigration 
laws.
    5. Add subpart 22.18 to read as follows:

Subpart 22.18--Employment Eligibility Verification

Sec.
22.1800 Scope.
22.1801 Definitions.
22.1802 Policy.
22.1803 Contract clause.


22.1800  Scope.

    This subpart prescribes policies and procedures requiring 
contractors to utilize the United States Citizenship and Immigration 
Service's employment eligibility verification program (E-Verify) as the 
means for verifying employment eligibility of certain employees.


22.1801  Definitions.

    As used in this subpart--
    Assigned employee means an employee who was hired after November 6, 
1986, who is directly performing work, in the United States, under a 
contract that is required to include the clause prescribed at 22.1803.
    Commercially available off-the-shelf (COTS) item--
    (1) Means any item of supply that is--
    (i) A commercial item (as defined in paragraph (1) of the 
definition at FAR 2.101);
    (ii) Sold in substantial quantities in the commercial marketplace; 
and
    (iii) Offered to the Government, without modification, in the same 
form in which it is sold in the commercial marketplace; and
    (2) Does not include bulk cargo, as defined in section 3 of the 
Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural 
products and petroleum products.
    United States, as defined in 8 U.S.C. 1101(a)(38), means the 50 
States, the District of Columbia, Puerto Rico, Guam, and the U.S. 
Virgin Islands.


22.1802  Policy.

    (a) Statutes and executive orders require employers to abide by the 
immigration laws of the United States and to employ in the United 
States only individuals who are eligible to work in the United States. 
The E-Verify program provides an Internet-based means of verifying 
employment eligibility of workers employed in the United States, but is 
not a substitute for any other employment eligibility verification 
requirements.
    (b) Contracting officers shall include in contracts, as prescribed 
at 22.1803, a requirement for contractors to--

[[Page 33381]]

    (1)(i) Enroll in the E-Verify program within 30 calendar days of 
contract award, and use E-Verify within 30 calendar days thereafter to 
verify employment eligibility of their employees assigned to the 
contract at the time of enrollment in E-Verify; or
    (ii) If the contractor is already enrolled in E-Verify, use E-
Verify within 30 calendar days of contract award to verify employment 
eligibility of their employees assigned to the contract; and
    (2) Following this initial period, initiate verification of all new 
hires of the contractor and of all employees newly assigned to the 
contract within three business days of their date of hire or date of 
assignment to the contract.
    (c) Subcontractor flowdown. The contracting officer shall require 
contractors to flow down the requirement to use E-Verify to 
subcontracts that--
    (1) Are for commercial or noncommercial services or construction;
    (2) Exceed $3,000; and
    (3) Include work performed in the United States.
    (d) In exceptional cases, the head of the contracting activity may 
waive the requirement to insert the clause at 52.222-XX, Employment 
Eligibility Verification, for a contract or subcontract or a class of 
contracts or subcontracts. This waiver authority may not be delegated.


22.1803  Contract clause.

    Insert the clause at 52.222-XX, Employment Eligibility 
Verification, in all solicitations and contracts, except those that--
    (a) Are for commercially available off-the-shelf items or items 
that would be COTS items, but for minor modifications (as defined at 
paragraph (3)(ii) of the definition of ``commercial item'' at FAR 
2.101);
    (b) Are under the micro-purchase threshold; or
    (c) Do not include any work that will be performed in the United 
States.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Add section 52.222-XX to read as follows:


52.222-XX  Employment Eligibility Verification.

    As prescribed in 22.1803 and 12.301(d)(3), insert the following 
clause:

EMPLOYMENT ELIGIBILITY VERIFICATION ([DATE])

    (a) Definitions. As used in this clause--
    (1) Assigned employee means an employee who was hired after 
November 6, 1986, who is directly performing work, in the United 
States, under a contract that is required to include the clause 
prescribed at 22.1803.
    (2) United States, as defined in 8 U.S.C. 1101(a)(38), means the 
50 States, the District of Columbia, Puerto Rico, Guam, and the U.S. 
Virgin Islands.
    (b) The Contractor shall--
    (1) Enroll in the E-Verify program within 30 calendar days of 
contract award;
    (2) Use E-Verify to verify the employment eligibility of all 
assigned employees; and
    (3) Comply, for the period of performance of this contract, with 
the requirements of the E-Verify program, including, but not limited 
to, verifying the employment eligibility of all new employees of the 
Contractor.
    (c) Information on registration for and use of the E-Verify 
program can be obtained via the Internet at the Department of 
Homeland Security Web site: http://www.dhs.gov/E-Verify.
    (d) Initiation of verification. The Contractor shall initiate a 
verification query--
    (1) Within 30 calendar days of its enrollment in the E-Verify 
program, for each assigned employee who is assigned to the contract 
at the time of enrollment in the E-Verify program;
    (2) Within three business days of the date of assignment to this 
contract, or within 30 days of the award of the contract to which 
the employee is assigned, whichever is later, for each assigned 
employee who is assigned to the contract after the date of 
enrollment in the E-Verify program; and
    (3) Within three business days of the date of employment, for 
all employees of the Contractor hired after the date of enrollment 
in the E-Verify program.
    (e) Individuals previously verified. The Contractor is not 
required by this clause to perform additional employment 
verification using E-Verify for any employee whose employment 
eligibility was previously verified by the Contractor through the E-
Verify program.
    (f) Subcontractor flowdown. The Contractor shall flow down the 
requirements of this clause, including this paragraph (f) 
(appropriately modified for identification of the parties), to each 
subcontract that--
    (1) Is for commercial or noncommercial services or construction;
    (2) Exceeds $3,000; and
    (3) Includes work performed in the United States.


(End of clause)

[FR Doc. E8-13358 Filed 6-11-08; 8:45 am]
BILLING CODE 6820-EP-S