[Federal Register Volume 74, Number 153 (Tuesday, August 11, 2009)]
[Rules and Regulations]
[Pages 40463-40466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19165]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 4, 15, 25, and 52

[FAC 2005-36; FAR Case 2008-004; Item IV; Docket 2008-0001; Sequence 
21]
RIN 9000-AL01


Federal Acquisition Regulation; FAR Case 2008-004, Prohibition on 
Restricted Business Operations in Sudan and Imports from Burma

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 implement Section 
6 of the Sudan Accountability and Divestment Act of 2007. Section 6 
requires certification in each contract entered into by an Executive 
Agency that the contractor does not conduct certain business operations 
in Sudan. In addition, the Councils added Burma to the list of 
countries from which most imports are prohibited. This action was taken 
in accordance with Executive Order (E.O.) 13310, Blocking Property of 
the Government of Burma and Prohibiting Certain Transactions, and E.O. 
13448, Blocking the Property and Prohibiting Certain Transactions 
Related to Burma.

DATES: Effective Date: August 11, 2009.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Ms. Meredith Murphy, Procurement Analyst, at (202) 208-6925. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-36, FAR 
case 2008-004.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule amends the Federal Acquisition Regulation (FAR) to 
implement Section 6 of the Sudan Accountability and Divestment Act of 
2007, which was signed on December 31, 2007.
    DoD, GSA, and NASA published an interim rule in the Federal 
Register at 73 FR 33636 on June 12, 2008. The public comment period 
ended August 11, 2008.
    This rule amends the FAR to implement Section 6 of the Sudan 
Accountability and Divestment Act of 2007 (the Act), which requires 
certification in each contract entered into by an executive agency that 
the contractor does not conduct certain business operations in Sudan. 
In addition, the Councils added Burma to the list of countries from 
which most imports are prohibited.

B. Discussion and Analysis.

    The FAR Secretariat received five (5) responses to the interim 
rule. These responses included a total of 16 comments on 11 issues. A 
sixth response was simply a copy of the statute and was not counted as 
a comment. All of the responses concerned the implementation of the 
Act; there were no comments on the addition of Burma to the list of 
prohibited countries. Each issue is discussed in the following 
sections.
    No public comments were received regarding the portion of the 
interim rule addressing Burma. Therefore, that part of the interim rule 
is unchanged (see the Federal Register at 73 FR 33636 dated June 12, 
2008).
    1. Delete the definition of ``person'' and other issues with 
definitions.
    Comment: a. Two respondents recommended that the final rule delete 
the definition of ``person.'' The respondents point out that Section 2 
of the Act, which defines the key terms in the Act, does not define 
``contractor'' but does define ``person.'' The term person, however, is 
used frequently in Section 3 of the Act, which addresses divestiture by 
State and local governments (not a subject of the FAR coverage), but it 
is not used at all in Section 6 of the Act, which the FAR is 
implementing. The respondents point out that, had the Congress intended 
``person'' and ``contractor'' to be synonymous, it should have defined 
them so, and one respondent points out portions of the legislative 
history that reinforce its conclusion that the congressional intent was 
to have a different meaning for each term.
    b. In addition, one respondent requested that the definition of 
``restricted business operations'' at FAR sections 25.702-1 and 52.225-
20 either delete the phrase ``as those terms are defined in the Sudan 
Accountability and Divestment Act of 2007 (Pub. L. 110-174)'' or 
replace ``defined in'' with the phrase ``described in Section 3(d) 
of''.
    c. Last, a respondent reminded the Councils that in the 
``definition of the

[[Page 40464]]

term `business operations' in Section 3(d) of the Act, the term means 
`engaging in commerce in any form in Sudan' (emphasis added).''
    Response: a. The Councils have deleted the definition of 
``person''. The definition of ``person'' was included at FAR 25.702-1, 
Definitions, and the clause at 52.225-20, as well, because Section 6 of 
the Act requires contractors to certify that they do not conduct 
business operations as described in Section 3(d) of the Act. This 
description of business operations that are restricted uses the term 
``person'', which is therefore used in the rule within the definition 
of ``restricted business operations''. A cross reference to the 
definition of ``person'' in the Act is included within the definition 
of ``restricted business operations,'' rather than including a separate 
definition of ``person'' in the rule. The rule does not use the term 
``person'' as synonymous with ``contractor'' or ``offeror''.
    b. The Councils note that, although the statute describes the 
business operations that are restricted and does not define the term 
``restricted business operations,'' the terms that are used within that 
definition of ``restricted business operations'' in the rule (``power 
production activities,'' ``mineral extraction activities,'' ``oil-
related activities,'' and ``military equipment'') are all defined in 
section 2 of the Act, which is entitled ``DEFINITIONS''.
    c. The Councils have not added ``in Sudan'' in the definition of 
``business operations''. The Councils defined the term ``restricted 
business operations'' to include any business operations in Sudan, 
which the Councils believe fully implements the intent of the statute. 
In addition, the other specific conditions regarding what types of 
business operations are restricted are addressed at FAR sections 
25.702-1, 52.212-3(a), and 52.225-20(a).
    2. Apply the certification requirement only to offerors that would 
be in privity of contract with the U.S. Government.
    Comment: a. Effectively, this recommendation is a logical outcome 
of the comment immediately above. Two respondents believed that, given 
the words the Congress chose, the way in which the law is structured, 
and the legislative history of the statute, it is clear that Congress 
intended the certification requirement to apply to the business 
operations of contractors themselves and not the business operations of 
other entities in their corporate families. One respondent quoted the 
report of the Senate Banking, Housing, and Urban Affairs Committee, in 
the section discussing divestment, not in the discussion of Section 6, 
says that ``(i)mplicit in this definition (of ``person'') is the 
requirement that parent companies to subsidiaries, or subsidiaries that 
share the same parent company, may be targeted for divestment as long 
as there is credible evidence linking their affiliates to business 
operations in key sectors of Sudan'' (emphasis added). In addition, the 
corporate entity that is submitting the proposal may not have any 
control over, or insight into, an affiliate or subsidiary of a shared 
corporate parent. In support of this position, another respondent 
states that ``(c)learly, only the offeror making the certification 
required under the interim regulation is the party that will be in 
privity of contract.''
    b. In addition, a respondent claimed that, because the statute used 
the term ``contractor'' rather than ``offeror,'' the certification 
should be restructured so that not every offeror has to certify and the 
certification will be required only of the successful offeror. This 
change, according to the respondent, will substantially reduce the 
scope of the certification in terms of the number of companies it 
impacts.
    Response: a. The Councils note that the plain words of the Act, 
Section 6, require each ``contractor,'' not each ``person,'' to 
certify, and only the definition of ``person'' includes the highly 
inclusive elements of affiliates, subsidiaries, and so forth. The 
interim rule has plainly implemented this, except that the term 
``contractor'' has been changed to ``offeror'' due to the timing of the 
certification. The certification requires the offeror to certify that 
``it'' does not conduct any restricted business operations in Sudan. 
This has been made even clearer by substituting ``the offeror'' for 
``it''.
    b. With regard to the timing of the certification requirement, 
however, the Councils do not agree that it should be delayed from 
proposal submission to a time immediately prior to award (when the 
Government knows which is the presumptive successful offeror) or should 
be limited solely to the successful offeror. The Government's 
solicitation and contract award process does not contemplate a second 
certification round wherein only the successful offeror is required to 
complete a certification(s). A failure to certify that it does not 
conduct restricted business operations in Sudan should remove an 
offeror from consideration for award. If an offeror is unable to 
certify, then it will not qualify for award, and the Government should 
not be expending time and money evaluating that offeror's proposal.
    3. Apply the certification requirement to affiliated companies.
    Comment: Two respondents were concerned that the interim rule does 
not explicitly extend to affiliated companies. One of these respondents 
notes that the report accompanying the Act specifically ``defines 
`persons' to include `parent companies to subsidiaries, or subsidiaries 
that share the same parent company' in addition to `successors, 
subunits, or subsidiaries''', and the respondent encourages the 
Councils to interpret the legislation to include affiliated companies 
in the contract certification requirement. Another respondent quotes 
the same language from the report in requesting that affiliates be 
included.
    Response: In response to the first comment above, the Councils 
attempted, in the interim rule, to stay as close as possible to the 
literal requirements in terms of the statute. Given that the statute 
does not use the term ``person,'' with its expansive definition, in 
Section 6 of the Act, the Councils do not agree that the certification 
requirement should be expanded to include affiliates. Please see also 
the response at Section 2 above.
    4. Don't apply the certification requirement to affiliated 
companies.
    Comment: A respondent stated that requiring companies to certify 
more broadly about the activities of their affiliates would require 
them to attest to factual matters typically beyond their reach. As a 
practical and legal matter, according to the respondent, offerors often 
do not have the right to access information about the activities of 
their affiliates, particularly of their parent or subsidiaries of that 
parent.
    Response: The Councils agree that it is unlikely that most 
prospective Government contractors would be able to access the 
information needed to certify to the activities of their affiliates, 
parents, or parent-company subsidiaries. Please see responses to 
Comments 2 and 3 above.
    5. Apply the requirement to all subcontractors.
     Comment: A respondent believed that the rule could be improved by 
extending the contract prohibition to all subcontractors of companies 
that receive Federal contracts. Another respondent, also, was concerned 
that the exclusion of subcontractors would result in the exclusion of a 
significant portion of entities seeking to carry out work for the U.S. 
Government.
    Response: In the Preamble to the interim rule, the Councils noted 
that the Act does not require flow down of the certification provision 
to subcontractors but only addresses contracts entered

[[Page 40465]]

into by executive agencies, i.e., prime contracts. The Councils do not 
think it appropriate to exceed the limits of the statute.
    6. Apply the certification requirement only to future contracts.
     Comment: The interim rule requested comments on whether the law 
should also be applied to existing contracts to ensure compliance with 
the overall intent of the law. Two respondents were against extending 
the certification requirement ``retroactively,'' and they noted that 
there is no indication in the Act's legislative history to indicate any 
such intention on the part of the Congress.
     Further, one respondent recommended that the certification not be 
required (1) under the annual Online Representations and Certifications 
(ORCA) update, (2) upon the exercise of an option or issuance of a task 
or delivery order under an existing contract, or (3) pursuant to the 
performance of warranty work or safety-related repair work for an 
otherwise completed project in Sudan.
     Response: The Councils have resisted applying new requirements to 
existing contracts, and the Councils do not recommend doing so now. 
This final rule will have normal effective date (prospective) language, 
as set forth in FAR 1.108(d).
     This rule does not require the new certification upon exercise of 
options or issuance of a task or delivery order.
     With regard to annual update of the Online Representations and 
Certifications (ORCA), that has no impact on an existing contract. 
Annual updates to ORCA are only applicable to future contracts.
     With regard to the third situation posed by the respondent above, 
this seems to be an extreme situation and should be treated by the 
contracting officer, if it occurs, under the FAR deviation process.
    7. Ensure that contract extensions are covered.
     Comment: A respondent was concerned that ``under existing 
practice, Federal contracts may be extended in some cases without being 
formally renewed and thus would not be subject to the contract 
prohibition rule.'' The respondent encouraged the Councils to ``address 
this potential loophole'' and ensure that contract extensions are 
covered by the certification requirement.
     Response: The Councils are unaware of any circumstances under 
which the FAR sanctions the informal extension of contracts.
    8. Require certification in ORCA and each individual offer.
     Comment: A respondent encouraged a final rule that requires 
certification in both the ``ORCA Application'' and each individual 
proposal.
     Response: The final rule does not change the interim rule's 
requirement to include the certification in each new procurement. In 
addition, the certification will be part of ORCA, and it will be 
considered in the contractor's annual ORCA certification. Annual 
updates to ORCA are only applicable to future contracts.
    9. Require contractors to certify that they will not engage in 
targeted business operations during contract performance.
     Comment: One respondent wanted the FAR to require companies that 
are awarded contract extensions to disclose any potential targeted 
business operations with Sudan and to explicitly require that companies 
certify they will not engage in targeted business operations for the 
duration of the contract.
     Response: The statute does not require that the certification 
apply to future (targeted) business operations or include a promise not 
to engage in restricted business operations in Sudan for the duration 
of the company's contract with the U.S. Government. Therefore, the 
Councils do not think that it would be appropriate to substitute their 
judgment for the language of the statute.
    10. Make certification into a check-the-box certification.
    Comment: A respondent recommended that the final rule change the 
certification to a check-the-box certification. The respondent said 
that, ``(g)iven that the certification requirement may only be 
incorporated by reference into a solicitation, the FAR could create a 
substantial risk to offerors'' because offerors that are unaware of the 
content of the certification provision may unknowingly, and falsely, 
certify compliance. The respondent argued, also, that an explicit, 
check-the-box certification requirement would eliminate a potential 
defense to a falsely certifying contractor that it did not realize it 
was certifying at all.
    Response: The respondent is incorrect in claiming that the 
certification may only be incorporated by reference. Incorporation by 
reference is the case for commercial items in the clause at 52.212-5; 
it is not the case for 52.225-20, Prohibition on Conducting Restricted 
Business Operation in Sudan--Certification, or 52.212-1, Instructions 
to Offerors--Commercial Items. In any case, a company signs and is 
responsible for complying with all requirements of the contract, 
whether a provision is reproduced in full or by reference.
    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 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 this rule will only 
impact an offeror that is conducting restricted business operations in 
Sudan and wants to do business with the U.S. Government because there 
are already numerous sanctions against dealing with Sudan (e.g., E.O.s 
13412, 13400, and 13067, and 31 CFR Part 538), the number of entities 
impacted will be minimal. No comments to the contrary were received 
from small entities in response to the interim rule.

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 approval of the Office of Management and Budget under 44 U.S.C. 
Chapter 35, et seq.

List of Subjects in 48 CFR Parts 25 and 52

    Government procurement.

    Dated: August 4, 2009.
Al Matera,
Director, Office of Acquisition Policy.

Interim Rule Adopted as Final With Changes

0
Accordingly, the interim rule amending 48 CFR parts 4, 15, 25, and 52 
which was published in the Federal Register at 73 FR 33636 on June 12, 
2008, is adopted as a final rule with the following changes:

0
1. The authority citation for 48 CFR parts 25 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 25--FOREIGN ACQUISITION

0
2. Amend section 25.702-1 by removing the definition ``Person''; and in 
the definition ``Restricted business

[[Page 40466]]

operations'' revising the introductory text of paragraph (2) to read as 
follows:


25.702-1  Definitions.

* * * * *
    Restricted business operations-- * * *
    (2) Does not include business operations that the person (as that 
term is defined in Section 2 of the Sudan Accountability and Divestment 
Act of 2007) conducting the business can demonstrate--
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Amend section 52.212-3 by--
0
a. Revising the date of the provision;
0
b. Revising in paragraph (a), in the definition ``Restricted business 
operations'' the second sentence of the introductory text; and
0
c. Removing from paragraph (m) ``that it'' and adding ``that the 
offeror'' in its place.
0
The revised text reads as follows:


52.212-3  Offeror Representations and Certifications--Commercial Items.

* * * * *
    OFFEROR REPRESENTATIONS AND CERTIFICATIONS--COMMERCIAL ITEMS 
(Aug 2009)
* * * * *
    (a) Definitions. * * *
    Restricted business operations * * * Restricted business operations 
do not include business operations that the person (as that term is 
defined in Section 2 of the Sudan Accountability and Divestment Act of 
2007) conducting the business can demonstrate--
* * * * *

0
4. Amend section 52.225-20 by--
0
a. Revising the date of the provision;
0
b. Removing from paragraph (a) the definition ``Person'', and revising 
the second sentence in the introductory text of the definition 
``Restricted business operations''; and
0
c. Removing from paragraph (b) ``that it'' and adding ``that the 
offeror'' in its place.
0
The revised text reads as follows:


52.225-20  Prohibition on Conducting Restricted Business Operations in 
Sudan--Certification.

* * * * *
    PROHIBITION ON CONDUCTING RESTRICTED BUSINESS OPERATIONS IN 
SUDAN--CERTIFICATION (Aug 2009)
    (a) Definitions. * * *
    Restricted business operations * * * Restricted business operations 
do not include business operations that the person (as that term is 
defined in Section 2 of the Sudan Accountability and Divestment Act of 
2007) conducting the business can demonstrate--
* * * * *
[FR Doc. E9-19165 Filed 8-10-09; 8:45 am]
BILLING CODE 6820-EP-S