[Federal Register Volume 74, Number 153 (Tuesday, August 11, 2009)]
[Rules and Regulations]
[Pages 40466-40467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19166]


-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 28 and 52

[FAC 2005-36; FAR Case 2006-013; Item V; Docket 2006-0033; Sequence 1]
RIN 9000-AK71


Federal Acquisition Regulation; FAR Case 2006-013, List of 
Approved Attorneys, Abstractors, and Title Companies

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

ACTION: Final rule.

-----------------------------------------------------------------------

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 update the 
procedures for the acceptance of a bond with a security interest in 
real property.

DATES: Effective Date: September 10, 2009.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Mr. Edward N. Chambers, Procurement Analyst, at (202) 501-3221. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-36, FAR 
case 2006-013.

SUPPLEMENTARY INFORMATION:

A. Background

    FAR Subpart 28.2 requires agencies to obtain adequate security for 
bonds when bonds are used with a contract. A corporate or individual 
surety is an acceptable form of security for a bond. FAR Subpart 28.2 
provides that when an individual surety secures a bond with an interest 
in real estate, the surety must provide evidence of title (i.e., 
ownership) in the form of a certificate of title prepared by a 
qualified title attorney or abstractor, or a title insurance policy 
issued by title insurance company that has been approved by the 
Department of Justice (DOJ). Since DOJ no longer maintains a list of 
approved title insurance companies, agency contracting officers must 
now take other steps to ensure the adequacy of the title evidence or 
ensure the surety obtains a title insurance policy for the full amount 
of the Government's lien interest from a qualified title insurance 
company.
    This FAR rule revises the types of acceptable title evidence by 
individual sureties to include mortgagee title insurance or other 
evidence of title consistent with Section 2 of the DOJ Title Standards 
2001, maintained on a DOJ website. FAR clause 52.228-11, Pledges of 
Assets, is also updated with this new reference.
    The rule also provides that contracting officers should request the 
assistance of agency legal counsel in determining if title evidence 
from individual sureties is consistent with the Justice Department 
Standards.

PUBLIC COMMENTS

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 72 FR 12584 on March 16, 2007. The Councils received a 
single comment on the proposed rule. The Councils have partially 
adopted this comment and revised the final rule accordingly.
    Comment: For those cases where real property is pledged to secure a 
bond, the proposed rule provided that ``depending on the value of the 
property, contracting officers should consider requesting assistance 
from agency designated legal counsel to determine if the evidence of 
title is adequate.'' The commenter believes this legal consultation 
should be mandatory.
    Response: Partially adopted. The final rule drops the qualifier 
``depending on the value of the property'' on seeking legal counsel 
when real property is pledged to secure a bond. However, the term 
``should'' has been retained to provide contracting officers with the 
discretion to use their business judgment.
    In considering the public comment, the Government revisited the 
proposed rule in total. In consultation with the Department of Justice, 
it was decided that when real property is pledged to secure a bond, 
instead of only allowing evidence of title that is consistent with DOJ 
standards as set forth in the proposed rule, that sureties could 
provide a mortgagee title insurance policy in an insurance amount equal 
to the amount of the lien. The Department of Justice observed that 
mortgagee title insurance is the most common form of title evidence in 
the commercial marketplace.

[[Page 40467]]

    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 incidence of the 
use of bonds secured by interest in real property is very low.

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 28 and 52

    Government procurement.

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

0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 28 and 52 as set forth 
below:

0
1. The authority citation for 48 CFR parts 28 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 28--BONDS AND INSURANCE

0
2. Amend section 28.203-3 by revising paragraph (a)(1) and removing 
from paragraph (d) ``shall be'' and adding ``shall be signed by all 
owners of the property and'' in its place.
0
The revised text reads as follows.


28.203-3  Acceptance of real property.

    (a) * * *
    (1) A mortgagee title insurance policy, in an insurance amount 
equal to the amount of the lien, or other evidence of title that is 
consistent with the requirements of Section 2 of the United States 
Department of Justice Title Standards at http://www.usdoj.gov/enrd/2001_Title_Standards.html. This title evidence must show fee simple 
title vested in the surety along with any concurrent owners; whether 
any real estate taxes are due and payable; and any recorded 
encumbrances against the property, including the lien filed in favor of 
the Government under paragraph (d) of this subsection. Agency 
contracting officers should request the assistance of their designated 
agency legal counsel in determining if the title evidence is consistent 
with the Department of Justice standards;
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Amend section 52.228-11 by--
0
a. Revising the date of the clause;
0
b. Removing from paragraph (b)(1) ``and/or;'' and adding ``; and/or'' 
in its place; and
0
c. Revising paragraph (b)(2)(i).
0
The revised text reads as follows:


52.228-11  Pledges of Assets.

* * * * *
    PLEDGES OF ASSETS (Sept 2009)
* * * * *
    (b) * * *
    (2) * * *
    (i) A mortgagee title insurance policy, in an insurance amount 
equal to the amount of the lien, or other evidence of title that is 
consistent with the requirements of Section 2 of the United States 
Department of Justice Title Standards at http://www.usdoj.gov/enrd/2001_Title_Standards.html. This title evidence must show fee simple 
title vested in the surety along with any concurrent owners; whether 
any real estate taxes are due and payable; and any recorded 
encumbrances against the property, including the lien filed in favor of 
the Government as required by FAR 28.203-3(d);
* * * * *
[FR Doc. E9-19166 Filed 8-10-09; 8:45 am]
BILLING CODE 6820-EP-S