[Federal Register Volume 76, Number 153 (Tuesday, August 9, 2011)]
[Notices]
[Pages 48789-48796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20138]


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  Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / 
Notices  

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ADMINISTRATIVE CONFERENCE OF THE UNITED STATES


Adoption of Recommendations

AGENCY: Administrative Conference of the United States.

ACTION: Notice.

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SUMMARY: The Administrative Conference of the United States adopted 
four recommendations at its Fifty-fourth Plenary Session. The appended 
recommendations address electronic rulemaking, rulemaking comments, 
contractor ethics, and video hearings.

FOR FURTHER INFORMATION CONTACT: For Recommendation 2011-1, Emily 
Schleicher Bremer, Attorney Advisor; for Recommendations 2011-2 and 
2011-3, Reeve Bull, Attorney Advisor; and for Recommendation 2011-4, 
Funmi Olorunnipa, Attorney Advisor. For all four recommendations the 
address and phone number is: Administrative Conference of the United 
States, Suite 706 South, 1120 20th Street, NW., Washington, DC 20036; 
Telephone 202-480-2080.

SUPPLEMENTARY INFORMATION: The Administrative Conference Act, 5 U.S.C. 
591-596, established the Administrative Conference of the United 
States. The Conference studies the efficiency, adequacy, and fairness 
of the administrative procedures used by Federal agencies and makes 
recommendations for improvements to agencies, the President, Congress, 
and the Judicial Conference of the United States (5 U.S.C. 594(1)). For 
further information about the Conference and its activities, see http://www.acus.gov.
    At its Fifty-fourth Plenary Session, held June 16-17, 2011, the 
Assembly of the Conference adopted four recommendations. Recommendation 
2011-1, ``Legal Considerations in e-Rulemaking,'' provides guidance on 
issues that have arisen in light of the change from paper to electronic 
rulemaking procedures. It recommends that agencies (1) consider using 
content analysis software to reduce the need for agency staff to spend 
time reading identical or nearly identical comments, (2) provide 
timely, online access to all studies and reports upon which they rely, 
(3) implement appropriate procedures for the handling of confidential, 
trade secret, or other protected information, (4) consider the 
potential need to revise Privacy Act notices and recordkeeping 
schedules to accommodate e-Rulemaking, and (5) replace paper files with 
electronic records in the rulemaking docket and in the record for 
appellate review.
    Recommendation 2011-2, ``Rulemaking Comments,'' recognizes 
innovations in the commenting process that could promote public 
participation and improve rulemaking outcomes. The recommendation 
encourages agencies (1) to provide public guidance on how to submit 
effective comments, (2) to leave comment periods open for sufficient 
periods, generally at least 60 days for significant regulatory actions 
and 30 days for other rulemakings, (3) to post comments received online 
within a specified period after submission, (4) to announce policies 
for anonymous and late-filed comments, and (5) to consider when reply 
and supplemental comment periods are useful.
    Recommendation 2011-3, ``Compliance Standards for Government 
Contractor Employees--Personal Conflicts of Interest and Use of Certain 
Non-Public Information'' responds to agencies' need to protect 
integrity and the public interest when they rely on contractors. The 
Conference recommends that the Federal Acquisition Regulatory Council 
provide model language for agency contracting officers to use when 
negotiating or administering contracts that pose particular risks that 
employees of contractors could have personal conflicts of interest or 
could misuse non-public information.
    Recommendation 2011-4, ``Agency Use of Video Hearings: Best 
Practices and Possibilities for Expansion,'' encourages agencies, 
especially those with a high volume of cases, to consider the use of 
video teleconferencing technology for hearings and other administrative 
proceedings. The recommendation sets forth factors agencies should 
consider when deciding whether to use video teleconferencing and best 
practices for the implementation of this technology.
    The Appendix (below) sets forth the full text of these four 
recommendations. The Conference will transmit them to affected 
agencies, to appropriate committees of the United States Congress, and 
(in the case of 2011-1) to the Judicial Conference of the United 
States. The recommendations are not binding, so the relevant agencies, 
the Congress and the courts will make decisions on their 
implementation.
    The Conference based these recommendations on research reports that 
it has posted at: http://www.acus.gov/events/54th-plenary-session/. The 
transcript of the Plenary Session is available at the same web address.

    Dated: August 4, 2011.
Paul R. Verkuil,
Chairman.

Appendix--Recommendations of the Administrative Conference of the 
United States

Administrative Conference Recommendation 2011-1

Legal Considerations in e-Rulemaking

Adopted June 16, 2011

    Agencies are increasingly turning to e-Rulemaking to conduct and 
improve regulatory proceedings. ``E-Rulemaking'' has been defined as 
``the use of digital technologies in the development and 
implementation of regulations'' \1\ before or during the informal 
rulemaking process, i.e., notice-and-comment rulemaking under the 
Administrative Procedure Act (APA). It may include many types of 
activities, such as posting notices of proposed and final 
rulemakings, sharing supporting materials, accepting public 
comments, managing the rulemaking record in electronic dockets, and 
hosting public meetings online or using social media, blogs, and 
other web applications to promote public awareness of and 
participation in regulatory proceedings.
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    \1\ Cary Coglianese, E-Rulemaking: Information Technology and 
the Regulatory Process at 2 (2004) (working paper), http://lsr.nellco.org/upenn_wps/108.
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    A system that brings several of these activities together is 
operated by the eRulemaking program management office (PMO), which 
is housed at the Environmental Protection Agency and funded by 
contributions from partner Federal agencies. This program contains 
two components: Regulations.gov, which is a public Web site where 
members of the public

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can view and comment on regulatory proposals, and the Federal Docket 
Management System (FDMS), which includes FDMS.gov, a restricted-
access Web site agency staff can use to manage their internal files 
and the publicly accessible content on Regulations.gov. According to 
the Office of Management and Budget, FDMS ``provides * * * better 
internal docket management functionality and the ability to publicly 
post all relevant documents on regulations.gov (e.g., Federal 
Register documents, proposed rules, notices, supporting analyses, 
and public comments).'' \2\ Electronic docketing also provides 
significant costs savings to the Federal government, while enabling 
agencies to make proposed and final regulations, supplemental 
materials, and public comments widely available to the public. These 
incentives and the statutory prompt of the E-Government Act of 2002, 
which required agencies to post rules online, accept electronic 
comments on rules, and keep electronic rulemaking dockets,\3\ have 
helped ensure that over 90% of agencies post regulatory material on 
Regulations.gov.\4\
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    \2\ Office of Mgmt. & Budget, Executive Office of the President, 
FY 2009 Report to Congress on the Implementation of the E-Government 
Act of 2002, at 10 (2009), http://www.whitehouse.gov/sites/default/files/omb/assets/egov_docs/2009_egov_report.pdf.
    \3\ See Public Law 107-347 Sec.  206.
    \4\ Improving Electronic Dockets on Regulations.gov and the 
Federal Docket Management System: Best Practices for Federal 
Agencies, p. D-1 (Nov. 30, 2010), http://www.regulations.gov/exchange/sites/default/files/doc_files/20101130_eRule_Best_Practices_Document_rev.pdf. Some agencies rely on their own 
electronic docketing systems, such as the Federal Trade Commission 
(which uses a system called CommentWorks) and the Federal 
Communications Commission, which has its own electronic comment 
filing system (http://fjallfoss.fcc.gov/ecfs/ ecfs/).
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    Federal regulators, looking to embrace the benefits of e-
Rulemaking, face uncertainty about how established legal 
requirements apply to the web. This uncertainty arises because the 
APA, enacted in 1946, still provides the basic framework for notice-
and-comment rulemaking. While this framework has gone largely 
unchanged, the technological landscape has evolved dramatically.
    The Conference has therefore examined some of the legal issues 
agencies face in e-Rulemaking and this recommendation provides 
guidance on these issues. The Conference has examined the following 
issues:
     Processing large numbers of similar or identical 
comments. The Conference has considered whether agencies have a 
legal obligation to ensure that a person reads every individual 
comment received, even when comment-processing software reports that 
multiple comments are identical or nearly identical.
     Preventing the publication of inappropriate or 
protected information. The Conference has considered whether 
agencies have a legal obligation to prevent the publication of 
certain types of information that may be included in comments 
submitted in e-Rulemaking.
     Efficiently compiling and maintaining a complete 
rulemaking docket. The Conference has considered issues related to 
the maintenance of rulemaking dockets in electronic form, including 
whether an agency is obliged to retain paper copies of comments once 
they are scanned to electronic format and how an agency that 
maintains its comments files electronically should handle comments 
that cannot easily be reduced to electronic form, such as physical 
objects.
     Preparing an electronic administrative record for 
judicial review. The Conference has considered issues regarding the 
record on review in e-Rulemaking proceedings.
    This recommendation seeks to provide all agencies, including 
those that do not participate in Regulations.gov, with guidance to 
navigate some of the issues they may face in e-Rulemaking.\5\ With 
respect to the issues addressed in this recommendation, the APA 
contains sufficient flexibility to support e-Rulemaking and does not 
need to be amended for these purposes at the present time. Although 
the primary goal of this recommendation is to dispel some of the 
legal uncertainty agencies face in e-Rulemaking, where the 
Conference finds that a practice is not only legally defensible, but 
also sound policy, it recommends that agencies use it. It bears 
noting, however, that agencies may face other legal issues in e-
Rulemaking, particularly when using wikis, blogs, or similar 
technological approaches to solicit public views, that are not 
addressed in this recommendation. Such issues, and other broad 
issues not addressed herein, are beyond the scope of this 
recommendation, but warrant further study.\6\
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    \5\ This report follows up on previous work of the 
Administrative Conference. On October 19, 1995, Professor Henry H. 
Perritt, Jr. delivered a report entitled ``Electronic Dockets: Use 
of Information Technology in Rulemaking and Adjudication.'' Although 
never published, the Perritt Report continues to be a helpful 
resource and is available at: http://www.kentlaw.edu/faculty/rstaudt/classes/oldclasses/internetlaw/casebook/electronic_dockets.htm.
    \6\ The Conference has a concurrent recommendation which focuses 
on issues relating to the comments phase of the notice-and-comment 
process independent of the innovations introduced by e-Rulemaking. 
See Administrative Conference of the United States, Recommendation 
2011-2, Rulemaking Comments.
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Recommendation

Considering Comments

    1. Given the APA's flexibility, agencies should:
    (a) Consider whether, in light of their comment volume, they 
could save substantial time and effort by using reliable comment 
analysis software to organize and review public comments.
    (1) While 5 U.S.C. 553 requires agencies to consider all 
comments received, it does not require agencies to ensure that a 
person reads each one of multiple identical or nearly identical 
comments.
    (2) Agencies should also work together and with the eRulemaking 
program management office (PMO), to share experiences and best 
practices with regard to the use of such software.
    (b) Work with the eRulemaking PMO and its interagency 
counterparts to explore providing a method, including for members of 
public, for flagging inappropriate or protected content, and for 
taking appropriate action thereon.
    (c) Work with the eRulemaking PMO and its interagency 
counterparts to explore mechanisms to allow a commenter to indicate 
prior to or upon submittal that a comment filed on Regulations.gov 
contains confidential or trade secret information.
    (d) Confirm they have procedures in place to review comments 
identified as containing confidential or trade secret information. 
Agencies should determine how such information should be handled, in 
accordance with applicable law.

Assessing Privacy Concerns

    2. Agencies should assess whether the Federal Docket Management 
System (FDMS) System of Records Notice provides sufficient Privacy 
Act compliance for their uses of Regulations.gov. This could include 
working with the eRulemaking PMO to consider whether changes to the 
FDMS System of Records Notice are warranted.

Maintaining Rulemaking Dockets in Electronic Form

    3. The APA provides agencies flexibility to use electronic 
records in lieu of paper records. Additionally, the National 
Archives and Records Administration has determined that agencies are 
not otherwise legally required, at least under certain 
circumstances, to retain paper copies of comments properly scanned 
and included in an approved electronic recordkeeping system. The 
circumstances under which such destruction is permitted are governed 
by each agency's records schedules. Agencies should examine their 
record schedules and maintain electronic records in lieu of paper 
records as appropriate.
    4. To facilitate the comment process, agencies should include in 
a publicly available electronic docket of a rulemaking proposal all 
studies and reports on which the proposal for rulemaking draws, as 
soon as practicable, except to the extent that they would be 
protected from disclosure in response to an appropriate Freedom of 
Information Act request.\7\
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    \7\ See also Exec. Order No. 13,563, Sec.  2(b), 76 FR 3,821 
(Jan. 18, 2011) (requiring agencies to provide timely online access 
to ``relevant scientific and technical findings'' in the rulemaking 
docket on regulations.gov).
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    5. Agencies should include in the electronic docket a 
descriptive entry or photograph for all physical objects received 
during the comment period.

Providing Rulemaking Records to Courts for Judicial Review

    6. In judicial actions involving review of agency regulations, 
agencies should work with parties and courts early in litigation to 
provide electronic copies of the rulemaking record in lieu of paper 
copies, particularly where the record is of substantial size. Courts 
should continue their efforts to embrace electronic filing and 
minimize requirements to file paper copies of rulemaking records.

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The Judicial Conference should consider steps to facilitate these 
efforts.

Complying With Recordkeeping Requirements in e-Rulemaking

    7. In implementing their responsibilities under the Federal 
Records Act, agencies should ensure their records schedules include 
records generated during e-Rulemaking.

Administrative Conference Recommendation 2011-2

Rulemaking Comments

Adopted June 16, 2011

    One of the primary innovations associated with the 
Administrative Procedure Act (``APA'') was its implementation of a 
comment period in which agencies solicit the views of interested 
members of the public on proposed rules.\1\ The procedure created by 
the APA has come to be called ``notice-and-comment rulemaking,'' and 
comments have become an integral part of the overall rulemaking 
process.
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    \1\ 5 U.S.C. 553; see also Antonin Scalia, Judicial Deference to 
Administrative Interpretations of Law, 1989 Duke L.J. 511, 514 
(1989) (describing the ``notice-and-comment procedures for 
rulemaking'' under the APA as ``probably the most significant 
innovation of the legislation'').
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    In a December 2006 report titled ``Interim Report on the 
Administrative Law, Process and Procedure Project for the 21st 
Century,'' the Subcommittee on Commercial and Administrative Law of 
the United States House of Representatives' Committee on the 
Judiciary identified a number of questions related to rulemaking 
comments as areas of possible study by the Administrative 
Conference.\2\ These questions include:
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    \2\ Subcomm. on Commercial & Admin. Law of the Comm. on the 
Judiciary, 109th Cong., Interim Rep. on the Admin. Law, Process and 
Procedure Project for the 21st Century at 3-5 (Comm. Print 2006).
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     Should there be a required, or at least recommended, 
minimum length for a comment period?
     Should agencies immediately make comments publicly 
available? Should they permit a ``reply comment'' period?
     Must agencies reply to all comments, even if they take 
no further action on a rule for years? Do comments eventually become 
sufficiently ``stale'' that they could not support a final rule 
without further comment?
     Under what circumstances should an agency be permitted 
to keep comments confidential and/or anonymous?
     What effects do comments actually have on agency rules?
    The Conference has studied these questions and other, related 
issues concerning the ``comment'' portion of the notice-and-comment 
rulemaking process. The Conference also has a concurrent 
recommendation that deals with separate matters, focusing 
specifically on legal issues implicated by the rise of e-rulemaking. 
See Administrative Conference of the United States, Recommendation 
2011-1, Legal Considerations in e-Rulemaking.
    The Conference believes that the comment process established by 
the APA is fundamentally sound. Nevertheless, certain innovations in 
the commenting process could allow that process to promote public 
participation and improve rulemaking outcomes more effectively. In 
this light, the Conference seeks to highlight a series of ``best 
practices'' designed to increase the opportunities for public 
participation and enhance the quality of information received in the 
commenting process. The Conference recognizes that different 
agencies have different approaches to rulemaking and therefore 
recommends that individual agencies decide whether and how to 
implement the best practices addressed.
    In identifying these best practices, the Conference does not 
intend to suggest that it has exhausted the potential innovations in 
the commenting process. Individual agencies and the Conference 
itself should conduct further empirical analysis of notice-and-
comment rulemaking, should study the effects of the proposed 
recommendations to the extent they are implemented, and should 
adjust and build upon the proposed processes as appropriate.

Recommendation

    1. To promote optimal public participation and enhance the 
usefulness of public comments, the eRulemaking Project Management 
Office should consider publishing a document explaining what types 
of comments are most beneficial and listing best practices for 
parties submitting comments. Individual agencies may publish 
supplements to the common document describing the qualities of 
effective comments. Once developed, these documents should be made 
publicly available by posting on the agency Web site, 
Regulations.gov, and any other venue that will promote widespread 
availability of the information.
    2. Agencies should set comment periods that consider the 
competing interests of promoting optimal public participation while 
ensuring that the rulemaking is conducted efficiently. As a general 
matter, for ``[s]ignificant regulatory action[s]'' as defined in 
Executive Order 12,866, agencies should use a comment period of at 
least 60 days. For all other rulemakings, they should generally use 
a comment period of at least 30 days. When agencies, in appropriate 
circumstances, set shorter comment periods, they are encouraged to 
provide an appropriate explanation for doing so.\3\
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    \3\ See also Administrative Conference of the United States, 
Recommendation 93-4, Improving the Environment for Agency Rulemaking 
(1993) (``Congress should consider amending section 553 of the APA 
to * * * [s]pecify a comment period of `no fewer than 30 days.' ''); 
Exec. Order No. 13,563, 76 FR 3,821, 3,821-22 (Jan. 18, 2011) (``To 
the extent feasible and permitted by law, each agency shall afford 
the public a meaningful opportunity to comment through the Internet 
on any proposed regulation, with a comment period that should 
generally be at least 60 days.'').
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    3. Agencies should adopt stated policies of posting public 
comments to the Internet within a specified period after submission. 
Agencies should post all electronically submitted comments on the 
Internet and should also scan and post all comments submitted in 
paper format.\4\
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    \4\ See also Office of Information & Regulatory Affairs, 
Memorandum for the President's Management Council on Increasing 
Openness in the Rulemaking Process--Improving Electronic Dockets at 
2 (May 28, 2010) (``OMB expects agencies to post public comments and 
public submissions to the electronic docket on Regulations.gov in a 
timely manner, regardless of whether they were received via postal 
mail, email, facsimile, or web form documents submitted directly via 
Regulations.gov.'').
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    4. The eRulemaking Project Management Office and individual 
agencies should establish and publish policies regarding the 
submission of anonymous comments.
    5. Agencies should adopt and publish policies on late comments 
and should apply those policies consistently within each rulemaking. 
Agencies should determine whether or not they will accept late 
submissions in a given rulemaking and should announce the policy 
both in publicly accessible forums (e.g., the agency's Web site, 
Regulations.gov) and in individual Federal Register notices 
including requests for comments. The agency may make clear that late 
comments are disfavored and will only be considered to the extent 
practicable.\5\
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    \5\ See, e.g., Highway-Rail Grade Crossing; Safe Clearance, 76 
Fed. Reg. 5,120, 5,121 (Jan. 28, 2011) (Department of Transportation 
notice of proposed rulemaking announcing that ``[c]omments received 
after the comment closing date will be included in the DOCKET, and 
we will consider late comments to the extent practicable'').
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    6. Where appropriate, agencies should make use of reply comment 
periods or other opportunities for receiving public input on 
submitted comments, after all comments have been posted. An 
opportunity for public input on submitted comments can entail a 
reply period for written comments on submitted comments, an oral 
hearing, or some other means for input on comments received.\6\
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    \6\ See also Administrative Conference of the United States, 
Recommendation 76-3, Procedures in Addition to Notice & the 
Opportunity for Comment in Informal Rulemaking (1976) (recommending 
a second comment period in proceedings in which comments or the 
agency's responses thereto ``present new and important issues or 
serious conflicts of data''); Administrative Conference of the 
United States, Recommendation 72-5, Procedures for the Adoption of 
Rules of General Applicability (1972) (recommending that agencies 
consider providing an ``opportunity for parties to comment on each 
other's oral or written submissions); Office of Information & 
Regulatory Affairs, Memorandum for the Heads of Executive 
Departments and Agencies, and of Independent Regulatory Agencies, on 
Executive Order 13,563, M-11-10, at 2 (Feb. 2, 2011) (``[Executive 
Order 13,563] seeks to increase participation in the regulatory 
process by allowing interested parties the opportunity to react to 
(and benefit from) the comments, arguments, and information of 
others during the rulemaking process itself.'').
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    7. Although agencies should not automatically deem rulemaking 
comments to have become stale after any fixed period of time, 
agencies should closely monitor their rulemaking dockets, and, where 
an agency believes the circumstances surrounding the rulemaking have 
materially changed or the rulemaking record has otherwise become 
stale, consider the use of available

[[Page 48792]]

mechanisms such as supplemental notices of proposed rulemaking to 
refresh the rulemaking record.

Administrative Conference Recommendation 2011-3

Compliance Standards for Government Contractor Employees--Personal 
Conflicts of Interest and Use of Certain Non-Public Information

Adopted June 17, 2011

    The Conference believes that it is important to ensure that 
services provided by government contractors--particularly those 
services that are similar to those performed by government 
employees--are performed with integrity and that the public interest 
is protected. In that light, the Conference recommends that the 
Federal Acquisition Regulatory Council (``FAR Council'') promulgate 
model language in the Federal Acquisition Regulation (``FAR'') \1\ 
for agency contracting officers to use when negotiating or 
administering contracts that pose particular risks of government 
contractor employee personal conflicts of interest or misuse of non-
public information. In order to ensure that, in its effort to 
protect the public interest, this recommendation does not create 
excessive compliance burdens for contractors or unnecessary 
monitoring costs for agencies, the Conference is limiting its 
recommendation to those areas that it has identified as the top 
priorities--contractor employees who perform certain activities 
identified as posing a high risk of personal conflicts of interest 
or misuse of non-public information.
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    \1\ The FAR is a set of uniform policies and procedures that all 
executive agencies must use in procurements from sources outside of 
the government. 48 CFR 1.101. All executive agencies must comply 
with the FAR when purchasing from contractors, though individual 
agencies can also adopt agency-specific supplements to the FAR by 
regulation or provide additional requirements in individual 
contracts. See, e.g., 48 CFR ch. 2 (Defense Federal Acquisition 
Regulation Supplement for the Department of Defense). The FAR 
Council consists of the Administrator for Federal Procurement 
Policy, the Secretary of Defense, the Administrator of National 
Aeronautics and Space, and the Administrator of General Services. 
See 41 U.S.C. 1102, 1302.
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Background

    In recent years, the Federal government has increasingly relied 
upon private contractors to perform services previously provided in-
house by civil servants.\2\ Despite this expansion in the use of 
government contractors, there continues to be a substantial 
disparity between the ethics rules regulating government employees 
and those applicable to government contractor employees. Whereas an 
array of statutes and regulations creates an extensive ethics regime 
for government employees, the rules currently applicable to 
contractor employees vary significantly by agency.
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    \2\ Specifically, Federal spending on service contracts 
increased by 85% in inflation adjusted dollars between 1983 and 
2007. Kathleen Clark, Ethics for an Outsourced Government Table 3 
(forthcoming), available at http://www.acus.gov/research/the-conference-current-projects/government-contractor-ethics. Over the 
same period, the number of executive branch employees declined by 
18%. Id. In this light, the relative significance of the contractor 
workforce vis-[agrave]-vis the Federal employee workforce has 
increased substantially in the last few decades.
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    Government employees are subject to various statutes and 
regulations that create a comprehensive ethics regime governing, 
among other things, their financial interests, use of government 
resources, outside activities, and activities in which they may 
engage after leaving government.\3\ By contrast, the compliance 
standards applicable to contractor employees are much less 
comprehensive and can vary significantly from contract to contract. 
A handful of statutes apply to contractor employees and prohibit 
their offering bribes or illegal gratuities,\4\ serving as foreign 
agents,\5\ disclosing procurement information,\6\ or offering or 
receiving kickbacks.\7\ The FAR requires contracting officers to 
identify organizational conflicts of interest (in which the 
contractor has a corporate interest that may bias its judgment or 
the advice it provides to the government) and either address or 
waive such conflicts.\8\ The FAR also requires that contracting 
firms that have entered into one or more government contracts valued 
in excess of $5 million and requiring 120 days or more to perform 
have in place ``codes of business ethics and conduct.'' \9\ A 
handful of agencies have adopted ethics regulations supplementing 
the FAR,\10\ and still other agencies impose additional ethics 
requirements by contract.\11\
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    \3\ Id. at 7.
    \4\ 18 U.S.C. 201(b)-(c).
    \5\ Id. Sec.  219.
    \6\ 41 U.S.C. Sec.  2102.
    \7\ Id. Sec. Sec.  8701-07 (prohibiting kickbacks to 
contractors, subcontractors, and their employees).
    \8\ 48 CFR 9.500 et seq. The FAR provision applies only to 
organizational conflicts of interest, wherein the firm itself 
possesses such business interests, and not to personal conflicts of 
interest, wherein one of the firm's employees has a business or 
financial interest that could influence his or her decisionmaking in 
performing a contract.
    \9\ Id. Sec. Sec.  3.1000-04. These codes must ensure that the 
firm has adequate systems for detecting, preventing, and reporting 
illegal conduct and violations of the civil False Claims Act and 
that it ``[o]therwise promote[s] an organizational culture that 
encourages ethical conduct.'' Id. Sec.  52.203-13. The FAR does not 
dictate, however, what types of potential ethical misconduct the 
internal corporate codes must address.
    \10\ Agencies that have adopted ethics regimes supplementing 
those contained in the FAR include the Department of Energy, 
Department of Health and Human Services, Department of the Treasury, 
Environmental Protection Agency, Nuclear Regulatory Commission, and 
United States Agency for International Development. Clark, supra 
note 2, Table VII. These supplemental regimes are not comprehensive, 
however, and generally apply only to specific types of contracts. By 
contrast, the Federal Deposit Insurance Corporation, though it is 
not covered by the FAR, has implemented a comprehensive ethics 
system that applies to all of its contractor employees. Id.; see 
also 12 CFR 366.0 et seq.
    \11\ See, e.g., USAID Acquisition Regulation 148, available at 
http://www.usaid.gov/policy/ads/300/aidar.pdf.
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    Finally, certain contracting firms, most notably some performing 
work for the Department of Defense, have voluntarily adopted 
internal ethics codes, some of which provide fairly detailed rules 
relating to such important ethical issues as personal conflicts of 
interest, confidentiality, gifts and gratuities, protection of 
government property, and other major ethical areas, and that 
establish internal disciplinary processes for employee violations of 
such codes.\12\ Nevertheless, the corporate codes do not generally 
require that unethical conduct that is not otherwise illegal or 
unlawful be reported to the contracting agency.\13\ Furthermore, 
though the corporate codes provide certain protections for the 
government,\14\ they generally only require contractor employees to 
protect against personal conflicts with their employer's interest 
rather than the government's interest.\15\ Finally, many contractors 
(particularly those outside of the defense setting) do not have 
internal ethics codes.
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    \12\ See generally Def. Indus. Initiative on Bus. Ethics & 
Conduct, Public Accountability Report (2009), available at http://www.dii.org/files/annual-report-2008.pdf. Many of the most extensive 
internal codes are implemented by companies that are members of the 
Defense Industry Initiative (``DII''), which includes 95 defense 
contractors that agree to implement such ethics codes and comply 
with certain values in maintaining an ethical workplace. Contractor 
employees can be disciplined internally for violating their 
company's ethics code, and companies commit to disclose violations 
of the law and ``instances of significant employee misconduct'' to 
the contracting agency. Id. at 49.
    \13\ See id. at 49-50 (contractors are only required to report 
those violations covered by FAR Sec.  52.203-13).
    \14\ See id. at 33 (noting that DII member company codes require 
them to protect government property).
    \15\ See id. at 34 (``Employees are prohibited from having 
personal, business, or financial interests that are incompatible 
with their responsibility to their employer.''); see also U.S. Gov't 
Accountability Office, GAO-08-169, Additional Personal Conflict of 
Interest Safeguards Needed for Certain DOD Contractor Employees 3 
(2008) (``Most of the contractor firms have policies requiring their 
employees to avoid a range of potential interests--such as owning 
stock in competitors--that conflict with the firm's interest. 
However, only three of these contractors' policies directly require 
their employees to disclose potential personal conflicts of interest 
with respect to their work at DOD so they can be screened and 
mitigated by the firms.'').
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Scope of the Problem

    By dint of their work for and as part of the government, 
contractors performing certain services, particularly those that can 
influence government decisions or have access to non-public 
information, are in a position of public trust and responsibility 
for the protection of public resources, as is the government itself. 
It is therefore critical that their employees behave with the same 
high degree of integrity as government employees and do not exploit 
positions of public trust for improper personal gain. Whether or not 
there is any widespread pattern of ethical abuses, the existence of 
significant ethical risks can erode public confidence in the 
government procurement process and in the government itself. 
Accordingly, it is entirely appropriate to hold those contractors 
and their employees to a high ethical standard of conduct.

[[Page 48793]]

    As noted above, a significant disparity currently exists between 
the ethical standards applicable to government employees, which are 
comprehensive and consist predominantly of specific rules, and those 
applicable to contractor employees, which are largely developed and 
applied on an ad hoc basis and involve significantly vaguer 
standards.\16\ Many contractors have undertaken laudable efforts to 
promote a culture of compliance through the implementation of 
company-specific ethics standards,\17\ but not every contractor has 
such internal standards. The Conference believes that adoption of 
contractor ethics standards applicable to certain high-risk 
activities would protect the public interest and promote integrity 
in government contracting. In addition, the Conference aims to 
promote public confidence in the system of government contracting 
and in the integrity of the government.
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    \16\ There are pending FAR rules relating to protection of non-
public information, 76 FR 23,236 (Apr. 26, 2011), and preventing 
personal conflicts of interest for contractor employees performing 
acquisition activities closely related to inherently governmental 
functions, 74 FR 58,584 (Nov. 13, 2009), but these proposed rules 
are not yet adopted and also cover only some of the topics addressed 
in this recommendation.
    \17\ See generally Def. Indus. Initiative on Bus. Ethics & 
Conduct, supra note 12.
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    Of course, the mere existence of a disparity between government 
employee and contractor ethics standards is not itself conclusive 
evidence that contractor employee ethics standards should be 
expanded. Indeed, simply applying the rules governing the ethics of 
government employees (particularly those dealing with financial 
disclosures to guard against personal conflicts of interest) 
directly to contractors could create excessive and unnecessary 
compliance burdens for contractors and monitoring costs for 
agencies.\18\ To address this concern, the Conference has focused on 
the most significant ethical risks that arise in government 
contracts as well as the activities most likely to implicate those 
risks. Specifically, the Conference has identified contractor 
employees' personal conflicts of interest and use of non-public 
information as two areas calling for greater measures to prevent 
misconduct. Of course, those are not necessarily the only risks in 
the current system, and individual agencies have chosen or may 
hereafter choose to impose ethics requirements in other areas as 
well. The Conference, however, believes those two identified areas 
warrant more comprehensive measures to prevent misconduct. The 
Conference believes those two identified areas call for ethics 
standards, although agencies should be mindful of risks requiring 
more particularized treatment that may be present in their specific 
contexts.
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    \18\ Report of the Acquisition Advisory Panel 418 (Jan. 2007). 
Various agencies have extended certain aspects of the ethics 
standards applicable to government employees to contractor 
employees, see, e.g., 12 CFR 366.0 et seq. (FDIC contractor 
regulations), and their decision to do so has not necessarily 
created excessive compliance or monitoring costs. Nevertheless, 
extending all government employee ethics rules to all contractor 
employees serving all agencies, without consideration of the 
specific ethical risks presented, would likely impose costs that are 
excessive in relation to the benefits received. Accordingly, the 
Conference believes that the FAR Council and individual agencies 
should proceed carefully in ensuring that any expansion of the 
current ethics regime is cost-effective, while at the same time 
protecting the government's interests.
---------------------------------------------------------------------------

Personal Conflicts of Interest and Misuse of Certain Non-Public 
Information

    The most common ethical risks currently addressed in specific 
agency supplements to the FAR (as well as in contractors' own 
internal codes of conduct) include personal conflicts of interest, 
gifts, misuse of government property, and misuse of non-public 
information.\19\ Of these major ethical risks, existing criminal 
laws regulate contractors' offering or receipt of gifts and misuse 
of government property. With respect to gifts, criminal bribery laws 
would prohibit a contractor employee's offering anything of value to 
a Federal employee to obtain favorable treatment,\20\ and the Anti-
Kickback Act would prohibit a contractor employee from accepting 
gifts from a potential sub-contractor or other party that are aimed 
at improperly obtaining favorable treatment under the contract.\21\ 
With respect to misuse of property, traditional criminal laws 
against larceny and embezzlement would prohibit a contractor 
employee's misappropriating public property, and Federal criminal 
law prohibits a contractor employee's misusing or abusing government 
property.\22\
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    \19\ See id.; Kathleen Clark, supra note 2, Table VII; Marilyn 
Glynn, Public Integrity & the Multi-Sector Workforce, 52 Wayne L. 
Rev. 1433, 1436-38 (2006); Def. Indus. Initiative on Bus. Ethics & 
Conduct, supra note 12, at 29-60.
    \20\ 18 U.S.C. 201(c).
    \21\ 41 U.S.C. 8702. Of course, in light of the severity of 
criminal sanctions, many instances of misconduct are likely to go 
unpunished under the current regime. For instance, resource 
constraints may make it unlikely that a United States Attorney would 
prosecute a contractor employee for accepting a lavish meal from a 
prospective sub-contractor. Nevertheless, the mere threat of 
criminal prosecution may deter potential misconduct.
    \22\ 18 U.S.C. 641; Morissette v. United States, 342 U.S. 246, 
272 (1952). In addition, agencies often stipulate by contract that 
government property may not be used for personal benefit (e.g., a 
contractor employee's using government computers for personal use). 
Glynn, supra note 19, at 1437.
---------------------------------------------------------------------------

    On the other hand, a contractor employee is less likely to face 
sanctions under existing laws if he or she acts despite a personal 
conflict of interest or exploits non-public information for personal 
gain. Though the Anti-Kickback Act would prevent a contractor 
employee's directing business to a third party in exchange for an 
actual payment,\23\ nothing under current law would prevent a 
contractor employee from directing business towards a company in 
which he or she owns stock (i.e., a personal conflict of interest). 
Similarly, though insider trading laws would apply if a contractor 
employee bought securities based upon information learned from 
government contracts,\24\ nothing under current law would prevent a 
contractor employee from purchasing other items, such as land that 
will appreciate upon announcement of construction of a military 
base, on the basis of information learned while performing his or 
her contractual duties.
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    \23\ 41 U.S.C. 8702.
    \24\ Dirks v. Sec. Exch. Comm'n, 463 U.S. 646, 655 n.14 (1983); 
17 CFR 240.10b5-2(b).
---------------------------------------------------------------------------

    In this light, various governmental entities that have studied 
issues of contractor ethics have singled out preventing personal 
conflicts of interest and misuse of non-public information as areas 
that need to be strengthened.\25\ By focusing on these two areas of 
risk, the Conference does not intend to discourage agencies from 
adopting additional ethics requirements regarding procurement 
activities by regulations or contract. Indeed, some agencies may 
choose to adopt rules regulating ethical risks such as contractor 
employee receipt of gifts or misuse of property as an additional 
prophylactic measure, notwithstanding the existence of criminal 
penalties covering similar conduct. Rather, the Conference believes 
that personal conflicts of interest and protection of non-public 
information are two areas for which greater measures to prevent 
misconduct are particularly appropriate, and it therefore recommends 
targeted measures designed to address those risks. The 
recommendation would serve as a floor upon which agencies could 
build and would not be intended to deter adoption of a more 
expansive ethics regime, either individually or through the FAR 
Council, to the extent the agencies find it appropriate.
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    \25\ See, e.g., Preventing Personal Conflicts of Interest for 
Contractor Employees Performing Acquisition Functions, 74 FR 58,584, 
58,588-89 (proposed Nov. 13, 2009) (setting forth proposed FAR rules 
regulating personal conflicts of interest and use of non-public 
information for private gain in the case of contractors performing 
acquisition activities closely related to inherently governmental 
functions); Glynn, supra note 19, at 1436-37 (article by general 
counsel of the Office of Government Ethics recommending, inter alia, 
extending ethics rules to include contractor employee conflicts of 
interest and misuse of non-public information); U.S. Gov't 
Accountability Office, supra note 15, at 31 (``We recommend * * * 
personal conflict of interest contract clause safeguards for defense 
contractor employees that are similar to those required for DOD's 
Federal employees.''); U.S. Gov't Accountability Office, GAO-10-693, 
Stronger Safeguards Needed for Contractor Access to Sensitive 
Information 30 (2010) (recommending that the FAR Council provide 
guidance on the use of non-disclosure agreements as a condition to 
contractors' accessing sensitive information and on ``establishing a 
requirement for prompt notification to appropriate agency officials 
of a contractor's unauthorized disclosure or misuse of sensitive 
information''); Office of Gov't Ethics, Report to the President & to 
Congressional Committees on the Conflict of Interest Laws Relating 
to Executive Branch Employment 38-39 (2006) (noting ``expressions of 
concern'' the Office has received regarding personal conflicts of 
interest and highlighting the possibility of agencies' including 
contract clauses to deal with such issues); Report of the 
Acquisition Advisory Panel, supra note 18, at 423-25 (concluding 
that additional safeguards were necessary in order to protect 
against contractor employee personal conflicts of interest and 
misuse of confidential or proprietary information).
---------------------------------------------------------------------------

``High Risk'' Contracts

    PCI-Risk Contracts: The Conference has sought to identify those 
types of activities most likely to create risks of personal

[[Page 48794]]

conflicts of interest, situations in which a contractor employee may 
have some interest that may bias his or her judgment. Several 
statutes and regulations prohibit contractors from performing 
``inherently governmental functions,'' which are defined as 
functions ``so intimately related to the public interest'' as to 
require performance by government employees.\26\ The FAR also 
contains a list of activities that ``approach'' being classified as 
``inherently governmental functions.'' \27\ As a recent proposed 
policy letter from the Office of Federal Procurement Policy 
recognizes, contractors performing activities that are similar to 
``inherently governmental functions'' should be subject to close 
scrutiny, given that the work that they perform is near the heart of 
the traditional role of the Federal government.\28\ Several of the 
functions listed as ``approach[ing] * * * inherently governmental 
functions'' involve activities wherein the contractor either advises 
in agency policymaking or participates in procurement functions, 
which raise particular risks of employee personal conflicts of 
interest. Other activities identified as raising particular risks of 
employee personal conflicts of interest include ``advisory and 
assistance services'' and ``management and operating'' 
functions.\29\
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    \26\ Federal Activities Inventory Reform Act of 1998, Public Law 
105-270, Sec.  5(2)(A), 112 Stat. 2382, 2384; 48 CFR 2.101; OMB, 
Circular A-76, Performance of Commercial Activities, Attachment A 
Sec.  B.1.a. Though each of these authorities uses slightly 
different wording in defining ``inherently governmental function,'' 
the differences are apparently of no legal significance. Office of 
Management & Budget, Work Reserved for Performance by Federal 
Government Employees, 75 FR 16,188, 16,190 (proposed Mar. 31, 2010).
    \27\ 48 CFR 7.503(d).
    \28\ Work Reserved for Performance by Federal Government 
Employees, 75 FR at 16,193-94.
    \29\ Report of the Acquisition Advisory Panel, supra note 18, at 
411.
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    The FAR contains provisions identifying activities that 
``approach'' being ``inherently governmental functions,'' \30\ 
feature ``advisory and assistance services,''\31\ or involve 
``management and operating'' functions.\32\ Many of these 
activities, such as those in which a contractor employee performs 
tasks that can influence government action, including the 
expenditure of agency funds, may pose a significant risk of personal 
conflicts of interest. Several contracting tasks, by their nature, 
elevate the risk of such conflicts. Those include substantive (as 
compared to administrative or process-oriented) contract work 
(hereinafter referred to as ``PCI-Risk'' contracts \33\) such as:
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    \30\ 48 CFR 7.503(d).
    \31\ Id. Sec.  2.101.
    \32\ Id. Sec.  17.601.
    \33\ The Conference believes that these activities are 
particularly likely to pose a risk of personal conflicts of 
interest. To the extent that the FAR Council or individual agencies 
believe that other activities pose similar risks, they should remain 
free to regulate contracts for such activities.
---------------------------------------------------------------------------

     Developing agency policy or regulations.
     Providing alternative dispute resolution services on 
contractual matters; legal advice involving interpretation of 
statutes or regulations; significant substantive input relevant to 
agency decision-making; or professional advice for improving the 
effectiveness of Federal management processes and procedures.
     Serving as the primary authority for managing or 
administering a project or operating a facility.
     Preparing budgets, and organizing and planning agency 
activities.
     Supporting substantive acquisition planning \34\ or 
research and development activities.
---------------------------------------------------------------------------

    \34\ The FAR Council has issued a proposed rule that would 
establish personal conflict of interest standards for contractor 
employees performing acquisition activities closely associated with 
inherently governmental functions. Preventing Personal Conflicts of 
Interest for Contractor Employees Performing Acquisition Functions, 
74 FR at 58,588. To the extent it is ultimately implemented, this 
rule would obviate the need for any additional FAR contract clause 
with respect to these contracts.
---------------------------------------------------------------------------

     Evaluating another contractor's performance or contract 
proposal.
     Assisting in the development of a statement of work or 
in contract management.
     Participating as a technical advisor to a source 
selection board or as a member of a source evaluation board (i.e., 
boards designed to select or evaluate bids or proposals for 
procurement contracts).
    Information-Risk Contracts: Existing regulations also do not 
comprehensively protect against contractor employees' disclosure or 
misuse of non-public governmental, business, or personal information 
learned while performing government contracts.\35\ As with personal 
conflicts of interest, specific activities pose a grave risk of 
contractor disclosure or misuse of non-public information, which 
include (hereinafter referred to as ``Information-Risk'' contracts 
\36\):
---------------------------------------------------------------------------

    \35\ U.S. Gov't Accountability Office, Stronger Safeguards 
Needed for Contractor Access to Sensitive Information, supra note 
25, at 30 (recommending that the FAR Council provide guidance on the 
use of non-disclosure agreements as a condition to contractors' 
accessing sensitive information and on ``establishing a requirement 
for prompt notification to appropriate agency officials of a 
contractor's unauthorized disclosure or misuse of sensitive 
information'').
    \36\ The Conference believes that these activities are 
particularly likely to pose a risk of disclosure or misuse of non-
public information. This recommendation does not define the term 
``non-public information;'' the FAR Council would be responsible for 
drafting language more precisely defining the types of information 
and services covered. In doing so, the FAR Council could choose to 
draw on existing definitions created for similar purposes. See, 
e.g., 5 CFR 2635.703 (defining ``nonpublic information'' and 
prohibiting government employees from misusing such information, 
including information routinely withheld under 5 U.S.C. Sec.  552(b) 
(FOIA exemptions)); U.S. Gov't Accountability Office, Stronger 
Safeguards Needed for Contractor Access to Sensitive Information, 
supra note 25, at 4-5 (defining a category of information that 
requires safeguards against unauthorized disclosure). To the extent 
that the FAR Council or individual agencies believe that other 
activities pose similar risks, they should remain free to regulate 
such activities through appropriate solicitation provisions or 
contract clauses.
---------------------------------------------------------------------------

     Contracts in which certain employees will receive 
access to information relating to an agency's deliberative 
processes, management operations, or staff that is not generally 
released to the public.
     Contracts in which certain employees will have access 
to certain business-related information, including trade secrets, 
non-public financial information, or other non-public information 
that could be exploited for financial gain.\37\
---------------------------------------------------------------------------

    \37\ For instance, if an employee of a contractor performing 
auditing functions for the government were to learn that a large 
manufacturing firm intends to open a new plant in coming months, the 
employee could purchase property near the plant and reap a 
substantial financial windfall. The contemplated regime would 
require that the contractor train employees privy to such 
information on their obligations to keep the information 
confidential and to avoid transacting business on the basis of such 
information, penalize employees who violate such obligations, and 
report any employee violations to the contracting agency.
---------------------------------------------------------------------------

     Contracts in which certain employees will have access 
to personally identifying or other non-public personal information, 
such as social security numbers, bank account numbers, or medical 
records.\38\
---------------------------------------------------------------------------

    \38\ U.S. Gov't Accountability Office, Stronger Safeguards 
Needed for Contractor Access to Sensitive Information, supra note 
24, at 6.
---------------------------------------------------------------------------

Recommendation

    1. The Federal Acquisition Regulatory Council (``FAR Council'') 
should promulgate model language for use in contracts posing a high 
risk of either personal conflicts of interest or misuse of certain 
non-public information.\39\ Current law does not adequately regulate 
against the risks of contractor employee personal conflicts of 
interest and misuse of non-public information. On occasion certain 
agencies impose additional ethics requirements by supplemental 
regulation or contract. In addition, certain contractors, especially 
large companies, have adopted and enforced internal ethics codes. 
Nevertheless, coverage varies significantly from agency to agency 
and contract to contract. In order to bring consistency to this 
process and ensure that the government's interests are adequately 
protected, the FAR Council should draft model language in the 
Federal Acquisition Regulation (``FAR'') for agency contracting 
officers to use, with modifications appropriate to the nature of the 
contractual services and risks presented, when soliciting and 
negotiating contracts that are particularly likely to raise issues 
of personal conflicts of interest or misuse of non-public 
information.
---------------------------------------------------------------------------

    \39\ The Conference takes no position on whether the contractual 
language adopted in individual contracts should ``flow down'' to 
sub-contractors and other persons besides prime contractors 
performing work on government contracts. That issue is best left to 
the discretion of the FAR Council.
---------------------------------------------------------------------------

    2. The model FAR provisions or clauses should apply to PCI-Risk 
and Information-Risk Contracts.\40\ The proposed FAR

[[Page 48795]]

provisions or clauses would apply only to PCI-Risk and Information-
Risk contracts (or solicitations for such contracts). At the same 
time, contracting agencies should remain free to incorporate 
contract language (or to promulgate agency-specific supplemental 
regulations) dealing with other ethical risks they deem important 
whether or not the contract at issue qualifies as a PCI-Risk or 
Information-Risk contract. Thus, the model FAR provisions or clauses 
adopted in response to this recommendation would serve as a floor 
upon which agencies could build if they deemed it appropriate, but 
would not supplant existing programs that now provide or may in the 
future provide more demanding or expansive ethical protections.
---------------------------------------------------------------------------

    \40\ The draft language would appear in part 52 of the FAR and 
would consist of draft solicitation provisions (which are used in 
soliciting contracts) and contract clauses (which are integrated 
into negotiated contracts). The use of the plural forms 
``provisions'' and ``clauses'' is not intended to exclude the 
possibility that the FAR Council could implement the recommendations 
with a single provision or clause. See the Preamble for the 
definition of ``PCI-Risk'' and ``Information-Risk'' contracts.
---------------------------------------------------------------------------

    3. Agencies should have the discretion whether to use or modify 
the model FAR provisions or clauses. An agency contracting officer 
would have the option to use the model FAR provisions or clauses 
when soliciting and/or contracting for activities falling into the 
PCI-Risk or Information-Risk categories. Because the provisions or 
clauses would be optional, the contracting agency would enjoy the 
discretion to modify the FAR language on a case-by-case basis to fit 
the circumstances, and to decide to forego including any such 
language if it deems that the particular contract at issue is 
unlikely to pose a significant risk of personal conflicts of 
interest or misuse of non-public information by contractor 
personnel. Nevertheless, the FAR Council should encourage 
contracting officers to use the model FAR language when applicable.
    4. The FAR should include model provisions or clauses for use in 
PCI-Risk procurements. The FAR Council should encourage agencies to 
include these model provisions or clauses in contracting actions 
involving PCI-Risk procurements.
    The proposed FAR provisions or clauses should require the 
contractor to certify \41\ that none of its employees who is in a 
position to influence government actions \42\ has a conflict of 
interest or that conflicted employees will be screened from 
performing work under any contract. Once a contractor is selected, 
the contract itself should include a clause requiring the contractor 
to train employees on recognizing conflicts, to implement a system 
for employees who can influence government action to report 
conflicts to the contractor, to screen any conflicted employees from 
contract performance, to report to the agency periodically on its 
efforts to protect against employee conflicts, and to disclose to 
the agency any instances of employee misconduct (as well as 
disciplinary action taken against any offending employee). A 
contractor's failure to implement an adequate system for employee 
conflict certification, to disclose or correct instances of employee 
misconduct, or to take appropriate disciplinary measures against 
employees who commit misconduct may be grounds for contract 
termination. In addition, a contractor that repeatedly proves 
incapable or unwilling to honor such contractual obligations may be 
subject to suspension or debarment in appropriate circumstances.
---------------------------------------------------------------------------

    \41\ The FAR should include a certification requirement rather 
than a disclosure process in order to minimize the burden on 
contractors. In order to fully perform their contractual 
obligations, contractors should be required to train their key 
personnel on recognizing and disclosing personal conflicts of 
interest. In the case of an anticipated conflict, a contractor 
employee should disclose the issue to the contractor, who must 
screen the employee from performing under the contract. The 
contractor should be responsible for disciplining employees who fail 
to disclose conflicts or honor a screening policy, and for 
disclosing such violations to the government.
    \42\ Every employee performing under the contract need not 
certify that he or she does not possess conflicting financial 
interests. For instance, in the case of a contractor assisting in 
the development of agency policy (a function falling within one of 
the ``high risk'' categories), employees performing administrative 
or other non-discretionary (particularly ministerial) tasks, such as 
those making copies of the report that the contractor will submit, 
need not perform such a certification.
---------------------------------------------------------------------------

    5. The FAR should include model provisions or clauses for use in 
Information-Risk procurements. The FAR Council should encourage 
agencies to include these model provisions or clauses in contracting 
actions involving Information-Risk procurements.
    The FAR language should require the contractor to ensure that 
its employees who have access to certain non-public information 
identified as posing an information risk are made aware of their 
duties to maintain the secrecy of such information and to avoid 
using it for personal gain. To the extent an employee breaches 
either of these obligations, the contractor should be responsible 
for reporting the breach to the government, minimizing the effects 
of the breach, and, where appropriate, disciplining the offending 
employee. A contractor's failure to observe these contractual 
requirements may be grounds for contract termination. In addition, a 
contractor that proves repeatedly incapable or unwilling to fulfill 
its duties may be subject to suspension or debarment in appropriate 
circumstances.
    6. Agencies not covered by the FAR also should consider using or 
modifying the model FAR provisions or clauses when negotiating 
contracts for activities falling in either of the ``high risk'' 
categories. Agencies and government instrumentalities not covered by 
the FAR should nevertheless familiarize themselves with the FAR 
language promulgated in response to this recommendation. To the 
extent that they plan to enter into contracts for activities listed 
in the PCI-Risk or Information-Risk categories, they should consider 
employing or, if necessary, modifying these solicitation provisions 
and/or contract clauses.

Administrative Conference Recommendation 2011-4

Agency Use of Video Hearings: Best Practices and Possibilities for 
Expansion

Adopted June 17, 2011

    Since the early 1990s, video teleconferencing technology 
(``VTC'') has been explored by various entities in the public and 
private sectors for its potential use in administrative hearings and 
other adjudicatory proceedings.\1\ In the last 10 years, advances in 
technology and carrier services coupled with reduced personnel and 
increased travel costs have made the use of VTC more attractive to 
local, state and Federal governments. The rise in the use of VTC by 
Federal and state courts has also been noted by academics.\2\ 
Similarly, in the past 10 years, there has been an increase in the 
use of video hearings by Federal agencies with high volume 
caseloads. Since pilot programs for video hearings at agencies first 
began in the early 1990s, VTC technology has become more advanced, 
more readily available and less expensive.
---------------------------------------------------------------------------

    \1\ See, e.g., Robert Anderson, The Impact of Information 
Technology on Judicial Administration: A Research Agenda for the 
Future, 66 S. Cal. L. Rev. 1762, 1770 (1993).
    \2\ See, e.g., Richard K. Sherwin, Neal Feigenson, & Christina 
Spiesel, Law in the Digital Age: How Visual Communication 
Technologies are Transforming the Practice, Theory, and Teaching of 
Law, 12 B.U. J. Sci. & Tech. L. 227, 229 (2006); Cathy Catterson, 
Changes in Appellate Caseload and Its Processing, 48 Ariz. L. Rev. 
287, 295 (2006); Fredric Lederer, The Road to the Virtual Courtroom? 
A Consideration of Today's--and Tomorrow's--High Technology 
Courtrooms, (State Justice Inst. 1999), reprinted in 50 S.C. L. Rev. 
799, 801 (2000).
---------------------------------------------------------------------------

    Certain Federal agencies, such as the Social Security 
Administration's Office of Disability Adjudication and Review 
(``ODAR''), the Department of Veteran Affairs' Board of Veteran 
Appeals (``BVA'') and the Department of Justice's Executive Office 
for Immigration Review (``EOIR'') have taken advantage of VTC for 
various adjudicatory proceedings. For example, in 2010, ODAR 
conducted a total of 120,624 video hearings, and a cost-benefit 
analysis conducted for the agency by outside consultants found that 
ODAR's current use of video hearings saves the agency a projected 
estimated amount of approximately $59 million dollars annually and 
$596 million dollars over a 10-year period. A study by the agency 
has also determined that the use of VTC has no effect on the outcome 
of cases.
    Other agencies, such as the Railroad Retirement Board, the 
United States Postal Service, the Department of Health and Human 
Services' Office of Medicare Hearings and Appeals, specifically have 
regulations allowing for the use of video teleconferencing.\3\ 
Similarly, agencies such as the U.S. Merit Systems Protection Board 
and the Commerce Trademark Trial and Appeal Board use VTC to conduct 
administrative hearings and other adjudicatory proceedings as a 
matter of practice under the broad statutory and/or regulatory 
discretion given to them.\4\
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    \3\ See, e.g., 20 CFR 260.5; 39 CFR 966.9; and 42 CFR 405.
    \4\ See, e.g., 5 U.S.C. 1204(a)(1) and 37 CFR 2.129(a).
---------------------------------------------------------------------------

    Despite the fact that some agencies within the Federal 
government have been using VTC to conduct mass adjudications for 
years, other agencies have yet to employ such technology. This may 
be because the use of VTC for administrative hearings is not without 
controversy. Some applaud the use of VTC by administrative agencies 
because it offers potential efficiency benefits, such as

[[Page 48796]]

reducing the need for travel and the costs associated with it, 
reducing caseload backlog, and increasing scheduling flexibility for 
agencies and attorneys as well as increasing access for parties.\5\ 
Critics, however, have suggested that hearings and other 
adjudicatory proceedings conducted by video may hamper communication 
between a party and the decision-maker; may hamper communication 
between parties and their attorneys or representatives; and/or may 
hamper a decision-maker's ability to make credibility 
determinations.\6\
---------------------------------------------------------------------------

    \5\ See Meghan Dunn & Rebecca Norwick, Federal Judicial Center 
Report of a Survey of Videoconferencing in the Court of Appeals 
(2006), pp. 1-2, available at http://www.fjc.gov/public/pdf.nsf/
lookup/vidconca.pdf/$file/vidconca.pdf.
    \6\ See American Bar Association's Commission on Immigration 
Report entitled ``Reforming the Immigration System'' (2010), pp. 2-
26-2-27.
---------------------------------------------------------------------------

    Recognizing both the praise for and critique of the use of VTC 
in administrative hearings and other adjudicatory proceedings, the 
Administrative Conference issues this Recommendation regarding the 
use of VTC in Federal agencies with high volume caseloads. The 
Conference has a long standing commitment to the values inherent in 
the agency adjudicatory process: Efficiency, fairness and 
acceptability/satisfaction.\7\ These values should drive decisions 
to use VTC. Therefore, this Recommendation suggests that agencies 
should use VTC only after conducting an analysis of the costs and 
benefits of VTC use and determining that such use would improve 
efficiency (i.e., timeliness and costs of adjudications) and would 
not impair the fairness of the proceedings or the participants' 
satisfaction with them. In addition, this Recommendation supports 
the Conference's statutory mandate of making improvements to the 
regulatory and adjudicatory process by improving the effectiveness 
and fairness of applicable laws. See generally Administrative 
Conference Act, 5 U.S.C Sec. Sec.  591-596.
---------------------------------------------------------------------------

    \7\ See Roger C. Cramton, A Comment on Trial-Type Hearings in 
Nuclear Power Plant Siting, 58 Va. L. Rev. 585, 591-93 (1972) 
(Professor Cramton is a former Chairman of the Conference); see also 
Paul R. Verkuil, A Study of Informal Adjudication Procedures, 43 U. 
Chi. L. Rev. 739 (1976) (describing the values of efficiency, 
fairness and satisfaction) (Mr. Verkuil is the current Chairman of 
the Conference). The balancing of these procedural values was 
undertaken in Mathews v. Eldridge, 424 U.S. 319 (1976).
---------------------------------------------------------------------------

    Accordingly, this Recommendation is directed at those agencies 
with high volume caseloads that do not currently use VTC as a 
regular practice in administrative hearings and/or other 
adjudicatory proceedings and that may benefit from the use of it to 
improve efficiency and/or reduce costs. Agencies with high volume 
caseloads are likely to receive the most benefit and/or cost savings 
from the use of VTC. However, the Conference encourages all agencies 
(including those with lower volume caseloads) to consider whether 
the use of VTC would be beneficial as a way to improve efficiency 
and/or reduce costs while also preserving the fairness and 
participant satisfaction of proceedings. This Recommendation sets 
forth some non-exclusive criteria that agencies should consider. For 
those agencies that determine that the use of VTC would be 
beneficial, this Recommendation also sets forth best practices 
provided in part by agencies currently using VTC.

Recommendation

    1. Federal agencies with high volume caseloads should consider 
using video teleconferencing technology (``VTC'') to conduct 
administrative hearings and other aspects of adjudicatory 
proceedings. Agencies with lower volume caseloads may also benefit 
from this recommendation.
    2. Federal agencies with high volume caseloads should consider 
the following non-exclusive criteria when determining whether to use 
video teleconferencing technology in administrative hearings and 
other adjudicatory proceedings:
    (a) Whether an agency's use of VTC is legally permissible under 
its organic legislation and other laws;
    (b) Whether the nature and type of administrative hearings and 
other adjudicatory proceedings conducted by the agency are conducive 
to the use of VTC;
    (c) Whether VTC can be used without affecting the outcome of 
cases heard by the agency;
    (d) Whether the agency's budget would allow for investment in 
appropriate and secure technology given the costs of VTC;
    (e) Whether the use of VTC would create cost savings, such as 
savings associated with reductions in personnel travel and with 
increased productivity resulting from reductions in personnel time 
spent on travel;
    (f) Whether the use of VTC would result in a reduction of the 
amount of wait time for an administrative hearing;
    (g) Whether users of VTC, such as administrative law judges, 
hearing officers and other court staff, parties, witnesses and 
attorneys (or other party representatives), would find the use of 
such technology beneficial;
    (h) Whether the agency's facilities and administration, both 
national and regional (if applicable), can be equipped to handle the 
technology and administration required for use of VTC;
    (i) Whether the use of VTC would adversely affect the 
representation of a party at an administrative hearing or other 
adjudicatory proceeding; and
    (j) Whether the communication between the various individuals 
present at a hearing or proceeding (including parties, witnesses, 
judges, hearing officers and other agency staff, translators and 
attorneys (or other party representatives)) would be adversely 
affected.
    3. Federal agencies with high volume caseloads that decide to 
use video teleconferencing technology to conduct administrative 
hearings and other adjudicatory proceedings should consider the 
following best practices:
    (a) Use VTC on a voluntary basis and allow a party to have an 
in-person hearing or proceeding if the party chooses to do so.
    (b) Periodically evaluate the use of VTC to make sure that the 
use is outcome-neutral (i.e., does not affect the decision rendered) 
and that the use is meeting the needs of its users.
    (c) Solicit feedback and comments (possibly through notice-and-
comment rulemaking) about VTC from those who would use it regularly 
(e.g., administrative law judges, hearing officers and other 
administrative staff, parties, witnesses and attorneys (or other 
party representatives)).
    (d) Begin the use of VTC with a pilot program and then evaluate 
the pilot program before moving to wider use.
    (e) Structure training at the outset of implementation of VTC 
use and have technical support available for troubleshooting and 
implementation questions.
    (f) Consult the staff of the Administrative Conference of the 
United States and/or officials at other agencies that have used VTC 
for best practices, guidance, advice, and the possibilities for 
shared resources and collaboration.

[FR Doc. 2011-20138 Filed 8-8-11; 8:45 am]
BILLING CODE 6110-01-P