[Federal Register Volume 78, Number 189 (Monday, September 30, 2013)]
[Rules and Regulations]
[Pages 59859-59861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23764]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 216 and 252

RIN 0750-AI04


Defense Federal Acquisition Regulation Supplement: Allowability 
of Legal Costs for Whistleblower Proceedings (DFARS Case 2013-D022)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Interim rule.

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[[Page 59860]]

SUMMARY: DoD is issuing an interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2013 that amends the 
allowability of legal costs incurred by a contractor related to 
whistleblower proceedings.

DATES: Effective date: September 30, 2013
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before November 29, 2013, to 
be considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2013-D022, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Submit comments 
via the Federal eRulemaking portal by entering ``DFARS Case 2013-D022'' 
under the heading ``Enter keyword or ID'' and selecting ``Search.'' 
Select the link ``Submit a Comment'' that corresponds with ``DFARS Case 
2013-D022.'' Follow the instructions provided at the ``Submit a 
Comment'' screen. Please include your name, company name (if any), and 
``DFARS Case 2013-D022'' on your attached document.
    [cir] Email: [email protected]. Include DFARS Case 2013-D022 in the 
subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
Williams, OUSD (AT&L) DPAP/DARS, Room 3B855, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition 
Regulations System, OUSD (AT&L) DPAP/DARS, Room 3B855, 3060 Defense 
Pentagon, Washington, DC 20301-3060. Telephone 571-372-6106; facsimile 
571-372-6094.

SUPPLEMENTARY INFORMATION:

I. Background

    This interim rule revises DFARS subparts 216.3 and adds a new 
clause at 252.216 to implement paragraphs (g) and (i) of section 827 of 
the National Defense Authorization Act for Fiscal Year 2013 (Pub. L. 
112-239).

II. Discussion and Analysis

    The National Defense Authorization Act (NDAA) for Fiscal Year 2013 
(Pub. L. 112-239, enacted January 2, 2013) established enhanced 
whistleblower protections for contractor and subcontractor employees in 
separate, but parallel, sections of the NDAA for titles 10 and 41 
agencies, respectively. Title 10 agencies are required by the terms of 
section 827(i)(2) to revise their respective FAR supplements. These 
enhanced whistleblower protections and the associated cost principle 
changes are being implemented by two DFARS cases (for DoD only) and two 
FAR cases (for title 41 agencies), which are independent, but parallel, 
rulemakings because of some minor differences in the operations of the 
underlying statutes and because the title 41 statute is only a four-
year pilot program.
    Paragraph 827(g) addresses the allowability of legal costs incurred 
by a contractor related to whistleblower proceedings.
    Paragraph 827(i)(1) specifies that the amendments made by section 
827 are applicable to--
     Contracts awarded on or after the effective date;
     Task orders entered into on or after the effective date, 
pursuant to contracts awarded before, on, or after such date; and
     Contracts awarded before the effective date, which are 
modified to include a contract clause providing for the applicability 
of such amendments.
    Paragraph 827(i)(3) requires that at the time of any major 
modification to a contract that was awarded before the effective date, 
the head of the contracting agency shall make best efforts to include 
in the contract a clause providing for the applicability to the 
contract of the amendments made by section 827.
    DoD has added a new clause at DFARS 252.216-7009, Allowability of 
Legal Costs Incurred in Connection With a Whistleblower Proceeding, as 
prescribed at DFARS 216.307(a). This clause is necessary to make the 
revised whistleblower cost principle applicable to any task orders 
issued against contracts awarded prior to the effective date of this 
regulation and any contracts modified to implement section 827. 
Otherwise, unless the terms of the contract state otherwise, FAR clause 
52.216-7, Allowable Cost and Payment, states in paragraph (a) that 
costs are determined to be allowable in accordance with FAR subpart 
31.2 in effect on the date of the contract award.
    DFARS Case 2013-D010 will address the paragraphs of section 827 
that provide enhancements of whistleblower protections for contractor 
employees, including revisions to 10 U.S.C. 2409.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is a significant regulatory action and, therefore, was subject to 
review under section 6(b) of E.O. 12866, Regulatory Planning and 
Review, dated September 30, 1993. This rule is not a major rule under 5 
U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD does not expect this interim rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because most contracts awarded to small entities are awarded on a 
competitive fixed-price basis, and do not require application of the 
cost principles contained in this rule. However, an initial regulatory 
flexibility analysis has been performed and is summarized as follows:
    The reason for the action is to implement paragraphs 827(g) and (i) 
of the National Defense Authorization Act for Fiscal Year 2013 (Pub. L. 
112-239). Section 827(g) expands the cost principle at 10 U.S.C. 
2324(k) to apply the cost principle on allowability of costs related to 
legal and other proceedings to costs incurred by contractors in 
proceedings commenced by a contractor employee submitting a complaint 
under 10 U.S.C. 2409 (whistleblowing), and include as specifically 
unallowable, legal costs of a proceeding that results in an order to 
take corrective action under 10 U.S.C. 2409. The legal basis for the 
rule is 10 U.S.C. 2324(k).
    Most contracts awarded on a fixed-price competitive basis do not 
require application of the cost principles. The majority of contracts 
valued at or below the simplified acquisition threshold are awarded on 
a fixed price competitive basis. Requiring submission of certified cost 
or pricing data for acquisitions that do not exceed the simplified 
acquisition threshold is prohibited (FAR 15.403-4(a)(2). According to 
the Federal

[[Page 59861]]

Procurement Data System data for Fiscal Year (FY) 2012, there were 
48,115 new DoD contract awards over the simplified acquisition 
threshold in FY 2012. Of those contracts, only 6,760 awards were to 
small businesses on other than a competitive fixed-price basis. 
Estimating 3 awards per small business, that could involve about 2,600 
small businesses. However, this rule would only affect a contractor if 
a contractor employee commenced a proceeding by submitting a complaint 
under 10 U.S.C. 2409, and if that proceeding resulted in imposition of 
a monetary penalty or an order to take corrective action under 10 
U.S.C. 2409. We do not have data on the percentage of contracts that 
involve submission of a whistleblower complaint and result in monetary 
penalty or an order to take corrective action.
    There are no projected reporting, recordkeeping, or other 
compliance requirements of this rule.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules. DoD was unable to identify any alternatives to the rule 
that would reduce the impact on small entities and still meet the 
requirements of the statute.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2013-D022), in 
correspondence.

V. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

VI. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. By operation 
of law, the new statute for the whistleblower protection became 
effective on July 1, 2013, i.e., Congress included language in section 
827(i) specifically addressing the effective date of the revisions to 
10 U.S.C. 2409 and 10 U.S.C. 2324. Section 827(g), which is implemented 
through this rulemaking, addresses the contractor's legal fees arising 
from an employee's complaint of reprisal and makes these fees expressly 
unallowable costs when there is contractor culpability. The most 
effective and efficient way to ensure awareness and compliance by the 
DoD and its contractors with section 827(g) is through the issuance of 
an interim rule. This regulation requires nothing beyond that which is 
set forth clearly in the statute. However, pursuant to 41 U.S.C. 1707 
and FAR 1.501-3(b), DoD will consider public comments received in 
response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 216 and 252

    Government procurement.

Manuel Quinones,
Editor, Defense Acquisition Regulations System.
    Therefore, 48 CFR parts 216 and 252 are amended as follows:

0
1. The authority citation for 48 CFR parts 216 and 252 continues to 
read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR Chapter 1.

PART 216--TYPES OF CONTRACTS

0
2. Add section 216.307 to subpart 216.3 to read as follows:


216.307  Contract clauses.

    (a) As required by section 827 of the National Defense 
Authorization Act for Fiscal Year 2013 (Pub. L. 112-239), use the 
clause at 252.216-7009, Allowability of Costs Incurred in Connection 
With a Whistleblower Proceeding--
    (1) In task orders entered pursuant to contracts awarded before 
September 30, 2013, that include the clause at FAR 52.216-7, Allowable 
Cost and Payment; and
    (2) In contracts awarded before September 30, 2013, that--
    (i) Include the clause at FAR 52.216-7, Allowable Cost and Payment; 
and
    (ii) Are modified to include the clause at DFARS 252.203-7002, 
Requirement to Inform Employees of Whistleblower Rights, dated 
September 2013 or later.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Add section 252.216-7009 to read as follows:


252.216-7009  Allowability of legal costs incurred in connection with a 
whistleblower proceeding.

    As prescribed in 216.307(a), use the following clause:

Allowability of Legal Costs Incurred in Connection With a Whistleblower 
Proceeding (SEP 2013)

    Pursuant to section 827 of the National Defense Authorization 
Act for Fiscal year 2013 (Pub. L. 112-239), notwithstanding FAR 
clause 52.216-7, Allowable Cost and Payment--
    (1) The restrictions of FAR 31.205-47(b) on allowability of 
costs related to legal and other proceedings also apply to any 
proceeding brought by a contractor employee submitting a complaint 
under 10 U.S.C. 2409, entitled ``Contractor employees: protection 
from reprisal for disclosure of certain information;'' and
    (2) Costs incurred in connection with a proceeding that is 
brought by a contractor employee submitting a complaint under 10 
U.S.C. 2409 are also unallowable if the result is an order to take 
corrective action under 10 U.S.C. 2409.

(End of clause)

[FR Doc. 2013-23764 Filed 9-27-13; 8:45 am]
BILLING CODE 5001-06-P