[Federal Register Volume 78, Number 232 (Tuesday, December 3, 2013)]
[Proposed Rules]
[Pages 72620-72622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-28930]





48 CFR Parts 44, 46, and 52

[FAR Case 2012-032; Docket No. 2012-0032; Sequence No. 1]
RIN 9000-AM65

Federal Acquisition Regulation; Higher-Level Contract Quality 

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

ACTION: Proposed rule.


SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to clarify when to use higher-level 
quality standards in solicitations and contracts, and to update the 
examples of higher-level quality standards by revising obsolete 
standards and adding two new industry standards that pertain to quality 
assurance for avoidance of counterfeit items. These standards will be 
used to help minimize and mitigate counterfeit items or suspect 
counterfeit items in Government contracting.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat at one of the addressees shown below on or 
before February 3, 2014 to be considered in the formation of the final 

ADDRESSES: Submit comments in response to FAR Case 2012-032 by any of 
the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by searching for ``FAR Case 
2012-032.'' Select the link ``Submit a Comment'' that corresponds with 
``FAR Case 2012-032.'' Follow the instructions provided at the ``Submit 
a Comment'' screen. Please include your name, company name (if any), 
and ``FAR Case 2012-032'' on your attached document.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (MVCB), ATTN: Hada Flowers, 1800 F Street NW., 2nd Floor, 
Washington, DC 20405-0001.
    Instructions: Please submit comments only and cite FAR Case 2012-
032, in all correspondence related to this case. All comments received 
will be posted without change to http://www.regulations.gov, including 
any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT: Ms. Marissa Petrusek, Procurement 
Analyst, at 202-501-0136, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAR Case 2012-032.


I. Background

    DoD, GSA, and NASA are proposing to amend the Federal Acquisition 
Regulation (FAR) to revise FAR subpart 46.2, Contract Quality 
Requirements, to ensure that agencies assess the risk of nonconforming 
items when determining whether higher-level quality standards should be 
used by the Government and relied on by contractors. These quality 
standards must be designated in the solicitation and resultant 
contract. The contractor must also ensure its

[[Page 72621]]

subcontractors adhere to the quality standards, where appropriate. This 
case proposes to add this to the list of issues to be considered during 
contractor purchasing system reviews, referenced in FAR 44.303, to 
ensure that higher-level quality standards are implemented 
appropriately by the prime contractor.
    Section 818, entitled ``Detection and Avoidance of Counterfeit 
Electronic Parts,'' of the National Defense Authorization Act (NDAA) 
for Fiscal Year (FY) 2012 (Pub. L. 112-81, enacted December 31, 2011) 
requires DoD to issue regulations addressing contractor 
responsibilities for detecting and avoiding the use or inclusion of 
counterfeit electronic parts or suspect counterfeit electronic parts. 
However, because of the globalization of the marketplace, the problem 
of counterfeits extends far beyond DoD and electronic parts, posing a 
supply chain challenge to both Government and industry. Globalization 
in the marketplace increased the risk of counterfeit items in the 
government's and industry's supply chain. Globalization raises the risk 
because of the variations in laws related to commerce and fragments the 
quality assurance process.
    While this rule does not directly implement any specific aspect of 
section 818, it recognizes the quality, reliability, and safety risk 
that counterfeit items represent, and adds two examples of higher-level 
quality standards that respond to the need for quality controls in 
acquisitions for complex or critical items.
    This proposed rule is one of three FAR system proposed rules 
addressing various aspects of detection and avoidance of counterfeit 
parts as required by section 818:
    1. Defense Federal Acquisition Regulation Supplement Case 2012-
D055, entitled ``Detection and Avoidance of Counterfeit Electronic 
Parts,'' which was published for public comment in the Federal Register 
at 78 FR 28780 on May 16, 2013.
    2. FAR Case 2013-002, entitled ``Expanded Reporting of 
Nonconforming Supplies,'' is being drafted to require expanded 
reporting of nonconforming items in partial implementation of section 
818 of the NDAA for FY 2012.

II. Discussion and Analysis

    The rule proposes to make the following changes:
     FAR 44.303, Contractors' Purchasing Systems Review, would 
be revised to add implementation of higher-level quality standards to 
the areas for evaluation when conducting a contractor's purchasing 
system review.
     Types of contract quality requirements FAR subsections 
will change as follows:
    [cir] FAR 46.202-4(a) would be revised to require agencies to 
establish procedures for determining when higher-level quality 
standards are appropriate, for determining the risk (both the 
likelihood and the impact) of receiving nonconforming items, and for 
advising the contracting officer which higher-level quality standards 
should be applied on the contract.
     FAR 46.202-4(a)(1) would be revised to add ``design'' and 
``testing'' to the list of examples of technical requirements requiring 
    [cir] FAR 46.202-4(b) would be revised to remove outdated or 
obsolete standards and add new examples of higher-level quality 
standards, including those related to counterfeit electronic parts and 
materials. This list of standards was reviewed and revised based on 
subject matter experts in quality assurance from across the Government.
     FAR 46.311, Higher-level Contract Quality Requirement, 
would be revised to clarify that, if the clause is used, the 
contracting officer shall list one or more higher-level quality 
     The clause at FAR 52.246-11, Higher-Level Contract Quality 
Requirement, would be revised to remove the opportunity for the offeror 
to select a standard.

III. Executive Order 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

    The Department of Defense (DoD), the General Services 
Administration (GSA), and the National Aeronautics and Space 
Administration (NASA) do not expect this proposed 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 it does not apply to acquisitions for goods or services 
that are not designated critical by the agency and does not add new 
reporting requirements.
    The Initial Regulatory Flexibility Analysis (IRFA) is summarized as 

    This case was opened to enable the Government to select 
appropriate quality standards based on the criticality of the 
requirement and the risk nonconforming items pose to the 
accomplishment of an agency's mission in a given acquisition. Based 
on this analysis, the Government will identify the appropriate 
quality standards for the procurement. The contractor must ensure 
that its deliverables meet all the specified quality standards, 
which also entails ensuring that its subcontractors adhere to the 
higher level quality standard where appropriate. This case proposes 
to (a) have the contracting officer specify the higher-level quality 
requirement(s), as opposed to the contractor selecting a standard 
from a list and (b) add the implementation of higher-level quality 
standards to the list of items to be considered during contractor 
purchasing system reviews. No instances were found in practice where 
this clause was being used to allow offerors an opportunity to opt-
out of a quality standard; therefore, this change is being made, in 
part, to be consistent with common practice.
    We estimate that small businesses that provide critical items 
directly to the Government or to Government prime contractors may be 
impacted by this rule, however, there are no statistics or databases 
that would identify the number of contracts that contain higher-
level quality standards and how many of those contracts are awarded 
to small businesses.
    There are no reporting, recordkeeping, or other compliance 
requirements associated with this proposed rule. Any such 
requirements for a contractor purchasing system review have already 
been addressed in FAR subpart 44.3. The proposed rule will not 
create new purchasing system review requirements beyond those that 
already exist. The rule does not duplicate, overlap, or conflict 
with any other Federal rules. The compliance and reporting 
requirements associated with the proposed rule have been minimized. 
DoD, GSA, and NASA have been unable to identify any alternatives 
that meet the objectives of this rule.

    The Regulatory Secretariat has submitted a copy of the IRFA to the 
Chief Counsel for Advocacy of the Small Business Administration. A copy 
of the IRFA may be obtained from the Regulatory Secretariat. DoD, GSA, 
and NASA invite comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
    DoD, GSA, and NASA 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

[[Page 72622]]

parties must submit such comments separately and should cite 5 U.S.C. 
610 (FAR Case 2012-032) in correspondence.

V. Paperwork Reduction Act

    The proposed 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).

List of Subjects in 48 CFR Parts 44, 46, and 52

    Government procurement.

    Dated: November 26, 2013.
William Clark,
Acting Director, Office of Government-Wide Acquisition Policy, Office 
of Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 44, 46, 
and 52 as set forth below:

1. The authority citation for 48 CFR part 44 continues to read as 

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.


2. Amend section 44.303 by--
a. Removing from the end of paragraph (i) ``and'';
b. Removing from the end of paragraph (j) the period and adding ``; 
and'' in its place; and
c. Adding paragraph (k).
    The added text reads as follows:

44.303   Extent of review.

* * * * *
    (k) Implementation of higher-level quality standards.


3. The authority citation for 48 CFR part 46 is revised to read as 

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

4. Revise section 46.202-4 to read as follows:

46.202-4   Higher-level contract quality requirements.

    (a) Agencies shall establish procedures for determining when 
higher-level contract quality requirements are necessary, for 
determining the risk (both the likelihood and the impact) of receiving 
nonconforming items, and for advising the contracting officer about 
which higher-level standards should be applied and included in the 
solicitation and contract. Requiring compliance with higher-level 
quality standards is appropriate in solicitations and contracts for 
complex or critical items (see 46.203(b) and (c)) or when the technical 
requirements of the contract require--
    (1) Control of such things as design, work operations, in-process 
controls, testing, and inspection; or
    (2) Attention to such factors as organization, planning, work 
instructions, documentation control, and advanced metrology.
    (b) When the contracting officer, in consultation with technical 
personnel and in accordance with agency procedures, finds it is in the 
Government's interest to require higher-level quality standards be 
implemented, the contracting officer shall use the clause prescribed at 
46.311 to list the applicable standard(s). Examples of higher-level 
quality standards include, but are not limited to, ISO 9001, ASQ E, 
ASME NQA-1, SAE AS9100, SAE AS9003, SAE AS5553, and SAE AS6174.
5. Revise section 46.311 to read as follows:

46.311   Higher-level contract quality requirement.

    The contracting officer shall insert the clause at 52.246-11, 
Higher-Level Contract Quality Requirement, in solicitations and 
contracts when the inclusion of a higher-level contract quality 
requirement is appropriate and one or more such standards will be 
included in the clause (see 46.202-4).


6. The authority citation for 48 CFR part 52 continues to read as 

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

7. Revise section 52.246-11 to read as follows:

52.246-11   Higher-Level Contract Quality Requirement.

    As prescribed in 46.311, insert the following clause: Higher-Level 
Contract Quality Requirement (Date)

    The Contractor shall comply with the higher-level quality 
standard(s) listed below.
    [Contracting Officer insert the title, number, date, and 
tailoring (if any) of the higher-level quality standards.]

    (End of clause)

[FR Doc. 2013-28930 Filed 12-2-13; 8:45 am]