[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]
[Rules and Regulations]
[Pages 80382-80384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31150]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 12, 13, 32, 43, and 52
[FAC 2005-72; FAR Case 2013-005; Item III; Docket 2013-0005, Sequence
1]
RIN 9000-AM45
Federal Acquisition Regulation; Terms of Service and Open-Ended
Indemnification and Unenforceability of Unauthorized Obligations
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: DoD, GSA, and NASA have adopted as final, without change, an
interim rule amending the Federal Acquisition Regulation (FAR) to
address concerns raised in an opinion from the U.S. Department of
Justice (DOJ) Office of Legal Counsel (OLC) involving the use of
unrestricted, open-ended indemnification clauses in acquisitions for
social media applications.
DATES: Effective: December 31, 2013.
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 FAC 2005-72, FAR Case 2013-
005.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published an interim rule in the Federal
Register at 78 FR 37686 on June 21, 2013, to implement a recent DOJ OLC
opinion, entitled ``Memorandum for Barbara S. Fredericks, Assistant
General Counsel for Administration, United States Department of
Commerce,'' which noted that the Anti-Deficiency Act (ADA) (31 U.S.C.
1341) is violated when a Government contracting officer or other
employee with authority to bind the Government agrees, without
statutory authorization or other exception, to an open-ended,
unrestricted indemnification clause. On April 4, 2013, the Office of
Management and Budget (OMB) issued guidance outlining a series of
management actions to ensure agencies act in compliance with the ADA
and in accordance with OLC's opinion. See
[[Page 80383]]
OMB Guidance M-13-10, Anti-deficiency Act Implications of Certain
Online Terms of Service Agreements. The interim rule became effective
on June 21, 2013. One respondent submitted comments on the interim
rule.
II. Discussion and Analysis
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council (the Councils) reviewed the comments in the
development of the final rule. A discussion of the comments is provided
as follows:
A. Summary of Significant Changes
No changes were made as a result of the public comments.
B. Analysis of Public Comments
1. Attachment of Clause to Licenses
Comment: The respondent believed that the clause does not reliably
attach to licenses because of situations where an End User License
Agreement (EULA) or Terms of Service (TOS) is passed through an
intermediary contractor or subcontractor to the Government. The
respondent recommended that the Government directly negotiate with
major commercial software and service providers to ensure that the
clause ``is included in those providers' EULAs or TOSs with the
Government and that the interim rule make clear that commercial items
and software can be accepted only where such an agreement has been made
directly with the licensor''.
Response: The clause does attach to licenses. The clause is not
limited to instances in which the Government has directly negotiated
with the indemnitees. No change is made in the final rule.
2. Unintended Consequences
Comment: The respondent expressed concern that this rule could lead
commercial companies to forego doing business with the Government. Not
all contractors may be able to accept the risk re-allocation effected
by the interim rule, according to the respondent.
Response: The interim rule became effective on June 21, 2013. The
objective of the rule is to clarify that the inclusion of an open-ended
indemnification clause in a EULA, TOS, or other agreement, is not
binding on the Government unless expressly authorized by statute and
specifically authorized under applicable agency regulations and
procedures, and shall be deemed to be stricken from the EULA, TOS, or
similar legal instrument or agreement. Since the interim rule was
published, the Councils have received no indications that the scenario
envisioned by the respondent has come to pass. No change is made in the
final rule.
3. Alternative Solutions To Address the ADA Concerns
Comment: The respondent suggested two alternatives. The first was
for the Department of Justice to definitively indicate that agency
disclosures are not required for (and contracting officers will not be
prosecuted for) ADA violations stemming solely from open-ended
indemnifications contained in commercial EULAs and TOSs so long as,
once discovered, the Government negotiates with the licensor directly
to limit the attendant open-ended risk. The other alternative was for
the Government to retain the clause from the interim rule with a cap on
licensors' liability at the amount of appropriated funds directed to
the particular purchase.
Response: This type of additional guidance would not be included in
the FAR. Development of this additional guidance is outside the purview
of the Councils. No change is made in the final rule.
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
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5
U.S.C. 601, et seq. The FRFA is summarized as follows:
This final rule is required to implement an opinion by the U.S.
Department of Justice Office of Legal Counsel. The objective of the
final rule is to clarify that the inclusion of an open-ended
indemnification clause in a EULA, TOS, or other agreement, is not
binding on the Government unless expressly authorized by statute and
specifically authorized under applicable agency regulations and
procedures, and shall be deemed to be stricken from the EULA, TOS,
or similar legal instrument or agreement.
The Chief Counsel for Advocacy of the Small Business
Administration did not submit any comments in response to the rule.
This rule will impact all small entities with a supply or
service contract subject to a supplier license agreement. There may
be a small beneficial impact on small entities because these
revisions to the FAR will help save time and streamline processes
since small entities will no longer have to individually
renegotiate, on a prospective basis, a EULA, TOS, or similar
agreement containing an indemnification provision. Further, clauses
like open-ended, unrestricted indemnification clauses have generally
been unenforceable against the Government, unless expressly
authorized by statute, and the FAR is being revised to reflect this.
DoD, GSA and NASA estimate that this rule will impact
approximately 3,538 small entities. Many supplies or services are
acquired subject to supplier license agreements. These are
particularly common in information technology acquisitions, but they
may apply to any supply or service. DoD, GSA and NASA considered
that the majority of the information technology purchases associated
with this rule will be purchased through the GSA Information
Technology Schedule 70 contracts. As such, DoD, GSA, and NASA used,
as a basis for the estimate, the number of GSA Information-
Technology Schedule 70 vendors, plus an estimate for contractors
other than information technology acquisitions.
There are currently 4,988 GSA Information-Technology Schedule 70
vendors. DoD, GSA and NASA estimate that this rule will impact 75
percent, or 3,741, of those vendors because they have EULAs or TOS
in their Government contracts. Of those affected entities, it is
estimated that around 86 percent, or 3,217, will be small entities.
DoD, GSA, and NASA estimate that there are approximately 10 percent,
or 321, more small entities across the Government with information
technology acquisitions and other than information-technology
acquisition with Government contracts that include EULAs or TOS and
therefore impacted. As a result, it is estimated that this rule will
impact approximately 3,538 small entities.
DoD, GSA, and NASA do not anticipate an impact on small entities
in acquisitions conducted through Government purchase cards. This is
because the rule does not require entities to negotiate or change
their agreement language.
There is no record keeping or reporting requirement for this
rule.
Steps have been taken in this interim rule to minimize the
impact on small entities which help to save them time and streamline
their processes; for example, this would greatly reduce the
requirement to negotiate all EULAs, TOS, or similar arrangements on
a case-by-case basis.
Interested parties may obtain a copy of the FRFA from the
Regulatory Secretariat. The Regulatory Secretariat
[[Page 80384]]
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of
the Small Business Administration.
V. Paperwork Reduction Act
The final 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 12, 13, 32, 43, and 52
Government procurement.
Dated: December 19, 2013.
William Clark,
Acting Director, Office of Government-wide Acquisition Policy, Office
of Acquisition Policy, Office of Government-wide Policy.
Interim Rule Adopted as Final Without Change
Accordingly, the interim rule amending 48 CFR parts 12, 13, 32, 43,
and 52, which was published in the Federal Register at 78 FR 37686 on
June 21, 2013, is adopted as a final rule without change.
[FR Doc. 2013-31150 Filed 12-30-13; 8:45 am]
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