[Federal Register Volume 79, Number 63 (Wednesday, April 2, 2014)]
[Proposed Rules]
[Pages 18503-18506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07371]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 3, 12, and 52
[FAR Case 2013-022; Docket No. 2013-0022; Sequence No. 1]
RIN 9000-AM69
Federal Acquisition Regulation; Extension of Limitations on
Contractor Employee Personal Conflicts of Interest
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to implement a section of the National
Defense Authorization Act (NDAA) for Fiscal Year 2013 to extend the
limitations on contractor employee personal conflicts of interest to
apply to the performance of all functions that are closely associated
with inherently governmental functions and contracts for personal
services.
DATES: Interested parties should submit written comments to the
Regulatory Secretariat at one of the addressees shown below on or
before June 2, 2014 to be considered in the formation of the final
rule.
ADDRESSES: Submit comments in response to FAR Case 2013-022 by any of
the following methods:
Regulations.gov: http://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by searching for ``FAR Case
2013-022.'' Select the link ``Comment Now'' that corresponds with ``FAR
Case 2013-022.'' Follow the instructions provided at the ``Submit a
Comment'' screen. Please include your name, company name (if any), and
``FAR Case 2013-022'' 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.
Instructions: Please submit comments only and cite FAR Case 2013-
022, 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. Cecelia L. Davis, Procurement
Analyst, at 202-219-0202, for clarification of content. For information
pertaining to status or publication schedules, contact the Regulatory
Secretariat at 202-501-4755. Please cite FAR Case 2013-022.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA are proposing to revise the FAR to implement
section 829 of the NDAA for Fiscal Year 2013 (Pub. L. 112-239). Section
829 required the Secretary of Defense to review the guidance on
personal conflicts of interest for contractor employees, issued
pursuant to section 841(a) of the NDAA for Fiscal Year 2009 (Pub. L.
110-417), in order to determine whether it would be in the best
interest of DoD and the taxpayers to extend such guidance to personal
conflicts of interest by contractor personnel performing any of the
following:
(1) Functions other than acquisition functions that are closely
associated with inherently governmental functions (as that term is
defined at 10 U.S.C. 2383(b)(3)).
(2) Personal services contracts (as that term is defined in 10
U.S.C. 2330a(g)(5)).
(3) Contracts for staff augmentation services (as that term is
defined in section 808(d)(3)) of the NDAA for Fiscal Year 2012 (Pub. L.
112-81).
A. Section 841(a) of the National Defense Authorization Act for Fiscal
Year 2008
1. Section 841(a) (now codified at 41 U.S.C. 2303(b)) required the
Administrator for Federal Procurement Policy to develop and issue a
policy to address personal conflicts of interest for contractor
employees who perform acquisition functions closely associated with
inherently governmental functions. The final rule to implement section
841(a) in the FAR was published in the Federal Register at 76 FR 68017
on November 2, 2011, effective December 2, 2011. The rule added FAR
subpart 3.11, Preventing Personal Conflicts of Interest for Contractor
Employees Performing Acquisition Functions, and FAR clause 52.203-16,
Preventing Personal Conflicts of Interest.
[[Page 18504]]
2. Section 841(b) (now codified at 41 U.S.C. 2303 Note) required
the Administrator for Federal Procurement Policy, in consultation with
the Director of the Office of Government Ethics, to determine whether
revisions to the FAR were necessary to address personal conflicts of
interest by contractor employees with respect to functions other than
those described in section 841(a).
DoD, GSA, and NASA, in consultation with the Office of Federal
Procurement Policy (OFPP) and the Office of Government Ethics,
published a request for information in the Federal Register on November
2, 2011, seeking public comment on whether additional guidance is
necessary to address personal conflicts of interest by employees of
Government contractors. Only one response was received. The respondent
recommended that it was premature at that time to extend the FAR
coverage on personal conflicts of interest, because the rule had only
been in effect for one month, and was just beginning to be applied to
new contracts and task orders.
B. Section 829 of the National Defense Authorization Act for Fiscal
Year 2013
The Secretary of Defense reviewed existing FAR guidance on personal
conflicts of interest for contractor employees by issuing a data call
on February 28, 2013, to the military departments and defense agencies,
requesting feedback on the questions posed by section 829. Responses
were received from 23 military departments and defense agencies. The
majority of the respondents indicated that protection or agreements
covering additional functions would be helpful, as would a contractor-
managed personal conflicts of interest identification and mitigation
program, similar to that required by section 841(a).
Following analysis of the responses received, DoD concluded that
extension of the FAR personal conflicts of interest regulations to
additional functions and contract types may be in the best interest of
DoD and the taxpayers. In a memo dated June 10, 2013, the Deputy
Director of Defense Procurement and Acquisition Policy (DPAP) (Contract
Policy and International Contracting) requested the Deputy Director
Defense Acquisition Regulations System, to open a case to propose
regulations relating to prevention of personal conflicts of interest.
The memorandum further recommended that DPAP confer with OFPP and the
FAR Council to determine whether to pursue such extension of coverage
as a FAR change. The FAR signatories agreed to open this FAR case on
August 2, 2013.
The FAR coverage of personal conflicts of interest has now been in
effect since December 2, 2011, and section 829 did not propose any
change to the FAR regulations at subpart 3.11 and section 52.203-16,
other than to consider extending the coverage to additional functions
and contract types.
II. Discussion and Analysis
A. Proposed Extension of Guidance on Personal Conflicts of Interest
This rule proposes to extend regulations on personal conflicts of
interest to contractor employees performing all functions that are
closely associated with inherently governmental functions (not just
acquisition functions) and to personal services contracts (to the
extent such contracts are authorized by law, e.g., legal or medical).
Section 736 of Division D of Pub. L. 111-8 defines ``functions
closely associated with inherently governmental functions'' as follows:
``The term `functions closely associated with inherently
governmental functions' means the functions described in section
7.503(d) of the Federal Acquisition Regulation.''
The Defense Acquisition Regulations Council and the Civilian Agency
Acquisition Council (Councils) welcome comments with regard to the
appropriateness and benefits of this proposal, particularly if there
are certain functions not currently covered in FAR subpart 3.11 and
section 52.203-16 that should definitely be included (or excluded) from
the final rule.
The Councils also note that FAR Case 2012-001, Performance of
Inherently Governmental Functions and Critical Functions, is currently
being processed as a proposed rule to implement the OFPP Policy Letter
11-01, Performance of Inherently Governmental and Critical Functions,
issued in the Federal Register at 76 FR 56227 on September 12, 2011,
which also addresses functions closely associated with inherently
governmental functions.
B. Inapplicability to Commercial Items and Below the Simplified
Acquisition Threshold
The current FAR regulations on contractor employee personal
conflicts of interest do not apply below the simplified acquisition
threshold or to acquisitions of commercial items. Section 841(a)(3)
specifically stated that the law does not apply to contracts in amounts
that do not exceed the simplified acquisition threshold. The final rule
under FAR Case 2008-025 added section 841(a) of the NDAA for Fiscal
Year 2008 (now codified at 41 U.S.C. 2303(b)) to the list of laws
inapplicable to contracts for the acquisition of commercial items (FAR
12.503). This rule does not propose to change the applicability of the
regulations on contractor employee personal conflicts of interest to
commercial items or acquisitions that do not exceed the simplified
acquisition threshold.
C. Further Changes
Section 12.503(a)(9) is amended to clarify and update related
citations. Further, corrections are made to the OMB Control Number in
section 1.106.
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 not a significant regulatory action and, therefore, was not
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 the NASA do not expect this 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. Nevertheless, an Initial Regulatory Flexibility Analysis (IRFA)
has been prepared and is summarized as follows:
This proposed rule was initiated to amend the FAR to implement
section 829 of the NDAA for Fiscal Year 2013 (Pub. L. 112-239), by
considering extension of the contractor employees personal conflict
of interest limitations at FAR subpart 3.11 (i.e., currently limited
to individuals who perform an acquisition function closely
associated with inherently governmental functions) to individuals
who perform a function closely associated with inherently
governmental functions or perform under a personal services contract
and are--
(1) An employee of the contractor; or
(2) A subcontractor that is a self-employed individual treated
as a covered employee of the contractor because there is no employer
to whom such an individual could submit the required disclosures.
[[Page 18505]]
By extending contractor employee personal conflict of interest
limitations, the proposed rule furthers enforcement of Government
policy that requires contractors and subcontractors to: (a) identify
and prevent personal conflicts of interest of their covered
employees; and (b) prohibit covered employees who have access to
non-public information by reason of performance on a Government
contract from using such information for personal gain.
Section 829 of the NDAA for Fiscal Year 2013 (Pub. L. 112-239)
required the Secretary of Defense to review the guidance on personal
conflicts of interest for contractor employees, issued pursuant to
section 841(a) of the NDAA for Fiscal Year 2009 (Pub. L. 110-417),
in order to determine whether it would be in the best interest of
the DoD and the taxpayers to extend such guidance to personal
conflicts of interest by contractor personnel performing any of the
following:
(1) Functions other than acquisition functions that are closely
associated with inherently governmental functions (as that term is
defined at 10 U.S.C. 2383(b)(3).
(2) Personal services contracts (as that term is defined in 10
U.S.C. 2330a(g)(5).
(3) Contracts for staff augmentation services (as that term is
defined in section 808(d)(3) of the NDAA for Fiscal Year 2012 (Pub.
L. 112-81).
The Secretary of Defense reviewed existing FAR guidance on
personal conflicts of interest for contractor employees by issuing a
data call on February 28, 2013, to the military departments and
defense agencies, requesting feedback on the questions posed by
section 829. Responses were received from 23 military departments
and defense agencies. The majority of the respondents indicated that
protection or agreements covering additional functions would be
helpful, as would a contractor-managed personal conflicts of
interest identification and mitigation program, similar to that
required by section 841(a).
Following analysis of the responses received, DoD concluded that
extension of the FAR personal conflicts of interest regulations to
additional functions may be in the best interest of DoD and the
taxpayers. In a memo dated June 10, 2013, the Deputy Director of
Defense Procurement and Acquisition Policy (DPAP) (Contract Policy
and International Contracting) requested the Deputy Director Defense
Acquisition Regulations System, to open a case to propose
regulations relating to prevention of personal conflicts of
interest. The memorandum further recommended that DPAP confer with
OFPP and the FAR Council to determine whether to pursue such
extension of coverage as a FAR change. The FAR signatories agreed to
open FAR Case 2013-022, Preventing Personal Conflicts of Interest
for Contractor Employees, on August 2, 2013.
Under the FAR clause at 52.203-16, as revised in the proposed
rule, ``covered employees'' means an individual who performs a
function closely associated with inherently governmental functions
or performs under a personal services contract and is--
(1) An employee of the contractor; or
(2) A subcontractor that is a self-employed individual treated
as a covered employee of the contractor because there is no employer
to whom such an individual could submit the required disclosures.
The following estimates are based on data reported to the
Federal Procurement Data System (FPDS) between March 1, 2012 and
March 1, 2013 (the first year during which such data was available),
on contract actions over the simplified acquisition threshold (SAT)
coded as being functions closely associated with inherently
governmental functions, or personal services contracts (Product
Service Code (PSC) R497).
Between March 1, 2012, and March 1, 2013, a total of
22,716 contract actions over the simplified acquisition threshold
were coded as functions closely associated with inherently
governmental functions. Of that total, 10,600 actions were awarded
to small businesses, and 12,116 actions were awarded to other than
small businesses.
During the same period, a total of 5,369 contract
actions exceeding the simplified acquisition threshold were coded
with a R497 Product Service Code (PSC), Support-Professional:
Personal Services Contracts. Of that total, 2,732 actions were
awarded to small businesses, and 2,637 were awarded to other than
small businesses.
DoD, GSA, and NASA estimate that the 13,332 actions (10,600 for
functions closely associated with inherently governmental functions
and 2,732 for personal services contracts) awarded to small business
were made to 4,444 unique small business entities (one-third of
13,332).
The clause at FAR 52.203-16 applies to contract actions over the
simplified acquisition threshold, and only requires contractors to
obtain information from each covered employee on an ``as required
basis,'' i.e., (1) when initially assigned to a task that requires a
disclosure of interests that might be affected by the task to which
the employee has been assigned; and (2) whenever the employee's
personal or financial circumstances change in such a way that a new
personal conflict of interest might occur because of the task that
the covered employee is performing. Other associated information
collection is required only to report to the contracting officer any
personal conflict of interest violation by a covered employee as
soon as it is identified, and, in exceptional circumstances, for the
contractor to submit a request, through the contracting officer, for
the head of the contracting activity to agree to a plan to mitigate
the personal conflict of interest, or waive the requirement to
prevent personal conflicts of interest. These requirements apply
regardless of the size of the contractor.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
There are no practical alternatives that will accomplish the
objectives of the proposed 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
entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 610 (FAR Case 2013-022),
in correspondence.
V. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The
proposed rule contains information collection requirements.
Accordingly, the Regulatory Secretariat has submitted a request for
approval of a revised information collection requirement concerning OMB
clearance number 9000-0183, Preventing Personal Conflicts of Interest
for Contractor Employees, to the Office of Management and Budget.
A. Public reporting burden for this collection of information is
estimated to average 30 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
The annual reporting burden estimated as follows:
Respondents: 188.
Responses per respondent: 1.
Total annual responses: 188.
Preparation hours per response: 30 hours.
Total response burden hours: 5,640.
The annual recordkeeping burden is estimated as follows:
Recordkeepers: 9,361.
Hours per recordkeeper: 59.
Total recordkeeping hours: 552,299.
B. Request for Comments Regarding Paperwork Burden
Submit comments, including suggestions for reducing this burden,
not later than June 2, 2014 to: FAR Desk Officer, OMB, Room 10102,
NEOB, Washington, DC 20503, and a copy to the General Services
Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1800
F Street, NW., 2nd Floor, Washington, DC 20405.
Public comments are particularly invited on: whether this
collection of information is necessary for the proper performance of
functions of the FAR, and will have practical utility; whether the
estimate of the public burden of this collection of information is
accurate, and based on valid assumptions and methodology; ways to
enhance the
[[Page 18506]]
quality, utility, and clarity of the information to be collected; and
ways in which the Government can minimize the burden of the collection
of information on those who are to respond, through the use of
appropriate technological collection techniques or other forms of
information technology.
Requesters may obtain a copy of the supporting statement from the
General Services Administration, Regulatory Secretariat (MVCB), ATTN:
Hada Flowers, 1800 F Street, NW., 2nd Floor, Washington, DC 20405.
Please cite OMB Control Number 9000-0181, Preventing Personal Conflicts
of Interest for Contractor Employees, in all correspondence.
List of Subjects in 48 CFR Parts 1, 3, 12, and 52
Government procurement.
Dated: March 27, 2014.
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 1, 3,
12, and 52 as set forth below:
0
1. The authority citation for 48 CFR parts 1, 3, 12, and 52 continues
to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM
1.106 [Amended]
0
2. Amend section 1.106 by--
0
a. Removing from FAR segment 3.11, the OMB Control Number ``9000-0181''
and adding ``9000-0183'' in its place; and
0
b. Removing from FAR segment 52.203-16, the OMB Control Number ``9000-
0181'' and adding ``9000-0183'' in its place.
PART 3--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF
INTEREST
0
3. Revise Subpart 3.11 heading to read as follows:
Subpart 3.11--Preventing Personal Conflicts of Interest for
Contractor Employees
0
4. Revise section 3.1100 to read as follows:
3.1100 Scope of subpart.
This subpart implements--
(a) Section 841(a) of the Duncan Hunter National Defense
Authorization Act for Fiscal Year 2009 (Pub. L. 110-417) (41 U.S.C.
2303); and
(b) Section 829 of the National Defense Authorization Act for
Fiscal Year 2013 (Pub. L. 112-239).
0
5. Amend section 3.1101 by--
0
a. Removing the definition ``Acquisition function closely associated
with inherently governmental functions''; and
0
b. Revising the introductory text of the definition ``Covered
employee''.
The revised text reads as follows:
3.1100 Definitions.
* * * * *
Covered employee means an individual who performs a function
closely associated with inherently governmental functions (see subpart
7.5) or performs under a personal services contract (see 37.104) and
is--
* * * * *
0
6. Amend section 3.1103 by revising the introductory text of paragraph
(a) to read as follows:
3.1103 Procedures.
(a) By use of the contract clause at 52.203-16, as prescribed at
3.1106, the contracting officer shall require each contractor with at
least one covered employee to--
* * * * *
0
7. Amend section 3.1106 by revising paragraphs (a)(2), (b), and (c) to
read as follows:
3.1106 Contract clause.
(a) * * *
(2) Include a requirement for services by contractor employee(s)
that are covered employees, i.e., an individual who performs a function
closely associated with inherently governmental functions or performs
under a personal services contract and is--
(i) An employee of the contractor; or
(ii) A subcontractor that is a self-employed individual treated as
a covered employee of the contractor because there is no employer to
whom such an individual could submit the required disclosures.
(b) If only a portion of a contract is for the performance of
services by covered employees, then the contracting officer shall still
insert the clause, but shall limit applicability of the clause to that
portion of the contract that is for the performance of such services.
(c) Do not insert the clause in solicitations or contracts with a
self-employed individual if the services are to be performed entirely
by the self-employed individual, rather than a covered employee of the
contractor. In such cases, the contracting officer shall consider these
matters as part of the Organizational Conflict of Interest analysis
(see subpart 9.5).
PART 12--ACQUISITION OF COMMERCIAL ITEMS
0
8. Amend section 12.503 by revising paragraph (a)(9) to read as
follows:
12.503 Applicability of certain laws to Executive agency contracts for
the acquisition of commercial items.
(a) * * *
(9) 41 U.S.C. 2303(b), Policy on Personal Conflicts of Interest by
Contractor Employees and 41 U.S.C. 2303 note (see subpart 3.11).
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
9. Amend section 52.203-16 by--
0
a. Revising the date of the clause;
0
b. Removing from paragraph (a) the definition ``Acquisition function
closely associated with inherently governmental functions'';
0
c. Revising the introductory text of the definition ``Covered
employee''; and
0
d. Removing from paragraph (d)(2) the word ``acquisition''.
The revised text read as follows:
52.203-16 Preventing Personal Conflicts of Interest.
* * * * *
Preventing Personal Conflicts of Interest (Date)
* * * * *
Covered employee means an individual who performs a function
closely associated with inherently governmental functions (see subpart
7.5) or performs under a personal services contract (see 37.104) and
is--
* * * * *
[FR Doc. 2014-07371 Filed 4-1-14; 8:45 am]
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