[Federal Register Volume 79, Number 143 (Friday, July 25, 2014)]
[Rules and Regulations]
[Pages 43589-43590]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17500]
[[Page 43589]]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 2005-76; FAR Case 2013-017; Item III; Docket 2013-0017, Sequence
1]
RIN 9000-AM64
Federal Acquisition Regulation; Allowability of Legal Costs for
Whistleblower Proceedings
AGENCY: 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, with changes, an
interim rule amending the Federal Acquisition Regulation (FAR) to
implement a section of the National Defense Authorization Act (NDAA)
for Fiscal Year (FY) 2013 that addresses the allowability of legal
costs incurred by a contractor or subcontractor related to a
whistleblower proceeding commenced by the submission of a complaint of
reprisal by the contractor or subcontractor employee.
DATES: Effective: July 25, 2014.
FOR FURTHER INFORMATION CONTACT: Mr. Edward N. Chambers, Procurement
Analyst, at 202-501-3221 for clarification of content. For information
pertaining to status or publication schedules, contact the Regulatory
Secretariat at 202-501-4755. Please cite FAC 2005-76, FAR Case 2013-
017.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published an interim rule in the Federal
Register at 78 FR 60173 on September 30, 2013, to implement sections
827(g) and 828(d) of the National Defense Authorization Act (NDAA) FY
2013 (Pub. L. 112-239). Section 827(g) amends 10 U.S.C. 2324(k),
Allowable costs under defense contracts, and section 828(d) similarly
amends 41 U.S.C. 4310, Proceeding costs not allowable, to address the
allowability of legal costs incurred by a contractor or subcontractor
in connection with a whistleblower proceeding commenced by a contractor
or subcontractor employee submitting a complaint of reprisal under the
applicable whistleblower section (10 U.S.C. 2409, Contractor employees:
Protection from reprisal for disclosure of certain information, or 41
U.S.C. 4712, Pilot program for enhancement of contractor [employee]
protection from reprisal for disclosure of certain information,
respectively).
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 and the
changes made to the rule as a result of those comments are provided as
follows:
A. Summary of Significant Changes
In response to a public comment, the final rule has been modified
to expressly include whistleblower complaints in the provisions at FAR
31.205-47(c).
B. Analysis of Public Comments
One respondent submitted comments on the interim rule.
1. Allowability of Costs Prior to Completion of Litigation
Comment: The respondent commented that the revised regulation can
be read and understood to allow an agency to declare all costs
associated with responding to a whistleblower complaint of reprisal as
presumptively unallowable until the matter is completely litigated and
the contractor prevails, at which point the contractor's recovery of
the reasonable net costs are limited by the not-to-exceed-80 percent
rule. According to the respondent, this effectively forces the
contractor to finance the defense of such claims, even if the cost of
settlement could be less than the cost of defense.
Response: This interim rule has directly implemented the statutory
requirement. The costs incurred in connection with any proceeding
brought by a contractor or subcontractor employee submitting a
whistleblower complaint of reprisal in accordance with 41 U.S.C. 4712
or 10 U.S.C. 2409 are treated exactly the same as the pre-existing cost
principle treats costs incurred in connection with any proceeding
brought by a Federal, State, local, or foreign government for violation
of, or a failure to comply with, law or regulation by the contractor
(including its agents or employees), or costs incurred in connection
with any proceeding brought by a third party in the name of the United
States under the False Claims Act, 31 U.S.C. 3730.
Any proceedings costs which are incurred in connection with any
proceeding under FAR 31.205-47(b), and which are not made unallowable
by that paragraph, are subject to the allowability rules of FAR 31.205-
47(c), (d), and (e). The not-to-exceed-80 percent rule in the
provisions of FAR 31.205-47(e)(3), which addresses the allowability of
reasonable net costs incurred in connection with proceedings described
in paragraph (b), applies equally to all proceedings addressed in
paragraph (b), including those proceedings for whistleblower complaints
of reprisal added by 41 U.S.C. 4712 or 10 U.S.C. 2409.
Comment: The respondent considered that the interim rule
effectively prohibits settlement of whistleblower claims by making
related legal costs entirely unallowable if the proceeding ``could have
led'' to an agency order for corrective action, with no apparent
exceptions.
The respondent noted the statement in the Initial Regulatory
Flexibility Analysis that 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.'' The
respondent did not reach a similar conclusion, because the rule also
affects a contractor who settles a whistleblower case that ``could have
led'' to imposition of a monetary penalty or an order to take
corrective action. The respondent requested that language be added at
FAR 31.205-47(c), to provide the same treatment for whistleblower
complaints as is currently provided for settlement of any proceeding
brought by a third party under the False Claims Act in which the United
States did not intervene.
Response: The Councils have incorporated the requested change in
the final rule. The FAR includes paragraph (c) to provide
interpretation of the cost principle when the matter is resolved
through consent or compromise. Now that whistleblower proceedings have
been included in paragraph (b), it is reasonable that they should be
covered in paragraph (c) as well.
The Final Regulatory Flexibility Analysis has also been reworded to
address potential impact if the proceedings result in the consequences
covered by paragraphs 31.105-47(b)(3) through (b)(5).
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
[[Page 43590]]
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 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 action implements sections 827(g) and 828(d) of the
National Defense Authorization Act for FY 2013. The objective of
this rule is to address the allowability of legal costs incurred by
a contractor in connection with a proceeding commenced by an
employee submitting a complaint under 10 U.S.C. 2409 or 41 U.S.C.
4712. The statutory authority is 10 U.S.C. 2324(k) and 41 U.S.C.
4310.
There were no significant issues raised by the public comments
in response to the initial regulatory flexibility analysis.
Most contracts awarded on a fixed-price competitive basis do not
require application of the cost principles. Most 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 Federal Procurement Data System (FPDS) data for FY 2012, there
were 73,014 Federal new contract awards over the simplified
acquisition threshold in FY 2012. Of those contracts, only 11,279
awards were to small businesses on other than a competitive fixed-
price basis. Within that number of awards, this rule would only
affect a contractor if a contractor employee commenced a proceeding
by submitting a complaint under 10 U.S.C. 2409 or 41 U.S.C. 4712,
and if that proceeding resulted in any of the consequences listed at
FAR 31.205-47(b). DoD, GSA, and NASA 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 reporting, recordkeeping, or other
compliance requirements in this rule.
DoD, GSA, and NASA were unable to identify any alternatives to
the rule which would reduce the impact on small entities and still
meet the requirements of the statute.
Interested parties may obtain a copy of the FRFA from the
Regulatory Secretariat. The Regulatory Secretariat has submitted a copy
of the FRFA to the Chief Counsel for Advocacy of the Small Business
Administration.
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).
List of Subjects in 48 CFR Part 31
Government procurement.
Dated: July 18, 2014.
William Clark,
Acting Director, Office of Government-Wide Acquisition Policy, Office
of Acquisition Policy, Office of Government-Wide Policy.
Interim Rule Adopted as Final With Changes
Accordingly, the interim rule amending 48 CFR part 31, which was
published in the Federal Register at 78 FR 60173, September 30, 2013,
is adopted as final with the following changes:
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
0
1. The authority citation for 48 CFR part 31 continues to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
0
2. Amend section 31.205-47 by--
0
a. Redesignating paragraph (c)(2) as paragraph (c)(2)(i);
0
b. Removing from the newly redesignated paragraph (c)(2)(i)
``proceeding,'' and ``States,'' and adding ``proceeding'' and
``States'' in their places, respectively; and
0
c. Adding paragraph (c)(2)(ii) to read as follows:
31.205-47 Costs related to legal and other proceedings.
* * * * *
(c) * * *
(2) * * *
(i) * * *
(ii) In the event of disposition by consent or compromise of a
proceeding brought by a whistleblower for alleged reprisal in
accordance with 41 U.S.C. 4712 or 10 U.S.C. 2409, reasonable costs
incurred by a contractor or subcontractor in connection with such a
proceeding that are not otherwise unallowable by regulation or by
agreement with the United States may be allowed if the contracting
officer, in consultation with his or her legal advisor, determined that
there was very little likelihood that the claimant would have been
successful on the merits.
* * * * *
[FR Doc. 2014-17500 Filed 7-24-14; 8:45 am]
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