[Federal Register Volume 79, Number 150 (Tuesday, August 5, 2014)]
[Proposed Rules]
[Pages 45666-45669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18206]



  Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / 
Proposed Rules  

[[Page 45666]]


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DEPARTMENT OF DEFENSE

48 CFR Parts 204, 209, 212, 225, and 252

RIN 0750-AI34


Defense Federal Acquisition Regulation Supplement: State Sponsors 
of Terrorism (DFARS Case 2014-D014)

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

ACTION: Proposed rule.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to clarify and relocate coverage relating 
to state sponsors of terrorism (as identified by the Department of 
State), add an explicit representation, and conform the terminology.

DATES: Comment Date: Comments on the proposed rule should be submitted 
in writing to the address shown below on or before October 6, 2014, to 
be considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2014-D014, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Submit comments 
via the Federal eRulemaking portal by entering ``DFARS Case 201X-D0XX'' 
under the heading ``Enter keyword or ID'' and selecting ``Search.'' 
Select the link ``Submit a Comment'' that corresponds with ``DFARS Case 
2014-D014.'' Follow the instructions provided at the ``Submit a 
Comment'' screen. Please include your name, company name (if any), and 
``DFARS Case 2014-D014'' on your attached document.
    [cir] Email: [email protected]. Include DFARS Case 2014-D014 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 3B941, 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 G. Williams, Defense 
Acquisition Regulations System, OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 
Defense Pentagon, Washington, DC 20301-3060. Telephone 571-372-6106.

SUPPLEMENTARY INFORMATION:

I. Background

    10 U.S.C. 2327 requires a firm or a subsidiary of a firm that 
submits an offer in response to a DoD solicitation to disclose if the 
firm is owned or controlled by a foreign government of a country that 
the Secretary of State determines under section 6(j)(1)(A) of the 
Export Administration Act of 1979 (50 App. U.S.C. 2405 (j)(1)(A)) has 
repeatedly provided support for acts of international terrorism. The 
statute further provides restrictions on entering into contracts or 
subcontracts with such firms.
    The Department of State identifies the countries identified as 
sponsoring terrorism on a list of ``State Sponsors of Terrorism'' 
available at http://www/state.gov/ct/list/c14151.htm.
    The restrictions are currently implemented in the DFARS in subpart 
209.1, Responsible Prospective Contractors; subpart 209.4, Debarment, 
Suspension, and Ineligibility; and clauses 252.209-7001, Disclosure of 
Ownership or Control by the Government of a Terrorist Country; and 
252.209-7004, Subcontracting with Firms that are owned or controlled by 
the Government of a Terrorist Country.
    This rule is part of DoD's retrospective plan, completed in August 
2011, under Executive Order 13563, ``Improving Regulation and 
Regulatory Review.'' DoD's full plan and updates can be accessed at: 
http://www.regulations.gov/#!docketDetail;dct=FR+PR+N+O+SR;rpp=10;po=0;D=DOD-2011-OS-0036.

II. Discussion and Analysis

 A. Clarification

    The prohibition, notification, and disclosure requirements have 
been amended to--
     Be consistent with the disclosure requirements of current 
DFARS 252.209-7001(e); and
     Make clear in each case whether the term ``subsidiary'' 
refers to a subsidiary of the offeror, or whether the offeror itself is 
a subsidiary of another firm that owns or controls the offeror.

B. Representation

    Although the solicitation provision 252.209-7001, Disclosure of 
Ownership or Control by the Government of a Terrorist Country, is 
currently included in the annual representations and certifications in 
the System for Award Management (SAM), the provision does not actually 
contain an explicit representation. The nonstatutory certification was 
removed from the provision in the 1991 DFARS rewrite, due to an 
initiative to streamline the DFARS. However, the fact that an offeror 
fails to disclose any significant interest by the government of a 
country that is a state sponsor of terrorism is not equivalent to an 
explicit representation that there is no such interest. DoD is 
proposing to include an explicit representation in the relocated 
provision at 252.225-70XX, Disclosure of Ownership or Control by the 
Government of a Country that is a State Sponsor of Terrorism, that, 
unless the offeror submits with its offer the disclosure required in 
paragraph (d) of the provision, the offeror represents, by submission 
of its offer, that that the government of a country that is a state 
sponsor of terrorism does not own or control a significant interest 
in--
    1. The offeror;
    2. A subsidiary of the offeror; or
    3. Any other firm that owns or controls the offeror.
    If this representation is false, then an offeror can be held liable 
for a false statement if the offeror does not disclose the ownership or 
control by the government of a country that is a state sponsor of 
terrorism.

C. Terminology

    In this proposed rule, the term ``terrorist country'' has been 
replaced with the more accurate term ``country that is a state sponsor 
of terrorism,'' which is consistent with the terminology used by the 
Department of State and in section 1261(c)(2)(C) of the National 
Defense Authorization Act for Fiscal Year 2013 (Pub. L. 112-239).

D. Location

    The text at 209.104-1(g)(i) and 209.104-70(a) has been relocated to 
DFARS subpart 225.7 and the provision at 252.209-7001 has been 
relocated to 252.225-70XX. Subpart 225.7, Prohibited Sources, is a 
better location because the prohibition is based on ownership or 
control of an offeror by the government of specified countries, rather 
than the responsibility of the individual offeror. Furthermore, DoD has 
included in DFARS 225.7 coverage of the restriction of acquisition of 
commercial satellite services from certain foreign entities (including 
restrictions relating to countries that are state sponsors of 
terrorism) (see DFARS Case 2014-D0).
    The coverage at 209.405-2 and 209.409 is properly located in 
subpart 209.4, Debarment, Suspension, and

[[Page 45667]]

Ineligibility, because it relates to treatment of entities listed as 
ineligible in the Exclusion section of the System for Award Management 
(SAM). However, cross-references have been added between DFARS 209.405-
2 and 225.771.

E. Applicability

    This rule does not change the applicability of the provision 
252.209-7001 or the clause at 252.209-7004 to solicitations for an 
amount less than the simplified acquisition threshold or for the 
acquisition of commercial items.
    10 U.S.C. 2327(f) specifically excludes applicability of the 
statute to contracts for acquisitions less than $100,000 (now escalated 
to $150,000, in accordance with 41 U.S.C. 1908).
    The provision currently at DFARS 252.209-7001 is included in the 
Exclusion section of SAM and is applicable to the acquisition of 
commercial items. Therefore, conforming changes are required at 
204.1202(2)(i), 212.201(f)(xi), and 252.204-7007.
    The clause at 252.209-7004 is not prescribed for use in the 
acquisitions of commercial items. This clause implements paragraphs (d) 
and (e) of 10 U.S.C. 2327, which were enacted in 1997 (Pub. L. 105-85) 
(subsequent to the Federal Acquisition Streamlining Act of 1994), and 
therefore were inapplicable to the acquisitions of commercial items and 
COTS items, unless a determination was made that it would not be in the 
best interest of the Government to exempt these acquisitions from 
applicability of the statute.
    The prescription for the solicitation provision 252.225-70XX has 
been slightly modified, to exclude applicability to acquisitions of 
commercial satellite services, which are covered by a separate 
provision (see DFARS Case 2014-D010).

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 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 this rule 
will only have an impact on a firm, or a subsidiary of a firm, in which 
the government of a country that is a state sponsor of terrorism has a 
significant interest.
    The number of domestic entities significantly impacted by this rule 
will be minimal, if any. For the definition of ``small business,'' the 
Regulatory Flexibility Act refers to the Small Business Act, which in 
turn allows the U.S. Small Business Administration (SBA) Administrator 
to specify detailed definitions or standards (5 U.S.C. 601(3) and 15 
U.S.C. 632(a)). The SBA regulations at 13 CFR 121.105 discuss who is a 
small business: ``(a)(1) Except for small agricultural cooperatives, a 
business concern eligible for assistance from SBA as a small business 
is a business entity organized for profit, with a place of business 
located in the United States, and which operates primarily within the 
United States or which makes a significant contribution to the U.S. 
economy through payment of taxes or use of American products, materials 
or labor.'' Therefore, an initial regulatory flexibility analysis has 
not been performed. DoD invites comments from small business concerns 
and other interested parties on the expected impact of this rule on 
small entities.
    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 2014-D014), in 
correspondence.

V. Paperwork Reduction Act

    The rule contains 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); however, these changes to the 
DFARS do not impose additional information collection requirements to 
the paperwork burden previously approved under OMB Control Number 0704-
0187, entitled ``Information Collection in Support of the DoD 
Acquisition Process (Various Miscellaneous Requirements).'' The burden 
in this clearance that is associated with the provision 252.209-7001, 
Disclosure of Ownership or Control by the Government of a Terrorist 
Country, is estimated at 1 hour, because such disclosure occurs rarely, 
if ever. 10 U.S.C. prohibits award to a firm or a subsidiary of a firm 
if the government of country that is a state sponsor of terrorism has a 
significant interest in the firm or subsidiary, unless the Secretary of 
Defense grants a waiver.

List of Subjects in 48 CFR Parts 204, 209, 212, 225, and 252

    Government procurement.

Amy G. Williams,
Deputy, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 204, 209, 212, 225, and 252 are proposed to 
be amended as follows:

0
1. The authority citation for parts 204, 209, 212, 225, and 252 
continues to read as follows:

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

PART 204--ADMINISTRATIVE MATTERS

0
2. Amend section 204.1202 by--
0
a. Removing paragraph (2)(i);
0
b. Redesignating paragraphs (2)(ii) through (xi) as (2)(i) through (x), 
respectively; and
0
c. Adding a new paragraph (2)(xi).


204.1202  Solicitation provision.

* * * * *
    (2) * * *
    (xi) 252.225-70XX, Disclosure of Ownership or Control by the 
Government of a Country that is a State Sponsor of Terrorism.
* * * * *

PART 209--CONTRACTOR QUALIFICATIONS


209.104-1  [Amended]

0
3. Amend section 209.104-1 by--
0
a. Removing paragraph (g)(i); and
0
b. Redesignating paragraph (g)(ii) as (g)(i).
0
4. Amend section 209.104-70 by--
0
a. Revising the section heading;
0
b. Removing paragraph (a); and
0
c. Removing the paragraph ``(b)'' designation from the remaining text.
    The revision reads as follows:


209.104-70  Solicitation provision.

* * * * *
0
5. Revise section 209.405-2 to read as follows:


209.405-2  Restrictions on subcontracting.

    (a) The contracting officer shall not consent to any subcontract 
with a firm, or a subsidiary of a firm, that is identified by the 
Secretary of Defense in the Exclusions section of the System for

[[Page 45668]]

Award Management as being owned or controlled by the government of a 
country that is a state sponsor of terrorism unless the agency head 
states in writing the compelling reasons for the subcontract. (See also 
225.771.)
0
6. Revise section 209.409 to read as follows:


209.409  Solicitation provision and contract clause.

    Use the clause at 252.209-7004, Subcontracting with Firms That Are 
Owned or Controlled by the Government of a Country that is a State 
Sponsor of Terrorism, in solicitations and contracts with a value of 
$150,000 or more.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
7. Amend section 212.301 by--
0
a. Removing paragraph (f)(xi);
0
b. Redesignating paragraphs (f)(xii) through (xlviii) as (xi) through 
(xlvii); and
0
c. Adding a new paragraph (f)(xlviii) to read as follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f) * * *
    (xlviii) Use the provision at 252.225-70XX, Disclosure of Ownership 
or Control by the Government of a Country that is a State Sponsor of 
Terrorism, as prescribed in 225.771-5, to comply with 10 U.S.C. 
2327(b).

PART 225--FOREIGN ACQUISITION


225.701  [Removed]

0
8. Remove section 225.701.
0
9. Add sections 225.771, 225.771-0, 225.771-1, 225.771-2, 225.771-3, 
225.771-4, and 225.771-5 to subpart 225.7 to read as follows.


225.771  Prohibition on contracting or subcontracting with a firm that 
is owned or controlled by the government of a country that is a state 
sponsor of terrorism.


225.771-0  Scope.

    This section implements 10 U.S.C. 2327(b).


225.771-1  Definition.

    ``State sponsor of terrorism,'' as used in this section, is defined 
in the provision at 252.225-70XX, Disclosure of Ownership or Control by 
the Government of a Country that is a State Sponsor of Terrorism.


225.771-2  Prohibition.

    (a) The contracting officer shall not award a contract of $150,000 
or more to a firm when a foreign government that is a state sponsor of 
terrorism owns or controls, either directly or indirectly, a 
significant interest in--
    (i) The firm;
    (ii) A subsidiary of the firm; or
    (iii) Any other firm that owns or controls the firm.
    (b) For restrictions on subcontracting with a firm, or a subsidiary 
of a firm, that is identified by the Secretary of Defense as being 
owned or controlled by the government of a country that is a state 
sponsor of terrorism, see 209.405-2.


225.771-3  Notification.

    Any disclosure that the government of a country that is a state 
sponsor of terrorism has a significant interest in an offeror, a 
subsidiary of an offeror, or any other firm that owns or controls an 
offeror shall be forwarded through agency channels to the address at 
PGI 225.771-3.


225.771-4  Waiver of prohibition.

    The prohibition in 225.771-2 may be waived if the Secretary of 
Defense determines that a waiver is not inconsistent with the national 
security objectives of the United States in accordance with 10 U.S.C. 
2327(c).


225.771-5  Solicitation provision.

    Use the provision at 252.225-70XX, Disclosure of Ownership or 
Control by the Government of a Country that is a State Sponsor of 
Terrorism, in solicitations, including solicitations using FAR part 12 
procedures for the acquisition of commercial items (other than 
commercial satellite services), that are expected to result in 
contracts of $150,000 or more. If the solicitation includes the 
provision at FAR 52.204-7, do not separately list the provision 
252.225-70XX in the solicitation.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
10. Amend section 252.204-7007 by--
0
a. Removing the clause date ``(AUG 2014)'' and adding ``(DATE)'' in its 
place;
0
b. Removing paragraph (d)(1)(i);
0
c. Redesignating paragraphs (d)(1)(ii) through (v) as (d)(1)(i) through 
(iv); and
0
d. Adding a new paragraph (d)(1)(v) to read as follows:


252.204-7007  Alternate A, Annual Representations and Certifications.

* * * * *
    (d)(1) * * *
    (v) 252.225-70XX, Disclosure of Ownership or Control by the 
Government of a Country that is a State Sponsor of Terrorism. Applies 
to all solicitations expected to result in contracts of $150,000 or 
more.
* * * * *


252.209-7001  [Removed and Reserved]

0
11. Remove and reserve section 252.209-7001.


252.209-7002  [Amended]

0
12. Amend the provision introductory text by removing ``209.104-70(b)'' 
and adding ``209.104-70'' in its place.
0
13. Amend section 252.209-7004 by--
0
a. Revising the clause heading, clause title, and date; and
0
b. Amending paragraphs (a) and (b) by removing ``terrorist country'' 
and adding ``country that is a state sponsor of terrorism'' in both 
places.
    The revision reads as follows:


252.209-7004  Subcontracting with Firms That Are Owned or Controlled by 
the Government of a Country that is a State Sponsor of Terrorism.

* * * * *

Subcontracting With Firms That Are Owned or Controlled by the 
Government of a Country That Is a State Sponsor of Terrorism (Date)

* * * * *
0
14. Add a new section 252.225-70XX to read as follows:


252.225-70XX  Disclosure of Ownership or Control by the Government of a 
Country that is a State Sponsor of Terrorism.

    As prescribed in 225.771-5, use the following provision:

Disclosure of Ownership or Control by the Government of a Country That 
Is a State Sponsor of Terrorism (Date)

    (a) Definitions. As used in this provision--
    Government of a country that is a state sponsor of terrorism 
includes the state and the government of a country that is a state 
sponsor of terrorism, as well as any political subdivision, agency, 
or instrumentality thereof.
    Significant interest means--
    (i) Ownership of or beneficial interest in 5 percent or more of 
the firm's or subsidiary's securities. Beneficial interest includes 
holding 5 percent or more of any class of the firm's securities in 
``nominee shares,'' ``street names,'' or some other method of 
holding securities that does not disclose the beneficial owner;
    (ii) Holding a management position in the firm, such as a 
director or officer;
    (iii) Ability to control or influence the election, appointment, 
or tenure of directors or officers in the firm;
    (iv) Ownership of 10 percent or more of the assets of a firm 
such as equipment, buildings, real estate, or other tangible assets 
of the firm; or
    (v) Holding 50 percent or more of the indebtedness of a firm.
    State sponsor of terrorism means a country determined by the 
Secretary of State, under

[[Page 45669]]

section 6(j)(1)(A) of the Export Administration Act of 1979 (50 
U.S.C. App. 2405(j)(1)(A)), to be a country the government of which 
has repeatedly provided support for acts of international terrorism. 
As of the date of this provision, state sponsors of terrorism 
include: Cuba, Iran, Sudan, and Syria.
    (b) Prohibition on award. In accordance with 10 U.S.C. 2327, 
unless a waiver is granted by the Secretary of Defense, no contract 
may be awarded to a firm if the government of a country that is a 
state sponsor of terrorism owns or controls a significant interest 
in--
    (1) The firm;
    (2) A subsidiary of the firm; or
    (3) Any other firm that owns or controls the firm.
    (c) Representation. Unless the Offeror submits with its offer 
the disclosure required in paragraph (d) of this provision, the 
Offeror represents, by submission of its offer, that the government 
of a country that is a state sponsor of terrorism does not own or 
control a significant interest in--
    (1) The Offeror;
    (2) A subsidiary of the Offeror; or
    (3) Any other firm that owns or controls the Offeror.
    (d) Disclosure.
    (1) The Offeror shall disclose in an attachment to its offer if 
the government of a country that is a state sponsor of terrorism 
owns or controls a significant interest in the Offeror; a subsidiary 
of the Offeror; or any other firm that owns or controls the Offeror.
    (2) The disclosure shall include--
    (i) Identification of each government holding a significant 
interest; and
    (ii) A description of the significant interest held by each 
government.


(End of provision)

[FR Doc. 2014-18206 Filed 8-4-14; 8:45 am]
BILLING CODE 5001-06-P