[Federal Register Volume 82, Number 9 (Friday, January 13, 2017)]
[Rules and Regulations]
[Pages 4717-4724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31497]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 3, 4, and 52

[FAC 2005-95; FAR Case 2015-012; Item III; Docket No. 2015-0012, 
Sequence No. 1]
RIN 9000-AN04


Federal Acquisition Regulation; Contractor Employee Internal 
Confidentiality Agreements or Statements

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 are issuing a final rule amending the 
Federal Acquisition Regulation (FAR) to implement a section of the 
Consolidated and Further Continuing Appropriations Act, 2015, that 
prohibits the use of funds, appropriated or otherwise made available, 
for a contract with an entity that requires employees or subcontractors 
to sign an internal confidentiality agreement that restricts such 
employees or subcontractors from lawfully reporting waste, fraud, or 
abuse to a designated Government representative authorized to receive 
such information.

DATES: Effective: January 19, 2017.
    Applicability: This rule applies to all solicitations and 
contracts, using fiscal year 2015 or subsequent fiscal year funds that 
do not already contain a comparable provision/clause.

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 Division at 202-501-4755. Please cite FAC 2005-95, FAR Case 
2015-012.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 81 FR 3763 on January 22, 2016, to implement section 743 of 
Division E, Title VII, of the Consolidated and Further Continuing 
Appropriations Act, 2015 (Pub. L. 113-235) and its successor provisions 
in subsequent appropriations acts (and as extended in continuing 
resolutions) (i.e., section 743 of Division E of Pub. L. 114-113). 
Section 743 prohibits the use of funds appropriated or otherwise made 
available by Division E or any other Act for a contract, grant, or 
cooperative agreement with an entity that requires employees or 
subcontractors of such entity seeking to report waste, fraud, or abuse 
to sign internal confidentiality agreements or statements prohibiting 
or otherwise restricting such employees or subcontractors from lawfully 
reporting such waste, fraud, or abuse to a designated investigative or 
law enforcement representative of a Federal department or agency 
authorized to receive such information.
    Four respondents 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 public 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 From the Proposed Rule
    The following significant changes are included in the final rule:
     Adds definitions of ``internal confidentiality agreement 
or statement,'' ``subcontract,'' and ``subcontractor'' (FAR 3.901, 
52.203-18(a), and 52.203-19(a)).
     Clarifies that the representation applies to future 
internal confidentiality agreements or statements that restrict 
reporting of waste, fraud, or abuse related to the performance of a 
Government contract, and specifically cites the agency Office of the 
Inspector General as a designated investigative or law enforcement 
representative of a Federal department or agency authorized to receive 
such information (FAR 3.909-2, 52.203-18(d), 52.203-19(b), and 52.212-
3(s)(3)).

[[Page 4718]]

     Clarifies that the contractor is required to give notice 
only to current employees and subcontractors that any prohibitions and 
restrictions of any preexisting confidentiality agreements or 
statements covered by the clause are no longer in effect, to the extent 
that such prohibitions and restrictions are in conflict with the 
prohibitions of the clause (FAR 52.203-19(c)).

B. Analysis of Public Comments

1. General Support for the Rule
    Comment: All respondents were in general support of the rule. For 
example, one respondent stated its support of the intent of section 743 
and the proposed rule to provide appropriate protection for employees 
looking to report waste, fraud, or abuse.
    Response: Noted.
2. Internal Confidentiality Agreement or Statement
    Several respondents raised questions about the meaning of 
``internal confidentiality agreements or statement'' and their scope.
    Comment: One respondent questioned use of the term ``internal 
confidentiality agreement'' to apply to an agreement with a 
subcontractor, because ``internal'' would imply an agreement with 
employees of the company.
    The respondent questioned how the rule applies to subcontractors 
and subcontracts and suggested that the application to subcontractors 
is only through flowdown, rather than direct application to the prime 
contractor.
    Response: Notwithstanding the word ``internal,'' which would 
normally apply to inside the company, the statute specifically 
addresses the situation in which the contractor requires employees or 
subcontractors to sign internal confidentiality agreements or 
statements.
    The clause does flow down to subcontracts, but it also prohibits 
the prime contractor from requiring subcontractors to sign internal 
confidentiality agreements or statements.
    Comment: One respondent asked whether the rule covers 
confidentiality agreements arising out of civil litigation. The 
respondent also questioned whether it applies to confidentiality 
agreements that employees sign at the behest of a Federal agency.
    Response: A definition of ``internal confidentiality agreement or 
statement'' has been added to the final rule. This definition excludes 
confidentiality agreements arising out of civil litigation or 
confidentiality agreements that contractor employees or subcontractors 
sign at the behest of a Federal agency.
3. Definitions of ``Entity,'' ``Employee,'' and ``Subcontractor''
a. ``Entity''
    Comment: One respondent noted that the proposed rule did not define 
``entity'' and sometimes used the term ``contractor'' or ``offeror'' in 
a manner that appears to be intended to mean ``entity.''
    Response: The term ``entity'' is a well-known legal term, 
frequently used in the FAR with its standard dictionary meaning, and 
does not require further definition in the acquisition regulations. 
According to Black's Law Dictionary, ``entity'' is a generic term 
inclusive of a person, partnership, organization, or business, which 
can be legally bound, and is uniquely identifiable from any other 
entity. All offerors and contractors are entities, but not all entities 
are offerors or contractors. The statute prohibits making funds 
available to entities that require employees or subcontractors to sign 
certain confidentiality agreements or statements due to this 
prohibition. Therefore, it is very possible that such entities will not 
submit offers or be awarded contracts. The terms ``offeror'' and 
``contractor'' are used when the rule is specifically addressing an 
entity that has submitted an offer or bid or an entity that has been 
awarded a contract.
b. ``Employee''
    Comment: One respondent requested a definition of the term 
``employee.'' The respondent suggested the term be defined to mean 
``any officer, partner, employee, or agent of a prime contractor,'' 
consistent with the definition of ``prime contractor employee'' at FAR 
3.502-1. The respondent noted that this definition would clarify that 
the term encompasses only current employees, reducing the burden of who 
would be covered for purposes of implementing the rule.
    Response: The term ``employee'' is used throughout the FAR, 
generally without definition. The definition of ``prime contractor 
employee'' at FAR 3.502-1 was first included in the FAR in FAC 84-24 
(February 6, 1987), to implement the Anti-Kickback Enforcement Act of 
1986. According to the Senate Report 99-435, the statute added a 
definition of ``prime contractor employee'' to parallel the language of 
41 U.S.C. 51, which prohibits payments to any prime contractor, or to 
any officer, partner, employee, or agent of a prime contractor. All of 
these separate terms were included in the expanded definition of 
``prime contractor employee'' in order to cover all those persons that 
might be acting to benefit or on behalf of the prime contractor when 
participating in a kick-back scheme. In general usage, an ``officer'' 
is an employee, but a ``partner'' is a co-owner, not an employee. An 
``agent'' also is not necessarily an employee and instead is frequently 
a subcontractor. More importantly, the difference between an employee 
and an independent contractor is not an issue in this rule, because the 
rule equally covers both employees and subcontractors (including 
consultants).
    However, the rule has been modified at FAR 52.203-19(c) to specify 
that the contractor is only required to notify current employees and 
subcontractors.
c. ``Subcontractor''
    Comment: Several respondents were concerned about limiting the 
meaning of the term subcontractor. One respondent stated that 
``subcontractor'' should cover only current subcontractors that have 
fully executed subcontracts under which work is currently being 
performed. Both respondents commented that the subcontract should be 
directly in support of a Government contract. The respondents consider 
that it would be a substantial burden to cover subcontractors that they 
do business with commercially that do not operate under a Government 
contract (e.g., cafeteria and lawn services).
    Response: Definitions of ``subcontract'' and ``subcontractor'' have 
been added to the final rule to specify that the term ``subcontract'' 
applies to contracts entered into by a prime contractor or by a 
subcontractor ``to furnish supplies or services for performance of a 
prime contract or subcontract.'' ``Subcontractor'' means any supplier, 
distributor, vendor, or firm (including a consultant) that furnishes 
supplies or services to or for a prime contractor or another 
subcontractor.
    As stated in the responses in section II.B.2.b. of this preamble, 
the rule has been modified at FAR 52.203-19(c) to specify that the 
contractor is only required to notify current employees and 
subcontractors.
4. Clarify Scope of Representation
    Comment: One respondent was concerned that the rule as proposed 
could be construed in a manner broader than the stated policy for the 
proposed rule. The policy states that the proposed rule is intended to 
reduce waste, fraud, and abuse in all Federal acquisitions. The 
respondent recommended that the rule be clarified that it only 
addresses those agreements or statements involving the employees or 
contractors

[[Page 4719]]

directly performing work on a Federal contract.
    Response: The definition of ``subcontractor'' limits the 
applicability of the rule to subcontracts under the Government 
contract. However, the statute focuses on reporting of waste, fraud, 
and abuse related to the performance of a Government contract. It is 
very possible that employees of the contractor not directly employed on 
the Government contract may have information to report relating to 
waste, fraud, or abuse on such contract. Therefore, the prohibition 
applies to all employees of the contractor, whether or not they are 
directly employed on the Government contract.
5. Timeframe of Representation
    One respondent recommended that the representation be revised to 
provide for prospective applicability.
    Retrospective representation would require offerors to locate and 
review all of its employee and subcontract agreements, which could be a 
time-consuming and costly task. The respondent recommended that the 
rule be revised to require offerors to represent that ``they have no 
such agreements in place with regard to current employees and current 
subcontracts used for performance of government contracts and it agrees 
that it will not enter into any new confidentiality agreements or 
statements that include prohibited limitations on reporting.''
    Response: The rule does not require retrospective representation. 
It allows contractors to make a blanket notice of nonenforcement (FAR 
52.203-19(b)). The respondent's proposed wording requiring contractors 
to represent they have no such agreements in place with current 
employees or subcontractors appears more burdensome that the current 
rule. However, the representation has been modified to accept the 
latter part of the recommendation, changing it to read that the offeror 
``will not require its employees or subcontractors'' to sign such 
internal confidentiality agreements or statements.
6. Reporting
    Comment: One respondent recommended that the FAR clause be modified 
so that the scope of the reporting is limited to waste, fraud, and 
abuse related to the execution of Government contracts.
    Response: The final rule has been amended at FAR 3.909-2 to specify 
that the policy applies to the reporting of waste, fraud, or abuse 
related to the performance of a Government contract. The same change is 
also incorporated in the associated provision and clause.
    Comment: Another respondent recommended that the rule should more 
precisely identify the ``designated investigative or law enforcement 
representative of a Federal department or agency authorized to receive 
such information.'' The respondent recommended that clarification would 
avoid creating a situation such as where the report is inadvertently 
made to the wrong agency, or to entities that have no responsibility 
for the procurement.
    Response: The purpose of the quoted phrase is to eliminate 
protection for disclosures to unauthorized people. The final rule has 
been amended to add ``(e.g., agency Office of the Inspector General)'' 
at the end of FAR 52.203-18(d) and 52.203-19(b).
    Comment: One respondent was concerned that the proposed rule does 
not apply to disclosures made to Congress.
    Response: Other statutes cover disclosures to Congress (see e.g., 
the whistleblower rights at FAR 3.907 and 3.908). This statute does not 
address disclosure to Congress.
7. Notice Requirements
    Comment: One respondent recommended that the preamble be amended to 
validate more flexible forms of notification, other than email, that 
could be selected by the contractor/offeror.
    Response: The rule does not specify how the notification is to be 
made. The preamble to the proposed rule only used email as an example, 
stating that ``This notice could be accomplished through normal 
business communication channels, such as email.''
8. Protection of Controlled Unclassified Information
    Comment: One respondent recommended that the rule should address 
the interplay with procedures for handling controlled unclassified 
information. An employee or subcontractor who wished to report fraud, 
waste, or abuse, should still be responsible for the proper protection 
and handling of controlled unclassified information. When an agency has 
a reason to limit the reporting of waste, fraud, or abuse to a limited 
chain of individuals, the rule should be revised to respect those 
limits.
    Another respondent stated concern that the rule does not 
acknowledge that contractors have a legitimate interest in protecting 
their privileged and confidential information. The respondent 
recommended a change to the clauses to acknowledge the ability of 
contractors to protect this information.
    Response: Information that is reported to the agency Office of the 
Inspector General is protected from further disclosure outside of the 
Government, respecting all markings on any data or confidential 
information that is received.
9. Safe Harbor
    Comment: One respondent requested examples of or guidance about 
confidentiality agreements or statements that would help contractors 
comply. The respondent recommended that the rule should include 
definitive guidance as to language to be included in a confidentiality 
statement or agreement that would comply with the requirements of the 
statute. The respondent suggested the following:
    ``Neither the confidentiality provision contained in the ___ 
[insert title of agreement, statement, policy], nor confidentiality 
provisions contained in any existing employment or contract with ___ 
[insert name of contractor] shall be construed to prohibit or otherwise 
restrict you, as an employee or {sub{time} contractor of ___ [insert 
name of contractor] from lawfully reporting waste, fraud, or abuse to a 
designated investigative or law enforcement representative of a federal 
department or agency authorized to receive such information under the 
procurement.''
    Response: Although the Councils do not consider it appropriate to 
prescribe specific language in the regulations, the language provided 
by the respondent is provided in full text in the preamble. The 
Councils concur that the sample contains appropriate language that 
could be included in an internal confidentiality agreement or 
statement, and could be tailored for use in the notice required by FAR 
52.203-19(c).
10. Applicability to Contracts Valued at or Below the Simplified 
Acquisition Threshold (SAT) and for the Acquisition of Commercial Items
    Comment: One respondent was pleased that the rule also applies to 
contracts and subcontracts for acquisitions in amounts not greater than 
the simplified acquisition threshold, and to contracts and subcontracts 
for the acquisition of commercial items, including commercially 
available off-the-shelf (COTS) items.
    Response: Noted.
    Comment: Another respondent recommended that the rule be revised to 
exclude contracts for commercial items, including COTS items, and 
purchases

[[Page 4720]]

below the simplified acquisition threshold.
     This rule would interfere with customary commercial 
practices and may deter certain valued commercial vendors from 
participating in Government procedures.
     Nothing in the statute indicates that commercial items or 
purchases below the simplified acquisition threshold are a significant 
source of this type of waste, fraud, or abuse.
     Government should determine whether commercial item 
suppliers routinely enter into such restrictive confidentiality 
agreements with their employees and subcontractors.
     The conclusion that the burdens imposed by this rule are 
minimal does not acknowledge the due diligence and effort necessary 
before a contractor can accurately represent compliance. According to 
the respondent, contractors will be required to review current internal 
confidentiality agreements, identify any conflicts with the regulatory 
requirement, and modify or enter into new confidentiality agreements to 
the extent necessary to ensure compliance.
     At a minimum, the clause should not require flowdown to 
commercial item subcontractors.
    Response: This is an appropriations act restriction on use of 
funds, passed by Congress to protect the Government's interests in 
preventing waste, fraud, and abuse on Federal contracts. The FAR 
signatories and the Administrator for Federal Procurement Policy have 
determined that it would not be in the best interest of the Government 
to waive applicability of this statute to acquisitions valued at or 
below the SAT and contracts and subcontracts for the acquisition of 
commercial items (including COTS items). In response to the specific 
comments of the respondent, the Government has no insight into when a 
contractor requires internal confidentiality agreements or statements 
from its employees and subcontractors. The concern that this rule will 
interfere with common commercial practice implies that it is common 
commercial practice to require internal confidentiality agreements or 
statements. Nothing in the statute indicates that acquisitions below 
the SAT and for the acquisition of commercial items are not a 
significant source of waste, fraud, and abuse. (See also section IV of 
this preamble.) Furthermore, the rule imposes far less burden than 
envisioned by the respondent (see response to the comments in section 
II.B.11. of this preamble.)
    Although the preamble for the proposed rule stated the clear intent 
to flow the clause down to subcontracts for the acquisition of 
commercial items, the rule did not actually implement this flowdown. 
The final rule implemented the flowdown requirement by adding the FAR 
clause 52.203-19 to the lists at 52.212-5(e) and 52.244-6.
11. Implementation Burden
    Comment: Several respondents commented that implementation of the 
proposed requirements would be immensely burdensome, without 
implementation of the recommended changes to limit scope and 
applicability. In particular, one respondent was especially concerned 
about the significant burden for contractors to track and trace all 
existing confidentiality agreements and statements, which may be 
freestanding or incorporated into other agreements. According to the 
respondent, an offeror would have to review each agreement and 
statement to determine whether it would be covered and compliant.
    Response: There is no requirement to track and trace all existing 
internal confidentiality agreements and statements. That is the purpose 
of the notification at FAR 52.203-19(c), to override the prohibitions 
and restrictions of any preexisting internal confidentiality agreements 
or statements covered by the clause that are in conflict with the new 
requirement.
12. Law Does Not Go Far Enough
    Comment: One respondent was concerned that the law does not go far 
enough and should be expanded to--
     Eliminate ``nondisclosure agreements'' to hide any 
criminal activity, including but not limited to fraud, waste, and 
abuse;
     Be worldwide; and
     Not be limited to just businesses with Government 
contracts.
    Response:
    The final rule implements the requirements of the statute. The 
Councils note that--
     Certain crimes are covered by existing whistleblower 
statutes; see FAR 3.908-3 and 3.907;
     Agreements are covered worldwide, but only for agreements 
applying to disclosures made to U.S. Federal officials; and
     The FAR cannot cover businesses that do not have 
Government contracts.

C. Other Changes

    The title of the FAR provision 52.203-18 and clause 52.203-19 were 
changed to include ``or Statements'' and the clause title was revised 
from ``Prohibition on Contracting with Entities that Require . . .'' to 
``Prohibition on Requiring . . .'' (since the contract has already been 
awarded).

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. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Items, Including Commercially 
Available Off-the-Shelf (COTS) Items

    Based on determinations by the FAR signatories (DoD, GSA, and NASA) 
and the Administrator for Federal Procurement Policy, in accordance 
with 41 U.S.C. 1905, 1906, and 1907, this rule applies to all 
solicitations and resultant contracts that are funded with fiscal year 
(FY) 2015 funds or subsequent FY funds that are subject to the same 
prohibition on confidentiality agreements, including contracts and 
subcontracts for acquisitions in amounts not greater than the SAT, and 
contracts and subcontracts for the acquisition of commercial items, 
(including COTS items). This is an appropriations act restriction that 
prohibits use of funds appropriated or otherwise made available by 
Division E of the Consolidated and Further Continuing Appropriations 
Act, 2015 (Pub. L. 112-235), or any other act, for a contract with an 
entity that requires employees or subcontractors to sign certain 
internal confidentiality agreements or statements. It is not in the 
best interest of the Federal Government to waive the applicability of 
section 743 to contracts and subcontracts in amounts not greater than 
the SAT, or for the acquisition of commercial items (including COTS 
items). In FY 2015, about 90 percent of all awards were below the SAT, 
and commercial procedures were used in more than 50 percent of all 
awards, so that excluding these awards from

[[Page 4721]]

application of the law would seriously weaken the impact of the law.
    Because the emphasis of section 743 is to prohibit restrictions on 
the ability of employees and subcontractors to report waste, fraud, or 
abuse to appropriate Government authorities, it is not in the best 
interest of the Federal Government to waive the applicability of 
section 743 to contracts and subcontracts in amounts not greater than 
the SAT. The suggested exception would exclude a significant number of 
acquisitions and thereby further limit the number of contractor/
subcontractor employees protected by section 743. Furthermore, this 
rule imposes a minimal burden on offerors and contractors, requiring 
only that offerors represent by submission of the offer that they will 
not require certain internal confidentiality agreements. Contractors 
only need to notify employees that the prohibition and restrictions of 
any preexisting internal confidentiality agreements covered by the 
clause, are no longer in effect to the extent that the restrictions are 
inconsistent with the prohibitions of the clause.
    Therefore, contractors are not required to conduct an exhaustive 
and burdensome search of all preexisting agreements to conform to the 
rule.

V. 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 rule implements section 743 of Division E, Title VII, of 
the Consolidated and Further Continuing Appropriations Act, 2015 
(Pub. L. 113-235) and successor provisions in subsequent 
appropriations acts (and as extended in continuing resolutions). 
Section 743 prohibits the use of funds appropriated or otherwise 
made available by Division E or any other Act for a contract, grant, 
or cooperative agreement with an entity that requires employees or 
subcontractors of such entity seeking to report waste, fraud, or 
abuse to sign internal confidentiality agreements or statements 
prohibiting or otherwise restricting such employees or 
subcontractors from lawfully reporting such waste, fraud, or abuse 
to a designated investigative or law enforcement representative of a 
Federal department or agency authorized to receive such information.
    The objective of the rule is to remove restrictions on the 
ability of employees and subcontractors to report waste, fraud, or 
abuse to the appropriate Government authorities.
    The legal basis for the rule is the above-cited statute.
    There were no public comments in response to the initial 
regulatory flexibility analysis.
    This rule will apply to all small entities that receive 
Government contracts awarded using funds subject to the restriction 
of section 743, or successor provisions in subsequent appropriations 
acts with the same prohibition (and as extended in continuing 
resolutions). Based on FPDS data for FY 2014, this rule may affect 
up to 108,500 small entities per year (75,000 small entities 
receiving new awards, 33,500 modifications). However, it is doubtful 
that most small entities have any such prohibited internal 
confidentiality agreements with their employees and subcontractors.
    There are no reporting or recordkeeping burdens associated with 
this rule and the other compliance requirements do not have 
significant impact, because the rule does not impose any significant 
burdens--it merely requires that contractors (1) not prohibit their 
employees and subcontractors from reporting fraud, waste, or abuse 
to appropriate Government authorities; and (2) notify employees 
previously subject to such agreements, that the prohibited sections 
of the agreements are no longer in effect (e.g., an email to all 
affected employees).
    The rule has no significant economic impact on small entities. 
DoD, GSA, and NASA did not identify any significant alternatives 
that would reduce the impact on small entities and still meet the 
objectives 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.

VI. 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 Parts 3, 4, and 52

    Government procurement.

    Dated: December 21, 2016.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 3, 4, and 52 as 
set forth below:

0
1. The authority citation for 48 CFR parts 3, 4, 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 3--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTERESTS

0
2. Amend section 3.900 by--
0
a. Removing from the introductory text ``three different'' and adding 
``various'' in its place;
0
b. Redesignating paragraph (c) as paragraph (d); and
0
c. Adding a new paragraph (c).
    The addition reads as follows:


3.900  Scope of subpart.

* * * * *
    (c) Section 743 of Division E, Title VII, of the Consolidated and 
Further Continuing Appropriations Act, 2015 (Pub. L. 113-235) and its 
successor provisions in subsequent appropriations acts (and as extended 
in continuing resolutions), implemented in 3.909, applicable to all 
agencies.
* * * * *

0
3. Amend section 3.901 by adding, in alphabetical order, definitions 
for ``Internal confidentiality agreement or statement'', 
``Subcontract'', and ``Subcontractor'' to read as follows:


3.901   Definitions.

* * * * *
    Internal confidentiality agreement or statement means a 
confidentiality agreement or any other written statement that the 
contractor requires any of its employees or subcontractors to sign 
regarding nondisclosure of contractor information, except that it does 
not include confidentiality agreements arising out of civil litigation 
or confidentiality agreements that contractor employees or 
subcontractors sign at the behest of a Federal agency.
    Subcontract means any contract as defined in subpart 2.1 entered 
into by a subcontractor to furnish supplies or services for performance 
of a prime contract or a subcontract. It includes but is not limited to 
purchase orders, and changes and modifications to purchase orders.
    Subcontractor means any supplier, distributor, vendor, or firm 
(including a consultant) that furnishes supplies or services to or for 
a prime contractor or another subcontractor.

0
4. Add sections 3.909, 3.909-1, 3.909-2, and 3.909-3 to read as 
follows:


3.909  Prohibition on providing funds to an entity that requires 
certain internal confidentiality agreements or statements.


3.909-1  Prohibition.

    (a) The Government is prohibited from using fiscal year 2015 and 
subsequent fiscal year funds for a contract with an entity that 
requires employees or subcontractors of such entity seeking to report 
waste, fraud, or abuse to sign internal confidentiality agreements or 
statements prohibiting or otherwise restricting such employees or 
subcontractors from lawfully reporting such waste, fraud, or abuse to a 
designated investigative or law

[[Page 4722]]

enforcement representative of a Federal department or agency authorized 
to receive such information. See section 743 of Division E, Title VII, 
of the Consolidated and Further Continuing Appropriations Act, 2015 
(Pub. L. 113-235) and its successor provisions in subsequent 
appropriations acts (and as extended in continuing resolutions.)
    (b) The prohibition in paragraph (a) of this section does not 
contravene requirements applicable to Standard Form 312 (Classified 
Information Nondisclosure Agreement), Form 4414 (Sensitive 
Compartmented Information Nondisclosure Agreement), or any other form 
issued by a Federal department or agency governing the nondisclosure of 
classified information.


3.909-2  Representation by the offeror.

    (a) In order to be eligible for contract award, an offeror must 
represent that it will not require its employees or subcontractors to 
sign internal confidentiality agreements or statements prohibiting or 
otherwise restricting such employees or subcontractors from lawfully 
reporting waste, fraud, or abuse related to the performance of a 
Government contract to a designated investigative or law enforcement 
representative of a Federal department or agency authorized to receive 
such information (e.g., agency Office of the Inspector General). Any 
offeror that does not so represent is ineligible for award of a 
contract.
    (b) The contracting officer may rely on an offeror's representation 
unless the contracting officer has reason to question the 
representation.


3.909-3   Solicitation provision and contract clause.

    When using funding subject to the prohibitions in 3.909-1(a), the 
contracting officer shall--
    (a)(1) Include the provision at 52.203-18, Prohibition on 
Contracting with Entities that Require Certain Internal Confidentiality 
Agreements or Statements--Representation, in all solicitations, except 
as provided in paragraph (a)(2) of this section; and
    (2) Do not insert the provision in solicitations for a personal 
services contract with an individual if the services are to be 
performed entirely by the individual, rather than by an employee of the 
contractor or a subcontractor.
    (b)(1) Include the clause at 52.203-19, Prohibition on Requiring 
Certain Internal Confidentiality Agreements or Statements, in all 
solicitations and resultant contracts, other than personal services 
contracts with individuals.
    (2) Modify existing contracts, other than personal services 
contracts with individuals, to include the clause before obligating FY 
2015 or subsequent FY funds that are subject to the same prohibition on 
internal confidentiality agreements or statements.

PART 4--ADMINISTRATIVE MATTERS

0
5. Amend section 4.1202 by--
0
a. Redesignating paragraphs (a)(3) through (33) as paragraphs (a)(4) 
through (34), respectively;
0
b. Revising the heading and first sentence of the Note in newly 
redesignated paragraph (a)(22); and
0
c. Adding new paragraph (a)(3).
    The addition and revision reads as follows:


4.1202   Solicitation provision and contract clause.

    (a) * * *
    (3) 52.203-18, Prohibition on Contracting with Entities that 
Require Certain Internal Confidentiality Agreements or Statements--
Representation.
* * * * *
    (22) * * *

    Note to paragraph (a)(22):  By a court order issued on October 
24, 2016, this paragraph (a)(22) is enjoined indefinitely as of the 
date of the order.

* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
6. Add sections 52.203-18 and 52.203-19 to read as follows:


52.203-18   Prohibition on Contracting with Entities that Require 
Certain Internal Confidentiality Agreements or Statements--
Representation.

    As prescribed in 3.909-3(a), insert the following provision:

Prohibition on Contracting With Entities That Require Certain Internal 
Confidentiality Agreements or Statements--Representation (JAN 2017)

    (a) Definition. As used in this provision--
    Internal confidentiality agreement or statement, subcontract, 
and subcontractor, are defined in the clause at 52.203-19, 
Prohibition on Requiring Certain Internal Confidentiality Agreements 
or Statements.
    (b) In accordance with section 743 of Division E, Title VII, of 
the Consolidated and Further Continuing Appropriations Act, 2015 
(Pub. L. 113-235) and its successor provisions in subsequent 
appropriations acts (and as extended in continuing resolutions), 
Government agencies are not permitted to use funds appropriated (or 
otherwise made available) for contracts with an entity that requires 
employees or subcontractors of such entity seeking to report waste, 
fraud, or abuse to sign internal confidentiality agreements or 
statements prohibiting or otherwise restricting such employees or 
subcontractors from lawfully reporting such waste, fraud, or abuse 
to a designated investigative or law enforcement representative of a 
Federal department or agency authorized to receive such information.
    (c) The prohibition in paragraph (b) of this provision does not 
contravene requirements applicable to Standard Form 312, (Classified 
Information Nondisclosure Agreement), Form 4414 (Sensitive 
Compartmented Information Nondisclosure Agreement), or any other 
form issued by a Federal department or agency governing the 
nondisclosure of classified information.
    (d) Representation. By submission of its offer, the Offeror 
represents that it will not require its employees or subcontractors 
to sign or comply with internal confidentiality agreements or 
statements prohibiting or otherwise restricting such employees or 
subcontractors from lawfully reporting waste, fraud, or abuse 
related to the performance of a Government contract to a designated 
investigative or law enforcement representative of a Federal 
department or agency authorized to receive such information (e.g., 
agency Office of the Inspector General).


(End of provision)


52.203-19   Prohibition on Requiring Certain Internal Confidentiality 
Agreements or Statements.

    As prescribed in 3.909-3(b), insert the following clause:

Prohibition on Requiring Certain Internal Confidentiality Agreements or 
Statements (JAN 2017)

    (a) Definitions. As used in this clause--
    Internal confidentiality agreement or statement means a 
confidentiality agreement or any other written statement that the 
contractor requires any of its employees or subcontractors to sign 
regarding nondisclosure of contractor information, except that it 
does not include confidentiality agreements arising out of civil 
litigation or confidentiality agreements that contractor employees 
or subcontractors sign at the behest of a Federal agency.
    Subcontract means any contract as defined in subpart 2.1 entered 
into by a subcontractor to furnish supplies or services for 
performance of a prime contract or a subcontract. It includes but is 
not limited to purchase orders, and changes and modifications to 
purchase orders.
    Subcontractor means any supplier, distributor, vendor, or firm 
(including a consultant) that furnishes supplies or services to or 
for a prime contractor or another subcontractor.
    (b) The Contractor shall not require its employees or 
subcontractors to sign or comply with internal confidentiality 
agreements or statements prohibiting or otherwise restricting such 
employees or subcontractors from lawfully reporting waste, fraud, or 
abuse related to the performance of a Government contract to a 
designated investigative or law enforcement

[[Page 4723]]

representative of a Federal department or agency authorized to 
receive such information (e.g., agency Office of the Inspector 
General).
    (c) The Contractor shall notify current employees and 
subcontractors that prohibitions and restrictions of any preexisting 
internal confidentiality agreements or statements covered by this 
clause, to the extent that such prohibitions and restrictions are 
inconsistent with the prohibitions of this clause, are no longer in 
effect.
    (d) The prohibition in paragraph (b) of this clause does not 
contravene requirements applicable to Standard Form 312 (Classified 
Information Nondisclosure Agreement), Form 4414 (Sensitive 
Compartmented Information Nondisclosure Agreement), or any other 
form issued by a Federal department or agency governing the 
nondisclosure of classified information.
    (e) In accordance with section 743 of Division E, Title VII, of 
the Consolidated and Further Continuing Appropriations Act, 2015, 
(Pub. L. 113-235), and its successor provisions in subsequent 
appropriations acts (and as extended in continuing resolutions) use 
of funds appropriated (or otherwise made available) is prohibited, 
if the Government determines that the Contractor is not in 
compliance with the provisions of this clause.
    (f) The Contractor shall include the substance of this clause, 
including this paragraph (f), in subcontracts under such contracts.


(End of clause)

0
7. Amend section 52.204-8 by--
0
a. Revising the date of the provision;
0
 b. Redesignating paragraphs (c)(1)(iii) through (xxiv) as paragraphs 
(c)(1)(iv) through (xxv), respectively;
0
 c. In the note to newly redesignated paragraph (c)(1)(xvi), remove 
``paragraph (c)(1)(xv)'' and add ``paragraph (c)(1)(xvi)'' in its 
place; and
0
 d. Adding a new paragraph (c)(1)(iii).
    The revision and addition reads as follows:


52.204-8   Annual Representations and Certifications.

* * * * *

Annual Representations and Certifications (JAN 2017)

* * * * *
    (c)(1) * * *
    (iii) 52.203-18, Prohibition on Contracting with Entities that 
Require Certain Internal Confidentiality Agreements or Statements--
Representation. This provision applies to all solicitations.
* * * * *

0
8. Amend section 52.212-3 by--
0
 a. Revising the date of provision;
0
b. Removing from the introductory text of the provision ``through (t)'' 
and adding ``through (u)'' in its place;
0
 c. Removing from paragraph (b)(2), in the bracketed paragraph, 
``through (t)'' and adding ``through (u)'' in its place; and
0
d. Adding paragraph (u).
    The revision and addition reads as follows:


52.212-3   Offeror Representations and Certifications--Commercial 
Items.

* * * * *

Offeror Representations and Certifications--Commercial Items (JAN 2017)

* * * * *
    (u)(1) In accordance with section 743 of Division E, Title VII, 
of the Consolidated and Further Continuing Appropriations Act, 2015 
(Pub. L. 113-235) and its successor provisions in subsequent 
appropriations acts (and as extended in continuing resolutions), 
Government agencies are not permitted to use appropriated (or 
otherwise made available) funds for contracts with an entity that 
requires employees or subcontractors of such entity seeking to 
report waste, fraud, or abuse to sign internal confidentiality 
agreements or statements prohibiting or otherwise restricting such 
employees or subcontractors from lawfully reporting such waste, 
fraud, or abuse to a designated investigative or law enforcement 
representative of a Federal department or agency authorized to 
receive such information.
    (2) The prohibition in paragraph (u)(1) of this provision does 
not contravene requirements applicable to Standard Form 312 
(Classified Information Nondisclosure Agreement), Form 4414 
(Sensitive Compartmented Information Nondisclosure Agreement), or 
any other form issued by a Federal department or agency governing 
the nondisclosure of classified information.
    (3) Representation. By submission of its offer, the Offeror 
represents that it will not require its employees or subcontractors 
to sign or comply with internal confidentiality agreements or 
statements prohibiting or otherwise restricting such employees or 
subcontractors from lawfully reporting waste, fraud, or abuse 
related to the performance of a Government contract to a designated 
investigative or law enforcement representative of a Federal 
department or agency authorized to receive such information (e.g., 
agency Office of the Inspector General).


0
9. Amend section 52.212-5 by--
0
a. Revising the date of clause;
0
b. Redesignating paragraphs (a)(1) through (3) as paragraphs (a)(2) 
through (4), respectively;
0
c. Adding a new paragraph (a)(1);
0
d. Redesignating paragraphs (e)(1)(ii) through (xxii) as (e)(1)(iii) 
through (xxiii), respectively;
0
 e. In the note to newly redesignated paragraph (e)(1)(xvii), remove 
``paragraph (e)(1)(xvi)'' and add ``paragraph (e)(1)(xvii)'' in its 
place; and
0
f. Adding a new paragraph (e)(1)(ii).
    The revision and additions read as follows:


52.212-5   Contract Terms and Conditions Required to Implement Statutes 
of Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 
Executive Orders--Commercial Items (JAN 2017)

* * * * *
    (a) * * *
    (1) 52.203-19, Prohibition on Requiring Certain Internal 
Confidentiality Agreements or Statements (JAN 2017) (section 743 of 
Division E, Title VII, of the Consolidated and Further Continuing 
Appropriations Act, 2015 (Pub. L. 113-235) and its successor provisions 
in subsequent appropriations acts (and as extended in continuing 
resolutions)).
* * * * *
    (e) * * *
    (1) * * *
    (ii) 52.203-19, Prohibition on Requiring Certain Internal 
Confidentiality Agreements or Statements (JAN 2017) (section 743 of 
Division E, Title VII, of the Consolidated and Further Continuing 
Appropriations Act, 2015 (Pub. L. 113-235) and its successor provisions 
in subsequent appropriations acts (and as extended in continuing 
resolutions)).
* * * * *

0
10. Amend section 52.213-4--
0
a. Revising the date of the clause;
0
 b. Redesignating paragraphs (a)(1)(i) through (vi) as (a)(1)(ii) 
through (vii), respectively;
0
c. Adding a new paragraph (a)(1)(i); and
0
d. Revising paragraph (a)(2)(viii).
    The revisions and addition reads as follows:


52.213-4  Terms and Conditions-simplified Acquisitions (Other Than 
Commercial Items).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial 
Items) (JAN 2017)

    (a) * * *
    (1) * * *
    (i) 52.203-19, Prohibition on Requiring Certain Internal 
Confidentiality Agreements or Statements (JAN 2017) (section 743 of 
Division E, Title VII, of the Consolidated and Further Continuing 
Appropriations Act, 2015 (Pub. L. 113-235) and its successor provisions 
in subsequent appropriations acts (and as extended in continuing 
resolutions)).
* * * * *
    (2) * * *

[[Page 4724]]

    (viii) 52.244-6, Subcontracts for Commercial Items (JAN 2017).
* * * * *

0
11. Amend section 52.244-6 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (c)(1)(iii) through (xix) as paragraphs 
(c)(1)(iv) through (c)(1)(xx);
0
c. In the note to newly redesignated paragraph (c)(1)(xiv), remove 
``paragraph (c)(1)(xiii)'' and add ``paragraph (c)(1)(xiv)'' in its 
place; and
0
d. Adding a new paragraph (c)(1)(iii).
    The revision and addition reads as follows:


52.244-6   Subcontracts for Commercial Items.

* * * * *

Subcontracts for Commercial Items (JAN 2017)

* * * * *
    (c) * * *
    (1) * * *
    (iii) 52.203-19, Prohibition on Requiring Certain Internal 
Confidentiality Agreements or Statements (JAN 2017).
* * * * *
[FR Doc. 2016-31497 Filed 1-12-17; 8:45 am]
 BILLING CODE 6820-EP-P