[Federal Register Volume 85, Number 169 (Monday, August 31, 2020)]
[Proposed Rules]
[Pages 53755-53758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18640]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 227 and 252
[Docket DARS-2019-0048]
RIN 0750-AK71
Defense Federal Acquisition Regulation Supplement: Validation of
Proprietary and Technical Data (DFARS Case 2018-D069)
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 implement a section of the National
Defense Authorization Act for Fiscal Year 2019, which amended the
statutory presumption of development exclusively at private expense for
commercial items in the procedures governing the validation of asserted
restrictions on technical data.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before October 30, 2020, to be considered
in the formation of a final rule.
ADDRESSES: Submit comments identified by DFARS Case 2018-D069, using
any of the following methods:
[cir] Federal eRulemaking Portal: http://www.regulations.gov.
Search for ``DFARS Case 2018-D069.'' Select ``Comment Now'' and follow
the instructions provided to submit a comment. Please include ``DFARS
Case 2018-D069'' on any attached documents.
[cir] Email: [email protected]. Include DFARS Case 2018-D069 in
the subject line of the message.
[cir] Fax: 571-372-6094.
[cir] Mail: Defense Acquisition Regulations System, Attn: Ms.
Jennifer D. Johnson, OUSD(A&S)DPC/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. Jennifer D. Johnson, telephone
571-372-6100.
SUPPLEMENTARY INFORMATION:
I. Background
DoD is proposing to revise the DFARS to implement section 865 of
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019
(Pub. L. 115-232), which repeals several years of congressional
adjustments to the statutory presumption of development at private
expense for commercial items in the validation procedures at paragraph
(f) of 10 U.S.C. 2321. DoD hosted public meetings to obtain the views
of interested parties with notice published in the Federal Register on
August 16, 2019, at 84 FR 41953. In addition, DoD published an advance
notice of proposed rulemaking (ANPR) on September 13, 2019, at 84 FR
48513, providing draft DFARS revisions and requesting any written
public comments by November 12, 2019.
The presumption of development funding at private expense for
commercial items was established in 1994 by section 8106 of the Federal
Acquisition Streamlining Act (FASA) (Pub. L. 103-355). This statutory
presumption has been amended numerous times, including by section
802(b) of the NDAA for FY 2007 (Pub. L. 109-364), section 815(a)(2) of
the NDAA for FY 2008 (Pub. L. 110-181), section 1071(a)(5) of the NDAA
for FY 2015 (Pub. L. 113-291), section 813(a) of the NDAA for FY 2016
(Pub. L. 114-92), and most recently by section 865.
The DFARS implementation of this mandatory presumption has evolved
accordingly to track the statutory changes, with the primary coverage
found at paragraph (c) of section 227.7103-13, Government right to
review, verify, challenge, and validate asserted restrictions, and
paragraph (b) of the clause at 252.227-7037, Validation of Restrictive
Markings on Technical Data. There is no DFARS coverage applying such a
presumption regarding development funding for commercial computer
software because, as a matter of policy also dating back to the FASA
time frame, the underlying procedures for challenging and validating
asserted restrictions have not been applied to commercial computer
software--only to noncommercial computer software (e.g., section
227.7203-13, Government right to review, verify, challenge, and
validate asserted restrictions, and the clause at 252.227-7019,
Validation of Asserted Restrictions--Computer Software).
II. Discussion and Analysis
DoD reviewed the public comments submitted in writing, and also as
discussed by the attendees at the public meeting on November 15, 2019,
in the development of the proposed rule. Only one respondent provided a
written public comment. A discussion of the comments and the changes
made to the rule as a result of those comments is provided, as follows:
A. Summary of Significant Changes From the ANPR
Language was added to clarify DFARS 227.7103-13(c). The proposed
revisions clarify that the statutory threshold for all challenges,
including those for commercial items, is that a contracting officer
must have reasonable grounds to question the validity of the asserted
restriction. In recognition of the higher burden to sustain a challenge
for commercial items, the text was revised to require a contracting
officer to include, to the maximum extent practicable, sufficient
information in the challenge notice to reasonably demonstrate that the
commercial item was not developed exclusively at private expense. The
proposed revisions require the contracting officer to provide, in order
to sustain a challenge, information demonstrating that the commercial
item was not developed exclusively at private expense. Additionally, a
change to DFARS 227.7103-13(d)(4) is proposed, in the case of
commercial item acquisitions, to direct the contracting officer to
DFARS 227.7103-13, paragraph (c)(2).
Changes were made to 252.227-7037(b) to clarify that the
presumption of development at private expense for commercial items
applies to the issuance of a challenge. A revision is proposed in
paragraph (e)(1)(i) of DFARS 252.227-7037 to clarify that, for
commercial items, the challenge notice will include, to the maximum
extent practicable, sufficient information to reasonably demonstrate
that the commercial item was not developed at private expense. In
paragraphs (f) and (g)(2)(i) of 252.227-7037, revisions are proposed to
explain that, in order to sustain a challenge for commercial items, the
contracting officer will provide information demonstrating that the
commercial item was not developed exclusively at private expense.
B. Analysis of Public Comments
Comment: The respondent requests two specific changes: (1) A
substitution of language so that a contracting officer
[[Page 53756]]
needs to provide information to the contractor that a commercial item
was not developed exclusively at private expense before challenging an
assertion in DFARS 227.7103-13(c), and (2) replacement of the word
``will'' with the word ``shall'' in paragraph (b) of the clause at
DFARS 252.227-7037. The respondent recommends a change to clarify that
a contracting officer must provide information to the contractor that a
commercial item was not developed exclusively at private expense in
order to challenge an assertion.
Response: DoD generally agrees that, as a matter of policy,
sufficient information should be provided to a contractor to reasonably
demonstrate that the commercial item was not developed exclusively at
private expense. Therefore, paragraph (c) in DFARS 227.7103-13 is
revised to clarify a need for transparency, to the maximum extent
practicable, when a contracting officer challenges any assertion.
Regarding the respondent's recommended change of the word ``will''
to the word ``shall'' in paragraph (b) of the clause, the requested
changes cannot be made pursuant to the FAR drafting conventions
regarding the use of the terms ``shall'' and ``will'' in clauses and
provisions. For consistency in the regulations, ``shall'' is the
preferred term to use in provisions and clauses to indicate an
obligation to act on the part of an offeror or contractor. To indicate
an obligation for the Government to act, the term ``will'' is used.
Accordingly, the word ``shall'' is replaced with ``will'' throughout
the clause at DFARS 252.227-7037, where the Government is to perform an
action.
C. Technical Amendments
References in the DFARS text to ``subsection'' are changed to
``section''. One editorial correction is made to a cross-reference in
the introductory text to clause 252.227-7037. The reference to
``27.7104(e)(5)'' is corrected to read ``227.7104(e)(5)''. In the
clause, ``shall'' is changed to ``will'' when providing direction to
the contracting officer.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf Items
DoD intends to apply the requirements of section 865 of the NDAA
for FY 2019 to contracts at or below the simplified acquisition
threshold and to acquisitions of commercial items, including
commercially available off-the-shelf (COTS) items.
A. Applicability to Contracts at or Below the Simplified Acquisition
Threshold
Title 41 U.S.C. 1905 governs the applicability of laws to contracts
or subcontracts in amounts not greater than the simplified acquisition
threshold. It is intended to limit the applicability of laws to such
contracts or subcontracts. Title 41 U.S.C. 1905 provides that if a
provision of law contains criminal or civil penalties, or if the FAR
Council makes a written determination that it is not in the best
interest of the Federal Government to exempt contracts or subcontracts
at or below the SAT, the law will apply to them. The Principal
Director, Defense Pricing and Contracting (DPC), is the appropriate
authority to make comparable determinations for regulations to be
published in the DFARS, which is part of the FAR system of regulations.
DoD has determined that it is in the best interest of the Federal
Government to apply the statutory requirements regarding the
presumption of development at private expense for commercial items in
validations of asserted restrictions to acquisitions at or below the
simplified acquisition threshold; i.e., the section 865 revisions to
the presumption scheme do not alter the applicability of the underlying
validation procedures. The validation procedures are necessary to
ensure that the license rights granted to the Government are consistent
with the applicable data rights clauses, and therefore affect both
parties' substantive legal rights. Moreover, within the validation
procedures, the presumption of development at private expense for
commercial items is designed primarily to protect the contractors'
interests and thus should remain applicable to acquisitions at or below
the simplified acquisition threshold.
B. Applicability to Contracts for the Acquisition of Commercial Items,
Including COTS Items
Title 10 U.S.C. 2375 governs the applicability of laws to DoD
contracts and subcontracts for the acquisition of commercial items
(including COTS items) and is intended to limit the applicability of
laws to contracts for the acquisition of commercial items, including
COTS items. Title 10 U.S.C. 2375 provides that if a provision of law
contains criminal or civil penalties, or if the Under Secretary of
Defense for Acquisition and Sustainment (USD(A&S)) makes a written
determination that it is not in the best interest of the Federal
Government to exempt commercial item contracts, the provision of law
will apply to contracts for the acquisition of commercial items. Due to
delegations of authority from USD(A&S), the Principal Director, DPC, is
the appropriate authority to make this determination.
Therefore, given that the requirements of section 865 of the NDAA
for FY 2019 were enacted to return to a presumption of development
exclusively at private expense for commercial items, DoD has determined
that it is in the best interest of the Federal Government to apply the
rule to contracts for the acquisition of commercial items, including
COTS items, as defined at FAR 2.101. An exception for contracts for the
acquisition of commercial items, including COTS items, would exclude
contracts intended to be covered by the law, thereby undermining the
overarching public policy purpose of the law.
IV. 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.
V. Executive Order 13771
This rule is not expected to be subject to E.O. 13771, because this
rule is not a significant regulatory action under E.O. 12866.
VI. Regulatory Flexibility Act
DoD does not expect this proposed 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 implementation of section 865 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2019 provides for a
presumption of development exclusively at private expense under a
contract for commercial items. Section 865 clarifies that burden is
shifted to the Government to provide information that
[[Page 53757]]
the commercial item was not developed exclusively at private expense.
However, an initial regulatory flexibility analysis has been performed
and is summarized as follows:
DoD is proposing to implement section 865 of the NDAA for FY 2019
(Pub. L. 115-232), which revised 10 U.S.C. 2321. Section 865 repeals
amendments to 10 U.S.C. 2321(f) made by the NDAAs for FY 2007 through
FY 2016. The impact is to return the coverage at DFARS 227.7103-13 and
252.227-7037 substantially back to the original Federal Acquisition
Streamlining Act-implementing language with regard to the presumption
of development exclusively at private expense. Section 865 also
codifies and revises DoD challenges to contractor-asserted restrictions
on technical data pertaining to a commercial item, i.e., DoD is
required to presume that the contractor or subcontractor has justified
the asserted restriction on the basis that the item was developed
exclusively at private expense, regardless of whether the contractor or
subcontractor submits a justification in response to the Government's
challenge notice. In such a case, the challenge to the use or release
restriction may be sustained only if information provided by DoD
demonstrates that the item was not developed exclusively at private
expense.
The objective of the proposed rule is to implement section 865 of
the NDAA for FY 2019.
This proposed rule will apply to small entities that have contracts
with DoD requiring delivery of technical data. Based on data from
Electronic Data Access for FY 2017 through FY 2019, DoD estimates that
43,939 contractors may be impacted by the changes in this proposed
rule. Of those entities, approximately 23,181 (53 percent) are small
entities.
This proposed rule does not impose any new reporting, recordkeeping
or other compliance requirements for small entities. The DFARS text and
clause that are proposed to be amended are covered by OMB Control
Number 0704-0369. The changes in this proposed rule are expected to
have negligible impact on the burdens already covered by the OMB
clearance.
This proposed rule does not duplicate, overlap, or conflict with
any other Federal rules.
There are no known alternatives which would accomplish the stated
objectives of the applicable statute.
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 2018-D069), in
correspondence.
VII. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) does apply to
this rule; however, these changes to the DFARS do not impose additional
information collection requirements to the paperwork burden previously
approved under OMB Control Number 0704-0369, entitled ``DFARS: Subparts
227.71, Rights in Technical Data; and Subpart 227.72, Rights in
Computer Software and Computer Software Documentation, and related
provisions and clauses of the Defense Federal Acquisition Regulation
Supplement (DFARS).''
List of Subjects in 48 CFR Parts 227 and 252
Government procurement.
Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 227 and 252 are proposed to be amended as
follows:
0
1. The authority citation for 48 CFR parts 227 and 252 continues to
read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 227--PATENTS, DATA, AND COPYRIGHTS
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2. Amend section 227.7103-13 by--
0
a. In paragraph (c)(1) removing the third sentence;
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b. Revising paragraph (c)(2); and
0
c. In paragraphs (d)(2)(i) and (d)(4), removing ``subsection'' wherever
it appears and adding ``section'' in each place; and
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d. In paragraph (d)(4), adding a sentence after the first sentence.
The revision and addition read as follows:
227.7103-13 Government right to review, verify, challenge, and
validate asserted restrictions.
* * * * *
(c) * * *
(2) Commercial items--presumption regarding development exclusively
at private expense. 10 U.S.C. 2320(b)(1) and 2321(f) establish a
presumption and procedures regarding validation of asserted
restrictions for technical data related to commercial items on the
basis of development exclusively at private expense. Contracting
officers shall presume that a commercial item was developed exclusively
at private expense whether or not a contractor or subcontractor submits
a justification in response to a challenge notice. The contracting
officer shall not challenge a contractor's assertion that a commercial
item was developed exclusively at private expense unless the Government
can specifically state the reasonable grounds to question the validity
of the assertion. The challenge notice shall, to the maximum extent
practicable, include sufficient information to reasonably demonstrate
that the commercial item was not developed exclusively at private
expense. In order to sustain the challenge, the contracting officer
shall provide information demonstrating that the commercial item was
not developed exclusively at private expense. A contractor's or
subcontractor's failure to respond to the challenge notice cannot be
the sole basis for issuing a final decision denying the validity of an
asserted restriction.
(d) * * *
(4) * * * For commercial items, also see paragraph (c)(2) of this
section. * * *
* * * * *
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
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3. Amend section 252.227-7037 by--
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a. In the introductory text, removing ``27.7104(e)(5)'' and adding
``227.7104(e)(5)'' in its place;
0
b. Removing the clause date ``(SEP 2016)'' and adding ``(DATE)'' in its
place;
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c. Revising paragraph (b);
0
d. In paragraph (c), removing ``paragraph (b)(1)'' and adding
``paragraph (b)'' in its place;
0
e. In paragraphs (d)(2), (e)(1) introductory text, (e)(2) and (4),
(g)(1), and (h)(2)(i) and (ii), removing ``shall'' and adding ``will''
in its place wherever it appears; and
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f. Revising paragraphs (e)(1)(i), (f), and (g)(2)(i).
The revisions read as follows:
252.227-7037 Validation of Restrictive Markings on Technical Data.
* * * * *
(b) Commercial items--presumption regarding development exclusively
at private expense. The Contracting Officer will presume that the
Contractor's or a subcontractor's asserted use or release restrictions
with respect to a commercial item are justified on the basis that the
item was developed exclusively at private expense. The Contracting
Officer will not issue a challenge unless there are reasonable grounds
to question the validity of the assertion that the commercial item was
[[Page 53758]]
not developed exclusively at private expense.
* * * * *
(e) * * *
(1) * * *
(i) State the specific grounds for challenging the asserted
restriction, including, for commercial items, to the maximum extent
practicable, sufficient information to reasonably demonstrate that the
commercial item was not developed exclusively at private expense;
* * * * *
(f) Final decision when Contractor or subcontractor fails to
respond. Upon a failure of a Contractor or subcontractor to submit any
response to the challenge notice the Contracting Officer will issue a
final decision to the Contractor or subcontractor in accordance with
the Disputes clause of this contract. In order to sustain the challenge
for commercial items, the Contracting Officer will provide information
demonstrating that the commercial item was not developed exclusively at
private expense. This final decision will be issued as soon as possible
after the expiration of the time period of paragraph (e)(1)(ii) or
(e)(2) of this clause. Following issuance of the final decision, the
Contracting Officer will comply with the procedures in paragraphs
(g)(2)(ii) through (iv) of this clause.
(g) * * *
(2)(i) If the Contracting Officer determines that the validity of
the restrictive marking is not justified, the Contracting Officer will
issue a final decision to the Contractor or subcontractor in accordance
with the Disputes clause of this contract. In order to sustain the
challenge for commercial items, the Contracting Officer will provide
information demonstrating that the commercial item was not developed
exclusively at private expense. Notwithstanding paragraph (e) of the
Disputes clause, the final decision will be issued within sixty (60)
days after receipt of the Contractor's or subcontractor's response to
the challenge notice, or within such longer period that the Contracting
Officer has notified the Contractor or subcontractor of the longer
period that the Government will require. The notification of a longer
period for issuance of a final decision will be made within sixty (60)
days after receipt of the response to the challenge notice.
* * * * *
[FR Doc. 2020-18640 Filed 8-28-20; 8:45 am]
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