[Federal Register Volume 86, Number 165 (Monday, August 30, 2021)]
[Rules and Regulations]
[Pages 48336-48339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18340]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212, 225 and 252

[Docket DARS-2020-0039]
RIN 0750-AL15


Defense Federal Acquisition Regulation Supplement: Improved 
Energy Security for Main Operating Bases in Europe (DFARS Case 2020-
D030)

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

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2020. This section 
prohibits contracts for the acquisition of furnished energy for a 
covered military installation in Europe that is sourced from inside the 
Russian Federation.

DATES: Effective August 30, 2021.

FOR FURTHER INFORMATION CONTACT: Ms. Kimberly Bass, telephone 571-372-
6174.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 86 FR 3935 
on January 15, 2021, to amend the DFARS to implement section 2821 of 
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 
(Pub. L. 116-92). Section 2821 prohibits use of energy sourced from 
inside the Russian Federation in an effort to promote energy security 
in Europe. The prohibition applies to all forms of energy ``furnished 
to a covered military installation'' as that term is defined in the 
statute. No public comments were received in response to the proposed 
rule.

II. Discussion and Analysis

A. Summary of Significant Changes

    No changes are made to the final rule as a result of public 
comments.

B. Other Changes

    One change is made to the rule as proposed to clarify the same 
language that appears in section 225.7019-2, paragraph (b); the 
provision 252.225-7053, paragraph (b)(2); and clause 252.225-7054, 
paragraph (b)(2). In all three locations, the statement ``Does not 
apply to a third party that uses it to create some other form of energy 
(e.g., heating, cooling, or electricity)'' is changed to read ``Does 
not apply to energy converted by a third party into another form of 
energy and not directly delivered to a covered military installation.'' 
No other changes are made to the rule.

III. Applicability to Contracts At or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This DFARS rule implements section 2821 of the NDAA for FY 2020 
(Pub. L. 116-92). Section 2821 prohibits use of energy sourced from 
inside the Russian Federation unless a waiver is approved by the head 
of the contracting activity. To implement section 2821, this rule 
creates a new solicitation provision and

[[Page 48337]]

contract clause: (1) DFARS 252.225-7053, Representation Regarding 
Prohibition on Use of Certain Energy Sourced from Inside the Russian 
Federation, and (2) DFARS 252.225-7054, Prohibition on Use of Certain 
Energy Sourced from Inside the Russian Federation.
    Section 2821 is silent on applicability to contracts and 
subcontracts in amounts at or below the simplified acquisition 
threshold (SAT) or for the acquisition of commercial items. Also, the 
statute does not provide for civil or criminal penalties. Therefore, it 
does not apply to contracts or subcontracts in amounts not greater than 
the SAT or to the acquisition of commercial items, including COTS 
items, unless a written determination is made as provided for in 41 
U.S.C. 1905 and 10 U.S.C. 2375, respectively. The Principal Director, 
Defense Pricing and Contracting, is the appropriate authority to make a 
determination for regulations to be published in the DFARS, which is 
part of the FAR system of regulations. In consonance with the written 
determination made by the Principal Director, Defense Pricing and 
Contracting, on May 29, 2020, DoD will apply section 2821 to 
solicitations and contracts at or below the SAT and to the acquisition 
of commercial items, including COTS items, as defined at FAR 2.101. Not 
applying this prohibition guidance to contracts at or below the SAT and 
for the acquisition of commercial items, including COTS items, would 
exclude contracts intended to be covered by this rule and undermine the 
overarching purpose of the rule to prohibit use of energy sourced from 
inside the Russian Federation. Consequently, DoD will apply the rule to 
contracts at or below the SAT and for the acquisition of commercial 
items, including COTS items, to promote energy security in Europe and 
reduce the risk of supply shortages and reliance on energy sourced 
inside the Russian Federation.

IV. Expected Impact of the Rule

    This rule amends the DFARS to implement section 2821 of the NDAA 
for FY 2020 (Pub. L. 116-92). Section 2821 prohibits the use of energy 
sourced from inside the Russian Federation in an effort to promote 
energy security in Europe. The prohibition applies to all forms of 
energy that is ``furnished to a covered military installation'', as 
that term is defined in the statute and only to main operating bases as 
defined and identified by DoD. This means the energy itself must be 
furnished to the military installation, not to a third party that uses 
it to create some other form of energy (e.g., heating, cooling, or 
electric). The prohibition applies only to Europe, not to Asia (for 
example, those parts of Turkey located in Asia).
    DoD will promote the energy security of its European installations 
by encouraging energy security and energy resilience and will not 
purchase energy sourced from inside the Russian Federation unless a 
waiver of the prohibition in section 2821 is approved by the head of 
the contracting activity. The rule requires the head of the contracting 
activity to submit to the congressional defense committees a notice of 
the waiver.
    The following factors will be taken into consideration for granting 
a waiver:
    (1) The energy supply system is physically incapable of segregating 
Russian Federation energy from non-Russian Federation energy.
    (2) The installation can only obtain the necessary energy from its 
current supplier without the unaffordable expense of constructing new 
supply lines.
    (3) The price of requiring the supplier to segregate the energy is 
unaffordable and would result in the installation being unable to 
perform its mission within its budget authority.
    (4) Consideration, by the requiring activity, of installation 
energy and security resilience has been taken into account (e.g., on-
site sources of energy and fuel resupply would allow the installation 
to continue to perform its mission even with disruption of Russian 
Federation-sourced energy, the installation has addressed energy 
resilience and security risks and vulnerabilities, etc.).
    According to Federal Procurement Data System (FPDS) data for fiscal 
years 2017 through 2019, DoD awards an average of 108 contracts each 
year that are assigned the product service code (PSC) S111, with an 
average of 3 of those awards being made to unique entities that were 
other than small businesses.

------------------------------------------------------------------------
              PSC                              Description
------------------------------------------------------------------------
S111...........................  Utilities--Gas (with locations in
                                  Europe).
------------------------------------------------------------------------

    The awardees were listed as foreign contractor consolidated 
reporting. Foreign contractor consolidated reporting is used to report 
procurement actions awarded to contractors located outside the United 
States providing utilities goods or services when a unique entity 
identifier is not available. When a generic entity identifier is used 
to report these actions, FPDS only allows contracting officers to 
select ``other than small business'' as the contracting officer's 
determination of business size. FPDS allows contracting officers to 
aggregate awards and report one record that includes multiple awards, 
which masks the identity of the entity. Consequently, reporting awards 
in this manner is likely to result in an undercount of the number of 
unique entities, as there is no data available to determine the number 
of entities or whether the entities are small or other than small.
    Based on this analysis, DoD estimates it is highly unlikely that an 
American small entity would be providing these utility services in 
Europe. It is expected that this rule will not impact small businesses, 
but it may impact large businesses or their subcontractors who compete 
on solicitations for Federal overseas energy contracts for utilities 
and gas in Europe.
    Utilizing energy sourced from inside the Russian Federation could 
increase the risk of limited access to the required energy supply, 
resulting in negative impacts to the warfighter. Section 2911 of title 
10 United States Code ensures the readiness of the armed forces for 
their military missions by pursuing energy security and resilience. 
Further, DoD Instruction 4170.11, Installation Energy Management, 
encourages DoD components to pursue energy resilience. In today's 
environment, maintaining secure access to energy resources is critical 
to DoD's execution of its mission, and ensuring energy resilience at 
DoD installations is a top priority.
    This prohibition will ensure improved energy security for main 
operating bases in Europe. This rule requires an offeror to represent, 
by submission of their offer, that the offeror will not use any energy 
sourced from inside the Russian Federation as a means of generating the 
furnished energy for the covered military installation in Europe. In 
addition, the rule provides a contract clause that ensures the 
prohibition is incorporated as a term and condition of the resulting 
contract.

V. Executive Orders 12866 and 13563

    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

[[Page 48338]]

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.

VI. Congressional Review Act

    As required by the Congressional Review Act (5 U.S.C. 801-808) 
before an interim or final rule takes effect, DoD will submit a copy of 
the interim or final rule with the form, Submission of Federal Rules 
Under the Congressional Review Act, to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States. A 
major rule under the Congressional Review Act cannot take effect until 
60 days after it is published in the Federal Register. The Office of 
Information and Regulatory Affairs in the Office of Management and 
Budget has determined that this rule is not a major rule as defined by 
5 U.S.C. 804.

VII. Regulatory Flexibility Act

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA is summarized as follows:
    The final rule is necessary to revise the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a statute that 
prohibits contracts for the use of energy sourced inside the Russian 
Federation for military installations in Europe.
    The objective for and the legal basis for the rule is section 2821 
of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 
2020, which prohibits use of energy sourced from inside the Russian 
Federation in an effort to promote energy security in Europe. The 
prohibition applies to all forms of energy ``furnished to a covered 
military installation,'' as that term is defined in the statute, and 
only to main operating bases as defined and identified by DoD.
    No public comments were received in response to the initial 
regulatory flexibility analysis.
    According to data obtained from the Federal Procurement Data System 
(FPDS) for fiscal years 2017 through 2019 for awards coded for product 
service code S111 (Utilities-Gas) with locations in Europe, 108 awards 
per year were made on average over the three fiscal years, with an 
average of 3 awards to unique entities that were other than small 
businesses. The awardees were listed as foreign contractor consolidated 
reporting, which is used to report procurement actions awarded to 
contractors located outside the United States providing utilities goods 
or services when a unique entity identifier is not available. When a 
generic entity identifier is used to report these actions, FPDS only 
allows contracting officers to select ``other than small business'' as 
the contracting officer's determination of business size. FPDS allows 
contracting officers to aggregate awards and report one record that 
includes multiple awards, which masks the identity of the entity. 
Consequently, reporting awards in this manner is likely to result in an 
undercount of the number of unique entities, as there is no data 
available to determine the number of entities or whether the entities 
are small or other than small. Based on this analysis, DoD estimates it 
is unlikely that an American small entity would be providing these 
utility services in Europe. Therefore, DoD does not expect this rule to 
impact small entities.
    This rule does not include any new reporting, recordkeeping, or 
other compliance requirements for small entities.
    DoD has not identified any alternative approaches to the rule that 
would meet the requirements of the statute.

VIII. Paperwork Reduction Act

    This 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 212, 225 and 252

    Government procurement.

Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 212, 225, and 252 are amended as follows:

0
1. The authority citation for 48 CFR parts 212, 225, and 252 continues 
to read as follows:

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

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
2. Amend section 212.301 by adding paragraphs (f)(ix)(GG) and (HH) to 
read as follows:


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

* * * * *
    (f) * * *
    (ix) * * *
    (GG) Use the provision at 252.225-7053, Representation Regarding 
Prohibition on Use of Certain Energy Sourced from Inside the Russian 
Federation, as prescribed in 225.7019-4(a), to comply with section 2821 
of the National Defense Authorization Act for Fiscal Year 2020 (Pub. L. 
116-92).
    (HH) Use the clause at 252.225-7054, Prohibition on Use of Certain 
Energy Sourced from Inside the Russian Federation, as prescribed in 
225.7019-4(b), to comply with section 2821 of the National Defense 
Authorization Act for Fiscal Year 2020 (Pub. L. 116-92).
* * * * *

PART 225--FOREIGN ACQUISITION

0
3. Add sections 225.7019, 225.7019-1, 225.7019-2, 225.7019-3, and 
225.7019-4 to subpart 225.70 to read as follows:
* * * * *
Sec.
225.7019 Prohibition on use of certain energy sourced from inside 
the Russian Federation.
225.7019-1 Definitions.
225.7019-2 Prohibition.
225.7019-3 Waiver.
225.7019-4 Solicitation provision and contract clause.
* * * * *


225.7019   Prohibition on use of certain energy sourced from inside the 
Russian Federation.


225.7019-1   Definitions.

    As used in this section--
    Covered military installation means a military installation in 
Europe identified by DoD as a main operating base.
    Furnished energy means energy furnished to a covered military 
installation in any form and for any purpose, including heating, 
cooling, and electricity.
    Main operating base means a facility outside the United States and 
its territories with permanently stationed operating forces and robust 
infrastructure.


225.7019-2   Prohibition.

    In accordance with section 2821 of the National Defense 
Authorization Act for Fiscal Year 2020 (Pub. L. 116-92), contracts for 
the acquisition of furnished energy for a covered military installation 
shall not use any energy sourced from inside the Russian Federation as 
a means of generating the furnished energy for the covered military 
installation. The prohibition--
    (a) Applies to all forms of energy that are furnished to a covered 
military installation; and
    (b) Does not apply to energy converted by a third party into 
another form of energy and not directly

[[Page 48339]]

delivered to a covered military installation.


225.7019-3   Waiver.

    (a) Request and approval of waiver. The requiring activity may 
submit to the contracting activity a request for waiver of the 
prohibition in 225.7019-2 for a specific contract for the acquisition 
of furnished energy for a covered military installation. The head of 
the contracting activity, without power of redelegation, may approve 
the waiver, upon certification to the congressional defense committees 
that--
    (1) The waiver of section 2821 is necessary to ensure an adequate 
supply of furnished energy for the covered military installation; and
    (2) National security requirements have been balanced against the 
potential risk associated with reliance upon the Russian Federation for 
furnished energy.
    (b) Submission of waiver notice. (1) Not later than 14 days before 
the execution of any energy contract for which a waiver is granted 
under paragraph (a) of this section, the head of the contracting 
activity shall submit to the congressional defense committees a notice 
of the waiver. See PGI 225.7019-3 for waiver procedures.
    (2) The waiver notice shall include the following:
    (i) The rationale for the waiver, including the basis for the 
certifications required by paragraph (a) of this section.
    (ii) An assessment of how the waiver may impact DoD's European 
energy resilience strategy.
    (iii) An explanation of the measures DoD is taking to mitigate the 
risk of using Russian Federation furnished energy.


225.7019-4   Solicitation provision and contract clause.

    Unless a waiver has been granted in accordance with 225.7019-3--
    (a) Use the provision at 252.225-7053, Representation Regarding 
Prohibition on Use of Certain Energy Sourced from Inside the Russian 
Federation, in solicitations, including solicitations using FAR part 12 
procedures for the acquisition of commercial items and solicitations at 
or below the simplified acquisition threshold, that are for the 
acquisition of furnished energy for a covered military installation; 
and
    (b) Use the clause at 252.225-7054, Prohibition on Use of Certain 
Energy Sourced from Inside the Russian Federation, in solicitations and 
contracts, including solicitations and contracts using FAR part 12 
procedures for the acquisition of commercial items and solicitations 
and contracts at or below the simplified acquisition threshold, that 
are for the acquisition of furnished energy for a covered military 
installation.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Add section 252.225-7053 to read as follows:


252.225-7053   Representation Regarding Prohibition on Use of Certain 
Energy Sourced from Inside the Russian Federation.

    As prescribed in 225.7019-4(a), use the following provision: 
REPRESENTATION REGARDING PROHIBITION ON USE OF CERTAIN ENERGY SOURCED 
FROM INSIDE THE RUSSIAN FEDERATION (AUG 2021)

    (a) Definitions. As used in this provision--
    Covered military installation means a military installation in 
Europe identified by DoD as a main operating base.
    Furnished energy means energy furnished to a covered military 
installation in any form and for any purpose, including heating, 
cooling, and electricity.
    Main operating base means a facility outside the United States 
and its territories with permanently stationed operating forces and 
robust infrastructure.
    (b) Prohibition. In accordance with section 2821 of the National 
Defense Authorization Act for Fiscal Year 2020 (Pub. L. 116-92), 
contracts for the acquisition of furnished energy for a covered 
military installation shall not use any energy sourced from inside 
the Russian Federation as a means of generating the furnished energy 
for the covered military installation, unless a waiver is approved. 
The prohibition--
    (1) Applies to all forms of energy that are furnished to a 
covered military installation; and
    (2) Does not apply to energy converted by a third party into 
another form of energy and not directly delivered to a covered 
military installation.
    (c) Representation. By submission of its offer, the Offeror 
represents that the Offeror will not use or provide any energy 
sourced from inside the Russian Federation as a means of generating 
the furnished energy for the covered military installation in the 
performance of any contract, subcontract, or other contractual 
instrument resulting from this solicitation.
(End of provision)

0
5. Add section 252.225-7054 to read as follows:


252.225-7054   Prohibition on Use of Certain Energy Sourced from Inside 
the Russian Federation.

    As prescribed in 225.7019-4(b), use the following clause: 
PROHIBITION ON USE OF CERTAIN ENERGY SOURCED FROM INSIDE THE RUSSIAN 
FEDERATION (AUG 2021)

    (a) Definitions. As used in this clause--
    Covered military installation means a military installation in 
Europe identified by DoD as a main operating base.
    Furnished energy means energy furnished to a covered military 
installation in any form and for any purpose, including heating, 
cooling, and electricity.
    Main operating base means a facility outside the United States 
and its territories with permanently stationed operating forces and 
robust infrastructure.
    (b) Prohibition. In accordance with section 2821 of the National 
Defense Authorization Act for Fiscal Year 2020 (Pub. L. 116-92), the 
Contractor shall not use in the performance of this contract any 
energy sourced from inside the Russian Federation as a means of 
generating the furnished energy for the covered military 
installation unless a waiver is approved. The prohibition--
    (1) Applies to all forms of energy that are furnished to a 
covered military installation; and
    (2) Does not apply to energy converted by a third party into 
another form of energy and not directly delivered to a covered 
military installation.
    (c) Subcontracts. The Contractor shall insert the substance of 
this clause, including this paragraph (c), in subcontracts and other 
commercial instruments that are for furnished energy at a covered 
military installation, including subcontracts and commercial 
instruments for commercial items.
(End of clause)
[FR Doc. 2021-18340 Filed 8-27-21; 8:45 am]
BILLING CODE 5001-06-P