[Federal Register Volume 86, Number 245 (Monday, December 27, 2021)]
[Proposed Rules]
[Pages 73219-73230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27443]


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GENERAL SERVICES ADMINISTRATION

48 CFR Part 552

[GSAR Case 2021-G522; Docket No. GSA-GSAR-2021-0028; Sequence No. 1]
RIN 3090-AK39


General Services Administration Acquisition Regulation; Contract 
Requirements for High-Security Leased Space

AGENCY: Office of Acquisition Policy, General Services Administration 
(GSA).

ACTION: Proposed rule.

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SUMMARY: GSA is proposing to amend the General Services Administration 
Acquisition Regulation (GSAR) to implement Section 4 requirements of 
the Secure Federal Leases from Espionage and Suspicious Entanglements 
Act (the Act or Secure Federal LEASEs Act). The Act addresses the risks 
of foreign ownership of Government-leased real estate and requires the 
disclosure of ownership information for high-security space leased to 
accommodate a federal agency.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat Division at the address shown below on or before 
February 25, 2022 to be considered in the formation of the final rule.

ADDRESSES: Submit comments in response to GSAR Case 2021-G522 to the 
Federal eRulemaking portal at https://www.regulations.gov by searching 
for ``GSAR Case 2021-G522''. Select the link ``Comment Now'' that 
corresponds with ``GSAR Case 2021-G522''. Follow the instructions 
provided at the ``Comment Now'' screen. Please include your name, 
company name (if any), and ``GSAR Case 2021-G522'' on your attached 
document. If your comment cannot be submitted using https://www.regulations.gov, call or email the points of contact in the FOR 
FURTHER INFORMATION CONTACT section of this document for alternate 
instructions.
    Instructions: Please submit comments only and cite ``GSAR Case 
2021-G522'' in all correspondence related to this case. Comments 
received generally will be posted without change to https://www.regulations.gov, including any personal and/or business 
confidential information provided. To confirm receipt of your 
comment(s), please check https://www.regulations.gov, approximately two 
to three days after submission to verify posting.

FOR FURTHER INFORMATION CONTACT: Mr. Stephen Carroll, Procurement 
Analyst, at 817-253-7858 or [email protected], for clarification of 
content. For information pertaining to status or publication schedules, 
contact the Regulatory Secretariat Division at 202-501-4755 or 
[email protected]. Please cite GSAR Case 2021-G522.

SUPPLEMENTARY INFORMATION:

I. Background

    On Dec. 31, 2020, the then president signed into law the Secure 
Federal Leases from Espionage and Suspicious Entanglements Act (Secure 
Federal LEASEs Act), (Pub. L. 116-276, 134 Stat. 3362). The Act imposes 
disclosure requirements regarding the foreign ownership, particularly 
``beneficial ownership,'' of prospective lessors of ``high-security 
leased space'' (i.e., property leased to the Federal government having 
a security level of III or higher).
    These requirements of the statute are applicable to leases by the 
U.S. General Services Administration (GSA), the Architect of the 
Capitol, ``or the head of any Federal agency, other than the Department 
of Defense (DOD), that has independent statutory leasing authority'' 
(Federal lessees). The Act is not applicable to DOD or to the 
intelligence community. In that regard, Section 2876 of the fiscal year 
(FY) 2018 National Defense Authorization Act (NDAA) (Pub. L. 115-91) 
already provides DOD similar authority to obtain ownership information 
with respect to its high-security leased space.
    GSA implemented a regulatory action for Sections 3 and 5 of the 
Act, effective June 30, 2021, as an interim rule (GSAR 2021-G527,\1\ 86 
FR 34966). The interim rule applies to GSA and to agencies relying upon 
GSA's leasing authority. This proposed rule addresses GSA's 
implementation of Section 4 of the Act.
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    \1\ GSAR 2021-G527, Federal Register Document.
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    The Act addresses national security risks identified in the 
Government Accountability Office (GAO) report, GSA Should Inform Tenant 
Agencies When Leasing High-Security Space from Foreign Owners, dated 
January 2017 (GAO-17-195). This report found certain high-security 
Federal agencies were in buildings owned or controlled by foreign 
entities. According to the report, most Federal tenants were unaware 
the spaces GAO identified were subject to foreign ownership or control, 
exposing these agencies to the heightened risk of surreptitious 
physical or cyber espionage by foreign actors. The report also noted 
GAO could not identify the owners of approximately one-third of the 
Federal government's high-security leases because such

[[Page 73220]]

ownership information was unavailable for those buildings.
    As the U.S. Government's ``landlord,'' GSA serves as the central 
leasing agent for Federal leases and is responsible for managing and 
obtaining space on behalf of multiple Federal agencies. When GSA enters 
into a leasing agreement, the agency becomes the ``tenant'' of GSA, 
with GSA acting as the lessee of the property.
    Prior to the interim rule, GSAR 2021-G527, GSA used information 
contained in the System for Award Management (SAM) to collect foreign 
ownership information for potential lessors, including immediate or 
highest-level owners. However, as Congress recognized in the Act, SAM 
does not capture more nuanced forms of foreign control such as entities 
involved in financing properties or beneficial ownership. Following the 
implementation of the interim rule, for GSA and agencies relying upon 
GSA's leasing authority, foreign ownership information for potential 
lessors, including immediate or highest-level owners, is collected 
manually (paper copy) through the GSAR representation clause 552.270-33 
(Foreign Ownership and Financing Representation for High-Security 
Leased Space). This proposed rule will expand that clause to address 
the representation clause to address beneficial ownership.
    GSA is currently reviewing and investigating potential future 
implementation steps and potential updates through electronic means to 
implement the requirements of the Act, including externally (e.g., 
System for Award Management) or internally (e.g., GSA's Lease Offer 
Platform). As these alternatives are not yet available, this proposed 
rule will require reporting on an action-by-action basis.

What is ``High-Security Leased Space''?

    The statute defines ``high security leased space'' as ``space 
leased by a Federal lessee that--(A) will be occupied by Federal 
employees for nonmilitary activities; and (B) has a facility security 
level of III, IV or V, as determined by the Federal tenant in 
consultation with the Interagency Security Committee, the Department of 
Homeland Security, and the General Services Administration.'' Facility 
security levels and the process for determining these are outlined in 
the Interagency Security Committees publication ``The Risk Management 
Process.'' \2\
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    \2\ Interagency Security Committees publication ``The Risk 
Management Process'', March 2021.
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New Disclosure Requirements

    Section 4 of the Act, specifically addressed in this proposed rule, 
imposes disclosure requirements for beneficial ownership:
     Subject to the development of GSA's government-wide plan 
for obtaining ownership information outlined in Section 4 of the Act, 
covered entities will be required to disclose information about 
beneficial ownership.

What is a ``Beneficial Owner''?

    Unlike the direct control-based immediate owner and highest-level 
owner, the Act defines the term ``beneficial owner'' as meaning ``with 
respect to a covered entity, each natural person who, directly or 
indirectly, through any contract, arrangement, understanding, 
relationship, or otherwise--(i) exercises control over the covered 
entity; or (ii) has a substantial interest in or receives substantial 
economic benefits from the assets of the covered entity.'' However, a 
beneficial owner of a covered entity does not include: A minor child, a 
person acting as a nominee, intermediary, custodian, or agent on behalf 
of another person; a person acting solely as an employee of the covered 
entity and whose control over or economic benefits from the covered 
entity derives solely from the employment status of the person; a 
person whose only interest in the covered entity is through a right of 
inheritance or a creditor of the covered entity unless either also 
meets the definition of ``beneficial owner.''
    The Act is one of several recent examples of congressional concern 
about foreign ownership and control and congressional action in the 
world of government contracting to help address potential national 
security concerns. See, e.g., FY 2021 NDAA (Pub. L. 116-283), section 
819, Modifications to Mitigating Risks Related to Foreign Ownership, 
Control, or Influence of DOD Contractors and Subcontractors; section 
885, Disclosure of Beneficial Owners in Database for Federal Agency 
Contract and Grant Officers; section 6403, Beneficial Ownership 
Information Reporting Requirements, and, as of June 30, 2021, GSAR 
2021-G527, Immediate and Highest-Level Owner for High-Security Leased 
Space.
    Because of the related rulemaking, there are several definitions of 
``beneficial owner'' (or ``beneficial ownership'').
The United States Securities and Exchange Commission (SEC) Definition
    Section 885 (Disclosure of beneficial owners in database for 
Federal agency contract and grant officers) of the FY 2021 NDAA (Pub. 
L. 116-283) \3\ states that beneficial ownership has the meaning given 
under section 847 (Mitigating risks related to foreign ownership, 
control, or influence of Department of Defense contractors or 
subcontractors) of the FY 2020 NDAA (Pub. L. 116-92).\4\ Section 847 
does not specifically define beneficial ownership but requires 
``beneficial ownership'' to ``be determined in a manner that is not 
less stringent than the manner set forth in section 240.13d-3 of title 
17, Code of Federal Regulations.'' This Code of Federal Regulations 
reference is the SEC definition.\5\ The SEC definition mainly concerns 
the beneficial owner of a security (e.g., stock/bond/option for a 
corporation), not the corporation or company-at-large.
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    \3\ FY 2021 NDAA.
    \4\ FY 2020 NDAA.
    \5\ 17 CFR 240.13d-3.
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Corporate Transparency Act Definition
    The Corporate Transparency Act (CTA) definition can be found at 
section 6403 of the FY 2021 NDAA. This section defines ``beneficial 
ownership'' as, with respect to an entity, an individual who, directly 
or indirectly, through any contract, arrangement, understanding, 
relationship, or otherwise (i) exercises substantial control over the 
entity; or (ii) owns or controls not less than 25 percent of the 
ownership interests of the entity.
Secure Federal LEASEs Act Definition
    A ``beneficial owner'' is with respect to a covered entity, each 
natural person who, directly or indirectly, through any contract, 
arrangement, understanding, relationship, or otherwise--(i) exercises 
control over the covered entity; or (ii) has a substantial interest in 
or receives substantial economic benefits from the assets of the 
covered entity.
GSA's Interpretation
    GSA interprets that the SEC definition is too limiting for use in 
the representation clause because it's concerned with the beneficial 
owner of a security rather than a company or corporation. The Secure 
Federal LEASEs Act and the CTA definitions are similar. Both 
definitions similarly characterize a beneficial owner as someone who 
(i) controls a covered entity, or (ii) has a substantial interest. The 
primary difference between the two is related to ``substantial 
interest.'' The Secure Federal LEASEs Act states that a beneficial 
owner is someone who ``. . . has a substantial interest in or receives 
substantial economic benefits from the

[[Page 73221]]

assets of the covered entity'' while the CTA definition says a 
beneficial owner ``owns or controls not less than 25 percent of the 
ownership interests of the entity.'' GSA interprets that the CTA 
definition meets the intent of the SFLA definition. As such, GSA 
intends to use the CTA definition (and therefore incorporates it into 
the GSAR representation clause at 552.270-33) because it's more 
specific (``not less than 25 percent'' as opposed to having to define 
``substantial interest'' or ``substantial economic benefits'') and 
because it would allow GSA to leverage Treasury's Financial Crimes 
Enforcement Network's (FinCEN) efforts to collect beneficial owner 
information for all corporations. GSA does not believe this definition 
to be ``not less stringent'' than the SEC definition.
    Covered entities already provide certain information on immediate 
and highest-level ownership, per Office of Management and Budget (OMB) 
Control Numbers 9000-0097, 9000-0185, and 3090-0324. However, covered 
entities will need to provide additional disclosure of creditors who 
may be deemed beneficial owners if they either exercise substantial 
control over the covered entity or owns or controls not less than 25 
percent of the ownership interests of the covered entity. Therefore, 
property owners will need to take this provision into account when 
considering financing options for leasing high-security space to the 
Federal Government.

Government-Wide Plan for Obtaining Ownership Information

    Section 4 of the Act requires GSA, in conjunction with the Office 
of Management and Budget (OMB), to develop a Government-wide plan for 
agencies to identify all immediate, highest-level, or beneficial owners 
of high-security leased spaces before entering into a lease agreement 
with a covered entity for the accommodation of a Federal tenant in a 
high-security leased space.
    The plan must require the disclosure of any immediate, highest-
level, or beneficial owner that is a foreign person and notification by 
the Federal lessee of high-security space to the affected Federal 
tenant of such foreign ownership. The plan, however, must exclude 
collecting ownership information on widely held pooled-investment 
vehicles, mutual funds, trusts, or other pooled-investment vehicles. 
The Act requires GSA to submit the plan to specific Congressional 
committees by Dec. 31, 2021, and to implement the plan by Dec. 31, 
2022. By Dec. 31, 2023, GSA will submit a report to the Committee on 
Homeland Security and Governmental Affairs of the Senate and the 
Committee on Transportation and Infrastructure of the House of 
Representatives on the status of the implementation of the plan, 
including the number of disclosures made. This plan is addressed 
separately, including in Federal Management Regulation (FMR) 2021-102-
1.

II. Requirements Contained in This Rulemaking and Related Rulemakings

    With this document, GSA is proposing to implement Section 4 of the 
Act. GSA previously implemented Section 3 and Section 5 of the Act 
through separate rulemaking at GSAR 2021-G527 (86 FR 34966) on June 30, 
2021.
    Section 4 of the Act requires the identification of beneficial 
owners of high-security leased spaces and will be addressed through 
this GSAR Case 2021-G522 and FMR Case 2021-102-1. In addition, the 
Federal Acquisition Regulatory (FAR) Council has opened FAR Case 2021-
005 which will implement sections 885 and 6403 of the NDAA for FY 2021 
(Pub. L. 116-283) to require certain offerors to disclose beneficial 
ownership information in their offers for contracts over the simplified 
acquisition threshold.
    Section 3 (already implemented through separate rulemaking that 
also included Section 5)--
     Requires Federal lessees for high-security leased space to 
require covered entities to identify and disclose whether the owner of 
the leased space, including an entity involved in the financing 
thereof, is a foreign person or a foreign entity, including the country 
associated with the ownership entity, before entering into a lease 
agreement. Covered entities must provide Federal lessees such 
information--
    [cir] when first submitting proposals in response to a solicitation 
for offers issued by the lessee; and
    [cir] annually, to include the list of immediate or highest-level 
owners of the covered entity during the preceding one-year period of 
occupancy.
     Requires the Federal lessee to notify the Federal tenant 
in writing if such a disclosure of foreign ownership is made and 
consult with the tenant regarding any security concerns prior to 
awarding a new lease agreement.
    Section 5 (already implemented through separate rulemaking that 
also included Section 3)--
     Requires that leases for high-security space include 
certain language regarding access to the high-security leased space by 
the covered entity and any member of the property management company.
    As noted in GSAR Case 2021-G527, other agencies may need to do 
additional rulemaking, related to Sections 3 and 5, because the GSAR 
only governs the contract terms and conditions for leased space 
procured by GSA and its delegated agencies. Section 4 is similar in 
that regard. This proposed rule, and the GSAR, only governs the 
contract terms and conditions for leased space procured by GSA and its 
delegated agencies. Other agencies may need to do additional 
rulemaking. Additionally, a separate Federal Management Regulation rule 
(2021-102-1) will be applicable to leases by the Architect of the 
Capitol, ``or the head of any Federal agency, other than the Department 
of Defense (DOD), that has independent statutory leasing authority'' 
(Federal lessees).

III. Authority for This Rulemaking

    Title 40 of the United States Code (U.S.C.) Section 121 authorizes 
GSA to issue regulations, including in the GSAR, to control the 
relationship between GSA and contractors. In addition, the Secure 
Federal LEASEs Act, authorizes GSA, in consultation with OMB, to issue 
a Government wide plan for Federal agencies with independent lease 
authority to collect foreign ownership information for high-security 
leased space. The Government-wide plan will be addressed separately, 
including in the Federal Management Regulation 2021-102-1.

IV. Revised GSAR Requirements

    With this rule, GSA is proposing to revise one GSAR representation 
clause. The revised representation is 552.270-33 (Foreign Ownership and 
Financing Representation for High-Security Leased Space). This 
representation clause applies to new lease awards, the exercise of 
options for current leases, lease extensions, and ownership changes for 
high-security leased space. Except where otherwise provided, the Act's 
disclosure requirements, shall apply with respect to any lease or 
novation agreement entered into on or after December 31, 2022, 
involving high-security leased space. That includes new, renewal, 
succeeding, expansion, superseding, extension, and replacing leases and 
novations. The disclosure requirements specific to Section 3 already 
apply as of June 30, 2021.
    The revised GSAR representation implemented at 552.270-33 now adds 
the requirement that offerors for high-security leased space identify 
whether the offeror does or does not have a beneficial owner(s), and if 
so, if the

[[Page 73222]]

beneficial owner(s) is a foreign person(s). Where there is an 
affirmative disclosure of any immediate, highest-level, or beneficial 
owner that is a foreign person, the offeror or lessor must represent 
the name, current residential or business street address, and an 
identifying number or document that verifies identity as a United 
States person, foreign person, or foreign identity of each beneficial 
owner. This representation also applies upon extensions, exercise of 
renewal options and change of ownership/novations.
    The disclosures required by Section 3 for immediate and highest-
level owner are already captured by GSAR clause 552.270-33 implemented 
by GSAR Case 2021-G527 (86 FR 34966).

V. Expected Impact of the Rule

    GSA anticipates that this rule will have an impact on current 
Federal lessors of high-security leased space, future potential lessors 
of high-security leased space, and the Federal lessor industry of high-
security leased space. The rule seeks to ensure effective 
implementation and enforcement of the national security measures 
imposed by the Secure Federal LEASEs Act with minimal disruption to the 
mission of GSA and its Federal tenants and Federal lessors. As set 
forth in Section VI.(d) below, GSA recognizes the benefits that will 
result from this rule.
    GSA notes that this rule is one of several actions with regard to 
the Secure Federal LEASEs Act and other statutes regarding foreign 
ownership by GSA, other agencies with lease authority promulgating 
their own rules, and by the FAR Council. GSA understands that the 
impact of actions dealing with foreign ownership, including 
specifically beneficial owners, is not well understood and is still 
being assessed.
    In addition, GSA is seeking public comment, including, as indicated 
below, on the potential impact of this rule on Federal lessors. After 
considering the comments received, a final rule will be issued, taking 
into account and addressing the public comments. GSA plans to share 
public comments received on such questions with other agencies and the 
FAR Council.

VI. Regulatory Impact Analysis

    The cost and benefit impacts of amending the General Services 
Administration Acquisition Regulation (GSAR) to implement the Section 4 
requirements outlined in the Secure Federal LEASEs Act (SFLA) (Pub. L. 
116-276) are discussed in the analysis below. This analysis was 
developed by GSA in consultation with agency procurement officials and 
the GSA Office of Leasing. Section VI.(h) of this rule is requesting 
specific feedback regarding the impact of this rule, as well as other 
pertinent policy questions of interest, in order to inform finalization 
of this and potential future subsequent rulemakings.

(a) Risks to Industry of Not Complying With SFLA

    As a strictly contractual matter, an organization's failure to 
submit an accurate representation to the Government constitutes a 
breach of contract that can lead to cancellation, termination, and 
financial consequences. Therefore, it is important for contractors to 
develop a compliance plan that will allow them to submit accurate 
representations to the Government in the course of their offers.
    GSA notes that this rule does not authorize GSA lease contracting 
officers to use the information disclosed by offerors as a 
differentiating factor for selection of a lease award, nor does it 
authorize GSA to terminate a lease, prevent a novation, or otherwise 
decline to make an award based on the disclosure. As such, GSA 
estimates that this rule will not result in these activities, and 
therefore no moving costs have been included in this regulatory impact 
analysis.

(b) Contractor Actions Needed for Compliance

    GSA assumes that most Federal lessors maintaining high-security 
leased space or Federal lessors that are competing for solicitations 
for high-security leased space are already familiar with the majority 
of the requirements of this rule, or, similarly, will not find the 
requirements of this interim rule as anything significantly more than 
what is currently expected. GSA previously implemented ownership 
disclosures requirements through internal policy,\6\ GSA's Request for 
Lease Proposals (or solicitations), and GSA's guidance through its 
public-facing Leasing Desk Guide \7\ and Leasing Alerts and Lease 
Acquisition Circulars.\8\
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    \6\ In March 2017, GSA's Office of Leasing issued Leasing Alert 
LA-FY17-06 requiring Lease Contracting Officers (LCOs) to determine 
whether the ownership of leased space is identified as a foreign-
owned entity and to notify the client agency in such instances, so 
that the agency can take any needed security mitigation measures. 
The Leasing Alert outlined the procedures to make this determination 
which involved a review of the entity's SAM registration; the 
Leasing Alert also required this review for all lease procurements 
and novations, regardless of the Facility Security Level (FSL).
    In October 2018, GSA added a ``Foreign Ownership and Financing 
Representation,'' to be included with all Request for Lease 
Proposals (RLP) packages issued for prospectus-level lease projects. 
This ``paper'' representation required the offeror to confirm both 
foreign ownership and foreign financing.
    \7\ GSA's Leasing Desk Guide, https://www.gsa.gov/real-estate/real-estate-services/leasing-policy-procedures/policy-and-tools/policy/leasing-desk-guide-and-other-policy-information/leasing-desk-guide-pdf.
    \8\ GSA's Leasing Alerts and Lease Acquisition Circulars (LAC), 
https://www.gsa.gov/real-estate/real-estate-services/leasing-policy-procedures/policy-and-tools/policy/leasing-desk-guide-and-other-policy-information/leasing-alerts-and-lease-acquisition-circulars-lac.
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(1) GSA Leasing--Current Processes
    Regardless of who owns the leased space, Federal agencies are 
already taking risk management measures appropriate for the security 
level of the space. The GSA Leasing Desk Guide \9\ outlines 
requirements and standards for new and replacement space. In Chapter 19 
(issued in 2012), it provides instructions for competitive procurements 
based on the Interagency Security Committee (ISC),\10\ Physical 
Security Standards, and it outlines the Public Buildings Service's 
(PBS) responsibilities for performing background investigations on the 
lessors' contractors. Additionally, GSA Leasing Alert LA-21-10,\11\ 
issued on August 11, 2021, revised GSA's security documents for leased 
space to align with the ISC's updated (2019) countermeasures.
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    \9\ The Desk Guide chapters contain authorities, policies, 
technical and procedural guides, and administrative limitations 
governing the acquisition by lease of real property. Chapter 19 is 
specific to security requirements.
    \10\ A Federal committee dedicated to the protection of Federal 
civilian facilities in the United States. It has 21 primary member 
agencies and 30 associate member agencies. The ISC has developed 
standards applicable to all civilian Federal facilities, including 
leased facilities.
    \11\ GSA's Leasing Alerts and Lease Acquisition Circulars (LAC) 
LA-21-10 https://www.gsa.gov/cdnstatic/Real_Estate_Acquisitions/Leasing_Alert_21-10_Revisions_to_FSL_Templates_and_SecUP_rev__8112021c.pdf.
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    In addition, a 2018 GSA Leasing Alert,\12\ provided required and 
recommended countermeasures for lessors related to cybersecurity 
protections and precautions in leased facilities. It establishes lease 
language that prohibits lessors from connecting any portion of their 
building and access control systems (BACS) to any federally-owned or 
operated IT network and requires notification for cybersecurity 
incidents that impact a federal tenant's safety, security, or proper 
functioning. The lease language also outlines

[[Page 73223]]

recommended cybersecurity measures that lessors are encouraged to 
follow.
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    \12\ LA-FY18-05, Cybersecurity Measures for Leased Facilities, 
https://www.gsa.gov/cdnstatic/Real_Estate_Acquisitions/Leasing_Alert_%28LA-FY18-05%29_-_Cybersecurity_Measures_for_Leased_Facilities.pdf.
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    Lessors are already currently required to report certain ownership 
information. As previously outlined, GSA currently collects foreign 
ownership information for potential lessors, including immediate or 
highest-level owners, and provides such information to tenant agencies. 
While this rule requires additional information related to the lessor's 
beneficial ownership, the review of owner detail has already been in 
place and is a requirement Federal lessors are familiar with.
(2) GSA Leasing--General Security Framework
    As outlined in the GSA Leasing Desk Guide, the facility security 
level (FSL) \13\ for each space requirement is set by the Department of 
Homeland Security--Federal Protective Service (FPS) and the client 
agency, in consultation with the GSA as part of the requirements 
development phase of a lease acquisition. If the client agency and FPS 
have not already conferred, GSA must coordinate with the necessary 
parties to set the appropriate level of security before the 
solicitation is drafted. The Desk Guide states that GSA Leasing 
acquisition members must maintain contact as necessary with the 
appropriate FPS inspector throughout the lease administration. The 
facility security level designation does not change solely based on 
lessor ownership information collected via this rule.
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    \13\ A categorization based on the analysis of several security-
related facility factors.
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(3) GSA Leasing--Determining Countermeasures
    GSA follows the Interagency Security Committee (ISC) provided 
standard for Physical Security Criteria (PSC) for Federal 
Facilities.\14\ This standard establishes baseline physical security 
measures for each designated FSL. This standard defines the process for 
determining the appropriate security measures; it also covers any 
uncommon measures required to address the unique risks at a particular 
facility. The GSA Desk Guide currently uses the PSC to prescribe the 
process for determining appropriate countermeasures for a facility. 
Adherence to this process (1) ensures that all security criteria will 
be considered; (2) defines the relationship between the levels of risk 
determined for each undesirable event and; (3) mitigates risk through 
countermeasures that provide a commensurate Level of Protection (LOP). 
The lessor ownership information does not affect the PSCs for Federal 
Facilities and therefore GSA does not anticipate this rule to have a 
significant impact on the security standards used by GSA tenants.
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    \14\ See Cybersecurity and Infrastructure Security Agency (CISA) 
ISC Standard, March 2021, https://www.cisa.gov/isc-policies-standards-best-practices.
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(c) Compliance Plan Estimated Due to Proposed Rule

    GSA assumes the following steps would most likely be part of a 
lessor's plan that would need to be developed by any entity to stay in 
compliance with the revised representation clause at GSAR 552.270-33:
    1. Regulatory Familiarization.
    The entity must read and understand the GSAR rules and the 
resulting necessary actions for compliance.
    2. Workforce Training.
    The entity must educate its purchasing/procurement professionals 
\15\ to ensure that they are familiar with the revised representation 
and their disclosure requirements (as applicable).
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    \15\ GSA estimates that the purchasing/procurement professional 
requiring training as a result of this rule on average would be 
equal to a mid-career professional. The equivalent labor category 
used to capture cost estimates therefore is a GS-12 Step 5, or 
Journeyman Level 1.
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    3. Compliance with the Revised Representation Clause.
    The entity must identify and disclose whether the entity does or 
does not have a beneficial owner of the leased space and, if so, 
whether that beneficial owner is a foreign person. If an affirmative 
disclosure is made, and if the Federal lessee is assigning the building 
or other improvement that will be used for high-security space to a 
Federal tenant, the Federal tenant shall be notified of the disclosure 
made in the representation clause prior to award of the lease or 
approval of the novation agreement.

(d) Benefits

    This Act requires the identification of all individuals who own or 
benefit from partial ownership of a property that will be leased by the 
federal government for high-security use. The statute is in response to 
a 2017 Government Accountability Office (GAO) report which indicated 
that Federal agencies were vulnerable to espionage and other intrusions 
because foreign actors could gain unauthorized access to spaces used 
for classified operations or to store sensitive data. Agencies store 
law enforcement evidence and other sensitive data and are often unaware 
of foreign ownership of their office spaces. While many of the foreign 
owners identified in the 2017 GAO report were companies based in allied 
countries such as Canada, Norway, Japan, or South Korea, other 
properties were owned and managed by entities based in more adversarial 
nations. The report noted Chinese-owned properties, in particular, 
presented security challenges because of the country's proclivity for 
cyberespionage and the close ties between private sector companies and 
the Chinese Government. The GAO report highlighted the dangers posed by 
these properties, indicating that ``leasing space in foreign-owned 
buildings could present security risks such as espionage, unauthorized 
cyber and physical access to the facilities, and sabotage.''
    The United States faces an expanding array of foreign intelligence 
threats by adversaries who are using increasingly sophisticated methods 
to harm the Nation. Threats to the United States posed by foreign 
intelligence entities are becoming more complex and harmful to U.S. 
interests. Foreign intelligence actors are employing innovative 
combinations of traditional spying, economic espionage, and supply 
chain and cyber operations to gain access to critical infrastructure 
and steal sensitive information and industrial secrets. The 
exploitation of key supply chains by foreign adversaries represents a 
complex and growing threat to strategically important U.S. economic 
sectors and critical infrastructure.\16\
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    \16\ National Counterintelligence Strategy of the United States 
of America 2020-2022.
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    Additionally, by requiring ``Beneficial Owner'' information in the 
representation clause, GSA will benefit by better understanding how an 
individuals' ownership position can provide them access that could 
prove problematic for certain agencies. Congress underscored that money 
launderers and others involved in commercial activity intentionally 
conduct transactions through corporate structures in order to evade 
detection, and may layer such structures across various secretive 
jurisdictions such that each time an investigator obtains ownership 
records for a domestic or foreign entity, the newly identified entity 
is yet another corporate entity, necessitating a repeat of the same 
process.\17\ The ability to engage in activity and obtain financial 
services in the name of a legal entity without disclosing the 
identities of the natural persons who own or control the entity--the 
natural persons whose interests the legal entity most directly serves--
enables those natural persons to conceal their interests. And as the 
Treasury's Financial Crimes Enforcement Network (FinCEN) has noted 
previously, such concealment ``facilitates crime, threatens national 
security, and

[[Page 73224]]

jeopardizes the integrity of the financial system.'' \18\ The goal of 
the Act is to close security loopholes by directing the GSA to design a 
verification system that identifies a property's owners if the space 
would be used for high-security purposes. While GSA and other Federal 
agencies have made positive changes in response to GAO's 2017 report, 
this rule will help support current best practices being followed more 
uniformly throughout the Federal government.
---------------------------------------------------------------------------

    \17\ Corporate Transparency Act Section 6402(4).
    \18\ Notice of Proposed Rulemaking: Customer Due Diligence 
Requirements for Financial Institutions, 79 FR 45151, 45153 (August 
4, 2014).
---------------------------------------------------------------------------

    Finally, this rule ensures that GSA will have the ability to obtain 
information on foreign ownership and provide it to relevant Federal 
tenants.

(e) Public Costs

    During the first and subsequent years after publication of the 
rule, lessors will need to learn about the representation clause and 
its requirements. GSA estimates this cost by multiplying the time 
required to review the regulation and guidance implementing the rule by 
the estimated compensation of a purchasing/procurement mid-career 
professional. The equivalent labor category used to capture cost 
estimates therefore is a GS-12 Step 5.
    A. To estimate the aggregate burden to Government lessors of 
complying with the rule, the number of lessors that will be impacted 
was calculated using numbers pulled from GSA's records and 
databases.\19\ As of August 2021, GSA has approximately 7,860 leases 
totaling approximately 183,000,000 in Rentable Square Footage (RSF) and 
approximately $5,600,000,000 in annual rent ($2,800,000,000 of that 
total represents small entities). Of the 7,860, approximately 1,263 
\20\ (or 16 percent) of the leases are for high-security lease space 
(lease space in a facility with a security level of III, IV, or V) 
totaling approximately 87,000,000 in RSF and approximately 
$3,000,000,000 in annual rent. Approximately 68 percent \21\ of the 
leasing entities are small entities. High-security leases with these 
small entities represents $1,370,000,000 in annual rent covering 
approximately 37,000,000 RSF.
---------------------------------------------------------------------------

    \19\ If not otherwise stated, numbers related to leases are 
provided by the GSA Office of Leasing through surveying their 
internal databases.
    \20\ The GSA Office of Leasing provided this number by surveying 
their internal database.
    \21\ This information is based on internal inventory data 
sources provided by the GSA Office of Leasing.
---------------------------------------------------------------------------

    B. GSA also delegates leasing authority to several agencies, which 
are required to follow GSA's policies. GSA estimates there are 5,000 
\22\ buildings represented by these agencies with Delegated Leasing 
Authority from GSA. GSA does not have data available that identifies 
which of these are for high-security lease space. GSA assumes that 
these delegated agencies have a similar profile to GSA's for high-
security leased space to total portfolio space, i.e., 16 percent. This 
would bring the total number of high-security lease space for delegated 
agencies to 800 (5,000 x 16 percent). GSA also assumes the same profile 
for small entities of 68 percent.
---------------------------------------------------------------------------

    \22\ This information is based on internal inventory data 
sources provided by the GSA Office of Leasing.
---------------------------------------------------------------------------

    C. Based on historical data maintained by GSA's Office of Leasing, 
GSA estimates that 6 percent of its high-security leased space will be 
solicited for a new contract each year (6 percent of 1,263 = 76 
leases). These solicitations result from a mix of expiring high-
security leases or new requirements for high-security facilities. GSA 
assumes these trends will continue for the time horizon outlined by 
this regulatory impact. Based on historic bid rates and high current 
vacancy levels, GSA further estimates that 3 lessors will make offers 
for these high-security lease procurement for a total of 228 offers (76 
high-security leases awarded * 3 lessors competing for each 
solicitation. 76 * 3 = 228) GSA assumes the same profile for delegated 
facilities.
    D. Since 2014, GSA has averaged approximately 31 renewal options 
per year for high-security leases (equal to approximately 17 percent of 
all renewals options during the same period) and averaged approximately 
106 extensions for existing high-security leases (also equal to 
approximately 17 percent of all extensions during the same period). GSA 
assumes the same trend will continue in subsequent years. GSA assumes 
the same profile for delegated facilities.
    E. GSA processed 380 novations from May 1, 2020 to April 30, 2021 
23 24 (therefore approximately 5 percent of leases resulted 
in a novation (380/7,860)). GSA does not have data on how many of those 
were related to FSL III, IV, or V. GSA will assume 16 percent of those 
novations were for FSL III, IV, or V leases. Therefore, it is assumed 
61 novations were processed for high-security leases in the last year.
---------------------------------------------------------------------------

    \23\ This information is based on internal inventory data 
sources provided by the GSA Office of Leasing.
    \24\ GSA does not have data on how many novations other agencies 
with Delegated Leasing Authority processed.
---------------------------------------------------------------------------

    A breakdown is provided in the table below.

----------------------------------------------------------------------------------------------------------------
                                                                                                   Delegated
              Par above                                                         GSA                authority
                                                                                                    agencies
----------------------------------------------------------------------------------------------------------------
A,B..................................  Leased Space.................                    7,860              5,000
A,B..................................  High-Security (HS) Space                         1,263                800
                                        Leases (16 percent).
                                       Total HS Portfolio...........                    1,263                800
                                       Existing HS Lease Baseline...                    1,263                800
                                                                     -------------------------------------------
                                       Combined HS Lease Baseline...              2,063 (1,263 + 800)
                                                                     -------------------------------------------
C....................................  New Procurements (6 percent                         76                 48
                                        HS).
C....................................  New Offers (x3)..............                      228                144
                                       Total New Responses..........                      228                144
D....................................  Renewals (17 percent HS).....                       31                  3
D....................................  Extensions (17 percent HS)...                      106                  3
E....................................  Novations (5 percent Leases).                      380                 38
E....................................  High-Security Space Novations                       61                  6
                                        (16 percent).
                                       Total HS Novations...........                       61                  6
                                       New HS Lease Baseline........      426 (228+31+106+61)    156 (144+3+3+6)
                                                                     -------------------------------------------
                                       Combined New HS Lease                        582 (426 + 156)
                                        Baseline.
----------------------------------------------------------------------------------------------------------------



[[Page 73225]]

Steps to Compliance:
1. Regulatory Familiarization
    Below is a list of compliance activities related to regulatory 
familiarization that GSA anticipates will occur:
a. Familiarization With GSAR 552.270-33, Foreign Ownership and 
Financing Representation for High-Security Leased Space
    i. GSA estimates that it will take existing high-security lessors 
approximately 0.5 hours \25\ each to familiarize themselves with the 
revised GSAR representation. Therefore, GSA calculated the total 
estimated cost for this part of the rule to be $86,900 \26\ (= 0.5 
hours x $84.16 \27\ x 2,063). Of the 2,063 lessors impacted by this 
part of the rule, GSA assumes that 68 percent, or approximately 1,403 
lessors, are small entities.
---------------------------------------------------------------------------

    \25\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
    \26\ Totals are rounded.
    \27\ This hourly rate, $84.16, is the 2021 GS rate for a GS-12 
Step 5 of $42.08 per hour (using the rate for the rest of the United 
States) adjusted upward by 100 percent to account for fringe 
benefits and overhead.
---------------------------------------------------------------------------

    After the initial familiarization in the first year for each 
current awardee or subsequent awardee, GSA estimates it will take 15 
minutes (0.25 hours \28\) to stay familiar with the representation. 
Therefore, GSA calculated the total estimated cost for this part of the 
rule to be $43,400 (= 0.25 hours x $84.16 x 2,063).
---------------------------------------------------------------------------

    \28\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    ii. GSA estimates that new high-security lessors each year will 
take approximately 0.5 hours \29\ each to familiarize themselves with 
the revised GSAR representation. Therefore, GSA calculated the total 
estimated cost for this part of the rule to be $24,500 (= 0.5 hours x 
$84.16 x 582). Of the 582 lessors impacted by this part of the rule, 
GSA assumes that 68 percent, or approximately 396 lessors, are small 
entities.
---------------------------------------------------------------------------

    \29\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    The total estimated cost to become familiar with the revised 
representation clause (GSAR 552.270-33) is estimated to be $86,900 for 
the existing high-security lessors. In subsequent years, this cost is 
estimated to be $68,000 for new high-security lessors annually.
2. Implementation of Workforce Training
    The entity must educate its purchasing/procurement professionals to 
ensure that they are familiar with the representation and their 
disclosure requirements (as applicable).
    a. GSA estimates that it will take existing high-security lessors 
approximately 3 hours \30\ each to train their workforce on the revised 
representation clause at GSAR 552.270-33. Therefore, GSA calculated the 
total estimated cost for this part of the rule to be $521,000 (= 3 
hours x $84.16 x 2,063). Of the 1,263 lessors impacted by this part of 
the rule, GSA assumes that 68 percent, or approximately 1,403 lessors, 
are small entities.
---------------------------------------------------------------------------

    \30\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    After the initial training in the first year for each current 
awardee or subsequent awardee, GSA estimates it will take 15 minutes 
(0.25 hours \31\) to conduct continuing additional workforce training. 
Therefore, GSA calculated the total estimated cost for this part of the 
rule to be $43,400 (= 0.25 hours x $84.16 x 2,063).
---------------------------------------------------------------------------

    \31\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    b. GSA estimates that new high-security lessors each year will take 
approximately 3 hours each to train their workforce on the 
representation clause at GSAR 552.270-33. Therefore, GSA calculated the 
total estimated cost for this part of the rule to be $147,000 (= 3 
hours x $84.16 x 582). Of the 582 lessors impacted by this part of the 
rule, GSA assumes that 68 percent, or approximately 396 lessors, are 
small entities.
    The total estimated cost to implement workforce training for the 
revised representation clause (GSAR 552.270-33) is estimated to be 
$521,000 for the existing high-security lessors. In subsequent years, 
this cost is estimated to be $190,000 for new high-security lessors 
annually.
3. Compliance With Clauses
a. GSAR 552.270-33, Foreign Ownership and Financing Representation for 
High-Security Leased Space
    i. GSA estimates that it will take existing high-security lessors 
approximately 0.5 hours \32\ each to complete the additional disclosure 
at paragraph (e)(1) of the representation clause. Therefore, GSA 
calculated the total estimated cost for this part of the rule to be 
$86,800 (= 0.5 hours x $84.16 x 2,063). Of the 2,063 lessors impacted 
by this part of the rule, GSA assumes that 68 percent, or approximately 
1,403 lessors, are small entities.
---------------------------------------------------------------------------

    \32\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    ii. GSA estimates that new high-security lessors each year will 
take approximately 0.5 hours each to complete the additional disclosure 
at paragraph (e)(1) of the representation clause. Therefore, GSA 
calculated the total estimated cost for this part of the rule to be 
$24,500 (= 0.5 hours x $84.16 x 582). Of the 582 lessors impacted by 
this part of the rule, GSA assumes that 68 percent, or approximately 
396 lessors, are small entities.
    iii. GSA further estimates that of the existing high-security 
lessors, 10 percent \33\ (or 206 lessors) will respond affirmatively to 
paragraph (e)(1) of the representation clause that the offeror ``does'' 
have a ``beneficial owner'' and will be required to complete the 
additional information at paragraph (e)(2). GSA estimates that it will 
take these offerors an additional 6 hours \34\ to complete those 
various sections of the representation clause. Therefore, GSA 
calculated the total estimated cost for this part of the rule to be 
$104,000 (= 6 hours x $84.16 x 206). Of the 206 lessors impacted by 
this part of the rule, GSA assumes that 68 percent, or approximately 
140 lessors, are unique small entities.
---------------------------------------------------------------------------

    \33\ The amount of lessors impacted is an assumption based on 
subject matter expert judgment.
    \34\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    iv. GSA estimates that of the new high-security lessors each year, 
10 percent \35\ (or 58 lessors) will respond

[[Page 73226]]

affirmatively to paragraph (e)(1) of the representation clause that the 
offeror ``does'' have a ``beneficial owner'' and will be required to 
complete the additional information at paragraph (e)(2). Thus, 
approximately 58 lessors (10 percent of 582) need to fully complete 
GSAR 552.270-33. Therefore, GSA calculated the total estimated cost for 
this part of the rule to be $28,800 (= 6 hours x $84.16 x 58). Of the 
58 lessors impacted by this part of the rule, GSA assumes that 68 
percent, or approximately 39 lessors, are small entities.
---------------------------------------------------------------------------

    \35\ The amount of lessors impacted is an assumption based on 
subject matter expert judgment.
---------------------------------------------------------------------------

    After the existing and new high-security lessors complete the 
representations, GSA estimates it will take 15 minutes (0.25 hours 
\36\) to update any information as necessary and as required annually. 
Therefore, GSA calculated the total estimated cost for this part of the 
rule to be $47,700 (= [0.25 hours x $84.16 x 2,063] + [0.25 x $84.16 x 
206]).
---------------------------------------------------------------------------

    \36\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    The total estimated cost to complete the representation clause is 
estimated to be $191,000 the existing high-security lessors. In 
subsequent years, this cost is estimated to be $101,000 for new high-
security lessors annually.
4. Public Total Costs
    The total cost of the above Cost Estimate is $799,000 in the first 
year after publication.
    The total cost of the above Cost Estimate in subsequent years is 
$359,000 annually.
    The following is a summary of the estimated costs calculated for a 
10 year time horizon in perpetuity at a 3- and 7-percent discount rate:

------------------------------------------------------------------------
                         Summary                            Total costs
------------------------------------------------------------------------
Present Value (3 percent)...............................      $3,491,000
Annualized Costs (3 percent)............................         409,000
Present Value (7 percent)...............................       2,934,000
Annualized Costs (7 percent)............................         418,000
------------------------------------------------------------------------

    GSA notes that this rule does not authorize GSA lease contracting 
officers to use the information disclosed by offerors as a 
differentiating factor for selection of a lease award, nor does it 
authorize GSA to terminate a lease, prevent a novation, or otherwise 
decline to make an award based on the disclosure. As such, GSA 
estimates that this rule will not result in these activities, and 
therefore no moving costs have been included in this regulatory impact 
analysis.
    GSA acknowledges that there is uncertainty underlying these 
estimates, including elements for which an estimate is unavailable 
given inadequate information. As more information becomes available, 
including through comment in response to this document, GSA will seek 
to update these estimates which could increase the estimated costs.

(f) Government Cost Analysis

    During the first and subsequent years after publication of the 
rule, leasing acquisition members (which includes a combination of 
Leasing Contracting Officers, Lease Administration Managers, Realty 
Specialists, and General Counsel) will need to learn about the 
representation clause and its requirements. GSA estimates this cost by 
multiplying the time required to review the regulations and guidance 
implementing the rule by the estimated compensation, on average, of a 
GS-12 leasing acquisition member. GSA assumes that leasing acquisition 
members will, on average, stay consistent in subsequent years. Numbers 
and assumptions apply to delegated agencies as well.
    GSA anticipates several areas of impact as a result of this rule. 
These impacts mirror the public impacts and will appear as regulatory 
familiarization, workforce training, and time to review compliance with 
clauses. These costs are justified in light of the compelling national 
security objective that this rule will advance.
    For consistency, the number of leases to be reviewed match the 
numbers in the ``Existing HS Lease Baseline'' row (2,063 combined) and 
``New annual Lease Baseline'' row (582 combined) found in table in 
section VI.(e).
1. Regulatory Familiarization
    a. GSA estimates that it will take approximately 722 leasing 
acquisition members 0.5 hours to become familiar with the revised GSAR 
552.270-33 representation. Therefore, GSA calculated the total 
estimated cost for this part of the rule to be $30,400 \37\ (= 0.5 
hours x $84.16 x 722).
---------------------------------------------------------------------------

    \37\ All totals in the Government Cost Analysis section are 
rounded.
---------------------------------------------------------------------------

    After the initial familiarization, GSA estimates it will take 15 
minutes (0.25 hours) to stay familiar with the revised representation 
in subsequent years. Therefore, GSA calculated the total estimated cost 
for this part of the rule to be $15,200 (= 0.25 hours x $84.16 x 722).
2. Workforce Training
    The Government must educate its leasing acquisition members to 
ensure that they are familiar with the representation and clause and 
how to review and act on the submitted information, access requests, 
and written procedures.
    a. GSA estimates that it will take approximately 722 leasing 
acquisition members 0.5 hour to complete training related to the 
revised GSAR 552.270-33 representation. Therefore, GSA calculated the 
total estimated cost for this part of the rule to be $30,400 (= 0.5 
hours x $84.16 x 722).
    After the initial training, GSA estimates it will take 15 minutes 
(0.25 hours) to maintain training related to the revised 
representation. Therefore, GSA calculated the total estimated cost for 
this part of the rule to be $15,200 (= 0.25 hours x $84.16 x 722).
3. Review of Compliance With Clauses
a. GSAR 552.270-33, Foreign Ownership and Financing Representation for 
High-Security Leased Space
    i. GSA estimates that it will take leasing acquisition members 
approximately 10 minutes (0.17 hours) to review the representation at 
paragraph (e)(1) of the revised representation clause at GSAR 552.270-
33 for existing high-security lessors. Therefore, GSA calculated the 
total estimated cost for this part of the rule to be $29,500 (= 0.17 
hours x $84.16 x 2,063).
    ii. GSA estimates that for new high-security lessors each year, it 
will take leasing acquisition members approximately 10 minutes (0.17 
hours) to review the representation at paragraph (e)(1) of the revised 
representation clause GSAR 552.270-33. Therefore, GSA calculated the 
total estimated cost for this part of the rule to be $8,300 (= 0.17 
hours x $84.16 x 582).
    iii. GSA estimates that for existing high-security lessors, 10 
percent (or 206 lessors) will respond affirmatively to paragraph (e)(1) 
of the representation clause that the offeror ``does'' have a 
``beneficial owner'' and will be required to complete the additional 
information at paragraph (e)(2). GSA estimates that it will take 
leasing acquisition members 2.5 hours to complete the reviews on those 
various sections of the revised representation clause, notify the 
Federal tenant of the building or other improvement of any security 
concerns and necessary mitigation measures (if any) prior to award or 
approval of a novation agreement. Therefore, GSA

[[Page 73227]]

calculated the total estimated cost for this part of the rule to be 
$43,300 (= 2.5 hours x $84.16 x 206).
    iv. GSA estimates 10 percent, or 58 lessors, of new high-security 
lessors each year will respond affirmatively to paragraph (e)(1) of the 
representation clause that the offeror ``does'' have a ``beneficial 
owner'' and will be required to complete the additional information at 
paragraph (e)(2). GSA estimates that it will take leasing acquisition 
members 2.5 hours to complete the reviews on those various sections of 
the revised representation clause, notify the Federal tenant of the 
building or other improvement of any security concerns and necessary 
mitigation measures (if any) prior to award or approval of a novation 
agreement. Therefore, GSA calculated the total estimated cost for this 
part of the rule to be $12,200 (= 2.5 hours x $84.16 x 58).
4. Reduced Competition
    GSA acknowledges the representation clause may lead to reduced 
competition. Some lessors may choose to exit the Federal market, 
particularly lessors that primarily lease to the private sector, 
because of the additional disclosure requirements, and the subsequent 
reduced level of competition may increase prices. However, estimated 
costs faced by contractors represent a small fraction of lease 
payments, and therefore GSA expects effects along these lines to be 
minimal.
5. Government Total Costs
    The total cost of the above Cost Estimate is $133,700 in the first 
year after publication. The total cost of the above Cost Estimate in 
subsequent years is $51,000 annually.
    The following is a summary of the estimated costs calculated for a 
10 year time horizon at a 3- and 7-percent discount rate:

------------------------------------------------------------------------
                         Summary                            Total costs
------------------------------------------------------------------------
Present Value (3 percent)...............................        $515,000
Annualized Costs (3 percent)............................          60,400
Present Value (7 percent)...............................         435,000
Annualized Costs (7 percent)............................          62,000
------------------------------------------------------------------------

    GSA notes that this proposed rule does not authorize GSA lease 
contracting officers to use the information disclosed by offerors as a 
differentiating factor for selection of a lease award, nor does it 
authorize GSA to terminate a lease, prevent a novation, or otherwise 
decline to make an award based on the disclosure. As such, GSA 
estimates that this rule will not result in these activities, and 
therefore no moving costs have been accounted for in this regulatory 
impact analysis.
6. Overall Total Costs
    The overall total cost of the above Cost Estimate, including both 
Public and Government costs, is $932,000 in the first year after 
publication.
    The overall total cost of the above Cost Estimate, including both 
Public and Government costs in subsequent years, is $410,000 annually.
    The following is a summary of the estimated overall total costs 
calculated for a 10 year time horizon at a 3- and 7-percent discount 
rate inclusive of both Public and Government costs:

------------------------------------------------------------------------
                         Summary                            Total costs
------------------------------------------------------------------------
Present Value (3 percent)...............................      $4,000,000
Annualized Costs (3 percent)............................         469,000
Present Value (7 percent)...............................       3,400,000
Annualized Costs (7 percent)............................         479,000
------------------------------------------------------------------------

(g) Analysis of Alternatives

    Alternative 1: GSA could take no regulatory action to implement 
this statute. However, this alternative would not provide any 
implementation and enforcement of the important national security 
measures imposed by the law. Moreover, the general public would not 
experience the benefits of improved national security resulting from 
the rule as detailed above in Section VI.(d). As a result, we reject 
this alternative.
    Alternative 2: GSA could take a more stringent approach to the 
requirements of the Act and apply the new clauses to not only all GSA 
leases and delegated leases for FSL III, IV, or V space but for all FSL 
designations. However, given the relatively low levels of risk at those 
facilities, as described by the ISC, compared with the costs and burden 
applying this revised representation clause clause,\38\ no additional 
benefit would be gained. As a result, we reject this alternative.
---------------------------------------------------------------------------

    \38\ As this Regulatory Impact Analysis only considers 2,063 
high-security leases (or approximately 16% of the GSA leasing 
portfolio), it's reasonable to estimate that if the entire portfolio 
was included, costs could be approximately 5X more costly than 
currently shown.
---------------------------------------------------------------------------

    GSA also considered issuing an acquisition letter, but concluded 
the best alternative was to issue this proposed rule directly 
implementing the statute and allowing for public comment, in addition 
to being consistent with previous rulemaking (GSAR 2021-G527).

(h) Specific Questions for Comment

    To understand the exact scope of the impact of this rule and how 
this impact could be affected, GSA welcomes input on the following 
assumptions and questions regarding anticipated impact on affected 
parties.
    Assumption 1: As previously stated, GSA assumes that most Federal 
lessors maintaining high-security leased space or Federal lessors that 
are competing for solicitations for high-security leased space are 
already familiar with the majority of the requirements of this rule, 
or, similarly, will not find the requirements of this proposed rule as 
anything significantly more than what is currently expected. GSA 
previously implemented ownership disclosures requirements through 
internal policy,\39\ GSA's Request for Lease Proposals (or 
solicitations), GSA's guidance through its public-facing Leasing Desk 
Guide,\40\ Leasing Alerts and Lease Acquisition Circulars,\41\ and GSAR 
Case 2021-G527.
---------------------------------------------------------------------------

    \39\ In March 2017, GSA's Office of Leasing issued Leasing Alert 
LA-FY17-06 requiring Lease Contracting Officers (LCOs) to determine 
whether the ownership of leased space is identified as a foreign-
owned entity and to notify the client agency in such instances, so 
that the agency can take any needed security mitigation measures. 
The Leasing Alert outlined the procedures to make this determination 
which involved a review of the entity's SAM registration; the 
Leasing Alert also required this review for all lease procurements 
and novations, regardless of the Facility Security Level (FSL). In 
October 2018, GSA added a ``Foreign Ownership and Financing 
Representation,'' to be included with all Request for Lease 
Proposals (RLP) packages issued for prospectus-level lease projects. 
This ``paper'' representation required the offeror to confirm both 
foreign ownership and foreign financing
    \40\ GSA's Leasing Desk Guide.
    \41\ GSA's Leasing Alerts and Lease Acquisition Circulars (LAC).
---------------------------------------------------------------------------

    Question 1: If this assumption is not valid, to what extent are the 
requirements in this rule, specifically the revised elements of GSAR 
552.270-33, significantly different from what GSA has currently been 
doing as part of its procedures for foreign ownership disclosure?
    Assumption 2: GSA estimates that this rule will impact mainly the 
Federal lessor industry.
    Question 2: If this assumption is not valid, is there another 
industry(s) to which this rule will cause significant impact or 
disruption?
    Assumption 3: The impact of this rule will not significantly change 
the way current Federal lessors interact with GSA.
    Question 3: If this assumption is not valid, to what extent will 
this rule, specifically the revised elements of GSAR 552.270-33, change 
how you interact with GSA?
    Assumption 4: The impact of this rule will not significantly reduce 
the number of lessors competing for High-Security Leased Space 
solicitations.
    Question 4: If this assumption is not valid, to what extent will 
this rule, specifically the revised elements of GSAR 552.270-33, reduce 
the

[[Page 73228]]

likelihood of you--lessor to the Federal Government for High-Security 
Leased Space--from not competing for future solicitations of High-
Security Leased Space?
    Assumption 5: The compliance activities, and associated costs, 
estimated by GSA are stated at Section VI.(e).
    Question 5: Is there a compliance activity that GSA has failed to 
consider? If so, please specify the activity, explain the activity, 
describe the impact of the activity, and please estimate the annual 
cost of such activities and subsequent yearly activity costs.
    Question 6: Is there a compliance activity that GSA has noted that 
is significantly understated (in terms of annual and subsequent costs)? 
If so, which compliance activity and what specifically was understated? 
Please explain how the compliance activity should be estimated.
    Assumption 7: Other agencies relying upon GSA's leasing authority 
have similar profiles of high security leases in their inventory.
    Question 7: What information is available to better estimate high 
security leases in other agency inventories?
    Assumption 8: GSA sufficiently detailed all compliance requirements 
for the rule.
    Question 9: What additional information or guidance do you view as 
necessary to effectively comply with this rule?
    Question 10: What other challenges do you anticipate facing in 
effectively complying with this rule?
    Question 11: What thoughts or observations would you like to share 
regarding foreign ownership, including beneficial ownership, for GSA to 
consider in subsequent rule-making?
    Assumption 9: GSA's ``beneficial owner'' definition is not less 
stringent than the SEC definition (17 CFR 204.13d-3).
    Question 12: Is this definition less stringent than the definition 
provided by the Secure Federal LEASEs Act definition? If so, how?
    Question 13: Is there a different definition of ``beneficial 
owner'' that GSA should use as part of the representation clause at 
GSAR 552.270-33? If so, what is the definition and why should it be 
used instead of the definition GSA has already drafted into GSAR 
552.270-33?

VII. Executive Order 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 rule is anticipated to be a significant regulatory action and, 
therefore, has been reviewed in accordance with section 6(b) of E.O. 
12866, Regulatory Planning and Review, dated September 30, 1993. See 
Section VI for a regulatory impact analysis of the rule.

VIII. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally provides that before a ``major rule'' may take effect, the 
agency promulgating the rule must submit a rule report, which includes 
a copy of the rule, to each House of the Congress and to the 
Comptroller General of the United States. A major rule cannot take 
effect until 60 days after it is published in the Federal Register. 
This rule is anticipated not to be a ``major rule'' under 5 U.S.C. 
804(2).

IX. Regulatory Flexibility Act

    The General Services Administration does not expect this rule to 
have a significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 
601, et seq. However, an Initial Regulatory Flexibility Analysis (IRFA) 
has been performed, and is summarized as follows:

    The purpose of this rule is to implement certain requirements 
outlined in the Secure Federal LEASEs Act (Pub. L. 116-276) into the 
GSAR.
    The objective of the rule is to prescribe appropriate policies 
and procedures to address the risks of foreign ownership of 
Government-leased real estate and requires the disclosure of 
ownership information for high-security space leased to accommodate 
a Federal agency. Representation clause GSAR 552.270-33 
(representation) is being revised to include beneficial owner 
disclosures. The representation will be required in all novations, 
solicitations and contracts for leased space that (1) will be 
occupied by Federal employees for nonmilitary activities; and (2) 
have a facility security level of III, IV, or V.
    The representation requirement at GSAR 552.270-33 will be 
incorporated into all new lease awards, options exercised for 
current leases, lease extensions, and ownership changes for high-
security leased space. Except where otherwise provided, the revised 
representation statutory disclosure requirements shall apply with 
respect to any lease or novation agreement entered into on or after 
December 31, 2022, involving high-security leased space. That 
includes new, replacing, succeeding, and superseding leases, renewal 
options, extensions, and novations. This includes actions involving 
small entities. The representation requires offerors for high-
security leased space to identify whether the offeror or lessor does 
or does not have a beneficial owner, and, if so, disclosure whether 
the beneficial owner is a foreign person. Further, if the offeror or 
lessor does represent it has a beneficial owner, they must represent 
the legal name of the person, their current residential or business 
street address, and the identifying number or document that verifies 
identity as a United States person, foreign person, or foreign 
entity. Awardees will also be required to re-represent on an annual 
basis. This representation also applies upon change of ownership/
novations.
    As of August 2021, GSA has approximately 7,860 leases in total. 
Approximately 68 percent (5,345) of leasing entities were small 
entities. This information is based on internal inventory data 
sources. Approximately 1,263 of GSA portfolio leases are for high-
security lease space (lease space in a facility with a security 
level of III, IV, or V). 76 leases per year are estimated to be 
solicited for new high-security space procurements. These 
solicitations result from a mix of expiring high-security leases or 
new requirements for high-security facilities. Using the 
approximation above (68 percent), GSA estimates that for the 1,263 
lessors already maintaining leased space at a Level III, IV, or V 
secure facility approximately 859 will be small entities (1,263*68 
percent). If GSA includes agencies with delegated leasing authority, 
the approximate number of total leases at a Level III, IV, or V is 
2,063. This would increase the approximate number of small entities 
to 1,403 (from 859). For the estimated 76 solicitations in 
subsequent years, assuming 3 offerors per solicitation, 
approximately 155 will be submitted by small entities.
    This rule does not duplicate, overlap, or conflict with any 
other Federal rules.
    Because of the requirements outlined by the statute, it is not 
possible to establish different compliance or reporting requirements 
or timetables that take into account the resources available to 
small entities or to exempt small entities from coverage of the 
rule, or any part thereof. However, in order to reduce the burden 
imposed on the public, GSA is currently reviewing and investigating 
potential future implementation through electronic means, including 
externally (System for Award Management) or internally.
    Entities that provide affirmative responses when completing the 
representation at 552.270-33 would be required to provide additional 
representation information in their offers for high-security leases.

    The Regulatory Secretariat Division has submitted a copy of the 
IRFA to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the IRFA may be obtained from the

[[Page 73229]]

Regulatory Secretariat Division. GSA invites comments from small 
business concerns and other interested parties on the expected impact 
of this rule on small entities.
    GSA will also consider comments from small entities concerning the 
existing regulations in subparts affected by the rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C 610 (GSAR Case 2021-G522) in 
correspondence.

X. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. Chapter 35) does apply 
because the rule contains procedures with information collection 
requirements. The revised GSAR clause 552.270-33 now adds the 
requirement that offerors for high-security leased space identify 
whether the offeror does or does not have a beneficial owner(s), and if 
so, if the beneficial owner(s) is a foreign person(s).
    The revised disclosure imposes additional information collection 
requirements to the paperwork burden previously approved under the 
existing OMB Control Number 3090-0324.
    The annual reporting burden is estimated as follows:

1. Initial Disclosure
Baseline Representation
Estimated annual responses: 582.
Estimated hours per response: 0.5.

Additional Representation
Estimated annual responses: 58.
Estimated hours per response: 6.
Total Initial Response Burden Hours: 639.
2. Annual Updates
Estimated annual responses: 582.
Estimated hours per response: 0.10.
Total Update Response Burden Hours: 58.

    Public comments are particularly invited on: Whether this 
collection of information is necessary; whether it will have practical 
utility; whether our estimate of the public burden of this collection 
of information is accurate, and based on valid assumptions and 
methodology; ways to enhance the quality, utility, and clarity of the 
information to be collected; and ways in which we can minimize the 
burden of the collection of information on those who are to respond, 
through the use of appropriate technological collection techniques or 
other forms of information technology.

List of Subjects in 48 CFR Part 552

    Government procurement.

Jeffrey A. Koses,
Senior Procurement Executive, Office of Acquisition Policy, Office of 
Government-wide Policy, General Services Administration.

    Therefore, GSA proposes to amend 48 CFR part 552 as set forth 
below:

PART 552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
1. The authority citation for 48 CFR part 552 continues to read as 
follows:

    Authority:  40 U.S.C. 121(c).
0
2. Amend section 552.270-33 by--
0
a. Revising the clause heading and the date of the clause;
0
b. In paragraph (a):
0
i. Adding the definitions ``Beneficial Owner'', ``Control'', and 
``Covered entity'' in alphabetical order;
0
ii. Revising the definition of ``Financing''; and
0
iii. In the definition of ``Foreign entity'', revising paragraph (ii);
0
c. Removing from paragraph (b) the words ``shall complete'' and adding 
``shall complete and provide'' in their place;
0
d. In paragraph (c)(2):
0
i. Removing from the introductory text the words ``each entity'' and 
adding ``each person or entity'' in their place; and
0
ii. Revising the table;
0
e. Removing paragraphs (c)(3) through (5);
0
f. Removing from paragraph (d)(1) the words ``another entity'' and 
adding ``owners (person or entity)'' in their place;
0
g. Revising the table in paragraph (d)(2);
0
h. Removing paragraphs (d)(3) through (5);
0
i. Redesignate paragraph (e) as paragraph (f);
0
j. Adding a new paragraph (e); and
0
k. In the newly designated paragraph (f)(3):
0
i. Removing from the introductory text the reference ``(e)(1) or (2)'' 
and adding ``(f)(1) or (2)'' in its place; and
0
ii. Revising the table.
    The additions and revisions read as follows:


552.270-33   Foreign Ownership and Financing Representation for High-
Security Leased Space.

* * * * *

Foreign Ownership and Financing Representation for High-Security Leased 
Space (DATE)

    (a) * * *
    Beneficial Owner means, with respect to a covered entity, an 
individual who, directly or indirectly, through any contract, 
arrangement, understanding, relationship, or otherwise--
    (i) Exercises substantial control over the covered entity; or
    (ii) Owns or controls not less than 25 percent of the ownership 
interests of the covered entity.
    Control means, with respect to a covered entity:
    (i) Having the authority or ability to determine how a covered 
entity is utilized; or
    (ii) Having some decision-making power for the use of a covered 
entity.
    Covered entity means:
    (i) A person, corporation, company, business association, 
partnership, society, trust, or any other nongovernmental entity, 
organization, or group; or
    (ii) Any governmental entity or instrumentality of a government.
    Financing means the process of raising, receiving, or providing 
funds, such as through debt or equity, for purposes of meeting the 
requirements of the Lease, including, but not limited to, acquisition, 
maintenance, or construction of, or improvements to, the property.
    Foreign entity * * *
    (ii) Government or governmental instrumentality that is not the 
United States or a state, local government, tribe, or territory within 
the United States.
* * * * *
    (c) * * *
    (2) * * *

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Legal name (do not use a ``doing business
 as'' name).
Unique entity identifier (if available)...
Physical address (including country)......
Status of Immediate Owner: United States
 person, foreign person, or foreign entity.
Identifying number or document that
 verifies status as a United States
 person, foreign person, or foreign entity.
------------------------------------------------------------------------

    (d) * * *
    (2) * * *

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Legal name (do not use a ``doing business
 as'' name).
Unique entity identifier (if available)...
Physical address (including country)......
Status of Highest-level Owner: United
 States person, foreign person, or foreign
 entity].
Identifying number or document that
 verifies status as a United States
 person, foreign person, or foreign entity.
------------------------------------------------------------------------


[[Page 73230]]

    (e) Beneficial owner. (1) The Offeror or Lessor represents that it 
[square] does or [square] does not have a beneficial owner.
    (2) If the Offeror or Lessor indicates ``does'' in paragraph (e)(1) 
of this clause, then enter the following information for the beneficial 
owner. If the Offeror or Lessor has more than one beneficial owner 
(e.g., joint venture), then the Offeror or Lessor shall provide the 
information for each person.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Legal name (do not use a ``doing business
 as'' name).
Unique entity identifier (if available)...
Physical address (Including country)......
Status of Beneficial Owner: United States
 person, foreign person, or foreign entity.
Identifying number or document that
 verifies status as a United States
 person, foreign person, or foreign entity.
------------------------------------------------------------------------

    (f) * * *
    (3) * * *

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Legal name (do not use a ``doing business
 as'' name).
Unique entity identifier (if available)...
Physical address (including country)......
Status of Financing Entity: United States
 person, foreign person, or foreign entity.
Identifying number or document that
 verifies status as a United States
 person, foreign person, or foreign entity.
------------------------------------------------------------------------

* * * * *
[FR Doc. 2021-27443 Filed 12-23-21; 8:45 am]
BILLING CODE 6820-61-P