[Federal Register Volume 87, Number 172 (Wednesday, September 7, 2022)]
[Proposed Rules]
[Pages 54663-54669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18814]


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DEPARTMENT OF HOMELAND SECURITY

48 CFR Parts 3049 and 3052

[Docket No. DHS-2022-0046]
RIN 1601-AB08


Homeland Security Acquisition Regulation (HSAR); United States 
Coast Guard Contract Termination Policy (HSAR Case 2020-001)

AGENCY: Office of the Chief Procurement Officer, Department of Homeland 
Security (DHS).

ACTION: Proposed rule.

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SUMMARY: DHS is proposing to amend the Homeland Security Acquisition 
Regulation (HSAR) to add a new subpart and new contract clause to 
establish contract termination policy for the United States Coast Guard 
(USCG) and amend a clause to address the applicability of USCG's 
contract termination policy to commercial items.

DATES: Interested parties should submit written comments to one of the 
addresses shown below on or before November 7, 2022, to be considered 
in the formation of the final rule.

ADDRESSES: Submit comments identified by HSAR Case 2020-001, Contract 
Termination Policy for the United States Coast Guard, using any of the 
following methods:

[[Page 54664]]

     Regulations.gov: https://www.regulations.gov.
    Submit comments via the Federal eRulemaking portal by entering 
``HSAR Case 2020-001'' under the heading ``Enter Keyword or ID'' and 
selecting ``Search.'' Select the link ``Submit a Comment'' that 
corresponds with ``HSAR Case 2020-001.'' Follow the instructions 
provided at the ``Submit a Comment'' screen. Please include your name, 
company name (if any), and ``HSAR Case 2020-001'' on your attached 
document.
    Comments received generally will be posted without change to 
https://www.regulations.gov, including any personal information 
provided. To confirm receipt of your comment(s), please check 
www.regulations.gov, approximately two to three days after submission 
to verify posting. The Department is not accepting mailed comments at 
this time.

FOR FURTHER INFORMATION CONTACT: Ms. Linda Stivaletti-Petty, 
Procurement Analyst, DHS, Office of the Chief Procurement Officer, 
Acquisition Policy and Legislation at (202) 447-5639 or email 
[email protected]. When using email, include HSAR Case 2020-001 in the 
``Subject'' line.

SUPPLEMENTARY INFORMATION:

I. Background

    The Federal Acquisition Regulations (FAR), found in 48 CFR part 1, 
is a uniform regulation regarding the acquisition of goods and services 
for Federal Government agencies. 48 CFR part 12, ``Acquisition of 
Commercial Products and Commercial Services,'' deals with the 
acquisition of commercial items, while part 49 discusses the 
termination of contracts or solicitations. Under 48 CFR 49.101 
contracts or solicitations may be terminated, either for convenience or 
default, only when it is in the government's interest. The use of a 
termination provision depends on the contract type such as a supply 
contract, service contract, construction contract, research and 
development contract and the method of payment, i.e., fixed price or 
cost type.\1\
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    \1\ See 48 CFR 49.5.
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    Section 3523 of the John S. McCain National Defense Authorization 
Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115-232)(14 U.S.C. 
1155(a)) requires that before terminating a procurement or acquisition 
contract with a total value of more than $1,000,000, the Commandant of 
the Coast Guard shall notify each vendor under such contract and 
require the vendor to maintain all work product related to the contract 
until the earlier of-- (A) not less than 1 year after the date of the 
notification; or (B) the date the Commandant notifies the vendor that 
maintenance of such work product is no longer required.\2\
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    \2\ This section of the NDAA was originally codified at 14 
U.S.C. 657. However, section 108(b) of the Frank LoBiondo Coast 
Guard Authorization Act of 2018 (Pub. L. 115-282) subsequently 
redesignated Sec.  657 as 14 U.S.C. 1155.
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    Specifically, 14 U.S.C. 1155(b) defines ``work product'' to mean: 
(1) tangible and intangible items and information produced or possessed 
as a result of a contract and (2) includes--(A) any completed end 
items; (B) any uncompleted end items; and (C) any property in the 
contractor's possession in which the United States Government has an 
interest. Section 1155(c) establishes a penalty such that any vendor 
that fails to maintain the work product is liable to the United States 
for a civil penalty of not more than $25,000 for each day on which the 
work product is unavailable.
    Department of Homeland Security (DHS) is proposing to add a new 
subpart regarding contract termination policy for the United States 
Coast Guard (USCG) in the Homeland Security Acquisition Regulation 
(HSAR) \3\ to ensure all USCG contractors and subcontractors comply 
with contract termination policy.
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    \3\ The HSAR is issued for Departmental guidance according to 
the policy cited in the FAR at 48 CFR 1.301. The HSAR establishes 
uniform DHS policies and procedures for all acquisition activities 
within the DHS and is issued by the Chief Procurement Officer who is 
the DHS Senior Procurement Executive. The HSAR is located at 48 CFR 
Chapter 30.
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II. Proposed Changes

    This rule proposes to amend the HSAR to:
    Add new subpart 3049.90 Contract Termination (USCG) to part 3049 
Termination of Contracts. This new subpart would consist of two 
sections, section 3049.9001 Policy (USCG) and section 3049.9002 
Contract Clause (USCG). The proposed addition of this subpart and 
sections would align the USCG's contract termination regulatory 
requirements with 14 U.S.C. 1155. HSAR 3049.9001 Policy (USCG) would 
incorporate the provisions laid out in 14 U.S.C. 1155(a), regarding the 
termination of contracts and maintenance of all work product related to 
contracts. The proposed policy would require that before terminating a 
contract with a value of more than $1,000,000, the Commandant of the 
Coast Guard shall notify the contractor and the contractor shall be 
required to maintain all work product related to the contract until the 
earlier of--(1) not less than 1 year after the date of the 
notification; or (2) the date the Commandant notifies the vendor that 
maintenance of such work product is no longer required. The proposed 
definition of ``Work Product'' is also taken from 14 U.S.C. 1155. This 
proposed new subpart would state that a contractor that fails to 
maintain a work product is liable to the United States for a civil 
penalty of not more than $25,000 for each day on which such work 
product is unavailable. This subpart would require the USCG to insert 
this contract termination policy in all contracts, including contracts 
for commercial items, with a total value of more than $1,000,000. These 
proposed revisions to the HSAR are necessary to ensure USCG contractors 
understand their roles and responsibilities to maintain work product in 
the event of a termination, as required by 14 U.S.C. 1155.
    This proposal would add a new HSAR clause, ``3052.249-90 Contract 
Termination (USCG),'' that would implement 3049.9001 Policy (USCG). 
This clause would be required in all USCG solicitations and contracts, 
including contracts for commercial items, with a total value of more 
than $1,000,000.
    This proposed rule would also amend HSAR clause 3052.212-70 
``Contract Terms and Conditions Applicable to DHS Acquisition of 
Commercial Items'' to add HSAR clause 3052.249-90 ``Contract 
Termination (USCG) that would implement 3049.9-9001 Policy (USCG)''. 
This clause would be required in all USCG solicitations and contracts, 
including contracts for commercial items, with a total value of more 
than $1,000,000.

III. Applicability to Commercial Item Acquisitions, Including 
Commercially Available Off-the-Shelf (COTS) Items, and Acquisitions 
Below the Simplified Acquisition Threshold (SAT)

    Section 3523 of the NDAA also provides for a civil penalty and does 
not limit the application of the requirements of the statute to non-
commercial contracts. Consistent with 41 U.S.C. 1905, 1906, and 1907, 
the DHS Chief Procurement Officer has determined that section 3523 of 
the NDAA does apply to the acquisition of commercial items, including 
COTS items. Because 41 U.S.C. 3523 states it applies to contracts with 
a total value of more than $1,000,000, the requirements of the statute 
do not apply to contracts below the SAT.

[[Page 54665]]

IV. Executive Orders 12866 and 13563

    Executive Orders 12866 (Regulatory Planning and Review) and 13563 
(Improving Regulation and Regulatory Review) direct agencies to assess 
the 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). Executive 
Order 13563 emphasizes the importance of quantifying costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility.
    The Office of Management and Budget (OMB) has not designated this 
proposed rule a significant regulatory action under section 3(f) of 
Executive Order 12866. Accordingly, OMB has not reviewed it. A 
regulatory analysis (RA) follows.
    Table 1 presents a summary of impacts of the proposed rule.

                 Table 1--Summary of Impacts of the NPRM
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             Category                              Summary
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Applicability.....................  Addition of contract termination and
                                     notification requirements for the
                                     Coast Guard in Chapter 30 of the
                                     HSAR for contracts that are
                                     terminated by the Coast Guard, this
                                     would apply to new contracts,
                                     including contracts for commercial
                                     items of more than $1 million.
Affected Population...............  Contractors and subcontractors whose
                                     contracts are terminated by the
                                     Coast Guard. Approximately 2
                                     contracts annually.
Costs.............................  There are no new costs of the
                                     proposed rule as its proposed
                                     requirements already exist in other
                                     regulations and statutes.
Unquantified Benefits.............  The proposed rule would provide
                                     consistency between existing
                                     statutes and regulations for
                                     contractors and subcontractors
                                     whose contracts are terminated by
                                     the Coast Guard.
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    The Federal Government seeks contractual work with the general 
public when it wishes to purchase, rent, lease, or otherwise obtain 
supplies or services from non-Federal sources. The FAR defines this 
process as ``contracting.'' \4\ This proposed rule would revise the 
HSAR to require Coast Guard to insert termination and notification 
requirements into its new contracts (this rulemaking would not apply to 
existing Coast Guard contracts), including contracts for commercial 
items, with a total value of more than $1 million.
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    \4\ Readers should reference the FAR for a full definition of 
the term ``contracting''.
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    The Coast Guard incorporates contract termination clauses in 
accordance with the FAR, the HSAR, the Homeland Security Acquisition 
Manual (HSAM), and the Coast Guard Acquisition Procedures (CGAP) into 
contracts as applicable and using this clause when deemed necessary for 
the Coast Guard to exercise its right to do so.
    Based on our analysis, we do not estimate that this proposed rule 
would impose any new requirements or regulatory costs on contractors 
and subcontractors who perform contractual work, with a total value of 
more than $1 million, for the Federal Government. Our analysis also 
shows that the Federal Government would not incur any new regulatory 
costs as a result of this proposed rule. We present a summary of the 
estimated impacts of the proposed rule in Table 2.

           Table 2--Proposed Changes and the Estimated Impacts
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   HSAR part or subpart       Description of
         affected            proposed change    Basis for no cost impact
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3049.....................  Removes the term     Administrative,\5\ we do
                            ``Reserved'' in      not estimate a cost for
                            the Homeland         this item because it
                            Security             contains the insertion
                            Acquisition          of the text, with no
                            Regulation (HSAR).   requirements, in part
                           Adds terms to the     3049 of the HSAR.
                            HSAR:.
                           --``Part 3049'' to
                            Termination of
                            Contracts.
                           --``Subpart 3049.90
                            Contract
                            Termination
                            (USCG)''.
                           --``3049.9001
                            Policy (USCG)''.
                           --``3049.9002
                            Contract Clause
                            (USCG)'', part and
                            subpart titles.
3049.90..................  Adds term            Administrative, we do
                            ``Contract           not estimate a cost for
                            Termination          this item because it
                            (USCG)''--subpart    contains the insertion
                            title, to the HSAR.  of text, with no
                                                 requirements, in part
                                                 3049 of the HSAR.
3049.9001................  Adds term ``Policy   Administrative, we do
                            (USCG)''--title,     not estimate a cost for
                            to the HSAR.         this item because it
                                                 contains the insertion
                                                 of text, with no
                                                 requirements, in part
                                                 3049 of the HSAR.
3049.9001(a).............  Adds paragraph (a)   We do not estimate a
                            to the HSAR and      cost for this
                            would implement      regulatory provision
                            requirements of 14   because the FAR, Title
                            U.S.C. 1155, which   48 of the CFR,
                            provides contract    currently requires the
                            termination policy   Federal Government to
                            for procurement or   include similar
                            acquisition          language in applicable
                            contracts,           Federal contracts.
                            including            Termination and
                            commercial           notification
                            contracts greater    requirements are
                            than $1 million.     addressed in subpart
                                                 49.1 of the FAR. The
                                                 statutory language for
                                                 contract termination is
                                                 currently in 14 U.S.C.
                                                 1155(a)(1) for all
                                                 contracts, including
                                                 commercial contracts,
                                                 with a total value of
                                                 more than $1 million.

[[Page 54666]]

 
3049.9001(b).............  Adds paragraph (b)   We do not estimate a
                            to the HSAR,         cost for this
                            ``Notification''--   regulatory provision
                            title.               because subpart 49.1 of
                           Paragraph would       the FAR currently
                            implement            contains notification
                            requirements of 14   requirements for the
                            U.S.C. 1155, which   Federal Government. The
                            states the           statutory language for
                            Commandant of the    notification of
                            Coast Guard must     contract termination is
                            notify the           currently in 14 U.S.C.
                            contractor before    1155(a)(1) for
                            terminating a        procurement or
                            procurement or       acquisition contracts
                            acquisition          of more than $1 million
                            contract of          (14 U.S.C. 1155(b)
                            greater than $1      defines work product).
                            million and the     Maintaining of records
                            contractor must      is required by section
                            maintain work        4.7 of the FAR. The
                            product as           Federal Government is
                            specified in the     currently required to
                            Code.                include similar
                                                 language in applicable
                                                 Federal contracts.
3049.9001(c).............  Adds paragraph (c)   Administrative--we do
                            ``Work Product       not estimate a cost for
                            Defined''--title,    the addition of this
                            to the HSAR.         regulatory provision
                                                 because there is no
                                                 requirement, 14 U.S.C.
                                                 1155 currently contains
                                                 the definition of the
                                                 term ``work product''.
3049.9001(d).............  Adds paragraph (d)   We do not estimate a
                            ``Penalty''--title   cost for this provision
                            , to the HSAR.       because 14 U.S.C. 1155
                                                 currently contains the
                                                 statutory language for
                                                 ``penalty''. This item
                                                 has not been levied for
                                                 past Coast Guard
                                                 contracts since the
                                                 statute was enacted in
                                                 2019.
3049.9001(e).............  Adds paragraph (e)   We do not estimate a
                            to the HSAR, which   cost for this provision
                            states the           because subpart 49.5 of
                            substance of the     the FAR requires the
                            clause shall be      contracting officer to
                            inserted by the      insert similar language
                            contractor in        in applicable
                            contracts and        contracts. The relevant
                            subcontracts and     clauses are in subpart
                            for commercial       52.249-1 through 10 of
                            items with a total   the FAR.
                            value of more than
                            $1 million.
3049.9002................  Adds the term        Administrative--we do
                            ``Contract Clause    not estimate a cost for
                            (USCG)''-title, to   the addition of the
                            the HSAR; states     title to this subpart
                            Coast Guard          of the HSAR. We do not
                            contracting          estimate a cost for
                            officers shall       this regulatory
                            insert the clause    provision itself
                            at 3052.249-90 in    because the contracting
                            all solicitations    officer of the Coast
                            and contracts,       Guard currently inserts
                            including            similar language in
                            commercial items     applicable contracts,
                            with a total value   including contracts for
                            of more than $1      commercial items, with
                            million.             a total value of more
                                                 than $1 million.
3052.....................  In subpart 3052.2    Administrative--we do
                            of the HSAR,         not estimate a cost for
                            ``Texts of           this item because it
                            Provisions and       includes the insertion
                            Clauses'', adds      of the regulatory text,
                            term ``3052.249-90   with no requirements,
                            Contract             in part 3052 of the
                            Termination          HSAR.
                            (USCG)''.
3052.249-90..............  --Adds text          Administrative--we do
                            ``Contract           not estimate a cost for
                            Termination          the insertion of the
                            (USCG)''--title,     regulatory text that
                            to part 3052 of      would be added to part
                            the HSAR.            3052 of the HSAR. We do
                           --Adds sentence to    not estimate costs for
                            part 3052 of the     the regulatory text in
                            HSAR, ``As           paragraphs (a) through
                            prescribed in the    (e) of this subpart
                            USCG guidance at     because the
                            (HSAR) 48 CFR        requirements are
                            3049.9002, insert    currently contained in
                            the following        49.5 of the FAR. The
                            clause:''.           statutory language
                           --Adds text           currently exists in 14
                            ``Contract           U.S.C. 1155. The
                            Termination (USCG)   requirements are also
                            (Month 2022)'' and   in 3049.9001(a) through
                            paragraphs (a)       (e).
                            through (e) to
                            part 3052 of the
                            HSAR.
3052.212-70..............  Adds term            Administrative--we do
                            ``3052.249-90        not estimate a cost for
                            Contract             this item because it
                            Termination          contains the insertion
                            (USCG)'' to the      of the regulatory text,
                            HSAR.                with no requirements,
                                                 in part 3052 of the
                                                 HSAR.
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Affected Population
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    \5\ We use the term ``administrative'' to mean proposed 
editorial changes or proposed changes to the regulatory text that 
contain no regulatory requirements or impacts to the affected 
population of the proposed rule. The provisions we identified as 
``administrative'' in Table 2 do not have quantifiable costs, cost 
savings, or benefits associated with them. See Table 1 for the 
unquantified benefits of the proposed rule.
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    The affected population of this proposed rule is a contractor (if a 
contractor enters into a contract with a subcontractor, the 
subcontractor would be counted as part of the main or primary contract) 
whose contract is terminated by the Coast Guard; this would apply only 
to a contract, including a commercial contract, with a total value of 
more than $1 million.
    DHS and the Coast Guard worked collaboratively to provide the 
information for this regulatory analysis. The Coast Guard collected 
acquisition data from the Coast Guard's Office of Procurement Policy 
and Oversight to obtain the population or the number of contracts it 
has acquired over the past 11 years. We used the Federal Procurement 
Data System-Next Generation (FPDS-NG) database to collect the 
acquisition data.\6\ The Coast Guard acquired a total of 7,228 
contracts, including commercial items, with a total value of more than 
$1 million, from fiscal year 2010 (FY 2010) through fiscal year 2020 
(FY 2020), which ended on September 30, 2020. Included in this number 
are an unknown number of subcontracts. For accounting purposes, the 
Coast Guard counts the main contract or the contract it awards as the 
primary contract, along with subcontracts, if applicable, as 1 
contract.\7\ During this period of time, the Coast Guard terminated 25 
contracts with a value of more than $1 million, or an average of about 
2.3 contracts a year.
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    \6\ The Federal Government retains data on Federal procurements 
through the FPDS-NG. Readers can reference the FPDS-NG website for 
information on the procurement of Federal contracts at: https://www.gsa.gov/tools-overview/buying-and-selling-tools/federal-procurement-data-system.
    \7\ A fiscal year in the Federal Government is the period of 
time from October 1 in one calendar year to September 30 of the 
following calendar year. It is the accounting period when Federal 
agencies submit budget requests to the Office of Management and 
Budget (OMB) for planning and operational purposes. The data we 
collected are through fiscal year 2020; the Coast Guard generally 
awards contracts, through its budget and acquisition process, in the 
preceding fiscal year for the following fiscal year.
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    Of the 7,228 total contracts, the Coast Guard awarded contracts to 
3,947 small businesses.\8\ Out of the 25 contracts,

[[Page 54667]]

including commercial contracts, with a value of more than $1 million, 
that the Coast Guard terminated during this period of time, 8 of them 
were associated with small businesses. This is an average of less than 
1 small business contract termination a year (we discuss the impacts to 
small entities in Section IV, ``Regulatory Flexibility Act'', of this 
``Regulatory Analysis'').
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    \8\ When a small business wishes to obtain a Federal contract, 
it can do so by ``self-certification'' on the Small Business 
Administration's (SBA) website before it registers for contract 
opportunities with the Federal Government. Readers can learn more 
about this process using the General Services Administration's (GSA) 
website at: https://www.gsa.gov/small-business#gsa-now. A small 
business is one that meets SBA's size standards based upon the North 
American Industry Classification System (NAICS). Readers can 
reference SBA's table of size standards and the NAICS codes at: 
https://www.sba.gov/document/support-table-size-standards. For more 
information on NAICS codes, readers should reference the U.S. Census 
Bureau's website at: https://www.census.gov/naics/. Small businesses 
may also obtain Federal contracts through GSA's ``One Acquisition 
Solution for Integrated Services'' (OASIS) Small Business (OASIS SB) 
contracts, see: https://www.gsa.gov/buying-selling/products-services/professional-services/buy-services/oasis-and-oasis-small-business.
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Cost Analysis of the Proposed Rule

    This proposed rule would not impose any new regulatory costs on 
contractors, subcontractor, and the Federal Government because the 
requirements of this proposed rule currently exist in the FAR and in 
the statute (see 48 CFR chapter 1). We explain our reasoning below for 
each regulatory provision of this proposed rule. However, the FAR does 
not contain the penalty clause that exists in 14 U.S.C. 1155 that we 
would implement in section 3049.9001, paragraph (d).
    We do not estimate a cost for the items we identified as 
``administrative'' in Table 2 because they would contain the addition 
of the regulatory text in the HSAR. This includes adding part, subpart, 
and section titles to the HSAR. This would cover part 3049, subpart 
3049.90 (with sections 3049.9001 and 3049.9002), part 3052, and 
3052.212-70 of the HSAR (see Table 2).
    Subpart 3049.90 of the HSAR would contain the contract termination 
policy and notification of termination requirements for the Coast 
Guard.
    Section 3049.9001 would implement the requirements of the NDAA. 
Paragraph (a) would implement the current statutory language in 14 
U.S.C. 1155(a)(1), which provides the contract termination policy for 
Coast Guard contracts, including contracts for commercial items, with a 
total value of more than $1 million. Additionally, subpart 49.1 
(49.101) of the FAR currently provides the authority for Federal 
agencies and more specifically contracting officers to terminate 
contracts ``. . . for the convenience of the Government, or for default 
. . .''. Because the proposed rule would add the statutory language, 
which supplements the existing regulatory requirement for contract 
termination of subpart 49.1 of the FAR, we do not estimate a cost for 
this proposed change.
    Paragraph (b) of section 3049.9001 would contain the notification 
requirement for the Commandant of the Coast Guard to notify the 
contractor before terminating a contract, including contracts for 
commercial items, with a total value of more than $1 million, and for 
the contractor to maintain all work product related to the contract 
until the earlier of--
    (1) Not less than 1 year after the date of notification; or
    (2) The date the Commandant notifies the vendor that maintenance of 
such work product is no longer required.
    Title 14 U.S.C. 1155(a)(1), currently provides the statutory 
authority for the Commandant of the Coast Guard to notify the 
contractor before terminating a procurement or acquisition contract 
with a total value of more than $1 million. It also states the 
contractor must maintain all work product related to the contract as we 
previously mentioned. Subpart 49.1, specifically section 49.102 of the 
FAR currently contains the regulatory requirement that Federal 
contracting officers notify the contractor before terminating a 
contract for convenience or default. Title 14 U.S.C. 1155 does not 
specify the method of notification; however, the FAR states it must be 
by written notice or it ``may be expedited by means of electronic 
communication capable of providing confirmation of receipt by the 
contractor''. It has been the past (and current) practice of the Coast 
Guard to notify contractors of contract termination by electronic means 
and for the contractor to reply by electronic means; therefore, this is 
not a new requirement and it would not impose any new costs on the 
contractor and the Coast Guard for this method of notification. Because 
the proposed rule would add the statutory language for the notification 
of contract termination, which section 49.102 of the FAR allows by 
electronic means, we do not estimate a cost for this proposed change 
(the statutory language for this provision also exists in 14 U.S.C. 
1155).
    We also do not estimate a cost for the requirement of the 
contractor to maintain all work product related to the contract because 
14 U.S.C. 1155(b) statutorily requires the contractor to perform this 
function for the timeframe specified in the statute. Furthermore, 
subpart 4.7 [specifically sections 4.703(a) through (d)] of the FAR 
requires a contractor to retain records for the time specified in these 
regulations (readers should refer to subpart 4.7 of the FAR for 
contractor records retention).
    Additionally, this is not a new Information Collection Request 
(ICR) nor would it amend an existing ICR under the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501).\9\ The proposed rule would add the 
statutory language, codified in 14 U.S.C. 1155, to this subpart and 
paragraph of the HSAR and would ensure the contractor maintains the 
work product for the timeframes specified in the statute. Lastly, 
because the Coast Guard terminated an average of about 2 contracts a 
year over the past 11 years, this number does not exceed the threshold 
of 10 or more persons for a collection of information as defined in 
Title 5 part 1320 of the CFR.\10\
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    \9\ Readers should reference the PRA for further information at: 
https://www.govinfo.gov/content/pkg/PLAW-104publ13/html/PLAW-104publ13.htm.
    \10\ Readers should reference the CFR for a full definition of 
the term ``collection of information'' and for further information 
on controlling paperwork burdens on the public at: https://www.govinfo.gov/content/pkg/CFR-2010-title5-vol3/xml/CFR-2010-title5-vol3-part1320.xml.
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    Paragraph (c) of 3049.9001 would contain the definition of the term 
``work product'' and would be titled ``Work Product Defined.'' We 
classify this as an administrative provision without a regulatory 
requirement. We do not estimate a cost for this provision because this 
proposed rule would add this definition to the HSAR, which is codified 
in the statute in 14 U.S.C. 1155.
    Paragraph (d) of 3049.9001 would add the penalty a contractor would 
incur if it fails to maintain the work product defined in paragraph (c) 
of this section. The Coast Guard does not believe it is likely it will 
levy this penalty in the future because for the contracts that it has 
terminated, the Coast Guard has generally been able to access the 
maintained work product when necessary. Because this regulatory 
language is codified in the statute in 14 U.S.C. 1155, we do not 
estimate a cost for this proposed change to the HSAR.
    Paragraph (e) of 3049.9001 would contain the requirement for the 
contractor to insert the substance of the clause into contracts and 
subcontracts, including contracts and for commercial items with a total 
value of more than $1 million. Subpart 49.5 (``Contract Termination 
Clauses'') of the FAR requires contracting officers to insert the 
substance of the clause into solicitations and contracts as specified 
in the statute. As a result, we classify this regulatory language and 
addition to the HSAR as an administrative item; therefore, we do not 
estimate a cost for this proposed change.

[[Page 54668]]

    The proposed rule would add section 3049.9002, ``Contract Clause 
(USCG''), to subpart 3049.90 of the HSAR. It states Coast Guard 
contracting officers shall insert the clause at 3052.249-90, ``Contract 
Termination (USCG)'', in all solicitations and contracts, including 
contracts for commercial items, with a total value of more than $1 
million. Similar to the proposed paragraph (e) of subpart 3049.9001, 
the contracting officer of the Coast Guard is required in subpart 49.5 
of the FAR to insert this language into all solicitations and 
contracts.\11\ As a result, we classify this regulatory language and 
addition to the HSAR as an administrative item; therefore, we do not 
estimate a cost for this proposed change.
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    \11\ The proposed rule includes all Coast Guard contracts. The 
Coast Guard, however, issues primarily fixed-price contracts or firm 
fixed-price contracts. The FAR defines fixed-price contracts as 
types of contracts that ``. . . provide for a firm price or, in 
appropriate cases, an adjustable price . . . the contracting officer 
shall use firm fixed-price or fixed price with economic price 
adjustment contracts when acquiring commercial items, except as 
provided in 12.207(b)''. Readers should refer to the FAR for 
information about other types of contracts.
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    Lastly, the proposed rule would add section 3052.249-90, ``Contract 
Termination (USCG)'', to the HSAR. We classify this proposed change as 
an administrative item, which would add the regulatory language with 
the same requirements that would be contained in section 3049.9001, 
paragraphs (a) through (e) of HSAR. As a result, we do not estimate a 
cost for this proposed change.

Benefit Analysis of the Proposed Rule

    The primary benefit of this proposed rule is to provide contractors 
and subcontractors, a consistent regulatory environment between the 
U.S.C., the FAR, and the HSAR, in the event the Federal Government 
terminates a contract, including contracts for commercial items, with a 
total value of more than $1 million. The regulatory consistency also 
includes the notification of termination to a contractor by the 
Commandant of the Coast Guard. The HSAR would contain the requirement 
of the U.S.C. for the contractor to maintain the work product specified 
and the penalty to be levied against a contractor for not maintaining 
the work product as defined in the statute.

Alternatives of the Proposed Rule

    DHS considered two alternatives to this proposed rule. Neither 
alternative would align the HSAR with the statutory requirements of 14 
U.S.C. 1155, nor would they provide the consistent regulatory 
environment of the chosen alternative.
    1. No Action Alternative. We rejected this alternative because the 
HSAR would not align with the relevant statute, which contain the 
statutory requirements for contract termination and notification for 
the Coast Guard, specifically, the National Defense Authorization Act 
(NDAA) for Fiscal Year 2019 (Pub. L. 115-232), 14 U.S.C. 1155, and 
subpart 49.5 of the FAR.\12\ The statutory requirements are applicable 
to contracts, including contracts for commercial items, with a total 
value of more than $1 million. The HSAR would also not contain the 
requirement for the contractor to maintain the work product as defined 
in the U.S.C. Lastly, the HSAR would not contain the penalty specified 
in the U.S.C. levied against a contractor for not maintaining the work 
product.
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    \12\ For further information, readers should reference the NDAA 
for fiscal year 2019 at: https://www.congress.gov/115/bills/hr5515/BILLS-115hr5515enr.pdf.
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    2. Issue a policy letter referencing the FAR and the U.S.C. for 
contract termination policy and notification for the Coast Guard. We 
rejected this alternative because the a policy letter would not revise 
the HSAR and thus it would not contain the requirements found in 14 
U.S.C. 1155. A policy letter would merely provide guidance for 
contractors regarding the Coast Guard's contract termination policy, 
including the penalty clause, and notification procedures for 
requirements that currently exist in the relevant statutes and 
regulations. There would be no costs associated with this alternative.

V. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act, 5 U.S.C. 601 612, we have 
considered whether this proposed rule would have a significant economic 
impact on a substantial number of small entities. The term ``small 
entities'' comprises small businesses, not-for-profit organizations 
that are independently owned and operated and are not dominant in their 
fields, and governmental jurisdictions with populations of less than 
50,000.
    This proposed rule would not impose any new requirements or costs 
on small entities. This proposed rule would insert the Coast Guard's 
termination policy and the notification of termination procedures for 
contracts, including contracts for commercial items, with a total value 
of more than $1 million, into DHS' HSAR. The requirements for contract 
termination and notification are currently in subpart 49.5 of the FAR 
and 14 U.S.C. 1155.
    The Coast Guard collected data on contracts it terminated over the 
past 11 years, including contracts for commercial items, with a total 
value of more than $1 million. Over this period of time, the Coast 
Guard terminated 8 contracts (or less than 1 a year on average) awarded 
to small businesses that met this total dollar value. Although these 8 
companies registered as a ``small business'' with the SBA in order to 
obtain a contract with the Federal Government as a small business, we 
researched these companies to determine the type of small entity that 
they are in order to correctly classify them in this Regulatory 
Flexibility Act (RFA) analysis. This is necessary because a ``small 
business'' is one type of small entity as stated previously in this 
section.
    We obtained the NAICS codes from the FPDS-NG for all 8 companies. 
We found company-specific information on 6 of the 8 companies by using 
the publicly-available online database of businesses in the United 
States, ReferenceUSAgov (we did not find revenue or employee 
information for 2 companies, and assumed they were small).\13\ 
Nevertheless, based on each company's NAICS code, and using SBA's table 
of size standards for each NAICS code, we found all of the 8 companies, 
who had contracts with a total value of more than $1 million that were 
terminated by the Coast Guard, to be small businesses, and not 
governmental jurisdictions or not-for-profit organizations that are 
independently owned and operated and are not dominant in their fields.
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    \13\ Readers can access the database at: https://www.referenceusagov.com/Home/Home.
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    As noted above, that the Coast Guard terminated an average of less 
than 1 contract a year (over the past 11 years) that was associated 
with a small entity and that the proposed rule would not impose any new 
requirements or costs on small entities. Therefore, DHS certifies under 
5 U.S.C. 605(b) that this proposed rule would not have a significant 
economic impact on a substantial number of small entities.
    If you think that your business, organization, or governmental 
jurisdiction qualifies as a small entity and that this proposed rule 
would have a significant economic impact on it, please submit a comment 
to the docket at the address listed in the ADDRESSES section of this 
preamble. In your comment, explain why you think it qualifies and how 
and to what degree this proposed rule would economically affect it.

[[Page 54669]]

VI. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 3520) requires 
agencies to consider the impact of paperwork and other information 
collection burdens imposed on the public. According to the 1995 
amendments to the Paperwork Reduction Act, an agency may not collect or 
sponsor the collection of information, nor may it impose an information 
collection requirement unless it displays a currently valid Office of 
Management and Budget (OMB) control number. As defined in 5 CFR 
1320.3(c), ``collection of information'' comprises reporting, 
recordkeeping, monitoring, posting, labeling, and other similar 
actions.
    DHS has determined that there would be no new requirement for 
information collection associated with this proposed rule. This 
proposed rule would not change the burden in the collections currently 
approved by OMB under OMB Control Numbers, 1600-0002, ``Various 
Contract Related Forms that will be Included in the Homeland Security 
Acquisition Regulation'', 1600-0003, ``Post-Contract Award 
Information'', and 1600-0005, ``Solicitation of Proposal Information 
for Award of Public Contracts''. There are no Coast Guard Information 
Collection Requests (ICRs) associated with non-Federal contracts.

List of Subjects in 48 CFR Parts 3049 and 3052

    Government procurement.

Paul Courtney,
Chief Procurement Officer, Department of Homeland Security.

    Therefore, DHS proposes to amend 48 CFR parts 3049 and 3052 as 
follows:

PART 3049--TERMINATION OF CONTRACTS

0
1. The authority citation for part 3049 is revised to read as follows:

    Authority: 14 U.S.C. 1155.

0
2. Add subpart 3049.90 to read as follows:

Subpart 3049.90 Contract Termination (USCG)

3049.9001 Policy (USCG).
3049.9002 Contract clause (USCG).


3049.9001  Policy (USCG).

    (a) This section implements 14 U.S.C. 1155 and provides the policy 
for the USCG to use for contract terminations. This contract 
termination policy applies to USCG contract terminations, including 
contracts for commercial items, with a total value of more than 
$1,000,000.
    (b) Notification. Before terminating a contract with a total value 
of more than $1,000,000, the Commandant of the Coast Guard shall notify 
the contractor and the contractor shall be required to maintain all 
work product related to the contract until the earlier of--
    (1) not less than 1 year after the date of the notification; or
    (2) the date the Commandant notifies the vendor that maintenance of 
such work product is no longer required.
    (c) Work Product Defined. The term ``work product''--
    (1) means tangible and intangible items and information produced or 
possessed as a result of a contract referred to in subsection (b); and
    (2) includes--
    (i) any completed end items;
    (ii) any uncompleted end items; and
    (iii) any property in the Contractor's possession in which the 
United States Government has an interest.
    (d) Penalty. A Contractor that fails to maintain work product as 
required under subsection (b) is liable to the United States for a 
civil penalty of not more than $25,000 for each day on which such work 
product is unavailable.
    (e) The Contractor shall insert the substance of this clause in 
contracts and subcontracts, including contracts and for commercial 
items, with a total value of more than $1,000,000.


3049.9002  Contract clause (USCG).

    USCG contracting officers shall insert the clause at 3052.249-90, 
Contract Termination (USCG), in all solicitations and contracts, 
including contracts for commercial items, with a total value of more 
than $1,000,000.

PART 3052--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. The authority citation for part 3052 is revised to read as follows:

    Authority: 5 U.S.C. 301-302, 14 U.S.C. 1155, 41 U.S.C. 1303, 41 
U.S.C. 1707, 41 U.S.C. 1702, and 48 CFR subpart 1.3.

0
4. Add Sec.  3052.249-90 to read as follows:


Sec.  3052.249-90  Contract Termination (USCG).

    As prescribed in the USCG guidance at (HSAR) 48 CFR 3049.9002, 
insert the following clause:

Contract Termination (USCG) (Month 2022)

    (a) This contract is subject to Section 3523 of the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. 
L. 115-232), 14 U.S.C. 1155, pertaining to contract terminations for 
the United States Coast Guard (USCG).
    (b) Notification. As required by 14 U.S.C. 1155(b), before 
terminating a contract with a total value of more than $1,000,000, 
the Commandant of the Coast Guard shall notify the contractor and 
the contractor shall be required to maintain all work product 
related to the contract until the earlier of--
    (1) not less than 1 year after the date of the notification; or
    (2) the date the Commandant notifies the vendor that maintenance 
of such work product is no longer required.
    (c) Work Product Defined. In this clause the term ``work 
product''--
    (1) means tangible and intangible items and information produced 
or possessed as a result of a contract referred to in subsection 
(b); and
    (2) includes--
    (i) any completed end items;
    (ii) any uncompleted end items; and
    (iii) any property in the Contractor's possession in which the 
United States Government has an interest.
    (d) Penalty. A Contractor that fails to maintain work product as 
required under subsection (b) is liable to the United States for a 
civil penalty of not more than $25,000 for each day on which such 
work product is unavailable.
    (e) The Contractor shall insert the substance of this clause in 
contracts and subcontracts, including contracts for commercial 
items, with a total value of more than $1,000,000.


(End of clause)


Sec.  3052.212-70   Contract Terms and Conditions Applicable to DHS 
Acquisition of Commercial Items. [Amended]

0
5. In Sec.  3052.212-70, add the text ``_HSAR 3052.249-90 Contract 
Termination (USCG)'' at the end of the section, after the text 
``_3052.247-72 F.o.B. Destination Only.'' and before the text ``(End of 
clause)''.

[FR Doc. 2022-18814 Filed 9-6-22; 8:45 am]
BILLING CODE 4410-10-P