[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Rules and Regulations]
[Pages 65500-65502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23275]



[[Page 65499]]

Vol. 87

Friday,

No. 208

October 28, 2022

Part IV





Department of Defense





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Defense Acquisition Regulations System





48 CFR Parts 212, 237, and 252





Defense Federal Acquisition Regulation Supplement: Requirement for 
Firms Used To Support Department of Defense Audits (DFARS Case 2019-
D010); Final Rule; Quick-Closeout Procedures Threshold (DFARS Case 
2021-D001); Undefinitized Contract Actions (DFARS Case 2021-D003): 
Proposed Rule

  Federal Register / Vol. 87, No. 208 / Friday, October 28, 2022 / 
Rules and Regulations  

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212, 237, and 252

[Docket DARS-2021-0021]
RIN 0750-AK47


Defense Federal Acquisition Regulation Supplement: Requirement 
for Firms Used To Support Department of Defense Audits (DFARS Case 
2019-D010)

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

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2019, as amended by 
a section of the National Defense Authorization Act for Fiscal Year 
2020, that requires accounting firms that provide financial statement 
auditing or audit remediation services in support of the Financial 
Improvement and Audit Remediation Plan to provide to DoD a statement 
setting forth the details of any disciplinary proceedings with respect 
to the accounting firm or its associated persons before any entity with 
the authority to enforce compliance with rules or laws applying to 
audit services offered by the accounting firm. DoD policy extends this 
requirement to firms other than accounting firms.

DATES: Effective October 28, 2022.

FOR FURTHER INFORMATION CONTACT: Mr. David E. Johnson, telephone 202-
913-5764.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD published a proposed rule in the Federal Register at 86 FR 
59947 on October 29, 2021, to implement section 1006 of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 
115-232), as amended by section 1011 of the NDAA for FY 2020 (Pub. L. 
116-92). Section 1006 applies to accounting firms that provide 
financial statement auditing to DoD in support of the audit under 31 
U.S.C. 3521 or audit remediation services in support of the Financial 
Improvement and Audit Remediation Plan described in 10 U.S.C. 240b. 
Such firms, when responding to a solicitation or awarded a contract for 
the acquisition of covered services, must disclose to DoD before any 
contract action (including award, renewals, and amendments) the details 
of any disciplinary proceedings with respect to the accounting firm or 
its associated persons before any entity with the authority to enforce 
compliance with rules or laws applying to audit services offered by the 
accounting firm. DoD, as a matter of policy to provide a level playing 
field between firms that provide audit services to support certain DoD 
audits, is extending this requirement to firms other than accounting 
firms that provide such services. Section 1011 amended section 1006 to 
require any disclosures to be treated as confidential to the extent 
required by the court or agency in which the proceeding occurred and to 
be treated in a manner consistent with any protections or privileges 
established by any other provision of Federal Law.
    There were no public comments submitted in response to the proposed 
rule. There are no changes made to the final rule.

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

    Consistent with the determinations that DoD made with regard to 
application of the requirements of section 1006 of the NDAA for FY 
2019, as amended by section 1011 of the NDAA for FY 2020, DoD is not 
applying the requirements of section 1006 of the NDAA for FY 2019 to 
contracts at or below the SAT; however, DoD is applying the rule to 
contracts for the acquisition of commercial items, excluding COTS 
items.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993.

IV. Congressional Review Act

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

V. Regulatory Flexibility Act

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA is summarized as follows:
    This final rule is necessary to implement section 1006 of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019, as 
amended by section 1011 of the NDAA for FY 2020, and DoD policy. 
Section 1006 applies to accounting firms that provide financial 
statement auditing to DoD in support of the audit under 31 U.S.C. 3521 
or audit remediation services in support of the Financial Improvement 
and Audit Remediation Plan described in 10 U.S.C. 240b. Such firms, 
when responding to a solicitation or awarded a contract for the 
acquisition of covered services, must disclose to DoD before any 
contract action (including award, renewals, and amendments) the details 
of any disciplinary proceedings with respect to the accounting firm or 
its associated persons before any entity with the authority to enforce 
compliance with rules or laws applying to audit services offered by the 
accounting firm. DoD policy extends this requirement to firms other 
than accounting firms, in order to provide a level playing field in 
competitive acquisitions.
    DoD received no public comments in response to the initial 
regulatory flexibility analysis in the proposed rule.
    DoD estimates there are 12 respondents that submit offers and 10 
respondents that receive award of a contract covered by this rule. Of 
the estimated 12 respondents, DoD further estimates that only two of 
these respondents are small entities.
    This rule adds a provision and a clause that require reporting 
details of any disciplinary proceedings with respect to the firm or its 
associated persons before any contract action on a covered contract in 
support of certain DoD audits. There are no other reporting or 
recordkeeping requirements.
    There are no significant alternatives that would meet the intent of 
the

[[Page 65501]]

statutes. The rule could be applied to only accounting firms, but that 
would not be fair to accounting firms competing against other than 
accounting firms. Applying the rule to other than accounting firms does 
not create a significant burden for small entities.

VI. Paperwork Reduction Act

    This rule contains information collection requirements that have 
been approved by the Office of Management and Budget under the 
Paperwork Reduction Act (44 U.S.C. chapter 35). This information 
collection requirement has been assigned OMB Control Number 0750-0006, 
entitled Defense Federal Acquisition Regulation Supplement (DFARS) Part 
237 Clauses 252.237-7025 and 252.237-7026.

List of Subjects in 48 CFR Parts 212, 237, and 252

    Government procurement.

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

    Therefore, 48 CFR parts 212, 237, and 252 are amended as follows:

0
1. The authority citation for parts 212, 237, and 252 continues to read 
as follows:

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

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
2. Amend section 212.301 by adding paragraphs (f)(xiv)(C) and (D) to 
read as follows:


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

* * * * *
    (f) * * *
    (xiv) * * *
    (C) Use the provision at 252.237-7025, Preaward Transparency 
Requirements for Firms Offering to Support Department of Defense 
Audits--Representation and Disclosure, as prescribed in 237.270(e)(3), 
to comply with section 1006 of the National Defense Authorization Act 
for Fiscal Year 2019 (Pub. L. 115-232) and section 1011 of the National 
Defense Authorization Act for Fiscal Year 2020 (Pub. L. 116-92).
    (D) Use the clause at 252.237-7026, Postaward Transparency 
Requirements for Firms that Support Department of Defense Audits, as 
prescribed in 237.270(e)(4), to comply with section 1006 of the 
National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 115-
232) and section 1011 of the National Defense Authorization Act for 
Fiscal Year 2020 (Pub. L. 116-92).
* * * * *

PART 237--SERVICE CONTRACTING

0
3. Amend section 237.270 by--
0
a. Redesignating paragraph (d) as paragraph (e);
0
b. Adding a new paragraph (d); and
0
c. Adding paragraphs (e)(3) and (4).
    The additions read as follows:


237.270   Acquisition of audit services.

* * * * *
    (d) Transparency requirement for firms used to support DoD audits.
    (1) This paragraph (d) implements the requirements of section 1006 
of the National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 
115-232) and section 1011 of the National Defense Authorization Act for 
Fiscal Year 2020 (Pub. L. 116-92) for transparency of accounting firms 
used to support DoD audits; and extends the statutory requirement, as a 
matter of DoD policy, to firms other than accounting firms in order to 
ensure consistent availability of data for contracting officer 
evaluation and appropriate use.
    (2) This requirement applies to solicitations and contracts for--
    (i) Financial statement auditing required under 31 U.S.C. 3521(e); 
or
    (ii) Audit remediation services in support of the Financial 
Improvement and Audit Remediation Plan described in 10 U.S.C. 240b.
    (3) Any firm responding to a solicitation or awarded a contract for 
the acquisition of the services described in paragraph (d)(2) of this 
section is required to represent with regard to whether it has been 
subject to disciplinary proceedings within the last 3 years and, if the 
offeror represents that it has, to disclose to DoD before any contract 
action (including award, renewals, and modifications)--
    (i) The details of any disciplinary proceedings, with respect to 
the firm or its associated persons (including principals and 
employees), before an entity with the authority to enforce compliance 
with rules or laws applying to audit services or audit remediation 
services offered by accounting firms or firms other than accounting 
firms; and
    (ii) For subsequent contract actions after contract award, whether 
there has been any change with regard to previously reported 
disciplinary proceedings since the last contract action.
    (e) * * *
    (3) Use the provision at 252.237-7025, Preaward Transparency 
Requirements for Firms Offering to Support Department of Defense 
Audits--Representation and Disclosure, in solicitations, including 
solicitations using FAR part 12 procedures for the acquisition of 
commercial items, that include the clause at 252.237-7026, Postaward 
Transparency Requirements for Firms that Support Department of Defense 
Audits.
    (4) Use the clause at 252.237-7026, Postaward Transparency 
Requirements for Firms that Support Department of Defense Audits, in 
solicitations and contracts, including solicitations and contracts 
using FAR part 12 procedures for the acquisition of commercial items, 
that--
    (i) Exceed the simplified acquisition threshold; and
    (ii) Are for the acquisition of financial statement auditing or 
audit remediation services as described in paragraph (d)(2) of this 
section.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.237-7000   [Amended]

0
4. Amend section 252.237-7000 introductory text by removing 
``237.270(d)(1)'' and adding ``237.270(e)(1)'' in its place.


252.237-7001   [Amended]

0
5. Amend section 252.237-7001 introductory text by removing 
``237.270(d)(2)'' and adding ``237.270(e)(2)'' in its place.

0
6. Add section 252.237-7025 to read as follows:


252.237-7025   Preaward Transparency Requirements for Firms Offering to 
Support Department of Defense Audits--Representation and Disclosure.

    As prescribed in 237.270(e)(3), use the following provision:

Preaward Transparency Requirements For Firms Offering To Support 
Department of Defense Audits--Representation and Disclosure (OCT 2022)

    (a) Representation. The Offeror represents that within the 3-
year period preceding this offer, the Offeror and/or any of its 
principals or employees have [ ] have not [ ] been the subject of 
disciplinary proceedings before an entity with the authority to 
enforce compliance with rules or laws applying to audit services or 
audit remediation services offered by the Offeror, that--
    (1) Are not yet fully adjudicated or settled; or
    (2) Were fully adjudicated or settled against the Offeror and/or 
its principals or employees.
    (b) Disclosure. If the Offeror checked ``have'' in the 
representation in paragraph (a) of this provision, the Offeror 
shall, at a minimum, disclose for each such proceeding--

[[Page 65502]]

    (1) The entity hearing the case;
    (2) The case or file number; and
    (3) The allegation or conduct at issue and, if fully adjudicated 
or settled, a brief description of the outcome.
    (c) Treatment of the statements. The Government will safeguard 
and treat as confidential all statements provided pursuant to this 
provision where the statement has been marked ``confidential'' or 
``proprietary'' by the Offeror. Statements so marked will not be 
released by the Government to the public pursuant to a request under 
the Freedom of Information Act, 5 U.S.C. 552, without prior 
notification to the Offeror and opportunity for the Offeror to claim 
an exemption from release. The Government will treat any statement 
provided pursuant to this provision as confidential to the extent 
required by any other applicable law.
(End of provision)

0
7. Add section 252. 237-7026 to read as follows:


252.237-7026  Postaward Transparency Requirements for Firms that 
Support Department of Defense Audits.

    As prescribed in 237.270(e)(4), use the following clause:

Postaward Transparency Requirements for Firms That Support Department 
of Defense Audits (OCT 2022)

    (a) Prior to each contract action under this contract (including 
renewal or modification), the Contractor shall disclose the details 
of any disciplinary proceedings, with respect to the firm and/or its 
principals or employees, before an entity with the authority to 
enforce compliance with rules or laws applying to audit services or 
audit remediation services offered by the Contractor, and whether 
there has been any change with regard to previously reported 
proceedings since the last contract action.
    (b) The disclosure shall, at a minimum, include--
    (1) The entity hearing the case;
    (2) The case or file number; and
    (3) A brief description of the allegation or conduct at issue 
and, if fully adjudicated or settled, a brief description of the 
outcome.
    (c) The Government will safeguard and treat as confidential all 
statements provided pursuant to this clause where the statement has 
been marked ``confidential'' or ``proprietary'' by the Contractor. 
Statements so marked will not be released by the Government to the 
public pursuant to a request under the Freedom of Information Act, 5 
U.S.C. 552, without prior notification to the Contractor and 
opportunity for the Contractor to claim an exemption from release. 
The Government will treat any statement provided pursuant to this 
clause as confidential to the extent required by any other 
applicable law.


(End of clause)

[FR Doc. 2022-23275 Filed 10-27-22; 8:45 am]
BILLING CODE 5001-06ep-P