[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Rules and Regulations]
[Pages 65510-65512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23281]



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

[[Page 65510]]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 203 and 212

[Docket DARS-2022-0013]
RIN 0750-AL36


Defense Federal Acquisition Regulation Supplement: Prohibition on 
Award to Contractors That Require Certain Nondisclosure Agreements 
(DFARS Case 2021-D018)

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 2021 that prohibits 
the award of any DoD contracts to an entity that requires its employees 
to sign internal confidentiality agreements or statements that would 
prohibit or otherwise restrict its employees from lawfully reporting 
waste, fraud, or abuse related to the performance of a DoD contract to 
a designated investigative or law enforcement representative of DoD 
authorized to receive such information.

DATES: Effective October 28, 2022.

FOR FURTHER INFORMATION CONTACT: Ms. Kimberly R. Ziegler, telephone 
703-901-3176.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 87 FR 
37470 on June 23, 2022, to implement section 883 of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2021 (Pub. L. 
116-283). Section 883 prohibits the award of a DoD contract to an 
entity that requires its employees to sign internal confidentiality 
agreements or statements that would prohibit or otherwise restrict such 
employees from lawfully reporting waste, fraud, or abuse related to the 
performance of a DoD contract to a designated investigative or law 
enforcement representative within DoD authorized to receive such 
information. The statute also requires entities to inform its employees 
of the limitations on confidentiality agreements or other statements. 
Offerors are required to represent compliance with the statutory 
restrictions in the System for Award Management prior to submitting an 
offer or quote.
    The requirements of section 883 closely resemble those provided in 
section 743 of Division E, Title VII, of the Consolidated and Further 
Continuing Appropriations Act, 2015 (Pub. L. 113-235), which was 
implemented at Federal Acquisition Regulation (FAR) 3.909, Prohibition 
on providing funds to an entity that requires certain internal 
confidentiality agreements or statements (82 FR 4717, dated January 13, 
2017). Since the prohibition at section 743 applies Governmentwide, DoD 
is currently complying with section 883 based on the FAR application of 
section 743 to employees and contractors.
    One respondent submitted a comment in response to the proposed 
rule.

II. Discussion and Analysis

    DoD reviewed the public comment in the development of the final 
rule. The respondent provided a comment about the definition of the 
term ``entity'' as it pertains to the application of the rule, which is 
outside of the scope of this rule. No changes were made in the final 
rule.

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

    This rule implements section 883 of the NDAA for FY 2021 (Pub. L. 
116-283) but does not create any new solicitation provisions or 
contract clauses. The rule does apply DFARS clause 252.203-7002, 
Requirement to Inform Employees of Whistleblower Rights, to contracts 
valued at or below the SAT and for commercial services and products, 
including COTS items. The rule, at DFARS 203.909-3, also prescribes use 
of Federal Acquisition Regulation (FAR) provision 52.203-18, 
Prohibition on Contracting with Entities that Require Certain Internal 
Confidentiality Agreements or Statements-Representation, and FAR clause 
52.203-19, Prohibition on Requiring Certain Internal Confidentiality 
Agreements or Statements. The FAR clause and provision, except for 
personal services contracts, are already prescribed for use in 
acquisitions at or below the SAT; and the FAR clause 52.203-19 is also 
prescribed for use in commercial acquisitions.

A. Applicability to Contracts at or Below the SAT

    41 U.S.C. 1905 governs the applicability of laws to contracts or 
subcontracts in amounts not greater than the SAT. It is intended to 
limit the applicability of laws to such contracts or subcontracts. 41 
U.S.C. 1905 provides that if a provision of law contains criminal or 
civil penalties, or if the Federal Acquisition Regulatory Council (FAR 
Council) makes a determination that it is not in the best interest of 
the Federal Government to exempt contracts or subcontracts at or below 
the SAT, the law will apply to them. The Principal Director, Defense 
Pricing and Contracting (DPC), is the appropriate authority to make 
comparable determinations for regulations to be published in the DFARS, 
which is part of the FAR system of regulations.

B. Applicability to Contracts for the Acquisition of Commercial 
Services and Commercial Products, Including COTS Items

    10 U.S.C. 2375 (redesignated as 10 U.S.C. 3452) governs the 
applicability of laws to DoD contracts and subcontracts for the 
acquisition of commercial services and commercial products, including 
COTS items, and is intended to limit the applicability of laws to 
contracts for the acquisition of commercial services and commercial 
products, including COTS items. 10 U.S.C. 2375 provides that if a 
provision of law contains criminal or civil penalties, or if the Under 
Secretary of Defense for Acquisition and Sustainment (USD(A&S)) makes a 
written determination that it is not in the best interest of the 
Federal Government to exempt commercial product and commercial service 
contracts, the provision of law will apply to contracts for the 
acquisition of commercial products and commercial services. Due to 
delegations of authority, the Principal Director, DPC is the 
appropriate authority to make this determination. DoD intends to apply 
this rule and the corresponding statutes (10 U.S.C. 2409 and section 
883 of the NDAA for FY 2021) to acquisitions at or below the SAT and 
for commercial services and commercial products, including COTS items.

C. Determination

    DoD intends to apply the requirements of 10 U.S.C. 2409 and section 
883 of the NDAA for FY 2021 to contracts at or below the SAT and those 
awarded under FAR part 12 procedures because the statutory protections 
are intended to apply to any employee of a contractor or subcontractor 
who discloses or may be restricted from disclosing evidence of waste, 
fraud, and abuse. The statutes only exempt the application to elements 
of the intelligence community.

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    10 U.S.C. 2409 provides contractor employees protection from 
reprisal for disclosure of waste, fraud, and abuse to designated 
persons and bodies identified in the statute. An employee of a 
contractor or subcontractor may not be discharged, demoted, or 
otherwise discriminated against as a reprisal for such a disclosure. 
The statute does not apply to elements of the intelligence committee.
    Section 883 prohibits the award of any DoD contract to an entity 
that requires its employees to sign internal confidentiality agreements 
or statements that would prohibit or otherwise restrict its employees 
from lawfully reporting waste, fraud, or abuse related to the 
performance of a DoD contract to a designated investigative or law 
enforcement representative of DoD authorized to receive such 
information.
    It is not in the best interest of the Federal Government to exempt 
application of this rule to actions at or below the SAT or to 
commercial services and commercial products (including COTS items). An 
exception for contracts at or below the SAT and those for commercial 
services and commercial products (including COTS items) would exclude 
the majority of the contracts and individuals intended to be protected 
under the laws, thereby undermining the overarching public policy 
purpose of the laws.

IV. Expected Impact of the Rule

    This proposed rule is not expected to have a significant impact on 
the public or Government agencies because the requirements of section 
883 have already been implemented Governmentwide at FAR 3.909. DoD-
specific implementation of section 883 would duplicate the previous 
implementation of section 743 of Division E, Title VII, of the 
Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 
113-235) as implemented Governmentwide in the FAR.

V. 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.

VI. Congressional Review Act

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

VII. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
and is summarized as follows:
    This rule amends the DFARS to implement section 883 of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2021 (Pub. L. 
116-283). Section 883 prohibits the award of a DoD contract to an 
entity that requires its employees to sign internal confidentiality 
agreements or statements that would prohibit or otherwise restrict such 
employees from lawfully reporting waste, fraud, or abuse related to the 
performance of a DoD contract to a designated investigative or law 
enforcement representative within DoD authorized to receive such 
information.
    The objective of the rule is to implement the DoD-specific statute 
that removes restrictions on the ability of employees to report waste, 
fraud, or abuse to the appropriate DoD authorities.
    There were no significant issues raised by the public in response 
to the initial regulatory flexibility analysis.
    This rule will apply to all small entities that are eligible to 
receive DoD contracts; however, the requirements of section 883 are 
already met through the Governmentwide implementation of a previously 
published prohibition at FAR 3.909 and in the System for Award 
Management (SAM) representations and certifications. As a result, the 
361,000 unique small entities registered in SAM as of January 12, 2021, 
are already compliant with these requirements and will not be required 
to take any additional action to comply with the DoD-specific 
prohibition in section 883.
    The rule does not impose any new reporting, recordkeeping, or 
compliance requirements.
    There are no practical alternatives that will accomplish the 
objectives of the statute.

VIII. Paperwork Reduction Act

    This rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Parts 203 and 212

    Government procurement.

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

    Therefore, 48 CFR parts 203 and 212 are amended as follows:

0
1. The authority citation for parts 203 and 212 continues to read as 
follows:

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

PART 203--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST

0
2. Revise section 203.900 to read as follows:


203.900  Scope of subpart.

    This subpart implements 10 U.S.C. 2409 and section 883 of the 
National Defense Authorization Act for Fiscal Year 2021 (Pub. L. 116-
283).
    (a)(i) 10 U.S.C. 2409 provides DoD whistleblower protection 
policies and procedures for contractor employees. Use sections 203.901 
through 203.906 of this subpart in lieu of FAR sections 3.901 through 
3.906 to implement 10 U.S.C. 2409.
    (ii) 10 U.S.C. 2409 does not apply to any element of the 
intelligence community, as defined in 50 U.S.C. 3003(4). Sections 
203.901 through 203.906 do not apply to any disclosure made by an 
employee of a contractor or subcontractor of an element of the 
intelligence community if such disclosure--
    (A) Relates to an activity or an element of the intelligence 
community; or
    (B) Was discovered during contract or subcontract services provided 
to an element of the intelligence community.
    (c) Section 883 of the National Defense Authorization Act for 
Fiscal Year 2021 (Pub. L. 116-283) prohibits the award of a DoD 
contract to contractors that require their employees to sign internal 
confidentiality agreements or statements that would prohibit or 
otherwise restrict such employees from lawfully reporting

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waste, fraud, or abuse related to the performance of a DoD contract to 
a designated investigative or law enforcement representative within DoD 
authorized to receive such information.

0
3. Add sections 203.909 and 203.909-3 to read as follows:


203.909  Prohibition on providing funds to an entity that requires 
certain internal confidentiality agreements or statements.


203.909-3  Solicitation provision and contract clause.

    Use the provision at FAR 52.203-18, Prohibition on Contracting with 
Entities That Require Certain Internal Confidentiality Agreements or 
Statements--Representation, and the clause at FAR 52.203-19, 
Prohibition on Requiring Certain Internal Confidentiality Agreements or 
Statements, prescribed at FAR 3.909-3 to implement section 883 of the 
National Defense Authorization Act for Fiscal Year 2021.

0
4. Revise section 203.970 to read as follows:


203.970  Contract clause.

    Use the clause at 252.203-7002, Requirement to Inform Employees of 
Whistleblower Rights, in all solicitations and contracts, including 
solicitations and contracts using FAR part 12 procedures for the 
acquisition of commercial items.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
5. Amend section 212.301--
0
a. In paragraph (f)(i), by redesignating paragraphs (f)(i)(C) and (D) 
as paragraphs (f)(i)(D) and (E); and
0
b. By adding a new paragraph (f)(i)(C).
    The addition reads as follows:


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

* * * * *
    (f) * * *
    (i) * * *
    (C) Use the clause at 252.203-7002, Requirement to Inform Employees 
of Whistleblower Rights, as prescribed in 203.970, to comply with 10 
U.S.C. 2409.
* * * * *
[FR Doc. 2022-23281 Filed 10-27-22; 8:45 am]
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