[Federal Register Volume 88, Number 31 (Wednesday, February 15, 2023)]
[Rules and Regulations]
[Pages 9766-9772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-02318]


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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: Final rule.

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SUMMARY: DHS adopts, as final, with minor editorial changes, the 
proposed rule amending the Homeland Security Acquisition Regulation 
(HSAR). This rule implements a new subpart and new contract clause to 
establish contract termination policies for the United States Coast 
Guard (USCG) and amends a clause to address the applicability of USCG's 
contract termination policy to commercial items.

DATES: This rule is effective March 17, 2023.

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:

Table of Contents for Preamble

I. Background
II. Discussion of Comments and the Final Rule
III. Regulatory Analyses
    A. Executive Orders 12866 and 13563 Assessment
    B. Affected Population
    C. Cost Analysis of the Final Rule
    D. Benefit Analysis of the Final Rule
    E. Alternatives of the Final Rule
IV. Regulatory Flexibility Act
V. Paperwork Reduction Act
VI. National Environmental Policy Act

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 section 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.

II. Discussion of Comments and the Final Rule

    The Department of Homeland Security (DHS) did not receive any 
comments on the proposed rule titled ``Homeland Security Acquisition 
Regulation (HSAR); United States Coast Guard Contract Termination 
Policy (HSAR Case 2020-001)'' published on September 7, 2022 (87 FR 
54663). With this rule, DHS adds a new subpart regarding contract 
termination policy for the United States Coast Guard (USCG) in the 
Homeland Security Acquisition Regulation (HSAR) \3\ to

[[Page 9767]]

ensure all USCG contractors and subcontractors have access to and 
comply with Coast Guard's contract termination policies. Thus, it 
aligns the USCG's contract termination regulatory requirements with 14 
U.S.C. 1155, requiring inclusion of the Coast Guard's termination 
policy and the notification of termination procedures in contracts, 
including contracts for commercial items, with a total value of more 
than $1 million. This final rule requires 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. 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. The USCG must also insert the contract 
termination policy in all its solicitations and contracts with a total 
value of more than $1,000,000.
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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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    Accordingly, DHS adopts the proposed regulations in the published 
HSAR proposed rule as final, with two minor editorial changes. The 
minor changes include updating the clause date in Sec.  3052.212-70 
from ``SEP 2012'' to the month this provision will become effective 
``MAR 2023''. In addition, we added paragraph headings within 
Sec. Sec.  3049.9001 and 3052.249-90 to align with the CFR formatting 
requirements. The paragraph headings provide information to the public 
on what each paragraph contains. For a detailed description of the 
proposed rule changes, please see the proposed rule and section III of 
this final rule.

III. Regulatory Analyses

A. Executive Orders 12866 and 13563 Assessment

    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 
final rule a significant regulatory action under section 3(f) of 
Executive Order 12866. Accordingly, OMB has not reviewed it. A 
regulatory analysis (RA) follows.
    DHS did not receive public comments on the regulatory analysis for 
the proposed rule, so the analysis is the same as set out in the 
proposed rule.
    Table 1 presents a summary of impacts of the final rule.

              Table 1--Summary of Impacts of the Final Rule
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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 will 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 final rule
                                as its requirements already exist in
                                other regulations and statutes.
Unquantified Benefits........  The final rule will 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 final rule revises 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 final rule will 
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 will not incur any new regulatory costs as 
a result of this final rule. We present a summary of the estimated 
impacts of the final rule in Table 2.

                              Table 2--Final Rule Changes and the Estimated Impacts
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       HSAR Part or subpart affected         Description of final rule changes      Basis for no cost impact
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3049.......................................  Removes the term ``Reserved'' in   Administrative, \5\ we do not
                                              the Homeland Security              estimate a cost for this item
                                              Acquisition Regulation (HSAR).     because it contains the
                                                                                 insertion of the text, with no
                                                                                 requirements, in part 3049 of
                                                                                 the HSAR.

[[Page 9768]]

 
                                             Adds terms to the 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 ``Contract Termination   Administrative, we do not
                                              (USCG).''--subpart title, to the   estimate a cost for this item
                                              HSAR.                              because it contains the
                                                                                 insertion of text, with no
                                                                                 requirements, in part 3049 of
                                                                                 the HSAR.
3049.9001..................................  Adds term ``Policy (USCG)''--      Administrative, we do not
                                              title, to the HSAR.                estimate a cost for this item
                                                                                 because it contains the
                                                                                 insertion of text, with no
                                                                                 requirements, in part 3049 of
                                                                                 the HSAR.
3049.9001(a)...............................  Adds paragraph (a) to the HSAR     We do not estimate a cost for
                                              and will implement requirements    this regulatory provision
                                              of 14 U.S.C. 1155, which           because the FAR, title 48 of
                                              provides contract termination      the CFR, currently requires the
                                              policy for procurement or          Federal Government to include
                                              acquisition contracts, including   similar language in applicable
                                              commercial contracts greater       Federal contracts. Termination
                                              than $1 million.                   and notification requirements
                                                                                 are 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.
3049.9001(b)...............................  Adds paragraph (b) to the HSAR,    We do not estimate a cost for
                                              ``Notification''--title.           this regulatory provision
                                             Paragraph will implement            because subpart 49.1 of the FAR
                                              requirements of 14 U.S.C. 1155,    currently contains notification
                                              which states the Commandant of     requirements for the Federal
                                              the Coast Guard must notify the    Government. The statutory
                                              contractor before terminating a    language for notification of
                                              procurement or acquisition         contract termination is
                                              contract of greater than $1        currently in 14 U.S.C.
                                              million and the contractor must    1155(a)(1) for procurement or
                                              maintain work product as           acquisition contracts of more
                                              specified in the Code..            than $1 million (14 U.S.C.
                                                                                 1155(b) defines work product).
                                                                                Maintaining of records is
                                                                                 required by subpart 4.7 of the
                                                                                 FAR. The Federal Government is
                                                                                 currently required to include
                                                                                 similar language in applicable
                                                                                 Federal contracts.
3049.9001(c)...............................  Adds paragraph (c) ``Work Product  Administrative--we do not
                                              Defined''--title, to the HSAR.     estimate a cost for the
                                                                                 addition of this 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) ``Penalty''--   We do not estimate a cost for
                                              title, to the HSAR.                this provision 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) to the HSAR,    We do not estimate a cost for
                                              which states the substance of      this provision because subpart
                                              the clause shall be inserted by    49.5 of the FAR requires the
                                              the contractor in contracts and    contracting officer to insert
                                              subcontracts and for commercial    similar language in applicable
                                              items with a total value of more   contracts. The relevant clauses
                                              than $1 million.                   are in sections 52.249-1
                                                                                 through 52.249-10 of the FAR.
3049.9002..................................  Adds the term ``Contract Clause    Administrative--we do not
                                              (USCG)''--title, to the HSAR;      estimate a cost for the
                                              states Coast Guard contracting     addition of the title to this
                                              officers shall insert the clause   subpart of the HSAR. We do not
                                              at 3052.249-90 in all              estimate a cost for this
                                              solicitations and contracts,       regulatory provision itself
                                              including commercial items with    because the contracting officer
                                              a total value of more than $1      of the Coast Guard currently
                                              million.                           inserts similar language in
                                                                                 applicable contracts, including
                                                                                 contracts for commercial items,
                                                                                 with a total value of more than
                                                                                 $1 million.
3052.......................................  In subpart 3052.2 of the HSAR,     Administrative--we do not
                                              ``Texts of Provisions and          estimate a cost for this item
                                              Clauses'', adds term ``3052.249-   because it includes the
                                              90 Contract Termination (USCG)''.  insertion of the regulatory
                                                                                 text, with no requirements, in
                                                                                 part 3052 of the HSAR.
3052.249-90................................  --Adds text ``Contract             Administrative--we do not
                                              Termination (USCG)''--title, to    estimate a cost for the
                                              part 3052 of the HSAR.             insertion of the regulatory
                                             --Adds sentence to part 3052 of     text that will be added to part
                                              the HSAR, ``As prescribed in the   3052 of the HSAR. We do not
                                              USCG guidance at (HSAR) 48 CFR     estimate costs for the
                                              3049.9002, insert the following    regulatory text in paragraphs
                                              clause.''.                         (a) through (e) of this subpart
                                             --Adds text ``Contract              because the requirements are
                                              Termination (USCG) (March          currently contained in subpart
                                              2023)'' and paragraphs (a)         49.5 of the FAR. The statutory
                                              through (e) to part 3052 of the    language currently exists in 14
                                              HSAR..                             U.S.C. 1155. The requirements
                                                                                 are also in 3049.9001(a)
                                                                                 through (e).
3052.212-70................................  Adds term ``3052.249-90 Contract   Administrative--we do not
                                              Termination (USCG)'' to the        estimate a cost for this item
                                              HSAR. Updates date of clause       because it contains the
                                              provision.                         insertion of the regulatory
                                                                                 text, with no requirements, in
                                                                                 part 3052 of the HSAR.
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\5\ We use the term ``administrative'' to mean editorial changes or changes to the regulatory text that contain
  no regulatory requirements or impacts to the affected population of the final 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 final rule.


[[Page 9769]]

B. Affected Population

    The affected population of this final rule is a contractor (if a 
contractor enters into a contract with a subcontractor, then the 
subcontractor is 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. To collect this acquisition data, 
the Coast Guard used the Federal Procurement Data System-Next 
Generation (FPDS-NG) database.\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, 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 a year being terminated by the Coast Guard. (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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C. Cost Analysis of the Final Rule

    This final rule will not impose any new regulatory costs on 
contractors, subcontractor, and the Federal Government because the 
requirements of this final 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 final rule. However, the FAR does not 
contain the penalty clause that exists in 14 U.S.C. 1155 that we will 
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 will contain the addition of 
the regulatory text in the HSAR. This includes adding part, subpart, 
and section titles to the HSAR. This covers 48 CFR 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 will contain the contract termination 
policy and notification of termination requirements for the Coast 
Guard.
    Section 3049.9001 implements the requirements of the NDAA. 
Paragraph (a) implements 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 this 
final rule uses 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 final change.
    Paragraph (b) of section 3049.9001 contains 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 will not impose any new costs on the 
contractor and the Coast Guard for this method of notification. Because 
the rule uses 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 final 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)

[[Page 9770]]

nor will it amend an existing ICR under the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501).\9\ The rule uses the statutory language, 
codified in 14 U.S.C. 1155, in the HSAR and will 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 5 CFR part 1320.\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 states the definition of the term ``work 
product'' and will 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 final rule will add 
this definition to the HSAR, which is codified in the statute in 14 
U.S.C. 1155.
    Paragraph (d) of 3049.9001 contains 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 final change to the HSAR.
    Paragraph (e) of 3049.9001 contains 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 final change.
    The final rule adds 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 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 
change.
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    \11\ The final 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 final rule will add section 3052.249-90, ``Contract 
Termination (USCG)'', to the HSAR. We classify this change as an 
administrative item, which adds the regulatory language with the same 
requirements that are contained in section 3049.9001, paragraphs (a) 
through (e) of HSAR. As a result, we do not estimate a cost for this 
change (see table 2 for a summary of these changes).

D. Benefit Analysis of the Final Rule

    The primary benefit of this 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 Coast Guard 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 will 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.

E. Alternatives of the Final Rule

    DHS considered two alternatives to this 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 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.

IV. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, we have 
considered whether this rule will 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 rule will not impose any new requirements or costs on small 
entities. This rule codifies 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

[[Page 9771]]

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.com (we did not find revenue or employee 
information for 2 companies, and assumed they are 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\ We accessed this database in October 2021. 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 rule will not impose any new 
requirements or costs on small entities. Therefore, DHS certifies under 
5 U.S.C. 605(b) that this rule will not have a significant economic 
impact on a substantial number of small entities.

V. 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 is no new requirement for information 
collection associated with this rule. This rule will 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.

VI. Environment

    We have analyzed this rule under Department of Homeland Security 
Management Directive 023-01, Rev. 1, associated implementing 
instructions, and Environmental Planning COMDTINST 5090.1 (series), 
which guide the Department in complying with the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a 
determination that this action is one of a category of actions that do 
not individually or cumulatively have a significant effect on the human 
environment. This rule is categorically excluded under paragraph A3 of 
Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev 1. 
Paragraph A3 pertains to promulgation of rules that are an 
administrative or procedural nature or those that implement, without 
substantive change, statutory or regulatory requirements. This rule 
involves adopting a statutorily required contract cancelation provision 
that outline the Coast Guard's procedural requirements for canceling 
applicable contracts.

List of Subjects in 48 CFR Parts 3049 and 3052

    Government procurement.

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

    Therefore, DHS amends 48 CFR chapter 30 as follows:

0
1. Add part 3049 to read as follows:

PART 3049--TERMINATION OF CONTRACTS

Subpart 3049.90--Contract Termination (USCG)

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

    Authority:  14 U.S.C. 1155.


3049.9001  Policy (USCG).

    (a) Applicability. 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) Requirement. 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
2. 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
3. Amend Sec.  3052.212-70 by:
0
a. Revising the heading of the clause; and
0
b. In paragraph (b), add an entry for ``HSAR 3052.249-90'' at the end 
of the list of clauses in the second Alternate I.
    The revision and addition read as follows:

[[Page 9772]]

3052.212-70  Contract Terms and Conditions Applicable to DHS 
Acquisition of Commercial Items.

Contract Terms and Conditions Applicable to DHS Acquisition of 
Commercial Items (Mar 2023)

* * * * *
    (b) * * *
    Alternate I * * *
    __HSAR 3052.249-90 Contract Termination (USCG).
* * * * *

0
4. Add section 3052.249-90 to subpart 3052.2 to read as follows:

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) (Mar 2023)

    (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)

[FR Doc. 2023-02318 Filed 2-14-23; 8:45 am]
BILLING CODE 4410-10-P