[Federal Register: September 6, 2007 (Volume 72, Number 172)]
[Rules and Regulations]
[Page 51306-51310]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06se07-21]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 4, 12, and 52
[FAC 2005-20; FAR Case 2006-029;Docket 2007-0001; Sequence 5]
RIN 9000-AK72
Federal Acquisition Regulation; FAR Case 2006-029, Federal
Funding Accountability and Transparency Act (FFATA) - Reporting
Requirement of Subcontractor Award Data
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) to require that
contractors report specific subcontract awards to a public database as
a pilot program. The Federal Funding Accountability and Transparency
Act of 2006 (FFATA) (Pub. L. 109-282) requires the existence and
operation of a searchable website that provides public access to
information about Federal expenditures.
DATES:
Effective Date: September 6, 2007.
[[Page 51307]]
FOR FURTHER INFORMATION CONTACT: Mr. Ernest Woodson, Procurement
Analyst, at (202) 501-3775, for clarification of content. For
information pertaining to status or publication schedules, contact the
FAR Secretariat at (202) 501-4755. Please cite FAC 2005-20, FAR case
2006-029.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule amends the FAR to establish a pilot program to test
the collection and accession of subcontract award data. As a result,
subcontracts awarded and funded with Federal appropriated funds will be
disclosed to the public in a single searchable website. However,
information reported under the pilot program will not be disclosed to
the public.
The FFATA requires the existence and operation of a searchable
website that provides public access to information about Federal
expenditures. Section 2(d) of the FFATA requires that a pilot program
be established to test the collection and accession of subcontract
award data.
In order to implement Section 2(d) of the FFATA, the Councils are
adding a new Subpart to FAR Part 4, with an associated clause in FAR
Part 52, which addresses reporting subcontract awards. The pilot
program will terminate no later than January 1, 2009.
This rule applies to contracts with values equal to or greater than
$500 million awarded and performed in the United States, and requires
the awardees to report all first tier subcontract awards exceeding $1
million to the FFATA database at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.esrs.gov. The Councils chose these
thresholds to ensure that a sufficient number of subcontract award
reports will be entered in the database to permit assessment of its
effectiveness without imposing a significant burden on contractors
during the pilot program. The Government does not guarantee the
reliability of the data reported. The Government has no mechanism to
verify the data submitted. Before completion of the pilot program, the
Councils will initiate a separate rulemaking process to establish the
requirements for the final subcontract reporting database pursuant to
the statute. This rule does not apply to classified contracts or
commercial item contracts issued under FAR Part 12.
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 72 FR 13234 on March 21, 2007. Seventeen respondents
submitted comments in response to the proposed rule. A discussion of
the comments is provided below. No changes were made to the rule as a
result of those comments.
1. Burden Imposed and Usefulness of Database. Thirteen comments
were received concerning the burden that will be imposed on contractors
in order to capture the required data in the final subcontract
reporting database. Some contractors currently do not collect the
specific subcontractor data and may need to create a new system of
collection. Respondents were concerned about the cost of software
modifications necessary to collect the information required by FFATA.
In addition, the manual input is perceived to be labor intensive and
the cost to ensure compliance, as well as cost to audit, will be
significant to both the contractor and the Government. It was suggested
that the pilot threshold of $1 million was a reasonable threshold and
it should be maintained in final reporting requirements in order to
relieve some of the burden associated with the rule. Another comment
related to the threshold suggested that the threshold should balance
the data aggregation costs with the resulting benefits of providing the
data to the public. One respondent suggested that the contractor should
not have to report to the public because there are sufficient
Government agencies that already monitor contractor performance and,
therefore, a public database would not be necessary. One respondent
requested that the rule be clarified to require reporting at the task
order level, as reporting the required information at the onset of the
contract (IDIQ or requirements contracts) would not accomplish the goal
of FFATA. No other comments were received regarding the proposed pilot
program. Five respondents submitted comments regarding the impact and
burden of FFATA final reporting requirements on small business
indicating that the burden on small businesses would be particularly
heavy.
Response: The FFATA of 2006 mandates the existence and operation of
a single searchable website, accessible by the public to require full
disclosure of all transactions of $25,000 or more involving Federal
funds. The Councils must comply with the statute when the final
reporting requirements are established. The definition of
``subcontract'' in FAR clause 52.204-10 refers to the definition of
``contract'' which would include all types of commitments that obligate
the Government to an expenditure of appropriated funds, including task
orders. According to the FFATA data definitions, available at the FFATA
reporting website, ``award amount'' is defined as the amount of support
provided in the award, based on obligations. The contractor should
report a subcontract when the money is obligated. If obligation happens
at the time the IDIQ is awarded then the contractor would report the
amount of the award in the FFATA database at the time of the IDIQ
award. If money is obligated at the time each task/delivery order is
issued, then the contractor would report the amount of the award in the
FFATA database at the time of award of the order. In addition, the
clause provides a definition of ``subcontract,'' which is based on the
FAR definition at 2.1, and includes bilateral contract modifications.
If additional money is obligated by a bilateral subcontract
modification, then that amount must also be reported in the FFATA
database as a separate record. The pilot program will not allow the
modification of an existing record, but the respondents recommendation
will be considered when establishing the final requirements. The
comments regarding small business are addressed in paragraph B,
Regulatory Flexibility Act, of this notice.
2. Duplicate Collection Requirement. Five comments were received
regarding the existence of current databases that would be viewed as
providing sufficient information to comply with the law. The existing
databases or system of collecting subcontract information include the
Federal Procurement Data System (FPDS), the Electronic Subcontracting
Reporting System, small business subcontracting plans, and IRS Form
1099. It was also suggested that the Councils consider coordinating
with other unspecified financial mechanisms that are currently under
development.
Response: The Councils agree that information contained in existing
data collection systems/databases should be utilized as much as
possible to fulfill the requirements of FFATA. However, required
subcontract information is not available from existing Federal systems/
databases. Therefore, a certain amount of data must be provided by the
contractor through a single searchable website as prescribed by Section
2(b)(1) of FFATA. Accordingly, the final rule remains unchanged.
3. Verification and Validation of Data in the FFATA Database. Three
respondents question the usefulness of a system that the Government
cannot validate. Four comments were received suggesting that the
Government needs to establish a means of ensuring compliance and
accuracy of the data available in the FFATA database.
Response: While the Government does not have a mechanism to verify
or validate subcontract data input by a
[[Page 51308]]
contractor, the Government will use routine contract administration
oversight to ensure contractor compliance with the FAR clause at
52.204-10, Reporting Subcontract Awards. The final rule therefore
remains unchanged.
4. Reporting Period. Six comments were received requesting
clarification of the reporting requirements for the pilot program and
suggesting alternative timeframes for reporting data. Clarification was
requested regarding reporting of the initial award of a subcontract and
subsequent extensions in the period of performance or an exercise of an
option for the same subcontract. It was suggested that the FFATA
database allow for updates of existing records. One respondent believes
that quarterly reporting would be burdensome. Another respondent
suggested changing the reporting requirement to 90 days after
subcontract award.
Response: The reporting periods for the pilot program are
sufficient to allow contractors to successfully report subcontract
awards. The suggestion to have the FFATA database allow for updates of
existing records, including the suggestion to tie the reporting periods
to the period of performance, will be given consideration when the
final reporting requirements are established.
5. Security Issues. Nine comments were received expressing concerns
about industrial, national, and other security issues. Since the
database will be public, anyone, including terrorists, will have access
to the information. Providing names and addresses of contractors/
subcontractors in a public database creates unnecessary risks in a
national, operational, and human security sense and will undermine the
Government mission and national security. It was suggested that
reporting requirements exclude any item constituting a weapon system or
components thereof and any item subject to the International Traffic in
Arms Regulation. One respondent believes that security will not be
compromised because the requirement clearly exempts classified
solicitations and contracts.
Response: FFATA mandates the existence and operation of a single
searchable website, accessible by the public to require full disclosure
of transactions of $25,000 or more involving Federal funds. The
specific data elements, including names and addresses, are required for
each Federal award, including subcontracts. However, Section 3 of FFATA
stipulates that the Act does not require disclosure of classified
information, and the FAR rule exempts classified contracts that may be
applicable to industrial, national, and other security issues, and the
pilot database only applies to prime contracts awarded and performed in
the United States. Accordingly, the Councils have determined that no
change is necessary.
6. Competition. Eleven respondents expressed concerns regarding
competition. In general, disclosure of information will provide
unwarranted competitive advantages to competitors. Comments received
stated that the name and location of subcontractors is considered
confidential proprietary business information and should not be
provided to the public. Longstanding laws (e.g., Freedom of Information
Act (FOIA) and Trade Secrets Act) are designed to protect contractors'
and subcontractors' confidential and proprietary business information.
Courts have interpreted Exemption 4 of FOIA to preclude the disclosure
of certain contractor pricing information, finding that the release of
pricing information, particularly line item prices and option year
prices, may result in substantial competitive harm to a contractor. The
FFATA database will provide competitors with source and price
information that could be used to develop procurement strategies that
undermine future business. In addition, posting pilot program
information goes beyond the requirements of FFATA and could present
serious risks to both contractors and subcontractors (e.g., competitors
may gain insight into a contractor's team partners). It is believed
that the public will misunderstand the basis of awards (e.g., a
contract awarded on a basis other than lowest price). One respondent
believes that the rule went beyond the FFATA requirements and suggests
that the Councils work with the Office of Management and Budget (OMB)
to establish the pilot program. One respondent believes that FFATA
infringes on important commercial business practices, making it
difficult to continue beneficial relationships that serve both
commercial and Government customers.
Response: FFATA requires the existence and operation of a single
searchable website, accessible by the public that includes specific
information for Federal awards. The Councils must comply with the
requirements of the law when the final reporting requirements are
established. Under 41 U.S.C. 405 and 421, the Office of Federal
Procurement Policy at OMB oversees the issuance of the FAR. OMB
approves all FAR rules before publication, including this final rule
and its proposed rule. The information reported under the pilot program
will not be disclosed to the public.
7. Applicability. Six comments were received regarding
applicability of the rule. Some required clarification of applicability
and others suggested changes in the application of the rule.
Clarification was requested as to whether the reference to the term
``contract number'' in the FAR clause at 52.204-10 applied to the prime
contract number or subcontract number/purchase order number, and
whether ``subcontractor location including address'' applied to the
billing address of the subcontractor. It was also requested that
clarification be provided regarding the assumption that a contract was
classified when it contained a Department of Defense, Contract Security
Classification Specification (DD Form 254).
Certain respondents strongly suggested that final reporting
requirements be limited to first tier subcontracts because no privity
of contract relationship exists between subcontractors and the
Government, while a single respondent believed that the requirement to
report all subcontracts, regardless of tier, was reasonable and would
ensure consistency in reporting and maximize visibility into Federal
spending. In addition, two respondents indicated that the final
reporting requirements should not apply to commercial contractors
because it will be excessively burdensome for them to identify and
report on Government contracts and items purchased as company inventory
should not be reportable. Concerns that commercial subcontractors might
have their subcontract prices and other sensitive information disclosed
on a public website raises concerns regarding the Federal Acquisition
Streamlining Act of 1994 (FASA). FASA generally exempts laws from
applying to commercial item subcontracts unless the statute
specifically refers to that section. The respondent further stated that
the final reporting requirements should not apply to contracts awarded
or performed outside the United States. Extending the reporting
requirements to contracts awarded or performed outside the United
States will stretch the resources of an already overtaxed acquisition
workforce in foreign countries. In addition, certain foreign countries
may prohibit release of financial information outside the country. One
respondent suggested that a limited set of data should be reported for
sensitive but unclassified contracts (e.g., do not
[[Page 51309]]
include the place of performance location).
Response: Regarding clarifications of applicability, the reference
to ``contract number'' in FAR 52.204-10 refers to the prime contract
number or purchase order number assigned by the Government, consistent
with the FAR convention of all references to ``contractor'' meaning the
recipient of a Government contract. The subcontractor location
including address refers to the principal business location of the
subcontractor receiving the award. The Councils expect the FFATA
database to include helpful information regarding field definitions.
The DD Form 254 is the basic document for conveying to contractors the
applicable classified areas of information involved in a classified
effort. The classification may be related to various attachments or
supplement documents or a facility and would be identified in the body
of the DD Form 254. The rule does not apply to classified contracts.
The FAR clause at 52.204-10 does not require reporting of
subcontract awards below the first tier. In addition, the clause is not
required in solicitations and contracts for commercial items issued
under FAR Part 12. However, comments received regarding the
applicability to commercial contractors and to contracts awarded or
performed outside the United States will be considered in formation of
the final requirements. Therefore, the final rule remains unchanged.
8. Unique Identifier for Subcontractors. Eight comments were
received regarding whether the unique subcontractor identifier should
be the ``data universal numbering system (DUNS'') number, the Taxpayer
Identification Number (TIN), some other number, or a non-numerical
unique identifier. One respondent requested clarification as to whether
the unique identifier was the prime contract number. Six respondents
favored the DUNS number because it is well-established as the unique
identifier for tracking Federal prime contractors. Since many
subcontractors are also prime contractors on other contracts, using the
DUNS number would eliminate any confusion regarding what role they are
playing, prime or subcontractor. Two respondents favored the use of the
TIN as a unique identifier because subcontractors are not required to
obtain a DUNS number. There are limited controls on the issuance of
DUNS numbers and therefore they are considered to be less reliable than
the TIN.
Response: Use of the DUNS number is expected to be the most cost-
effective identifier for reporting awards in the FFATA database. It is
the common identifier used in most Federal systems/databases to
identify contractors. Any contractor or subcontractor needing to obtain
a DUNS number may do so by visiting http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.dnb.com/us. For the Pilot
Program, the unique identifier for the subcontractor will be defined in
the FFATA pilot database. Therefore, the final rule remains unchanged.
9. Definition of Subcontract. One comment was received stating that
the proposed definition of ``subcontract'' (see FAR clause 52.204-10)
would lead to confusion over which business entity is entering into the
subcontract. The respondent suggested that the definition be revised to
be more closely aligned to the definition found at FAR 44.101.
Response: The definition at FAR clause 52.204-10 was adapted from
the FAR 44.101 definition of ``subcontract'' and means ``* * * any
contract entered into by the Contractor to furnish supplies or services
for performance of this contract * * *.'' The definition is clear and,
therefore, remains unchanged in the final rule.
10. Conflict with DFARS 252.204-7000, Disclosure of Information.
Two comments were received regarding the apparent conflict of FFATA
with Defense Federal Acquisition Regulation Supplement (DFARS) Clause
252.204-7000, Disclosure of Information. The DFARS clause prohibits the
disclosure of any part of the contract unless the contracting officer
provides written approval. Clarification is requested as to whether the
FFATA clause supersedes DFARS 252.204-7000.
Response: This comment is outside the scope of this FAR rule.
This is not a significant regulatory action and, therefore, was not
subject to review under Section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
DoD, GSA, and NASA certify that this final rule will not have a
significant economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et
seq., because the contract dollar threshold for the application of the
pilot program is $500 million. The number of small businesses receiving
such large prime contract awards is estimated to be miniscule to none.
Comments were received regarding the impact of FFATA final
reporting requirements on small business. One respondent stated that
historically, small businesses have not been required to track
subcontract awards by contract and implementing the final reporting
requirements of FFATA would mean that they would need to develop a
tracking system. A respondent stated that FFATA would increase costs
associated with hiring resources to track and input data. In addition,
another respondent stated that many small businesses may not be
familiar with regulations and laws related to subcontract reporting.
The public comments and results of the pilot program will be
considered when the final reporting requirements are established, with
a goal of minimizing burdens imposed on small businesses.
C. Paperwork Reduction Act
The Paperwork Reduction Act (Pub. L. 104-13) applies because the
final rule contains information collection requirements. Accordingly,
the FAR Secretariat has forwarded a request for approval of a new
information collection requirement concerning OMB Control Number 9000-
00XX, FFATA Reporting Requirement of Subcontractor Award Data, to OMB
under 44 U.S.C. 3501, et seq. Public comments concerning this request
will be invited through a subsequent Federal Register notice.
List of Subjects in 48 CFR Parts 4, 12, and 52
Government procurement.
Dated: August 29, 2007.
Al Matera,
Director, Office of Acquisition Policy.
0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 4, 12, and 52 as set
forth below:
0
1. The authority citation for 48 CFR parts 4, 12, and 52 continues to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 4--ADMINISTRATIVE MATTERS
0
2. Add subpart 4.14 to read as follows:
Subpart 4.14--Reporting Subcontract Awards
4.1400 Scope of subpart.
This subpart implements section 2(d) of the Federal Funding
Accountability and Transparency Act of 2006 (Pub. L. No. 109-282) by
establishing a pilot program for a single searchable website, which
will eventually be available to the public at no charge, that includes
information on Federal subcontracts. This pilot program will expire not
later than January 1, 2009. Information
[[Page 51310]]
reported under the pilot program will not be disclosed to the public.
4.1401 Contract clause.
(a) Except as provided in paragraph (b) of this section, insert the
clause at 52.204-10, Reporting Subcontract Awards, in all solicitations
and contracts with values of $500,000,000 or more when the contract
will be awarded and performed in the United States.
(b) The clause is not required in--
(1) Solicitations and contracts for commercial items issued under
FAR Part 12; or
(2) Classified solicitations and contracts.
PART 12--ACQUISITION OF COMMERCIAL ITEMS
0
3. Amend section 12.503 by adding new paragraph (a)(6) to read as
follows:
12.503 Applicability of certain laws to Executive agency contracts for
the acquisition of commercial services.
(a) * * *
(6) 31 U.S.C. 6101 note, Pub. L. 109-282, Federal Funding
Accountability and Transparency Act of 2006, requirement to report
subcontract data.
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
4. Add section 52.204-10 to read as follows:
52.204-10 Reporting Subcontract Awards.
As prescribed in 4.1401(a), insert the following clause:
REPORTING SUBCONTRACT AWARDS (SEP 2007)
(a) Definition. Subcontract, as used in this clause, means any
contract as defined in FAR Subpart 2.1 entered into by the
Contractor to furnish supplies or services for performance of this
contract. It includes, but is not limited to, purchase orders and
changes and modifications to purchase orders, but does not include
contracts that provide supplies or services benefiting two or more
contracts.
(b) Section 2(d) of the Federal Funding Accountability and
Transparency Act of 2006 (Pub. L. No. 109-282) requires
establishment of a pilot program for a single searchable website,
available to the public at no charge that includes information on
Federal subcontracts.
(c) Within thirty days after the end of March, June, September,
and December of each year through 2008, the Contractor shall report
the following information at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.esrs.gov for each subcontract award
with a value greater than $1 million made during that quarter. (The
Contractor shall follow the instructions at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.esrs.gov to report
the data.)
(1) Name of the subcontractor.
(2) Amount of the award.
(3) Date of award.
(4) The applicable North American Industry Classification System
code.
(5) Funding agency or agencies.
(6) Award title descriptive of the purpose of the action.
(7) Contract number.
(8) Subcontractor location including address.
(9) Subcontract primary performance location including address.
(10) Unique identifier for the subcontractor.
(End of clause)
[FR Doc. 07-4336 Filed 9-5-07; 8:45 am]
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