[Federal Register: May 16, 2008 (Volume 73, Number 96)]
[Proposed Rules]
[Page 28407-28410]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16my08-17]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 3, 9, 12, and 52
[FAR Case 2007-006; Docket 2007-0001; Sequence 11]
RIN 9000-AK80
Federal Acquisition Regulation; FAR Case 2007-006, Contractor
Compliance Program and Integrity Reporting (2nd Proposed Rule)
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule; additional changes proposed.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) are seeking comments on
changes to the proposed rule, FAR Case 2007-006, Contractor Compliance
Program and Integrity Reporting, published in the Federal Register at
72 FR 64019, November 14, 2007, for which the initial comment period
has closed, that may be included in the final rule. The Councils do not
contemplate publishing a final or interim rule until public comments
are received and considered on the specific changes discussed further
in this document.
DATES: Interested parties should submit written comments to the FAR
Secretariat on or before July 15, 2008 to be considered in the
formulation of a final rule.
ADDRESSES: Submit comments identified by FAR case 2007-006 by any of
the following methods:
Regulations.gov: http://www.regulations.gov.Submit
comments via the Federal eRulemaking portal by inputting ``FAR Case
2007-006'' under the heading ``Comment or Submission''. Select the link
``Send a Comment or Submission'' that corresponds with FAR Case 2007-
006. Follow the instructions provided to complete the ``Public Comment
and submission Form''. Please include your name, company name (if any),
and ``FAR Case 2007-006'' on your attached document.
Fax: 202-501-4067.
Mail: General Services Administration, Regulatory
Secretariat (VPR), 1800 F Street, NW., Room 4041, Washington, DC 20405.
Instructions: Please submit comments only and cite FAR case 2007-
006 in all correspondence related to this case. All comments received
will be posted without change to http://www.regulations.gov, including
any personal and/or business confidential information provided.
FOR FURTHER INFORMATION CONTACT: 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 FAR case 2007-006.
SUPPLEMENTARY INFORMATION:
A. Background
The Councils published FAR Case 2007-006, Contractor Compliance
Program and Integrity Reporting, as a proposed rule in the Federal
Register at 72 FR 64019, November 14, 2007. The proposed rule was
published, at the request of the Department of Justice (DOJ), in order
to--
Require contractors to have a code of ethics and business
conduct;
Establish and maintain specific internal controls to
detect and prevent improper conduct in connection with the award or
performance of Government contracts or subcontracts; and
Notify contracting officers without delay whenever they
become aware of violations of Federal criminal law with regard to such
contracts or subcontracts.
The proposed rule was a follow-on case to FAR Case 2006-007,
published as a final rule in the Federal Register on November 23, 2007
(72 FR 65873).
Thirty three respondents commented on the proposed rule. The
Councils currently are reviewing the comments and are considering
changes to the proposed rule.
The public and other interested parties have expressed
concerns about--
[cir] The proposed exemption for contracts to be performed entirely
outside the United States; and
[cir] The proposed exemption for contracts for the acquisition of
commercial items.
In addition, the Department of Justice (DOJ) proposes to
add a requirement for contractors to report violations of the civil
False Claims Act, and add knowing failure to timely report such
violations as an additional cause for debarment or suspension to FAR
Subpart 9.4.
Therefore, the Councils are seeking comments and recommendations
regarding the changes to the proposed rule FAR text listed later in
this notice. This notice includes only the sections of the proposed
rule affected by these changes, summarized as follows:
(1) Require inclusion of the clause FAR 52.203-13 in contracts and
subcontracts that will be performed outside the United States (see FAR
3.1004 and 52.203-13(d) in the initial proposed rule). This change
would result in making the clause requirements for a contractor code of
business ethics and conduct, business ethics awareness and compliance
program, and internal control system applicable to contracts performed
outside the United States.
The exemption from the requirement to include the clause 52.203-13
in contracts and subcontracts to be performed entirely outside the
United States was a carry-over from the proposed and final rules under
FAR Case 2006-007, which addressed both contractor code of business
ethics and conduct and the use of fraud hotline posters. The final rule
under FAR case 2006-007 relied heavily on the Defense Acquisition
Regulations System (DFARS) coverage of contractor business ethics and
hotline posters (see 48 CFR 203.70 and 48 CFR 252.203-7002). The DFARS
clause on hotline posters does not apply to overseas contracts or to
commercial items. There is no DFARS clause on contractor code of
business ethics and conduct, just recommended guidelines. When the
Councils added the clause at FAR 52.203-13 to contractually require a
contractor code of business ethics and conduct, the same exemptions as
applied to the hotline posters were perpetuated. The proposed rule
under 2007-006, which was issued on an extremely expedited basis, did
not propose change to the exemption for overseas contracts that was
initiated under FAR case 2006-007. After publication of the proposed
rule under 2007-006, DOJ and other respondents expressed concern about
the overseas exemption.
The Councils note that the proposed rule did not exempt contracts
that will be performed entirely outside the United States from all the
requirements of the proposed rule. The proposed rule--
Applied the proposed debarment/suspension for knowing
failure to timely disclose an overpayment on a Government contract or
violations of Federal criminal law in connection with the award or
performance of any
[[Page 28408]]
Government contract or subcontract, to all contracts, whether domestic
or overseas.
Applied the policy demanding integrity and honesty (see
FAR 3.1002) to all contractors.
Only exempted contracts to be performed entirely outside
the United States from inclusion of the clause.
Had a clause requirement for an internal control system
which mandated an internal reporting mechanism by which employees may
report suspected instances of improper conduct, and instructions that
encourage employees to make such reports on any of the contractor's
contracts or subcontracts, whether overseas or domestic.
(2) Require inclusion of the clause at FAR 52.203-13 in contracts
(and subcontracts) for all acquisitions of a commercial item. However,
just like small businesses, a formal business ethics awareness and
compliance program and internal control system are not required in
contracts and subcontracts for the acquisition of commercial items.
This would have the effect of applying to contracts for the acquisition
of commercial items the requirements for--
A written code of business ethics;
Preventing and detecting criminal conduct; and
Notifying, in writing, when the contractor has reasonable
grounds to believe that violations of the civil False Claims Act or
Federal criminal law have occurred in connection with the award or
performance of this contract or any subcontract thereunder.
This is in some ways more fair to contractors providing commercial
items, because even though the clause was not included in contracts for
the acquisition of commercial items, the contractors were still subject
under the initial proposed rule to debarment or suspension for knowing
failure to notify the Government of violations of Federal criminal law
in connection with the award or performance of the contract (or
subcontract). Now the requirement to report violations is explicitly
stated in the contract.
(3) Add a new cause for suspension or debarment to the current
lists at FAR 9.407-2 and 9.406-2, respectively. For suspension, the new
cause would be adequate evidence of a knowing failure to timely
disclose the violation of the civil False Claims Act in connection with
the award or performance of any Government contract, or subcontract
thereunder. For debarment, the new cause would be a preponderance of
the evidence of a knowing failure to timely disclose violation of the
civil False Claims Act (31 U.S.C. 3729-3733) in connection with the
award or performance of any Government contract, or subcontract
thereunder. This would also be added as a required disclosure in the
contract clause.
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
The changes may 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 small businesses will
be required to notify, in writing, the agency Office of the Inspector
General, with a copy to the contracting officer, whenever the
contractor has reasonable grounds to believe that a principal,
employee, agent, or subcontractor of the contractor has committed a
violation of the civil False Claims Act or a violation of Federal
criminal law in connection with the award or performance of this
contract or any subcontract thereunder.
An Initial Regulatory Flexibility Analysis (IRFA) was prepared in
connection with the initial proposed rule. The analysis is summarized
as follows:
The IRFA reported that ``the clause requirements for a formal
awareness/training program and internal control system will not
apply to small business concerns.'' (See 72 FR 64021.) That is still
true. Only the requirements of paragraph (b) of the clause will
apply (to have a written code of business ethics and to notify the
agency Office of the Inspector General in writing, with a copy to
the contracting officer whenever the Contractor has reasonable
grounds to believe that a principal, employee, agency, or
subcontractor of the contractor has committed a violation of the
False Claims Act or a violation of Federal criminal law).
The proposed changes that affect the IRFA are as follows:
Applies to contracts to be performed outside the United
States.
Applies to contracts for the acquisition of commercial
items (except 52.203-13(c)).
Requires reporting of violations of civil False Claims
Act.
The requirement in the proposed rule ``to notify the agency
inspector general and the contracting officer in writing whenever
the contractor has reasonable grounds to believe that a principal,
employee, agent, or subcontractor of the contractor has committed a
violation of Federal criminal law in connection with the award or
performance of any Government contract or subcontract'' (72 FR
64020) was applicable to small, as well as large, businesses. The
IRFA estimated that approximately 1,400 prime and subcontracts with
small businesses would include the contract clause. We estimate that
by including small businesses that offer commercial items or that
perform contracts outside the United States, the number of small
businesses impacted by the clause may increase by 50%. We estimate
that the requirement to report violations of the civil False Claims
Act may double the number of reports. The number of small businesses
that would actually be required by the clause to submit a report
would then be calculated as 84 (28 x 1.5 x 2). The number of small
entities that are not impacted by the clause requirement but would
report alleged violations of the civil False Claims Act was
estimated to be 17. This estimate has doubled, because of the
addition of mandatory reporting of violations of the civil False
Claims Act. Therefore, the total number of small businesses
submitting a report has increased from 45 to 118 (84+34).
The FAR Secretariat has submitted a copy of the amended IRFA to the
Chief Counsel for Advocacy of the Small Business Administration. A copy
of the IRFA may be obtained from the FAR Secretariat. The Councils will
consider comments from small entities concerning the affected FAR parts
3, 9, 12, and 52 in accordance with 5 U.S.C. 610. Comments must be
submitted separately and should cite 5 U.S.C 601, et seq. (FAR case
2007-006), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act (Pub. L. 104-13) applies because the
proposed rule contains information collection requirements.
Accordingly, the FAR Secretariat will submit a request for approval of
a revised information collection requirement concerning Contractor
Compliance Program and Integrity Reporting to the Office of Management
and Budget under 44 U.S.C. 3501, et seq. The estimated reporting burden
for a violation remains 3 hours. Based on the revised number of
impacted contractors and retaining the other figures used in the
initial estimate, the annual reporting burden is revised as follows:
Respondents: 284.
Responses per respondent: 1.
Total annual responses: 284.
Preparation hours per response: 3.
Total response burden hours: 852.
Annual Reporting Burden
Public reporting burden for this collection of information is
estimated to average 3 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
[[Page 28409]]
D. Request for Comments Regarding Paperwork Burden
Submit comments, including suggestions for reducing this burden,
not later than June 16, 2008 to: FAR Desk Officer, OMB, Room 10102,
NEOB, Washington, DC 20503, and a copy to the General Services
Administration, FAR Secretariat (VPR), 1800 F Street, NW., Room 4041,
Washington, DC 20405. Please cite OMB Control Number 9000-00XX,
Contractor Compliance Program and Integrity Reporting, in all
correspondence.
Public comments are particularly invited on: Whether this
collection of information is necessary for the proper performance of
functions of the FAR, and will have practical utility; whether our
estimate of the public burden of this collection of information is
accurate, and based on valid assumptions and methodology; ways to
enhance the quality, utility, and clarity of the information to be
collected; and ways in which we can minimize the burden of the
collection of information on those who are to respond, through the use
of appropriate technological collection techniques or other forms of
information technology.
Requester may obtain a copy of the justification from the General
Services Administration, FAR Secretariat (VPR), Room 4041, Washington,
DC 20405, telephone (202) 501-4755. Please cite OMB Control Number
9000-00XX, Contractor Compliance Program and Integrity Reporting, in
all correspondence.
List of Subjects in 48 CFR Parts 3, 9, 12, and 52
Government procurement.
Dated: May 14, 2008.
Al Matera,
Director, Office of Acquisition Policy.
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 3, 9,
12, and 52 as set forth below:
1. The authority citation for 48 CFR parts 3, 9, 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 3--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF
INTEREST
2. Amend section 3.1002 by adding paragraph (c) to read as follows:
3.1002 Policy.
* * * * *
(c) A contractor may be suspended and/or debarred for knowing
failure to timely disclose a violation of the civil False Claims Act or
Federal criminal law in connection with the award or performance of any
Government contract performed by the contractor or a subcontract
awarded thereunder (see 9.406-2(b)(1)(v) and 9.407-2(a)(7)).
3. Revise paragraph (a) of section 3.1004 to read as follows:
3.1004 Contract clauses.
* * * * *
(a) Insert the clause at FAR 52.203-13, Contractor Code of Business
Ethics and Conduct, in solicitations and contracts if the value of the
contract is expected to exceed $5,000,000 and the performance period is
120 days or more.
* * * * *
PART 9--CONTRACTOR QUALIFICATIONS
4. Amend section 9.406-2 by revising the introductory text of
paragraph (b)(1) and adding paragraph (b)(1)(v) to read as follows:
9.406-2 Causes for debarment.
* * * * *
(b)(1) A contractor, based upon a preponderance of the evidence,
for any of the following--
* * * * *
(v) Knowing failure to timely disclose--
(A) An overpayment on a Government contract;
(B) Violation of the civil False Claims Act (31 U.S.C 3729-3733) in
connection with the award or performance of any Government contract or
subcontract; or
(C) Violation of Federal criminal law in connection with the award
or performance of any Government contract or subcontract.
* * * * *
5. Amend section 9.407-2 by adding paragraph (a)(7) to read as
follows:
9.407-2 Causes for suspension.
(a) * * *
(7) Knowing failure to timely disclose--
(i) An overpayment on a Government contract;
(ii) Violation of the civil False Claims Act (31 U.S.C 3729-3733)
in connection with the award or performance of any Government contract
or subcontract; or
(iii) Violation of Federal criminal law in connection with the
award or performance of any Government contract or subcontract.
* * * * *
PART 12--ACQUISITION OF COMMERCIAL ITEMS
6. Amend section 12.301 by redesignating paragraph (d)(2) as (d)(3)
and adding a new (d)(2) to read as follows:
12.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(d) * * *
(2) Insert the clause at 52.203-13, Contractor Code of Business
Ethics and Conduct, as prescribed in 3.1004(a).
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
7. Amend section 52.203-13 by--
a. Revising the date of clause;
b. Adding paragraph (b)(3);
c. Revising the introductory text of paragraph (c) and (c)(2)(ii);
d. Adding paragraph (c)(2)(ii)(F); and
e. Revising paragraph (d).
52.203-13 Contractor Code of Business Ethics and Conduct.
* * * * *
Contractor Code of Business Ethics and Conduct
([Insert Abbreviated Month and Year of Publication in the Federal
Register])
* * * * *
(b) * * *
(3) The Contractor shall notify, in writing, the agency Office
of the Inspector General, with a copy to the Contracting Officer,
whenever the Contractor has reasonable grounds to believe that a
principal, employee, agent, or subcontractor of the Contractor has
committed a violation of the civil False Claims Act or a violation
of Federal criminal law in connection with the award or performance
of this contract or any subcontract thereunder.
(c) Business ethics awareness and compliance program and
internal control system. This paragraph (c) does not apply if the
Contractor has represented itself as a small business concern
pursuant to the award of this contract or if 52.212-4 appears in
this contract.
* * * * *
(2) * * *
(ii) At a minimum, the Contractor's internal control system
shall provide for the following:
* * * * *
(F) Timely reporting, in writing, to the agency Office of the
Inspector General, with a copy to the Contracting Officer, whenever
the Contractor has reasonable grounds to believe that a principal,
employee, agent, or subcontractor of the Contractor has committed a
violation of the civil False Claims Act (31 U.S.C 3729-3733) or a
violation of Federal criminal law in connection with the award or
performance of any Government contract performed by the Contractor
or a subcontract thereunder.
* * * * *
(d) Subcontracts. (1) The Contractor shall include the substance
of this clause,
[[Page 28410]]
including this paragraph (d), in subcontracts that have a value in
excess of $5,000,000 and a performance period of more than 120 days.
(2) In altering this clause to identify the appropriate parties,
all reports of violation of the civil False Claims Act or violation
of Federal criminal law shall be directed to the agency Office of
the Inspector General, with a copy to the Contracting Officer.
(End of clause)
[FR Doc. E8-11137 Filed 5-15-08; 8:45 am]
BILLING CODE 6820-EP-P