[Federal Register: December 27, 2001 (Volume 66, Number 248)]
[Rules and Regulations]
[Page 66986-66990]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de01-32]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 9, 14, 15, 31, and 52
[FAC 2001-03; FAR Case 2001-014; Item II]
RIN 9000-AJ10
Federal Acquisition Regulation; Contractor Responsibility, Labor
Relations Costs, and Costs Relating to Legal and Other Proceedings--
Revocation
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 Federal Acquisition Regulatory Council (FAR Council)
published in the Federal Register at 66 FR 17758, April 3, 2001, a
proposed rule (April proposed rule) with request for public comment.
The April proposed rule proposed revoking a final rule published in the
Federal Register at 65 FR 80255, December 20, 2000 (December final
rule). The December final rule addressed responsibility, labor
relations costs, and costs incurred in legal and other proceedings.
This rule finalizes the aforementioned April proposed rule.
An interim FAR rule was published in the Federal Register at 66 FR
17754, April 3, 2001, concurrently with the April proposed rule. The
interim rule immediately stayed the December final rule (under FAR case
1999-010, Responsibility, Labor Relations Costs, and Costs Relating to
Legal and Other Proceedings). During the stay, the FAR text was
restored to the text as it existed before January 19, 2001. The FAR
Council intended the stay to last for 270 days from April 3, 2001
(December 29, 2001), or until finalization of the April proposed rule,
whichever was sooner. In a separate document being published elsewhere
in this issue, the FAR Council is terminating the stay.
The FAR Council published in the Federal Register at 66 FR 23134,
May 7, 2001, an extension of the April
[[Page 66987]]
proposed rule public comment period from June 4, 2001, to July 6, 2001,
and a notice of a public meeting on the April proposed rule, which was
conducted on June 18, 2001.
DATES: Effective Date: December 27, 2001.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC, 20405, (202) 501-4755, for information
pertaining to status or publication schedules. For clarification of
content, contact Mr. Ralph De Stefano, Procurement Analyst, at (202)
501-1758. Please cite FAC 2001-03, FAR case 2001-014.
SUPPLEMENTARY INFORMATION:
A. Background
1. The Final Rule
The final rule published in the Federal Register at 65 FR 80255
(December final rule) included the following revisions:
FAR Part 9
At FAR 9.104-1(d), added language stating that a satisfactory
record of integrity and business ethics includes satisfactory
compliance with the law including tax, labor and employment,
environmental, antitrust, and consumer protection laws.
At FAR 9.104-3(c), required contracting officers to consider all
relevant credible information but stated that the greatest weight must
be given to offenses adjudicated within the past three years.
FAR Parts 14 and 15
At 14.404-2(i) and 15.503(a)(1), directed contracting officers to
notify offerors if the offerors were excluded based on a
nonresponsibility determination.
FAR Part 31
At FAR 31.205-21, made unallowable those costs incurred for
activities that assist, promote, or deter unionization.
At FAR 31.305-47, made unallowable those costs incurred in civil or
administrative proceedings brought by a government where the contractor
violated, or failed to comply with, a law or regulation.
FAR Part 52
At FAR 52.209-5, amended the previous certification to require
offerors to certify to additional violations (violations of tax, labor
and employment, environmental, antitrust, or consumer protection laws)
adjudicated within the last three years. It was a check-the-box
certification. An offeror would have to provide additional detailed
information only upon the request of the contracting officer.
At 52.212-3(h), made an equivalent change for the certification for
commercial items.
2. The Stay
The interim rule published at 66 FR 17754, April 3, 2001,
immediately stayed the December final rule and also requested public
comment. During the stay, the FAR text was restored to the text, as it
existed before January 19, 2001. The FAR Council intended the stay to
last for 270 days from April 3, 2001 (December 29, 2001), or until
finalization of the April proposed rule, whichever is sooner. In a
separate document being published today elsewhere in this issue, the
FAR Council is terminating the stay.
The FAR Council determined that the December final rule 30-day
effective date did not give contractors, and the Government, sufficient
time to meet the new obligations and responsibilities imposed by the
final rule. Government contracting officers had not had sufficient
training.
Offerors had not had sufficient time to establish a system to track
compliance with applicable laws and keep it current, in order to be
able to properly fill out the certification. Although there is language
in the noncommercial items certification, which assures contractors
that no system of records needs to be established to render the
certification in good faith, this language was not found in the
commercial items certification. There are criminal penalties for a
false certification (18 U.S.C. 1001). The FAR Council recognized that
it would take more time than it anticipated for businesses to put the
systems in place. Ninety-eight comments were received on the stay.
3. Extension of Public Comment Period and Public Meeting
The FAR Council published in the Federal Register at 66 FR 23134,
May 7, 2001, an extension of the April proposed rule public comment
period from June 4, 2001, to July 6, 2001, to ensure potential
commentors had adequate time to prepare their comments, and a notice of
a public meeting on June 18, 2001, to ensure an open dialogue between
the Government and interested parties on the April proposed rule.
Twenty-seven individuals and organizations presented at the public
meeting.
4. Reconsideration
Under the April proposed rule, the FAR Council reassessed the
advantages and disadvantages of the changes made by the December 20,
2000, final rule, to determine if the benefits of the rule are
outweighed by the burdens imposed by the rule. In this regard, it was
not clear to the FAR Council that there is a justification for
including the added categories of covered laws in the rule and its
implementing certification, that the rule provided contracting officers
with sufficient guidelines to prevent arbitrary or otherwise abusive
implementation, or that the final rule was justified from a cost-
benefit perspective.
The FAR Council realized that there was a high degree of
controversy about the merits of the December final rule (there were
1800 public comments). The typical FAR rule generates about 1 percent
of that amount. The two proposed rules that resulted in the December
final rule were the most controversial ever published by the FAR
Council. Adverse comments were made by individuals within the
Government itself, as well as by the public.
After the publication of the December final rule, the FAR Council
continued to receive information that the December final rule was not
in the best interests of industry or the Government. The FAR Council
wanted to be responsive to the needs of the contracting community, and
therefore continued a dialog about the rule. Some 4698 public comments
were received in response to the April 3, 2001, proposed rule. All
comments were considered in the formulation of the final rule (see
Section 5 of this preamble). The FAR Council has determined that the
December final rule should be revoked in its entirety.
With the revocation of the December final rule, contracting
officers will continue to have the authority and duty to make
responsibility decisions. Agency debarring officials will continue to
have the authority and duty to make determinations whether to suspend
and debar a contractor. The requirement that contractors must be
responsible is statutory. Offerors must have a satisfactory record of
integrity and business ethics.
The FAR Council fully supports the proposition that Government
contracts should be awarded to law-abiding entities. Entities whose
behavior reflects negatively on their responsibility have always been
subject to scrutiny and the possibility of being disqualified for award
of Government contracts. In fact, the very last thing a contracting
officer must do before awarding a Government contract is determine
whether the company is responsible. This requirement has been a long-
standing policy and process of Government
[[Page 66988]]
contracting dating prior to the Civil War. Ferreting out companies who
are not responsible has been a responsibility shared by a number of
individuals in the Government's contracting process. The FAR Council
supports the principle that the Government should do business only with
those entities willing and able to comply with the laws enumerated in
the December final rule.
After reviewing the public comments submitted in response to the
proposed revocation of the December final rule (66 FR 17758, April 3,
2001), it is clear that there is a conviction held by people at many
levels and many walks of life that the Government should conduct its
business with corporations that adhere to the law. The problem lies in
the means to ensure that the entities with which the Government
conducts its business are good citizens and adhere to the myriad of
regulations and laws. In other words, we support the objective but find
the vehicle unworkable and defective.
The FAR Council finds that the current regulations governing
suspension and debarment provide adequate protection to address serious
threats of waste, fraud, abuse, poor performance, and noncompliance.
Any one of these concerns may authorize suspension or debarment under
appropriate conditions and circumstances, subject to judicial review.
The FAR Council reminds members of the general public that anyone
may submit to an agency debarment official relevant information about
the responsibility of a company seeking to do business with the
Government. Debarment and suspension provides a means of getting
adverse information to appropriate Government officials with
appropriate procedures, knowledge, and skills to review and take
appropriate action in such matters. This process also provides subjects
of those actions with due process procedures that will withstand
judicial scrutiny. The outcome of these reviews have Governmentwide
applicability within the executive branch.
The existing debarment process provides the authority for at least
one official in an executive agency which procures goods or services
with appropriated funds under the FAR, to be responsible for reviewing
the behavior of contractors to determine whether that company is
sufficiently responsible to continue doing business with the
Government. That official is the agency debarring official. The agency
debarring official is typically located at the agency's headquarters.
This individual is typically a senior official of the agency familiar
with a variety of issues that affect contractor responsibility and
supported by a staff including the agency's general counsel. The
debarring official is authorized to consider a company's responsibility
at any time, whether the company is a current competitor for a
Government contract or not. Should the debarring official determine
that the company is not responsible, the debarring official may impose
a debarment of the company. This debarment is effective with regard to
all Federal agencies and many state and local governments as well who
choose to use the debarment list as their own. The suspension and
debarment rules contain well established and defined decision-making
criteria and due process safeguards, which have evolved through case
law precedent and agency practices.
When a question of a company's honesty and integrity is raised,
reliance on the debarment and suspension remedies provides effective
intervention. This remedy provides consistent application of a
determination across the enterprise of Government and will assure that
officials with both the training and expertise will consider and
resolve these matters. There are some 50 causes upon which entities may
be found ineligible to conduct business including business done under
nonprocurement transactions under the Governmentwide Debarment and
Suspension (Nonprocurement) and Governmentwide Requirements for Drug-
Free Workplace (Grants) rules; otherwise known as the Common Rule for
Suspension and Debarment.
5. Summary of Public Comments
Below is a summary of the issues raised in the public comments:
``The Government ought not do business with lawbreakers'' was a
common thread in the sentiment expressing support for the December
final rule. The FAR Council agrees with this statement. Only doing
business with law abiding contractors provides a positive incentive for
voluntary compliance with tax, environmental, labor, civil rights, and
consumer laws, as well as criminal laws involving contracting and
certain other kinds of business activities. The debarment regulations
provide a highly effective remedy for appropriately excluding those who
cannot or will not comply with the law, especially where there is a
demonstrated lack of business integrity or honesty.
The December final rule flies in the face of long-standing policy
of neutrality in labor-management disputes. Technically, the language
in the December final rule does not require a change in the policy of
impartiality in labor-management disputes. In practice, the December
final rule could undermine the longstanding policy of neutrality in
labor-management disputes.
The December final rule requires contracting officers to perform a
function, which they lack the experience, procedures, and resources to
perform. Contracting officers are not experts in tax laws, labor and
employment laws, environmental laws, antitrust laws, and consumer
protection laws. This lack of expertise would create a problem rather
than solving a problem. Contracting officers are not the appropriate
individuals to make decisions regarding satisfactory compliance with
the law.
The requirement in the December final rule to consult with legal
counsel before finding a prospective contractor nonresponsible does not
resolve this issue. Legal counsel may not be an expert in the covered
laws under review in the instant fact situation. An agency suspension
and debarment authority has the requisite knowledges and skills
combined with the required procedures and resources to use the
information to support suspension and debarment decisions.
De facto debarment could occur under the December final rule. In
some cases, repeated nonresponsibility findings based on the same
facts, within the same agency, could be considered a de facto
debarment. The suspension and debarment rules contain well established
and defined decision-making criteria and due process safeguards, which
have evolved through case law precedent and agency practices.
The December final rule's wording is unclear and provides
insufficient guidance for contracting officers. There is no guidance to
contracting officers to ensure consistent application. Contracting
officers could make disparate nonresponsibility determinations. The
hierarchy establishing the priority and weight to be given to various
types of evidence does not resolve this issue.
Sufficient enforcement regulations already existed before the
December final rule. The Government has sufficient regulations to
address contractor responsibility. Among other things, debarment rules
provide for existing and appropriate remedies with sufficient due
process safeguard for addressing conduct adversely reflecting on
business honesty and integrity. Also,
[[Page 66989]]
for example, under statutory schemes, determinations in the area of
worker health and safety, failure to pay minimum wages, or violations
of other worker protection laws lie within the purview of the
Department of Labor. This approach ensures consistency Governmentwide.
The certification under the December final rule is burdensome. The
certification is contrary to the intent of the Federal Acquisition
Streamlining Act of 1994 and the Clinger-Cohen Act of 1996 because it
imposes an unnecessary requirement with little or no offsetting
commensurate benefit. Moreover, agencies lack the resources and
expertise to effectively use the information received under the
certification.
The December final rule undermines competition. Contactors may be
unwilling to spend money to submit offers unless they can ascertain the
basis by which responsibility determinations will be made with some
degree of exactness and objectivity. As stated above, the December
final rule's wording is unclear and provides insufficient guidance for
contracting officers.
After reviewing the public comments in response to the proposed
revocation of the December rule, it is clear that there is a conviction
held by people at many levels and many walks of life that the
Government should conduct its business with entities that adhere to the
law. The FAR Council agrees that the Government should not do business
with lawbreakers. The problem lies in the means to ensure that the
entities with which the Government conducts business are good corporate
citizens and adhere to the myriad of regulations and laws. The FAR
Council has determined that the suspension and debarment process is the
proper vehicle to accomplish this goal. The suspension and debarment
rules contain well-established and defined decision-making criteria and
due process safeguards, which have evolved through case law precedent
and agency practices.
This rule is a significant rule and was subject to Office of
Management and Budget 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 Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration 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 rule will eliminate
FAR revisions implemented under FAR case 1999-010 published in the
Federal Register on December 20, 2000 (65 FR 80255), that did not have
a significant economic impact on a substantial number of small
entities.
C. Paperwork Reduction Act
The Paperwork Reduction Act (Pub. L. 104-13) applies because the
FAR changes to Parts 9 and 52 decrease the information collection
requirements that the Office of Management and Budget (OMB) approved
under OMB Control Number 9000-0094. un
The FAR Council estimates that the annual reporting burden for OMB
Control Number 9000-0094 applies to 89,995 respondents, of which
approximately 50,000 would be affected by the modified certification
requirement. The 39,995 subcontractors that respond to inquiries from
the prime contractor regarding debarment, suspension, or proposed
debarment are not affected by the modified certification requirements.
The total estimated responses of 500,000 per year are not affected by
the modified certification requirements.
The FAR Council estimates that the modified certification
requirement would reduce the total burden by 505,000 hours, changing
the total from 596,667 to 91,667. This is based on an estimate of
50,000 respondents and 500,000 responses per year. The FAR Council
estimates that the modified certification would take an average of 1
hour less for each of the 50,000 initial responses and .3 hours less
for each of the 450,000 subsequent responses that year, for a total of
185,000 hours less to respond to the modified certification
requirements. The FAR Council further estimates that in many
acquisitions, the contracting officer only would have requested
additional information if the otherwise apparently successful offeror
had certified affirmatively. However, the FAR Council estimates, in
some source selections, the contracting officer would have requested
such information from all offerors in the competitive range that
certified affirmatively. Therefore, we estimate a reduced burden of
140,000 hours for providing additional information. This is based on a
burden estimate of 4 hours per initial response and 1 hour per
subsequent response, for a total of 140,000 hours for providing
additional information. The FAR Council further estimates an additional
reduction of 180,000 annual recordkeeping hours based on an estimated
average of 6 hours per year for recordkeeping for each of the 30,000
respondents to respond to the request for additional information.
The revised annual reporting burden is estimated as follows:
Respondents: 89,995.
Responses Per Respondent: 12.22.
Total Annual Responses: 1,100,000.
Average Hours Per Response: .083.*
Total Burden Hours: 91,667 hours.
*Average hours per response is calculated by dividing total burden
hours by total annual responses.
The Paperwork Reduction Act does not apply to FAR part 31 cost
principles changes because the changes do not impose information
collection requirements that require Office of Management and Budget
approval under 44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 9, 14, 15, 31, and 52
Government procurement.
Dated: December 14, 2001.
Gloria M. Sochon,
Acting Director, Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 9, 14, 15, 31, and
52 as stayed effective April 3, 2001, as set forth below:
1. The authority citation for 48 CFR parts 9, 14, 15, 31, and 52
continues to read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 9--CONTRACTOR QUALIFICATIONS
9.103 [Amended]
2. Amend section 9.103 in paragraph (b) by removing the third
sentence.
3. Amend section 9.104-1 by revising paragraph (d) to read as
follows:
9.104-1 General standards.
(d) Have a satisfactory record of integrity and business ethics;
9.104-3 [Amended]
4. Amend section 9.104-3 by removing paragraph (c); and by
redesignating paragraphs (d) and (e) as (c) and (d), respectively.
PART 14--SEALED BIDDING
5. Amend section 14.404-2 by revising paragraph (i) to read as
follows:
14.404-2 Rejection of individual bids.
(i) Low bids received from concerns determined to be not
responsible pursuant to subpart 9.1 shall be rejected (but if a bidder
is a small business
[[Page 66990]]
concern, see 19.6 with respect to certificates of competency).
* * * * *
PART 15--CONTRACTING BY NEGOTIATION
6. Amend section 15.503 by revising paragraph (a)(1) to read as
follows:
15.503 Notification to unsuccessful offerors.
(a) Preaward notices--(1) Preaward notices of exclusion from
competitive range. The contracting officer shall notify offerors
promptly in writing when their proposals are excluded from the
competitive range or otherwise eliminated from the competition. The
notice shall state the basis for the determination and that a proposal
revision will not be considered.
* * * * *
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
31.205-21 [Amended]
7. Amend section 31.205-21 by removing the paragraph designation
``(a)''; and by removing paragraph (b) in its entirety.
8. Amend section 31.205-47 in paragraph (a) by adding, in
alphabetical order, the definition ``Fraud'' (which was removed in the
December 20, 2000, final rule (65 FR 80255) and stayed effective April
3, 2001); and by revising paragraph (b)(2) to read as follows:
31.205-47 Costs related to legal and other proceedings.
(a) * * *
Fraud, as used in this subsection, means--
(1) Acts of fraud or corruption or attempts to defraud the
Government or to corrupt its agents;
(2) Acts which constitute a cause for debarment or suspension under
9.406-2(a) and 9.407-2(a); and
(3) Acts which violate the False Claims Act, 31 U.S.C., sections
3729-3731, or the Anti-Kickback Act, 41 U.S.C., sections 51 and 54.
* * * * *
(b) * * *
(2) In a civil or administrative proceeding, either a finding of
contractor liability where the proceeding involves an allegation of
fraud or similar misconduct or imposition of a monetary penalty where
the proceeding does not involve an allegation of fraud or similar
misconduct;
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
52.209-5 [Amended]
9. In section 52.209-5--
a. Revise the date of the provision to read ``(Dec 2001)'';
b. In paragraph (a)(1)(i)(B), remove ``the three-year'' and add ``a
three-year'' in its place; and add ``and'' at the end of the paragraph;
c. In paragraph (a)(1)(i)(C), at the end of the paragraph, remove
``; and'' and add a period in its place; and
d. Remove paragraph (a)(1)(ii), and redesignate paragraph
(a)(1)(iii) as (a)(1)(ii).
10. Amend section 52.212-3 by revising the date of the provision
and paragraph (h) to read as follows:
52.212-3 Offeror Representations and Certifications--Commercial Items.
Offeror Representations and Certifications--Commercial Items (Dec 2001)
(h) Certification Regarding Debarment, Suspension or
Ineligibility for Award (Executive Order 12549). The offeror
certifies, to the best of its knowledge and belief, that--
(1) The offeror and/or any of its principals [ ] are, [ ] are
not presently debarred, suspended, proposed for debarment, or
declared ineligible for the award of contracts by any Federal
agency; and
(2) [ ] Have, [ ] have not, within a three-year period
preceding this offer, been convicted of or had a civil judgment
rendered against them for: commission of fraud or a criminal offense
in connection with obtaining, attempting to obtain, or performing a
Federal, state or local government contract or subcontract;
violation of Federal or state antitrust statutes relating to the
submission of offerors; or commission of embezzlement, theft,
forgery, bribery, falsification or destruction of records, making
false statements, tax evasion, or receiving stolen property; and [
] are, [ ] are not presently indicted for, or otherwise criminally
or civilly charged by a Government entity with, commission of any of
these offenses.
(End of provision)
[FR Doc. 01-31302 Filed 12-26-01; 8:45 am]
BILLING CODE 6820-EP-P