Revision of Department of Homeland Security Acquisition Regulation, 25759-25780 [06-4046]

Agencies

• DEPARTMENT OF HOMELAND SECURITY

[Federal Register Volume 71, Number 84 (Tuesday, May 2, 2006)]
[Rules and Regulations]
[Pages 25759-25780]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-4046]


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DEPARTMENT OF HOMELAND SECURITY

48 CFR Chapter 30

RIN 1601-AA16


Revision of Department of Homeland Security Acquisition 
Regulation

AGENCY: Department of Homeland Security.

ACTION: Final rule.

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SUMMARY: This final rule adopts, with specified changes, the interim 
rule establishing the Department of Homeland Security Acquisition 
Regulation (HSAR). This regulation supplements the Federal Acquisition 
Regulation (FAR) and provides a uniform department-wide acquisition 
regulation for the Department of Homeland Security (DHS). The HSAR 
provides specificity about the Department's organization, policies, 
procedures, and delegations of authority. The FAR and HSAR apply to all 
DHS entities, except the Transportation Security Administration (TSA).

DATES: This rule is effective on June 1, 2006.

FOR FURTHER INFORMATION CONTACT: Kathy Strouss, Office of the Chief 
Procurement Officer, Department of Homeland Security: (202) 205-0141.

SUPPLEMENTARY INFORMATION:

I. Background
II. Discussion of Public Comments
III. Additional Technical Changes
IV. Regulatory Requirements
    A. Executive Order 12866 Assessment
    B. Regulatory Flexibility Act
    C. Paperwork Reduction Act
    D. Executive Order 13132 Federalism

I. Background

    On December 4, 2003, the HSAR was published in the Federal Register 
(68 FR 67867) as an interim rule and request for comment. 
Simultaneously, DHS promulgated the Homeland Security Acquisition 
Manual (HSAM), which provides procedural guidance on internal 
acquisition matters that need not be set out in a regulation.
    The numbering scheme of the HSAR and HSAM parallels that of the 
FAR. The purpose of the HSAR is not to duplicate the FAR text. Instead, 
the HSAR supplements the FAR by providing specificity regarding DHS's 
organization, policies, procedures, and delegations, and by 
implementing unique authorities provided by the Homeland Security Act, 
Public Law 107-296, as amended. These authorities include: (1) 
Increased use of FAR part 12, simplified acquisition, and micro-
purchase procedures where the Department's mission would be

[[Page 25760]]

seriously impaired otherwise; (2) a prohibition against most contracts 
with corporate expatriates, also referred to as inverted domestic 
corporations; and (3) personal services contracting authority, 
including waiver of pay limitations when necessary for urgent homeland 
security purposes.
    The HSAR (1) establishes the DHS Mentor Prot[eacute]g[eacute] 
Program to develop small business sources; (2) designates the 
Department of Transportation Board of Contract Appeals as the DHS Board 
of Contract Appeals; (3) creates uniform DHS provisions and clauses, as 
well as Organizational Element (OE) unique clauses; and (4) identifies 
OEs with procurement authority. There are no HSAR parts relating to FAR 
parts 7, 8, 10, 12, 14, 18, 20, 21, 25, 26, 29, 34, 38, 39, 40, 41, 43, 
44, 48, 49, 50, or 51.
    The final rule amends the HSAR in order to incorporate changes 
resulting from the comments, changes resulting from statutory 
requirements, and changes to carry out the intent of the interim rule. 
General changes made to HSAR by this rulemaking are provided in the 
list below. Of particular note, the rule--
     Revises (HSAR) 48 CFR 3001.104 to provide a forum for 
resolutions of Non-appropriated Fund Instrumentality (NAFI) contract 
disputes and to provide the option for appropriated fund contracting 
officers to follow the procurement regulations where feasible, even 
when the resulting contract does not use appropriated funds.
     Revises (HSAR) 48 CFR 3001.301-71 to include language 
similar to FAR 1.108 regarding application of regulatory changes to 
existing solicitations and contracts.
     Revises (HSAR) 48 CFR 3001.404 to include a requirement to 
consult with the Civilian Agency Acquisition Council Chairperson prior 
to issuing non-emergency FAR class deviations.
     Adds a definition for ``sensitive information'' in (HSAR) 
48 CFR 3002.101 and (HSAR) 48 CFR 3052.204-71.
     Revises (HSAR) 48 CFR 3004.470 to prescribe clauses 
regarding security requirements for sensitive but unclassified 
information and contractor access to Information Technology resources.
     Adds (HSAR) 48 CFR 3006.1 and 3006.101-70 to define the 
terms ``Agency Competition Advocate'' and ``Competition Advocate for 
the Procuring Activity.''
     Amends (HSAR) 48 CFR 3009.104-72, 3009.104-73, and 
3009.104-74 to comport with statutory changes regarding the prohibition 
against contracting with companies treated as inverted domestic 
corporations and waivers to that prohibition.
     Removes the previous prescription at (HSAR) 48 CFR 
3009.507, regarding (HSAR) 48 CFR 3052.209-72, which addressed 
organizational conflicts of interest, and inserts two new subsections, 
3009.507-1 and 3009.507-2, which provide prescriptions for a revised 
provision at (HSAR) 48 CFR 3052.209-72 and a new clause at (HSAR) 48 
CFR 3052.209-71.
     Removes (HSAR) 48 CFR 3011.204-90, 3013.106-190, and 
3013.302-590 and the corresponding clauses at (HSAR) 48 CFR 3052.211-90 
and 3052.213-90, which contained obsolete references and content.
     Removes (HSAR) 48 CFR 3015.404-470, which required 
withholding profit and fee payments until after definitization of a 
letter contract.
     Adds text at (HSAR) 48 CFR 3016.505(b)(5)(ii) to identify 
the DHS Task and Delivery Order Ombudsman as the Senior Competition 
Advocate.
     Adds a new subpart at (HSAR) 48 CFR 3017.204-90 to 
implement Public Law 106-553, Title I, Section 119, regarding contracts 
for detention and incarceration facilities for Immigration and Customs 
Enforcement (ICE).
     Corrects the text at (HSAR) 48 CFR 3019.201 to include all 
the current small business categories listed in (FAR) 48 CFR 19.201(a).
     Revises (HSAR) 48 CFR 3022.101-70(a) to distinguish 
between non-employee and contractor union employee representatives and 
to ensure appropriate access to facilities.
     Adds a new section at (HSAR) 48 CFR 3035.017 regarding 
Federally Funded Research and Development Centers (FFRDCs).
     Removes internal procedural matters in (HSAR) 48 CFR 
3037.104-70 relating to personal services contracts.
     Amends (HSAR) 48 CFR 3046.7, regarding warranties, by 
removing the sections applying to DHS and all OEs other than the Coast 
Guard, and by clarifying the use of warranties in major systems 
acquisitions for the USCG.
     Removes the certification requirement from (HSAR) 48 CFR 
3052.223-70 relating to the licenses and permits required by Federal, 
state, and local laws to perform hazardous substance(s) removal or 
disposal services.
     Redesignates (HSAR) 48 CFR 3052.237-70, Qualifications of 
Contractor Employees, as (HSAR) 48 CFR 3052.204-71, Contractor Employee 
Access, and revises the content of the redesignated clause with regard 
to access to sensitive information and to information technology 
resources.

II. Discussion of Public Comments

    Sixty-six sources submitted comments on the interim rule. All 
comments were considered in developing the final rule. The public 
comments received, and the actions taken, are summarized below:

Small Entities and Small Business Administration Office of Advocacy 
Comments

    We received comments from forty-seven small business entities and 
the Small Business Administration Office of Advocacy. Thirty of these 
small businesses submitted general comments expressing concern that the 
rule would have a negative impact on small businesses, without 
specifying how. These comments may have originated from an analysis 
posted on a private sector Web site, whose authors apparently believed 
that the HSAR excluded small businesses from competing for prime 
contracts and that DHS's small business programs included only those 
specifically set out in the HSAR.
    Our response to these general comments is that the HSAR 
supplements, rather than replaces the FAR, and that DHS has implemented 
the FAR's small business programs. The additional small business 
programs in the HSAR, especially the Mentor-Prot[eacute]g[eacute] 
program, are expected to have a positive impact on small business 
subcontracting opportunities without adversely affecting prime 
contracting opportunities. We have included additional discussion under 
the Regulatory Flexibility Act section of this preamble.
    The eighteen remaining commenters addressed specific small business 
issues, which we have summarized as follows:
    1. Comment: Several comments expressed concern that the incentives 
provided to a large contractor participating as a mentor may actually 
penalize small business subcontractors that do not desire to 
participate in the program as prot[eacute]g[eacute]s. Several comments 
recommended that DHS revise paragraph (d) of (HSAR) 48 CFR 3052.219-71 
to clarify whether DHS will permit mentors to satisfy their 
subcontracting plans solely by awarding contracts and development 
assistance to prot[eacute]g[eacute]s, and recommended that DHS perform 
a regulatory flexibility analysis. The Small Business Administration's 
Office of Advocacy letter of January 5, 2004, specifically questioned 
this same issue and recommended DHS provide the factual basis to 
support its decision to certify the rule under the Regulatory 
Flexibility Act.

[[Page 25761]]

    Response: We disagree that, as a practical matter, large businesses 
can fulfill their entire subcontracting plan goals for a contract 
through Mentor-Prot[eacute]g[eacute] agreements, nor does DHS intend to 
approve any subcontracting plan that solely relies on Mentor-
Prot[eacute]g[eacute] agreements. Because DHS intends the Mentor-
Prot[eacute]g[eacute] Program as an extension of its Small Business 
Program--not its replacement--we have clarified (HSAR) 48 CFR 3052.219-
71(d) regarding the limitations of the individual Mentor-
Prot[eacute]g[eacute] agreements. DHS will use the Mentor-
Prot[eacute]g[eacute] program in addition to the small business 
programs in (FAR) 48 CFR part 19: The business development program 
established under section 8(a) of the Small Business Act, 15 U.S.C. 
section 637(a) (the ``8(a) program''), the HUBZone program, the service 
disabled veteran small business program, the traditional small business 
set-aside program, and the small business subcontracting program. It is 
expected that the prot[eacute]g[eacute] entities will directly benefit 
from the forms of mentoring provided for in this rule. Hence, the rule 
will not have a significant economic impact on a substantial number of 
small entities in the sense envisioned by the Regulatory Flexibility 
Act.
    2. Comment: Several comments expressed concerns about TSA's 
exemption from the FAR and the HSAR, particularly from the small 
business requirements.
    Response: TSA is statutorily exempt from the FAR, HSAR, and Small 
Business Act, under the Aviation and Transportation Security Act of 
2001, and is bound instead by the Federal Aviation Administration (FAA) 
Acquisition Management System (AMS). Section 3.6.1 of the AMS, ``Small 
Business Utilization,'' sets out TSA's requirements with regard to 
small business acquisition programs. Nonetheless, TSA actively 
participates in DHS's small business programs, including taking part in 
small business outreach events, setting small business goals, and 
providing information for the annual Forecast of Contract 
Opportunities.
    3. Comment: Fourteen comments requested language granting priority 
for small business prime contract acquisition in the HSAR.
    Response: The requested language would unnecessarily duplicate 
(FAR) 48 CFR 19.201(a) and the ``Rule of Two'' set out at (FAR) 48 CFR 
19.505-2, which require exclusive set-asides for small businesses in 
certain circumstances.
    4. Comment: Multiple comments requested that ``the DHS Director, 
Small Business Entities, be given the authority and responsibility for 
the final execution and management of subcontracting plans and program 
contracts. Such contracts must require the DHS contracting officer to 
include the Small Business Entity and the DHS Director, Small Business 
Entities, a place at the negotiating and evaluation table with the 
Large Prime Contractor.''
    Response: We interpret the comments as requesting authority for 
small business offerors on DHS subcontracts and DHS's Director of Small 
and Disadvantaged Business Utilization to participate in contracting 
officers' discussions and negotiations with large business prime 
contract offerors. We believe that such a change would exceed the scope 
of the interim rule, and would require modification to statutory 
authority or the FAR.
    5. Comment: DHS received multiple requests for a DHS-wide pilot to 
provide funds for small business demonstration projects, including 
financial incentives for individual small businesses and groups of 
small businesses to compete.
    Response: DHS believes the requested demonstration projects would 
constitute financial assistance, and would require statutory authority.

Specific Comments Relating to HSAR Parts

    6. Comment: DHS received several comments dealing with the 
structure of the regulations. One comment recommended clarification of 
the order of precedence to include court and administrative decisions. 
Another comment suggested including a cross reference between the FAR 
and the HSAR to minimize confusion over precedence, and an instruction 
to follow the FAR unless the HSAR provides specific supplemental 
regulations. One comment asked why the regulation is focused on U.S. 
Coast Guard acquisitions.
    Response: The HSAM and HSAR, like other regulatory and 
administrative documents, implicitly incorporate interpretations from 
courts and administrative bodies. We do not believe that the HSAR needs 
additional cross references to the FAR; HSAR numbering corresponds to 
the FAR citations addressing the same subject matter, with the HSAR 
providing more specificity. Some HSAR numbers have no parallel FAR 
citations because they address issues unique to DHS. We have placed 
such regulations in HSAR parts that relate generally to the subject 
matter and numbered them with the suffix ``70'', for example: 3019.70 
(a DHS unique subpart), 3004.470-3 (a DHS unique section), or 3019.708-
70 (a DHS unique subsection). Unique requirements applying to a 
particular Organizational Element, such as the U.S. Coast Guard, are 
numbered similarly, except that their suffixes begin with ``90'', 
instead of ``70'', for example, 3028.106-490 (unique section) and 
3037.104-91 (unique subsection) . Finally, as a uniformed service, the 
Coast Guard is subject to unique statutory requirements. Hence, the 
HSAR contains several sections specific to the Coast Guard.
    7. Comment: Two comments recommended that (HSAR) 48 CFR 3001.104(c) 
should be revised to explicitly provide a forum for resolution of Non-
appropriated Funded Instrumentality (NAFI) contract disputes.
    Response: We agree. The (HSAR) 48 CFR 3001.104(c) was revised to 
provide for appeal of NAFI contract disputes to the Department of 
Transportation Board of Contract Appeals.
    8. Comment: The requirement at (HSAR) 48 CFR 3001.301-71(b) to 
obtain the Chief of the Contracting Office's (COCO's) determination to 
include new HSAR provisions in previously issued solicitations is ``too 
inflexible.''
    Response: We agree. The (HSAR) 48 CFR 3001.301-71 was revised to 
contain language similar to (FAR) 48 CFR 1.108 regarding effective 
dates and application of regulatory changes.
    9. Comment: The final rule should include language similar to (FAR) 
48 CFR 1.404(a)(2) that states, ``An agency official who may authorize 
a class deviation, before doing so, shall consult with the chairperson 
of the Civilian Agency Acquisition Council (CAA Council), unless that 
agency official determines that urgency precludes such consultation.''
    Response: We agree. (HSAR) 48 CFR 3001.404(a) was modified to 
include the requirement to consult with the CAA Council Chairperson for 
FAR class deviations.
    10. Comment: One comment suggested addressing the ``Special 
Emergency Procurement Authority,'' granted by section 1443 of the 
Services Acquisition Reform Act of 2003, enacted as title XIV of the 
fiscal year 2004 National Defense Authorization Act (Pub. L. 108-136), 
in (HSAR) 48 CFR 3013.7004.
    Response: We disagree. Federal Acquisition Circular (FAC) 2001-022, 
published on February 23, 2004, incorporated the new authorities listed 
in section 1443 of the Services Acquisition Reform Act (SARA) into the 
FAR. The authorities in section 1443 of SARA overlap the special 
authorities set out in section 833 of the Homeland Security Act, 6 
U.S.C. 393. The

[[Page 25762]]

definitions of ``micro-purchase threshold,'' at (HSAR) 48 CFR 
3013.7003, and ``simplified acquisition threshold,'' at (HSAR) 48 CFR 
3013.7004, apply only to DHS procurements that take place under the 
streamlined authority in section 833 of the Homeland Security Act, and 
not those under the similar authority in section 1443 of SARA. Any 
internal DHS requirements associated with the FAR rule will be 
addressed in the HSAM.
    11. Comment: One comment recommended that the HSAR address DHS's 
Procurement Instrument Identification Descriptions (PIID) (contract 
numbers).
    Response: DHS's PIID scheme is addressed in section 3004.602-71 of 
the HSAM.
    12. Comment: Some of the comments indicated confusion over use of 
different terms in different places to refer to the Departmental and OE 
competition advocates, specifically in (HSAR) 48 CFR 3006.501 and 
3006.502, FAR 6.5, and the office of Federal Procurement Policy (OFPP) 
Act.
    Response: We have amended the HSAR to include language at 3006.1 
and 3006.101-70 (previously located in the HSAM, at section 3006.101-
70) to make clear that the different titles refer to the same 
individual.
    13. Comment: The term ``Departmental Advocates for Competition'' 
should be replaced with ``DHS SCA'' at (HSAR) 48 CFR 3006.502 to be 
consistent with the title established in (HSAR) 48 CFR 3006.501 
``Competition Advocates.''
    Response: We agree. However, we have removed (HSAR) 48 CFR 3006.502 
and included provisions in the HSAM because the procedures identified 
are internal policy matters.
    14. Comment: DHS should provide additional details regarding 
bundled procurements in accordance with (FAR) 48 CFR 7.107(c), which 
states, ``Without power of delegation, * * * the Deputy Secretary or 
equivalent for the civilian agencies may determine that bundling is 
necessary and justified when * * * .''
    Response: The (FAR) 48 CFR 7.107(c) specifies that the Deputy 
Secretary of DHS must make the necessary determinations. The specific 
procedures for making such determinations are internal matters that are 
addressed in HSAM 3007.107(e).
    15. Comment: The HSAR does not provide Departmental procedure to 
ensure compliance with section 803 of the National Defense 
Authorization Act for Fiscal Year 2002 (Pub. L. 107-107), which applies 
to orders for services over $100,000 placed by non-Department of 
Defense (DoD) agencies on behalf of DoD.
    Response: DHS believes that the General Services Administration's 
(GSA) special ordering procedures for the Federal Supply Schedules and 
Defense Federal Acquisition Regulation Supplement (DFARS) 48 CFR 
208.404-70, ``Additional Ordering Procedures for Services,'' adequately 
set out DHS's requirements when ordering off the schedules on behalf of 
DoD components.
    16. Comment: The prohibition at (HSAR) 48 CFR 3009.104-71 
implementing section 835(b) of the Homeland Security Act (HSA), 6 
U.S.C. section 395(b), against contracting with a foreign incorporated 
entity treated as an inverted domestic corporation, does not state how 
it is to be applied with regard to purchases at or below the simplified 
acquisition threshold, or to task and delivery orders issued under 
contracts with other agencies.
    Response: The HSA states, ``The Secretary may not enter into any 
contract'' with a company deemed under the statute to be an ``inverted 
domestic corporation.'' The statute provides a waiver for specific 
contracts if the Secretary determines that such a waiver is in the 
interests of national security. DHS employees and officials exercising 
the Secretary's delegated authority to enter into contracts are bound 
by this requirement. OEs are advised to consult with legal counsel if 
questions exist regarding the application of the language of section 
835.
    17. Comment: One comment recommended revising (HSAR) 48 CFR 
3009.104-71 because it fails to recognize the Homeland Security Act's 
explicit authority to waive the prohibition in appropriate 
circumstances against contracting with corporate expatriates. The 
comment suggested adding a new lead-in phrase stating ``Except as 
provided in (HSAR) 48 CFR 3009.104-74.''
    Response: We modified (HSAR) 48 CFR 3009.104-71 as recommended. 
Also, we modified the text of (HSAR) 48 CFR 3009.104-72 to comport with 
changes in the 2005 Homeland Security Appropriations Act, Public Law 
108-334, section 523 (General Provisions), regarding companies that are 
to be treated as inverted domestic corporations.
    18. Comment: One comment recommended changing the heading of (HSAR) 
48 CFR 3009.104, the text of (HSAR) 48 CFR 3009.104-75, and the section 
heading and the title of (HSAR) 48 CFR 3052.209-70 to refer to 
``Inverted Domestic Corporations,'' instead of ``corporate 
expatriates.''
    Response: The current heading is consistent with section 835 of the 
Homeland Security Act, 6 U.S.C. 395, ``Prohibition on Contracts with 
Corporate Expatriates.''
    19. Comment: Several comments were submitted regarding (HSAR) 48 
CFR 3009.104-74 and the clause, Prohibition on Contracts with 
Expatriates at (HSAR) 48 CFR 3052.209-70, which implement the 
Secretary's authority to waive the prohibition on contracting with 
inverted domestic corporations. The specific recommendations included 
referring to the substantive provisions of the HSAR rather than to the 
substantive provisions of the statute; adding language that encourages 
the contractor to submit waiver requests at the earliest time 
practicable; adding language permitting an offeror to submit an offer 
at its risk before a waiver has been granted; and adding an alternate 
certification permitting a company to state that it is an inverted 
corporation pursuant to the criteria of the Act but has submitted a 
request for waiver pursuant to (HSAR) 48 CFR 3009.104-74. Also, one 
comment noted that Public Law 108-7, Div. L, section 101(2), 117 Stat. 
528 (February 20, 2003), limited waivers to those ``in the interest of 
homeland security,'' and suggested amending the regulation accordingly.
    Response: We adopt the recommendation to cite the regulation rather 
than the Homeland Security Act and have also changed (HSAR) 48 CFR 
3009.104-74(a) to comport with amendments to the Act. Additionally, we 
have amended (HSAR) 48 CFR 3052.209-70(f) to provide for offerors to 
submit one of three alternative representations: That the offeror is 
not an inverted domestic corporation, that the offeror should be 
treated as an inverted domestic corporation but has submitted a waiver 
request, and that the offeror should be treated as an inverted domestic 
corporation but plans to apply for a waiver. Adding such a 
representation will allow entities that do not meet the requirements to 
remain in line for award while their waiver requests are processed. We 
do not adopt recommendations to add language suggesting offerors submit 
waiver requests as early as possible or language allowing submission of 
an offer at the offeror's risk before a waiver is granted. In both 
cases, we believe that the suggested wording is common sense advice 
that need not be codified in formal regulations.
    20. Comment: DHS received comments objecting to the burdens imposed 
by the Disclosure of Conflicts of Interest provision at (HSAR) 48 CFR 
3052.209-72 and the lack of clarity at

[[Page 25763]]

(HSAR) 48 CFR 3009.507 regarding the conditions for the provision's 
use.
    Response: We have deleted the prescription in the interim rule at 
(HSAR) 48 CFR 3009.507 and the clause at (HSAR) 48 CFR 3052.209-72 and 
replaced them with a new prescription at (HSAR) 48 CFR 3009.507-1 and 
provision at (HSAR) 48 CFR 3052.209-72. Additionally, DHS has inserted 
a new clause at (HSAR) 48 CFR 3052.209-73, Limitation on Future 
Contracting, which the contracting officer shall insert into 
solicitations and contracts according to the new prescription at (HSAR) 
48 CFR 3009.507-2. We believe that the new procedures will reduce the 
burden on offerors.
    21. Comment: One comment recommended adding language to HSAR 
subpart 3010 to implement section 509(2) of the Homeland Security Act, 
6 U.S.C. 319(2), which provides: ``It is the sense of Congress that in 
order to further the policy of the United States to avoid competing 
commercially with the private sector, the Secretary should rely on 
commercial sources to supply the goods and services needed by the 
Department.''
    Response: We have not added language to the HSAR for this purpose 
because we believe (FAR) 48 CFR parts 7, 10, and 11 adequately 
implement the Homeland Security Act's policy in favor of private sector 
performance of commercial functions.
    22. Comment: One comment suggested including a statement at (HSAR) 
48 CFR 3012.303 instructing contracting officers in commercial item 
acquisitions to use the format set out at (FAR) 48 CFR 12.303, instead 
of the uniform contract format.
    Response: We disagree that additional regulatory language is 
required beyond the FAR. However, we will consider placing recommended 
language in the HSAM as internal guidance to DHS contracting officers.
    23. Comment: One comment suggested adding special provisions for 
large dollar expedited acquisitions under emergency circumstances, to 
facilitate the ability for a quick national recovery.
    Response: The special acquisition provisions found in (HSAR) 48 CFR 
parts 3002 (Definitions) and 3013.7000 through 3013.7005, which 
implement statutory authority in section 833 of the Homeland Security 
Act, 6 U.S.C. 393, address such acquisitions designed to facilitate 
quick national recovery.
    24. Comment: One comment recommended referring to the FAR in (HSAR) 
48 CFR subpart 3013.70 instead of including the specific micro-purchase 
and Simplified Acquisition Procedures dollar amounts.
    Response: We agree. We changed (HSAR) 48 CFR 3013.7005 accordingly.
    25. Comment: Several comments expressed concern regarding (HSAR) 48 
CFR 3015.207-70(b), which allows releasing proposals and information 
outside the government ``for evaluation and similar purposes if 
qualified personnel are not available'' within the government to 
analyze the submissions. The comments included urging DHS to require a 
non-disclosure agreement for those outside the Department, asking DHS 
to establish qualifications for contractors and consultants to receive 
such material, and seeking establishment of an additional level of 
review before allowing such release.
    Response: We do not believe that the regulation needs to be 
changed. (HSAR) 48 CFR 3009.507, 3052.204-70, 3052.204-71, and 
3052.209-72 restrict the conditions under which the government may 
release contractor or offeror information. Furthermore, the HSAM 
requires DHS personnel to ensure that contractors receiving sensitive 
information execute non-disclosure agreements.
    26. Comment: The (HSAR) 48 CFR 3015.404-470 imposes an unnecessary 
and unfair hardship on the contractor by withholding profit or fee 
payments until after definitization of a letter contract.
    Response: We agree. We removed (HSAR) 48 CFR 3015.404-470.
    27. Comment: One comment objected to the (HSAR) 48 CFR 3015.603(a) 
language stating costs associated with proposal preparation are solely 
the responsibility of the offeror submitting the proposal. Another 
comment stated that such costs should be reimbursable if a contract is 
awarded to that contractor.
    Response: We agree in part. We removed (HSAR) 48 CFR 3015.603(a) 
because it potentially contradicts the FAR.
    28. Comment: One comment recommended establishing a uniform 
Departmental policy for unsolicited proposals, to avoid separate 
requirements applicable to each OE.
    Response: DHS issued Management Directive (MD) 0750.1, ``Responding 
to Unsolicited Proposals'' to provide uniform procedures. DHS will 
consider incorporating appropriate procedures into the HSAM.
    29. Comment: (HSAR) 48 CFR 3016.505(b)(5)(iii) provides for 
complaint referrals from each OE Task and Delivery Order Ombudsman to 
the DHS Task and Delivery Order Ombudsman. Comments suggested that the 
regulations identify the DHS position title and organization of the 
individuals whose duties will include serving as DHS Task and Delivery 
Order Ombudsmen.
    Response: We agree. We modified (HSAR) 48 CFR 3016.505(b)(5)(ii) to 
include the reporting requirements and to identify the DHS Task and 
Delivery Order Ombudsman as the Senior Competition Advocate.
    30. Comment: One comment expressed concern that the term 
``definitized letter contracts'' in the prescription at (HSAR) 48 CFR 
3016.603-4, Contract clauses, has no meaning. The comment states that 
letter contracts and definitized contracts exist, but not ``definitized 
letter contracts.''
    Response: Although the term ``definitized letter contract'' is not 
described in the FAR, we believe the term is widely used to describe 
the act of completing the definitization (negotiation) of the 
preliminary contractual instrument (i.e., letter contract.) We have 
used the term ``definitized letter contract'' in the contract clause 
prescription to refer to the negotiated contractual instrument with 
agreed-to prices, terms and conditions.
    31. Comment: Several comments addressed energy savings performance 
contracts. One comment noted that the statutory authority to engage in 
energy savings performance contracts, 42 U.S.C. 8287, expired on 
October 1, 2003.
    Response: We removed (HSAR) 48 CFR 3017.7000, which addressed 
internal procedural matters pertaining to energy savings contracts. DHS 
will amend the HSAM to address internal procedural matters pertaining 
to the program's administration, reauthorized through Fiscal Year 2006 
by the Ronald W. Reagan National Defense Authorization Act for Fiscal 
Year 2005, Public Law No. 108-375, section 1090, 118 Stat 1811 (2004).
    32. Comment: The clauses and provisions listed in 3017.9000(a) 
apply to ``sealed bid fixed-price solicitations and contracts * * * to 
be performed within the United States, its possessions, or Puerto 
Rico.'' The clauses and provisions listed in 3017.9000(b) apply to ``* 
* * negotiated solicitations and contracts to be performed outside the 
United States.'' What are the clauses applicable to sealed bid fixed-
price solicitations and contracts to be performed outside the United 
States, its possessions, or Puerto Rico? What are the clauses 
applicable to negotiated solicitations and contracts to be performed 
inside the United States?
    Response: There are no specific clauses and provisions required for 
sealed bid solicitations and contracts

[[Page 25764]]

outside the United States or negotiated solicitations and contracts 
inside the United States. The contracting officer retains discretion to 
include the clauses and provisions listed in 3017.9000, if appropriate, 
for such solicitations and contracts.
    33. Comment: One comment suggested that the HSAR implement section 
119 of Public Law 106-553. That section authorizes the Bureau of 
Immigration and Customs Enforcement (ICE) to enter into Federal 
procurement contracts for detention or incarceration space or 
facilities, including related services, for any reasonable duration and 
on any reasonable basis ``notwithstanding any other provision of law, 
including section 4(d) of the Service Contract Act of 1965 (41 U.S.C. 
353(d)).''
    Response: We agree. Public Law 106-553, Title I, section 119, 18 
U.S.C.A. 4013 note (redesignated as section 118 by Public Law 106-554, 
section 213), authorized the Attorney General of the United States to 
enter into contracts exceeding five years in duration, notwithstanding 
any other provision of law, including section 4(d) of the Service 
Contract Act of 1965, 41 U.S.C. 353(d). As a result of sections 441 and 
1511(d)(2) of the Homeland Security Act, 6 U.S.C. 251 and 551(d)(2), 
the Department of Homeland Security may exercise that authority. 
Accordingly, we added a new section, (HSAR) 48 CFR 3017.204-90, to 
implement the statutory authority for ICE.
    34. Comment: One comment stated that the list of small business 
categories in (HSAR) 48 CFR 3019.201(d), assigning responsibility to 
the Director, Office of Small and Disadvantaged Business Utilization 
for small business programs, includes only small and small 
disadvantaged businesses, and should also include veteran-owned small 
businesses, service-disabled veteran-owned small businesses, HUBZone 
businesses, and women-owned small business concerns.
    Response: We agree. We corrected the text at (HSAR) 48 CFR 
3019.201(d) to include the business categories listed in (FAR) 48 CFR 
19.201(a).
    35. Comment: We received numerous comments regarding subpart 3019.7 
and its associated provisions and clauses. One comment stated that 
(HSAR) 48 CFR subpart 3019.705-1 should begin with the phrase ``Except 
when otherwise required,'' to indicate that a subcontracting plan is 
mandatory in some circumstances and inappropriate in others. The 
comment continued that evaluation factors should focus on the plan's 
details, rewarding good faith efforts rather than only results. In 
contrast, another comment argued that (FAR) 48 CFR 42.1502 requires 
consideration of the offeror's past performance regarding previous 
subcontracting goals. Two other comments suggested changes to (HSAR) 48 
CFR 3019.708-70, one to ensure the contracting officer includes an 
evaluation factor for Mentor-Prot[eacute]g[eacute] participation and 
one suggesting an addition to paragraph (c) requiring inclusion of 
(HSAR) 48 CFR 3052.219-71 and 3052.219-72 only ``where involvement in 
subcontracting to small and disadvantaged businesses will be considered 
as a source selection evaluation factor.'' Another comment recommended 
that (HSAR) 48 CFR 3052.219-71 be clarified by adding the word 
``additional'' before the phrase ``credit for purposes of determining'' 
in paragraph (d), and address the Department's intent to permit a 
prot[eacute]g[eacute] to have more than one mentor. Finally, a comment 
recommended modifying (HSAR) 48 CFR 3052.219-72, which another comment 
noted is a provision--not a clause--to include a representation that an 
offeror has submitted a Mentor-Prot[eacute]g[eacute] agreement that has 
not yet been approved.
    Response: DHS has adopted some of the recommendations. We have 
rewritten: (HSAR) 48 CFR 3019.705-1 to clarify the contracting 
officer's responsibility involving evaluation factors; HSAR (48 CFR 
3019.708(a) and (c) to correct names of clauses and provisions; (HSAR) 
48 CFR 3052.219-71(d) to include the word ``additional'' as suggested; 
and (HSAR) 48 CFR 3052.219-72 to clarify contracting officer's 
discretion for approval of credits. We have not adopted the suggestion 
to give automatic evaluation credit if the offeror receives approval of 
a Mentor-Prot[eacute]g[eacute] agreement before the final evaluation of 
proposals, because such a rigid requirement could lead to unfairness to 
other competitors. However, we believe that the contracting officer 
should have the discretion to grant such credit if appropriate, and 
have amended (HSAR) 48 CFR 3052.219-72 accordingly. We do not adopt the 
comment to affirm that a prot[eacute]g[eacute] may have more than one 
mentor. While we have permitted multiple mentors on a case-by-case 
basis through Mentor-Prot[eacute]g[eacute] Agreements, we have not yet 
decided whether to make this policy permanent and plan to address this 
matter through future rulemaking. Neither have we adopted the comment 
to incorporate (FAR) 48 CFR 42.1502, requiring past performance 
evaluations regarding subcontracting plans, into (HSAR) 48 CFR 
3019.705-1 because we believe (FAR) 48 CFR part 42 applies during 
contract administration and not pre-award. Reports generated under 
(FAR) 48 CFR part 42 should be considered during evaluations on the 
same basis as other past performance information.
    36. Comment: One comment suggested clarifying the term ``union 
representative'' in (HSAR) 48 CFR 3022.101-70 to distinguish between 
outside union representatives and contractor employee union 
representatives to ensure access for union representatives who are 
contractor employees. The same comment also expressed concerns about 
unlawful surveillance of union activities and urged adoption of a 
governmental appeal process for contractor employees who lose their 
jobs.
    Response: We have amended (HSAR) 3022.101-70(a) to distinguish 
between non-employee and contractor union employee representatives, and 
to ensure appropriate access. With regard to concerns about unlawful 
investigation or surveillance of union activity, DHS does not believe 
that it has directly or indirectly proposed investigation or 
surveillance. We do not adopt the suggestion to provide an appeal 
process for aggrieved contractor employees in the acquisition 
regulations, because DHS believes the question of appeal rights is best 
addressed through other means.
    37. Comment: One comment questioned the need for (HSAR) 48 CFR 
3023.501(d) to delegate authority to the head of law enforcement 
Organizational Elements to determine that the Drug-Free Workplace 
requirements do not apply in particular circumstances.
    Response: We disagree, but have reworded the (HSAR) 48 CFR 
3023.501(d) for clarity.
    38. Comment: Two comments sought incorporation of (FAR) 48 CFR part 
25 and (DFARS) 48 CFR part 225 into the HSAR to assure compliance with 
procurement treaties. Another comment sought the adoption of provisions 
similar to (DFARS) 48 CFR 225.870 to allow DHS to contract with the 
Canadian Commercial Corporation, using individual Canadian companies to 
perform the actual contract work as subcontractors.
    Response: We do not adopt these comments at this time. DHS plans to 
abide by applicable procurement treaties, and believes that the FAR 
provides sufficient protection for foreign companies seeking to do 
business with DHS. While DHS is not averse to amending the HSAR to 
address the role of the Canadian Commercial Corporation explicitly, the 
Department

[[Page 25765]]

believes that such a change is not appropriate in a final rule.
    39. Comment: One comment expressed concern that universities will 
be able to participate only in research contracts, and not in service 
contracts because of the contractor qualification requirements limiting 
access to information technology systems and other sensitive 
information. The same comment suggested deleting or modifying (HSAR) 48 
CFR 3052.242-70(c) to permit press releases by universities without 
pre-clearance by DHS.
    Response: The requirements of (HSAR) 48 CFR part 3037 (moved to 
subpart 3004.4), regarding contractor employee access and security 
matters involving sensitive but unclassified information, will not 
ordinarily apply to universities. We have included language to that 
effect in HSAR 48 CFR 3004.470-3(b). Because we agree that press 
releases from universities should not require pre-clearance, we have 
deleted (HSAR) 48 CFR 3052.242-70(c). Additionally, we have moved the 
prescription at (HSAR) 48 CFR 3042.202-70(a) to a new HSAR subpart 
3035.70 and moved the clause to (HSAR) 48 CFR 3052.235-70.
    40. Comment: One comment stated that (FAR) 48 CFR 31.205-32 
adequately addresses the allowability of precontract costs and that 
(HSAR) 48 CFR 3031.205-32(a) is unnecessary.
    Response: We disagree. DHS believes that the additional information 
contained in the HSAR will provide further clarification regarding 
precontract costs.
    41. Comment: One comment recommended that the HSAR include guidance 
regarding the ``other transaction'' authority in section 831 of the 
Homeland Security Act, 6 U.S.C. 391. The comment also recommended 
adding language to (HSAR) 48 CFR 3035 to address the use of Federally 
Funded Research and Development Centers (FFRDCs) and national 
laboratories.
    Response: Section 831 of the Homeland Security Act, 6 U.S.C. 391, 
provides the Secretary of Homeland Security temporary authority (until 
September 2007) to enter into ``Other Transactions.'' ``Other 
Transactions'' is the term commonly used to refer to the 10 U.S.C. 2371 
authority to enter into transactions other than contracts, grants or 
cooperative agreements. Since the policies and procedures applicable to 
these instruments are outside the Federal Acquisition Regulation, a 
separate Management Directive and Guide was issued by the Office of the 
Chief Procurement Officer. With regard to the second part of the 
comment, new language regarding FFRDCs has been added to (HSAR) 48 CFR 
3035.017.
    42. Comment: One comment asked why the National Institutes of 
Health (NIH) Contractor Performance System (CPS) is used in the HSAR 
instead of the Past Performance Information Retrieval System (PPIRS).
    Response: The NIH CPS is one tool in existence to collect 
contractor performance information. The DoD PPIRS is not a performance 
information collection tool, but a Web site that displays final 
collected performance reports. The two systems work together.
    43. Comment: One comment asked why the HSAR did not contain more 
guidance on the use of Performance Based Contracting.
    Response: There is adequate published guidance on the use of 
Performance-Based Contracting in the FAR, as well as industry 
associations and Federal Web sites. The HSAR sets out regulations 
unique to DHS.
    44. Comment: One comment noted that the Office of Management and 
Budget's clearances for HSIF Form 3237, Contractor Personnel Access 
Application and HSIF Form 4024, Sensitive Information Non-Disclosure 
Agreement, were not included in (HSAR) 48 CFR 3037.103-71.
    Response: These two forms have been removed from the DHS centrally 
managed forms program. We have removed (HSAR) 48 CFR 3037.103-70 and 
3037.103-71 from the final rule.
    45. Comment: One comment asked why (HSAR) 48 CFR 3037.104-90, 
granting authority to enter into medical personal service contracts, 
applies only to the U.S. Coast Guard. Another comment noted that 10 
U.S.C. 1091(a)(2) now contains permanent authority to enter into 
personal services contracts for the performance of health care 
responsibilities at locations other than military medical treatment 
facilities.
    Response: 10 U.S.C. 1091 specifically authorizes the Department of 
Defense and the U. S. Coast Guard to award medical personal services 
contracts. This authority does not apply to DHS civilian entities. We 
removed the expiration date from (HSAR) 48 CFR 3037.104-90(a).
    46. Comment: One comment recommended that (HSAR) 48 CFR Part 3038 
include the Department's specialized authority in Section 803 of the 
2004 National Defense Authorization Act (Pub. L. 108-136) to permit 
cooperative purchasing by state and local governments.
    Response: Consistent with section 803 of Public Law 108-136, DHS is 
presently working with the Administrator of the Office of Federal 
Procurement Policy to develop the scope and process for cooperative 
purchasing by states and units of local government.
    47. Comment: One comment recommended amending subpart 3039 to 
implement section 509 of the Homeland Security Act, 6 U.S.C. 319, ``the 
sense of Congress'' to use off-the-shelf technologies ``to collect, 
manage, share, analyze and disseminate information securely over 
multiple channels of communication.''
    Response: We disagree. Existing FAR and HSAR language regarding the 
procurement of commercial items adequately implements the statute.
    48. Comment: DHS received several comments concerning warranty 
requirements. One comment recommended that (HSAR) 48 CFR 3046.705(a)(3) 
be amended to exclude warranty liability resulting from terrorism. 
Another recommended rephrasing (HSAR) 48 CFR 3046.703(a)(1) to make 
clear when warranties are required for major systems acquisitions. A 
third stated that (HSAR) 48 CFR 3046.706(a) is more procedural than 
regulatory, and should be included in the HSAM. Finally, one comment 
recommended changing the (HSAR) 48 CFR 3046.702-70 to be consistent 
with the statutory (FASA) and regulatory (FAR) definition of a 
commercial item.
    Response: We have amended the warranty requirements and renumbered 
subpart 3046 to make clear that the content applies only to the Coast 
Guard, in accordance with Public Law 99-190, Title I, Department of 
Transportation Appropriations, ``Acquisition, Construction, and 
Improvements'' (December 19, 1985) (mandating warranty procedures for 
the Coast Guard and setting out a combat exemption). We did not extend 
the exclusion from warranty liability to damage by terrorism because 
such an exclusion would exceed the statutory authority. We have also 
reworded the exclusion to apply to ``combat damage'' (as opposed to 
``in time of war or national emergency'') to comport with statutory 
language. Finally, DHS has removed (HSAR) 48 CFR 3046.702-70 and the 
internal instructions to contracting officers found in the interim rule 
at (HSAR) 48 CFR 3046.706. We will insert the latter into HSAM Chapter 
3046.
    49. Comment: One comment recommended that the HSAR implement the 
Support Anti-terrorism by Fostering Effective Technologies Act of 2002 
(SAFETY Act), found in sections 861-865 of the Homeland Security Act, 6 
U.S.C. 441-444, and

[[Page 25766]]

address its extraordinary relief provisions in (HSAR) 48 CFR 3050.
    Response: DHS believes a change is necessary to (FAR) 48 CFR part 
50 with regard to extraordinary relief and provided our business case 
recommendation to the FAR Secretariat. Concurrent rulemaking is taking 
place in DHS to implement the SAFETY Act in general. After completion 
of that rulemaking process, we will consider adding any necessary 
provisions to the HSAR.
    50. Comment: One comment expressed concern that while the 
introductory paragraph of (HSAR) 48 CFR 3052.209-70 identifies it as a 
clause, subparagraphs (f) and (g) make clear that it is a solicitation 
provision.
    Response: We disagree. (HSAR) 48 CFR 3052.209-70 applies to both 
solicitations and contracts and is therefore a clause.
    51. Comment: (HSAR) 48 CFR 3052.211-90 contains references to 
Military Standards (Mil-Std), 1189, ``Bar Coding Symbology,'' and 129H, 
``Marking for Shipment and Storage''. One comment stated that Mil-Std 
1189 is an inactive standard and Mil-Std 129H has been replaced by Mil-
Std 129P.
    Response: We agree. We removed (HSAR) 48 CFR 3011.204-90, 3013.106-
190, 3013.302-590, and the corresponding clauses at (HSAR) 48 CFR 
3052.211-90 and 3052.213-90, all of which contain obsolete references.
    52. Comment: One comment stated that the (HSAR) 48 CFR 3052.215-70 
is too restrictive and firms should be able to replace key personnel 
without pre-approval.
    Response: We disagree. The approval process is standard practice in 
federal contracting.
    53. Comment: One comment recommended that ``will be rejected'' is 
too restrictive and should be changed to ``may be rejected'' in the 
first paragraph of (HSAR) 48 CFR 3052.216-70.
    Response: We agree. We have changed the clause as suggested.
    54. Comment: One comment recommended that (HSAR) 48 CFR 3052.216-73 
permit provisional payment of award fees, similar to regulations 
recently implemented by the DoD in the DFARS.
    Response: We decline to adopt the DoD policy concerning provisional 
payment of award fees. DHS believes that its own award fee system 
provides for flexibility and timely payment without adding the 
complexity of a provisional payment system.
    55. Comment: One comment questioned why the vessel repair guarantee 
periods in paragraphs (a) and (e) of the (HSAR) 48 CFR 3052.217-100 are 
inconsistent.
    Response: For consistency we changed the number of days in 
paragraph (e) of (HSAR) 48 CFR 3052.217-100 from 90 days to 60 days.
    56. Comment: One comment stated that (HSAR) 48 CFR 3052.222-90, 
Local Hire, could be interpreted to mean that all hires must be from 
the local area.
    Response: The comment correctly interprets the HSAR text and 
clause, which properly identify the restrictions placed on the U.S. 
Coast Guard under 14 U.S.C. 666. However, DHS has amended the language 
to parallel the statute.
    57. Comment: One comment recommended revising (HSAR) 48 CFR 
3052.223-70 to read: ``The Contractor must have all licenses and 
permits required by Federal, state, and local laws to perform hazardous 
substance(s) removal or disposal services. If the Contractor does not 
currently possess the necessary licenses and permits, it must obtain 
them within -- days after date of award. The Contractor shall provide 
evidence of compliance to the Contracting Officer or designated 
Government representative prior to commencement of work under the 
contract.''
    Response: We agree, and have amended (HSAR) 48 CFR 3052.223-70 to 
include the revised text, although we have revised the comment's 
suggested wording to provide additional clarity.
    58. Comment: Several comments noted the stringency of the 
``contractor qualification'' requirements. Some of the comments 
expressed concern that the interim regulation required citizenship or 
legal permanent resident alien status for all contractor employees.
    Response: DHS did not intend the requirements to apply to all 
individuals employed by the contractor's organization, but only to 
those employed on DHS contracts. We have modified the restrictions to 
apply only to contracts involving access to information technology, 
sensitive information, or government facilities, and have clarified the 
requirements.
    59. Comment: Several comments objected to the sweeping definition 
of ``sensitive information'' in (HSAR) 48 CFR 3052.237-70(a).
    Response: DHS has narrowed the definition of ``sensitive 
information'' and moved it to (HSAR) Part 3002.101, the ``Definition'' 
section of the regulation. The amended text clarifies that the 
government must mark sensitive information that it furnishes to the 
contractor. The government may designate as ``sensitive'' information 
generated by the contractor during performance.
    60. Comment: One comment recommended additional specificity in 
(HSAR) 48 CFR 3052.237-70(c) regarding the forms contractor employees 
must complete.
    Response: The HSAM will be amended to include the relevant 
information.
    61. Comment: One comment raised concerns that (HSAR) 48 CFR 
3052.237-72, Contractor Screening for Unclassified Information 
Technology Access, provides the Department with virtually unlimited 
rights to inspect contractor facilities and question contractor 
personnel.
    Response: We have removed the clause and plan to include 
administrative guidance in the HSAM.
    62. Comment: Numerous comments provided edits for various parts of 
the HSAR.
    Response: We have considered the comments relating to technical 
edits and corrections. We have addressed changes in the amended 
sections of the final rule.

III. Additional Technical Changes

    We have made additional technical changes to the interim rule, 
examples of which follow. These revisions are not intended to change 
the substance of the rule. Typographical corrections include (HSAR) 48 
CFR 3001.104(c), which was revised to correct ``institutions'' to 
``Instrumentality'' and (HSAR) 48 CFR 3002.101, the definition section, 
where ``Head of Contracting Activity'' was corrected to read ``Head of 
the Contracting Activity.'' Typographical error corrections are 
identified in the amended text section of this rule. Each DHS form was 
modified to include the expiration date of September 27, 2007, in 
consonance with the expiration date of OMB Control Number 1600-0002 for 
the collection of information under (HSAR) 48 CFR chapter 30. (HSAR) 48 
CFR parts 3002, 3005, 3009, 3013, 3035, 3037, and 3052, reflect the 
codified cites to the Homeland Security Act, which were not available 
when the interim rule was published, were added.

IV. Regulatory Requirements

A. Executive Order 12866 Assessment

    This rule is not considered by DHS to be a ``significant regulatory 
action'' under Executive Order 12866, section 3(f), Regulatory Planning 
and Review. Accordingly, the Office of Management and Budget has waived 
its review process under section 6(a)(3)(A). As identified in the 
interim rule, the HSAR is the supplemental regulation to the

[[Page 25767]]

FAR, similar to all other Federal agencies' FAR supplements. Since the 
FAR is the controlling document for the conduct of most federal 
acquisitions, the HSAR provides necessary supplemental information 
regarding DHS acquisition procedures.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) mandates that an agency 
conduct an RFA analysis when an agency is ``required by section 553 * * 
*, or any other law, to publish general notice of proposed rulemaking 
for any proposed rule.'' RFA analysis is not required when a rule is 
exempt from notice and comment rulemaking under 5 U.S.C. 553(b). DHS 
has determined that good cause exists under 5 U.S.C. 553(b)(B) to 
exempt this rule from the notice and comments requirements of 5 U.S.C. 
553(b). Therefore no RFA analysis under 5 U.S.C. 603 is required for 
this rule. However, DHS did consider the impact of this rule on small 
entities and does not believe it will have an adverse impact. There 
were comments from small entities on the December 4, 2003, interim rule 
and those comments were previously addressed in the ``Discussion of 
Public Comments'' section of the preamble.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 96-511) applies because the 
final rule contains information collection requirements which require 
OMB approval under 44 U.S.C. 3501, et seq. OMB has granted approval for 
a 3-year period under OMB Control Numbers 1600-0003 through 1600-0005.

D. Executive Order 13132--Federalism

    DHS has determined that this final rule does not contain federalism 
implications and would not preempt State laws. Accordingly, DHS 
certifies that it will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or the distribution of power and responsibilities among various 
levels of government, as specified in Executive Order 13132. 
Accordingly, this rule is not subject to the requirements of Executive 
Order 13132.

List of Subjects in 48 CFR Parts 3001, 3002, 3003, 3004, 3005, 
3006, 3009, 3011, 3013, 3015, 3016, 3017, 3019, 3022, 3023, 3028, 
3030, 3031, 3033, 3035, 3037, 3042, 3046, 3052 and 3053

    Government procurement.

    Dated: April 25, 2006.
Elaine C. Duke,
Chief Procurement Officer.

0
Accordingly, the interim rule amending the 48 CFR chapter 30 which was 
published at 68 FR 67870 on December 4, 2003, is adopted as a final 
rule with the following changes:
0
1. The authority citation for 48 CFR parts 3001, 3002, 3003, 3004, 
3005, 3006, 3009, 3011, 3013, 3015, 3016, 3017, 3019, 3022, 3023, 3028, 
3030, 3031, 3033, 3035, 3037, 3042, 3046, 3052, and 3053 continues to 
read as follows:

    Authority: 41 U.S.C. 418b(a) and (b).

PART 3001--FEDERAL ACQUISITION REGULATION SYSTEM

0
2. Amend section 3001.104 by revising paragraph (c) and by adding 
paragraph (d) to read as follows:


3001.104  Applicability.

* * * * *
    (c) Contracts involving Non-Appropriated Fund Instrumentalities 
(NAFIs) must contain suitable dispute provisions and may provide for 
appellate dispute jurisdiction in the Department of Transportation's 
Board of Contract Appeals (DOTBCA). However, the contract must not 
attempt to confer court jurisdiction that does not otherwise exist.
    (d) The FAR and HSAR may be followed, where feasible, for:
    (1) No-cost contracts;
    (2) Concession contracts; and
    (3) Contracts on behalf of NAFIs entered into by appropriated fund 
contracting officers.

0
3. Amend section 3001.105-2 by revising the second sentence of 
paragraph (a) to read as follows:


3001.105-2  Arrangement of regulations.

    (a) * * * Guidance that is unique to an Organizational Element 
contains the organization's acronym or abbreviation directly following 
the title. * * *
* * * * *


3001.301  [Amended]

    4. Amend section 3001.301(a)(1) by removing ``OE'' and by replacing 
it with ``Organizational Element (OE).''


3001.301-70  [Amended]

0
5. Amend section 3001.301-70(a) by removing ``Request'' in the first 
sentence and replacing it with ``Requests.''

0
6. Revise section 3001.301-71 to read as follows:


3001.301-71  Effective date.

    Unless otherwise stated:
    (a) HSAR changes apply to solicitations issued on or after the 
effective date of the change;
    (b) Contracting officers may, at their discretion, amend 
solicitations issued before the effective date to include HSAR changes, 
provided award of the resulting contract(s) will occur on or after the 
effective date of the change; and
    (c) Contracting officers, at their discretion, may use the changes 
clause or other suitable authority to modify existing contract to 
include HSAR changes.

0
7. Revise section 3001.404(a) to read as follows:


3001.404  Class deviations.

    (a) Unless precluded by law, executive order, or other regulation, 
the CPO is authorized to approve FAR class deviations, except (FAR) 48 
CFR 30.201-3, and 30.201-4 (the requirements of the Cost Accounting 
Standards Board); 48 CFR Chapter 99 (FAR Appendix); and part 50. Prior 
to authorizing a FAR class deviation, the CPO shall consult with the 
chairperson of the Civilian Agency Acquisition Council (CAA Council), 
unless the CPO determines that urgency precludes such consultation. FAR 
class deviation requests shall be submitted to the CPO per (HSAR) 48 
CFR subpart 3001.70 including complete documentation of the 
justification for the deviation, and the estimated number and type of 
contract actions affected. The CPO will transmit a copy of each 
approved FAR deviation to the FAR Secretariat.


3001.603-1  [Amended]

0
8. Amend section 3001.603-1 by removing ``COCO'' in the first sentence 
and replacing it with ``Chief of the Contracting Office (COCO).''

PART 3002--DEFINITIONS OF WORDS AND TERMS

0
9. Amend section 3002.101 by revising the definition for ``Micro-
purchase threshold'', by revising the term ``Head of Contracting 
Activity'' to read ``Head of the Contracting Activity,'' by revising 
the definition for ``Simplified acquisition threshold,'' and by adding 
a definition for ``sensitive information,'' as follows:


3002.101  Definitions.

* * * * *
    Micro-purchase threshold is defined as in (FAR) 48 CFR 2.101, 
except when (HSAR) 48 CFR 3013.7003(a) applies.
* * * * *
    Sensitive Information as used in this Chapter, means any 
information, the

[[Page 25768]]

loss, misuse, disclosure, or unauthorized access to or modification of 
which could adversely affect the national or homeland security 
interest, or the conduct of Federal programs, or the privacy to which 
individuals are entitled under 5 U.S.C. 552a (the Privacy Act), but 
which has not been specifically authorized under criteria established 
by an Executive Order or an Act of Congress to be kept secret in the 
interest of national defense, homeland security or foreign policy. This 
definition includes the following categories of information:
    (1) Protected Critical Infrastructure Information (PCII) as set out 
in the Critical Infrastructure Information Act of 2002 (Title II, 
Subtitle B, of the Homeland Security Act, Pub. L. 107-296, 196 Stat. 
2135), as amended, the implementing regulations thereto (6 CFR part 29) 
as amended, the applicable PCII Procedures Manual, as amended, and any 
supplementary guidance officially communicated by an authorized 
official of the Department of Homeland Security (including the PCII 
Program Manager or his/her designee);
    (2) Sensitive Security Information (SSI), as defined in 49 CFR part 
1520, as amended, ``Policies and Procedures of Safeguarding and Control 
of SSI,'' as amended, and any supplementary guidance officially 
communicated by an authorized official of the Department of Homeland 
Security (including the Assistant Secretary for the Transportation 
Security Administration or his/her designee);
    (3) Information designated as ``For Official Use Only,'' which is 
unclassified information of a sensitive nature and the unauthorized 
disclosure of which could adversely impact a person's privacy or 
welfare, the conduct of Federal programs, or other programs or 
operations essential to the national or homeland security interest; and
    (4) Any information that is designated ``sensitive'' or subject to 
other controls, safeguards or protections in accordance with 
subsequently adopted homeland security information handling procedures.
    Simplified acquisition threshold is defined as in (FAR) 48 CFR 
2.101, except when (HSAR) 48 CFR 3013.7004 applies.

PART 3003--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST


3003.101-3  [Amended]

0
10. Amend section 3003.101-3 by removing the ``(a)'' designation, by 
removing ``parts 2635 and 3101'' and adding in its place ``part 2635'', 
and replacing ``MD 0480, Ethics/Standards of Conduct'' with ``MD 
0480.1, Ethics/Standards of Conduct, or any replacement Management 
Directive.''


3003.203  [Amended]

0
11. Amend section 3003.203(a) introductory text by amending the first 
sentence to remove the phrase ``of the Gratuities clause.''


3003.204  [Amended]

0
12. Revise section 3003.204(c) to read as follows:


3003.204  Treatment of violations.

* * * * *
    (c) If the HCA determines that the alleged gratuities violation 
occurred during the ``conduct of an agency procurement'' the COCO shall 
consult with Government legal counsel regarding appropriate action.

PART 3004--ADMINISTRATIVE MATTERS

0
13. Revise subpart 3004.4 to read as follows:

Subpart 3004.4--Safeguarding Classified and Sensitive Information 
Within Industry

Sec.
3004.470 Security requirements for access to unclassified 
facilities, Information Technology resources, and sensitive 
information.
3004.470-1 Scope.
3004.470-2 Policy.
3004.470-3 Contract clauses.

Subpart 3004.4--Safeguarding Classified and Sensitive Information 
Within Industry


3004.470  Security requirements for access to unclassified facilities, 
Information Technology resources, and sensitive information.


3004.470-1  Scope.

    This section implements DHS's policies for assuring the security of 
unclassified facilities, Information Technology (IT) resources, and 
sensitive information during the acquisition process and contract 
performance.


3004.470-2  Policy.

    (a) DHS's policies and procedures on contractor personnel security 
requirements are set forth in various management directives (MDs). MD 
11042.1, Safeguarding Sensitive But Unclassified (For Official Use 
only) Information describes how contractors must handle sensitive but 
unclassified information. MD 4300.1, entitled Information Technology 
Systems Security, and the DHS Sensitive Systems Handbook, prescribe the 
policies and procedures on security for Information Technology 
resources. Compliance with these policies and procedures, any 
replacement publications, or any other current or future DHS policies 
and procedures covering contractors specifically is required in all 
contracts that require access to facilities, IT resources or sensitive 
information.
    (b) The contractor must not use or redistribute any DHS information 
processed, stored, or transmitted by the contractor except as specified 
in the contract.


3004.470-3  Contract clauses.

    (a) Contracting officers shall insert a clause substantially the 
same as the clause at (HSAR) 48 CFR 3052.204-70, Security Requirements 
for Unclassified Information Technology Resources