Federal Acquisition Regulation; FAR Case 2006-029, Federal Funding Accountability and Transparency Act (FFATA) - Reporting Requirement of Subcontractor Award Data, 51306-51310 [07-4336]

Agencies

• General Services Administration
• National Aeronautics and Space Administration
• DEPARTMENT OF DEFENSE

[Federal Register Volume 72, Number 172 (Thursday, September 6, 2007)]
[Rules and Regulations]
[Pages 51306-51310]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-4336]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 4, 12, and 52

[FAC 2005-20; FAR Case 2006-029;Docket 2007-0001; Sequence 5]
RIN 9000-AK72


Federal Acquisition Regulation; FAR Case 2006-029, Federal 
Funding Accountability and Transparency Act (FFATA) - Reporting 
Requirement of Subcontractor Award Data

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to require that 
contractors report specific subcontract awards to a public database as 
a pilot program. The Federal Funding Accountability and Transparency 
Act of 2006 (FFATA) (Pub. L. 109-282) requires the existence and 
operation of a searchable website that provides public access to 
information about Federal expenditures.

DATES:
    Effective Date: September 6, 2007.

[[Page 51307]]


FOR FURTHER INFORMATION CONTACT: Mr. Ernest Woodson, Procurement 
Analyst, at (202) 501-3775, for clarification of content. For 
information pertaining to status or publication schedules, contact the 
FAR Secretariat at (202) 501-4755. Please cite FAC 2005-20, FAR case 
2006-029.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule amends the FAR to establish a pilot program to test 
the collection and accession of subcontract award data. As a result, 
subcontracts awarded and funded with Federal appropriated funds will be 
disclosed to the public in a single searchable website. However, 
information reported under the pilot program will not be disclosed to 
the public.
    The FFATA requires the existence and operation of a searchable 
website that provides public access to information about Federal 
expenditures. Section 2(d) of the FFATA requires that a pilot program 
be established to test the collection and accession of subcontract 
award data.
    In order to implement Section 2(d) of the FFATA, the Councils are 
adding a new Subpart to FAR Part 4, with an associated clause in FAR 
Part 52, which addresses reporting subcontract awards. The pilot 
program will terminate no later than January 1, 2009.
    This rule applies to contracts with values equal to or greater than 
$500 million awarded and performed in the United States, and requires 
the awardees to report all first tier subcontract awards exceeding $1 
million to the FFATA database at www.esrs.gov. The Councils chose these 
thresholds to ensure that a sufficient number of subcontract award 
reports will be entered in the database to permit assessment of its 
effectiveness without imposing a significant burden on contractors 
during the pilot program. The Government does not guarantee the 
reliability of the data reported. The Government has no mechanism to 
verify the data submitted. Before completion of the pilot program, the 
Councils will initiate a separate rulemaking process to establish the 
requirements for the final subcontract reporting database pursuant to 
the statute. This rule does not apply to classified contracts or 
commercial item contracts issued under FAR Part 12.
    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 72 FR 13234 on March 21, 2007. Seventeen respondents 
submitted comments in response to the proposed rule. A discussion of 
the comments is provided below. No changes were made to the rule as a 
result of those comments.
    1. Burden Imposed and Usefulness of Database. Thirteen comments 
were received concerning the burden that will be imposed on contractors 
in order to capture the required data in the final subcontract 
reporting database. Some contractors currently do not collect the 
specific subcontractor data and may need to create a new system of 
collection. Respondents were concerned about the cost of software 
modifications necessary to collect the information required by FFATA. 
In addition, the manual input is perceived to be labor intensive and 
the cost to ensure compliance, as well as cost to audit, will be 
significant to both the contractor and the Government. It was suggested 
that the pilot threshold of $1 million was a reasonable threshold and 
it should be maintained in final reporting requirements in order to 
relieve some of the burden associated with the rule. Another comment 
related to the threshold suggested that the threshold should balance 
the data aggregation costs with the resulting benefits of providing the 
data to the public. One respondent suggested that the contractor should 
not have to report to the public because there are sufficient 
Government agencies that already monitor contractor performance and, 
therefore, a public database would not be necessary. One respondent 
requested that the rule be clarified to require reporting at the task 
order level, as reporting the required information at the onset of the 
contract (IDIQ or requirements contracts) would not accomplish the goal 
of FFATA. No other comments were received regarding the proposed pilot 
program. Five respondents submitted comments regarding the impact and 
burden of FFATA final reporting requirements on small business 
indicating that the burden on small businesses would be particularly 
heavy.
    Response: The FFATA of 2006 mandates the existence and operation of 
a single searchable website, accessible by the public to require full 
disclosure of all transactions of $25,000 or more involving Federal 
funds. The Councils must comply with the statute when the final 
reporting requirements are established. The definition of 
``subcontract'' in FAR clause 52.204-10 refers to the definition of 
``contract'' which would include all types of commitments that obligate 
the Government to an expenditure of appropriated funds, including task 
orders. According to the FFATA data definitions, available at the FFATA 
reporting website, ``award amount'' is defined as the amount of support 
provided in the award, based on obligations. The contractor should 
report a subcontract when the money is obligated. If obligation happens 
at the time the IDIQ is awarded then the contractor would report the 
amount of the award in the FFATA database at the time of the IDIQ 
award. If money is obligated at the time each task/delivery order is 
issued, then the contractor would report the amount of the award in the 
FFATA database at the time of award of the order. In addition, the 
clause provides a definition of ``subcontract,'' which is based on the 
FAR definition at 2.1, and includes bilateral contract modifications. 
If additional money is obligated by a bilateral subcontract 
modification, then that amount must also be reported in the FFATA 
database as a separate record. The pilot program will not allow the 
modification of an existing record, but the respondents recommendation 
will be considered when establishing the final requirements. The 
comments regarding small business are addressed in paragraph B, 
Regulatory Flexibility Act, of this notice.
    2. Duplicate Collection Requirement. Five comments were received 
regarding the existence of current databases that would be viewed as 
providing sufficient information to comply with the law. The existing 
databases or system of collecting subcontract information include the 
Federal Procurement Data System (FPDS), the Electronic Subcontracting 
Reporting System, small business subcontracting plans, and IRS Form 
1099. It was also suggested that the Councils consider coordinating 
with other unspecified financial mechanisms that are currently under 
development.
    Response: The Councils agree that information contained in existing 
data collection systems/databases should be utilized as much as 
possible to fulfill the requirements of FFATA. However, required 
subcontract information is not available from existing Federal systems/
databases. Therefore, a certain amount of data must be provided by the 
contractor through a single searchable website as prescribed by Section 
2(b)(1) of FFATA. Accordingly, the final rule remains unchanged.
    3. Verification and Validation of Data in the FFATA Database. Three 
respondents question the usefulness of a system that the Government 
cannot validate. Four comments were received suggesting that the 
Government needs to establish a means of ensuring compliance and 
accuracy of the data available in the FFATA database.
    Response: While the Government does not have a mechanism to verify 
or validate subcontract data input by a

[[Page 51308]]

contractor, the Government will use routine contract administration 
oversight to ensure contractor compliance with the FAR clause at 
52.204-10, Reporting Subcontract Awards. The final rule therefore 
remains unchanged.
    4. Reporting Period. Six comments were received requesting 
clarification of the reporting requirements for the pilot program and 
suggesting alternative timeframes for reporting data. Clarification was 
requested regarding reporting of the initial award of a subcontract and 
subsequent extensions in the period of performance or an exercise of an 
option for the same subcontract. It was suggested that the FFATA 
database allow for updates of existing records. One respondent believes 
that quarterly reporting would be burdensome. Another respondent 
suggested changing the reporting requirement to 90 days after 
subcontract award.
    Response: The reporting periods for the pilot program are 
sufficient to allow contractors to successfully report subcontract 
awards. The suggestion to have the FFATA database allow for updates of 
existing records, including the suggestion to tie the reporting periods 
to the period of performance, will be given consideration when the 
final reporting requirements are established.
    5. Security Issues. Nine comments were received expressing concerns 
about industrial, national, and other security issues. Since the 
database will be public, anyone, including terrorists, will have access 
to the information. Providing names and addresses of contractors/
subcontractors in a public database creates unnecessary risks in a 
national, operational, and human security sense and will undermine the 
Government mission and national security. It was suggested that 
reporting requirements exclude any item constituting a weapon system or 
components thereof and any item subject to the International Traffic in 
Arms Regulation. One respondent believes that security will not be 
compromised because the requirement clearly exempts classified 
solicitations and contracts.
    Response: FFATA mandates the existence and operation of a single 
searchable website, accessible by the public to require full disclosure 
of transactions of $25,000 or more involving Federal funds. The 
specific data elements, including names and addresses, are required for 
each Federal award, including subcontracts. However, Section 3 of FFATA 
stipulates that the Act does not require disclosure of classified 
information, and the FAR rule exempts classified contracts that may be 
applicable to industrial, national, and other security issues, and the 
pilot database only applies to prime contracts awarded and performed in 
the United States. Accordingly, the Councils have determined that no 
change is necessary.
    6. Competition. Eleven respondents expressed concerns regarding 
competition. In general, disclosure of information will provide 
unwarranted competitive advantages to competitors. Comments received 
stated that the name and location of subcontractors is considered 
confidential proprietary business information and should not be 
provided to the public. Longstanding laws (e.g., Freedom of Information 
Act (FOIA) and Trade Secrets Act) are designed to protect contractors' 
and subcontractors' confidential and proprietary business information. 
Courts have interpreted Exemption 4 of FOIA to preclude the disclosure 
of certain contractor pricing information, finding that the release of 
pricing information, particularly line item prices and option year 
prices, may result in substantial competitive harm to a contractor. The 
FFATA database will provide competitors with source and price 
information that could be used to develop procurement strategies that 
undermine future business. In addition, posting pilot program 
information goes beyond the requirements of FFATA and could present 
serious risks to both contractors and subcontractors (e.g., competitors 
may gain insight into a contractor's team partners). It is believed 
that the public will misunderstand the basis of awards (e.g., a 
contract awarded on a basis other than lowest price). One respondent 
believes that the rule went beyond the FFATA requirements and suggests 
that the Councils work with the Office of Management and Budget (OMB) 
to establish the pilot program. One respondent believes that FFATA 
infringes on important commercial business practices, making it 
difficult to continue beneficial relationships that serve both 
commercial and Government customers.
    Response: FFATA requires the existence and operation of a single 
searchable website, accessible by the public that includes specific 
information for Federal awards. The Councils must comply with the 
requirements of the law when the final reporting requirements are 
established. Under 41 U.S.C. 405 and 421, the Office of Federal 
Procurement Policy at OMB oversees the issuance of the FAR. OMB 
approves all FAR rules before publication, including this final rule 
and its proposed rule. The information reported under the pilot program 
will not be disclosed to the public.
    7. Applicability. Six comments were received regarding 
applicability of the rule. Some required clarification of applicability 
and others suggested changes in the application of the rule.
    Clarification was requested as to whether the reference to the term 
``contract number'' in the FAR clause at 52.204-10 applied to the prime 
contract number or subcontract number/purchase order number, and 
whether ``subcontractor location including address'' applied to the 
billing address of the subcontractor. It was also requested that 
clarification be provided regarding the assumption that a contract was 
classified when it contained a Department of Defense, Contract Security 
Classification Specification (DD Form 254).
    Certain respondents strongly suggested that final reporting 
requirements be limited to first tier subcontracts because no privity 
of contract relationship exists between subcontractors and the 
Government, while a single respondent believed that the requirement to 
report all subcontracts, regardless of tier, was reasonable and would 
ensure consistency in reporting and maximize visibility into Federal 
spending. In addition, two respondents indicated that the final 
reporting requirements should not apply to commercial contractors 
because it will be excessively burdensome for them to identify and 
report on Government contracts and items purchased as company inventory 
should not be reportable. Concerns that commercial subcontractors might 
have their subcontract prices and other sensitive information disclosed 
on a public website raises concerns regarding the Federal Acquisition 
Streamlining Act of 1994 (FASA). FASA generally exempts laws from 
applying to commercial item subcontracts unless the statute 
specifically refers to that section. The respondent further stated that 
the final reporting requirements should not apply to contracts awarded 
or performed outside the United States. Extending the reporting 
requirements to contracts awarded or performed outside the United 
States will stretch the resources of an already overtaxed acquisition 
workforce in foreign countries. In addition, certain foreign countries 
may prohibit release of financial information outside the country. One 
respondent suggested that a limited set of data should be reported for 
sensitive but unclassified contracts (e.g., do not

[[Page 51309]]

include the place of performance location).
    Response: Regarding clarifications of applicability, the reference 
to ``contract number'' in FAR 52.204-10 refers to the prime contract 
number or purchase order number assigned by the Government, consistent 
with the FAR convention of all references to ``contractor'' meaning the 
recipient of a Government contract. The subcontractor location 
including address refers to the principal business location of the 
subcontractor receiving the award. The Councils expect the FFATA 
database to include helpful information regarding field definitions. 
The DD Form 254 is the basic document for conveying to contractors the 
applicable classified areas of information involved in a classified 
effort. The classification may be related to various attachments or 
supplement documents or a facility and would be identified in the body 
of the DD Form 254. The rule does not apply to classified contracts.
    The FAR clause at 52.204-10 does not require reporting of 
subcontract awards below the first tier. In addition, the clause is not 
required in solicitations and contracts for commercial items issued 
under FAR Part 12. However, comments received regarding the 
applicability to commercial contractors and to contracts awarded or 
performed outside the United States will be considered in formation of 
the final requirements. Therefore, the final rule remains unchanged.
    8.  Unique Identifier for Subcontractors. Eight comments were 
received regarding whether the unique subcontractor identifier should 
be the ``data universal numbering system (DUNS'') number, the Taxpayer 
Identification Number (TIN), some other number, or a non-numerical 
unique identifier. One respondent requested clarification as to whether 
the unique identifier was the prime contract number. Six respondents 
favored the DUNS number because it is well-established as the unique 
identifier for tracking Federal prime contractors. Since many 
subcontractors are also prime contractors on other contracts, using the 
DUNS number would eliminate any confusion regarding what role they are 
playing, prime or subcontractor. Two respondents favored the use of the 
TIN as a unique identifier because subcontractors are not required to 
obtain a DUNS number. There are limited controls on the issuance of 
DUNS numbers and therefore they are considered to be less reliable than 
the TIN.
    Response: Use of the DUNS number is expected to be the most cost-
effective identifier for reporting awards in the FFATA database. It is 
the common identifier used in most Federal systems/databases to 
identify contractors. Any contractor or subcontractor needing to obtain 
a DUNS number may do so by visiting www.dnb.com/us. For the Pilot 
Program, the unique identifier for the subcontractor will be defined in 
the FFATA pilot database. Therefore, the final rule remains unchanged.
    9. Definition of Subcontract. One comment was received stating that 
the proposed definition of ``subcontract'' (see FAR clause 52.204-10) 
would lead to confusion over which business entity is entering into the 
subcontract. The respondent suggested that the definition be revised to 
be more closely aligned to the definition found at FAR 44.101.
    Response: The definition at FAR clause 52.204-10 was adapted from 
the FAR 44.101 definition of ``subcontract'' and means ``* * * any 
contract entered into by the Contractor to furnish supplies or services 
for performance of this contract * * *.'' The definition is clear and, 
therefore, remains unchanged in the final rule.
    10. Conflict with DFARS 252.204-7000, Disclosure of Information. 
Two comments were received regarding the apparent conflict of FFATA 
with Defense Federal Acquisition Regulation Supplement (DFARS) Clause 
252.204-7000, Disclosure of Information. The DFARS clause prohibits the 
disclosure of any part of the contract unless the contracting officer 
provides written approval. Clarification is requested as to whether the 
FFATA clause supersedes DFARS 252.204-7000.
    Response: This comment is outside the scope of this FAR rule.
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    DoD, GSA, and NASA certify that this final rule will not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et 
seq., because the contract dollar threshold for the application of the 
pilot program is $500 million. The number of small businesses receiving 
such large prime contract awards is estimated to be miniscule to none.
    Comments were received regarding the impact of FFATA final 
reporting requirements on small business. One respondent stated that 
historically, small businesses have not been required to track 
subcontract awards by contract and implementing the final reporting 
requirements of FFATA would mean that they would need to develop a 
tracking system. A respondent stated that FFATA would increase costs 
associated with hiring resources to track and input data. In addition, 
another respondent stated that many small businesses may not be 
familiar with regulations and laws related to subcontract reporting.
    The public comments and results of the pilot program will be 
considered when the final reporting requirements are established, with 
a goal of minimizing burdens imposed on small businesses.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 104-13) applies because the 
final rule contains information collection requirements. Accordingly, 
the FAR Secretariat has forwarded a request for approval of a new 
information collection requirement concerning OMB Control Number 9000-
00XX, FFATA Reporting Requirement of Subcontractor Award Data, to OMB 
under 44 U.S.C. 3501, et seq. Public comments concerning this request 
will be invited through a subsequent Federal Register notice.

List of Subjects in 48 CFR Parts 4, 12, and 52

    Government procurement.

    Dated: August 29, 2007.
Al Matera,
Director, Office of Acquisition Policy.

0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 4, 12, and 52 as set 
forth below:
0
1. The authority citation for 48 CFR parts 4, 12, and 52 continues to 
read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 4--ADMINISTRATIVE MATTERS

0
2. Add subpart 4.14 to read as follows:

Subpart 4.14--Reporting Subcontract Awards


4.1400  Scope of subpart.

    This subpart implements section 2(d) of the Federal Funding 
Accountability and Transparency Act of 2006 (Pub. L. No. 109-282) by 
establishing a pilot program for a single searchable website, which 
will eventually be available to the public at no charge, that includes 
information on Federal subcontracts. This pilot program will expire not 
later than January 1, 2009. Information

[[Page 51310]]

reported under the pilot program will not be disclosed to the public.


4.1401  Contract clause.

    (a) Except as provided in paragraph (b) of this section, insert the 
clause at 52.204-10, Reporting Subcontract Awards, in all solicitations 
and contracts with values of $500,000,000 or more when the contract 
will be awarded and performed in the United States.
    (b) The clause is not required in--
    (1) Solicitations and contracts for commercial items issued under 
FAR Part 12; or
    (2) Classified solicitations and contracts.

PART 12--ACQUISITION OF COMMERCIAL ITEMS

0
3. Amend section 12.503 by adding new paragraph (a)(6) to read as 
follows:


12.503  Applicability of certain laws to Executive agency contracts for 
the acquisition of commercial services.

    (a) * * *
    (6) 31 U.S.C. 6101 note, Pub. L. 109-282, Federal Funding 
Accountability and Transparency Act of 2006, requirement to report 
subcontract data.
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Add section 52.204-10 to read as follows:


52.204-10  Reporting Subcontract Awards.

    As prescribed in 4.1401(a), insert the following clause:
    REPORTING SUBCONTRACT AWARDS (SEP 2007)
    (a) Definition. Subcontract, as used in this clause, means any 
contract as defined in FAR Subpart 2.1 entered into by the 
Contractor to furnish supplies or services for performance of this 
contract. It includes, but is not limited to, purchase orders and 
changes and modifications to purchase orders, but does not include 
contracts that provide supplies or services benefiting two or more 
contracts.
    (b) Section 2(d) of the Federal Funding Accountability and 
Transparency Act of 2006 (Pub. L. No. 109-282) requires 
establishment of a pilot program for a single searchable website, 
available to the public at no charge that includes information on 
Federal subcontracts.
    (c) Within thirty days after the end of March, June, September, 
and December of each year through 2008, the Contractor shall report 
the following information at www.esrs.gov for each subcontract award 
with a value greater than $1 million made during that quarter. (The 
Contractor shall follow the instructions at www.esrs.gov to report 
the data.)
    (1) Name of the subcontractor.
    (2) Amount of the award.
    (3) Date of award.
    (4) The applicable North American Industry Classification System 
code.
    (5) Funding agency or agencies.
    (6) Award title descriptive of the purpose of the action.
    (7) Contract number.
    (8) Subcontractor location including address.
    (9) Subcontract primary performance location including address.
    (10) Unique identifier for the subcontractor.
    (End of clause)
[FR Doc. 07-4336 Filed 9-5-07; 8:45 am]
BILLING CODE 6820-EP-S