Federal Acquisition Regulation; Organizational Conflicts of Interest, 23236-23254 [2011-9415]

Download as PDF jlentini on DSKJ8SOYB1PROD with PROPOSALS 23236 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules (e)(1) The Bureau of Land Management may segregate, if it finds it to be necessary for the orderly administration of the public lands, lands included in a right-of-way application for the generation of electrical energy under 43 CFR subpart 2804 from wind or solar sources. In addition, the Bureau of Land Management may also segregate public lands that it identifies for potential rights-of-way for electricity generation from wind or solar sources. Upon segregation, such lands will not be subject to appropriation under the public lands laws, including location under the General Mining Law, but not the Mineral Leasing Act of 1920 (30 U.S.C. 181 et seq.) or the Materials Act of 1947 (30 U.S.C. 601 et seq.). The Bureau of Land Management will effect such segregation by publishing a Federal Register notice that includes a description of the lands covered by the segregation. The Bureau of Land Management may impose a segregation in this way on both pending and new right-of-way applications. (2) The effective date of segregation is the date of publication of the notice in the Federal Register and the date of termination of the segregation is the date that is the earliest of the following: (i) Upon issuance of a decision by the authorized officer granting, granting with modifications, or denying the application for a right-of-way; (ii) Automatically at the end of the segregation period provided for in the Federal Register notice initiating the segregation, without further action by the authorized officer; or (iii) Upon publication of a Federal Register notice of termination of the segregation. (3) The segregation period may not exceed 2 years from the date of publication of the Federal Register notice initiating the segregation unless, on a case-by-case basis, the Bureau of Land Management State Director determines and documents in writing, prior to the expiration of the segregation period, that an extension is necessary for the orderly administration of the public lands. If an extension is determined to be necessary, the Bureau of Land Management will publish a notice in the Federal Register, prior to expiration of the initial segregation period that the segregation is being extended for up to 2 years. Only one extension may be authorized; the total segregation period therefore cannot exceed 4 years. VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 PART 2800—RIGHTS-OF-WAY UNDER THE FEDERAL LAND POLICY AND MANAGEMENT ACT 3. The authority citation for part 2800 continues to read as follows: Authority: 43 U.S.C. 1733, 1740, 1763, and 1764. Subpart 2804—Applying for FLPMA Grants 4. Amend § 2804.25 by adding a new paragraph (e) to read as follows: § 2804.25 How will BLM process my application? * * * * (e)(1) The BLM may segregate, if it finds it to be necessary for the orderly administration of the public lands, lands included within a right-of-way application under 43 CFR subpart 2804 for the generation of electricity from wind or solar sources. In addition, the BLM may segregate public lands that it identifies for potential rights-of-way for electricity generation from wind or solar sources under the BLM’s right-of-way regulations. Upon segregation, such lands will not be subject to appropriation under the public land laws, including location under the General Mining Law, but not from the Mineral Leasing Act of 1920 (30 U.S.C. 181 et seq.) or the Materials Act of 1947 (30 U.S.C. 601 et seq.). The BLM will effect such segregation by publishing a Federal Register notice that includes a description of the lands covered by the segregation. The Bureau of Land Management may impose a segregation in this way on both pending and new right-of-way applications. (2) The segregative effect of the Federal Register notice terminates on the date that is the earliest of the following: (i) Upon issuance of a decision by the authorized officer granting, granting with modifications, or denying the application for a right-of-way; (ii) Automatically at the end of the segregation period provided for in the Federal Register notice initiating the segregation, without further action by the authorized officer; or (iii) Upon publication of a Federal Register notice of termination of the segregation. (3) The segregation period may not exceed 2 years from the date of publication of the Federal Register notice initiating the segregation unless, on a case by case basis, the BLM State Director determines and documents in writing, prior to the expiration of the segregation period, that an extension is necessary for the orderly administration of the public lands. If an extension is determined to be necessary, the BLM will publish a notice in the Federal Register, prior to expiration of the initial segregation period that the segregation is being extended for up to 2 years. Only one extension may be authorized; the total segregation period therefore cannot exceed 4 years. Dated: April 6, 2011. Wilma A. Lewis, Assistant Secretary of the Interior, Land and Minerals Management. [FR Doc. 2011–10017 Filed 4–25–11; 8:45 am] BILLING CODE 4310–84–P * PO 00000 Frm 00029 Fmt 4702 Sfmt 4702 DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 48 CFR Parts 2, 3, 4, 7, 9, 11, 12, 13, 14, 15, 16, 18, 37, 42, 52, and 53 [FAR Case 2011–001; Docket 2011–0001; Sequence 1] RIN 9000–AL82 Federal Acquisition Regulation; Organizational Conflicts of Interest Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Proposed rule. AGENCIES: DoD, GSA, and NASA are proposing to amend the Federal Acquisition Regulation (FAR) to provide revised regulatory coverage on organizational conflicts of interest (OCIs), provide additional coverage regarding contractor access to nonpublic information, and add related provisions and clauses. Section 841 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 required a review of the FAR coverage on OCIs. This proposed rule was developed as a result of a review conducted in accordance with Section 841 by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) and the Office of Federal Procurement Policy (OFPP), in consultation with the Office of Government Ethics (OGE). This proposed rule was preceded by an Advance Notice of Proposed Rulemaking (ANPR), under FAR Case 2007–018 (73 FR 15962), to gather comments from the public with regard to whether and how to improve the FAR coverage on OCIs. SUMMARY: E:\FR\FM\26APP1.SGM 26APP1 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules Interested parties should submit written comments to the Regulatory Secretariat at one of the addressees shown below on or before June 27, 2011 to be considered in the formation of the final rule. ADDRESSES: Submit comments in response to FAR case 2011–001 by any of the following methods: • Regulations.gov: http:// www.regulations.gov. Submit comments via the Federal eRulemaking portal by inputting ‘‘FAR Case 2011–001’’ under the heading ‘‘Enter Keyword or ID’’ and selecting ‘‘Search.’’ Select the link ‘‘Submit a Comment’’ that corresponds with ‘‘FAR Case 2011–001.’’ Follow the instructions provided at the ‘‘Submit a Comment’’ screen. Please include your name, company name (if any), and ‘‘FAR Case 2011–001’’ on your attached document. • Fax: (202) 501–4067. • Mail: General Services Administration, Regulatory Secretariat (MVCB), Attn: Hada Flowers, 1275 First Street, NE., 7th Floor, Washington, DC 20417. Instructions: Please submit comments only and cite FAR Case 2011–001, in all correspondence related to this case. All comments received will be posted without change to http:// www.regulations.gov, including any personal and/or business confidential information provided. FOR FURTHER INFORMATION CONTACT: Mr. Anthony Robinson, Procurement Analyst, at (202) 501–2658, for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at (202) 501–4755. Please cite FAR Case 2011–001. SUPPLEMENTARY INFORMATION: DATES: I. Background jlentini on DSKJ8SOYB1PROD with PROPOSALS A. Current FAR Subpart 9.5, Organizational and Consultant Conflicts of Interest The integrity of the Federal acquisition process is protected, in part, by OCI rules currently found in FAR subpart 9.5. These rules are designed to help the Government in identifying and addressing circumstances in which a Government contractor may be unable to render impartial assistance or advice to the Government or might have an unfair competitive advantage based on unequal access to information or prior involvement in setting the ground rules for an acquisition. FAR 9.504 directs contracting agencies to ‘‘identify and evaluate potential OCIs as early in the acquisition process as possible’’ and ‘‘avoid, neutralize, or mitigate VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 significant potential conflicts before contract award.’’ FAR coverage on OCIs has remained largely unchanged since the initial publication of the FAR in 1984. The FAR coverage was adapted from an appendix to the Defense Acquisition Regulation, which dated back to the 1960s. B. Origins of This Case 1. Changes in Government and Industry. In recent years, a number of trends in acquisition and industry have led to the increased potential for OCIs, including— • Industry consolidation; • Agencies’ growing reliance on contractors for services, especially where the contractor is tasked with providing advice to the Government; and • The use of multiple-award task- and delivery-order contracts, which permit large amounts of work to be awarded among a limited pool of contractors. 2. SARA Panel. In its 2007 report, the Acquisition Advisory Panel (established pursuant to section 1423 of the Services Acquisition Reform Act of 2003) (SARA Panel) concluded that the FAR does not adequately address ‘‘the range of possible conflicts that can arise in modern Government contracting.’’ The SARA Panel observed that the FAR provides no detailed guidance to contracting officers regarding how they should detect and mitigate actual and potential OCIs and called for improved guidance, to possibly include a standard OCI clause or set of clauses. See Report of the Acquisition Advisory Panel (January 2007), available at https:// www.acquisition.gov/comp/aap/ 24102_GSA.pdf, at pp. 405–407, 417, 422. 3. Duncan Hunter National Defense Authorization Act for Fiscal Year 2009. Congress subsequently directed, in Section 841 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110–417), a review of the conflicts of interest provisions in the FAR. Section 841 required that appropriate revisions, including contract clauses, be developed as necessary, pursuant to that review. C. Evaluation of FAR Subpart 9.5 The Councils have worked with OFPP and consulted with OGE to evaluate FAR subpart 9.5. This evaluation was informed, in part, by the following: 1. A review of recent case law and opinions from the Government Accountability Office (GAO) and Court of Federal Claims (CoFC). Collectively, this review indicated that, when PO 00000 Frm 00030 Fmt 4702 Sfmt 4702 23237 addressing OCIs, agencies do not always perform adequate, case-by-case, factspecific analysis. 2. The findings of the SARA Panel, which concluded that contracting officers and agencies have encountered difficulties implementing appropriate OCI avoidance and mitigation measures. 3. Responses to a 2008 ANPR which sought comment on whether the current guidance on OCIs adequately addresses the current needs of the acquisition community or whether providing standard provisions and/or clauses might be beneficial. The ten respondents to the ANPR offered a range of views, from the complete rewrite of FAR subpart 9.5, to maintaining the current coverage largely as is. Several respondents encouraged the Councils to adopt already-existing agency-level regulations, while two respondents stated that the regulations should consider providing Governmentwide standard clauses that allow agencies to add more stringent requirements, if needed, on a procurement-specific basis. One respondent suggested that any change to FAR subpart 9.5 should be consistent with existing case law on OCIs, as developed by GAO and the CoFC. Copies of all responses may be obtained at http://www.regulations.gov. 4. Public comments provided in response to Defense Federal Acquisition Regulation Supplement (DFARS) Proposed Rule 2009–D015, published in the Federal Register on April 22, 2010 (see 75 FR 20954–20965). DFARS Proposed Rule 2009–D015 was designed to implement section 207 of the Weapons System Acquisition Reform Act of 2009 (WSARA) (Pub. L. 111–23), which requires DoD to revise the DFARS to provide uniform guidance and tighten existing rules regarding OCIs concerning major defense acquisition programs. To implement section 207 in the most effective manner possible, DoD concluded that the basic principles, policies, and practices governing OCIs must be clearly understood. DoD reviewed the FAR coverage and issued the proposed rule that clarified the prescribed general rules and procedures for identifying, evaluating, and resolving OCIs. As with the ANPR, respondents to the DFARS proposed rule provided a range of views regarding the proposed coverage. II. Overview Based on their review, the Councils and OFPP reached the following main conclusions regarding OCIs: E:\FR\FM\26APP1.SGM 26APP1 23238 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules A. Opportunity for Public Comment on Two Alternative OCI Frameworks Because the proposed DFARS rule (2009–D015) not only addressed the requirements of the WSARA but also contained a comprehensive OCI framework, the public now has a unique opportunity to comment on two distinct options for revising the regulatory coverage on OCIs. To this end, this proposed rule diverges substantially from the framework presented in the proposed DFARS rule, and we are seeking specific feedback regarding which course of action, or whether some combination of the two, is preferable. jlentini on DSKJ8SOYB1PROD with PROPOSALS B. OCI Case Law The fundamental approach provided in the proposed DFARS rule is sound and provides a regulatory framework that thoroughly implements the established OCI case law. However, the fact that the OCI regulations are not primarily based in statute means that revisions to the regulations need not conform with existing case law. Rather, substantive departures from the case law should be considered if such changes will produce an OCI framework that is clearer, easier to implement, and better suited to protecting the interests of the Government. C. Similarities of Proposed FAR Rule to Proposed DFARS Rule Both this proposed FAR rule and the proposed DFARS rule propose coverage that recognizes the present-day challenges faced by acquisition officials in identifying and addressing OCIs in the procurement of products and services to satisfy agency requirements. In particular, both this proposed rule and the proposed DFARS framework— 1. Reorganize and move OCI coverage to FAR part 3, so that OCIs are addressed along with related issues, namely other business practices and personal conflicts of interest (on which final coverage is pending under FAR Case 2008–025); 2. Clarify key terms and provide more detailed guidance regarding how contracting officers should identify and address OCIs while emphasizing that each OCI case may be unique and therefore must be approached with thoughtful consideration; 3. Provide standard OCI clauses, coupled with the opportunity for contracting officers to tailor the clauses as appropriate for particular circumstances; and 4. Address unique policy issues and contracting officer responsibilities associated with OCIs arising in the context of task- and delivery-order contracts. VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 D. Differences Between Proposed FAR Rule and Proposed DFARS Rule The coverage in this proposed rule differs from that provided by the framework presented in the DFARS rule by— 1. Providing an analysis of the risks posed by OCIs, and the two types of harm that can come from them, i.e.,— • Harm to the integrity of the competitive acquisition system; and • Harm to the Government’s business interests; 2. Recognizing that harm to the integrity of the competitive acquisition system affects not only the Government, but also other vendors, in addition to damaging the public trust in the acquisition system. The risk of such harm must be substantially reduced or eliminated. In contrast, the risk of harm to the Government’s business interests may sometimes be assessed as an acceptable performance risk; 3. Moving coverage of unequal access to nonpublic information and the requirement for resolving any resulting unfair competitive advantage out of the domain of OCIs and treating it separately in FAR part 4. Competitive integrity issues caused by unequal access to nonpublic information are often unrelated to OCIs. Therefore, treating this topic independently will allow for more targeted coverage that properly addresses the specific concerns involved in such cases; and 4. Adding broad coverage regarding contractor access to nonpublic information, to provide a more detailed framework in which to address the topic of unequal access to nonpublic information. III. Proposed OCI Coverage The Councils propose the following FAR coverage on OCIs: A. Placement of Coverage in the FAR As noted above, OCIs are currently addressed in FAR subpart 9.5, which deals with contractor qualifications. While the ability to provide impartial advice and assistance is an important qualification of a Government contractor, the larger issues that underlie efforts to identify and address OCIs are more directly associated with some of the business practices issues discussed in FAR part 3. For this reason, the Councils propose to relocate the FAR coverage on OCIs from FAR subpart 9.5 to a new FAR subpart 3.12. B. Changes To Provide Greater Clarity of Purpose and Policy This proposed rule makes the following changes to clarify OCI policy: PO 00000 Frm 00031 Fmt 4702 Sfmt 4702 1. Definitions a. Organizational Conflict of Interest. The proposed FAR rule establishes a clearer definition for ‘‘organizational conflict of interest’’ (which is included in FAR part 2 and applies throughout the FAR). The definition of ‘‘organizational conflict of interest’’ is refined to reflect the two types of situations that give rise to OCI concerns. b. Address. The verb ‘‘address’’ is defined in FAR subpart 3.12, for the purposes of the subpart, to provide a summary term for the various approaches for dealing with the risks and preventing the harms that may be caused by OCIs; each of those approaches is then explained in more detail in FAR 3.1204. c. Marketing consultant. In addition, the existing definition of ‘‘marketing consultant’’ in FAR subpart 9.5 is removed as unnecessary because the proposed coverage is expanded beyond contracts for these entities. 2. Policy. Within the new policy section at FAR 3.1203, the proposed rule explains the harm OCIs can cause and the actions the Government must take to address the risks of such harm. This involves an expanded discussion of the two types of harm that OCIs cause to the procurement system—harm to the integrity of the competitive acquisition process and harm to the Government’s business interests. a. Harm to the Integrity of the Competitive Acquisition Process. In cases where there is a risk of harm to the integrity of a competitive acquisition process, both the Government’s interests and the public interest in fair competitions are at risk. For this reason, such risks must be eliminated to the maximum extent possible. In the extremely rare case that such a risk cannot be eliminated, but award is nonetheless necessary to meet the Government’s needs, a waiver provision that requires approval at the head of the contracting activity level or above is provided. b. Harm to the Government’s Business Interests. In cases where the potential harm from an OCI threatens only the Government’s business interests, it may be appropriate to accept this potential harm as a performance risk. Acceptance of performance risk represents a novel means of addressing OCIs and will often only be appropriate after other steps to reduce the risk have been taken, either by the contractor (e.g., implementation of a mitigation plan) or by the Government (e.g., additional contract management steps or oversight). E:\FR\FM\26APP1.SGM 26APP1 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules jlentini on DSKJ8SOYB1PROD with PROPOSALS C. Changes To Improve Policy Implementation This proposed rule assists contracting officers in implementing the Government’s OCI policy by amending existing FAR coverage in two ways: consolidating the contracting officer’s responsibilities regarding OCIs; and providing standard, but customizable, solicitation provisions and contract clauses related to OCIs. 1. Consolidated Discussion of Contracting Officer Responsibilities. This proposed rule creates a new section FAR 3.1206 that provides a consolidated discussion of contracting officer responsibilities, including the steps a contracting officer must take during the different phases of an acquisition to identify and address OCIs. • FAR section 3.1206–2 addresses OCI-related responsibilities associated with presolicitation activities and requires the contracting officer to determine whether an acquisition has the potential to give rise to an OCI early enough in the acquisition process to include an appropriate provision in the solicitation, if necessary. • FAR section 3.1206–3 provides guidance related to evaluating information from the offeror and other sources to determine if an OCI is present during the evaluation phase and to then address or waive any OCI before making a contract award. • FAR section 3.1206–4 addresses OCI-related responsibilities associated with contract award. • FAR section 3.1206–5 addresses task- and delivery-order contracts, and requires the contracting officer to consider OCIs both at the time of award and at the time of issuance of each order. Æ For interagency acquisitions where the ordering (customer) agency places orders directly under another agency’s contract (a ‘‘direct acquisition’’), the ordering agency would be responsible for addressing OCIs. Æ For interagency acquisitions where the servicing agency performs acquisition activities on the requesting agency’s behalf (an ‘‘assisted acquisition’’), the interagency agreement entered into between the servicing and requesting agency to establish the terms and conditions of the assisted acquisition would need to identify which party is responsible for carrying out these responsibilities. By providing a more complete description of the steps involved in addressing OCIs, the rule will better equip contracting officers to identify conflicts and work with contractors to VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 address them. This approach should also help to address the criticism with current FAR coverage that describing OCIs only through examples misleads contracting officers to believe that OCIs do not exist in contract actions that do not fall within the scope of an identified example. 2. New Solicitation Provision and Contract Clauses Related to OCIs. This proposed rule contains a new solicitation provision and three new contract clauses related to OCIs. Existing FAR coverage anticipates appropriate handling of OCI issues through solicitation provisions and contract clauses, but does not provide a standard format (see FAR 9.507). The Councils determined that it was desirable to provide contracting officers with standard language that can be used or tailored as appropriate. The Councils used the requirements currently in FAR 9.506 and 9.507 as the basis for the proposed provision and clauses on OCI, providing specific fill-ins the contracting officer must complete, and language that incorporates any mitigation plan by reference. The proposed solicitation provision and clauses are as follows: • FAR 52.203–XX, Notice of Potential Organizational Conflict of Interest. This provision— Æ References the definition of ‘‘organizational conflict of interest;’’ Æ Provides notice to offerors that the contracting officer has determined that the nature of the work is such that OCIs may result from contract performance; Æ Requires an offeror to disclose all relevant information regarding any OCI (including active limitations on future contracting), and to represent, to the best of its knowledge and belief, that it has disclosed all relevant information regarding any OCI; Æ Requires an offeror to explain the actions it intends to use to address any OCI, e.g., submit a mitigation plan if it believes an OCI may exist or agree to a limitation on future contracting; and Æ Identifies the clauses that may be included in the resultant contract, depending upon the manner in which the OCI is addressed (i.e., FAR 52.203– YY or 52.203–YZ, described below); • FAR 52.203–ZZ, Disclosure of Organizational Conflict of Interest After Contract Award. The Councils recognize that events may occur during the performance of a contract that give rise to a new conflict, or that a conflict might be discovered only after award has been made. This clause, which is included in solicitations and contracts when the solicitation includes the provision FAR 52.203–XX, Notice of Potential Organizational Conflicts of PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 23239 Interest, includes by reference the definition of ‘‘organizational conflict of interest’’ and requires the contractor to make a prompt and full disclosure of any new or newly discovered OCI. • FAR 52.203–YY, Mitigation of Organizational Conflicts of Interest. This clause is generally intended to be used when the contract may involve an OCI that can be addressed by an acceptable contractor-submitted mitigation plan prior to contract award. The clause— Æ Includes a reference to the definition of ‘‘organizational conflict of interest;’’ Æ Incorporates the mitigation plan in the contract; Æ Addresses changes to the mitigation plan; Æ Addresses noncompliance with the clause or with the mitigation plan; and Æ Requires flowdown of the clause. • FAR 52.203–YZ, Limitation of Future Contracting. This clause is intended for use when the contracting officer decides to address a potential conflict of interest through a limitation on future contracting. The contracting officer must fill in the nature of the limitation on future contractor activities and the length of any such limitation. D. Other Remarks In addition to the changes described above, the Councils note the following proposed coverage: • This rule continues to apply to contracts with both profit and non-profit organizations (current FAR 9.502(a)). • This rule does not exclude the acquisition of commercial items, including commercially available offthe-shelf (COTS) items. This proposed rule only requires use of the provision and clauses in solicitations when the contracting officer determines that the work to be performed has the potential to give rise to an OCI. Therefore, use in acquisitions of commercial items, especially COTS items, will probably not be frequent. The Councils decided that allowing this discretion to the contracting officer is better than an outright exclusion of applicability to contracts for the acquisition of commercial items. • This rule applies to contract modifications that add additional work. The Councils recognize that contracting officers may not be able to identify conflicts arising from all future modifications to a contract at the time of contract award. • This rule adds a requirement at FAR 7.105(b)(18) to consider OCIs when preparing acquisition plans. IV. Access to Nonpublic Information FAR subpart 9.5 and the GAO and CoFC cases interpreting the subpart E:\FR\FM\26APP1.SGM 26APP1 jlentini on DSKJ8SOYB1PROD with PROPOSALS 23240 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules currently treat situations involving contractors having an unfair competitive advantage based on unequal access to nonpublic information as OCIs. However, the Councils recognized that these situations do not actually involve conflicts of interest at all, and may arise from circumstances unrelated to conflicts of interest, such as where a former Government employee (who has had access to competitively useful nonpublic information) has been hired by a vendor. Further, the Councils observed that the methods available to resolve situations involving unequal access to information differ from those available to address actual OCIs. For these reasons, the Councils determined that separating the coverage of unfair competitive advantage based on unequal access to nonpublic information from the general coverage of OCIs is a desirable outcome, as it will remove some of the confusion often associated with identifying and addressing OCIs. In developing coverage to treat situations involving unfair competitive advantage based on unequal access to information, the Councils recognized that much of such access comes from performance on other Government contracts. Accordingly, if appropriate contractual safeguards are established prior to, or at the time of, such access, the number of situations where unequal access to information will taint a competition can be minimized. For this reason, this proposed rule provides a new uniform Governmentwide policy regarding the disclosure and protection of nonpublic information to which contractors may gain access during contract performance. This coverage provides substantial safeguards designed to address some of the concerns created by unequal access to nonpublic information, while leaving it to the contracting officer to determine, for any given acquisition, whether the protections are adequate, or if a situation involving an unfair competitive advantage remains to be resolved. Because protection and release of information are administrative matters, this coverage has been placed in FAR part 4. The coverage provides— • A definition of ‘‘nonpublic information’’ to clearly identify the scope of information covered; • Coverage of contractor access to nonpublic information during the course of contract performance; • Specific coverage for situations involving unfair competitive advantage based on unequal access to nonpublic information; and • Appropriate solicitation provisions and contract clauses. VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 information to sign nondisclosure agreements and that the obligations The definition of ‘‘nonpublic information’’ provided by this proposed arising from these agreements will be enforceable by both the Government and rule includes information belonging to third-party information owners. By either the Government or a third party implementing these protections as the that is not generally made publicly default position, the proposed approach available, i.e., information that cannot substantially enhances the protection be released under the Freedom of for third-party and Government Information Act, or information for information provided by the FAR. which a determination has not yet been Many contracts of the type described made regarding ability to release. above involve not only multiple B. Contractor Access to Nonpublic subcontractors, but also many lower-tier Information subcontracts. The current ad hoc approach employed by Government The SARA Panel recommended that agencies for ensuring that all of these the Federal Acquisition Regulatory (FAR) Council review existing rules and contractors have properly executed regulations and, to the extent necessary, nondisclosure agreements among create uniform, Governmentwide policy themselves has resulted in the existence of a substantial number of overlapping, and clauses dealing with protection of but not necessarily uniform, nonpublic information. Additionally, a recent GAO report, ‘‘Contractor Integrity: agreements—and oftentimes confusion and misunderstandings between the Stronger Safeguards Needed for Government and its contractors. The Contractor Access to Sensitive Councils have determined that the Information’’ (GAO–10–693), approach of requiring inclusion of an recommended that OFPP act with the ‘‘access’’ clause to protect information FAR Council to provide more thorough disclosed to a contractor, and a ‘‘release’’ protections when contractors are allowed access to sensitive information. clause to notify third-party information owners of their rights when their These recommendations, combined information is improperly used or with the need to provide preventive disclosed should provide thorough protections in dealing with cases of protection while eliminating the need unfair competitive advantage based on for many interconnecting nondisclosure unequal access to information, have agreements. prompted the Councils to develop the 1. Access Clause. The first element of coverage in this section. this new approach is the proposed Traditionally, the Government has Access clause at FAR 52.204–XX, relied primarily on civil servants to Access to Nonpublic Information. The perform the functions that require purpose of the Access clause is to access to third-party contract preclude contractors from using information and other information in Government or third-party information the Government’s possession that for any purpose unrelated to contract requires protection from unauthorized performance. This clause requires that use and disclosure. However, in recent contractors receiving access to years, the Government has significantly nonpublic information must limit the increased its use of contractors to assist use of such nonpublic information to in performing many such functions. In the purposes specified in the contract, addition, some agencies now utilize safeguard the nonpublic information contractors to perform research studies from unauthorized outside disclosure, that require the contractors to access and inform employees of their third-party information. With the obligations and obtain written increasing need for contractor access to nondisclosure agreements consistent nonpublic information, this rule seeks with those obligations. The clause also to establish a uniform, and more sets forth certain exceptions (relating to streamlined and efficient approach. the applicability of the contractor’s The Councils are proposing that obligations), but the exceptions do not contractors should be contractually apply unless the contractor can obligated to protect all nonpublic information to which they obtain access demonstrate to the contracting officer that an exception is applicable. by means of contract performance The Access clause is subordinate to (whether information from the all other contract clauses or Government or a third party), with certain exceptions (e.g., the information requirements that specifically address the access, use, handling, or disclosure was already in the contractor’s of nonpublic information. If any possession) (see FAR 52.204–XX(c)). Further, the Councils are proposing that restrictions or authorizations in the clause are inconsistent with any other contractors should require all clause or requirement of the contract, employees who may access nonpublic A. Definition PO 00000 Frm 00033 Fmt 4702 Sfmt 4702 E:\FR\FM\26APP1.SGM 26APP1 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules jlentini on DSKJ8SOYB1PROD with PROPOSALS the other clause or requirement takes precedence. This rule proposes, as the default position, mandatory use of the Access clause in solicitations and contracts when contract performance may involve contractor access to nonpublic information. However, the prescription allows agencies to provide otherwise in their procedures. The Access clause is prescribed on the same basis for use in solicitations and contracts for the acquisition of commercial items and in simplified acquisitions. 2. Alternate to the Access Clause a. Alternate I. Alternate I is prescribed for use if the contracting officer anticipates that there may be a need for executing confidentiality agreements between the contractor and one or more third parties that have provided nonpublic information to the Government. This alternate requires the contractor, if requested by the contracting officer, to negotiate and sign an agreement identical, in all material respects, to the restrictions on use and disclosure of nonpublic information in the Access clause, with each entity that has provided the Government nonpublic information to which the contractor must now have access to perform its obligations under the contract. b. Alternate II. Alternate II is for use if the contracting officer anticipates that the contractor may require access to a third party’s facilities or nonpublic information that is not in the Government’s possession. This alternate requires the contractor, if requested by the contracting officer, to execute a Government-approved agreement with any party to whose facilities or nonpublic information it is given access, restricting the contractor’s use of the nonpublic information to performance of the contract. 3. Release Clause. The purpose of the Release clause at FAR 52.204–YY, Release of Nonpublic Information, is to obtain the consent of the original owners of third-party nonpublic information for the Government to release such information to those contractors who need access to it for purposes of contract performance and who have signed up to the conditions of the Access clause. Unless agency procedures provide otherwise, the contracting officer must use the Release clauses in all solicitations and contracts, including solicitations and contracts for the acquisition of commercial items and below the simplified acquisition threshold. A solicitation provision at FAR 52.204–XY, Release of Nonpublic VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 Information, that provides similar coverage is prescribed for all solicitations. C. Unequal Access to Nonpublic Information 1. Policy. FAR section 4.402 addresses situations in which access to nonpublic information constitutes a risk to the competitive integrity of the acquisition process. It includes a policy section, expressing the Government’s policy that contracting officers must take action to resolve situations where one or more offerors hold an unfair competitive advantage. The policy section also states that disqualification of an offeror is the least-favored approach and should only be adopted if no other method of resolution will adequately protect the integrity of the competition. 2. General Principles. FAR subsection 4.402–3 contains general principles for determining when access to nonpublic information requires resolution. Specifically, the access must be Government-provided, the access must be unequal (that is, not all of the prospective offerors have access), the information must be competitively useful, and the competitive advantage must be unfair. 3. Contracting Officer Responsibilities. FAR subsection 4.402– 4 contains details covering contracting officer responsibilities. This begins with requirements to collect information regarding unequal access to nonpublic information, both from within the Government and from offerors. If the contracting officer becomes aware that an offeror may have unequal access to nonpublic information, the rule requires that the contracting officer conduct an analysis, consistent with the general principles discussed above, to determine whether resolution is required. If resolution is not required, the contracting officer simply documents the file. If resolution is required, the contracting officer must take action consistent with the section detailing appropriate resolution techniques, which consist of information sharing, mitigation through the use of a firewall, or disqualification. 4. Solicitation Provision. FAR subsection 4.402–5 prescribes a solicitation provision, FAR 52.204–YZ, Unequal Access to Nonpublic Information, that requires offerors to identify, early in the solicitation process, whether it or any of its affiliates possesses any nonpublic information relevant to the solicitation and provided by the Government. It also requires that the contractor certify by submission of its offer that, where a mitigation plan involving a firewall is already in place PO 00000 Frm 00034 Fmt 4702 Sfmt 4702 23241 (addressing nonpublic information relevant to the current competition), the offeror knows of no breaches of that firewall. V. Solicitation of Public Comment When commenting on the proposed rule, respondents are encouraged to offer their views on the following questions: A. Do the policy and associated principles set forth in the proposed rule provide an effective framework for evaluating and addressing conflicts of interest? B. Is the definition of ‘‘organizational conflict of interest’’ sufficiently comprehensive to address all potential forms of such conflicts? C. Do the enumerated techniques for addressing OCIs adequately address the Government’s interests? Are any too weak or overbroad? Are there other techniques that should be addressed? D. Does the rule adequately address the potential conflicts that may arise for companies that have both advisory and production capabilities? What, if any, improvements might be made? E. Do the proposed solicitation provisions and contract clauses adequately implement the policy framework set forth in the proposed rule? For example, is a clause limiting future contracting an operationally feasible means of resolving a conflict? Would it be beneficial and appropriate for this information generally to be made publicly available, such as through a notice on FedBizOpps? Do the solicitation provisions and contract clauses afford sufficient flexibility to help an agency meet its individual needs regarding a prospective or actual conflict? F. Is there a need for additional guidance to supplement the proposed FAR coverage of OCIs (e.g., guidance addressing the management of OCI responsibilities)? If so, what points should the guidance make? G. Is the framework presented by this proposed rule preferable to the framework presented in the DFARS Proposed Rule 2009–D015 published in the Federal Register on April 22, 2010 (75 FR 20954–20965)? Why or why not? Would some hybrid of the two proposed rules be preferable? H. Does the proposed rule strike the right balance between providing detailed guidance for contracting officers and allowing appropriate flexibility for dealing with the variety of forms that organizational conflicts of interest take and the variety of circumstances under which they arise? Are there certain types of contracts, or contracts for certain types of services, E:\FR\FM\26APP1.SGM 26APP1 23242 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules that warrant coverage that is more strict than that provided by the proposed rule? VI. Executive Orders 12866 and 13563 This is a significant regulatory action and, therefore, 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. In accordance with Executive Order 13563, Improving Regulation and Regulatory Review, dated January 18, 2011, DoD, GSA, and NASA determined that this rule is not excessively burdensome on the public, and is consistent with Section 841 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, which required a review of the FAR coverage on OCIs. jlentini on DSKJ8SOYB1PROD with PROPOSALS VII. Regulatory Flexibility Act A. The proposed changes are not expected to result in 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— 1. The requirements of FAR subpart 3.12 do not differ from the burden currently imposed on offerors and contractors by FAR subpart 9.5 and the requirements of subpart 3.12 are not significantly burdensome. It is good business practice to have procedures in place to identify potential organizational conflicts of interest and to have prepared mitigation plans for obvious conflicts. This proposed rule has also reduced the potential burden by— a. Not including a certification requirement; and b. Providing for avoidance, neutralization, or mitigation of organizational conflicts or interest or, under exceptional circumstances, waiver of the requirement for resolution. 2. Unless the Access clause is used with Alternate I or Alternate II, this approach standardizes and simplifies the current system of third-party agreements envisioned by FAR 9.505–4. Having each contractor implement specific safeguards and procedures should offer the same or better protection for information belonging to small business entities. Moreover, this rule should ease the burden on most small business entities by not requiring them to enter multiple, interrelated third-party agreements with numerous service contractors. If the Access clause is used with Alternate I or Alternate II, then that is no more burdensome than VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 the current requirements of FAR 9.505– 4. B. However, an Initial Regulatory Flexibility Analysis has nevertheless been prepared and is summarized as follows: This proposed rule implements Section 841 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110–417) by providing revised regulatory coverage on organizational conflicts of interest (OCIs) and unequal access to information. The rule also provides additional coverage regarding contractor access to nonpublic information, and adds related provisions and clauses. The objective of the rule is to help the Government in identifying and addressing circumstances in which a Government contractor may be unable to render impartial assistance or advice to the Government or might have an unfair competitive advantage based on unequal access to information or prior involvement in setting the ground rules for an acquisition. In recent years, a number of trends in acquisition and industry have led to the increased potential for OCIs, including— • Industry consolidation; • Agencies’ growing reliance on contractors for services, especially where the contractor is tasked with providing advice to the Government; and • The use of multiple-award task- and delivery-order contracts, which permit large amounts of work to be awarded among a limited pool of contractors. Section 841 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110–417) directed a review of the conflicts of interest provisions in the FAR. Section 841 required that appropriate revisions, including contract clauses, be developed as necessary, pursuant to that review. Competitive integrity issues caused by unequal access to nonpublic information are often unrelated to OCIs. Therefore, treating this topic independently will allow for more targeted coverage that properly addresses the specific concerns involved in such cases; and including broad coverage of contractor access to nonpublic information will provide a framework for the topic of unequal access to nonpublic information. An OCI is defined as a situation in which a Government contract requires a contractor to exercise judgment to assist the Government in a matter (such as in drafting specifications or assessing another contractor’s proposal or performance) and the contractor or its PO 00000 Frm 00035 Fmt 4702 Sfmt 4702 affiliates have financial or other interests at stake in the matter, so that a reasonable person might have concern that when performing work under the contract, the contractor may be improperly influenced by its own interests rather than the best interests of the Government; or a contractor could be viewed as having an unfair competitive advantage in an acquisition as a result of having previously performed work on a Government contract, under circumstances such as those just described, that put the contractor in a position to influence the acquisition. The circumstances that lead to OCIs are most likely to occur in large businesses that have diverse capacity to provide both upfront advice and also a capacity for production. Although a small business might become involved in OCIs through its affiliates, we estimate that the proposed rules on OCIs would not impact a significant number of small entities. Furthermore, this rule is not adding burdens relating to OCIs that are beyond the current expectations of FAR subpart 9.5. It is just providing standard procedures and clauses, rather than requiring each contracting officer to craft unique provisions and clauses appropriate to the situation. With regard to contractor access to information, the rule will impact entities that have access to nonpublic information in performance of a Government contract. We estimate that about half of the entities impacted will be small entities (estimated at 25,000 small entities). Typical contracts that may provide access to nonpublic information include services contracts such as professional, administrative, or management support or special studies and analyses. Furthermore, small entities that are submitting offers to the Government must inform the Government, prior to submission of offers, if they possess any nonpublic information relevant to the current solicitation (estimated at 5,750 small entities). This rule requires the following projected reporting burdens for access to information: a. Provide copy of nondisclosure agreement upon request (6,250 respondents × .5 hours per response = 3,125 hours). b. Notify contracting officer of violation (250 respondents × 4 hours per response = 1,000 hours). c. Notify contracting officer if access information that should not have access to (125 respondents × 1 hour per response = 125 hours). d. Explain in solicitation any unequal access to nonpublic information (5,750 E:\FR\FM\26APP1.SGM 26APP1 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules respondents × 3 hours per response = 17,250). e. Explain if firewall was not implemented, or breached (rare) (10 respondent × 5 hours per response = 50 hours). We estimate that the respondents will be administrative employees earning approximately $75 per hour (+ .3285 overhead). This rule overlaps, with other Federal rules: FAR Cases 2007–018, 2007–019, 2008–025, 2009–022, and 2009–030; and DFARS Case 2009–D015. The Councils identified a significant alternative that would accomplish the objectives of the statute and the policies. See the discussion in the rule preamble about DFARS case 2009–D015. DoD, GSA, and NASA invite comments from small business concerns and other interested parties on the expected impact of this rule on small entities. DoD, GSA, and NASA will also consider comments from small entities concerning the existing regulations in subparts affected by the rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (FAR Case 2011–001), in correspondence. VIII. Paperwork Reduction Act The proposed changes to the FAR impose a new information collection requirement that requires the approval of the Office of Management and Budget under 44 U.S.C. chapter 35, et seq. Under this proposed rule, an offeror may be required to submit information to identify an OCI and propose a resolution, such as a mitigation plan submitted by the offeror with its proposal. While this requirement existed informally since 1984 in FAR subpart 9.5, it is only now being formalized via the new contract provision and clause at FAR 52.203–XX and FAR 52.203–YY. jlentini on DSKJ8SOYB1PROD with PROPOSALS A. Annual Reporting Burden: Public reporting burden for this collection of information is estimated to average approximately 4.6 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The annual reporting burden is estimated as follows: 1. Organizational Conflicts of Interest. Respondents: 30,930. Responses per respondent: 1.0. Total annual responses: 30,930. Preparation hours per response: 6.96. VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 Total response burden hours: 215,273. 2. Contractor Access to Nonpublic Information. Respondents: 24,760. Responses per respondent: 1. Total annual responses: 24,760. Preparation hours per response: 2. Total response burden hours: 49,520. 3. Total. Respondents: 55,690. Responses per respondent: 1. Total annual responses: 55,690. Preparation hours per response: 4.755. Total response burden hours: 264,793. B. Request for Comments Regarding Paperwork Burden Submit comments, including suggestions for reducing this burden, not later than June 27, 2011 to: FAR Desk Officer, OMB, Room 10102, NEOB, Washington, DC 20503, and a copy to the General Services Administration, Regulatory Secretariat (MVCB), Attn: Hada Flowers, 1275 First Street, NE., 7th Floor, Washington, DC 20417. Public comments are particularly invited on: Whether this collection of information is necessary for the proper performance of functions of the FAR, and will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology. Requester may obtain a copy of the supporting statement from the General Services Administration, Regulatory Secretariat (MVCB), 1275 First Street, NE., 7th Floor, Washington, DC 20417. Please cite OMB Control Number 9000– 0178, Organizational Conflicts of Interest, in correspondence. List of Subjects in 48 CFR Parts 2, 3, 4, 7, 9, 11, 12, 13, 14, 15, 16, 18, 37, 42, 52, and 53 Government procurement. Dated: April 13, 2011. Millisa Gary, Acting Director, Office of Governmentwide Acquisition Policy. Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 2, 3, 4, 7, 9, 11, 12, 13, 14, 15, 16, 18, 37, 42, 52, and 53 as set forth below: 1. The authority citation for 48 CFR parts 2, 3, 4, 7, 9, 11, 12, 13, 14, 15, 16, 18, 37, 42, 52, and 53 continues to read as follows: PO 00000 Frm 00036 Fmt 4702 Sfmt 4702 23243 Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c). PART 2—DEFINITIONS OF WORDS AND TERMS 2. Amend section 2.101 in paragraph (b)(2) by— a. Removing from paragraph (3) in the definition ‘‘Advisory and assistance services’’ ‘‘(see 9.505–1(b))’’; b. Adding, in alphabetical order, the definition ‘‘Nonpublic information’’; and c. Revising ‘‘Organizational conflict of interest.’’ The added and revised text to read as follows: § 2.101 Definitions. * * * * * (b) * * * (2) * * * Nonpublic information means any Government or third-party information that— (1) Is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552) or otherwise protected from disclosure by statute, Executive order, or regulation; or (2) Has not been disseminated to the general public, and the Government has not yet determined whether the information can or will be made available to the public. * * * * * Organizational conflict of interest means a situation in which— (1) A Government contract requires a contractor to exercise judgment to assist the Government in a matter (such as in drafting specifications or assessing another contractor’s proposal or performance) and the contractor or its affiliates have financial or other interests at stake in the matter, so that a reasonable person might have concern that when performing work under the contract, the contractor may be improperly influenced by its own interests rather than the best interests of the Government; or (2) A contractor could have an unfair competitive advantage in an acquisition as a result of having performed work on a Government contract, under circumstances such as those described in paragraph (1) of this definition, that put the contractor in a position to influence the acquisition. * * * * * PART 3—BUSINESS ETHICS AND CONFLICTS OF INTEREST 3. Revise part 3 heading to read as set forth above. 4. Revise section 3.000 to read as follows: E:\FR\FM\26APP1.SGM 26APP1 23244 § 3.000 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules Scope of part. This part prescribes policies and procedures for addressing issues regarding business ethics and conflicts of interest. § 3.603 [Amended] 5. Amend section 3.603 by removing from paragraph (b) ‘‘subpart 9.5’’ and adding ‘‘subpart 3.12’’ in its place. 6. Add subpart 3.12 to read as follows: Subpart 3.12—Organizational Conflicts of Interest Sec. 3.1200 Scope of subpart. 3.1201 Definition. 3.1202 Applicability. 3.1203 Policy. 3.1204 Methods of addressing organizational conflicts of interest. 3.1204–1 Avoidance. 3.1204–2 Limitation on future contracting (neutralization). 3.1204–3 Mitigation. 3.1204–4 Assessment that risk is acceptable. 3.1205 Waiver. 3.1206 Contracting officer responsibilities. 3.1206–1 General. 3.1206–2 Pre-solicitation responsibilities. 3.1206–3 Addressing organizational conflicts of interest during evaluation of offers. 3.1206–4 Contract award. 3.1206–5 Issuance of task or delivery orders or blank purchase agreement calls. 3.1207 Solicitation provision and contract clauses. Subpart 3.12—Organizational Conflicts of Interest § 3.1200 Scope of subpart. jlentini on DSKJ8SOYB1PROD with PROPOSALS Definition. ‘‘To address,’’ as used in this subpart, means to protect the integrity of the competitive acquisition process, as well as the Government’s business interests (see 3.1203(a)(2)), by one or more of the following methods: (1) Avoidance. (2) Neutralization through limitations on future contracting. (3) Mitigation of the risks involved. (4) Assessment that the risk inherent in the conflict is acceptable (either without further action or in conjunction with application of one or more of the other methods listed in paragraphs (a) VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 § 3.1202 Applicability. (a) This subpart— (1) Applies to contracts and subcontracts with both profit and nonprofit organizations, including nonprofit organizations created largely or wholly with Government funds. Contracts include task and delivery orders and modifications that add work; and (2) Applies to the acquisition of commercial items, including commercially available off-the-shelf items (see 12.301(d)(3)) if the contracting officer determines that contractor performance of the work may give rise to an organizational conflict of interest. (b) Although this subpart applies to every type of acquisition, organizational conflicts of interest are more likely to arise when at least one of the contracts involved is for acquisition support services or advisory and assistance services. (c) Application of this subpart is independent of coverage concerning unequal access to nonpublic information (see 4.402). Contracting officers must consider each issue separately in determining whether steps must be taken to protect the interests of the Government. (d) This subpart shall not be applied in any manner that conflicts with an agency-specific conflict of interest statute. § 3.1203 (a) This subpart prescribes policies and procedures for identifying, analyzing, and addressing organizational conflicts of interest (as defined in 2.101). It implements 41 U.S.C. 2304 and section 841(b)(2) of Public Law 110–417. (b) This subpart does not address unequal access to nonpublic information, which is addressed in 4.402. § 3.1201 through (c) of this definition). (See 3.1204.) Policy. (a) The Government’s interests. It is the Government’s policy to identify, analyze, and address organizational conflicts of interest that might otherwise exist or arise in acquisitions in order to maintain the public’s trust in the integrity and fairness of the Federal acquisition system. Organizational conflicts of interest have the potential to undermine the public’s trust in the Federal acquisition system because they can impair— (1) The integrity of the competitive acquisition process. The Government has an interest in preserving its ability to solicit competitive proposals and affording prospective offerors an opportunity to compete for Government requirements on a level playing field. In some cases, an organizational conflict of interest will be accompanied by a risk that the conflicted contractor will create for itself, or obtain, whether intentionally or not, an unfair advantage in competing for a future Government requirement. The result may be a seriously flawed competition, which is PO 00000 Frm 00037 Fmt 4702 Sfmt 4702 unacceptable in terms of good governance, fairness, and maintenance of the public trust; and (2) The Government’s business interests. As a steward of public funds, the Government has an interest in ensuring both that it acquires products and services that provide the best value to the Government and that the contractor’s performance in fulfilling the Government’s requirements is consistent with contractual expectations. In many cases, an organizational conflict of interest will be accompanied by a risk that the conflict will affect the contractor’s judgment during performance in a way that degrades the value of its services to the Government. This type of risk is most likely to appear when the exercise of judgment is a key aspect of the service that the contractor will be providing. (b) Addressing organizational conflicts of interest. (1) Agencies must examine and address organizational conflicts of interest on a case-by-case basis, because such conflicts arise in various, and often unique, factual settings. Contracting officers shall consider both the specific facts and circumstances of the contracting situation and the nature and potential extent of the risks associated with an organizational conflict of interest when determining what method or methods of addressing the conflict will be appropriate. (2) If an organizational conflict of interest is such that it risks impairing the integrity of the competitive acquisition process, then the contracting officer must take action to substantially reduce or eliminate this risk. (3) If the only risk created by an organizational conflict of interest is a performance risk relating to the Government’s business interests, then the contracting officer has broad discretion to select the appropriate method for addressing the conflict, including the discretion to conclude that the Government can accept some or all of the performance risk. (c) Waiver. It is the policy of the Government to minimize the use of waivers of organizational conflicts of interest. However, in exceptional circumstances, the agency may grant a waiver in accordance with 3.1205. § 3.1204 Methods of addressing organizational conflicts of interest. Organizational conflicts of interest may be addressed by means of avoidance, limitations on future contracting, mitigation, or the Government’s assessment that the risk inherent in the conflict is acceptable. In E:\FR\FM\26APP1.SGM 26APP1 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules some cases, a combination of methods may be appropriate. jlentini on DSKJ8SOYB1PROD with PROPOSALS § 3.1204–1 Avoidance. Avoidance consists of Government action taken in one acquisition that is intended to prevent organizational conflicts of interest from arising in that acquisition or in a future acquisition. In order to successfully implement an avoidance strategy, the contracting officer should work with the program office or requiring activity early in the acquisition process. Methods of avoiding organizational conflicts of interest include, but are not limited to, the following: (a) Drafting the statement of work to exclude tasks that require contractors to utilize subjective judgment. This strategy may be used to avoid or prevent organizational conflicts of interest both in the instant contract and in future acquisitions. Tasks requiring subjective judgment include— (1) Making recommendations; (2) Providing analysis, evaluation, planning, or studies; and (3) Preparing statements of work or other requirements and solicitation documents. (b) Requiring the contractor (and its affiliates, as appropriate) to implement structural barriers, internal corporate controls, or both, in order to forestall organizational conflicts of interest that could arise because, for example, the contractor will be participating in preparing specifications or work statements in the performance of the immediate contract. This avoidance method differs from mitigation in that it is used to prevent organizational conflicts of interest from arising in future acquisitions, rather than addressing organizational conflicts of interest in the instant contract. (c) Excluding an offeror or offerors from participation in a procurement. (1) Use of this method may be appropriate when the contracting officer concludes that— (i) The offeror will have an unfair advantage in the competition because of its prior involvement (or an affiliate’s prior involvement) in developing the ground rules for the procurement; or (ii) The risk that the offeror’s judgment or objectivity in performing the proposed work will be impaired because the substance of the work has the potential to affect other of the offeror’s (or its affiliates’) current or future activities or interests is more significant than the Government is willing to accept. (2) This approach may be used only if the contracting officer has determined that no less restrictive method for VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 addressing the conflict will adequately protect the Government’s interest. This determination must be documented in the contract file. (3) Before excluding an offeror from participation in a procurement on the basis of an organizational conflict of interest that arises because of work done by an affiliate of the offeror (creating an unfair competitive advantage), the contracting officer shall identify and analyze the corporate and business relationship between the offeror and the affiliate. The contracting officer’s efforts should be directed toward understanding the nature of the relationship between the entities and determining whether the risk associated with the organizational conflict of interest can be addressed through mitigation (see 3.1204–3). The contracting officer should, at a minimum, examine whether— (i) The offeror and affiliate are controlled by a common corporate headquarters; (ii) The overall corporate organization has established internal barriers, such as corporate resolutions, management agreements, or restrictions on personnel transfers, that limit the flow of information, personnel, and other resources between the relevant entities; (iii) The offeror and affiliates are separate legal entities and are managed by separate boards of directors; (iv) The corporate organization has instituted recurring training on organizational conflicts of interest and protections against organizational conflicts of interest; and (v) The affiliate can influence the offeror’s performance of its contractual requirements. § 3.1204–2 Limitation on future contracting (neutralization). (a) A limitation on future contracting allows a contractor to perform on the instant contract but precludes the contractor from submitting offers for (or participating as a subcontractor in) future contracts where the contractor would have an unfair advantage in competing for award (or could provide the prime contractor with such an advantage). The limitation on future contracting effectively ‘‘neutralizes’’ the organizational conflict of interest. (b) Limitations on future contracting shall be restricted to a fixed term of reasonable duration that is sufficient to neutralize the organizational conflict of interest. The restriction shall end on a specific date or upon the occurrence of an identifiable event. § 3.1204–3 Mitigation. (a)(1) Mitigation is any action taken to reduce the risk that an organizational PO 00000 Frm 00038 Fmt 4702 Sfmt 4702 23245 conflict of interest will undermine the public’s trust in the Federal acquisition system. (2) Mitigation may require Government action, contractor action, or a combination of both. (b) When this approach is utilized, a Government-approved mitigation plan, reflecting the actions a contractor has agreed to take to mitigate a conflict, shall be incorporated into the contract. The required complexity of the mitigation plan is related to the complexity of the organizational conflict of interest and the size of the acquisition. While implementation of a mitigation plan may rest largely with a contractor, the Government bears responsibility for ensuring that mitigation plans are properly implemented, and the Government must not leave enforcement to the contractor. (c) Ways of mitigating organizational conflicts of interest include, but are not limited to, the following: (1) Requiring a subcontractor or team member that is conflict-free to perform the conflicted portion of the work on the instant contract. This technique will not be effective in reducing the risk associated with a conflict unless it is utilized in conjunction with a system of controls that can ensure that the conflicted entity has no input or influence on the work of the subcontractor or team member performing the conflicted portion of the work. (2) Requiring the contractor to implement structural or behavioral barriers, internal controls, or both. (i) This method can be used to lessen the risk that the potentially conflicting financial interests of an affiliate will influence the contractor’s exercise of judgment during contract performance. The choice of specific barriers or controls should be based on an analysis of the facts and circumstances of each case. Examples of such methods include, but are not limited to— (A) An agreement that the contractor’s board of directors will adopt a binding resolution prohibiting certain directors, officers, or employees, or parts of the company from any involvement with contract performance; (B) A condition for a nondisclosure agreement between the contractor performing the contract and all of its affiliates; (C) A condition that the contractor’s board of directors include one or more independent directors who have no prior relationship with the contractor; and (D) Creation of a corporate organizational conflict of interest compliance official at a senior level to E:\FR\FM\26APP1.SGM 26APP1 23246 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules oversee implementation of any mitigation plan. (ii) A firewall will often be necessary to implement the controls in the previous paragraph (c)(2)(i) of this subsection. However, a firewall that serves only to limit the sharing of information, by itself, is generally not effective in addressing an organizational conflict of interest. (3) Obtaining advice from more than one source on a particular issue, so that the Government is not relying solely on the advice of any one of the sources. 3.1204–4 Assessment that risk is acceptable. (a) The contracting officer shall not use this method of assessment that the risk is acceptable to address conflicts when the conflict could impair the competitive acquisition process (see 3.1203). (b) The contracting officer may assess that the risk associated with an organizational conflict of interest is acceptable when— (1) The only risk created by the conflict is a performance risk relating to the business interests of the Government; (2) The risk is manageable; and (3) The potential harm to the Government’s interest is outweighed by the expected benefit from having the conflicted offeror perform the contract. (c) This method of addressing conflicts should generally be combined with other methods, particularly mitigation. For example, the contracting officer may require a mitigation plan, and elect to accept the remaining risk if the contracting officer concludes that the mitigation plan does not remove all of the performance risk associated with the conflict. (d) The contracting officer shall consider all readily available information (see 3.1206–3) before concluding that the risk of harm is acceptable. (e) All assessments that the risk is acceptable must be in writing, setting forth the extent of the conflict and explaining why it is in the best interest of the Government to accept the risk associated with the conflict. jlentini on DSKJ8SOYB1PROD with PROPOSALS 3.1205 Waiver. (a) Authority. (1) In exceptional circumstances, the agency head may waive the requirement to address an organizational conflict of interest in a particular acquisition, but only if the agency head first determines that— (i) Mitigation or other means of addressing the organizational conflict of interest are not feasible (e.g., the agency cannot assess the risk as acceptable VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 because the organizational conflict of interest involves an unfair competitive advantage); and (ii) The waiver is necessary to accomplish the agency’s mission. (2) The agency head shall not delegate this waiver authority below the head of a contracting activity. (b) Requirements. (1) Any waiver shall— (i) Be in writing; (ii) Cover only one contract action; (iii) Describe the extent of the organizational conflict of interest; (iv) Explain why the waiver is necessary to accomplish the agency’s mission; and (v) Be approved by the appropriate official. (2) The contracting officer shall include the waiver documentation and decision in the contract file. 3.1206 Contracting officer responsibilities. 3.1206–1 General. (a) The contracting officer shall assess early in the acquisition process whether contractor performance of the contemplated work is likely to create any organizational conflicts of interest (see 3.1206–2 and 7.105(b)(18)). (b) The contracting officer shall exercise common sense, good judgment, and sound discretion— (1) In deciding whether an acquisition may give rise to an organizational conflict of interest; and (2) In developing an appropriate means for addressing any such conflicts. 3.1206–2 Pre-solicitation responsibilities. (a) Initial assessment. (1) The contracting officer shall review the nature of the work to be performed to decide whether performance by a contractor has the potential to create an organizational conflict of interest (see 3.1202(b)). In addition to evaluating the nature of the work to be performed on the immediate contract, the contracting officer should also consider whether performance of the present contract could cause the contractor to have an organizational conflict of interest in a foreseeable future contract. (2) As appropriate to the circumstances, the contracting officer should obtain the assistance of the program office, appropriate technical specialists, and legal counsel in identifying the potential for organizational conflicts of interest. (3) If the contracting officer decides that contractor performance of the contemplated work does not have the potential to create an organizational conflict of interest, the contracting officer shall document in the contract PO 00000 Frm 00039 Fmt 4702 Sfmt 4702 file the rationale supporting the decision. (4) If the contracting officer decides that contractor performance of the contemplated work has the potential to create an organizational conflict of interest, the contracting officer should consult with the program office or requiring activity to determine whether any organizational conflicts of interest could be avoided by drafting the requirements documents to exclude tasks that require the contractor to exercise subjective judgment during contract performance. If avoiding organizational conflicts of interest is not feasible at this stage, then the contracting officer shall proceed with the pre-solicitation actions described in paragraph (b) of this subsection. (b) Pre-solicitation actions. (1) When assessing the nature and scope of any organizational conflicts of interest that may arise during contract performance and preliminarily considering how best to address any such conflicts, the contracting officer should weigh the following factors to the extent feasible at this pre-solicitation phase: (i) The extent to which the contract calls for the contractor to exercise subjective judgment and provide advice. (ii) The extent and severity of the expected impact of the organizational conflict of interest (for example, whether it is expected to occur only once or twice during performance or to impact performance of the entire contract). (iii) The extent to which the agency has effective oversight controls to ensure that the contractor’s actions are unaffected by an organizational conflict of interest during performance. (iv) Whether the organizational conflict of interest risks creation of an unfair competitive advantage. (v) The degree to which any impairment of the contractor’s objectivity may reduce the value of its services to the agency, and the agency’s willingness to accept the performance risk of that impairment. (2) If the contracting officer concludes that the only risk associated with organizational conflicts of interest is a risk to the Government’s business interests, the contracting officer may choose one of the following approaches: (i) Include consideration of potential risks associated with organizational conflicts of interest as an evaluation factor in the technical rating. If the Government determines that treatment of organizational conflicts of interest through use of an evaluation factor is appropriate, an appropriate evaluation factor must be included in the solicitation. E:\FR\FM\26APP1.SGM 26APP1 jlentini on DSKJ8SOYB1PROD with PROPOSALS Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules (ii) Do not include consideration of potential risks associated with organizational conflicts of interest as an evaluation factor in the technical rating. In this case, the Government will address the performance risks associated with any organizational conflicts of interest outside of the evaluation process and may engage in exchanges with offerors in order to understand the conflicts and assess the feasibility of addressing the risks (see 3.1206–3(b)(2)(ii)). Prior to contract award, the source selection team will select the apparent successful offeror independent of any organizational conflict of interest. The contracting officer will then assess whether or not to proceed with award, based on whether any organizational conflict of interest can be addressed (see 3.1206– 4(a)). Award to the apparent successful offeror will not be made if any organizational conflict of interest cannot be addressed. (3) If the contracting officer has decided that contractor performance of the contemplated work has the potential to create an organizational conflict of interest, the contracting officer shall select the appropriate solicitation provisions and contract clauses for the resulting solicitation in accordance with 3.1207. (i) The contracting officer shall require the program office or requiring activity to identify any contractor(s) that participated in preparation of the statement of work or other requirements documents, including cost or budget estimates. The contracting officer shall review this list to identify the nature and scope of any conflict. The solicitation should, if appropriate, include a provision identifying contractors prohibited from competing as a prime contractor or a subcontractor due to any applicable pre-existing limitations on future contracting. (ii) The contracting officer shall include in the solicitation a provision and clause as prescribed in 3.1207(a) and 3.1207(b). (iii) If the contracting officer anticipates that the parties will use a mitigation plan to address an organizational conflict of interest in whole or in part, the contracting officer shall include in the solicitation a clause as prescribed in 3.1207(c). (iv) When the contemplated work calls for the contractor to exercise subjective judgment or provide advice which may create an unfair competitive advantage, the contracting officer shall include in the solicitation an appropriate limitation on future contracting as prescribed in 3.1207(d). VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 3.1206–3 Addressing organizational conflicts of interest during evaluation of offers. (a) Sources of Information—(1) Information from offerors. The contracting officer shall use information provided by the offerors (see 52.203– XX, Notice of Potential Organizational Conflict of Interest) to identify organizational conflicts of interest. However, the contracting officer should not rely solely on this contractorprovided information. (2) Other sources of information. The contracting officer should seek readily available information about the financial interests of the offerors, affiliates of the offerors, and prospective subcontractors from within the Government or from other sources and compare this information against information provided by the offeror. (i) Government sources. Government sources include the files and the knowledge of personnel within— (A) The contracting office; (B) Other contracting offices; (C) The cognizant contract administration, finance, and audit activities; and (D) The requiring activity. (ii) Non-Government sources. NonGovernment sources include, but are not limited to— (A) Offeror’s Web sites; (B) Trade and financial journals; (C) Business directories and registers; and (D) Annual corporate shareholder reports. (b) Actions to address organizational conflicts of interest. (1) Consistent with 3.1206–3(a), the contracting officer should analyze both contractorprovided and otherwise available information in determining how to address any organizational conflicts of interest. (2) If the acquisition involves contractor-submitted mitigation plans, then the contracting officer shall analyze the feasibility of mitigation of the organizational conflict of interest, including both the expected effectiveness of the conflicted entity’s proposed mitigation plan and the Government’s ability to monitor and enforce the provisions of the plan. (i) If organizational conflicts of interest were included as an evaluation factor, then communications between the Government and an offeror that could result in changes to the offeror’s mitigation plan will constitute discussions. Changes to an offeror’s mitigation plan will likely also lead the Government to reassess the technical rating assigned to the offeror. (ii) If organizational conflicts of interest were not included as an PO 00000 Frm 00040 Fmt 4702 Sfmt 4702 23247 evaluation factor, then communications between the Government and an offeror regarding the offeror’s mitigation plan, will not constitute discussions, unless the communications result in changes to evaluated aspects of the offeror’s proposal. 3.1206–4 Contract award. (a) If organizational conflicts of interest were not considered as an evaluation factor, before withholding award from the apparent successful offeror based on conflict of interest considerations, the contracting officer shall— (1) Notify the contractor in writing; (2) Provide the reasons therefore; and (3) Allow the contractor a reasonable opportunity to respond. (b) Except as provided in paragraphs (c) and (d) of this subsection, the contracting officer shall award the contract to the apparent successful offeror only if all organizational conflicts of interest have been addressed. (c) If the contracting officer finds that it is in the best interest of the Government to award the contract notwithstanding an unaddressed conflict of interest, a request for waiver shall be submitted in accordance with 3.1205. (d) For task- or delivery-order contracts or blanket purchase agreements, the contracting officer shall attempt to identify all organizational conflict of interest issues at the time of award of the basic task- or deliveryorder contract or blanket purchase agreement. To the extent an organizational conflict of interest can be identified at the time of award of the underlying vehicle, the contracting officer shall include a mitigation plan or limitation on future contracting in the basic contract or agreement, unless the contracting officer decides to accept the risk associated with the conflict without any such actions. 3.1206–5 Issuance of task or delivery orders or blanket purchase agreement calls. (a) The contracting officer shall consider organizational conflicts of interest at the time of issuance of each order (going through the steps comparable to those in 3.1206–2, except that there is no solicitation involved in issuance of orders). If procedures for addressing an organizational conflict of interest are in the basic task- or delivery-order contract or blanket purchase agreement at the time of its award, the contracting officer may need to appropriately tailor the procedures when issuing an order. (b) For interagency acquisitions that are facilitated through task- or delivery- E:\FR\FM\26APP1.SGM 26APP1 23248 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules order contracts, including the Federal Supply Schedules— (1) If the order is placed as a direct acquisition, the contracting officer for the ordering agency is responsible for determining if a mitigation plan is required, developing a Governmentapproved plan, if necessary, and administering the plan, if one is developed; or (2) If the order is placed as an assisted acquisition, the servicing agency and requesting agency shall identify which agency is responsible for the actions identified in paragraph (a) of this section and reflect this understanding in their interagency agreement. jlentini on DSKJ8SOYB1PROD with PROPOSALS 3.1207 Solicitation provision and contract clauses. (a)(1) The contracting officer shall include a solicitation provision substantially the same as 52.203–XX, Notice of Potential Organizational Conflict of Interest, upon determining that contractor performance of the work may give rise to organizational conflicts of interest. (2) The contracting officer shall fill in paragraph (b)(2) of the provision, if the program office or requiring activity has identified any contractors that participated in preparation of the statement of work or other requirements documents, including cost or budget estimates. (b) The contracting officer shall include in solicitation and contracts a clause substantially the same as 52.203– ZZ, Disclosure of Organizational Conflict of Interest after Contract Award, when the solicitation includes the provision 52.203–XX, Notice of Potential Organizational Conflict of Interest. (c) The contracting officer shall include in solicitations and contracts a clause substantially the same as 52.203– YY, Mitigation of Organizational Conflicts of Interest, when the contract may involve an organizational conflict of interest that can be addressed by an acceptable contractor-submitted mitigation plan prior to contract award. (d) The contracting officer shall include in solicitations and contracts a clause substantially the same as 52.203– YZ, Limitation on Future Contracting, when the method of addressing the organizational conflict of interest will involve a limitation on future contracting. (1) The contracting officer shall fill in the nature and duration of the limitation on future contractor activities in paragraph (a) of the clause. (2) The contracting officer shall ensure that the duration of the VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 limitation is sufficient to neutralize any unfair competitive advantage. PART 4—ADMINISTRATIVE MATTERS 7. Revise the heading of subpart 4.4 to read as follows: Subpart 4.4—Safeguarding Information Within Industry 8. Add sections 4.401 through 4.401– 4 to read as follows: 4.401 Contractor access to nonpublic information. 4.401–1 Scope. This section prescribes policies and procedures applicable to contracts that may require, authorize, or permit contractor access to nonpublic information during contract performance. 4.401–2 Policy. It is the Government’s policy— (a) To preclude contractor use or disclosure of nonpublic information for any purpose unrelated to contract performance; (b) To ensure that the contractor does not obtain any unfair competitive advantage by virtue of its access to nonpublic information (see 4.402); and (c) To allow agencies discretion to prescribe more restrictive policies and regulations regarding the release and disclosure of nonpublic information than are established in this subpart (e.g., limitations on reassignment of personnel, more stringent notification requirements in cases of unauthorized disclosure, etc.). 4.401–3 Restrictions on access to nonpublic information. (a) The contracting officer shall not permit contractor access to nonpublic information unless— (1) The Government is authorized to permit such access, e.g., under subpart 24.2. (2) The access is necessary for performance of the contract; and (3) Access is limited to persons who require access to that information to perform the contract. (b) If a contractor reports an unauthorized disclosure or misuse of information in accordance with paragraph (b)(2)(vii) of 52.204–XX, Access to Nonpublic Information, the contracting officer shall— (1) Review the actions taken by the contractor; (2) Determine whether any action taken by the contractor has addressed the situation satisfactorily; and (3) If the contracting officer determines that the contractor has not PO 00000 Frm 00041 Fmt 4702 Sfmt 4702 addressed the situation satisfactorily, take any appropriate action in consultation with agency legal counsel. 4.401–4 Solicitation provision and contract clauses. Unless agency procedures provide otherwise— (a)(1) The contracting officer shall insert the clause at 52.204–XX, Access to Nonpublic Information, in solicitations and contracts when the contractor (or its subcontractors) may have access to nonpublic information. (2) If the contracting officer decides that due to the contract requirements— (i) There may be a need for executing confidentiality agreements between the contractor and one or more third parties that have provided information to the Government, insert the clause with its Alternate I. (ii) The contractor may require access to a third party’s facilities or proprietary information that is not in the Government’s possession, insert the clause with its Alternate II. (b) The contracting officer shall insert the provision at 52.204–XY, Release of Pre-Award Information, in all solicitations. (c) The contracting officer shall insert the clause at 52.204–YY, Release of Nonpublic Information, in all solicitations and contracts. 4.402 through 4.404 [Redesignated as 4.403–1 through 4.403–3] 9a. Redesignate sections 4.402 through 4.404 as sections 4.403–1 through 4.403–3, respectively. 9b. Add new sections 4.402 and 4.403 to read as follows: 4.402 Unequal access to nonpublic information. 4.402–1 Scope. This section prescribes policies and procedures for identifying and resolving situations in which an offeror’s access to nonpublic information provides the offeror with an unfair competitive advantage. 4.402–2 Policy. (a) Because an unfair competitive advantage held by one or more offerors risks tainting the integrity of the competitive acquisition process, the Government must take action to resolve any situations in which an offeror has obtained an unfair competitive advantage because of its unequal access to nonpublic information. (b) When an offeror has an unfair competitive advantage because of unequal access to nonpublic information, the Government shall disqualify the offeror from a E:\FR\FM\26APP1.SGM 26APP1 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules competition only when no other method of resolution is appropriate (see 4.402– 4(c)). (c) In competing for follow-on requirements, incumbent contractors will often have a natural advantage that is based on their experience, insights, and expertise rather than any unequal access to nonpublic information. This type of competitive advantage is not considered unfair. This situation must be distinguished from situations in which an incumbent contractor also had access to nonpublic information that could provide it, in a future acquisition, a competitive advantage that is unfair. jlentini on DSKJ8SOYB1PROD with PROPOSALS 4.402–3 General principles. An offeror’s unequal access to nonpublic information may give it an unfair competitive advantage with respect to a particular acquisition. However, not all access to nonpublic information is unequal and, even where access may be unequal, such access will not always result in the offeror obtaining an unfair competitive advantage. Contracting officers shall consider the following factors when determining whether a particular situation involving offeror access to nonpublic information requires resolution: (a) Whether access to the nonpublic information was provided by the Government. (1) Nonpublic information can come to an offeror from the Government either— (i) Directly, through, or in connection with, performance on another Government contract; or (ii) Indirectly, through sources such as former Government employees or employees of other contractors or subcontractors who received the nonpublic information from the Government. (2) The Government has not provided access to nonpublic information, even indirectly, when an offeror gains access to nonpublic information through market research efforts or by way of private-sector business contacts. (3) If an offeror gained access to the nonpublic information at issue in a particular situation through a source other than the Government, then the contracting officer need not take steps to resolve the situation. (b) Whether the nonpublic information (although provided by the Government) is available to all potential offerors. If the nonpublic information is otherwise available to all potential offerors, then— (1) The offeror’s access to the information is not unequal; and (2) The contracting officer need not take steps (other than potentially VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 sharing the information with all offerors, see 4.402–4(c)) to resolve the situation. (c) Whether having unequal access to the nonpublic information would be competitively useful to an offeror responding to a solicitation. (1) In assessing whether nonpublic information would be competitively useful to an offeror, the contracting officer should make a reasonable effort to consult with people with knowledge of the market and the industry. (2) If the nonpublic information to which an offeror has or had access is not competitively useful, then the contracting officer need not take steps to resolve the situation. 4.402–4 Contracting officer responsibilities. (a) Sources of information. (1) During acquisition planning, the contracting officer shall ask the relevant contracting activity and requiring activity (as appropriate) to examine whether any potential offerors may have had Government-provided access (see 4.402–3(a)) to nonpublic information relevant to the acquisition. (2) When initially announcing an acquisition, the contracting officer shall include a statement asking that potential offerors indicate, as early as possible, if they have or had Government-provided access (see 4.402–3(a)) to any nonpublic information relevant to the acquisition. (i) For contract actions, this statement shall be included in the sources sought notification. (ii) For orders placed against multiple-award task- and delivery-order contracts or blanket purchase agreements, this statement shall be included in the first announcement to contract-holders regarding the order. (iii) For Federal Supply Schedule orders, this statement shall be included in the request for quote. (3) As prescribed at 4.402–5, the contracting officer shall include in the solicitation the provision requiring offerors to state whether they are aware of anyone in their corporate organization, including affiliates, who has gained access to nonpublic information relevant to the acquisition that was made available by the Government. (b) Analysis. (1) If the Contracting Officer is aware that one or more offerors have or had access to nonpublic information provided by the Government, the contracting officer shall determine whether resolution is required. Consistent with the general principles provided in 4.402–3, the contracting officer must resolve the PO 00000 Frm 00042 Fmt 4702 Sfmt 4702 23249 situation (taking into consideration the policy at 4.402–2(b)) if— (i) The nonpublic information is available to some, but not all, potential offerors; (ii) The nonpublic information would be competitively useful in responding to a solicitation; and (iii) The advantage afforded to the contractor by its access to the nonpublic information is unfair. (2) If resolution is not required, the Contracting Officer shall document the file. (c) Resolution. Unfair competitive advantage resulting from unequal access to nonpublic information may be resolved by information sharing, mitigation through use of a firewall, or exclusion. In some cases, a combination of methods may be appropriate. (1) Information sharing. Information sharing consists of disseminating the information in question to all potential offerors, either in the solicitation, in a solicitation amendment, or through some other method, such as posting it online. (i) This method is generally available when the relevant information is Government information. In situations where the information belongs to another party (for instance, a contractor for whom a potential offeror worked as a subcontractor), appropriate permission must be obtained before such information can be shared with other parties, and appropriate protections must be implemented with respect to the shared information. (ii) For this method to be effective, information must be shared with potential offerors early enough in the acquisition process to allow those offerors to effectively utilize the information. (2) Mitigation through use of a firewall. In cases where only some of an offeror’s employees have or had access to the relevant information, it may be possible for the offeror to create an internal barrier (often called a firewall) to prevent those employees from sharing that information with others. The contracting officer may conclude that this is an acceptable resolution if the result is that none of the offeror’s employees who are involved in the competition has access to the nonpublic information. (i) The contracting officer may determine that the requirements and protections of clause 52.204–XX, Access to Nonpublic Information, constitute an adequate firewall, if nonpublic information was gained directly through performance on another Government contract that included the clause. E:\FR\FM\26APP1.SGM 26APP1 23250 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules (ii) Creation of a firewall may be proposed by a potential offeror, or it may be proposed by the agency. The contracting officer retains discretion to approve or reject the proposed firewall. Firewalls can consist of a variety of elements, including organizational and physical separation; facility and workspace access restrictions; information system access restrictions; independent compensation systems; and individual and organizational nondisclosure agreements. (iii) In cases involving mitigation through use of a firewall, the offeror’s proposal must include a representation that, to the best of its knowledge and belief, there were no breaches of the firewall during preparation of the proposal or must explain any breach that occurred. (See paragraph (c) of provision 52.204–YZ.) (3) Disqualification. The contracting officer must disqualify the offeror from consideration for the contract if the contracting officer determines that— (i) A potential offeror has, or has had, unequal, Government-provided access to nonpublic information; (ii) The information would provide the potential offeror with an unfair competitive advantage; and (iii) Neither information sharing nor mitigation through use of a firewall will serve to protect the fairness of the competition. (d) Multiple-award contracts. In addition to complying with the requirements outlined in paragraphs (a) through (c) when placing orders under multiple-award contract vehicles (including multiple-award indefinitedelivery/indefinite quantity contracts and multiple-award blanket purchase agreements), contracting officers must take additional steps when awarding such contracts and blanket purchase agreements. The contracting officer shall ensure that the ordering procedures clause requires the inclusion of terms similar to those found in the provision at 52.204–YZ, Unequal Access to Nonpublic Information, in any order competed under the multiple-award contract or blanket purchase agreement (see 16.505(b)). jlentini on DSKJ8SOYB1PROD with PROPOSALS 4.402–5 Solicitation provision. The contracting officer shall include in all solicitations that exceed the simplified acquisition threshold a provision substantially the same as 52.204–YZ, Unequal Access to Nonpublic Information. 4.403 Safeguarding Classified Information. 4.403–2 [Amended] 9c. In newly redesignated section 4.403–2, remove from paragraph (b) VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 ‘‘(see 4.404)’’ and add ‘‘(see 4.403–3)’’ in its place. PART 7—ACQUISITION PLANNING 10. Amend section 7.105 by redesignating paragraphs (b)(18) through (b)(22) as paragraphs (b)(19) through (b)(23), respectively; and adding a new paragraph (b)(18) to read as follows: 7.105 Contents of written acquisition plans. * * * * * (b) * * * (18) Organizational conflicts of interest. Describe any significant potential organizational conflicts of interest (see subpart 3.12) that may exist at time of contract award or may arise during contract performance and explain the proposed method of addressing these conflicts. Briefly identify any solicitation provisions and contract clauses that would be used. * * * * * 7.503 [Amended] 11. Amend section 7.503 by removing from paragraph (d)(11) ‘‘4.402(b)’’ and adding ‘‘4.403–1(b)’’ in its place. PART 9—CONTRACTOR QUALIFICATIONS 12. Revise section 9.000 to read as follows: 9.000 Scope of part. This part prescribes policies, standards, and procedures pertaining to prospective contractors’ responsibility; debarment, suspension, and ineligibility; qualified products; first article testing and approval; contractor team arrangements; and defense production pools and research and development pools. Subpart 9.5 [Removed and Reserved] 13. Remove and reserve subpart 9.5. PART 11—DESCRIBING AGENCY NEEDS 11.000 [Amended] 14. Amend section 11.002 by removing from paragraph (c) ‘‘Subpart 9.5’’ and adding ‘‘subpart 3.12’’ in its place. (2) Insert the provision and clauses relating to Organizational Conflicts of Interest as prescribed at 3.1207 when applicable. (3) Insert the provision 52.204–XY, Release of Pre-Award Information, and clauses at 52.204–XX, Access to Nonpublic Information, and 52.204–YY, Release of Nonpublic Information, as prescribed at 4.401–4. Insert a provision substantially the same as 52.204–YZ, Unequal Access to Nonpublic Information, as prescribed in 4.402–5. * * * * * (6) Insert the clause at 52.225–19, Contractor Personnel in a Designated Operational Area or Supporting a Diplomatic or Consular Mission outside the United States, as prescribed in 25.301–4. * * * * * PART 13—SIMPLIFIED ACQUISITION PROCEDURES 16. Amend section 13.302–5 by adding paragraph (e) to read as follows: 13.302–5 Clauses. * * * * * (e) Insert the provision at 52.204–XY, Release of Pre-Award Information, and the clauses at 52.204–XX, Access to Nonpublic Information, and 52.204–YY, Release of Nonpublic Information, as prescribed at 4.401–4. Insert a provision substantially the same as 52.204–YZ, Unequal Access to Non-Public Information, as prescribed in 4.402–5. Insert the provision and clauses relating to Organizational Conflicts of Interest as prescribed at 3.1207 when applicable. PART 14—SEALED BIDDING 17. Amend section 14.201–6 by adding paragraph (y) to read as follows: 14.201–6 Solicitation provisions. * * * * * (y) See the prescription at 4.401–4(b) for use of the provision at 52.204–XY, Release of Pre-Award Information. 18. Amend section 14.201–7 by adding paragraph (e) to read as follows: 14.201–7 Contract clauses. PART 12—ACQUISITION OF COMMERCIAL ITEMS 15. Amend section 12.301 in paragraph (d) by revising paragraph (2); redesignating paragraphs (3) and (4) as (4) and (5), respectively; and adding new paragraphs (3) and (6) to read as follows: (d) * * * * * * * (e) See the clause prescription at 4.401–4(c) for use of the clause at 52.204–YY, Release of Nonpublic Information. PART 15—CONTRACTING BY NEGOTIATION PO 00000 Frm 00043 Fmt 4702 Sfmt 4702 * 19. Amend section 15.209 by adding paragraph (i) to read as follows: E:\FR\FM\26APP1.SGM 26APP1 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules 15.209 Solicitation provisions and contract clauses. 42.1204 Applicability of novation agreements. * * * * * * (i)(1) See the prescription at 4.401– 4(b) for use of the provision at 52.204– XY, Release of Pre-Award Information. (2) See the clause prescription at 4.401–4(c) for use of the clause at 52.204–YY, Release of Nonpublic Information. 20. Amend section 15.604 by revising paragraph (a)(2) to read as follows: 15.604 Agency points of contact. (a) * * * (2) Requirements concerning responsible prospective contractors (see subpart 9.1). * * * * * PART 16—TYPES OF CONTRACTS 21. Amend section 16.505 by revising paragraph (b)(1)(ii)(C) to read as follows: 16.505 22. Amend section 18.000 by revising paragraph (b) to read as follows: Scope of part. * * * * * (b) The acquisition flexibilities in this part are not exempt from the requirements and limitations set forth in Part 3, Business Ethics and Conflicts of Interest. * * * * * jlentini on DSKJ8SOYB1PROD with PROPOSALS PART 37—SERVICE CONTRACTING 23. Amend section 37.110 by revising paragraph (d) to read as follows: * * * * * (d) See subpart 3.12 regarding the use of an appropriate provision and clause concerning organizational conflicts of interest, which may at times be significant in solicitations and contracts for services. * * * * * VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 (End of provision) As prescribed in 3.1207(b), insert the following clause: Disclosure of Organizational Conflict of Interest After Contract Award (Date) Notice of Potential Organizational Conflict of Interest (Date) PART 18—EMERGENCY ACQUISITIONS 24. Amend section 42.1204 by revising paragraph (d) to read as follows: 25. Add sections 52.203–XX, 52.203– ZZ, 52.203–YY, and 52.203–YZ to read as follows: As prescribed in 3.1207(a), insert a provision substantially the same as the following: * * * * (b) * * * (1) * * * (ii) * * * (C) Tailor the procedures to each acquisition, including appropriate procedures for addressing unequal access to nonpublic information (see 4.402); * * * * * PART 42—CONTRACT ADMINISTRATION AND AUDIT SERVICES PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES (4) To the extent that either the offeror or the Government identifies any organizational conflicts of interest on the current contract, the offeror shall explain the actions it intends to use to address such conflicts, e.g., by submitting a mitigation plan and/or accepting a limitation on future contracting. (5) The Contracting Officer is the final authority in determining whether an organizational conflict of interest exists and whether the organizational conflict of interest has been adequately addressed. (d) Resultant contract. (1) If the offeror submits an organizational conflict of interest mitigation plan, the resultant contract will include the Government-approved Mitigation Plan and a clause substantially the same as 52.203–YY, Mitigation of Organizational Conflicts of Interest. (2) If the resolution of the organizational conflict of interest involves a limitation on future contracting, the resultant contract will include a clause substantially the same as 52.203–YZ, Limitation on Future Contracting. 52.203–XX, Notice of Potential Organizational Conflict of Interest. Ordering. * 18.000 * * * * (d) When considering whether to recognize a third party as a successor in interest to Government contracts, the responsible contracting officer shall identify and evaluate any significant organizational conflicts of interest in accordance with subpart 3.12. If the responsible contracting officer determines that a conflict of interest cannot be addressed, but that it is in the best interest of the Government to approve the novation request, a request for a waiver may be submitted in accordance with the procedures at 3.1205. * * * * * 23251 (a) Definition. Organizational conflict of interest, as used in this provision, is defined in 52.203–ZZ, Disclosure of Organizational Conflict of Interest after Contract Award. (b) Notice. (1) The Contracting Officer has determined that the nature of the work to be performed in the contract resulting from this solicitation is such that it may give rise to organizational conflicts of interest (see subpart 3.12, Organizational Conflicts of Interest). (2) The following contractors participated in the preparation of the statement of work or other requirements documents, including cost or budget estimates: lllllllllllllllllllll [Contracting Officer to fill in, if any.] (c) Proposal requirements. (1) Assessment. Applying the principles of subpart 3.12, the offeror shall assess whether there is an organizational conflict of interest associated with the offer it plans to submit, including any potential subcontracts. (2) Disclosure. The offeror shall— (i) Disclose all relevant information regarding any organizational conflicts of interest, including information about potential subcontracts; and (ii) Describe any relevant limitations on future contracting, the term of which has not yet expired, to which the offeror or potential subcontractor agreed. (3) Representation. The offeror represents, by submission of its offer, that to the best of its knowledge and belief it has disclosed all relevant information regarding any organizational conflicts of interest as required in paragraph (c)(2) of this provision. PO 00000 Frm 00044 Fmt 4702 Sfmt 4702 52.203–ZZ, Disclosure of Organizational Conflict of Interest After Contract Award. (a) Definition. Organizational conflict of interest, as used in this clause, means a situation in which— (1) A Government contract requires a contractor to exercise judgment to assist the Government in a matter (such as in drafting specifications or assessing another contractor’s proposal or performance) and the contractor or its affiliates have financial or other interests at stake in the matter, so that a reasonable person might have concern that when performing work under the contract, the contractor may be improperly influenced by its own interests rather than the best interests of the Government; or (2) A contractor could have an unfair competitive advantage in an acquisition as a result of having performed work on a Government contract, under circumstances such as those described in paragraph (1) of this definition, that put the contractor in a position to influence the acquisition. (b) If the Contractor identifies an organizational conflict of interest that was not previously addressed and for which a waiver has not been granted, or a change to any relevant facts relating to a previously identified organizational conflict of interest, the Contractor shall make a prompt and full disclosure in writing to the Contracting Officer. Organizational conflicts of interest that arise during performance of the contract, as well as newly discovered conflicts that existed before contract award, shall be disclosed. This disclosure shall include a description of— (1) The organizational conflict of interest; and (2) Actions to address the conflict that— (i) The Contractor has taken or proposes to take; or E:\FR\FM\26APP1.SGM 26APP1 23252 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules (ii) The Contractor recommends that the Government take. (c) If, in compliance with this clause, the Contractor identifies and promptly reports an organizational conflict of interest that cannot be addressed in a manner acceptable to the Government, the Contracting Officer may terminate for the convenience of the Government— (1) This contract, except as provided in paragraph (c)(2) of this clause; (2) If this is a task- or delivery-order contract, the task or delivery order; or (3) If this is a blanket purchase agreement, the blanket purchase agreement call. (d) Subcontracts. The Contractor shall include the substance of this clause, including this paragraph (d), in subcontracts where the work includes or may include tasks that may create a potential for an organizational conflict of interest. The terms ‘‘Contractor’’ and ‘‘Contracting Officer’’ shall be appropriately modified to reflect the change in parties. (End of clause) 52.203–YY, Mitigation of Organizational Conflicts of Interest. As prescribed in 3.1207(c), insert a clause substantially the same as the following: jlentini on DSKJ8SOYB1PROD with PROPOSALS Mitigation of Organizational Conflicts of Interest (Date) (a) Definition. Organizational conflict of interest, as used in this clause, is defined in the clause 52.203–ZZ, Disclosure of Organizational Conflict of Interest after Contract Award. (b) Mitigation plan. The Governmentapproved Organizational Conflict of Interest Mitigation Plan (Mitigation Plan) and its obligations are hereby incorporated in the contract by reference. (c) Changes. (1) Either the Contractor or the Government may propose changes to the Mitigation Plan. Such changes are subject to the mutual agreement of the parties and will become effective only upon written approval of the revised Mitigation Plan by the Contracting Officer. (2) The Contractor shall update the mitigation plan within 30 days of any changes to the legal construct of its organization, any subcontractor changes, or any significant management or ownership changes. (d) Noncompliance. (1) The Contractor shall report to the Contracting Officer any noncompliance with this clause or with the Mitigation Plan, whether by its own personnel or those of the Government or other contractors. (2) The report shall describe the noncompliance and the actions the Contractor has taken or proposes to take to mitigate and avoid repetition of the noncompliance. (3) After conducting such further inquiries and discussions as may be necessary, the Contracting Officer and the Contractor shall agree on appropriate corrective action, if any, or the Contracting Officer shall direct corrective action, subject to the terms of this contract. VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 (e) Subcontracts. The Contractor shall include the substance of this clause, including this paragraph (e), in subcontracts where the work includes or may include tasks related to the organizational conflict of interest. The terms ‘‘Contractor’’ and ‘‘Contracting Officer’’ shall be appropriately modified to reflect the change in parties. (End of clause) 52.203–YZ, Limitation on Future Contracting. As prescribed in 3.1207(d), insert a clause substantially the same as the following: Limitation on Future Contracting (Date) (a) Limitation. The Contractor and any of its affiliates, shall be ineligible to perform llllllllll [Contracting Officer to describe the work that the Contractor will be ineligible to perform] as a contractor or as a subcontractor for a period of llllll. [Contracting Officer to determine appropriate length of prohibition.] (b) Subcontracts. The Contractor shall include the substance of this clause, including this paragraph (b), in subcontracts where the work includes tasks which result in an organizational conflict of interest. The terms ‘‘Contractor’’ and ‘‘Contracting Officer’’ shall be appropriately modified to reflect the change in parties. (End of clause) 26. Amend section 52.204–2 by removing from the introductory paragraph ‘‘4.404(a)’’ and adding ‘‘4.403– 3(a)’’ in its place; and revising the introductory texts of Alternate I and Alternate II to read as follows: 52.204–2 * * Security requirements. * * * Alternate I (Apr 1984). As prescribed in 4.403–3(b), add the following paragraphs (e), (f), and (g) to the basic clause: * * * * * Alternate II (Apr 1984). As prescribed in 4.403–3(c), add the following paragraph (e) to the basic clause: * * * * * 27. Add sections 52.204–XX, 52.204– XY, 52.204–YY, and 52.204–YZ to read as follows: 52.204–XX, Access to Nonpublic Information. As prescribed in 4.401–4(a), insert the following clause: Access to Nonpublic Information (Date) (a) Definition. Nonpublic information, as used in this clause, means any Government or third-party information that— (1) Is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552) or otherwise protected from disclosure by statute, Executive order, or regulation; or (2) Has not been disseminated to the general public, and the Government has not PO 00000 Frm 00045 Fmt 4702 Sfmt 4702 yet determined whether the information can or will be made available to the public. (b) Restrictions on use and disclosure of nonpublic information. (1) The restrictions provided in this clause are intended to protect both the Government and third-party owners of nonpublic information from unauthorized use or disclosure of such information. (i) The Contractor shall indemnify and hold harmless the Government, its agents, and employees from every claim or liability, including attorneys fees, court costs, and expenses arising out of, or in any way related to, the misuse or unauthorized modification, reproduction, release, performance, display, or disclosure of any nonpublic information to which it is given access during performance of this contract. (ii) Third-party owners of nonpublic information to which the Contractor may have access during performance of this contract are third-party beneficiaries with respect to the terms of this clause who, in addition to any other rights they may have, may have the right of direct action against the Contractor to seek damages from any violation of the terms of this clause or to otherwise enforce the terms of this clause. (2) With regard to any nonpublic information to which the Contractor is given access in performance of this contract, whether the information comes from the Government or from third parties, the Contractor shall— (i) Utilize the nonpublic information only for the purposes of performing the services specified in this contract, and not for any other purposes; (ii) Safeguard the nonpublic information from unauthorized use and disclosure; (iii) Limit access to the nonpublic information to only those persons who need it to perform services under this contract; (iv) Inform persons who may have access to nonpublic information about their obligations to utilize it only to perform the services specified in this contract and to safeguard it from unauthorized use and disclosure; (v) Obtain a signed nondisclosure agreement, which at a minimum includes language substantially the same as that found in paragraph (b)(1) and (b)(2)(i) through (iv) of this clause, from each person who may have access to the nonpublic information; (vi) Provide a copy of any such nondisclosure agreement to the contracting officer upon request; and (vii) Report to the contracting officer any violations of requirements (i) through (vi) of this paragraph as soon as the violation is identified. This report shall include a description of the violation and the proposed actions to be taken by the contractor in response to the violation, with follow-up reports of corrective actions taken as necessary. (3) If the Contractor receives information that is marked in a way that indicates the Contractor should not receive this information, the Contractor shall— (i) Notify the Contracting Officer; (ii) Use the information only in accordance with the instructions of the Contracting Officer; and E:\FR\FM\26APP1.SGM 26APP1 jlentini on DSKJ8SOYB1PROD with PROPOSALS Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules (iii) Comply with any other notification provisions contained in this contract. (c) Applicability. (1) The obligations and prohibitions of paragraph (b) do not apply if the Contractor can demonstrate to the Contracting Officer that the information— (i) Was in the public domain at the time the information was accessed by the Contractor; (ii) Was published, after having been accessed by the Contractor, or otherwise becomes part of the public domain through no fault of the Contractor; (iii) Was lawfully in the Contractor’s possession at the time the Contractor accessed it and was not acquired directly or indirectly— (A) From the Government; or (B) Under another Government contract; (iv) Was received by the Contractor from a party, other than the information owner, who has the authority to release the information and did not require the Contractor to hold it in confidence. (v) Is or becomes available, on an unrestricted basis in a lawful manner, to a third party from the information owner or someone acting under the control of the information owner; (vi) Is developed by or for the Contractor independently of the information received from the Government or the information owner and such independent development can be shown; (vii) Becomes available to the Contractor by wholly lawful inspection or analysis of products offered for sale by the information owner or someone acting under the information owner’s control, or an authorized third-party reseller or distributor; or (viii) Is provided to a third party by the Contractor with the prior written approval of the information owner. (2) The Contractor may release nonpublic information to which the Contractor is given access in performance of this contract to a third party pursuant to the lawful order or rules of a United States Court or Federal administrative tribunal or body of competent jurisdiction, provided that the Contractor gives to the information owner prior written notice of such obligation and the opportunity to oppose such disclosure. The Contractor shall provide a copy of the notice to the Contracting Officer at the same time as notice is given to the information owner. (d) Other contractual restrictions on information. This clause is subordinate to all other contract clauses or requirements that specifically address the access, use, handling, or disclosure of information. If any restrictions or authorizations in this clause are inconsistent with a requirement of any other clause of this contract, the requirement of the other clause shall take precedence over the requirement of this clause. (e) Remedies available to a third-party information owner. The Contractor’s failure to comply with the requirements of this clause may provide grounds for independent legal action or other remedies available to a third-party information owner based on the protections of paragraph (b)(1) of this clause (third-party beneficiary). (f) Subcontracts. The Contractor shall include this clause, including this paragraph VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 (f), in subcontracts under which a subcontractor may have access to nonpublic information, The terms ‘‘contract,’’ ‘‘contractor,’’ and ‘‘contracting officer’’ shall be appropriately modified to preserve the Government’s rights. (End of clause) Alternate I (Date). As prescribed in 4.401– 4(a)(2)(i), add the following paragraph (c)(3) to the basic clause: (c)(3) The Contractor shall, if requested by the Contracting Officer— (i) Negotiate and sign an agreement identical, in all material respects, to paragraphs (b)(2) and (c) of this clause, with each entity identified by the Contracting Officer that has provided the Government nonpublic information to which the Contractor must now have access to perform its obligations under this contract; and (ii) Supply a copy of the executed agreement(s) to the Contracting Officer [within 30 days]. Alternate II (Date). As prescribed in 4.401– 4(a)(2)(ii), add the following paragraph (c)(3) to the basic clause (if Alternate I is also used, redesignate the following paragraph as (c)(4)): (c)(3) The Contractor shall, if requested by the Contracting Officer— (i) Execute a Government-approved agreement with each entity identified by the Contracting Officer to whose facilities or nonpublic information the Contractor is given access; and (ii) Supply a copy of the executed agreement(s) to the Contracting Officer. 52.204–XY, Release of Pre-Award Information. As prescribed in 4.401–4(b), insert the following provision: Release of Pre-Award Information (Date) (a) Definition. Nonpublic information, as used in this provision, means any Government or third-party information that— (1) Is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552) or otherwise protected from disclosure by statute, Executive order, or regulation; or (2) Has not been disseminated to the general public, and the Government has not yet determined whether the information can or will be made available to the public. (b) The Government may need to release some of the nonpublic information submitted by the offeror in connection with this solicitation. By submission of its offer, the offeror agrees that the Government may, in appropriate circumstances, release to its contractors, their subcontractors, and their individual employees, such nonpublic information, subject to the protections referenced at paragraph (d) of this provision. (c) This provision does not affect the agency’s responsibilities under the Freedom of Information Act or the Procurement Integrity Act. (d) To receive access to nonpublic information needed to assist in accomplishing agency functions, the contractor that will receive access to the information must be operating under a PO 00000 Frm 00046 Fmt 4702 Sfmt 4702 23253 contract that contains the clause at 52.204– XX, Access to Nonpublic Information, which obligates the contractor to do the following: (1) Utilize the nonpublic information only for the purposes of performing the services specified in this contract, and not for any other purposes; (2) Safeguard nonpublic information from unauthorized use and disclosure; (3) Limit access to the nonpublic information to only those persons who need it to perform services under this contract; (4) Inform persons who may have access to nonpublic information about their obligations to utilize it only to perform the services specified in this contract and to safeguard that information from unauthorized use and disclosure; (5) Obtain a signed nondisclosure agreement from each person who may have access to the nonpublic information; and (6) Report to the Contracting Officer any violations of requirements (1) through (5) of this paragraph as soon as the violation is identified. This report shall include a description of the violation and the proposed actions to be taken by the Contractor in response to the violation, with follow-up reports of corrective actions taken as necessary. (e) Paragraph (e) of the clause at 52.204– XX, Access to Nonpublic Information, included in the contract of the contractor with access to the nonpublic information provides that the third-party information owner may have the right to pursue thirdparty beneficiary rights against the contractor with access to the information for breaches of the requirements of that clause. (End of provision) 52.204–YY, Release of Nonpublic Information. As prescribed in 4.401–4(c) insert the following clause: Release of Nonpublic Information (Date) (a) Definition. Nonpublic information, as used in this clause, means any Government or third-party information that— (1) Is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552) or otherwise protected from disclosure by statute, Executive order, or regulation; or (2) Has not been disseminated to the general public, and the Government has not yet determined whether the information can or will be made available to the public. (b) The Contractor agrees that the Government may, in appropriate circumstances, release to its contractors, their subcontractors, and their individual employees, nonpublic information provided by the Contractor in the performance of this contract, subject to the protections referenced at paragraph (d) of this clause. (c) This clause does not affect the agency’s responsibilities under the Freedom of Information Act or the Procurement Integrity Act. (d) To receive access to nonpublic information needed to assist in accomplishing agency functions, the E:\FR\FM\26APP1.SGM 26APP1 23254 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Proposed Rules contractor that will receive access to the nonpublic information must be operating under a contract that contains the clause at 52.204–XX, Access to Nonpublic Information, which obligates the contractor to do the following: (1) Utilize the nonpublic information only for the purposes of performing the services specified in this contract, and not for any other purposes; (2) Safeguard nonpublic information from unauthorized use and disclosure; (3) Limit access to the nonpublic information to only those persons who need it to perform services under this contract; (4) Inform persons who may access nonpublic information about their obligations to utilize it only to perform the services specified in this contract and to safeguard that information from unauthorized use and disclosure; (5) Obtain a signed nondisclosure agreement from each person who may have access to the nonpublic information; and (6) Report to the Contracting Officer any violations of requirements (1) through (5) of this paragraph as soon as the violation is identified. This report shall include a description of the violation and the proposed actions to be taken by the contractor in response to the violation, with follow-up reports of corrective actions taken as necessary. (e) Paragraph (e) of the clause at 52.204– XX, Access to Nonpublic Information, included in the contract of the contractor with access to the nonpublic information provides that the third-party information owner may have the right to pursue thirdparty beneficiary rights against the contractor with access to the nonpublic information for breaches of the requirements of that clause. (f) Subcontracts. The Contractor shall insert this clause, including this paragraph (f), suitably modified to reflect the relationship of the parties, in all subcontracts that may require the furnishing of nonpublic information to this agency under the subcontract. (End of clause) 52.204–YZ, Unequal Access to Nonpublic Information. As prescribed in 4.402–5, insert a provision substantially the same as the following: jlentini on DSKJ8SOYB1PROD with PROPOSALS Unequal Access to Nonpublic Information (Date) (a) Definition. Nonpublic information, as used in this provision, means any Government or third-party information that— (1) Is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552) or otherwise protected from disclosure by statute, Executive order, or regulation; or (2) Has not been disseminated to the general public, and the Government has not yet determined whether the information can or will be made available to the public. (b) Pre-proposal requirements. Applying the principles of 4.402, the offeror shall inform the Contracting Officer, prior to the submission of its offer, if it or any of its VerDate Mar<15>2010 16:08 Apr 25, 2011 Jkt 223001 affiliates possesses any nonpublic information relevant to the current solicitation and provided by the Government, either directly or indirectly; the offeror should also advise the Contracting Officer of any actions that the offeror proposes to take to resolve the situation. (c) Proposal requirements. If a firewall has been used to mitigate the impact of access to nonpublic information, the offeror represents, to the best of its knowledge and belief, that the firewall was implemented as agreed, and was not breached during the preparation of this offer; or, by checking this box [ ], that the firewall was not implemented or was breached, and additional explanatory information is attached. (End of provision) PART 53—FORMS 53.204–1 [Amended] 28. Amend section 53.204–1 by removing from paragraph (a) ‘‘(see 4.403(c)(1).)’’ and adding ‘‘(see 4.403– 2(c)(1).)’’ in its place. [FR Doc. 2011–9415 Filed 4–25–11; 8:45 am] BILLING CODE 6820–EP–P DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration 49 CFR Part 571 [Docket No. NHTSA–2011–0052] Federal Motor Vehicle Safety Standards; Lamps, Reflective Devices, and Associated Equipment National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT). ACTION: Granting petition for rulemaking. AGENCY: This notice grants the petition for rulemaking submitted by the Motorcycle Industry Council (MIC) requesting that the agency amend the license plate holder requirements of Federal Motor Vehicle Safety Standard (FMVSS) No. 108 to allow motorcycles to mount license plates at an upward angle of up to 30 degrees.1 Based on the information received in MIC’s petition and the petitions for reconsideration of the December 4, 2007 final rule reorganizing FMVSS No. 108,2 the agency believes that MIC’s petition merits further consideration through the rulemaking process. The National Highway Traffic Safety Administration plans to initiate the SUMMARY: 1 Motorcycle Industry Council Petition for Rulemaking, March 14, 2005 (Docket No. NHTSA– 2005–20286–0009) 2 72 FR 68234 (December 4, 2007). PO 00000 Frm 00047 Fmt 4702 Sfmt 4702 rulemaking process on this issue with a notice of proposed rulemaking later this year. The determination of whether to issue a rule will be made in the course of the rulemaking proceeding, in accordance with statutory criteria. FOR FURTHER INFORMATION CONTACT: For technical issues: Markus Price, Office of Crash Avoidance Standards (NVS–121), NHTSA, 1200 New Jersey Avenue, SE., West Building, Washington, DC 20590 (Telephone: (202) 366–0098) (Fax: (202) 366–7002). For legal issues: Jesse Chang, Office of the Chief Counsel (NCC–112), NHTSA, 1200 New Jersey Avenue, SE., West Building, Washington, DC 20590 (Telephone: (202) 366–2992) (Fax: (202) 366–3820). SUPPLEMENTARY INFORMATION: Background On March 14, 2005, MIC submitted to the agency a petition for rulemaking requesting that the agency include an additional subpart to FMVSS No. 108. Specifically, MIC requested the addition of a subpart to be designated as S5.1.1.30, which would read as follows: ‘‘S5.1.1.30 On a motorcycle where the upper edge of the license plate is not more than 1.2 m (47.25 in.) from the ground, the plate bearing the license numbers shall face between 30 degrees upward and 15 degrees downward from the vertical plane.’’ MIC submitted this petition for rulemaking with the understanding that the current FMVSS No. 108 requires license plates to be mounted at ± 15 degrees of perpendicular to the plane on which the vehicle stands. In their petition, MIC took note that ‘‘although the lighting standard doesn’t directly speak to license plate mounting, the requirement at issue is contained in SAE J587 October 1981, which is incorporated into FMVSS No. 108 in Table III for license plate lamps.’’ Petitioner notes that the requirements of the October 1981 Standard J587 are different from the European Community (ECE) regulations. By including the proposed subpart, petitioner hopes to harmonize the current motorcycle license plate requirements with the requirements in the ECE regulations. Petitioner stated that this harmonization would not adversely affect safety or law enforcement efforts but would serve to reduce unnecessary design and manufacturing complexities for its member companies. Further, petitioner believes that by allowing a 30 degree upward angle, the manufacturers will be afforded greater flexibility in design without any detriment to real world reflective illumination of the license plates. As additional support for E:\FR\FM\26APP1.SGM 26APP1

Agencies

[Federal Register Volume 76, Number 80 (Tuesday, April 26, 2011)]
[Proposed Rules]
[Pages 23236-23254]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-9415]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 3, 4, 7, 9, 11, 12, 13, 14, 15, 16, 18, 37, 42, 52, 
and 53

[FAR Case 2011-001; Docket 2011-0001; Sequence 1]
RIN 9000-AL82


Federal Acquisition Regulation; Organizational Conflicts of 
Interest

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to provide revised regulatory coverage on 
organizational conflicts of interest (OCIs), provide additional 
coverage regarding contractor access to nonpublic information, and add 
related provisions and clauses. Section 841 of the Duncan Hunter 
National Defense Authorization Act for Fiscal Year 2009 required a 
review of the FAR coverage on OCIs. This proposed rule was developed as 
a result of a review conducted in accordance with Section 841 by the 
Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) and the Office of Federal 
Procurement Policy (OFPP), in consultation with the Office of 
Government Ethics (OGE). This proposed rule was preceded by an Advance 
Notice of Proposed Rulemaking (ANPR), under FAR Case 2007-018 (73 FR 
15962), to gather comments from the public with regard to whether and 
how to improve the FAR coverage on OCIs.

[[Page 23237]]


DATES: Interested parties should submit written comments to the 
Regulatory Secretariat at one of the addressees shown below on or 
before June 27, 2011 to be considered in the formation of the final 
rule.

ADDRESSES: Submit comments in response to FAR case 2011-001 by any of 
the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by inputting ``FAR Case 
2011-001'' under the heading ``Enter Keyword or ID'' and selecting 
``Search.'' Select the link ``Submit a Comment'' that corresponds with 
``FAR Case 2011-001.'' Follow the instructions provided at the ``Submit 
a Comment'' screen. Please include your name, company name (if any), 
and ``FAR Case 2011-001'' on your attached document.
     Fax: (202) 501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (MVCB), Attn: Hada Flowers, 1275 First Street, NE., 7th 
Floor, Washington, DC 20417.

Instructions: Please submit comments only and cite FAR Case 2011-001, 
in all correspondence related to this case. All comments received will 
be posted without change to http://www.regulations.gov, including any 
personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT: Mr. Anthony Robinson, Procurement 
Analyst, at (202) 501-2658, for clarification of content. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at (202) 501-4755. Please cite FAR Case 2011-
001.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Current FAR Subpart 9.5, Organizational and Consultant Conflicts of 
Interest

    The integrity of the Federal acquisition process is protected, in 
part, by OCI rules currently found in FAR subpart 9.5. These rules are 
designed to help the Government in identifying and addressing 
circumstances in which a Government contractor may be unable to render 
impartial assistance or advice to the Government or might have an 
unfair competitive advantage based on unequal access to information or 
prior involvement in setting the ground rules for an acquisition. FAR 
9.504 directs contracting agencies to ``identify and evaluate potential 
OCIs as early in the acquisition process as possible'' and ``avoid, 
neutralize, or mitigate significant potential conflicts before contract 
award.''
    FAR coverage on OCIs has remained largely unchanged since the 
initial publication of the FAR in 1984. The FAR coverage was adapted 
from an appendix to the Defense Acquisition Regulation, which dated 
back to the 1960s.

B. Origins of This Case

    1. Changes in Government and Industry. In recent years, a number of 
trends in acquisition and industry have led to the increased potential 
for OCIs, including--
     Industry consolidation;
     Agencies' growing reliance on contractors for services, 
especially where the contractor is tasked with providing advice to the 
Government; and
     The use of multiple-award task- and delivery-order 
contracts, which permit large amounts of work to be awarded among a 
limited pool of contractors.
    2. SARA Panel. In its 2007 report, the Acquisition Advisory Panel 
(established pursuant to section 1423 of the Services Acquisition 
Reform Act of 2003) (SARA Panel) concluded that the FAR does not 
adequately address ``the range of possible conflicts that can arise in 
modern Government contracting.'' The SARA Panel observed that the FAR 
provides no detailed guidance to contracting officers regarding how 
they should detect and mitigate actual and potential OCIs and called 
for improved guidance, to possibly include a standard OCI clause or set 
of clauses. See Report of the Acquisition Advisory Panel (January 
2007), available at https://www.acquisition.gov/comp/aap/24102_GSA.pdf, at pp. 405-407, 417, 422.
    3. Duncan Hunter National Defense Authorization Act for Fiscal Year 
2009. Congress subsequently directed, in Section 841 of the Duncan 
Hunter National Defense Authorization Act for Fiscal Year 2009 (Pub. L. 
110-417), a review of the conflicts of interest provisions in the FAR. 
Section 841 required that appropriate revisions, including contract 
clauses, be developed as necessary, pursuant to that review.

C. Evaluation of FAR Subpart 9.5

    The Councils have worked with OFPP and consulted with OGE to 
evaluate FAR subpart 9.5. This evaluation was informed, in part, by the 
following:
    1. A review of recent case law and opinions from the Government 
Accountability Office (GAO) and Court of Federal Claims (CoFC). 
Collectively, this review indicated that, when addressing OCIs, 
agencies do not always perform adequate, case-by-case, fact-specific 
analysis.
    2. The findings of the SARA Panel, which concluded that contracting 
officers and agencies have encountered difficulties implementing 
appropriate OCI avoidance and mitigation measures.
    3. Responses to a 2008 ANPR which sought comment on whether the 
current guidance on OCIs adequately addresses the current needs of the 
acquisition community or whether providing standard provisions and/or 
clauses might be beneficial. The ten respondents to the ANPR offered a 
range of views, from the complete rewrite of FAR subpart 9.5, to 
maintaining the current coverage largely as is. Several respondents 
encouraged the Councils to adopt already-existing agency-level 
regulations, while two respondents stated that the regulations should 
consider providing Governmentwide standard clauses that allow agencies 
to add more stringent requirements, if needed, on a procurement-
specific basis. One respondent suggested that any change to FAR subpart 
9.5 should be consistent with existing case law on OCIs, as developed 
by GAO and the CoFC. Copies of all responses may be obtained at http://www.regulations.gov.
    4. Public comments provided in response to Defense Federal 
Acquisition Regulation Supplement (DFARS) Proposed Rule 2009-D015, 
published in the Federal Register on April 22, 2010 (see 75 FR 20954-
20965). DFARS Proposed Rule 2009-D015 was designed to implement section 
207 of the Weapons System Acquisition Reform Act of 2009 (WSARA) (Pub. 
L. 111-23), which requires DoD to revise the DFARS to provide uniform 
guidance and tighten existing rules regarding OCIs concerning major 
defense acquisition programs. To implement section 207 in the most 
effective manner possible, DoD concluded that the basic principles, 
policies, and practices governing OCIs must be clearly understood. DoD 
reviewed the FAR coverage and issued the proposed rule that clarified 
the prescribed general rules and procedures for identifying, 
evaluating, and resolving OCIs. As with the ANPR, respondents to the 
DFARS proposed rule provided a range of views regarding the proposed 
coverage.

II. Overview

    Based on their review, the Councils and OFPP reached the following 
main conclusions regarding OCIs:

[[Page 23238]]

A. Opportunity for Public Comment on Two Alternative OCI Frameworks

    Because the proposed DFARS rule (2009-D015) not only addressed the 
requirements of the WSARA but also contained a comprehensive OCI 
framework, the public now has a unique opportunity to comment on two 
distinct options for revising the regulatory coverage on OCIs. To this 
end, this proposed rule diverges substantially from the framework 
presented in the proposed DFARS rule, and we are seeking specific 
feedback regarding which course of action, or whether some combination 
of the two, is preferable.

B. OCI Case Law

    The fundamental approach provided in the proposed DFARS rule is 
sound and provides a regulatory framework that thoroughly implements 
the established OCI case law. However, the fact that the OCI 
regulations are not primarily based in statute means that revisions to 
the regulations need not conform with existing case law. Rather, 
substantive departures from the case law should be considered if such 
changes will produce an OCI framework that is clearer, easier to 
implement, and better suited to protecting the interests of the 
Government.

C. Similarities of Proposed FAR Rule to Proposed DFARS Rule

    Both this proposed FAR rule and the proposed DFARS rule propose 
coverage that recognizes the present-day challenges faced by 
acquisition officials in identifying and addressing OCIs in the 
procurement of products and services to satisfy agency requirements. In 
particular, both this proposed rule and the proposed DFARS framework--
    1. Reorganize and move OCI coverage to FAR part 3, so that OCIs are 
addressed along with related issues, namely other business practices 
and personal conflicts of interest (on which final coverage is pending 
under FAR Case 2008-025);
    2. Clarify key terms and provide more detailed guidance regarding 
how contracting officers should identify and address OCIs while 
emphasizing that each OCI case may be unique and therefore must be 
approached with thoughtful consideration;
    3. Provide standard OCI clauses, coupled with the opportunity for 
contracting officers to tailor the clauses as appropriate for 
particular circumstances; and
    4. Address unique policy issues and contracting officer 
responsibilities associated with OCIs arising in the context of task- 
and delivery-order contracts.

D. Differences Between Proposed FAR Rule and Proposed DFARS Rule

    The coverage in this proposed rule differs from that provided by 
the framework presented in the DFARS rule by--
    1. Providing an analysis of the risks posed by OCIs, and the two 
types of harm that can come from them, i.e.,--
     Harm to the integrity of the competitive acquisition 
system; and
     Harm to the Government's business interests;
    2. Recognizing that harm to the integrity of the competitive 
acquisition system affects not only the Government, but also other 
vendors, in addition to damaging the public trust in the acquisition 
system. The risk of such harm must be substantially reduced or 
eliminated. In contrast, the risk of harm to the Government's business 
interests may sometimes be assessed as an acceptable performance risk;
    3. Moving coverage of unequal access to nonpublic information and 
the requirement for resolving any resulting unfair competitive 
advantage out of the domain of OCIs and treating it separately in FAR 
part 4. Competitive integrity issues caused by unequal access to 
nonpublic information are often unrelated to OCIs. Therefore, treating 
this topic independently will allow for more targeted coverage that 
properly addresses the specific concerns involved in such cases; and
    4. Adding broad coverage regarding contractor access to nonpublic 
information, to provide a more detailed framework in which to address 
the topic of unequal access to nonpublic information.

III. Proposed OCI Coverage

    The Councils propose the following FAR coverage on OCIs:

A. Placement of Coverage in the FAR

    As noted above, OCIs are currently addressed in FAR subpart 9.5, 
which deals with contractor qualifications. While the ability to 
provide impartial advice and assistance is an important qualification 
of a Government contractor, the larger issues that underlie efforts to 
identify and address OCIs are more directly associated with some of the 
business practices issues discussed in FAR part 3. For this reason, the 
Councils propose to relocate the FAR coverage on OCIs from FAR subpart 
9.5 to a new FAR subpart 3.12.

B. Changes To Provide Greater Clarity of Purpose and Policy

    This proposed rule makes the following changes to clarify OCI 
policy:
1. Definitions
    a. Organizational Conflict of Interest. The proposed FAR rule 
establishes a clearer definition for ``organizational conflict of 
interest'' (which is included in FAR part 2 and applies throughout the 
FAR). The definition of ``organizational conflict of interest'' is 
refined to reflect the two types of situations that give rise to OCI 
concerns.
    b. Address. The verb ``address'' is defined in FAR subpart 3.12, 
for the purposes of the subpart, to provide a summary term for the 
various approaches for dealing with the risks and preventing the harms 
that may be caused by OCIs; each of those approaches is then explained 
in more detail in FAR 3.1204.
    c. Marketing consultant. In addition, the existing definition of 
``marketing consultant'' in FAR subpart 9.5 is removed as unnecessary 
because the proposed coverage is expanded beyond contracts for these 
entities.
    2. Policy. Within the new policy section at FAR 3.1203, the 
proposed rule explains the harm OCIs can cause and the actions the 
Government must take to address the risks of such harm. This involves 
an expanded discussion of the two types of harm that OCIs cause to the 
procurement system--harm to the integrity of the competitive 
acquisition process and harm to the Government's business interests.
    a. Harm to the Integrity of the Competitive Acquisition Process. In 
cases where there is a risk of harm to the integrity of a competitive 
acquisition process, both the Government's interests and the public 
interest in fair competitions are at risk. For this reason, such risks 
must be eliminated to the maximum extent possible. In the extremely 
rare case that such a risk cannot be eliminated, but award is 
nonetheless necessary to meet the Government's needs, a waiver 
provision that requires approval at the head of the contracting 
activity level or above is provided.
    b. Harm to the Government's Business Interests. In cases where the 
potential harm from an OCI threatens only the Government's business 
interests, it may be appropriate to accept this potential harm as a 
performance risk. Acceptance of performance risk represents a novel 
means of addressing OCIs and will often only be appropriate after other 
steps to reduce the risk have been taken, either by the contractor 
(e.g., implementation of a mitigation plan) or by the Government (e.g., 
additional contract management steps or oversight).

[[Page 23239]]

C. Changes To Improve Policy Implementation

    This proposed rule assists contracting officers in implementing the 
Government's OCI policy by amending existing FAR coverage in two ways: 
consolidating the contracting officer's responsibilities regarding 
OCIs; and providing standard, but customizable, solicitation provisions 
and contract clauses related to OCIs.
    1. Consolidated Discussion of Contracting Officer Responsibilities. 
This proposed rule creates a new section FAR 3.1206 that provides a 
consolidated discussion of contracting officer responsibilities, 
including the steps a contracting officer must take during the 
different phases of an acquisition to identify and address OCIs.
     FAR section 3.1206-2 addresses OCI-related 
responsibilities associated with presolicitation activities and 
requires the contracting officer to determine whether an acquisition 
has the potential to give rise to an OCI early enough in the 
acquisition process to include an appropriate provision in the 
solicitation, if necessary.
     FAR section 3.1206-3 provides guidance related to 
evaluating information from the offeror and other sources to determine 
if an OCI is present during the evaluation phase and to then address or 
waive any OCI before making a contract award.
     FAR section 3.1206-4 addresses OCI-related 
responsibilities associated with contract award.
     FAR section 3.1206-5 addresses task- and delivery-order 
contracts, and requires the contracting officer to consider OCIs both 
at the time of award and at the time of issuance of each order.
    [cir] For interagency acquisitions where the ordering (customer) 
agency places orders directly under another agency's contract (a 
``direct acquisition''), the ordering agency would be responsible for 
addressing OCIs.
    [cir] For interagency acquisitions where the servicing agency 
performs acquisition activities on the requesting agency's behalf (an 
``assisted acquisition''), the interagency agreement entered into 
between the servicing and requesting agency to establish the terms and 
conditions of the assisted acquisition would need to identify which 
party is responsible for carrying out these responsibilities.
    By providing a more complete description of the steps involved in 
addressing OCIs, the rule will better equip contracting officers to 
identify conflicts and work with contractors to address them. This 
approach should also help to address the criticism with current FAR 
coverage that describing OCIs only through examples misleads 
contracting officers to believe that OCIs do not exist in contract 
actions that do not fall within the scope of an identified example.
    2. New Solicitation Provision and Contract Clauses Related to OCIs. 
This proposed rule contains a new solicitation provision and three new 
contract clauses related to OCIs. Existing FAR coverage anticipates 
appropriate handling of OCI issues through solicitation provisions and 
contract clauses, but does not provide a standard format (see FAR 
9.507). The Councils determined that it was desirable to provide 
contracting officers with standard language that can be used or 
tailored as appropriate. The Councils used the requirements currently 
in FAR 9.506 and 9.507 as the basis for the proposed provision and 
clauses on OCI, providing specific fill-ins the contracting officer 
must complete, and language that incorporates any mitigation plan by 
reference.
    The proposed solicitation provision and clauses are as follows:
     FAR 52.203-XX, Notice of Potential Organizational Conflict 
of Interest. This provision--
    [cir] References the definition of ``organizational conflict of 
interest;''
    [cir] Provides notice to offerors that the contracting officer has 
determined that the nature of the work is such that OCIs may result 
from contract performance;
    [cir] Requires an offeror to disclose all relevant information 
regarding any OCI (including active limitations on future contracting), 
and to represent, to the best of its knowledge and belief, that it has 
disclosed all relevant information regarding any OCI;
    [cir] Requires an offeror to explain the actions it intends to use 
to address any OCI, e.g., submit a mitigation plan if it believes an 
OCI may exist or agree to a limitation on future contracting; and
    [cir] Identifies the clauses that may be included in the resultant 
contract, depending upon the manner in which the OCI is addressed 
(i.e., FAR 52.203-YY or 52.203-YZ, described below);
     FAR 52.203-ZZ, Disclosure of Organizational Conflict of 
Interest After Contract Award. The Councils recognize that events may 
occur during the performance of a contract that give rise to a new 
conflict, or that a conflict might be discovered only after award has 
been made. This clause, which is included in solicitations and 
contracts when the solicitation includes the provision FAR 52.203-XX, 
Notice of Potential Organizational Conflicts of Interest, includes by 
reference the definition of ``organizational conflict of interest'' and 
requires the contractor to make a prompt and full disclosure of any new 
or newly discovered OCI.
     FAR 52.203-YY, Mitigation of Organizational Conflicts of 
Interest. This clause is generally intended to be used when the 
contract may involve an OCI that can be addressed by an acceptable 
contractor-submitted mitigation plan prior to contract award. The 
clause--
    [cir] Includes a reference to the definition of ``organizational 
conflict of interest;''
    [cir] Incorporates the mitigation plan in the contract;
    [cir] Addresses changes to the mitigation plan;
    [cir] Addresses noncompliance with the clause or with the 
mitigation plan; and
    [cir] Requires flowdown of the clause.
     FAR 52.203-YZ, Limitation of Future Contracting. This 
clause is intended for use when the contracting officer decides to 
address a potential conflict of interest through a limitation on future 
contracting. The contracting officer must fill in the nature of the 
limitation on future contractor activities and the length of any such 
limitation.

D. Other Remarks

    In addition to the changes described above, the Councils note the 
following proposed coverage:
     This rule continues to apply to contracts with both profit 
and non-profit organizations (current FAR 9.502(a)).
     This rule does not exclude the acquisition of commercial 
items, including commercially available off-the-shelf (COTS) items. 
This proposed rule only requires use of the provision and clauses in 
solicitations when the contracting officer determines that the work to 
be performed has the potential to give rise to an OCI. Therefore, use 
in acquisitions of commercial items, especially COTS items, will 
probably not be frequent. The Councils decided that allowing this 
discretion to the contracting officer is better than an outright 
exclusion of applicability to contracts for the acquisition of 
commercial items.
     This rule applies to contract modifications that add 
additional work. The Councils recognize that contracting officers may 
not be able to identify conflicts arising from all future modifications 
to a contract at the time of contract award.
     This rule adds a requirement at FAR 7.105(b)(18) to 
consider OCIs when preparing acquisition plans.

IV. Access to Nonpublic Information

    FAR subpart 9.5 and the GAO and CoFC cases interpreting the subpart

[[Page 23240]]

currently treat situations involving contractors having an unfair 
competitive advantage based on unequal access to nonpublic information 
as OCIs. However, the Councils recognized that these situations do not 
actually involve conflicts of interest at all, and may arise from 
circumstances unrelated to conflicts of interest, such as where a 
former Government employee (who has had access to competitively useful 
nonpublic information) has been hired by a vendor. Further, the 
Councils observed that the methods available to resolve situations 
involving unequal access to information differ from those available to 
address actual OCIs. For these reasons, the Councils determined that 
separating the coverage of unfair competitive advantage based on 
unequal access to nonpublic information from the general coverage of 
OCIs is a desirable outcome, as it will remove some of the confusion 
often associated with identifying and addressing OCIs.
    In developing coverage to treat situations involving unfair 
competitive advantage based on unequal access to information, the 
Councils recognized that much of such access comes from performance on 
other Government contracts. Accordingly, if appropriate contractual 
safeguards are established prior to, or at the time of, such access, 
the number of situations where unequal access to information will taint 
a competition can be minimized. For this reason, this proposed rule 
provides a new uniform Governmentwide policy regarding the disclosure 
and protection of nonpublic information to which contractors may gain 
access during contract performance. This coverage provides substantial 
safeguards designed to address some of the concerns created by unequal 
access to nonpublic information, while leaving it to the contracting 
officer to determine, for any given acquisition, whether the 
protections are adequate, or if a situation involving an unfair 
competitive advantage remains to be resolved. Because protection and 
release of information are administrative matters, this coverage has 
been placed in FAR part 4.
    The coverage provides--
     A definition of ``nonpublic information'' to clearly 
identify the scope of information covered;
     Coverage of contractor access to nonpublic information 
during the course of contract performance;
     Specific coverage for situations involving unfair 
competitive advantage based on unequal access to nonpublic information; 
and
     Appropriate solicitation provisions and contract clauses.

A. Definition

    The definition of ``nonpublic information'' provided by this 
proposed rule includes information belonging to either the Government 
or a third party that is not generally made publicly available, i.e., 
information that cannot be released under the Freedom of Information 
Act, or information for which a determination has not yet been made 
regarding ability to release.

B. Contractor Access to Nonpublic Information

    The SARA Panel recommended that the Federal Acquisition Regulatory 
(FAR) Council review existing rules and regulations and, to the extent 
necessary, create uniform, Governmentwide policy and clauses dealing 
with protection of nonpublic information. Additionally, a recent GAO 
report, ``Contractor Integrity: Stronger Safeguards Needed for 
Contractor Access to Sensitive Information'' (GAO-10-693), recommended 
that OFPP act with the FAR Council to provide more thorough protections 
when contractors are allowed access to sensitive information. These 
recommendations, combined with the need to provide preventive 
protections in dealing with cases of unfair competitive advantage based 
on unequal access to information, have prompted the Councils to develop 
the coverage in this section.
    Traditionally, the Government has relied primarily on civil 
servants to perform the functions that require access to third-party 
contract information and other information in the Government's 
possession that requires protection from unauthorized use and 
disclosure. However, in recent years, the Government has significantly 
increased its use of contractors to assist in performing many such 
functions. In addition, some agencies now utilize contractors to 
perform research studies that require the contractors to access third-
party information. With the increasing need for contractor access to 
nonpublic information, this rule seeks to establish a uniform, and more 
streamlined and efficient approach.
    The Councils are proposing that contractors should be contractually 
obligated to protect all nonpublic information to which they obtain 
access by means of contract performance (whether information from the 
Government or a third party), with certain exceptions (e.g., the 
information was already in the contractor's possession) (see FAR 
52.204-XX(c)). Further, the Councils are proposing that contractors 
should require all employees who may access nonpublic information to 
sign nondisclosure agreements and that the obligations arising from 
these agreements will be enforceable by both the Government and third-
party information owners. By implementing these protections as the 
default position, the proposed approach substantially enhances the 
protection for third-party and Government information provided by the 
FAR.
    Many contracts of the type described above involve not only 
multiple subcontractors, but also many lower-tier subcontracts. The 
current ad hoc approach employed by Government agencies for ensuring 
that all of these contractors have properly executed nondisclosure 
agreements among themselves has resulted in the existence of a 
substantial number of overlapping, but not necessarily uniform, 
agreements--and oftentimes confusion and misunderstandings between the 
Government and its contractors. The Councils have determined that the 
approach of requiring inclusion of an ``access'' clause to protect 
information disclosed to a contractor, and a ``release'' clause to 
notify third-party information owners of their rights when their 
information is improperly used or disclosed should provide thorough 
protection while eliminating the need for many interconnecting 
nondisclosure agreements.
    1. Access Clause. The first element of this new approach is the 
proposed Access clause at FAR 52.204-XX, Access to Nonpublic 
Information. The purpose of the Access clause is to preclude 
contractors from using Government or third-party information for any 
purpose unrelated to contract performance. This clause requires that 
contractors receiving access to nonpublic information must limit the 
use of such nonpublic information to the purposes specified in the 
contract, safeguard the nonpublic information from unauthorized outside 
disclosure, and inform employees of their obligations and obtain 
written nondisclosure agreements consistent with those obligations. The 
clause also sets forth certain exceptions (relating to the 
applicability of the contractor's obligations), but the exceptions do 
not apply unless the contractor can demonstrate to the contracting 
officer that an exception is applicable.
    The Access clause is subordinate to all other contract clauses or 
requirements that specifically address the access, use, handling, or 
disclosure of nonpublic information. If any restrictions or 
authorizations in the clause are inconsistent with any other clause or 
requirement of the contract,

[[Page 23241]]

the other clause or requirement takes precedence.
    This rule proposes, as the default position, mandatory use of the 
Access clause in solicitations and contracts when contract performance 
may involve contractor access to nonpublic information. However, the 
prescription allows agencies to provide otherwise in their procedures. 
The Access clause is prescribed on the same basis for use in 
solicitations and contracts for the acquisition of commercial items and 
in simplified acquisitions.
2. Alternate to the Access Clause
    a. Alternate I. Alternate I is prescribed for use if the 
contracting officer anticipates that there may be a need for executing 
confidentiality agreements between the contractor and one or more third 
parties that have provided nonpublic information to the Government. 
This alternate requires the contractor, if requested by the contracting 
officer, to negotiate and sign an agreement identical, in all material 
respects, to the restrictions on use and disclosure of nonpublic 
information in the Access clause, with each entity that has provided 
the Government nonpublic information to which the contractor must now 
have access to perform its obligations under the contract.
    b. Alternate II. Alternate II is for use if the contracting officer 
anticipates that the contractor may require access to a third party's 
facilities or nonpublic information that is not in the Government's 
possession. This alternate requires the contractor, if requested by the 
contracting officer, to execute a Government-approved agreement with 
any party to whose facilities or nonpublic information it is given 
access, restricting the contractor's use of the nonpublic information 
to performance of the contract.
    3. Release Clause. The purpose of the Release clause at FAR 52.204-
YY, Release of Nonpublic Information, is to obtain the consent of the 
original owners of third-party nonpublic information for the Government 
to release such information to those contractors who need access to it 
for purposes of contract performance and who have signed up to the 
conditions of the Access clause.
    Unless agency procedures provide otherwise, the contracting officer 
must use the Release clauses in all solicitations and contracts, 
including solicitations and contracts for the acquisition of commercial 
items and below the simplified acquisition threshold.
    A solicitation provision at FAR 52.204-XY, Release of Nonpublic 
Information, that provides similar coverage is prescribed for all 
solicitations.

C. Unequal Access to Nonpublic Information

    1. Policy. FAR section 4.402 addresses situations in which access 
to nonpublic information constitutes a risk to the competitive 
integrity of the acquisition process. It includes a policy section, 
expressing the Government's policy that contracting officers must take 
action to resolve situations where one or more offerors hold an unfair 
competitive advantage. The policy section also states that 
disqualification of an offeror is the least-favored approach and should 
only be adopted if no other method of resolution will adequately 
protect the integrity of the competition.
    2. General Principles. FAR subsection 4.402-3 contains general 
principles for determining when access to nonpublic information 
requires resolution. Specifically, the access must be Government-
provided, the access must be unequal (that is, not all of the 
prospective offerors have access), the information must be 
competitively useful, and the competitive advantage must be unfair.
    3. Contracting Officer Responsibilities. FAR subsection 4.402-4 
contains details covering contracting officer responsibilities. This 
begins with requirements to collect information regarding unequal 
access to nonpublic information, both from within the Government and 
from offerors. If the contracting officer becomes aware that an offeror 
may have unequal access to nonpublic information, the rule requires 
that the contracting officer conduct an analysis, consistent with the 
general principles discussed above, to determine whether resolution is 
required. If resolution is not required, the contracting officer simply 
documents the file. If resolution is required, the contracting officer 
must take action consistent with the section detailing appropriate 
resolution techniques, which consist of information sharing, mitigation 
through the use of a firewall, or disqualification.
    4. Solicitation Provision. FAR subsection 4.402-5 prescribes a 
solicitation provision, FAR 52.204-YZ, Unequal Access to Nonpublic 
Information, that requires offerors to identify, early in the 
solicitation process, whether it or any of its affiliates possesses any 
nonpublic information relevant to the solicitation and provided by the 
Government. It also requires that the contractor certify by submission 
of its offer that, where a mitigation plan involving a firewall is 
already in place (addressing nonpublic information relevant to the 
current competition), the offeror knows of no breaches of that 
firewall.

V. Solicitation of Public Comment

    When commenting on the proposed rule, respondents are encouraged to 
offer their views on the following questions:
    A. Do the policy and associated principles set forth in the 
proposed rule provide an effective framework for evaluating and 
addressing conflicts of interest?
    B. Is the definition of ``organizational conflict of interest'' 
sufficiently comprehensive to address all potential forms of such 
conflicts?
    C. Do the enumerated techniques for addressing OCIs adequately 
address the Government's interests? Are any too weak or overbroad? Are 
there other techniques that should be addressed?
    D. Does the rule adequately address the potential conflicts that 
may arise for companies that have both advisory and production 
capabilities? What, if any, improvements might be made?
    E. Do the proposed solicitation provisions and contract clauses 
adequately implement the policy framework set forth in the proposed 
rule? For example, is a clause limiting future contracting an 
operationally feasible means of resolving a conflict? Would it be 
beneficial and appropriate for this information generally to be made 
publicly available, such as through a notice on FedBizOpps? Do the 
solicitation provisions and contract clauses afford sufficient 
flexibility to help an agency meet its individual needs regarding a 
prospective or actual conflict?
    F. Is there a need for additional guidance to supplement the 
proposed FAR coverage of OCIs (e.g., guidance addressing the management 
of OCI responsibilities)? If so, what points should the guidance make?
    G. Is the framework presented by this proposed rule preferable to 
the framework presented in the DFARS Proposed Rule 2009-D015 published 
in the Federal Register on April 22, 2010 (75 FR 20954-20965)? Why or 
why not? Would some hybrid of the two proposed rules be preferable?
    H. Does the proposed rule strike the right balance between 
providing detailed guidance for contracting officers and allowing 
appropriate flexibility for dealing with the variety of forms that 
organizational conflicts of interest take and the variety of 
circumstances under which they arise?
    Are there certain types of contracts, or contracts for certain 
types of services,

[[Page 23242]]

that warrant coverage that is more strict than that provided by the 
proposed rule?

VI. Executive Orders 12866 and 13563

    This is a significant regulatory action and, therefore, 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.
    In accordance with Executive Order 13563, Improving Regulation and 
Regulatory Review, dated January 18, 2011, DoD, GSA, and NASA 
determined that this rule is not excessively burdensome on the public, 
and is consistent with Section 841 of the Duncan Hunter National 
Defense Authorization Act for Fiscal Year 2009, which required a review 
of the FAR coverage on OCIs.

VII. Regulatory Flexibility Act

    A. The proposed changes are not expected to result in 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--
    1. The requirements of FAR subpart 3.12 do not differ from the 
burden currently imposed on offerors and contractors by FAR subpart 9.5 
and the requirements of subpart 3.12 are not significantly burdensome. 
It is good business practice to have procedures in place to identify 
potential organizational conflicts of interest and to have prepared 
mitigation plans for obvious conflicts. This proposed rule has also 
reduced the potential burden by--
    a. Not including a certification requirement; and
    b. Providing for avoidance, neutralization, or mitigation of 
organizational conflicts or interest or, under exceptional 
circumstances, waiver of the requirement for resolution.
    2. Unless the Access clause is used with Alternate I or Alternate 
II, this approach standardizes and simplifies the current system of 
third-party agreements envisioned by FAR 9.505-4. Having each 
contractor implement specific safeguards and procedures should offer 
the same or better protection for information belonging to small 
business entities. Moreover, this rule should ease the burden on most 
small business entities by not requiring them to enter multiple, 
interrelated third-party agreements with numerous service contractors. 
If the Access clause is used with Alternate I or Alternate II, then 
that is no more burdensome than the current requirements of FAR 9.505-
4.
    B. However, an Initial Regulatory Flexibility Analysis has 
nevertheless been prepared and is summarized as follows:
    This proposed rule implements Section 841 of the Duncan Hunter 
National Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110-
417) by providing revised regulatory coverage on organizational 
conflicts of interest (OCIs) and unequal access to information. The 
rule also provides additional coverage regarding contractor access to 
nonpublic information, and adds related provisions and clauses.
    The objective of the rule is to help the Government in identifying 
and addressing circumstances in which a Government contractor may be 
unable to render impartial assistance or advice to the Government or 
might have an unfair competitive advantage based on unequal access to 
information or prior involvement in setting the ground rules for an 
acquisition.
    In recent years, a number of trends in acquisition and industry 
have led to the increased potential for OCIs, including--
     Industry consolidation;
     Agencies' growing reliance on contractors for services, 
especially where the contractor is tasked with providing advice to the 
Government; and
     The use of multiple-award task- and delivery-order 
contracts, which permit large amounts of work to be awarded among a 
limited pool of contractors.
    Section 841 of the Duncan Hunter National Defense Authorization Act 
for Fiscal Year 2009 (Pub. L. 110-417) directed a review of the 
conflicts of interest provisions in the FAR. Section 841 required that 
appropriate revisions, including contract clauses, be developed as 
necessary, pursuant to that review.
    Competitive integrity issues caused by unequal access to nonpublic 
information are often unrelated to OCIs. Therefore, treating this topic 
independently will allow for more targeted coverage that properly 
addresses the specific concerns involved in such cases; and including 
broad coverage of contractor access to nonpublic information will 
provide a framework for the topic of unequal access to nonpublic 
information.
    An OCI is defined as a situation in which a Government contract 
requires a contractor to exercise judgment to assist the Government in 
a matter (such as in drafting specifications or assessing another 
contractor's proposal or performance) and the contractor or its 
affiliates have financial or other interests at stake in the matter, so 
that a reasonable person might have concern that when performing work 
under the contract, the contractor may be improperly influenced by its 
own interests rather than the best interests of the Government; or a 
contractor could be viewed as having an unfair competitive advantage in 
an acquisition as a result of having previously performed work on a 
Government contract, under circumstances such as those just described, 
that put the contractor in a position to influence the acquisition. The 
circumstances that lead to OCIs are most likely to occur in large 
businesses that have diverse capacity to provide both upfront advice 
and also a capacity for production. Although a small business might 
become involved in OCIs through its affiliates, we estimate that the 
proposed rules on OCIs would not impact a significant number of small 
entities. Furthermore, this rule is not adding burdens relating to OCIs 
that are beyond the current expectations of FAR subpart 9.5. It is just 
providing standard procedures and clauses, rather than requiring each 
contracting officer to craft unique provisions and clauses appropriate 
to the situation.
    With regard to contractor access to information, the rule will 
impact entities that have access to nonpublic information in 
performance of a Government contract. We estimate that about half of 
the entities impacted will be small entities (estimated at 25,000 small 
entities). Typical contracts that may provide access to nonpublic 
information include services contracts such as professional, 
administrative, or management support or special studies and analyses. 
Furthermore, small entities that are submitting offers to the 
Government must inform the Government, prior to submission of offers, 
if they possess any nonpublic information relevant to the current 
solicitation (estimated at 5,750 small entities).
    This rule requires the following projected reporting burdens for 
access to information:
    a. Provide copy of nondisclosure agreement upon request (6,250 
respondents x .5 hours per response = 3,125 hours).
    b. Notify contracting officer of violation (250 respondents x 4 
hours per response = 1,000 hours).
    c. Notify contracting officer if access information that should not 
have access to (125 respondents x 1 hour per response = 125 hours).
    d. Explain in solicitation any unequal access to nonpublic 
information (5,750

[[Page 23243]]

respondents x 3 hours per response = 17,250).
    e. Explain if firewall was not implemented, or breached (rare) (10 
respondent x 5 hours per response = 50 hours).
    We estimate that the respondents will be administrative employees 
earning approximately $75 per hour (+ .3285 overhead).
    This rule overlaps, with other Federal rules: FAR Cases 2007-018, 
2007-019, 2008-025, 2009-022, and 2009-030; and DFARS Case 2009-D015.
    The Councils identified a significant alternative that would 
accomplish the objectives of the statute and the policies. See the 
discussion in the rule preamble about DFARS case 2009-D015.
    DoD, GSA, and NASA invite comments from small business concerns and 
other interested parties on the expected impact of this rule on small 
entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by the rule in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 610 (FAR Case 2011-001), 
in correspondence.

VIII. Paperwork Reduction Act

    The proposed changes to the FAR impose a new information collection 
requirement that requires the approval of the Office of Management and 
Budget under 44 U.S.C. chapter 35, et seq. Under this proposed rule, an 
offeror may be required to submit information to identify an OCI and 
propose a resolution, such as a mitigation plan submitted by the 
offeror with its proposal. While this requirement existed informally 
since 1984 in FAR subpart 9.5, it is only now being formalized via the 
new contract provision and clause at FAR 52.203-XX and FAR 52.203-YY.

A. Annual Reporting Burden:

    Public reporting burden for this collection of information is 
estimated to average approximately 4.6 hours per response, including 
the time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information.
    The annual reporting burden is estimated as follows:
    1. Organizational Conflicts of Interest.
    Respondents: 30,930.
    Responses per respondent: 1.0.
    Total annual responses: 30,930.
    Preparation hours per response: 6.96.
    Total response burden hours: 215,273.
    2. Contractor Access to Nonpublic Information.
    Respondents: 24,760.
    Responses per respondent: 1.
    Total annual responses: 24,760.
    Preparation hours per response: 2.
    Total response burden hours: 49,520.
    3. Total.
    Respondents: 55,690.
    Responses per respondent: 1.
    Total annual responses: 55,690.
    Preparation hours per response: 4.755.
    Total response burden hours: 264,793.

B. Request for Comments Regarding Paperwork Burden

    Submit comments, including suggestions for reducing this burden, 
not later than June 27, 2011 to: FAR Desk Officer, OMB, Room 10102, 
NEOB, Washington, DC 20503, and a copy to the General Services 
Administration, Regulatory Secretariat (MVCB), Attn: Hada Flowers, 1275 
First Street, NE., 7th Floor, Washington, DC 20417.
    Public comments are particularly invited on: Whether this 
collection of information is necessary for the proper performance of 
functions of the FAR, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    Requester may obtain a copy of the supporting statement from the 
General Services Administration, Regulatory Secretariat (MVCB), 1275 
First Street, NE., 7th Floor, Washington, DC 20417. Please cite OMB 
Control Number 9000-0178, Organizational Conflicts of Interest, in 
correspondence.

List of Subjects in 48 CFR Parts 2, 3, 4, 7, 9, 11, 12, 13, 14, 15, 
16, 18, 37, 42, 52, and 53

    Government procurement.

    Dated: April 13, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide Acquisition Policy.
    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 2, 3, 
4, 7, 9, 11, 12, 13, 14, 15, 16, 18, 37, 42, 52, and 53 as set forth 
below:
    1. The authority citation for 48 CFR parts 2, 3, 4, 7, 9, 11, 12, 
13, 14, 15, 16, 18, 37, 42, 52, and 53 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 2--DEFINITIONS OF WORDS AND TERMS

    2. Amend section 2.101 in paragraph (b)(2) by--
    a. Removing from paragraph (3) in the definition ``Advisory and 
assistance services'' ``(see 9.505-1(b))'';
    b. Adding, in alphabetical order, the definition ``Nonpublic 
information''; and
    c. Revising ``Organizational conflict of interest.''
    The added and revised text to read as follows:


Sec.  2.101  Definitions.

* * * * *
    (b) * * *
    (2) * * *
    Nonpublic information means any Government or third-party 
information that--
    (1) Is exempt from disclosure under the Freedom of Information Act 
(5 U.S.C. 552) or otherwise protected from disclosure by statute, 
Executive order, or regulation; or
    (2) Has not been disseminated to the general public, and the 
Government has not yet determined whether the information can or will 
be made available to the public.
* * * * *
    Organizational conflict of interest means a situation in which--
    (1) A Government contract requires a contractor to exercise 
judgment to assist the Government in a matter (such as in drafting 
specifications or assessing another contractor's proposal or 
performance) and the contractor or its affiliates have financial or 
other interests at stake in the matter, so that a reasonable person 
might have concern that when performing work under the contract, the 
contractor may be improperly influenced by its own interests rather 
than the best interests of the Government; or
    (2) A contractor could have an unfair competitive advantage in an 
acquisition as a result of having performed work on a Government 
contract, under circumstances such as those described in paragraph (1) 
of this definition, that put the contractor in a position to influence 
the acquisition.
* * * * *

PART 3--BUSINESS ETHICS AND CONFLICTS OF INTEREST

    3. Revise part 3 heading to read as set forth above.
    4. Revise section 3.000 to read as follows:

[[Page 23244]]

Sec.  3.000  Scope of part.

    This part prescribes policies and procedures for addressing issues 
regarding business ethics and conflicts of interest.


Sec.  3.603  [Amended]

    5. Amend section 3.603 by removing from paragraph (b) ``subpart 
9.5'' and adding ``subpart 3.12'' in its place.
    6. Add subpart 3.12 to read as follows:

Subpart 3.12--Organizational Conflicts of Interest
Sec.
3.1200 Scope of subpart.
3.1201 Definition.
3.1202 Applicability.
3.1203 Policy.
3.1204 Methods of addressing organizational conflicts of interest.
3.1204-1 Avoidance.
3.1204-2 Limitation on future contracting (neutralization).
3.1204-3 Mitigation.
3.1204-4 Assessment that risk is acceptable.
3.1205 Waiver.
3.1206 Contracting officer responsibilities.
3.1206-1 General.
3.1206-2 Pre-solicitation responsibilities.
3.1206-3 Addressing organizational conflicts of interest during 
evaluation of offers.
3.1206-4 Contract award.
3.1206-5 Issuance of task or delivery orders or blank purchase 
agreement calls.
3.1207 Solicitation provision and contract clauses.

Subpart 3.12--Organizational Conflicts of Interest


Sec.  3.1200  Scope of subpart.

    (a) This subpart prescribes policies and procedures for 
identifying, analyzing, and addressing organizational conflicts of 
interest (as defined in 2.101). It implements 41 U.S.C. 2304 and 
section 841(b)(2) of Public Law 110-417.
    (b) This subpart does not address unequal access to nonpublic 
information, which is addressed in 4.402.


Sec.  3.1201  Definition.

    ``To address,'' as used in this subpart, means to protect the 
integrity of the competitive acquisition process, as well as the 
Government's business interests (see 3.1203(a)(2)), by one or more of 
the following methods:
    (1) Avoidance.
    (2) Neutralization through limitations on future contracting.
    (3) Mitigation of the risks involved.
    (4) Assessment that the risk inherent in the conflict is acceptable 
(either without further action or in conjunction with application of 
one or more of the other methods listed in paragraphs (a) through (c) 
of this definition). (See 3.1204.)


Sec.  3.1202  Applicability.

    (a) This subpart--
    (1) Applies to contracts and subcontracts with both profit and 
nonprofit organizations, including nonprofit organizations created 
largely or wholly with Government funds. Contracts include task and 
delivery orders and modifications that add work; and
    (2) Applies to the acquisition of commercial items, including 
commercially available off-the-shelf items (see 12.301(d)(3)) if the 
contracting officer determines that contractor performance of the work 
may give rise to an organizational conflict of interest.
    (b) Although this subpart applies to every type of acquisition, 
organizational conflicts of interest are more likely to arise when at 
least one of the contracts involved is for acquisition support services 
or advisory and assistance services.
    (c) Application of this subpart is independent of coverage 
concerning unequal access to nonpublic information (see 4.402). 
Contracting officers must consider each issue separately in determining 
whether steps must be taken to protect the interests of the Government.
    (d) This subpart shall not be applied in any manner that conflicts 
with an agency-specific conflict of interest statute.


Sec.  3.1203  Policy.

    (a) The Government's interests. It is the Government's policy to 
identify, analyze, and address organizational conflicts of interest 
that might otherwise exist or arise in acquisitions in order to 
maintain the public's trust in the integrity and fairness of the 
Federal acquisition system. Organizational conflicts of interest have 
the potential to undermine the public's trust in the Federal 
acquisition system because they can impair--
    (1) The integrity of the competitive acquisition process. The 
Government has an interest in preserving its ability to solicit 
competitive proposals and affording prospective offerors an opportunity 
to compete for Government requirements on a level playing field. In 
some cases, an organizational conflict of interest will be accompanied 
by a risk that the conflicted contractor will create for itself, or 
obtain, whether intentionally or not, an unfair advantage in competing 
for a future Government requirement. The result may be a seriously 
flawed competition, which is unacceptable in terms of good governance, 
fairness, and maintenance of the public trust; and
    (2) The Government's business interests. As a steward of public 
funds, the Government has an interest in ensuring both that it acquires 
products and services that provide the best value to the Government and 
that the contractor's performance in fulfilling the Government's 
requirements is consistent with contractual expectations. In many 
cases, an organizational conflict of interest will be accompanied by a 
risk that the conflict will affect the contractor's judgment during 
performance in a way that degrades the value of its services to the 
Government. This type of risk is most likely to appear when the 
exercise of judgment is a key aspect of the service that the contractor 
will be providing.
    (b) Addressing organizational conflicts of interest. (1) Agencies 
must examine and address organizational conflicts of interest on a 
case-by-case basis, because such conflicts arise in various, and often 
unique, factual settings. Contracting officers shall consider both the 
specific facts and circumstances of the contracting situation and the 
nature and potential extent of the risks associated with an 
organizational conflict of interest when determining what method or 
methods of addressing the conflict will be appropriate.
    (2) If an organizational conflict of interest is such that it risks 
impairing the integrity of the competitive acquisition process, then 
the contracting officer must take action to substantially reduce or 
eliminate this risk.
    (3) If the only risk created by an organizational conflict of 
interest is a performance risk relating to the Government's business 
interests, then the contracting officer has broad discretion to select 
the appropriate method for addressing the conflict, including the 
discretion to conclude that the Government can accept some or all of 
the performance risk.
    (c) Waiver. It is the policy of the Government to minimize the use 
of waivers of organizational conflicts of interest. However, in 
exceptional circumstances, the agency may grant a waiver in accordance 
with 3.1205.


Sec.  3.1204  Methods of addressing organizational conflicts of 
interest.

    Organizational conflicts of interest may be addressed by means of 
avoidance, limitations on future contracting, mitigation, or the 
Government's assessment that the risk inherent in the conflict is 
acceptable. In

[[Page 23245]]

some cases, a combination of methods may be appropriate.


Sec.  3.1204-1  Avoidance.

    Avoidance consists of Government action taken in one acquisition 
that is intended to prevent organizational conflicts of interest from 
arising in that acquisition or in a future acquisition. In order to 
successfully implement an avoidance strategy, the contracting officer 
should work with the program office or requiring activity early in the 
acquisition process. Methods of avoiding organizational conflicts of 
interest include, but are not limited to, the following:
    (a) Drafting the statement of work to exclude tasks that require 
contractors to utilize subjective judgment. This strategy may be used 
to avoid or prevent organizational conflicts of interest both in the 
instant contract and in future acquisitions. Tasks requiring subjective 
judgment include--
    (1) Making recommendations;
    (2) Providing analysis, evaluation, planning, or studies; and
    (3) Preparing statements of work or other requirements and 
solicitation documents.
    (b) Requiring the contractor (and its affiliates, as appropriate) 
to implement structural barriers, internal corporate controls, or both, 
in order to forestall organizational conflicts of interest that could 
arise because, for example, the contractor will be participating in 
preparing specifications or work statements in the performance of the 
immediate contract. This avoidance method differs from mitigation in 
that it is used to prevent organizational conflicts of interest from 
arising in future acquisitions, rather than addressing organizational 
conflicts of interest in the instant contract.
    (c) Excluding an offeror or offerors from participation in a 
procurement. (1) Use of this method may be appropriate when the 
contracting officer concludes that--
    (i) The offeror will have an unfair advantage in the competition 
because of its prior involvement (or an affiliate's prior involvement) 
in developing the ground rules for the procurement; or
    (ii) The risk that the offeror's judgment or objectivity in 
performing the proposed work will be impaired because the substance of 
the work has the potential to affect other of the offeror's (or its 
affiliates') current or future activities or interests is more 
significant than the Government is willing to accept.
    (2) This approach may be used only if the contracting officer has 
determined that no less restrictive method for addressing the conflict 
will adequately protect the Government's interest. This determination 
must be documented in the contract file.
    (3) Before excluding an offeror from participation in a procurement 
on the basis of an organizational conflict of interest that arises 
because of work done by an affiliate of the offeror (creating an unfair 
competitive advantage), the contracting officer shall identify and 
analyze the corporate and business relationship between the offeror and 
the affiliate. The contracting officer's efforts should be directed 
toward understanding the nature of the relationship between the 
entities and determining whether the risk associated with the 
organizational conflict of interest can be addressed through mitigation 
(see 3.1204-3). The contracting officer should, at a minimum, examine 
whether--
    (i) The offeror and affiliate are controlled by a common corporate 
headquarters;
    (ii) The overall corporate organization has established internal 
barriers, such as corporate resolutions, management agreements, or 
restrictions on personnel transfers, that limit the flow of 
information, personnel, and other resources between the relevant 
entities;
    (iii) The offeror and affiliates are separate legal entities and 
are managed by separate boards of directors;
    (iv) The corporate organization has instituted recurring training 
on organizational conflicts of interest and protections against 
organizational conflicts of interest; and
    (v) The affiliate can influence the offeror's performance of its 
contractual requirements.


Sec.  3.1204-2  Limitation on future contracting (neutralization).

    (a) A limitation on future contracting allows a contractor to 
perform on the instant contract but precludes the contractor from 
submitting offers for (or participating as a subcontractor in) future 
contracts where the contractor would have an unfair advantage in 
competing for award (or could provide the prime contractor with such an 
advantage). The limitation on future contracting effectively 
``neutralizes'' the organizational conflict of interest.
    (b) Limitations on future contracting shall be restricted to a 
fixed term of reasonable duration that is sufficient to neutralize the 
organizational conflict of interest. The restriction shall end on a 
specific date or upon the occurrence of an identifiable event.


Sec.  3.1204-3  Mitigation.

    (a)(1) Mitigation is any action taken to reduce the risk that an 
organizational conflict of interest will undermine the public's trust 
in the Federal acquisition system.
    (2) Mitigation may require Government action, contractor action, or 
a combination of both.
    (b) When this approach is utilized, a Government-approved 
mitigation plan, reflecting the actions a contractor has agreed to take 
to mitigate a conflict, shall be incorporated into the contract. The 
required complexity of the mitigation plan is related to the complexity 
of the organizational conflict of interest and the size of the 
acquisition. While implementation of a mitigation plan may rest largely 
with a contractor, the Government bears responsibility for ensuring 
that mitigation plans are properly implemented, and the Government must 
not leave enforcement to the contractor.
    (c) Ways of mitigating organizational conflicts of int