Department of the Treasury Acquisition Regulations; Contract Clause on Minority and Women Inclusion in Contractor Workforce, 15551-15554 [2014-05846]

Agencies

• DEPARTMENT OF THE TREASURY

[Federal Register Volume 79, Number 54 (Thursday, March 20, 2014)]
[Rules and Regulations]
[Pages 15551-15554]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05846]


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DEPARTMENT OF THE TREASURY

48 CFR Parts 1022 and 1052

RIN 1505-AC40


Department of the Treasury Acquisition Regulations; Contract 
Clause on Minority and Women Inclusion in Contractor Workforce

AGENCY: Departmental Offices, Treasury.

ACTION: Final rule.

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SUMMARY: The Department of the Treasury (the Department) is amending 
the Department of the Treasury Acquisition Regulation (DTAR) to include 
a contract clause on minority and women inclusion, as required by the 
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the 
Dodd-Frank Act).

DATES: Effective Date: April 21, 2014.

FOR FURTHER INFORMATION CONTACT: Lorraine Cole, Director, Office of 
Minority and Women Inclusion, 202-927-8181 (this is not a toll-free 
number) or lorraine.cole@treasury.gov.

SUPPLEMENTARY INFORMATION:

I. Background and Proposed Rule

    Section 342 of the Dodd-Frank Act, 12 U.S.C. 5452, established an 
Office of Minority and Women Inclusion (OMWI) within certain agencies, 
including the Departmental Offices of the Department of the Treasury. 
Section 342(c)(2) provides that covered agencies shall require 
contractors to provide a written statement that the ``contractor shall 
ensure, to the maximum extent possible, the fair inclusion of women and 
minorities in the workforce of the contractor, and as applicable, 
subcontractors.'' This rule will implement the statement required by 
the Dodd-Frank Act through a contract clause.
    The contract clause, which is similar to those adopted by other 
OMWI agencies, requires that a contractor make good faith efforts to 
include minorities and women in its workforce. This standard is derived 
from section 342(c)(3) of the Dodd-Frank Act, which provides for 
remedies, including termination, against a contractor that fails to 
make good faith efforts to include minorities and women in its 
workforce. Treasury interprets ``good faith efforts'' to mean efforts 
consistent with the Equal Protection Clause of the Constitution, Title 
VII of the Civil Rights Act of 1964, and Executive Order 11246, as 
amended, such as the identification and elimination of employment 
barriers, the widespread publication of employment opportunities, and 
other forms of outreach to minorities and women.
    Section 342 applies to ``all contracts . . . for services of any 
kind,'' but the section does not define the term ``contract.'' Treasury 
applies the clause to all service contracts above the simplified 
acquisition threshold. Further, as noted above, section 342 applies to 
Treasury Departmental Offices (DO). DO does not currently include an 
office responsible for operational procurement; acquisitions in support 
of DO are performed primarily by the Internal Revenue Service Office of 
Treasury Procurement Services. The clause will be included in all 
service contracts in support of requirements originating from DO, 
regardless of the Treasury component performing the acquisition.

II. This Final Rule

    In its August 21, 2012, proposed rule, the Department solicited 
public comments on all aspects of the proposal. This comment period 
closed on October 22, 2012, and eight comment letters were received. 
Comments were received from interest groups, private citizens, and law 
students. This section sets out significant comments raised by the 
commenters and the Department's response to these comments. As set 
forth below, the Department has considered the comments and is adopting 
the proposed rule with two minor changes in response to comments 
received, which are noted below.

Public Comments and Department Responses

    One commenter suggested that the clause should apply only to 
subcontracts subject to reporting under FAR clause 52.204-10. The 
Department declines to adopt this suggestion. It is, however, the 
Department's intent that the clause should be required only in 
subcontracts that are awarded to support a covered contract. To clarify 
this point, Treasury has modified the language of the clause to require 
flow-down only to ``subcontracts awarded under'' the contract.
    One commenter suggested inserting the language ``including Title 
VII of the 1964 Civil Rights Act'' after ''To implement this 
commitment, the Contractor shall ensure, to the maximum extent possible 
consistent with applicable law, the fair inclusion of minorities and 
women in its workforce.'' The commenter contends that, without the 
insertion, there is a danger of discrimination against men and non-
minorities.
    The Department does not believe that a specific reference to Title 
VII is necessary. The Department believes that its contractors are 
aware of their obligations under that statute. Further, our contracts 
contain a separate clause, FAR 52.222-26, Equal Opportunity, that 
expressly prohibits discrimination.
    Several commenters suggested that the Department require specified 
documentation to demonstrate a ``good faith effort.'' These suggestions 
are not adopted. The clause provides Treasury with the authority to 
obtain

[[Page 15552]]

employment data and other information regarding good faith efforts to 
the extent necessary for its review of a contractor's inclusion of 
minorities and women in its workforce. Treasury does not believe that 
requiring contractors to submit specific information absent a request 
or predetermining what must be included in a request would serve any 
useful purpose. Moreover, the focus of the clause, and of the relevant 
provisions of section 342, is on a contractor's overall efforts to 
reduce barriers to employment of minorities and women. Specific 
information on individual employees will rarely, if ever, be required 
for that purpose.
    Two commenters suggested that the clause be modified to provide 60 
days for contractors to provide information requested by the 
contracting officer. The suggestion is not adopted. Section 342 and the 
clause require contractors to engage in good faith efforts at all times 
during contract performance, not merely in the 60 days preceding a 
contracting officer's review. Because a good faith efforts plan should 
be in place at all times during contract performance, 10 days will 
normally be sufficient to forward a copy to the contracting officer. 
The other data contemplated by the clause are factual in nature, and it 
is reasonable for contractors to be prepared to provide them. Moreover, 
the clause requires that information be provided within 10 business 
days of a written request ``or such longer time as the contracting 
officer determines.'' Contracting officers have a duty to act in good 
faith in administering contracts. Thus, if unusual circumstances 
existed or if there was a need for information not listed in the clause 
and not immediately available, the contracting officer would be 
required to provide the contractor a reasonable period of time in which 
to respond to the request.
    One commenter suggested that the rule be modified to expressly 
provide that completion of the EEO-1 form and compliance with 
applicable Office of Federal Contract Compliance Programs (OFCCP) rules 
are sufficient to establish compliance with the requirements of the 
clause. The Department declines to adopt this suggestion. With respect 
to the EEO-1 form, item (1) of the clause provides that one type of 
information the contracting officer may request is the total number of 
the contractor's employees and the number of women and minority 
employees by race, ethnicity, and gender. The EEO-1 form contains this 
information; there is no need for an explicit statement that providing 
the form will provide the information contemplated by this element of 
the clause. With respect to a contractor's plan to make good faith 
efforts, addressed by item (4) of the clause, the clause is drafted to 
provide the contractor wide discretion to determine what efforts should 
be made to remove barriers to the employment and of women and 
minorities. In most instances, a contractor that establishes an 
affirmative action program compliant with the OFCCP regulations will 
not need to take any additional steps to comply with the good faith 
requirement. However, expressly incorporating compliance with the OFCCP 
regulations as a standard for meeting the good faith effort requirement 
would place Treasury in the position of evaluating compliance with the 
OFCCP regulations, something it has neither the expertise nor the 
authority to do. Accordingly, the Department does not adopt the 
suggested change. To clarify the relationship between compliance with 
OFCCP regulations and the good faith requirement contained in the 
clause, however, the Department does add language to the clause to the 
effect that compliance with the clause neither satisfies contractors' 
obligations under Executive Order 11246, as amended, nor precludes 
OFCCP evaluations or enforcement actions undertaken pursuant to that 
Order.
    One commenter suggested that the clause should be modified to 
expressly state that it applies only to contracts with the Department 
of the Treasury. As the commenter acknowledges, the prescription at 48 
CFR 1022.7000 requires that the clause be inserted only in contracts in 
support of Treasury Departmental Offices. As with all FAR clauses, the 
clause will apply only to the contracts in which it is inserted. 
Language expressly providing that the clause does not form part of 
contracts in which it does not appear (and in which its insertion is 
not required by regulation) is unnecessary and would be potentially 
confusing.
    Two commenters suggested that the proposed rule only require 
information from subcontractors to the extent that it is available. The 
Department declines to adopt this suggestion. Treasury cannot fulfill 
its statutory responsibilities without information concerning 
subcontractors. Moreover, the flow down provision of the clause 
establishes a required mechanism for ensuring that subcontractors are 
contractually bound to provide necessary information to the prime 
contractor.
    One commenter suggested that the clause should not be limited to 
contracts above $150,000, and asserted that interpreting the statutory 
language to apply only to such contracts ``could place treasury in 
noncompliance with the Dodd-Frank Act.'' Section 342 does not define 
the term ``contract.'' While we are aware that the term is defined in 
some contexts to include any legally binding procurement instrument, we 
do not believe that Congress intended the good faith efforts 
requirement to apply regardless of contract dollar value. The burden 
imposed by the clause is proportionate to the size of the contractor's 
workforce, not to the value of the contract in which the clause is 
inserted. Thus, absent a contract value threshold, the clause could 
impose a burden that is large in relation to the contract price and 
make it difficult or impossible to retain contractors to perform 
smaller requirements. Requiring the clause only in contracts above the 
Simplified Acquisition Threshold, currently $150,000 in the FAR, 
represents an appropriate balance between making the clause broadly 
applicable and not including it where doing so would create a 
disproportionate burden. Treasury has determined that it is appropriate 
to interpret the statutory language to apply only to contracts above 
that threshold.
    One commenter suggested that there should be remedies for non-
compliance with the clause other than termination for default. Because 
the clause will be a requirement of the contract in which it is 
included, standard contractual remedies will be available in the event 
of non-compliance. The specific remedies available will depend on the 
nature of the underlying contract, but may include such options as 
downward equitable adjustments, lowered or negative contractor 
performance ratings, discontinuance or curtailment of new task order 
awards, or non-exercise of options, withholding of progress payments, 
termination of contracts, and debarment from receiving future 
contracts. Termination for default remains the ultimate contractual 
sanction in the event of an uncured failure to comply with the 
requirements of the clause.
    One commenter suggested that the definition of ``minorities'' in 
the clause should be expanded. The clause incorporates the definition 
set forth in section 342, from which Treasury declines to depart.
    Two commenters noted that the term ``fair inclusion'' is not 
defined in the statute or proposed contract language. One commenter 
also noted that there appears to be no consequences ``for not reporting 
or for poor numbers in a report.'' Treasury has considered providing a 
more specific definition of good faith efforts, but determined that 
doing so would not be feasible. The actions that might be appropriate 
to

[[Page 15553]]

eliminate barriers to the employment of minorities and women will vary 
significantly depending on a particular contractor's organization and 
workforce. The commenter is incorrect that there are no consequences 
for failing to report required information. The clause will form part 
of a contract, and Treasury will have available standard contract 
remedies, up to and including termination of the contract for default 
in case of an uncured failure. Under no circumstances, however, will 
there be consequences for reporting ``poor'' numbers. While the 
composition of a contractor's workforce may help inform a determination 
of what barrier-reduction efforts are appropriate, the clause does not 
require--and Treasury does not seek--any specific set of numbers, or 
any specific changes in numbers over time. A contractor that makes good 
faith efforts to identify and eliminate barriers to the employment of 
minorities and women (and that complies with applicable reporting 
requirements) will fully comply with the clause, regardless of the 
ultimate effect of those efforts on its workforce.
    One commenter suggested that the clause should be revised so as to 
list examples of information a contractor could choose to submit in 
order to establish that it has engaged in good faith efforts. This 
suggestion is not adopted. Treasury has an obligation under section 342 
to determine whether a contractor is in compliance with the applicable 
good faith efforts requirements. While the information necessary to 
demonstrate such compliance will vary significantly depending on a 
contractor's organization and its approach to the requirement, Treasury 
must have the ability to obtain the information it determines necessary 
under the circumstances. Permitting a contractor to unilaterally 
determine what information is necessary for Treasury's determination 
would not accomplish the purpose of the clause.
    One commenter suggested that there should be a cutoff beyond the 
$150,000 threshold to limit the number of subcontractors to which the 
clause applies. The commenter asserts that there may be many tiers of 
subcontractors, ``hundreds (and possibly thousands) of subcontracts'' 
under a contract that exceed the threshold. We do not accept the 
suggestion. First, the commenter's concern as to the number of possibly 
affected subcontracts appears to be overstated. In Fiscal Year 2012, 
only two contracts supporting Treasury Departmental Offices exceeded 
$10 million. Given the relatively modest value of Departmental Offices 
contracts, few if any will involve ``hundreds'' of subcontracts. More 
importantly, we consider it appropriate that a firm accepting $150,000 
in funds to perform a subcontract be subject to the good faith effort 
requirement, regardless of the tier of its subcontract. While this will 
result in prime contractors with larger contracts and more 
subcontractors bearing a larger compliance burden, such a burden will 
be roughly proportionate to the contract value.
    One commenter suggested that the regulation should include 
provisions concerning the protection of sensitive data provided to the 
government. As with all other sensitive data received in contract 
administration, sensitive data provided under the clause is protected 
by the Trade Secrets Act, 18 U.S.C. 1905. Proprietary information 
received from a contractor is protected from disclosure under Exemption 
4 of the FOIA. We do not see a need to promulgate special procedures 
for contract administration data provided under this specific clause. 
Further, Treasury lacks authority to issue a regulation that would 
restrict the availability of information under the FOIA.
    One commenter asserted that the clause would expand OFCCP's 
jurisdiction. The regulation does no more than echo the provision of 
section 342 setting forth referral to OFCCP as one option in the event 
a contractor fails to comply with the good faith effort requirement. 
Any effect section 342 may have on OFCCP's jurisdiction is beyond the 
scope of Treasury's authority and this regulation.
    One commenter asserted that the Department's Regulatory Flexibility 
Act analysis does not provide an adequate factual basis to support the 
certification in this proposal. Treasury believes that the Regulatory 
Flexibility Act certification is fully supported. While application of 
the clause to small business subcontractors will extend its reach 
somewhat, the total number will remain small. Of those small businesses 
affected, most will already be subject to OFCCP requirements. Finally, 
the clause only applies to contracts above $150,000, ensuring that 
compliance costs will not be disproportionate to the contract value and 
will not have a significant economic impact on a substantial number of 
small entities.
    The commenter expressed concern that the proposed rule does not 
increase contract spending by the agency with diverse owned businesses. 
Increasing Departmental Offices' spend with specific businesses is 
beyond the scope of the rulemaking, which concerns only the requirement 
of section 342 that firms awarded contracts make good faith efforts to 
include minorities and women in their workforces.
    A commenter supported the $150,000 threshold as applied to 
contracts with small businesses, but suggested that the clause should 
apply to all contracts with large firms, regardless of dollar value. To 
minimize the burden on all contractors, Treasury will apply this 
requirement to service contracts over the simplified acquisition 
threshold, $150,000.

III. Other Matters

Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires agencies to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute, unless the agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities. It is hereby certified that 
this rule will not have a significant economic impact on a substantial 
number of small entities and thus no initial regulatory flexibility 
analysis is required.
    First, this rule will not affect a substantial number of small 
entities. While this rule will affect all contracts for services above 
the simplified acquisition threshold ($150,000), it will not affect a 
substantial number of small entities because it will only apply to 
those entities that actually contract with Departmental Offices. In 
Fiscal Year 2011, DO contracted with 370 small businesses.
    Additionally, the rule's economic impact is not expected to be 
significant. The rule satisfies the statutory requirement that 
contractors affirm a commitment to the fair inclusion of minorities and 
women in the workforce, but does so in a way that minimizes burden on 
contractors. The rule provides maximum flexibility for contractors in 
implementing the statutory requirement because it does not impose any 
specific requirements on contractor hiring. Further, most contractors 
are already subject to and have implemented other FAR requirements that 
will satisfy this rule's requirements. Essentially all contracts for 
services to which this requirement applies are subject to FAR Clause 
52.222-26, Equal Opportunity, which requires, among other things, that 
contractors complete the EEO Form 1 containing workforce demographic 
data. Thus, contractors are already required to compile and retain much 
of the data

[[Page 15554]]

required by this clause. Further, contractors with supply and service 
contracts of $50,000 or more and over 50 employees are required by 
Department of Labor regulations to develop affirmative action programs; 
a contractor that develops and implements such a program should be able 
to provide documentation to demonstrate compliance with the clause.

Executive Order 12866

    This rule is not a ``significant regulatory action'' for the 
purposes of Executive Order 12866.

Paperwork Reduction Act

    The information collections contained in the notice of proposed 
rulemaking have been previously approved by the Office of Management 
and Budget (OMB) and assigned control number 1505-0080. Under the 
Paperwork Reduction Act (44 U.S.C. chapter 35), an agency may not 
conduct or sponsor and a person is not required to respond to a 
collection of information unless it displays a valid OMB control 
number.

Lists of Subjects in 48 CFR Part 1022 and 48 CFR Part 1052

    Government procurement.

    Dated: February 28, 2014.
Iris B. Cooper,
Senior Procurement Executive, Department of the Treasury.
    For the reasons set forth in the preamble, the Department amends 48 
CFR Chapter 10 to read as follows:

0
1. Add Subchapter D consisting of part 1022 to read as follows:

Subchapter D. Socioeconomic Programs

PART 1022--MINORITY AND WOMEN INCLUSION

Subpart 1022.7. Fair inclusion of minorities and women in contractor's 
workforce
Sec.
1022.7000 Contract clause.


    Authority:  12 U.S.C. 5452.

Subpart 1022.7. Fair inclusion of minorities and women


1022.7000  Contract clause.

    Insert the clause at 1052.222-70, Minority and Women Inclusion, in 
all solicitations and contracts in support of Departmental Offices for 
services that exceed the simplified acquisition threshold.

0
2. Add subpart 1052.2 to Subchapter H to read as follows:

Subchapter H. Clauses and Forms

PART 1052--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

Subpart 1052.2--Texts of Provisions and Clauses
Sec.
1052.222-70 Minority and Women Inclusion


    Authority: 12 U.S.C. 5452(c)(2).

Subpart 1052.2--Texts of Provisions and Clauses


1052.222-70  Minority and Women Inclusion.

    As prescribed in 1022.7000, insert the following clause:

MINORITY AND WOMEN INCLUSION (APR 2014)

    ``Contractor confirms its commitment to equal opportunity in 
employment and contracting. To implement this commitment, the 
Contractor shall ensure, to the maximum extent possible consistent 
with applicable law, the fair inclusion of minorities and women in 
its workforce. The Contractor shall insert the substance of this 
clause in all subcontracts awarded under this Contract whose dollar 
value exceeds $150,000. Within ten business days of a written 
request from the contracting officer, or such longer time as the 
contracting officer determines, and without any additional 
consideration required from the Agency, the Contractor shall provide 
documentation, satisfactory to the Agency, of the actions it (and as 
applicable, its subcontractors) has undertaken to demonstrate its 
good faith effort to comply with the aforementioned provisions. For 
purposes of this contract, ``good faith effort'' may include actions 
by the contractor intended to identify and, if present, remove 
barriers to minority and women employment or expansion of employment 
opportunities for minorities and women within its workforce. Efforts 
to remove such barriers may include, but are not limited to, 
recruiting minorities and women, providing job-related training, or 
other activity that could lead to those results.
    ``The documentation requested by the contracting officer to 
demonstrate ``good faith effort'' may include, but is not limited 
to, one or more of the following:
    1. The total number of Contractor's employees, and the number of 
minority and women employees, by race, ethnicity, and gender (e.g., 
an EEO-1);
    2. A list of subcontract awards under the Contract that 
includes: dollar amount, date of award, and subcontractor's race, 
ethnicity, and/or gender ownership status;
    3. Information similar to that required in item 1, above, with 
respect to each subcontractor; and/or
    4. The Contractor's plan to ensure that minorities and women 
have appropriate opportunities to enter and advance within its 
workforce, including outreach efforts.
    ``Consistent with Section 342(c)(3) of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Pub. L. 111-203) (Dodd-
Frank Act), a failure to demonstrate to the Director of the Agency's 
Office of Minority and Women Inclusion such good faith efforts to 
include minorities and women in the Contractor's workforce (and as 
applicable, the workforce of its subcontractors), may result in 
termination of the Contract for default, other contractual remedies, 
or referral to the Office of Federal Contract Compliance Programs. 
Compliance with this clause does not, however, necessarily satisfy 
the requirements of Executive Order 11246, as amended, nor does it 
preclude OFCCP compliance evaluations and/or enforcement actions 
undertaken pursuant to that Order.
    ``For purposes of this clause, the terms ``minority,'' 
``minority-owned business'' and ``women-owned business'' shall have 
the meanings set forth in Section 342(g) of the Dodd-Frank Act.''

[FR Doc. 2014-05846 Filed 3-19-14; 8:45 am]
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