Federal Management Regulation; Real Estate Acquisition, 71604-71611 [2021-27333]

Agencies

• General Services Administration

[Federal Register Volume 86, Number 240 (Friday, December 17, 2021)]
[Proposed Rules]
[Pages 71604-71611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27333]


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GENERAL SERVICES ADMINISTRATION

41 CFR Part 102-73

[FMR Case 2021-102-1; Docket No. GSA-FMR-2021-0020; Sequence No. 1]
RIN 3090-AK42


Federal Management Regulation; Real Estate Acquisition

AGENCY: Office of Government-wide Policy (OGP), General Services 
Administration (GSA).

ACTION: Proposed rule.

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SUMMARY: The General Services Administration is amending the FMR part 
regarding real property acquisition to reflect current laws and 
regulatory policies and to clarify the policies for entering into 
leasing agreements for high security space in accordance with the 
Secure Federal LEASEs Act.

DATES: Interested parties should submit written comments at the address 
shown below on or before February 15, 2022 to be considered in the 
formation of the final rule.

ADDRESSES: Submit comments in response to FMR case 2021-102-1 to: 
Regulations.gov: https://www.regulations.gov. Submit comments via the 
Federal eRulemaking portal by searching for ``FMR Case 2021-102-1''. 
Select the link ``Comment Now'' that corresponds with FMR Case 2021-
102-1. Follow the instructions provided at the ``Comment Now'' screen. 
Please include your name, company name (if any), and ``FMR Case 2021-
102-1'' on your attached document. If your comment cannot be submitted 
using https://www.regulations.gov, call or email the points of contact 
in the FOR FURTHER INFORMATION CONTACT section of this document for 
alternate instructions.
    Instructions: Please submit comments only and cite FMR Case 2021-
102-1, in all correspondence related to this case. Comments received 
generally will be posted without change to https://www.regulations.gov, 
including any personal and/or business confidential information 
provided. To confirm receipt of your comment(s), please check 
www.regulations.gov, approximately two to three days after submission 
to verify posting.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Mr. Chris Coneeney, Director, Real Property Policy Division, Office of 
Government-wide Policy, at 202-208-2956 or [email protected]. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat Division at 202-501-4755 or [email protected]. 
Please cite FMR Case 2021-102-1.

SUPPLEMENTARY INFORMATION:

I. Background

    The Secure Federal Leases from Espionage And Suspicious 
Entanglements Act, or the Secure Federal LEASEs Act, Public Law 116-
276, 134 Stat. 3362 (2020) (the ``Act''), provides for the disclosure 
of ownership information to Federal lessees leasing high-security space 
that would allow the lessee to mitigate potential national security 
risks. The Act was signed into law on December 31, 2020 (available at 
https://www.congress.gov/116/plaws/publ276/PLAW-116publ276.pdf). The 
Act imposes disclosure requirements regarding the foreign ownership, 
particularly ``immediate owner'', ``highest level owner'' and 
``beneficial ownership,'' of prospective lessors of ``high-security 
leased space'' (i.e., property leased to the Federal government having 
a security level of III or higher). GSA implemented Section 3 and 
Section 5 of the Act through the interim rule General Services 
Administration Acquisition Regulation (GSAR) Case 2021-G527 (86 FR 
34966) (available at https://www.federalregister.gov/documents/2021/07/01/2021-14161/general-services-administration-acquisition-regulation-immediate-and-highest-level-owner-for).
    The requirements of the statute are applicable to Federal lessees, 
defined by the Act as leases by the U.S. General Services 
Administration (GSA), the Architect of the Capitol, ``or the head of 
any Federal agency, other than the

[[Page 71605]]

Department of Defense (DOD), that has independent statutory leasing 
authority''. The Act is not applicable to DOD or to the intelligence 
community. Section 2876 of the FY 2018 National Defense Authorization 
Act (Pub. L. 115-91) already provides DOD similar authority to obtain 
ownership information with respect to its high-security leased space.
    The Act addresses national security risks identified in the 
Government Accountability Office (GAO) report, GSA Should Inform Tenant 
Agencies When Leasing High-Security Space from Foreign Owners, dated 
January 2017 (GAO-17-195) (available at https://www.gao.gov/assets/gao-17-195.pdf). This report found certain high-security Federal agencies 
were in buildings owned or controlled by foreign entities. According to 
the report, most Federal tenants were unaware the spaces GAO identified 
were subject to foreign ownership or control, exposing these agencies 
to the heightened risk of surreptitious physical or cyber espionage by 
foreign actors. The report also noted GAO could not identify the owners 
of approximately one-third of the Federal government's high-security 
leases because such ownership information was unavailable for those 
buildings.
    Section 4 of the Act adds the requirement for identification of 
beneficial ownership information, and requires GSA to develop a 
government-wide plan for identifying all immediate, highest-level, and 
beneficial owners of high-security leased space. Section 4 of the Act 
further requires GSA to submit a corresponding report. This proposed 
rule addresses the annual collection of ownership disclosures from GSA, 
delegated lease authority agencies, and independent leasing agencies to 
GSA.

What is a ``beneficial owner''?

    Unlike the direct control-based immediate owner and highest-level 
owner, the Act defines the term ``beneficial owner'' to include any 
person that--through a contract, arrangement, understanding, 
relationship, or otherwise--exercises control over the covered entity 
or has a substantial interest in or receives substantial economic 
benefits from the assets of the covered entity, with some exceptions.
    The Act is one of several recent examples of congressional concern 
about foreign ownership and control and congressional action in the 
world of government contracting to help address potential national 
security concerns. See, e.g., FY 2021 National Defense Authorization 
Act (NDAA) (Pub. L. 116-283), Sec.  819, Modifications to Mitigating 
Risks Related to Foreign Ownership, Control, or Influence of DOD 
Contractors and Subcontractors; Sec.  885, Disclosure of Beneficial 
Owners in Database for Federal Agency Contract and Grant Officers; 
Sec.  6403, Beneficial Ownership Information Reporting Requirements, 
and, as of June 30, 2021, GSAR 2021-G527, Immediate and Highest-Level 
Owner for High-Security Leased Space.
    Because of the related rulemaking, there are several definitions of 
``beneficial owner'' (or ``beneficial ownership'').

The United States Securities and Exchange Commission (SEC) Definition

    Sec.  885 (Disclosure of beneficial owners in database for Federal 
agency contract and grant officers) of the FY 2021 NDAA (Pub. L. 116-
283) \1\ states that beneficial ownership has the meaning given under 
Sec.  847 (Mitigating risks related to foreign ownership, control, or 
influence of Department of Defense contractors or subcontractors) of 
the FY 2020 NDAA (Pub. L. 116-92).\2\ Sec.  847 does not specifically 
define beneficial ownership but requires ``beneficial ownership'' to 
``be determined in a manner that is not less stringent than the manner 
set forth in section 240.13d-3 of title 17, Code of Federal 
Regulations.'' This Code of Federal Regulations reference is the SEC 
definition.\3\ The SEC definition mainly concerns the beneficial owner 
of a security (e.g. stock/bond/option for a corporation), not the 
corporation or company-at-large.
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    \1\ https://www.congress.gov/bill/116th-congress/house-bill/6395/text.
    \2\ https://www.congress.gov/bill/116th-congress/senate-bill/1790/text.
    \3\ https://www.ecfr.gov/current/title-17/chapter-II/part-240/section-240.13d-3#p-240.13d-3(a).
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Corporate Transparency Act Definition

    The Corporate Transparency Act (CTA) definition can be found at 
Sec.  6403 of the FY 2021 NDAA. This section defines ``beneficial 
ownership'' as, with respect to an entity, an individual who, directly 
or indirectly, through any contract, arrangement, understanding, 
relationship, or otherwise (i) exercises substantial control over the 
entity; or (ii) owns or controls not less than 25 percent of the 
ownership interests of the entity.

Secure Federal LEASEs Act Definition

    A ``beneficial owner'' is ``with respect to a covered entity, each 
natural person who, directly or indirectly, through any contract, 
arrangement, understanding, relationship, or otherwise--(i) exercises 
control over the covered entity; or (ii) has a substantial interest in 
or receives substantial economic benefits from the assets of the 
covered entity.''

GSA's Interpretation

    GSA interprets that the SEC definition is too limiting for use in 
the representation clause because it's concerned with the beneficial 
owner of a security rather than a company or corporation. The Secure 
Federal LEASEs Act and the CTA definitions are similar. Both 
definitions similarly characterize a beneficial owner as someone who 
(i) controls a covered entity, or (ii) has a substantial interest. The 
primary difference between the two is related to ``substantial 
interest.'' The Secure Federal LEASEs Act states that a beneficial 
owner is someone who ``. . . has a substantial interest in or receives 
substantial economic benefits from the assets of the covered entity'' 
while the CTA definition says a beneficial owner ``owns or controls not 
less than 25 percent of the ownership interests of the entity.'' GSA 
interprets that the CTA definition meets the intent of the SFLA 
definition. As such, GSA intends to use the CTA definition (and 
therefore incorporates it into the GSAR representation clause at 
552.270-33) because it's more specific (``not less than 25 percent'' as 
opposed to having to define ``substantial interest'' or ``substantial 
economic benefits'') and because it would allow GSA to leverage 
Treasury's Financial Crimes Enforcement Network's (FinCEN) efforts to 
collect beneficial owner information for all corporations. GSA does not 
believe this definition to be ``not less stringent'' than the SEC 
definition.
    Covered entities already provide certain information on immediate 
and highest-level ownership, per OMB Control Numbers 9000-0097, 9000-
0185, and 3090-0324. However, covered entities will need to provide 
additional disclosure of creditors who may be deemed beneficial owners 
if they either exercise substantial control over the covered entity or 
owns or controls not less than 25 percent of the ownership interests of 
the covered entity. Therefore, property owners will need to take this 
provision into account when considering financing options for leasing 
high-security space to the Federal government.

II. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic,

[[Page 71606]]

environmental, public health and safety effects, distributive impacts, 
and equity). E.O. 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. This rule is anticipated to be a significant 
regulatory action and, therefore, was subject to review under Section 
6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 
1993.

III. Congressional Review Act

    This rule is not a major rule under 5 U.S.C. 804(2). Subtitle E of 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(codified at 5 U.S.C. 801-808), also known as the Congressional Review 
Act or CRA, generally provides that before a rule may take effect, the 
agency promulgating the rule must submit a rule report, which includes 
a copy of the rule, to each House of the Congress and to the 
Comptroller General of the United States. A major rule under the CRA 
cannot take effect until 60 days after it is published in the Federal 
Register. OIRA anticipates that this rule is not a ``major rule'' as 
defined by 5 U.S.C. 804(2).

IV. Regulatory Flexibility Act

    GSA certifies this rule will not have a significant economic impact 
on a substantial number of small entities because it applies only to 
Federal agencies and employees.

V. Paperwork Reduction Act

    The proposed rule does not contain any information collection 
requirements that require the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

VI. Regulatory Impact Analysis

    The cost and benefit impacts of amending FMR part 102-73 regarding 
real property acquisition to reflect current laws and regulatory 
policies to implement the Section 4 requirements outlined in the Secure 
Federal Leases Act (SFLA) (Pub. L. 116-276) are discussed in the 
analysis below. This analysis was developed by GSA in consultation with 
agency procurement officials and the GSA Office of Leasing. Section 
VI.(h) of this rule is requesting specific feedback regarding the 
impact of this rule, as well as other pertinent policy questions of 
interest, in order to inform finalization of this and potential future 
subsequent rulemakings.

(1) Federal Leasing--Current Processes

    Potential offerors are required to report certain ownership 
information to the System for Acquisition Management (SAM), including 
immediate or highest-level owners.

(2) Federal Government Leasing--General Security Framework

    As outlined within the Interagency Security Committee (ISC) 
Standard and the GSA Leasing Desk Guide, the facility security level 
(FSL) \4\ is set by the Department of Homeland Security--Federal 
Protective Service (FPS) and the client agency, in consultation with 
the GSA as part of the requirements development phase of a lease 
acquisition. If the client agency and FPS have not already conferred, 
the Federal lessee and GSA must coordinate with the necessary parties 
to set the appropriate level of security before the solicitation is 
drafted. This level of security will be memorialized by the Security 
Organization as a preliminary FSL, which serves as a precursor to the 
final FSL generally made with the tenants' post award. The Risk 
Management Process for Federal Facilities: An Interagency Security 
Committee Standard \5\ outlines the policies required for federal 
tenants in consultation with the responsible Security Organization to 
determine, set, and modify levels of security. The ownership 
information collected via this rule will not affect the FSL 
designation.
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    \4\ A categorization based on the analysis of several security-
related facility factors, which serves as the basis for the 
implementation of countermeasures specified in ISC standards. (ISC 
Standard, March 2021).
    \5\ https://www.cisa.gov/sites/default/files/publications/The%20Risk%20Management%20Process%20-%202021%20Edition_1.pdf.
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(3) Federal Government Leasing--Determining Countermeasures

    Federal lessees follow the ISC Standard for physical security 
criteria (PSC) for Federal Facilities. The standard establishes 
baseline physical security countermeasures for each FSL. The standard 
defines the process for determining the appropriate security measures 
through the ISC Risk Management Process; it also covers any uncommon 
measures required to address the unique risks at a particular facility. 
The GSA Public Buildings Service Leasing Desk Guide currently uses the 
PSC to prescribe the process for determining appropriate 
countermeasures for a facility. Therefore, GSA assumes other federal 
agency lessees adhere to ISC standards as well within their leasing 
guides and use the criteria provided by ISC to calculate the level of 
security required for the tenants.

(c) Compliance Plan Estimated Due to Proposed Rule

    GSA assumes the following steps would most likely be part of an 
agency's plan to collect and report owner disclosures using GSA's 
government-wide plan and GSAR 552.270-33 and 552.270-34:

    1. Government-Wide Plan and Regulatory Familiarization.
    The agency reads and understands the government-wide plan and 
potentially uses GSAR 552.270-33 and 552.270-34 for collection 
actions.
    2. Workforce Training.
    The agency must educate its purchasing/procurement professionals 
\6\ to heighten their familiarization with GSA's government-wide 
plan's disclosure requirements (as applicable).
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    \6\ GSA estimates that the purchasing/procurement professional 
requiring training as a result of this rule on average would be 
equal to a mid-career professional. The equivalent labor category 
used to capture cost estimates therefore is a GS-12 Step 5, or 
Journeyman Level 1.
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    3. Compliance with the Revised Representation Clause.
    The agency must identify and disclose whether entities do or do 
not have a foreign beneficial owner of leased space. If an 
affirmative disclosure is made for leases involving high-security 
space, GSA shall be notified of the disclosure made in the 
representation per the schedule set forth within the GSA government-
wide plan.

(d) Benefits

    This Act requires the disclosure of the identification of all 
individuals who own or benefit from partial ownership of a property 
that will be leased by the federal government for high-security use. 
The statute is in response to a 2017 Government Accountability Office 
(GAO) report which indicated that Federal agencies were vulnerable to 
espionage and other intrusions because foreign actors could gain 
unauthorized access to spaces used for classified operations or to 
store sensitive data. Agencies store law enforcement evidence and other 
sensitive data and are often unaware of foreign ownership of their 
office spaces. While many of the foreign owners identified in the 2017 
GAO report were companies based in allied countries such as Canada, 
Norway, Japan, or South Korea, other properties were owned and managed 
by entities based in more adversarial nations. The report noted 
Chinese-owned properties, in particular, presented security challenges 
because of the country's proclivity for cyberespionage and the close 
ties between private sector companies and

[[Page 71607]]

the Chinese government. The GAO report highlighted the dangers posed by 
these properties, indicating that ``leasing space in foreign-owned 
buildings could present security risks such as espionage, unauthorized 
cyber and physical access to the facilities, and sabotage.''
    The United States faces an expanding array of foreign intelligence 
threats by adversaries who are using increasingly sophisticated methods 
to harm the Nation.\7\ Threats to the United States posed by foreign 
intelligence entities are becoming more complex and harmful to U.S. 
interests.\8\ Foreign intelligence actors are employing innovative 
combinations of traditional spying, economic espionage, and supply 
chain and cyber operations to gain access to critical infrastructure 
and steal sensitive information and industrial secrets.\9\ The 
exploitation of key supply chains by foreign adversaries represents a 
complex and growing threat to strategically important U.S. economic 
sectors and critical infrastructure.\10\
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    \7\ National Counterintelligence Strategy of the United States 
of America 2020-2022.
    \8\ National Counterintelligence Strategy of the United States 
of America 2020-2022.
    \9\ National Counterintelligence Strategy of the United States 
of America 2020-2022.
    \10\ National Counterintelligence Strategy of the United States 
of America 2020-2022.
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    Additionally, by requiring ``Beneficial Owner'' information in the 
representation clause, Federal lessees will benefit by better 
understanding how an individual's ownership position can provide them 
access that could prove problematic for certain agencies. Congress 
underscored that ``money launderers and others involved in commercial 
activity intentionally conduct transactions through corporate 
structures in order to evade detection, and may layer such structures . 
. . across various secretive jurisdictions such that each time an 
investigator obtains ownership records for a domestic or foreign 
entity, the newly identified entity is yet another corporate entity, 
necessitating a repeat of the same process.'' \11\ The ability to 
engage in activity and obtain financial services in the name of a legal 
entity without disclosing the identities of the natural persons who own 
or control the entity--the natural persons whose interests the legal 
entity most directly serves--enables those natural persons to conceal 
their interests. And as the Treasury's Financial Crimes Enforcement 
Network (FinCEN) has noted previously, such concealment ``facilitates 
crime, threatens national security, and jeopardizes the integrity of 
the financial system.'' \12\ The goal of the Act is to close security 
loopholes by directing Federal agencies to notify GSA whether foreign 
owners have a stake in high-security buildings leased by Federal 
agencies, either through foreign-incorporated legal entities or through 
ownership in United States-incorporated legal entities, even when the 
leased space is used for classified operations or to store sensitive 
data. While GSA and other Federal agencies have made positive changes 
in response to GAO's 2017 report, this rule will help support current 
best practices being followed more uniformly throughout the Federal 
government.
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    \11\ Corporate Transparency Act Section 6402(4).
    \12\ Notice of Proposed Rulemaking: Customer Due Diligence 
Requirements for Financial Institutions, 79 FR 45151, 45153 (August 
4, 2014).
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    Finally, this rule ensures that Federal lessees will have the 
ability to obtain information on foreign ownership and provide it to 
relevant Federal tenants.

(e) Public Costs

    A. To estimate the aggregate burden to agencies of complying with 
the Act, the number of disclosures to obtain was calculated using 
numbers pulled from GSA's records and databases.\13\ As of August 2021, 
GSA has approximately 7,860 leases. Of the 7,860, approximately 1,263 
\14\ (or 16 percent) of the leases are for high-security lease space 
(lease space in a facility with a security level of III, IV, or V).
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    \13\ If not otherwise stated, numbers related to leases are 
provided by the GSA Office of Leasing through surveying their 
internal databases.
    \14\ The GSA Office of Leasing provided this number by surveying 
their internal database.
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    B. GSA also delegates leasing authority to several agencies, which 
are required to follow GSA's policies. GSA estimates there are 5,000 
leases represented by these agencies with the Delegated Leasing 
Authority from GSA.\15\ GSA does not have data available that 
identifies which of these are for high-security lease space. GSA 
assumes that these delegated agencies have a similar profile to GSA's 
for high-security leased space to total portfolio space, i.e., 16 
percent. This would bring the total number of high-security lease space 
for delegated agencies to 800 (5,000 x 16 percent).
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    \15\ This information is based on internal inventory data 
sources provided by the GSA Office of Leasing.
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    C. Agencies possessing independent leasing authority are not 
required to follow GSA's policies. GSA indicates that there are 41 
agencies with independent statutory authority.\16\ Further, GSA 
estimates there are 25,995 leases represented by these agencies.\17\ 
GSA does not have data available to identify which of these are for 
high-security lease space. GSA assumes these agencies have a similar 
profile to GSA's for high-security leased space to total portfolio 
space, i.e., 16 percent. This would bring the total number of high-
security lease space for independent agencies to 4,159 (25,995 x 16 
percent).
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    \16\ The GSA Office of Government-wide Policy used the Federal 
Real Property Profile Management System to determine the number of 
agencies with a lease authority indicator of independent statutory 
authority.
    \17\ This information is based on publicly available data 
sources provided by the GSA Office of Government-wide Policy Real 
Property Policy Division. https://www.gsa.gov/policy-regulations/policy/real-property-policy/asset-management/federal-real-property-profile-frpp/federal-real-property-public-data-set.
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    D. Based on historical data maintained by GSA's Office of Leasing, 
GSA estimates that 6 percent of its high-security leased space will be 
solicited for a new contract each year (6 percent of 1,263 = 76 
leases). These solicitations result from a mix of expiring high-
security leases or new requirements for high-security facilities. GSA 
assumes these trends will continue for the time horizon outlined by 
this regulatory impact. Based on historic bid rates and high current 
vacancy levels, GSA further estimates that 3 lessors will make offers 
for each of these high-security lease procurement for a total of 228 
offers (76 high-security leases awarded x 3 lessors competing for each 
solicitation; 76 x 3 = 228). GSA assumes the same profile for delegated 
facilities and independent agencies.
    E. Since 2014, GSA has averaged approximately 31 renewal options 
per year for high-security leases (equal to approximately 17 percent of 
all renewals options during the same period) and averaged approximately 
106 extensions for existing high-security leases (also equal to 
approximately 17 percent of all extensions during the same period). GSA 
assumes the same trend will continue in subsequent years. GSA assumes 
the same profile for delegated facilities and independent agencies.
    F. GSA processed 380 novations from May 1, 2020 to April 30, 2021 
\18\ (therefore approximately 5 percent of leases resulted in a 
novation (380/7,860)). GSA does not have data on how many of those were 
related to FSL III, IV, or V. GSA will assume 16 percent of those 
novations were for FSL III, IV, or V leases. Therefore, it is assumed 
61 novations were processed for high-security leases in the last year. 
GSA

[[Page 71608]]

assumes the same profile for delegated facilities and independent 
agencies.
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    \18\ This information is based on internal inventory data 
sources provided by the GSA Office of Leasing. GSA does not have 
data on how many novations other agencies with Delegated Leasing 
Authority processed.
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    A breakdown is provided in the table below.

----------------------------------------------------------------------------------------------------------------
                                                                                                    Independent
                                                                                     Delegated         lease
             Part above                                                 GSA          authority       authority
                                                                                     agencies        agencies
----------------------------------------------------------------------------------------------------------------
A, B...............................  Leased Space...............           7,860           5,000          25,995
                                     High Security (HS) Lease              1,263             800           4,159
                                      Space.
C..................................  New Procurements...........              76              48             250
                                     New Offers.................             228             144             749
D..................................  Renewals...................              31              16              83
E..................................  Extensions.................             106              64             333
F..................................  Novations..................             380             250           1,300
                                     HS Novations...............              61              40             208
                                                                 -----------------------------------------------
                                     HS Lease Baseline..........           6,222
                                                                 -----------------------------------------------
                                     Combined New HS Lease                 2,063
                                      Baseline.
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1. Public Total Costs
    GSA notes that amendment to FMR 102.73--Real Estate Acquisition 
regarding real property acquisition to reflect current laws and 
regulatory policies carries no direct cost to the public. Section 4 of 
the Secure Federal Lease Act focuses solely on the government's 
required activities for the planning, disclosures and notifications, 
reporting and implementation of the Act by GSA and Federal agencies to 
Congress.

(f) Government Cost Analysis

    During the first and subsequent years after publication of the 
rule, leasing acquisition members (which include a combination of 
Leasing Contracting Officers, Lease Administration Managers, Realty 
Specialists, and General Counsel) will need to learn about GSA's 
government-wide plan and disclosure requirements. GSA estimates this 
cost by multiplying the time required to review the regulations and 
guidance implementing the rule by the estimated compensation, on 
average, of a GS-12 leasing acquisition member unless specified. GSA 
assumes that leasing acquisition members will, on average, stay 
consistent in subsequent years. Numbers and assumptions apply to 
delegated and independent leasing agencies as well.
    For consistency, the number of leases to be reviewed match the 
numbers in the ``Existing HS Lease Baseline'' row (6,222 combined) and 
``New annual Lease Baseline'' row (2,063 combined) found in table in 
Section VI.(f).
    Below is a list of compliance activities related to regulatory 
familiarization that GSA anticipates will occur:
1. Government Compliance With Public Law 116-276. Section 4(a) 
Development of a Government-Wide Plan
    The Government must educate its leasing acquisition members via a 
government-wide plan to heighten their familiarity with the collection 
and reporting of the beneficial owners of high security leased space.
    a. GSA calculates it will take 160 hours in the second year to 
create the plan. GSA estimates this cost by multiplying the time 
required to develop and approve the plan by the estimated compensation, 
on average, of a GS-12. Therefore, GSA calculated the total estimated 
cost for this part of the rule to be $13,466 (= 160 hours x $84.16 x 
1).
    GSA estimates that it will take 5 hours in outyears to update the 
plan on a yearly basis. Therefore, GSA calculated the total estimated 
cost for this part of the rule to be $421 (= 5 hours x $84.16 x 1).
    b. GSA calculates it will take 80 hours in the second year to 
submit the plan to the Committee on Homeland Security and Governmental 
Affairs of the Senate and the Committee on Transportation and 
Infrastructure of the House of Representatives. GSA estimates this cost 
by multiplying the time required to submit the plan by the estimated 
compensation, on average, of a GS-12. Therefore, GSA calculated the 
total estimated cost for this part of the rule to be $6,733 (= 80 hours 
x $84.16 x 1).
    c. GSA estimates that it will take approximately 2,178 leasing 
acquisition members 30 minutes (0.5 hour \19\) to complete training 
related to the plan.\20\ Therefore, GSA calculated the total estimated 
cost for this part of the rule to be $91,650 (= 0.5 hours x $84.16 x 
2,178).\21\
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    \19\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
    \20\ Combined number of GSA/Delegate lease members and 
independent authority lease members.
    \21\ All totals in the Government Cost Analysis section are 
rounded.
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    After the initial training, GSA estimates it will take 15 minutes 
(0.25 hours \22\) to maintain training related to the plan. Therefore, 
GSA calculated the total estimated cost for this part of the rule to be 
$45,825 (= 0.25 hours x $84.16 x 2,178).
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    \22\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
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    d. GSA estimates the 41 agencies with independent lease authority 
may review GSAR 522.270-33 and 522.270-34 in a limited capacity to 
mirror GSA's policies. Therefore, GSA estimates those agencies may 
spend less time than GSA reviewing the GSARs as they may write, review, 
and become familiar with their own internal policies. GSA estimated on 
average, a GS-12 would spend 1 hour per year becoming familiar with 
GSAR 522.270-33 and GSAR 552.270-34 therefore, it would take 
independent leasing agencies 30 minutes (0.5 hours \23\) to review the 
GSAR. This would only occur for those agencies in the first year of 
collection and reporting. Therefore, GSA calculated the total estimated 
cost for this part of the rule to be $1,725 (= 0.5 hours x $84.16 x 
41).
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    \23\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    e. GSA calculates it will take 60 hours in the first year of 
collection and

[[Page 71609]]

reporting for independent leasing agencies to create their own policy 
in response to GSA's plan. GSA estimates this cost by multiplying the 
time required to develop the policy by the estimated compensation, on 
average, of a GS-12. Therefore, GSA calculated the total estimated cost 
for this part of the rule to be $207,034 (= 60 hours x $84.16 x 41). 
GSA calculates it will take 2.5 hours in outyears to review the policy 
and possibly revise the policy. Therefore, GSA calculated the total 
estimated cost for this part of the rule to be $8,626 (= 2.5 hours x 
$84.16 x 41).
    f. GSA estimates independent leasing agencies would spend 30 
minutes (0.5 hours \24\) training their workforce on their new policy. 
Therefore, GSA calculated the total estimated cost for this part of the 
rule to be $61,268 (= 0.5 hours x $84.16 x 1,456).
---------------------------------------------------------------------------

    \24\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

    GSA estimates independent leasing agencies would spend 15 (0.25 
hours \25\) minutes training their workforce on their policy in 
subsequent years. Therefore, GSA calculated the total estimated cost 
for this part of the rule to be $30,634 (= 0.25 hours x $84.16 x 
1,456).
---------------------------------------------------------------------------

    \25\ The hours estimated are an assumption based on historical 
familiarization hours and subject matter expert judgement. Subject 
matter experts include representatives from GSA's Office of Leasing, 
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------

2. Government Compliance With Public Law 116-276. Section 4(b), 
Disclosures and Notifications
    a. GSA estimates that of the baseline high-security lessors for GSA 
and delegated authority leases each year, 10 percent \26\ (or 206 
lessors) will respond affirmatively that the offeror ``does'' have an 
``immediate owner'', and/or ``is'' owned or controlled by another 
entity (or ``highest owner''), and/or ``does'' involve a ``foreign 
entity'' and it will take leasing acquisition members approximately 5 
hours to collect this information. Therefore, GSA calculated the total 
estimated cost for this part of the rule to be $86,684 (= 5 hours x 
$84.16 x 206).
---------------------------------------------------------------------------

    \26\ GSAR Case 2021-G527.
---------------------------------------------------------------------------

    GSA estimates it will take approximately 5 hours to collect the 
information submitted by GSA lease contracting officers and delegated 
authority leases. Therefore, GSA calculated the total estimated cost 
for this part of the rule to be $86,684 (= 5 hours x $84.16 x 206).
    b. GSA estimates that of the new high-security lessors for GSA and 
delegated authority leases each year, 10 percent \27\ (or 69 lessors) 
will respond affirmatively that the offeror ``does'' have an 
``immediate owner'', and/or ``is'' owned or controlled by another 
entity (or ``highest owner''), and/or ``does'' involve a ``foreign 
entity'' and it will take leasing acquisition members approximately 1 
hour to submit this information to GSA. Therefore, GSA calculated the 
total estimated cost for this part of the rule to be $5,807 (= 1 hours 
x $84.16 x 69).
---------------------------------------------------------------------------

    \27\ GSAR Case 2021-G527.
---------------------------------------------------------------------------

    c. GSA estimates it will take approximately 5 hours to collect the 
information submitted by GSA and delegated authority leases. Therefore, 
GSA calculated the total estimated cost for this part of the rule to be 
$5,807 (= 1 hours x $84.16 x 69).
    d. GSA estimates that of the baseline high-security lessors for 
independent authority leases each year, 10 percent (or 416 lessors) 
will respond affirmatively that the offeror ``does'' have an 
``immediate owner'', and/or ``is'' owned or controlled by another 
entity (or ``highest owner''), and/or ``does'' involve a ``foreign 
entity'' and it will take leasing acquisition members approximately 5 
hours to collect this information. Therefore, GSA calculated the total 
estimated cost for this part of the rule to be $175,053 (= 5 hours x 
$84.16 x 416).
    GSA estimates it will take approximately 5 hours to collect the 
information submitted by independent authority leases. Therefore, GSA 
calculated the total estimated cost for this part of the rule to be 
$175,053 (= 5 hours x $84.16 x 416).
    e. GSA estimates that of the new high-security lessors for 
independent authority leases each year, 10 percent (or 137 lessors) 
will respond affirmatively that the offeror ``does'' have an 
``immediate owner'', and/or ``is'' owned or controlled by another 
entity (or ``highest owner''), and/or ``does'' involve a ``foreign 
entity'' and it will take leasing acquisition members approximately 1 
hour to collect this information. Therefore, GSA calculated the total 
estimated cost for this part of the rule to be $11,530 (= 1 hours x 
$84.16 x 137).
    GSA estimates it will take approximately 1 hour to collect the 
information submitted by independent authority leases. Therefore, GSA 
calculated the total estimated cost for this part of the rule to be 
$11,530 (= 1 hours x $84.16 x 137).
3. Government Compliance With Public Law 116-276. Section 4(c), Report 
and Implementation
    a. GSA estimates it will take 8 hours beginning in year 3 to submit 
an annual report to the Committee on Homeland Security and Governmental 
Affairs of the Senate and the Committee on Transportation and 
Infrastructure of the House of representatives. Therefore, GSA 
calculated the total estimated cost for this part of the rule to be 
$673 (= 8 hours x $84.16 x 1).
4. Government Compliance With Public Law 116-276; Section 4(c)(3), 
Secure Federal Lease Act Consideration of Implementation Improvements
    a. GSA estimates it will take a total of 40 hours in years 3 and 4 
to review and consider commercial technology offerings to improve data 
collection. Therefore, GSA calculated the total estimated cost for this 
part of the rule to be $3,366 (= 40 hours x $84.16 x 1).
    b. GSA estimates it will take a total of 8 hours in years 5-10 to 
review and consider commercial new technology offerings to improve data 
collection. Therefore, GSA calculated the total estimated cost for this 
part of the rule to be $673 (= 8 hours x $84.16 x 1).
5. Government Total Costs
    The total cost of the above Cost Estimate is $848,376 in the first 
year after publication.\28\ The total cost of the above Cost Estimate 
in subsequent years is $127,738 annually.\29\
---------------------------------------------------------------------------

    \28\ Total costs calculated by GSA.
    \29\ Total costs calculated by GSA.
---------------------------------------------------------------------------

    The following is a summary of the estimated costs calculated for a 
10-year time horizon at a 3- and 7-percent discount rate:

------------------------------------------------------------------------
                          Summary                            Total costs
------------------------------------------------------------------------
Present Value (3 percent)..................................   $1,649,361
Annualized Costs (3 percent)...............................      161,932
Present Value (7 percent)..................................    1,415,574
Annualized Costs (7 percent)...............................      134,298
------------------------------------------------------------------------

6. Overall Total Costs
    The overall total cost is equal to Section VI.(f) Government Total 
Costs above as there is no direct cost to the public based on the 
amendment to FMR 102.73 as noted in Section VI.(e).

(g) Analysis of Alternatives

    The preferred alternative is the process laid out in the Act 
whereby GSA annually collects disclosures from Federal lessees and then 
reports that information to Congress.
    Alternative 1: GSA could take no regulatory action to implement 
this

[[Page 71610]]

statute. However, this alternative would not provide any implementation 
and enforcement of the important national security measures imposed by 
the law. Moreover, the general public would not experience the benefits 
of improved national security resulting from the rule as detailed above 
in Section VI.(d). As a result, we reject this alternative.
    Alternative 2: Federal lessees could send information on their 
activity directly to Congress, rather than in a centralized approach 
through the GSA. However, GSA rejects this approach given the 
likelihood of inconsistent collection and reporting of data along with 
potential additional costs and burden to government agencies.
    Alternative 3: GSA could follow the implementation approach based 
Section 4 of the Act directing GSA to aggregate disclosures from each 
Federal lessee one year after the implementation of the plan described 
in subsection (a) of the Act, and each year thereafter for 9 years, 
submit a report to the Committee on Homeland Security and Governmental 
Affairs of the Senate and the Committee on Transportation and 
Infrastructure of the House of Representatives on the status of the 
implementation of the plan, including the number of disclosures. This 
is the preferred method, which will allow GSA to help close security 
loopholes by designing a verification system that identifies a 
property's owners if the space would be used for high-security 
purposes. In addition, this rule will help support current best 
practices being followed more uniformly throughout the Federal 
government. Finally, this rule ensures that Federal lessees will have 
the ability to obtain information on foreign ownership and provide it 
to relevant Federal tenants.

(h) Specific Questions for Comment

    To understand the exact scope of the impact of this rule and how 
this impact could be affected, GSA welcomes input on the following 
assumptions and questions regarding anticipated impact on affected 
parties.
    Assumption 1: GSA estimates that this rule will impact mainly 
Federal agencies.
    Question 1: If this assumption is not valid, are there industry(s) 
to which this rule will cause significant impact or disruption?
    Assumption 2: The impact of this rule will not significantly change 
the way current Federal lessors interact with GSA.
    Question 2: If this assumption is not valid, to what extent will 
this rule, specifically the revised elements of FMR 102.73, change how 
you interact with GSA?

List of Subjects in 41 CFR Part 102-73

    Administrative practice and procedure, Federal buildings and 
facilities, Rates and fares.

Krystal J. Brumfield,
Associate Administrator, Office of Government-wide Policy.

    Therefore, GSA proposes amending 41 CFR part 102-73 as set forth 
below:

PART 102-73--REAL ESTATE ACQUISITION

0
1. The authority citation for 41 CFR part 102-73 is revised to read as 
follows:

    Authority: 40 U.S.C. 121(c); Sec. 3(c), Reorganization Plan No. 
18 of 1950 (40 U.S.C. 301 note); Sec. 1-201(b), E.O. 12072, as 
amended by E.O. 13946, 85 FR 52879, Aug 27, 2020; Subpart D 
Authority Pub. L. 116-276, 134 Stat. 3362.

0
2. Revise 102-73.5 to read as follows:


Sec.  102-73.5   What is the scope of this part?

    The real property policies contained in this part apply to Federal 
agencies, including GSA's Public Buildings Service (PBS), operating 
under, or subject to, the authorities of the Administrator of General 
Services; except for subpart D, which applies to Federal agencies 
exercising independent lease authority in addition to those operating 
under or subject to the authorities of the Administrator of General 
Services.
0
3. Add subpart D to part 102-73 to read as follows:
Subpart D--Secure Federal Leases From Espionage and Suspicious 
Entanglements Act, Public Law 116-276

Authority

102-73.310 What are the governing authorities for this subpart?

Definitions

102-73.315 What definitions apply to this subpart?

Applicability

102-73.320 Who must comply with these provisions?

Information Collection

102-73.325 What information must a covered entity provide to the 
Federal lessee?
102-73.330 What information must a Federal lessee provide to GSA?
102-73.335 When will Federal lessees provide information to GSA?
102-73.340 How will Federal lessees provide information to GSA?

Subpart D--Secure Federal Leases From Espionage and Suspicious 
Entanglements Act, Public Law 116-276

Authority


Sec.  102-73.310   What are the governing authorities for this subpart?

    The governing authorities are the Secure Federal Leases from 
Espionage And Suspicious Entanglements Act, Public Law 116-276, 134 
Stat. 3362 (2020) (the ``Secure Federal LEASEs Act'') and 40 U.S.C. 
121(c).

Definitions


Sec.  102-73.315  What definitions apply to this subpart?

    Federal lessee, as defined by the Secure Federal LEASEs Act, means:
    (a) The Administrator of General Services, the Architect of the 
Capitol, or the head of any Federal agency, other than the Department 
of Defense, that has independent statutory leasing authority; and
    (b) Does not include the head of an element of the intelligence 
community.
    Covered entity, as defined by the Secure Federal LEASEs Act, means:
    (a) A person, corporation, company, business association, 
partnership, society, trust, or any other nongovernmental entity, 
organization, or group; or
    (b) Any governmental entity or instrumentality of a government.
    Beneficial owner means, with respect to a covered entity, an 
individual who, directly or indirectly, through any contract, 
arrangement, understanding, relationship, or otherwise--
    (a) Exercises substantial control over the covered entity; or
    (b) Owns or controls not less than 25 percent of the ownership 
interests of the covered entity.
    Control means, with respect to a covered entity:
    (a) Having the authority or ability to determine how a covered 
entity is utilized; or
    (b) Having some decision-making power for the use of a covered 
entity.
    Highest-level owner means the entity that owns or controls an 
immediate owner of the offeror or Lessor, or that owns or controls one 
or more entities that control an immediate owner of the offeror or 
Lessor. No entity owns or exercises control of the highest-level owner.
    Immediate owner means an entity, other than the offeror or Lessor, 
that has direct control of the offeror or Lessor. Indicators of control 
include, but are not limited to, one or more of the following: 
Ownership or interlocking management,

[[Page 71611]]

identity of interests among family members, shared facilities and 
equipment, and the common use of employees.

Applicability


Sec.  102-73.320   Who must comply with these provisions?

    Each Federal lessee and covered entity must cooperate and comply 
with these provisions.

Information Collection


Sec.  102-73.325  What information must a covered entity provide to a 
Federal lessee?

    Sections 3 and 4 of the Secure Federal LEASEs Act require that, 
before the Government may enter into a lease agreement or novation with 
an entity for high-security leased space (defined as Facility Security 
Level III, IV or V), offerors must disclose whether the immediate 
owner, highest-level owner, or beneficial owner of the leased space, 
including an entity involved in the financing thereof, is a foreign 
person or entity, including the country associated with the ownership 
entity. Other agencies may replicate GSA's approach to this 
requirement, by referring to the interim rule General Services 
Administration Acquisition Regulation Case 2021-G527 (86 FR 34966).


Sec.  102-73.330  What information must a Federal lessee provide to 
GSA?

    Federal lessees must provide the following information when sharing 
their Secure Federal LEASEs Act disclosures with GSA:
    (a) Name of the agency conducting the procurement
    (b) Date of disclosure
    (c) Solicitation number or Contract number (for novations)
    (d) Type of Action (prior to entering a lease or prior to a 
novation agreement)
    (e) Total number of affirmative disclosures made (note--in some 
instances, there may be more than one owner-of-a-type. If more than one 
affirmative disclosure is made, include all disclosures)
    (f) As part of the total number of disclosures made, was one of the 
disclosures an affirmative immediate owner disclosure? If so, how many?
    (g) As part of the total number of disclosures made, was one of the 
disclosures an affirmative highest-level owner disclosure? If so, how 
many?
    (h) As part of the total number of disclosures made, was one of the 
disclosures an affirmative beneficial owner disclosure? If so, how 
many?


Sec.  102-73.335   When will Federal lessees provide information to 
GSA?

    Federal lessees will submit the required information on an annual 
basis.


Sec.  102-73.340   How will Federal lessees provide information to GSA?

    Federal lessees will submit the required information to GSA via 
email at [email protected].

[FR Doc. 2021-27333 Filed 12-16-21; 8:45 am]
BILLING CODE 6820-14-P