Federal Management Regulation; Real Estate Acquisition, 14058-14065 [2023-04340]
Download as PDF
14058
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Rules and Regulations
Rule No.
*
State effective
date
Rule title
*
*
EPA effective
date
*
Final rule citation/date
*
*
Comments
*
Chapter 2. Legal Authority
*
*
*
Section 2.15 ......................... Respecting Boards ...............
*
*
*
[FR Doc. 2023–04427 Filed 3–6–23; 8:45 am]
BILLING CODE 6560–50–P
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
Office of Government-wide
Policy (OGP), General Services
Administration (GSA).
ACTION: Final rule.
AGENCY:
GSA is finalizing an
amendment to the Federal Management
Regulation (FMR) part regarding real
property acquisition to clarify the
policies for entering into lease
agreements for high-security space in
accordance with the Secure Federal
Leases from Espionage And Suspicious
Entanglements Act, also referred to as
the Secure Federal LEASEs Act.
DATES: Effective: April 6, 2023.
FOR FURTHER INFORMATION CONTACT: For
clarification of content, contact Mr.
Chris Coneeney, Director, Real Property
Policy Division, Office of Governmentwide Policy, at 202–208–2956 or
chris.coneeney@gsa.gov. For
information pertaining to status or
publication schedules, contact the
Regulatory Secretariat Division at 202–
501–4755 or GSARegSec@gsa.gov.
Please cite FMR Case 2021–102–1.
SUPPLEMENTARY INFORMATION:
SUMMARY:
ddrumheller on DSK120RN23PROD with RULES1
I. Background
GSA published a proposed rule at 86
FR 71604 on December 17, 2021, to
implement section [4] of the Secure
Federal Leases from Espionage And
Suspicious Entanglements Act, also
referred to as the Secure Federal
LEASEs Act, Public Law 116–276, 134
Stat. 3362 (2020) (the ‘‘Act’’), which
VerDate Sep<11>2014
16:34 Mar 06, 2023
Jkt 259001
*
7/1/2020
*
*
4/6/2023
*
requires the disclosure of ownership
information to Federal lessees leasing
high-security space to enable 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 and
control, 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/generalservices-administration-acquisitionregulation-immediate-and-highest-levelowner-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
Department of Defense, that has
independent statutory leasing
authority.’’ The Act is not applicable to
the Department of Defense (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 U.S. 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
PO 00000
Frm 00012
Fmt 4700
*
[Insert Federal Register citation], 3/7/2023.
Sfmt 4700
*
*
*
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.
This final rule addresses the following
specific requirements in Section 4 of the
Act:
• Identification of beneficial
ownership information.
• Development of a governmentwide
plan for identifying all immediate,
highest-level, and beneficial owners of
high-security leased space.
• Submission of a corresponding
report to Congress.
This final rule addresses the annual
submission of ownership disclosures to
GSA from agencies operating under
either independent statutory leasing
authority or a grant of delegated leasing
authority from 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), § 819, Modifications to Mitigating
E:\FR\FM\07MRR1.SGM
07MRR1
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Rules and Regulations
Risks Related to Foreign Ownership,
Control, or Influence of DOD
Contractors and Subcontractors; § 885,
Disclosure of Beneficial Owners in
Database for Federal Agency Contract
and Grant Officers; § 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’’). In an attempt to
standardize the data provided to
Congress, the definitions stated in the
regulatory text need to be used to have
consistency in the collection of
information.
The United States Securities and
Exchange Commission (SEC) Definition
Section 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 section 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 Section 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.
ddrumheller on DSK120RN23PROD with RULES1
Corporate Transparency Act Definition
The Corporate Transparency Act
(CTA) definition can be found at section
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.
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).
VerDate Sep<11>2014
16:34 Mar 06, 2023
Jkt 259001
Financial Crimes Enforcement Network
Definition
The U.S. Department of the Treasury’s
Financial Crimes Enforcement Network
(FinCEN) issued a final rule
implementing the beneficial ownership
information reporting requirements of
the CTA, at 87 FR 59498 (September 30,
2022, to be codified at 31 CFR 1010).
These regulations go into effect on
January 1, 2024.
Under the rule, a beneficial owner
includes any individual who, directly or
indirectly, either (1) exercises
substantial control over a reporting
company, or (2) owns or controls at least
25 percent of the ownership interests of
a reporting company. The rule defines
the terms ‘‘substantial control’’ and
‘‘ownership interest.’’ In keeping with
the CTA, the rule exempts five types of
individuals from the definition of
‘‘beneficial owner.’’ 4
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, subject to
certain exceptions listed in the section
2(1)(B).’’
GSA’s Interpretation
GSA interprets that the SEC definition
is too limiting for use in the
representation clause because it is
concerned with the beneficial owner of
a security rather than a company or
corporation. The Secure Federal
LEASEs Act, the CTA, and the
subsequent FinCEN definitions are
similar. The 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 and FinCEN definitions says a
beneficial owner ‘‘owns or controls not
less than 25 percent of the ownership
interests of the entity.’’ GSA interprets
that the FinCEN definition meets the
intent of the SFLA (Pub. L. 116–276)
definition. As such, GSA intends to base
its definition on the FinCEN definition
because it is more specific (‘‘not less
4 https://www.fincen.gov/beneficial-ownershipinformation-reporting-rule-fact-sheet.
PO 00000
Frm 00013
Fmt 4700
Sfmt 4700
14059
than 25 percent’’ as opposed to having
to define ‘‘substantial interest’’ or
‘‘substantial economic benefits’’) and
because it would allow GSA to leverage
FinCEN’s efforts to collect beneficial
owner information for all corporations.
GSA does not believe this definition to
be ‘‘not less stringent’’ than the SEC
definition.
Other agencies may choose whether to
replicate GSA’s approach on how to
collect the information by referring to
GSA’s rule for General Services
Administration Acquisition Regulation
(GSAR) Case 2021–G527 at 86 FR 34966
and GSAR Case 2021–G522 at 86 FR
73219. However, to have a consistent
approach to the information GSA
provides Congress, agencies must follow
the definitions outlined in this final
rule.
Covered entities already provide
certain information on immediate and
highest-level ownership, per Office of
Management and Budget (OMB) Control
Numbers 9000–0097, 9000–0185, and
3090–0324. However, covered entities
will need to provide additional
disclosure of creditors or other entities
who may be deemed beneficial owners
if they either exercise substantial
control over the covered entity or own
or control 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. Discussion of the Final Rule
A. Summary of Significant Changes
As published in the proposed rule,
GSA added subpart D to address the
authorities, definitions, applicability,
and information collection associated
with the Secure Federal LEASEs Act.
GSA also revised section 102–73.5 to
expand the scope of the regulation in
subpart D to apply to Federal agencies
exercising independent leasing
authority in addition to those operating
under or subject to the authorities of the
Administrator of General Services.
B. Analysis of Public Comments
In the proposed rule published in the
Federal Register at 86 FR 71604 on
December 17, 2021, GSA provided the
public a 60-day comment period, which
ended on February 15, 2022. GSA
received one public comment in
response to the proposed rule:
‘‘With heightened international
tensions from some foreign actors
toward the US and increased threat of
physical and cyber espionage, I agree
and recommend that Sections 3 and 4 of
E:\FR\FM\07MRR1.SGM
07MRR1
14060
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES1
the Secure Federal LEASEs Act be
accepted under the noted Assumptions
from GSA that (1) this rule will impact
mainly Federal agencies and (2) the
impact of this rule will not significantly
change the way current Federal lessors
interact with the GSA. It is very
concerning that there are a large number
of Federal agencies with high-security
leases that are unaware they are leasing
from foreign entities. Awareness and
reporting of foreign lessors should
indeed help close any security
loopholes while not providing any
further financial burden on the general
public. Further, GSA should adopt the
preferred [Corporate Transparency Act]
CTA definition for the beneficial owner.
Lastly, it is recommended that the GSA
preferred method for reporting,
Alternative 3, be adopted for the
implementation of these rules.’’
This comment was supportive of the
rule. GSA did not change the regulatory
text of the definition from the published
proposed rule, but did add a sentence to
clarify that it is based on the FinCEN
definition for beneficial owner. The
FinCEN definition was issued pursuant
to the CTA and was published following
GSA’s proposed rule. GSA is using the
FinCEN definition because it is more
specific than the definition in the
Secure Federal LEASEs Act and is
congruent with the CTA definition.
GSA is also using Alternative 3 from
the Analysis of Alternatives discussed
in section VII. Regulatory Impact
Analysis to collect and aggregate the
disclosures from other Federal lessees
and report it to Congress as directed in
section 4 of the Act.
III. 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,
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. OIRA has determined that
this rule is a significant regulatory
action and, therefore, was subject to
review under subsection 6(b) of E.O.
12866, Regulatory Planning and Review,
dated September 30, 1993.
IV. Congressional Review Act
OIRA has determined that this rule is
not a ‘‘major rule’’ as defined by 5
U.S.C. 804(2). Subtitle E of the Small
Business Regulatory Enforcement
VerDate Sep<11>2014
16:34 Mar 06, 2023
Jkt 259001
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. GSA will submit a report
containing this rule and other required
information to the U.S. Senate, the U.S.
House of Representatives, and 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.
V. Regulatory Flexibility Act
This final rule will not have a
significant economic impact on a
substantial number of small entities
within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq.,
because it applies to agency
management or personnel. Therefore, a
Final Regulatory Flexibility Analysis
has not been performed.
VI. Paperwork Reduction Act
The Paperwork Reduction Act does
not apply because the changes to the
FMR do not impose recordkeeping or
information collection requirements, or
the collection of information from
offerors, contractors, or members of the
public that require the approval of OMB
under 44 U.S.C. 3501 et seq.
VII. 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 SFLA are discussed in the
analysis below, which was developed
by GSA in consultation with agency
procurement officials and the GSA
Office of Leasing. No public comments
were received on this analysis, so GSA
is finalizing this analysis without
change as discussed below.
(A) Federal Leasing—Current Processes
Potential offerors are required to
report certain ownership information to
the System for Acquisition
Management, including immediate or
highest-level owners.
(B) 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) 5 is set by the U.S.
5 A categorization based on the analysis of several
security-related facility factors, which serves as the
PO 00000
Frm 00014
Fmt 4700
Sfmt 4700
Department of Homeland Security—
Federal Protective Service (FPS) and the
client agency, in consultation with 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 6 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 through this rule will not
affect the FSL designation.
(C) 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.
(D) Compliance Plan
GSA assumes the following steps
would most likely be part of an agency’s
plan to collect and report owner
disclosures using GSA’s
governmentwide plan and GSAR
552.270–33 and 552.270–34:
1. Governmentwide Plan and
Regulatory Familiarization.
basis for the implementation of countermeasures
specified in ISC standards. (See ISC Standard,
March 2021, available at https://www.cisa.gov/sites/
default/files/publications/The%20Risk%20
Management%20Process%20-%202021%20
Edition_1.pdf).
6 See ISC Standard, March 2021, available at https
https://www.cisa.gov/sites/default/files/
publications/The%20Risk%20Management
%20Process%20-%202021%20Edition_1.pdf.
E:\FR\FM\07MRR1.SGM
07MRR1
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES1
The agency reads and understands the
governmentwide 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 7
to heighten their familiarity with GSA’s
governmentwide plan’s disclosure
requirements (as applicable).
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 must be notified of the disclosure
made in the representation in
accordance with the schedule set forth
in the GSA governmentwide plan.
(E) 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 GAO
report GAO–17–195, titled ‘‘Federal
Real Property: GSA Should Inform
Tenant Agencies When Leasing HighSecurity Space from Foreign Owners’’
(available at https://www.gao.gov/
products/gao-17-195) which indicated
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 Chineseowned properties, in particular,
presented security challenges because of
the country’s proclivity for
cyberespionage and the close ties
between private sector companies and
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.’’
7 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.
VerDate Sep<11>2014
16:34 Mar 06, 2023
Jkt 259001
The United States faces an expanding
array of foreign intelligence threats by
adversaries who are using increasingly
sophisticated methods to harm the
Nation.8 Threats to the United States
posed by foreign intelligence entities are
becoming more complex and harmful to
U.S. interests.9 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.10
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.11
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.’’ 12 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 FinCEN has
noted previously, such concealment
‘‘facilitates crime, threatens national
security, and jeopardizes the integrity of
the financial system.’’ 13 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 foreignincorporated legal entities or through
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.
11 National Counterintelligence Strategy of the
United States of America 2020–2022.
12 Corporate Transparency Act, section 6402(4).
13 Notice of Proposed Rulemaking: Customer Due
Diligence Requirements for Financial Institutions,
79 FR 45151, 45153 (August 4, 2014).
PO 00000
Frm 00015
Fmt 4700
Sfmt 4700
14061
ownership in United Statesincorporated legal entities, particularly
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.
Finally, this rule enables Federal
lessees to obtain information on foreign
ownership and provide it to Federal
occupant agencies.
(F) Public Costs
1. 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.14 As of
December 2022, GSA has approximately
7,711 active leases. Of the 7,711,
approximately 1,228 15 (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).
2. GSA also delegates leasing
authority to several agencies, which are
required to follow GSA’s policies. GSA
estimates there are 6,000 leases
represented by these agencies with the
delegated leasing authority from GSA.16
GSA does not have data available that
identifies which of these leases are for
high-security space. GSA assumes that
these agencies with delegated leasing
authority 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 highsecurity lease space for agencies with
delegated leasing authority to 960 (6,000
× 16 percent).
3. Agencies possessing independent
leasing authority are generally not
required to follow GSA’s policies,
except for subpart D of 41 CFR part 102–
73, made final by this rule. GSA
indicates that there are 41 agencies with
independent statutory leasing
authority.17 Further, GSA estimates
there are 25,995 leases represented by
these agencies.18 GSA does not have
14 If not otherwise stated, numbers related to
leases are provided by the GSA Office of Leasing
through surveying its internal databases.
15 The GSA Office of Leasing provided this
number by surveying its internal database.
16 This information is based on internal inventory
data sources provided by the GSA Office of Leasing.
17 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.
18 This information is based on publicly available
data sources provided by the GSA Office of
Government-wide Policy Real Property Policy
E:\FR\FM\07MRR1.SGM
Continued
07MRR1
14062
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Rules and Regulations
data available to identify which of these
leases are for high-security 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 leased space for
agencies with independent leasing
authority to 4,159 (25,995 × 16 percent).
4. Based on historical data maintained
by GSA’s Office of Leasing, GSA
estimates that 6 percent of its highsecurity leased space will be solicited
for a new contract each year (6 percent
of 1,228 = 74 leases). These solicitations
result from a mix of expiring highsecurity leases or new requirements for
high-security facilities. GSA assumes
these trends will continue for the time
horizon outlined by this regulatory
impact analysis. Based on historic bid
rates and high current vacancy levels,
GSA further estimates that 3 lessors will
make offers for each of these highsecurity lease procurements for a total of
222 offers (74 high-security leases
awarded × 3 lessors competing for each
solicitation = 222). GSA assumes the
same profile for agencies with delegated
leasing authority. This would bring the
total number of high-security leased
space solicited for a new contract each
year for agencies with delegated leasing
authority to 58 (6 percent of 960 = 58
leases). GSA further estimates that 3
lessors will make offers for each of these
delegated leasing authority agency highsecurity lease procurements for a total of
174 offers (58 high-security leases
awarded × 3 lessors competing for each
solicitation = 174). GSA assumes the
same profile for agencies with
independent leasing authority. This
would bring the total number of high-
security leased space solicited for a new
contract each year for agencies with
independent leasing authority to 250 (6
percent of 4,159 = 250). GSA further
estimates that 3 lessors will make offers
for each of these independent leasing
authority agency high-security lease
procurements for a total of 750 offers
(250 high-security leases awarded × 3
lessors competing for each solicitation =
750).
5. 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
agencies with delegated leasing
authority. This would bring the total
number of renewal options per year for
high-security leases for delegated
leasing authority agencies to 16 (equal
to approximately 17 percent of all
renewals options during the same
period) and the total number of
extensions for existing high-security
leases for delegated leasing authority
agencies to 64 (also equal to
approximately 17 percent of all
extensions during the same period).
GSA assumes the same profile for
agencies with independent leasing
authority. This would bring the total
number of renewal options per year for
high-security leases for independent
leasing authority agencies to 83 (equal
to approximately 17 percent of all
renewals options during the same
Part above
Delegated
authority
agencies
GSA
1, 2, 3 .....................................................................................................
Independent
lease
authority
agencies
Leased Space .........
High-Security (HS)
Leased Space.
HS New Procurements.
HS New Offers ........
HS Renewals ..........
HS Extensions ........
Novations ................
HS Novations ..........
7,711
1,228
6,000
960
25,995
4,159
74
58
250
222
31
106
340
54
174
16
64
240
38
750
83
333
1,040
166
Total GSA, Delegated Authority Agencies, and Independent
Lease Authority Agencies HS Leases Baseline.
Total of HS Lease
Baseline.
6,347
........................
........................
Total GSA, Delegated Authority Agencies, and Independent
Lease Authority Agencies New HS Leases Baseline.
.................................
382
........................
........................
4 .............................................................................................................
5 .............................................................................................................
6 .............................................................................................................
ddrumheller on DSK120RN23PROD with RULES1
period) and the total number of
extensions for existing high-security
leases for independent leasing authority
agencies to 333 (also equal to
approximately 17 percent of all
renewals options for delegated and
independent leasing authority during
the same period).
6. GSA processed 340 novations per
year for the last two years (therefore,
approximately 4 percent of leases
resulted in a novation (340/7,711)). GSA
does not have data on how many of
those were related to FSL III, IV, or V
facilities. GSA will assume 16 percent of
those novations were for FSL III, IV, or
V leases, based on the percentage of
high-security leased space in GSA’s
portfolio as noted above. Therefore, it is
assumed 54 novations were processed
for high-security leases in the last year
(16 percent of 340 novations = 54). GSA
assumes the same profile for agencies
with delegated and independent leasing
authority. This would bring the total
number of novations per year for
delegated leasing authority agencies to
240 (4 percent of 6,000 leases = 240) and
the total number of high-security lease
novations per year for delegated leasing
authority agencies to 38 (16 percent of
240 novations = 38). GSA assumes the
same profile for agencies with
independent leasing authority. This
would bring the total number of
novations per year for independent
leasing authority agencies to 1,040 (4
percent of 25,995 leases = 1,040
novations) and the total number of highsecurity lease novations for independent
leasing authority agencies to 166 (16
percent of 1,040 novations = 166).
A breakdown is provided in the table
below.
Division. https://www.gsa.gov/policy-regulations/
policy/real-property-policy/asset-management/
VerDate Sep<11>2014
16:34 Mar 06, 2023
Jkt 259001
federal-real-property-profile-frpp/federal-realproperty-public-data-set.
PO 00000
Frm 00016
Fmt 4700
Sfmt 4700
E:\FR\FM\07MRR1.SGM
07MRR1
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Rules and Regulations
(G) Public Total Costs
GSA notes that the amendment to
FMR part 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.
(H) 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 otherwise specified. GSA
assumes that leasing acquisition
members will, on average, stay
consistent in subsequent years. The
same numbers and assumptions apply
to agencies with delegated and
independent leasing authority, as well.
For consistency, the number of leases
to be reviewed match the numbers in
the ‘‘Total GSA, Delegated Authority
Agencies, and Independent Lease
Authority Agencies HS Leases Baseline’’
row (6,347 combined) and ‘‘Total GSA,
Delegated Authority Agencies, and
Independent Lease Authority Agencies
New HS Leases Baseline’’ row (382
combined) found in the table in
subsection VII.(F)(6), above.
Below is a list of compliance activities
related to regulatory familiarization that
GSA anticipates will occur:
ddrumheller on DSK120RN23PROD with RULES1
1. Government Compliance With Public
Law 116–276. Subsection 4(a)
Development of a Governmentwide Plan
The Government must educate its
leasing acquisition members through a
governmentwide 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 step 5 (based on the 2023 pay
table for Rest of US). Therefore, GSA
VerDate Sep<11>2014
16:34 Mar 06, 2023
Jkt 259001
calculated the total estimated cost for
this part of the rule to be $9,806 (= 160
hours × $61.29 × 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 $306 (= 5 hours × $61.29
× 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 $4,903 (= 80 hours × $61.29 × 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 $66,745 (= 0.5 hours × $61.29 ×
2,178).21
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 $33,372 (= 0.25 hours ×
$61.29 × 2,178).
d. GSA estimates the 41 agencies with
independent leasing authority may
review GSAR sections 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 GSAR
provisions 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
sections 522.270–33 and GSAR
552.270–34; therefore, it would take
independent leasing agencies 30
19 The hours estimated are an assumption based
on historical familiarization hours and subject
matter expert judgment. Subject matter experts
include representatives from GSA’s Office of
Leasing, including Realty Specialists and Leasing
Contracting Officers.
20 Combined number of GSA lease members and
lease members from agencies with delegated and
independent leasing authority.
21 All totals in the Government Cost Analysis
section are rounded.
22 The hours estimated are an assumption based
on historical familiarization hours and subject
matter expert judgment. Subject matter experts
include representatives from GSA’s Office of
Leasing, including Realty Specialists and Leasing
Contracting Officers.
PO 00000
Frm 00017
Fmt 4700
Sfmt 4700
14063
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 $1,256 (= 0.5
hours × $61.29 × 41).
e. GSA calculates it will take 60 hours
in the first year of collection and
reporting for agencies with independent
leasing authority to create their own
policies 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 $150,773 (= 60 hours ×
$61.29 × 41).
GSA calculates it will take 2.5 hours
in outyears to review the policy and, if
necessary, revise the policy. Therefore,
GSA calculated the total estimated cost
for this part of the rule to be $6,282 (=
2.5 hours × $61.29 × 41).
f. GSA estimates agencies with
independent leasing authority 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 $44,619 (= 0.5 hours × $61.29 ×
1,456).
GSA estimates agencies with
independent leasing authority would
spend 15 minutes (0.25 hours 25)
training their workforce on their policy
in subsequent years. Therefore, GSA
calculated the total estimated cost for
this part of the rule to be $22,310 (= 0.25
hours × $61.29 × 1,456).
2. Government Compliance With Public
Law 116–276. Subsection 4(b),
Disclosures and Notifications
a. GSA estimates that, of the baseline
high-security lessors for GSA and
agencies with delegated leasing
authority, each year 10 percent 26 (or
219 lessors) will respond affirmatively
that the offeror ‘‘does’’ have an
‘‘immediate owner,’’ or ‘‘is’’ owned or
23 The hours estimated are an assumption based
on historical familiarization hours and subject
matter expert judgment. Subject matter experts
include representatives from GSA’s Office of
Leasing, including Realty Specialists and Leasing
Contracting Officers.
24 The hours estimated are an assumption based
on historical familiarization hours and subject
matter expert judgment. Subject matter experts
include representatives from GSA’s Office of
Leasing, including Realty Specialists and Leasing
Contracting Officers.
25 The hours estimated are an assumption based
on historical familiarization hours and subject
matter expert judgment. Subject matter experts
include representatives from GSA’s Office of
Leasing, including Realty Specialists and Leasing
Contracting Officers.
26 GSAR Case 2021–G527.
E:\FR\FM\07MRR1.SGM
07MRR1
ddrumheller on DSK120RN23PROD with RULES1
14064
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Rules and Regulations
controlled by another entity (or ‘‘highest
owner’’), or ‘‘does’’ involve a ‘‘foreign
entity,’’ or any combination of the
foregoing, 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 $67,113 (= 5 hours × $61.29 × 219).
GSA estimates it will take
approximately 5 hours to collect the
information submitted by GSA lease
contracting officers and agencies with
delegated leasing authority. Therefore,
GSA calculated the total estimated cost
for this part of the rule to be $67,113 (=
5 hours × $61.29 × 219).
b. GSA estimates that, of the new
high-security lessors for GSA and
agencies with delegated leasing
authority, each year 10 percent 27 (or 13
lessors) will respond affirmatively that
the offeror ‘‘does’’ have an ‘‘immediate
owner,’’ or ‘‘is’’ owned or controlled by
another entity (or ‘‘highest owner’’), or
‘‘does’’ involve a ‘‘foreign entity,’’ or
any combination of the foregoing, 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 $797 (= 1
hours × $61.29 × 13).
c. GSA estimates it will take
approximately 5 hours to collect the
information submitted by GSA and
agencies with delegated leasing
authority. Therefore, GSA calculated the
total estimated cost for this part of the
rule to be $797 (= 1 hours × $61.29 ×
13).
d. GSA estimates that, of the baseline
high-security lessors for agencies with
independent leasing authority, each
year 10 percent (or 416 lessors) will
respond affirmatively that the offeror
‘‘does’’ have an ‘‘immediate owner,’’ or
‘‘is’’ owned or controlled by another
entity (or ‘‘highest owner’’), or ‘‘does’’
involve a ‘‘foreign entity,’’ or any
combination of the foregoing, 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 $127,483 (= 5 hours ×
$61.29 × 416).
GSA estimates it will take
approximately 5 hours to collect the
information submitted by agencies with
independent leasing authority.
Therefore, GSA calculated the total
estimated cost for this part of the rule
to be $127,483 (= 5 hours × $61.29 ×
416).
e. GSA estimates that, of the new
high-security lessors for agencies with
independent leasing authority, each
year 10 percent (or 25 lessors) will
respond affirmatively that the offeror
‘‘does’’ have an ‘‘immediate owner,’’, or
‘‘is’’ owned or controlled by another
entity (or ‘‘highest owner’’), or ‘‘does’’
involve a ‘‘foreign entity,’’ or any
combination of the foregoing, 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 $1,532 (= 1 hours × $61.29
× 25).
GSA estimates it will take
approximately 1 hour to collect the
information submitted by agencies with
independent leasing authority.
Therefore, GSA calculated the total
estimated cost for this part of the rule
to be $1,532 (= 1 hours × $61.29 × 25).
3. Government Compliance With Public
Law 116–276. Subsection 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 $490 (= 8
hours × $61.29 × 1).
4. Government Compliance With Public
Law 116–276. Subsection 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 $2,452 (= 40 hours × $61.29 × 1).
b. GSA estimates it will take a total of
8 hours in years 5–10 to review and
consider new commercial technology
offerings to improve data collection.
Therefore, GSA calculated the total
estimated cost for this part of the rule
to be $306 (= 8 hours × $61.29 × 1).
5. Government Total Costs
The total cost of the above Cost
Estimate is $605,207 in the first year
after publication.28 The total cost of the
above Cost Estimate in subsequent years
is $72,432 annually.29
The following is a summary of the
estimated costs calculated for a 10-year
time horizon at a 3- and 7-percent
discount rate:
28 Total
27 GSAR
Case 2021–G527.
VerDate Sep<11>2014
16:34 Mar 06, 2023
29 Total
Jkt 259001
PO 00000
costs calculated by GSA.
costs calculated by GSA.
Frm 00018
Fmt 4700
Sfmt 4700
Summary
Present Value (3 percent) ....
Annualized Costs (3 percent)
Present Value (7 percent) ....
Annualized Costs (7 percent)
Total costs
$1,052,989
123,442
912,461
129,914
6. Overall Total Costs
The overall total cost is equal to
subsection VII.(H), Government Total
Costs, above, as there is no direct cost
to the public based on the amendment
to FMR part 102.73 as noted in
subsection VII.(G), above.
(I) 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
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 subsection VII.(E).
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 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 on
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
enables Federal lessees to obtain
information on foreign ownership and
provide it to relevant Federal occupant
agencies.
E:\FR\FM\07MRR1.SGM
07MRR1
Federal Register / Vol. 88, No. 44 / Tuesday, March 7, 2023 / Rules and Regulations
List of Subjects in 41 CFR Part 102–73
Administrative practice and
procedure, Federal buildings and
facilities, Rates and fares.
Robin Carnahan,
Administrator of General Services.
Therefore, GSA amends 41 CFR part
102–73 as set forth below:
PART 102–73—REAL ESTATE
ACQUISITION
1. The authority citation for 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; Pub. L. 116–276, 134 Stat. 3362.
2. Revise § 102–73.5 to read as
follows:
■
§ 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, operating under, or subject to,
the authorities of the Administrator of
General Services; except for subpart D of
this part, which applies to Federal
agencies exercising independent leasing
authority in addition to those agencies
operating under or subject to the
authorities of the Administrator of
General Services.
■ 3. Add subpart D to read as follows:
Subpart D—Secure Federal Leases From
Espionage and Suspicious Entanglements
Act
Sec.
102–73.310 What are the governing
authorities for this subpart?
102–73.315 What definitions apply to this
subpart?
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 must Federal lessees
provide information to GSA?
102–73.340 How must Federal lessees
provide information to GSA?
ddrumheller on DSK120RN23PROD with RULES1
Subpart D—Secure Federal Leases
From Espionage and Suspicious
Entanglements Act
§ 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).
VerDate Sep<11>2014
16:34 Mar 06, 2023
Jkt 259001
§ 102–73.315
subpart?
What definitions apply to this
Beneficial owner means:
(1) With respect to a covered entity,
an individual who, directly or
indirectly, through any contract,
arrangement, understanding,
relationship, or otherwise—
(i) Exercises substantial control over
the covered entity; or
(ii) Owns or controls not less than 25
percent of the ownership interests of the
covered entity.
(2) This definition is based on the
Department of the Treasury Financial
Crimes Enforcement Network’s
Beneficial Ownership Information
Reporting Requirements at 31 CFR part
1010.
Control means, with respect to a
covered entity:
(1) Having the authority or ability to
determine how a covered entity is used;
or
(2) Having some decision-making
power for the use of a covered entity.
Covered entity, as defined by the
Secure Federal LEASEs Act, means:
(1) A person, corporation, company,
business association, partnership,
society, trust, or any other
nongovernmental entity, organization,
or group; or
(2) Any governmental entity or
instrumentality of a government.
Federal lessee, as defined by the
Secure Federal LEASEs Act, means:
(1) 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
(2) Does not include the head of an
element of the intelligence community.
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,
identity of interests among family
members, shared facilities and
equipment, and the common use of
employees.
§ 102–73.320
provisions?
Who must comply with these
Each Federal lessee and covered
entity must cooperate and comply with
these provisions.
PO 00000
Frm 00019
Fmt 4700
Sfmt 9990
14065
Information Collection
§ 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.
§ 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?; and
(h) As part of the total number of
disclosures made, was one of the
disclosures an affirmative beneficial
owner disclosure? If so, how many?
§ 102–73.335 When must Federal lessees
provide information to GSA?
Federal lessees must submit the
required information on an annual
basis.
§ 102–73.340 How must Federal lessees
provide information to GSA?
Federal lessees must submit the
required information to GSA by email at
SFLA@gsa.gov.
[FR Doc. 2023–04340 Filed 3–6–23; 8:45 am]
BILLING CODE 6820–14–P
E:\FR\FM\07MRR1.SGM
07MRR1
Agencies
[Federal Register Volume 88, Number 44 (Tuesday, March 7, 2023)]
[Rules and Regulations]
[Pages 14058-14065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04340]
=======================================================================
-----------------------------------------------------------------------
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: Final rule.
-----------------------------------------------------------------------
SUMMARY: GSA is finalizing an amendment to the Federal Management
Regulation (FMR) part regarding real property acquisition to clarify
the policies for entering into lease agreements for high-security space
in accordance with the Secure Federal Leases from Espionage And
Suspicious Entanglements Act, also referred to as the Secure Federal
LEASEs Act.
DATES: Effective: April 6, 2023.
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
GSA published a proposed rule at 86 FR 71604 on December 17, 2021,
to implement section [4] of the Secure Federal Leases from Espionage
And Suspicious Entanglements Act, also referred to as the Secure
Federal LEASEs Act, Public Law 116-276, 134 Stat. 3362 (2020) (the
``Act''), which requires the disclosure of ownership information to
Federal lessees leasing high-security space to enable 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 and control, 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 Department of Defense, that has
independent statutory leasing authority.'' The Act is not applicable to
the Department of Defense (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 U.S.
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.
This final rule addresses the following specific requirements in
Section 4 of the Act:
Identification of beneficial ownership information.
Development of a governmentwide plan for identifying all
immediate, highest-level, and beneficial owners of high-security leased
space.
Submission of a corresponding report to Congress.
This final rule addresses the annual submission of ownership
disclosures to GSA from agencies operating under either independent
statutory leasing authority or a grant of delegated leasing authority
from 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
[[Page 14059]]
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''). In an attempt to
standardize the data provided to Congress, the definitions stated in
the regulatory text need to be used to have consistency in the
collection of information.
The United States Securities and Exchange Commission (SEC) Definition
Section 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 section 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\ Section 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
Corporate Transparency Act Definition
The Corporate Transparency Act (CTA) definition can be found at
section 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.
Financial Crimes Enforcement Network Definition
The U.S. Department of the Treasury's Financial Crimes Enforcement
Network (FinCEN) issued a final rule implementing the beneficial
ownership information reporting requirements of the CTA, at 87 FR 59498
(September 30, 2022, to be codified at 31 CFR 1010). These regulations
go into effect on January 1, 2024.
Under the rule, a beneficial owner includes any individual who,
directly or indirectly, either (1) exercises substantial control over a
reporting company, or (2) owns or controls at least 25 percent of the
ownership interests of a reporting company. The rule defines the terms
``substantial control'' and ``ownership interest.'' In keeping with the
CTA, the rule exempts five types of individuals from the definition of
``beneficial owner.'' \4\
---------------------------------------------------------------------------
\4\ https://www.fincen.gov/beneficial-ownership-information-reporting-rule-fact-sheet.
---------------------------------------------------------------------------
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, subject to certain exceptions listed in the section
2(1)(B).''
GSA's Interpretation
GSA interprets that the SEC definition is too limiting for use in
the representation clause because it is concerned with the beneficial
owner of a security rather than a company or corporation. The Secure
Federal LEASEs Act, the CTA, and the subsequent FinCEN definitions are
similar. The 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 and FinCEN definitions says a beneficial
owner ``owns or controls not less than 25 percent of the ownership
interests of the entity.'' GSA interprets that the FinCEN definition
meets the intent of the SFLA (Pub. L. 116-276) definition. As such, GSA
intends to base its definition on the FinCEN definition because it is
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 FinCEN's efforts to collect
beneficial owner information for all corporations. GSA does not believe
this definition to be ``not less stringent'' than the SEC definition.
Other agencies may choose whether to replicate GSA's approach on
how to collect the information by referring to GSA's rule for General
Services Administration Acquisition Regulation (GSAR) Case 2021-G527 at
86 FR 34966 and GSAR Case 2021-G522 at 86 FR 73219. However, to have a
consistent approach to the information GSA provides Congress, agencies
must follow the definitions outlined in this final rule.
Covered entities already provide certain information on immediate
and highest-level ownership, per Office of Management and Budget (OMB)
Control Numbers 9000-0097, 9000-0185, and 3090-0324. However, covered
entities will need to provide additional disclosure of creditors or
other entities who may be deemed beneficial owners if they either
exercise substantial control over the covered entity or own or control
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. Discussion of the Final Rule
A. Summary of Significant Changes
As published in the proposed rule, GSA added subpart D to address
the authorities, definitions, applicability, and information collection
associated with the Secure Federal LEASEs Act. GSA also revised section
102-73.5 to expand the scope of the regulation in subpart D to apply to
Federal agencies exercising independent leasing authority in addition
to those operating under or subject to the authorities of the
Administrator of General Services.
B. Analysis of Public Comments
In the proposed rule published in the Federal Register at 86 FR
71604 on December 17, 2021, GSA provided the public a 60-day comment
period, which ended on February 15, 2022. GSA received one public
comment in response to the proposed rule:
``With heightened international tensions from some foreign actors
toward the US and increased threat of physical and cyber espionage, I
agree and recommend that Sections 3 and 4 of
[[Page 14060]]
the Secure Federal LEASEs Act be accepted under the noted Assumptions
from GSA that (1) this rule will impact mainly Federal agencies and (2)
the impact of this rule will not significantly change the way current
Federal lessors interact with the GSA. It is very concerning that there
are a large number of Federal agencies with high-security leases that
are unaware they are leasing from foreign entities. Awareness and
reporting of foreign lessors should indeed help close any security
loopholes while not providing any further financial burden on the
general public. Further, GSA should adopt the preferred [Corporate
Transparency Act] CTA definition for the beneficial owner. Lastly, it
is recommended that the GSA preferred method for reporting, Alternative
3, be adopted for the implementation of these rules.''
This comment was supportive of the rule. GSA did not change the
regulatory text of the definition from the published proposed rule, but
did add a sentence to clarify that it is based on the FinCEN definition
for beneficial owner. The FinCEN definition was issued pursuant to the
CTA and was published following GSA's proposed rule. GSA is using the
FinCEN definition because it is more specific than the definition in
the Secure Federal LEASEs Act and is congruent with the CTA definition.
GSA is also using Alternative 3 from the Analysis of Alternatives
discussed in section VII. Regulatory Impact Analysis to collect and
aggregate the disclosures from other Federal lessees and report it to
Congress as directed in section 4 of the Act.
III. 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, 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.
OIRA has determined that this rule is a significant regulatory action
and, therefore, was subject to review under subsection 6(b) of E.O.
12866, Regulatory Planning and Review, dated September 30, 1993.
IV. Congressional Review Act
OIRA has determined that this rule is not a ``major rule'' as
defined by 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.
GSA will submit a report containing this rule and other required
information to the U.S. Senate, the U.S. House of Representatives, and
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.
V. Regulatory Flexibility Act
This final rule will not have a significant economic impact on a
substantial number of small entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because it applies
to agency management or personnel. Therefore, a Final Regulatory
Flexibility Analysis has not been performed.
VI. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FMR do not impose recordkeeping or information collection
requirements, or the collection of information from offerors,
contractors, or members of the public that require the approval of OMB
under 44 U.S.C. 3501 et seq.
VII. 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 SFLA are
discussed in the analysis below, which was developed by GSA in
consultation with agency procurement officials and the GSA Office of
Leasing. No public comments were received on this analysis, so GSA is
finalizing this analysis without change as discussed below.
(A) Federal Leasing--Current Processes
Potential offerors are required to report certain ownership
information to the System for Acquisition Management, including
immediate or highest-level owners.
(B) 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) \5\ is set by the U.S. Department of Homeland Security--Federal
Protective Service (FPS) and the client agency, in consultation with
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 \6\ 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 through this rule will not affect the FSL
designation.
---------------------------------------------------------------------------
\5\ 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. (See
ISC Standard, March 2021, available at https://www.cisa.gov/sites/default/files/publications/The%20Risk%20Management%20Process%20-%202021%20Edition_1.pdf).
\6\ See ISC Standard, March 2021, available at https https://www.cisa.gov/sites/default/files/publications/The%20Risk%20Management%20Process%20-%202021%20Edition_1.pdf.
---------------------------------------------------------------------------
(C) 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.
(D) Compliance Plan
GSA assumes the following steps would most likely be part of an
agency's plan to collect and report owner disclosures using GSA's
governmentwide plan and GSAR 552.270-33 and 552.270-34:
1. Governmentwide Plan and Regulatory Familiarization.
[[Page 14061]]
The agency reads and understands the governmentwide 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
\7\ to heighten their familiarity with GSA's governmentwide plan's
disclosure requirements (as applicable).
---------------------------------------------------------------------------
\7\ 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.
---------------------------------------------------------------------------
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 must
be notified of the disclosure made in the representation in accordance
with the schedule set forth in the GSA governmentwide plan.
(E) 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 GAO report GAO-17-195, titled ``Federal
Real Property: GSA Should Inform Tenant Agencies When Leasing High-
Security Space from Foreign Owners'' (available at https://www.gao.gov/products/gao-17-195) which indicated 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 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.\8\ Threats to the United States posed by foreign
intelligence entities are becoming more complex and harmful to U.S.
interests.\9\ 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.\10\ 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.\11\
---------------------------------------------------------------------------
\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.
\11\ National Counterintelligence Strategy of the United States
of America 2020-2022.
---------------------------------------------------------------------------
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.'' \12\ 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 FinCEN has noted previously, such concealment
``facilitates crime, threatens national security, and jeopardizes the
integrity of the financial system.'' \13\ 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,
particularly 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.
---------------------------------------------------------------------------
\12\ Corporate Transparency Act, section 6402(4).
\13\ Notice of Proposed Rulemaking: Customer Due Diligence
Requirements for Financial Institutions, 79 FR 45151, 45153 (August
4, 2014).
---------------------------------------------------------------------------
Finally, this rule enables Federal lessees to obtain information on
foreign ownership and provide it to Federal occupant agencies.
(F) Public Costs
1. 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.\14\ As of December
2022, GSA has approximately 7,711 active leases. Of the 7,711,
approximately 1,228 \15\ (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).
---------------------------------------------------------------------------
\14\ If not otherwise stated, numbers related to leases are
provided by the GSA Office of Leasing through surveying its internal
databases.
\15\ The GSA Office of Leasing provided this number by surveying
its internal database.
---------------------------------------------------------------------------
2. GSA also delegates leasing authority to several agencies, which
are required to follow GSA's policies. GSA estimates there are 6,000
leases represented by these agencies with the delegated leasing
authority from GSA.\16\ GSA does not have data available that
identifies which of these leases are for high-security space. GSA
assumes that these agencies with delegated leasing authority 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 agencies with delegated leasing authority
to 960 (6,000 x 16 percent).
---------------------------------------------------------------------------
\16\ This information is based on internal inventory data
sources provided by the GSA Office of Leasing.
---------------------------------------------------------------------------
3. Agencies possessing independent leasing authority are generally
not required to follow GSA's policies, except for subpart D of 41 CFR
part 102-73, made final by this rule. GSA indicates that there are 41
agencies with independent statutory leasing authority.\17\ Further, GSA
estimates there are 25,995 leases represented by these agencies.\18\
GSA does not have
[[Page 14062]]
data available to identify which of these leases are for high-security
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 leased space for
agencies with independent leasing authority to 4,159 (25,995 x 16
percent).
---------------------------------------------------------------------------
\17\ 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.
\18\ 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.
---------------------------------------------------------------------------
4. 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 1,228 = 74
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 analysis. 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 procurements for a total
of 222 offers (74 high-security leases awarded x 3 lessors competing
for each solicitation = 222). GSA assumes the same profile for agencies
with delegated leasing authority. This would bring the total number of
high-security leased space solicited for a new contract each year for
agencies with delegated leasing authority to 58 (6 percent of 960 = 58
leases). GSA further estimates that 3 lessors will make offers for each
of these delegated leasing authority agency high-security lease
procurements for a total of 174 offers (58 high-security leases awarded
x 3 lessors competing for each solicitation = 174). GSA assumes the
same profile for agencies with independent leasing authority. This
would bring the total number of high-security leased space solicited
for a new contract each year for agencies with independent leasing
authority to 250 (6 percent of 4,159 = 250). GSA further estimates that
3 lessors will make offers for each of these independent leasing
authority agency high-security lease procurements for a total of 750
offers (250 high-security leases awarded x 3 lessors competing for each
solicitation = 750).
5. 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 agencies with delegated leasing authority. This
would bring the total number of renewal options per year for high-
security leases for delegated leasing authority agencies to 16 (equal
to approximately 17 percent of all renewals options during the same
period) and the total number of extensions for existing high-security
leases for delegated leasing authority agencies to 64 (also equal to
approximately 17 percent of all extensions during the same period). GSA
assumes the same profile for agencies with independent leasing
authority. This would bring the total number of renewal options per
year for high-security leases for independent leasing authority
agencies to 83 (equal to approximately 17 percent of all renewals
options during the same period) and the total number of extensions for
existing high-security leases for independent leasing authority
agencies to 333 (also equal to approximately 17 percent of all renewals
options for delegated and independent leasing authority during the same
period).
6. GSA processed 340 novations per year for the last two years
(therefore, approximately 4 percent of leases resulted in a novation
(340/7,711)). GSA does not have data on how many of those were related
to FSL III, IV, or V facilities. GSA will assume 16 percent of those
novations were for FSL III, IV, or V leases, based on the percentage of
high-security leased space in GSA's portfolio as noted above.
Therefore, it is assumed 54 novations were processed for high-security
leases in the last year (16 percent of 340 novations = 54). GSA assumes
the same profile for agencies with delegated and independent leasing
authority. This would bring the total number of novations per year for
delegated leasing authority agencies to 240 (4 percent of 6,000 leases
= 240) and the total number of high-security lease novations per year
for delegated leasing authority agencies to 38 (16 percent of 240
novations = 38). GSA assumes the same profile for agencies with
independent leasing authority. This would bring the total number of
novations per year for independent leasing authority agencies to 1,040
(4 percent of 25,995 leases = 1,040 novations) and the total number of
high-security lease novations for independent leasing authority
agencies to 166 (16 percent of 1,040 novations = 166).
A breakdown is provided in the table below.
----------------------------------------------------------------------------------------------------------------
Independent
Delegated lease
Part above GSA authority authority
agencies agencies
----------------------------------------------------------------------------------------------------------------
1, 2, 3............................... Leased Space............ 7,711 6,000 25,995
High-Security (HS) 1,228 960 4,159
Leased Space.
4..................................... HS New Procurements..... 74 58 250
HS New Offers........... 222 174 750
5..................................... HS Renewals............. 31 16 83
HS Extensions........... 106 64 333
6..................................... Novations............... 340 240 1,040
HS Novations............ 54 38 166
-----------------------------------------------
Total GSA, Delegated Authority Total of HS Lease 6,347 .............. ..............
Agencies, and Independent Lease Baseline.
Authority Agencies HS Leases
Baseline.
-------------------------------------------------------------------------
Total GSA, Delegated Authority ........................ 382 .............. ..............
Agencies, and Independent Lease
Authority Agencies New HS Leases
Baseline.
----------------------------------------------------------------------------------------------------------------
[[Page 14063]]
(G) Public Total Costs
GSA notes that the amendment to FMR part 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.
(H) 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 otherwise
specified. GSA assumes that leasing acquisition members will, on
average, stay consistent in subsequent years. The same numbers and
assumptions apply to agencies with delegated and independent leasing
authority, as well.
For consistency, the number of leases to be reviewed match the
numbers in the ``Total GSA, Delegated Authority Agencies, and
Independent Lease Authority Agencies HS Leases Baseline'' row (6,347
combined) and ``Total GSA, Delegated Authority Agencies, and
Independent Lease Authority Agencies New HS Leases Baseline'' row (382
combined) found in the table in subsection VII.(F)(6), above.
Below is a list of compliance activities related to regulatory
familiarization that GSA anticipates will occur:
1. Government Compliance With Public Law 116-276. Subsection 4(a)
Development of a Governmentwide Plan
The Government must educate its leasing acquisition members through
a governmentwide 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 step 5 (based on the 2023 pay table for Rest of
US). Therefore, GSA calculated the total estimated cost for this part
of the rule to be $9,806 (= 160 hours x $61.29 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 $306 (= 5 hours x $61.29 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 $4,903 (= 80 hours
x $61.29 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 $66,745 (= 0.5 hours x $61.29 x
2,178).\21\
---------------------------------------------------------------------------
\19\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgment. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
\20\ Combined number of GSA lease members and lease members from
agencies with delegated and independent leasing authority.
\21\ All totals in the Government Cost Analysis section are
rounded.
---------------------------------------------------------------------------
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
$33,372 (= 0.25 hours x $61.29 x 2,178).
---------------------------------------------------------------------------
\22\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgment. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
d. GSA estimates the 41 agencies with independent leasing authority
may review GSAR sections 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 GSAR provisions 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 sections 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
$1,256 (= 0.5 hours x $61.29 x 41).
---------------------------------------------------------------------------
\23\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgment. 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 reporting for agencies with independent leasing
authority to create their own policies 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 $150,773 (= 60 hours x $61.29 x 41).
GSA calculates it will take 2.5 hours in outyears to review the
policy and, if necessary, revise the policy. Therefore, GSA calculated
the total estimated cost for this part of the rule to be $6,282 (= 2.5
hours x $61.29 x 41).
f. GSA estimates agencies with independent leasing authority 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 $44,619 (= 0.5 hours x $61.29 x 1,456).
---------------------------------------------------------------------------
\24\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgment. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
GSA estimates agencies with independent leasing authority would
spend 15 minutes (0.25 hours \25\) training their workforce on their
policy in subsequent years. Therefore, GSA calculated the total
estimated cost for this part of the rule to be $22,310 (= 0.25 hours x
$61.29 x 1,456).
---------------------------------------------------------------------------
\25\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgment. 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. Subsection 4(b),
Disclosures and Notifications
a. GSA estimates that, of the baseline high-security lessors for
GSA and agencies with delegated leasing authority, each year 10 percent
\26\ (or 219 lessors) will respond affirmatively that the offeror
``does'' have an ``immediate owner,'' or ``is'' owned or
[[Page 14064]]
controlled by another entity (or ``highest owner''), or ``does''
involve a ``foreign entity,'' or any combination of the foregoing, 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 $67,113 (= 5 hours x $61.29 x
219).
---------------------------------------------------------------------------
\26\ GSAR Case 2021-G527.
---------------------------------------------------------------------------
GSA estimates it will take approximately 5 hours to collect the
information submitted by GSA lease contracting officers and agencies
with delegated leasing authority. Therefore, GSA calculated the total
estimated cost for this part of the rule to be $67,113 (= 5 hours x
$61.29 x 219).
b. GSA estimates that, of the new high-security lessors for GSA and
agencies with delegated leasing authority, each year 10 percent \27\
(or 13 lessors) will respond affirmatively that the offeror ``does''
have an ``immediate owner,'' or ``is'' owned or controlled by another
entity (or ``highest owner''), or ``does'' involve a ``foreign
entity,'' or any combination of the foregoing, 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 $797 (= 1 hours x $61.29 x 13).
---------------------------------------------------------------------------
\27\ GSAR Case 2021-G527.
---------------------------------------------------------------------------
c. GSA estimates it will take approximately 5 hours to collect the
information submitted by GSA and agencies with delegated leasing
authority. Therefore, GSA calculated the total estimated cost for this
part of the rule to be $797 (= 1 hours x $61.29 x 13).
d. GSA estimates that, of the baseline high-security lessors for
agencies with independent leasing authority, each year 10 percent (or
416 lessors) will respond affirmatively that the offeror ``does'' have
an ``immediate owner,'' or ``is'' owned or controlled by another entity
(or ``highest owner''), or ``does'' involve a ``foreign entity,'' or
any combination of the foregoing, 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
$127,483 (= 5 hours x $61.29 x 416).
GSA estimates it will take approximately 5 hours to collect the
information submitted by agencies with independent leasing authority.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $127,483 (= 5 hours x $61.29 x 416).
e. GSA estimates that, of the new high-security lessors for
agencies with independent leasing authority, each year 10 percent (or
25 lessors) will respond affirmatively that the offeror ``does'' have
an ``immediate owner,'', or ``is'' owned or controlled by another
entity (or ``highest owner''), or ``does'' involve a ``foreign
entity,'' or any combination of the foregoing, 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 $1,532 (= 1 hours x $61.29 x 25).
GSA estimates it will take approximately 1 hour to collect the
information submitted by agencies with independent leasing authority.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $1,532 (= 1 hours x $61.29 x 25).
3. Government Compliance With Public Law 116-276. Subsection 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
$490 (= 8 hours x $61.29 x 1).
4. Government Compliance With Public Law 116-276. Subsection 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 $2,452 (= 40 hours x $61.29 x 1).
b. GSA estimates it will take a total of 8 hours in years 5-10 to
review and consider new commercial technology offerings to improve data
collection. Therefore, GSA calculated the total estimated cost for this
part of the rule to be $306 (= 8 hours x $61.29 x 1).
5. Government Total Costs
The total cost of the above Cost Estimate is $605,207 in the first
year after publication.\28\ The total cost of the above Cost Estimate
in subsequent years is $72,432 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)............................... $1,052,989
Annualized Costs (3 percent)............................ 123,442
Present Value (7 percent)............................... 912,461
Annualized Costs (7 percent)............................ 129,914
------------------------------------------------------------------------
6. Overall Total Costs
The overall total cost is equal to subsection VII.(H), Government
Total Costs, above, as there is no direct cost to the public based on
the amendment to FMR part 102.73 as noted in subsection VII.(G), above.
(I) 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 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 subsection VII.(E). 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 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
on 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 enables Federal lessees to obtain
information on foreign ownership and provide it to relevant Federal
occupant agencies.
[[Page 14065]]
List of Subjects in 41 CFR Part 102-73
Administrative practice and procedure, Federal buildings and
facilities, Rates and fares.
Robin Carnahan,
Administrator of General Services.
Therefore, GSA amends 41 CFR part 102-73 as set forth below:
PART 102-73--REAL ESTATE ACQUISITION
0
1. The authority citation for 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; Pub. L. 116-276,
134 Stat. 3362.
0
2. Revise Sec. 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, operating under, or
subject to, the authorities of the Administrator of General Services;
except for subpart D of this part, which applies to Federal agencies
exercising independent leasing authority in addition to those agencies
operating under or subject to the authorities of the Administrator of
General Services.
0
3. Add subpart D to read as follows:
Subpart D--Secure Federal Leases From Espionage and Suspicious
Entanglements Act
Sec.
102-73.310 What are the governing authorities for this subpart?
102-73.315 What definitions apply to this subpart?
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 must Federal lessees provide information to GSA?
102-73.340 How must Federal lessees provide information to GSA?
Subpart D--Secure Federal Leases From Espionage and Suspicious
Entanglements Act
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).
Sec. 102-73.315 What definitions apply to this subpart?
Beneficial owner means:
(1) With respect to a covered entity, an individual who, directly
or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise--
(i) Exercises substantial control over the covered entity; or
(ii) Owns or controls not less than 25 percent of the ownership
interests of the covered entity.
(2) This definition is based on the Department of the Treasury
Financial Crimes Enforcement Network's Beneficial Ownership Information
Reporting Requirements at 31 CFR part 1010.
Control means, with respect to a covered entity:
(1) Having the authority or ability to determine how a covered
entity is used; or
(2) Having some decision-making power for the use of a covered
entity.
Covered entity, as defined by the Secure Federal LEASEs Act, means:
(1) A person, corporation, company, business association,
partnership, society, trust, or any other nongovernmental entity,
organization, or group; or
(2) Any governmental entity or instrumentality of a government.
Federal lessee, as defined by the Secure Federal LEASEs Act, means:
(1) 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
(2) Does not include the head of an element of the intelligence
community.
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, identity of interests among
family members, shared facilities and equipment, and the common use of
employees.
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.
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?; and
(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 must Federal lessees provide information to GSA?
Federal lessees must submit the required information on an annual
basis.
Sec. 102-73.340 How must Federal lessees provide information to GSA?
Federal lessees must submit the required information to GSA by
email at [email protected].
[FR Doc. 2023-04340 Filed 3-6-23; 8:45 am]
BILLING CODE 6820-14-P