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]


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GENERAL SERVICES ADMINISTRATION

41 CFR Part 102-73

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


Federal Management Regulation; Real Estate Acquisition

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

ACTION: Final rule.

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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.
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    \1\ https://www.congress.gov/bill/116th-congress/house-bill/6395/text.
    \2\ https://www.congress.gov/bill/116th-congress/senate-bill/1790/text.
    \3\ https://www.ecfr.gov/current/title-17/chapter-II/part-240/section-240.13d-3#p-240.13d-3(a).
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Corporate Transparency Act Definition

    The Corporate Transparency Act (CTA) definition can be found at 
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\
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    \4\ https://www.fincen.gov/beneficial-ownership-information-reporting-rule-fact-sheet.
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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


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