82 FR 4732 - Federal Acquisition Regulation; Prohibition on Reimbursement for Congressional Investigations and Inquiries
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Federal Register Volume 82, Issue 9 (January 13, 2017)
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
Federal Register Volume 82, Issue 9 (January 13, 2017)
| Page Range | 4732-4734 | |
| FR Document | 2016-31499 |
[Federal Register Volume 82, Number 9 (Friday, January 13, 2017)] [Rules and Regulations] [Pages 4732-4734] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-31499] [[Page 4732]] ----------------------------------------------------------------------- DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 48 CFR Part 31 [FAC 2005-95; FAR Case 2015-016; Item V; Docket No. 2015-0016; Sequence No. 1] RIN 9000-AM97 Federal Acquisition Regulation; Prohibition on Reimbursement for Congressional Investigations and Inquiries AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: DoD, GSA, and NASA are issuing a final rule to amend the Federal Acquisition Regulation (FAR) to implement section 857 of the Carl Levin and Howard P. `Buck' McKeon National Defense Authorization Act for Fiscal Year 2015. This section provides additional requirements relative to the allowability of costs incurred by a contractor in connection with a Congressional investigation or inquiry. DATES: Effective: January 13, 2017. FOR FURTHER INFORMATION CONTACT: For clarification of content, contact Ms. Zenaida Delgado, Procurement Analyst, at 202-969-7207. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755. Please cite FAC 2005-95, FAR Case 2015-016. SUPPLEMENTARY INFORMATION: I. Background DoD, GSA, and NASA published a proposed rule in the Federal Register at 81 FR 8031 on February 17, 2016, soliciting public comments on implementing section 857 of the Carl Levin and Howard P. `Buck' McKeon National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2015 (Pub. L. 113-291). This statute amended 10 U.S.C. 2324(e)(1) to disallow costs incurred by a contractor in connection with a Congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition as described in 10 U.S.C. 2324(k)(2). While section 857 only applies to contracts with DoD, NASA, and the Coast Guard, for the purpose of promoting consistency in the accounting systems of Federal contractors, it was decided to apply the section's requirements to all agencies subject to the FAR. Additionally, conforming language on unallowable costs is added to FAR 31.603-16 and 31.603-15 (to update language associated with whistleblower complaints). Two respondents submitted public comments. II. Discussion and Analysis The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the public comments in the development of the final rule: A. Summary of Significant Changes Several editorial changes are made to the rule as a result of the comments received; these were aimed at simplifying sentence structure for clarification purposes. There were no comments on the Initial Regulatory Flexibility Analysis. B. Analysis of Public Comments 1. Unfair Withholding of Costs Comment: One respondent stressed that contractors should not be penalized until guilt is determined by a court of law. Contractors should be reimbursed for their costs, as incurred, at the time of their participation in a Congressional investigation or inquiry. While affirming that it only makes sense that a contractor found guilty of defrauding or cheating the Government in association with their work should forfeit their reimbursement, the respondent maintained that, until guilt is determined by a court of law, the contractor should be reimbursed for its costs. Then, if the contractor is found guilty of defrauding or cheating the Government, it should pay those costs back to the Government. Response: The disallowance of costs in accordance with 10 U.S.C. 2324(e)(1)(Q) (i.e., any costs incurred by a contractor in connection with a Congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition that meets conditions at FAR 31.205-47(b)(1) through (5)) does not constitute a penalty. The regulation clearly states that costs are unallowable if incurred in connection with a Congressional investigation or inquiry into an issue that is the subject matter of a proceeding that results in a specified disposition. Absent a specified disposition, no disallowance of costs would exist. Comment: The same respondent stated that the ``guilty verdict'' must come from an impartial court, and must be associated with the inquiry. Response: The Councils appreciate this concern, but note that it extends beyond the scope of this case. 2. Use of Congressional Investigations Comment: One respondent suggested fixing ``the real problem'' by writing regulations to penalize politicians who use Congressional investigations to promote their personal or their affiliated party's agenda. The respondent noted that, in many cases, small businesses incur hundreds of thousands of dollars in costs associated with the inquiry, despite the fact that the only thing they did wrong was work for a Government entity that was targeted by a political party. Response: The Councils appreciate this concern, but note that it extends beyond the scope of this case. 3. Clarify Relationship Among the FAR 31.205-47 Paragraphs Comment: One respondent questioned whether FAR 31.205-47(c) or (d) would impact the allowability of the cost of a Congressional investigation or inquiry. Specifically, the respondent asked if the cost of a Congressional investigation or inquiry related to an issue that is the subject matter of a FAR 31.205-47(b) proceeding, whose result is described in FAR 31.205-47(b)(1) through (5), would be unallowable if one of the circumstances described in FAR 31.205-47(c) or (d) existed. Response: The cost of a Congressional investigation or inquiry cannot be treated the same as the cost of a proceeding under FAR 31.205-47(c) or (d). Although the section 857 language ties the cost of the Congressional investigation or inquiry to an issue that is the subject matter of a proceeding resulting in a disposition as described in 10 U.S.C. 2324(k)(2), Congress did not enact parallel treatment. 10 U.S.C. 2324(e)(1)(O) disallows ``Costs incurred by a contractor in connection with any criminal, civil, or administrative proceeding commenced by the United States or a State, to the extent provided in subsection (k),'' which includes the exceptions in paragraphs (k)(3) and (k)(4), covered in the FAR at 31.205-47(c) and (d). Section 857, as implemented in 10 U.S.C. 2324(e)(1)(Q), references only paragraph (k)(2) and does not reference paragraph (k) in its entirety; nor does it reference paragraphs (k)(3) or (k)(4) specifically. Therefore, the statute requires that the costs incurred in connection with a Congressional investigation or inquiry be treated differently than the costs incurred in connection with other [[Page 4733]] criminal, civil, or administrative proceedings in which costs may be allowable under certain circumstances. Comment: The same respondent questioned whether the limitations at FAR 31.205-47(e) would be applicable to the costs incurred in connection with a Congressional investigation or inquiry. Specifically, the respondent asked if the costs of a Congressional investigation or inquiry into a subject matter of a FAR 31.205-47(b) proceeding, whose result is not one described in FAR 31.205-47(b)(1) through (5), would be subject to the limitations in FAR 31.205-47(e). Response: FAR 31.205-47(e) relates to costs not made unallowable by paragraph (b), while the new paragraph (f)(9) relates to costs made unallowable by paragraphs (b)(1) through (5), which describe the outcomes that would deem the costs unallowable. Because there is no overlap between the two concepts, there is no need to clarify that relationship in the FAR text. Comment: The same respondent questioned whether requirements in FAR 31.205-47(g), regarding costs that may be unallowable under FAR 31.205- 47(b), would be applicable to costs that may be unallowable under FAR 31.205-47(f)(9). Response: FAR 31.205-47(g) pertains to all unallowable costs under 31.205-47. 4. Clarify the Relationship Between FAR 31.205-47(g) and FAR 31.603(b)(15) and FAR 31.603(b)(16) Comment: One respondent questioned whether the FAR 31.205-47(g) segregation of cost requirements are to be imposed regarding costs that may be made unallowable based on FAR 31.603(b)(15) or (16). Since the proposed rule does not address this issue, there was a question as to whether FAR 31.205-47(g) is applicable to costs that may be made unallowable based on FAR 31.603(b)(15) or (16). For costs that may be made unallowable under FAR 31.205-47, the respondent argued that it would be in the Government's best interest for: (1) State, local, and federally recognized Indian tribal governments to segregate and account separately for costs that may be made unallowable under FAR 31.603(b)(15) and FAR 31.603(b)(16) during the pendency of a related proceeding, and (2) the contracting officer to normally withhold payment of such costs. Accordingly, the respondent recommended that FAR 31.603(b)(15) and (16) be revised to incorporate requirements similar to those in FAR 31.205-47(g). Response: The Councils appreciate this concern, but note that adding this as a requirement would require a separate FAR case. Although segregation of potentially unallowable costs (as described at FAR 31.205-47(g)) is a prudent business practice for State, local, and federally recognized Indian tribal governments, section 857 of the NDAA for FY 2016 did not extend this requirement to such entities. 5. Clarification of Regulatory Intent of FAR 31.205-47(f)(9) Comment: One respondent focused a question upon Congressional inquiry or investigation activities that predate the existence of the proceeding, noting that the proposed version of FAR 31.205-47(f)(9) makes unallowable costs incurred in connection with a Congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition as described in FAR 31.205- 47(b)(1) through (5). The respondent interpreted this to mean that, in order for the costs of the Congressional investigation or inquiry to be unallowable, a proceeding would have to be in process. Therefore, it would follow that costs incurred in connection with a Congressional investigation or inquiry that predate the existence of a proceeding are allowable. Specifically, even if the issue becomes the subject matter of a FAR 31.205-47 proceeding at a later date, there is no intention under the proposed rule to retroactively make costs incurred in connection with a Congressional investigation or inquiry that is the subject matter of the proceeding unallowable. If that understanding is incorrect and the rule's intent is to make the costs incurred in connection with a Congressional investigation or inquiry that pre-date the existence of a proceeding unallowable, then the proposed rule should be revised to state that requirement in the cost principle. Response: The statutory language states: ``. . . congressional investigation or inquiry into an issue that is [emphasis added] the subject matter of a proceeding.'' Therefore, the proceeding must be a known event, whether it has already commenced or is known to be commencing on a future date. Preparation (i.e., segregation of costs) for a potential disallowance begins when it is known that a proceeding will ensue. Comment: The same respondent asked about Government Accountability Office (GAO) investigations, noting that the proposed version of FAR 31.205-47(f)(9) makes unallowable the costs incurred in connection with a Congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition described in FAR paragraphs 31.205-47(b)(1) through (5). The respondent stated that no specifics are provided in the proposed rule concerning what is considered a Congressional investigation or inquiry into an issue that is the subject matter of a proceeding, cautioning that this could lead to different interpretations concerning costs incurred to facilitate or respond to a GAO audit or request, in the event that the project was suggested or specifically required by a Congressional committee or subcommittee. The respondent posited that some might conclude that the proposed rule makes such costs unallowable, and requested confirmation that there is, in fact, no intent to make such costs unallowable. Response: The Councils believe that Congress intended 10 U.S.C. 2324(e)(1)(Q) to apply only to investigations and inquiries conducted by Congress, per se. Therefore, under FAR 31.205-47(f)(9), the potential disallowance and requisite segregation of costs would not be triggered by the GAO's efforts, but rather by an actual investigation or inquiry conducted by Congress. Further, the language is clear in its applicability to a Congressional investigation or inquiry into an issue--one that is the subject matter of a proceeding, a known event. 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. This has been deemed a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804. IV. Regulatory Flexibility Act DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory Flexibility Act 5 U.S.C. 601, et seq. The FRFA is summarized as follows: DoD, GSA, and NASA do not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, [[Page 4734]] 5 U.S.C. 601, et seq., because the rule will be manifested as a cost principle to which only select small businesses are subject. Pursuant to FAR 31.000, the cost principles are applicable to contracts, subcontracts, and modifications whenever cost analysis is performed, or when a contract clause requires the determination or negotiation of costs. An analysis of contracts awarded during Fiscal Year 2014, the most recent full year for which information was available, revealed that fewer than 200 small businesses were performing contracts subject to FAR 31. Again, the rule merely disallows costs incurred in the extremely rare instances when a contractor incurs costs in connection with a Congressional investigation or inquiry into an issue resulting in a disposition (e.g., conviction, liability, corrective action, etc.), as described in 10 U.S.C. 2324(k)(2). Accordingly, given the miniscule segment of the small business population that could potentially be impacted by the rule, and the low likelihood of the conditions being met, the impact on small businesses is insignificant. There were no significant issues raised by the public in response to the Initial Regulatory Flexibility Analysis provided in the proposed rule. The final rule applies to all entities, both small and other than small, performing as contractors or subcontractors on U.S. Government contracts, and who are required to abide by the Cost Principles at FAR part 31. However, the rule is not expected to have a significant impact. There are no reporting, recordkeeping, or other information collection requirements of the rule. DoD, GSA, and NASA did not identify any significant alternatives that would reduce the impact on small entities and still meet the objectives of the statute. Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat. The Regulatory Secretariat has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration. V. Paperwork Reduction Act This rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35). List of Subjects in 48 CFR Part 31 Government procurement. Dated: December 21, 2016. William F. Clark, Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy. Therefore, DoD, GSA, and NASA amend 48 CFR part 31 as set forth below: PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES 0 1. The authority citation for 48 CFR part 31 continues to read as follows: Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113. 0 2. Amend section 31.205-47 by-- 0 a. In paragraph (a): 0 i. In the definition of ``Fraud'', removing ``Fraudmeans'' and adding ``Fraud means'' in its place; 0 ii. In the definition of ``Penalty'', removing the comma after the word ``Penalty''; 0 iii. In the definition of ``Proceeding'', removing the comma after the word ``Proceeding''; 0 b. Revising paragraph (b) introductory text; and 0 c. Adding paragraph (f)(9). The addition reads as follows: 31.205-47 Costs related to legal and other proceedings. * * * * * (b) Costs incurred in connection with any proceeding brought by: A Federal, State, local, or foreign government for a violation of, or failure to comply with, law or regulation by the contractor (including its agents or employees) (41 U.S.C. 4310 and 10 U.S.C. 2324(k)); a contractor or subcontractor employee submitting a whistleblower complaint of reprisal in accordance with 41 U.S.C. 4712 or 10 U.S.C. 2409; or a third party in the name of the United States under the False Claims Act, 31 U.S.C. 3730, are unallowable if the result is-- * * * * * (f) * * * (9) A Congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition as described in paragraphs (b)(1) through (5) of this section (see 10 U.S.C. 2324(e)(1)(Q)). * * * * * 0 3. Amend section 31.603 by-- 0 a. Revising paragraphs (b) introductory text and (b)(15); and 0 b. Adding paragraph (b)(16). The revisions and addition reads as follows: 31.603 Requirements. * * * * * (b) Agencies are not expected to place additional restrictions on individual items of cost. However, under 10 U.S.C. 2324, 41 U.S.C. 4304, 31 U.S.C. 3730, and 41 U.S.C. 4310, the following costs are unallowable: * * * * * (15) Unless any of the exceptions at 31.205-47(c) or (d) apply, costs incurred by a contractor in connection with any criminal, civil, or administrative proceedings that result in dispositions described at 31.205-47(b)(1) through (5) commenced by: A Federal, State, local, or foreign government, for a violation of, or failure to comply with, law or regulation by the contractor (including its agents or employees); a contractor or subcontractor employee submitting a whistleblower complaint of reprisal in accordance with 41 U.S.C. 4712 or 10 U.S.C. 2409; or a third party in the name of the United States under the False Claims Act, 31 U.S.C. 3730. For any such proceeding that does not result in a disposition described at 31.205-47(b)(1) through (5), or to which 31.205-47(c) exceptions apply, the cost of that proceeding shall be subject to the limitations in 31.205-47(e). (16) Costs incurred in connection with a Congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition as described at 31.205-47(b)(1) through (5). [FR Doc. 2016-31499 Filed 1-12-17; 8:45 am] BILLING CODE 6820-EP-P
![4732 Federal Register / Vol. 82, No. 9 / Friday, January 13, 2017 / Rules and Regulations
DEPARTMENT OF DEFENSE accounting systems of Federal come from an impartial court, and must
contractors, it was decided to apply the be associated with the inquiry.
GENERAL SERVICES section’s requirements to all agencies Response: The Councils appreciate
ADMINISTRATION subject to the FAR. this concern, but note that it extends
Additionally, conforming language on beyond the scope of this case.
NATIONAL AERONAUTICS AND unallowable costs is added to FAR
2. Use of Congressional Investigations
SPACE ADMINISTRATION 31.603–16 and 31.603–15 (to update
language associated with whistleblower Comment: One respondent suggested
48 CFR Part 31 complaints). fixing ‘‘the real problem’’ by writing
Two respondents submitted public regulations to penalize politicians who
[FAC 2005–95; FAR Case 2015–016; Item use Congressional investigations to
comments.
V; Docket No. 2015–0016; Sequence No. 1]
promote their personal or their affiliated
RIN 9000–AM97
II. Discussion and Analysis party’s agenda. The respondent noted
The Civilian Agency Acquisition that, in many cases, small businesses
Federal Acquisition Regulation; Council and the Defense Acquisition incur hundreds of thousands of dollars
Prohibition on Reimbursement for Regulations Council (the Councils) in costs associated with the inquiry,
Congressional Investigations and reviewed the public comments in the despite the fact that the only thing they
Inquiries development of the final rule: did wrong was work for a Government
A. Summary of Significant Changes entity that was targeted by a political
AGENCY: Department of Defense (DoD),
party.
General Services Administration (GSA), Several editorial changes are made to Response: The Councils appreciate
and National Aeronautics and Space the rule as a result of the comments this concern, but note that it extends
Administration (NASA). received; these were aimed at beyond the scope of this case.
ACTION: Final rule. simplifying sentence structure for
clarification purposes. There were no 3. Clarify Relationship Among the FAR
SUMMARY: DoD, GSA, and NASA are comments on the Initial Regulatory 31.205–47 Paragraphs
issuing a final rule to amend the Federal Flexibility Analysis. Comment: One respondent questioned
Acquisition Regulation (FAR) to whether FAR 31.205–47(c) or (d) would
implement section 857 of the Carl Levin B. Analysis of Public Comments
impact the allowability of the cost of a
and Howard P. ‘Buck’ McKeon National 1. Unfair Withholding of Costs Congressional investigation or inquiry.
Defense Authorization Act for Fiscal Specifically, the respondent asked if the
Year 2015. This section provides Comment: One respondent stressed
that contractors should not be penalized cost of a Congressional investigation or
additional requirements relative to the inquiry related to an issue that is the
allowability of costs incurred by a until guilt is determined by a court of
law. Contractors should be reimbursed subject matter of a FAR 31.205–47(b)
contractor in connection with a proceeding, whose result is described in
Congressional investigation or inquiry. for their costs, as incurred, at the time
of their participation in a Congressional FAR 31.205–47(b)(1) through (5), would
DATES: Effective: January 13, 2017. be unallowable if one of the
investigation or inquiry. While affirming
FOR FURTHER INFORMATION CONTACT: For that it only makes sense that a circumstances described in FAR
clarification of content, contact Ms. contractor found guilty of defrauding or 31.205–47(c) or (d) existed.
Zenaida Delgado, Procurement Analyst, cheating the Government in association Response: The cost of a Congressional
at 202–969–7207. For information with their work should forfeit their investigation or inquiry cannot be
pertaining to status or publication reimbursement, the respondent treated the same as the cost of a
schedules, contact the Regulatory maintained that, until guilt is proceeding under FAR 31.205–47(c) or
Secretariat at 202–501–4755. Please cite determined by a court of law, the (d). Although the section 857 language
FAC 2005–95, FAR Case 2015–016. contractor should be reimbursed for its ties the cost of the Congressional
SUPPLEMENTARY INFORMATION: costs. Then, if the contractor is found investigation or inquiry to an issue that
guilty of defrauding or cheating the is the subject matter of a proceeding
I. Background resulting in a disposition as described in
Government, it should pay those costs
DoD, GSA, and NASA published a back to the Government. 10 U.S.C. 2324(k)(2), Congress did not
proposed rule in the Federal Register at Response: The disallowance of costs enact parallel treatment. 10 U.S.C.
81 FR 8031 on February 17, 2016, in accordance with 10 U.S.C. 2324(e)(1)(O) disallows ‘‘Costs incurred
soliciting public comments on 2324(e)(1)(Q) (i.e., any costs incurred by by a contractor in connection with any
implementing section 857 of the Carl a contractor in connection with a criminal, civil, or administrative
Levin and Howard P. ‘Buck’ McKeon Congressional investigation or inquiry proceeding commenced by the United
National Defense Authorization Act into an issue that is the subject matter States or a State, to the extent provided
(NDAA) for Fiscal Year (FY) 2015 (Pub. of a proceeding resulting in a in subsection (k),’’ which includes the
L. 113–291). disposition that meets conditions at exceptions in paragraphs (k)(3) and
This statute amended 10 U.S.C. FAR 31.205–47(b)(1) through (5)) does (k)(4), covered in the FAR at 31.205–
2324(e)(1) to disallow costs incurred by not constitute a penalty. The regulation 47(c) and (d). Section 857, as
a contractor in connection with a clearly states that costs are unallowable implemented in 10 U.S.C. 2324(e)(1)(Q),
Congressional investigation or inquiry if incurred in connection with a references only paragraph (k)(2) and
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into an issue that is the subject matter Congressional investigation or inquiry does not reference paragraph (k) in its
of a proceeding resulting in a into an issue that is the subject matter entirety; nor does it reference
disposition as described in 10 U.S.C. of a proceeding that results in a paragraphs (k)(3) or (k)(4) specifically.
2324(k)(2). specified disposition. Absent a specified Therefore, the statute requires that the
While section 857 only applies to disposition, no disallowance of costs costs incurred in connection with a
contracts with DoD, NASA, and the would exist. Congressional investigation or inquiry
Coast Guard, for the purpose of Comment: The same respondent be treated differently than the costs
promoting consistency in the stated that the ‘‘guilty verdict’’ must incurred in connection with other
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criminal, civil, or administrative as a requirement would require a of a proceeding resulting in a
proceedings in which costs may be separate FAR case. Although segregation disposition described in FAR
allowable under certain circumstances. of potentially unallowable costs (as paragraphs 31.205–47(b)(1) through (5).
Comment: The same respondent described at FAR 31.205–47(g)) is a The respondent stated that no specifics
questioned whether the limitations at prudent business practice for State, are provided in the proposed rule
FAR 31.205–47(e) would be applicable local, and federally recognized Indian concerning what is considered a
to the costs incurred in connection with tribal governments, section 857 of the Congressional investigation or inquiry
a Congressional investigation or inquiry. NDAA for FY 2016 did not extend this into an issue that is the subject matter
Specifically, the respondent asked if the requirement to such entities. of a proceeding, cautioning that this
costs of a Congressional investigation or could lead to different interpretations
inquiry into a subject matter of a FAR 5. Clarification of Regulatory Intent of
concerning costs incurred to facilitate or
31.205–47(b) proceeding, whose result FAR 31.205–47(f)(9)
respond to a GAO audit or request, in
is not one described in FAR 31.205– Comment: One respondent focused a the event that the project was suggested
47(b)(1) through (5), would be subject to question upon Congressional inquiry or or specifically required by a
the limitations in FAR 31.205–47(e). investigation activities that predate the Congressional committee or
Response: FAR 31.205–47(e) relates to existence of the proceeding, noting that subcommittee. The respondent posited
costs not made unallowable by the proposed version of FAR 31.205– that some might conclude that the
paragraph (b), while the new paragraph 47(f)(9) makes unallowable costs proposed rule makes such costs
(f)(9) relates to costs made unallowable incurred in connection with a unallowable, and requested
by paragraphs (b)(1) through (5), which Congressional investigation or inquiry confirmation that there is, in fact, no
describe the outcomes that would deem into an issue that is the subject matter intent to make such costs unallowable.
the costs unallowable. Because there is of a proceeding resulting in a Response: The Councils believe that
no overlap between the two concepts, disposition as described in FAR 31.205– Congress intended 10 U.S.C.
there is no need to clarify that 47(b)(1) through (5). The respondent 2324(e)(1)(Q) to apply only to
relationship in the FAR text. interpreted this to mean that, in order investigations and inquiries conducted
Comment: The same respondent for the costs of the Congressional by Congress, per se. Therefore, under
questioned whether requirements in investigation or inquiry to be FAR 31.205–47(f)(9), the potential
FAR 31.205–47(g), regarding costs that unallowable, a proceeding would have disallowance and requisite segregation
may be unallowable under FAR 31.205– to be in process. Therefore, it would of costs would not be triggered by the
47(b), would be applicable to costs that follow that costs incurred in connection GAO’s efforts, but rather by an actual
may be unallowable under FAR 31.205– with a Congressional investigation or investigation or inquiry conducted by
47(f)(9). inquiry that predate the existence of a Congress. Further, the language is clear
Response: FAR 31.205–47(g) pertains proceeding are allowable. Specifically, in its applicability to a Congressional
to all unallowable costs under 31.205– even if the issue becomes the subject investigation or inquiry into an issue—
47. matter of a FAR 31.205–47 proceeding one that is the subject matter of a
at a later date, there is no intention proceeding, a known event.
4. Clarify the Relationship Between FAR
under the proposed rule to retroactively
31.205–47(g) and FAR 31.603(b)(15) and III. Executive Orders 12866 and 13563
make costs incurred in connection with
FAR 31.603(b)(16)
a Congressional investigation or inquiry Executive Orders (E.O.s) 12866 and
Comment: One respondent questioned that is the subject matter of the 13563 direct agencies to assess all costs
whether the FAR 31.205–47(g) proceeding unallowable. If that and benefits of available regulatory
segregation of cost requirements are to understanding is incorrect and the rule’s alternatives and, if regulation is
be imposed regarding costs that may be intent is to make the costs incurred in necessary, to select regulatory
made unallowable based on FAR connection with a Congressional approaches that maximize net benefits
31.603(b)(15) or (16). Since the investigation or inquiry that pre-date the (including potential economic,
proposed rule does not address this existence of a proceeding unallowable, environmental, public health and safety
issue, there was a question as to then the proposed rule should be effects, distributive impacts, and
whether FAR 31.205–47(g) is applicable revised to state that requirement in the equity). E.O. 13563 emphasizes the
to costs that may be made unallowable cost principle. importance of quantifying both costs
based on FAR 31.603(b)(15) or (16). For Response: The statutory language and benefits, of reducing costs, of
costs that may be made unallowable states: ‘‘. . . congressional investigation harmonizing rules, and of promoting
under FAR 31.205–47, the respondent or inquiry into an issue that is flexibility. This has been deemed a
argued that it would be in the [emphasis added] the subject matter of significant regulatory action and,
Government’s best interest for: (1) State, a proceeding.’’ Therefore, the therefore, was subject to review under
local, and federally recognized Indian proceeding must be a known event, section 6(b) of E.O. 12866, Regulatory
tribal governments to segregate and whether it has already commenced or is Planning and Review, dated September
account separately for costs that may be known to be commencing on a future 30, 1993. This rule is not a major rule
made unallowable under FAR date. Preparation (i.e., segregation of under 5 U.S.C. 804.
31.603(b)(15) and FAR 31.603(b)(16) costs) for a potential disallowance
during the pendency of a related begins when it is known that a IV. Regulatory Flexibility Act
proceeding, and (2) the contracting proceeding will ensue. DoD, GSA, and NASA have prepared
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officer to normally withhold payment of Comment: The same respondent a Final Regulatory Flexibility Analysis
such costs. Accordingly, the respondent asked about Government Accountability (FRFA) consistent with the Regulatory
recommended that FAR 31.603(b)(15) Office (GAO) investigations, noting that Flexibility Act 5 U.S.C. 601, et seq. The
and (16) be revised to incorporate the proposed version of FAR 31.205– FRFA is summarized as follows:
requirements similar to those in FAR 47(f)(9) makes unallowable the costs DoD, GSA, and NASA do not expect this
31.205–47(g). incurred in connection with a rule to have a significant economic impact on
Response: The Councils appreciate Congressional investigation or inquiry a substantial number of small entities within
this concern, but note that adding this into an issue that is the subject matter the meaning of the Regulatory Flexibility Act,
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![4734 Federal Register / Vol. 82, No. 9 / Friday, January 13, 2017 / Rules and Regulations
5 U.S.C. 601, et seq., because the rule will be PART 31—CONTRACT COST criminal, civil, or administrative
manifested as a cost principle to which only PRINCIPLES AND PROCEDURES proceedings that result in dispositions
select small businesses are subject. Pursuant described at 31.205–47(b)(1) through (5)
to FAR 31.000, the cost principles are ■ 1. The authority citation for 48 CFR commenced by: A Federal, State, local,
applicable to contracts, subcontracts, and part 31 continues to read as follows:
modifications whenever cost analysis is
or foreign government, for a violation of,
performed, or when a contract clause Authority: 40 U.S.C. 121(c); 10 U.S.C. or failure to comply with, law or
requires the determination or negotiation of chapter 137; and 51 U.S.C. 20113. regulation by the contractor (including
costs. An analysis of contracts awarded ■ 2. Amend section 31.205–47 by— its agents or employees); a contractor or
during Fiscal Year 2014, the most recent full ■ a. In paragraph (a): subcontractor employee submitting a
year for which information was available, ■ i. In the definition of ‘‘Fraud’’, whistleblower complaint of reprisal in
revealed that fewer than 200 small businesses accordance with 41 U.S.C. 4712 or 10
removing ‘‘Fraudmeans’’ and adding
were performing contracts subject to FAR 31. U.S.C. 2409; or a third party in the name
Again, the rule merely disallows costs ‘‘Fraud means’’ in its place;
■ ii. In the definition of ‘‘Penalty’’, of the United States under the False
incurred in the extremely rare instances
when a contractor incurs costs in connection removing the comma after the word Claims Act, 31 U.S.C. 3730. For any
with a Congressional investigation or inquiry ‘‘Penalty’’; such proceeding that does not result in
into an issue resulting in a disposition (e.g., ■ iii. In the definition of ‘‘Proceeding’’, a disposition described at 31.205–
conviction, liability, corrective action, etc.), removing the comma after the word 47(b)(1) through (5), or to which 31.205–
as described in 10 U.S.C. 2324(k)(2). ‘‘Proceeding’’; 47(c) exceptions apply, the cost of that
Accordingly, given the miniscule segment of ■ b. Revising paragraph (b) introductory proceeding shall be subject to the
the small business population that could limitations in 31.205–47(e).
text; and
potentially be impacted by the rule, and the (16) Costs incurred in connection
■ c. Adding paragraph (f)(9).
low likelihood of the conditions being met, with a Congressional investigation or
the impact on small businesses is The addition reads as follows:
inquiry into an issue that is the subject
insignificant. 31.205–47 Costs related to legal and other matter of a proceeding resulting in a
There were no significant issues proceedings. disposition as described at 31.205–
raised by the public in response to the * * * * * 47(b)(1) through (5).
Initial Regulatory Flexibility Analysis (b) Costs incurred in connection with [FR Doc. 2016–31499 Filed 1–12–17; 8:45 am]
provided in the proposed rule. The final any proceeding brought by: A Federal, BILLING CODE 6820–EP–P
rule applies to all entities, both small State, local, or foreign government for a
and other than small, performing as violation of, or failure to comply with,
contractors or subcontractors on U.S. law or regulation by the contractor DEPARTMENT OF DEFENSE
Government contracts, and who are (including its agents or employees) (41
required to abide by the Cost Principles U.S.C. 4310 and 10 U.S.C. 2324(k)); a GENERAL SERVICES
at FAR part 31. However, the rule is not contractor or subcontractor employee ADMINISTRATION
expected to have a significant impact. submitting a whistleblower complaint of
There are no reporting, recordkeeping, reprisal in accordance with 41 U.S.C. NATIONAL AERONAUTICS AND
or other information collection 4712 or 10 U.S.C. 2409; or a third party SPACE ADMINISTRATION
requirements of the rule. in the name of the United States under
DoD, GSA, and NASA did not identify the False Claims Act, 31 U.S.C. 3730, 48 CFR Chapter 1
any significant alternatives that would are unallowable if the result is— [Docket No. FAR 2016–0051, Sequence No.
reduce the impact on small entities and * * * * * 9]
still meet the objectives of the statute. (f) * * *
(9) A Congressional investigation or Federal Acquisition Regulation;
Interested parties may obtain a copy
inquiry into an issue that is the subject Federal Acquisition Circular 2005–95;
of the FRFA from the Regulatory
matter of a proceeding resulting in a Small Entity Compliance Guide
Secretariat. The Regulatory Secretariat
has submitted a copy of the FRFA to the disposition as described in paragraphs AGENCY: Department of Defense (DoD),
Chief Counsel for Advocacy of the Small (b)(1) through (5) of this section (see 10 General Services Administration (GSA),
Business Administration. U.S.C. 2324(e)(1)(Q)). and National Aeronautics and Space
* * * * * Administration (NASA).
V. Paperwork Reduction Act ■ 3. Amend section 31.603 by— ACTION: Small Entity Compliance Guide.
This rule does not contain any ■ a. Revising paragraphs (b)
information collection requirements that introductory text and (b)(15); and SUMMARY: This document is issued
require the approval of the Office of ■ b. Adding paragraph (b)(16). under the joint authority of DOD, GSA,
Management and Budget under the The revisions and addition reads as and NASA. This Small Entity
Paperwork Reduction Act (44 U.S.C. follows: Compliance Guide has been prepared in
chapter 35). accordance with section 212 of the
31.603 Requirements. Small Business Regulatory Enforcement
List of Subjects in 48 CFR Part 31 * * * * * Fairness Act of 1996. It consists of a
Government procurement. (b) Agencies are not expected to place summary of the rules appearing in
additional restrictions on individual Federal Acquisition Circular (FAC)
Dated: December 21, 2016.
asabaliauskas on DSK3SPTVN1PROD with RULES
items of cost. However, under 10 U.S.C. 2005–95, which amends the Federal
William F. Clark, 2324, 41 U.S.C. 4304, 31 U.S.C. 3730, Acquisition Regulation (FAR). An
Director, Office of Government-wide and 41 U.S.C. 4310, the following costs asterisk (*) next to a rule indicates that
Acquisition Policy, Office of Acquisition are unallowable: a regulatory flexibility analysis has been
Policy, Office of Government-wide Policy.
* * * * * prepared. Interested parties may obtain
Therefore, DoD, GSA, and NASA (15) Unless any of the exceptions at further information regarding these
amend 48 CFR part 31 as set forth 31.205–47(c) or (d) apply, costs incurred rules by referring to FAC 2005–95,
below: by a contractor in connection with any which precedes this document. These
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Document Created: 2017-01-13 02:44:28
Document Modified: 2017-01-13 02:44:28
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final rule. | |
| Dates | Effective: January 13, 2017. | |
| Contact | For clarification of content, contact Ms. Zenaida Delgado, Procurement Analyst, at 202-969-7207. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202-501-4755. Please cite FAC 2005-95, FAR Case 2015-016. | |
| FR Citation | 82 FR 4732 | |
| RIN Number | 9000-AM97 |
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