[Federal Register Volume 64, Number 131 (Friday, July 9, 1999)]
[Proposed Rules]
[Pages 37360-37361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17298]
[[Page 37359]]
_______________________________________________________________________
Part VII
Department of Defense
General Services Administration
National Aeronautics and Space Administration
_______________________________________________________________________
48 CFR Parts 9 and 31
Federal Acquisition Regulation; Contractor Responsibility, Labor
Relations Costs, and Costs Relating to Legal and Other Proceedings;
Proposed Rule
Federal Register / Vol. 64, No. 131 / Friday, July 9, 1999 / Proposed
Rules
[[Page 37360]]
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 9 and 31
[FAR Case 99-010]
RIN 9000-AI40
Federal Acquisition Regulation; Contractor Responsibility, Labor
Relations Costs, and Costs Relating to Legal and Other Proceedings
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (the Councils) are proposing to amend
the Federal Acquisition Regulation (FAR) to clarify coverage and give
examples of suitable contractor responsibility considerations, as well
as to make unallowable the costs of attempting to influence employee
decisions regarding unionization, and make unallowable those legal
expenses related to defense of judicial or administrative proceedings
brought by the Federal Government when a contractor is found to have
violated a law or regulation, or the proceeding is settled by consent
or compromise, except to the extent specifically provided as part of
the settlement agreement.
DATES: Comments should be submitted on or before November 8, 1999 to be
considered in the formulation of a final rule.
ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (MVR), 1800 F Street,
NW, Room 4035 ATTN: Laurie Duarte Washington, DC 20405.
Address e-mail comments submitted via the Internet to: farcase.99-
010@gsa.gov.
Please submit comments only and cite FAR case 99-010 in all
correspondence related to this case.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC, 20405, at (202) 501-4755 for information
pertaining to status or publication schedules. For clarification of
content, contact Mr. Ralph De Stefano, Procurement Analyst, at (202)
501-1758. Please cite FAR case 99-010.
SUPPLEMENTARY INFORMATION:
A. Background
1. FAR Responsibility Criteria
This proposed rule revises FAR 9.104-1(d) and (e) to clarify
coverage concerning contractor responsibility considerations, by adding
examples of what falls within the existing definition of ``an
unsatisfactory record of integrity and business ethics.'' The proposed
amendment will provide contracting officers with guidance concerning
general standards of contractor compliance with applicable laws when
making pre-award responsibility determinations.
A prospective contractor's record of compliance with laws and
regulations promulgated by the Federal Government is a relevant and
important part of the overall responsibility determination. This
proposed FAR amendment clarifies the existing rule by providing several
examples of what constitutes an unsatisfactory record of compliance
with laws and regulations. These examples are premised on the existing
principle that the Federal Government should not enter into contracts
with contractors who do not comply with the law. For example, the
proposed rule clarifies that a prospective contractor's failure to
comply with applicable tax laws may be considered by the contracting
officer in making a responsibility determination. Similarly, the
proposed rule attempts to clarify the fact that an established record
of employment discrimination would be a relevant part of the
contracting officer's responsibility determination because such a
record or pattern is a strong indication of a contractor's overall
willingness or capability to comply with applicable laws.
Normally, the contracting officer should base adverse
responsibility determinations involving violations of law or regulation
upon a final adjudication by a competent authority concerning the
underlying charge. However, in some circumstances, it may be
appropriate for the contracting officer to base an adverse
responsibility determination upon persuasive evidence of substantial
noncompliance with a law or regulation (i.e., not isolated or trivial,
but repeated and substantial violations establishing a pattern or
practice by a prospective contractor. The facts and circumstances in
each such case will require close scrutiny and examination.).
An efficient, economical and well-functioning procurement system
requires the award of contracts to organizations that meet high
standards of integrity and business ethics and have the necessary
workplace practices to assure a skilled, stable and productive
workforce. This proposal seeks to further the Government's use of best
practices by ensuring the Government does business only with high-
performing and successful companies that work to maintain a good record
of compliance with applicable laws.
2. Cost Principle Changes
This proposed rule revises the cost principle at FAR 31.205-21 to
make unallowable those costs relating to attempts to influence employee
decisions regarding unionization. This cost principle change is in
furtherance of the Government's long-standing policy to remain neutral
with respect to employer-employee labor disputes (see FAR Part 22).
Some contractors are claiming, as an allowable cost, those activities
designed to influence employees with regard to unionization decisions.
Inasmuch as a number of cost-based Federal programs have long made
these types of costs unallowable as a matter of public policy (e.g.,
see 29 U.S.C. 1553(c)(1), 42 U.S.C. 1395x(v)(1)(N), 42 U.S.C. 9839(e),
and 42 U.S.C. 12634(b)(1)), equity dictates that this same principle be
extended to Government contracts as well.
The proposed rule also revises FAR 31.205-47 to make clear that
costs relating to legal and other proceedings are unallowable where the
outcome is a finding that a contractor has violated a law or
regulation, or where the proceeding was settled by consent or
compromise (except that such costs may be made allowable to the extent
specifically provided as a part of a settlement agreement). At present,
the relevant cost principle generally makes unallowable legal and other
proceeding costs where, for example, in a criminal proceeding, there is
a conviction; or where, for example, in a civil proceeding, there is a
monetary penalty imposed. There are a number of civil proceedings
brought by the Federal Government each year that do not result in
imposition of a monetary penalty (e.g., NLRB or EEOC proceedings), but
which do involve a finding or adjudication that a contractor has
violated a law or regulation, and where appropriate remedies are then
ordered.
Under the proposed rule, the allowability of legal and other
proceedings costs would depend on whether or not a contractor is found
to have violated a law or regulation rather than on the nature of the
remedy imposed. Taxpayers should not have to pay the legal defense
costs associated
[[Page 37361]]
with adverse decisions against contractors, especially where the
proceeding is brought by an agency of the Federal Government.
3. Additional Considerations
In order to give greater effect to the FAR responsibility
clarifications being proposed, please provide comments and suggestions
concerning whether the provision appearing at FAR 52.209-5,
Certification Regarding Debarment, Suspension, Proposed Debarment, and
Other Responsibility Matters, should be amended to provide for enhanced
responsibility disclosure relative to this proposal.
This is not a significant regulatory action and, therefore, was not
subject to Office of Management and Budget review under Section 6(b) of
Executive Order 12866, Regulatory Planning and Review, dated September
30, 1993. This rule is not a major rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
This proposed rule is not expected to 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 most
contracts awarded to small entities do not involve use of formal
responsibility surveys. In addition, most contracts awarded to small
entities use simplified acquisition procedures or are awarded on a
competitive fixed-price basis and do not require the submission of cost
or pricing data or information other than cost or pricing data, and
thus do not require application of the FAR cost principles. An Initial
Regulatory Flexibility Analysis has, therefore, not been performed.
Comments are invited from small businesses and other interested
parties. The Councils will consider comments from small entities
concerning the affected FAR subparts in accordance with 5 U.S.C. 610.
Interested parties must submit such comments separately and should cite
5 U.S.C. 601, et seq. (FAR case 99-010), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed FAR
changes do not impose information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
3501, et seq.
List of Subjects in 48 CFR Parts 9 and 31
Government procurement.
Dated: July 1, 1999.
Jeremy F. Olson,
Acting Director, Federal Acquisition Policy Division.
Therefore, DoD, GSA, and NASA propose that 48 CFR parts 9 and 31 be
amended as set forth below:
1. The authority citation for 48 CFR parts 9 and 31 continues to
read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 9--CONTRACTOR QUALIFICATIONS
2. Amend section 9.104-1 to revise paragraphs (d) and (e) to read
as follows:
9.104-1 General standards.
* * * * *
(d) Have a satisfactory record of integrity and business ethics
(examples of an unsatisfactory record may include persuasive evidence
of the prospective contractor's lack of compliance with tax laws, or
substantial noncompliance with labor laws, employment laws,
environmental laws, antitrust laws or consumer protection laws);
(e) Have the necessary organization, experience, accounting and
operational controls, and technical skills, or the ability to obtain
them (including, as appropriate, such elements as production control
procedures, property control systems, quality assurance measures, and
safety programs applicable to materials to be produced or services to
be performed by the prospective contractor and subcontractors) (see
9.104-3(a)) and the necessary workplace practices addressing matters
such as training, worker retention, and legal compliance to assure a
skilled, stable and productive workforce;
* * * * *
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
3. Revise section 31.205-21 to read as follows:
31.205-21 Labor relations costs.
(a) Costs incurred in maintaining satisfactory relations between
the contractor and its employees, including costs of shop stewards,
labor management committees, employee publications, and other related
activities, are allowable.
(b) Costs incurred for activities related to influencing employees'
decision regarding unionization are unallowable.
4. In section 31.205-47, redesignate paragraphs (b)(3) through
(b)(5) as paragraphs (b)(4) through (b)(6) and add new paragraph
(b)(3); and revise redesignated paragraphs (b)(5) and (b)(6) to read as
follows:
31.205-47 Costs related to legal and other proceedings.
* * * * *
(b) * * *
(3) In a judicial or administrative proceeding brought by the
Government, a finding that the contractor violated a law or regulation;
* * * * *
(5) Disposition of the matter by consent or compromise if the
proceeding could have led to any of the outcomes listed in paragraphs
(b)(1) through (4) of this subsection (but see paragraphs (c) and (d)
of this subsection); or
(6) Not covered by paragraphs (b)(1) through (5) of this
subsection, but where the underlying alleged contractor misconduct was
the same as that which led to a different proceeding whose costs are
unallowable by reason of paragraphs (b)(1) through (5) of this
subsection.
* * * * *
[FR Doc. 99-17298 Filed 7-8-99; 8:45 am]
BILLING CODE 6820-EP-P