27 March 1998 Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html ------------------------------------------------------------------------- [Federal Register: March 27, 1998 (Volume 63, Number 59)] [Rules and Regulations] [Page 14836-14837] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr27mr98-13] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF DEFENSE 48 CFR Parts 209 and 252 [DFARS Case 97-D325] Defense Federal Acquisition Regulation Supplement; List of Firms Not Eligible for Defense Contracts AGENCY: Department of Defense (DoD). ACTION: Interim rule with request for comments. ----------------------------------------------------------------------- SUMMARY: The Director of Defense Procurement has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 843 of the National Defense Authorization Act for Fiscal Year 1998. Section 843 requires that the Secretary of Defense maintain a list of all firms that the Secretary has identified as being subject to a prohibition on contract award due to ownership or control of the firm by the government of a terrorist country; and that DoD contractors be prohibited from entering into subcontracts with firms on the list unless there is a compelling reason to do so. DATES: Effective date: March 27, 1998. Comment date: Comments on the interim rule should be submitted in writing to the address shown below on or before May 11, 1998, to be considered in the formulation of the final rule. ADDRESSES: Interested parties should submit written comments to: Defense Acquisition Regulation Council, Attn: Mr. Michael Pelkey, PDUSD (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington DC 20301- 3062. Telefax number (703) 602-0350. E-mail comments submitted over the Internet should be addressed to: dfars@acq.osd.mil Please cite DFARS Case 97-D325 in all corresponding related to this issue. E-mail comments should cite DFARS Case 97-D325 in the subject line. FOR FURTHER INFORMATION CONTACT: Michael Pelkey, (703) 602-0131. SUPPLEMENTARY INFORMATION: A. Background 10 U.S.C. 2327 contains a prohibition on contracting with a firm or a subsidiary of a firm that is owned or controlled by the government of a country that has repeatedly provided support for acts of international terrorism. Section 843 of the National Defense Authorization Act for Fiscal Year 1998 (Pub. L. 105-85) amended 10 U.S.C. 2327 to require that the Secretary of Defense maintain a list of all firms that the Secretary has identified as being subject to the prohibition, and that DoD contractors be prohibited from entering into subcontracts with firms on the list unless there is a compelling reason to do so. This DFARS rule provides procedures to facilitate maintenance of the list and a contract clause that requires DoD approval of a proposed subcontract with a firm on the list. B. Regulatory Flexibility Act The interim 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 few small entities are believed to subcontract with firms that are owned or controlled by the government of a terrority country. An initial regulatory flexibility analysis has therefore not been performed. Comments are invited from small businesses and other interested parties. Comments from small entities concerning the affected DFARS subparts also will be considered in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 97- D325 in correspondence. C. Paperwork Reduction Act The Paperwork Reduction Act does not apply, because the interim rule does not impose any information collection requirements that require Office of Management and Budget approval under 44 U.S.C. 3501, et seq. D. Determination to Issue an Interim Rule A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish this interim rule prior to affording the public an opportunity to comment. This interim rule implements Section 843 of the National Defense Authorization Act for Fiscal Year 1998 (Pub. L. 105-85). Section 843 requires that the Secretary of Defense maintain a list of all firms that the Secretary has identified as being subject to the prohibition at 10 U.S.C. 2327 due to ownership or control of the firm by the government of a terrorist country, and that DoD contractors be prohibited from entering into subcontracts with firms on the list unless there is a compelling reason to do so. Section 843 was effective upon enactment on November 18, 1997. Immediate implementation is necessary to prevent the award of contracts and subcontracts that are prohibited by Section 843. Commments received in response to the publication of this interim rule will be considered in formulating the final rule. [[Page 14837]] List of Subjects in 48 CFR Parts 209 and 252 Government procurement. Michele P. Peterson, Executive Editor, Defense Acquisition Regulations Council. Therefore, 48 CFR Parts 209 and 252 are amended as follows: 1. The authority citation for 48 CFR Parts 209 and 252 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 209--CONTRACTOR QUALIFICATIONS 2. Section 209.104-1 is amended by revising paragraph (g)(i)(A) introductory text and paragraph (g)(i)(A)(1) to read as follows: 209.104-1 General standards. * * * * * (g)(i) * * * (A) Under 10 U.S.C. 2327(b), a contracting officer shall not award a contract of $100,000 or more to a firm or to a subsidiary of a firm when a foreign government-- (1) Either directly or indirectly, has a significant interest-- (i) In the firm; or (ii) In the subsidiary or the firm that owns the subsidiary; and * * * * * 3. Section 209.104-70 is amended by revising paragraph (a) to read as follows: 209.104-70 Solicitation provisions. (a) Use the provision at 252.209-7001, Disclosure of Ownership or Control by the Government of a Terrorist Country, in all solicitations expected to result in contracts of $100,000 or more. Any disclosure that the government of a terrorist country has a significant interest in an offeror or a subsidiary of an offeror shall be forwarded through the head of the agency to the Director, Defense Procurement, ATTN: OUSD(A&T)DP/FC, 3060 Defense Pentagon, Washington, DC 20101-3060. * * * * * 4. Section 209.405-2 is added to read as follows: 209.405-2 Restrictions on subcontracting. (a) The contracting officer shall not consent to any subcontract with a firm, or a subsidiary of a firm, that is identified by the Secretary of Defense as being owned or controlled by the government of a terrorist country unless the agency head states in writing the compelling reasons for the subcontract. 5. Section 209.409 is added to read as follows: 209.409 Solicitation provision and contract clause. Use the clause at 252.209-7004, Subcontracting with Firms That Are Owned or Controlled by the Government of a Terrorist Country, in solicitations and contracts with a value of $100,000 or more. PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES 6. Section 252.209-7001 is amended by revising the clause date and paragraph (b) to read as follows: 252.209-7001 Disclosure of Ownership or Control by the Government of a Terrorist Country. * * * * * Disclosure of Ownership or Control by the Government of a Terrorist Country (Mar 1998) * * * * * (b) Prohibition on award. In accordance with 10 U.S.C. 2327, no contract may be awarded to a firm or a subsidiary of a firm if the government of a terrorist country has a significant interest in the firm or subsidiary or, in the case of a subsidiary, the firm that owns the subsidiary, unless a waiver is granted by the Secretary of Defense. * * * * * 7. Section 252.209-7004 is added to read as follows: 252.209-7004 Subcontracting with Firms That Are Owned or Controlled by the Government of a Terrorist Country. As prescribed in 209.409, use the following clause: Subcontracting with Firms that are Owned or Controlled by the Government of a Terrorist County (Mar 1998) (a) Unless the Government determines that there is a compelling reason to do so, the Contractor shall not enter into any subcontract in excess of $25,000 with a firm, or a subsidiary of a firm, that is identified, on the List of Parties Excluded from Federal Procurement and Nonprocurement Programs, as being ineligible for the award of Defense contracts or subcontracts because it is owned or controlled by the government of a terrorist country. (b) A corporate officer or a designee of the Contractor shall notify the Contracting Officer, in writing, before entering into a subcontract with a party that is identified, on the List of Parties Excluded from Federal Procurement and Nonprocurement Programs, as being ineligible for the award of Defense contracts or subcontracts because it is owned or controlled by the government of a terrorist country. The notice must include the name of the proposed subcontractor and the compelling reason(s) for doing business with the subcontractor notwithstanding its inclusion on the List of Parties Excluded From Federal Procurement and Nonprocurement Programs. (End of clause) [FR Doc. 98-7707 Filed 3-26-98; 8:45 am] BILLING CODE 5000-04-M