[Federal Register Volume 69, Number 240 (Wednesday, December 15, 2004)]
[Rules and Regulations]
[Pages 74989-74990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27348]


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DEPARTMENT OF DEFENSE

48 CFR Parts 203, 209, and 252

[DFARS Case 2003-D012]


Defense Federal Acquisition Regulation Supplement; Improper 
Business Practices and Contractor Qualifications Relating to Debarment, 
Suspension, and Business Ethics

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to streamline and clarify 
text pertaining to debarment, suspension, and improper business 
practices. This rule is a result of a transformation initiative 
undertaken by DoD to dramatically change the purpose and content of the 
DFARS.

EFFECTIVE DATE: December 15, 2004.

FOR FURTHER INFORMATION CONTACT: Mr. Euclides Barrera, Defense 
Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0296; 
facsimile (703) 602-0350. Please cite DFARS Case 2003-D012.

SUPPLEMENTARY INFORMATION:

A. Background

    DFARS Transformation is a major DoD initiative to dramatically 
change the purpose and content of the DFARS. The objective is to 
improve the efficiency and effectiveness of the acquisition process, 
while allowing the acquisition workforce the flexibility to innovate. 
The transformed DFARS will contain only requirements of law, DoD-wide 
policies, delegations of FAR authorities, deviations from FAR 
requirements, and policies/procedures that have a significant effect 
beyond the internal operating procedures of DoD or a significant cost 
or administrative impact on contractors or offerors. Additional 
information on the DFARS Transformation initiative is available at 
http://www.acq.osd.mil/dpap/dfars/transf.htm.
    This final rule is a result of the DFARS Transformation initiative. 
The DFARS changes include--
    <bullet> Consolidation of requirements for reporting violations and 
suspected violations of certain requirements into a new section at 
DFARS 203.070. This results in elimination of DFARS sections 203.103, 
203.103-2, and 203.104-10; subparts 203.2, 203.3, and 203.4; and 
sections 203.502 and 203.570-4.
    <bullet> Streamlining of text at DFARS 203.570-1 and 203.570-2 
relating to prohibitions on persons convicted of fraud or other 
defense-contract-related felonies.
    <bullet> Revision of the clause at 252.203-7001, Prohibition on 
Persons Convicted of Fraud or Other Defense-Contract-Related Felonies, 
to remove unnecessary references to first-tier subcontracts in 
paragraphs (b) and (d). Paragraph (g) of the clause adequately 
addresses requirements for flow down to first-tier subcontracts.
    <bullet> Deletion of text at DFARS 203.570-3 relating to internal 
DoD procedures for waiver of the 5-year period for prohibitions on 
persons convicted of fraud or other defense-contract-related felonies; 
and deletion of text at DFARS 209.105-2, 209.406-3, and 209.407-3 
containing internal DoD procedures for referral of matters to agency 
debarment and suspension officials. This text has been relocated to the 
new DFARS companion resource, Procedures, Guidance, and Information 
(PGI), available at http://www.acq.osd.mil/dpap/dars/pgi.
    DoD published a proposed rule at 69 FR 8146 on February 23, 2004. 
Two sources submitted comments on the proposed rule. A discussion of 
the comments is provided below:
    1. Comment: Section 203.070, which specifies the violations or 
suspected violations that must be reported, should also include: the 
Truth in Negotiations Act (19 U.S.C. 2306(f)); the False Claims Act (31 
U.S.C. 3729 et seq.); a reference to FAR 9.406-2(a)(3), which lists 
causes for debarment; and a reference to FAR 9.407-2(a)(3), which lists 
causes for suspension.
    DoD Response: Do not agree. Since section 203.070 falls within the 
scope of FAR Part 3 and DFARS Part 203, Improper Business Practices and 
Personal Conflicts of Interest, the violations listed in section 
203.070 are limited to those addressed in FAR Part 3 and DFARS Part 
203.
    2. Comment: In section 203.070, the reference to ``DoDD 7075.5'' 
should be corrected to read ``DoDD 7050.5.''
    DoD Response: Agree. This correction has been included in the final 
rule.
    3. Comment: In section 203.070(c), the reference to the gratuities 
clause should be corrected to read ``FAR 3.203.''
    DoD Response: Agree. This correction has been included in the final 
rule.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD certifies that 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 the rule streamlines and clarifies existing DFARS text, with no 
substantive change in policy.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the rule does 
not impose any 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 203, 209, and 252

    Government procurement.

Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.


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Therefore, 48 CFR Parts 203, 209, and 252 are amended as follows:

[[Page 74990]]

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1. The authority citation for 48 CFR Parts 203, 209, and 252 continues 
to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 203--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST

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2. Section 203.070 is added to read as follows:


Sec.  203.070  Reporting of violations and suspected violations.

    Report violations and suspected violations of the following 
requirements in accordance with 209.406-3 or 209.407-3 and DoDD 7050.5, 
Coordination of Remedies for Fraud and Corruption Related to 
Procurement Activities:
    (a) Certificate of Independent Price Determination (FAR 3.103).
    (b) Procurement integrity (FAR 3.104).
    (c) Gratuities clause (FAR 3.203).
    (d) Antitrust laws (FAR 3.303).
    (e) Covenant Against Contingent Fees (FAR 3.405).
    (f) Anti-kickback Act (FAR 3.502).
    (g) Prohibitions on persons convicted of defense-related contract 
felonies (203.570).


Sec.  203.103,  203.103-2, and 203.104-10 [Removed]

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3. Sections 203.103, 203.103-2, and 203.104-10 are removed.

Subparts 203.2 through 203.4 [Removed]

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4. Subparts 203.2 through 203.4 are removed.


Sec.  203.502  [Removed]

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5. Section 203.502 is removed.

0
6. Section 203.502-2 is amended by revising the heading to read as 
follows:


Sec.  203.502-2  Subcontractor kickbacks.

* * * * *

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7. Sections 203.570-1 and 203.570-2 are revised to read as follows:


Sec.  203.570-1  Scope.

    This subpart implements 10 U.S.C. 2408.


Sec.  203.570-2  Prohibition period.

    DoD has sole responsibility for determining the period of the 
prohibition described in paragraph (b) of the clause at 252.203-7001, 
Prohibition on Persons Convicted of Fraud or Other Defense-Contract-
Related Felonies. The prohibition period--
    (a) Shall not be less than 5 years from the date of conviction 
unless the agency head or a designee grants a waiver in the interest of 
national security. Follow the waiver procedures at PGI 203.570-2(a); 
and
    (b) May be more than 5 years from the date of conviction if the 
agency head or a designee makes a written determination of the need for 
the longer period. The agency shall provide a copy of the determination 
to the address at PGI 203.570-2(b).


Sec.  203.570-3 and 203.570-4  [Removed]

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8. Sections 203.570-3 and 203.570-4 are removed.


Sec.  203.570-5  [Redesignated as 203.570-3]

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9. Section 203.570-5 is redesignated as section 203.570-3.

PART 209--CONTRACTOR QUALIFICATIONS

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10. Section 209.105-2 is revised to read as follows:


Sec.  209.105-2  Determinations and documentation.

    (a) For guidance on submission of determinations to the appropriate 
debarring and suspending official, see PGI 209.105-2(a).

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11. Section 209.406-3 is revised to read as follows:


Sec.  209.406-3  Procedures.

    Refer all matters appropriate for consideration by an agency 
debarring and suspending official as soon as practicable to the 
appropriate debarring and suspending official identified in 209.403. 
Any person may refer a matter to the debarring and suspending official. 
Follow the procedures at PGI 209.406-3.

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12. Section 209.407-3 is revised to read as follows:


Sec.  209.407-3  Procedures.

    Refer all matters appropriate for consideration by an agency 
debarring and suspending official as soon as practicable to the 
appropriate debarring and suspending official identified in 209.403. 
Any person may refer a matter to the debarring and suspending official. 
Follow the procedures at PGI 209.407-3.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

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13. Section 252.203-7001 is amended by revising the introductory text, 
clause date, paragraph (b), paragraph (d) introductory text, and 
paragraph (h) to read as follows:


Sec.  252.203-7001  Prohibition on persons convicted of fraud or other 
defense-contract-related felonies.

    As prescribed in 203.570-3, use the following clause:

Prohibition on Persons Convicted of Fraud or Other Defense-Contract-
Related Felonies (Dec 2004)

* * * * *
    (b) Any individual who is convicted after September 29, 1988, of 
fraud or any other felony arising out of a contract with the DoD is 
prohibited from serving--
    (1) In a management or supervisory capacity on this contract;
    (2) On the board of directors of the Contractor;
    (3) As a consultant, agent, or representative for the 
Contractor; or
    (4) In any other capacity with the authority to influence, 
advise, or control the decisions of the Contractor with regard to 
this contract.
* * * * *
    (d) 10 U.S.C. 2408 provides that the Contractor shall be subject 
to a criminal penalty of not more than $500,000 if convicted of 
knowingly--
* * * * *
    (h) Pursuant to 10 U.S.C. 2408(c), defense contractors and 
subcontractors may obtain information as to whether a particular 
person has been convicted of fraud or any other felony arising out 
of a contract with the DoD by contacting The Office of Justice 
Programs, The Denial of Federal Benefits Office, U.S. Department of 
Justice, telephone (301) 809-4904.
    (End of clause)

[FR Doc. 04-27348 Filed 12-14-04; 8:45 am]
BILLING CODE 5001-08-P