Federal Register / Vol. 75, No. 135 / Thursday, July 15, 2010 / Rules and Regulations 41097 

TASK–ORDER AND DELIVERY–ORDER 

OMBUDSMAN (AUG 2010) 

GSA has designated a Task–Order and 

Delivery–Order Ombudsman who will 

review complaints from contractors and 

ensure that they are afforded a fair 

opportunity for consideration in the 

award of task or delivery orders under 

Indefinite Delivery/Indefinite Quantity 

(ID/IQ) contracts, consistent with the 

procedures in the contract. Written 

complaints shall be submitted to the 

Ombudsman, with a copy to the 

Contracting Officer. 

In the case that the contractor is not 

satisfied with the resolution of the 

complaint by the GSA Task–Order and 

Delivery–Order Ombudsman, the 

contractor may follow the procedures 

outlined in subpart 33.1. 

The GSA Ombudsman is the Director, 

Office of Acquisition Integrity located 

at: General Services Administration 

(GSA), Office of Governmentwide Policy 

(OGP), Office of Acquisition Policy 

(MV), Acquisition Integrity Division 

(MVA), 1800 F Street, NW., Room 4014, 

Washington, D.C. 20405, Telephone: 

(202) 219–3454, Fax: (202) 219–3615, Email:joseph.neurauter@gsa.gov. 

[FR Doc. 2010–17140 Filed 7–14–10; 8:45 am] 

BILLING CODE 6820–61–S 

DEPARTMENT OF HOMELAND 

SECURITY 

48 CFR Parts 3002, 3007, 3009, 3016, 

3034, 3035, and 3052 

[Docket No. DHS–2009–0006] 

RIN 1601–AA49 

Homeland Security Acquisition 

Regulation; Lead System Integrators 

[HSAR Case 2009–003] 

AGENCY: Office of the Chief Procurement 

Officer, DHS. 

ACTION: Interim rule with request for 

comments. 

SUMMARY: The Department of Homeland 

Security (DHS) is issuing an interim rule 

amending the Homeland Security 

Acquisition Regulation (HSAR) to 

implement section 6405 of the U.S. 

Troop Readiness, Veterans’ Care, 

Katrina Recovery, and Iraq 

Accountability Appropriations Act, 

2007. This section of the Act and these 

implementing regulations restrict 

contractors from acting as lead system 

integrators in the acquisition of DHS 

major systems if they have direct 

financial interests in the development or 

construction of any individual system or 

element of any system of systems they 

integrate subject to stated exceptions. 

DATES: Effective Date: This rule is 

effective July 15, 2010. 

Comments Due Date: Comments must 

reach the Department of Homeland 

Security, Office of the Chief 

Procurement Officer, Acquisition Policy 

and Legislation, on or before August 16, 

2010. 

ADDRESSES: Please submit written 

comments, identified by agency name 

and docket number DHS–2009–0006, by 

one of the following methods: 

(1) Federal eRulemaking Portal: 

http://www.regulations.gov. To submit 

comments, follow instructions on 

www.regulations.gov and use docket 

number DHS–2009–0006. 

(2) By mail to the Department of 

Homeland Security, Office of the Chief 

Procurement Officer, Acquisition Policy 

and Legislation, ATTN: Timothy J. 

Frank, 245 Murray Drive SW., STOP 

0415, Washington, DC 20528–0415. 

FOR FURTHER INFORMATION CONTACT: 

Timothy J. Frank, Senior Procurement 

Analyst, at (202) 447–5252 for 

clarification of content. Please cite 

HSAR Case 2009–003. 

SUPPLEMENTARY INFORMATION: 

I. Request for Comments 

II. Background 

III. Discussion of Interim Rule 

IV. Regulatory Analyses 

A. Executive Order 12866 Assessment 

B. Determination To Issue an Interim Rule 

C. Regulatory Flexibility Act 

D. Paperwork Reduction Act 

E. National Environmental Policy Act 

I. Request for Comments 

Interested persons are invited to 

participate in this rulemaking by 

submitting written comments, views, or 

arguments on all or any aspect of this 

rule. Comments must be received by 

August 16, 2010. Comments should be 

organized by Homeland Security 

Acquisition Regulation (HSAR) Part, 

and address the specific section that is 

being commented on. All comments 

received will be posted without change 

to http://www.regulations.gov, including 

any personal information provided. See 

ADDRESSES above for information on 

how to submit comments. If you submit 

comments by mail, please submit them 

in an unbound format, on 81⁄2-by-11- 

inch paper, suitable for copying and 

optical character recognition. If you 

would like DHS to acknowledge receipt 

of comments submitted by mail, please 

enclose a self- addressed stamped post 

card or envelope. DHS will consider all 

comments and material received during 

the comment period. Access to the 

docket, including background 

documents and comments received, can 

be obtained at http://www. 

regulations.gov which contains relevant 

instructions under the FAQs tab on the 

home page. 

II. Background 

The U.S. Troop Readiness, Veterans’ 

Care, Katrina Recovery, and Iraq 

Accountability Appropriations Act, 

2007, Public Law 110–28, section 6405, 

121 Stat. 112, 176 (2007) (codified as 6 

U.S.C. 396; hereinafter ‘‘Section 396’’), 

limits firms that can serve as lead 

system integrators on DHS acquisitions 

of major systems. Such contractors may 

have no direct financial interest in the 

development or construction of any 

individual system or element of any 

system of systems they would integrate, 

unless one of the stated exceptions has 

been satisfied. 

One exception applies when the 

contractor is selected by a subcontractor 

as a lower-tier subcontractor, through a 

process over which the contractor had 

no control, to develop or construct an 

individual system or element of any 

system of systems the contractor would 

integrate. The other exception applies 

where the lead system integrator was 

selected using competitive procedures, 

DHS takes appropriate steps to prevent 

any organizational conflicts of interest 

in the selection process, and the 

Secretary of Homeland Security certifies 

these facts to various committees in 

Congress. 

Section 396 also requires DHS to 

update its acquisition regulations and to 

include a definition of ‘‘lead system 

integrators’’ modeled after that used by 

the Department of Defense and a 

specification of various types of 

contracts and fee structures that are 

appropriate for use with lead system 

integrators. This rule implements 

Section 396. 

This rule is issued by DHS’s Chief 

Procurement Officer, who is the Senior 

Procurement Executive (SPE), see 41 

U.S.C. 414 and DHS Delegation Number 

0700, under authority of 5 U.S.C. 301– 

302, the Office of Federal Procurement 

Policy Act, Public Law 93–400, 88 Stat. 

796 (1974), including sections 22 and 

25, 41 U.S.C. 418b and 421, and FAR 48 

CFR part 1, subpart 1.3. 

III. Discussion of Interim Rule 

The interim rule revises (HSAR) 48 

CFR 3002.101, 3007.106, 3009.5, 3016.1, 

3034.004, 3035.008, 3052.209–74 and 

3052.209–75 to implement Public Law 

110–28, Title VI, Section 6405. 

This rule changes the HSAR as 

follows: 

• Amends the definition of ‘‘Major 

system’’ in (HSAR) 48 CFR 3002.101 and 

removes the reference to the obsolete 

Management Directive (MD) 1400, 

Investment Review Process. The 


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definition of ‘‘Major system’’ for DHS 

has been revised in accordance with 

OMB Circular A–109, Major System 

Acquisitions, and FAR 2.101. 

• Removes the ‘‘Reserved’’ 

identification from (HSAR) 48 CFR 3007 

and adds a reference to the newlyrevised (HSAR) 48 CFR 3009.570 in new 

(HSAR) 48 CFR 3007.106–70 to address 

limitations on the use of certain 

contractors as lead system integrators. 

• Amends (HSAR) 48 CFR 3009 to 

add new section 3009.570 which 

describes the limitations on the use of 

lead system integrators and provides 

prescriptions for a new provision and 

clause found at (HSAR) 48 CFR 

3052.209–74 and 3052.209–75, 

respectively, for use in certain 

solicitations and contracts. 

• Amends (HSAR) 48 CFR 3016 to 

add subpart 3016.1 to address selection 

of the most appropriate contract type 

and fee structure. 

• Removes the (HSAR) 48 CFR 3034 

‘‘Reserved’’ identification and adds a 

reference in new section 3034.004 

pointing to 3009.570 for the policy 

applicable to acquisition strategies in 

the use of lead system integrators. 

• Amends (HSAR) 48 CFR 3035 to 

add section 3035.008, which refers to 

3009.570 describing limitations on the 

use of certain contractors as lead system 

integrators. 

• Adds the new provision at (HSAR) 

48 CFR 3052.209–74, Limitations on 

Contractors Acting as Lead System 

Integrators. 

• Adds the new clause at (HSAR) 48 

CFR 3052.209–75, Prohibited Financial 

Interests for Lead System Integrators. 

IV. Regulatory Analyses. 

A. Executive Order 12866 Assessment 

This is a not a significant regulatory 

action under Section 6 of Executive 

Order 12866, Regulatory Planning and 

Review, dated September 30, 1993. The 

Office of Management and Budget has 

not reviewed it under that Order. This 

rule is not a major rule under 5 U.S.C. 

804. This rule helps to avoid 

organizational conflicts of interest in the 

award and performance of contracts 

awarded by the Department of 

Homeland Security that involve the use 

of lead system integrators. Additionally, 

it encourages the use of a larger number 

of contractors by establishing 

limitations on the extent of work that 

can be performed by lead system 

integrators. 

B. Determination To Issue an Interim 

Rule 

DHS has determined that urgent and 

compelling reasons exist to promulgate 

this interim rule without prior 

opportunity for public comment. This 

action is necessary because it 

implements 6 U.S.C. 396, which 

specifies that the section applies to 

contracts entered into after July 1, 2007, 

and that DHS shall update the HSAR 

prior to that date. Nevertheless, 

pursuant to 41 U.S.C. 418(b) and FAR 

1.501, DHS will consider public 

comments received in response to this 

interim rule with request for comment 

in the formation of a final rule. 

C. Regulatory Flexibility Act 

The Department of Homeland 

Security certifies that the interim rule 

amending (HSAR) 48 CFR 3002.101, 

3007.106, 3009.5, 3016.1, 3034.004, 

3035.008, 3052.209–74 and 3052.209– 

75, 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. The factual basis for certification 

is presented in the following analysis of 

the effects of this rule. Application of 

the rule is limited to offerors or 

contractors providing services as lead 

system integrators or considering the 

provision of such services. Lead system 

integrators are limited to contracts for 

the development or production of major 

systems, and often involve the 

contractor performing functions closely 

associated with inherently 

governmental functions. 

Under this interim rule, an entity that 

receives a contract as a lead system 

integrator cannot have any direct 

financial interest in the development or 

construction of any individual system or 

element of any system of systems while 

performing lead system integrator 

functions in the acquisition of a major 

system by the Department of Homeland 

Security under this contract. Lead 

system integrator contracts usually 

extend several years, and we estimate 

that a limited number of such contracts 

are in effect within DHS at any one 

time. Very few contracts of this 

character are awarded in any given year. 

The limitations on entities (both large 

and small) apply only to contractors 

who choose to perform work for the 

Department of Homeland Security as a 

lead system integrator. If an entity does 

believe that participating in the 

particular contract as lead system 

integrator would impose a significant 

economic impact on their operation, the 

entity would make a business decision 

whether the revenue generated by doing 

business with the Department of 

Homeland Security as a lead system 

integrator would provide a financial 

return sufficient to justify the restriction 

of not having a direct financial interest 

in the development or construction of 

any individual system or element of any 

system of systems while performing 

lead system integrator functions. 

Presumably, entities which do not 

receive the desired return on revenue to 

justify participating as lead system 

integrator would choose not to propose 

on the particular contract. Such an 

entity could still choose to propose as 

a subcontractor under the prime 

contract, thereby mitigating the effect 

even further. 

In addition, this rule is not 

discretionary; a statute requires that 

DHS address these matters in its 

acquisition regulation. 

D. 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. 

E. National Environmental Policy Act 

We have analyzed this rule under 

Department of Homeland Security 

Directive 023–01, which guides the 

Department in complying with the 

National Environmental Policy Act of 

1969 (NEPA) (42 U.S.C. 4321–4370f), 

and have concluded that this action is 

one of a category of actions which do 

not individually or cumulatively have a 

significant effect on the human 

environment. This rule, which does not 

involve any extraordinary 

circumstances, is categorically excluded 

under paragraphs A3(b) and A3(d) in 

Table I of Appendix A of Directive 023– 

01 because it implements legislation by 

amending acquisition regulations 

without changing the regulation’s 

environmental effect. 

List of Subjects in 48 CFR Parts 3002, 

3007, 3009, 3016, 3034, 3035, and 3052 

Government procurement. 

Dated: June 30, 2010. 

Richard K. Gunderson, 

Acting Chief Procurement Officer, 

Department of Homeland Security. 

■ Accordingly, DHS amends 48 CFR 

parts 3002, 3007, 3009, 3016, 3034, 

3035, and 3052 as follows: 

■ 1. Revise the authority citation for 48 

CFR parts 3002, 3007, 3009, 3016, 3034, 

3035, and 3052 to read as follows: 

Authority: 5 U.S.C. 301–302, 41 U.S.C. 

418b(a) and (b), 41 U.S.C. 414, 48 CFR part 

1, subpart 1.3, and DHS Delegation Number 

0700. 


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PART 3002—DEFINITIONS OF WORDS 

AND TERMS 

■ 2. Amend section 3002.101 by 

revising the definition of ‘‘major system’’ 

to read as follows: 

3002.101 Definitions. 

Major system means, for DHS, that 

combination of elements that will 

function together to produce the 

capabilities required to fulfill a mission 

need, including hardware, equipment, 

software, or any combination thereof, 

but excluding construction or other 

improvements to real property. A DHS 

major system is one where the total 

lifecycle costs for the system are 

estimated to equal or exceed $300M (in 

constant 2009 dollars), or if the Deputy 

Secretary has designated a program or 

project as a major system. This 

corresponds to a DHS Level 1 or 2 

capital investment acquisition. 

* * * * * 

■ 3. Add new part 3007 to read as 

follows: 

PART 3007—ACQUISITION PLANNING 

Subpart 3007.1—Acquisition Plans 

Sec. 

3007.106 Additional Requirements for 

Major Systems. 

3007.106–70 Limitations on Lead System 

Integrators. 

Subpart 3007.1—Acquisition Plans 

3007.106 Additional Requirements for 

Major Systems. 

3007.106–70 Limitations on Lead System 

Integrators. 

See (HSAR) 48 CFR 3009.570 for 

policy applicable to acquisition 

strategies that consider the use of lead 

system integrators. 

PART 3009—CONTRACTOR 

QUALIFICATIONS 

■ 4. Add sections 3009.570 through 

3009.570–4 to Subpart 3009.5 to read as 

follows: 

Subpart 3009.5—Organizational and 

Consultant Conflicts of Interest 

Sec. 

3009.570 Limitations on contractors acting 

as lead system integrators. 

3009.570–1 Definitions. 

3009.570–2 Policy. 

3009.570–3 Procedures. 

3009.570–4 Solicitation provision and 

contract clause. 

Subpart 3009.5—Organizational and 

Consultant Conflicts of Interest 

3009.570 Limitations on contractors acting 

as lead system integrators. 

3009.570–1 Definitions. 

‘‘Direct Financial Interest,’’ as used in 

this section, is defined in the clause at 

HSAR 48 CFR 3052.209–75, Prohibited 

Financial Interests for Lead System 

Integrators. 

‘‘Lead system integrator,’’ as used in 

this section, is defined in the clause at 

(HSAR) 48 CFR 3052.209–75, Prohibited 

Financial Interests for Lead System 

Integrators. 

3009.570–2 Policy. 

(a) Except as provided in paragraph 

(b) of this subsection, under 6 U.S.C. 

396, no entity performing lead system 

integrator functions in the acquisition of 

a major system (See (HSAR) 48 CFR 

3002.101) by DHS may have any direct 

financial interest in the development or 

construction of any individual system or 

element of any system of systems under 

the program in which the entity is 

performing lead system integrator 

functions. 

(b) The prohibition in paragraph (a) of 

this subsection does not apply if— 

(1) The Secretary of Homeland 

Security certifies to the Committees on 

Appropriations of the Senate and the 

House of Representatives, the 

Committee on Homeland Security of the 

House of Representatives, the 

Committee on Transportation and 

Infrastructure of the House of 

Representatives, the Committee on 

Homeland Security and Governmental 

Affairs of the Senate, and the Committee 

on Commerce, Science and 

Transportation of the Senate that— 

(i) The entity was selected by DHS as 

a contractor to develop or construct the 

system or element concerned through 

the use of competitive procedures, and 

(ii) DHS took appropriate steps to 

prevent any organizational conflict of 

interest in the selection process; or 

(2) The entity was selected by a 

subcontractor to serve as a lower-tier 

subcontractor, through a process over 

which the entity exercised no control. 

(c) CONSTRUCTION—Nothing in this 

section 3009.570 shall be construed to 

preclude an entity described in 

paragraph (a) of this subsection from 

performing work necessary to integrate 

two or more individual systems or 

elements of a system of systems with 

each other. 

3009.570–3 Procedures. 

In making a responsibility 

determination before awarding a 

contract for the acquisition of a major 

system, the contracting officer shall— 

(a) Determine whether the prospective 

contractor meets the definition of ‘‘lead 

system integrator’’; 

(b) Consider all information regarding 

the prospective contractor’s direct 

financial interests in view of the 

prohibition at (HSAR) 48 CFR 

3009.570–2(a); and 

(c) Apply the following procedures: 

(1) After assessing the offeror’s direct 

financial interests in the development or 

construction of any individual system or 

element of any system of systems, if the 

offeror— 

(i) Has no direct financial interest in 

such systems, the contracting officer 

shall document the contract file to that 

effect and may then further consider the 

offeror for award of the contract; 

(ii) Has a direct financial interest in 

such systems, but the exception in 

(HSAR) 3009.570–2(b)(2) applies, the 

contracting officer shall document the 

contract file to that effect and may then 

further consider the offeror for award of 

the contract; 

(iii) Has a direct financial interest in 

such systems and the exception in 

(HSAR) 3009.570–2(b)(2) does not 

apply, but the conditions in (HSAR) 

3009.570–2(b)(1)(i) and (ii) do apply, the 

contracting officer— 

(A) Shall document the contract file to 

that effect; 

(B) May, in coordination with 

program officials, request an exception 

for the offeror from the Secretary of 

Homeland Security, in accordance with 

Homeland Security Acquisition Manual 

section 3009.570; and 

(C) Shall not award to the offeror 

unless the Secretary of Homeland 

Security grants the exception and 

provides the required certification to 

Congress; or 

(iv) Has a direct financial interest in 

such systems and the exceptions in 

(HSAR) 3009.570–2(b)(1) and (2) do not 

apply, the contracting officer shall not 

award to the offeror. 

3009.570–4 Solicitation provision and 

contract clause. 

(a) Use the provision at (HSAR) 48 

CFR 3052.209–74, Limitations on 

Contractors Acting as Lead System 

Integrators, in solicitations for the 

acquisition of a major system when the 

acquisition strategy envisions the use of 

a lead system integrator. 

(b) Use the clause at (HSAR) 48 CFR 

3052.209–75, Prohibited Financial 

Interests for Lead System Integrators— 

(1) In solicitations that include the 

provision at (HSAR) 48 CFR 3052.209– 

74; and 

(2) In contracts when the contractor 

will fill the role of a lead system 


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41100 Federal Register / Vol. 75, No. 135 / Thursday, July 15, 2010 / Rules and Regulations 

integrator for the acquisition of a major 

system. 

PART 3016—TYPES OF CONTRACTS 

■ 5. Add subpart 3016.1 to read as 

follows: 

Subpart 3016.1—Selecting Contract Types 

Sec. 

3016.170 Contracts with Lead System 

Integrators. 

Subpart 3016.1—Selecting Contract 

Types 

3016.170 Contracts with Lead System 

Integrators. 

The contracting officer should 

negotiate the most appropriate contract 

type and fee structure based on risks 

inherent in the work to be performed, in 

accordance with (FAR) 48 CFR 

16.103(a). Contract type and fee 

structure should be commensurate with 

the work to be performed and the risks 

assumed. Worthwhile existing guidance 

on contract type selection, pricing, and 

fee structures, such as exists in Vol. I, 

Ch. 4 of the Contract Reference Pricing 

Guides [http://www.acq.osd.mil/dpap/

cpf/docs/contract_pricing_finance_

guide/vol4_ch1.pdf] can be consulted to 

determine the appropriate contract type 

and fee structure for use in varied 

contracts with lead system integrators in 

the production, fielding and 

sustainment of complex systems. 

■ 6. Add part 3034 to read as follows: 

PART 3034—MAJOR SYSTEM 

ACQUISITION 

Subpart 3034.0—General 

Sec. 

3034.004 Acquisition strategy. 

3034.0 General 

3034.004 Acquisition strategy. 

See (HSAR) 48 CFR 3009.570 for 

policy applicable to acquisition 

strategies that consider the use of lead 

system integrators. 

PART 3035—RESEARCH AND 

DEVELOPMENT CONTRACTING 

■ 7. Add section 3035.008 to read as 

follows: 

3035.008 Evaluation for award. 

See (HSAR) 48 CFR 3009.570 for 

limitations on the award of contracts to 

contractors acting as lead system 

integrators. 

PART 3052—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 8. Sections 3052.209–74 and 

3052.209–75 are added to read as 

follows: 

3052.209–74 Limitations on Contractors 

Acting as Lead System Integrators. 

As prescribed in (HSAR) 48 CFR 

3009.570–4(a), use the following 

provision: 

LIMITATIONS ON CONTRACTORS 

ACTING AS LEAD SYSTEM 

INTEGRATORS (JUL 2010) 

(a) Definitions. ‘‘Direct financial interest,’’ 

‘‘lead system integrator,’’ ‘‘lead system 

integrator with system responsibility,’’ and 

‘‘lead system integrator without system 

responsibility,’’ as used in this provision, 

have the meanings given in the clause of this 

solicitation entitled ‘‘Prohibited Financial 

Interests for Lead System Integrators’’ 

((HSAR) 48 CFR 3052.209–75). 

(b) General. Unless an exception is granted, 

no contractor performing lead system 

integrator functions in the acquisition of a 

major system by the Department of 

Homeland Security may have any direct 

financial interest in the development or 

construction of any individual system or 

element of any system of systems. 

(c) Representations. (1) The offeror 

represents that it does [ ] does not [ ] 

propose to perform this contract as a lead 

system integrator with system responsibility. 

(2) The offeror represents that it does [ ] 

does not [ ] propose to perform this contract 

as a lead system integrator without system 

responsibility. 

(3) If the offeror answered in the 

affirmative in paragraph (c)(1) or (2) of this 

provision, the offeror represents that it does 

[ ] does not [ ] have any direct financial 

interest in the development or construction 

of any system(s), subsystem(s), system of 

systems, element of any system of systems, 

or services it proposes or intends to seek to 

satisfy this solicitation. 

(d) If the offeror answered in the 

affirmative in paragraph (c)(3) of this 

provision, the offeror should contact the 

Contracting Officer for guidance on whether 

an exception may apply and what 

responsibilities the offeror may have in 

qualifying for an exception. 

(e) If the offeror does have a direct 

financial interest, the offeror shall be 

prohibited from receiving an award under 

this solicitation, unless: 

(1) The offeror submits to the Contracting 

Officer appropriate evidence that the offeror 

was selected by a subcontractor to serve as 

a lower-tier subcontractor through a process 

over which the offeror exercised no control; 

or 

(2) the conditions described in (HSAR) 48 

CFR 3009.570–2(b)(1)(i) and (ii) exist, after an 

opportunity is afforded to the offeror to 

provide information or commitments as may 

be necessary to meet (HSAR) 48 CFR 

3009.570–2(b)(1)(ii), assuming any such 

information or commitment will allow DHS 

to meet that standard. 

(f) This provision implements the 

requirements of 6 U.S.C. 396, as added by 

Section 6405 of the U.S. Troop Readiness, 

Veterans’ Care, Katrina Recovery, And Iraq 

Accountability Appropriations Act, 2007 

(Pub. L. 110–28). 

(End of provision) 

3052.209–75 Prohibited Financial Interests 

for Lead System Integrators. 

As prescribed in (HSAR) 48 CFR 

3009.570–4(b), use the following clause: 

PROHIBITED FINANCIAL INTERESTS 

FOR LEAD SYSTEM INTEGRATORS 

(JUL 2010) 

(a) Definitions. As used in this clause— 

(1) ‘‘Direct financial interest,’’ for the 

purpose of this clause and contract, and 

subject to exceptions set forth 6 U.S.C. 396(b) 

as implemented, means: 

(i) Developing or constructing any 

individual system or element of any system 

of systems for which the Contractor is the 

lead system integrator; 

(ii) Owning or being in a position to exert 

corporate control over a subcontractor at any 

level under the prime contract; 

(iii) Owning, or being in a position to exert 

corporate control over an entity that either— 

(A) Is a subcontractor at any level under 

the prime contract, or 

(B) Owns or is in a position to control 

another entity that is a subcontractor at any 

level under the prime contract; and 

(iv) Participating or sharing in the profits 

of another firm’s development or 

construction of any individual system or 

element of any system of systems for which 

the Contractor is the lead system integrator 

or agreeing to participate in the profits of the 

firm from such development or construction. 

(2) ‘‘Lead system integrator’’ includes ‘‘lead 

system integrator with system responsibility’’ 

and ‘‘lead system integrator without system 

responsibility.’’ 

(3) ‘‘Lead system integrator with system 

responsibility’’ means a prime contractor for 

the development or production of a major 

system, if the prime contractor is not 

expected at the time of award to perform a 

substantial portion of the work on the system 

and the major subsystems. 

(4) ‘‘Lead system integrator without system 

responsibility’’ means a prime contractor 

under a contract for the procurement of 

services, the primary purpose of which is to 

perform acquisition functions closely 

associated with inherently governmental 

functions (see section 7.503(d) of the Federal 

Acquisition Regulation) with regard to the 

development or production of a major 

system. 

(5) The phrase ‘‘substantial portion of the 

work,’’ as used in the definition of ‘‘lead 

system integrator with system responsibility,’’ 

may relate to the dollar value of the effort or 

to the criticality of the effort performed. 

(b) Limitations. The Contracting Officer has 

determined that the Contractor meets the 

definition of lead system integrator with [ ] 

without [ ] system responsibility. Unless an 

exception is granted, the Contractor shall not 


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Federal Register / Vol. 75, No. 135 / Thursday, July 15, 2010 / Rules and Regulations 41101 

have any direct financial interest in the 

development or construction of any 

individual system or element of any system 

of systems while performing lead system 

integrator functions in the acquisition of a 

major system by the Department of 

Homeland Security under this contract. 

(c) Agreement. The Contractor agrees that 

during performance of this contract it will 

not acquire any direct financial interest as 

described in paragraph (b) of this clause, or, 

if it does acquire or plan to acquire such 

interest, it will immediately notify the 

Contracting Officer. The Contractor further 

agrees to provide to the Contracting Officer 

all relevant information regarding the change 

in financial interests so that the Contracting 

Officer can determine whether an exception 

applies or whether the Contractor will be 

allowed to continue performance on this 

contract. If an organizational conflict of 

interest in the performance of this contract 

that is attributable to the Contractor’s direct 

financial interest cannot be avoided, 

eliminated, or mitigated to the Contracting 

Officer’s satisfaction, the Contracting Officer 

may terminate this contract for default or 

may take other remedial measures as 

appropriate in the Contracting Officer’s sole 

discretion. 

(d) Notwithstanding any other clause of 

this contract, if the Contracting Officer 

determines that the Contractor 

misrepresented its financial interests at the 

time of award or has violated the agreement 

in paragraph (c) of this clause, the 

Government may terminate this contract for 

default or may take other remedial measures 

as appropriate in the Contracting Officer’s 

sole discretion. 

(e) This clause implements the 

requirements of 6 U.S.C. 396, as added by 

Section 6405 of the U.S. Troop Readiness, 

Veterans’ Care, Katrina Recovery, And Iraq 

Accountability Appropriations Act, 2007 

(Pub. L. 110–28). 

(End of clause) 

[FR Doc. 2010–16582 Filed 7–14–10; 8:45 am] 

BILLING CODE 9110–9B–P 


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