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[Federal Register Volume 76, Number 223 (Friday, November 18, 2011)]
[Rules and Regulations]
[Pages 71826-71830]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29421]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 203 and 252

RIN 0750-AG99

Defense Federal Acquisition Regulation Supplement: Representation 
Relating to Compensation of Former DoD Officials (DFARS Case 2010-D020)

AGENCIES:  Defense Acquisition Regulations System, Department of 
Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD is amending the DFARS to require offerors to represent 
whether former DoD officials who are employees of the offeror are in 
compliance with post-employment restrictions.

DATES: Effective Date: November 18, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Meredith Murphy, 703-602-1302.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD published a proposed rule at 76 FR 32846 on June 6, 2011, that 
proposed adding a requirement for offerors submitting proposals to DoD 
to represent whether former DoD officials employed by the offeror are 
in compliance with post-employment restrictions. Four respondents 
submitted public comments on the proposed rule.

A. Post-Employment Statutory Restrictions and Regulatory Implementation

    The principal statutory restrictions concerning post-Government 
employment for DoD officials after leaving Government employment are at 
18 U.S.C. 207 and 41 U.S.C. 2104 (formerly 41 U.S.C. 423) and 5 CFR 
parts 2637 and 2641.
    1. FAR 3.104 implements 41 U.S.C 2104 and 18 U.S.C. 207.
    2. DFARS 203.104 implements the Procurement Integrity Act for DoD.
    3. DFARS 203.171-3 implements section 847 of the National Defense 
Authorization Act (NDAA) for Fiscal Year (FY) 2008.

B. General Accountability Office (GAO) Study GAO-08-485

    The Congress included a provision in the NDAA for FY 2007 (section 
851 of Pub. L. 109-364) requiring the GAO to report on recent 
employment of former DoD officials by major defense contractors. In May 
2008, the GAO issued its report, entitled ``Defense Contracting: Post-
Government Employment of Former DoD Officials Needs Greater 
Transparency'' (GAO-08-485). The GAO found that contractors 
significantly under-reported the employment of former DoD officials and 
concluded that defense contractors may employ a substantial number of 
former DoD officials on assignments related to their former positions. 
GAO further concluded that greater transparency is needed by DoD with 
respect to former senior and acquisition executives to ensure 
compliance with applicable post-employment restrictions. The GAO 
recommended that DoD ask potential offerors to certify that the former 
DoD officials employed by the offeror are in compliance with post-
employment restrictions when contracts are being awarded and that 
contracting officers consider continuing certifications throughout the 
performance of the contract.

C. DFARS Rule

    This DFARS rule implements the recommendation of the GAO by adding 
a new representation for offerors to complete and provide as part of 
each proposal, including proposals for commercial items. DoD elected to 
employ a representation rather than a certification and have the 
representation submitted by offerors as part of the proposal process. 
The representation will be required only one time rather than 
continuously throughout contract performance. The provision will not be 
included in the annual representations and certifications.
    The solicitation provision at DFARS 252.203-7005, entitled 
``Representation Relating to Compensation of Former DoD Officials,'' is 
a representation that all of the offeror's employees who are former DoD 
officials are in compliance with the post-employment restrictions at 18 
U.S.C. 207, 41 U.S.C. 2101-2107, and 5 CFR parts 2637 and 2641, as well 
as FAR 3.104-2.

II. Discussion and Analysis of the Public Comments

    DoD reviewed the public comments received in response to the 
proposed rule in the formation of the final rule. A discussion of the 
comments and the changes made to the rule as a result of those comments 
follows.

A. Contractor Compliance Responsibility

    Comment: Two respondents noted that compliance with ethics rules is 
the responsibility of the covered officials, not the contractor 
employing them. According to the respondents, although contractors 
instruct and train employees to observe all post-government employment 
restrictions, contractors have no official compliance responsibility 
regarding employees' post-government employment restrictions.
    Response: FAR subpart 3.10, entitled ``Contractor Code of Business 
Ethics and Conduct,'' requires, among other things, that contractors 
exercise due diligence to prevent and detect criminal conduct and 
otherwise promote an organizational culture that encourages ethical 
conduct and a commitment to compliance with the law. Contractors must 
also timely disclose to the Government any credible evidence of a 
violation of criminal law, which would include, for example, a 
violation of 18 U.S.C. 207 (post-Government employment restrictions). 
Accordingly, contractors, as employers of covered officials, have an 
affirmative compliance responsibility regarding employees'

[[Page 71827]]

post-Government employment restrictions. Contractors must ensure their 
employees avoid engaging in criminal conduct while carrying out duties 
on the contractor's behalf. Stated individuals' resumes generally do 
not include every particular matter on which they worked. Hiring 
contractors have a duty to interview their new hires who formerly 
worked for DoD and screen their work experiences for relevant 
particular matters.
    Comment: Two respondents asserted that implementation of the 
proposed rule would require contractors to establish compliance systems 
to identify, track, educate, and require periodic certifications from 
employees and consultants across their businesses (rather than those 
specific to a contract) to identify former DoD covered officials. 
According to the respondents, such systems would require additional 
compliance mechanisms and personnel to design, implement, execute, 
test, and evaluate, thereby raising overhead costs for contractors, 
which could ultimately increase costs to the Government.
    Response: Contractors should know on what particular matters 
covered officials worked and already ensure employees are not assigned 
to work on those matters because there are current requirements to 
maintain and track this information. FAR subpart 3.10 requires 
contractors to be aware of employees who are covered officials and any 
existing prohibitions and requirements relating to their employment. In 
addition, when contractors hire covered DoD officials, DFARS 252.203-
7000(b) requires them to determine whether the covered officials sought 
and received advice regarding post-employment restrictions on behalf of 
the contractor. This rule does not require the creation of new 
compliance systems, and additional costs should not be incurred.
    Comment: Two respondents asserted that the proposed rule would 
require contractors to certify compliance involving matters unrelated 
and unknown to the offeror, because the proposed regulation provides no 
limitation related to the contractors' business and the covered 
officials' other activities or employment. Respondents suggested 
limiting the proposed representation to ``work related to this offer'' 
or ``activities that the official is expected to undertake on behalf of 
the contractor.''
    Response: DFARS 252.203-7000(b) provides ``(t)he Contractor shall 
not knowingly provide compensation to a covered DoD official within 2 
years after the official leaves DoD service, without first determining 
that the official has sought and received, or has not received after 30 
days of seeking, a written opinion from the appropriate DoD ethics 
counselor regarding the applicability of post-employment restrictions 
to the activities that the official is expected to undertake on behalf 
of the Contractor.'' It would be reasonable to include a similar 
limitation in the representation, e.g., ``that all covered DoD 
officials employed by, or otherwise receiving compensation from the 
offeror, and who are expected to undertake activities on behalf of the 
offeror for any resulting contract, are presently in compliance with--* 
* *.'' Appropriate revision has been made in the final rule to the 
DFARS provision at 252.203-7005(b).

B. Contractor Identification of ``Covered Officials'' and ``Particular 
Matters''

    Comment: One respondent stated that ``identifying which job 
applicants are `covered officials' is not trivial.'' This respondent 
explained that ``resumes are often tailored to the job being sought: 
Certain items are highlighted, others omitted entirely. Consequently, 
while it is usually simple to tell if a potential candidate was a 
`senior official,' it is often difficult to identify if he or she was 
an `acquisition executive'.''
    Response: The term ``covered DoD official'' is defined in DFARS 
252.203-7000(a) as an individual who ``left DoD service on or after 
January 28, 2008,'' and either ``participated personally and 
substantially in an acquisition as defined in 41 U.S.C. 131 with a 
value in excess of $10 million'' and who served in specifically 
highlighted positions or served within DoD as ``program manager, deputy 
program manager, procuring contracting officer, administrative 
contracting officer, source selection authority, member of the source 
selection evaluation board, or chief of a financial or technical 
evaluation team for a contract in an amount in excess of $10 million.'' 
Contractors need to seek clarification with job applicants and 
employees as to whether the applicant meets the DFARS definition in 
order to ensure employees are in compliance with DoD post-employment 
restrictions.
    Comment: A respondent highlighted potential difficulties in 
identifying ``particular matters'' on which the job applicant worked. 
The respondent stated that ethics opinions rarely identify the 
``particular matters'' upon which the former DoD official worked and to 
which post-employment restrictions apply. The respondent concluded that 
failure to identify ``particular matters'' is ``a significant problem 
for individuals (and their employers) whose government portfolio was 
substantially broader'' than simply working on one program during their 
Government career.
    Response: It is not feasible or practicable to expect that a 
Government ethics official list all ``particular matters'' for a 
Government employee. The most likely, and probably only, source for 
this type of information is the Government official requesting the 
post-employment restrictions opinion from the ethics official. Failure 
of the Government employee to provide a comprehensive list would 
inappropriately limit the scope of the ethics opinion to those items 
listed. The former Government official is in the best position to (1) 
recall the particular matters that he or she worked during his or her 
Government tenure and (2) advise future employers of his or her 
involvement in ``particular matters'' when the employer provides work 
assignments. The Code of Federal Regulations contains a definition of 
``particular matter,'' as well as examples of what a ``particular 
matter'' is. The examples provide guidance for the types of situations 
and circumstances covered by the term. It is unrealistic to expect a 
finite set of examples listed in the regulations to cover all possible 
circumstances and situations that could arise regarding what 
constitutes a ``particular matter''.

C. Contractor Certification ``to the Best of Its Knowledge and Belief''

    Comment: A respondent stated that there is no generally accepted 
definition of ``to the best of its knowledge or belief.'' This 
respondent explained that ``(s)ometimes it means simply that the person 
making the representation has no information to the contrary and is not 
willfully refusing to see a problem. At other times, it has been held 
to imply a duty to investigate before making the representation.''
    Response: The standard, ``to the best of its knowledge and 
belief,'' is a recognized legal term of art, and one that has been used 
in numerous statutes over decades, e.g., The Truth in Negotiations Act 
has been in effect since 1963. (``A person required, as an offeror, 
contractor, or subcontractor, to submit cost or pricing data under 
paragraph (1) * * * shall be required to certify that, to the best of 
the person's knowledge and belief, the cost or pricing data submitted 
are accurate, complete, and current.'' (10 U.S.C. 2306a, paragraph 
(a)(2)).

D. Consequences of the Rule

    Comment: Two respondents suggested that the rule may have several 
adverse effects, including deterring: (1) Small companies from 
competing for

[[Page 71828]]

Government contracts; (2) contractors from hiring ``covered DoD 
officials;'' and (3) Federal employees who would be subject to the rule 
from seeking employment with DoD.
    Response: This rule requires offerors to verify compliance with 
existing laws and regulations and, therefore, is unlikely to have the 
suggested deterrent effects unless the business was not otherwise 
ensuring compliance and/or did not intend to comply in the future. In 
that event, deterring non-compliance is consistent with the purposes 
underlying the rule. Further, to the extent one of the respondents was 
suggesting that small business concerns be exempted from the rule, such 
an exemption would substantially undermine its purpose of improving 
compliance, as available data indicates that small business concerns 
are likely to hire a large majority of ``covered DoD officials'' (see 
Regulatory Flexibility Act section).

E. Relationship to Existing Statutes and Regulations, Including the 
Clinger/Cohen Act Ban on New Certifications That Are Not Required by 
Law

    Comment: Two respondents concluded that there was no need for this 
rule because (1) the Congress already addressed the concerns underlying 
the GAO report by enacting section 847 of the NDAA for FY 2009 (Pub. L. 
110-417, enacted October 14, 2008); (2) FAR subpart 3.10, Contractor 
Code of Business Ethics and Conduct, already requires contractors to 
monitor post-employment compliance with 18 U.S.C. 207; and (3) the 
responsibility for post-employment compliance should rest primarily 
with former DoD employees. One of these respondents stated that the 
representation violates the Clinger/Cohen Act ban on new contractor 
certifications that are not required by law.
    Response: (1) Section 847 of the NDAA for FY 2008 is entitled 
``Requirements for Senior Department of Defense Officials Seeking 
Employment with Defense Contractors.'' The provision applies to defense 
contractors by prohibiting such contractors from knowingly providing 
compensation to a former DoD official ``within two years after such 
former official leaves (DoD), without first determining that the former 
official has sought and received (or has not received after 30 days of 
seeking) a written opinion from the appropriate ethics counselor 
regarding the applicability of post-employment restrictions to the 
activities that the former official is expected to undertake on behalf 
of the contractor.'' While there is some relationship to section 847, 
the representation in the rule addresses the broader arena of post-
employment restrictions (see paragraph A in the Background section of 
this notice for the listing). Further, the prohibition against 
providing compensation (section 847) was implemented by adding the 
clause at DFARS 252.203-7000, Requirements Relating to Compensation of 
Former DoD Officials (see the interim rule at 74 FR 2408, dated January 
15, 2009, and the final rule at 74 FR 59913, dated November 19, 2009; 
DFARS Case 2008-D007).
    (2) There is some relationship to FAR subpart 3.10. However, the 
FAR policy (FAR 3.1002(b)) states that contractors ``should have a 
written code of business ethics and conduct'' and ``should have an 
internal control system.'' (A contractor is not required to have an 
internal control system unless the procurement is over $5 million and 
it is not a small business concern (see FAR 3.1004(a) and 52.203-
13(c)(2)). Further, the proposed rule is applicable exclusively to DoD 
procurements, and it is narrower than FAR subpart 3.10, in that it is 
concerned exclusively with post-employment restrictions for former DoD 
officials.
    (3) The former DoD employee should be primarily responsible for his 
or her compliance with post-employment restrictions. However, 
businesses should support the highest ethical standards (see FAR 
3.1002(a)) and should not hire former DoD officials who have not 
complied with the law or assign them to work on projects that are 
barred to them by the nature of their DoD assignments. The 
representation at DFARS 252.203-7005 in the final rule is intended to 
ensure that DoD does business with companies that are committed to the 
highest ethical standards.
    (4) The Clinger/Cohen Act prohibited the creation of contractor 
certifications that are not required by law. The FAR and DFARS 
regularly employ the distinction between a representation and a 
certification, and representations have regularly been deemed not 
subject to the Clinger/Cohen Act ban.

F. Strengthen the Rule by Adding Five Requirements

    Comment: One respondent expressed support for the proposed rule, 
but suggested that it be strengthened by adding the following five 
requirements for--
    (1) The offeror to expressly state, when true, that it is 
compensating former DoD employees who have not received a written 
ethics opinion within the 30-day timeframe;
    (2) The DoD IG to audit annually a stratified random sample of 
contracts and the contractor's list of former employees to determine 
whether contractors are in full compliance with post-employment 
restrictions asserted, whether former Government employees are in full 
compliance with post-employment restrictions, and whether DoD ethics 
officers have issued said written opinions within 30 days of being 
sought;
    (3) DoD to sanction contractors and former DoD employees identified 
by the DoD IG as having violated the requirements;
    (4) DoD to take appropriate action to ensure ethics opinions are 
issued within the 30-day timeframe; and
    (5) DoD to make public the following information: (a) The database 
of ethics opinions required pursuant to section 847(b)(1); (b) the 
names of contractors and former DoD officials identified by the DoD IG 
as not being in compliance with the requirements of the proposed rule; 
(c) the actions taken by DoD to seek sanctions for each non-compliant 
contractor and former DoD official; and (d) what, if any, sanctions 
were actually imposed on the identified contractors and former DoD 
officials.
    Response: All of the above recommendations are outside the scope of 
the GAO study and this rule.

G. Scope

    Comment: A respondent stated that ``due to its broad scope'', 
implementation of substantial compliance programs is required.
    Response: Contractors should already have programs in place that 
comply with standards of conduct and ethics program requirements as 
described in FAR 3.10 and more specifically, in DFARS clause 252.203-
7000, included in all DoD solicitations and contracts. All companies, 
whether large or small, should have knowledge of the former defense 
employees that are proposed to work on specific solicitations.

H. Application to New Task or Delivery Orders

    Comment: One respondent stated that the proposed rule does not 
specify whether contracts would need to include the post-employment 
representation in task and delivery orders and proposed the rule ``be 
amended to clarify that such representation would only be required at 
the time the umbrella indefinite-delivery, indefinite-quantity contract 
is awarded, and not for each task or delivery order.''
    Response: The final rule clarifies the requirement. The 
prescription, at

[[Page 71829]]

DFARS 203.171-4, requires the provision at DFARS 252.203-7005, 
Representation Relating to Compensation of Former DoD Officials, ``in 
all solicitations, including solicitations for task and delivery 
orders.''

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 is not a significant regulatory action and, therefore, was not 
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

    A final regulatory flexibility analysis has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
and is summarized as follows:
    This rule is being issued in response to a study by the General 
Accountability Office (GAO), entitled ``Defense Contracting: Post-
Government Employment of Former DoD Officials Needs Greater 
Transparency'' (GAO-08-485), issued in May 2008. The GAO found that 
contractors under-reported the employment of former DoD officials to 
the extent that the contractors employed almost twice as many former 
DoD officials as had been reported. The GAO report showed that major 
defense contractors are not currently ensuring that former DoD senior 
officials and acquisition executives working on contracts are complying 
with post-employment restrictions.
    The final rule requires offerors to submit, as part of the 
proposal, a representation that all former DoD officials who will be 
working on any resultant contract are in compliance with post-
employment restrictions at 18 U.S.C. 207, 41 U.S.C. 2101-2107, and 5 
CFR parts 2637 and 2641, as well as FAR 3.104-2.
    The rule requires a representation from all offerors responding to 
a DoD solicitation, including commercial item acquisitions. A ``covered 
DoD official'' is already defined in the clause at DFARS 252.203-7000, 
Requirements Relating to Compensation of Former DoD Employees. That 
same clause also implements section 847 of the National Defense 
Authorization Act for Fiscal Year 2008 by prohibiting any DoD 
contractor from knowingly providing compensation to a covered DoD 
official within two years after the official leaves DoD service. There 
is no impact on an offeror from this new representation unless the 
contractor has not been monitoring its employees who are former covered 
DoD officials to ensure compliance with DFARS 252.203-7000.
    No comments from small entities were received in response to the 
Federal Register Notice of the proposed rule, published June 6, 2011, 
at 76 FR 32846. However, a ``think tank'' requested the ``addition of 
language making it clear that the offeror has no duty to establish 
systems and procedures to police and define compliance * * *'' No 
language has been added in response to this request. Companies are 
prohibited, pursuant to subsection 3 of DFARS 203.171, entitled 
``Senior DoD officials seeking employment with defense contractors,'' 
from ``knowingly provid(ing) compensation to a covered DoD official 
within two years after the official leaves DoD service unless the 
contractor first determines that the official has received * * * the 
post-employment ethics opinion'' pursuant to section 847 of the 
National Defense Authorization Act for Fiscal Year 2008 (Pub. L. 110-
181).
    In the period of 2001-2006, 1.85 million former military and 
civilian personnel left DoD service. A ``covered DoD official'' is 
defined to include former DoD officials who held certain positions and 
who left DoD within the past two years (see DFARS 203.171-3(a) and 
252.203-7000). The GAO found that the 1.85 million personnel who had 
left DoD service over a six-year period included only 35,192 who had 
served in the type of senior or acquisition official positions that 
made them subject to post-Government employment restrictions, if they 
were subsequently hired by defense contractors. Dividing 35,192 by 
three (to reduce the six-year period to a two-year period), we estimate 
that 11,730 of those officials would have left within the last two 
years. We estimate that 7,635 of these former officials may accept 
employment with a defense contractor (about 65 percent). The GAO study 
found that 2,435 of these covered officials were employed by 52 major 
defense contractors. Of the remaining 5,200 former officials covered by 
the Procurement Integrity Act, we estimate that 3,900 (75 percent) of 
them may work for small business concerns.
    There were no comments filed by the Chief Counsel for Advocacy of 
the Small Business Administration in response to the rule.
    There is no reporting, recordkeeping, or other compliance 
requirement associated with this rule. Offerors make the representation 
by submission of an offer. By the terms of the representation, an 
offeror is prohibited from submitting an offer if it cannot make the 
representation. In order to submit an offer, small entities that hire a 
former DoD official covered by the Procurement Integrity Act will have 
to check the compliance of such employees with various applicable post-
employment restrictions. DFARS clause 252.203-7000, Requirements 
Relating to Compensation of Former DoD Officials, already requires 
contractors to determine that a covered DoD official has sought and 
received, or has not received after 30 days of seeking, a written 
opinion from the appropriate DoD ethics counselor, regarding the 
applicability of post-employment restrictions to the activities that 
the official is expected to undertake on behalf of the contractor. This 
representation of compliance does not impose an additional burden on 
the offeror.
    There were no known significant alternatives identified that would 
achieve the objectives of the rule.

V. Paperwork Reduction Act

    The 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 Parts 203 and 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

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

0
1. The authority citation for 48 CFR parts 203 and 252 continues to 
read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

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

0
2. Revise section 203.171-4 to read as follows:

[[Page 71830]]

203.171-4  Solicitation provision and contract clause.

    (a) Use the clause at 252.203-7000, Requirements Relating to 
Compensation of Former DoD Officials, in all solicitations and 
contracts.
    (b) Use the provision at 252.203-7005, Representation Relating to 
Compensation of Former DoD Officials, in all solicitations, including 
solicitations for task and delivery orders.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Add section 252.203-7005 to read as follows:

252.203-7005  Representation Relating to Compensation of Former DoD 
Officials.

    As prescribed in 203.171-4(b), insert the following provision:

REPRESENTATION RELATING TO COMPENSATION OF FORMER DOD OFFICIALS (NOV 
2011)

    (a) Definition. Covered DoD official is defined in the clause at 
252.203-7000, Requirements Relating to Compensation of Former DoD 
Officials.
    (b) By submission of this offer, the offeror represents, to the 
best of its knowledge and belief, that all covered DoD officials 
employed by or otherwise receiving compensation from the offeror, 
and who are expected to undertake activities on behalf of the 
offeror for any resulting contract, are presently in compliance with 
all post-employment restrictions covered by 18 U.S.C. 207, 41 U.S.C. 
2101-2107, and 5 CFR parts 2637 and 2641, including Federal 
Acquisition Regulation 3.104-2.

(End of provision)

[FR Doc. 2011-29421 Filed 11-17-11; 8:45 am]
BILLING CODE 5001-06-P
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