Federal Register / Vol. 76, No. 180 / Friday, September 16, 2011 / Rules and Regulations 57671 

TABLE 1—GENERAL SUPERFUND SECTION—Continued 

State Site name City/county Notes a

*******

NJ .......... Garfield Ground Water Contamination ................................. Garfield 

*******

NM ......... Chevron Questa Mine .......................................................... Questa 

*******

NY .......... New Cassel/Hicksville Ground Water Contamination .......... New Cassel/Hicksville 

*******

OR ......... North Ridge Estates ............................................................. Klamath Falls 

*******

SC .......... US Finishing/Cone Mills ....................................................... Greenville 

*******

TN .......... Alamo Contaminated Ground Water .................................... Alamo 

*******

TX .......... Falcon Refinery .................................................................... Ingleside 

*******

a A = Based on issuance of health advisory by Agency for Toxic Substance and Disease Registry (HRS score need not be greater than or 

equal to 28.50). 

C = Sites on Construction Completion list. 

S = State top priority (HRS score need not be greater than or equal to 28.50). 

P = Sites with partial deletion(s). 

* * * * * 

[FR Doc. 2011–23652 Filed 9–15–11; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 203 and 252 

[DFARS Case 2010–D026] 

RIN 0750–AG98 

Defense Federal Acquisition 

Regulation Supplement; Display of 

DoD Inspector General Fraud Hotline 

Posters 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is issuing a final rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to require contractors to 

display the DoD fraud hotline poster in 

common work areas. 

DATES: Effective Date: September 16, 

2011. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Meredith Murphy, 703–602–1302. 

SUPPLEMENTARY INFORMATION: 

I. Background 

This final rule implements the 

recommendations of the DoD Inspector 

General (IG) by providing a DFARS 

clause to use in lieu of the FAR clause 

at 52.203–14, Display of Hotline 

Poster(s). 

Government Accountability Office 

(GAO) Report GAO–09–591, entitled 

‘‘Defense Contracting Integrity: 

Opportunities Exist to Improve DoD’s 

Oversight of Contractor Ethics 

Programs,’’ recommended that the DoD 

IG determine the need for defense 

contractors to display the DoD IG’s 

fraud hotline poster. 

The DoD IG determined that DoD 

contractors, including contractors that 

have an ethics and compliance program 

that includes a reporting mechanism 

such as a hotline poster, need to display 

DoD fraud hotline posters in a common 

work area within business segments 

performing work under the contract and 

at contract work sites. 

FAR 52.203–14(c) states that ‘‘(i)f the 

Contractor has implemented a business 

ethics and conduct awareness program, 

including a reporting mechanism, such 

as a hotline poster, then the Contractor 

need not display any agency fraud 

hotline posters, other than any required 

DHS posters.’’ The DoD IG determined 

that this exemption has the potential to 

make the DoD hotline program less 

effective by ultimately reducing 

contractor exposure to DoD IG fraud 

hotline posters and diminishing the 

means by which fraud, waste, and abuse 

can be reported under the protection of 

Federal whistleblower protection laws. 

According to the DoD IG, some 

contractors’ posters may not be as 

effective as the DoD poster in 

advertising the hotline number, which 

is integral to the fraud program. The 

DoD IG is also revising the DoD IG fraud 

hotline poster to inform contractor 

employees of their Federal 

whistleblower protections. 

Therefore, the prescription for use of 

the new DFARS clause provides no 

exception to the use of the DoD hotline 

poster for contractors that have 

implemented a business ethics and 

conduct awareness program, even those 

that include a reporting mechanism 

such as a hotline poster. 

II. Discussion and Analysis 

DoD published a proposed rule at 76 

FR 13327 on March 11, 2011, to 

implement the DoD IG’s policy. Nine 

respondents submitted 25 public 

comments on the proposed rule. The 

comments are summarized and 

discussed in the following paragraphs. 

A. Supportive Comments 

Comments: Four respondents 

supported the DFARS rule, stating that 

it would assist employees in reporting 

fraud, waste, and abuse and might 

promote qui tam suits. Two respondents 

recommended expanding the rule’s 

applicability by (1) Lowering the 


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57672 Federal Register / Vol. 76, No. 180 / Friday, September 16, 2011 / Rules and Regulations 

threshold or (2) making it applicable to 

U.S.-owned and -operated firms that 

perform overseas. 

Response: DoD acknowledges the 

respondents’ support. DoD declines to 

expand the rule’s applicability because 

the prescription and conditions for the 

use of the hotline poster in DoD 

contracts are exactly those prescribed at 

FAR 3.1004(b) for the inclusion of the 

FAR clause at 52.203–14, Display of 

Hotline Poster(s). The respondents did 

not provide rationale supporting the 

proposed further expansion of 

requirements to use the DoD IG hotline 

poster clause. 

B. Requirement To Post the DHS Hotline 

Poster 

Comments: One respondent asked 

that the DFARS Procedures, Guidance 

and Information (PGI), include guidance 

on obtaining relevant information to be 

inserted in the clause regarding the title 

of the applicable Department of 

Homeland Security (DHS) fraud hotline 

poster and Web site(s) or other contact 

information. Another respondent, 

however, stated that the requirement, at 

252.203–700X(b)(ii) of the proposed 

rule, to display the DHS fraud hotline 

posters, is unnecessary for several 

reasons. It is unlikely, according to the 

respondent, that DoD would be 

awarding DHS contracts for disaster 

recovery, and the coverage at FAR 

52.203–14 relating to the display of DHS 

fraud hotline posters does not need to 

be duplicated in the DFARS. 

Response: There is a reason to include 

in the DFARS clause a requirement to 

use the DHS fraud hotline poster when 

DHS disaster relief funding is added to 

a DoD contract. The DoD clause 

prescription has been expanded (at 

203.1004(b)(2)(ii)) to explain that 

information regarding the DHS hotline 

poster is needed only when DHS 

disaster relief funding is added to the 

DoD contract. In most cases, there is no 

need to display the DHS hotline poster 

and, therefore, no need to include in the 

clause information about where to 

obtain the DHS poster. Adding this 

clarification to the DFARS clause 

prescription removes any need to add 

PGI guidance on relevant information 

regarding the applicable DHS fraud 

hotline poster and Web sites or other 

contact information. 

C. Rule Does Not Pass a Cost/Benefit 

Analysis 

Comments: Five comments were 

received on this issue. One respondent 

remarked that the new requirement will 

be unnecessarily burdensome with 

little, if any, commensurate benefit. The 

respondent called the rule ‘‘an example 

of the stacking of regulations within and 

across agencies that increases the 

burden without any apparent benefit to 

achieving the mission.’’ Three other 

respondents made essentially the same 

point, one suggesting that the rule could 

be viewed as an unintentional but 

unfortunate effort by DoD to discourage 

contractors from implementing rigorous 

internal mechanisms for dealing with 

compliance concerns. A respondent 

suggested that the proposed rule ignored 

the significant change already made to 

the FAR that requires mandatory 

reporting to the agency IG if the 

contractor has credible evidence of a 

violation of Federal criminal law 

involving fraud, conflict of interest, 

bribery, or gratuity, or a violation of the 

civil False Claims Act in connection 

with Government contracts (see FAR 

3.1003(b)). 

According to one respondent, many 

company employee hotline reports 

simply disclose a concern about an 

activity or behavior without the 

employee knowing whether it violates 

only company policy or some 

Government contract provision or law. 

Posting the DoD IG hotline poster will 

confuse employees, asserted the 

respondent, and will result in company 

employees not reporting potentially 

valuable information to anyone. 

Response: A requirement to hang a 

free poster in work areas does not 

appear to be measurably burdensome. 

Further, the DoD poster contains a 

prominent location for inclusion of the 

contractor’s own fraud hotline number 

and does not preclude or preempt 

posting of a contractor’s separate fraud 

hotline poster. As to any additional 

burden on the DoD IG, that office has 

weighed the potential cost and elected 

this approach. 

D. Replaces the Contractor as the First 

Line of Defense Against Waste and 

Fraud 

Comments: One respondent stated 

that this change would seriously 

undermine the role company hotline 

posters have in internal contractor 

compliance and ethics programs. The 

respondent noted that these company 

programs have a proven track record of 

inhibiting improper and/or illegal 

behavior. This respondent and one other 

respondent expressed concern that, 

from a purely practical perspective, 

removing the exemption and requiring 

the use of the DoD hotline posters will 

usurp the company’s position as the 

first line of defense against waste and 

fraud and, instead, place the DoD/IG in 

that role. 

Response: There is no intent to 

replace the company hotline poster. 

This rule supplements the Government 

defense against fraud, waste, and abuse. 

E. Will Result in Inefficiencies for Both 

Contractors and the DoD IG 

Comments: Five comments were 

received from two respondents. A 

respondent concluded that posting the 

DoD IG fraud hotline poster will result 

in the DoD IG becoming involved in 

matters of an urgent nature, as well as 

a significant number of day-to-day 

issues. Both respondents pointed out 

that the majority of the matters reported 

to company hotlines are human 

resource-related issues that have little or 

nothing to do with the direct 

performance and final deliverables 

under DoD-funded contracts and 

subcontracts. The respondents were 

concerned that, if such matters are 

reported through the DoD IG fraud 

hotline rather than directly to the 

contractor, the latter will be left to learn 

about them from the DoD IG and will be 

unable to respond quickly, which 

ultimately will have a negative impact 

on employee morale. Further, display of 

the DoD IG fraud hotline posters, 

according to a respondent, will 

assuredly result in the DoD IG being 

quickly drawn into a myriad of 

personnel and related issues, thus 

bogging down the system. The 

respondents considered that result to be 

against the best interests of both DoD 

and its contractors. 

The respondents also noted that, if 

employees choose to contact the DoD IG 

hotline regarding more serious potential 

workplace-safety or product-quality 

matters, the contractor may not learn 

about these matters in a timely manner, 

thereby increasing the possibility of 

injury or deficient product quality. The 

respondents suggested that directly 

inserting the DoD IG into these matters 

could potentially result in DoD ‘‘taking 

on some measure of responsibility for 

failing to respond in a timely manner.’’ 

One of the respondents quoted the GAO 

report as recognizing these potential 

issues: 

‘‘* * * there might be practical reasons for 

continuing to exempt some defense 

contractors with their own hotlines from 

displaying DOD’s hotline poster, such as 

avoiding the confusion or duplication that 

could occur with too many hotline posters on 

display in one place * * *’’ 

Response: This rule provides 

contractor employees with more than 

one option for reporting matters of 

concern. Further, the Office of the DoD 

IG advises that its fraud hotline is 

adequately staffed with personnel 

trained to recognize and react 

appropriately to reports with the 

potential to affect safety or quality. They 


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Federal Register / Vol. 76, No. 180 / Friday, September 16, 2011 / Rules and Regulations 57673 

further advise that the staff is trained to 

distinguish between routine personnel 

issues and those that impact 

Government contracts. 

F. Unnecessary Because of Contractors’ 

Existing Duty 

Comments: Four respondents raised 

issues on this subject. One respondent 

pointed out that contractors already 

have existing contractual and regulatory 

duties to notify the Government of 

certain significant events that occur in 

connection with contract performance. 

Another respondent stated that the 

requirement is likely to lead to 

confusion as to appropriate reporting 

channels and mechanisms. The 

respondents asserted that defense 

industry and research institutions, as 

well as other segments of DoD’s 

contracting community, take most 

seriously the responsibility to self-report 

or voluntarily disclose violations to the 

Government. Contractors also take very 

seriously the need to have open and 

accessible reporting mechanisms and 

respond expeditiously and thoroughly 

to matters raised through those 

reporting mechanisms. Creating an 

alternate reporting mechanism without 

the same level of accountability as the 

contractor’s in-house or external 

reporting mechanism, according to 

respondents, adds no value to the 

process and undermines existing 

systems, processes, and programs 

already in place. A respondent took 

issue with the DoD IG implication, 

made in the background section of the 

proposed rule (76 FR 13328, March 11, 

2011), that reports made to a contractor 

hotline diminished the protections 

available under Federal whistleblowerprotection laws. This respondent 

expressed the strong belief that adequate 

provisions ensure that employees who 

in good faith report information to a 

company hotline, but who are not 

themselves culpable, have full 

whistleblower protection for their 

disclosures. 

Response: For those contractors that 

have existing internal compliance 

programs with a fraud hotline number, 

the posting of the DoD IG fraud hotline 

poster supplements the existing 

reporting mechanisms. A contractor’s 

existing duty to self-report or 

voluntarily disclose violations to the 

Government is not preempted by 

posting the DoD IG fraud hotline poster. 

G. Exclusions and Flowdown 

Requirement 

Comments: One respondent expressed 

strong support for the $5 million 

threshold and the exclusions provided 

for prime contracts that are for 

commercial items or that will be 

performed entirely outside the U.S. This 

respondent also strongly supported the 

$5 million threshold for flowdown of 

the requirement to subcontracts, as well 

as the exclusion from the flowdown 

requirement for subcontracts that are for 

commercial items or that will be 

performed entirely outside the U.S. 

However, the respondent recommended 

that the flowdown requirement be 

further limited to first-tier subcontracts. 

Response: DoD has adopted the same 

criteria for flowdown of the new clause 

at DFARS 252.203–7004, Display of 

Fraud Hotline Posters, as is used for the 

comparable clause at FAR 52.203–14, 

Display of Hotline Posters. Because DoD 

is using DFARS 252.203–7004 in lieu of 

the clause at FAR 52.203–14, DoD has 

retained the same criteria for flowdown 

to subcontractors. 

H. Allow Electronic, as an Alternate to 

Physical, Display of Poster 

Comment: A respondent noted that 

the nature of the workplace has changed 

significantly, making the requirement to 

display the DoD IG hotline poster in 

traditional office locations less effective 

than it might have been in the past. The 

respondent, noting that the clause at 

FAR 52.203–14 already requires each 

company to display the hotline poster 

on the company’s Web site, if a Web site 

is maintained, recommended that the 

DFARS final rule allow electronic 

posting to satisfy the regulatory 

requirement to ‘‘display the hotline 

poster in common work areas.’’ 

Response: The DFARS coverage 

specifically requires electronic display, 

if the contractor maintains a Web site, 

in addition to physical display. These 

are the same posting rules as are used 

in the comparable FAR clause, 52.203– 

14, Display of Fraud Hotline Posters. 

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 

DoD does not expect this final rule 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 the requirement to display 

posters has minimal economic impact 

and the rule only applies to contracts 

and subcontracts that exceed $5 million 

in value, so few small business concerns 

are impacted. However, a final 

regulatory flexibility analysis has been 

performed and is summarized as 

follows: 

This rule was initiated in response to 

a Government Accountability Office 

(GAO–09–591) recommendation that the 

DoD IG should determine the need for 

defense contractors to display the DoD 

IG’s fraud hotline poster. The DoD IG 

subsequently determined that DoD 

contractors, including contractors with 

an ethics and compliance program that 

includes a reporting mechanism such as 

a hotline poster (currently exempt), 

need to display DoD fraud hotline 

posters in a common work area within 

business segments performing work 

under the contract and at contract work 

sites. 

The final rule does not include an 

exemption for DoD contractors to post 

their own company posters instead of 

the DoD IG hotline poster and requires 

all DoD contractors with contracts that 

exceed $5 million to post the DoD IG 

fraud hotline poster. The DoD IG 

determined that this FAR exemption to 

the posting of an agency’s fraud hotline 

poster had the potential to make the 

DoD IG hotline program less effective by 

ultimately reducing contractor exposure 

to DoD IG fraud hotline posters and 

diminishing the means by which fraud, 

waste, and abuse can be reported under 

the protection of Federal whistleblower 

protection laws. The DOD IG further 

determined that some contractors’ 

posters may not be as effective as the 

DoD poster in advertising the hotline 

number, which is integral to the DoD 

fraud program. The legal basis for the 

rule is 41 U.S.C. 1303 and 48 CFR 

chapter 1. 

The rule applies to all contractors 

with DoD contracts with a value that 

exceeds $5 million. Many small 

businesses, therefore, are not impacted. 

Paragraph (c) of the clause at FAR 

52.203–14 provides that a contractor 

need not display any agency fraud 

hotline posters (other than required 

DHS posters) if the contractor has 

implemented a business ethics and 

conduct awareness program that 

includes a reporting mechanism such as 

a hotline poster. The DFARS rule differs 


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57674 Federal Register / Vol. 76, No. 180 / Friday, September 16, 2011 / Rules and Regulations 

only in that it removes this FAR 

exemption. 

There is no reporting or 

recordkeeping requirement established 

by this rule. The rule does not 

duplicate, overlap, or conflict with any 

other Federal rules. There are no 

alternatives that would achieve the 

objectives of the final rule. No 

comments were received on the small 

business impact in response to the 

initial regulatory flexibility analysis. 

Interested parties may obtain a copy 

of the final regulatory flexibility 

analysis (FRFA) from the point of 

contact named herein. A copy of the 

FRFA has been submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration. 

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: 

■ 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 

■ 2. Amend section 203.1004 by 

revising paragraph (b)(2)(ii) to read as 

follows: 

203.1004 Contract clauses. 

(a) * * * 

(b)(2)(ii) Unless the contract is for the 

acquisition of a commercial item or will 

be performed entirely outside the 

United States, if the contract exceeds $5 

million, use the clause at 252.203–7004, 

Display of Fraud Hotline Poster(s), in 

lieu of the clause at FAR 52.203–14, 

Display of Hotline Poster(s). If the 

Department of Homeland Security 

(DHS) provides disaster relief funds for 

the contract, DHS will provide 

information on how to obtain and 

display the DHS fraud hotline poster. 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 3. Add section 252.203–7004 to read 

as follows: 

252.203–7004 Display of fraud hotline 

poster(s). 

As prescribed in 203.1004(b)(2)(ii), 

use the following clause: 

Display of Fraud Hotline Poster(s) (Sep 2011) 

(a) Definition. United States, as used in this 

clause, means the 50 States, the District of 

Columbia, and outlying areas. 

(b) Display of fraud hotline poster(s). 

(1) The Contractor shall display 

prominently in common work areas within 

business segments performing work in the 

United States under Department of Defense 

(DoD) contracts DoD fraud hotline posters 

prepared by the DoD Office of the Inspector 

General. DoD fraud hotline posters may be 

obtained from the DoD Inspector General, 

Attn: Defense Hotline, 400 Army Navy Drive, 

Washington, DC 22202–2884. 

(2) If the contract is funded, in whole or 

in part, by Department of Homeland Security 

(DHS) disaster relief funds, the DHS fraud 

hotline poster shall be displayed in addition 

to the DoD fraud hotline poster. If a display 

of a DHS fraud hotline poster is required, the 

Contractor may obtain such poster from: 

lllllllllllllllllllll

[Contracting Officer shall insert the 

appropriate DHS contact information or 

website.] 

(3) Additionally, if the Contractor 

maintains a company website as a method of 

providing information to employees, the 

Contractor shall display an electronic version 

of the poster(s) at the website. 

(c) Subcontracts. The Contractor shall 

include the substance of this clause, 

including this paragraph (c), in all 

subcontracts that exceed $5 million except 

when the subcontract— 

(1) Is for the acquisition of a commercial 

item; or 

(2) Is performed entirely outside the United 

States. 

(End of clause) 

[FR Doc. 2011–23782 Filed 9–15–11; 8:45 am] 

BILLING CODE 5001–08–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 209, 216, and 252 

[DFARS Case 2011–D033] 

RIN–0750–AH37 

Defense Federal Acquisition 

Regulation Supplement; Award Fee 

Reduction or Denial for Health or 

Safety Issues 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DOD). 

ACTION: Interim rule. 

SUMMARY: DoD is issuing an interim rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to implement those sections of 

the National Defense Authorization Acts 

(NDAA) for Fiscal Years (FY) 2011 and 

2010 providing increased statutory 

authorities to reduce or deny award fees 

to companies found to jeopardize the 

health or safety of Government 

personnel and adding a mechanism to 

decrease or eliminate a contractor’s 

award fee for a specific performance 

period. In addition, this rule modifies 

the section of the NDAA for FY 2009 

that requires that information on the 

final determination of award fee be 

entered into the Federal Awardee 

Performance and Integrity Information 

System (FAPIIS). 

DATES: Effective Date: September 16, 

2011. 

Applicability Date: This interim rule 

is applicable to any contract entered 

into on or after the effective date. This 

interim rule is applicable to any task 

order or delivery order issued on or after 

the effective date of this interim rule, 

under a contract entered into before, on, 

or after the effective date. 

Comments Date: Comments on the 

interim rule should be submitted in 

writing to the address shown below on 

or before November 15, 2011 to be 

considered in the formation of the final 

rule. 

ADDRESSES: Submit comments 

identified by DFARS Case 2011–D033, 

using any of the following methods: 

• Regulations.gov: http:// 

www.regulations.gov. Submit comments 

via the Federal eRulemaking portal by 

entering ‘‘DFARS Case 2011–D033’’ 

under the heading ‘‘Enter keyword or 

ID’’ and selecting ‘‘Search.’’ Select the 

link ‘‘Submit a Comment’’ that 

corresponds with ‘‘DFARS Case 2011– 

D033.’’ Follow the instructions provided 

at the ‘‘Submit a Comment’’ screen. 


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