[Federal Register Volume 87, Number 120 (Thursday, June 23, 2022)]
[Proposed Rules]
[Pages 37470-37473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13369]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 203 and 212

[Docket DARS-2022-0013]
RIN 0750-AL36


Defense Federal Acquisition Regulation Supplement: Prohibition on 
Award to Contractors That Require Certain Nondisclosure Agreements 
(DFARS Case 2021-D018)

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to implement a section of the National 
Defense Authorization Act for Fiscal Year 2021 that prohibits the award 
of any DoD contracts to an entity that requires its employees to sign 
internal confidentiality agreements or statements that would prohibit 
or otherwise restrict its employees from lawfully reporting waste, 
fraud, or abuse related to the performance of a DoD contract to a 
designated investigative or law enforcement representative of DoD 
authorized to receive such information.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before August 22, 2022, to be considered 
in the formation of the final rule.

ADDRESSES: Submit comments identified by DFARS Case 2021-D018, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``DFARS Case 2021-D018.'' Select ``Comment'' and follow the 
instructions to submit a comment. Please include your name, company 
name (if any), and ``DFARS Case 2021-D018'' on any attached document.
    [cir] Email: <a href="/cdn-cgi/l/email-protection#b2ddc1d69cd6d4d3c0c1f2dfd3dbde9cdfdbde"><span class="__cf_email__" data-cfemail="f9968a9dd79d9f988b8ab994989095d7949095">[email protected]</span></a>. Include DFARS Case 2021-D018 in 
the subject line of the message.
    Comments received generally will be posted without change to 
https://www.regulations.gov, including any personal information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission 
to verify posting.

FOR FURTHER INFORMATION CONTACT: Ms. Kimberly R. Ziegler, telephone 
703-901-3176.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD is proposing to amend DFARS subpart 203.9 to implement section 
883 of the National Defense Authorization Act (NDAA) for Fiscal Year 
(FY) 2021 (Pub. L. 116-283). Section 883 prohibits the award of a DoD 
contract to an entity that requires its employees to sign internal 
confidentiality agreements or statements that would prohibit or 
otherwise restrict such employees from lawfully reporting waste, fraud, 
or abuse related to the performance of a DoD contract to a designated 
investigative or law enforcement representative within DoD authorized 
to receive such information. The statute also requires entities to 
inform their employees of the limitations on confidentiality agreements 
or other statements. Offerors are required to represent compliance with 
the statutory restrictions prior to submitting an offer or quote.
    The requirements of section 883 closely resemble those provided in 
section 743 of Division E, Title VII, of the Consolidated and Further 
Continuing Appropriations Act, 2015 (Pub. L. 113-235), which was 
implemented at Federal Acquisition Regulation (FAR) 3.909, Prohibition 
on providing funds to an entity that requires certain internal 
confidentiality agreements or statements (82 FR 4717, dated January 13, 
2017).
    Differences between the statutory requirements are negligible; the 
most notable is that section 743 applies the prohibition to entities 
who require their employees or contractors to sign the internal 
confidentiality agreements or statements. Section 883, however, applies 
the prohibition to entities who require their employees to sign them. 
Since the prohibition at section 743 applies Governmentwide, DoD is 
currently complying with section 883 based on the FAR application of 
section 743 to employees and contractors.

II. Discussion and Analysis

    The proposed rule implements section 883 of the NDAA for FY 2021 by 
utilizing the existing Governmentwide prohibition at FAR subpart 3.9 
and clarifies the applicability of Governmentwide statutory guidance at 
DFARS 203.900. Section 883 provides

[[Page 37471]]

DoD-specific statutory guidance that is almost identical to section 
743, as implemented Governmentwide in FAR 3.909. Both statutes prohibit 
the award of a contract using appropriated funds to an entity that 
requires certain confidentiality agreements or statements. Given that 
the differences in the prohibitions are negligible and the FAR 
prohibition already applies to DoD contracts, a separate implementation 
of section 883 in the DFARS is unnecessary. As a result, the proposed 
rule will add the statutory citation for section 883 in DFARS 203.900 
and update the language needed to ensure contracting officers comply 
with the applicable sections in FAR subpart 3.9.
    FAR 3.909-2(a) provides the representation in the System for Award 
Management required by section 883(a)(1). The representation refers to 
Government contracts and Federal departments or agencies, which 
includes DoD. FAR 3.909-2(b) provides direction to the contracting 
officer regarding reliance on an offeror's representation, as required 
in section 883(b).
    FAR 3.909-3 prescribes the use of the solicitation provision at 
52.203-18, Prohibition on Contracting with Entities That Require 
Certain Internal Confidentiality Agreements or Statements-
Representation, and the contract clause at 52.203-19, Prohibition on 
Requiring Certain Internal Confidentiality Agreements or Statements, in 
all solicitations and contracts except those for a personal services 
contract with an individual. The contract clause at 52.203-19 requires 
the contractor to notify its current employees and subcontractors of 
these prohibitions and restrictions, fulfilling the requirement at 
section 883(a)(2).
    The proposed rule revises the scope of DFARS subpart 203.9 to 
reconcile with FAR 3.900. The clause prescription at 203.970 is revised 
to clarify that DFARS 252.203-7002, Requirement to Inform Employees of 
Whistleblower Rights, which implements 10 U.S.C. 2409 (redesignated as 
10 U.S.C. 4701), is applicable to solicitations and contracts using FAR 
part 12 procedures for the acquisition of commercial items. The rule 
makes a conforming change to DFARS 212.301, Solicitation provisions and 
contract clauses for the acquisition of commercial items. While the 
clause was always applicable to all solicitations and contracts, the 
proposed revision is intended to reduce the risk of noncompliance.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Services and Commercial Products, 
Including Commercially Available Off-the-Shelf (COTS) Items

    This proposed rule implements section 883 of the NDAA for FY 2021 
(Pub. L. 116-283) but does not create any new solicitation provisions 
or contract clauses. The rule revises the prescription for DFARS clause 
252.203-7002, Requirement to Inform Employees of Whistleblower Rights, 
which implements 10 U.S.C. 2409, to require use of the clause in 
contracts valued at or below the simplified acquisition threshold and 
to acquisitions of commercial services and commercial products, 
including COTS items. Therefore, DoD intends to apply the rule to 
contracts at or below the SAT, and DoD intends to apply the rule to 
contracts for the acquisition of commercial products including COTS 
items and for the acquisition of commercial services.
    The proposed rule, at DFARS 203.909-3, also prescribes use of FAR 
solicitation provision 52.203-18, Prohibition on Contracting with 
Entities that Require Certain Internal Confidentiality Agreements or 
Statements-Representation, and FAR contract clause 52.203-19, 
Prohibition on Requiring Certain Internal Confidentiality Agreements or 
Statements. The FAR clause and provision, except for personal services 
contracts, are already prescribed for use in acquisitions valued at or 
below the SAT; and the FAR clause 52.203-19 is also prescribed for use 
in commercial acquisitions.

A. Applicability to Contracts at or Below the SAT

    41 U.S.C 1905 governs the applicability of laws to contracts or 
subcontracts in amounts not greater than the SAT. It is intended to 
limit the applicability of laws to such contracts or subcontracts. 41 
U.S.C. 1905 provides that if a provision of law contains criminal or 
civil penalties, or if the Federal Acquisition Regulatory Council makes 
a determination that it is not in the best interest of the Federal 
Government to exempt contracts or subcontracts at or below the SAT, the 
law will apply to them. The Principal Director, Defense Pricing and 
Contracting (DPC), is the appropriate authority to make comparable 
determinations for regulations to be published in the DFARS, which is 
part of the FAR system of regulations. DoD does intend to make that 
determination. Therefore, this rule will apply at or below the SAT.

B. Applicability to Contracts for the Acquisition of Commercial 
Services and Commercial Products, Including COTS Items

    10 U.S.C. 3452 (previously 10 U.S.C. 2375) exempts contracts and 
subcontracts for the acquisition of commercial products, including COTS 
items, and commercial services from provisions of law enacted after 
October 13, 1994, unless the Under Secretary of Defense for Acquisition 
and Sustainment (USD (A&S)) makes a written determination that it would 
not be in the best interest of DoD to exempt contracts for the 
procurement of commercial products and commercial services from the 
applicability of the provision or contract requirement, except for a 
provision of law that--
    <bullet> Provides for criminal or civil penalties;
    <bullet> Requires that certain articles be bought from American 
sources pursuant to 10 U.S.C. 4862 (previously 10 U.S.C. 2533c), or 
that strategic materials critical to national security be bought from 
American sources pursuant to 10 U.S.C. 4863 (previously 10 U.S.C. 
2533b); or
    <bullet> Specifically refers to 10 U.S.C. 3452 and states that it 
shall apply to contracts and subcontracts for the acquisition of 
commercial products (including COTS items) and commercial services; or
    <bullet> USD (A&S) determines in writing that it would not be in 
the best interest of the Government to exempt contracts or subcontracts 
for the acquisition of commercial products or commercial services from 
the applicability of the provision or contract clause requirement.
    The statutes implemented in this rule do not impose criminal or 
civil penalties, do not require purchase pursuant to 10 U.S.C. 4862 or 
4863, and do not refer to 10 U.S.C. 3452. Therefore, 10 U.S.C. 2409 
will not apply to the acquisition of commercial services or commercial 
products including COTS items unless a written determination is made. 
Due to delegations of authority, the Principal Director, DPC is the 
appropriate authority to make this determination. DoD intends to make a 
determination to apply this rule and the corresponding statutes (10 
U.S.C. 2409 and section 883 of the NDAA for FY 2021) to acquisitions at 
or below the SAT and for commercial services and commercial products, 
including COTS items.

[[Page 37472]]

C. Determination

    DoD is proposing to apply the requirements of 10 U.S.C. 2409 and 
section 883 of the NDAA for FY 2021 to contracts at or below the SAT 
and to the acquisition of commercial services and commercial products, 
including COTS items, because the statutory protections are intended to 
apply to any employee of a contractor or subcontractor who discloses or 
may be restricted from disclosing evidence of waste, fraud, or abuse. 
The statutes only exempt the application to elements of the 
intelligence community.
    10 U.S.C. 2409 provides contractor employees protection from 
reprisal for disclosure of waste, fraud, and abuse to designated 
persons and bodies identified in the statute. An employee of a 
contractor or subcontractor may not be discharged, demoted, or 
otherwise discriminated against as a reprisal for such a disclosure. 
The statute does not apply to elements of the intelligence committee.
    Section 883 prohibits the award of any DoD contract to an entity 
that requires its employees to sign internal confidentiality agreements 
or statements that would prohibit or otherwise restrict its employees 
from lawfully reporting waste, fraud, or abuse related to the 
performance of a DoD contract to a designated investigative or law 
enforcement representative of DoD authorized to receive such 
information.
    It is not in the best interest of the Federal Government to exempt 
application of this rule to actions below the SAT or to commercial 
services and commercial products, including COTS items. An exception 
for contracts below the SAT and those for commercial services and 
commercial products, including COTS items, would exclude the majority 
of the contracts and individuals intended to be protected under the 
laws, thereby undermining the overarching public policy purpose of the 
laws.

IV. Expected Impact of the Rule

    This proposed rule is not expected to have a significant impact on 
the public or Government agencies, because the requirements of section 
883 have already been implemented Governmentwide at FAR 3.909. DoD-
specific implementation of section 883 would duplicate the previous 
implementation of section 743 of Division E, Title VII, of the 
Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 
113-235) as implemented Governmentwide in the FAR.

V. 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.

VI. Congressional Review Act

    As required by the Congressional Review Act (5 U.S.C. 801-808) 
before an interim or final rule takes effect, DoD will submit a copy of 
the interim or final rule with the form, Submission of Federal Rules 
Under the Congressional Review Act, to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States. A 
major rule under the Congressional Review Act cannot take effect until 
60 days after it is published in the Federal Register. This rule is not 
anticipated to be a major rule under 5 U.S.C. 804.

VII. Regulatory Flexibility Act

    DoD does not expect this 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 this rule 
does not implement new requirements on any entities beyond those 
already published in the FAR. However, an initial regulatory 
flexibility analysis has been performed and is summarized as follows:
    This rule proposes to amend the DFARS to implement section 883 of 
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2021 
(Pub. L. 116-283). Section 883 prohibits the award of a DoD contract to 
an entity that requires its employees to sign internal confidentiality 
agreements or statements that would prohibit or otherwise restrict such 
employees from lawfully reporting waste, fraud, or abuse related to the 
performance of a DoD contract to a designated investigative or law 
enforcement representative within DoD authorized to receive such 
information.
    The objective of the rule is to implement the DoD-specific statute 
that removes restrictions on the ability of employees to report waste, 
fraud, or abuse to the appropriate DoD authorities. The legal basis of 
the rule is section 883 of the NDAA for FY 2021.
    This rule will apply to all small entities that are eligible to 
receive DoD contracts; however, the requirements of section 883 are 
already met through the Governmentwide implementation of a previously 
published prohibition at FAR 3.909 and in the System for Award 
Management (SAM) representations and certifications. As a result, the 
361,000 unique small entities registered in SAM as of January 12, 2021, 
are already compliant with these requirements and will not be required 
to take any additional action to comply with the DoD-specific 
prohibition in section 883.
    The rule does not impose any new reporting, recordkeeping, or 
compliance requirements.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    There are no practical alternatives that will accomplish the 
objectives of the statute.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by the rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C 610 (DFARS Case 2021-D018), in 
correspondence.

VIII. Paperwork Reduction Act

    This rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Parts 203 and 212

    Government Procurement.

Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 203 and 212 are proposed to be amended as 
follows:

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

0
1. The authority citation for part 203 is revised to read as follows:

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

0
2. Revise section 203.900 to read as follows:

[[Page 37473]]

203.900   Scope of subpart.

    This subpart implements 10 U.S.C. 2409 and section 883 of the 
National Defense Authorization Act for Fiscal Year 2021 (Pub. L. 116-
283).
    (a)(i) 10 U.S.C. 2409 provides DoD whistleblower protection 
policies and procedures for contractor employees. Use sections 203.901 
through 203.906 of this subpart in lieu of FAR sections 3.901 through 
3.906 to implement 10 U.S.C. 2409.
    (ii) 10 U.S.C. 2409 does not apply to any element of the 
intelligence community, as defined in 50 U.S.C. 3003(4). Sections 
203.901 through 203.906 do not apply to any disclosure made by an 
employee of a contractor or subcontractor of an element of the 
intelligence community if such disclosure--
    (A) Relates to an activity or an element of the intelligence 
community; or
    (B) Was discovered during contract or subcontract services provided 
to an element of the intelligence community.
    (c) Section 883 of the National Defense Authorization Act for 
Fiscal Year 2021 (Pub. L. 116-283) prohibits the award of a DoD 
contract to contractors that require their employees to sign internal 
confidentiality agreements or statements that would prohibit or 
otherwise restrict such employees from lawfully reporting waste, fraud, 
or abuse related to the performance of a DoD contract to a designated 
investigative or law enforcement representative within DoD authorized 
to receive such information.
0
3. Add sections 203.909 and 203.909-3 to read as follows:


203.909   Prohibition on providing funds to an entity that requires 
certain internal confidentiality agreements or statements.


203.909-3   Solicitation provision and contract clause.

    Use the provision at FAR 52.203-18, Prohibition on Contracting with 
Entities That Require Certain Internal Confidentiality Agreements or 
Statements--Representation, and the clause at FAR 52.203-19, 
Prohibition on Requiring Certain Internal Confidentiality Agreements or 
Statements, prescribed at FAR 3.909-3 to implement section 883 of the 
National Defense Authorization Act for Fiscal Year 2021.
0
4. Revise section 203.970 to read as follows:


203.970   Contract clause.

    Use the clause at 252.203-7002, Requirement to Inform Employees of 
Whistleblower Rights, in all solicitations and contracts, including 
solicitations and contracts using FAR part 12 procedures for the 
acquisition of commercial items.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
5. The authority citation for part 212 continues to read as follows:

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

0
6. Amend section 212.301 by--
0
a. Redesignating paragraphs (f)(i)(C) and (D) as paragraphs (f)(i)(D) 
and (E); and
0
b. Adding a new paragraph (f)(i)(C) to read as follows:


212.301   Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (f) * * *
    (i) * * *
    (C) Use the clause at 252.203-7002, Requirement to Inform Employees 
of Whistleblower Rights, as prescribed in 203.970, to comply with 10 
U.S.C. 2409.
* * * * *
[FR Doc. 2022-13369 Filed 6-22-22; 8:45 am]
BILLING CODE 5001-06-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>