Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules and Regulations 2627

Item X—Mentor Prote ́ge ́ Program (FAR

Case 93–308)

This interim rule amends FAR 19.702,

Statutory requirements, to allow mentor

firms participating in the Department of

Defense (DOD) Mentor-Prote ́ge ́ Program

to be granted credit toward

subcontracting goals under small

business subcontracting plans entered

into with any executive agency. FAR

52.244–5, Competition in

Subcontracting, is amended to permit

DOD mentor firms to award

subcontracts on a noncompetitive basis

to prote ́ge ́ firms under DOD and other

contracts.

Item XI—Subcontracting Plans (FAR

Case 92–019)

This final rule amends FAR 19.705–

2(d) to expand the circumstances when

subcontracting plans may be required

from and negotiated with more than the

apparently successful offeror. The

clause prescription at 19.708(b)(1) and

Alternate II for the clause at 52.219–9

are added for use when subcontracting

plans are required with initial

proposals.

Item XII—Insurance—Liability to Third

Persons (under Cost Reimbursement

Contracting) (FAR Case 92–014)

This final rule deletes the provision at

FAR 52.228–6 and makes related

changes at 28.311, 52.228–7, 52.245–7,

and 52.245–10 to remove obsolete

language pertaining to liability

insurance under cost-reimbursement

contracts.

Item XIII—Availability of Accounting

Guide (FAR Case 94–002)

This final rule amends FAR Part 31 to

add a new section 31.001 advising

contractors on how to obtain a copy of

an informational guide entitled

‘‘Guidance for New Contractors.’’

Item XIV—Nonallowability of Excise

Taxes on Nondeductible Contributions

to Deferred Compensation Plans (FAR

Case 92–604)

This final rule amends FAR 31.205–

41 to designate excise taxes at subtitle

D, chapter 43 of the Internal Revenue

Code, as unallowable costs.

Item XV—Contractors’ Purchasing

Systems Reviews and Subcontractor

Consent (FAR Case 92–40)

This final rule amends FAR Parts 44

and 52 to increase the thresholds for

Contractors’ Purchasing Systems

Reviews (CPSR’s) and subcontract

consent. The threshold at 44.302(a) for

performing CPSR’s is raised from $10

million to $25 million. The threshold at

52.244–2(a) for consent to subcontract

under cost-reimbursement and letter

prime contracts for fabrication,

purchase, rental, installation, or other

acquisition for special test equipment is

raised from $10,000 to $25,000. The

threshold at 52.244–2(b)(1) requiring

additional information on certain

subcontracts is raised from $10,000 to

$25,000.

Dated: January 11, 1996.

Edward C. Loeb,

Acting Director, Office of Federal Acquisition

Policy.

Federal Acquisition Circular

Number 90–37

Federal Acquisition Circular (FAC)

90–37 is issued under the authority of

the Secretary of Defense, the

Administrator of General Services, and

the Administrator for the National

Aeronautics and Space Administration.

Unless otherwise specified, all

Federal Acquisition Regulation (FAR)

and other directive material contained

in FAC 90–37 is effective March 26,

1996, except for Item X which is

effective January 26, 1996.

Dated: January 4, 1996.

Eleanor R. Spector,

Director, Defense Procurement.

Dated: January 17, 1996.

Ada M. Ustad,

Deputy Associate Administrator, Office of

Acquisition Policy, General Services

Administration.

Dated: January 12, 1996.

Deidre A. Lee,

Associate Administrator for Procurement,

National Aeronautics and Space

Administration.

[FR Doc. 96–1014 Filed 1–25–96; 8:45 am]

BILLING CODE 6820–EP–M

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 7, 11, and 37

[FAC 90–37; FAR Case 92–051 Item I]

RIN 9000–AF56

Federal Acquisition Regulation;

Inherently Governmental Functions

AGENCIES: Department of Defense (DOD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Final rule.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council have

agreed to revise the Federal Acquisition

Regulation (FAR) to implement Office of

Federal Procurement Policy (OFPP)

Policy Letter 92–1, Inherently

Governmental Functions. This rule

provides a definition of, and internal

Government responsibilities and

procedures relating to, inherently

governmental functions. This regulatory

action was not subject to Office of

Management and Budget review under

Executive Order 12866, dated

September 30, 1993.

EFFECTIVE DATE: March 26, 1996.

FOR FURTHER INFORMATION CONTACT:

Mr. Peter O’Such (202) 501–1759 in

reference to this FAR case. For general

information, contact the FAR

Secretariat, Room 4037, GS Building,

Washington, DC 20405 (202) 501–4755.

Please cite FAC 90–37, FAR case 92–

051.

SUPPLEMENTARY INFORMATION:

A. Background

This final rule implements the

requirements of the Office of Federal

Procurement Policy (OFPP) Policy

Letter 92–1, Inherently Governmental

Functions. The OFPP published its

proposed policy letter for public

comment in the Federal Register at 56

FR 65279, December 16, 1991. OFPP

evaluated public comments and

published the final policy letter in the

Federal Register at 57 FR 45096,

September 30, 1992.

A FAR proposed rule to implement

the policy letter was published in the

Federal Register at 59 FAR 29696, June

8, 1994. Thirteen sources submitted

public comments. Minor revisions were

made to the rule as a result of those

comments.

B. Regulatory Flexibility Act

The Department of Defense, the

General Services Administration, and

the National Aeronautics and Space

Administration certify that this final

rule will not have a significant

economic impact on a substantial

number of small entities under the

Regulatory Flexibility Act, 5 U.S.C. 601,

et seq., because the rule pertains to

internal Government responsibilities

and procedures relating to inherently

governmental functions.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the changes to the

FAR do not impose recordkeeping or

information collection requirements, or

collections of information from offerors,
2628 Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules and Regulations

contractors, or members of the public

which require the approval of the Office

of Management and Budget under 44

U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 7, 11,

and 37

Government procurement.

Dated: January 11, 1996.

Edward C. Loeb,

Acting Director, Office of Federal Acquisition

Policy.

Therefore, 49 CFR parts 7, 11, and 37

are amended as set forth below:

The authority citation for 48 CFR

parts 7, 11, and 37 continues to read as

follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C.

chapter 137; and 42 U.S.C. 2473(c).

PART 7—ACQUISITION PLANNING

2. Section 7.000 is amended in

paragraph (b) by removing the word

‘‘and’’; in paragraph (c) by removing the

period at the end of the sentence and

inserting in its place ‘‘; and’’; and by

adding paragraph (d) to read as follows:

§ 7.000 Scope of part.

* * * * *

(d) Determining whether functions are

inherently governmental.

3. Section 7.103 is amended by

adding paragraph (p) to read as follows:

7.103 Agency-head responsibilities.

* * * * *

(p) Ensuring that no purchase request

is initiated or contract entered into that

would result in the performance of an

inherently governmental function by a

contractor and that all contracts are

adequately managed so as to ensure

effective official control over contract

performance.

4. Section 7.105 is amended by

redesignating paragraphs (b)(9) through

(b)(19) as (b)(10) through (b)(20) and

adding a new (b)(9) to read as follows:

7.105 Contents of written acquisition

plans.

* * * * *

(b) * * *

(9) Inherently governmental functions.

Address the consideration given to

OFPP Policy Letter 92–1 (see subpart

7.5).

5. Subpart 7.5 is added to read as

follows:

Subpart 7.5—Inherently Governmental

Functions

Sec.

7.500 Scope of subpart.

7.501 Definition.

7.502 Applicability.

7.503 Policy.

Subpart 7.5—Inherently Governmental

Functions

7.500 Scope of subpart.

The purpose of this subpart is to

prescribe policies and procedures to

ensure that inherently governmental

functions are not performed by

contractors. It implements the policies

of Office of Federal Procurement Policy

(OFPP) Policy Letter 92–1, Inherently

Governmental Functions.

7.501 Definition.

Inherently governmental function

means, as a matter of policy, a function

that is so intimately related to the public

interest as to mandate performance by

Government employees. This definition

is a policy determination, not a legal

determination. An inherently

governmental function includes

activities that require either the exercise

of discretion in applying Government

authority, or the making of value

judgments in making decisions for the

Government. Governmental functions

normally fall into two categories: the act

of governing, i.e., the discretionary

exercise of Government authority, and

monetary transactions and entitlements.

(a) An inherently governmental

function involves, among other things,

the interpretation and execution of the

laws of the United States so as to—

(1) Bind the United States to take or

not to take some action by contract,

policy, regulation, authorization, order,

or otherwise;

(2) Determine, protect, and advance

United States economic, political,

territorial, property, or other interests by

military or diplomatic action, civil or

criminal judicial proceedings, contract

management, or otherwise;

(3) Significantly affect the life, liberty,

or property of private persons;

(4) Commission, appoint, direct, or

control officers or employees of the

United States; or

(5) Exert ultimate control over the

acquisition, use, or disposition of the

property, real or personal, tangible or

intangible, of the United States,

including the collection, control, or

disbursement of Federal funds.

(b) Inherently governmental functions

do not normally include gathering

information for or providing advice,

opinions, recommendations, or ideas to

Government officials. They also do not

include functions that are primarily

ministerial and internal in nature, such

as building security, mail operations,

operation of cafeterias, housekeeping,

facilities operations and maintenance,

warehouse operations, motor vehicle

fleet management operations, or other

routine electrical or mechanical

services. The list of commercial

activities included in the attachment to

Office of Management and Budget

(OMB) Circular No. A–76 is an

authoritative, nonexclusive list of

functions which are not inherently

governmental functions.

7.502 Applicability.

The requirements of this subpart

apply to all contracts for services. This

subpart does not apply to services

obtained through either personnel

appointments, advisory committees, or

personal services contracts issued under

statutory authority.

7.503 Policy.

(a) Contracts shall not be used for the

performance of inherently governmental

functions.

(b) Agency decisions which determine

whether a function is or is not an

inherently governmental function may

be reviewed and modified by

appropriate Office of Management and

Budget officials.

(c) The following is a list of examples

of functions considered to be inherently

governmental functions or which shall

be treated as such. This list is not all

inclusive:

(1) The direct conduct of criminal

investigations.

(2) The control of prosecutions and

performance of adjudicatory functions

other than those relating to arbitration

or other methods of alternative dispute

resolution.

(3) The command of military forces,

especially the leadership of military

personnel who are members of the

combat, combat support, or combat

service support role.

(4) The conduct of foreign relations

and the determination of foreign policy.

(5) The determination of agency

policy, such as determining the content

and application of regulations, among

other things.

(6) The determination of Federal

program priorities for budget requests.

(7) The direction and control of

Federal employees.

(8) The direction and control of

intelligence and counter-intelligence

operations.

(9) The selection or non-selection of

individuals for Federal Government

employment, including the interviewing

of individuals for employment.

(10) The approval of position

descriptions and performance standards

for Federal employees.

(11) The determination of what

Government property is to be disposed

of and on what terms (although an

agency may give contractors authority to

dispose of property at prices within
Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules and Regulations 2629

specified ranges and subject to other

reasonable conditions deemed

appropriate by the agency).

(12) In Federal procurement activities

with respect to prime contracts—

(i) Determining what supplies or

services are to be acquired by the

Government (although an agency may

give contractors authority to acquire

supplies at prices within specified

ranges and subject to other reasonable

conditions deemed appropriate by the

agency);

(ii) Participating as a voting member

on any source selection boards;

(iii) Approving any contractual

documents, to include documents

defining requirements, incentive plans,

and evaluation criteria;

(iv) Awarding contracts;

(v) Administering contracts (including

ordering changes in contract

performance or contract quantities,

taking action based on evaluations of

contractor performance, and accepting

or rejecting contractor products or

services);

(vi) Terminating contracts;

(vii) Determining whether contract

costs are reasonable, allocable, and

allowable; and

(viii) Participating as a voting member

on performance evaluation boards.

(13) The approval of agency responses

to Freedom of Information Act requests

(other than routine responses that,

because of statute, regulation, or agency

policy, do not require the exercise of

judgment in determining whether

documents are to be released or

withheld), and the approval of agency

responses to the administrative appeals

of denials of Freedom of Information

Act requests.

(14) The conduct of Administrative

hearings to determine the eligibility of

any person for a security clearance, or

involving actions that affect matters of

personal reputation or eligibility to

participate in Government programs.

(15) The approval of Federal licensing

actions and inspections.

(16) The determination of budget

policy, guidance, and strategy.

(17) The collection, control, and

disbursement of fees, royalties, duties,

fines, taxes, and other public funds,

unless authorized by statute, such as 31

U.S.C. 952 (relating to private collection

contractors) and 31 U.S.C. 3718 (relating

to private attorney collection services),

but not including—

(i) Collection of fees, fines, penalties,

costs, or other charges from visitors to

or patrons of mess halls, post or base

exchange concessions, national parks,

and similar entities or activities, or from

other persons, where the amount to be

collected is easily calculated or

predetermined and the funds collected

can be easily controlled using standard

case management techniques; and

(ii) Routine voucher and invoice

examination.

(18) The control of the treasury

accounts.

(19) The administration of public

trusts.

(20) The drafting of Congressional

testimony, responses to Congressional

correspondence, or agency responses to

audit reports from the Inspector

General, the General Accounting Office,

or other Federal audit entity.

(d) The following is a list of examples

of functions generally not considered to

be inherently governmental functions.

However, certain services and actions

that are not considered to be inherently

governmental functions may approach

being in that category because of the

nature of the function, the manner in

which the contractor performs the

contract, or the manner in which the

Government administers contractor

performance. This list is not all

inclusive:

(1) Services that involve or relate to

budget preparation, including workload

modeling, fact finding, efficiency

studies, and should-cost analyses, etc.

(2) Services that involve or relate to

reorganization and planning activities.

(3) Services that involve or relate to

analysis, feasibility studies, and strategy

options to be used by agency personnel

in developing policy.

(4) Services that involve or relate to

the development of regulations.

(5) Services that involve or relate to

the evaluation of another contractor’s

performance.

(6) Services in support of acquisition

planning.

(7) Contractors providing assistance in

contract management (such as where the

contractor might influence official

evaluations of other contractors).

(8) Contractors providing technical

evaluation of contract proposals.

(9) Contractors providing assistance in

the development of statements of work.

(10) Contractors providing support in

preparing responses to Freedom of

Information Act requests.

(11) Contractors working in any

situation that permits or might permit

them to gain access to confidential

business information and/or any other

sensitive information (other than

situations covered by the Defense

Industrial Security Program described in

4.402(b)).

(12) Contractors providing

information regarding agency policies or

regulations, such as attending

conferences on behalf of an agency,

conducting community relations

campaigns, or conducting agency

training courses.

(13) Contractors participating in any

situation where it might be assumed

that they are agency employees or

representatives.

(14) Contractors participating as

technical advisors to a source selection

board or participating as voting or

nonvoting members of a source

evaluation board.

(15) Contractors serving as arbitrators

or providing alternative methods of

dispute resolution.

(16) Contractors constructing

buildings or structures intended to be

secure from electronic eavesdropping or

other penetration by foreign

governments.

(17) Contractors providing inspection

services.

(18) Contractors providing legal

advice and interpretations of regulations

and statutes to Government officials.

(19) Contractors providing special

non-law enforcement, security activities

that do not directly involve criminal

investigations, such as prisoner

detention or transport and non-military

national security details.

(e) Agency implementation shall

include procedures requiring the agency

head or designated requirements official

to provide the contracting officer,

concurrent with transmittal of the

statement of work (or any modification

thereof), a written determination that

none of the functions to be performed

are inherently governmental. This

assessment should place emphasis on

the degree to which conditions and facts

restrict the discretionary authority,

decision-making responsibility, or

accountability of Government officials

using contractor services or work

products. Disagreements regarding the

determination will be resolved in

accordance with agency procedures

before issuance of a solicitation.

PART 11—DESCRIBING AGENCY

NEEDS

6. Section 11.105 is added to read as

follows:

11.105 Purchase descriptions for service

contracts.

In drafting purchase descriptions for

service contracts, agency requiring

activities shall ensure that inherently

governmental functions (see subpart 7.5)

are not assigned to a contractor. These

purchase descriptions shall

(a) Reserve final determination for

Government officials;

(b) Require proper identification of

contractor personnel who attend

meetings, answer Government

telephones, or work in situations where
2630 Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules and Regulations

their actions could be construed as acts

of Government officials unless, in the

judgment of the agency, no harm can

come from failing to identify

themselves; and

(c) Require suitable marking of all

documents or reports produced by

contractors.

PART 37—SERVICE CONTRACTING

7. Section 37.102 is revised to read as

follows:

37.102 Policy.

(a) Agencies shall generally rely on

the private sector for commercial

services (see OMB Circular No. A–76,

Performance of Commercial Activities

and subpart 7.3).

(b) Agencies shall not award a

contract for the performance of an

inherently governmental function (see

subpart 7.5).

(c) Non-personal service contracts are

proper under general contracting

authority.

8. Section 37.114 is added to read as

follows:

37.114 Special acquisition requirements.

Contracts for services which require

the contractor to provide advice,

opinions, recommendations, ideas,

reports, analyses, or other work

products have the potential for

influencing the authority,

accountability, and responsibilities of

Government officials. These contracts

require special management attention to

ensure that they do not result in

performance of inherently governmental

functions by the contractor and that

Government officials properly exercise

their authority. Agencies must ensure

that—

(a) A sufficient number of qualified

Government employees are assigned to

oversee contractor activities, especially

those that involve support of

government policy or decision making.

During performance of service contracts,

the functions being performed shall not

be changed or expanded to become

inherently governmental.

(b) A greater scrutiny and an

appropriate enhanced degree of

management oversight is exercised

when contracting for functions that are

not inherently governmental but closely

support the performance of inherently

governmental functions (see 7.503(c)).

(c) All contractor personnel attending

meetings, answering Government

telephones, and working in other

situations where their contractor status

is not obvious to third parties are

required to identify themselves as such

to avoid creating an impression in the

minds of members of the public or

Congress that they are Government

officials, unless, in the judgment of the

agency, no harm can come from failing

to identify themselves. They must also

ensure that all documents or reports

produced by contractors are suitably

marked as contractor products or that

contractor participation is appropriately

disclosed.

[FR Doc. 96–1015 Filed 1–25–96; 8:45 am]

BILLING CODE 6820–EP–M

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 8, 51, and 52

[FAC 90–37; FAR Case 91–108; Item II]

RIN 9000–AF71

Federal Acquisition Regulation; JavitsWagner-O’Day Program (JWOD)

AGENCIES: Department of Defense (DOD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Final rule.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council have

agreed on a final rule amending the

Federal Acquisition Regulation (FAR) to

clarify that the Government’s obligation

to purchase items from statutorily

mandated sources of supply also applies

when contractors purchase items for

Government use. This regulatory action

was not subject to Office of Management

and Budget review under Executive

Order 12866, dated September 30, 1993.

EFFECTIVE DATE: March 26, 1996.

FOR FURTHER INFORMATION CONTACT:

Ms. Linda Klein at (202) 501–3775 in

reference to this FAR case. For general

information, contact the FAR

Secretariat, Room 4037, GS Building,

Washington, DC 20405 (202) 501–4755.

Please cite FAC 90–37, FAR case 91–

108.Q02

SUPPLEMENTARY INFORMATION:

A. Background

A proposed rule was published in the

Federal Register at 59 FR 14454, March

28, 1994. The rule amended FAR Parts

8, 51, and 52 to clarify that the statutory

obligation for Government agencies to

purchase certain items from the

Committee for Purchase from People

Who are Blind or Severely Disabled also

applies when contractors purchase

items for Government use.

Five substantive comments from three

sources were received during the public

comment period. Clarifying revisions

have been made to §§ 51.101(c) and

52.208–9 of the rule as a result of the

public comments.

B. Regulatory Flexibility Act

The Department of Defense, the

General Services Administration, and

the National Aeronautics and Space

Administration certify that this final

rule will not have a significant

economic impact on a substantial

number of small entities under the

Regulatory Flexibility Act, 5 U.S.C. 601,

et seq., because it merely clarifies that

contractors must purchase certain items

from the same statutorily mandated

sources that Government agencies are

required to use, when a contractor is

performing an agency’s supply function.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the changes to the

FAR do not impose recordkeeping or

information collection requirements, or

collections of information from offerors,

contractors, or members of the public

which require the approval of OMB

under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 8, 51,

and 52

Government procurement.

Dated: January 11, 1996.

Edward C. Loeb,

Acting Director, Office of Federal Acquisition

Policy.

Therefore, 48 CFR parts 8, 51, and 52

are amended as set forth below:

1. The authority citation for 48 CFR

parts 8, 51, and 52 continues to read as

follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C.

chapter 137; and 42 U.S.C. 2473(c).

PART 8—REQUIRED SOURCES OF

SUPPLIES AND SERVICES

2. Section 8.001 is amended by

revising paragraphs (a)(2) (ii) and (iii)

and adding paragraph (c) to read as

follows:

8.001 Priorities for use of Government

supply sources.

(a) * * *

(2) * * *

(ii) Mandatory Federal Supply

Schedules (see subpart 8.4);

(iii) Optional use Federal Supply

Schedules (see subpart 8.4); and

* * * * *

(c) The statutory obligation for

Government agencies to satisfy their