Federal Register / Vol. 79, No. 198 / Tuesday, October 14, 2014 / Rules and Regulations 61743 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Chapter 1 

[Docket No. FAR 2014–0052, Sequence No. 

5] 

Federal Acquisition Regulation; 

Federal Acquisition Circular 2005–77; 

Small Entity Compliance Guide 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Small Entity Compliance Guide. 

SUMMARY: This document is issued 

under the joint authority of DOD, GSA, 

and NASA. This Small Entity 

Compliance Guide has been prepared in 

accordance with section 212 of the 

Small Business Regulatory Enforcement 

Fairness Act of 1996. It consists of a 

summary of the rules appearing in 

Federal Acquisition Circular (FAC) 

2005–77, which amends the Federal 

Acquisition Regulation (FAR). An 

asterisk (*) next to a rule indicates that 

a regulatory flexibility analysis has been 

prepared. Interested parties may obtain 

further information regarding these 

rules by referring to FAC 2005–77, 

which precedes this document. These 

documents are also available via the 

Internet at http://www.regulations.gov. 

DATES: October 14, 2014. 

FOR FURTHER INFORMATION CONTACT: For 

clarification of content, contact the 

analyst whose name appears in the table 

below. Please cite FAC 2005–77 and the 

FAR case number. For information 

pertaining to status or publication 

schedules, contact the Regulatory 

Secretariat at 202–501–4755. 

RULES LISTED IN FAC 2005–77 

Item Subject FAR case Analyst 

* I ................. Federal Contracting Programs for Minority-Owned and Other Small Businesses .................................. 2009–016 Uddowla. 

* II ................ Irrevocable Letters of Credit .................................................................................................................... 2011–023 Davis. 

* III ............... Uniform Procurement Identification .......................................................................................................... 2012–023 Loeb. 

SUPPLEMENTARY INFORMATION: 

Summaries for each FAR rule follow. 

For the actual revisions and/or 

amendments made by these rules, refer 

to the specific item numbers and 

subjects set forth in the documents 

following these item summaries. FAC 

2005–77 amends the FAR as specified 

below: 

Item I—Federal Contracting Programs 

for Minority-Owned and Other Small 

Businesses (FAR Case 2009–016) 

This final rule amends the FAR to 

remove certain coverage involving 

procurements with small disadvantaged 

business concerns and certain 

institutions of higher education that is 

based on authority which has expired 

and been found to be unconstitutional 

by the Court of Appeals for the Federal 

Circuit. These changes harmonize the 

FAR with current statutory authorities. 

The impact of this rule on small 

businesses should be minimal, given 

that the coverage applied only to prime 

contracting opportunities in specific 

North American Industry Classification 

System codes, and was applicable to 

only three Government agencies, (DoD, 

NASA and U.S. Coast Guard). The 

obligation of Federal Agencies to meet 

or exceed the statutory five percent 

small disadvantaged business goals at 

the prime and subcontracting levels are 

not affected by this rule. 

Item II—Irrevocable Letters of Credit 

(FAR Case 2011–023) 

This final rule amends the FAR to 

remove all references to Office of 

Federal Procurement Policy (OFPP) 

Pamphlet No. 7, Use of Irrevocable 

Letters of Credit (ILC). This change is 

necessary to update the sources of data 

required to verify the credit worthiness 

of a financial entity issuing or 

confirming an ILC. 

This final rule has no significant 

impact on the Government and 

contractors including small business 

entities and imposes no new 

requirements. Contracting Officers are 

currently required to verify the credit 

worthiness of a financial entity issuing 

or confirming an ILC and will benefit 

from this updated information to 

conduct an accurate analysis. 

Item III—Uniform Procurement 

Identification (FAR Case 2012–023) 

This final rule amends the FAR to 

implement a uniform Procurement 

Instrument Identification (PIID) 

numbering system, which will require 

the use of Activity Address Codes 

(AACs) as the unique identifier for 

contracting offices and other offices, in 

order to standardize procurement 

transactions across the Federal 

Government. Agencies shall comply 

with the new PIID procedures in FAR 

subpart 4.16 by October 1, 2017, for new 

solicitations and contract awards. 

Dated: September 30, 2014. 

William Clark, 

Acting Director, Office of Government-Wide 

Acquisition Policy, Office of Acquisition 

Policy, Office of Government-Wide Policy. 

[FR Doc. 2014–24242 Filed 10–10–14; 8:45 am] 

BILLING CODE 6820–EP–P 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Parts 1, 28, and 52 

[FAC 2005–77; FAR Case 2011–023; Item 

II; Docket 2011–0023, Sequence 1] 

RIN 9000–AM53 

Federal Acquisition Regulation; 

Irrevocable Letters of Credit 

AGENCY: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Final rule. 

SUMMARY: DoD, GSA, and NASA are 

issuing a final rule amending the 

Federal Acquisition Regulation (FAR) to 

remove all references to Office of 

Federal Procurement Policy (OFPP) 

Pamphlet No. 7, Use of Irrevocable 

Letters of Credit, and also provide 

updated sources of data required to 

verify the credit worthiness of a 

financial entity issuing or confirming an 

irrevocable letter of credit (ILC). 

DATES: Effective: November 13, 2014. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Cecelia L. Davis, Procurement Analyst, 

at 202–219–0202, for clarification of 

content. For information pertaining to 

status or publication schedules, contact 

the Regulatory Secretariat at 202–501– 

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61744 Federal Register / Vol. 79, No. 198 / Tuesday, October 14, 2014 / Rules and Regulations 

4755. Please cite FAC 2005–77, FAR 

Case 2011–023. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD, GSA, and NASA published a 

proposed rule in the Federal Register at 

78 FR 26573 on May 7, 2013, to remove 

all references to OFPP Pamphlet No. 7, 

Use of Irrevocable Letters of Credit, and 

provide updated sources of data 

required to verify the credit worthiness 

of a financial entity issuing or 

confirming an ILC. 

OFPP Pamphlet No. 7 provided 

detailed guidance for implementing 

policy letter 91–4, Use of Irrevocable 

Letters of Credit, for Government 

contracts. A prior FAR final rule (FAR 

Case 2000–605, Rescission of Office of 

Federal Procurement Policy Letters, 65 

FR 36014) removed the FAR references 

to OFPP Policy Letter 91–4 along with 

several other policy letters that were 

rescinded by OFPP, effective March 30, 

2000 (see 65 FR 16968). However, the 

reference to OFPP Pamphlet No. 7 

remained in FAR part 28 because the 

information was considered relevant 

and provided, among other information, 

a listing of available quantitative and 

qualitative credit rating institutions and 

resources, formats for ILCs, and other 

useful data. 

FAR 28.204–3 currently cites OFPP 

Pamphlet No. 7 at paragraphs (g)(1) and 

(h)(1) as an available resource that may 

be used to obtain information on credit 

rating services or investment grade 

ratings of financial entities issuing or 

confirming ILCs because it provides 

overarching policy and specific 

guidance on the use of ILCs, but some 

of the information is outdated. 

Therefore, instead of referencing the 

OFPP Pamphlet, this rule— 

(1) Extracts from the OFPP Pamphlet 

the relevant and current information for 

inclusion in the FAR; and 

(2) Provides additional sources of data 

required to verify the credit worthiness 

of a financial entity issuing or 

confirming an ILC, as summarized on 

the Web sites of the Federal Deposit 

Insurance Corporation (http://www2.

fdic.gov/idasp/index.asp) and Securities 

and Exchange Commission http://www.

sec.gov/answers/nrsro.htm). 

Five respondents submitted 

comments on the proposed rule. 

II. Discussion and Analysis 

The Civilian Agency Acquisition 

Council and the Defense Acquisition 

Regulations Council (the Councils) 

reviewed the comments in the 

development of the final rule. A 

discussion of the comments is provided 

as follows: 

A. Summary of Significant Changes 

This final rule reflects no change to 

the proposed rule. 

B. Analysis of Public Comments 

The Regulatory Secretariat received 

public comments from five entities in 

response to the proposed rule. A 

discussion of these comments is 

provided as follows: 

1. Support for the Proposed Rule 

Comment: Two respondents 

expressed support for the rule. 

Response: The Councils acknowledge 

the public support for this rule. 

2. Standby Letters of Credit 

Comment: Five respondents 

recommended that the proposed rule 

recognize and permit the use of standby 

letters of credit, in accordance with 

International Standby Practices (ISP 98), 

as described in International Chamber of 

Commerce Publication No. 590. 

Response: The intent of the proposed 

rule, as stated in the published 

preamble is as follows: ‘‘. . . to remove 

all references to the Office of Federal 

Procurement Policy (OFPP) Pamphlet 

No. 7, Use of Irrevocable Letters of 

Credit (ILC), and also provide updated 

sources of data required to verify the 

credit worthiness of a financial entity 

issuing or confirming an ILC.’’ As a 

result, the inclusion of ISP 98 is 

considered to be a substantive change 

and thus beyond the scope of this case. 

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, GSA, and NASA have prepared 

a Final Regulatory Flexibility Analysis 

(FRFA) consistent with the Regulatory 

Flexibility Act, 5 U.S.C. 601, et seq. The 

FRFA is summarized as follows: 

This action is necessary to remove all 

references to OFPP Pamphlet No. 7, Use of 

Irrevocable Letters of Credit, and provide 

updated sources of data required to verify 

credit worthiness of a financial entity issuing 

or confirming an ILC. 

The objective of the rule is to provide upto-date and readily available information on 

requirements regarding credit rating for the 

financial institution issuing or confirming an 

ILC. 

This will apply to all contracts for services, 

supplies, or construction, when a bid 

guarantee or performance and payment 

bonds are required. 40 U.S.C. 3131 requires 

performance and payment bonds for any 

construction contract exceeding $100,000; 

this was raised for inflation to $150,000 (see 

FAR 1.109). Any person required to furnish 

a bond has the option to furnish a bond 

secured by an ILC. 

For construction contracts valued at 

$30,000 to $150,000, alternative payment 

protection is required, which may involve an 

ILC. Generally, agencies do not require bonds 

for other than construction contracts. 

According to data from the Federal 

Procurement Data System, in FY 2011 there 

were about 58,000 new awards for 

construction and construction maintenance, 

of which 41,000 were awarded to small 

businesses (about 70 percent). If we estimate 

that 10 percent of these awards involve an 

ILC, then this rule applies to approximately 

4,100 small businesses. 

The rule only removes references to OFPP 

Pamphlet No. 7 and replaces these references 

with information relative to sources of data 

required to verify an ILC that generally 

replicates what was in the pamphlet. There 

are no new reporting, recordkeeping, or 

compliance requirements. The rule does not 

duplicate, overlap, or conflict with any other 

Federal rules. 

No significant alternatives to the rule were 

identified that would accomplish the 

objectives of the rule. We do not foresee any 

significant economic impact of the rule on 

small entities. The basic requirements remain 

unchanged; the requirements of the pamphlet 

are directly stated, some of the references 

have been updated, and a Web site provided 

for access to a list of Nationally Recognized 

Statistical Rating Organizations. 

There were no significant issues raised by 

the public in response to the Initial 

Regulatory Flexibility Analysis. 

Interested parties may obtain a copy 

of the FRFA from the Regulatory 

Secretariat. The Regulatory Secretariat 

has submitted a copy of the FRFA to the 

Chief Counsel for Advocacy of the Small 

Business Administration. 

V. Paperwork Reduction Act 

The rule does not contain any new 

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). However, there is a preexisting requirement at FAR 52.228–14 

for offerors/contractors to provide the 

contacting officer a credit rating that 

indicates the financial institutions have 

the required credit rating as of the date 

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Federal Register / Vol. 79, No. 198 / Tuesday, October 14, 2014 / Rules and Regulations 61745 

of issuance of the ILC. OMB Control 

Number 9000–0045, titled: Bid 

Guarantees, Performance and Payment 

Bonds, and Alternative Payment 

Protections, covers the information 

collection requirements associated with 

alternative payment protections 

(including ILCs) and acceptable security 

for bonds (including ILCs). ILCs are 

seldom offered as alternative payment 

protection or security for a bid bond, 

performance bond, or payment bond. 

The negligible burden of providing a 

credit rating along with the required ILC 

is already sufficiently covered by the 

approved burden hours in 9000–0045. 

List of Subjects in 48 CFR Parts 1, 28, 

and 52 

Government procurement. 

Dated: September 30, 2014. 

William F. Clark, 

Acting Director, Office of Government-Wide 

Acquisition Policy, Office of Acquisition 

Policy, Office of Government-Wide Policy. 

Therefore, DoD, GSA, and NASA 

amend 48 CFR parts 1, 28, and 52 as set 

forth below: 

■ 1. The authority citation for 48 CFR 

parts 1, 28, and 52 continues to read as 

follows: 

Authority: 40 U.S.C. 121(c); 10 U.S.C. 

chapter 137; and 51 U.S.C. 20113. 

PART 1—FEDERAL ACQUISITION 

REGULATIONS SYSTEM 

1.106 [Amended] 

■ 2. Amend section 1.106, in the list 

following the introductory text, by 

adding in numerical sequence, FAR 

segment ‘‘52.228–14’’ and its 

corresponding OMB Control No. ‘‘9000– 

0045’’. 

PART 28—BONDS AND INSURANCE 

■ 3. Amend section 28.204–3 by 

revising the section heading and 

paragraphs (a), (g), and (h) to read as 

follows: 

28.204–3 Irrevocable letter of credit. 

(a) Any person required to furnish a 

bond has the option to furnish a bond 

secured by an irrevocable letter of credit 

(ILC) in an amount equal to the penal 

sum required to be secured (see 28.204). 

A separate ILC is required for each 

bond. 

* * * * * 

(g) Only federally insured financial 

institutions rated investment grade shall 

issue or confirm the ILC. Unless the 

financial institution issuing the ILC had 

letter of credit business of at least $25 

million in the past year, ILCs over $5 

million must be confirmed by another 

acceptable financial institution that had 

letter of credit business of at least $25 

million in the past year. 

(1) The offeror/contractor is required 

by paragraph (d) of the clause at 52.228– 

14, Irrevocable Letter of Credit, to 

provide the contracting officer a credit 

rating from a recognized commercial 

rating service that indicates the 

financial institution has the required 

rating(s) as of the date of issuance of the 

ILC. 

(2) To support the credit rating of the 

financial institution(s) issuing or 

confirming the ILC, the contracting 

officer shall verify the following 

information: 

(i) Federal insurance: Each financial 

institution is federally insured. 

Verification of federal insurance is 

available through the Federal Deposit 

Insurance Corporation (FDIC) institution 

directory at the Web site http://www2.

fdic.gov/idasp/index.asp. 

(ii) Current credit rating. The current 

credit rating for each financial 

institution is investment grade and that 

the credit rating is from a Nationally 

Recognized Statistical Rating 

Organization (NRSRO). NRSROs can be 

located at the Web site http://www.sec.

gov/answers/nrsro.htm maintained by 

the SEC. 

(3) The rating services listed in the 

Web site http://www.sec.gov/answers/

nrsro.htm use different rating scales 

(e.g., AAA, AA, A, BBB, BB, B, CCC, CC, 

C, and D; or Aaa, Aa, A, Baa, Ba, B, Caa, 

Ca, and C) to provide evaluations of 

institutional credit risk; however, all 

such systems specify the range of 

investment grade ratings (e.g., BBB– 

AAA or Baa–Aaa in the examples in this 

section) and permit evaluation of the 

relative risk associated with a specific 

institution. If the contracting officer 

learns that a financial institution’s 

rating has dropped below investment 

grade level, the contracting officer shall 

give the contractor 30 days to substitute 

an acceptable ILC or shall draw on the 

ILC using the sight draft in paragraph (g) 

of the clause at 52.228–14. 

(h) A copy of the Uniform Customs 

and Practice (UCP) for Documentary 

Credits, 2006 Edition, International 

Chamber of Commerce Publication No. 

600, is available from: ICC Books USA, 

1212 Avenue of the Americas, 21st 

Floor, New York, NY 10036; Phone: 

212–703–5066; Fax: 212–391–6568; EMail: iccbooks@uscib.org; Via the 

Internet at: http://store.iccbooksusa.net. 

PART 52—SOLICITATION PROVISIONS 

AND CONTRACT CLAUSES 

■ 5. Amend section 52.228–14 by 

revising the date of the clause and 

paragraphs (d), (e)5, and (f)5 to read as 

follows: 

52.228–14 Irrevocable Letter of Credit. 

* * * * * 

IRREVOCABLE LETTER OF CREDIT (Nov 

2014) 

* * * * * 

(d)(1) Only federally insured financial 

institutions rated investment grade by a 

commercial rating service shall issue or 

confirm the ILC. 

(2) Unless the financial institution issuing 

the ILC had letter of credit business of at least 

$25 million in the past year, ILCs over $5 

million must be confirmed by another 

acceptable financial institution that had letter 

of credit business of at least $25 million in 

the past year. 

(3) The Offeror/Contractor shall provide 

the Contracting Officer a credit rating that 

indicates the financial institutions have the 

required credit rating as of the date of 

issuance of the ILC. 

(4) The current rating for a financial 

institution is available through any of the 

following rating services registered with the 

U.S. Securities and Exchange Commission 

(SEC) as a Nationally Recognized Statistical 

Rating Organization (NRSRO). NRSRO’s can 

be located at the Web site http://www.sec.

gov/answers/nrsro.htm maintained by the 

SEC. 

(e) * * * 

5. This Letter of Credit is subject to the 

Uniform Customs and Practice (UCP) for 

Documentary Credits, International Chamber 

of Commerce Publication No.___ (Insert 

version in effect at the time of ILC issuance, 

e.g., ‘‘Publication 600, 2006 edition’’) and to 

the extent not inconsistent therewith, to the 

laws of lll[State of confirming financial 

institution, if any, otherwise State of issuing 

financial institution]. 

* * * * * 

(f) * * * 

5. This confirmation is subject to the 

Uniform Customs and Practice (UCP) for 

Documentary Credits, International Chamber 

of Commerce Publication No.___ (Insert 

version in effect at the time of ILC issuance, 

e.g., ‘‘Publication 600, 2006 edition’’) and to 

the extent not inconsistent therewith, to the 

laws oflll[State of confirming financial 

institution]. 

* * * * * 

[FR Doc. 2014–24239 Filed 10–10–14; 8:45 am] 

BILLING CODE 6820–EP–P 

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