Rule2023-02318
Homeland Security Acquisition Regulation (HSAR); United States Coast Guard Contract Termination Policy (HSAR Case 2020-001)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 15, 2023
Effective
March 17, 2023
Issuing agencies
Homeland Security Department
Abstract
DHS adopts, as final, with minor editorial changes, the proposed rule amending the Homeland Security Acquisition Regulation (HSAR). This rule implements a new subpart and new contract clause to establish contract termination policies for the United States Coast Guard (USCG) and amends a clause to address the applicability of USCG's contract termination policy to commercial items.
Full Text
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<title>Federal Register, Volume 88 Issue 31 (Wednesday, February 15, 2023)</title>
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[Federal Register Volume 88, Number 31 (Wednesday, February 15, 2023)]
[Rules and Regulations]
[Pages 9766-9772]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-02318]
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DEPARTMENT OF HOMELAND SECURITY
48 CFR Parts 3049 and 3052
[Docket No. DHS-2022-0046]
RIN 1601-AB08
Homeland Security Acquisition Regulation (HSAR); United States
Coast Guard Contract Termination Policy (HSAR Case 2020-001)
AGENCY: Office of the Chief Procurement Officer, Department of Homeland
Security (DHS).
ACTION: Final rule.
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SUMMARY: DHS adopts, as final, with minor editorial changes, the
proposed rule amending the Homeland Security Acquisition Regulation
(HSAR). This rule implements a new subpart and new contract clause to
establish contract termination policies for the United States Coast
Guard (USCG) and amends a clause to address the applicability of USCG's
contract termination policy to commercial items.
DATES: This rule is effective March 17, 2023.
FOR FURTHER INFORMATION CONTACT: Ms. Linda Stivaletti-Petty,
Procurement Analyst, DHS, Office of the Chief Procurement Officer,
Acquisition Policy and Legislation at (202) 447-5639 or email
<a href="/cdn-cgi/l/email-protection#b6fee5f7e4f6dec798d2dec598d1d9c0"><span class="__cf_email__" data-cfemail="4d051e0c1f0d253c6329253e632a223b">[email protected]</span></a>. When using email, include HSAR Case 2020-001 in the
``Subject'' line.
SUPPLEMENTARY INFORMATION:
Table of Contents for Preamble
I. Background
II. Discussion of Comments and the Final Rule
III. Regulatory Analyses
A. Executive Orders 12866 and 13563 Assessment
B. Affected Population
C. Cost Analysis of the Final Rule
D. Benefit Analysis of the Final Rule
E. Alternatives of the Final Rule
IV. Regulatory Flexibility Act
V. Paperwork Reduction Act
VI. National Environmental Policy Act
I. Background
The Federal Acquisition Regulations (FAR), found in 48 CFR part 1,
is a uniform regulation regarding the acquisition of goods and services
for Federal Government agencies. 48 CFR part 12, ``Acquisition of
Commercial Products and Commercial Services,'' deals with the
acquisition of commercial items, while part 49 discusses the
termination of contracts or solicitations. Under 48 CFR 49.101
contracts or solicitations may be terminated, either for convenience or
default, only when it is in the government's interest. The use of a
termination provision depends on the contract type such as a supply
contract, service contract, construction contract, research and
development contract and the method of payment, i.e., fixed price or
cost type.\1\
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\1\ See 48 CFR 49.5.
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Section 3523 of the John S. McCain National Defense Authorization
Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115-232) (14 U.S.C.
1155(a)) requires that before terminating a procurement or acquisition
contract with a total value of more than $1,000,000, the Commandant of
the Coast Guard shall notify each vendor under such contract and
require the vendor to maintain all work product related to the contract
until the earlier of--(A) not less than 1 year after the date of the
notification; or (B) the date the Commandant notifies the vendor that
maintenance of such work product is no longer required.\2\
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\2\ This section of the NDAA was originally codified at 14
U.S.C. 657. However, section 108(b) of the Frank LoBiondo Coast
Guard Authorization Act of 2018 (Pub. L. 115-282) subsequently
redesignated section 657 as 14 U.S.C. 1155.
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Specifically, 14 U.S.C. 1155(b) defines ``work product'' to mean:
(1) tangible and intangible items and information produced or possessed
as a result of a contract and (2) includes--(A) any completed end
items; (B) any uncompleted end items; and (C) any property in the
contractor's possession in which the United States Government has an
interest. Section 1155(c) establishes a penalty such that any vendor
that fails to maintain the work product is liable to the United States
for a civil penalty of not more than $25,000 for each day on which the
work product is unavailable.
II. Discussion of Comments and the Final Rule
The Department of Homeland Security (DHS) did not receive any
comments on the proposed rule titled ``Homeland Security Acquisition
Regulation (HSAR); United States Coast Guard Contract Termination
Policy (HSAR Case 2020-001)'' published on September 7, 2022 (87 FR
54663). With this rule, DHS adds a new subpart regarding contract
termination policy for the United States Coast Guard (USCG) in the
Homeland Security Acquisition Regulation (HSAR) \3\ to
[[Page 9767]]
ensure all USCG contractors and subcontractors have access to and
comply with Coast Guard's contract termination policies. Thus, it
aligns the USCG's contract termination regulatory requirements with 14
U.S.C. 1155, requiring inclusion of the Coast Guard's termination
policy and the notification of termination procedures in contracts,
including contracts for commercial items, with a total value of more
than $1 million. This final rule requires that before terminating a
contract with a value of more than $1,000,000, the Commandant of the
Coast Guard shall notify the contractor and the contractor shall be
required to maintain all work product related to the contract until the
earlier of--(1) not less than 1 year after the date of the
notification; or (2) the date the Commandant notifies the vendor that
maintenance of such work product is no longer required. A contractor
that fails to maintain a work product is liable to the United States
for a civil penalty of not more than $25,000 for each day on which such
work product is unavailable. The USCG must also insert the contract
termination policy in all its solicitations and contracts with a total
value of more than $1,000,000.
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\3\ The HSAR is issued for Departmental guidance according to
the policy cited in the FAR at 48 CFR 1.301. The HSAR establishes
uniform DHS policies and procedures for all acquisition activities
within the DHS and is issued by the Chief Procurement Officer who is
the DHS Senior Procurement Executive. The HSAR is located at 48 CFR
chapter 30.
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Accordingly, DHS adopts the proposed regulations in the published
HSAR proposed rule as final, with two minor editorial changes. The
minor changes include updating the clause date in Sec. 3052.212-70
from ``SEP 2012'' to the month this provision will become effective
``MAR 2023''. In addition, we added paragraph headings within
Sec. Sec. 3049.9001 and 3052.249-90 to align with the CFR formatting
requirements. The paragraph headings provide information to the public
on what each paragraph contains. For a detailed description of the
proposed rule changes, please see the proposed rule and section III of
this final rule.
III. Regulatory Analyses
A. Executive Orders 12866 and 13563 Assessment
Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review) direct agencies to assess
the 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). Executive
Order 13563 emphasizes the importance of quantifying costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
The Office of Management and Budget (OMB) has not designated this
final rule a significant regulatory action under section 3(f) of
Executive Order 12866. Accordingly, OMB has not reviewed it. A
regulatory analysis (RA) follows.
DHS did not receive public comments on the regulatory analysis for
the proposed rule, so the analysis is the same as set out in the
proposed rule.
Table 1 presents a summary of impacts of the final rule.
Table 1--Summary of Impacts of the Final Rule
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Category Summary
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Applicability................ Addition of contract termination and
notification requirements for the Coast
Guard in chapter 30 of the HSAR for
contracts that are terminated by the
Coast Guard, this will apply to new
contracts, including contracts for
commercial items of more than $1
million.
Affected Population.......... Contractors and subcontractors whose
contracts are terminated by the Coast
Guard. Approximately 2 contracts
annually.
Costs........................ There are no new costs of the final rule
as its requirements already exist in
other regulations and statutes.
Unquantified Benefits........ The final rule will provide consistency
between existing statutes and
regulations for contractors and
subcontractors whose contracts are
terminated by the Coast Guard.
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The Federal Government seeks contractual work with the general
public when it wishes to purchase, rent, lease, or otherwise obtain
supplies or services from non-Federal sources. The FAR defines this
process as ``contracting.'' \4\ This final rule revises the HSAR to
require Coast Guard to insert termination and notification requirements
into its new contracts (this rulemaking would not apply to existing
Coast Guard contracts), including contracts for commercial items, with
a total value of more than $1 million.
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\4\ Readers should reference the FAR for a full definition of
the term ``contracting''.
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The Coast Guard incorporates contract termination clauses in
accordance with the FAR, the HSAR, the Homeland Security Acquisition
Manual (HSAM), and the Coast Guard Acquisition Procedures (CGAP) into
contracts as applicable and using this clause when deemed necessary for
the Coast Guard to exercise its right to do so.
Based on our analysis, we do not estimate that this final rule will
impose any new requirements or regulatory costs on contractors and
subcontractors who perform contractual work, with a total value of more
than $1 million, for the Federal Government. Our analysis also shows
that the Federal Government will not incur any new regulatory costs as
a result of this final rule. We present a summary of the estimated
impacts of the final rule in Table 2.
Table 2--Final Rule Changes and the Estimated Impacts
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HSAR Part or subpart affected Description of final rule changes Basis for no cost impact
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3049....................................... Removes the term ``Reserved'' in Administrative, \5\ we do not
the Homeland Security estimate a cost for this item
Acquisition Regulation (HSAR). because it contains the
insertion of the text, with no
requirements, in part 3049 of
the HSAR.
[[Page 9768]]
Adds terms to the HSAR:
--``Part 3049'' to Termination of
Contracts..
--``Subpart 3049.90 Contract
Termination (USCG)''..
--``3049.9001 Policy (USCG).''...
--``3049.9002 Contract Clause
(USCG)'', part and subpart
titles..
3049.90.................................... Adds term ``Contract Termination Administrative, we do not
(USCG).''--subpart title, to the estimate a cost for this item
HSAR. because it contains the
insertion of text, with no
requirements, in part 3049 of
the HSAR.
3049.9001.................................. Adds term ``Policy (USCG)''-- Administrative, we do not
title, to the HSAR. estimate a cost for this item
because it contains the
insertion of text, with no
requirements, in part 3049 of
the HSAR.
3049.9001(a)............................... Adds paragraph (a) to the HSAR We do not estimate a cost for
and will implement requirements this regulatory provision
of 14 U.S.C. 1155, which because the FAR, title 48 of
provides contract termination the CFR, currently requires the
policy for procurement or Federal Government to include
acquisition contracts, including similar language in applicable
commercial contracts greater Federal contracts. Termination
than $1 million. and notification requirements
are addressed in subpart 49.1
of the FAR. The statutory
language for contract
termination is currently in 14
U.S.C. 1155(a)(1) for all
contracts, including commercial
contracts, with a total value
of more than $1 million.
3049.9001(b)............................... Adds paragraph (b) to the HSAR, We do not estimate a cost for
``Notification''--title. this regulatory provision
Paragraph will implement because subpart 49.1 of the FAR
requirements of 14 U.S.C. 1155, currently contains notification
which states the Commandant of requirements for the Federal
the Coast Guard must notify the Government. The statutory
contractor before terminating a language for notification of
procurement or acquisition contract termination is
contract of greater than $1 currently in 14 U.S.C.
million and the contractor must 1155(a)(1) for procurement or
maintain work product as acquisition contracts of more
specified in the Code.. than $1 million (14 U.S.C.
1155(b) defines work product).
Maintaining of records is
required by subpart 4.7 of the
FAR. The Federal Government is
currently required to include
similar language in applicable
Federal contracts.
3049.9001(c)............................... Adds paragraph (c) ``Work Product Administrative--we do not
Defined''--title, to the HSAR. estimate a cost for the
addition of this regulatory
provision because there is no
requirement, 14 U.S.C. 1155
currently contains the
definition of the term ``work
product''.
3049.9001(d)............................... Adds paragraph (d) ``Penalty''-- We do not estimate a cost for
title, to the HSAR. this provision because 14
U.S.C. 1155 currently contains
the statutory language for
``penalty''. This item has not
been levied for past Coast
Guard contracts since the
statute was enacted in 2019.
3049.9001(e)............................... Adds paragraph (e) to the HSAR, We do not estimate a cost for
which states the substance of this provision because subpart
the clause shall be inserted by 49.5 of the FAR requires the
the contractor in contracts and contracting officer to insert
subcontracts and for commercial similar language in applicable
items with a total value of more contracts. The relevant clauses
than $1 million. are in sections 52.249-1
through 52.249-10 of the FAR.
3049.9002.................................. Adds the term ``Contract Clause Administrative--we do not
(USCG)''--title, to the HSAR; estimate a cost for the
states Coast Guard contracting addition of the title to this
officers shall insert the clause subpart of the HSAR. We do not
at 3052.249-90 in all estimate a cost for this
solicitations and contracts, regulatory provision itself
including commercial items with because the contracting officer
a total value of more than $1 of the Coast Guard currently
million. inserts similar language in
applicable contracts, including
contracts for commercial items,
with a total value of more than
$1 million.
3052....................................... In subpart 3052.2 of the HSAR, Administrative--we do not
``Texts of Provisions and estimate a cost for this item
Clauses'', adds term ``3052.249- because it includes the
90 Contract Termination (USCG)''. insertion of the regulatory
text, with no requirements, in
part 3052 of the HSAR.
3052.249-90................................ --Adds text ``Contract Administrative--we do not
Termination (USCG)''--title, to estimate a cost for the
part 3052 of the HSAR. insertion of the regulatory
--Adds sentence to part 3052 of text that will be added to part
the HSAR, ``As prescribed in the 3052 of the HSAR. We do not
USCG guidance at (HSAR) 48 CFR estimate costs for the
3049.9002, insert the following regulatory text in paragraphs
clause.''. (a) through (e) of this subpart
--Adds text ``Contract because the requirements are
Termination (USCG) (March currently contained in subpart
2023)'' and paragraphs (a) 49.5 of the FAR. The statutory
through (e) to part 3052 of the language currently exists in 14
HSAR.. U.S.C. 1155. The requirements
are also in 3049.9001(a)
through (e).
3052.212-70................................ Adds term ``3052.249-90 Contract Administrative--we do not
Termination (USCG)'' to the estimate a cost for this item
HSAR. Updates date of clause because it contains the
provision. insertion of the regulatory
text, with no requirements, in
part 3052 of the HSAR.
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\5\ We use the term ``administrative'' to mean editorial changes or changes to the regulatory text that contain
no regulatory requirements or impacts to the affected population of the final rule. The provisions we
identified as ``administrative'' in Table 2 do not have quantifiable costs, cost savings, or benefits
associated with them. See Table 1 for the unquantified benefits of the final rule.
[[Page 9769]]
B. Affected Population
The affected population of this final rule is a contractor (if a
contractor enters into a contract with a subcontractor, then the
subcontractor is counted as part of the main or primary contract) whose
contract is terminated by the Coast Guard; this would apply only to a
contract, including a commercial contract, with a total value of more
than $1 million.
DHS and the Coast Guard worked collaboratively to provide the
information for this regulatory analysis. The Coast Guard collected
acquisition data from the Coast Guard's Office of Procurement Policy
and Oversight to obtain the population or the number of contracts it
has acquired over the past 11 years. To collect this acquisition data,
the Coast Guard used the Federal Procurement Data System-Next
Generation (FPDS-NG) database.\6\ The Coast Guard acquired a total of
7,228 contracts, including commercial items, with a total value of more
than $1 million, from fiscal year 2010 (FY 2010) through fiscal year
2020 (FY 2020), which ended on September 30, 2020. Included in this
number are an unknown number of subcontracts. For accounting purposes,
the Coast Guard counts the main contract or the contract it awards as
the primary contract, along with subcontracts, if applicable, as 1
contract.\7\ During this period of time, the Coast Guard terminated 25
contracts with a value of more than $1 million, or an average of about
2.3 contracts a year.
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\6\ The Federal Government retains data on Federal procurements
through the FPDS-NG. Readers can reference the FPDS-NG website for
information on the procurement of Federal contracts at: <a href="https://www.gsa.gov/tools-overview/buying-and-selling-tools/federal-procurement-data-system">https://www.gsa.gov/tools-overview/buying-and-selling-tools/federal-procurement-data-system</a>.
\7\ A fiscal year in the Federal Government is the period of
time from October 1 in one calendar year to September 30 of the
following calendar year. It is the accounting period when Federal
agencies submit budget requests to the Office of Management and
Budget (OMB) for planning and operational purposes. The data we
collected are through fiscal year 2020; the Coast Guard generally
awards contracts, through its budget and acquisition process, in the
preceding fiscal year for the following fiscal year.
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Of the 7,228 total contracts, the Coast Guard awarded contracts to
3,947 small businesses.\8\ Out of the 25 contracts, including
commercial contracts, with a value of more than $1 million, that the
Coast Guard terminated during this period of time, 8 of them were
associated with small businesses. This is an average of less than 1
small business contract a year being terminated by the Coast Guard. (We
discuss the impacts to small entities in section IV, ``Regulatory
Flexibility Act'', of this ``Regulatory Analysis.'')
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\8\ When a small business wishes to obtain a Federal contract,
it can do so by ``self-certification'' on the Small Business
Administration's (SBA) website before it registers for contract
opportunities with the Federal Government. Readers can learn more
about this process using the General Services Administration's (GSA)
website at: <a href="https://www.gsa.gov/small-business#gsa-now">https://www.gsa.gov/small-business#gsa-now</a>. A small
business is one that meets SBA's size standards based upon the North
American Industry Classification System (NAICS). Readers can
reference SBA's table of size standards and the NAICS codes at:
<a href="https://www.sba.gov/document/support-table-size-standards">https://www.sba.gov/document/support-table-size-standards</a>. For more
information on NAICS codes, readers should reference the U.S. Census
Bureau's website at: <a href="https://www.census.gov/naics/">https://www.census.gov/naics/</a>. Small businesses
may also obtain Federal contracts through GSA's ``One Acquisition
Solution for Integrated Services'' (OASIS) Small Business (OASIS SB)
contracts, see: <a href="https://www.gsa.gov/buying-selling/products-services/professional-services/buy-services/oasis-and-oasis-small-business">https://www.gsa.gov/buying-selling/products-services/professional-services/buy-services/oasis-and-oasis-small-business</a>.
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C. Cost Analysis of the Final Rule
This final rule will not impose any new regulatory costs on
contractors, subcontractor, and the Federal Government because the
requirements of this final rule currently exist in the FAR and in the
statute (see 48 CFR chapter 1). We explain our reasoning below for each
regulatory provision of this final rule. However, the FAR does not
contain the penalty clause that exists in 14 U.S.C. 1155 that we will
implement in section 3049.9001, paragraph (d).
We do not estimate a cost for the items we identified as
``administrative'' in Table 2 because they will contain the addition of
the regulatory text in the HSAR. This includes adding part, subpart,
and section titles to the HSAR. This covers 48 CFR part 3049, subpart
3049.90 (with sections 3049.9001 and 3049.9002), part 3052, and
3052.212-70 of the HSAR (see Table 2).
Subpart 3049.90 of the HSAR will contain the contract termination
policy and notification of termination requirements for the Coast
Guard.
Section 3049.9001 implements the requirements of the NDAA.
Paragraph (a) implements the current statutory language in 14 U.S.C.
1155(a)(1), which provides the contract termination policy for Coast
Guard contracts, including contracts for commercial items, with a total
value of more than $1 million. Additionally, subpart 49.1 (49.101) of
the FAR currently provides the authority for Federal agencies and more
specifically contracting officers to terminate contracts ``. . . for
the convenience of the Government, or for default . . .''. Because this
final rule uses the statutory language, which supplements the existing
regulatory requirement for contract termination of subpart 49.1 of the
FAR, we do not estimate a cost for this final change.
Paragraph (b) of section 3049.9001 contains the notification
requirement for the Commandant of the Coast Guard to notify the
contractor before terminating a contract, including contracts for
commercial items, with a total value of more than $1 million, and for
the contractor to maintain all work product related to the contract
until the earlier of--
(1) Not less than 1 year after the date of notification; or
(2) The date the Commandant notifies the vendor that maintenance of
such work product is no longer required.
Title 14 U.S.C. 1155(a)(1), currently provides the statutory
authority for the Commandant of the Coast Guard to notify the
contractor before terminating a procurement or acquisition contract
with a total value of more than $1 million. It also states the
contractor must maintain all work product related to the contract as we
previously mentioned. Subpart 49.1, specifically section 49.102 of the
FAR currently contains the regulatory requirement that Federal
contracting officers notify the contractor before terminating a
contract for convenience or default. Title 14 U.S.C. 1155 does not
specify the method of notification; however, the FAR states it must be
by written notice or it ``may be expedited by means of electronic
communication capable of providing confirmation of receipt by the
contractor''. It has been the past (and current) practice of the Coast
Guard to notify contractors of contract termination by electronic means
and for the contractor to reply by electronic means; therefore, this is
not a new requirement, and it will not impose any new costs on the
contractor and the Coast Guard for this method of notification. Because
the rule uses the statutory language for the notification of contract
termination, which section 49.102 of the FAR allows by electronic
means, we do not estimate a cost for this final change (the statutory
language for this provision also exists in 14 U.S.C. 1155).
We also do not estimate a cost for the requirement of the
contractor to maintain all work product related to the contract because
14 U.S.C. 1155(b) statutorily requires the contractor to perform this
function for the timeframe specified in the statute. Furthermore,
subpart 4.7 [specifically sections 4.703(a) through (d)] of the FAR
requires a contractor to retain records for the time specified in these
regulations (readers should refer to subpart 4.7 of the FAR for
contractor records retention).
Additionally, this is not a new Information Collection Request
(ICR)
[[Page 9770]]
nor will it amend an existing ICR under the Paperwork Reduction Act of
1995 (44 U.S.C. 3501).\9\ The rule uses the statutory language,
codified in 14 U.S.C. 1155, in the HSAR and will ensure the contractor
maintains the work product for the timeframes specified in the statute.
Lastly, because the Coast Guard terminated an average of about 2
contracts a year over the past 11 years, this number does not exceed
the threshold of 10 or more persons for a collection of information as
defined in 5 CFR part 1320.\10\
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\9\ Readers should reference the PRA for further information at:
<a href="https://www.govinfo.gov/content/pkg/PLAW-104publ13/html/PLAW-104publ13.htm">https://www.govinfo.gov/content/pkg/PLAW-104publ13/html/PLAW-104publ13.htm</a>.
\10\ Readers should reference the CFR for a full definition of
the term ``collection of information'' and for further information
on controlling paperwork burdens on the public at: <a href="https://www.govinfo.gov/content/pkg/CFR-2010-title5-vol3/xml/CFR-2010-title5-vol3-part1320.xml">https://www.govinfo.gov/content/pkg/CFR-2010-title5-vol3/xml/CFR-2010-title5-vol3-part1320.xml</a>.
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Paragraph (c) of 3049.9001 states the definition of the term ``work
product'' and will be titled ``Work Product Defined.'' We classify this
as an administrative provision without a regulatory requirement. We do
not estimate a cost for this provision because this final rule will add
this definition to the HSAR, which is codified in the statute in 14
U.S.C. 1155.
Paragraph (d) of 3049.9001 contains the penalty a contractor would
incur if it fails to maintain the work product defined in paragraph (c)
of this section. The Coast Guard does not believe it is likely it will
levy this penalty in the future because for the contracts that it has
terminated, the Coast Guard has generally been able to access the
maintained work product when necessary. Because this regulatory
language is codified in the statute in 14 U.S.C. 1155, we do not
estimate a cost for this final change to the HSAR.
Paragraph (e) of 3049.9001 contains the requirement for the
contractor to insert the substance of the clause into contracts and
subcontracts, including contracts and for commercial items with a total
value of more than $1 million. Subpart 49.5 (``Contract Termination
Clauses'') of the FAR requires contracting officers to insert the
substance of the clause into solicitations and contracts as specified
in the statute. As a result, we classify this regulatory language and
addition to the HSAR as an administrative item; therefore, we do not
estimate a cost for this final change.
The final rule adds section 3049.9002, ``Contract Clause (USCG)'',
to subpart 3049.90 of the HSAR. It states Coast Guard contracting
officers shall insert the clause at 3052.249-90, ``Contract Termination
(USCG)'', in all solicitations and contracts, including contracts for
commercial items, with a total value of more than $1 million. Similar
to the paragraph (e) of subpart 3049.9001, the contracting officer of
the Coast Guard is required in subpart 49.5 of the FAR to insert this
language into all solicitations and contracts.\11\ As a result, we
classify this regulatory language and addition to the HSAR as an
administrative item; therefore, we do not estimate a cost for this
change.
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\11\ The final rule includes all Coast Guard contracts. The
Coast Guard, however, issues primarily fixed-price contracts or firm
fixed-price contracts. The FAR defines fixed-price contracts as
types of contracts that ``. . . provide for a firm price or, in
appropriate cases, an adjustable price . . . the contracting officer
shall use firm fixed-price or fixed price with economic price
adjustment contracts when acquiring commercial items, except as
provided in 12.207(b)''. Readers should refer to the FAR for
information about other types of contracts.
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Lastly, the final rule will add section 3052.249-90, ``Contract
Termination (USCG)'', to the HSAR. We classify this change as an
administrative item, which adds the regulatory language with the same
requirements that are contained in section 3049.9001, paragraphs (a)
through (e) of HSAR. As a result, we do not estimate a cost for this
change (see table 2 for a summary of these changes).
D. Benefit Analysis of the Final Rule
The primary benefit of this rule is to provide contractors and
subcontractors, a consistent regulatory environment between the U.S.C.,
the FAR, and the HSAR, in the event the Coast Guard terminates a
contract, including contracts for commercial items, with a total value
of more than $1 million. The regulatory consistency also includes the
notification of termination to a contractor by the Commandant of the
Coast Guard. The HSAR will contain the requirement of the U.S.C. for
the contractor to maintain the work product specified and the penalty
to be levied against a contractor for not maintaining the work product
as defined in the statute.
E. Alternatives of the Final Rule
DHS considered two alternatives to this rule. Neither alternative
would align the HSAR with the statutory requirements of 14 U.S.C. 1155,
nor would they provide the consistent regulatory environment of the
chosen alternative.
1. No Action Alternative. We rejected this alternative because the
HSAR would not align with the relevant statute, which contain the
statutory requirements for contract termination and notification for
the Coast Guard, specifically, the National Defense Authorization Act
(NDAA) for Fiscal Year 2019 (Pub. L. 115-232), 14 U.S.C. 1155, and
subpart 49.5 of the FAR.\12\ The statutory requirements are applicable
to contracts, including contracts for commercial items, with a total
value of more than $1 million. The HSAR would also not contain the
requirement for the contractor to maintain the work product as defined
in the U.S.C. Lastly, the HSAR would not contain the penalty specified
in the U.S.C. levied against a contractor for not maintaining the work
product.
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\12\ For further information, readers should reference the NDAA
for fiscal year 2019 at: <a href="https://www.congress.gov/115/bills/hr5515/BILLS-115hr5515enr.pdf">https://www.congress.gov/115/bills/hr5515/BILLS-115hr5515enr.pdf</a>.
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2. Issue a policy letter referencing the FAR and the U.S.C. for
contract termination policy and notification for the Coast Guard. We
rejected this alternative because the policy letter would not revise
the HSAR and thus it would not contain the requirements found in 14
U.S.C. 1155. A policy letter would merely provide guidance for
contractors regarding the Coast Guard's contract termination policy,
including the penalty clause, and notification procedures for
requirements that currently exist in the relevant statutes and
regulations. There would be no costs associated with this alternative.
IV. Regulatory Flexibility Act
Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, we have
considered whether this rule will have a significant economic impact on
a substantial number of small entities. The term ``small entities''
comprises small businesses, not-for-profit organizations that are
independently owned and operated and are not dominant in their fields,
and governmental jurisdictions with populations of less than 50,000.
This rule will not impose any new requirements or costs on small
entities. This rule codifies the Coast Guard's termination policy and
the notification of termination procedures for contracts, including
contracts for commercial items, with a total value of more than $1
million, into DHS' HSAR. The requirements for contract termination and
notification are currently in subpart 49.5 of the FAR and 14 U.S.C.
1155.
The Coast Guard collected data on contracts it terminated over the
past 11 years, including contracts for commercial items, with a total
value of more than $1 million. Over this period of time, the Coast
Guard terminated 8 contracts (or less than 1 a year on average) awarded
to small businesses that met this total dollar value. Although these 8
companies registered as a ``small business'' with the SBA in
[[Page 9771]]
order to obtain a contract with the Federal Government as a small
business, we researched these companies to determine the type of small
entity that they are in order to correctly classify them in this
Regulatory Flexibility Act (RFA) analysis. This is necessary because a
``small business'' is one type of small entity as stated previously in
this section.
We obtained the NAICS codes from the FPDS-NG for all 8 companies.
We found company-specific information on 6 of the 8 companies by using
the publicly-available online database of businesses in the United
States, <a href="http://ReferenceUSAgov.com">ReferenceUSAgov.com</a> (we did not find revenue or employee
information for 2 companies, and assumed they are small).\13\
Nevertheless, based on each company's NAICS code, and using SBA's table
of size standards for each NAICS code, we found all of the 8 companies,
who had contracts with a total value of more than $1 million that were
terminated by the Coast Guard, to be small businesses, and not
governmental jurisdictions or not-for-profit organizations that are
independently owned and operated and are not dominant in their fields.
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\13\ We accessed this database in October 2021. <a href="https://www.referenceusagov.com/Home/Home">https://www.referenceusagov.com/Home/Home</a>.
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As noted above, that the Coast Guard terminated an average of less
than 1 contract a year (over the past 11 years) that was associated
with a small entity and that the rule will not impose any new
requirements or costs on small entities. Therefore, DHS certifies under
5 U.S.C. 605(b) that this rule will not have a significant economic
impact on a substantial number of small entities.
V. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) requires
agencies to consider the impact of paperwork and other information
collection burdens imposed on the public. According to the 1995
amendments to the Paperwork Reduction Act, an agency may not collect or
sponsor the collection of information, nor may it impose an information
collection requirement unless it displays a currently valid Office of
Management and Budget (OMB) control number. As defined in 5 CFR
1320.3(c), ``collection of information'' comprises reporting,
recordkeeping, monitoring, posting, labeling, and other similar
actions.
DHS has determined that there is no new requirement for information
collection associated with this rule. This rule will not change the
burden in the collections currently approved by OMB under OMB Control
Numbers, 1600-0002, ``Various Contract Related Forms that will be
Included in the Homeland Security Acquisition Regulation'', 1600-0003,
``Post-Contract Award Information'', and 1600-0005, ``Solicitation of
Proposal Information for Award of Public Contracts''. There are no
Coast Guard Information Collection Requests (ICRs) associated with non-
Federal contracts.
VI. Environment
We have analyzed this rule under Department of Homeland Security
Management Directive 023-01, Rev. 1, associated implementing
instructions, and Environmental Planning COMDTINST 5090.1 (series),
which guide the Department in complying with the National Environmental
Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a
determination that this action is one of a category of actions that do
not individually or cumulatively have a significant effect on the human
environment. This rule is categorically excluded under paragraph A3 of
Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev 1.
Paragraph A3 pertains to promulgation of rules that are an
administrative or procedural nature or those that implement, without
substantive change, statutory or regulatory requirements. This rule
involves adopting a statutorily required contract cancelation provision
that outline the Coast Guard's procedural requirements for canceling
applicable contracts.
List of Subjects in 48 CFR Parts 3049 and 3052
Government procurement.
Paul Courtney,
Chief Procurement Officer, Department of Homeland Security.
Therefore, DHS amends 48 CFR chapter 30 as follows:
0
1. Add part 3049 to read as follows:
PART 3049--TERMINATION OF CONTRACTS
Subpart 3049.90--Contract Termination (USCG)
Sec.
3049.9001 Policy (USCG).
3049.9002 Contract clause (USCG).
Authority: 14 U.S.C. 1155.
3049.9001 Policy (USCG).
(a) Applicability. This section implements 14 U.S.C. 1155 and
provides the policy for the USCG to use for contract terminations. This
contract termination policy applies to USCG contract terminations,
including contracts for commercial items, with a total value of more
than $1,000,000.
(b) Notification. Before terminating a contract with a total value
of more than $1,000,000, the Commandant of the Coast Guard shall notify
the contractor and the contractor shall be required to maintain all
work product related to the contract until the earlier of--
(1) not less than 1 year after the date of the notification;
or
(2) the date the Commandant notifies the vendor that maintenance of
such work product is no longer required.
(c) Work Product Defined. The term ``work product''--
(1) Means tangible and intangible items and information produced or
possessed as a result of a contract referred to in subsection (b); and
(2) Includes--
(i) Any completed end items;
(ii) Any uncompleted end items; and
(iii) Any property in the Contractor's possession in which the
United States Government has an interest.
(d) Penalty. A Contractor that fails to maintain work product as
required under subsection (b) is liable to the United States for a
civil penalty of not more than $25,000 for each day on which such work
product is unavailable.
(e) Requirement. The Contractor shall insert the substance of this
clause in contracts and subcontracts, including contracts and for
commercial items, with a total value of more than $1,000,000.
3049.9002 Contract clause (USCG).
USCG contracting officers shall insert the clause at 3052.249-90,
Contract Termination (USCG), in all solicitations and contracts,
including contracts for commercial items, with a total value of more
than $1,000,000.
PART 3052--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
2. The authority citation for part 3052 is revised to read as follows:
Authority: 5 U.S.C. 301-302, 14 U.S.C. 1155, 41 U.S.C. 1303, 41
U.S.C. 1707, 41 U.S.C. 1702, and 48 CFR subpart 1.3.
0
3. Amend Sec. 3052.212-70 by:
0
a. Revising the heading of the clause; and
0
b. In paragraph (b), add an entry for ``HSAR 3052.249-90'' at the end
of the list of clauses in the second Alternate I.
The revision and addition read as follows:
[[Page 9772]]
3052.212-70 Contract Terms and Conditions Applicable to DHS
Acquisition of Commercial Items.
Contract Terms and Conditions Applicable to DHS Acquisition of
Commercial Items (Mar 2023)
* * * * *
(b) * * *
Alternate I * * *
__HSAR 3052.249-90 Contract Termination (USCG).
* * * * *
0
4. Add section 3052.249-90 to subpart 3052.2 to read as follows:
3052.249-90 Contract Termination (USCG).
As prescribed in the USCG guidance at (HSAR) 48 CFR 3049.9002,
insert the following clause:
Contract Termination (USCG) (Mar 2023)
(a) This contract is subject to Section 3523 of the John S.
McCain National Defense Authorization Act for Fiscal Year 2019 (Pub.
L. 115-232), 14 U.S.C. 1155, pertaining to contract terminations for
the United States Coast Guard (USCG).
(b) Notification. As required by 14 U.S.C. 1155(b), before
terminating a contract with a total value of more than $1,000,000,
the Commandant of the Coast Guard shall notify the contractor and
the contractor shall be required to maintain all work product
related to the contract until the earlier of--
(1) not less than 1 year after the date of the notification;
or
(2) the date the Commandant notifies the vendor that maintenance
of such work product is no longer required.
(c) Work Product Defined. In this clause the term ``work
product''--
(1) means tangible and intangible items and information produced
or possessed as a result of a contract referred to in subsection
(b); and
(2) includes--
(i) any completed end items;
(ii) any uncompleted end items; and
(iii) any property in the Contractor's possession in which the
United States Government has an interest.
(d) Penalty. A Contractor that fails to maintain work product as
required under subsection (b) is liable to the United States for a
civil penalty of not more than $25,000 for each day on which such
work product is unavailable.
(e) The Contractor shall insert the substance of this clause in
contracts and subcontracts, including contracts for commercial
items, with a total value of more than $1,000,000.
(End of clause)
[FR Doc. 2023-02318 Filed 2-14-23; 8:45 am]
BILLING CODE 4410-10-P
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</html>Indexed from Federal Register on February 15, 2023.
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