27 March 1998
Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html

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[Federal Register: March 27, 1998 (Volume 63, Number 59)]
[Rules and Regulations]
[Page 14836-14837]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27mr98-13]

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DEPARTMENT OF DEFENSE

48 CFR Parts 209 and 252

[DFARS Case 97-D325]


Defense Federal Acquisition Regulation Supplement; List of Firms
Not Eligible for Defense Contracts

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: The Director of Defense Procurement has issued an interim rule
amending the Defense Federal Acquisition Regulation Supplement (DFARS)
to implement Section 843 of the National Defense Authorization Act for
Fiscal Year 1998. Section 843 requires that the Secretary of Defense
maintain a list of all firms that the Secretary has identified as being
subject to a prohibition on contract award due to ownership or control
of the firm by the government of a terrorist country; and that DoD
contractors be prohibited from entering into subcontracts with firms on
the list unless there is a compelling reason to do so.

DATES: Effective date: March 27, 1998.
    Comment date: Comments on the interim rule should be submitted in
writing to the address shown below on or before May 11, 1998, to be
considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to:
Defense Acquisition Regulation Council, Attn: Mr. Michael Pelkey, PDUSD
(A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington DC 20301-
3062. Telefax number (703) 602-0350.
    E-mail comments submitted over the Internet should be addressed to:
dfars@acq.osd.mil
    Please cite DFARS Case 97-D325 in all corresponding related to this
issue. E-mail comments should cite DFARS Case 97-D325 in the subject
line.

FOR FURTHER INFORMATION CONTACT: Michael Pelkey, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    10 U.S.C. 2327 contains a prohibition on contracting with a firm or
a subsidiary of a firm that is owned or controlled by the government of
a country that has repeatedly provided support for acts of
international terrorism. Section 843 of the National Defense
Authorization Act for Fiscal Year 1998 (Pub. L. 105-85) amended 10
U.S.C. 2327 to require that the Secretary of Defense maintain a list of
all firms that the Secretary has identified as being subject to the
prohibition, and that DoD contractors be prohibited from entering into
subcontracts with firms on the list unless there is a compelling reason
to do so. This DFARS rule provides procedures to facilitate maintenance
of the list and a contract clause that requires DoD approval of a
proposed subcontract with a firm on the list.

B. Regulatory Flexibility Act

    The interim rule is not expected 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 few
small entities are believed to subcontract with firms that are owned or
controlled by the government of a terrority country. An initial
regulatory flexibility analysis has therefore not been performed.
Comments are invited from small businesses and other interested
parties. Comments from small entities concerning the affected DFARS
subparts also will be considered in accordance with 5 U.S.C. 610. Such
comments should be submitted separately and should cite DFARS Case 97-
D325 in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply, because the interim
rule does not impose any information collection requirements that
require Office of Management and Budget approval under 44 U.S.C. 3501,
et seq.

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary
of Defense that urgent and compelling reasons exist to publish this
interim rule prior to affording the public an opportunity to comment.
This interim rule implements Section 843 of the National Defense
Authorization Act for Fiscal Year 1998 (Pub. L. 105-85). Section 843
requires that the Secretary of Defense maintain a list of all firms
that the Secretary has identified as being subject to the prohibition
at 10 U.S.C. 2327 due to ownership or control of the firm by the
government of a terrorist country, and that DoD contractors be
prohibited from entering into subcontracts with firms on the list
unless there is a compelling reason to do so. Section 843 was effective
upon enactment on November 18, 1997. Immediate implementation is
necessary to prevent the award of contracts and subcontracts that are
prohibited by Section 843. Commments received in response to the
publication of this interim rule will be considered in formulating the
final rule.

[[Page 14837]]

List of Subjects in 48 CFR Parts 209 and 252

    Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
    Therefore, 48 CFR Parts 209 and 252 are amended as follows:
    1. The authority citation for 48 CFR Parts 209 and 252 continues to
read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 209--CONTRACTOR QUALIFICATIONS

    2. Section 209.104-1 is amended by revising paragraph (g)(i)(A)
introductory text and paragraph (g)(i)(A)(1) to read as follows:

209.104-1 General standards.

* * * * *
    (g)(i) * * *
    (A) Under 10 U.S.C. 2327(b), a contracting officer shall not award
a contract of $100,000 or more to a firm or to a subsidiary of a firm
when a foreign government--
    (1) Either directly or indirectly, has a significant interest--
    (i) In the firm; or
    (ii) In the subsidiary or the firm that owns the subsidiary; and
* * * * *
    3. Section 209.104-70 is amended by revising paragraph (a) to read
as follows:

209.104-70 Solicitation provisions.

    (a) Use the provision at 252.209-7001, Disclosure of Ownership or
Control by the Government of a Terrorist Country, in all solicitations
expected to result in contracts of $100,000 or more. Any disclosure
that the government of a terrorist country has a significant interest
in an offeror or a subsidiary of an offeror shall be forwarded through
the head of the agency to the Director, Defense Procurement, ATTN:
OUSD(A&T)DP/FC, 3060 Defense Pentagon, Washington, DC 20101-3060.
* * * * *
    4. Section 209.405-2 is added to read as follows:

209.405-2 Restrictions on subcontracting.

    (a) The contracting officer shall not consent to any subcontract
with a firm, or a subsidiary of a firm, that is identified by the
Secretary of Defense as being owned or controlled by the government of
a terrorist country unless the agency head states in writing the
compelling reasons for the subcontract.
    5. Section 209.409 is added to read as follows:

209.409 Solicitation provision and contract clause.

    Use the clause at 252.209-7004, Subcontracting with Firms That Are
Owned or Controlled by the Government of a Terrorist Country, in
solicitations and contracts with a value of $100,000 or more.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Section 252.209-7001 is amended by revising the clause date and
paragraph (b) to read as follows:

252.209-7001 Disclosure of Ownership or Control by the Government of a
Terrorist Country.

* * * * *

Disclosure of Ownership or Control by the Government of a Terrorist
Country (Mar 1998)

* * * * *
    (b) Prohibition on award. In accordance with 10 U.S.C. 2327, no
contract may be awarded to a firm or a subsidiary of a firm if the
government of a terrorist country has a significant interest in the
firm or subsidiary or, in the case of a subsidiary, the firm that
owns the subsidiary, unless a waiver is granted by the Secretary of
Defense.
* * * * *
    7. Section 252.209-7004 is added to read as follows:

252.209-7004 Subcontracting with Firms That Are Owned or Controlled by
the Government of a Terrorist Country.

    As prescribed in 209.409, use the following clause:

Subcontracting with Firms that are Owned or Controlled by the
Government of a Terrorist County (Mar 1998)

    (a) Unless the Government determines that there is a compelling
reason to do so, the Contractor shall not enter into any subcontract
in excess of $25,000 with a firm, or a subsidiary of a firm, that is
identified, on the List of Parties Excluded from Federal Procurement
and Nonprocurement Programs, as being ineligible for the award of
Defense contracts or subcontracts because it is owned or controlled
by the government of a terrorist country.
    (b) A corporate officer or a designee of the Contractor shall
notify the Contracting Officer, in writing, before entering into a
subcontract with a party that is identified, on the List of Parties
Excluded from Federal Procurement and Nonprocurement Programs, as
being ineligible for the award of Defense contracts or subcontracts
because it is owned or controlled by the government of a terrorist
country. The notice must include the name of the proposed
subcontractor and the compelling reason(s) for doing business with
the subcontractor notwithstanding its inclusion on the List of
Parties Excluded From Federal Procurement and Nonprocurement
Programs.

(End of clause)

[FR Doc. 98-7707 Filed 3-26-98; 8:45 am]
BILLING CODE 5000-04-M
