1. Proposed Rule to Amend DFARS Coverage of Contractor Personnel Supporting U.S. Armed Forces Deployed Outside the United States. 

On October 31, 2013, the Department of Defense (“DoD”) proposed to amend the Defense Federal Acquisition Regulation Supplement (“DFARS”) to amend and clarify certain provisions regarding contractor personnel supporting U.S. Armed Forces deployed outside the United States.  As an initial matter, DFARS § 252.225-7040(a) would be amended to clarify which contractors are authorized to accompany the force (“CAAF”).  Further, DoD proposed to add language to section (b)(3) to emphasize that, when CAAF are authorized to carry arms for personal protection, they are only authorized to use force for individual defense.  Finally, the proposed rule would clarify the broad discretionary power of the Contracting Officer overseeing CAAF; specifically, the rule would provide that the Contracting Officer “may direct the Contractor, at its own expense, to remove and replace any Contractor personnel who jeopardize or interfere with mission accomplishment or who fail to comply with or violate applicable requirements” of the Contract.

2. Final Rule Adding Croatia to List of Designated Countries.

On July 1, 2013, Croatia became a member of the European Union and, therefore, the European Union has committed to assume rights and obligations on behalf of Croatia under the World Trade Organization Government Procurement Agreement (“WTO GPA”).  The United States, as a member of the WTO GPA, has agreed to waive discriminatory purchasing requirements for eligible products and suppliers of Croatia.  The final rule, published on October 31, 2013, adds Croatia to the list of WTO GPA countries wherever it appears in the DFARS.

3. Final Rule Implementing the United States–Panama Trade Promotion Agreement.

On October 31, 2013, DoD adopted as final, with certain changes, an interim rule amending the DFARS to implement the United States–Panama Trade Promotion Agreement.  This Agreement is a free trade agreement that provides for mutually non-discriminatory treatment of eligible products and services from Panama.

4. Final Rule Removing DFARS Coverage of Contractors Performing Private Security Functions.

On November 18, 2013, DoD issued a final rule amending the DFARS to remove the duplicative coverage of contractors performing private security functions, as such contractors are now covered by the Federal Acquisition Regulation (“FAR”).  On July 22, 2013, two FAR provisions, both entitled “Contractors Performing Private Security Functions Outside the United States,” were implemented, thereby negating the need for the identical DFARS provisions.  As of November 18, the FAR shall be used in applicable cases.

5. Interim Rule Regarding Requirements Relating to Supply Chain Risk – Comments Due on or Before January 17, 2014.

On November 18, 2013, DoD issued an interim rule that amends the DFARS to implement section 806 of the National Defense Authorization Act for Fiscal Year 2011 (“NDAA”), “Requirements for Information Relating to Supply Chain Risk,” as amended by section 806 of the NDAA for FY 2013.  Section 806, and the interim rule, allows DoD to consider the impact of supply chain risk in certain National Security System (“NSS”)-related procurements.  The interim rule implements section 806’s three supply-chain risk-management approaches, as follows:

(i) Excludes sources that fail to meet qualification standards established in accordance with the requirements of 10 U.S.C. 2319, “Encouragement of new competitors,” for the purpose of reducing supply chain risk in the acquisition of covered systems.

(ii) Excludes sources that fail to achieve an acceptable rating with regard to an evaluation factor for the consideration of supply chain risk in the contract proposal phase.

(iii) Allows the Government to withhold consent for a contractor to subcontract with a particular source or to direct a contractor for a covered system to exclude a particular source from consideration for a subcontract under the contract.

The rule provides a new provision and clause for inclusion in all solicitations and contracts, including those for commercial items or commercial off-the-shelf items, as parts of these contracts may be used to support one or more NSS.

There are, however, a number of provisions limiting the Government’s authorities under section 806.  First, 806 authorities can only be used in procurement of NSS or of covered items of supply used within NSS; “covered item of supply,” in turn, is defined as “an item of information technology … that is purchased for inclusion in (an NSS), and the loss of integrity of which could result in a supply chain risk” to the entire system.  Second, the decision to exclude a source under 806 can only be made by the “head of a covered agency,” the definition of which includes only the Secretaries of Defense and of the military departments, with delegation limited to officials at or above the agency’s service acquisition executive level.  Third, the head of a covered agency must obtain a joint recommendation from the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) and the Chief Information Officer of the DoD (DoD CIO), with input from the Under Secretary of Defense for Intelligence (USD(I)), providing that there is significant supply chain risk to a particular NSS.

Fourth, the head of a covered agency must make a written determination that the use of 806 authority is “necessary to protect national security by reducing supply chain risk” and that less intrusive measures are not reasonably available.  Finally, notice of each determination must be provided in advance to the appropriate congressional committees.

The interim rule also provides that the head of a covered agency may limit the disclosure of information “relating to the basis for carrying out a covered procurement action,” notwithstanding any other provision of law, if a determination is made that disclosure would pose a greater risk to national security than non-disclosure.  If the Government exercises the authority to limit disclosure, no action undertaken by the Government under the authority will be subject to review in a bid protest or in Federal court.

6. Final Rule Addressing Requirements for Safeguarding Unclassified Controlled Technical Information.

On November 18, 2013 a final rule was issued amending the DFARS to add a new subpart and associated contract clause to address requirements for safeguarding unclassified controlled technical information.  In direct response to the comments received in the comments period, the final rule is significantly different, and far more narrow, than the 2011 proposed rule.  Commenters expressed concern regarding the proposed rule’s scope and, specifically, recommended that the rule explicitly apply to systems containing controlled information and not the general information technology environment.

The final rule reduces the scope of its safeguarding requirements and limits the application of safeguarding controls to unclassified controlled technical information, which is marked in accordance with DoD Instruction 5230.24, Distribution Statements on Technical Documents.