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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: December 5, 2003

SUBJECT: National Aeronautics and Space Administration Federal Acquisition Regulation (FAR) Supplement (NFS); Contractor Access to Confidential Information

SOURCE: Federal Register, December 5, 2003, Vol. 68, No. 234, page 67995

AGENCIES: National Aeronautics and Space Administration (NASA)

ACTION: Proposed Rule

SYNOPSIS: NASA is proposing to amend NFS Subpart 1837.2, Advisory and Assistance Services, to provide guidance on how NASA will acquire services to support management activities and administrative functions when performing those services requires the contractor to have access to confidential information submitted by other contractors.

DATES: Comments must be submitted no later than February 3, 2004.

ADDRESSES: Comments should be submitted to David Forbes, NASA Headquarters, Office of Procurement, Contract Management Division (Code HK), Washington, DC 20546, or by e-mail to: David.P.Forbes@nasa.gov.

FOR FURTHER INFORMATION CONTACT: David Forbes, 202-358-2051; e-mail: David.P.Forbes@nasa.gov.

SUPPLEMENTAL INFORMATION: NASA expends about 85% of its budget through contracts. As part of the contracting process, offerors and contractors frequently provide technical, financial, proprietary, commercial, privileged, or otherwise sensitive business information. NASA generates confidential information, including pre-negotiation analyses and positions and pre-decisional advice on a variety of subjects. NASA has long recognized a responsibility to protect this type of information from unauthorized use and disclosure, so it has traditionally allowed only civil servants to have access to confidential information in its government's possession.

After years of "downsizing" its civil service workforce, particularly in acquisition, NASA no longer has enough employees to manage and safeguard all this confidential information. Because of the reduced civilian acquisition workforce, NASA is increasing its use of service contractors to assist in the performance of many administrative, financial, and technical functions that had been performed previously by NASA employees only. The types of services NASA procures, and will be procuring, run the gamut from routine clerical support such as data entry and invoice processing, to more complex in-plant reviews, contract closeout processing, system administration, and safety and quality assurance activities. Service contractors may soon be supporting most of these activities and functions. Therefore, NASA must find new, more streamlined ways to receive confidential information from offerors and contractors that may be entitled to protection and to disclose it to third party service providers without compromising the information received.

Of course, as NASA releases more confidential information provided by offerors and contractors to other contractors, the risk increases that unauthorized uses and disclosures will occur. One aspect of this increased risk is the potential that organizational conflicts of interest may occur when NASA discloses one contractor's confidential information to another contractor. FAR Subpart 9.5, Organizational and Consultant Conflicts of Interest, prescribes general rules for managing organizational conflicts of interest and provides four specific examples of situations that may give rise to problems: FAR 9.505-1, Providing Systems Engineering and Technical Direction; FAR 9.505-2, Preparing Specifications or Work Statements; FAR 9.505-3, Providing Evaluation Services; and FAR 9.505-4, Obtaining Access to Proprietary Information. This proposed rule addresses the situation in FAR 9.505-4.

When a contractor gains access to other companies' proprietary information, FAR 9.505-4 directs the contractor to enter into agreements with the other companies to protect their information from unauthorized use or disclosure and to refrain from using the information for any purpose other than that for which it was furnished. In addition, FAR 9.505-4 requires the contracting officer to obtain copies of these third party agreements and insure that they are properly executed.

In the past, NASA contracts rarely required access to another contractor's proprietary or other forms of confidential information, so the requirements of FAR 9.505-4 were manageable. However, the current environment brings into question whether FAR 9.505-4 continues to be workable for NASA. For example, a contractor providing contract closeout services may have access to hundreds of contract files, each of which document the pre- and post-award activities for a particular contract. Typically, the contracts to be closed have multiple subcontractors, and many subcontractors will have lower-tier subcontracts. To insure that the close-out contractor has properly executed "non-disclosure agreements" with all these contractors and subcontractors could result in a huge number of agreements. Furthermore, the number of agreements would be compounded if the close-out contractor itself employs subcontractors. To manage all these agreements, NASA would have to contract for even more support services. And contract close-out is just one example of the types of services that may require one NASA contractor to have access to another contractor's confidential information before performance can proceed.

In view of the current environment and the problems NASA would face in complying with FAR 9.505-4, the Assistant Administrator for Procurement has waived the FAR 9.505-4 requirements as not being in NASA's interest. Instead, NASA proposes to implement new policy and procedures described in proposed NFS 1837.203-70, Providing Contractors Access to Confidential Information.

As one element of this new approach, NFS 1837.203-70(d)(1) would specify that solicitations for services that require contractor access to confidential information shall require each offeror to submit with its proposal a preliminary analysis of possible organizational conflicts of interest that might arise from the award of a contract. After contract award, contractor would be required to submit to the contracting officer for approval a comprehensive organizational conflict of interest avoidance plan based on the preliminary analysis. "This plan should thoroughly analyze all organizational conflicts of interest that might arise because the service contractor has access to other companies' confidential information. This analysis should propose specific methods to control, mitigate, or eliminate all problems identified." Also, the plan would have to commit the contractor to take all corrective actions necessary to address any failures to protect confidential information from unauthorized use or disclosure. The approved plan would be incorporated into the contract as a compliance document.

In the introduction to the proposed rule, NASA states that it has taken this two-step approach because it recognizes that developing this plan will take considerable time and effort, so offerors would only need to summarize its analysis. "Each offeror's analysis, together with the other elements of each proposal, will be considered in selecting a contractor for award."

In addition, NASA proposes to add two clauses to implement these policies:

Besides these changes to NFS Subpart 1837.2 and the proposed addition of corresponding clauses, NFS 1809.505-4, Obtaining Access to Confidential Information, would be added. It would provide notice that the Assistant Administrator for Procurement has waived the FAR 9.505-4 requirement to provide agreements, and directs readers to NFS 1837.203-70 for NASA's new policy and procedures.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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