[Federal Register Volume 60, Number 186 (Tuesday, September 26, 1995)]
[Proposed Rules]
[Pages 49519-49523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23508]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 60, No. 186 / Tuesday, September 26, 1995 /
Proposed Rules
[[Page 49519]]
DEPARTMENT OF AGRICULTURE
7 CFR Part 3017
RIN 0503-AA12
Nonprocurement Debarment and Suspension
AGENCY: Department of Agriculture (USDA).
ACTION: Notice of proposed rulemaking.
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SUMMARY: USDA proposes to amend its regulations that implement
Executive Order (E.O.) 12549, ``Debarment and Suspension.`` E.O. 12549
required executive departments and agencies to issue regulations,
consistent with guidelines issued by the Office of Management and
Budget (OMB), to establish governmentwide effect for an agency's
nonprocurement debarment and suspension actions. These changes are
being proposed to enhance USDA participation in the governmentwide
nonprocurement debarment and suspension system by making appropriate
modifications to the coverage of the regulations and clarifying the
relationship of the regulations to other USDA procedures for
establishing participant ineligibility for specific programs.
DATES: Comments must be received on or before November 27, 1995.
ADDRESSES: Comments should be sent to Assistant General Counsel,
Research and Operations Division, Office of the General Counsel, U.S.
Department of Agriculture, Washington, DC 20250-1400.
FOR FURTHER INFORMATION CONTACT:
Gary W. Butler, Deputy Assistant General Counsel, Office of the General
Counsel, (202) 720-2577.
SUPPLEMENTARY INFORMATION: As part of the Federal Government's
initiatives to curb fraud, waste, and abuse, E.O. 12549, ``Debarment
and Suspension,'' was signed on February 18, 1986. E.O. 12549 required
executive departments and agencies to issue regulations to establish
governmentwide effect for an agency's nonprocurement debarment and
suspension actions. Section 3 of E.O. 12549 required that such
regulations be consistent with guidelines issued by OMB.
On October 20, 1987, 20 executive departments and agencies
published a proposed common rule (52 FR 39035-39042) which implemented
the final OMB guidelines that had been published on May 29, 1987 (52 FR
20360-20369). USDA did not join the proposed common rule, but rather
published a proposed rule that addressed some problems peculiar to USDA
while being consistent with the OMB guidelines.
On May 26, 1988, 27 executive departments and agencies published a
final common rule (53 FR 19159-19211) and OMB adopted the final common
rule as its amended final guidelines. Upon reconsideration of the issue
of joining the common rule, USDA published a final rule on January 30,
1989 (54 FR 4729), which followed the text of the final common rule
published on May 26, 1988. However, USDA limited the scope of coverage
of the rule (7 CFR Part 3017) to domestic assistance transactions and
added material generally to reflect internal organization and
procedures. Following extended consultations with OMB, USDA has
determined that the coverage of this rule should be amended by removing
the provision that limits the coverage of the rule to domestic
assistance transactions. This change would make the scope of the USDA
rule consistent with the scope of the common rule as adopted by most
other agencies. However, USDA is proposing additional specific
exceptions from coverage of the common rule, as implemented by USDA,
that are deemed in the public interest. These exceptions are necessary
because, for certain USDA programs, the benefits resulting from full
application of the rule would be outweighed by potential programmatic
harms that are explained in detail in the section-by-section analysis.
While proposing additional exceptions from coverage, USDA
emphasizes that certain programs, including, but not limited to, those
related to warehouse licensing; producer entitlements; predator
control; grading; inspection; timber export; and public animal, and
plant health or safety that would be affected by such exceptions are
subject to existing statutes and regulations that provide exclusionary
actions of various kinds that may be imposed by USDA for improper
conduct. Accordingly, the fact that a USDA program may be excepted from
the application of the nonprocurement debarment and suspension common
rule would not preclude USDA from using such other authorities to
exclude persons who violate certain statutes or USDA regulations from
participation in such excepted programs. For example, this proposal
would not in any manner restrict appropriate USDA officials' ability
to: (1) Suspend or revoke licenses under the United States Warehouse
Act; (2) determine ineligibility for payments under the provisions of
section 1001B of the Food Security Act of 1985; (3) withdraw or suspend
inspection services for violations of the Federal Meat Inspection Act,
the Poultry Products Inspection Act, or the regulations issued under
the Federal Meat Inspection Act or the Poultry Products Inspection Act;
(4) revoke licenses for violations of the Animal Welfare Act or the
regulations issued under the Animal Welfare Act; (5) withdraw or
suspend permits for the importation or transportation of organisms or
vectors for violation of the Virus-Serum Toxin Act or the regulations
issued under the Virus-Serum Toxin Act; (6) revoke or suspend licenses
for the treatment of garbage under the Swine Health Protection Act or
the regulations issued under the Swine Health Protection Act; (7) deny
or withdraw grading and inspection services under the Agricultural
Marketing Act of 1946; (8) refuse the payment of indemnity under the
Act of May 29, 1884; (9) debar persons who violate the Forest Resources
Conservation and Shortage Relief Act of 1990; or (10) impose civil
monetary penalties, when authorized, for violations of acts and
regulations administered by the Secretary of Agriculture. Moreover, in
any case in which an administrative exclusion is considered under one
or more of such other provisions, USDA will initiate, where
appropriate, debarment or suspension under the common rule for the
protection of the entire Government.
During the development of this proposed rule, questions were raised
about the treatment under Part 3017 of the transactions with local non-
governmental entities (such as nonprofit
[[Page 49520]]
child care centers and private schools) in the Child Nutrition Programs
of the Food and Consumer Service. In particular, some have questioned
the agency's position that these transactions constitute mandatory
awards since there are nearly 200 of such entities currently denied
participation in the Child Nutrition Programs based on their serious
deficiencies in those programs. However, if viewed as mandatory awards,
these transactions would be excluded from coverage both for purposes of
certification and for eligibility for the awards (7 CFR
3017.110(a)(2)(i) and 3017.200(c)(1)) under Part 3017. It has been
suggested that USDA require all non-governmental entities to complete
the certification, even though the award itself might not be denied.
While this rule does not propose any changes in these areas, the
Department welcome comments on these questions. Further, as indicated
above, whenever USDA takes an action to exclude a local non-
governmental entity from participation in a Child Nutrition Program,
USDA will consider initiating, where appropriate, debarment or
suspension under the common rule for the protection of the entire
Government.
For USDA programs subject to existing statutes and/or regulations
permitting certain exclusionary actions, this proposed rule shall not
affect actions taken under these statutes or regulations prior to the
effective date of this rulemaking. Exclusionary actions taken prior to
the effective date of this rulemaking shall be governed by the statutes
and regulations then in effect.
Section-by-Section Analysis
Subpart A
Section 3017.110, Coverage
--USDA proposes to amend Sec. 3017.110, ``Coverage,'' by revising
paragraph (a)(3), Department of Agriculture covered transactions, which
currently limits the coverage of the USDA nonprocurement debarment and
suspension rule to domestic assistance covered transactions. This
limitation would be removed, which would make the scope of the USDA
rule consistent with the scope of the common rule as adopted by most
other agencies. However, USDA is proposing additional specific
exceptions from coverage of the common rule that are deemed in the
public interest.
--With respect to paragraph (a)(1), Covered transaction, USDA proposes
to state in paragraph (a)(3)(i) that, for USDA's export and foreign
assistance programs, only primary covered transactions will be
considered covered transactions for the purposes of these regulations.
Any lower tier transactions with respect to such programs will not be
considered lower tier covered transactions. Export programs in this
context do not include transactions for the export or substitution of
Federal timber pursuant to the Forest Resources Conservation and
Shortage Relief Act of 1990, 16 U.S.C. 620 et seq. (the ``Export
Act''). In fact, the Export Act provides statutory authority for the
head of the Forest Service to debar persons who violate the Export Act
and/or regulations issued thereunder.
One effect of the proposed amendment will be that, although
participants in primary covered transactions under these programs will
have to provide the required certifications, there will be no
certification requirements applicable to participants in lower tier
transactions. This partial limitation from coverage for these programs
is necessary because it is expected to be difficult, and in some cases
impossible, for participants in primary covered transactions under
these programs to obtain the necessary certifications from lower tier
participants.
Lower tier participants in USDA's export and foreign assistance
programs may include domestic suppliers, foreign or domestic agents,
foreign or domestic parties involved in the transportation of the
commodity, foreign or domestic subcontracted representatives, and
foreign buyers of the commodity. The foreign entities that would be
required to provide certifications may be unwilling to make
certifications, and any certifications obtained may not be enforceable
because these foreign entities will generally not be subject to U.S.
laws. The different legal structures for organizations which may exist
in foreign countries further complicate matters. For example, it may be
difficult for a non-governmental foreign entity to identify its
``principals'' for purposes of providing the necessary certification.
To impose an additional administrative burden upon foreign buyers would
only encourage them to purchase from our competitors, thereby defeating
the purpose of many of the USDA export programs.
The fungible nature of most of the commodities involved in the
export and foreign assistance programs creates additional problems.
Without the proposed amendment, participants in primary covered
transactions under these programs (primarily exporters) would be
required to obtain certifications from each supplier providing at least
$100,00 worth of the commodities, services, or goods in connection with
a covered transaction. (We note that 7 CFR Part 3017 applies to lower
tier procurement contracts that equal or exceed the Federal procurement
small purchase threshold. See 7 CFR Sec. 3017.110(a)(1)(ii)(B).
Pursuant to the providings of sections 4001 and 4003 of the Federal
Acquisition Streamlining Act of 1994, this threshold and thus the level
of expected lower tier procurement contracts has increased to
$100,000.) This requirement would continue down the supply chain, with
all such suppliers obtaining certifications from their suppliers, until
a transaction amounting to less than $100,000 was reached. (However, it
would be necessary to obtain a certification from a person
participating in a transaction amounting to less than $100,000 under a
covered transaction if that person will have a critical influence on or
substantive control over that covered transaction. The $100,000 figure
is used in this section-by-section analysis to simplify the
discussion.) Downstream suppliers would, in some cases, be unable to
provide the required certifications with respect to lower tier
transactions. Suppliers generally obtain commodities from a variety of
sources and store them commingled until they are sold. In some cases,
it would be impossible for a supplier to determine the source of a
particular quantity of a commodity in order to obtain the necessary
certification from such source.
--With respect to paragraph (a)(1)(ii)(B), USDA proposes in paragraph
(a)(3)(ii) to limit coverage of lower tier procurement contracts in the
domestic food assistance programs to the initial procurement contracts
and the first tier of subcontracts under those procurement contracts.
The current rule includes lower tier procurement contracts within
the scope of coverage of this part. USDA recognizes the importance of
maintaining lower tier coverage of the initial procurement contract and
the first tier subcontract thereunder in order to protect the integrity
of its domestic food assistance programs. However, extending lower tier
coverage beyond these levels is unworkable because suppliers in these
programs may provide food to a variety of outlets, obtain food from
many different sources, and commingle the food before selling it to the
outlets.
For example, in a domestic food assistance program such as the
National
[[Page 49521]]
School Lunch Program, many school districts contract with food service
management companies to provide school lunches. To ensure compliance
with the requirements of the common rule for all lower tier covered
transactions, not only would the food service management company have
to provide a certification and agree not to knowingly contract with
debarred or suspended companies, but certifications would also have to
be obtained from the bakery which supplies the break to the food
service management company, the food wholesaler which supplies the
flour to the bakery, the flour mill which sells the flour to the
wholesaler, the merchants who supply the wheat to the flour mill, and
even the farmers (of which there will be many) who sell the wheat to
the merchants. Given that at each level these products are typically
commingled, it would be impossible to determine the precise outlet for
each item for each of these lower tier transactions. Thus, each entity
would need to obtain certifications from all of its suppliers to ensure
compliance with the common rule. This certification requirement would
continue down the chain of contracts until the $100,000 limit is
reached. Such a requirement would be an onerous and unreasonable burden
on commerce.
--With respect to paragraph (a)(2), USDA proposes in paragraph
(a)(3)(iii) to provide an exception from the coverage of this part for
transactions under programs that provide statutory entitlements and
make available loans to individuals and entities in their capacity as
agricultural producers. This exception would not apply to transactions
under programs that provide loans or other assistance to recipients for
business or industrial purposes. The proposed exception is necessary in
order to avoid the imposition of unnecessary and unduly burdensome
certification requirements upon participants in these programs and to
relieve them of the burden of trying to determine when a certification
would even be required.
In addition, with respect to entitlement and farm lending programs,
these producers would have to obtain certifications from all persons or
entities with whom they do business involving at least $100,000. This
requirement would increase regulatory burdens on producers and put the
Consolidated Farm Service Agency (CFSA) in the position of partially
regulating all of the producers' business transactions from purchasing
inputs to selling commodities.
For a typical farming operation, lower tier transactions could
easily include payments to landlords or mortgage companies, seed
dealers, fertilizer dealers, herbicide/insecticide suppliers, equipment
dealers (implement purchases or equipment leasing arrangements),
petroleum suppliers (gasoline and diesel fuel), irrigation input
suppliers (including well digging and electricity), custom services
(custom farming, heavy equipment work, custom fertilizer or herbicide
application, and custom harvesting), and commodity sales/marketing
services. Most individual producers will not have the economic clout to
require suppliers to provide these certifications. Even if they were
able to obtain such certifications, given the number of suppliers that
could be involved, it would be a substantial administrative burden on
producers to collect these certifications.
Furthermore, producers would be required to agree not to knowingly
do business with a debarred party. Yet, a producer may have little
choice in a situation where a major input supplier, such as a seed
company or cooperative, becomes debarred, the debarment is widely
publicized, and it is the only supplier through which the producer is
able to obtain required inputs.
--Also under paragraph (a)(2), USDA proposes in paragraph (a)(3)(iii)
to provide an exception from the coverage of this part for transactions
under conservation programs.
This proposed exception is necessary to avoid the same type of
lower tier certification problems which were discussed with respect to
farm entitlement and farm lending programs. In addition, because many
of USDA's conservation programs, such as the Agricultural Conservation
Program, have relatively low dollar limits for payment, it is quite
possible that the certification requirements would remove any incentive
producers would have to participate in these programs. This result
would be contrary to the objective of promoting the stewardship of land
through conservative incentives designed to encourage pollution
abatement and land conservation practices, thus providing a benefit to
the general public rather than to the individual participants only.
--Also under paragraph (a)(2), USDA proposes in paragraph (a)(3)(iii)
to provide an exception from the coverage of this part for transactions
under warehouse licensing programs.
In the absence of this proposed exception, the burden imposed upon
participants in the warehouse licensing programs would be substantial.
It would be impossible for warehousemen to obtain lower tier
certifications with respect to most of their commodity transactions
because commodities like fertilizer, wheat, and feed grains are
generally stored and merchandized from a commingled, fungible mass. In
addition, the warehouseman is required to store commodities on a non-
discriminatory basis and performs a public service by assuring that a
farmer has a facility, which is bonded and meets federal licensing
requirements, available to store and market commodities.
--Also under paragraph (a)(2), USDA proposes in paragraph (a)(3)(iii)
to provide exceptions from the coverage of this part for the receipt of
licenses, permits, certificates, and indemnification under regulatory
programs in the interest of public health and safety, and animal and
plant health and safety. In addition, this paragraph would provide
exceptions for the provision by State or local governments of official
grading and inspection services, animal damage control services, and
public health and safety and animal and plant health and safety
inspection services, and the receipt of official grading and inspection
services, animal damage control services, and public health and safety
and animal and plant health and safety inspection services.
USDA conducts a number of programs and provides certain services
that are designed to protect public health and safety, protect animal
and plant health and safety, control predators, and provide markets for
agricultural products that are fair and free of deceptive trade
practices. In many instances, USDA's inability to conduct these
programs with and provide these services to persons who have been
debarred would undermine USDA's ability to protect public health and
safety, protect animal and plant health and safety, control predators,
and provide markets for agricultural products that are fair and free of
deceptive trade practices. This inability to engage in nonprocurement
transactions with debarred persons may injure not only the debarred
person, but may also injure persons who are not debarred.
The following are examples of injuries to public health and safety,
animal and plant health and safety, predator control, and fair and free
markets that may result because of USDA's inability to engage in
nonprocurement transactions with debarred persons.
[[Page 49522]]
USDA conducts an animal damage control program under which persons
who have suffered losses from predators may receive assistance from
USDA with the control of the predators on that person's property.
USDA's inability to provide predator control assistance to debarred
persons would not only injure the debarred individual, but would also
injure all persons who are within the range of the predators on the
debarred person's premises.
USDA conducts numerous programs designed to prevent the spread of
plant and animal diseases and pests. In many circumstances, USDA has no
authority to require individuals to destroy animals or plants that are
infected with or exposed to disease. USDA does have authority under
certain circumstances to pay indemnity to producers who voluntarily
destroy plants or animals that are infected with or exposed to disease.
USDA's inability to pay indemnity to debarred producers who voluntarily
destroy animals or plants infected with or exposed to disease may
result in the continued existence of foci of infection and the spread
of animal and plant diseases to animals and plants owned by persons who
have not been debarred.
USDA issues licenses and permits for animal biologics, such as
vaccines or diagnostics. In order to ship animal biologics, persons
must first obtain either a license or a permit from USDA. USDA's
inability to grant licenses or permits to debarred persons could result
in the unavailability of products necessary for the protection of
animal and public health.
USDA grades products in order to correct market inefficiencies
arising from the lack of information about quality or performance of
agricultural products. USDA's grading programs benefit producers of
quality products by increasing consumer acceptance of agricultural
products and increasing the likelihood that the producer will receive
more for graded quality products than for similar ungraded products.
Grading benefits consumers by providing consumers with information
regarding the quality and performance of the graded products. USDA's
inability to provide grading services to debarred producers could
result in the inability to sell ungraded products, a reduction of
graded products in the market place, and a reduction in the information
consumers have available regarding the quality and performance of
agricultural products.
--Also under paragraph (a)(2), USDA proposes in paragraph (a)(3)(iii)
to provide an exception from the coverage of this part for permits,
licenses, exchanges, and other acquisitions of real property, rights of
way, and easements under natural resource management programs. This
paragraph would except such transactions from coverage because the
value derived from the application of the rule which precludes doing
business with debarred and suspended persons is outweighed by the fact
that, in many such transactions, fair market value is exchanged and, in
many others, royalty systems operate to return significant reserves or
cash to the United States from fees collected for the use of these
lands, uses which have been determined to be in the best interest of
sound land and resource management.
Further, the benefits of applying this rule are significantly
outweighed by the inability to efficiently manage and administer the
rule, as hundreds of thousands of permits are issued under natural
resource programs annually for which nominal benefits are received by
permittees.
Section 3017.115, Policy
--USDA proposes to amend Sec. 3017.115, ``Policy,'' by adding a new
paragraph (d) to provide that, in any case in which an administrative
exclusion is considered under an authority other than this rule, USDA
will initiate, where appropriate, a debarment or suspension action
under this rule for the protection of the entire Federal Government.
Subpart B
Section 3017.200, Debarment or Suspension
--USDA proposes to amend Sec. 3017.200(c) to reflect the exceptions to
coverage to be inserted in Sec. 3017.110(a)(3).
Impact Analysis
Executive Order 12866
This proposed rule has been determined to be ``significant,'' and
it has been reviewed by the Office of Management and Budget.
Regulatory Flexibility Act of 1980
The Regulatory Flexibility Act of 1980
The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.)
requires that, for each rule with a ``significant economic impact on a
substantial number of small entities,'' an analysis must be prepared
describing the rule's impact on small entities and identifying any
significant alternatives to the rule that would minimize the economic
impact on the small entities.
USDA certifies that these proposed regulations would not have a
significant economic impact on a substantial number of small entities.
Paperwork Reduction Act
USDA certifies that this proposed rule would not impose any
reporting or recordkeeping requirements under the Paperwork Reduction
Act of 1980, 44 U.S.C. Chapter 35.
List of Subjects in 7 CFR Part 3017
Administrative practice and procedure, Drug abuse, Grant
administration, Grant programs (Agriculture), Loan programs, Reporting
and recordkeeping requirements.
For the reasons set forth in the preamble, USDA proposes to amend 7
CFR Part 3017 as follows:
PART 3017--GOVERNMENTWIDE DEBARMENT AND SUSPENSION (NONPROCUREMENT)
AND GOVERNMENTWIDE REQUIREMENTS FOR DRUG-FREE WORKPLACE (GRANTS)
1. The authority citation for Part 3017 would be revised to read as
follows:
Authority: 5 U.S.C. 301; 41 U.S.C. 701 et seq.; E.O. 12549, 51
FR 6370, 3 CFR, 1986 Comp., p. 189.
2. Section 3017.110 would be amended by revising paragraph (a)(3)
to read as follows:
Sec. 3017.110 Coverage.
(a) * * *
(3) Department of Agriculture covered transactions. (i) With
respect to paragraph (a)(1) of this section, for USDA's export and
foreign assistance programs, covered transactions will include only
primary covered transactions. Any lower tier transactions with respect
to USDA's export and foreign assistance programs will not be considered
lower tier covered transactions for the purposes of this part. The
export or substitution of Federal timber governed by the Forest
Resources Conservation and Shortage Relief Act of 1990, 16 U.S.C. 620
et seq. (the ``Export Act''), is specifically excluded from the
coverage of this rule. The Export Act provides separate statutory
authority to debar persons engaged in both primary covered transactions
and lower tier transactions.
(ii) With respect to paragraph (a)(1)(ii)(B) of this section, for
USDA's domestic food assistance programs, only the initial such
procurement contract and the first tier subcontract under that
procurement contract shall be
[[Page 49523]]
considered lower tier covered transactions.
(iii) With respect to paragraph (a)(2) of this section, the
following USDA transactions also are not covered: transactions under
programs which provide statutory entitlements and make available loans
to individuals and entities in their capacity as producers of
agricultural commodities; transactions under conservation programs;
transactions under warehouse licensing programs; the receipt of
licenses, permits, certificates, and indemnification under regulatory
programs conducted in the interest of public health and safety and
animal and plant health and safety; the receipt of official grading and
inspection services, animal damage control services, public health and
safety inspection services, and animal and plant health and safety
inspection services; if the person is a State or local government, the
provision of official grading and inspection services, animal damage
control services, public health and safety inspection services, and
animal and plant health and safety inspection services; and permits,
licenses, exchanges and other acquisitions of real property, rights of
way, and easements under natural resource management programs.
* * * * *
3. Section 3017.115 would be amended by adding a new paragraph (d)
to read as follows:
Sec. 3017.115 Policy.
* * * * *
(d) In any case in which an administrative exclusion is considered
under an authority other than this part, USDA will initiate, where
appropriate, a debarment or suspension action under this part for the
protection of the entire Federal Government.
4. Section 3017.200 would be amended by adding a new paragraph (d)
to read as follows:
Sec. 3017.200 Debarment or suspension.
* * * * *
(d) Department of Agriculture excepted transactions. With respect
to paragraph (c) of this section, the following USDA transactions also
are excepted: transactions under programs which provide statutory
entitlements and make available loans to individuals and entities in
their capacity as producers of agricultural commodities; transactions
under conservation programs; transactions under warehouse licensing
programs; the receipt of licenses, permits, certificates, and
indemnification under regulatory programs conducted in the interest of
public health and safety and animal and plant health and safety; the
receipt of official grading and inspection services, animal damage
control services, public health and safety inspection services, and
animal and plant health and safety inspection services; if the person
is a State or local government, the provision of official grading and
inspection services, animal damage control services, public health and
safety inspection services, and animal and plant health and safety
inspection services; and permits, licenses, exchanges, and other
acquisitions of real property, rights of way, and easements under
natural resource management programs.
Dated: September 15, 1995.
Dan Glickman,
Secretary of Agriculture.
[FR Doc. 95-23508 Filed 9-25-95; 8:45 am]
BILLING CODE 3410-01-M
