2024-08438. Defense Federal Acquisition Regulation Supplement: Update of Challenge Period for Validation of Asserted Restrictions on Technical Data and Computer Software (DFARS Case 2022-D016)

AGENCY:

Defense Acquisition Regulations System, Department of Defense (DoD).

ACTION:

Proposed rule.

SUMMARY:

DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a section of the National Defense Authorization Act for Fiscal Year 2012, which addresses the validation of proprietary data restrictions. In addition to the request for written comments, DoD will hold a public meeting to hear the views of interested parties.

DATES:

Comments on the proposed rule should be submitted in writing to the address shown below on or before June 24, 2024, to be considered in the formation of a final rule.

Public Meeting: A virtual public meeting will be held on May 17, 2024, from 1:00 p.m. to 5:00 p.m. Eastern time. The public meeting will end at the stated time, or when the discussion ends, whichever comes first.

Registration: Registration to attend the public meeting must be received no later than close of business on May 9, 2024. Information on how to register for the public meeting is provided under the SUPPLEMENTARY INFORMATION section of this proposed rule.

ADDRESSES:

Public Meeting: A virtual public meeting will be held using Zoom video conferencing software.

Submission of Comments: Submit comments identified by DFARS Case 2022-D016, using either of the following methods:

○ Federal eRulemaking Portal: https://www.regulations.gov. Search for DFARS Case 2022-D016. Select “Comment” and follow the instructions to submit a comment. Please include “DFARS Case 2022-D016” on any attached documents.

○ Email: [e-mail]. Include DFARS Case 2022-D016 in the subject line of the message.

Comments received generally will be posted without change to https://www.regulations.gov, including any personal information provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission to verify posting.

FOR FURTHER INFORMATION CONTACT:

David Johnson, telephone [phone].

SUPPLEMENTARY INFORMATION:

I. Background

DoD is proposing to revise the DFARS to implement section 815(b) of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012 (Pub. L. 112-81). Section 815(b) amended 10 U.S.C. 2321 (currently 10 U.S.C. 3782) by increasing the validation period for asserted restrictions from three years to six years. Section 815(b) also amended 10 U.S.C. 2321 to provide an exception to the prescribed time limit for validation of asserted restrictions if the technical data involved are the subject of a fraudulently asserted use or release restriction.

DoD published an advance notice of proposed rulemaking (ANPR) in the Federal Register on December 16, 2022, at 87 FR 77055, providing draft DFARS revisions and requesting written public comments. DoD hosted a public meeting to obtain the views of interested parties regarding the ANPR on January 26, 2023.

The preamble to the ANPR provided detailed explanations of revisions related to—

• The validation period for asserted restrictions; and
• The new statutory exception to the prescribed time limit for validation of asserted restrictions.

One respondent submitted public comments in response to the ANPR.

II. Public Meeting

DoD is interested in continuing a dialogue with experts and interested parties in the Government and the private sector regarding amending the DFARS to implement section 815(b) of the NDAA for FY 2012.

Registration: Individuals wishing to participate in the virtual meeting must register by May 9, 2024, to facilitate entry to the meeting. Interested parties may register for the meeting by sending the following information via email to [e-mail] and include “Public Meeting, DFARS Case 2022-D016” in the subject line of the message:

• Full name.
• Valid email address, which will be used for admittance to the meeting.
• Valid telephone number, which will serve as a secondary connection method. Registrants must provide the telephone number they plan on using to connect to the virtual meeting.
• Company or organization name.
• Whether the individual desires to make a presentation.

Pre-registered individuals will receive instructions for connecting using the Zoom video conferencing software not more than one week before the meeting is scheduled to commence.

Presentations: Presentations will be limited to 5 minutes per company or organization. This limit may be subject to adjustment, depending on the number of entities requesting to present, in order to ensure adequate time for discussion. If you wish to make a presentation, please submit an electronic copy of your presentation via email to [e-mail] no later than the registration date for the meeting. Each presentation should be in PowerPoint to facilitate projection during the public meeting and should include the presenter's name, title, organization affiliation, telephone number, and email address on the cover page.

Correspondence, Comments, and Presentations: Please cite “Public Meeting, DFARS Case 2022-D016” in all correspondence related to the public meeting. There will be no transcription at the meeting. The submitted presentations will be posted to the following website at the conclusion of the public meeting: https://www.acq.osd.mil/​dpap/​dars/​technical_​data_​rights.html.

III. Discussion and Analysis

DoD reviewed the public comments in response to the ANPR in the development of the proposed rule. No changes are made in this proposed rule text as a result of the public comments. A discussion of the comments is provided, as follows:

A. Analysis of Public Comments

1. Virtual Public Meetings

Comment: The respondent thanked DoD for the opportunity to participate in the rulemaking process and provide input.

Response: DoD acknowledges the respondent's comment.

2. Definition of Fraud

Comment: The respondent requested clarification with respect to when a use or release restriction would be considered “fraudulently asserted.” In particular, the respondent asked whether there is a knowledge requirement on behalf of the contractor asserting restrictions.

Response: The statutory revisions being implemented in DFARS Case 2022-D016 do not establish a specialized definition of “fraudulently asserted” or a knowledge requirement. DoD will rely upon the common meaning of the terminology used in the statute and regulatory implementation, informed by applicable procurement statutes, other applicable statutes, and case precedent.

3. Deferred Ordering and the Challenge Period

Comment: The respondent requested clarification regarding applicability to deferred ordering situations. The respondent asked if the period related to final payment resets when a payment is made on a deferred ordering basis.

Response: The proposed rule includes the following language related to technical data: “During the period within 6 years of final payment on a contract or within 6 years of delivery of the technical data to the Government, whichever is later, the Contracting Officer may review and make a written determination to challenge the restriction.” It also includes the following language regarding software: “the Government may exercise this right only within 6 years after the date(s) the software is delivered or otherwise furnished to the Government, or 6 years following final payment under this contract, whichever is later.”

Invocation of the deferred ordering clause institutes new technical data or software delivery requirements; these deliverables may be delivered under the original contract (in which the clause was incorporated) or another contract. Accordingly, the expiration of the challenge period will depend upon the date the data is furnished or the date of final payment under the contract where the technical data or software is delivered, whichever is later.

B. Other Changes

The proposed rule includes other changes to align the language in the clauses at DFARS 252.227-7019, Validation of Asserted Restrictions—Computer Software, and DFARS 252.227-7037, Validation of Restrictive Markings on Technical Data. In addition, editorial changes were made, including updates to comport with DFARS content and drafting conventions. For example, the proposed rule includes changes to the clauses to consistently refer to validation of “asserted restrictions” (rather than “restrictive markings”), thereby aligning this language with the scope and purpose of the clauses and the underlying statutes (10 U.S.C 3781-3786). In addition, the proposed rule includes revisions to the clauses to ensure consistent syntax in instances where the clause refers to striking or correcting a restrictive marking. Furthermore, the proposed rule corrects all references to the “United States Claims Court” to read as the “United States Court of Federal Claims”, to reflect the correct name of the applicable court.

IV. Applicability to Contracts at or Below the Simplified Acquisition Threshold, for Commercial Products (Including Commercially Available Off-the-Shelf Items), and for Commercial Services

This proposed rule amends the clauses at DFARS 252.227-7019, Validation of Asserted Restrictions—Computer Software, and DFARS 252.227-7037, Validation of Restrictive Markings on Technical Data. However, this proposed rule does not impose any new requirements on contracts at or below the SAT, for commercial products including COTS items, or for commercial services. The clause will continue to apply to acquisitions at or below the SAT, to acquisitions of commercial products including COTS items, and to acquisitions of commercial services.

V. Expected Impact of the Rule

The proposed rule includes changes to lengthen the validation period for asserted restrictions from three years to six years. The proposed rule also provides an exception to the prescribed time limit for validation of asserted restrictions if the technical data or computer software involved are the subject of a fraudulently asserted restriction. Therefore, the proposed rule, when finalized, may increase the number of challenges to which contractors must respond. However, DoD cannot quantify the estimated number of the additional challenges at this time.

VI. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all 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). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993, as amended.

VII. Regulatory Flexibility Act

DoD does not expect this proposed rule, when finalized, 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 the statutory requirements only lengthen the challenge period for asserted restrictions. However, an initial regulatory flexibility analysis has been performed and is summarized as follows:

DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 815(b) of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012, which addresses the time period for validation of proprietary data restrictions.

The objective of the rule is to implement section 815(b) of the NDAA for FY 2012 (Pub. L. 112-81), which is the legal basis for the rule. Section 815(b) amended 10 U.S.C. 2321 (currently 10 U.S.C. 3782) by increasing the validation period for asserted restrictions from three years to six years. Section 815(b) also amended 10 U.S.C. 2321 to provide an exception to the prescribed time limit for validation of asserted restrictions if the technical data involved are the subject of a fraudulently asserted use or release restriction. This proposed rule, when finalized, will ensure that the Government has adequate opportunity to challenge discrepancies or inaccuracies in contractor assertions of data and software rights.

This proposed rule will apply to small entities that have contracts with DoD requiring delivery of data, including technical data and computer software. DoD obtained data for fiscal years 2020 through 2022 from the Procurement Business Intelligence Service for all contracts and modifications that include one or more of the following DFARS clauses: 252.227-7013, Rights in Technical Data—Other Than Commercial Products or Commercial Services; 252.227-7014, Rights in Other Than Commercial Computer Software and Other Than Commercial Computer Software Documentation; 252.227-7015, Technical Data—Commercial Products and Commercial Services; and 252.227-7018, Rights in Other Than Commercial Technical Data and Computer Software—Small Business Innovation Research (SBIR) Program. DoD awarded on average 54,255 contract actions per year that included one or more of the listed clauses to 9,550 unique entities, of which 28,657 contract awards (53 percent) were made to 6,033 unique small entities (63 percent).

This proposed rule does not impose any new reporting, recordkeeping, or other compliance requirements for small entities.

This proposed rule does not duplicate, overlap, or conflict with any other Federal rules.

There are no known alternatives that would accomplish the stated objectives of the applicable statute.

DoD invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities.

DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this proposed rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (DFARS Case 2022-D016), in correspondence.

VIII. Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C. chapter 35) applies to this proposed rule. However, these changes to the DFARS do not impose additional information collection requirements to the paperwork burden previously approved by the Office of Management and Budget (OMB) under OMB Control Number 0704-0369, entitled “DFARS Subpart 227.71, Rights in Technical Data; and Subpart 227.72, Rights in Computer Software and Computer Software Documentation, and related provisions and clauses.”

List of Subjects in 48 CFR Part 252

• Government procurement

Jennifer D. Johnson,

Editor/Publisher, Defense Acquisition Regulations System.

Therefore, 48 CFR part 252 is proposed to be amended as follows:

PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

1. The authority citation for part 252 continues to read as follows:

Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

2. Amend section 252.227-7019—

a. By revising the date of the clause;

b. By revising paragraph (b);

c. In paragraph (d)(2)(i)(B) by revising the second sentence;

d. In paragraph (e)(1) by revising the second sentence;

e. In paragraph (f)(1)(ii) by removing “within sixty (60)” and adding “in writing within 60” in its place;

f. In paragraph (f)(1)(iv) by removing “three-year” and adding “3-year” in its place;

g. In paragraph (g)(1)(i) by removing “ninety (90)” and adding “90” in its place;

h. In paragraph (g)(1)(ii) by removing “one” and “ninety (90)” and adding “1” and “90” in their places, respectively;

i. In paragraph (g)(1)(iii) by removing “suit an appropriate”, “ninety (90)” wherever it appears, and “one” and adding “suit in an appropriate”, “90”, and “1” in their places, respectively;

j. In paragraph (g)(2)(i) and (ii) by removing “ninety (90)” and adding “90” in its place;

k. In paragraph (g)(2)(iii) removing “one” and “ninety (90)” and adding “1” and “90” in their places, respectively; and

l. In paragraph (g)(3) removing “government” wherever it appears and “non-disclosure” and adding “Government” and “nondisclosure” in their places, respectively.

The revisions read as follows:

252.227-7019

Validation of Asserted Restrictions-Computer Software.

* * * * *

Validation Of Asserted Restrictions—Computer Software (DATE)

* * * * *

(b) Justification. The Contractor shall maintain records sufficient to justify the validity of any asserted restrictions on the Government's rights to use, modify, reproduce, perform, display, release, or disclose computer software delivered, required to be delivered, or otherwise provided to the Government under this contract and shall be prepared to furnish to the Contracting Officer a written justification for such asserted restrictions in response to a request for information under paragraph (d) of this clause or a challenge under paragraph (f) of this clause.

* * * * *

(d) * * *

(2) * * *

(i) * * *

(B) * * * If the Contractor fails to correct or strike the unjustified marking and return the corrected software to the Contracting Officer within 60 days following receipt of the software, the Contracting Officer may correct the strike the marking at the Contractor's expense.

* * * * *

(e) * * *

(1) * * * Except for software that is publicly available, has been furnished to the Government without restrictions, has been otherwise made available without restrictions, or is the subject of a fraudulently asserted use or release restriction, the Government may exercise this right only within 6 years after the date(s) the software is delivered or otherwise furnished to the Government, or 6 years following final payment under this contract, whichever is later.

* * * * *

3. Amend section 252.227-7037—

a. By revising the section heading, and the heading and date of the clause;

b. By revising paragraphs (c), and (d);

c. By revising paragraph (e)(1) introductory text;

d. In paragraph (e)(1)(i) removing “services,” and adding “services, with” in its place;

e. By revising paragraph (e)(1)(iii);

f. In paragraph (e)(4) by removing “restrictive markings” and adding “asserted restrictions” in its place;

g. By revising paragraph (g)(1);

h. In paragraph (g)(2)(i) by removing “restrictive marking” and “In order to” and adding “asserted restriction” and “To” in their places, respectively;

i. By revising paragraphs (g)(2)(ii), (iii), and (iv);

j. In paragraph (h)(1)(i) by removing “marking” and adding “marking that is based on the asserted restriction” in its place;

k. In paragraph (h)(1)(ii) by removing “restrictive marking” wherever it appears and “marking” and adding “asserted restriction” in their places;

l. By revising paragraph (i); and

m. In paragraph (k) by removing “restrictive marking” and “subcontractors” and adding “restrictions” and “subcontractor” in their places, respectively.

The revisions read as follows:

252.227-7037

Validation of Asserted Restrictions on Technical Data.

* * * * *

Validation of Asserted Restrictions on Technical Data (DATE)

* * * * *

(c) Justification. The Contractor or subcontractor at any tier is responsible for maintaining records sufficient to justify the validity of its asserted restrictions on the rights of the Government and others to use, duplicate, release, or disclose technical data delivered, required to be delivered, or otherwise provided to the Government under the contract or subcontract. Except as provided in paragraph (b) of this clause, the Contractor or subcontractor shall be prepared to furnish to the Contracting Officer a written justification for such asserted restrictions in response to a challenge under paragraph (e) of this clause.

(d) Prechallenge request for information.

(1) The Contracting Officer may request the Contractor or subcontractor to furnish a written explanation for any asserted restriction on the right of the United States or others to use, disclose, or release technical data. If, upon review of the explanation submitted, the Contracting Officer cannot determine the basis of the asserted restriction, the Contracting Officer may further request the Contractor or subcontractor to furnish additional information in the records of, or otherwise in the possession of or reasonably available to, the Contractor or subcontractor to justify the validity of any asserted restriction on technical data delivered, to be delivered, or otherwise provided to the Government under the contract or subcontract ( e.g., a statement of facts accompanied with supporting documentation). The Contractor or subcontractor shall submit such written data as requested by the Contracting Officer within the time required or such longer period as may be mutually agreed.

(2) If the Contracting Officer, after reviewing the written data furnished pursuant to paragraph (d)(1) of this clause, or any other available information pertaining to the validity of an asserted restriction, determines that reasonable grounds exist to question the current validity of the asserted restriction and that continued adherence to the asserted restriction would make impracticable the subsequent competitive acquisition of the item or process to which the technical data relates, the Contracting Officer will follow the procedures in paragraph (e) of this clause.

(3) If the Contractor or subcontractor fails to respond to the Contracting Officer's request for information under paragraph (d)(1) of this clause, and the Contracting Officer determines that continued adherence to the asserted restriction would make impracticable the subsequent competitive acquisition of the item or process to which the technical data relates, the Contracting Officer may challenge the validity of the asserted restriction as described in paragraph (e) of this clause.

(e) * * *

(1) Notwithstanding any provision of this contract concerning inspection and acceptance, if the Contracting Officer determines that a challenge to the asserted restriction is warranted, the Contracting Officer will send a written challenge notice to the Contractor or subcontractor making the asserted restriction. The challenge notice and all related correspondence shall be subject to handling procedures for classified information and controlled unclassified information. Such challenge shall—

* * * * *

(iii) State that a Contracting Officer's final decision, issued pursuant to paragraph (g) of this clause, sustaining the validity of a prior asserted restriction identical to the current asserted restriction, within the 3-year period preceding the current challenge, shall serve as justification for the current asserted restriction if the prior validated restriction was asserted by the same Contractor or subcontractor (or any licensee of such Contractor or subcontractor) to which such notice is being provided; and

* * * * *

(g) * * *

(1) If the Contracting Officer determines that the Contractor or subcontractor has justified the validity of the asserted restriction, the Contracting Officer will issue a final decision to the Contractor or subcontractor that sustains the validity of the asserted restriction and that states that the Government will continue to be bound by the asserted restriction. The Contracting Officer will issue this final decision within 60 days after receipt of the Contractor's or subcontractor's response to the challenge notice, or within such longer period that the Contracting Officer has notified the Contractor or subcontractor that the Government will require. The Contracting Officer will provide notification of any longer period for issuance of a final decision within 60 days after receipt of the response to the challenge notice.

(2) * * *

(i) * * *

(ii) The Government agrees that it will continue to be bound by the asserted restriction for a period of 90 days from the issuance of the Contracting Officer's final decision under paragraph (g)(2)(i) of this clause. The Contractor or subcontractor agrees that, if it intends to file suit in the United States Court of Federal Claims, it will provide a notice of intent to file suit to the Contracting Officer within 90 days from the issuance of the Contracting Officer's final decision under paragraph (g)(2)(i) of this clause. If the Contractor or subcontractor fails to appeal, file suit, or provide a notice of intent to file suit to the Contracting Officer within the 90-day period, the Government may cancel or ignore the restrictive markings that are based on the asserted restrictions, and the failure of the Contractor or subcontractor to take the required action constitutes agreement with such Government action.

(iii) The Government agrees that it will continue to be bound by the asserted restriction where a notice of intent to file suit in the United States Court of Federal Claims is provided to the Contracting Officer within 90 days from the issuance of the final decision under paragraph (g)(2)(i) of this clause. The Government will no longer be bound, and the Contractor or subcontractor agrees that the Government may strike or ignore the restrictive marking that is based on the asserted restriction, if the Contractor or subcontractor fails to file its suit within 1 year after issuance of the final decision. Notwithstanding the foregoing, where the head of an agency determines, on a nondelegable basis, that urgent or compelling circumstances will not permit waiting for the filing of a suit in the United States Court of Federal Claims, the Contractor or subcontractor agrees that the agency may, following notice to the Contractor or subcontractor, authorize release or disclosure of the technical data. Such agency determination may be made at any time after issuance of the final decision and will not affect the Contractor's or subcontractor's right to damages against the United States where its asserted restrictions are ultimately upheld or to pursue other relief, if any, as may be provided by law.

(iv) The Government agrees that it will be bound by the asserted restrictions where an appeal or suit is filed pursuant to the Contract Disputes statute until final disposition by an agency Board of Contract Appeals or the United States Court of Federal Claims. Notwithstanding the foregoing, where the head of an agency determines, on a nondelegable basis, following notice to the Contractor that urgent or compelling circumstances will not permit awaiting the decision by such Board of Contract Appeals or the United States Court of Federal Claims, the Contractor or subcontractor agrees that the agency may authorize release or disclosure of the technical data. Such agency determination may be made at any time after issuance of the final decision and will not affect the Contractor's or subcontractor's right to damages against the United States where its asserted restrictions are ultimately upheld or to pursue other relief, if any, as may be provided by law.

* * * * *

(i) Duration of right to challenge.

(1) The Government may review the validity of any restriction on technical data, delivered or to be delivered under a contract, asserted by the Contractor or subcontractor. During the period within 6 years of final payment on a contract or within 6 years of delivery of the technical data to the Government, whichever is later, the Contracting Officer may review and make a written determination to challenge the restriction. The Government may, however, challenge a restriction on the release, disclosure, or use of technical data at any time if such technical data—

(i) Are publicly available;

(ii) Have been furnished to the United States without restriction;

(iii) Have been otherwise made available without restriction; or

(iv) Are the subject of a fraudulently asserted use or release restriction.

(2) Only the Contracting Officer's final decision resolving a formal challenge by sustaining the validity of a restrictive marking constitutes “validation” as addressed in 10 U.S.C. 3785(c).

* * * * *