General Services Administration Acquisition Regulation; Immediate and Highest Level Owner for High-Security Leased Space
| Published date | 01 July 2021 |
| Citation | 86 FR 34966 |
| Record Number | 2021-14161 |
| Section | Rules and Regulations |
| Court | General Services Administration |
Federal Register, Volume 86 Issue 124 (Thursday, July 1, 2021)
[Federal Register Volume 86, Number 124 (Thursday, July 1, 2021)]
[Rules and Regulations]
[Pages 34966-34979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14161]
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GENERAL SERVICES ADMINISTRATION
48 CFR Parts 501, 552 and 570
[GSAR Case 2021-G527; Docket No. GSA-GSAR-2021-0014; Sequence No. 1]
RIN 3090-AK44
General Services Administration Acquisition Regulation; Immediate
and Highest Level Owner for High-Security Leased Space
AGENCY: Office of Acquisition Policy, General Services Administration
(GSA).
ACTION: Interim rule.
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SUMMARY: GSA is amending the General Services Administration
Acquisition Regulation (GSAR) to implement Section 3 and Section 5
requirements of the Secure Federal Leases from Espionage and Suspicious
Entanglement Act (the Act or Secure Federal LEASEs Act). The Act
addresses the risks of foreign ownership of Government-leased real
estate and requires the disclosure of ownership information for high-
security space leased to accommodate a Federal agency.
DATES: Effective: June 30, 2021.
Applicability: This interim rule applies to new lease awards, the
exercise of options for current leases, lease extensions, and ownership
changes for high-security leased space. Except where otherwise
provided, the Act's disclosure requirements shall apply with respect to
any lease or novation agreement entered into on or after June 30, 2021,
involving high-security leased space. That includes new, renewal,
succeeding, expansion, superseding, extension, and replacing leases and
novations.
Comment Date: Interested parties should submit written comments to
the Regulatory Secretariat Division at the address shown below on or
before August 30, 2021 to be considered in the formation of the final
rule.
ADDRESSES: Submit comments in response to GSAR Case 2021-G527 to the
Federal eRulemaking portal at https://www.regulations.gov by searching
for ``GSAR Case 2021-G527''. Select the link ``Comment Now'' that
corresponds with ``GSAR Case 2021-G527''. Follow the instructions
provided at the ``Comment Now'' screen. Please include your name,
company name (if any), and ``GSAR Case 2021-G527'' on your attached
document. If your comment cannot be submitted using https://www.regulations.gov, call or email the points of contact in the FOR
FURTHER INFORMATION CONTACT section of this document for alternate
instructions.
Instructions: Please submit comments only and cite ``GSAR Case
2021-G527'' in all correspondence related to this case. Comments
received generally will be posted without change to https://www.regulations.gov, including any personal and/or business
confidential 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: Mr. Stephen Carroll, Procurement
Analyst, at 817-253-7858 or [email protected], for clarification of
content. For information pertaining to status or publication schedules,
contact the Regulatory Secretariat Division at 202-501-4755 or
[email protected]. Please cite GSAR Case 2021-G527.
SUPPLEMENTARY INFORMATION:
I. Background
On Dec. 31, 2020, the then president signed into law the Secure
Federal Leases from Espionage and Suspicious Entanglements Act (Secure
Federal LEASEs Act), (Pub. L. 116-276, 134 Stat. 3362). The Act imposes
disclosure requirements regarding the foreign ownership, particularly
``beneficial ownership,'' of prospective lessors of ``high-security
leased space'' (i.e., property leased to the Federal government having
a security level of III or higher). Section 3 and Section 5 of the Act
regarding immediate and highest-level ownership applies to a lease or
lease novation for high-security leased space entered into six months
after the date of the enactment of the Act. GSA will modify existing
leases to reflect the requirements of the Act when any of the various
actions highlighted in the Applicability section arise.
These requirements of the statute are applicable to leases by the
U.S. General Services Administration (GSA), the Architect of the
Capitol, ``or the head of any Federal agency, other than the Department
of Defense (DOD), that has independent statutory leasing authority''
(Federal lessees). The Act is not applicable to DOD or to the
intelligence community. In that regard, Section 2876 of the FY 2018
National Defense Authorization Act (NDAA) (Pub. L. 115-91) already
provides DOD similar authority to obtain ownership information with
respect to its high-security leased space. GSA's regulatory action
applies to GSA and to agencies relying upon GSA's leasing authority.
The Act addresses national security risks identified in the
Government Accountability Office (GAO) report, GSA Should Inform Tenant
Agencies When Leasing High-Security Space from Foreign Owners, dated
January 2017 (GAO-17-195). This report found certain high-security
Federal agencies were in buildings owned or controlled by foreign
entities. According to the report, most Federal tenants were unaware
the spaces GAO identified were subject to foreign ownership or control,
exposing these agencies to the heightened risk of surreptitious
physical or cyber espionage by foreign actors. The report also noted
GAO could not identify the owners of approximately one-third of the
Federal government's high-security leases because such ownership
information was unavailable for those buildings.
As the US Government's ``landlord,'' GSA serves as the central
leasing agent for Federal leases and is responsible for managing and
obtaining space on behalf of multiple Federal agencies. When GSA enters
into a leasing agreement, the agency becomes the ``tenant'' of GSA,
with GSA acting as the lessee of the property. GSA currently uses
information contained in the System for Award Management (SAM) to
collect foreign ownership information for potential lessors, including
immediate or highest-level owners. However, as Congress recognized in
the Act, SAM does not capture more nuanced forms of foreign control
such as entities involved in financing properties or beneficial
ownership.
GSA is currently reviewing and investigating potential future
implementation steps and potential updates through electronic means to
implement the requirements of the Act, including externally (System for
Award Management) or internally (GSA's Lease Offer Platform). As these
alternatives are not yet available, this interim rule will require
reporting on an action-by-action basis.
What is ``high-security leased space''?
The statute defines ``high security leased space'' as ``space
leased by a Federal lessee that--(A) will be occupied by Federal
employees for nonmilitary activities; and (B) has a facility security
level of III, IV or V, as
[[Page 34967]]
determined by the Federal tenant in consultation with the Interagency
Security Committee, the Department of Homeland Security, and the
General Services Administration.'' Facility security levels and the
process for determining these are outlined in the Interagency Security
Committees publication ``The Risk Management Process.'' \1\
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\1\ Interagency Security Committees publication ``The Risk
Management Process'', March 2021
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New Disclosure Requirements
Section 3 of the Act imposes the following requirements:
Prior to entering into a lease agreement with a ``covered
entity'' or allowing such a landlord to convey its interest in a leased
space that qualifies as a ``high-security leased space''--meaning a
lease with a security level of Level III, IV, or V--a Federal lessee
must require the landlord to identify and disclose whether the
``immediate owner'' or ``highest-level owner'' of the leased space,
including an entity involved in the financing thereof, is a foreign
person or a foreign entity, and to identify the country associated with
each ownership entity. A ``covered entity'' is a person, corporation,
company, business association, partnership, society, trust, or any
other nongovernmental entity, organization, or group, or any
governmental entity or instrumentality of a government. Leases entered
into by the Department of Defense and for Federal tenants within the
intelligence community (as defined in the National Security Act of
1947, 50 U.S.C. 3003) are expressly excluded from these requirements.
The Act requires disclosure of the ``immediate owner''
(the entity that has direct control of the offeror of a lease, as
defined by ownership or interlocking management, identity of interests
among family members, shared facilities and equipment, and the common
use of employees) and ``highest-level owner'' (the entity that owns or
controls an immediate owner of the offeror of a lease or that owns or
controls one or more entities that control the immediate owner).
The Act also requires disclosure of whether an entity is
involved in the financing of the leased space is a foreign person or
entity. GSA has provided a definition of ``financing'' at 552.270-33.
Once a lease is executed, the Act requires annual
disclosure of the foreign ownership of the landlord (and financing of
the property) with respect to each prior one year period.
Section 3 of the Act applies to any lease or novation
agreement entered into on or after June 30, 2021.
This Section of the Act requires that a covered entity
(i.e., ``a person, corporation, company, business association,
partnership, society, trust, or any other nongovernmental entity,
organization, or group''; or ``any governmental entity or
instrumentality of a government'') identify and disclose whether the
immediate or highest-level owner of the leased space, including an
entity involved in financing of the property, is a foreign person or a
foreign entity, including the country of origin associated with the
ownership, before a Federal lessee enters into a lease agreement with a
covered entity or approves a novation agreement with a covered entity
that involves a change of ownership under a lease for high-security
leased space.
Under the Act, an ``immediate owner'' is ``an entity,
other than the offeror of a lease, that has direct control of the
offeror, including ownership or interlocking management, identity of
interests among family members, shared facilities and equipment, and
the common use of employees'' and a ``highest-level owner'' is ``the
entity that owns or controls an immediate owner of the offeror of a
lease, or that owns or controls 1 or more entities that control an
immediate owner of the offeror.'' If a disclosure is made, the Federal
lessee is required to notify the Federal tenant of the building (or
other improvement) that will be used for high-security space and to
consult with the Federal tenant regarding security concerns and to
determine whether mitigation measures are necessary prior to lease
award or approval of the novation agreement.
A covered entity is required to provide this ownership
information in response to a solicitation for offers issued by the
Federal lessee or before approving a novation agreement for a lease.
Covered entities also must update the information provided to the
Federal lessee annually. The information that must be provided on an
annual basis includes: The list of immediate or highest-level owners of
the covered entity during the preceding one-year period of Federal
occupancy or the information required to be provided relating to each
such immediate or highest-level owner.
Section 4 of the Act is not addressed in this regulation. It will
be implemented through separate rulemaking and is outlined here for
awareness. Section 4 also imposes disclosure requirements for
beneficial ownership:
Subject to the development of GSA's government-wide plan
for obtaining ownership information outlined in Section 4 of the Act,
covered entities also will be required to disclose information about
beneficial ownership. A ``beneficial owner'' is ``with respect to a
covered entity, each natural person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or
otherwise--(i) exercises control over the covered entity; or (ii) has a
substantial interest in or receives substantial economic benefits from
the assets of the covered entity.'' However, a beneficial owner of a
covered entity does not include: A minor child, a person acting as a
nominee, intermediary, custodian, or agent on behalf of another person;
a person acting solely as an employee of the covered entity and whose
control over or economic benefits from the covered entity derives
solely from the employment status of the person; a person whose only
interest in the covered entity is through a right of inheritance or a
creditor of the covered entity unless either also meets the definition
of ``beneficial owner.'' This disclosure will be addressed in a future
rule.
Comments are welcome on foreign ownership, including
beneficial ownership, with the understanding that such comments may
help inform a future regulatory action.
Additional Lease Language
Lease agreements for high-security leased space will be required to
include language that limits the access to the leased space by the
covered entity and any member of the property management company
responsible for the space without prior approval from the Federal
tenant. The Federal tenant may only grant access to the high-security
leased space (or any property or information located in the space) if
the tenant determines that access is ``clearly consistent with [its]
mission and responsibilities.'' The Federal lessee is required to have
written procedures, signed by both the Federal lessee and the covered
entity, that govern ``access to the high-security leased space in case
of emergencies that may damage the leased property.''
Government-Wide Plan for Obtaining Ownership Information
Section 4 of the Act requires GSA, in conjunction with the Office
of Management and Budget (OMB), to develop a government-wide plan for
agencies to identify all immediate, highest-level, or beneficial owners
of high-security leased spaces before
[[Page 34968]]
entering into a lease agreement with a covered entity for the
accommodation of a Federal tenant in a high-security leased space.
The plan must require the disclosure of any immediate, highest-
level, or beneficial owner that is a foreign person and notification by
the Federal lessee of high-security space to the affected Federal
tenant of such foreign ownership. The plan, however, must exclude
collecting ownership information on widely held pooled-investment
vehicles, mutual funds, trusts, or other pooled-investment vehicles.
The Act requires GSA to submit the plan to specific Congressional
committees by Dec. 31, 2021 and to implement the plan by Dec. 31, 2022.
This plan will be separately addressed in a future rule, and is not
included in this interim rule.
Unlike the direct control-based immediate owner and highest-level
owner, the Act defines the term ``beneficial owner'' to include any
person that--through a contract, arrangement, understanding,
relationship, or otherwise--exercises control over the covered entity
or has a substantial interest in or receives substantial economic
benefits from the assets of the covered entity, with some exceptions.
GSA and OMB's plan must require the Federal lessee to collect the
foreign ownership information for any immediate, highest-level, or
beneficial owner that is a foreign person and, upon such a disclosure
of foreign ownership, to notify and consult with the Federal tenant.
Implications of the Act and Related Rulemakings
This Act is one of several recent examples of congressional concern
about foreign ownership and control and congressional action in the
world of government contracting to help address potential national
security concerns. See, e.g., FY 2021 NDAA (Pub. L. 116-283), Sec.
819, Modifications to Mitigating Risks Related to Foreign Ownership,
Control, or Influence of DOD Contractors and Subcontractors; Sec. 885,
Disclosure of Beneficial Owners in Database for Federal Agency Contract
and Grant Officers; Sec. 6403, Beneficial Ownership Information
Reporting Requirements.
Covered entities already provide certain information on immediate
and highest-level ownership through the System for Award Management
registration process, per OMB Control Numbers 9000-0097 and 9000-0185.
However, covered entities will need to provide additional information
through a manual representation regarding any financing entities and
foreign ownership details for the enhanced requirements per Section 3
of the Act. Additionally, subject to the development and implementation
of GSA's government-wide plan for Section 4 of the Act, through
separate rulemaking, covered entities will need to provide disclosure
of creditors who may be deemed beneficial owners if they either
exercise control over the covered entity or have a substantial interest
in or receive substantial economic benefits from the covered entity's
assets. Therefore, property owners will need to take this provision
into account when considering financing options for leasing high-
security space to the Federal government.
II. Requirements Contained in This Rulemaking and Related Rulemakings
With this rule, GSA is implementing Section 3 and Section 5 of the
Act.
Section 3--
Requires Federal lessees for high-security leased space to
require covered entities to identify and disclose whether the owner of
the leased space, including an entity involved in the financing
thereof, is a foreign person or a foreign entity, including the country
associated with the ownership entity, before entering into a lease
agreement. Covered entities must provide Federal lessees such
information--
[cir] when first submitting proposals in response to a solicitation
for offers issued by the lessee; and
[cir] annually, to include the list of immediate or highest level
owners of the covered entity during the preceding one-year period of
occupancy.
Requires the Federal lessee to notify the Federal tenant
in writing if such a disclosure of foreign ownership is made and
consult with the tenant regarding any security concerns prior to
awarding a new lease agreement.
Section 5--
Requires that leases for high-security space include
certain language regarding access to the high-security leased space by
the covered entity and any member of the property management company.
Section 4 of the Act requires the identification of beneficial
owners of high-security leased spaces and will be addressed in a
subsequent rulemaking through GSAR Case 2021-G522 and FMR Case 2021-
102-1. In addition, the FAR Council has opened FAR Case 2021-005 which
will implement sections 885 and 6403 of the NDAA for FY 2021 (Pub. L.
116-283) to require certain offerors to disclose beneficial ownership
information in their offers for contracts over the simplified
acquisition threshold.
Finally, other agencies may need to do additional rulemaking
because the GSAR only governs the contract terms and conditions for
leased space procured by GSA and its delegated agencies.
III. Authority for This Rulemaking
Title 40 of the United States Code (U.S.C.) Section 121 authorizes
GSA to issue regulations, including in the GSAR, to control the
relationship between GSA and contractors. In addition, the Secure
Federal LEASEs Act, authorizes the collection of ownership information
for high-security leased space.
IV. New GSAR Requirements
With this rule, GSA is implementing one new GSAR representation and
one new GSAR clause. The new representation is 552.270-33 (Foreign
Ownership and Financing Representation for High-Security Leased Space)
and the new clause is 552.270-34 (Access to Limitations for High-
Security Leased Space). Both apply to new lease awards, the exercise of
options for current leases, lease extensions, and ownership changes for
high-security leased space. Except where otherwise provided, the Act's
disclosure requirements shall apply with respect to any lease or
novation agreement entered into on or after June 30, 2021, involving
high-security leased space. That includes new, renewal, succeeding,
expansion, superseding, extension, and replacing leases and novations.
The new GSAR representation implemented in 552.270-33 requires
offerors for high-security leased space to identify whether the
immediate owner, highest-level owner, or an entity involved in the
financing of the lease is foreign-owned. If so, they must represent the
associated country. Awardees will also be required to re-represent on
an annual basis. This representation also applies upon extensions,
exercise of renewal options and change of ownership/novations.
The new GSAR clause at 552.270-34 requires lessors for high-
security leased space to limit access to the space unless approved by
an authorized Government representative.
V. Expected Impact of the Rule
GSA anticipates that this rule will have an impact on current
Federal lessors of high-security leased space, future potential lessors
of high-security leased space, and the Federal lessor
[[Page 34969]]
industry of high-security leased space. The rule seeks to ensure
effective implementation and enforcement of the national security
measures imposed by the Secure Federal LEASEs Act with minimal
disruption to the mission of GSA and its Federal tenants and Federal
lessors. As set forth in Section VI.(d) below, GSA recognizes the
benefits that will result from this rule.
GSA notes that this rule is one of several actions with regard to
the Secure Federal LEASEs Act and other statutes regarding foreign
ownership by GSA, other agencies with lease authority promulgating
their own rules, and by the FAR Council. GSA understands that the
impact of actions dealing with foreign ownership, including
specifically beneficial owners, is not well understood and is still
being assessed.
In addition, while this interim rule, specific to Sections 3 and 5
of the Secure Federal LEASEs Act, will be effective June 30, 2021, GSA
is seeking public comment, including, as indicated below, on the
potential impact of this rule on Federal lessors. After considering the
comments received, a final rule will be issued, taking into account and
addressing the public comments, as well as helping to shape
implementation of future rules like beneficial ownership. GSA plans to
share public comments received on such questions with other agencies
and the FAR Council.
VI. Regulatory Impact Analysis
The cost and benefit impacts of amending the General Services
Administration Acquisition Regulation (GSAR) to implement certain
requirements outlined in the Secure Federal LEASEs Act (SFLA) (Pub. L.
116-276) are discussed in the analysis below. This analysis was
developed by GSA in consultation with agency procurement officials and
the GSA Office of Leasing. Section VI.(h) of this rule is requesting
specific feedback regarding the impact of this rule, as well as other
pertinent policy questions of interest, in order to inform finalization
of this and potential future subsequent rulemakings.
(a) Risks to Industry of Not Complying With SFLA
As a strictly contractual matter, an organization's failure to
submit an accurate representation to the Government constitutes a
breach of contract that can lead to cancellation, termination, and
financial consequences. Therefore, it is important for contractors to
develop a compliance plan that will allow them to submit accurate
representations to the Government in the course of their offers.
GSA notes that this interim rule does not authorize GSA lease
contracting officers to use the information disclosed by offerors as a
differentiating factor for selection of a lease award, nor does it
authorize GSA to terminate a lease, prevent a novation, or otherwise
decline to make an award based on the disclosure. As such, GSA
estimates that this rule will not result in these activities, and
therefore no moving costs have been included in this regulatory impact
analysis.
(b) Contractor Actions Needed for Compliance
GSA assumes that most Federal lessors maintaining high-security
leased space or Federal lessors that are competing for solicitations
for high-security leased space are already familiar with the majority
of the requirements of this rule, or, similarly, will not find the
requirements of this interim rule as anything significantly more than
what is currently expected. GSA previously implemented ownership
disclosures requirements through internal policy \2\, GSA's Request for
Lease Proposals (or solicitations), and GSA's guidance through its
public-facing Leasing Desk Guide \3\ and Leasing Alerts and Lease
Acquisition Circulars.\4\
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\2\ In March 2017, GSA's Office of Leasing issued Leasing Alert
LA-FY17-06 requiring Lease Contracting Officers (LCOs) to determine
whether the ownership of leased space is identified as a foreign-
owned entity and to notify the client agency in such instances, so
that the agency can take any needed security mitigation measures.
The Leasing Alert outlined the procedures to make this determination
which involved a review of the entity's SAM registration; the
Leasing Alert also required this review for all lease procurements
and novations, regardless of the Facility Security Level (FSL).
In October 2018, GSA added a ``Foreign Ownership and Financing
Representation,'' to be included with all Request for Lease
Proposals (RLP) packages issued for prospectus-level lease projects.
This ``paper'' representation required the offeror to confirm both
foreign ownership and foreign financing.
\3\ GSA' Leasing Desk Guide (Desk Guide).
\4\ GSA's Leasing Alerts and Lease Acquisition Circulars (LAC).
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(1) GSA Leasing--Current Processes
Regardless of who owns the leased space, Federal agencies are
already taking risk management measures appropriate for the security
level of the space. The GSA Leasing Desk Guide \5\ outlines
requirements and standards for new and replacement space. In Chapter 19
(issued in 2012), it provides instructions for competitive procurements
based on the Interagency Security Committee (ISC),\6\ Physical Security
Standards, and it outlines the Public Buildings Service's (PBS)
responsibilities for performing background investigations on the
lessors' contractors.
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\5\ The Desk Guide chapters contain authorities, policies,
technical and procedural guides, and administrative limitations
governing the acquisition by lease of real property. Chapter 19 is
specific to security requirements.
\6\ A Federal committee dedicated to the protection of Federal
civilian facilities in the United States. It has 21 primary member
agencies and 30 associate member agencies. The ISC has developed
standards applicable to all civilian Federal facilities, including
leased facilities.
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In addition, a 2018 GSA Leasing Alert,\7\ provided required and
recommended measures for lessors related to cybersecurity protections
and precautions in leased facilities. It establishes lease language
that prohibits lessors from connecting any portion of their building
and access control systems (BACS) to any federally-owned or operated IT
network and requires notification for cybersecurity incidents that
impact a federal tenant's safety, security, or proper functioning. The
lease language also outlines recommended cybersecurity measures that
lessors are encouraged to follow.
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\7\ LA-FY18-05, Cybersecurity Measures for Leased Facilities.
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Lessors are already currently required to report certain ownership
information. As previously outlined, GSA currently uses information
contained in the System for Award Management (SAM) to collect foreign
ownership information for potential lessors, including immediate or
highest-level owners, and provides such information to tenant agencies.
While this rule requires additional information related to the lessor's
financing, the review of immediate or highest-level owner detail has
already been in place and is a requirement Federal lessor's are
familiar with.
(2) GSA Leasing--General Security Framework
As outlined in the GSA Leasing Desk Guide, the facility security
level (FSL) \8\ for each space requirement is set by the Department of
Homeland Security- Federal Protective Service (FPS) and the client
agency, in consultation with the GSA as part of the requirements
development phase of a lease acquisition. If the client agency and FPS
have not already conferred, GSA must coordinate with the necessary
parties to set the appropriate level of security before the
solicitation is drafted. The Desk Guide states that GSA Leasing
[[Page 34970]]
acquisition members must maintain contact as necessary with the
appropriate FPS inspector throughout the lease administration. The
facility security level designation does not change solely based on
lessor ownership information collected via this rule.
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\8\ A categorization based on the analysis of several security-
related facility factors, which serves as the basis for the
implementation of countermeasures specified in ISC standards. (CISA
ISC Standard, March 2021).
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(3) GSA Leasing--Determining Countermeasures
GSA follows the Interagency Security Committee (ISC) provided
standard for Physical Security Criteria (PSC) for Federal Facilities.
This standard establishes baseline physical security measures for each
FSL. This standard defines the process for determining the appropriate
security measures; it also covers any uncommon measures required to
address the unique risks at a particular facility. The GSA Desk Guide
currently uses the PSC to prescribe the process for determining
appropriate countermeasures for a facility. Adherence to this process
(1) ensures that all security criteria will be considered; (2) defines
the relationship between the levels of risk determined for each
undesirable event and; (3) mitigates risk through countermeasures that
provide a commensurate Level of Protection (LOP). The lessor ownership
information does not affect the PSCs for Federal Facilities and
therefore GSA does not anticipate this rule to have a significant
impact on the security standards used by GSA tenants.
(c) Compliance Plan Estimated Due to Interim Rule
GSA assumes the following steps would most likely be part of a
lessor's plan that would need to be developed by any entity to stay in
compliance with the new representation clause at GSAR 552.270-33 and
other clause at GSAR 552.207-34 being implemented by this rule:
1. Regulatory Familiarization. The entity must read and understand
the GSAR rules and the resulting necessary actions for compliance.
2. Workforce Training. The entity must educate its purchasing/
procurement professionals \9\ to ensure that they are familiar with the
representation and clause and their disclosure requirements (as
applicable).
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\9\ GSA estimates that the purchasing/procurement professional
requiring training as a result of this rule on average would be
equal to a mid-career professional. The equivalent labor category
used to capture cost estimates therefore is a GS-12 Step 5, or
Journeyman Level 1.
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3. Compliance with Clauses. The entity must identify and disclose
whether the immediate or highest-level owner of the leased space,
including an entity involved in the financing thereof, is a foreign
person or a foreign entity, including the country associated with the
ownership entity. If a disclosure is made, the Federal lessee shall
notify the Federal tenant of the building or other improvement that
will be used for high-security space in writing, and consult with the
Federal tenant regarding security concerns and necessary mitigation
measures, if any, prior to award of the lease or approval of the
novation agreement.
(d) Benefits
This Act requires the identification of all individuals who own or
benefit from partial ownership of a property that will be leased by the
federal government for high-security use. The statute is in response to
a 2017 Government Accountability Office (GAO) report which indicated
that Federal agencies were vulnerable to espionage and other intrusions
because foreign actors could gain unauthorized access to spaces used
for classified operations or to store sensitive data. Agencies store
law enforcement evidence and other sensitive data and are often unaware
of foreign ownership of their office spaces. While many of the foreign
owners identified in the 2017 GAO report were companies based in allied
countries such as Canada, Norway, Japan or South Korea, other
properties were owned and managed by entities based in more adversarial
nations. The report noted Chinese-owned properties, in particular,
presented security challenges because of the country's proclivity for
cyberespionage and the close ties between private sector companies and
the Chinese government. The GAO report highlighted the dangers posed by
these properties, indicating that ``leasing space in foreign-owned
buildings could present security risks such as espionage, unauthorized
cyber and physical access to the facilities, and sabotage.''
The United States faces an expanding array of foreign intelligence
threats by adversaries who are using increasingly sophisticated methods
to harm the Nation.\10\ Threats to the United States posed by foreign
intelligence entities are becoming more complex and harmful to U.S.
interests.\11\ Foreign intelligence actors are employing innovative
combinations of traditional spying, economic espionage, and supply
chain and cyber operations to gain access to critical infrastructure,
and steal sensitive information and industrial secrets.\12\ The
exploitation of key supply chains by foreign adversaries represents a
complex and growing threat to strategically important U.S. economic
sectors and critical infrastructure.\13\
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\10\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\11\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\12\ National Counterintelligence Strategy of the United States
of America 2020-2022.
\13\ National Counterintelligence Strategy of the United States
of America 2020-2022.
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Additionally, by requiring ``Financing Entity'' information in the
representation clause, GSA will benefit by better understanding the
source of funds used to finance projects. Risks associated with
financing, such as money laundering, involve disguising financial
assets so they can be used without detection of the illegal activity
that produced them.\14\ These transactions further shield the entity
from a recorded connection to the funds by providing a plausible
explanation for the source of the funds.\15\ Typical examples used for
this type of activity include the purchase and resale of real estate,
investment securities, foreign trusts, or other assets.\16\ By
collecting this information, GSA will be able to share more transparent
information on foreign financing of leases with tenant agencies.
---------------------------------------------------------------------------
\14\ Government Accountability Office Report ((GAO-17-195), GSA
Should Inform Tenant Agencies When Leasing High-Security Space from
Foreign Owners, dated January 2017.
\15\ Government Accountability Office Report ((GAO-17-195), GSA
Should Inform Tenant Agencies When Leasing High-Security Space from
Foreign Owners, dated January 2017.
\16\ Government Accountability Office Report ((GAO-17-195), GSA
Should Inform Tenant Agencies When Leasing High-Security Space from
Foreign Owners, dated January 2017.
---------------------------------------------------------------------------
The goal of the Act is to close security loopholes by directing the
GSA to design a verification system that identifies a property's owners
if the space would be used for high-security purposes. While GSA and
other Federal agencies have made positive changes in response to GAO's
2017 report, this rule will help support current best practices being
followed more uniformly throughout the Federal government.
Finally, this Act ensures that GSA (and all agencies particularly
with independent leasing authority) will have the ability to obtain
information on foreign ownership and provide it to relevant Federal
tenants.
(e) Public Costs
During the first and subsequent years after publication of the
rule, lessors will need to learn about the clauses and its
requirements. GSA estimates this cost by multiplying the time required
to review the regulations and guidance implementing the rule by the
estimated compensation of a purchasing/
[[Page 34971]]
procurement mid-career professional. The equivalent labor category used
to capture cost estimates therefore is a GS-12 Step 5.
A. To estimate the aggregate burden to Government lessors of
complying with the rule, the number of lessors that will be impacted
was calculated using numbers pulled from GSA's records and
databases.\17\ As of June 2021, GSA has approximately 7,860 leases
totaling approximately 183,000,000 in Rentable Square Footage (RSF) and
approximately $5,600,000,000 in annual rent ($2,800,000,000 of that
total represents small entities). Of the 7,860, approximately 1,263
\18\ (or 16 percent) of the leases are for high-security lease space
(lease space in a facility with a security level of III, IV, or V)
totaling approximately 87,000,000 in RSF and approximately
$3,000,000,000 in annual rent. Approximately 68 percent \19\ of the
leasing entities are small entities. High-security leases with these
small entities represents $1,370,000,000 in annual rent covering
approximately 37,000,000 RSF.
---------------------------------------------------------------------------
\17\ If not otherwise stated, numbers related to leases are
provided by the GSA Office of Leasing through surveying their
internal databases.
\18\ The GSA Office of Leasing provided this number by surveying
their internal database.
\19\ This information is based on internal inventory data
sources provided by the GSA Office of Leasing.
---------------------------------------------------------------------------
B. GSA also delegates leasing authority to several agencies, which
are required to follow GSA's policies. GSA estimates there are 1,300
\20\ buildings represented by these agencies with Delegated Leasing
Authority \21\ from GSA. GSA does not have data available that
identifies which of these are for high-security lease space. GSA
assumes that these delegated agencies have a similar profile to GSA's
for high-security leased space to total portfolio space, i.e., 16
percent. This would bring the total number of high-security lease space
for delegated agencies to 208 (1,300 x 16 percent). GSA also assumes
the same profile for small entities of 68 percent.
---------------------------------------------------------------------------
\20\ This information is based on internal inventory data
sources provided by the GSA Office of Leasing.
\21\ Federal Management Regulation (FMR) Bulletin 2008-B1 limits
the square footage permissible under a General Purpose lease
delegation to 19,999 usable ANSI/BOMA (``ABOA'') square feet of
space; since FSL designations are tied to square footage in addition
to other factors,this estimate is likely higher than actual.
---------------------------------------------------------------------------
C. Based on historical data maintained by GSA's Office of Leasing,
GSA estimates that 6 percent of its high-security leased space will be
solicited for a new contract each year (6 percent of 1,263 = 76
leases). These solicitations result from a mix of expiring high-
security leases or new requirements for high-security facilities. GSA
assumes these trends will continue for the time horizon outlined by
this regulatory impact. Based on historic bid rates and high current
vacancy levels, GSA further estimates that 3 lessors will make offers
for these high-security lease procurement for a total of 228 offers (76
high-security leases awarded * 3 lessors competing for each
solicitation. 76 * 3 = 228) GSA assumes the same profile for delegated
facilities.
D. Since 2014, GSA has averaged approximately 31 renewal options
per year for high-security leases (equal to approximately 17 percent of
all renewals options during the same period) and averaged approximately
106 extensions for existing high-security leases (also equal to
approximately 17 percent of all extensions during the same period). GSA
assumes the same trend will continue in subsequent years. GSA assumes
the same profile for delegated facilities.
E. GSA processed 380 novations from May 1, 2020 to April 30, 2021
22 23 (therefore approximately 5 percent of leases resulted
in a novation (380/7,860)). GSA does not have data on how many of those
were related to FSL III, IV, or V. GSA will assume 16 percent of those
novations were for FSL III, IV, or V leases. Therefore, it is assumed
61 novations were processed for high-security leases in the last year.
---------------------------------------------------------------------------
\22\ This information is based on internal inventory data
sources provided by the GSA Office of Leasing.
\23\ GSA does notg have data on how many novation other agencies
with Delegated Leasing Authority processed.
---------------------------------------------------------------------------
A breakdown is provided in the table below.
----------------------------------------------------------------------------------------------------------------
Delegated
Par above GSA authority
agencies
----------------------------------------------------------------------------------------------------------------
A,B................................... Leased Space...................... 7,860 1,300
A,B................................... High-Security (HS) Space Leases 1,263 208
(16 percent).
Total HS Portfolio............. 1,263 208
-------------------------------------
Existing HS Lease Baseline........ 1,263 208
----------------------------------------------------------------------------------------------------------------
Combined HS Lease Baseline........ 1,471 (1,263 + 208)
-------------------------------------
C..................................... New Procurements (6 percent HS)... 76 12
C..................................... New Offers (x3)................... 228 36
Total New Responses............... 228 36
D..................................... Renewals (17 percent HS).......... 31 35
D..................................... Extensions (17 percent HS)........ 106 35
E..................................... Novations (5 percent Leases)...... 380 65
E..................................... High-Security Space Novations (16 61 10
percent).
-------------------------------------
Total HS Novations................ 61 10
----------------------------------------------------------------------------------------------------------------
New HS Lease Baseline............. 426 116
(228+31+106+61) (36+35+35+10)
----------------------------------------------------------------------------------------------------------------
Combined New HS Lease Baseline.... 542 (426 + 116)
----------------------------------------------------------------------------------------------------------------
[[Page 34972]]
Steps to Compliance
1. Regulatory Familiarization
Below is a list of compliance activities related to regulatory
familiarization that GSA anticipates will occur:
a. Familiarization With GSAR 552.270-33, Foreign Ownership and
Financing Representation for High-Security Leased Space
i. GSA estimates that it will take existing high-security lessors
approximately 3 hours \24\ each to familiarize themselves with the new
GSAR representation. Therefore, GSA calculated the total estimated cost
for this part of the rule to be $372,000 \25\ (= 3 hours x $84.16 \26\
x 1,471). Of the 1,471 lessors impacted by this part of the rule, GSA
assumes that 68 percent, or approximately 1,000 lessors, are small
entities.
---------------------------------------------------------------------------
\24\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
\25\ Totals are rounded.
\26\ This hourly rate, $84.16, is the 2021 GS rate for a GS-12
Step 5 of $42.08 per hour (using the rate for the rest of the United
States) adjusted upward by 100 percent to account for fringe
benefits and overhead.
---------------------------------------------------------------------------
After the initial familiarization in the first year for each
current awardee or subsequent awardee, GSA estimates it will take 15
minutes (0.25 hours \27\) to stay familiar with the representation.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $31,000 (= 0.25 hours x $84.16 x 1,471).
---------------------------------------------------------------------------
\27\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
ii. GSA estimates that new high-security lessors each year will
take approximately 3 hours \28\ each to familiarize themselves with the
new GSAR representation. Therefore, GSA calculated the total estimated
cost for this part of the rule to be $137,000 \29\ (= 3 hours x $84.16
x 542). Of the 542 lessors impacted by this part of the rule, GSA
assumes that 68 percent, or approximately 369 lessors, are small
entities.
---------------------------------------------------------------------------
\28\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
\29\ Totals are rounded.
---------------------------------------------------------------------------
b. Familiarization With GSAR 552.270-34, Access to Limitations for
High-Security Leased Space
i. GSA estimates that it will take existing high-security lessors
approximately 2 hours \30\ each to familiarize themselves with the
clause at GSAR 552.270-34. Therefore, GSA calculated the total
estimated cost for this part of the rule to be $248,000 (= 2 hours x
$84.16 x 1,471). Of the 1,471 lessors impacted by this part of the
rule, GSA assumes that 68 percent, or approximately 1,000 lessors, are
unique small entities.
---------------------------------------------------------------------------
\30\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
After the initial familiarization in the first year for each
current awardee or subsequent awardee, GSA estimates it will take 15
minutes (0.25 hours \31\) to stay familiar with the representation.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $31,000 (= 0.25 hours x $84.16 x 1,471).
---------------------------------------------------------------------------
\31\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
ii. GSA estimates that new high-security lessors each year will
take approximately 2 hours \32\ each to familiarize themselves with the
clause at GSAR 552.270-34. Therefore, GSA calculated the total
estimated cost for this part of the rule to be $108,000 (= 2 hours x
$84.16 x 542). Of the 542 lessors impacted by this part of the rule,
GSA assumes that 68 percent, or approximately 369 lessors, are small
entities.
---------------------------------------------------------------------------
\32\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
The total estimated cost to become familiar with the representation
clause (GSAR 552.270-33) and the other new clause (GSAR 552.270-34) is
estimated to be $619,000 for the existing high-security lessors. In
subsequent years, this cost is estimated to be $290,000 for new high-
security lessors annually.
2. Implementation of Workforce Training
The entity must educate its purchasing/procurement professionals to
ensure that they are familiar with the representation and clause and
their disclosure requirements (as applicable).
a. GSA estimates that it will take existing high-security lessors
approximately 6 hours \33\ each to train their workforce on the
representation clause at GSAR 552.270-33 and the GSAR clause at
552.270-34. Therefore, GSA calculated the total estimated cost for this
part of the rule to be $743,000 (= 6 hours x $84.16 x 1,471). Of the
1,263 lessors impacted by this part of the rule, GSA assumes that 68
percent, or approximately 1,000 lessors, are small entities.
---------------------------------------------------------------------------
\33\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
After the initial training in the first year for each current
awardee or subsequent awardee, GSA estimates it will take 30 minutes
(0.50 hours \34\) to conduct continuing additional workforce training.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $62,000 (= 0.50 hours x $84.16 x 1,471).
---------------------------------------------------------------------------
\34\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
b. GSA estimates that new high-security lessors each year will take
approximately 6 hours each to train their workforce on the
representation clause at GSAR 552.270-33 and the GSAR clause at
552.270-34. Therefore, GSA calculated the total estimated cost for this
part of the rule to be $274,000 (= 6 hours x $84.16 x 542). Of the 542
lessors impacted by this part of the rule, GSA assumes that 68 percent,
or approximately 369 lessors, are small entities.
The total estimated cost to implement workforce training for the
representation clause (GSAR 552.270-33) and the access limitation
clause (GSAR 552.270-34) is estimated to be $743,000 for the existing
high-security lessors. In subsequent years, this cost is estimated to
be $336,000 for new high-security lessors annually.
3. Compliance With Clauses
a. GSAR 552.270-33, Foreign Ownership and Financing Representation for
High-Security Leased Space
i. GSA estimates that it will take existing high-security lessors
approximately 2 hours \35\ each to
[[Page 34973]]
complete the representation at sections (c)(1), (d)(1), and (e)(1)
(essentially no required disclosures required) of the representation
clause. Therefore, GSA calculated the total estimated cost for this
part of the rule to be $248,000 (= 2 hours x $84.16 x 1,471). Of the
1,471 lessors impacted by this part of the rule, GSA assumes that 68
percent, or approximately 1000 lessors, are small entities.
---------------------------------------------------------------------------
\35\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
ii. GSA estimates that new high-security lessors each year will
take approximately 2 hours each to complete the representation at
sections (c)(1), (d)(1), and (e)(1) (essentially no required
disclosures required) of the representation clause. Therefore, GSA
calculated the total estimated cost for this part of the rule to be
$91,000 (= 2 hours x $84.16 x 542). Of the 542 lessors impacted by this
part of the rule, GSA assumes that 68 percent, or approximately 369
lessors, are small entities.
iii. GSA further estimates that of the existing high-security
lessors, 10 percent \36\ (or 147 lessors) will respond affirmatively to
one or more sections at (c)(1), (d)(1), and (e)(1) of the
representation clause that the offeror ``does'' have an ``immediate
owner'', and/or ``is'' owned or controlled by another entity (or
``highest owner''), and/or ``does'' involve a ``foreign entity'' and
will be required to complete additional section at (c)(2) and (c)(3),
potentially (c)(4), (d)(2) and (d)(3), potentially (d)(4), and (e)(2).
GSA estimates that it will take these offerors an additional 10 hours
\37\ to complete those various sections of the representation clause.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $124,000 (= 10 hours x $84.16 x 147). Of the 147 lessors
impacted by this part of the rule, GSA assumes that 68 percent, or
approximately 100 lessors, are unique small entities.
---------------------------------------------------------------------------
\36\ The amount of lessors impacted is an assumption based on
subject matter expert judgment.
\37\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
iv. GSA estimates that of the new high-security lessors each year,
10 percent \38\ (or 54 lessors) will respond affirmatively to one or
more sections at (c)(1), (d)(1), and (e)(1) of the representation
clause that the offeror ``does'' have an ``immediate owner'', and/or
``is'' owned or controlled by another entity (or ``highest owner''),
and/or ``does'' involve a ``foreign entity'' and will be required to
complete additional sections at (c)(2) and (c)(3), potentially (c)(4),
(d)(2) and (d)(3), potentially (d)(4), and (e)(2). Thus, approximately
54 lessors (10 percent of 542) need to fully complete GSAR 552.270-33.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $45,000 (= 10 hours x $84.16 x 54). Of the 54 lessors
impacted by this part of the rule, GSA assumes that 68 percent, or
approximately 37 lessors, are small entities.
---------------------------------------------------------------------------
\38\ The amount of lessors impacted is an assumption based on
subject matter expert judgment.
---------------------------------------------------------------------------
After the existing and new high-security lessors complete the
representations, GSA estimates it will take 15 minutes (0.25 hours
\39\) to update any information as necessary and as required annually.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $34,000 (= [0.25 hours x $84.16 x 1,471] + [.25 x $84.16 x
147]).
---------------------------------------------------------------------------
\39\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
b. GSAR 552.270-34, Access to Limitations for High-Security Leased
Space
i. GSAR 552.270-34 requires lessors for high-security leased space
to limit access to the space unless approved by an authorized
Government representative. GSA estimates that 10 percent of lessors, or
147 (10 percent of 1,471) will request approval once per lease and will
take an estimated 3 hours \40\ to submit each request. Therefore, GSA
calculated the total estimated cost for this part of the rule to be
$37,000 (= 3 hours x $84.16 x 147). Of the 147 lessors impacted by this
part of the rule, GSA assumes that 68 percent, or 100 lessors, are
small entities.
---------------------------------------------------------------------------
\40\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
ii. GSA estimates that 10 percent, or 54 (10 percent of 542) of new
high-security lessors each year will request approval once per lease
and will take an estimated 3 hours \41\ to submit each request.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $14,000 (= 3 hours x $84.16 x 54). Of the 54 lessors
impacted by this part of the rule, GSA assumes that 68 percent, or 37
lessors, are small entities.
---------------------------------------------------------------------------
\41\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
iii. GSA acknowledges that existing high-security lessors will be
required to establish written procedures, as documented in the
Government's Occupant Emergency Plan, governing access to the high-
security leased space in case of emergencies. GSA estimates that
reviewing these procedures will take approximately 3 hours.\42\
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $371,000 (= 3 hours x $84.16 x 1,471). Of the 1,471 lessors
impacted by this part of the rule, GSA assumes that 68 percent, or
approximately 1000 lessors, are small entities.
---------------------------------------------------------------------------
\42\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
iv. GSA acknowledges that new high-security lessors will be
required to sign written procedures, as documented in the Government's
Occupant Emergency Plan, governing access to the high-security leased
space in case of emergencies. GSA estimates that reviewing these
procedures will take approximately 3 hours.\43\ Therefore, GSA
calculated the total estimated cost for this part of the rule to be
$137,000 (= 3 hours x $84.16 x 542). Of the 542 lessors impacted by
this part of the rule, GSA assumes that 68 percent, or 369 lessors, are
small entities.
---------------------------------------------------------------------------
\43\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
After the existing high-security lessors initially establishes the
written procedures, GSA estimates it will take 15 minutes (0.25 hours
\44\) to update any information as necessary. Therefore, GSA calculated
the total estimated cost for this part of the rule to be $31,000 (=
0.25 hours x $84.16 x 1,471).
---------------------------------------------------------------------------
\44\ The hours estimated are an assumption based on historical
familiarization hours and subject matter expert judgement. Subject
matter experts include representatives from GSA's Office of Leasing,
including Realty Specialists and Leasing Contracting Officers.
---------------------------------------------------------------------------
The total estimated cost to complete both the representations and
the clause is estimated to be $780,000 the existing high-security
lessors. In subsequent years, this cost is estimated to be $351,000 for
new high-security lessors annually.
4. Public Total Costs
The total cost of the above Cost Estimate is $2,100,000 in the
first year
[[Page 34974]]
after publication. The total cost of the above Cost Estimate in
subsequent years is $977,000 annually.
The following is a summary of the estimated costs calculated for a
10 year time horizon in perpetuity at a 3- and 7-percent discount rate:
------------------------------------------------------------------------
Summary Total costs
------------------------------------------------------------------------
Present Value (3 percent).................................. $9,500,000
Annualized Costs (3 percent)............................... 1,100,000
Present Value (7 percent).................................. 7,950,000
Annualized Costs (7 percent)............................... 1,330,000
------------------------------------------------------------------------
GSA notes that this interim rule does not authorize GSA lease
contracting officers to use the information disclosed by offerors as a
differentiating factor for selection of a lease award, nor does it
authorize GSA to terminate a lease, prevent a novation, or otherwise
decline to make an award based on the disclosure. As such, GSA
estimates that this rule will not result in these activities, and
therefore no moving costs have been included in this regulatory impact
analysis.
GSA acknowledges that there is uncertainty underlying these
estimates, including elements for which an estimate is unavailable
given inadequate information. As more information becomes available,
including through comment in response to this notice, GSA will seek to
update these estimates which could increase the estimated costs.
(f) Government Cost Analysis
During the first and subsequent years after publication of the
rule, leasing acquisition members (which includes a combination of
Leasing Contracting Officers, Lease Administration Managers, Realty
Specialists, and General Counsel) will need to learn about the clauses
and its requirements. GSA estimates this cost by multiplying the time
required to review the regulations and guidance implementing the rule
by the estimated compensation, on average, of a GS-12 leasing
acquisition member. GSA assumes that leasing acquisition members will,
on average, stay consistent in subsequent years. Numbers and
assumptions apply to delegated agencies as well.
GSA anticipates several areas of impact as a result of this rule.
These impacts mirror the public impacts and will appear as regulatory
familiarization, workforce training, and time to review compliance with
clauses. These costs are justified in light of the compelling national
security objective that this rule will advance.
For consistency, the number of leases to be reviewed match the
numbers in the ``Existing HS Lease Baseline'' row (1,471 combined) and
``New annual Lease Baseline'' row (542 combined) found in table in
section VI.(e).
1. Regulatory Familiarization
a. GSA estimates that it will take approximately 516 leasing
acquisition members 1.5 hours to become familiar with the GSAR 552.270-
33 representation. Therefore, GSA calculated the total estimated cost
for this part of the rule to be $65,000 \45\ (= 1.5 hours x $84.16 x
516).
---------------------------------------------------------------------------
\45\ All totals in the Government Cost Analysis section are
rounded.
---------------------------------------------------------------------------
After the initial familiarization, GSA estimates it will take 15
minutes (0.25 hours) to stay familiar with the representation in
subsequent years. Therefore, GSA calculated the total estimated cost
for this part of the rule to be $11,000 (= 0.25 hours x $84.16 x 516).
b. GSA estimates that it will take approximately 516 leasing
acquisition members 30 minutes (0.5 hours) to become familiar with the
GSAR 552.270-34 representation. Therefore, GSA calculated the total
estimated cost for this part of the rule to be $22,000 (= 0.50 hours x
$84.16 x 516).
After the initial familiarization, GSA estimates it will take 6
minutes (0.10 hours) to stay familiar with the representation in
subsequent years. Therefore, GSA calculated the total estimated cost
for this part of the rule to be $4,300 (= 0.10 hours x $84.16 x 516).
2. Workforce Training
The Government must educate its leasing acquisition members to
ensure that they are familiar with the representation and clause and
how to review and act on the submitted information, access requests,
and written procedures.
a. GSA estimates that it will take approximately 516 leasing
acquisition members 1 hour to complete training related GSAR 552.270-33
representation. Therefore, GSA calculated the total estimated cost for
this part of the rule to be $43,000 (= 1 hours x $84.16 x 516).
After the initial training, GSA estimates it will take 6 minutes
(0.10 hours) to maintain training related to the representation.
Therefore, GSA calculated the total estimated cost for this part of the
rule to be $4,300 (= 0.10 hours x $84.16 x 516).
b. GSA estimates that it will take approximately 516 leasing
acquisition members 30 minutes (0.50 hours) to complete training
related to the GSAR 552.270-34 clause. Therefore, GSA calculated the
total estimated cost for this part of the rule to be $22,000 (= 0.50
hours x $84.16 x 516).
After the initial training, GSA estimates it will take 3 minutes
(0.05 hours) to maintain training related to the clause. Therefore, GSA
calculated the total estimated cost for this part of the rule to be
$2,200 (= 0.05 hours x $84.16 x 516).
3. Review of Compliance With Clauses
The primary cost to GSA will be to review the representations
required by GSAR 552.270-33 and the compliance with GSAR 552.270-34.
a. GSAR 552.270-33, Foreign Ownership and Financing Representation for
High-Security Leased Space
i. GSA estimates that it will take leasing acquisition members
approximately 6 minutes (0.10 hours) to review the representation at
sections (c)(1), (d)(1), and (e)(1) (essentially no required
disclosures required) of the representation clause at GSAR 552.270-33
for existing high-security lessors. Therefore, GSA calculated the total
estimated cost for this part of the rule to be $12,000 (= 0.10 hours x
$84.16 x 1,471).
ii. GSA estimates that for new high-security lessors each year, it
will take leasing acquisition members approximately 6 minutes (0.10
hours) to review the representation at sections (c)(1), (d)(1), and
(e)(1) (essentially no required disclosures required). Therefore, GSA
calculated the total estimated cost for this part of the rule to be
$4,600 (= 0.10 hours x $84.16 x 542).
iii. GSA estimates that for existing high-security lessors, 10
percent (or 147 lessors) will respond affirmatively to one or more
sections at (c)(1), (d)(1), and (e)(1) of the representation clause
that the offeror ``does'' have an ``immediate owner'', and/or ``is''
owned or controlled by another entity (or ``highest owner''), and/or
``does'' involve a ``foreign entity'' and will be required to complete
additional sections at (c)(2) and (c)(3), potentially (c)(4), (d)(2)
and (d)(3), potentially (d)(4), and (e)(2). GSA estimates that it will
take leasing acquisition members 5 hours to complete the reviews on
those various sections of the representation clause, notify the Federal
tenant of the building or other improvement of any security concerns
and necessary mitigation measures (if any) prior to award or approval
of a novation agreement. Therefore, GSA calculated the total
[[Page 34975]]
estimated cost for this part of the rule to be $62,000 (= 5 hours x
$84.16 x 147).
iv. GSA estimates 10 percent, or 54 lessors, of new high-security
lessors each year will respond affirmatively to one or more sections at
(c)(1), (d)(1), and (e)(1) of the representation clause that the
offeror ``does'' have an ``immediate owner'', and/or ``is'' owned or
controlled by another entity (or ``highest owner''), and/or ``does''
involve a ``foreign entity'' and will be required to complete
additional sections at (c)(2) and (c)(3), potentially (c)(4), (d)(2)
and (d)(3), potentially (d)(4), and (e)(2). GSA estimates that it will
take leasing acquisition members 5 hours to complete the reviews on
those various sections of the representation clause, notify the Federal
tenant of the building or other improvement of any security concerns
and necessary mitigation measures (if any) prior to award or approval
of a novation agreement. Therefore, GSA calculated the total estimated
cost for this part of the rule to be $23,000 (= 5 hours x $84.16 x 54).
b. GSAR 552.270-34, Access to Limitations for High-Security Leased
Space
i. GSAR 552.270-34 requires lessors for high-security leased space
to limit access to the space unless approved by an authorized
Government representative. GSA estimates that 10 percent of lessors, or
147 (10 percent of 1,471) will request approval once per lease and it
will take the leasing acquisition member an estimated 3 hours to review
and approve the request. Therefore, GSA calculated the total estimated
cost for this part of the rule to be $37,000 (= 3 hours x $84.16 x
147).
ii. GSA estimates that for new high-security lessors, 10 percent of
lessors (or approximately 54) will request approval once per lease and
it will take the leasing acquisition members an estimated 3 hours to
review and approve the request. Therefore, GSA calculated the total
estimated cost for this part of the rule to be $14,000 (= 3 hours x
$84.16 x 54).
iii. GSA acknowledges that the rule will require written
procedures, as documented in the Government's Occupant Emergency
Plan,\46\ governing access to the high-security leased space in case of
emergencies. GSA estimates that writing these procedures will take
approximately 2 hours. Therefore, GSA calculated the total estimated
cost for this part of the rule to be $248,000 (= 2 hours x $84.16 x
1,471).
---------------------------------------------------------------------------
\46\ The GSA Office of Leasing will develop a templated Plan for
all leasing acquisition members to use. Therefore, it will not
require individual development of each plan by each member. This
will lessen the burden.
---------------------------------------------------------------------------
iv. GSA acknowledges that the rule will require, for new high-
security leases, written procedures, as documented in the Government's
Occupant Emergency Plan, governing access to the high-security leased
space in case of emergencies. GSA estimates that writing these
procedures will take approximately 2 hours. Therefore, GSA calculated
the total estimated cost for this part of the rule to be $91,000 (= 2
hours x $84.16 x 542).
After the first year the rule is implemented, GSA estimates it will
take 6 minutes (0.10 hours) to update any information in the subsequent
years for the written procedures. GSA does not estimate any additional
significant burden with access requests. Therefore, GSA calculated the
total estimated cost for this part of the rule to be $12,000 (= 0.10
hours x $84.16 x 1,471).
The total estimated cost to GSA to review representations and
written procedures is estimated to be $359,000 in the first year after
publication. The total estimated cost to GSA to review representations
and written procedures annually is estimated to be $145,000.
4. Reduced Competition
GSA acknowledges both new clauses may lead to reduced competition.
Some lessors may choose to exit the Federal market, particularly
lessors that primarily lease to the private sector, because of the
additional disclosure requirements, and the subsequent reduced level of
competition may increase prices. However, estimated costs faced by
contractors represent a small fraction of lease payments, and therefore
GSA expects effects along these lines to be minimal.
5. Government Total Costs
The total cost of the above Cost Estimate is $511,000 in the first
year after publication. The total cost of the above Cost Estimate in
subsequent years is $166,000 annually.
The following is a summary of the estimated costs calculated for a
10 year time horizon at a 3- and 7-percent discount rate:
------------------------------------------------------------------------
Summary Total costs
------------------------------------------------------------------------
Present Value (3 percent).................................. $1,750,000
Annualized Costs (3 percent)............................... 205,000
Present Value (7 percent).................................. 1,488,000
Annualized Costs (7 percent)............................... 212,000
------------------------------------------------------------------------
GSA notes that this interim rule does not authorize GSA lease
contracting officers to use the information disclosed by offerors as a
differentiating factor for selection of a lease award, nor does it
authorize GSA to terminate a lease, prevent a novation, or otherwise
decline to make an award based on the disclosure. As such, GSA
estimates that this rule will not result in these activities, and
therefore no moving costs have been included for in this regulatory
impact analysis.
6. Overall Total Costs
The overall total cost of the above Cost Estimate, including both
Public and Government costs, is $2,653,000 in the first year after
publication. The overall total cost of the above Cost Estimate,
including both Public and Government costs in subsequent years, is
$1,143,000 annually.
The following is a summary of the estimated overall total costs
calculated for a 10 year time horizon at a 3- and 7-percent discount
rate inclusive of both Public and Government costs:
------------------------------------------------------------------------
Summary Total costs
------------------------------------------------------------------------
Present Value (3 percent)................................. $11,216,000
Annualized Costs (3 percent).............................. 1,315,000
Present Value (7 percent)................................. 9,439,000
Annualized Costs (7 percent).............................. 1,344,000
------------------------------------------------------------------------
(g) Analysis of Alternatives
Alternative 1: GSA could take no regulatory action to implement
this statute. However, this alternative would not provide any
implementation and enforcement of the important national security
measures imposed by the law. Moreover, the general public would not
experience the benefits of improved national security resulting from
the rule as detailed above in Section VI.(d). As a result, we reject
this alternative.
Alternative 2: GSA could take a more stringent approach to the
requirements of the Act and apply the new clauses to not only all GSA
leases and delegated leases for FSL III, IV, or V space but for all FSL
designations. However, given the relatively low levels of risk at those
facilities, as described by the ISC, compared with the costs and burden
applying this new representation clause and access clause,\47\ no
additional benefit would be gained. As a result, we reject this
alternative.
---------------------------------------------------------------------------
\47\ As this Regulatory Impact Analysis only considers 1,471
high-security leases (or approximately 16% of the GSA leasing
portfolio), it's reasonable to estimate that if the entire portfolio
was included, costs could be approximately 5X more costly than
currently shown.
---------------------------------------------------------------------------
GSA also considered issuing an acquisition letter, but concluded
the best alternative was to issue this interim rule directly
implementing the statute and allowing for public comment.
[[Page 34976]]
(h) Specific Questions for Comment
To understand the exact scope of the impact of this rule and how
this impact could be affected in subsequent rulemaking, GSA welcomes
input on the following assumptions and questions regarding anticipated
impact on affected parties.
Assumption 1: As previously stated, GSA assumes that most Federal
lessors maintaining high-security leased space or Federal lessors that
are competing for solicitations for high-security leased space are
already familiar with the majority of the requirements of this rule,
or, similarly, will not find the requirements of this interim rule as
anything significantly more than what is currently expected. GSA
previously implemented ownership disclosures requirements through
internal policy,\48\ GSA's Request for Lease Proposals (or
solicitations), GSA's guidance through its public-facing Leasing Desk
Guide,\49\ Leasing Alerts and Lease Acquisition Circulars.\50\
---------------------------------------------------------------------------
\48\ In March 2017, GSA's Office of Leasing issued Leasing Alert
LA-FY17-06 requiring Lease Contracting Officers (LCOs) to determine
whether the ownership of leased space is identified as a foreign-
owned entity and to notify the client agency in such instances, so
that the agency can take any needed security mitigation measures.
The Leasing Alert outlined the procedures to make this determination
which involved a review of the entity's SAM registration; the
Leasing Alert also required this review for all lease procurements
and novations, regardless of the Facility Security Level (FSL).
In October 2018, GSA added a ``Foreign Ownership and Financing
Representation,'' to be included with all Request for Lease
Proposals (RLP) packages issued for prospectus-level lease projects.
This ``paper'' representation required the offeror to confirm both
foreign ownership and foreign financing.
\49\ GSA' Leasing Desk Guide (Desk Guide).
\50\ GSA's Leasing Alerts and Lease Acquisition Circulars (LAC).
---------------------------------------------------------------------------
Question 1: If this assumption is not valid, to what extent are the
requirements in this rule significantly different from what GSA has
currently been doing as part of its procedures for foreign ownership
disclosure?
Assumption 2: GSA estimates that this rule will impact mainly the
Federal lessor industry.
Question 2: If this assumption is not valid, is there another
industry(s) to which this rule will cause significant impact or
disruption?
Assumption 3: The impact of this rule will not significantly change
the way current Federal lessors interact with GSA (or other Federal
agencies with independent leasing authority).
Question 3: If this assumption is not valid, to what extent will
this rule change how you interact with GSA (or other Federal agencies
with independent leasing authority)?
Assumption 4: The impact of this rule will not significantly reduce
the number of lessors competing for High-Security Leased Space
solicitations.
Question 4: If this assumption is not valid, to what extent will
this rule reduce the likelihood of you--lessor to the Federal
Government for High-Security Leased Space--from not competing for
future solicitations of High-Security Leased Space?
Assumption 5: The compliance activities, and associated costs,
estimated by GSA are stated at Section VI.(e).
Question 5: Is there a compliance activity that GSA has failed to
consider? If so, please specify the activity, explain the activity,
describe the impact of the activity, and please estimate the annual
cost of such activities and subsequent yearly activity costs.
Question 6: Is there a compliance activity that GSA has noted that
is significantly understated (in terms of annual and subsequent costs)?
If so, which compliance activity and what specifically was understated?
Please explain how the compliance activity should be estimated.
Assumption 7: Other agencies relying upon GSA's leasing authority
have similar profiles of high security leases in their inventory.
Question 7: What information is available to better estimate high
security leases in other agency inventories?
Assumption 8: GSA sufficiently detailed all compliance requirements
for the rule.
Question 9: What additional information or guidance do you view as
necessary to effectively comply with this rule?
Question 10: What other challenges do you anticipate facing in
effectively complying with this rule?
Question 11: What thoughts or observations would you like to share
regarding foreign ownership, including beneficial ownership, for GSA to
consider in subsequent rule-making?
VII. Executive Order 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 interim rule has been reviewed in accordance with E.O. 12866
Section 6(b) and determined by OMB to be a significant regulatory
action. See Section VI for a regulatory impact analysis of the rule.
VIII. Congressional Review Act
The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a ``major rule'' may take effect, the
agency promulgating the rule must submit a rule report, which includes
a copy of the rule, to each House of the Congress and to the
Comptroller General of the United States. A major rule cannot take
effect until 60 days after it is published in the Federal Register.
This interim rule has been reviewed and determined by OMB not to be a
``major rule'' under 5 U.S.C. 804(2).
IX. Regulatory Flexibility Act
The General Services Administration does not expect this interim
rule 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. However, an Initial Regulatory Flexibility Analysis
has been performed, and is summarized as follows:
The purpose of this interim rule is to implement certain
requirements outlined in the Secure Federal LEASEs Act (Pub. L. 116-
276) into the GSAR.
The objective of the rule is to prescribe appropriate policies
and procedures to address the risks of foreign ownership of
Government-leased real estate and requires the disclosure of
ownership information for high-security space leased to accommodate
a Federal agency. One new representation and one new clause have
been developed to support these policies and procedures: GSAR
552.270-33 (representation) and GSAR 552.270-34 (clause). Both will
be required in all novations, solicitations and contracts for leased
space that (1) will be occupied by Federal employees for nonmilitary
activities; and (2) have a facility security level of III, IV, or V.
A new representation requirement at GSAR 552.270-33 will be
incorporated into all new lease awards, options exercised for
current leases, lease extensions, and ownership changes for high-
security leased space. Except where otherwise provided, the
statutory disclosure requirements shall apply with respect to any
lease or novation agreement entered into on or after June 30, 2021,
involving high-security leased space. That includes new, replacing,
succeeding, and superseding leases, renewal options, extensions, and
novations. This includes actions involving small entities. The
representation requires offerors for high-security leased space to
identify whether the immediate owner, highest-level owner, or an
entity involved in the financing of the lease is foreign-owned. If
so, they must represent
[[Page 34977]]
the associated country. Awardees will also be required to re-
represent on an annual basis. This representation also applies upon
change of ownership/novations.
As of June 2021, GSA has approximately 7,860 leases in total.
Approximately 68 percent (5,345) of leasing entities were small
entities. This information is based on internal inventory data
sources. Approximately 1,263 of GSA portfolio leases are for high-
security lease space (lease space in a facility with a security
level of III, IV, or V). 76 leases per year are estimated to be
solicited for new high-security space procurements. These
solicitations result from a mix of expiring high-security leases or
new requirements for high-security facilities. Using the
approximation above (68 percent), GSA estimates that for the 1,263
lessors already maintaining leased space at a Level III, IV, or V
secure facility approximately 859 will be small entities (1,263*68
percent). If GSA includes agencies with delegated leasing authority,
the approximate number of total leases at a Level III, IV, or V is
1,471. This would increase the approximate number of small entities
to 1000 (from 859). For the estimated 76 solicitations in subsequent
years, assuming 3 offerors per solicitation, approximately 155 will
be submitted by small entities.
The clause at GSAR 552.270-34 requires lessors for high-security
leased space to limit access to the space unless approved by an
authorized Government representative.
This rule does not duplicate, overlap, or conflict with any
other Federal rules.
Because of the requirements outlined by the statute, it is not
possible to establish different compliance or reporting requirements
or timetables that take into account the resources available to
small entities or to exempt small entities from coverage of the
rule, or any part thereof. However, in order to reduce the burden
imposed on the public, GSA is currently reviewing and investigating
potential future implementation through electronic means, including
externally (System for Award Management) or internally (GSA's Lease
Offer Platform).
Entities that provide affirmative responses when completing the
representation at 552.270-33 would be required to provide additional
representation information in their offers for high-security leases.
The Regulatory Secretariat Division has submitted a copy of the
IRFA to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the IRFA may be obtained from the Regulatory
Secretariat Division. GSA invites comments from small business concerns
and other interested parties on the expected impact of this rule on
small entities.
GSA will also consider comments from small entities concerning the
existing regulations in subparts affected by the rule in accordance
with 5 U.S.C. 610. Interested parties must submit such comments
separately and should cite 5 U.S.C. 610 (GSAR Case 2021-G527) in
correspondence.
X. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. GSA has
requested, and OMB authorized, emergency processing of the collection
of information involved in this rule, consistent with 5 CFR 1320.13.
GSA has determined the following conditions have been met:
a. The collection of information is needed prior to the expiration
of time periods normally associated with a routine submission for
review under the provisions of the PRA, because the immediate and
highest level owner disclosure requirement for high-security leased
space in the Secure Federal LEASEs Act goes into effect on June 30,
2021.
b. The collection of information is essential to the mission of GSA
to ensure compliance with the Secure Federal LEASEs Act and protect the
Government supply chain from risks posed by foreign owners.
c. Moreover, GSA cannot comply with existing representations
because public harm is reasonably likely to result if current
procedures are followed. Specifically, authorizing collection of this
information will ensure that GSA does not enter into leases that are in
violation of the Secure Federal LEASEs Act or enter into, extend, or
renew leases with any entity or lessor that is in violation of the
Secure Federal LEASEs Act.
This requirement supports implementation of Section 3 of the Secure
Federal LEASEs Act (Pub. L. 116-276) for high-security leased space.
This section requires offerors to identify the immediate or highest-
level owner of the space, including any financing entity, and disclose
whether that owner or financing entity is a foreign person or entity,
including the country associated with the ownership entity. The
offerors shall (1) provide such identification and disclosure when
first submitting a proposal in response to a solicitation; and, if
awarded the lease, (2) update such information annually.
This requirement is partially implemented in the Federal
Acquisition Regulation (FAR) through the provisions at FAR 52.204-3,
Taxpayer Identification, FAR 52.204-7, System for Award Management, FAR
52.204-17, Ownership and Control of Offeror, and clause at FAR 52.204-
13, System for Award Management Maintenance. OMB Control Numbers 9000-
0097 and 9000-0185 cover the FAR provisions and clause. However, the
FAR does not account for foreign financing as required by the Act.
The annual public reporting burden for this collection of
information through GSAR 552.270-33 is estimated based on the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
The annual reporting burden is estimated as follows:
1. Initial Disclosure
Baseline Representation
Estimated annual responses: 542.
Estimated hours per response: 2.
Additional Representation
Estimated annual responses: 54.
Estimated hours per response: 10.
Total Initial Response Burden Hours: 1,624.
2. Annual Updates
Estimated annual responses: 542.
Estimated hours per response: 0.25.
Total Update Response Burden Hours: 136.
Public comments are particularly invited on: Whether this
collection of information is necessary; whether it will have practical
utility; whether our estimate of the public burden of this collection
of information is accurate, and based on valid assumptions and
methodology; ways to enhance the quality, utility, and clarity of the
information to be collected; and ways in which we can minimize the
burden of the collection of information on those who are to respond,
through the use of appropriate technological collection techniques or
other forms of information technology.
XI. Determination To Issue an Interim Rule
A determination has been made under the authority of the
Administrator of General Services (GSA) that urgent and compelling
circumstances necessitate that this interim rule go into effect earlier
than 60 days after its publication date.
Since the Secure Federal LEASEs Act was signed on December 30,
2020, GSA has been working diligently to implement the statute, which
has multiple effective dates embedded. Specifically, Section 7 requires
implementation of the Section 3 requirements by June 30, 2021.
Given the complexity of the Secure Federal LEASEs Act, this rule
required thorough efforts to reach out to other agencies and conduct
up-front analysis. These factors have left GSA with insufficient time
to publish the rule with 60 days before the legislatively established
effective date of June 30, 2021, or to complete full public notice and
comment before the rule becomes
[[Page 34978]]
effective. As noted, however, GSA is seeking public comment on this
interim rule and will consider and address those comments.
It is worth noting this rule follows FAR rules dealing with
ownership disclosure and supply chain security, such as FAR Case 2012-
024 which added FAR provision 52.204-17 and FAR Case 2019-009 which
added FAR provision 52.204-24. As such, Government agencies are already
authorized to collect certain immediate and highest-level owner
information (reference OMB Control Numbers 9000-0097 and 9000-0185).
Having an implementing regulation in place by the effective date is
important to avoid confusion, uncertainty, and potentially substantial
legal consequences for agencies and the lessor community. The statute
requires lessors to identify and disclose whether the immediate or
highest-level owner of the leased space, including an entity involved
in the financing thereof, is a foreign person or a foreign entity,
including the country associated with the ownership entity. If they did
so without an implementing regulation in place, contractors would have
no guidance as to how to comply with the requirement.
For the foregoing reasons, pursuant to 41 U.S.C. 1707(d), GSA finds
that urgent and compelling circumstances make compliance with the
notice and comment and delayed effective date requirements of 41 U.S.C.
1707(a) and (b) impracticable, and invokes the exception to those
requirements under 1707(d). While a public comment process will not be
completed prior to the rule's effective date, GSA will consider
comments submitted in response to this interim rule in issuing a
subsequent rulemaking.
List of Subjects in 48 CFR Parts 501, 552, and 570
Government procurement.
Jeffrey A. Koses,
Senior Procurement Executive, Office of Acquisition Policy, Office of
Governmentwide Policy, General Services Administration.
Therefore, GSA amends 48 CFR parts 501, 552, and 570 as set forth
below:
0
1. The authority citation for 48 CFR parts 501, 552, and 570 continues
to read as follows:
Authority: 40 U.S.C. 121(c).
PART 501--GENERAL SERVICES ADMINISTRATION ACQUISITION REGULATION
SYSTEM
0
2. In section 501.106, amend table 1 by adding entries for ``552.270-
33'' and ``570.703(c)'' in numerical order to read as follows:
501.106 OMB approval under the Paperwork Reduction Act.
------------------------------------------------------------------------
OMB control
GSAR reference No.
------------------------------------------------------------------------
* * * * *
552.270-33................................................ 3090-0324
570.703(c)................................................ 3090-0324
* * * * *
------------------------------------------------------------------------
PART 552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
3. Add sections 552.270-33 and 552.270-34 to read as follows:
552.270-33 Foreign Ownership and Financing Representation for High-
Security Leased Space.
As prescribed in 570.703(c), use the following clause:
Foreign Ownership and Financing Representation For High Security Leased
Space (JUN 2021)
(a) Definitions. As used in this clause--
Financing means the process of raising or providing funds
through debt or equity for purposes of meeting the requirements of
the Lease, including, but not limited to, acquisition, maintenance,
and construction of, or improvements to, the Property.
Foreign entity means a:
(i) Corporation, company, business association, partnership,
society, trust, or any other nongovernmental entity, organization,
or group that is headquartered or organized under the laws of a
country that is not the United States or a state, local government,
tribe, or territory within the United States; or
(ii) Government or governmental instrumentality that is not the
United States Government.
Foreign person means an individual who is not:
(i) A United States citizen; or
(ii) An alien lawfully admitted for permanent residence in the
United States.
Highest-level owner means the entity that owns or controls an
immediate owner of the offeror or Lessor, or that owns or controls
one or more entities that control an immediate owner of the offeror
or Lessor. No entity owns or exercises control of the highest-level
owner.
Immediate owner means an entity, other than the offeror or
Lessor, that has direct control of the offeror or Lessor. Indicators
of control include, but are not limited to, one or more of the
following: Ownership or interlocking management, identity of
interests among family members, shared facilities and equipment, and
the common use of employees.
Unique entity identifier means a number or other identifier used
to identify a specific commercial, nonprofit, or Government entity.
See www.sam.gov for the designated entity for establishing unique
entity identifiers.
(b) Timing. The Offeror or Lessor shall complete this
representation when submitting a proposal. If the Offeror is the
successful awardee, the Offeror (now Lessor) shall review, update,
and provide this representation on an annual basis, reflecting all
changes to immediate owner, highest-level owner and financing during
the preceding 1-year period, starting one year from the Lease Term
Effective Date through final payment of any contract. If the Lessor
intends to transfer the lease to a successor in interest under the
circumstances set forth in FAR 42.1204, the Lessor shall submit this
representation to the Lease Contracting Officer with any request to
novate the lease. The Offeror or Lessor is responsible for the
currency, accuracy and completeness of the data disclosed, and for
any liability resulting from the Government's reliance on inaccurate
or incomplete data.
(c) Immediate owner. (1) The Offeror or Lessor represents that
it [square] does or [square] does not have an immediate owner.
(2) If the Offeror or Lessor indicates ``does'' in paragraph
(c)(1) of this clause, then enter the following information for the
immediate owner. If the offeror or Lessor has more than one
immediate owner (e.g., joint venture), then the offeror or Lessor
shall provide the information for each entity.
------------------------------------------------------------------------
------------------------------------------------------------------------
Legal name (do not use a ``doing business
as'' name).
------------------------------------------------------------------------
Unique entity identifier (if available)... ............................
------------------------------------------------------------------------
(3) If the Offeror or Lessor indicates ``does'' in paragraph
(c)(1) of this clause, then complete this additional representation:
Is the immediate owner a foreign entity?: [square] Yes or [square]
No.
(4) If the Offeror or Lessor indicates ``does'' in paragraph
(c)(1) of this clause, then complete this additional representation:
Is the immediate owner a foreign person?: [square] Yes or [square]
No.
(5) If the Offeror or Lessor indicates ``Yes'' in either
paragraph (c)(3) or (4) of this clause, indicating that there is
foreign ownership (as a foreign entity or foreign person), then
enter the following information for the foreign owner (respond for
each as applicable).
------------------------------------------------------------------------
------------------------------------------------------------------------
Physical address..........................
------------------------------------------------------------------------
Country...................................
------------------------------------------------------------------------
(d) Highest-level owner. (1) The Offeror or Lessor represents
that the immediate owner, if any, [square] is or [square] is not
owned or controlled by another entity?
(2) If the Offeror or Lessor indicates ``is'' in paragraph
(d)(1) of this clause, indicating that the immediate owner is owned
or controlled by another entity, then enter the following
information for the highest-level owner.
------------------------------------------------------------------------
------------------------------------------------------------------------
Legal name (do not use a ``doing business
as'' name).
------------------------------------------------------------------------
Unique entity identifier (if available)...
------------------------------------------------------------------------
[[Page 34979]]
(3) If the Offeror or Lessor indicates ``is'' in paragraph
(d)(1) of this clause, then complete this additional representation:
Is the highest-level owner a foreign entity?: [square] Yes or
[square] No.
(4) If the Offeror or Lessor indicates ``is'' in paragraph
(d)(1) of this clause, then complete this additional representation:
Is the highest-level owner a foreign person?: [square] Yes or
[square] No.
(5) If the Offeror or Lessor indicates ``Yes'' in either
paragraph (d)(3) or (4) of this clause, indicating that there is
foreign ownership (as a foreign entity or foreign person), then
enter the following information for the foreign owner (respond for
each as applicable).
------------------------------------------------------------------------
------------------------------------------------------------------------
Physical address..........................
------------------------------------------------------------------------
Country...................................
------------------------------------------------------------------------
(e) Financing entity. (1) The Offeror or Lessor represents that
the financing [square] does or [square] does not involve a foreign
entity?
(2) The Offeror or Lessor represents that the financing [square]
does or [square] does not involve a foreign person?
(3) If the Offeror or Lessor indicates ``does'' in either
paragraph (e)(1) or (2) of this clause, indicating foreign financing
(as a foreign entity or foreign person), then enter the following
information for the foreign financing (respond for each as
applicable).
------------------------------------------------------------------------
------------------------------------------------------------------------
Legal name (do not use a ``doing business
as'' name).
------------------------------------------------------------------------
Unique entity identifier (if available)... ............................
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Physical address..........................
------------------------------------------------------------------------
Country...................................
------------------------------------------------------------------------
(End of clause)
552.270-34 Access Limitations for High-Security Leased Space.
As prescribed in 570.703(d), use the following clause:
Access Limitations for High-Security Leased Space (Jun 2021)
(a) The Lessor, including representatives of the Lessor's
property management company responsible for operation and
maintenance of the leased space, shall not--
(1) Maintain access to the leased space; or
(2) Have access to the leased space without prior approval of
the authorized Government representative.
(b) Access to the leased space or any property or information
located within that Space will only be granted by the Government
upon determining that such access is consistent with the
Government's mission and responsibilities.
(c) Written procedures governing access to the leased space in
the event of emergencies shall be documented as part of the
Government's Occupant Emergency Plan, to be signed by both the
Government and the Lessor.
(End of clause)
PART 570--ACQUIRING LEASEHOLD INTERESTS IN REAL PROPERTY
0
4. Add section 570.118 to subpart 570.1 to read as follows:
570.118 Foreign Ownership Disclosure.
If a foreign ownership disclosure is made pursuant to clause
552.270-33:
(a) The contracting officer shall notify the Federal tenant for the
leased space in writing:
(1) If the disclosure is made during the lease acquisition process,
the contracting officer shall notify the Federal tenant prior to lease
award.
(2) If the disclosure is made concurrent with a request for
novation, the contracting officer shall notify the Federal tenant prior
to executing the novation.
(3) If the disclosure is made concurrent with a renewal option or
extension, the contracting officer shall notify the Federal tenant
prior to executing the renewal option or extension.
(b) The contracting officer shall coordinate with the Federal
tenant regarding security concerns and any necessary mitigation
measures.
0
5. Amend section 570.703 by adding paragraphs (c) and (d) to read as
follows:
570.703 GSAR contract clauses.
* * * * *
(c) Insert the representation clause at 552.270-33, Foreign
Ownership and Financing Representation for High-Security Leased Space,
in novations, solicitations and contracts for leased space that:
(1) Will be occupied by Federal employees for nonmilitary
activities; and
(2) Has a facility security level of III, IV, or V.
(d) Insert the clause at 552.270-34 Access Limitations for High-
Security Leased Space, in novations, solicitations and contracts for
leased space that:
(1) Will be occupied by Federal employees for nonmilitary
activities; and
(2) Has a facility security level of III, IV, or V.
[FR Doc. 2021-14161 Filed 6-30-21; 8:45 am]
BILLING CODE 6820-61-P
