Implementation of Section 109 of the Communications Assistance for Law Enforcement Act

DEPARTMENT OF JUSTICE

Federal Bureau of Investigation

28 CFR Part 100

RIN 1105-AA39

Implementation of Section 109 of the Communications Assistance

for Law Enforcement Act

AGENCY: Federal Bureau of Investigation, DOJ.

ACTION: Proposed rule.

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SUMMARY: This rule establishes the procedures whereby

telecommunications carriers can recover the costs associated with

complying with the Communications Assistance for Law Enforcement Act

(CALEA), which requires telecommunications carriers to ensure law

enforcement's ability, pursuant to court order or other lawful

authorization, to intercept communications notwithstanding advanced

telecommunications technologies.

DATES: Written comments must be received on or before July 9, 1996.

ADDRESSES: Comments should be submitted in triplicate to the

Telecommunications Contracts and Audit Unit, Federal Bureau of

Investigation, P.O. Box 221286, Chantilly, VA 22022-1286, Attention:

CALEA FR Representative, telephone number (703) 814-4900.

FOR FURTHER INFORMATION CONTACT:

Walter V. Meslar, Unit Chief, Telecommunications Contracts and Audit

Unit, Federal Bureau of Investigation, P.O. Box 221286, Chantilly, VA

22022-1286, telephone number (703) 814-4900.

SUPPLEMENTARY INFORMATION: Recent and continuing advances in

telecommunications technology and the introduction of new digitally-

based services and features have, in some instances, impaired the

ability of federal, state, and local law enforcement agencies to fully

and properly conduct various types of court-authorized electronic

surveillance. Therefore, on October 25, 1994, the President signed into

law the Communications Assistance for Law Enforcement Act (CALEA)

(Public Law 103-414, 47 U.S.C. 1001-1010)

w digitally-

based services and features have, in some instances, impaired the

ability of federal, state, and local law enforcement agencies to fully

and properly conduct various types of court-authorized electronic

surveillance. Therefore, on October 25, 1994, the President signed into

law the Communications Assistance for Law Enforcement Act (CALEA)

(Public Law 103-414, 47 U.S.C. 1001-1010). This law requires

telecommunications carriers, as defined in CALEA, to ensure law

enforcement's ability, pursuant to court order or other lawful

authorization, to intercept communications notwithstanding advanced

telecommunications technologies.

Under CALEA, certain implementation responsibilities are conferred

upon the Attorney General; the Attorney General has, in turn, delegated

responsibilities set forth in CALEA to the Director, FBI, or his

designee, pursuant to 28 CFR 0.85(o). The Director, FBI, has designated

personnel in the Engineering Section of the Information Resources

Division and the Property Procurement and Management Section of the

Finance Division to carry out these responsibilities.

Definition of ``Telecommunications Carrier''

CALEA defines a ``telecommunications carrier'' as any ``person or

entity engaged in the transmission or switching of wire or electronic

communications as a common carrier for hire'' (section 102(8)(A)), and

includes any ``person or entity engaged in providing commercial mobile

service, (as defined in section 332(d) of the Communication Act of

1934, as amended (47 U.S.C. 332(d))'' (section 102(8)(B))

efines a ``telecommunications carrier'' as any ``person or

entity engaged in the transmission or switching of wire or electronic

communications as a common carrier for hire'' (section 102(8)(A)), and

includes any ``person or entity engaged in providing commercial mobile

service, (as defined in section 332(d) of the Communication Act of

1934, as amended (47 U.S.C. 332(d))'' (section 102(8)(B)). This

definition includes, but is not limited to, local exchange and

interexchange carriers; competitive access providers; resellers, cable

operators, utilities, and shared tenant services providers, to the

extent that they offer telecommunications services as common carriers

for hire; cellular telephone companies; personal communications

services (PCS) providers; satellite-based mobile communications

providers; specialized mobile radio services (SMRS) providers and

enhanced SMRS providers; and paging service providers.

The Federal Communications Commission (FCC) may determine that a

person or entity who is not a common carrier is subject to CALEA if

that person or entity provides wire or electronic communication service

and the FCC concludes that such service is a replacement for a

substantial portion of the local telephone exchange service and that it

is in the public interest to deem such a person or entity to be a

telecommunications carrier for purposes of CALEA.

The definition does not include (1) persons or entities insofar as

they are engaged in providing information services such as electronic

publishing and messaging services; and (2) any class or category of

telecommunications carriers that the FCC exempts by rule after

consultation with the Attorney General.

Capability Requirements

ity to be a

telecommunications carrier for purposes of CALEA.

The definition does not include (1) persons or entities insofar as

they are engaged in providing information services such as electronic

publishing and messaging services; and (2) any class or category of

telecommunications carriers that the FCC exempts by rule after

consultation with the Attorney General.

Capability Requirements

CALEA requires telecommunications carriers to ensure that, within

four years of the date of enactment, their systems have the capability

to meet the Assistance Capability Requirements as described in section

103 of CALEA. These requirements are that a telecommunications carrier

shall ensure that its equipment, facilities, or services that provide a

customer or subscriber with the ability to originate, terminate, or

direct communications are capable of--

(1) expeditiously isolating and enabling the government, pursuant

to a court order or other lawful authorization, to intercept, to the

exclusion of any other communications, all wire and electronic

communications carried by the carrier within a service area to or from

equipment, facilities, or services of a subscriber of such carrier

concurrently with their transmission to or from the subscriber's

equipment, facility, or service, or at such later time as may be

acceptable to the government;

(2) expeditiously isolating and enabling the government, pursuant

to a court order or other lawful authorization, to access call-

identifying information that is reasonably available to the carrier--

(A) before, during, or immediately after the transmission of a wire or

electronic communications (or at such later time as may be acceptable

to the government); and (B) in a manner that allows it to be associated

with the communication to which it pertains, except that, with regard

to information acquired solely pursuant to the authority for pen

registers and trap and trace devices (as defined in section 3127 of

Title 18, United States Code), such call-identifying

ctronic communications (or at such later time as may be acceptable

to the government); and (B) in a manner that allows it to be associated

with the communication to which it pertains, except that, with regard

to information acquired solely pursuant to the authority for pen

registers and trap and trace devices (as defined in section 3127 of

Title 18, United States Code), such call-identifying information shall

not include any information that may disclose the physical location of

the subscriber (except to the extent that the location may be

determined from the telephone number);

(3) delivering intercepted communications and call-identifying

information to the government, pursuant to a court order or lawful

authorization, in a format such that they may be transmitted by means

of equipment, facilities, or services procured by the government to a

location other than the premises of the carrier; and

(4) facilitating authorized communication interceptions and access

to call-identifying information unobtrusively and with a minimum of

interference with any subscriber's telecommunications service and in a

manner that protects--(A) the privacy and security of communications

and call-identifying information not authorized to be intercepted; and

(B) information regarding the government's interception of

communications and access to call-identifying information.

Under section 107(a)(2) of CALEA, a carrier will be deemed to be in

compliance if it adheres to publicly available technical requirements,

feature descriptions, or standards adopted by an industry association

or standard-setting organization relevant to CALEA. Telecommunications

carriers may also develop their own solutions. In any case, carriers

must meet the requirements set forth in Section 103 of CALEA. If no

technical requirements or standards are issued, or if they are

challenged as being deficient, upon petition, the FCC has authority to

develop them through a rule making.

Capacity Requirements

andard-setting organization relevant to CALEA. Telecommunications

carriers may also develop their own solutions. In any case, carriers

must meet the requirements set forth in Section 103 of CALEA. If no

technical requirements or standards are issued, or if they are

challenged as being deficient, upon petition, the FCC has authority to

develop them through a rule making.

Capacity Requirements

Section 104 of CALEA requires that the Attorney General, after

seeking public notice and comment, establish and publish:

(1) Notice of the actual number of communications interceptions,

pen registers, and trap and trace devices representing a portion of the

maximum capacity required to accommodate all of the communication

interceptions, pen registers, and trap and trace devices that the

Attorney General estimates that the government agencies authorized to

conduct electronic surveillance may conduct and use simultaneously by

the date 4 years after the date of enactment of CALEA, and

(2) Notice of the maximum capacity required to accommodate all of

the communication interceptions, pen registers, and trap and trace

devices that the Attorney General estimates that the government

agencies authorized to conduct electronic surveillance may conduct and

use simultaneously after the date that is 4 years after the date of

enactment of CALEA.

On October 16, 1995 the FBI proposed for comment those notices (60

FR 53643), and on November 9, 1995 the comment period was extended

until January 16, 1996.

Section 104 of CALEA also provides that within 180 days after the

publication of the final notice of capacity requirements, a

telecommunications carrier shall submit to the Attorney General a

statement identifying any of the systems or services that do not have

the capacity to accommodate simultaneously the number of interceptions,

pen registers, and trap and trace devices set forth in that notice

on 104 of CALEA also provides that within 180 days after the

publication of the final notice of capacity requirements, a

telecommunications carrier shall submit to the Attorney General a

statement identifying any of the systems or services that do not have

the capacity to accommodate simultaneously the number of interceptions,

pen registers, and trap and trace devices set forth in that notice. The

FBI intends to use those statements as a basis from which to solicit

cooperative agreements to reimburse carriers for reasonable costs of

modifications performed to comply with CALEA capability and capacity

requirements, based on available funding.

Industry Implementation

Industry's compliance with the requirements set forth in section

103 of CALEA is affected by a number of interrelated factors, including

whether the Attorney General is required to, and has agreed to, pay for

needed modifications, and whether the equipment, facility, or service

was installed or deployed on or before January 1, 1995.

In the case of equipment, facilities, and services installed or

deployed after January 1, 1995, compliance is dependant upon whether

the necessary modifications are reasonably achievable as determined by

the FCC using criteria set forth in CALEA. These criteria are as

follows:

(1) The effect on public safety and national security.

(2) The effect on rates for basic residential telephone service.

(3) The need to protect the privacy and security of communications

not authorized to be intercepted.

(4) The need to achieve the capability assistance requirements of

section 103 of CALEA by cost effective methods.

(5) The effect on the nature and cost of the equipment, facility or

service at issue.

(6) The effect on the operation of the equipment, facility, or

service at issue.

(7) The policy of the United States to encourage the provision of

new technologies and services to the public.

(8) The financial resources of the telecommunications carrier.

of

section 103 of CALEA by cost effective methods.

(5) The effect on the nature and cost of the equipment, facility or

service at issue.

(6) The effect on the operation of the equipment, facility, or

service at issue.

(7) The policy of the United States to encourage the provision of

new technologies and services to the public.

(8) The financial resources of the telecommunications carrier.

(9) The effect on competition in the provision of

telecommunications services.

(10) The extent to which the design and development of the

equipment, facility, or service was initiated before January 1, 1995.

(11) Such other factors as the FCC determines are appropriate.

Telecommunications carriers also may petition regulatory

authorities to adjust charges, practices, classifications, and

regulations to recover costs expended for making needed modifications

to equipment, facilities, or services pursuant to the assistance

capability requirements of CALEA section 103. CALEA also includes

provisions for exemption, extension of the compliance date,

consultation with industry, and systems security. Noncompliance may

lead to civil actions by the Attorney General and the imposition of

civil fines. In addition, it requires telecommunications transmission

and switching equipment manufacturers, as well as providers of

telecommunications support services, to cooperate with

telecommunications carriers in achieving the required capacities and

capabilities

n with industry, and systems security. Noncompliance may

lead to civil actions by the Attorney General and the imposition of

civil fines. In addition, it requires telecommunications transmission

and switching equipment manufacturers, as well as providers of

telecommunications support services, to cooperate with

telecommunications carriers in achieving the required capacities and

capabilities.

Section 109 of CALEA, Payment of Costs of Telecommunications

Carriers to Comply with Capability Requirements, authorizes the

Attorney General, subject to the availability of appropriations, to

agree to pay telecommunications carriers for: (1) all reasonable costs

directly associated with the modifications performed by carriers in

connection with equipment, facilities, and services installed or

deployed on or before January 1, 1995, to establish the capabilities

necessary to comply with section 103 of CALEA; (2) additional

reasonable costs directly associated with making the assistance

capability requirements found in section 103 of CALEA reasonably

achievable with respect to equipment, facilities, or services installed

or deployed after January 1, 1995, in accordance with the procedures

established in CALEA section 109(b); and, (3) reasonable costs directly

associated with modifications of any of a carrier's systems or

services, as identified in the Carrier Statement required by CALEA

section 104(d), which do not have the capacity to accommodate

simultaneously the number of interceptions, pen registers, and trap and

trace devices set forth in the Capacity Notice(s) published in

accordance with CALEA section 104.

CALEA section 109(e), Cost Control Regulations, authorizes the

Attorney General, after notice and comment, to establish regulations

necessary to effectuate timely and cost-efficient payment to

telecommunications carriers under CALEA, under 18 U.S.C. chapters 119

and 121 and under the Foreign Intelligence Surveillance Act of 1978 (50

U.S.C. 1801 et seq.)

in

accordance with CALEA section 104.

CALEA section 109(e), Cost Control Regulations, authorizes the

Attorney General, after notice and comment, to establish regulations

necessary to effectuate timely and cost-efficient payment to

telecommunications carriers under CALEA, under 18 U.S.C. chapters 119

and 121 and under the Foreign Intelligence Surveillance Act of 1978 (50

U.S.C. 1801 et seq.).

CALEA directs the Attorney General to consult with the FCC prior to

the establishment of regulations that will allow for cost recovery by

telecommunications carriers of reasonable costs incurred for

compliancy.

Regulations shall minimize the cost to the Federal Government and

permit recovery by telecommunications carriers of the direct costs of

developing necessary modifications for CALEA compliance, including

providing the capabilities requested, providing capacities requested,

the costs of training personnel in the use of such capabilities and

capacities, and the direct costs of deploying or installing such

capabilities and capacities.

In the case of any modification that may be used for any purpose

other than lawfully authorized electronic surveillance by a law

enforcement agency of a government, CALEA permits

the recovery of only the incremental cost of making the modification

suitable for such law enforcement purposes.

Establishment of Cost Recovery Rules and Procedures

The regulations proposed herein are intended to ensure that each

carrier's practices used in estimating costs are consistent with the

current cost accumulating and reporting procedures utilized by the

carrier for the preparation of its financial statements. Further, these

regulations establish that not all expenses reportable in accordance

with generally accepted accounting principles will be eligible for

reimbursement. Consistency in the application of cost accounting

practices is necessary to enhance the likelihood that comparable

transactions are treated alike

rocedures utilized by the

carrier for the preparation of its financial statements. Further, these

regulations establish that not all expenses reportable in accordance

with generally accepted accounting principles will be eligible for

reimbursement. Consistency in the application of cost accounting

practices is necessary to enhance the likelihood that comparable

transactions are treated alike. Consistent application of internal cost

accounting practices will facilitate the preparation of reliable cost

estimates and allow comparison with the costs of performance. Such

comparisons provide an important basis for financial control over costs

and aid in establishing accountability for cost in the manner agreed to

by both parties.

These regulations also ensure that each cost is allocated only once

and on only one basis to a cost group. The criteria for determining the

allocation of costs to a cost group should be the same for all similar

groupings.

The following proposed cost recovery rules will be incorporated in

any cooperative agreement established under section 109 of CALEA and

entered into between the carriers and the FBI. Subsequent to the

submission to the FBI of the Carrier Statements, as required under

section 104(d) of CALEA, the FBI will directly solicit cooperative

agreements from the carriers based upon available funding. A separate

Federal Register notice concerning carrier statements will be published

soon. These rules were developed to establish the procedures whereby

carriers may seek reimbursement under section 109(a) and 104(e) of

CALEA. Cost recovery under section 109(b)(2) of CALEA will be

determined pursuant to the procedures set forth in section 109(b)(1) of

CALEA in accordance with these cost recovery rules as promulgated. To

the extent possible, these rules will allow carriers to utilize their

existing accounting procedures to record the costs of bringing

equipment, facilities, and services into compliance with CALEA.

. Cost recovery under section 109(b)(2) of CALEA will be

determined pursuant to the procedures set forth in section 109(b)(1) of

CALEA in accordance with these cost recovery rules as promulgated. To

the extent possible, these rules will allow carriers to utilize their

existing accounting procedures to record the costs of bringing

equipment, facilities, and services into compliance with CALEA.

Applicable Administrative Procedures and Executive Orders

Regulatory Flexibility Act

As required by section 603 of the Regulatory Flexibility Act, the

FBI has prepared this Initial Regulatory Flexibility Analysis (IRFA)

section to ascertain the expected impact on small entities of the

regulations proposed in this document. The FBI is obligated to

implement the mandate of Congress as set out in CALEA. Therefore, these

regulations were developed to establish the mechanism whereby

telecommunications carriers can recover the costs associated with

complying with CALEA. The FBI seek to subject all carriers to the same

regulatory policy (proposed herein), while allowing carriers to utilize

their existing accounting systems in the reimbursement process.

Pursuant to the goal of imposing the least burden on carriers while

also fulfilling the obligation to adhere to Government fiscal

accountability requirements, the proposed regulations specify reporting

objectives rather than specifying the manner in which these records

must be kept. The FBI estimates that approximately three thousand

(3,000) telecommunications carriers may be affected by these rules.

While most carriers are not large in terms of capitalization, most are

dominant within their markets, so they are not considered ``small'' for

the purposes of the Regulatory Flexibility Act. Although it is not

anticipated that any small carriers will be adversely affected, these

proposed rules have been written to allow any such carriers to seek

reimbursement in an equitable manner

se rules.

While most carriers are not large in terms of capitalization, most are

dominant within their markets, so they are not considered ``small'' for

the purposes of the Regulatory Flexibility Act. Although it is not

anticipated that any small carriers will be adversely affected, these

proposed rules have been written to allow any such carriers to seek

reimbursement in an equitable manner. Therefore, these regulations seek

to allow these carriers to use their current recordkeeping procedures,

along with the existing skill levels on their staffs. As mandated by

section 603(c) of the Regulatory Flexibility Act, consideration was

given to alternative forms of compliance requirements for the small

entities affected by these proposed rules. However, the FBI determined

that these alternatives were not viable in that they would require the

carriers to alter their internal accounting methodologies, would not

take into account carrier individuality with respect to directly

allocable costs or would violate CALEA's mandate to reimburse carriers'

reasonable costs, while maintaining Government fiscal accountability

requirements. This Proposed Rule solicits comments on both the proposed

regulations and their possible impact on small entities. The FBI will

send a copy of these proposed rules, including this IRFA, to the Chief

Counsel for Advocacy of the Small Business Administration in accordance

with section 603(a) of the Regulatory Flexibility Act, Public Law 96-

354, 94 Stat. 1164, 5 U.S.C. 601 et seq. There are no federal rules

that overlap, duplicate or conflict with these rules.

Executive Order 12612

impact on small entities. The FBI will

send a copy of these proposed rules, including this IRFA, to the Chief

Counsel for Advocacy of the Small Business Administration in accordance

with section 603(a) of the Regulatory Flexibility Act, Public Law 96-

354, 94 Stat. 1164, 5 U.S.C. 601 et seq. There are no federal rules

that overlap, duplicate or conflict with these rules.

Executive Order 12612

These regulations will not have substantial direct effects on the

States, on the relationship between the national Government and the

States, or on distribution of power and responsibilities among the

various levels of government. Therefore, in accordance with Executive

Order 12612, it is determined that this rule does not have sufficient

federalism implications to warrant the preparation of a Federalism

Assessment.

Executive Order 12866

The FBI has examined these proposed regulations in light of

Executive Order 12866 and has found that they constitute a significant

regulatory action under sections 3(f)(1) and 3(f)(4). Pursuant to

Executive Order 12866, 28 CFR part 100 is the draft text of the

regulatory actions that are required under CALEA. These proposed

regulations promulgate procedures whereby carriers may seek

reimbursement for their efforts to assist law enforcement in preserving

electronic surveillance capabilities as mandated by CALEA, which

authorizes appropriations of $500 million for carrier reimbursement.

These regulations have been developed in order to effect the least

burden on the administrative staffs of both the carriers and the

Government while maintaining the Government's obligation to adhere to

its fiscal accountability requirements. In order to accomplish this

goal, the proposed regulations specify reporting objectives rather than

specifying the manner in which these records must be kept. As mandated

by Executive Order 12866, consideration was given to potentially

effective and feasible alternatives to the proposed regulations

le maintaining the Government's obligation to adhere to

its fiscal accountability requirements. In order to accomplish this

goal, the proposed regulations specify reporting objectives rather than

specifying the manner in which these records must be kept. As mandated

by Executive Order 12866, consideration was given to potentially

effective and feasible alternatives to the proposed regulations.

However, the FBI determined that alternative requirements were not

viable in that they would require the carriers to alter their internal

accounting methodologies, would not take into account carrier

individuaity with respect to directly allocable costs and violate

CALEA's mandate to maintain Government fiscal accountability standards

in the reimbursement process.

Unfunded Mandates Reform Act of 1995

As required by Title II of the Unfunded Mandates Reform Act of

1995, this section assesses the effects of

the proposed regulations on State, local and tribal governments and the

private sector. These regulations are required under section 109(e) of

CALEA. No unfunded mandate is imposed upon State, and local or tribal

governments by these regulations. Therefore, sections 203 and 204 of

the Unfunded Mandates Reform Act do not apply to these proposed rules.

However, the FBI has determined that these proposed rules are subject

to sections 201, 202, and 205 of the Unfunded Mandates Reform Act.

While the telecommunications industry is primarily affected by these

proposed rules, all reasonable costs, as shall be defined in 28 CFR

part 100, incurred by the private sector will be subject to

reimbursement from the $500 million authorized to be appropriated by

Congress under CALEA section 110. Furthermore, CALEA sections 109 and

104 specifically establish the conditions whereby a telecommunications

carrier may be deemed in compliance with regard to the equipment,

facilities or services covered in these proposed regulations should the

Government not agree to reimburse the carrier for the compliance

effort

00 million authorized to be appropriated by

Congress under CALEA section 110. Furthermore, CALEA sections 109 and

104 specifically establish the conditions whereby a telecommunications

carrier may be deemed in compliance with regard to the equipment,

facilities or services covered in these proposed regulations should the

Government not agree to reimburse the carrier for the compliance

effort. Accurate estimates of the effects on the national economy of

this part, which is proposed so that carriers may seek reimbursement

for their efforts to assist law enforcement in preserving electronic

surveillance capabilities as mandated by CALEA, are not feasible. As

mandated by section 205 of the Unfunded Mandates Reform Act,

consideration was given to potentially effective and feasible

alternates to the proposed rules. However, the FBI determined that

alternative requirements were not viable in that they would require the

carriers to alter their internal accounting methodologies, would not

take into account carrier individuality with respect to directly

allocable costs and violated CALEA's mandate to maintain Government

fiscal accountability standards in the reimbursement process.

Information Collection Under Review

The proposed information collection is published to obtain comments

from the public and affected agencies. Comments are encouraged and will

be accepted for sixty days from the date listed at the top of this page

in the Federal Register. This process is conducted in accordance with

the Paperwork Reduction Act of 1995.

This collection covers:

(1) Type of Information Collection: NEW COLLECTION: Quantitative

and qualitative data necessary to evaluate cooperative agreement

proposals and subsequent requests for reimbursement.

(2) The title of the information collection: ``Telecommunications

Carrier Reimbursement Cost Estimate'' and ``Telecommunications Carrier

Reimbursement Request for Payment.''

Act of 1995.

This collection covers:

(1) Type of Information Collection: NEW COLLECTION: Quantitative

and qualitative data necessary to evaluate cooperative agreement

proposals and subsequent requests for reimbursement.

(2) The title of the information collection: ``Telecommunications

Carrier Reimbursement Cost Estimate'' and ``Telecommunications Carrier

Reimbursement Request for Payment.''

(3) The agency form number, if any, and the applicable component of

the Department sponsoring the collections: No form number; sponsored by

the FBI, United States Department of Justice.

(4) Who will be asked or required to respond, as well as a brief

abstract; BUSINESS OR OTHER FOR PROFIT: Telecommunications carriers

will respond. This data collection will be necessary to evaluate

cooperative agreement proposals and subsequent requests for

reimbursement under CALEA. This information will be used to determine

whether agreement prices are fair and reasonable and to make

recommendations to agreement officers for approval or disapproval of

the carrier's request.

(5) An estimate of the total number of respondents and the amount

of time estimated for an average respondent to respond: The FBI

estimates that approximately three thousand (3,000) telecommunications

carriers, with approximately twenty-three thousand (23,000) unique

switches, that, over a five (5) year period, may be affected by these

rules. The time required to read and prepare information for one switch

is estimated at four (4) hours per response.

By publication of this notice, written comments and suggestions

from the public and affected agencies concerning the proposed

collection of information was requested. Your comments should address

one or more of the following four points:

(1) Evaluate whether the proposed collection of information is

necessary for the proper performance of the functions of the agency,

including whether the information will have practical utility;

comments and suggestions

from the public and affected agencies concerning the proposed

collection of information was requested. Your comments should address

one or more of the following four points:

(1) Evaluate whether the proposed collection of information is

necessary for the proper performance of the functions of the agency,

including whether the information will have practical utility;

(2) Evaluate the accuracy of the agencies estimate of the burden of

the proposed collection of information, including the validity of

methodology and assumptions used;

(3) Enhance the quality, utility, and clarity of the information to

be collected; and

(4) Minimize the burden of collection of information on those who

are to respond, including through the use of appropriate automated,

electronic, mechanical or other technological collection techniques or

other forms of information technology (i.g., permitting electronic

submission of responses).

Comments or suggestions regarding the items contained in this

information collections request should be directed to Mr. Porter F.

Dunn, Telecommunications Contracts and Audit Unit, Federal Bureau of

Investigation, P.O. Box 221286, Chantilly, VA 22022-1286, telephone

number (703) 814-4902.

List of Subjects in 28 CFR Part 100

Accounting, Law enforcement--wiretapping and electronic

surveillance, Reporting and recordkeeping requirements,

Telecommunications.

Dated: May 6, 1996.

Louis Freeh,

Director, Federal Bureau of Investigation, Department of Justice.

For the reasons set out in the preamble, 28 CFR part 100 is

proposed to be added as follows:

PART 100--COST RECOVERY REGULATIONS, COMMUNICATIONS ASSISTANCE FOR

LAW ENFORCEMENT ACT OF 1994

--wiretapping and electronic

surveillance, Reporting and recordkeeping requirements,

Telecommunications.

Dated: May 6, 1996.

Louis Freeh,

Director, Federal Bureau of Investigation, Department of Justice.

For the reasons set out in the preamble, 28 CFR part 100 is

proposed to be added as follows:

PART 100--COST RECOVERY REGULATIONS, COMMUNICATIONS ASSISTANCE FOR

LAW ENFORCEMENT ACT OF 1994

Sec.

100.9 General.

100.10 Definitions.

100.11 Allowable costs.

100.12 Reasonable costs.

100.13 Directly assignable costs.

100.14 Directly allocable costs.

100.15 Disallowed costs.

100.16 Cost estimate submission.

100.17 Request for payment.

100.18 Audit.

100.19 Reduction for defective cost data.

100.20 Accounting for unallowable costs.

100.21 Confidentiality of trade secrets/proprietary information.

Authority: 47 U.S.C. 1001-1010; 28 CFR 0.85(o).

Sec. 100.9 General.

These Cost Recovery Regulations were developed to define allowable

costs and establish reimbursement procedures in accordance with section

109(e) of Communications Assistance for Law Enforcement Act (CALEA)

(Public Law 103-414, 47 U.S.C. 1001-1010). Reimbursement of costs is

subject to the availability of funds and agreement, prior to the

incurrence of costs, by the Attorney General or designee to reimburse

costs.

Sec. 100.10 Definitions.

(a) Allocable means chargeable to two or more costs objectives.

(b) Business unit means any segment of an organization for which

cost data are routinely accumulated by the carrier for tracking and

measurement purposes.

(c) Cost objective means a function, organizational subdivision,

contract, or other work unit for which cost data are desired and for

which provision is made to accumulate and measure the cost of

processes, products, jobs, capitalization projects, etc.

(d) Cost pool means groupings of incurred costs identified with two

or more cost objectives, but not identified specifically with any final

cost objective.

ive means a function, organizational subdivision,

contract, or other work unit for which cost data are desired and for

which provision is made to accumulate and measure the cost of

processes, products, jobs, capitalization projects, etc.

(d) Cost pool means groupings of incurred costs identified with two

or more cost objectives, but not identified specifically with any final

cost objective.

(e) Directly allocable costs means any costs that are directly

chargeable to two or more cost objectives.

(f) Directly assignable cost means any cost that can wholly be

attributed to a cost objective.

(g) Directly associated cost means any directly assignable cost or

directly allocable cost which is generated solely as a result of

incurring another cost, and which would not have been incurred had the

said cost not been incurred.

(h) Final cost objective means a cost objective that has allocated

to it, both assignable and allocable costs and, in the carrier's

accumulation system, is one of the final accumulation points.

(i) Installed or deployed means that, on a specific switching

system, equipment, facilities, or services are operable and available

for use by the carrier's customers.

(j) Plant nonspecific costs means costs related to property held

for future telecommunications use, along with the associated

provisioning expenses, network operations expenses, and depreciation

and amortization expenses. These costs shall also include the costs of

supervising and office support of these activities.

, or services are operable and available

for use by the carrier's customers.

(j) Plant nonspecific costs means costs related to property held

for future telecommunications use, along with the associated

provisioning expenses, network operations expenses, and depreciation

and amortization expenses. These costs shall also include the costs of

supervising and office support of these activities.

(k) Plant specific costs means costs related to specific kinds of

telecommunications plants. These costs shall include the costs of

inspecting, testing and reporting on the condition of

telecommunications plant to determine the need for repairs,

replacements, rearranges and changes; performing routine work to

prevent trouble except replacing items of plant other than retirement

units; rearranging and changing the location of plant not retired;

repairing material for reuse; restoring the condition of plant damaged

by storms, floods, fire, or other casualties (other than the cost of

replacing retirement units); inspecting after repairs have been made;

and receiving training to perform these kinds of work. Also included

are the costs of direct supervision (immediate or first-level) and

office support of this work.

(l) Trade secrets/proprietary information means information which

is in the possession of a carrier but not generally available to the

public, which that carrier desires to protect against unrestricted

disclosure or competitive use, and which is clearly identified as such

at the time of its disclosure to the government.

Sec. 100.11 Allowable costs.

st-level) and

office support of this work.

(l) Trade secrets/proprietary information means information which

is in the possession of a carrier but not generally available to the

public, which that carrier desires to protect against unrestricted

disclosure or competitive use, and which is clearly identified as such

at the time of its disclosure to the government.

Sec. 100.11 Allowable costs.

(a) Costs that are eligible for reimbursement under section 109(e)

CALEA are:

(1) All reasonable plant specific costs directly associated with

the modifications performed by carriers in connection with equipment,

facilities, and services installed or deployed on or before January 1,

1995, to establish the capabilities necessary to comply with section

103 of CALEA, until the equipment, facility, or service is replaced or

significantly upgraded or otherwise undergoes major modifications;

(2) Additional reasonable plant specific costs directly associated

with making the assistance capability requirements found in section 103

of CALEA reasonably achievable with respect to equipment, facilities,

or services installed or deployed after January 1, 1995, in accordance

with the procedures established in CALEA section 109(b); and

(3) Reasonable plant specific costs directly associated with

modifications to any of a carrier's systems or services, as identified

in the Carrier Statement required by CALEA section 104(d), that do not

have the capacity to accommodate simultaneously the number of

interceptions, pen registers, and trap and trace devices set forth in

the Capacity Notice(s) published in accordance with CALEA section 104.

(b) Allowable plant specific costs shall include:

(1) The costs of installation, inspection, and testing of the

telecommunications plant, and inspection after modifications have been

made; and

(2) The costs of direct first-line supervision and office support

for this work for plant specific expenses.

devices set forth in

the Capacity Notice(s) published in accordance with CALEA section 104.

(b) Allowable plant specific costs shall include:

(1) The costs of installation, inspection, and testing of the

telecommunications plant, and inspection after modifications have been

made; and

(2) The costs of direct first-line supervision and office support

for this work for plant specific expenses.

(c) In the case of any modification that may be used for any

purpose other than lawfully authorized electronic surveillance by a

government law enforcement agency, this part permits recovery of only

the incremental cost of making the modification suitable for such law

enforcement purposes.

(d) Reasonable costs that are directly associated with the

modifications performed by a carrier as described in Sec. 100.11(a) are

recoverable. These allowable costs are limited to direct and directly

allocable costs incurred by the business units whose efforts are

expended on the implementation of CALEA requirements.

Sec. 100.12 Reasonable costs.

(a) A cost is reasonable if, in its nature and amount, it does not

exceed that which would be incurred by a prudent person in the conduct

of competitive business. Reasonableness of specific costs must be

examined with particular care in connection with the carrier or its

separate divisions that may not be subject to effective competitive

restraints.

(1) No presumption of reasonableness shall be attached to the

incurrence of costs by a carrier.

(2) The burden of proof shall be upon the carrier to justify that

such cost is reasonable under this part.

(b) Reasonableness depends upon considerations and circumstances,

including, but not limited to:

(1) Whether a cost is of the type generally recognized as ordinary

and necessary for the conduct of the carrier's business or the

performance of this obligation; or

(2) Whether it is a generally accepted sound business practice,

arm's-length bargaining or the result of Federal or State laws and/or

regulations.

ess depends upon considerations and circumstances,

including, but not limited to:

(1) Whether a cost is of the type generally recognized as ordinary

and necessary for the conduct of the carrier's business or the

performance of this obligation; or

(2) Whether it is a generally accepted sound business practice,

arm's-length bargaining or the result of Federal or State laws and/or

regulations.

(c) It is the carrier's responsibility to inform the Government of

any deviation from the carrier's established practices.

Sec. 100.13 Directly assignable costs.

(a) An allowable directly assignable cost is any plant specific

cost that can be definitively linked with the performance of bringing

equipment, facilities or services into compliance with CALEA as

described in Sec. 100.11(a).

(1) A direct cost which has been incurred for the same purpose in

like circumstances and which has been included in any allocable cost

pool to be assigned to that or any other final cost objective shall not

be assigned to the CALEA compliance effort (or any portion thereof).

(2) Costs identified specifically with the work performed are

direct costs to be charged directly to the CALEA compliance effort. All

costs specifically identified with other projects, business units, or

cost objectives of the carrier as direct costs shall not be charged to

the CALEA compliance effort, directly or indirectly.

(3) The burden of proof shall be upon the carrier to justify that

such cost is a direct cost under this part.

(b) For reasons of practicality, any directly assignable cost of

minor dollar amount may be treated as a directly allocable cost if the

accounting treatment is consistently applied within the carrier's

accounting system and the application produces substantially the same

results as treating the cost as a directly assignable cost.

Sec. 100.14 Directly allocable costs.

ct cost under this part.

(b) For reasons of practicality, any directly assignable cost of

minor dollar amount may be treated as a directly allocable cost if the

accounting treatment is consistently applied within the carrier's

accounting system and the application produces substantially the same

results as treating the cost as a directly assignable cost.

Sec. 100.14 Directly allocable costs.

(a) A cost is directly allocable to the CALEA compliance effort if:

(1) It is plant specific cost incurred specifically to meet the

requirements of CALEA sections 103 and 104; or

(2) It benefits both the CALEA compliance effort and other work,

and can be distributed to them in reasonable proportion to the benefits

received.

(b) The burden of proof shall be upon the carrier to justify that

such cost is an allocable cost under this part.

(c) An allocable cost shall not be assigned to the CALEA compliance

effort if other costs incurred for the same purpose in like

circumstances have been included as a direct cost of that, or any

other, cost objective.

(d) The accumulation of allocable costs shall be as follows:

(1) Allocable costs shall be accumulated by logical groupings with

due consideration of the reason for incurring such costs.

(i) Each grouping should be determined so as to permit distribution

of the grouping on the basis of the benefits accruing to the multiple

cost objectives.

(ii) Similarly, the particular case may require subdivision of

these groupings (e.g., building occupancy costs might be separable from

those of personnel administration within the engineering group).

(2) Such allocation necessitates selecting a distribution base

common to all cost objectives to which the grouping is to be allocated.

The base should be selected so as to permit allocation of the grouging

on the basis of the benefits accruing to the multiple objectives.

gs (e.g., building occupancy costs might be separable from

those of personnel administration within the engineering group).

(2) Such allocation necessitates selecting a distribution base

common to all cost objectives to which the grouping is to be allocated.

The base should be selected so as to permit allocation of the grouging

on the basis of the benefits accruing to the multiple objectives.

(3) When substantially the same results can be achieved through

less precise methods, the number and composition of cost groupings

should be governed by practical considerations and should not unduly

complicate the allocation.

(4) Once a methodology for determining an appropriate base for

distributing allocable costs has been accepted by the FBI, it shall not

be modified without written approval of the FBI. All items properly

includable in an allocable cost base should bear a pro rata share of

allocable costs irrespective of their acceptance as reimbursable under

this part.

(5) The carrier's method of allocating allocable costs shall be in

accordance with the accounting principles used by the carrier in the

preparation of their externally audited financial statements and

consistently applied, to the extent that the expenses are allowable

under these regulations. The method may require further examination

when:

(i) Substantial differences occur between the cost patterns of work

under CALERA compliance effort and the carrier's other work;

(ii) Significant changes occur in the nature of the business, the

extent of subcontracting, fixed-asset improvement programs,

inventories, the volume of sales and production, manufacturing

processes, the carrier's products, or other relevant circumstances; or

when:

(i) Substantial differences occur between the cost patterns of work

under CALERA compliance effort and the carrier's other work;

(ii) Significant changes occur in the nature of the business, the

extent of subcontracting, fixed-asset improvement programs,

inventories, the volume of sales and production, manufacturing

processes, the carrier's products, or other relevant circumstances; or

(iii) Allocable cost groupings developed for a carrier's primary

location are applied to off-site locations. Separate cost groupings for

costs allocable to off-site location may be necessary to permit

equitable distribution of costs on the basis of the benefits accruing

to the multiple cost objectives.

(6) The base period for allocating allocable costs is the cost

accounting period during which such costs are incurred and accumulated

for distribution to work performed in that period. The base period for

allocating allocable costs will normally be the carrier's fiscal year.

A shorter period may be appropriated when performance involves only a

minor portion of the fiscal year, or when it is general practice to use

a shorter period. When the compliance effort is performed over an

extended period, as many base periods shall be used as are required to

accurately represent the period of performance.

Sec. 100.15 Disallowed costs.

(a) General and Administrative (G&A) costs are disallowed. G&A

costs include, but are not limited to, any management, financial, and

other expenditures which are incurred by or allocated to a business

unit and which are for the general management and administration of the

business unit as a whole. These include, but are not limited to:

(1) Accounting and Finance, External Relations, Human Resources,

Information Management, Legal, Procurement; and

(2) Other general administrative activities such as library

services, food services, archives, and general security investigation

services.

ess

unit and which are for the general management and administration of the

business unit as a whole. These include, but are not limited to:

(1) Accounting and Finance, External Relations, Human Resources,

Information Management, Legal, Procurement; and

(2) Other general administrative activities such as library

services, food services, archives, and general security investigation

services.

(b) Customer Service costs are disallowed. These costs include, but

are not limited to, any Marketing, Sales, Product Management, and

Advertising expenses.

(c) Plant nonspecific costs are disallowed. These include, but are

not limited to, expenses related to property held for future

telecommunications use, provisioning expenses, network operations

expenses, and depreciation and amortization expenses. Any plant

nonspecific supervision and office support costs are also disallowed.

(d) Cost that have already been recovered from any governmental or

nongovernmental entity are disallowed.

(e) Costs that cannot be either directly assigned or directly

allocated are disallowed.

(f) Additional costs that are incurred due to the carrier's failure

to complete the CALEA compliance effort in the agreed upon time frame

are disallowed.

(g) Costs associated with modifications of any equipment, facility

or service installed or deployed after January 1, 1995 which are deemed

reasonably achievable by the Federal Communications Commission under

section 109(b) of CALEA are disallowed.

Sec. 100.16 Cost estimate submission.

(a) The carrier shall provide sufficient cost data at the time of

proposal submission to allow adequate analysis and evaluation of the

estimated costs. The FBI reserves the right to request additional cost

data from carriers in order to ensure compliance with this part.

(b) The requirement for submission of cost data is met if, as

determined by the FBI, all cost data reasonably available to the

carrier are either submitted or identified in writing by the time of

agreement.

on to allow adequate analysis and evaluation of the

estimated costs. The FBI reserves the right to request additional cost

data from carriers in order to ensure compliance with this part.

(b) The requirement for submission of cost data is met if, as

determined by the FBI, all cost data reasonably available to the

carrier are either submitted or identified in writing by the time of

agreement.

(c) If cost data and information to explain the estimating process

are required by the FBI and the carrier refuses to provide necessary

data, or the FBI determines that the data provided are so deficient as

to preclude adequate analysis and evaluation, the FBI will attempt to

secure the data and/or elicit corrective action. If the carrier

persists in refusing to provide the needed data or to take corrective

action, the FBI will refer the action to higher authority, including

details of the attempts made to resolve the matter, and a statement of

noncompliance with CALEA will be issued.

(d) Instructions for submission of the cost data for the estimate

are as follows:

(1) The carrier shall submit to the FBI estimated and/or incurred

costs by line item with supporting information, adequately cross-

referenced, suitable for detailed analysis.

(2) A cost element breakdown as described in Sec. 100.16(h) shall

be attached for each proposed line item and must reflect any specific

requirements established by the FBI.

(3) Supporting breakdowns shall be furnished for each cost element,

consistent with the carrier's cost accounting system.

(4) When more than one line item is proposed, summary total amounts

covering all line items shall be furnished for each cost element.

(5) Depending on the carrier's accounting system, the carrier shall

provide breakdownS for the following categories of cost elements, as

applicable:

ing breakdowns shall be furnished for each cost element,

consistent with the carrier's cost accounting system.

(4) When more than one line item is proposed, summary total amounts

covering all line items shall be furnished for each cost element.

(5) Depending on the carrier's accounting system, the carrier shall

provide breakdownS for the following categories of cost elements, as

applicable:

(i) Materials. Provide a consolidated cost summary of individual

material quantities included in the various tasks, orders, or agreement

line items being proposed and the basis upon which they were developed

(vendor quotes, invoice prices, etc.). Include raw materials, parts,

software, components, and assemblies. For all items proposed, identify

the item, source, quantity, and cost.

(ii) Direct labor. Provide a time-phased (e.g., monthly, quarterly)

breakdown of labor hours, rates, and costs by appropriate category, and

furnish the methodologies used in developing estimates.

(iii) Allocable direct costs. Indicate how allocable costs are

computed and applied, including cost breakdowns, and showing trends and

budgetary data, to provide a basis for evaluating the reasonableness of

proposed rates. Indicate the rates used and provide an appropriate

explanation.

(iv) Subcontracting costs. For any subcontractor costs submitted

for reimbursement, the carrier is responsible for ensuring that

documentation requirements set forth herein are passed on to any and

all subcontractors utilized in the carrier's efforts to meet CALEA

requirements.

(v) Other costs. List all other costs not otherwise included in the

categories described above (e.g., special tooling, travel, computer and

consultant services) and provide bases for costs.

ursement, the carrier is responsible for ensuring that

documentation requirements set forth herein are passed on to any and

all subcontractors utilized in the carrier's efforts to meet CALEA

requirements.

(v) Other costs. List all other costs not otherwise included in the

categories described above (e.g., special tooling, travel, computer and

consultant services) and provide bases for costs.

(e) As part of the specific information required, the carrier shall

submit with its cost estimate and clearly identify as such, costs that

are verifiable and factual. In addition, the carrier shall submit

information reasonably required to explain its estimating process,

including:

(1) The judgmental factors applied and the mathematical or other

methods used in the estimate, including those used in projecting from

known data; and

(2) The nature and amount of any contingencies included in the

proposed estimate.

(f) There is a clear distinction between submitting cost data and

merely making available books, records, and other documents without

identification. The requirement for submission of cost data is met when

all accurate cost data reasonably available to the carrier have been

submitted, either actually or by specific identification, to the FBI.

As later information comes into the carrier's possession, it must be

promptly submitted to the FBI. The requirement for submission of cost

data continues up to the time of final reimbursement.

(g) In submitting its estimate, the carrier must include an index,

appropriately referenced, of all the cost data and information

accompanying or identified in the estimated. In addition, any future

additions and/or revisions, up to the date of agreement on the costs,

must be annotated in a supplemental index.

(h) Headings for submission are as follows:

(1) Total Project Cost: Summary.

ent.

(g) In submitting its estimate, the carrier must include an index,

appropriately referenced, of all the cost data and information

accompanying or identified in the estimated. In addition, any future

additions and/or revisions, up to the date of agreement on the costs,

must be annotated in a supplemental index.

(h) Headings for submission are as follows:

(1) Total Project Cost: Summary.

(i) Cost Elements (Enter appropriate cost elements.).

(ii) Proposed Cost Estimate--Total Cost (enter those necessary and

reasonable costs that in the carrier's judgment will properly be

incurred in efficient completion of CALEA requirements. When any of the

costs in this have already been incurred (e.g., under a letter

contract), describe them on an attached support schedule.).

(iii) Proposed Cost Estimate--Unit Cost (Enter the unit costs for

each cost element.).

(iv) Supporting Material (Identify the attachment in which the

information supporting the specific cost element may be found. Attach

separate pages as necessary.).

(2) Total Project Costs: Detail (at Switch Level, Research &

Development, or Project level, as appropriate).

(i) Cost Elements (Enter appropriate cost elements.).

(ii) Proposed Cost Estimate--Total Cost (enter those necessary and

reasonable costs that in the carrier's judgment will properly be

incurred in efficient completion of CALEA requirements. When any of the

costs in this have already been incurred (e.g., under a letter

contract), describe them on an attached supporting schedule.).

(iii) Proposed Cost Estimate--Unit Cost (Enter the unit costs for

each element.).

(iv) Supporting Material (Identify the attachment in which the

information supporting the specific cost element may be found. Attach

separate pages as necessary.).

Sec. 100.17 Request for payment.

is have already been incurred (e.g., under a letter

contract), describe them on an attached supporting schedule.).

(iii) Proposed Cost Estimate--Unit Cost (Enter the unit costs for

each element.).

(iv) Supporting Material (Identify the attachment in which the

information supporting the specific cost element may be found. Attach

separate pages as necessary.).

Sec. 100.17 Request for payment.

(a) The carrier shall provide sufficient supporting documentation

at the time of submission of request for payment to allow adequate

analysis and evaluation of the incurred costs. The FBI reserves the

right to request additional cost data from carriers in order to ensure

compliance with this part.

(b) Instructions for submission of the supporting documentation for

the request for payment are as follows:

(1) The carrier shall submit to the FBI incurred costs by line item

with supporting information, adequately cross-referenced, suitable for

detailed analysis.

(2) A cost element breakdown Sec. 100.17(f) shall be attached for

each agreed upon line item and must reflect any specific requirements

established by the FBI.

(3) Supporting breakdowns shall be furnished for each cost element,

consistent with the carrier's cost accounting system.

(c) When more than one line item has been agreed upon, summary

total amounts covering all line items shall be furnished for each cost

element. If agreement has been reached with FBI representatives on use

of forward costing rates/factors, identify the agreement, include a

copy, and describe its nature. Depending on the carrier's accounting

system, breakdowns shall be provided to the FBI for the following

categories of cost elements, as applicable:

mmary

total amounts covering all line items shall be furnished for each cost

element. If agreement has been reached with FBI representatives on use

of forward costing rates/factors, identify the agreement, include a

copy, and describe its nature. Depending on the carrier's accounting

system, breakdowns shall be provided to the FBI for the following

categories of cost elements, as applicable:

(1) Materials. Provide a consolidated cost summary of individual

material quantities included in the various tasks, orders, or agreement

line items and the basis upon which they were determined (vendor

invoices, time sheets, payroll records, etc.). Include raw materials,

parts, software, components, and assemblies. For all reimbursable

items, identify the item, source, quantity, and cost.

(2) Direct labor. Provide time sheets and labor rate justification

for all direct labor charged to this agreement. Include a breakdown of

labor hours, rates, and cost by appropriate category, and furnish the

methodologies used in identifying these costs.

(3) Allocable direct costs. Indicate how allocable costs are

computed and applied, including cost breakdowns, comparing estimates to

actual data as a basis for evaluating the reasonableness of actual

costs.

(4) Subcontracting costs. For any subcontractor costs submitted for

reimbursement, along with a copy of the invoice, the carrier must

provide documentation that costs incurred are just and reasonable.

(5) Other costs. List all other costs not otherwise included in the

categories described above (e.g., special tooling, travel, computer and

consultant services) and provide documentation of these costs.

ontracting costs. For any subcontractor costs submitted for

reimbursement, along with a copy of the invoice, the carrier must

provide documentation that costs incurred are just and reasonable.

(5) Other costs. List all other costs not otherwise included in the

categories described above (e.g., special tooling, travel, computer and

consultant services) and provide documentation of these costs.

(d) There is a clear distinction between submitting cost data and

merely making available books, records, and other documents without

identification.

(1) The requirement for submission of cost data is met when all

accurate cost data reasonably available to the carrier have been

submitted, either actually or by specific identification, to the FBI.

(2) As later information comes into the carrier's possession, it

must be promptly submitted to the FBI.

(3) The requirement for submission of cost data continues up to the

time of final reimbursement.

(e) In submitting its invoice, the carrier must include an index,

appropriately referenced, of all the cost data and information

accompanying or identified in the estimate. With any future additions

and/or revisions to an estimate, the carrier must provide a

supplemental index, up to the date of the agreement on the costs.

(f) Headings for submission are as follows:

(1) Total Project Cost: Summary.

(i) Cost Elements (Enter appropriate cost elements.).

(ii) Actual Costs Incurred--Total Cost (Enter those necessary and

reasonable costs that were incurred in the efficient completion of

CALEA requirements.).

(iii) Actual Costs Incurred--Unit Cost (Enter the unit costs for

each cost element.).

(iv) Supporting Material (Identify the attachment in which the

information supporting the specific cost element may be found. Attach

separate pages as necessary.).

(2) Total Project Costs: Detail (at Switch Level, Research &

Development, or Project level, as appropriate).

mpletion of

CALEA requirements.).

(iii) Actual Costs Incurred--Unit Cost (Enter the unit costs for

each cost element.).

(iv) Supporting Material (Identify the attachment in which the

information supporting the specific cost element may be found. Attach

separate pages as necessary.).

(2) Total Project Costs: Detail (at Switch Level, Research &

Development, or Project level, as appropriate).

(i) Cost Elements (Enter appropriate cost elements.).

(ii) Actual Costs Incurred--Total Cost (Enter those necessary and

reasonable costs that were incurred in the efficient completion of

CALEA requirements.).

(iii) Actual Costs Incurred--Unit Cost (Enter the unit costs for

each cost element.).

(iv) Supporting Material (Identify the attachment in which the

information supporting the specific cost element may be found. Attach

separate pages as necessary.).

Sec. 100.18 Audit.

(a) General. In order to evaluate the accuracy, completeness, and

currency of the cost data, the FBI or other representatives of the

Government shall have the right to examine and audit all of the

carrier's supporting materials.

(1) These materials include, but are not limited to books, records,

documents, and other data, regardless of form (e.g., machine readable

media such as disk, tape) or type (e.g., data bases, applications

software, data base management software, utilities), including

computations and projections related to proposing, negotiating,

costing, or performing CALEA compliance efforts or modifications.

(2) The right of examination shall extend to all documents

necessary to permit adequate evaluation of the cost data submitted,

along with the computations and projections used.

data bases, applications

software, data base management software, utilities), including

computations and projections related to proposing, negotiating,

costing, or performing CALEA compliance efforts or modifications.

(2) The right of examination shall extend to all documents

necessary to permit adequate evaluation of the cost data submitted,

along with the computations and projections used.

(b) Audits of request for payment. The carrier shall maintain and

the FBI or representatives of the Government shall have the right to

examine and audit supporting materials.

(1) These materials include, but are not limited to, books,

records, documents, and other evidence and accounting procedures and

practices, regardless of form (e.g., machine readable media such as

disk, tape) or type (e.g., data bases, applications software, data

based management software, utilities), sufficient to reflect properly

all costs claimed to have been incurred, or anticipated to be incurred,

in performing the CALEA compliance effort.

(2) This right of examination shall include inspection at all

reasonable times of the carrier's plants, or parts of them, engaged in

performing the effort.

(c) Reports. If the carrier is required to furnish cost, funding,

or performance reports, the FBI or representatives of the Government

shall have the right to examine and audit books, records, other

documents, and supporting materials, for the purpose of evaluating the

effectiveness of the carrier's policies and procedures to produce data

compatible with the objectives of these reports and the data reported.

the carrier is required to furnish cost, funding,

or performance reports, the FBI or representatives of the Government

shall have the right to examine and audit books, records, other

documents, and supporting materials, for the purpose of evaluating the

effectiveness of the carrier's policies and procedures to produce data

compatible with the objectives of these reports and the data reported.

(d) Availability. The carrier shall make available at its office at

all reasonable times the costs and support material described herein,

for examination, audit, or reproduction, until five (5) years after

final reimbursement payment. In addition,

(1) If the CALEA compliance effort is completely or partially

terminated, the records relating to the work terminated shall be made

available for five (5) years after any resulting final termination

settlement; and

(2) Records relating to appeals, litigation or the settlement of

claims arising under or relating to the CALEA compliance effort shall

be made available until such appeals, litigation, or claims are

disposed of.

(e) Subcontractors. The carrier shall ensure that all terms and

conditions herein are incorporated in any agreement with a

subcontractor that may be utilized by the carrier to perform any or all

portions of this agreement.

Sec. 100.19 Reduction for defective cost data.

(a) The cost shall be reduced accordingly and the agreement shall

be modified to reflect the reduction if any cost estimate negotiated in

connection with the CALEA compliance effort, or any cost reimbursable

under the effort, or any data modification is increased by any

significant amount because:

(1) The carrier or a subcontractor furnished cost data that were

not complete, accurate, and current;

(2) A subcontractor or prospective subcontractor furnished the

carrier cost data that were not complete, accurate, and current; or

(3) Any of these parties furnished data of any description that

were not accurate.

ort, or any data modification is increased by any

significant amount because:

(1) The carrier or a subcontractor furnished cost data that were

not complete, accurate, and current;

(2) A subcontractor or prospective subcontractor furnished the

carrier cost data that were not complete, accurate, and current; or

(3) Any of these parties furnished data of any description that

were not accurate.

(b) Any reduction in the negotiated cost under Sec. 100.19(a) due

to defective data from a prospective subcontractor that was not

subsequently awarded the subcontract shall be limited to the amount by

which either the actual subcontract or the actual cost to the carrier,

if there was no subcontract, was less than the prospective subcontract

cost estimate submitted by the carrier, provided that the actual

subcontract cost was not itself affected by defective cost data.

(c) If the FBI determines under Sec. 100.19(a) that a cost

reduction should be made, the carrier shall not raise the following

matters as a defense:

(1) The carrier or subcontractor was a sole source supplier or

otherwise was in a superior bargaining position and thus the costs of

the agreement would not have been modified even if accurate, complete,

and current cost data had been submitted;

(2) The FBI should have known that the cost data at issue were

defective even though the carrier or subcontractor took no affirmative

action to bring the character of the data to the attention of the FBI;

ier or

otherwise was in a superior bargaining position and thus the costs of

the agreement would not have been modified even if accurate, complete,

and current cost data had been submitted;

(2) The FBI should have known that the cost data at issue were

defective even though the carrier or subcontractor took no affirmative

action to bring the character of the data to the attention of the FBI;

(3) The carrier or subcontractor did not submit accurate cost data.

Except as prohibited, an offset in an amount determined appropriate by

the FBI based upon the facts shall be allowed against the cost

reimbursement of an agreement amount reduction if the carrier certifies

to the FBI that, to the best of the carrier's knowledge and belief, the

carrier is entitled to the offset in the amount requested and the

carrier proves that the cost data were available before the date of

agreement on the cost of the agreement (or cost of the modification)

and that the data were not submitted before such date. An offset shall

not be allowed if the understated data were known by the carrier to be

understated when the agreement was signed; or the Government proves

that

the facts demonstrate that the agreement amount would not have

increased even if the available data had been submitted before the date

of agreement on cost; or

(4) In the event of an overpayment, the carrier shall be liable to

and shall pay the United States at that time such overpayment as was

made, with simple interest on the amount of such overpayment to be

computed from the date(s) of overpayment to the carrier to the date the

Government is repaid by the carrier at the applicable underpayment rate

effective for each quarter prescribed by the Secretary of the Treasury

under 26 U.S.C. 6621(a)(2).

Sec. 100.20 Accounting for unallowable costs.

To ensure that the Government does not reimburse carriers for

unallowable costs, the following provisions are included:

he date(s) of overpayment to the carrier to the date the

Government is repaid by the carrier at the applicable underpayment rate

effective for each quarter prescribed by the Secretary of the Treasury

under 26 U.S.C. 6621(a)(2).

Sec. 100.20 Accounting for unallowable costs.

To ensure that the Government does not reimburse carriers for

unallowable costs, the following provisions are included:

(a) Costs that are expressly unallowable or mutually agreed to be

unallowable, including mutually agreed to be unallowable directly

associated costs, shall be identified and excluded from any billing,

claim, or proposal applicable to reimbursement under CALEA. When an

unallowable cost is incurred, its directly associated costs are also

unallowable.

(b) The detail and depth of records required as backup support for

cost estimates, billings, or claims shall be those which are adequate

to establish and maintain visibility of identified unallowable costs,

including their directly associated costs. Unallowable costs involved

in determining rates used for standard costs, or for allocable cost

proposals or billing, need be identified only at the time rates are

proposed, established, revised, or adjusted. These requirements may be

satisfied by any form of cost identification which is adequate for

purposes of cost determination and verification.

Sec. 100.21 Confidentiality of trade secrets/proprietary information.

With respect to any information provided to the FBI under this part

that is identified as company proprietary information, it shall be

treated as privileged and confidential. It shall not be disclosed

outside the government for any reason inclusive of Freedom of

Information requests, without the prior written approval of the

company. Information provided will be used exclusively for the

implementation of CALEA. This restriction does not limit the

government's right to use the information provided if obtained from any

other source without limitation.