DoD Seal DoD 50 Year Seal

OFFICE OF THE SECRETARY OF DEFENSE

1000 DEFENSE PENTAGON
WASHINGTON, DC 20301-1000
December 6, 1996

 
ACQUISITION AND
 TECHNOLOGY

DP(DAR)

                                                          In reply refer to
                                                          DFARS Case: 96-D334
                                                          D. L. 96-022



MEMORANDUM FOR	DIRECTORS OF DEFENSE AGENCIES
                    DEPUTY FOR ACQUISITION AND BUSINESS MANAGEMENT,
                      ASN(RD&A)/ABM
                    DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE
                      (CONTRACTING), SAF/AQC
                    DIRECTOR, PROCUREMENT POLICY, ASA(RD&A)/SARD-PP
                    DEPUTY DIRECTOR (ACQUISITION), DEFENSE LOGISTICS
                      AGENCY



SUBJECT:    Restructuring Costs


     We have amended Part 231 of the Defense Federal Acquisition Regulation Supplement
(DFARS) to implement Section 8115 of the National Defense Appropriations Act for
Fiscal Year 1997 (Pub. L. 104-208).  Section 8115 restricts the use of fiscal year
1997 appropriated funds to reimburse external restructuring costs associated with a
business combination undertaken by a defense contractor unless certain conditions
are met.


     This interim DFARS rule is effective immediately and will be published in a
future Defense Acquisition Circular.








                                                    /s/

                                             Eleanor R. Spector
                                             Director, Defense Procurement

Attachment

cc: DSMC, Ft. Belvoir


RESTRUCTURING COSTS
DFARS CASE 96-D334

SUBPART 231.2 -- CONTRACTS WITH COMMERCIAL ORGANIZATIONS

231.205 Selected costs.

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231.205-70 External restructuring costs.

(a) Scope.
This subsection prescribes policies and procedures for allowing contractor external restructuring costs when net savings would result for DoD. This subsection also implements Section 818 or the National Defense Authorization Act for Fiscal Year 1995 (Pub. L. 103-337) [and Section 8115 of the National Defense Appropriations Act for Fiscal Year 1997 (Pub. L. 104-208)].

* * * * *

(c) Limitations on cost allowability.

* * * * *

[(3) Additionally, for business combinations that occur after September 30, 1996, no fiscal year 1997 appropriated funds may be obligated or expended to reimburse a contractor for restructuring costs accociated with external restructuring activities unless --

(i) The audited savings for DoD resulting from the restructuring will exceed the costs allowed by a factor of at least two to one; or

(ii) The savings for DoD resulting from the restructuring will exceed the costs allowed, and the Secretary of Defense determines that the business combination will result in the preservation of a critical capability that might otherwise be lost to DoD].

(d) Procedures and ACO responsibilities.
As soon as it is known that the contractor will incur restructuring costs for external restructuring activities, the cognizant ACO shall:

* * * * *

[(10) Consult with the Director of Defense Procurement, Office of the Under Secretary of Defense (Acquisition & Technology), when 231.205-70(c) (3) (11) applies.]