OFFICE OF THE UNDER SECRETARY OF DEFENSE

3000 DEFENSE PENTAGON

WASHINGTON DC 20301-3000

DP (DAR)

MEMORANDUM FOR DIRECTORS OF DEFENSE AGENCIES DEPUTY FOR ACQUISITION AND BUSINESS MANAGEMENT,

ASN (RD&A) IASM

DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE (CONTRACTING), SAF/AQC

DEPUTY ASSISTANT SECRETARY OF THE ARMY (PROCUREMENT)

DEPUTY DIRECTOR (ACQUISITION), DEFENSE LOGISTICS AGENCY~

SUBJECT: Restructuring Costs

We have amended Part 231 of the Defense Federal Acquisition Regulation Supplement to implement Section 8092 of the National Defense Appropriations Act for Fiscal Year 1998

(Pub. L. 105-56), and Section 804 of the National Defense Authorization Act for

Fiscal Year 1998 (Pub. L. 105-85). Sections 8092 and 804 restrict the reimbursement of restructuring costs associated with a business combination of a defense contractor unless certain conditions are met.

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

Eleanor R. Spector

Director, Defense Procurement

Attachment

RESTRUCTURING COSTS

DFARS 97-D313

INTERIM RULE

Added language is in [hold and brackets]. Deleted language is

indicated by [ ].

PART 23l CONTRACT COST PRINCIPLES AND PROCEDURES

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231.205-70 External restructuring costs.

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(4) "Restructuring costs" means the costs, including both direct and indirect, of restructuring activities. Restructuring costs that may be allowed include, but are not limited to, severance pay for employees, early retirement incentive payments for employees, employee retraining costs, relocation expense for retained employees, and relocation and rearrangement of plant and equipment. For purposes of this definition, if restructuring costs associated with external restructuring activities allocated to DoD contracts are less than $2.5 million, the costs shall not be subject to the audit, review, [ ] certification[, and determination] requirements of [paragraph ][ ] (c)(1) [of this subsection]; instead, the normal rules for determining cost allowability in accordance with FAR Part 31 shall apply.

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(c) Limitations on cost allowability.

(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 [paragraph (c)(1)(iv)(B)(2)(ii) or(c)(1)(iv)(C)(2) of this subsection] applies.

(e) Information needed to obtain certification [and determination].

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