INTERIM POLICY NOTICE

98-9

15 APR 98

EFFECTIVE DATE/IMPLEMENTATION: 15 APR 98

1. This notice implements revisions to AFMCFARS Part 5346.7, Warranties. A brief discussion of the background of this revision is as follows:

Discussion: Repeal of 10 U.S.C. 2403 followed a June 1996 General Accounting Office (GAO) Report (B-259383) which concluded the use of warranties in weapon system acquisitions is not practical and does not provide sufficient benefits to the Government. GAO estimated that the military services spend about $271 million annually for weapon system warranties with a return of only 5 cents per dollar. To implement this change at the DoD level, the Director of Defense Procurement issued Departmental Letter (D.L.) 98-002 on 6 Feb 98 removing the regulatory requirement for the mandatory purchase weapon system warranties found at DFARS 246.770. This letter will be formally implemented in DFARS Case 97-D326. With the repeal of 10 U.S.C. 2403 and issuance of D.L. 98-002, all AFFARS and AFMCFARS language pertaining to the mandatory use of weapon system warranties was also obsolete. To implement this change at the Air Force level, SAF/AQC issued Policy Memo 98-C-03 on 24 Mar 98 with "Interim" AFFARS Warranty Policy as follows:

This "Interim" policy will be revised upon comment resolution by SAF/AQC and subsequently finalized as AFFARS Case 98-01. AFMC has provided continual input to this AFFARS revision. Our latest comment is focused on subpart 5346.703 and incorporates field comments (FMS wording) arising from our own AFMC case as follows:

This suggested language has been discussed with the SAF/AQCS action officer and is tentatively approved as the "Final" AFFARS version. It will be included in the next AFFARS revision. As such, it is being used as the baseline for the attached approved AFMC case.

The only other issue with the AFFARS policy is the referencing of AFM 64-110, Manual for Weapon System Warranties. AFMC/PKP (the OPR for AFM 64-110) will locate all guidance needed (deleted from DFARS, AFFARS, AFMCFARS, and currently in AFM 64-110) for weapon system warranties and consolidate this guidance in one place -- the new AFMC Weapon System Warranty Guide. SAF/AQCP does not wish to cite the new guide until it is issued, thus they still reference AFM 64-110. If the new guide is approved prior to the AFFARS revision, it will also be included in the new language.

This case (AFMCFARS case 98-006) was approved by the AFMC FAR Council Chairman on 14 Apr 98 and will be formally incorporated in the next AFMCAC.

2. Refer questions to Maj Pat Rhode,

3. This IPN is effective until superceded by applicable AFMCAC.

Attachment:

Revised AFMCFARS Language

ATTACHMENT

SUBPART 5346.7--WARRANTIES

5346.703 Criteria for use of warranties 46-4

5346.704 Authority for use of warranties 46-4

5346.710 Contract clauses 46-4

5346.703 Criteria for use of warranties.

(90) To support a determination that a weapon system warranty (WSW) is cost effective, a cost benefit analysis (CBA) in accordance with AFI 65-501, Economic Analysis, must be accomplished.

(91) A Foreign Military Sales (FMS) customer-directed WSW does not require a CBA unless specifically requested.

(92) Follow-on contracts on acquisition programs that have established WSW provisions may continue such provisions without conducting a CBA as long as no changes to warranty price are anticipated and no changes to planned operational, maintenance, or supply concepts have been made.

5346.704 Authority for use of warranties.

(90) The contracting officer shall document the decision to purchase a WSW. This documentation shall include the chief of the contracting office approval citing applicable rationale and a CBA (if applicable).

5346.710 Contract clauses.