DFARS Change Notice 19981117

[Federal Register: November 17, 1998 (Volume 63, Number 221)]

[Rules and Regulations]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

DEPARTMENT OF DEFENSE

48 CFR Parts 215 and 253

[DFARS Case 97-D025]

Defense Federal Acquisition Regulation Supplement; Weighted

Guidelines--Federally Funded Research and Development Centers

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: The Director of Defense Procurement has issued a final rule

amending the Defense Federal Acquisition Regulation Supplement (DFARS)

to exempt contract actions with Federally Funded Research and

Development Centers (FFRDCs) from the weighted guidelines method of

establishing profit and fee objectives. The fee for an FFRDC is based

on assessment of need and, therefore, should not be subject to the

risk-based approach used in the weighted guidelines method. The rule

instead requires contracting officers to establish fee objectives for

FFRDCs in accordance with the DoD FFRDC Management Plan.

EFFECTIVE DATE: November 17, 1998.

FOR FURTHER INFORMATION CONTACT:

Ms. Amy Williams, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

A proposed rule with request for comments was published in the

Federal Register on September 15, 1997 (62 FR 48205). Two sources

submitted comments in response to the proposed rule. All comments were

considered in the development of the final rule.

B. Regulatory Flexibility Act

DoD certifies that this final rule will not 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.,

because the rule applies only to contract actions with Federally Funded

Research and Development Centers. The rule is not applicable to small

businesses.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the final rule

does not impose any information collection requirements that require

the approval of the Office of Management and Budget under 44 U.S.C.

3501, et seq.

List of Subjects in 48 CFR Parts 215 and 253

Government procurement.

Michele P. Peterson,

Executive Editor, Defense Acquisition Regulations Council.

Therefore, 48 CFR Parts 215 and 253 are amended as follows:

1. The authority citation for 48 CFR Parts 215 and 253 continues to

read as follows:

Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 215--CONTRACTING BY NEGOTIATION

2. Section 215.404-4 is amended by revising paragraph (b)(1)

introductory text, paragraph (c)(2) introductory text, and paragraphs

(c)(2)(A) and (c)(2)(B) to read as follows:

215.404-4 Profit.

(b) * * *

(1) Departments and agencies shall use a structured approach for

developing a prenegotiation profit or fee objective on any negotiated

contract action that requires cost analysis, except on cost-plus-award-

free contracts (see 215.404-74) or contracts with Federally Funded

Research and Development Centers (FFRDCs) (see 215.404-75). There are

three structured approaches--

* * * * *

(c) * * *

(2) When using a structured approach, the contracting officer--

(A) Shall use the weighted guidelines method (see 215.404-71),

except as provided in paragraphs (c)(2)(B) and (c)(2)(C) of this

subsection.

(B) Shall use the modified weighted guidelines method (see 215.404-

72) on contract actions with nonprofit organizations other than FFRDCs.

* * * * *

3. Section 215.404-72 is revised to read as follows:

215.404-72 Modified weighted guidelines method for nonprofit

organizations other than FFRDCs.

(a) Definition. As used in this subpart, a nonprofit organization

is a business entity--

(1) That operates exclusively for charitable, scientific, or

educational purposes;

(2) Whose earnings do not benefit any private shareholder or

individual;

(3) Whose activities do not involve influencing legislation or

political campaigning for any candidate for public office; and

(4) That is exempted from Federal income taxation under section 501

of the Internal Revenue Code.

(b) For nonprofit organizations that are entities that have been

identified by the Secretary of Defense or a Secretary of a Department

as receiving sustaining support on a cost-plus-fixed-fee basis from a

particular DoD department or agency, compute a fee objective for

covered actions using the weighted guidelines method in 215.404-71,

with the following modifications:

(1) Modifications to performance risk (Blocks 21-24 of the DD Form

1547). (i) If the contracting officer assigns a value from the standard

designated range (see 215.404-71-2(c)), reduce the fee objective by an

amount equal to 1 percent of the costs in Block 18 of the DD Form 1547.

Show the net (reduced) amount on the DD Form 1547.

(ii) If the contracting officer assigns a value from the alternate

designated range, reduce the fee objective by an amount equal to 2

percent of the costs in Block 18 of the DD Form 1547. Show the net

(reduced) amount on the DD Form 1547.

(2) Modifications to contract type risk (Block 25 of the DD Form

1547). Use a designated range of -1 percent to 0 percent instead of the

values in 215.404-71-3. There is no normal value.

(c) For all other nonprofit organizations except FFRDCs, compute a

fee objective for covered actions using the weighted guidelines method

in 215.404-71, modified as described in paragraph (b)(1) of this

subsection.

215.404-75 [Redesignated as 215.404-76]

4. Section 215.404-75 is redesignated as section 215.404-76.

5. A new section 215.404-75 is added to read as follows:

215.404-75 Fee requirements for FFRDCs.

For nonprofit organizations that are FFRDCs, the contracting

officer--

(a) Should consider whether any fee is appropriate. Considerations

shall include the FFRDC's--

(1) Proportion of retained earnings (as established under generally

accepted accounting methods) that relates to DoD contracted effort;

(2) Facilities capital acquisition plans;

(3) Working capital funding as assessed on operating cycle cash

needs; and

(4) Provision for funding unreimbursed costs deemed ordinary and

necessary to the FFRDC.

(b) Shall, when a fee is considered appropriate, establish the fee

objective in accordance with FFRDC fee policies in the DoD FFRDC

Management Plan.

(c) Shall not use the weighted guidelines method or an alternate

structured approach.

PART 253--FORMS

253.215-70 [Amended]

6. Section 253.215-70 is amended in paragraph (b)(4) by revising

the parenthetical to read ``(see 215.404-76)''.