DFARS Change Notice 19990416

[Federal Register: April 16, 1999 (Volume 64, Number 73)]

[Rules and Regulations]

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

DEPARTMENT OF DEFENSE

48 CFR Part 231

[DFARS Case 98-D019]

Defense Federal Acquisition Regulation Supplement; Restructuring Savings Repricing Clause

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 specify that contracting officers should consider using a repricing clause in noncompetitive fixed-price contracts that are negotiated

during the period between the time a business combination is announced and the time the contractor's forward pricing rates are adjusted to reflect the impact of restructuring.

EFFECTIVE DATE: April 16, 1999.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra Haberlin, Defense Acquisition Regulations Council, PDUSD (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0131; telefax (703) 602-0350. Please cite DFARS Case 98-D019.

SUPPLEMENTARY INFORMATION:

A. Background

This final rule amends DFARS 231.205-70, External restructuring costs, to specify that contracting officers should consider including a downward-only repricing clause in noncompetitive fixed-price contracts that are negotiated during the period between the time a business combination is announced and the time the contractor's forward pricing rates are adjusted to reflect the impact of restructuring.

Since the late 1980's, defense contractors have been restructuring their business operations to increase efficiencies and become more competitive in the defense marketplace. Many of the restructuring activities result from business combinations (such as mergers or acquisitions) and often lead to reduced overall costs and future savings. The repricing clause should ensure that DoD receives its appropriate share of restructuring savings.

A proposed DFARS rule was published in the Federal Register on November 30, 1998 (63 FR 65727). Nine 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 most contracts awarded to small entities use simplified acquisition procedures or are awarded on a competitive fixed-price basis, and do not require application of the cost principle contained in this rule.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the 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 Part 231

Government procurement.Michele P. Peterson,

Executive Editor, Defense Acquisition Regulations Council.

Therefore, 48 CFR Part 231 is amended as follows:

1. The authority citation for 48 CFR Part 231 continues to read as follows:

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

Restructuring Savings Repricing Clause

DFARS Case 98-D019

Final Rule

PART 231-CONTRACT COST PRINCIPLES AND PROCEDURES

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SUBPART 231.2-CONTRACTS WITH COMMERCIAL ORGANIZATIONS

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231.205-70 External restructuring costs.

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[(f) Contracting officer responsibilities. (1) The contracting officer, in consultation with the cognizant ACO, should consider including a repricing clause in noncompetitive fixed-price contracts that are negotiated during the period between-

(2) The decision to use a repricing clause will depend upon the particular circumstances involved, including-

(3) If the contracting officer decides to use a repricing clause, the clause must provide for a downward-only price adjustment to ensure that DoD receives its appropriate share of restructuring net savings.]

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[Federal Register: April 16, 1999 (Volume 64, Number 73)]

[Rules and Regulations]

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

DEPARTMENT OF DEFENSE 48 CFR Parts 232 and 252

[DFARS Case 98-D012]

Defense Federal Acquisition Regulation Supplement; Electronic

Funds Transfer

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 remove policy and procedures for use of the electronic funds transfer (EFT) method of contract payment when the payment office uses

the Central Contractor Registration (CCR) database as its source of EFT information. The DFARS policy and procedures are no longer necessary, as a result of changes made to the Federal Acquisition Regulation (FAR) in Item IV of Federal Acquisition Circular 97-11.

EFFECTIVE DATE: May 3, 1999.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra Haberlin, Defense Acquisition Regulations Council, PDUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0131; telefax (703) 602-0350. Please cite DFARS Case 98-D012.SUPPLEMENTARY INFORMATION:

A. Background

An interim DFARS rule was published in the Federal Register on May 20, 1998 (63 FR 27682). The rule prescribed use of a new clause at DFARS 252.232-7009, Payment by Electronic Funds Transfer (CCR). This clause was especially tailored for DoD contractors that are paid by EFT

and registered in the CCR database as required by DFARS Subpart 204.73. No public comments were received in response to the interim DFARS rule. Subsequently, on March 4, 1999, a final FAR rule was published in the Federal Register (64 FR 10538). The rule amends the FAR, effective

May 3, 1999, to provide policy and procedures for making contract financing and delivery payments to contractors by EFT. To accommodate the DoD requirement for contractors to register into a CCR database, the rule prescribes a new clause at FAR 52.232-33, Payment by Electronic Funds Transfer-Central Contractor Registration, for use when the payment office will make payment by EFT and will use the CCR database as its source of EFT information. The clause at FAR 52.232-33 is equivalent to the clause at DFARS 252.232-7009.

This final rule eliminates the DFARS changes made in the interim rule published on May 20, 1998, as a result of the FAR changes pertaining to payment by EFT published on March 4, 1999.

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 this final rule eliminates the DFARS changes made in the interim rule, as a result of

recent changes to the FAR pertaining to payment by EFT.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the 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 232 and 252

Government procurement. Michele P. Peterson, Executive Editor, Defense Acquisition Regulations Council.

Therefore, 48 CFR Parts 232 and 252 are amended as follows:

1. The authority citation for 48 CFR Parts 232 and 252 continue to read as follows:

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

ELECTRONIC FUNDS TRANSFER

DFARS CASE 98-D012

FINAL RULE

PART 232-CONTRACT FINANCING

TABLE OF CONTENTS

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SUBPART 232.11-ELECTRONIC FUNDS TRANSFER

232.1101 Policy.

232.1103 Contract clauses.

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SUBPART 232.11-ELECTRONIC FUNDS TRANSFER

232.1101 Policy.

(a) If the payment office is not capable of making payment by electronic funds transfer (EFT), the payment office is relieved of the requirement to pay by EFT if DoD complies with 31 CFR 208.3, which requires written notice and submittal of an implementation plan to the Department of the Treasury, Financial Management Service.

232.1103 Contract clauses.

If the solicitation or contract includes the clause at

252.204-7004, Required Central Contractor Registration, and payment under the contract will be made by electronic funds transfer, use the clause at 252.232-7009, Payment by Electronic Funds Transfer (CCR), instead of the clause at FAR 52.232-33, Mandatory Information for Electronic Funds Transfer Payment, or the clause at FAR 52.232-34, Optional Information for Electronic Funds Transfer Payment.

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PART 252-SOLICITATION PROVISIONS AND CONTRACT CLAUSES

TABLE OF CONTENTS

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252.232-7009 Payment by Electronic Funds Transfer (CCR).

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252.232-7009 Payment by Electronic Funds Transfer (CCR).

As prescribed in 232.1103, use the following clause:

PAYMENT BY ELECTRONIC FUNDS TRANSFER (CCR)(JUN 1998)

(a) Method of payment.

(b) Alternative contractor certification. If the Contractor certifies in writing, as part of its registration with the Central Contractor Registration (CCR) database that it does not have an account with a financial institution and does not have an authorized payment agent, payment shall be made by check to the remittance address contained in the CCR database. All contractor certifications will expire on January 1, 1999.

(c) Contractor's EFT information. Except as provided in paragraph (b) of this clause, the Government shall make payment to the Contractor using the EFT information contained in the CCR database. In the event that the EFT information changes, the Contractor shall be responsible for providing the updated information to the CCR database.

(d) Mechanisms for EFT payment. The Government may make payment by EFT through either an Automated Clearing House subject to the banking laws of the United States or the Federal Reserve Wire Transfer System.

(e) Suspension of payment. If the Contractor's EFT information in the CCR database is incorrect and the Contractor has not certified under paragraph (b) of this clause, the Government need not make payment to the Contractor under this contract until correct EFT information or certification is entered into the CCR database; and any invoice or contract financing request shall be deemed not to be a proper invoice for the purpose of prompt payment under this contract. The prompt payment terms of the contract regarding notice of an improper invoice and delays in accrual of interest penalties apply.

(f) Contractor EFT arrangements. If the Contractor has identified multiple payment receiving points (i.e., more than one remittance address or EFT information set) in the CCR database, and the Contractor has not notified the Government of the payment receiving point applicable to this contract, the Government shall make payment to the first payment receiving point (EFT information set or remittance address as applicable) listed in the CCR database.

(g) Liability for uncompleted or erroneous transfers.

(h) EFT and prompt payment. A payment shall be deemed to have been made in a timely manner in accordance with the prompt payment terms of this contract if, in the EFT payment transaction instruction released to the Federal Reserve System, the date specified for settlement of the payment is on or before the prompt payment due date, provided the specified payment date is a valid date under the rules of the Federal Reserve System.

(i) EFT and assignment of claims. If the Contractor assigns the proceeds of this contract as provided for in the assignment of claims terms of this contract, the Contractor shall require as a condition of any such assignment, that the assignee register in the CCR database and be paid by EFT in accordance with the terms of this clause. In all respects, the requirements of this clause shall apply to the assignee as if it were the Contractor. EFT information that shows the ultimate recipient of the transfer to be other than the Contractor, in the absence of a proper assignment of claims acceptable to the Government, is incorrect EFT information within the meaning of paragraph (e) of this clause.

(j) Liability for change of EFT information by financial agent. The Government is not liable for errors resulting from changes to EFT information made by the Contractor's financial agent.

(k) Payment information. The payment or disbursing office shall forward to the Contractor available payment information that is suitable for transmission as of the date of release of the EFT instruction to the Federal Reserve System. The Government may request the Contractor to designate a desired format and method(s) for delivery of payment information from a list of formats and methods the payment office is capable of executing. However, the Government does not guarantee that any particular format or method of delivery is available at any particular payment office and retains the latitude to use the format and delivery method most convenient to the Government. If the Contractor has certified in accordance with paragraph (b) of this clause or if the Government otherwise makes payment by check in accordance with paragraph (a) of this clause, the Government shall mail the payment information to the remittance address contained in the CCR database.

(End of clause)

[Federal Register: April 16, 1999 (Volume 64, Number 73)]

[Rules and Regulations]

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

DEPARTMENT OF DEFENSE

48 CFR Part 235

[DFARS Case 98-D306]

Defense Federal Acquisition Regulation Supplement; Manufacturing

Technology Program

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

SUMMARY: The Director of Defense Procurement has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 213 of the Strom Thurmond National Defense Authorization Act of Fiscal Year 1999. Section 213 requires that, for each contract entered into on a cost-sharing basis under the Manufacturing Technology Program, the ratio of contract recipient cost to Government cost must be determined by competitive procedures.

DATES: Effective date: April 16, 1999.

Comment date: Comments on the interim rule should be submitted in writing to the address shown below on or before June 15, 1999, to be considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to Defense Acquisition Regulations Council, Attn: Ms. Melissa Rider, PDUSD (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telefax (703) 602-0350.

E-mail comments submitted over the Internet should be addressed to: dfars@acq.osd.mil

Please cite DFARS Case 98-D306 in all correspondence related to this issue. E-mail comments should cite DFARS Case 98-D306 in the subject line.

FOR FURTHER INFORMATION CONTACT: Ms. Melissa Rider, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

This interim rule amends DFARS guidance concerning the Manufacturing Technology Program to implement Section 213 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Public Act 105-261). Section 213 amends 10 U.S.C. 2525(d) to require that, for each contract entered into on a cost-sharing basis under the Manufacturing Technology Program, the ratio of contract recipient cost to Government cost must be determined by competitive procedures; and that the Secretary of Defense may delegate the authority to approve use of other than a cost-sharing contract under the Program only to the Under Secretary of Defense (Acquisition and Technology) of a service acquisition executive. On January 9, 1999, the Secretary of Defense

delegated this authority to the Under Secretary of Defense (Acquisition and Technology).

The rule also removes guidance from DFARS 235.006 pertaining to the Manufacturing Technology Program, as the guidance has been relocated to a new section at 235.006-70; and removes obsolete language from 235.006 pertaining to prior years' appropriations acts.

B. Regulatory Flexibility Act

This interim rule is not expected to 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 only new requirement for offerors or contractors is a requirement for the inclusion of a cost-sharing ratio in proposals for contracts under the Manufacturing Technology Program. This change is not expected to significantly alter the procedures for award of contracts under the

Manufacturing Technology Program, as the DFARS already requires the use of cost-sharing arrangements and competitive procedures for contracts under the Program. An initial regulatory flexibility analysis has, therefore, not been performed. Comments are invited from small

businesses and other interested parties. Comments from small entities concerning the affected DFARS subparts also will be considered in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 98-D306 in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the 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.

D. Determination To Issue an Interim Rule

A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish this interim rule prior to affording the public an opportunity to comment. This interim rule implements Section 213 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Public Law 105-261) pertaining to the Manufacturing Technology Program. Section 213 became effective on October 17, 1998. Comments received in response to the publication of this interim rule will be considered in the formation of the final rule.

List of Subjects in 48 CFR Part 235

Government procurement. Michele P. Peterson, Executive Editor, Defense Acquisition Regulations Council.

Therefore, 48 CFR Part 235 is amended as follows:

1. The authority citation for 48 CFR Part 235 continues to read as follows:

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

Manufacturing Technology Program

DFARS Case 98-D306

Interim Rule

PART 235-RESEARCH AND DEVELOPMENT CONTRACTING

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235.006 Contracting methods and contract type.

(a) All contracts under the Manufacturing Technology Program (see DoDI 4200.15, Manufacturing Technology Program) shall be awarded using competitive procedures (10 U.S.C. 2525).

(b)(i) [Do not award a] A fixed-price type contract shall not be awarded for a development program effort unless-

(C) A repricing of fixed-price type production options to a development contract, or a contract for the lead ship of a class, which [that] increases the price or ceiling price by more than $250 million for equivalent quantities.

(iii) Notify the USD(A&T) of an intent not to exercise a fixed-price production option on a development contract for a major weapon system reasonably in advance of the expiration of the option exercise period.

(iv) A cost-sharing arrangement (see FAR 16.303) must be used for contracts awarded in support of the Manufacturing Technology Program, unless an alternative is approved by the Secretary of Defense (10 U.S.C. 2525). Approval by the Secretary of Defense to use other than a cost-sharing arrangement for the Manufacturing Technology Program must be based on a determination that the contract is for a program that-

(A) Is not likely to have any immediate and direct commercial application;

(B) Is of sufficiently high risk to discourage cost sharing by non-Federal Government sources; or

(C) Will be carried out by an institution of higher education.

[235.006-70 Manufacturing Technology Program.

(a) This subsection implements 10 U.S.C. 2525(d).

(b) Award all contracts under the Manufacturing Technology Program (see DoDI 4200.15, Manufacturing Technology Program) using competitive procedures.

(c)(1) Use a cost-sharing arrangement (see FAR 16.303) for contracts awarded under the Manufacturing Technology Program, unless the USD(A&T) makes a determination that the contract is for a program that--

(i) Is not likely to have any immediate and direct commercial application;

(ii) Is of sufficiently high risk to discourage cost sharing by non-Federal Government sources; or

(iii) Will be carried out by an institution of higher education.

(d) For each contract entered into on a cost-sharing basis, determine the ratio of contractor cost to Government cost by competitive procedures, i.e., each offeror must propose the ratio as part of its proposal. If only one offer is received, negotiate the ratio that provides the best value to the Government.]