DFARS Change Notice 20001213

 

The DFARS has been revised by 1 interim rule and 5 final rules published on December 13, 2000, as follows:

 

Interim Rule

From the Federal Register Online via GPO

DEPARTMENT OF DEFENSE

48 CFR Parts 212, 225, and 252

[DFARS Case 2000-D301]

Defense Federal Acquisition Regulation Supplement; Domestic Source Restrictions-Ball and Roller Bearings and Vessel Propellers

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 8064 of the DoD Appropriations Act for Fiscal year 2001 and Section 805 of the DoD Authorization Act for Fiscal Year 2001. These laws place restrictions on the acquisition of vessel propellers and ball and roller bearings from foreign sources.

DATES: Effective date: December 13, 2000.

    Comment date: Comments on the interim rule should be submitted to the address shown below on or before February 12, 2001, to be considered in the formation of the final rule.

ADDRESSES: E-mailed comments are preferred. Submit comments to: dfars@acq.osd.mil. Please cite DFARS Case 2001-D301 in the subject line.

    Respondents that cannot submit comments by e-mail may submit comments to: Defense Acquisition Regulations Council, Attn: Ms. Amy Williams, OUSD(AT&L) DP (DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. Please cite DFARS Case 2000-D301.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, (703) 602-0288.

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule amends the DFARS to implement Section 8064 of the DoD Appropriations Act for Fiscal Year 2001 (Public Law 106-259) and Section 805 of the DoD Authorization Act for Fiscal Year 2001 (Public Law 106-398). Section 8064 of Public Law 106-259 restricts the acquisition of ball and roller bearings and vessel propellers to those produced by a domestic source and of domestic origin. The restriction does not apply to the purchase of commercial items, except ball or roller bearings purchased as end items. Section 805 of Public Law 106- 398 extends the restriction on acquisition of ball and roller bearings at 10 U.S.C. 2534 through fiscal year 2005.

    This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. B. Regulatory Flexibility Act

    This interim rule may 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. An initial regulatory flexibility analysis has been prepared and is summarized as follows: The objective of this interim rule is to protect the domestic industrial base for ball and roller bearings and vessel propellers as required by Section 8064 of Public Law 106-259 and 10 U.S.C. 2534. By restricting foreign competition, the rule will benefit domestic small business concerns that manufacture ball or roller bearings, bearing components, vessel propellers, or vessel propeller casings. This rule does not duplicate, overlap, or conflict with other relevant Federal rules.

    DoD has submitted a copy of the initial regulatory flexibility analysis to the Chief Counsel for Advocacy of the Small Business Administration. Interested parties may obtain a copy of the analysis from the point of contact specified herein. Comments are invited. DoD also will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2000-D301.

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 8064 of the DoD Appropriations Act for Fiscal Year 2001 (Public Law 106-259) and Section 805 of the DoD Authorization Act for Fiscal Year 2001 (Public Law 106-398). Section 8064 of Public Law 106-259 restricts the acquisition of ball and roller bearings and vessel propellers to those produced by a domestic source and of domestic origin. Section 805 of Public Law 106-398 extends the restriction on acquisition of ball and roller bearings at 10 U.S.C. 2534 through fiscal year 2005. Section 8064 of Public Law 106-259 became effective on August 9, 2000, and Section 805 of Public Law 106-398 became effective on October 30, 2000. DoD will consider comments received in response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 212, 225, and 252

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

    Therefore, 48 CFR Parts 212, 225, and 252 are amended as follows:

* * * * *

 

PART 212—ACQUISITION OF COMMERCIAL ITEMS

 

* * * * *

 

SUBPART 212.5—APPLICABILITY OF CERTAIN LAWS TO THE ACQUISITION OF COMMERCIAL ITEMS

 

212.503  Applicability of certain laws to Executive Agency contracts for the acquisition of commercial items.

 

  (a)  The following laws are not applicable to contracts for the acquisition of commercial items:

 

* * * * *

    (xi) Domestic Content Restrictions in the National Defense Appropriations Acts for Fiscal Years 1996 and Subsequent Years[, unless the restriction specifically applies to commercial items.   For the restriction that specifically applies to commercial ball or roller bearings as end items, see 225.7019-2(b) (Section 8064 of Pub. L. 106-259)].

 

* * * * *

212.504  Applicability of certain laws to subcontracts for the acquisition of commercial items.

 

  (a)  * * *

 

* * * * *

    (xxv)  Domestic Content Restrictions in the National Defense Appropriations Acts for Fiscal Years 1996 and Subsequent Years[, unless the restriction specifically applies to commercial items.  For the restriction that specifically applies to commercial ball or roller bearings as end items, see 225.7019-2(b) (Section 8064 of Pub. L. 106-259)].

 

* * * * *

Subpart 225.70—authorization acts, appropriations acts, and other statutory restrictions on foreign acquisition.

 

* * * * *

 

225.7019              Restrictions on ball and roller bearings.

 

225.7019-1  Restrictions.

  (a)  In accordance with 10 U.S.C. 2534 and 225.7019-3(b)(5), through fiscal year 2000[5], do not acquire ball and roller bearings or bearing components that are not manufactured in the United States, Canada, or the United Kingdom.

 

* * * * *

225.7019-2  Exceptions.

 

* * * * *

            (b)  The restriction in 225.7019-1(b) does not apply to contracts [or subcontracts] for acquisition of commercial items or subcontracts for acquisition of commercial items or commercial components (see 212.503(a)(xi) and 212.504(a)(xxvi))[, except for commercial ball and roller bearings acquired as end items] .

 

* * * * *

225.7019-4  Contract clause.

  [(a)]  Use the clause at 252.225-7016, Restriction on Acquisition of Ball and Roller Bearings, in all solicitations and contracts, unless—

 

  (a[1])  * * *

 

  (b[2]) * * *

 

  [(b)  In solicitations and contracts that use simplified acquisition procedures, use the clause with its Alternate I.]

 

* * * * *

  

225.7020  Reserved[Restriction on vessel propellers].

 

[225.7020-1  Restriction.

In accordance with Section 8064 of the National Defense Appropriations Act for Fiscal Year 2001 (Pub. L. 106-259), do not use fiscal year 2000 or 2001 funds to acquire vessel propellers other than those produced by a domestic source and of domestic origin, i.e., vessel propellers—

 

    (a)  Manufactured in the United States or Canada; and

 

    (b)  For which all component castings were poured and finished in the United States or Canada.

 

225.7020-2  Exceptions.

This restriction does not apply to contracts or subcontracts for acquisition of commercial items.

 

225.7020-3  Waiver.

The Secretary of the department responsible for acquisition may waive this restriction on a case-by-case basis, by certifying to the House and Senate Committees on Appropriations that—

 

            (a)  Adequate domestic supplies are not available to meet DoD requirements on a timely basis; and

 

            (b)  The acquisition must be made in order to acquire capability for national security purposes.

 

225.7020-4  Contract clause.

Use the clause at 252.225-7023, Restriction on Acquisition of Vessel Propellers, in solicitations and contracts for the acquisition of vessels or vessel propellers, unless—

 

            (a)  An exception under 225.7020-2 is known to apply or a waiver has been granted in accordance with 225.7020-3; or

 

            (b)  The vessels being acquired do not contain vessel propellers.]

 

* * * * *

                       

PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

 

* * * * *

 

252.212-7001  Contract Terms and Conditions Required to Implement Statutes or Executive Orders Applicable to Defense Acquisitions of Commercial Items.

 

* * * * *

 

  CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUTES OR 

        EXECUTIVE ORDERS APPLICABLE TO DEFENSE ACQUISITIONS OF 

                                                            COMMERCIAL ITEMS (MAR 2000[DEC 2000]).

 

  (a)  * * *

 

 

 

 

_____

252.225-7015

Preference for Domestic Hand or Measuring Tools (10 U.S.C. 2241 note).

______

[252.225-7016

Restriction on Acquisition of Ball and Roller Bearings (____Alternate I) (Section 8064 of Pub. L. 106-259).]

 

 

 

 

* * * * *

 

252.225-7016  Restriction on Acquisition of Ball and Roller Bearings.

 

* * * * *

 

RESTRICTION ON ACQUISITION OF BALL AND ROLLER BEARINGS

 (AUG 1998[DEC 2000])

 

* * * * *

 

  (c)(1)  The restriction in paragraph (b) of this clause does not apply to the extent that [ball or roller bearings that are acquired as components if] —

 

                        (i)  The end items or components containing ball or roller bearings are commercial items; or

 

                        (ii)  The ball or roller bearings are commercial items [components] manufactured in the United Kingdom.

 

* * * * *

 

 [Alternate I (DEC 2000)  As prescribed in 225.7019-4(b), substitute the following paragraph (c)(1)(ii) for paragraph (c)(1)(ii) of the basic clause:

 

  (c)(1)(ii)  The ball or roller bearings are commercial components.]

 

* * * * *

 

252.225-7023  Reserved. [Restriction on Acquisition of Vessel Propellers.

  As prescribed in 225.7020-4, use the following clause:

 

RESTRICTION ON ACQUISITION OF VESSEL PROPELLERS (DEC 2000)

 

 

  (a)  Except as provided in paragraph (b) of this clause, the Contractor shall deliver under this contract, whether as end items or components of end items, vessel propellers—

           

    (1)  Manufactured in the United States or Canada; and

 

    (2)  For which all component castings were poured and finished in the United States or Canada.

 

  (b)  The restriction in paragraph (a) of this clause—

   

    (1)  Does not apply to vessel propellers that are commercial items; and 

 

    (2)  For other than commercial items, may be waived upon request from the Contractor in accordance with subsection 225.7020-3 of the Defense Federal Acquisition Regulation Supplement.

 

                                                                                    (End of clause)]

* * * * *

 

 

Final Rules

Profit Incentives to Produce Innovative New Technologies (DFARS Case 2000-D300)

From the Federal Register Online via GPO Access DEPARTMENT OF DEFENSE

48 CFR Part 215

[DFARS Case 2000-D300]

Defense Federal Acquisition Regulation Supplement; Profit Incentives To Produce Innovative New Technologies

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: The Director Defense Procurement has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 813 of the National Defense Authorization Act for Fiscal Year 2000. Section 813 requires DoD to review its profit guidelines to consider whether appropriate modifications, such as placing increased emphasis on technical risk as a factor for determining appropriate profit margins, would provide an increased profit incentive for contractors to develop and produce complex and innovative new technologies.

EFFECTIVE DATE: December 13, 2000.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition Regulations Council, OUSD (AT&L) DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0288;

facsimile (703) 602-0350. Please cite DFARS Case 2000-D300.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule amends DoD profit policy to implement Section 813 of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106-65). The rule amends the weighted guidelines method of profit computation at DFARS 215.404-71 to combine the management and cost control elements of the performance risk factor; to establish a new ``technology incentive'' range for technical risk; and to slightly modify some of the cost control standards. In addition, the rule amends

DFARS 215.404-4(b) to clarify that DoD departments and agencies must use a structured approach for developing a prenegotiation profit for fee objective on any negotiated contract action when cost or pricing data is obtained.

    DoD published a proposed rule at 65 FR 32066 on May 22, 2000. Five sources submitted comments on the proposed rule. DoD considered all comments in the development of the final rule. The final rule is similar to the proposed rule, except for changes at 215.404-71-2(c)(3) that: (1) Permit use of the technology incentive range for acquisitions that include application of innovative new technologies; and (2) specify that the technology incentive range does not apply to efforts restricted to studies, analyses, or demonstrations that have a technical report as their primary deliverable.

    This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

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 are below $500,000, are based on adequate price competition, or are for commercial items, and do not require submission of cost or pricing data.

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 215

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

    Therefore, 48 CFR Part 215 is amended as follows:

 

PART 215—CONTRACTING BY NEGOTIATION

 

* * * * *

 

SUBPART 215.4—CONTRACT PRICING

 

* * * * *

215.404  Proposal analysis.

 

* * * * *

215.404-4  Profit.

 

            (b)  Policy.

 

                        (1)  Departments and agencies shall[must] use a structured approach for developing a prenegotiation profit or fee objective on any negotiated contract action [when cost or pricing data is obtained] that requires cost analysis, except on[for] cost-plus-award-fee contracts (see 215.404-74) or contracts with Federally Funded Research and Development Centers (FFRDCs) (see 215.404-75).  There are three structured approaches

 

* * * * *

215.404-71     Weighted guidelines method.

 

215.404-71-1  General.

 

* * * * *

 

215.404-71-2  Performance risk.

 

            (a)  Description.  This profit factor addresses the contractor's degree of risk in fulfilling the contract requirements.  The factor consists of three [two] parts:

 

                        (1)  Technical--the technical uncertainties of performance.

 

                        (2)  Management[/cost control]--the degree of management effort necessary[—

                                    (i)  T]to ensure that contract requirements are met. [; and

                                    (ii)]  (3)  Cost control--the contractor's efforts t [T]o reduce and control costs.

 

            (b)  Determination.  The following extract from the DD Form 1547 is annotated to describe the process.

 

 

 

Assigned

Assigned

Base

Profit

Item

Contractor Risk Factors

Weighting

Value

(Item 18)

Objective

21.

Technical

(1)

(2)

N/A

N/A

22.

Management[/Cost Control]

      (1)

(2)

N/A

N/A

23.

Cost Control[Reserved]

(1)

(2)

N/A

N/A

24.

Performance Risk

(Composite)

N/A

(3)

(4)

(5)

 

 

 

 

 

 

 

 

                        (1)  Assign a weight (percentage) to each element according to its input to the total performance risk.  The total of the three [two] weights equals 100 percent.

 

                        (2)  Select a value for each element from the list in paragraph (c) of this subsection using the evaluation criteria in paragraphs (d), [and] (e), and (f) of this subsection.

 

                        (3)  Compute the composite as shown in the following example:

 

 

Assigned Weighting

Assigned Value

Weighted Value

Technical

 

3[6]0%

 

5.0%

 

1.5[3.0]%

Management[/Cost Control]

 

3[4]0[%]

 

4.0[%]

 

1.2[1.6%]

Cost Control

 

40

 

4.5

 

1.8

 

 

 

 

 

 

 

Composite Value

 

100%

 

 

 

4.5[4.6]%

 

                        (4) * * *

 

                        (5) * * *

 

            (c)  Values:  Normal and designated ranges.

 

 

Normal Value

Designated Range

Standard

4%

2% to 6%

Alternate

6%

4% to 8%

[Technology Incentive

8%

6% to 10%]

 

                        (1) * * *

 

                        (2) * * *

 

           [(3)  Technology incentive.  For the technical factor only, contracting officers may use the technology incentive range for acquisitions that include development, production, or application of innovative new technologies.  The technology incentive range does not apply to efforts restricted to studies, analyses, or demonstrations that have a technical report as their primary deliverable.]

 

            (d)  Evaluation criteria for technical.

 

                        (1)  * * *

 

                        (2)  Above normal conditions.

 

                                    (i)  The contracting officer may assign a higher than normal value in those cases where there is a substantial technical risk.  Indicators are—

 

                                                (A)  The contractor is either developing or applying advanced technologies;

 

                                                (B[A])  Items are being manufactured using specifications with stringent tolerance limits;

 

                                                (C[B])  The efforts require highly skilled personnel or require the use of state-of-the-art machinery;

 

                                                (D[C])  The services and analytical efforts are extremely important to the Government and must be performed to exacting standards;

 

                                                (E[D])  The contractor's independent development and investment has reduced the Government's risk or cost;

 

                                                (F[E])  The contractor has accepted an accelerated delivery schedule to meet DoD requirements; or

 

                                                (G[F])  The contractor has assumed additional risk through warranty provisions.

 

* * * * *

 

                        (3)  * * *

 

                        [(4)            Technology incentive range.

 

                                    (i)  The contracting officer may assign values within the technology incentive range when contract performance includes the introduction of new, significant technological innovation.  Use the technology incentive range only for the most innovative contract efforts.  Innovation may be in the form of—

 

                                                (A)  Development or application of new technology that fundamentally changes the characteristics of an existing product or system and that results in increased technical performance, improved reliability, or reduced costs; or

 

                                                (B)  New products or systems that contain significant technological advances over the products or systems they are replacing.

 

                                    (ii) When selecting a value within the technology incentive range, the contracting officer should consider the relative value of the proposed innovation to the acquisition as a whole.  When the innovation represents a minor benefit, the contracting officer should consider using values less than the norm.  For innovative efforts that will have a major positive impact on the product or program, the contracting officer may use values above the norm.]

 

(e)  Evaluation criteria for management[/cost control].

 

                        (1)  The contracting officer should [evaluate]

 

                                    (i)  Assess t[T]he contractor's management and internal control systems using contracting office information and reviews made by field contract administration offices or other DoD field offices;

 

                                    (ii)  Assess t[T]he management involvement expected on the prospective contract action;

 

                                    (iii)  Consider t[T]he degree of cost mix as an indication of the types of resources applied and value/added by the contractor; and

 

                                    (iv)  Consider t[T]he contractor's support of Federal socioeconomic programs.[;

 

                                    (v)  The expected reliability of the contractor's cost estimates (including the contractor's cost estimating system);

 

                                    (vi)  The contractor's cost reduction initiatives (e.g., competition advocacy programs, technical insertion programs, obsolete parts control programs, dual sourcing, spare parts pricing reform, value engineering);

 

                                    (vii)  The adequacy of the contractor's management approach to controlling cost and schedule; and

 

                                    (viii)  Any other factors that affect the contractor's ability to meet the cost targets (e.g., foreign currency exchange rates and inflation rates).]

 

                        (2)  Above normal conditions.

 

                                    (i)  The contracting officer may assign a higher than normal value when the management effort is intense.  Indicators of this are—

 

                                    (A)  The contractor's value/added is both considerable and reasonably difficult;

 

                                    (B)  The effort involves a high degree of integration or coordination; or

 

                                                (C)  The contractor has a substantial record of active participation in Federal socioeconomic programs. [;

 

                                                (D)  The contractor provides fully documented and reliable cost estimates;

 

                                                (E)  The contractor has an aggressive cost reduction program that has demonstrable benefits;

 

                                                (F)  The contractor uses a high degree of subcontract competition (e.g., aggressive dual sourcing);

 

                                                (G)  The contractor has a proven record of cost tracking and control; or

 

                                                (H)  The contractor aggressively seeks process improvements to reduce costs.]

 

                                    (ii)  The contracting officer may justify a maximum value when the effort—

 

                                                (A)  Requires large scale integration of the most complex nature;

 

                                                (B)  Involves major international activities with significant management coordination (e.g., offsets with foreign vendors); or

 

                                                (C)  Has critically important milestones.

 

                        (3)  Below normal conditions.

 

                                    (i)  The contracting officer may assign a lower than normal value when the management effort is minimal.  Indicators of this are—

 

                                                (A)  The program is mature and many end item deliveries have been made;

 

                                                (B)  The contractor adds minimum[al] value to an item;

 

                                                (C)  The efforts are routine and require minimal supervision;

 

                                                (D)  The contractor provides poor quality, untimely proposals;

 

                                                (E)  The contractor fails to provide an adequate analysis of subcontractor costs; or

 

                                                (F)  The contractor does not cooperate in the evaluation and negotiation of the proposal.[;

 

                                                (G)  The contractor's cost estimating system is marginal;

 

                                                (H)  The contractor has made minimal effort to initiate cost reduction programs;

 

                                                (I)  The contractor's cost proposal is inadequate; or

 

                                                (J)  The contractor has a record of cost overruns or another indication of unreliable cost estimates and lack of cost control.]

 

                                    (ii)  The following may justify a value significantly below normal—

 

                                                (A)  Reviews performed by the field contract administration offices disclose unsatisfactory management and internal control systems (e.g., quality assurance, property control, safety, security); or

 

                                                (B)  The effort requires an unusually low degree of management involvement.

 

            (f)  Evaluation criteria for cost control.

 

                        (1)  The contracting officer should evaluate—

 

                                    (i)  The expected reliability of the contractor's cost estimates (including the contractor's cost estimating system);

 

                                    (ii)  The contractor's cost reduction initiatives (e.g., competition advocacy programs, dual sourcing, spare parts pricing reform, value engineering);

 

                                    (iii)  The adequacy of the contractor's management approach to controlling cost and schedule; and

 

                                    (iv)  Any other factors that affect the contractor's ability to meet the cost targets (e.g., foreign currency exchange rates and inflation rates).

 

                        (2)  Above normal conditions.  The contracting officer may assign a higher than normal value if the contractor can demonstrate a highly effective cost control program.  Indicators of this are—

 

                                    (i)  The contractor provides fully documented and reliable cost estimates;

 

                                    (ii)  The contractor has an aggressive cost reduction program that has demonstrable benefits;

 

                                    (iii)  The contractor uses a high degree of subcontract competition (e.g., aggressive dual sourcing); or

 

                                    (iv)  The contractor has a proven record of cost tracking and control.

 

                        (3)  Below normal conditions.  The contracting officer may assign a lower than normal value if the contractor demonstrates minimal concern for cost control.  Indicators are—

 

                                    (i)  The contractor's cost estimating system is marginal;

 

                                    (ii)  The contractor has made minimal effort to initiate cost reduction programs;

 

                                    (iii)  The contractor's cost proposal is inadequate; or

 

                                    (iv)  The contractor has a record of cost overruns or other indication of unreliable cost estimates and lack of cost control.

 

* * * * *

                       

215.404-72  Modified weighted guidelines method for nonprofit organizations other than FFRDCs.

 

* * * * *

 

            (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.

 

                                    [(iii)  Do not assign a value from the technology incentive designated range.]

           

* * * * *

 

           

North American Industry Classification System (DFARS Case 2000-D015)

From the Federal Register Online via GPO DEPARTMENT OF DEFENSE

48 CFR Parts 217, 219, and 236

[DFARS Case 2000-D015]

Defense Federal Acquisition Regulation Supplement; North American Industry Classification System

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: The Director of Defense Procurement is adopting as final, without change, an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS). The rule converts programs based on the Standard Industrial Classification (SIC) system to the North American Industry Classification System (NAICS), in accordance with the final rule issued by the Small Business Administration (SBA) on May 15, 2000.

EFFECTIVE DATE: December 13, 2000.

FOR FURTHER INFORMATION CONTACT: Ms. Susan Schneider, Defense Acquisition Regulations Council, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0326; facsimile (703) 602-0350. Please cite DFARS Case 2000-D015.

SUPPLEMENTARY INFORMATION:

A. Background

    SBA issued a final rule at 65 FR 30836 on May 15, 2000, providing a new size standards listing that is based on NAICS rather than SIC codes. The SBA rule requires Federal agencies to use the new size standards to determine whether a business is a small business concern. An interim rule amending the Federal Acquisition Regulation was published at 65 FR 46055 on July 26, 2000, to establish policy for use of the new size standards in Government acquisitions. DoD published an interim rule at 65 FR 50148 on August 17, 2000, to make corresponding changes to the DFARS. One source submitted comments on the interim DFARS rule. DoD considered those comments in the decision to convert the interim rule to a final rule without change.

    This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

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 rule implements the final rule issued by SBA on May 15, 2000, and SBA has certified that the impact of the change from SIC to

NAICS on each business will not be substantial.

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 217, 219, and 236

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

Interim Rule Adopted as Final Without Change

 

PART 217—SPECIAL CONTRACTING METHODS

 

* * * * *

 

SUBPART 217.4—LEADER COMPANY CONTRACTING

 

217.401  General.

 

            (1)  When leader company contracting is to be considered, take special effort to select a small disadvantaged business (SDB) concern as the follower company if—

 

                        (i)  The follower company will be a subcontractor and the Standard Industrial Classification (SIC) Major Group [North American Industry Classification System (NAICS) Industry Subsector] of the acquisition is one in which use of an evaluation factor or subfactor for participation of SDB concerns is currently authorized (see FAR 19.201(b)); or

 

                        (ii)  The follower company will be a prime contractor and the SIC Major Group [NAICS Industry Subsector] of the acquisition is one in which use of a price evaluation adjustment is currently authorized (see FAR 19.201(b)).

 

* * * * *

 

PART 219—SMALL BUSINESS PROGRAMS

 

* * * * *

 

219.201  General policy.

 

* * * * *

            (f)  The Directors, Office of Small and Disadvantaged Business Utilization, of the military departments and defense agencies are responsible for determining whether use of the price evaluation adjustment to achieve a small disadvantaged business goal has caused non-SDB firms in a particular Standard Industrial Classification Major Group [North American Industry Classification System Industry Subsector] to bear an undue burden or other inappropriate effect.  * * *

 

* * * * *

 

219.502-3  Partial set-asides.

 

            (c)(1)  If the Standard Industrial Classification Major Group [North American Industry Classification System Industry Subsector] of the acquisition is one in which use of a price evaluation adjustment for small disadvantaged business concerns is currently authorized (see FAR 19.201(b)), [apply] the adjustment shall be applied to the non-set-aside portion.

 

* * * * *

 

SUBPART 219.10—SMALL BUSINESS COMPETITIVENESS DEMONSTRATION PROGRAM

 

219.1005  Applicability.

 

* * * * *

 

            (b)  The targeted industry categories for DoD are:

 

                        Standard Industrial Classification (SIC)                  SIC Code

                        [North American Industry Classification                [NAICS Code]

                        System (NAICS) Description]

                                               

                        (1)  Pharmaceutical preparations                                         2834

                                      [Pharmaceutical Preparation Manufacturing                      325412]

 

                        (2)  Ammunition, except for small arms                             3483

                                      [Ammunition (except Small Arms) Manufacturing            332993]

 

                        (3)  Ordnance and accessories, not elsewhere       3489

                                      classified

                                      [Other Ordnance and Accessories Manufacturing            332995]

 

                        (4)  Turbines and turbine generator sets                           3511

                                      [Turbine and Turbine Generator Set Unit                

                                                Manufacturing                                                                                   333611]

 

                        (5)  Aircraft engines and engine parts                             3724

                                      [(i)  Aircraft Engine and Engine Parts

                                                             Manufacturing                                                                      336412

 

                                                (ii) Research and Development in the

                                                             Physical, Engineering, and Life

                                                             Sciences (Aircraft Engines and

                                                             Engine Parts only)                                                    54171]

 

                        (6)  Guided missiles and space vehicles                                    3761

                                      [(i)  Guided Missile and Space Vehicle                                                                                                    Manufacturing                                                                      336414

 

                                                (ii) Research and Development in the

                                                             Physical, Engineering, and Life

                                                             Sciences (Guided Missiles and

                                                             Space Vehicles only)                                     54171]

 

                        (7)  Space vehicle equipment, NEC                                        3769

                                      [(i)  Other Guided Missile and Space Vehicle

                                                             Parts and Auxiliary Equipment

                                                             Manufacturing                                                                      336419

                                                (ii) Research and Development in the

                                                             Physical, Engineering, and Life

                                                             Sciences (Guided Missile and Space

                                                             Vehicle Parts and Auxiliary Equipment

                                                               only)                                                                           54171]

 

                        (8)  Tanks and tank components                                                      3795

                                      [Military Armored Vehicle, Tank and

                                                  Tank Component Manufacturing                                              336992]

 

                        (9)  Search and navigation equipment                                 3812

                                      [Search and Navigation System and

                                                Instrument Manufacturing                                                          334511]

 

                        (10) Communication services, NEC                                      4899

                                      [(i)  Cellular and Other Wireless                                 513322

                                                             Telecommunications

 

                                                (ii) Satellite Telecommunications                          51334

 

                                                (iii) Other Telecommunications                          51339]

 

* * * * *

 

219.1203  Incentive subcontracting with small disadvantaged business concerns.

 

The contracting officer shall encourage increased subcontracting opportunities for SDB concerns in negotiated acquisitions by providing monetary incentives in the SIC Major Groups [North American Industry Classification System Industry Subsectors] for which use of an evaluation factor or subfactor for participation of SDB concerns is currently authorized (see FAR 19.201(b)).  * * *

 

* * * * *

 

PART 236—CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

 

* * * * *

 

236.602  Selection of firms for architect-engineer contracts.

 

236.602-1  Selection criteria.

 

            (a)(i)  * * *

 

                                    (6) * * *

 

                                                (A)  Consider the volume of work awarded by DoD during the previous 12 months.  In considering equitable distribution of work among A-E firms, include small business concerns; historically black colleges and universities and minority institutions; firms that have not had prior DoD contracts; and small disadvantaged business concerns and joint ventures with small disadvantaged business participants if the Standard Industrial Classification Major Group [North American Industry Classification System (NAICS) Industry Subsector] of the acquisition is one in which use of a price evaluation adjustment is currently authorized (see FAR 19.201(b)).

 

* * * * *

 

                                                (C)  Consider the extent to which potential contractors identify and commit to small business, to small disadvantaged business (SDB) if the Standard Industrial Classification Major Group [NAICS Industry Subsector] of the subcontracted effort is one in which use of an evaluation factor or subfactor for participation of SDB concerns is currently authorized (see FAR 19.201(b)), and to historically black college or university and minority institution performance as subcontractors.

 

* * * * *

 

APPENDIX I—POLICY AND PROCEDURES FOR THE DOD PILOT MENTOR-PROTEGE PROGRAM

 

* * * * *

 

I-104  Eligibility requirements for a protege firm.

 

            (a)  An entity may qualify as a protege firm if it is—

 

                        (1)  * * *

 

                                    (ii)  A small business according to the Small Business Administration (SBA) size standard for the Standard Industrial Classification (SIC) [North American Industry Classification System (NAICS)] code that represents the contemplated supplies or services to be provided by the protege firm to the mentor firm; or

 

* * * * *

 

I-106  Approval process for companies to participate in the Program as mentor firms.

 

* * * * *

 

            (c)  In addition to the information required in paragraph (b) of this section, companies must submit the following information for each proposed mentor-protege relationship:

 

* * * * *

 

                        (2)  * * *

 

                                    (ii)  The protege firm’s business classification, based upon the SIC [NAICS] code(s) that represents the contemplated supplies or services to be provided by the protege firm to the mentor firm.

 

* * * * *

 

I-107  Mentor-protege agreements.

 

* * * * *

 

            (b)  Each signed mentor-protege agreement submitted for approval under the Program must include—

 

* * * * *

 

                        (2)  The SIC [NAICS] code that represents the contemplated supplies or services to be provided by the protege firm to the mentor firm and a statement that, at the time the agreement is submitted for approval, the protege firm, if an SDB concern, does not exceed the size standard for the appropriate SIC [NAICS] code;

 

* * * * *

 

 

Polyacrylonitrile (PAN) Carbon Fiber (DFARS Case 2000-D017)

From the Federal Register Online via GPO DEPARTMENT OF DEFENSE

48 CFR Part 225

[DFARS Case 2000-D017]

Defense Federal Acquisition Regulation Supplement; Polyacrylonitrile Carbon Fiber

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 phase out restrictions on the acquisition of polyacrylonitrile (PAN) carbon fiber from foreign sources. The restrictions will be phased out over a 5-year period to minimize short-term risks to DoD and current

domestic suppliers.

EFFECTIVE DATE: December 13, 2000.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition Regulations Council, OUSD (AT&L) DP (DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0288;

facsimile (703) 602-0350.

SUPPLEMENTARY INFORMATION:

A. Background

    This rule revises DFARS 225.7103-1 and 225.7103-3 to phase out restrictions on the acquisition of PAN carbon fiber from foreign sources. DoD conducted a review of the administratively imposed restrictions that included an evaluation of DoD applications for PAN carbon fiber, key domestic and foreign suppliers, supply and demand market information, potential impacts on DoD and key suppliers, and potential national security issues. As a result, DoD is phasing out the restrictions over the 5-year period ending May 31, 2005. The phased elimination will minimize short-term risks to both DoD and current

domestic suppliers and will allow for a gradual introduction of competition that will encourage innovation and affordability. This

action is consistent with DoD's interest in promoting vigorous competition in defense markets while ensuring that industrial

capabilities essential to national defense are preserved. The market for PAN carbon fiber is projected to grow in the future as defense and commercial application demand increases. The 5-year phase-in period gives domestic suppliers time to adjust to market conditions and also gives DoD the flexibility to adjust its policy (i.e., extend the restrictions) if projected circumstances do not materialize.

    DoD published a proposed rule at 65 FR 41037 on July 3, 2000. Three sources submitted comments on the proposed rule. DoD considered all comments in the development of the final rule.

    This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

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 known domestic manufacturers of PAN carbon fiber are not small businesses.

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 225

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

    Therefore, 48 CFR Part 225 is amended as follows:

 

PART 225—FOREIGN ACQUISITION

 

* * * * *

 

SUBPART 225.71—OTHER RESTRICTIONS ON FOREIGN ACQUISITION

 

* * * * *

 

225.7103  Polyacrylonitrile (PAN) carbon fiber.

 

225.7103-1  Policy.

[DoD has imposed restrictions on the acquisition of PAN carbon fiber from foreign sources.  DoD is phasing out the restrictions over the 5-year period ending May 31, 2005.  Contractors with contracts that contain the clause at 252.225-7022] All new major systems must use U.S. or Canadian manufacturers or producers for all PAN carbon fiber requirements. 

 

* * * * *

 

225.7103-3  Contract clause.

Use the clause at 252.225-7022, Restriction on Acquisition of Polyacrylonitrile (PAN) Carbon Fiber, in all acquisitions for major systems (as defined in FAR Part 2) that are [solicitations and contracts for major systems as follows:

 

  (a)  In solicitations and contracts issued on or before May 31, 2003, if—

 

    (1)  The system is] not yet in production (milestone III as defined in DoD 5000.2-R, Mandatory Procedures for Major Defense Acquisition Programs (MDAPS) and Major Automated Information System (MAIS) Acquisition Programs).  Also use the clause in contracts for major systems if [; or

 

    (2)  T]the clause was used in prior program contracts.

 

  [(b)  In solicitations and contracts issued during the period beginning June 1, 2003, and ending May 31, 2005, if the system is not yet in engineering and manufacturing development (milestone II as defined in DoD 5000.2-R).]

 

* * * * *

 

Material Management and Accounting Systems (DFARS Case 2000-D003)

From the Federal Register Online via GPO Access

DEPARTMENT OF DEFENSE

48 CFR Parts 242 and 252

[DFARS Case 2000-D003]

Defense Federal Acquisition Regulation Supplement; Material Management and Accounting Systems

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 revise the criteria for determining when review of a contractor's material management and accounting system (MMAS) is needed. The rule also replaces the current requirement for an MMAS ``demonstration''

with a requirement for the contractor to provide the results of internal reviews that it has conducted to ensure compliance with

established MMAS policies, procedures, and operating instructions.

EFFECTIVE DATE: December 13, 2000.

FOR FURTHER INFORMATION CONTACT: Mr. Rick Layser, Defense Acquisition Regulations Council, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-

0293; facsimile (703) 602-0350. Please cite DFARS Case 2000-D003.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule makes the following changes to the DFARS:     1. Revises the prescription for use of the clause at 252.242-7004, Material Management and Accounting System, to--

    a. Require inclusion of the clause only in cost-reimbursement contracts and in fixed-price contracts with progress payments made on the basis of costs incurred by the contractor as work progresses under the contract; and

    b. Eliminate the requirement for inclusion of the clause in contracts with small businesses, educational institutions, and

nonprofit organizations.

    2. Revises the clause at 252.242-7004 to replace the requirement for an MMAS ``demonstration'' with a requirement for the contractor to--

    a. Have policies, procedures, and operating instructions that adequately describe its MMAS; and

    b. Provide to the Government, upon request, the results of internal reviews that it has conducted to ensure compliance with established MMAS policies, procedures, and operating instructions.

    3. Makes the dollar threshold for conducting an MMAS review consistent with the threshold for conducting a Contractor Insurance/ Pension Review ($40 million of qualifying sales to the Government during the contractor's preceding fiscal year).

    4. Clarifies the responsibilities of the ACO and the MMAS team members.     DoD published a proposed rule at 65 FR 41038 on July 3, 2000. Six sources submitted comments on the proposed rule. DoD considered all comment sin the development of the final rule.     This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

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 DFARS already exempts small business concerns from the major MMAS requirements.

C. Paperwork Reduction Act

    The rule eliminates the requirement for contractors to demonstrate their material management and accounting systems, and will reduce the number of contractors that must disclose their systems to the Government. Therefore, this rule reduces the paperwork burden hours approved under Office of Management and Budget Control Number 0704-0250.

List of Subjects in 48 CFR Parts 242 and 252

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

    Therefore, 48 CFR Parts 242 and 252 are amended as follows:

 

SUBPART 242.72--CONTRACTOR MATERIAL MANAGEMENT AND ACCOUNTING SYSTEM

 

242.7200  Scope of subpart.

[(a)]  This subpart provides policies, procedures, and standards for use in the evaluation of a contractor's material management and accounting system (MMAS). 

 

            [(b)  The policies, procedures, and standards in this subpart—

 

                        (1)  Apply only when the contractor has contracts exceeding the simplified acquisition threshold that are not for the acquisition of commercial items and are either—

 

                                    (i)  Cost-reimbursement contracts; or

 

                                    (ii)  Fixed-price contracts with progress payments made on the basis of costs incurred by the contractor as work progresses under the contract; and

 

                        (2)  Do not apply to small businesses, educational institutions, or nonprofit organizations.]

 

242.7201  Definitions.

“Material management and accounting system” and “valid time-phased requirements” are defined in the clause at 252.242-7004, Material Management and Accounting System.

 

242.7202  Policy.

            DoD policy is for all[its] contractors to have an MMAS that [conforms to the standards in paragraph (e) of the clause at 252.242-7004, so that the system]

                 (a)  Reasonably forecasts material requirements;

                 (b)  Ensures the costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements; [and]

                        (c)  Maintains a consistent, equitable, and unbiased logic for costing of material transactions[.]; and

            (d) Conforms to the standards at 252.242-7004(f) when the contractor has cost-reimbursement or fixed-price contracts exceeding the simplified acquisition threshold, with progress or other contract financing provisions, except when all of the contracts and subcontracts are awarded under the set-aside or Section 8(a) procedures of FAR Part 19.

 

242.7203  MMAS disclosure, demonstration, and maintenance

requirements.

            (a)  A large business contractor is subject to MMAS disclosure, demonstration,and maintenance if in its preceding fiscal year the contractor received DoD prime contracts or subcontracts (including modifications) totaling—

                        (1)  $70 million or more; or

                        (2)  $30 million or more (but less than $70 million), and the contracting officer determines it to be in the best interests of the Government (e.g., contractor disclosure, demonstration, or other activities indicate significant MMAS problems exist).

            (b)  After the administrative contracting officer determines the contractor’s MMAS is adequate (see 242.7204(b)), written disclosure will not be required for the next MMAS review unless the contractor’s policies, procedures, or practices have changed in the interim period(s).  Similarly, once the contractor demonstrates that its MMAS contains no significant deficiencies, demonstration requirements for subsequent reviews may be satisfied if internal audits are reasonably current and contain sufficient transaction tests to demonstrate MMAS compliance with each standard.

 

242.7204  Responsibilities.

 

            (a)  The contracting officer shall—

 

                        (1)  Through use of the clause at 252.242-7004, Material Management and Accounting System, apply the disclosure, demonstration, and maintenance requirements to large business contractors meeting the criteria in 242.7203(a);

 

                        (2)  Consider whether to apply the disclosure, demonstration, and maintenance requirements to other large business contractors under 242.7203(a)(2) after concurrence from, or at the request of, the administrative contracting officer; and

 

                        (3)  Not apply the disclosure, demonstration, and maintenance requirements to small businesses, educational institutions, or nonprofit organizations.

 

            (b)  For contractors subject to the disclosure, demonstration, and maintenance requirements, the administrative contracting officer (ACO) determines the adequacy of the contractor's MMAS and pursues correction of deficiencies.

 

            (c)  The contract auditor shall—

 

                        (1)  Assist the ACO in evaluating the contractor's MMAS;

 

                        (2)  Assess the significance of contractor deficiencies and provide the ACO an estimate of the resulting adverse material impact to the Government; and

 

                        (3)  Assist the ACO in evaluating the contractor's correction of deficiencies.

 

242.7205[3]  Review procedures.

 

            [(a)  Criteria for conducting reviews.  Conduct an MMAS review when

 

                        (1)  A contractor has $40 million of qualifying sales to the Government during the contractor’s preceding fiscal year; and

 

                        (2)  The administrative contracting officer (ACO), with advice from the auditor, determines an MMAS review is needed based on a risk assessment of the contractor’s past experience and current vulnerability.

 

            (b)  Qualifying sales.  Qualifying sales are sales for which cost or pricing data were required under 10 U.S.C. 2306a, as implemented in FAR 15.403, or that are contracts priced on other than a firm-fixed-price or fixed-price with economic price adjustment basis.  Sales include prime contracts, subcontracts, and modifications to such contracts and subcontracts.]

 

            (a[c])  System evaluation.  Cognizant contract administration and audit activities shall[must] jointly establish and manage programs for evaluating the MMAS systems of contractors subject to disclosure, demonstration, and maintenance requirements and [must] annually establish a schedule of contractors to be reviewed.  [In addition,] T[t]hey shall[must]

 

                        (1)  Conduct reviews as a team effort.

 

                                    (i)  The [ACO] administrative contracting officer

 

                                                (A)  Appoints a team leader; and

 

                                                (B)  Ensures that the team includes appropriate functional specialists (i.e.[e.g.], industrial specialists, engineer, property administrator, auditor, etc.).

 

                                    (ii)  The team leader—

 

                                                (A)  Advises the ACO and [the] contractor of findings during the review and at the exit conference.[; and]

 

                                                (B)  Makes every effort to resolve differences regarding questions of fact during the review.

 

                                    [(iii)  The contract auditor—

 

                                                (A)  Participates as a member of the MMAS team or serves as the team leader (see paragraph (c)(1)(i) of this section); and

 

                                                (B)  Issues an audit report for incorporation into the MMAS report based on an analysis of the contractor’s books, accounting records, and other related data.]

 

                        (2)  Tailor reviews to take full advantage of the day-to-day work done by both organizations.

 

                        (3)  Prepare a review[the MMAS] report.

 

                        (4)  Conduct a review every three years.  The ACO, with advice from the auditor, may lengthen or shorten the three-year period based on a risk assessment of the contractor's past experience and current vulnerability.

 

            (b[d])  Disposition of evaluation team findings.  The team leader shall[must] document the evaluation team findings and recommendations in a[the MMAS] report to the ACO.  If there are [any] significant MMAS deficiencies, the report must provide an estimate of the adverse impact on the Government resulting from those deficiencies.

 

                        (1)  Initial notification to the contractor.  The ACO shall immediately [must] provide a copy of the report to the contractor [immediately] upon receipt from the team leader.

 

                                    (i)  The ACO shall[must] notify the contractor in a timely manner if there are no deficiencies.

 

                                    (ii)  If there are [any] deficiencies, the ACO shall[must] request the contractor to provide a written response within 30 days [(or such other date as may be mutually agreed to by the ACO and the contractor)] from the date of initial notification.

 

                                    (iii)  If the contractor agrees with the report, the contractor has 60 days [(or such other date as may be mutually agreed to by the ACO and the contractor)] to correct any identified deficiencies or submit a corrective action plan showing milestones and actions to eliminate the deficiencies.

 

                                    (iv)  If the contractor disagrees [with the report], request[the contractor must provide] rationale in the written response.

 

                        (2)  Evaluation of the contractor's response.  The administrative contracting officer[ACO], in consultation with the auditor, evaluates the contractor's response and determines whether—

 

                                    (i)  The MMAS contains [any] deficiencies which need correction[and, if so, any corrective action is needed];

 

                                    (ii)  The deficiencies are significant enough to result in the reduction or suspension of progress payments or of payments[disallowance of costs on] under public vouchers; and

 

                                    (iii)  Proposed corrective actions (if the contractor submitted them) are adequate to correct the deficiencies.

 

                        (3)  Reduction or Suspension of payments.

 

                                    (i)  When the administrative contracting officer (ACO) determines that there is a significant MMAS deficiency, the ACO shall reduce progress payment claims by an appropriate percentage based on affected costs (in accordance with FAR 32.503-6) and/or suspend questionable costs on public vouchers in accordance with FAR 42.803).  The reductions or suspensions shall remain in effect until the ACO determines that—

 

                                                (A)  The deficiencies are corrected; or

 

                                                (B)  The amount of the impact is immaterial.

 

                                    (ii)  The maximum payment adjustment is the adverse material impact to the Government as specified in the team's report.  The ACO should use the maximum adjustment when the contractor did not submit a corrective action plan with its response, or the plan is unacceptable.  In other cases, the ACO should consider the quality of the contractor's self-assessment, demonstration, and corrective action plan in determining the appropriate percentage.

 

                                    (iii)  As the contractor implements its accepted corrective action plan, the ACO should reinstate a portion of withheld amounts commensurate with the contractor's progress in making corrections.  However, the ACO shall not fully reinstate withheld amounts until the contractor corrects the deficiency, or until the impact of the deficiency becomes immaterial.

 

                        (4[3])  Notification of administrative contracting officer[ACO] determination.

 

                                    (i)  The administrative contracting officer (ACO) shall [must] notify the contractor in writing (copy to auditor and functional specialists) of—

 

                                                (A)  [Any] D[d]eficiencies [and the necessary corrective action] needing correction;

 

                                                (B)  Acceptability of the contractor's corrective action plan (if one was submitted) or the need for a corrective action plan; and

 

                                                (C)  Any decision to reduce or suspend progress payments or public [disallow costs on] vouchers because of significant deficiencies.

 

                                    (ii)  The Government does not approve or disapprove the contractor's MMAS system.  ACO notifications should avoid any such implications.

 

                                    (iii)  From the time the ACO determines that there is a[are any] significant material management and accounting system[MMAS] deficiency[ies] until the time the deficiency[ies] is[are] corrected, all field pricing reports for that contractor shall[must] contain a recommendation relating to proposed cost or pricing data adjustments necessary to protect the Government's interests.

 

                                    (iv)  The ACO should consider the effect of [any] significant MMAS deficiencies in reviews of the contractor's estimating system (see 215.407-5).

 

                        [(4)  Reductions or disallowances.

 

                        (i)  When the ACO determines the MMAS deficiencies have a material impact on Government contract costs, the ACO must reduce progress payments by an appropriate percentage based on affected costs (in accordance with FAR 32.503-6) and/or disallow costs on vouchers (in accordance with FAR 42.803).  The reductions or disallowances must remain in effect until the ACO determines that—

 

                                                (A)  The deficiencies are corrected; or

 

                                                (B)  The amount of the impact is immaterial.

 

                           (ii)  The maximum payment adjustment is the adverse material impact to the Government as specified in the MMAS report.  The ACO should use the maximum adjustment when the contractor did not submit a corrective action plan with its response, or when the plan is unacceptable.  In other cases, the ACO should consider the quality of the contractor's corrective action plan in determining the appropriate percentage.

 

                             (iii)  As the contractor implements its accepted corrective action plan, the ACO should reinstate a portion of withheld amounts commensurate with the contractor's progress in making corrections.  However, the ACO must not fully reinstate withheld amounts until the contractor corrects the deficiencies, or until the impact of the deficiencies become immaterial.]

 

(5)  Monitoring contractor's corrective action.  The [ACO] administrative contracting officer (ACO) and [the] auditor shall[must] monitor the contractor's progress in correcting deficiencies.  [When the ACO determines the deficiencies have been corrected, the ACO must notify the contractor in writing.]  If the contractor fails to make adequate progress, the ACO shall[must] take further action.  Actions for consideration may include[The ACO may]

 

                                    (i)  Elevate the issue to higher level management;

 

                                    (ii)  Further reduce or suspend [reduce] progress payments [and/or disallow costs on vouchers];

 

                                    (iii)  Notify the contractor of the inadequacy of the contractor's cost estimating system and/or cost accounting system; [and]

 

                                    (iv)  Take appropriate contractual action, i.e., disallow charges as unreasonable; and

 

                                    (v[iv])  Issue cautions to contracting activities regarding the award of future contracts.

 

242.7206[4]  Contract clause.

 

Use the clause at 252.242-7004, Material Management and Accounting System, in all solicitations and contracts exceeding the simplified acquisition threshold that are not for the acquisition of commercial items and—

 

            (a)  Are not awarded under the set-aside or Section 8(a) procedures of FAR Part 19 [to small businesses, educational institutions, or nonprofit organizations]; and

 

            (b)  Are either—

 

                        (1)  Cost-reimbursement contracts; or

 

                        (2)  Fixed-price contracts with progress payments [made on the basis of costs incurred by the contractor as work progresses under the contract] or other Government financing provisions.

 

*  *  *  *  *

 

 

252.242-7004  Material Management and Accounting System.

As prescribed in 242.7206[4], use the following clause:

 

MATERIAL MANAGEMENT AND ACCOUNTING SYSTEM (SEP 1996[DEC 2000])

 

            (a)  Definitions.  As used in this clause—

 

                        (1)  “Material management and accounting system [(MMAS)]” means the Contractor's system or systems for planning, controlling, and accounting for the acquisition, use, issuing, and disposition of material.  Material management and accounting systems may be manual or automated.  They may be stand-alone systems or they may be integrated with planning, engineering, estimating, purchasing, inventory, accounting, or other systems.

 

                        (2)  “Valid time-phased requirements” means material which[that] is—

 

                                    (i)  Needed to fulfill the production plan, including reasonable quantities for scrap, shrinkage, yield, etc.; and

 

Charged/billed to contracts or other cost objectives in a manner consistent with the need to fulfill the production plan.

           

                        (3)  “Contractor” means a business unit as defined in section 31.001 of the Federal Acquisition Regulation [(FAR)].

 

            (b)  General.  The Contractor agrees to[shall]

 

                        (1)  Maintain a[n] material management and accounting system (MMAS) that—

 

                                    (i)  Reasonably forecasts material requirements;

 

                                    (ii)  Ensures that costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements; and

 

                                    (iii)  Maintains a consistent, equitable, and unbiased logic for costing of material transactions.[; and]

 

                        (2)  Assess its MMAS and take reasonable action to comply with the MMAS standards in paragraph (f[e]) of this clause.

 

            (c)  Applicability.  Paragraphs (d) and (e) of this clause apply only if the Contractor—

 

                        (1)  Is a large business; and

 

                        (2)  Received, in its fiscal year preceding award of this contract, Department of Defense prime contracts or subcontracts, and their modifications totaling—

 

                                    (i)  $70 million or more; or

 

                                    (ii)  $30 million or more (but less than $70 million), and is notified in writing by the Contracting Officer that paragraphs (d) and (e) apply.

 

            (d[c])  Disclosure, demonstration, and maintenance requirements.  (1)  The Contractor shall

 

                        [(1)  Have policies, procedures, and operating instructions that adequately describe its MMAS;

 

               (2)  Provide to the Administrative Contracting Officer (ACO), upon request, the results of the internal reviews that it has conducted to ensure compliance with established MMAS policies, procedures, and operating instructions; and]

 

                                    (i)  Disclose its MMAS to the Administrative Contracting Officer in writing; and

 

                                    (ii)  If requested by the Administrative Contracting Officer, demonstrate that the MMAS conforms to the standards in paragraph (f) of this clause.

 

                        (2)  An MMAS disclosure is adequate when the Contractor has provided the Administrative Contracting Officer with documentation which—

 

                                    (i)  Accurately describes those policies, procedures, and practices that the Contractor currently uses in its MMAS; and

 

                                    (ii)  Provides sufficient detail for the Government to reasonably make an informed judgment regarding the adequacy of the MMAS.

 

                        (3)  An MMAS demonstration is adequate when the Contractor has provided the Administrative Contracting Officer—

 

                                    (i)  Sufficient evidence to demonstrate the degree of compliance of its MMAS with the standards at paragraph (f) of this clause; and

 

                                    (ii)  Identification of any significant deficiencies, the estimated cost impact of the deficiency, and a comprehensive corrective action plan.

 

                        (4[3])  The Contractor shall d[D]isclose significant changes in its MMAS to the Administrative Contracting Officer[ACO at least] 30 days [prior to] of implementation.

 

                        (5)  If the contractor desires the Government to protect such information as privileged or confidential, the Contractor shall—

 

                                    (i)  Notify the Government representative to whom the information is submitted, i.e., the ACO, or the auditor; and

 

                                    (ii)  Ensure an appropriate legend is on the face of the document(s) at the time of submission.

 

            (e[d])  Deficiencies.

 

                        (1)  If the Contractor receives a report which[from the ACO that] identifies [any] deficiencies in its MMAS, the Contractor agrees to[shall] respond as follows[:]

 

                                    (i)  If the Contractor agrees with the report findings and recommendations, the Contractor shall—

 

                                                (A)  Within 30 days [(or such other date as may be mutually agreed to by the ACO and the Contractor)], state its agreement in writing; and

 

(B)  Within 60 days [(or such other date as may be mutually agreed to by the ACO and the Contractor)], correct the deficiencies or submit a corrective action plan [showing milestones and actions to eliminate the deficiencies].

 

                                    (ii)  If the Contractor disagrees with the report findings and recommendations, the Contractor shall, within 30 days [(or such other date as may be mutually agreed to by the ACO and the Contractor)], state its rationale for each area of disagreement.

 

                        (2)  The Administrative Contracting Officer shall[ACO will] evaluate the Contractor's response and [will] notify the Contractor [in writing] of the—

 

                                    (i)  Determination concerning [any] remaining deficiencies;

 

                                    (ii)  Adequacy of any proposed or completed corrective action plan; and

 

                                    (iii)  Need for any new or revised corrective action plan.

 

                        [(3)  When the ACO determines the MMAS deficiencies have a material impact on Government contract costs, the ACO must reduce progress payments by an appropriate percentage based on affected costs (in accordance with FAR 32.503-6) and/or disallow costs on vouchers (in accordance with FAR 42.803) until the ACO determines that—

 

                                    (i)  The deficiencies are corrected; or

 

                                    (ii)  The amount of the impact is immaterial.]

 

            (f[e])  MMAS standards.  [The] MMAS systems shall have adequate internal accounting and administrative controls to ensure system and data integrity, and comply with the following:[shall—]

 

                        (1)  Have an adequate system description including policies, procedures, and operating instructions which[that] comply with the Federal Acquisition Regulation[FAR] and Defense FAR Supplement;

 

                        (2)  Ensure that costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements as impacted by minimum/economic order quantity restrictions[.]

 

                                    (i)  A 98 percent bill of material accuracy and a 95 percent master production schedule accuracy are desirable as a goal in order to ensure that requirements are both valid and appropriately time-phased.

 

                                    (ii)  If systems have accuracy levels below these, the Contractor shall demonstrate[provide adequate evidence] that—

 

                                                (A)  There is no material harm to the Government due to lower accuracy levels; and

 

                                                (B)  The cost to meet the accuracy goals is excessive in relation to the impact on the Government;

 

                        (3)  Provide a mechanism to identify, report, and resolve system control weaknesses and manual override.  Systems should identify operational exceptions such as excess/residual inventory as soon as known;

 

                        (4)  Provide audit trails and maintain records (manual and those in machine readable form) necessary to evaluate system logic and to verify through transaction testing that the system is operating as desired;

 

                        (5)  Establish and maintain adequate levels of record accuracy, and include reconciliation of recorded inventory quantities to physical inventory by part number on a periodic basis.  A 95 percent accuracy level is desirable.  If systems have an accuracy level below 95 percent, the Contractor shall demonstrate [provide adequate evidence] that—

 

                                    (i)  There is no material harm to the Government due to lower accuracy levels; and

 

                                    (ii)  The cost to meet the accuracy goal is excessive in relation to the impact on the Government;

 

                        (6)  Provide detailed descriptions of circumstances which[that] will result in manual or system generated transfers of parts;

 

                        (7)  Maintain a consistent, equitable, and unbiased logic for costing of material transactions[as follows:]

 

                                    (i)  The Contractor shall maintain and disclose written policies describing the transfer methodology and the loan/pay-back technique.

 

                                    (ii)  The costing methodology may be standard or actual cost, or any of the inventory costing methods in 48 CFR 9904.411-50(b).  [The Contractor shall maintain] C[c]onsistency shall be maintained across all contract and customer types, and from accounting period to accounting period for initial charging and transfer charging.

 

                                    (iii)  The system should transfer parts and associated costs within the same billing period.  In the few instances where this may not be appropriate, the Contractor may accomplish the material transaction using a loan/pay-back technique.  The “loan/pay-back technique” means that the physical part is moved temporarily from the contract, but the cost of the part remains on the contract.  The procedures for the loan/pay-back technique must be approved by the Administrative Contracting Officer[ACO].  When the technique is used, the Contractor shall have controls to ensure—

 

                                                (A)  Parts are paid back expeditiously;

 

                                                (B)  Procedures and controls are in place to correct any overbilling that might occur;

 

                                                (C)  Monthly, at a minimum, identification of the borrowing contract and the date the part was borrowed; and

 

                                                (D)  The cost of the replacement part is charged to the borrowing contract;

 

                        (8)  Where allocations from common inventory accounts are used, have controls (in addition to those in paragraphs (b[e])(2) and (7) of this clause) to ensure that—

 

                                    (i)  Reallocations and any credit due are processed no less frequently than the routine billing cycle;

 

                                    (ii)  Inventories retained for requirements which[that] are not under contract are not allocated to contracts; and

 

                                    (iii)  Algorithms are maintained based on valid and current data;

 

                        (9)  Notwithstanding [Regardless of the provisions of] FAR 45.505-3(f)(1)(ii), have adequate controls to ensure that physically commingled inventories that may include material for which costs are charged or allocated to fixed-price, cost-reimbursement, and commercial contracts do not compromise requirements of any of the standards in paragraphs (f[e])(1) through (8) of this clause.  Government[-] furnished material shall not be—

 

                                    (i)   Physically commingled with other material; or

 

                                    (ii)  Used on commercial work; and

 

                        (10)  Be subjected to periodic internal audits [reviews] to ensure compliance with established policies and procedures.

 

(End of clause)

 

 

Authority to Indemnify Against Unusually Hazardous or Nuclear Risks (DFARS Case 2000-D025)

From the Federal Register Online via GPO DEPARTMENT OF DEFENSE

48 CFR Part 250

[DFARS Case 2000-D025]

Defense Federal Acquisition Regulation Supplement; Authority to Indemnify Against Unusually Hazardous or Nuclear Risks

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 clarify the authority of the Under Secretary of Defense (Acquisition, Technology, and Logistics) to indemnify a contractor against unusually hazardous or nuclear risks.

EFFECTIVE DATE: December 13, 2000.

FOR FURTHER INFORMATION CONTACT: Mr. Rick Layser, Defense Acquisition Regulations Council, OUSD (AT&L) DP (DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0293;

facsimile (703) 602-0350. Please cite DFARS Case 2000-D025.

SUPPLEMENTARY INFORMATION:

A. Background     This final rule amends DFARS Part 250, Extraordinary Contractual Actions, to clarify that the Under Secretary of Defense (Acquisition, Technology, and Logistics) may indemnify a contractor against unusually

hazardous or nuclear risks, in accordance with the acquisition authority provided the Under Secretary at 10 U.S.C. 133.

    This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act     This final rule does not constitute a significant revision within the meaning of FAR 1.501 and Public Law 98-577 and publication for public comment is not required. However, DoD will consider comments from small entities concerning the affected DFARS subpart in accordance with 5 U.S.C. 610. Such comments should cite DFARS Case 2000-D025.

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 250

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

    Therefore, 48 CFR Part 250 is amended as follows:

 

PART 250—EXTRAORDINARY CONTRACTUAL ACTIONS

 

* * * * *

 

subpart 250.2--delegation of and limitations on exercise of authority

 

250.201  Delegation of authority.

 

            (b)  Authority under FAR Subpart 50.4 to approve actions obligating $50,000 or less may not be delegated below the level of the head of the contracting activity; however, see FAR 50.201(d) for indemnification authority.

 

  [(d)  In accordance with the acquisition authority of the Under Secretary of Defense (Acquisition, Technology, and Logistics (USD(AT&L)) under 10 U.S.C. 133, in addition to the Secretary of Defense and the Secretaries of the military departments, the USD(AT&L) may exercise authority to indemnify against unusually hazardous or nuclear risks.]

 

250.201-70  Delegations.

 

            (a)  Military Departments.  The Departments of the Army, Navy and Air Force will specify delegations and levels of authority for actions under the Act and the Executive Order in departmental supplements.

 

            (b)  Defense Agencies.  Subject to the restrictions on delegations of authority in 250.201(b) and FAR 50.201, the directors of the defense agencies may exercise and redelegate the authority contained in the Act and the Executive Order.  The agency supplements shall specify the delegations and levels of authority.

 

                        (1)  Requests to obligate the Government in excess of $50,000 must be submitted to the Under Secretary of Defense (Acquisition, Technology, and Logistics) (USD(AT&L)) for approval.

 

                        (2)  Requests for indemnification against unusually hazardous or nuclear risks must be submitted to the USD(AT&L) for approval before using the indemnification clause at FAR 52.250-1, Indemnification Under Public Law 85-804.

 

            (c)  Approvals.  The service Secretary [of the military department] or [the] agency director must approve any delegations in writing.

 

* * * * *