DFARS Change Notice 20020426

Competition Requirements for Purchases from a Required Source

DFARS Case 2002-D003

Interim Rule

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

DEPARTMENT OF DEFENSE

48 CFR Parts 208 and 210

[DFARS Case 2002-D003]

Defense Federal Acquisition Regulation Supplement; Competition Requirements for Purchases From a Required Source

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

SUMMARY: DoD has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 811 of the Fiscal Year 2002 National Defense Authorization Act. Section 811 requires DoD to conduct market research before purchasing a product listed in the Federal Prison Industries (FPI) catalog, to determine

whether the FPI product is comparable in price, quality, and time of delivery to products available from the private sector.

DATES: Effective date: April 26, 2002.

Comment date: Comments on the interim rule should be submitted to the address shown below on or before June 25, 2002, to be considered in the formation of the final rule.

ADDRESSES: Respondents may submit comments directly on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@acq.osd.mil. Please cite DFARS Case 2002-D003 in the subject line of e-mailed comments.

Respondents that cannot submit comments using either of the above methods may submit comments to: Defense Acquisition Regulations Council, Attn: Ms. Susan Schneider, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. Please cite DFARS Case 2002-D003.

As a test, public comments will be posted on the World Wide Web as they are received. Interested parties may view the public comments at http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Ms. Susan Schneider, (703) 602-0326.

SUPPLEMENTARY INFORMATION:

A. Background This interim rule amends the DFARS to implement Section 811 of the Fiscal Year 2002 National Defense Authorization Act (Public Law 107-107). Section 811 requires DoD to conduct market research before purchasing a product listed in the FPI catalog, to determine whether the FPI product is comparable in price, quality, and time of delivery to products available from the private sector. If the FPI product is not comparable, DoD must use competitive procedures to acquire the product. In conducting such a competition, DoD must consider a timely offer from FPI for award in accordance with the specifications and

evaluation factors in the solicitation. This rule was subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act This 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., because the rule will permit small entities to compete with FPI for DoD contract awards under certain conditions. An initial regulatory flexibility analysis has been prepared and is summarized as follows: This interim rule amends DoD policy pertaining to the acquisition of products from FPI. The rule implements new statutory requirements. The impact of the rule is

unknown at this time. However, the rule could benefit small business concerns that offer products comparable to those listed in the FPI catalog, by permitting those concerns to compete for DoD contract awards.

A copy of the analysis may be obtained from the point of contact specified herein. DoD invites comments from small businesses and other interested parties. 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 2002-D003.

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 an interim rule prior to affording the public an opportunity to comment. This interim rule implements Section 811 of the Fiscal Year 2002 National Defense Authorization Act (Public Law 107-107). Section 811

requires DoD to conduct market research before purchasing a product listed in the FPI catalog to determine whether the FPI product is comparable to products available from the private sector. If the FPI product is not comparable, DoD must use competitive procedures to acquire the product. Section 811 became effective on October 1, 2001. Comments received in response to this interim rule will be considered in the formation of the final rule.

List of Subjects in 48 CFR Parts 208 and 210 Government procurement.Michele P. Peterson,

Executive Editor, Defense Acquisition Regulations Council.

Therefore, 48 CFR Parts 208 and 210 are amended as follows:

1. The authority citation for 48 CFR Part 208 continues to read as follows:

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

2. Section 208.602 is added to read as follows:

PART 208-REQUIRED SOURCES OF SUPPLIES AND SERVICES

* * * * *

SUBPART 208.6-ACQUISITION FROM FEDERAL PRISON INDUSTRIES, INC.

[208.602 Policy.

(A) Use competitive procedures to acquire the product; and

(B) Consider a timely offer from FPI for award in accordance with the specifications and evaluation factors in the solicitation.]

208.606 Exceptions.

(1) For] orders of listed items totaling $250 or less that require delivery within 10 days[; or

(2) If market research shows that the FPI product is not comparable to products available from the private sector that best meet the Government's needs in terms of price, quality, and time of delivery].

* * * * *

[PART 210-MARKET RESEARCH

210.001 Policy.

* * * * *

DFARS Case 2002-D002

Codification and Modification of Berry Amendment

Interim Rule

From the Federal Register Online via GPO Access

DEPARTMENT OF DEFENSE

48 CFR Parts 225 and 252

[DFARS Case 2002-D002]

Defense Federal Acquisition Regulation Supplement; Codification and Modification of Berry Amendment

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

SUMMARY: DoD has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 832 of the National Defense Authorization Act for Fiscal Year 2002. Section 832 codifies and modifies the provision of law known as the ``Berry Amendment,'' which requires the acquisition of certain items from

domestic sources.

EFFECTIVE DATE: April 26, 2002.

Comment date: Comments on the interim rule should be submitted to the address shown below on or before June 25, 2002, to be considered in the formation of the final rule.

ADDRESSES: Respondents may submit comments directly on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@acq.osd.mil. Please cite DFARS Case 2002-D002 in the subject line of e-mailed comments.

Respondents that cannot submit comments using either of the above methods 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 2002-D002.

At the end of the comment period, interested parties may view public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, (703) 602-0328.

SUPPLEMENTARY INFORMATION:

A. Background This interim rule implements Section 832 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107). Section 832 codifies and makes minor modifications to the provision of law known as the Berry Amendment (formerly 10 U.S.C. 2241 note, Limitations on Procurement of Food, Clothing, and Specialty Metals Not Produced in

the United States; now codified at 10 U.S.C. 2533a). The rule updates statutory references in the DFARS text, and clarifies the DFARS text by specifying that--

The domestic source requirements apply to listed items acquired either as end products or as components of end products;

For foods manufactured or processed in the United States, an exception to the domestic source requirement applies regardless of where the foods (and any component) were grown or produced; and

The clause at 252.225-7012, Preference for Certain Domestic Commodities, does not apply to end products incidentally incorporating minor amounts of cotton, other natural fibers, or wool.

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 does not expect this rule 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 rule is intended to clarify existing policy pertaining to the acquisition of certain items from domestic sources. Therefore, DoD has not prepared an

initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. 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 2002-D002.

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 an interim rule prior to affording the public an opportunity to comment. This interim rule implements Section 832 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107). Section 832 codifies and modifies the provision of law known as the ``Berry Amendment,'' which requires the acquisition of certain items from domestic sources. Section 832 became effective upon enactment, on December 28, 2001. Comments received in response to this interim rule

will be considered in the formation of the final rule.

List of Subjects in 48 CFR Parts 225 and 252 Government procurement. Michele P. Peterson,

Executive Editor, Defense Acquisition Regulations Council.

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

1. The authority citation for 48 CFR Parts 225 and 252 continues to read as follows:

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

PART 225-FOREIGN ACQUISITION

* * * * *

SUBPART 225.70--AUTHORIZATION ACTS, APPROPRIATIONS ACTS, AND OTHER STATUTORY RESTRICTIONS ON FOREIGN ACQUISITION

* * * * *

225.7001 Definitions.

As used in this subpart-

(a) * * *

* * * * *

225.7002 Restrictions on food, clothing, fabrics, specialty metals, and hand or measuring tools.

225.7002-1 Restrictions.

10 U.S.C. 2533a. Except as provided in subsection 225.7002-2,] do not acquire[--

(a)] supplies consisting in whole or in part of a [A]ny of the following [items, either as end products or components,], that [unless the items] have not been grown[, reprocessed, reused,] or produced in the United States or its possessions-[:]

225.7002-2 Exceptions.

Acquisitions in the following categories are not subject to the restrictions in 225.7002-1-[:]

[(c) Acquisitions of items listed in FAR 25.104(a), unless the items are hand or measuring tools.]

* * * * *

225.7002-3 Contract clauses.

Unless an exception is known to apply[ies]-

[(2)] Use the clause with its Alternate I in all solicitations and contracts over [exceeding] the simplified acquisition threshold requiring delivery, for one of the following major programs, of an article containing specialty metals-[:]

* * * * *

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.

As prescribed in 212.301(f)(iii), use the following clause:

CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUTES OR EXECUTIVE ORDERS APPLICABLE TO DEFENSE ACQUISITIONS OF COMMERCIAL ITEMS (NOV 2001[APR 2002])

* * * * *

* * * * *

* * * * *

* * * * *

252.225-7012 Preference for Certain Domestic Commodities.

As prescribed in 225.7002-3(a), use the following clause:

PREFERENCE FOR CERTAIN DOMESTIC COMMODITIES (AUG 2000[APR 2002])

* * * * *

NAFTA Procurement Threshold

DFARS Case 2002-D007

Final Rule

From the Federal Register Online via GPO

DEPARTMENT OF DEFENSE

48 CFR Part 225

[DFARS Case 2002-D007]

Defense Federal Acquisition Regulation Supplement; NAFTA Procurement Threshold

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS). The rule implements the determination of the U.S. Trade Representative to increase the dollar threshold for application of the North American Free Trade Agreement

(NAFTA) to procurement of goods from Mexico, from $54,372 to $56,190.

EFFECTIVE DATE: April 26, 2002.

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) 602-0328; facsimile (703) 602-0350. Please cite DFARS Case 2002-D007.

SUPPLEMENTARY INFORMATION:

A. Background On February 21, 2002 (67 FR 8057), the U.S. Trade Representative

published a determination that increased the dollar threshold for application of NAFTA to procurement of goods from Mexico, from $54,372 to $56,190. This final rule amends the prescription for use of the clause at DFARS 252.225-7036, Buy American Act--North American Free Trade Agreement Implementation Act--Balance of Payments Program, to reflect the new dollar threshold.

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 rule will not have a significant cost or administrative impact

on contractors or offerors, or a significant effect beyond the internal operating procedures of DoD. Therefore, 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 2002-D007.

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:

1. The authority citation for 48 CFR part 225 continues to read as follows:

PART 225-FOREIGN ACQUISITION

* * * * *

225.1101 Acquisition of supplies.

* * * * *

* * * * *

Research and Development Streamlined Contracting Procedures

DFARS Case 2001-D002

Final Rule

From the Federal Register Online via GPO Access

DEPARTMENT OF DEFENSE

48 CFR Part 235

[DFARS Case 2001-D002]

Defense Federal Acquisition Regulation Supplement; Research and Development Streamlined Contracting Procedures

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to eliminate the requirement for posting of solicitations at the Research and Development Streamlined Solicitation Web site. Posting of solicitations at this Web

site is no longer necessary, because contracting activities now make synopses and solicitations available to the public through the Governmentwide point of entry (FedBizOpps).

EFFECTIVE DATE: April 26, 2002.

FOR FURTHER INFORMATION CONTACT: Ms. Angelena Moy, Defense Acquisition

Regulations Council, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-1302; facsimile (703) 602-0350. Please cite DFARS Case 2001-D002.

SUPPLEMENTARY INFORMATION:

A. Background DFARS subpart 235.70 contains streamlined procedures for acquiring

research and development using a standard solicitation and contract format. The standard format is available on the Research and Development Streamlined Solicitation (RDSS) Web site at http://www.rdss.osd.mil. This final rule revises DFARS 235.7003-2 to eliminate the requirement for posting of individual solicitations at the RDSS Web site. Contracting activities now make synopses and solicitations available to the public through the Governmentwide point of entry

(FedBizOpps), in accordance with FAR 5.102 and 5.203.

DoD published a proposed rule at 66 FR 63348 on December 6, 2001. DoD received no comments on the proposed rule. Therefore, DoD is adopting the proposed rule as 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 the rule does not significantly change solicitation procedures or limit public access to solicitation information.

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 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:

SUBPART 235.70-RESEARCH AND DEVELOPMENT STREAMLINED CONTRACTING PROCEDURES

* * * * *

235.7003-2 RDSS process.

* * * * *

Changes to Profit Policy

DFARS Case 2000-D018

Final Rule

From the Federal Register Online via GPO

DEPARTMENT OF DEFENSE

48 CFR Part 215

[DFARS Case 2000-D018]

Defense Federal Acquisition Regulation Supplement; Changes to Profit Policy

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to make changes to profit policy. The changes reduce the emphasis on facilities investment, add general and administrative expense to the cost base used in determining

profit objectives, increase emphasis on performance risk, and encourage contractor cost efficiency.

EFFECTIVE DATE: April 26, 2002.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra Haberlin, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0289; facsimile (703) 602-0350. Please cite DFARS Case 2000-D018.

SUPPLEMENTARY INFORMATION:

A. Background This final rule amends the profit policy in DFARS Subpart 215.4. The rule--

Reduces the value assigned to facilities capital employed for equipment by 50 percent, and eliminates facilities capital employed for buildings in establishing profit objectives on sole source, negotiated contracts;

Offsets these changes by increasing the values for performance risk by 1 percentage point; and

Adds a special factor for cost efficiency to encourage cost reduction efforts.

DoD published a proposed rule at 65 FR 45574 on July 24, 2000. Due to the complexity of the issues raised in the comments received, DoD published a notice of public meeting at 65 FR 69895 on November 21, 2000. The public meeting was held on December 12, 2000. After

considering written comments received in response to the proposed rule, and verbal comments provided during the public meeting, DoD published a second proposed rule at 66 FR 48649 on September 21, 2001.

DoD received comments from five respondents on the second proposed rule. The comments, grouped into eight major categories, are discussed below:

1. Use of the Cost Efficiency Factor. Several respondents expressed concern regarding the measurement and documentation of cost savings. One thought metrics should be developed to aid in assessing cost efficiency gains. Another thought consideration should be expanded beyond ``pending contracts'' and that its use should be mandatory. Another wanted an element in the cost efficiency factor that would recognize new facilities when they contributed to improved

productivity. DoD Response: Partially concur. A sentence has been added to DFARS 215.404-71-5(b)(4) to suggest how metrics could be used to demonstrate cost reduction efforts. The policy requires the contractor to demonstrate cost reduction efforts that benefit the pending

contract. While we believe in a longer-term focus, we believe that the longer-term payoff will be on those contract actions that actually benefit from the contractor's efforts at cost reduction. Since cost efficiency is being added as a special factor, it already must be considered; however, we do not concur with mandating its use. We have also added a new 215.404-41-5(b)(8) to recognize new facilities when such investments contribute to improved productivity.

2. Reduction of Facilities Capital Employed as a Factor in Calculating Profit Objectives. One respondent wanted facilities capital completely restored while another wanted only the equipment portion restored. A number of respondents believed it was a good idea to eliminate facilities capital, while others thought there might be circumstances where it would be desirable to reward facilities investment. DoD Response: Partially concur. The equipment portion has

been restored by 50 percent from the policy shown in the first proposed rule. DoD remains concerned about overcapacity within the defense industry and continues to believe some reduction in emphasis on facilities capital employed is warranted. However, we added a new 215.404-71-5(b)(8) so that contracting officers could recognize new facilities as part of the cost efficiency factor in appropriate circumstances.

3. Adding general and administrative (G&A) expense to the Cost base used to develop profit objectives. Some respondents thought putting G&A expense back into the cost base was a good idea, while others thought it would incentivize contractors to increase their G&A costs. DoD

Response: Most other agencies include G&A in computing profit objectives, and this was the DoD policy until 1986. We believe that adding G&A into the cost base results in consistent treatment of all allowable costs when computing profit objectives, and that G&A expenses

should not be subject to less favorable treatment than other types of contract costs.

4. Revenue neutrality. Some respondents believed that the changes to the profit policy would increase negotiated profits; one thought profits would stay the same; and one thought profits would decrease under the proposed policy. DoD Response: DoD's goal was to have the

policy changes be revenue neutral, excluding the cost efficiency factor. We believe the final policy achieves that objective.

5. Performance risk. One respondent did not agree with the added emphasis on performance risk, whereas another respondent stated that the high end of the range should be increased to allow the contracting officer to provide the statutory limits where the risk merits the highest fee. DoD Response: Do not concur. The increase to performance risk was to offset the impact of reducing facilities capital employed, thereby maintaining revenue neutrality. Any further increase or decrease would affect the goal of revenue neutrality. Statutory limits of profit apply only to cost-plus-fixed-fee contracts.

6. Contract type risk. One respondent recommended increasing the weights for fixed-price contracts. DoD Response: Do not concur. This policy makes no change to contract type risk.

7. Eliminate structured approach. One respondent recommended eliminating the structured approach to profit, determining profit based on sound business judgment, and establishing a website with guidance on current profit incentivizing techniques used by Government and

industry. DoD Response: Do not concur. The FAR requires a structured approach for establishing profit objectives. The ``Guide to Incentive Strategies for Defense Acquisitions'' is available at www.acq.osd.mil/ar/resources.htm.

8. Other Comments

a. One respondent indicated that DoD should expressly allow and encourage the use of a technology incentive factor for superior life cycle support through COTS insertion. DoD Response: Technology incentive is not being considered as a part of this case.

b. One respondent recommended modifying DFARS 215.404-71-3(d)(2) so that it is inoperative when contractors furnish funds prior to contract award in order to protect schedule, permit efficient material ordering, and provide continuity of workflow. Additional profit for management/cost control should be allowed. DoD Response: Current policy is appropriate, which requires the contracting officer to assess the extent to which costs have been incurred prior to contract definitization, reimburse the contractor for actual costs incurred, and reduce contract risk accordingly.

c. One respondent stated that adjusting a factor or two by a point or half a point is not going to provide adequate incentive to change contractor operations. DoD Response: Concur. That is why a 4 percent factor for cost efficiency was added.

d. One respondent recommended eliminating cost of money since the money at stake is often minimal. DoD Response: Do not concur. e. One respondent recommended that the profit percentage should be lowered if performance-based payments are used. DoD Response: Concur.

The DFARS weighted guidelines method already has different weights for this type of financing than for the progress payments type of financing. In addition, contracts with performance-based payments do not receive any working capital adjustment factor.

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:

1. The authority citation for 48 CFR Part 215 continues to read as follows:

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

PART 215-CONTRACTING BY NEGOTIATION

* * * * *

SUBPART 215.4-CONTRACT PRICING

* * * * *

215.404-71 Weighted guidelines method.

215.404-71-1 General.

215.404-71-2 Performance risk.

* * * * *

   

Assigned

Assigned

Base

Profit

Item

Contractor Risk Factors

Weighting

Value

(Item 18[20])

Objective

21.

Technical

(1)

(2)

N/A

N/A

22.

Management/

Cost Control

(1)

(2)

N/A

N/A

23.

Reserved

       

24.

Performance Risk

(Composite)

N/A

(3)

(4)

(5)

           

* * * * *

* * * * *

* * * * *

* * * * *

* * * * *

performance;

* * * * *

* * * * *

* * * * *

215.404-71-3 Contract type risk and working capital adjustment.

* * * * *

* * * * *

* * * * *

* * * * *

215.404-71-4 Facilities capital employed.

* * * * *

* * * * *

[215.404-71-5 Cost efficiency factor.

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

* * * * *

* * * * *

215.404-73 Alternate structured approaches.

215.404-74 Fee requirements for cost-plus-award-fee contracts.

In developing a fee objective for cost-plus-award-fee contracts, the contracting officer shall-

* * * * *

Balance of Payments Program

DFARS Case 2000-D020

Final Rule

From the Federal Register Online via GPO Access

DEPARTMENT OF DEFENSE

48 CFR Parts 225 and 252

[DFARS Case 2000-D020]

Defense Federal Acquisition Regulation Supplement; Balance of Payments Program

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to add policy pertaining to the Balance of Payments Program. The DFARS policy replaces Federal Acquisition Regulation (FAR) policy on this subject that is being

eliminated. The Balance of Payments Program provides a preference for the acquisition of domestic supplies and construction material for use outside the United States.

EFFECTIVE DATE: April 26, 2002.

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) 602-0328; facsimile (703) 602-0350. Please cite DFARS Case 2000-D020.

SUPPLEMENTARY INFORMATION:

A. Background This DFARS rule provides policy pertaining to the Balance of Payments Program to replace FAR policy on this subject that has been proposed for elimination (65 FR 54936, September 11, 2000). The Balance of Payments Program applies to contracts for supplies to be used, and construction to be performed, outside the United States. Although the DFARS already contained policy that implemented the Balance of Payments Program for acquisition of supplies for use outside the United States, DoD used the FAR policy for construction contracts performed outside the United States. This final rule adds DFARS policy for application of the Balance of Payments Program to construction contracts.

DoD published a proposed rule with request for comments at 66 FR 47155 on September 11, 2001. DoD also requested comments on the advisability of discontinuing application of the Balance of Payments Program to DoD construction contracts.

Seven sources submitted comments on the proposed rule. Four of the respondents expressed concerns regarding the potential impact of the rule on the American maritime industry. A summary of these comments and the DoD response is provided below:

Comment: The Balance of Payments Program should be applied to purchases at or below the simplified acquisition threshold.

DoD Response: Do not concur. The exception for purchases at or below the simplified acquisition threshold represents a continuation of the policy at FAR 25.303(a). DoD is not aware of any significant negative impact to domestic sources that has resulted from use of this

exception.

Comment: DoD should eliminate the policy that permits a contracting officer to make a pre-solicitation determination that a requirement can be filled only by a foreign product.

DoD Response: Do not concur. The DFARS policy sufficiently identifies the situations where such a determination would be appropriate and, therefore, should not arbitrarily or adversely affect domestic sources.

Comment: The rule grants wide discretionary authority to contracting officers and agency heads to avoid implementing the Balance of Payments Program.

DoD Response: Do not concur. The authorities provided to contracting officers and agency heads are sufficiently defined to maintain proper compliance with the Balance of Payments Program.

Comment: The rule exempts ``petroleum products'' and ``end items acquired for commissary resale'' from the Balance of Payments Program. These product descriptions are too generic and should be considered for deletion.

DoD Response: Do not concur. These exemptions represent a continuation of the policy at FAR 25.303(d). DoD is not aware of any significant negative impact to domestic sources that has resulted from use of these exemptions.

Three respondents submitted comments regarding administrative aspects of the rule. A summary of these comments and the DoD response is provided below:

Comment: Any determination made by the contracting officer, that a requirement can best be filled by a foreign end product or construction material, and any determination made by the head of the agency, that it is not in the public interest to apply the restrictions of the Balance of Payments Program to an end product or construction material, should be in writing.

DoD Response: Do not concur. Although such determinations are frequently in writing, DoD does not consider it necessary to specify a requirement for a written determination. The policy at FAR 25.303, pertaining to similar determinations, does not specify that the determinations be in writing. DoD is not aware of any implementation problems that have resulted from use of the FAR policy.

Comment: The rule should clarify who has the authority to make the determination at 225.7501(a)(2)(ii), that a product or material can best be acquired in the geographic area concerned.

DoD Response: Concur. This paragraph has been moved to 225.7501(5)(ii) to clarify that the contracting officer has the authority to make this determination.

Comment: The contracting officer's determination made in accordance with 225.7501(a)(1), that a particular construction material is at or below the simplified acquisition threshold, will be reflected in the contract clause at 252.225-7044(b)(2), in the list of excepted construction materials. This could cause a conflict if the contracting officer determines the construction material to be above the simplified acquisition threshold, but the offeror determines the material to be at or below the threshold.

DoD Response: Do not concur. Exclusion of a particular construction material from the list of excepted materials at 252.225-7044(b)(2) does not necessarily mean the contracting officer has determined the material to be above the simplified acquisition threshold. Materials at or below the simplified acquisition threshold are covered by the blanket exception at 252.225-7044(b)(1). Materials excepted for other reasons would be listed at 252.225-7044(b)(2).

DoD also received comments on the advisability of eliminating the Balance of Payments Program for DoD construction contracts. Several respondents expressed concerns regarding the impact that elimination of the program would have on the American maritime industry. Others

favored elimination of the program, stating that the program has resulted in higher costs and longer lead times. DoD is continuing to study this issue.

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 Balance of Payments Program requirements in this rule are transferred from existing FAR requirements, with administrative changes that are not expected to have a significant effect outside of the Government.

C. Paperwork Reduction Act This rule does not impose any additional information collection

requirements that require the approval of the Office of Management and Budget (OMB) under 44 U.S.C. 3501, et seq. The information collection requirements associated with the clause at 252.225-7005, Identification of Expenditures in the United States, are approved under OMB Clearance Number 0704-0229 for use through March 31, 2004.

List of Subjects in 48 CFR Parts 225 and 252 Government procurement. Michele P. Peterson,

Executive Editor, Defense Acquisition Regulations Council.

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

1. The authority citation for 48 CFR parts 225 and 252 continues to read as follows:

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

PART 225-FOREIGN ACQUISITION

* * * * *

225.003 Definitions.

As used in this part-

* * * * *

(3) "Domestic concern" means[-

(i) A] a concern incorporated in the United States [(including a subsidiary that is incorporated in the United States, even if the parent corporation is a foreign concern);] or

[(ii) A]an unincorporated concern having its principal place of business in the United States.

* * * * *

SUBPART 225.3-BALANCE OF PAYMENTS PROGRAM (Deleted)

* * * * *

225.1101 Acquisition of supplies.

* * * * *

* * * * *

225.1103 Other provisions and clauses.

* * * * *

[SUBPART 225.75-BALANCE OF PAYMENTS PROGRAM

225.7500 Scope of subpart.

This subpart provides policies and procedures implementing the Balance of Payments Program. It applies to contracts for the acquisition of-

(a) Supplies for use outside the United States; and

(b) Construction to be performed outside the United States.

225.7501 Policy.

Acquire only domestic end products for use outside the United States, and use only domestic construction material for construction to be performed outside the United States, including end products and construction material for foreign military sales, unless-

(a) Before issuing the solicitation-

(1) The estimated cost of the acquisition or the value of a particular construction material is at or below the simplified acquisition threshold;

(2) The end product or particular construction material is-

(i) Listed in FAR 25.104 or 225.104(a)(iii);

(ii) A petroleum product;

(iii) A spare part for foreign-manufactured vehicles, equipment, machinery, or systems, provided the acquisition is restricted to the original manufacturer or its supplier in accordance with DoD standardization policy (see DoD Directive 4120.3, Defense Standardization and Specification Program);

(iv) An industrial gas; or

(v) A brand drug specified by the Defense Medical Materiel Board;

(3) The acquisition of foreign end products or construction material is required by a treaty or executive agreement between governments;

(4) The end product is acquired for commissary resale; or

(5) The contracting officer determines that a requirement can best be filled by a foreign end product or construction material, including determinations that-

(i) A subsistence product is perishable and delivery from the United States would significantly impair the quality at the point of consumption;

(ii) An end product or construction material, by its nature or as a practical matter, can best be acquired in the geographic area concerned, e.g., ice or books; or bulk material, such as sand, gravel, or other soil material, stone, concrete masonry units, or fired brick;

(iii) A particular domestic construction material is not available;

(iv) The cost of domestic construction material would exceed the cost of foreign construction material by more than 50 percent, calculated on the basis of-

(A) A particular construction material; or

(B) The comparative cost of application of the Balance of Payments Program to the total acquisition; or

(v) Use of a particular domestic construction material is impracticable;

(b) After receipt of offers-

(1) The evaluated low offer (see Subpart 225.5) is an offer of an end product that-

(i) Is a qualifying country end product;

(ii) Is an eligible product subject to the Trade Agreements Act or NAFTA;

(iii) For acquisitions subject to the Trade Agreements Act, is an information technology product in Federal Supply Group 70 or 74 that is substantially transformed in the United States; or

(iv) Is a nonqualifying country end product, but application of the Balance of Payments Program evaluation factor would not result in award on a domestic offer; or

(2) The construction material is designated country construction material or NAFTA country construction material, and the acquisition is subject to the Trade Agreements Act or NAFTA respectively; or

(c) At any time during the acquisition process, the head of the agency determines that it is not in the public interest to apply the restrictions of the Balance of Payments Program to the end product or construction material.

225.7502 Procedures.

(a) Solicitation of offers. Identify, in the solicitation, supplies and construction material known in advance to be exempt from the Balance of Payments Program.

(b) Evaluation of offers. (1) Supplies. Unless the entire acquisition is exempt from the Balance of Payments Program, evaluate offers for supplies that are subject to the Balance of Payments Program using the evaluation procedures in Subpart 225.5. However, treatment of duty may differ when delivery is overseas.

(i) Duty may not be applicable to nonqualifying country offers.

(ii) The U.S. Government cannot guarantee the exemption of duty for components or end products imported into foreign countries.

(iii) Foreign governments may impose duties. Evaluate offers including such duties as offered.

(2) Construction. Because the contracting officer evaluates the estimated cost of foreign and domestic construction material in accordance with 225.7501(a)(5)(iv) before issuing the solicitation, no special procedures are required for evaluation of construction offers.

(c) Postaward. For construction contracts, the procedures at FAR 25.206, for noncompliance under the Buy American Act, also apply to noncompliance under the Balance of Payments Program.

225.7503 Contract clauses.

Unless the entire acquisition is exempt from the Balance of Payments Program-

(a) Use the clause at 252.225-7044, Balance of Payments Program-Construction Material, in solicitations and contracts for construction to be performed outside the United States with a value greater than the simplified acquisition threshold but less than $6,806,000.

(b) Use the clause at 252.225-7045, Balance of Payments Program-Construction Material Under Trade Agreements, in solicitations and contracts for construction to be performed outside the United States with a value of $6,806,000 or more. For acquisitions with a value of $6,806,000 or more, but less than $7,068,419, use the clause with its Alternate I.]

* * * * *

PART 252-SOLICITATION PROVISIONS AND CONTRACT CLAUSES

* * * * *

252.225-7005 Identification of Expenditures in the United States.

As prescribed in 225.1103(1), use the following clause:

IDENTIFICATION OF EXPENDITURES IN THE UNITED STATES

(DEC 1991[APR 2002])

[(a) This clause applies only if the Contractor is-

(1) A concern incorporated in the United States (including a subsidiary that is incorporated in the United States, even if the parent corporation is not incorporated in the United States); or

(2) An unincorporated concern having its principal place of business in the United States.]

(a[b]) On each invoice, voucher, or other request for payment under this contract, the Contractor shall identify that part of the requested payment which[that] represents estimated expenditures in the United States. The identification-

* * * * *

[252.225-7044 Balance of Payments Program-Construction Material.

As prescribed in 225.7503(a), use the following clause:

BALANCE OF PAYMENTS PROGRAM-CONSTRUCTION MATERIAL (APR 2002)

(a) Definitions. As used in this clause-

"Component" means any article, material, or supply incorporated directly into construction material.

"Construction material" means an article, material, or supply brought to the construction site by the Contractor or a subcontractor for incorporation into the building or work. The term also includes an item brought to the site preassembled from articles, materials, or supplies. However, emergency life safety systems, such as emergency lighting, fire alarm, and audio evacuation systems, that are discrete systems incorporated into a public building or work and that are produced as complete systems, are evaluated as a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site. Materials purchased directly by the Government are supplies, not construction material.

"Cost of components" means-

(1) For components purchased by the Contractor, the acquisition cost, including transportation costs to the place of incorporation into the end product (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or

(2) For components manufactured by the Contractor, all costs associated with the manufacture of the component, including transportation costs as described in paragraph (1) of this definition, plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the end product.

"Domestic construction material" means-

(1) An unmanufactured construction material mined or produced in the United States; or

(2) A construction material manufactured in the United States, if the cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. Components of foreign origin of the same class or kind for which nonavailability determinations have been made are treated as domestic.

"United States" means the 50 States and the District of Columbia, U.S. territories and possessions, Puerto Rico, the Northern Mariana Islands, and any other place subject to U.S. jurisdiction, but does not include leased bases.

(b) Domestic preference. This clause implements the Balance of Payments Program by providing a preference for domestic construction material. The Contractor shall use only domestic construction material in performing this contract, except for-

(1) Construction material valued at or below the simplified acquisition threshold in Part 2 of the Federal Acquisition Regulation; or

(2) The construction material or components listed by the Government as follows:

______________________________________________________________

[Contracting Officer to list applicable excepted materials or indicate "none"]

(End of clause)

252.225-7045 Balance of Payments Program-Construction Material Under Trade Agreements.

As prescribed in 225.7503(b), use the following clause:

BALANCE OF PAYMENTS PROGRAM-CONSTRUCTION MATERIAL UNDER TRADE AGREEMENTS (APR 2002)

(a) Definitions. As used in this clause-

"Component" means any article, material, or supply incorporated directly into construction material.

"Construction material" means an article, material, or supply brought to the construction site by the Contractor or a subcontractor for incorporation into the building or work. The term also includes an item brought to the site preassembled from articles, materials, or supplies. However, emergency life safety systems, such as emergency lighting, fire alarm, and audio evacuation systems, that are discrete systems incorporated into a public building or work and that are produced as complete systems, are evaluated as a single and distinct construction material regardless of when or how the individual parts or components of those systems are delivered to the construction site. Materials purchased directly by the Government are supplies, not construction material.

"Cost of components" means-

(1) For components purchased by the Contractor, the acquisition cost, including transportation costs to the place of incorporation into the end product (whether or not such costs are paid to a domestic firm), and any applicable duty (whether or not a duty-free entry certificate is issued); or

(2) For components manufactured by the Contractor, all costs associated with the manufacture of the component, including transportation costs as described in paragraph (1) of this definition, plus allocable overhead costs, but excluding profit. Cost of components does not include any costs associated with the manufacture of the end product.

"Designated country" means any of the following countries:

Aruba Kiribati

Austria Korea, Republic of

Bangladesh Lesotho

Belgium Liechtenstein

Benin Luxembourg

Bhutan Malawi

Botswana Maldives

Burkina Faso Mali

Burundi Mozambique

Canada Nepal

Cape Verde Netherlands

Central African Republic Niger

Chad Norway

Comoros Portugal

Denmark Rwanda

Djibouti Sao Tome and Principe

Equatorial Guinea Sierra Leone

Finland Singapore

France Somalia

Gambia Spain

Germany Sweden

Greece Switzerland

Guinea Tanzania U.R.

Guinea-Bissau Togo

Haiti Tuvalu

Hong Kong Uganda

Iceland United Kingdom

Ireland Vanuatu

Israel Western Samoa

Italy Yemen

Japan

"Designated country construction material" means a construction material that-

(1) Is wholly the growth, product, or manufacture of a designated country; or

(2) In the case of a construction material that consists in whole or in part of materials from another country, has been substantially transformed in a designated country into a new and

different construction material distinct from the material from which it was transformed.

"Domestic construction material" means-

(1) An unmanufactured construction material mined or produced in the United States; or

(2) A construction material manufactured in the United States, if the cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. Components of foreign origin of the same class or kind for which nonavailability determinations have been made are treated as domestic.

"North American Free Trade Agreement (NAFTA) country" means Canada or Mexico.

"North American Free Trade Agreement (NAFTA) country construction material" means a construction material that-

(1) Is wholly the growth, product, or manufacture of a NAFTA country; or

(2) In the case of a construction material that consists in whole or in part of materials from another country, has been substantially transformed in a NAFTA country into a new and

different construction material distinct from the material from which it was transformed.

"United States" means the 50 States and the District of Columbia, U.S. territories and possessions, Puerto Rico, the Northern Mariana Islands, and any other place subject to U.S. jurisdiction, but does not include leased bases.

(b) This clause implements the Balance of Payments Program by providing a preference for domestic construction material. In addition, the Contracting Officer has determined that the Trade Agreements Act and the North American Free Trade Agreement (NAFTA) apply to this acquisition. Therefore, the Buy American Act and Balance of Payments Program restrictions are waived for designated country and NAFTA country construction materials.

(c) The Contractor shall use only domestic, designated country, or NAFTA country construction material in performing this contract, except for-

(1) Construction material valued at or below the simplified acquisition threshold in Part 2 of the Federal Acquisition Regulation; or

(2) The construction material or components listed by the Government as follows:

______________________________________________________________

[Contracting Officer to list applicable excepted materials or indicate "none"]

(End of clause)

ALTERNATE I (APR 2002). As prescribed in 225.7503(b), delete the definitions of "North American Free Trade Agreement country" and "North American Free Trade Agreement country construction material" from the definitions in paragraph (a) of the basic clause and

substitute the following paragraphs (b) and (c) for paragraphs (b) and (c) of the basic clause:

(b) This clause implements the Balance of Payments Program by providing a preference for domestic construction material. In addition, the Contracting Officer has determined that the Trade Agreements Act applies to this acquisition. Therefore, the Balance of Payments Program restrictions are waived for designated country construction material.

(c) The Contractor shall use only domestic or designated country construction material in performing this contract, except for-

(1) Construction material valued at or below the simplified acquisition threshold in Part 2 of the Federal Acquisition Regulation; or

(2) The construction material or components listed by the

Government as follows:

______________________________________________________________

[Contracting Officer to list applicable excepted materials or indicate "none"]]

* * * * *

PROPOSED RULE:

Foreign Military Sales Customer Involvement

DFARS Case 2002-D005

Proposed Rule

From the Federal Register Online via GPO Access

DEPARTMENT OF DEFENSE

48 CFR Part 225

[DFARS Case 2002-D005]

Defense Federal Acquisition Regulation Supplement; Foreign Military Sales Customer Involvement

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

SUMMARY: DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to add policy regarding the participation of foreign military sales (FMS) customers in the development of contracts that DoD awards on their behalf. The objective is to provide FMS customers with more visibility into the contract pricing and award process.

DATES: Comments on the proposed rule should be submitted in writing to the address shown below on or before June 25, 2002, to be considered in the formation of the final rule.

ADDRESSES: Respondents may submit comments directly on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@acq.osd.mil. Please cite DFARS Case 2002-D005 in the subject line of e-mailed comments.

Respondents that cannot submit comments using either of the above methods 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 2002-D005.

At the end of the comment period, interested parties may view public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, (703) 602-0328.

SUPPLEMENTARY INFORMATION:

A. Background

FMS customers have requested more visibility into the preparation and pricing of contracts that DoD awards on their behalf. This proposed rule revises DFARS 225.7304 to provide for greater involvement of FMS customers in the contract award process, while protecting against

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

B. Regulatory Flexibility Act The proposed 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 involvement of FMS customers in contract development should have no significant effect on offerors or contractors. The rule provides for the protection of contractor proprietary data. Therefore, DoD has not performed an initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. DoD also

will consider comments from small entities concerning the affected DFARS subpart in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2002-D005.

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, DoD proposes to amend 48 CFR Part 225 as follows:

PART 225-FOREIGN ACQUISITION

* * * * *

SUBPART 225.73-ACQUISITIONS FOR FOREIGN MILITARY SALES

* * * * *

225.7304 Source selection [FMS customer involvement].

End of DCN 20020426