DFARS CHANGE NOTICE, 20021025

Five rules, effective 25 Oct 2002

Federal Register: October 25, 2002 (Volume 67, Number 207)

Rules and Regulations

From the Federal Register Online via GPO Access

DEPARTMENT OF DEFENSE

48 CFR Parts 212, 226, and 237

[DFARS Case 2000-D306]

Defense Federal Acquisition Regulation Supplement; Performance-Based Contracting Using Federal Acquisition Regulation Part 12 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 implement Section 821(b) of the National Defense Authorization Act for Fiscal Year 2001. Section 821(b) permits DoD to treat certain performance-based service contracts

and task orders as contracts for the procurement of commercial items.

EFFECTIVE DATE: October 25, 2002.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra Haberlin, Defense Acquisition Regulations Council, 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-D306.

SUPPLEMENTARY INFORMATION:

A. Background This rule revises and finalizes the interim rule published at 66 FR 63335 on December 6, 2001. The rule implements Section 821(b) of the National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398). Section 821(b) permits DoD to use Federal Acquisition

Regulation (FAR) Part 12 (Acquisition of Commercial Items) procedures for performance-based service contracts and task orders, if certain conditions are met.

Four respondents submitted comments on the interim rule. A discussion of the comments is provided below:

Comment: The rule appears to contradict the language in FAR Subpart 13.5, which permits the use of simplified procedures for the acquisition of commercial items in amounts exceeding the simplified acquisition threshold but not exceeding $5 million. Section 212.102 of the rule prohibits the use of FAR Subpart 13.5 procedures when using FAR Part 12 for acquisitions that are performance-based. DoD Response: Do not concur. FAR 12.102 authorizes the use of FAR Part 12 in conjunction with FAR Part 13, 14, or 15, when acquiring supplies or services that meet the definition of commercial item at FAR 2.101. DFARS 212.102 provides additional authority for use

of FAR Part 12 to acquire services that do not meet the definition of commercial item, when performance-based contracting methods are used. Therefore, the prohibition against use of FAR Subpart 13.5 in conjunction with FAR Part 12 applies only to performance-based contracts for services that do not meet the definition of commercial item but can be acquired using FAR Part 12 pursuant to the authority in DFARS 212.102.

Comment: The statement in 212.102(a)(i) specifying that the rule applies to contracts or task orders ``. . . entered into on or before October 30, 2003'' should be changed to apply to contracts or task orders ``. . . entered into after October 30, 2000, but before October 30, 2003.'' The statute became effective on October 30, 2000, and this new authority is not available to task orders that were awarded prior to that date, but would be applicable to task orders awarded after that date even though the contract was awarded before October 30, 2000. DoD Response: Do not concur. The interim rule became effective on December 6, 2001. Since this date is in the past, there is no need to include it in the DFARS text. In addition, the rule, as written, does not preclude application to task orders issued under contracts that were awarded before the rule became effective.

Comment: The statement in 212.102(a)(i) that requires the use of quality assurance surveillance plans should be deleted from the rule. While such plans are a common best practice for performance-based contracts, this requirement is not part of the statute and, therefore, is not ``in accordance with the Act.'' DoD Response: Do not concur. While quality assurance surveillance plans are not specifically addressed in the statute, this requirement should be retained, because

the plans are an element of performance-based contracting. See FAR Subpart 37.6, which establishes quality assurance as a component of performance-based contracting.

Comment: The statement in 212.102(a)(i) that permits application of the rule if award is made ``to an entity that provides similar services at the same time to the general public under terms and conditions similar to those in the contract'' should be changed to add, at the end, the phrase ``or task order.'' Under the law, it is clear that the two similarity tests are appropriately applied at either the contract level or at the task order level. DoD Response: Concur. The statement has been amended to add the phrase ``or task order.''

Comment: The cross-reference text at 237.601 should be changed from ``See 212.102 for the use of FAR Part 12 procedures with performance-based contracting'' to ``See 212.102 for additional authority and specific conditions where it is appropriate to use FAR Part 12 procedures with performance-based contracting.'' This change is necessary to avoid any misconception that DFARS 212.102 contains the only provisions for use of FAR Part 12 for performance-based contracts.

Public Law 106-398 clearly established these conditions as an additional incentive for use of the performance-based service contract under FAR Part 12. DoD Response: Do not concur. The change is not necessary, as the DFARS does not indicate such a limitation.

Comment: The text at 212.102(a)(ii) should be changed from

``* * * modify paragraph (a) of the clause at FAR 52.212-4 * * *'' to

``* * * tailor paragraph (a) of the clause at FAR 52.212-4* * *''

DoD Response: Concur. The word ``tailor'' is consistent with the terminology used in

FAR Part 12. This change has been made in the final rule.

Comment: The statement in 212.102(a)(i) that permits application of the rule if award is made ``to an entity that provides similar services at the same time to the general public * * *'' may exclude some small businesses, including 8(a) and native-owned firms, that focus their efforts on Government contracts. DoD Response: Partially concur. Firms that direct their efforts exclusively toward providing services to the Government will not meet this condition of the rule. However, this

condition was established by Section 821(b) of Public Law 106-398 and cannot be deleted.

Comment: The rule reclassifies all service contracts of less than $5 million as subject to FAR Part 12 procedures. DFARS 226.104(1) precludes use of the clause at 252.226-7001, Utilization of Indian Organizations and Indian-Owned Economic Enterprises--DoD Contracts, in any contract that uses FAR Part 12 procedures. Therefore, this rule eliminates all service contracts of less than $5 million from the Indian Incentive Program, thereby causing significant harm to Native

American service companies and Indian Tribal Corporations. DoD should remove the Part 12 exclusion from the clause prescription at DFARS 226.104(1).

DoD Response: Partially concur. DoD does not agree that the rule reclassifies all service contracts of less than $5 million as subject to FAR Part 12. The rule is limited to performance-based

contracting for services that meet specific criteria. DoD does agree that, as the interim rule was written, the Indian Incentive Program could not be used for any performance-based service contracts awarded using FAR Part 12 procedures. The FAR Part 12 exclusion at DFARS

226.104 was established prior to this rule and was intended to apply to the acquisition of supplies and services that meet the definition of commercial item at FAR 2.101. Since this rule permits the use of FAR Part 12 procedures for acquisition of services that do not meet the definition of commercial item, DFARS 226.104 has been amended to clarify that there is no restriction on use of the clause at 252.226-7001 in performance-based contracts for services that either are not

commercial items, or are treated as commercial items solely as a result of the authority in 212.102.

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. The rule permits the use of FAR Part 12 procedures for the award of certain performance-based service contracts and task orders. While the use of FAR Part 12 procedures will improve the efficiency of contracting for these services, the economic impact on small entities 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 212, 226, and 237

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

Interim Rule Adopted as Final With Changes

Accordingly, the interim rule amending 48 CFR Parts 212 and 237, which was published at 66 FR 63335 on December 6, 2001, is adopted as a final rule with the following changes:

1. The authority citation for 48 CFR Parts 212, 226, and 237 continues to read as follows:

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

PART 212--ACQUISITION OF COMMERCIAL ITEMS

2. Section 212.102 is revised to read as follows:

212.102 Applicability.

(a)(i) In accordance with Section 821 of the National Defense Authorization Act for Fiscal Year 2001 (Pub. L. 106-398), the contracting officer also may use FAR Part 12 for any performance-based contracting for services if the contract or task order--

(A) Is not awarded using the procedures in FAR Subpart 13.5;

(B) Is entered into on or before October 30, 2003;

(C) Has a value of $5 million or less;

(D) Meets the definition of performance-based contracting at FAR 2.101;

(E) Uses quality assurance surveillance plans;

(F) Includes performance incentives where appropriate;

(G) Specifies a firm-fixed price; and

(H) Is awarded to an entity that provides similar services at the same time to the general public under terms and conditions similar to those in the contract or task order.

(ii) In exercising the authority specified in paragraph (a)(i) of this section, the contracting officer should tailor paragraph (a) of the clause at FAR 52.212-4 as may be necessary to ensure the contract's remedies adequately protect the Government's interests.

PART 226--OTHER SOCIOECONOMIC PROGRAMS

3. Section 226.104 is revised to read as follows:

226.104 Contract clause.

Use the clause at 252.226-7001, Utilization of Indian Organizations and Indian-Owned Economic Enterprises--DoD Contracts, in solicitations and contracts for supplies or services that--

(1)(i) Are other than commercial items; or

(ii) Qualify to use FAR Part 12 procedures solely through the authority in 212.102; and

(2) Are expected to exceed the simplified acquisition threshold.

DEPARTMENT OF DEFENSE

48 CFR Parts 208 and 216

[DFARS Case 2001-D017]

Defense Federal Acquisition Regulation Supplement; Competition Requirements for Purchase of Services Under Multiple Award Contracts

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 803 of the National Defense Authorization Act for Fiscal Year 2002. Section 803 requires DoD to issue DFARS policy requiring competition in the

purchase of services under multiple award contracts.

DATES: Effective Date: October 25, 2002.

Applicability Date: This rule applies to all orders for services placed under multiple award contracts on or after October 25, 2002, regardless of whether the multiple award contracts were awarded before, on, or after that date.

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 2001-D017.

SUPPLEMENTARY INFORMATION: Notification of training opportunities: DoD and civilian agency contracting professionals that place orders under multiple award contracts using DoD funds, and contractors that sell services on multiple award contracts, should receive training on the new procedures for placing orders over $100,000 for services. DoD has developed many training tools on Section 803 and will be providing training in the DC metro area. Please visit the Defense Procurement Home Page, ``Interest Items'' drop-down box, for Section 803 training materials and lists of training opportunities at http://www.acq.osd.mil/dp. Additional questions regarding training should be directed to Melissa Rider at melissa.rider@osd.mil or (703) 695-1098.

A. Background This rule amends DFARS Parts 208 and 216 to implement Section 803 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107). Section 803 requires DoD to issue DFARS policy requiring competition in the purchase of services under multiple award contracts. Multiple award contracts include the Multiple Award Schedules (MAS)

Program operated by the General Services Administration (GSA) and multiple award indefinite-quantity (task and delivery) order contracts issued pursuant to FAR 16.504. Competition requirements for the MAS are set forth in DFARS 208.404-70. Competition requirements for multiple award indefinite-quantity contracts other than the MAS are covered in

DFARS 216.505-70.

While DFARS 208.404-70, addressing MAS ordering, focuses on competition, DoD recognizes that additional regulatory coverage is needed to improve practices related to the acquisition of services under the MAS. In this regard, the Director of Defense Procurement is working with the other members of the Federal Acquisition Regulatory Council on separate revisions to FAR Subpart 8.4 that will provide Governmentwide guidance on considerations, in addition to competition, that must be taken into account to ensure sound MAS purchasing. These

considerations include, among others, use of statements of work, effective pricing of orders, and proper documentation of award decisions.

In addition, the Administrator of the Office of Federal Procurement Policy (OFPP) has determined that additional clarification is necessary with respect to the structuring of orders under the MAS. FAR 12.207 currently requires that agencies use firm-fixed-price contracts or

fixed-price contracts with economic price adjustment for the acquisition of commercial items. FAR 12.207 further states that use of any other contract type to acquire commercial items is prohibited.

However, GSA's non-regulatory special ordering procedures for services permit use of additional contract types for commercial item acquisitions, which is the sole focus of the MAS. In particular, GSA's special ordering procedures permit orders to be priced on a time-and-materials or labor-hour basis under limited circumstances, i.e., when the ordering office makes a determination that it is not possible at the time of placing the order to estimate accurately the extent or duration of the work or to anticipate cost with any reasonable degree of confidence. The special ordering procedures rely on somewhat different and less stringent safeguard provisions than those that the FAR imposes when time-and-materials and labor-hour contracts are used.

The OFPP Administrator intends to work with the other FAR Council members to develop appropriate revisions to current FAR coverage to address the use of time-and-materials and labor-hour contracts for commercial item acquisitions, including safeguards that are needed to effectively protect taxpayer interests when these contractual arrangements are used under FAR Part 12.

DoD published a proposed rule at 67 FR 15351 on April 1, 2002, and held a public meeting on April 29, 2002. Seventy-one sources submitted written comments on the proposed rule. DoD considered all comments in the development of the final rule. A summary of the comments grouped by subject area is provided below:

1. Small Business Impact Comment: The rule, as applied to the Federal Supply Schedules,

could harm the small business community, as the requirement to provide all contractors a fair notice of the intent to make a purchase will dramatically increase the number of competitors for each task, which will likely reduce the odds of winning an award and which will increase

bid and proposal costs. The additional procedural burden imposed by this rule will encourage contracting officers to bundle requirements, thereby making it less likely that DoD's small business goals will be met.

DoD Response: The intent of the rule is to ensure fairness and enhance competition. The rule requires the Government to provide fair notice and opportunity. Because the rule does not require the contractor to respond to every notice--leaving the decision to respond to the contractor `` the fair notice requirement, as imposed by this rule, should not increase bid and proposal costs. In addition, the final rule has taken into account the resource burdens associated with the fair notice process that might precipitate efforts to bundle. With respect to Federal Supply Schedule purchases, for example, DoD has revised the rule to shift the emphasis from providing fair notice to

all contractors to providing fair notice to as many contractors as practicable based on effective market research. The final rule should increase competition while minimizing burden (otherwise associated with notifying all contractors) by allowing contracting officers to provide notice to a reasonable number of offerors that can do the required work. DoD does not believe the rule will negatively affect the ability of DoD to meet its small business goals. However, a reminder that

orders placed against Federal Supply Schedules may be credited toward the ordering agency's small business goals has been added to the rule.

Comment: It is unclear whether small business participation will be significantly affected and whether DoD will be allowed to continue with the practice of setting aside a portion of the work under multiple award contracts exclusively for small business concerns.

DoD Response: The rule does not change the policies associated with small business considerations. The preferences afforded small business concerns under FAR 8.404(b)(6) still apply.

2. Brooks Act Applicability Comment: The rule should not apply to architect-engineer services.

Acquisitions of architect-engineer services are governed by the Brooks Act (40 U.S.C. 541-544), as implemented in FAR Subpart 36.6. DoD Response: Concur. The final rule has been amended to clarify that acquisitions of architect-engineer services are subject to the Brooks Act and the procedures in FAR Subpart 36.6.

3. Training Comment: Sufficient training for contracting, program management, and requirements personnel is needed to ensure that services are acquired in accordance with regulatory requirements. Industry should have access to the same tools as Government personnel.

DoD Response: Concur. DoD has developed training packages that will be released with this DFARS rule and has revised the Defense Acquisition University contracting coursework to focus on the proper way to make awards under Federal Supply Schedules, Governmentwide

acquisition contracts, multi-agency contracts and multiple award contracts. Additionally, DoD is exploring ways to best reach the program management community and has asked the Defense Acquisition University to insert material in its program management courses. DoD intends to make the Government training tools available to industry. An information briefing on this DFARS rule is available on the Defense Procurement Web site at http://www.acq.osd.mil/dp under ``Special Interest Items'' in the dropdown box entitled ``Section 803.''

4. Clarification of Services Covered Comment: DoD should revise the rule to clarify that the scope of the term ``services'' for purposes of the rule does not apply to product-like solutions, ancillary services, and transaction-based services. For example, the regulations that implement the Service

Contract Act exempt contracts principally for the maintenance, calibration, or repair of many types of equipment, including automatic data processing equipment.

DoD Response: Do not concur. Section 803 provides no authority for DoD to limit the scope of the term ``services'' in the manner recommended by the respondent.

5. Electronic Notice Comment: DoD should post the notice of fair opportunity to a specific web page or FedBizOpps. DoD Response: Do not concur. The notice requirement is sufficiently

addressed in the rule. The method of meeting that requirement is a management decision more appropriately made at the contracting office level. It should be noted that steps are being taken to improve transparency through electronic means. For example, GSA recently introduced ``e-buy'', among other things, to assist MAS customers in providing fair notice to MAS contractors. The availability of e-buy is highlighted in the rule.

6. Civilian Agency Applicability/Economy Act Comment: Clarification is needed regarding the applicability of Section 803 to civilian agencies and interagency acquisitions made under the Economy Act.

DoD Response: Section 803 applies to all DoD requirements for services, regardless of which agency acquires the services. The final rule addresses this issue by adding a statement to clarify that the rule also applies to orders placed by non-DoD agencies on behalf of DoD.

7. Effective Date Comment: Clarification is needed regarding the timing for applicability of the rule.

DoD Response: Section 803 applies to all purchases of services made under multiple award contracts, regardless of whether the multiple award contracts were entered into before, on, or after the effective date of this rule. This DFARS rule contains the same effective date and applicability requirements. Contracting officers must review the terms and conditions of existing contracts to determine if modifications to the contracts are needed.

8. Exceptions to the Rule Comment: The rule should provide an exception that allows a sole-

source follow-on to an initially placed sole-source order with adequate justification and legal review.

DoD Response: The statute does not provide this authority. Section 803 authorizes use of the exceptions in 2304c(b) which allow for a logical follow-on to a task or delivery order already issued on a competitive basis.

9. Burden on Industry and Government Comment: The rule is difficult to understand; the notification requirement will unnecessarily slow down the acquisition process and increase acquisition costs; and it will be burdensome for each company to continuously receive solicitations for work they have no interest in performing.

DoD Response: The intent of the rule is to ensure fairness by requiring a fair notice, fair opportunity to respond, and fair consideration of offers. The value added by the fairness component

should outweigh any burdens associated with the rule. The final rule was drafted to provide as much flexibility as permitted by Section 803.

10. Blanket Purchase Agreement (BPA) Issues Comment: The rule should be revised to delete the overly restrictive requirement that single award BPA tasks or services be firm-fixed-price, as this is not required by statute or policy. The BPA competition requirements in 208.404-70(d) should apply only to the initial establishment of the BPA, and thereafter the traditional Federal Supply Schedule rules for the placement of orders should apply.

DoD Response: DoD does not agree with the respondent's recommendation regarding the use of traditional Federal Supply Schedule rules for placement of orders, as this is contrary to the provisions of Section 803. However, as noted above, the OFPP Administrator intends to work with the other FAR Council members to develop appropriate FAR coverage addressing the use of time-and-materials and labor-hour contracts for commercial item acquisitions, including safeguards that

are needed to effectively protect the government's interest when these contractual arrangements are used.

11. Ordering Procedures Comment: The ordering procedures in the proposed rule were derived

from FAR 16.505(b)(1), which was based upon the fair opportunity requirements of the Federal Acquisition Streamlining Act of 1994 (FASA). Section 803 displaced the ordering procedures under FASA. Therefore, appropriate revisions should be made to the rule, e.g., the statement in 216.505-70(d)(3)(ii) to ``Not use any method (such as allocation or designation of any preferred awardee)'' is unnecessary and confuses the issue, because Section 803 now requires that orders be

placed on a competitive basis that affords all contractors a fair opportunity to submit an offer. Obviously, an allocation method cannot be used under the Section 803 description of competitive basis, so there is no need to mention this issue.

DoD Response: DoD agrees that language in the proposed rule at 216.505-70(d)(3)(i) through (iv) and 216.505-70(e)(2) and (3) is not essential given that the rule makes competition requirements clear.

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. The rule clarifies and strengthens existing FAR requirements for competition in the placement of orders under multiple award contracts. The rule makes no change to preferences afforded small business concerns under FAR 8.404(b)(6) for the placement of orders against Federal Supply Schedules. FAR 8.404(b)(6) specifies that contracting

officers should (1) consider including one or more small, women-owned small, and/or small disadvantaged business schedule contractor(s) when conducting evaluations and before placing an order; and (2) for orders exceeding the micro-purchase threshold, give preference to the items of

small business concerns when two or more items at the same delivered price will satisfy the requirement.

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 208 and 216

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

Therefore, 48 CFR Parts 208 and 216 are amended as follows:

1. The authority citation for 48 CFR Parts 208 and 216 continues to read as follows:

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

PART 208--REQUIRED SOURCES OF SUPPLIES AND SERVICES

2. The heading of Subpart 208.4 is revised to read as follows:

Subpart 208.4--Federal Supply Schedules

3. Section 208.404 is amended by adding paragraph (b) to read as follows:

208.404 Using schedules.

* * * * *

(b) Ordering procedures for optional use schedules--

(2) Orders exceeding the micro-purchase threshold but not exceeding the maximum order threshold. The procedures at FAR 8.404(b)(2), regarding review of catalogs or pricelists of at least three schedule contactors, do not apply to orders for services exceeding $100,000. Instead, use the procedures at 208.404-70.

(3) Orders exceeding the maximum order threshold.

(i) For orders for services exceeding $100,000, use the procedures at 208.404-70 in addition to the procedures at FAR 8.404(b)(3)(i).

(7) Documentation. For orders for services exceeding $100,000, use the procedures at 208.404-70 in addition to the procedures at FAR 8.404(b)(7).

4. Section 208.404-70 is added to read as follows:

208.404-70 Additional ordering procedures for services.

(a) This subsection--

(1) Implements Section 803 of the National Defense Authorization Act for Fiscal Year 2002 (Pub. L. 107-107); and

(2) Also applies to orders placed by non-DoD agencies on behalf of DoD.

(b) Each order for services exceeding $100,000 shall be placed on a competitive basis in accordance with paragraph (c) of this subsection, unless the contracting officer waives this requirement on the basis of a written determination that--

(1) One of the circumstances described at FAR 16.505(b)(2)(i) through (iii) applies to the order; or

(2) A statute expressly authorizes or requires that the purchase be made from a specified source.

(c) An order for services exceeding $100,000 is placed on a competitive basis only if the contracting officer provides a fair notice of the intent to make the purchase, including a description of the work the contractor shall perform and the basis upon which the contracting officer will make the selection, to--

(1) As many schedule contractors as practicable, consistent with market research appropriate to the circumstances, to reasonably ensure that offers will be received from at least three contractors that can fulfill the work requirements, and the contracting officer--

(i)(A) Receives offers from at least three contractors that can fulfill the work requirements; or

(B) Determines in writing that no additional contractors that can fulfill the work requirements could be identified despite reasonable efforts to do so (documentation should clearly explain efforts made to obtain offers from at least three contractors); and

(ii) Ensures all offers received are fairly considered; or

(2) All contractors offering the required services under the applicable multiple award schedule, and affords all contractors responding to the notice a fair opportunity to submit an offer and have

that offer fairly considered. Posting of a request for quotations on the General Services Administration's electronic quote system, ``e-Buy'' ( http://www.gsaAdvantage.gov ), is one medium for providing fair notice to all contractors as required by this paragraph (c).

(d) Single and multiple blanket purchase agreements (BPAs) may be established against Federal Supply Schedules (see FAR 8.404(b)(4)) if the contracting officer--

(1) Follows the procedures in paragraphs (b) and (c) of this subsection;

(2)(i) For a single BPA, defines the individual tasks to be performed; or

(ii) For multiple BPAs, forwards the statement of work and the selection criteria to all multiple BPA holders before placing orders; and

(3) Reviews established BPAs no less than annually to determine whether the BPA still represents the best value.

(e) Orders placed against Federal Supply Schedules may be credited toward the ordering agency's small business goals (see FAR 8.404(b)(6)).

PART 216--TYPES OF CONTRACTS

5. Section 216.501-1 is added to read as follows:

216.501-1 Definitions.

Multiple award contract, as used in this subpart, means--

(1) A multiple award task order contract entered into in accordance with FAR 16.504(c); or

(2) Any other indefinite-delivery, indefinite-quantity contract that an agency enters into with two or more sources under the same solicitation.

6. Section 216.505-70 is added to read as follows:

216.505-70 Orders for services under multiple award contracts.

(a) This subsection--

(1) Implements Section 803 of the National Defense Authorization Act for Fiscal Year 2002 (Pub. L. 107-107);

(2) Applies to orders for services exceeding $100,000 placed under multiple award contracts, instead of the procedures at FAR 16.505(b)(1) and (2) (see Subpart 208.4 for procedures applicable to orders placed against Federal Supply Schedules);

(3) Also applies to orders placed by non-DoD agencies on behalf of DoD; and

(4) Does not apply to orders for architect-engineer services, which shall be placed in accordance with the procedures in FAR subpart 36.6.

(b) Each order for services exceeding $100,000 shall be placed on a competitive basis in accordance with paragraph (c) of this subsection, unless the contracting officer waives this requirement on the basis of a written determination that--

(1) One of the circumstances described at FAR 16.505(b)(2)(i) through (iv) applies to the order; or (2) A statute expressly authorizes or requires that the purchase be made from a specified source.

(c) An order for services exceeding $100,000 is placed on a competitive basis only if the contracting officer--

(1) Provides a fair notice of the intent to make the purchase, including a description of the work the contractor shall perform and the basis upon which the contracting officer will make the selection, to all contractors offering the required services under the multiple award contract; and

(2) Affords all contractors responding to the notice a fair opportunity to submit an offer and have that offer fairly considered.

(d) When using the procedures in this subsection--

(1) The contracting officer should keep contractor submission requirements to a minimum;

(2) The contracting officer may use streamlined procedures, including oral presentations;

(3) The competition requirements in FAR part 6 and the policies in FAR subpart 15.3 do not apply to the ordering process, but the contracting officer shall consider price or cost under each order as one of the factors in the selection decision; and

(4) The contracting officer should consider past performance on earlier orders under the contract, including quality, timeliness, and cost control.

DEPARTMENT OF DEFENSE

48 CFR Part 201

[DFARS Case 2002-D021]

Defense Federal Acquisition Regulation Supplement; Contracting Officer Qualifications

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 824 of the National Defense Authorization Act for Fiscal Year 2002. Section 824 revised the qualification requirements that a new entrant into the

contracting field must meet in order to serve as a contracting officer with authority to award or administer contracts exceeding the simplified acquisition threshold.

EFFECTIVE DATE: October 25, 2002.

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 2002-D021.

SUPPLEMENTARY INFORMATION:

A. Background This final rule revises DFARS 201.603-2 to implement Section 824 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107). Section 824 amended 10 U.S.C. 1724 to revise the qualification requirements that a new entrant into the contracting

field must meet in order to serve as a contracting officer with authority to award or administer contracts exceeding the simplified acquisition threshold. The revised qualifications include a requirement for a baccalaureate degree and 24 semester credit hours of study in a business-related discipline.

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-D021.

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 201

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

Therefore, 48 CFR part 201 is amended as follows:

1. The authority citation for 48 CFR part 201 continues to read as follows:

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

PART 201--FEDERAL ACQUISITION REGULATIONS SYSTEM

2. Section 201.603-2 is revised to read as follows:

201.603-2 Selection.

(1) In accordance with 10 U.S.C. 1724, in order to qualify to serve as a contracting officer with authority to award or administer contracts for amounts above the simplified acquisition threshold, a

person must--

(i) Have completed all contracting courses required for a contracting officer to serve in the grade in which the employee or member of the armed forces will serve;

(ii) Have at least 2 years experience in a contracting position;

(iii) Have--

(A) Received a baccalaureate degree from an accredited educational institution; and

(B) Completed at least 24 semester credit hours, or equivalent, of study from an accredited institution of higher education in any of the following disciplines: accounting, business finance, law, contracts, purchasing, economics, industrial management, marketing, quantitative

methods, and organization and management; and

(iv) Meet such additional requirements, based on the dollar value and complexity of the contracts awarded or administered in the position, as may be established by the Secretary of Defense.

(2) The qualification requirements in paragraph (1)(iii) of this subsection do not apply to a DoD employee or member of the armed forces who--

(i) On or before September 30, 2000, occupied--

(A) A contracting officer position with authority to award or administer contracts above the simplified acquisition threshold; or

(B) A position either as an employee in the GS-1102 occupational series or a member of the armed forces in an occupational specialty similar to the GS-1102 series;

(ii) Is in a contingency contracting force; or

(iii) Is an individual appointed to a 3-year developmental position. Information on developmental opportunities is contained in DoD Manual 5000.52-M, Acquisition Career Development Program.

(3) Waivers to the requirements in paragraph (1) of this subsection may be authorized. Information on waivers is contained in DoD Manual 5000.52-M.

DEPARTMENT OF DEFENSE

48 CFR Parts 208, 239, 251, and 252

[DFARS Case 2000-D023]

Defense Federal Acquisition Regulation Supplement; Enterprise Software Agreements

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 use of enterprise software agreements for the acquisition of commercial software and software maintenance.

EFFECTIVE DATE: October 25, 2002.

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-D023.

SUPPLEMENTARY INFORMATION:

A. Background This rule adds a new DFARS Subpart 208.74 to address the use of

enterprise software agreements for the acquisition of commercial software and software maintenance in accordance with the DoD Enterprise Software Initiative. This initiative promotes the use of enterprise software agreements with contractors that offer DoD favorable terms and

pricing for commercial software and related services. Associated DFARS changes are made in Parts 208, 239, 251, and 252.

DoD published a proposed rule at 67 FR 4231 on January 29, 2002. Five sources submitted comments on the proposed rule. DoD considered all comments in the development of the final rule. A discussion of the comments is provided below:

Comment: Due to a lack of central budget control, ``profit centers'' cannot bargain as a unit to establish an Enterprise Software Agreement (ESA), and vendors must contract with each organization individually. DoD Response: The lack of a centralized approach to DoD software budgeting is a prime reason for the existence of the Enterprise Software Initiative (ESI). By consolidating established department and agency requirements for commercial software, ESI gains

pricing and terms concessions not normally available to the individual or the small command buyer.

Comment: New vendors may be at a competitive disadvantage. Lack of objective performance criteria will deny new vendors the opportunity to compete on merit versus familiarity. DoD Response: ESI does not eliminate the need for acquisition planning and market research. Use of

ESAs is not mandatory, but must be considered only when requirements for products available under the agreements have already been established.

Comment: The term ``most favored customer'' at 208.7403(e)(2) is vague and should be eliminated from the rule. DoD Response: The intent is to give the software product manager (SPM) the opportunity to adjust the ESA to provide the best value to the customer. The language at

208.7403(e)(2) has been revised to more clearly convey this intent.

Comment: The rule will reduce the number of vendors able to market and sell commercial software products to DoD. DoD Response: Authorized commercial resellers with General Services Administration (GSA) Federal Supply Schedules are eligible to carry ESAs for commercial software products. In this sense, the software manufacturer determines the universe of potentially eligible resellers, and the resellers themselves decide whether or not to apply for and maintain a GSA Schedule, and whether or not to comply with the terms and conditions of a DoD ESA.

Comment: The ``nonstandard'' methods of the rule may encourage software manufacturers to keep products off ESAs. DoD Response: The use of blanket purchase agreements against GSA Schedules is a standard DoD acquisition practice. There is no evidence to indicate that this rule

will discourage manufacturers from seeking ESAs or from placing commercial products on ESAs.

Comment: Industrial funding fees will cancel potential savings of volume purchases. DoD Response: No additional resources are required to manage ESAs. DoD ESAs result in lower overhead for contract maintenance and result in net savings or cost avoidance for the Government.

Comment: Use of BPAs against GSA Schedules for the acquisition of software implies incorporation of the clause at FAR 52.227-14, Rights of Data. This clause may conflict with DoD policy on intellectual property rights and uses. The rule should follow DoD, not GSA, policy.

DoD Response: Use of BPAs against GSA Schedules is a standard acquisition practice in DoD and is in accordance with FAR subpart 8.4 and DFARS subpart 208.4.

Comment: Customized terms and conditions must often be negotiated. The 90-day process for allowing the SPM to negotiate on behalf of the purchaser adds needless delay and cost. DoD Response: Many ESAs contain special provisions for pricing and other terms and conditions. Should those provisions not be sufficient, the SPM is given up to 90 days to renegotiate the ESA. Historically, the turn-around time has been much quicker than 90 days. However, purchasers have the option to pursue a waiver to the use of the ESA if the SPM cannot negotiate satisfactory

terms and conditions within the purchaser's required timeframe.

Comment: The use of the term ``commercial software or related services such as software maintenance'' is overly broad. The phrase ``related services'' should be deleted. DoD Response: The phrase ``related services'' does address a broad range of services. It is the intent of ESI to address software asset management across the spectrum and throughout the life cycle of enterprise software management, rather than limit its scope to software acquisition and software maintenance.

Comment: The term ``software maintenance'' should be defined. DoD Response: A definition of ``software maintenance'' has been added at 208.7401.

Comment: Read literally, the rule could require DoD customers to acquire hardware without preloaded software. DoD Response: The rule is not intended to preclude the acquisition of preloaded software with computers from the original equipment manufacturer. The language at

208.7400(a) has been revised to clarify the intent.

Comment: The rule appears to support the development of software acquisition processes without the benefit of public comment. This may result in processes inconsistent with Federal Acquisition Streamlining Act requirements pertaining to the acquisition of commercial items. DoD

Response: DoD policy is to make maximum practical use of GSA Schedules, and ESI has established BPAs against GSA Schedules for DoD use. Software asset management encompasses all aspects of life-cycle management. Should any elements of implementing the software asset

management process require public comment, those elements will be published accordingly as has been done for this DFARS rule.

Comment: Software manufacturers and resellers cannot be expected to offer the favorable terms and discounts sought through ESI without DoD's commitment to purchase the quantities that result in the lowest prices. There is no evidence that DoD is willing or is able to make such a commitment. DoD Response: Many manufacturers and resellers have offered favorable terms and conditions without a commitment to specific quantities, for a chance at increased market share or additional DoD exposure.

Comment: The acquisition procedures in 208.7403 should be revised for clarity and for consistency with DoD Chief Information Officer Guidance and Policy Memorandum No. 12-8430 dated July 26, 2000, pertaining to requirements for use of ESAs, rationale for use of alternate sources, and reimbursement of funds to the SPM. DoD Response: This section has been revised to clarify procedures for determining when use of an ESA is appropriate, and to clarify documentation

requirements when use of an alternate source is deemed necessary. However, SPM reimbursement of funds is a procedure handled outside of the contracting arena, and, therefore, is not considered

appropriate for inclusion in this DFARS 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 most enterprise software agreements are blanket purchase agreements established under Federal Supply Schedules. Establishment of such agreements is already permitted by section 8.404(b)(4) of the Federal Acquisition Regulation.

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 208, 239, 251, and 252

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

Therefore, 48 CFR Parts 208, 239, 251, and 252 are amended as follows:

1. The authority citation for 48 CFR Parts 208, 239, 251, and 252 continues to read as follows:

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

PART 208--REQUIRED SOURCES OF SUPPLIES AND SERVICES

2. Section 208.001 is amended by revising paragraph (a)(1)(v) to read as follows:

208.001 Priorities for use of Government supply sources.

(a)(1)(v) See Subpart 208.70, Coordinated Acquisition, and Subpart 208.74, Enterprise Software Agreements.

* * * * *

3. Subpart 208.74 is added to read as follows:

Subpart 208.74--Enterprise Software Agreements

Sec.

208.7400 Scope of subpart.

208.7401 Definitions.

208.7402 General.

208.7403 Acquisition procedures.

208.7400 Scope of subpart.

This subpart prescribes policy and procedures for acquisition of commercial software and software maintenance, including software and software maintenance that is acquired--

(a) As part of a system or system upgrade, where practicable;

(b) Under a service contract;

(c) Under a contract or agreement administered by another agency (e.g., under an interagency agreement);

(d) Under a Federal Supply Schedule contract or blanket purchase agreement established in accordance with FAR 8.404(b)(4); or

(e) By a contractor that is authorized to order From a Government supply source pursuant to FAR 51.101.

208.7401 Definitions.

As used in this subpart--

Enterprise software agreement means an agreement or a contract that is used to acquire designated commercial software or related services such as software maintenance.

Enterprise Software Initiative means an initiative led by the DoD Chief Information Officer to develop processes for DoD-wide software asset management.

Golden Disk means a purchased license or entitlement to distribute an unlimited or bulk number of copies of software throughout DoD.

Software maintenance means services normally provided by a software company as standard services at established catalog or market prices, e.g., the right to receive and use upgraded versions of software, updates, and revisions.

Software product manager means the Government official who manages an enterprise software agreement.

208.7402 General.

Departments and agencies shall fulfill requirements for commercial software and related services, such as software maintenance, in accordance with the DoD Enterprise Software Initiative (ESI) (see Web site at http://www.don-imit.navy.mil/esi ). ESI promotes the use of enterprise software agreements (ESAs) with contractors that allow DoD to obtain favorable terms and pricing for commercial software and related services. ESI does not dictate the products or services to be

acquired.

208.7403 Acquisition procedures.

(a) After requirements are determined, the requiring official shall review the information at the ESI website to determine if the required commercial software or related services are available from DoD inventory (e.g., Golden Disks and DoD-wide software maintenance agreements). If the software or services are available, the requiring official shall fulfill the requirement from the DoD inventory.

(b) If the required commercial software or related services are not in the DoD inventory, and not on an ESA, the contracting officer or requiring official may fulfill the requirement by other means. Existing ESAs are listed on the ESI website.

(c) If the commercial software or related services are on an ESA, the contracting officer or requiring official shall review the terms and conditions and prices in accordance with otherwise applicable source selection requirements.

(d) If an ESA's terms and conditions and prices represent the best value to the Government, the contracting officer or requiring official shall fulfill the requirement for software or services through the ESA.

(e) If existing ESAs do not represent the best value to the Government, the software product manager (SPM) shall be given an opportunity to provide the same or a better value to the Government under the ESAs before the contracting officer or requiring official may continue with alternate acquisition methods.

(1) The contracting officer or requiring official shall notify the SPM of specific concerns about existing ESA terms and conditions or prices through the ESI webpage.

(2) The SPM shall consider adjusting, within the scope of the ESA, terms and conditions or prices to provide the best value to the customer.

(i) Within 3 working days, the SPM shall--

(A) Update the ESA;

(B) Provide an estimated date by which the update will be accomplished; or

(C) Inform the contracting officer or requiring official that no change will be made to the ESA.

(ii) If the SPM informs the contracting officer or requiring official that no change will be made to the ESA terms and conditions or prices, the contracting officer or requiring official may fulfill the requirement by other means.

(iii) If the SPM does not respond within 3 working days or does not plan to adjust the ESA within 90 days, the contracting officer or requiring official may fulfill the requirement by other means.

(3) A management official designated by the department or agency may waive the requirement to obtain commercial software or related services through an ESA after the steps in paragraphs (e)(1) and (e)(2)(i) of this section are complete. The rationale for use of an alternate source shall be included in the waiver request and shall be provided to the SPM.

PART 239--ACQUISITION OF INFORMATION TECHNOLOGY

4. Subpart 239.1 is added to read as follows:

Subpart 239.1--General

Sec.

239.101 Policy.

239.101 Policy.

See Subpart 208.74 when acquiring commercial software or software maintenance.

PART 251--USE OF GOVERNMENT SOURCES BY CONTRACTORS

5. Section 251.102 is amended as follows:

a. By revising paragraph (f);

b. In Table 51-1, by revising paragraph 1.;

c. In Table 51-1, in paragraph 2.b.(1) in the last sentence, and in paragraph 2.b.(2) in the last sentence, by removing ``telefax'' and adding in its place ``facsimile'; and

d. In Table 51-1, by adding paragraph 2.c. to read as follows:

251.102 Authorization to use Government supply sources.

* * * * *

(f) The authorizing agency is also responsible for promptly considering requests of the DoD supply source for authority to refuse to honor requisitions from a contractor that is indebted to DoD and has failed to pay proper invoices in a timely manner.

Table 51-1, Authorization To Purchase From Government Supply Sources

* * * * *

1. You are hereby authorized to use Government sources in performing Contract No. -------- for ---------------- [insert applicable military department or defense agency], as follows: --------

-------- [Insert applicable purchasing authority given to the contractor.]

2. * * *

c. Enterprise Software Initiative. Place orders in accordance with the terms and conditions of the attached Enterprise Software Agreement(s), or instructions for obtaining commercial software or

software maintenance from Enterprise Software Initiative inventories, and this authorization. Attach a copy of this authorization to the order (unless a copy was previously furnished to the Enterprise Software Agreement contractor).

Insert the following statement in the order:

This order is placed under written authorization from ---------- dated (*----------). In the event of any inconsistency between the terms and conditions of this order, and those of the Enterprise

Software Agreement, the latter will govern.

* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

6. Section 252.251-7000 is amended as follows:

a. By revising the clause date and paragraph (a);

b. By removing paragraph (b) and redesignating paragraphs (c) through (f) as paragraphs (b) through (e); and

c. In newly designated paragraph (c)(4), in the last sentence, by removing ``Such'' and adding in its place ``The''. The revised text reads as follows:

252.251-7000 Ordering From Government Supply Sources.

* * * * *

Ordering from Government Supply Sources (OCT 2002)

(a) When placing orders under Federal Supply Schedules, Personal Property Rehabilitation Price Schedules, or Enterprise Software Agreements, the Contractor shall follow the terms of the applicable schedule or agreement and authorization. Include in each order:

(1) A copy of the authorization (unless a copy was previously furnished to the Federal Supply Schedule, Personal Property Rehabilitation Price Schedule, or Enterprise Software Agreement

contractor).

(2) The following statement: Any price reductions negotiated as part of an Enterprise Software Agreement issued under a Federal Supply Schedule contract shall control. In the event of any other

inconsistencies between an Enterprise Software Agreement, established as a Federal Supply Schedule blanket purchase agreement, and the Federal Supply Schedule contract, the latter shall govern.

(3) The completed address(es) to which the Contractor's mail, freight, and billing documents are to be directed.

* * * * *

DEPARTMENT OF DEFENSE

48 CFR Part 252

[DFARS Case 2002-D028]

Defense Federal Acquisition Regulation Supplement; Caribbean Basin Country--Honduras

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 Honduras to the list of Caribbean Basin countries whose products DoD may acquire under the Trade Agreements Act, in accordance with a determination of the United States Trade Representative.

EFFECTIVE DATE: October 25, 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-D028.

SUPPLEMENTARY INFORMATION:

A. Background This final rule amends the clauses at DFARS 252.225-7007, Buy

American Act-Trade Agreements--Balance of Payments Program, and 252.225-7021, Trade Agreements, to add Honduras to the definition of ``Caribbean Basin country.'' The rule implements the direction of the United States Trade Representative to treat the products of Honduras as

eligible products in acquisitions subject to the Trade Agreements Act (67 FR 46239, July 12, 2002).

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-D028.

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 252

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

Therefore, 48 CFR Part 252 is amended as follows:

1. The authority citation for 48 CFR part 252 continues to read as follows:

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

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

252.225-7007 [Amended]

2. Section 252.225-7007 is amended as follows:

a. By revising the clause date to read ``(OCT 2002)''; and

b. In paragraph (a)(1) by adding, in alphabetical order, ``Honduras'' to the list of countries.

252.225-7021 [Amended]

3. Section 252.225-7021 is amended as follows:

a. By revising the clause date to read ``(OCT 2002)''; and

b. In paragraph (a)(1) by adding, in alphabetical order, ``Honduras'' to the list of countries.

End of DCN 20021025