DFARS CHANGE NOTICE, 20030821

Interim Rule:

 

Multiyear Contracting Authority Revisions (DFARS Case 2002-D041)

 Restricts the use of multiyear contracts for supplies to only those for complete and usable end items, and restricts the use of advance procurement to only those long-lead items necessary in order to meet a planned delivery schedule for complete major end items. This change implements Section 820 of the National Defense Authorization Act for Fiscal Year 2003.

Affected subparts/sections: Part 217 Table of Contents; 217.1

 The Federal Register notice for this rule is available here:

[DFARS Case 2002-D041]

Defense Federal Acquisition Regulation Supplement; Multiyear Contracting Authority Revisions

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 820 of the National Defense Authorization Act for Fiscal Year 2003. Section 820 restricts the use of multiyear contracts for supplies to only those for complete and usable end items, and restricts the use of advance procurement to only those long-lead items necessary in order to meet a planned delivery schedule for complete major end items.

DATES: Effective date: August 21, 2003.

Comment date: Comments on the interim rule should be submitted to the address shown below on or before October 20, 2003, 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@osd.mil. Please cite DFARS Case 2002-D041 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. Teresa Brooks, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. Please cite DFARS Case 2002-D041. 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. Teresa Brooks, (703) 602-0326.SUPPLEMENTARY INFORMATION: A. Background This interim rule amends DFARS Subpart 217.1 to implement Section 820 of the National Defense Authorization Act for Fiscal Year 2003 (Public Law 107-314). Section 820 amends the multiyear contracting authority at 10 U.S.C. 2306b(i) to specify that DoD may obligate funds for procurement of an end item under a multiyear contract only if the item is a complete and usable end item; and that DoD may obligate funds for advance procurement of property only for those long-lead items necessary to meet a planned delivery schedule for complete major end items that are programmed under the contract to be acquired with funds appropriated for a subsequent fiscal year (including an economic order quantity of such long-lead items when authorized by law). 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 primarily pertains to DoD planning and budget considerations with regard to multiyear contracts. 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-D041.

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 820 of the National Defense Authorization Act for Fiscal Year 2003 (Public Law 107-314), which restricts the use of multiyear contracts for supplies to only those for complete and usable end items, and restricts the use of advance procurement to only those long-lead items necessary in order to meet a

planned delivery schedule for complete major end items. Section 820 became effective upon enactment on December 2, 2002. Comments received in response to this interim rule will be considered in the formation of the final rule.

List of Subjects in 48 CFR Part 217

Government procurement.

Michele P. Peterson, Executive Editor, Defense Acquisition Regulations Council. 0

Therefore, 48 CFR Part 217 is amended as follows:

PART 217-MULTIYEAR CONTRACTING

* * * * *

SUBPART 217.1--MULTIYEAR CONTRACTING

* * * * *

217.172 Multiyear contracts for supplies.

217.173 Multiyear contracts for weapon systems [and other multiyear acquisitions specifically authorized by law].

217.174 Multiyear contracts that employ economic order quantity procurement.

Final Rules:

Liability for Loss Under Vessel Repair and Alteration Contracts (DFARS Case 2002-D016)

Increases a contractor's liability for loss or damage under vessel repair and alteration contracts from $5,000 to $50,000 per incident. The increased dollar ceiling is based on adjustments for inflation, the need to provide a financial incentive for contractors to minimize loss and damage, and common insurance practices.

Affected subparts/sections: 252.217

The Federal Register notice for this rule is available here:

DEPARTMENT OF DEFENSE

48 CFR Part 252

[DFARS Case 2002-D016]

Defense Federal Acquisition Regulation Supplement; Liability for Loss Under Vessel Repair and Alteration 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 increase a contractor's liability for loss or damage under vessel repair and alteration contracts, from $5,000 to $50,000 per incident. The increased dollar ceiling is based on adjustments for inflation, the need to provide a financial incentive for contractors to minimize loss and damage, and common insurance practices.

EFFECTIVE DATE: August 21, 2003.

FOR FURTHER INFORMATION CONTACT: Mr. Euclides Barrera, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132,

3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0296; facsimile (703) 602-0350. Please cite DFARS Case 2002-D016.

SUPPLEMENTARY INFORMATION:

A. Background DoD uses the clause at DFARS 252.217-7012, Liability and Insurance, in master agreements for repair and alteration of vessels. The clause holds a contractor liable for loss or damage resulting from defective contractor workmanship and materials, and contains a liability ceiling for any other contractor-incurred loss or damage. This rule increases the contractor's liability ceiling from $5,000 to $50,000 per incident. DoD published a proposed rule at 68 FR 7491 on February 14, 2003. One respondent submitted comments on the proposed rule. A summary of DoD's analysis of the comments is provided below:

Comment: The respondent took issue with the increase in the contractor's liability ceiling from $5,000 to $50,000, and instead recommended a ceiling of $7,465 based on actual inflation experienced by the shipbuilding industry since 1982 when the $5,000 ceiling was established.

DoD Response: Do not concur. The increase was not based solely on inflation factors. The increase from $5,000 to $50,000 was determined to be appropriate as a result of a Navy study of incidents of contractor-incurred damages under vessel repair and alteration contracts during a recent 3-year period, which indicated that 70 percent of the incidents were for amounts below $50,000, whereas only 30 percent of the incidents were for amounts of $5,000 or less. The objective of the increase is to provide a financial incentive for contractors to minimize loss and damage.

Comment: The respondent does not agree with DoD's position that the increased dollar ceiling is necessary to provide a financial incentive for contractors to minimize loss or damage. The clause at DFARS 252.217-7012 already provides a strong financial incentive for contractors to minimize loss or damage. Under the clause, the Government's assumption of risk is essentially limited to loss or damage resulting from accidents. To require contractors to assume more of the costs associated with accidental damage to vessels will not necessarily result in a reduced number of occurrences, but will force contractors to price the costs of assumption of additional risks (due to higher ceilings) into their cost proposals for Navy ship repair work.

DoD Response: Do not concur. Increasing the ceiling is consistent with the commercial insurance practice of setting a deductible that lowers claim frequency, eliminates insubstantial claims, and provides an incentive for the insured to avoid losses. Any increased contract costs that might result from the higher ceiling should be offset by the reduced number of claims submitted to the Government. 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 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. DoD has prepared a final regulatory flexibility analysis, which is summarized as follows: This rule increases a contractor's liability for loss or damage to a Government vessel, materials, or equipment, from $5,000 to $50,000 per incident. The rule will apply to small entities that have a master agreement with DoD for repair and alteration of vessels. There is no available estimate of the total number of small entities that will be subject to the rule. However, the Naval Sea Systems Command (NAVSEA), which is responsible for the maintenance and repair of the majority of vessels, has collected data indicating that, during the period from May 1997 to October 2002, there were 61 occurrences of contractor-caused damages. Of those, 13 occurrences (21 percent) were attributed to small entities. Entities with master agreements for repair and alteration of vessels will need to increase their insurance coverage from $5,000 to $50,000. DoD considered using a liability ceiling of less than $50,000, but believes the $50,000 ceiling to be appropriate because-

1. This ceiling should capture a majority of claims, since a NAVSEA study has shown that 70 percent of incidents of contractor-incurred damages during a recent 3-year period were for amounts less than $50,000;

2. The increase should provide an incentive for contractors to reduce the number of such occurrences, thereby reducing vessel ``down-time'' for maintenance and repair and making more efficient use of scarce maintenance dollars; and

3. The increase is consistent with the commercial insurance practice of setting a deductible that lowers claim frequency, eliminates insubstantial claims, and provides an incentive for the insured to avoid losses.

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:

A Microsoft Word format document showing all additions and deletions made by this rule is here:

Liability for Loss Under Vessel Repair and Alteration Contracts

DFARS Case 2002-D016

Final Rule

PART 252-SOLICITATION PROVISIONS AND CONTRACT CLAUSES

* * * * *

252.217-7012 Liability and Insurance.

As prescribed in 217.7104(a), use the following clause:

LIABILITY AND INSURANCE (DEC 1991[AUG 2003])

* * * * *

* * * * *

* * * * *

Caribbean Basin Country - Dominican Republic (DFARS Case 2003-D007)

Adds the Dominican Republic to the list of Caribbean Basin countries whose products DoD may acquire under the Trade Agreements Act. This change implements a determination made by the U.S. Trade Representative on May 21, 2003.

Affected subparts/sections: 252.225

The Federal Register notice for this rule is available here:

DEPARTMENT OF DEFENSE

48 CFR Part 252

[DFARS Case 2003-D007]

Defense Federal Acquisition Regulation Supplement; Caribbean Basin Country--Dominican Republic

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 the Dominican Republic 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: August 21, 2003.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0328; facsimile (703) 602-0350. Please cite DFARS Case 2003-D007.

SUPPLEMENTARY INFORMATION:

. Background

This final rule amends the clause at DFARS 252.225-7021, Trade Agreements, to add the Dominican Republic to the definition of ``Caribbean Basin country.'' The rule implements the direction of the United States Trade Representative to treat the products of the Dominican Republic as eligible products in acquisitions subject to the Trade Agreements Act (68 FR 27883, May 21, 2003). 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 2003-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 252

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

Therefore, 48 CFR Part 252 is amended as follows:

A Microsoft Word format document showing all additions and deletions made by this rule is here:http://www.acq.osd.mil/dp/dars/lilo/2003d007f.doc.

Caribbean Basin Country - Dominican Republic

DFARS Case 2003-D007

Final Rule

PART 252-SOLICITATION PROVISIONS AND CONTRACT CLAUSES

* * * * *

252.225-7021 Trade Agreements.

As prescribed in 225.1101(11), use the following clause:

TRADE AGREEMENTS (APR 2003[AUG 2003])

* * * * *

Competitiveness Demonstration Codes Update (DFARS Case 2003-D003)

Updates the codes used to identify the industry categories designated for expanded small business participation under the Small Business Competitiveness Demonstration Program. This change is administrative only and has no impact on the Program.

Affected subparts/sections: 219.10

The Federal Register notice for this rule is available here.

DEPARTMENT OF DEFENSE

48 CFR Part 219

[DFARS Case 2003-D003]

Defense Federal Acquisition Regulation Supplement; Competitiveness Demonstration Codes Update

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to update the list of industry categories designated by DoD for enhanced small business participation under the Small Business Competitiveness Demonstration Program.

EFFECTIVE DATE: August 21, 2003.

FOR FURTHER INFORMATION CONTACT: Mr. Euclides Barrera, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0296; facsimile (703) 602-0350. Please cite DFARS Case 2003-D003.SUPPLEMENTARY INFORMATION:

A. Background Policy for the Small Business Competitiveness Demonstration Program is in FAR subpart 19.10. One of the objectives of the Program is to expand small business participation in certain targeted industry categories. Each Federal agency participating in the Program designates its own targeted categories in consultation with the Small Business Administration. DoD's targeted categories are in DFARS 219.1005(b). This final rule updates the North American Industry Classification System (NAICS) codes shown for the targeted industry categories at 219.1005(b)(10), for consistency with the 2002 NAICS listing published by the U.S. Census Bureau. In addition, to simplify the descriptions of targeted categories, the entries for research and development have been combined with the entries for manufacturing at 219.1005(b)(5), (6), and (7). These changes are administrative only and have no impact on the Program.

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 2003-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.

List of Subjects in 48 CFR Part 219

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

Therefore, 48 CFR Part 219 is amended as follows:

A Microsoft Word format document showing all additions and deletions made by this rule is here:

Competitiveness Demonstration Codes Update

DFARS Case 2003-D003

Final Rule

PART 219-SMALL BUSINESS PROGRAMS

* * * * *

SUBPART 219.10-SMALL BUSINESS COMPETITIVENESS DEMONSTRATION PROGRAM

219.1005 Applicability.

* * * * *

Contractor Performance of Security-Guard Functions (DFARS Case 2002-D042)

Finalizes, without change, the interim rule published on February 14, 2003 (Change Notice 20030214), to implement Section 332 of the National Defense Authorization Act for Fiscal Year 2003. Section 332 permits the award of contracts for performance of security-guard functions at military installations or facilities to meet the increased need for such functions since September 11, 2001.

Affected subparts/sections: None.

The Federal Register notice for this rule is available here:

DEPARTMENT OF DEFENSE

48 CFR Part 237

[DFARS Case 2002-D042]

Defense Federal Acquisition Regulation Supplement; Contractor Performance of Security-Guard Functions

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

SUMMARY: DoD has adopted as final, without change, an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 332 of the National Defense Authorization Act for Fiscal Year 2003. Section 332 provides temporary authority for contractor performance of security-guard functions at military installations or facilities to meet the increased need for such functions since September 11, 2001.

EFFECTIVE DATE: August 21, 2003.

FOR FURTHER INFORMATION CONTACT: Ms. Teresa Brooks, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0326; facsimile (703) 602-0350. Please cite DFARS Case 2002-D042.SUPPLEMENTARY INFORMATION:

A. Background DoD published an interim rule at 68 FR 7443 on February 14, 2003, to implement Section 332 of the NationalDefense Authorization Act for Fiscal Year 2003 (Public Law 107-314). Section 332 authorizes DoD to waive the prohibition at 10 U.S.C. 2465(a), to permit contractor performance of security-guard functions

at military installations or facilities to meet the increased need for such functions since September 11, 2001. Three respondents submitted comments on the interim rule. Two of the respondents expressed their support for the rule. A third

respondent stated that a contracting officer's representative (COR) may be appointed to an installation's Provost Marshal or Security Office and questioned whether the rule should specify that contracting offices must ensure that CORs are duly trained. DoD believes that training of CORs is already adequately addressed in DFARS 201.602-2(2), which states that a COR must be ``qualified by training and experience commensurate with the responsibilities to be delegated in accordance with department/agency guidelines.'' Therefore, DoD believes that no change to the rule is needed, and has adopted the interim rule as a final rule.

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

B. Regulatory Flexibility Act DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule applies only to security-guard functions in excess of those being performed on military installations or facilities as of September 10, 2001. While the rule is expected to result in additional opportunities for small business concerns to perform security-guard functions, the overall impact is not expected to 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 Part 237

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

Interim Rule Adopted as Final Without Change

Accordingly, the interim rule amending 48 CFR part 237, which was published at 68 FR 7443 on February 14, 2003, is adopted as a final rule without change.

EDN OF DCN 20030821.