DEFENSE FAR SUPPLEMENT (DFARS) Change Notice 20031001

DoD published 2 interim DFARS rules and technical amendments in the Federal Register on October 1, 2003. In addition, DoD has updated the DFARS to incorporate the DD Form 350 reporting requirements published in the Federal Register on June 20, 2003, for use beginning October 1, 2003. Further information on these actions is provided below:

Interim Rules:

Approval of Service Contracts and Task Orders (DFARS Case 2002-D024)

Establishes approval requirements that contracting activities must meet before acquiring services through a DoD contract or task order that is not performance based, or through any contract or task order that is awarded by an agency other than DoD. This change implements Section 801(b) of the National Defense Authorization Act for Fiscal Year 2002.

Summary of Federal Register notice:

SUMMARY: DoD has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 801(b) of the National Defense Authorization Act for Fiscal Year 2002. Section 801(b) requires DoD to establish and implement a management structure for the procurement of services.

DATES: Effective date: October 1, 2003.

Comment date: Comments on the interim rule should be submitted to the address shown below on or before December 1, 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@acq.osd.mil. Please cite DFARS Case 2002-D024 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: Mr. Steven Cohen, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. Please cite DFARS Case 2002-D024. 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: Mr. Steven Cohen, (703) 602-0293.

SUPPLEMENTARY INFORMATION:

A. Background This interim rule adds DFARS section 237.170, Approval of contracts and task orders for services, to implement Section 801(b) of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107). Section 801 of Public Law 107-107 established a series of requirements impacting the acquisition of services in DoD. On May 31, 2002, the Under Secretary of Defense (Acquisition, Technology, and Logistics) issued a policy memorandum that established a review structure and process for the acquisition of services in accordance with section 801(d). The policy memorandum is available on the World Wide Web at http://www.acq.osd.mil/dpap.

This interim DFARS rule implements section 801(b) of Public Law 107-107 by establishing approval requirements for contracts and task orders for services. The rule prohibits the acquisition of services through use of a DoD contract or task order that is not performance based, or through any contract or task order that is awarded by an agency other than DoD, unless certain approval requirements are met. With respect to services acquisitions through a contract or task order awarded by an agency other than DoD, the rule requires approval in accordance with department or agency procedures. Each of the three military departments has developed a ``Management and Oversight of Acquisition of Services Process'' to provide a review structure for services acquisitions, as required by the May 31, 2002, memorandum. The military departments are working to implement this infrastructure, which will include approval levels for services acquired through another agency's contract.

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 FAR part 37 already requires the use of performance-based contracting to the maximum extent practicable. This DFARS rule establishes internal DoD approval requirements to manage compliance with the existing FAR requirements. 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-D024.

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 801(b) of the National Defense Authorization Act for Fiscal Year 2002, which requires DoD to establish and implement a management structure for the procurement of services. Section 801(b) 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.

Affected subparts/sections: Part 237 Table of Contents; 237.1

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

Approval of Service Contracts and Task Orders

DFARS Case 2002-D024

Interim Rule

PART 237-SERVICE CONTRACTING

* * * * *

SUBPART 237.1-SERVICE CONTRACTS-GENERAL

[237.170 Approval of contracts and task orders for services.

237.170-1 Scope.

This section-

(a) Implements 10 U.S.C. 2330; and

(b) Applies to services acquired for DoD, regardless of whether the services are acquired through-

237.170-2 Prohibition on acquisition of services.

Unless approval is obtained in accordance with 237.170-3, do not acquire services through use of a contract or task order that-

(a) Is not performance based; or

(b) Is awarded by an agency other than DoD.

237.170-3 Approval requirements.

(a) Acquisition of services through a DoD contract or task order that is not performance based.

(b) Acquisition of services through any contract or task order awarded by an agency other than DoD. Obtain approval in accordance with department or agency procedures.]

Indian Incentive Program (DFARS Case 2002-D033)

Revises the criteria for application of the Indian Incentive Program, which permits incentive payments to contractors that use Indian organizations as subcontractors. Establishes a threshold of $500,000 for contracts and subcontracts under which incentives may be paid; expands the Program to permit incentive payments for subcontracts awarded to Native Hawaiian small business concerns; and adds contracts and subcontracts for commercial items to the Program. This change implements Section 8021 of the DoD Appropriations Act for Fiscal Year 2003.

Summary of Federal Register notice:

SUMMARY: DoD has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 8021 of the DoD Appropriations Act for Fiscal Year 2003. Section 8021 revises the criteria for application of the Indian Incentive Program to DoD contracts.

DATES: Effective date: October 1, 2003.

Comment date: Comments on the interim rule should be submitted to the address shown below on or before December 1, 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@acq.osd.mil. Please cite DFARS Case 2002-D033 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. Angelena Moy, OUSD (AT&L) DPAP (DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. Please cite DFARS Case 2002-D033. 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. Angelena Moy, (703) 602-1302.

SUPPLEMENTARY INFORMATION:

A. Background The Indian Incentive Program provides for incentive payments to contractors, and subcontractors at any tier, that use Indian organizations and Indian-owned economic enterprises as subcontractors. DoD implementation of the Indian Incentive Program is in DFARS Subpart 226.1 and the clause at 252.226-7001. Section 8021 of the DoD Appropriations Act for Fiscal Year 2003 (Public Law 107-248) revises the criteria for application of the Indian Incentive Program by establishing a $500,000 threshold for contracts and subcontracts under which incentives may be paid; by authorizing incentive payments for subcontracts awarded to Native Hawaiian small business concerns; and by adding contracts and subcontracts for commercial items to the Program. This interim rule amends DFARS subpart 226.1 and the clause at 252.226-7001 to implement section 8021 of Public Law 107-248. In addition, this interim rule incorporates changes to the clause at 252.226-7001 resulting from the proposed rule published at 67 FR 70389 on November 22, 2002, under DFARS Case 2002-D013. That proposed rule removed references to specific contract types from the clause, since the Indian Incentive Program applies to all contract types. Four sources submitted comments on the proposed rule. A discussion of the comments is provided below. 1. Comment: The rule should clarify that a contractor can receive a separate equitable adjustment in addition to the incentive payment under the clause. The equitable adjustment would apply if the cost of subcontracting with an Indian organization exceeds the cost of subcontracting with a non-Indian source. The 1996 version of the Indian Incentive clause at FAR 52.226-1 substantiates this position.

DoD Response: Do not concur. 25 U.S.C. 1544 provides that ``a contractor * * * may be allowed an additional amount of compensation equal to 5 percent of the amount paid, or to be paid, to a subcontractor or supplier, in carrying out the contract if such subcontractor or supplier is an Indian organization or Indian-owned economic enterprise * * *'' Section 8021 of Public Law 107-248 appropriates funds ``only for incentive payments authorized by * * * 25 U.S.C. 1544 * * *'' Accordingly, the clause at DFARS 252.226-7001 provides for an incentive payment of 5 percent of the amount of a subcontract awarded to an Indian organization or Indian-owned economic enterprise.

When the Indian Incentive Program was added to the FAR as an interim rule on August 22, 1991 (56 FR 41736), the clause at 52.226-1 provided that a contract adjustment under the Program would be the lesser of (1) the difference between the price of the subcontract awarded to an Indian concern and the price of the otherwise low, non-Indian offeror, or (2) 5 percent of the price of the subcontract awarded to an Indian concern. When the FAR rule was finalized on July 26, 1996 (61 FR 39210), the clause was revised to eliminate the first option and to specify the ``5 percent'' payment method as the sole method of incentive payment under the Program. Confusion has existed because the FAR and DFARS clauses have used the terms ``incentive'' and ``adjustment'' interchangeably. However, the statutes and the implementing clauses historically have permitted only one type of incentive payment per subcontract award. To clarify this point, DoD has replaced the term ``adjustment'' with the term ``incentive'' each place it appeared in the clause at 252.226-7001.

2. Comment: The requirement of DFARS 252.226-7001(d), that prohibits an incentive payment from being made within 50 working days of subcontract award, is arbitrary and should be deleted. The contracting officer should have the flexibility to make a case-by-case determination of when it is appropriate to make the incentive payment.

DoD Response: Concur. The interim rule eliminates the 50-day waiting period.

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 an initial regulatory flexibility analysis, which is summarized as follows: This interim rule amends the DFARS to implement Section 8021 of the DoD Appropriations Act for Fiscal Year 2003. Section 8021 does the following: (1) Appropriates funds for implementation of the Indian Incentive Program; (2) establishes a threshold of $500,000 for contracts and subcontracts under which incentives may be paid; (3) expands the Program to permit incentive payments for subcontract awards to Native Hawaiian small business concerns; and (4) adds contracts and subcontracts for commercial items to the Program, provided the commercial items are produced or manufactured in whole or in part by an Indian organization or enterprise or Native Hawaiian small business concern. The rule will apply to contractors and subcontractors that subcontract work under DoD contracts, and will pertain to subcontract awards to Indian organizations, Indian-owned economic enterprises, and Native Hawaiian small business concerns. The net effect on small entities is unknown at this time. DoD knows of no alternatives that would meet the requirements of Section 8021 of the DoD Appropriations Act for Fiscal Year 2003.

A copy of the analysis may be obtained from the address 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-D033.

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 8021 of the DoD Appropriations Act for Fiscal Year 2003 (Pub. L. 107-248). Section 8021 revises the criteria for application of the Indian Incentive Program by establishing a $500,000 threshold for contracts and subcontracts under which incentives may be paid; by authorizing incentive payments for subcontracts awarded to Native Hawaiian small business concerns; and by adding contracts and subcontracts for commercial items to the Program. Section 8021 became effective upon enactment, on October 23, 2002. Comments received in response to this interim rule will be considered in the formation of the final rule.

Affected subparts/sections: 226.1; 252.212; 252.226

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

Indian Incentive Program

DFARS Case 2002-D033

Interim Rule

PART 226-OTHER SOCIOECONOMIC PROGRAMS

* * * * *

SUBPART 226.1 INDIAN INCENTIVE PROGRAM

226.103 Procedures.

226.104 Contract clause.

Use the clause at 252.226-7001, Utilization of Indian Organizations[,] and Indian-Owned Economic Enterprises[, and Native Hawaiian Small Business Concerns]--DoD Contracts, in solicitations and contracts for supplies or services [exceeding $500,000 in value for which subcontracting opportunities may exist.] that--

* * * * *

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 (APR 2003 [OCT 2003])

* * * * *

* * * * *

* * * * *

252.226-7001 Utilization of Indian Organizations[,] and Indian-Owned Economic Enterprises[, and Native Hawaiian Small Business Concerns]--DoD Contracts.

As prescribed in 226.104, use the following clause:

UTILIZATION OF INDIAN ORGANIZATIONS[,] AND INDIAN-OWNED ECONOMIC ENTERPRISES[, AND NATIVE HAWAIIAN SMALL BUSINESS CONCERNS]--DOD CONTRACTS (SEP 2001 [OCT 2003])

"Indian" means any person who is a member of any Indian tribe, band, group, pueblo, or community that is recognized by the Federal Government as eligible for services from the Bureau of Indian Affairs (BIA) in accordance with 25 U.S.C. 1452(c) and any "Native" as defined in the Alaska Native Claims Settlement Act (43 U.S.C. 1601).

"Indian organization" means the governing body of any Indian tribe or entity established or recognized by the governing body of an Indian tribe for the purposes of 25 U.S.C. Chapter 17.

"Indian-owned economic enterprise" means any Indian-owned (as determined by the Secretary of the Interior) commercial, industrial, or business activity established or organized for the purpose of profit, provided that Indian ownership constitutes not less than 51 percent of the enterprise.

* * * * *

["Native Hawaiian small business concern" means an entity that is-

 

 

 

The BIA will determine the eligibility and will notify the Contracting Officer.

The Department of Hawaiian Home Lands will determine the eligibility and will notify the Contracting Officer.]

 

 

 

 

(End of clause)

Final Rules:

Reporting Requirements Update (DFARS Case 2003-D002)

Updates DD Form 350 contract action reporting requirements for Fiscal Year 2004. Contains changes related to reporting of contract modifications and program or system information. These changes were published in the Federal Register on June 20, 2003 (DFARS Change Notice 20030620), to allow sufficient time for contracting activities to program their automated systems prior to the start of the new fiscal year.

Summary of Federal Register notice:.

SUMMARY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to update contract action reporting requirements for Fiscal Year 2004. The rule makes changes to instructions for completion of the Individual Contracting Action Report.

EFFECTIVE DATE: October 1, 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-D002.

SUPPLEMENTARY INFORMATION:

A. Background This final rule contains instructions for contracting officers to use in completing DD Form 350, Individual Contracting Action Report, during Fiscal Year 2004. DoD uses this form to collect statistical data on its contracting actions. The rule includes changes related to reporting of contract modification actions and program or system information. DD Form 350, and other forms prescribed by the DFARS, are not included in the Code of Federal Regulations. The forms are available electronically via the Internet at http://web1.whs.osd.mil/icdhome/ddeforms.htm

. 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-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.

Affected subparts/sections: 253.204; DD Form 350

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

Reporting Requirements Update

DFARS Case 2003-D002

Final Rule

PART 253-FORMS

* * * * *

253.204-70 DD Form 350, Individual Contracting Action Report

* * * * *

* * * * *

* * * * *

Technical Amendments

Updates activity names, clause titles and dates, and cross-references.

Affected subparts/sections: 202.1; 213.3; 252.212

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

Technical Amendments

Final Rule

PART 202-DEFINITIONS OF WORDS AND TERMS

* * * * *

202.101 Definitions.

* * * * *

DoD contracting activities are-

* * * * *

* * * * *

* * * * *

PART 213-SIMPLIFIED ACQUISITION PROCEDURES

* * * * *

213.301 Governmentwide commercial purchase card.

* * * * *

* * * * *

213.302-5 Clauses.

* * * * *

* * * * *

* * * * *

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.

* * * * *

* * * * *

End of DFARS Change Notice 20031001