[Federal Register: August 10, 2010 (Volume 75, Number 153)]

[Rules and Regulations]

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

[DOCID:fr10au10-7]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 225 and 252

[DFARS Case 2009-D024]

Defense Federal Acquisition Regulation Supplement; Reporting of Commercially Available Off-the-Shelf Items That Contain Specialty Metals--Deletion of Obsolete Clause

AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing this final rule to amend the Defense Federal Acquisition Regulation Supplement (DFARS) by deleting the requirement for contractors to report commercially available off-the-shelf items that contain foreign specialty metals and are incorporated into noncommercial end items.

DATES: Effective Date: August 10, 2010.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition Regulations System, OUSD (AT&L) DPAP (DARS), 3060 Defense Pentagon, Room 3B855, Washington, DC 20301-3060. Telephone 703-602-0328; facsimile 703-602-0350. Please cite DFARS Case 2009-D024.

SUPPLEMENTARY INFORMATION:

A. Background

This final rule deletes DFARS clause 252.225-7029, Reporting of Commercially Available Off-the-Shelf Items that Contain Specialty Metals and are Incorporated into Noncommercial End Items. This requirement was incorporated in the DFARS to implement section 804, paragraph (i), of the National Defense Authorization Act for Fiscal Year 2008 (Pub. L. 110-181). Paragraph (i) requires the Government to report to Congress for fiscal years 2008 and 2009 on the use of the exception to the specialty metals restrictions of 10 U.S.C. 2533b for commercially available off-the-shelf items that are incorporated in noncommercial end items. In order to obtain information for this report, the DFARS clause 252.225-7029, Reporting of Commercially Available Off-the-Shelf Items that Contain Specialty Metals and are Incorporated into Noncommercial End Items, was added to the DFARS on July 29, 2009 (74 FR 37626). This requirement is now obsolete, because the reporting requirement does not extend beyond fiscal year 2009.

DoD is issuing this rule as a final rule because this rule does not have a significant effect beyond the internal operating procedures of DoD and does not have a significant cost or administrative impact on contractors or offerors. Therefore, public comment is not required in accordance with 41 U.S.C. 418b(a).

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

B. Regulatory Flexibility Act

The Regulatory Flexibility Act does not apply to this rule. This rule will not have a significant economic impact upon a substantial number of small entities because this final rule does not constitute a significant DFARS revision within the meaning of 41 U.S.C. 418b and FAR 1.501, and did not require publication for public comment.

C. Paperwork Reduction Act

This rule will eliminate 306,800 information collection hours currently approved under Office of Management and Budget Control Number

List of subjects in 48 CFR Parts 225 and 252

Government procurement.

Ynette R. Shelkin,

Editor, Defense Acquisition Regulations System.

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

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

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

PART 225--FOREIGN ACQUISITION

225.7003-3 [Amended]

2. Section 225.7003-3 is amended by removing paragraph (b)(2)(iii).

225.7003-5 [Amended]

3. Section 225.7003-5 is amended by removing paragraph (c) and redesignating paragraphs (d) and (e) as paragraphs (c) and (d), respectively.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

252.225-7029 [Removed and Reserved]

4. Section 252.225-7029 is removed and reserved.

[FR Doc. 2010-19666 Filed 8-9-10; 8:45 am]

BILLING CODE 5001-08-P

FR Doc 2010-19672[Federal Register: August 10, 2010 (Volume 75, Number 153)]

[Rules and Regulations]

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

[DOCID:fr10au10-6]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 215, 231, and 252

[DFARS Case 2006-D057]

Defense Federal Acquisition Regulation Supplement; Excessive Pass-Through Charges

AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule to delete the DFARS language implementing section 852 of the National Defense Authorization Act for Fiscal Year 2007 that ensures that pass-through charges on contracts or subcontracts that are entered into for or on behalf of DoD are not relation to the cost of work performed by the relevant contractor or subcontractor. The interim DFARS rule language, which implements the requirements of section 852, was made obsolete with the publication of the FAR interim rule at 74 FR 52853 on October 14, 2009.

DATES: Effective Date: August 10, 2010.

FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, Defense Acquisition Regulations System, OUSD (AT&L) DPAP (DARS), Room 3B855, 3060 Defense Pentagon, Washington, DC 20301-3060. Telephone 703-602-0302; facsimile 703-602-0350. Please cite DFARS Case 2006-D057.

SUPPLEMENTARY INFORMATION:

A. Background

Section 852 of the National Defense Authorization Act (NDAA) for Fiscal Year 2007 required DoD to prescribe regulations to ensure that pass-through charges on contracts or subcontracts that are entered into for or on behalf of DoD are not excessive in relation to the cost of work performed by the relevant contractor or subcontractor. DoD published an interim rule at 72 FR 20758 on April 26, 2007, to amend the DFARS to include a solicitation provision and contract clause in DoD contracts to implement the requirements of section 852.

Fourteen sources submitted comments on the interim rule. Public comments were addressed in a second interim rule published at 73 FR 27464 on May 13, 2008, when the interim rule language was revised in response to comments received. DoD determined at that time that it did not expect the rule to have a significant impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. FAR interim rule 2008-031, published at 74 FR 52853 on October 14, 2009, implemented the requirements of section 866 of the NDAA for FY09 on the issue of excessive pass-through charges. The FAR rule language is duplicative of the interim DFARS rule language implementing section 852.

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

B. Regulatory Flexibility Act

This final rule removes interim rule DFARS language made obsolete by publication of FAR rule language on October 14, 2009. Therefore, the Regulatory Flexibility Act does not apply to this final rule because it does not constitute a significant DFARS revision within the meaning of 41 U.S.C. 418b and FAR 1.501, and publication for public comment was not required.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the rule does not impose additional 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 215, 231, and 252

Government procurement.

Ynette R. Shelkin,

Editor, Defense Acquisition Regulations System.

Therefore, 48 CFR parts 215, 231, and 252 are amended as follows:

1. The authority citation for 48 CFR parts 215, 231, and 252 continues to read as follows:

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

PART 215--CONTRACTING BY NEGOTIATION

215.408 [Amended]

2. Section 215.408 is amended by removing paragraphs (3) and (4).

PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES

231.201-2 [Removed]

3. Section 231.201-2 is removed.

231.203 [Removed]

4. Section 231.203 is removed.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

252.217-7003 [Removed and Reserved]

5. Section 252.217-7003 is removed and reserved.

252.217-7004 [Removed and Reserved]

6. Section 252.217-7004 is removed and reserved.

[FR Doc. 2010-19672 Filed 8-9-10; 8:45 am]

BILLING CODE 5001-08-P

FR Doc 2010-19674[Federal Register: August 10, 2010 (Volume 75, Number 153)]

[Rules and Regulations]

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

[DOCID:fr10au10-5]

DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 215, 217, and 243

[DFARS Case 2008-D034]

RIN 0750-AG27

Defense Federal Acquisition Regulation Supplement; Management of Unpriced Change Orders

AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: The Department of Defense (DoD) is adopting as final a proposed rule amending the DFARS to make requirements for DoD management and oversight of unpriced change orders consistent with those that apply to other undefinitized contract actions. This final rule adds new policy to address section 812 of the National Defense Authorization Act for Fiscal Year 2010.

DATES: Effective Date: August 10, 2010.

FOR FURTHER INFORMATION CONTACT: Ms. Meredith Murphy, Defense Acquisition Regulations System, OUSD (AT&L) DPAP/DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301-3060, Telephone 703-602-1302; facsimile 703-602-0350. Please cite DFARS Case 2008-D034.

SUPPLEMENTARY INFORMATION:

A. Background

The proposed rule addressed DFARS subpart 217.74, which prescribes policies and procedures for the management and oversight of undefinitized contract actions (UCAs). In the current DFARS, unpriced change orders that are issued in accordance with FAR part 43 and DFARS part 243 are excluded from the scope of subpart 217.74. A rule was proposed because of the need for full accountability and enhanced oversight of unpriced contractual actions, including unpriced change orders.

The proposed rule was published in the Federal Register at 74 FR 37669 on July 29, 2009. Two respondents submitted comments in response to the proposed rule. One respondent deemed this ``a new rule that is very much needed,'' while the other respondent requested that the proposed rule be withdrawn. To enhance transparency and accountability, DoD has determined to proceed with this rule. The comments submitted by the respondents are addressed in the following paragraphs.

Comment: Make a separate limitation on obligations applicable to small businesses.

One respondent addressed the percentage limitation on obligations prior to definitization, which the proposed rule, at DFARS 243.204-70-4(a), set at 50 percent. There is an exception in the proposed rule allowing an increase from 50 percent to 75 percent when a contractor submits a qualifying proposal before 50 percent of the not-to-exceed price has been obligated by the Government. The respondent recommended that the latter percentage be increased from 75 percent to 95 percent for small, small disadvantaged, and HUBZone businesses. In support of its position, the respondent cited frequent instances where it believed that a particular agency had requested multiple audits as a delaying tactic to avoid definitization. When definitization is delayed, the contractor can perform up to half of the work that has been required unilaterally by the Government without being reimbursed. According to the respondent, this burden would impact small and small disadvantaged businesses disproportionately, because they do not have the internal cash flow generally available to large businesses.

Response: This is an issue of faulty execution on the part of the agency cited, not a problem with the policy. Enabling an unpriced contract action to continue in an unpriced state up to 95 percent of the not-to-exceed price, would only place contractors at greater risk and give contracting officers even less incentive to definitize the action in a timely manner.

Comment: Limiting a contractor's profit for reduced risk doesn't consider that the contractor's risk is increased while a contract obligation is undefinitized.

The new section 243.204-70-6 (Allowable profit) requires the Government to consider ``(a) Any reduced cost risk to the contractor'' when a substantial portion of the required performance has been completed before the contract action is definitized. Both respondents objected to the regulation's assumption that a contractor's cost risk declines in this situation. One respondent stated that it would be grossly unfair for DoD to retain the uniquely Government right to issue unilateral change orders and then penalize contractors by decrementing allowable profit on incurred costs. The other respondent claimed that the contractor experiences increased, not decreased, cost risk during the period that the change order remains undefinitized.

Response: The respondents have not acknowledged that the Government also incurs increased cost risk during the period prior to definitization of the contract action. The intent of this coverage is to (1) increase transparency; (2) provide management oversight to prevent abuses in the definitization process; and (3) provide incentives for both the Government and contractors to definitize UCAs as quickly as reasonably possible. Therefore, this portion of the proposed rule will not be changed because doing so would reduce a big incentive to definitize an action in the minimum reasonable time. Further, the 50 percent and 75 percent limitations are established by statute (10 U.S.C. 2326(b)(3)), and DoD does not have authority to modify them.

Comment: Foreign military sales, special access programs, congressionally mandated long-lead procurement contracts, and purchases under the simplified acquisition threshold are exempted from the definition of undefinitized contract action (UCA).

One respondent cites 10 U.S.C. 2326 as exempting the above categories from the definition of UCA. Therefore, according to the respondent, DoD is prohibited from including these types of change orders in the UCA definition.

Response: The Congress recently took a different position on this issue. It is a matter of statutory construction that later-enacted laws take precedence over prior-enacted laws. This rule of statutory construction is particularly relevant here. In this case, section 812 of the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111-84), enacted October 28, 2009, requires DoD to extend the limitations on cost reimbursement and profit/fee to all categories of undefinitized contract actions.

This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

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 change is to internal Government operating procedures. The rule makes requirements for DoD management and oversight of unpriced change orders consistent with those that apply to other undefinitized contract actions.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the final 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 215, 217, and 243

Government procurement.

Ynette R. Shelkin,

Editor, Defense Acquisition Regulations System.

Therefore, 48 CFR parts 215, 217, and 243 are amended as follows:

1. The authority citation for 48 CFR parts 215, 217, and 243 continues to read as follows:

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

PART 215--CONTRACTING BY NEGOTIATION

215.404-71-3 [Amended]

2. Amend section 215.404-71-3 in the first sentence of paragraph (d)(2), by revising the parenthetical to read ``(also see 217.7404-6(a) and 243.204-70-6)''.

PART 217--SPECIAL CONTRACTING METHODS

3. Amend section 217.7401 in paragraph (d) by adding a third sentence to read as follows:

217.7401 Definitions.

* * * * *

(d) * * * For policy relating to definitization of change orders, see 243.204-70.

4. Revise section 217.7402 to read as follows:

217.7402 Exceptions.

(a) The following undefinitized contract actions (UCAs) are not subject to this subpart. However, the contracting officer shall apply the policy and procedures to them to the maximum extent practicable (also see paragraph (b) of this section):

(1) UCAs for foreign military sales;

(2) Purchases at or below the simplified acquisition threshold;

(3) Special access programs;

(4) Congressionally mandated long-lead procurement contracts.

(b) If the contracting officer determines that it is impracticable to adhere to the policy and procedures of this subpart for a particular contract action that falls within one of the categories in paragraph (a)(1), (3), or (4) of this section, the contracting officer shall provide prior notice, through agency channels, to the Deputy Director, Defense Procurement and Acquisition Policy (Contract Policy and International Contracting), 3060 Defense Pentagon, Washington, DC 20301-3060.

5. Amend section 217.7405 by adding paragraph (c) to read as follows:

217.7405 Plans and reports.

* * * * *

(c) Consolidated UCA Management Reports shall include information about all change orders that are not forward priced (i.e., unpriced) and have an estimated value exceeding $5 million.

6. Revise section 217.7406 to read as follows:

217.7406 Contract clauses.

(a) Use the clause at FAR 52.216-24, Limitation of Government Liability, in--

(1) All UCAs;

(2) Solicitations associated with UCAs;

(3) Basic ordering agreements;

(4) Indefinite-delivery contracts;

\

(5) Any other type of contract providing for the use of UCAs; and

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(6) Unpriced change orders with an estimated value exceeding $5 million.

(b)(1) Use the clause at 252.217-7027, Contract Definitization, in--

(i) All UCAs;

(ii) Solicitations associated with UCAs;

(iii) Basic ordering agreements;

(iv) Indefinite-delivery contracts;

(v) Any other type of contract providing for the use of UCAs; and

(vi) Unpriced change orders with an estimated value exceeding $5 million.

(2) Insert the applicable information in paragraphs (a), (b), and (d) of the clause.

(3) If, at the time of entering into the UCA or unpriced change order, the contracting officer knows that the definitive contract action will meet the criteria of FAR 15.403-1, 15.403-2, or 15.403-3 for not requiring submission of cost or pricing data, the words ``and cost or pricing data'' may be deleted from paragraph (a) of the clause.

PART 243--CONTRACT MODIFICATIONS

7. Revise section 243.204 to read as follows:

243.204 Administration.

Follow the procedures at PGI 243.204 for administration of change orders.

243.204-70 [Redesignated as 243.204-71]

8. Redesignate section 243.204-70 as section 243.204-71.

9. Add a new section 243.204-70 to read as follows:

243.204-70 Definitization of change orders.

243.204-70-1 Scope.

(a) This subsection applies to unpriced change orders with an estimated value exceeding $5 million.

(b) Unpriced change orders for foreign military sales and special access programs are not subject to this subsection, but the contracting officer shall apply the policy and procedures to them to the maximum extent practicable. If the contracting officer determines that it is impracticable to adhere to the policy and procedures of this subsection for an unpriced change order for a foreign military sale or a special access program, the contracting officer shall provide prior notice, through agency channels, to the Deputy Director, Defense Procurement and Acquisition Policy (Contract Policy and International Contracting), 3060 Defense Pentagon, Washington, DC 20301-3060.

243.204-70-2 Price ceiling.

Unpriced change orders shall include a not-to-exceed price.

243.204-70-3 Definitization schedule.

(a) Unpriced change orders shall contain definitization schedules that provide for definitization by the earlier of--

(1) The date that is 180 days after issuance of the change order (this date may be extended but may not exceed the date that is 180 days after the contractor submits a qualifying proposal); or

(2) The date on which the amount of funds obligated under the change order is equal to more than 50 percent of the not-to-exceed price.

(b) Submission of a qualifying proposal in accordance with the definitization schedule is a material element of the contract. If the contractor does not submit a timely qualifying proposal, the contacting officer may suspend or reduce progress payments under FAR 32.503-6, or take other appropriate action.

243.204-70-4 Limitations on obligations.

(a) The Government shall not obligate more than 50 percent of the not-to-exceed price before definitization. However, if a contractor submits a qualifying proposal before 50 percent of the not-to-exceed price has been obligated by the Government, the limitation on obligations before definitization may be increased to no more than 75 percent (see 232.102-70 for coverage on provisional delivery payments).

(b) Obligations should be consistent with the contractor's requirements for the undefinitized period.

243.204-70-5 Exceptions.

(a) The limitations in 243.204-70-2, 243.204-70-3, and 243.204-70-4 do not apply to unpriced change orders for the purchase of initial spares.

(b) The limitations in 243.204-70-4(a) do not apply to unpriced change orders for ship construction and ship repair.

(c) The head of the agency may waive the limitations in 243.204-70-2, 243.204-70-3, and 243.204-70-4 for unpriced change orders if the head of the agency determines that the waiver is necessary to support--

(1) A contingency operation; or

(2) A humanitarian or peacekeeping operation.

243.204-70-6 Allowable profit.

When the final price of an unpriced change order is negotiated after a substantial portion of the required performance has been completed, the head of the contracting activity shall ensure the profit allowed reflects--

(a) Any reduced cost risk to the contractor for costs incurred during contract performance before negotiation of the final price;

(b) The contractor's reduced cost risk for costs incurred during performance of the remainder of the contract; and

(c) The extent to which costs have been incurred prior to definitization of the contract action (see 215.404-71-3(d)(2)). The risk assessment shall be documented in the contract file.

243.204-70-7 Plans and reports.

To provide for enhanced management and oversight of unpriced change orders, departments and agencies shall--

(a) Include in the Consolidated Undefinitized Contract Action (UCA) Management Plan required by 217.7405, the actions planned and taken to ensure that unpriced change orders are definitized in accordance with this subsection; and

(b) Include in the Consolidated UCA Management Report required by 217.7405, each unpriced change order with an estimated value exceeding $5 million.

10. Add section 243.205-72 to read as follows:

243.205-72 Unpriced change orders.

See the clause prescriptions at 217.7406 for all unpriced change orders with an estimated value exceeding $5 million.

[FR Doc. 2010-19674 Filed 8-9-10; 8:45 am]

BILLING CODE 5001-08-P