95-25343. Defense Federal Acquisition Regulation Supplement; Material Management and Accounting Systems (MMAS)

[Federal Register Volume 60, Number 199 (Monday, October 16, 1995)]
[Proposed Rules]
[Pages 53575-53576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25343]



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DEPARTMENT OF DEFENSE
48 CFR Parts 242 and 252


Defense Federal Acquisition Regulation Supplement; Material 
Management and Accounting Systems (MMAS)

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comment.

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SUMMARY: The Director of Defense Procurement is proposing to amend the 
Defense Federal Acquisition Regulation Supplement (DFARS) to raise MMAS 
disclosure, demonstration, and maintenance threshold requirements; 
clarify circumstances under which contractors will be subject to MMAS 
disclosure, demonstration, and maintenance; and clarify MMAS provisions 
regarding material transfer methodologies and approved loan/pay-back 
techniques.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before December 15, 1995, to be 
considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, Attn: Mr. R. G. Layser, PDUSD 
(A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-
3062. Telefax number [phone]. Please cite DFARS Case 95-D029 in 
all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT:
Mr. Rick Layser, Telephone [phone].

SUPPLEMENTARY INFORMATION:

A. Background

    The Secretary of Defense recently commissioned a study to assess 
the effect of DoD regulations on the defense industry, measure the 
impact of those regulations on defense industry costs, and identify key 
cost drivers and describe their impact on contractor business 
processes. The material management and accounting system (MMAS) 
standards were among the top ten cost drivers identified in the study 
report. A working group was formed to evaluate the related findings and 
determine what actions, if any, might be appropriate to reduce the MMAS 
cost premium. One MMAS finding pertained to dollar thresholds that 
determine when MMAS requirements apply to defense contractors, and to 
criteria that determine the degree of MMAS disclosure and demonstration 
required. The working group determined that MMAS thresholds appeared to 
be outdated due to inflation and that disclosure, demonstration, and 
maintenance criteria could be more objective. Another finding pertained 
to the language at DFARS 252.242-7004(f)(7) regarding a loan/pay-back 
technique for material transfers, which appeared susceptible to 
misinterpretation. This proposed rule implements the working group's 
recommendations pertaining to MMAS requirements.

B. Regulatory Flexibility Act

    The proposed rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. Although the 
proposed rule applies to small business under certain circumstances, 
only large businesses meeting certain dollar thresholds are required to 
demonstrate the degree to which their material management and 
accounting systems conform to the standards contained in the proposed 
rule. An Initial Regulatory Flexibility Analysis, therefore, has not 
been performed. Comments from small entities concerning the affected 
DFARS subparts will be considered in accordance with section 610 of the 
Act. Such comments must be submitted separately and cite DFARS Case 95-
D029 in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
rule does not impose recordkeeping or information collection 
requirements which 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 242 and 252

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

    Therefore, 48 CFR Parts 242 and 252 are proposed to be amended as 
follows:

PART 242--CONTRACT ADMINISTRATION

    1. The authority citation for Parts 242 and 252 continues to read 
as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
    2. Section 242.7202 is amended by revising paragraph (d) to read as 
follows:


242.7202  Policy.

 * * * * *
    (d) Conforms to the standards at 252.242-7004(f) when the 
contractor has cost-reimbursement of fixed-price contracts greater than 
the simplified acquisition threshold in FAR part 13 with progress of 
other contract financing provisions, except when all of the contracts 
and subcontracts are awarded under the set-aside or Section 8(a) 
procedures of FAR part 19.
    3. Section 242.7203 is revised to read as follows:


242.7203  MMAS disclosure, demonstration, and maintenance requirements.

    (a) A large business contractor is subject to MMAS disclosure, 
demonstration, and maintenance if in its preceding fiscal year the 
contractor received DoD prime contracts or subcontracts (including 
modifications) totaling--
    (1) $70 million or more; or
    (2) $30 million or more (but less than $70 million), and the 
contracting officer determines it to be in the best interests of the 
Government (e.g., contractor disclosure, demonstration, or other 
activities indicate significant MMAS problems exist).
    (b) After the administrative contracting officer determines the 
contractor's MMAS is adequate (see 242.7204(b)), written disclosure 
will not be required for the next MMAS review unless the contractor's 
policies, procedures, or practices have changed in the interim 
period(s). Similarly, once the contractor demonstrates that its MMAS 
contains no significant deficiencies, demonstration requirements for 
subsequent reviews may be satisfied if internal audits are reasonably 
current and contain sufficient transaction tests to demonstrate MMAS 
compliance with each standard.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    4. Section 252.242-7004 is amended by revising paragraphs (f)(7)(i) 
and (f)(7)(iii) introductory text to read as follows;

[[Page 53576]]



252.242-7004  Material management and accounting system.

 * * * * *
    (f) * * *
    (7) * * *
    (i) The Contractor shall maintain and disclose written policies 
describing the transfer methodology and the loan/pay-back technique.
    (ii) * * *
    (iii) The system should transfer parts and associated costs within 
the same billing period. In the few instances where this may not be 
appropriate, the Contractor may accomplish the material transaction 
using a loan/payback technique. The loan/pay-back technique means that 
the physical part is moved temporarily from the contract but the cost 
of the part remains on the contract. The procedures for the loan/pay-
back technique must be approved by the Administrative Contracting 
Officer. When the technique is used, the Contractor shall have controls 
to ensure--
 * * * * *
[FR Doc. 95-25343 Filed 10-13-95; 8:45 am]
BILLING CODE 5000-04-M