[Federal Register Volume 62, Number 245 (Monday, December 22, 1997)]
[Rules and Regulations]
[Pages 66826-66828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33221]
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DEPARTMENT OF DEFENSE
Department of the Navy
48 CFR Part 5231
Department of the Navy Acquisition Regulations; Shipbuilding
Capability Preservation Agreements
AGENCY: Department of the Navy, DoD
ACTION: Interim rule with request for comments.
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SUMMARY: The Deputy for Acquisition and Business Management, Office of
the Assistant Secretary of the Navy (Research, Development and
Acquisition), has issued an interim rule amending the Navy Acquisition
Regulations to permit the Department of the Navy (DoN) to enter into a
shipbuilding capability preservation agreement with a shipbuilder where
it would facilitate the achievement of the policy objectives set forth
in section 2501(b) of title 10, United States Code.
DATES: Effective Date: December 22, 1997.
Comment date: Comments on the interim rule should be submitted in
writing to the address shown below on or before February 20, 1998, in
order to be considered in formulation of the final rule.
ADDRESSES: Interested parties should submit written comments to
Department of the Navy, Office of the Assistant Secretary of the Navy,
Acquisition and Business Management, Attn: Mr. Clarence Belton, ABM-
P&R, 2211 South
[[Page 66827]]
Clark Place, Arlington, VA 22244-5104. Telefax number (703) 602-2117.
Please cite ``Shipbuilding Capability Preservation Agreements'' in all
correspondence related to this issue.
FOR FURTHER INFORMATION CONTACT: Mr. Clarence Belton, (703) 602-2807.
SUPPLEMENTARY INFORMATION:
A. Background
This interim rule adds part 5231 to the Department of the Navy
Acquisition Regulations (48 CFR Chapter 52), to implement section 1027
of the National Defense Authorization Act for Fiscal Year 1998 (Pub. L.
105-85). Section 1027 permits the DoN to enter into a shipbuilding
capability preservation agreement with a shipbuilder where it would
facilitate the achievement of the policy objectives set forth in 10
U.S.C. 2501(b). Such an agreement would permit the contractor to claim
certain indirect costs, attributable to its private sector work, on its
Navy shipbuilding contracts.
B. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of the Navy that urgent and compelling reasons exist to promulgate this
interim rule without prior opportunity for public comment. This rule
implements section 1027 of the National Defense Authorization Act for
Fiscal Year 1998 (Pub. L. 105-85), which became effective upon
enactment on November 18, 1997. Congress specifically directed DoN to
establish application procedures and procedures for expeditious
consideration of shipbuilding capability preservation agreements within
30 days of enactment and to submit a report on applications for such
agreements to Congress not later than February 15, 1998. Given these
statutory-imposed deadlines, opportunity for public comment prior to
promulgation of this rule is not possible. However, comments received
in response to the publication of this interim rule will be considered
in formulating the final rule.
C. Regulatory Flexibility Act
The interim 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., because most
contracts awarded to small entities are awarded on a competitive fixed-
price basis and do not require application of the cost principle
contained in this rule. An initial regulatory flexibility analysis has
therefore not been performed. Comments are invited from small
businesses and other interested parties. Comments from small entities
concerning the affected Navy Acquisition Regulations subpart will also
be considered in accordance with 5 U.S.C. 610. Such comments must be
submitted separately and should cite 5 U.S.C. 601, et seq.
(Shipbuilding Capability Preservation Agreement), in correspondence.
D. Paperwork Reduction Act
It is anticipated that collection of information requirements will
not be imposed on ten or more persons within any 12-month period.
Therefore, this rule contains no information collection requirements
that require the approval of the Office of Management and Budget under
44 U.S.C. 3501, et seq., and 5 CFR part 1320.
List of Subjects in 48 CFR Part 5231
Government procurement.
For the reasons set forth in the preamble, add 48 CFR part 5231 to
read as follows:
PART 5231--CONTRACT COST PRINCIPLES AND PROCEDURES
Subpart 5231.2--Contracts with Commercial Organizations
Sec.
5231.205 Selected costs.
5231.205-90 Shipbuilding capability preservation agreements.
Authority: 5 U.S.C. 301, 10 U.S.C. 2501, 10 U.S.C. 7315, DoD
Directive 5000.35.
Subpart 5231.2--Contracts With Commercial Organizations
Sec. 5231.205 Selected costs.
Sec. 5231.205-90 Shipbuilding capability preservation agreements.
(a) Scope and authority. Where it would facilitate the achievement
of the policy objectives set forth in 10 U.S.C. 2501(b), the Navy may
enter into a shipbuilding capability preservation agreement with a
contractor. As authorized by section 1027 of the National Defense
Authorization Act for Fiscal Year 1998 (Public Law 105-85), such an
agreement permits the contractor to claim certain indirect costs
attributable to its private sector work as allowable costs on Navy
shipbuilding contracts.
(b) Definition. Incremental indirect cost, as used in this
subsection, means an additional indirect cost that results from
performing private sector work described in a shipbuilding capability
preservation agreement.
(c) Purpose and guidelines. The purpose of a shipbuilding
capability preservation agreement is to broaden and strengthen the
shipbuilding industrial base by providing an incentive for a
shipbuilder to obtain new private sector work, thereby reducing the
Navy's cost of doing business. The Navy will use the following
guidelines to evaluate requests for shipbuilding capability
preservation agreements:
(1) The Assistant Secretary of the Navy for Research, Development
and Acquisition must make a determination that an agreement would
facilitate the achievement of the policy objectives set forth in 10
U.S.C. 2501(b). The primary consideration in making this determination
is whether an agreement would promote future growth in the amount of
private sector work that a shipbuilder is able to obtain.
(2) An agreement generally will be considered only for a
shipbuilder with little or no private sector work.
(3) The agreement shall apply to prospective private sector work
only, and shall not extend beyond 5 years.
(4) The agreement must project an overall benefit to the Navy,
including net savings. This would be achieved by demonstrating that
private sector work will absorb costs that otherwise would be absorbed
by the Navy.
(d) Cost-reimbursement rules. If the Navy enters into a
shipbuilding capability preservation agreement with a contractor, the
following cost-reimbursement rules apply:
(1) The agreement shall require the contractor to allocate the
following costs to private sector work:
(i) The direct costs attributable to the private sector work;
(ii) The incremental indirect costs attributable to the private
sector work; and
(iii) The non-incremental indirect costs to the extent that the
revenue attributable to the private sector work exceeds the sum of the
costs specified in paragraphs (d)(1)(i) and (d)(1)(ii) of this
subsection.
(2) The agreement shall require that the sum of the costs specified
in paragraphs (d)(1)(ii) and (d)(1)(iii) of this subsection not exceed
the amount of indirect costs that would have been allocated to the
private sector work in accordance with the contractor's established
accounting practices.
(3) The Navy may agree to modify the amount calculated in
accordance with paragraph (d)(1) of this subsection if it determines
that a modification is appropriate to the particular situation. In so
doing, the Navy may agree to the allocation of a smaller or larger
portion of the amount calculated in accordance
[[Page 66828]]
with paragraph (d)(1) of this subsection, to private sector work.
(i) Any smaller amount shall not be less than the sum of the costs
specified in paragraphs (d)(1)(i) and (d)(1)(ii) of this subsection.
(ii) Any larger amount shall not exceed the sum of the costs
specified in paragraph (d)(1)(i) of this subsection and the amount of
indirect costs that would have been allocated to the private sector
work in accordance with the contractor's established accounting
practices.
(iii) In determining whether such a modification is appropriate,
the Navy will consider factors such as the impact of pre-existing firm-
fixed-price Navy contracts on the amount of costs that would be
reimbursed by the Navy, the impact of pre-existing private sector work
on the cost benefit that would be received by the contractor, and the
extent to which allocating a smaller or larger portion of costs to
private sector work would provide a sufficient incentive for the
contractor to obtain additional private sector work.
(e) Procedure. A contractor may submit a request for a shipbuilding
capability preservation agreement, together with appropriate
justification, through the Deputy Assistant Secretary of the Navy for
Ships, to the Assistant Secretary of the Navy for Research, Development
and Acquisition, who has approval or disapproval authority. The
contractor should also provide an informational copy of any such
request to the cognizant administrative contracting officer.
Dated: December 16, 1997.
Michael I. Quinn,
Lieutenant Commander, Judge Advocate General's Corps, U.S. Navy,
Alternate Federal Register Officer.
[FR Doc. 97-33221 Filed 12-19-97; 8:45 am]
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