E7-23654. Defense Federal Acquisition Regulation Supplement; Allowability of Costs To Lease Government Equipment for Display or Demonstration (DFARS Case 2007-D004)

AGENCY:

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

ACTION:

Proposed rule with request for comments.

SUMMARY:

DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to address limitations on the allowability of contractor costs associated with the leasing of Government equipment for display or demonstration. The proposed rule specifies that monies paid to the Government for the leasing of Government equipment are unallowable, except in the case of foreign military sales contracts.

DATES:

Comments on the proposed rule should be submitted in writing to the address shown below on or before February 5, 2008, to be considered in the formation of the final rule.

ADDRESSES:

You may submit comments, identified by DFARS Case 2007-D004, using any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
• E-mail: [e-mail]. Include DFARS Case 2007-D004 in the subject line of the message.
• Fax: [phone].
• Mail: Defense Acquisition Regulations System, Attn: Mr. John McPherson, OUSD (AT&L) DPAP (CPF), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062.
• Hand Delivery/Courier: Defense Acquisition Regulations System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402.

Comments received generally will be posted without change to http://www.regulations.gov,, including any personal information provided.

FOR FURTHER INFORMATION CONTACT:

Mr. John McPherson, 703-602-0296.

SUPPLEMENTARY INFORMATION:

A. Background

DoD Directive 7230.8, Leases and Demonstrations of DoD Equipment, contains policy on the leasing of DoD equipment to defense contractors for demonstration to foreign governments or for display or demonstration at international trade shows and exhibitions. In addition to the leasing of equipment, contractors may obtain related support services from DoD. The Directive provides that the contractor leasing the equipment may not recover the DoD charges associated with the lease, directly or indirectly through any U.S. Government contract, except to the extent chargeable to contracts for foreign military sales. For consistency with the policy in DoD Directive 7230.8, this proposed rule adds DFARS text to address the limitations on the allowability of costs associated with the leasing of Government equipment.

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 is consistent with existing DoD policy, and applies only in those situations where a contractor chooses to lease military equipment for display or demonstration purposes. 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 subparts in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2007-D004.

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 Parts 225 and 231

• Government procurement

Michele P. Peterson,

Editor, Defense Acquisition Regulations System.

Therefore, DoD proposes to amend 48 CFR parts 225 and 231 as follows:

1. The authority citation for 48 CFR parts 225 and 231 continues to read as follows:

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

PART 225—FOREIGN ACQUISITION

2. Section 225.7303-2 is amended by revising paragraph (b) and adding paragraph (e) to read as follows:

225.7303-2

Cost of doing business with a foreign government or an international organization.

* * * * *

(b) Costs not allowable under FAR Part 31 are not allowable in pricing FMS contracts, except as noted in paragraphs (c) and (e) of this subsection.

* * * * *

(e) The limitations on allowability of costs associated with leasing Government equipment, in 231.205-1, do not apply to FMS contracts.

PART 231—CONTRACT COST PRINCIPLES AND PROCEDURES

3. Section 231.205-1 is added to read as follows:

231.205-1

Public relations and advertising costs.

(e) See 225.7303-2(e) for allowability provisions affecting foreign military sales contracts.

(f) Unallowable public relations and advertising costs also include monies paid to the Government associated with the leasing of Government equipment, including lease payments and reimbursement for support services, except for foreign military sales contracts as provided for at 225.7303-2.