99-9559. Defense Federal Acquisition Regulation Supplement; Restructuring Savings Repricing Clause

[Federal Register Volume 64, Number 73 (Friday, April 16, 1999)]
[Rules and Regulations]
[Pages 18827-18828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9559]


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DEPARTMENT OF DEFENSE

48 CFR Part 231

[DFARS Case 98-D019]


Defense Federal Acquisition Regulation Supplement; Restructuring 
Savings Repricing Clause

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: The Director of Defense Procurement has issued a final rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to specify that contracting officers should consider using a repricing 
clause in noncompetitive fixed-price contracts that are negotiated 
during the period between the time a business combination is announced 
and

[[Page 18828]]

the time the contractor's forward pricing rates are adjusted to reflect 
the impact of restructuring.

EFFECTIVE DATE: April 16, 1999.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra Haberlin, Defense 
Acquisition Regulations Council, PDUSD (A&T) DP (DAR), IMD 3D139, 3062 
Defense Pentagon, Washington, DC 20301-3062. Telephone [phone]; 
telefax [phone]. Please cite DFARS Case 98-D019.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule amends DFARS 231.205-70, External restructuring 
costs, to specify that contracting officers should consider including a 
downward-only repricing clause in noncompetitive fixed-price contracts 
that are negotiated during the period between the time a business 
combination is announced and the time the contractor's forward pricing 
rates are adjusted to reflect the impact of restructuring.
    Since the late 1980's, defense contractors have been restructuring 
their business operations to increase efficiencies and become more 
competitive in the defense marketplace. Many of the restructuring 
activities result from business combinations (such as mergers or 
acquisitions) and often lead to reduced overall costs and future 
savings. The repricing clause should ensure that DoD receives its 
appropriate share of restructuring savings.
    A proposed DFARS rule was published in the Federal Register on 
November 30, 1998 (63 FR 65727). Nine sources submitted comments in 
response to the proposed rule. All comments were considered in the 
development of the final rule.

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 most contracts awarded to small entities use simplified 
acquisition procedures or are awarded on a competitive fixed-price 
basis, and do not require application of the cost principle contained 
in this rule.

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 Part 231

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

    Therefore, 48 CFR Part 231 is amended as follows:
    1. The authority citation for 48 CFR Part 231 continues to read as 
follows:

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

PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES

    2. Section 231.205-70 is amended by adding paragraph (f) to read as 
follows:


Sec. 231.205-70  External restructuring costs.

* * * * *
    (f) Contracting officer responsibilities. (1) The contracting 
officer, in consultation with the cognizant ACO, should consider 
including a repricing clause in noncompetitive fixed-price contracts 
that are negotiated during the period between--
    (i) The time a business combination is announced; and
    (ii) The time the contractor's forward pricing rates are adjusted 
to reflect the impact of restructuring.
    (2) The decision to use a repricing clause will depend upon the 
particular circumstances involved, including--
    (i) When the restructuring will take place;
    (ii) When restructuring savings will begin to be realized;
    (iii) The contract performance period;
    (iv) Whether the contracting parties are able to make a reasonable 
estimate of the impact of restructuring on the contract; and
    (v) The size of the potential dollar impact of restructuring on the 
contract.
    (3) If the contracting officer decides to use a repricing clause, 
the clause must provide for a downward-only price adjustment to ensure 
that DoD receives its appropriate share of restructuring net savings.

[FR Doc. 99-9559 Filed 4-15-99; 8:45 am]
BILLING CODE 5000-04-M