[Federal Register Volume 62, Number 161 (Wednesday, August 20, 1997)]
[Proposed Rules]
[Pages 44248-44249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21892]
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DEPARTMENT OF DEFENSE
48 CFR Part 231
[DFARS Case 96-D303]
Defense Federal Acquisition Regulation Supplement; Cost
Reimbursement Rules for Indirect Costs--Private Sector
AGENCY: Department of Defense (DoD).
ACTION: Proposed rule with request for comments.
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SUMMARY: The Director of Defense Procurement is proposing to amend the
Defense Federal Acquisition Regulation Supplement (DFARS) to provide
additional guidance on defense capability preservation agreements.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before October 20, 1997, to be considered
in the formulation of the final rule.
ADDRESSES: Interested parties should submit written comments to:
Defense Acquisition Regulations Council, Attn: Ms. Sandra G. Haberlin,
PDUSD (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC
20301-3062. Telefax number (703) 602-0350. Please cite DFARS Case 96-
D303 in all correspondence related to this issue.
FOR FURTHER INFORMATION CONTACT:
Ms. Sandra G. Haberlin, (703) 602-0131.
SUPPLEMENTARY INFORMATION:
A. Background
Section 808 of the National Defense Authorization Act for Fiscal
Year 1996 (Public Law 104-106) permits DoD to enter into a defense
capability preservation agreement with a defense contractor 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 defense contracts. To implement Section 808, an interim rule was
published in the Federal Register on May 13, 1996 (61 FR 21973), that
added DFARS subsection 231.205-71, Defense capability preservation
agreements.
This proposed rule revises subsection 231.205-71 to add additional
guidance for evaluating requests for defense capability preservation
agreements, and to add cost reimbursement rules to apply if DoD enters
into such an agreement with a contractor. Specifically, this rule
differs from the interim rule by (1) redesignating paragraph (b) as
paragraph (e); (2) adding paragraphs (b) Definition, (c) Purpose and
guidelines, and (d) Cost-reimbursement rules; and (3) making editorial
changes. Due to the differences between the two rules, a proposed rule
is being promulgated to obtain further public comment prior to
finalizing the rule.
Public comments on the interim rule were received from three
sources. All comments were considered in the development of this
proposed rule.
B. Regulatory Flexibility Act
This 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., 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.
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 DFARS subpart also will be considered in accordance with 5
U.S.C. 610. Such comments should be submitted separately and should
cite DFARS Case 96-D303 in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. 3501, et seq.) applies
because the proposed rule contains information collection requirements.
The Office of Management and Budget (OMB) has approved an information
collection concerning defense capability preservation agreements
through July 31, 1999, under OMB Control Number 0704-0387, based on the
requirements in the interim rule. However, the actual number of
respondents requesting defense capability preservation agreements since
publication of the interim rule on May 13, 1996, is lower than
previously estimated. Accordingly, the estimate of the annual number of
respondents is decreased from 50 to 10, and the estimated annual
information collection burden is decreased from 4000 to 800 hours.
List of Subjects in 48 CFR Part 231
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, it is proposed that 48 CFR Part 231 be 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 231.205-71 is revised to read as follows:
231.205-71 Defense 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), DoD may enter
into a defense capability preservation agreement with a contractor. As
authorized by Section 808 of the National Defense Authorization Act for
Fiscal Year 1996 (Public Law 104-106), such an agreement would permit
the contractor to claim certain indirect costs attributable to its
private sector work as allowable costs on its defense 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 defense capability
preservation agreement.
(c) Purpose and guidelines. The purpose of a defense capability
preservation agreement is to broaden and strengthen the industrial base
by providing an incentive for a company to obtain new private sector
work, thereby reducing DoD's cost of doing business.
[[Page 44249]]
DoD will use the following guidelines to evaluate requests for defense
capability preservation agreements:
(1) the Under Secretary of Defense for Acquisition and Technology
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 company is able to obtain.
(2) An agreement generally will be considered only for a company or
business segment 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 DoD, including
net savings. This would be achieved by demonstrating that private
sector work will absorb costs that otherwise would be absorbed by DoD.
(d) Cost-reimbursement rules. If DoD enters into a defense
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) DoD 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,
DoD may agree to the allocation of a smaller or larger portion of the
amount calculated in accordance 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,
DoD will consider factors such as the impact of pre-existing firm-
fixed-price DoD contracts on the amount of costs that would be
reimbursed by DoD, 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 defense
capability preservation agreement, together with appropriate
justification, through the Deputy Under Secretary of Defense for
Industrial Affairs and Installations, to the Under Secretary of Defense
for Acquisition and Technology, who has exclusive approval or
disapproval authority. The contractor should also provide an
informational copy of any such request to the cognizant administrative
contracting officer.
[FR Doc. 97-21892 Filed 8-19-97; 8:45 am]
BILLING CODE 5000-04-M
