Defense Federal Acquisition Regulation Supplement; Government Source Inspection Requirements, 8539-8543 [05-3202]

Agencies

• DEPARTMENT OF DEFENSE

[Federal Register Volume 70, Number 34 (Tuesday, February 22, 2005)]
[Rules and Regulations]
[Pages 8539-8543]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-3202]


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DEPARTMENT OF DEFENSE

48 CFR Part 246

[DFARS Case 2002-D032]


Defense Federal Acquisition Regulation Supplement; Government 
Source Inspection Requirements

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to eliminate requirements for 
Government contract quality assurance at source for contracts or 
delivery orders valued below $250,000, unless certain conditions exist.

DATES: Effective Date: February 22, 2005.

FOR FURTHER INFORMATION CONTACT: Ms. Michele Peterson, Defense 
Acquisition Regulations Council, OUSD (AT&L) DPAP (DAR), IMD 3C132, 
3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-
0311; facsimile (703) 602-0350. Please cite DFARS Case 2002-D032.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule adds policy at DFARS 246.402 and 246.404 to 
eliminate the requirement for Government contract quality assurance at 
source for contracts or delivery orders valued below $250,000, unless 
(1) mandated by DoD regulation, (2) required by a memorandum of 
agreement between the acquiring department or agency and the contract 
administration agency, or (3) the contracting officer determines that 
certain conditions exist.
    DoD published a proposed rule at 68 FR 53946 on September 15, 2003. 
Thirty-seven respondents submitted comments on the proposed rule. Nine 
of the respondents were in favor of the rule, noting that the change 
will result in savings, will expedite deliveries, and is especially 
appropriate for commercial items. A discussion of comments submitted by 
the other respondents is provided below:
    1. Comment: It is unclear as to why the criteria of both 
242.402(3)(i) and (ii) must be met. If the Government specifies 
important technical requirements (through technical documents, 
specifications, drawings, etc.), there is adequate justification for 
Government quality assurance at source. Paragraphs (3)(i) and (ii) 
should be combined to read ``(i) Contract technical requirements are 
significant (e.g., the technical requirements include drawings, test 
procedures, characteristics that are critical to proper performance of 
the item are identified, specific concerns have been identified with 
regard to the contractors ability to meet technical requirements, 
etc)''.
    DoD Response: Do not agree with the proposed revision. However, 
246.402(3)(ii) has been revised in the final rule for clarity.
    2. Comment: Section 246.402(3)(iii), addressing manufacturers/
producers and non-manufacturers/non-producers, should be eliminated.
    DoD Response: Do not agree. The delivery of supplies through a non-
manufacturer or non-producer affects the ability to perform meaningful 
quality assurance at sources. The rule is intended to ensure that 
contracting officers address this issue.
    3. Comment: Section 246.402(3)(iii) should be clarified to explain 
its meaning and how it will be defined to apply equally.
    DoD Response: Do not agree. The terms in paragraph (3)(iii), 
relating to manufacturers and producers, are sufficiently clear and do 
not require definition.
    4. Comment: One respondent posed a question regarding 
246.402(3)(ii) and asked about the interpretation of critical product 
features/characteristics and specific acquisition concerns at the 
contract administration office level.
    DoD Response: The final rule revises 246.402(3) to further clarify 
the requirement for the contracting officer to ensure that critical 
product features and characteristics are identified, either through 
contract technical requirements or through other communications with 
the provider of the Government contract quality assurance at source, 
and to identify specific concerns. The contract administration office 
should assist in this identification as appropriate, but is not 
expected to provide the information absent the contracting officer 
activities.
    5. Comment: To minimize confusion that will ensue regarding 
determinations for the need for source inspection, the phrase 
``critical product feature'' should be clarified.
    DoD Response: The final rule revises 246.402(3)(ii) for further 
clarification.
    6. Comment: The following subparagraphs should be added to 246.402 
as exceptions to the proposed rule: (3)(iv)--``The contract will 
require shipment of material OCONUS''; and (4)--``Contract is in 
support of a Security Assistance or Foreign Military Sales case.'' The 
comment details additional costs and export licenses associated with 
free on board (f.o.b.) destination conditions for OCONUS shipments and 
agreed-to letters of offer and acceptance between the U.S. Government 
and foreign governments.
    DoD Response: Do not agree with the recommended change. If the 
conditions for Government contract quality assurance at source are met, 
the additional requirements may be communicated by defining them as a 
specific acquisition concern.
    7. Comment: Section 246.402(3) should be revised to provide 
flexibility with regard to the first two criteria and to add a fourth 
criterion to allow for other circumstances determined by the 
contracting officer after consultation with quality assurance 
personnel.
    DoD Response: Do not agree. Neither an additional criterion nor 
changes to the existing criteria are needed. However, 246.402(3)(ii) 
has been revised for further clarity.
    8. Comment: The text at 246.402 provides differing criteria for 
Government contract quality assurance at source than that found at FAR 
46.404.
    DoD Response: Do not agree. FAR 46.404 directs the user to FAR 
46.402, which is supplemented by this DFARS change.
    9. Comment: DFARS 246.405 should be reinstated to ensure that 
subcontract activities parallel the proposed change.
    DoD Response: Do not agree. The provisions of FAR 46.405 adequately 
address required Government quality assurance activity at the 
subcontract level.
    10. Comment: FAR 52.213-4(d) and FAR 52.246-2 should not be used 
concurrently in the same contract.
    DoD Response: The comment is outside the scope of this case. 
However, it is noted that FAR 46.302 specifically allows for inclusion 
of the clause at FAR 52.246-2 in contracts below the simplified 
acquisition threshold when it is in the Government's best interest.
    11. Comment: The threshold of $250,000 could be twice that amount.
    DoD Response: DoD considers a threshold of $250,000 to be 
appropriate at this time.
    12. Comment: The dollar threshold should be eliminated on the basis 
that it is irrelevant and appears arbitrary in nature. Technical 
description, complexity, and criticality are the FAR 46.203 criteria 
for establishment of contract quality requirements.
    DoD Response: DoD recognizes that cost is not the indicator of 
requirements for Government contract quality assurance at source. 
Therefore, the

[[Page 8540]]

conditions for Government contract quality assurance at source as 
described in the rule are of primary importance. The establishment of a 
dollar threshold is a means for ensuring that contracting offices apply 
the conditions as a matter of course.
    13. Comment: The words ``and delivery orders'' should be deleted 
from the introductory sentence of 246.402 to support Air Force Material 
Command strategic contracts.
    DoD Response: Do not agree. Delivery orders under strategic 
contracts must meet the conditions described in the rule in order to 
receive Government contract quality assurance at source.
    14. Comment: The rule should explicitly address indefinite 
delivery/indefinite quantity contracts used through corporate contracts 
that may mix source and destination inspection/acceptance requirements 
on the same contract.
    DoD Response: Do not agree. The rule already addresses delivery 
orders. For delivery orders under $250,000, only contract line items 
that meet the conditions specified in the rule qualify for Government 
contract quality assurance at source.
    15. Comment: Contracting offices are not capable of providing 
critical characteristics.
    DoD Response: Do not agree. A basic responsibility of the 
contracting office, per FAR 46.103, is to provide technical 
requirements and any specifications for inspection, testing, and other 
contract quality requirements essential to ensure the integrity of the 
supplies or services.
    16. Comment: The contracting officer receives quality assurance 
requirements from the technical activity (FAR 46.103) and is not 
adequately trained to determine whether technical requirements are 
significant and to identify critical product features/characteristics.
    DoD Response: The technical activity provides quality assurance 
requirements to the contracting officer, including inspection and 
testing requirements, which are conveyed to the contractor and the 
contract administration activity by the contracting officer.
    17. Comment: DFARS 213.402, Conditions for Use of Fast Payment 
Procedures, should be changed to accommodate direct vendor delivery 
awards exceeding the $25,000 threshold for use of fast payment 
procedures, and awards that combine contract line items being shipped 
to stock not meeting the fast payment conditions, as well as direct 
vendor delivery contract line items that do; and to provide for 
instances when the best value is conditional on f.o.b. origin shipment 
terms. Additionally, conflict with FAR 47.305-5 and 47.304-1(d) may be 
resolved by amending DFARS 213.402 further by adding (a)(vi)--``When 
the sole reason for designating inspection and acceptance at source 
would be because f.o.b. origin is required in accordance with FAR 
47.305-5 and 47.304-1(d).''
    DoD Response: The recommended changes are outside the scope of this 
case.
    18. Comment: Instead of this new language, allow ``good'' 
contractors to deliver with limited Government contract quality 
assurance at source, since adequate tools are available to the 
Government quality assurance representative (i.e., alternative release 
procedures, certificates of conformance, and fast pay).
    DoD Response: Do not agree. The intent of the change is to 
alleviate Government contract quality assurance at source for those 
procurements that typically are limited to the assessments of kind, 
count, and condition. With the exception of certificates of 
conformance, the tools described in this comment do not alleviate 
quality assurance activities at source. The tools will remain available 
for use as appropriate.
    19. Comment: The change to 246.402 is too broad. It should be 
applied to commercial items and non-commercial items delivered via 
certificate of conformance.
    DoD Response: Do not agree. The scope of the rule is appropriate. 
The conditions for Government contract quality assurance at source as 
described are of primary importance.
    20. Comment: Contractors approved for alternative release 
procedures should be allowed to continue to conduct their own origin 
inspections and designate contracts to approved contractors for 
continued origin inspection.
    DoD Response: Do not agree. The comment expresses a misapplication 
of the alternative release provision as defined by DFARS 246.471(b).
    21. Comment: Language should be added to provide for Government 
contract quality assurance at source due to adverse manufacturer past 
performance; significant changes to the supplier's quality assurance 
program, manufacturing environment, or supplier base; or the previous 
receipt of nonconforming material for same or similar items.
    DoD Response: The events described by the respondent may 
necessitate the requirement for Government contract quality assurance 
at source. Circumstances such as these are adequately covered by the 
provision for specific acquisition concerns at 246.402(3)(ii)(C).
    22. Comment: Instead of the dollar value, the clause should be 
designed to reduce Government contract quality assurance at source for 
ISO-certified suppliers.
    DoD Response: Do not agree. Currently, DoD does not require 
certification to international standards as a contract condition, 
opting to require compliance with associated contract quality 
requirements. Although ISO certification/compliance is a risk 
management tool considered while performing Government contract quality 
assurance, the comment is not supported by current acquisition 
regulations and policies.
    23. Comment: The change ignores the relationship with the f.o.b. 
point.
    DoD Response: Do not agree. The rule affects the f.o.b. point as 
specified by FAR 47.302(c)(2). However, there is no conflict. The 
provisions of FAR 47.302 state that the place of performance of 
Government acquisition quality assurance actions and the place of 
acceptance shall not control the delivery term, except when acceptance 
is at destination.
    24. Comment: Contracts will need to be modified to account for 
additional cost burden associated with the f.o.b. point based on the 
change, per FAR 47.302. Additional costs will be incurred through 
contractor liability for delivery, storage, demurrage, and other costs 
prior to actual delivery; duplicate packaging and marking by the 
contractor and the Government; and liability for loss/damage before 
shipment receipt.
    DoD Response: Do not agree. The rule affects the f.o.b. point as 
specified by FAR Part 47 and, as such, will require contractors to 
consider those costs when proposing on future contracts. However, 
current contracts will not require modification, because this change is 
not retroactive.
    25. Comment: The f.o.b. points for both solicitations and contracts 
(FAR 47.305-5(a)(1) and 47.302(c)(1)) conflict with the rule, 
particularly when shipping to foreign military sales customers and 
Naval vessels.
    DoD Response: Do not agree. The rule affects the f.o.b. point as 
specified by FAR 47.302(c)(2); however, there is no conflict. The 
provisions of FAR 47.302 state that the place of performance of 
Government acquisition quality assurance actions and the place of 
acceptance shall not control the delivery term, except when acceptance 
is at destination. Additionally, solicitation provisions are available 
to the contracting officer with regard to FAR

[[Page 8541]]

47.305-5(b)(2) when destinations are unknown that would not result in a 
conflict.
    26. Comment: The phrase ``for contracts assigned administration to 
the Defense Contract Management Agency'' should be added to allow for 
the conduct of Government contract quality assurance at source when 
conditions are not met by the contracting agency.
    DoD Response: Do not agree. The initiative to reduce Government 
contract quality assurance at source unless appropriate conditions 
exist should not be applicable to only one DoD agency. The conditions 
described allow for effective Government contract quality assurance at 
source for all involved in DoD acquisition and make the best use of 
resources throughout DoD.
    27. Comment: The rule should exempt contractor plants with in-plant 
Defense Contract Management Agency offices. It is not cost-effective to 
have hardware delivered, subjected to process assessment at the plant 
level, then inspected at another location. If non-exempt, assure that 
the rule is only applied to future contracts.
    DoD Response: The rule will result in Government contract quality 
assurance at source for only those supplies that meet the conditions of 
the rule. The rule is not retroactive to include current contracts.
    28. Comment: The Government quality assurance representative 
provides assistance in interpreting contract requirements and 
facilitates corrections.
    DoD Response: Agree. The revision does not preclude Government 
quality assurance representatives from providing assistance to 
contractors in support of Government contract interpretation as 
appropriate and facilitating corrections with the contracting office.
    29. Comment: The Government quality assurance representative 
provides deterrence with regard to fraudulent activities.
    DoD Response: Not applicable. Government contract quality assurance 
is not intended to detect fraudulent activities. It is incumbent upon 
all involved in Government acquisition to identify and report any 
potentially fraudulent activities.
    30. Comment: The Government quality assurance representative at 
source rejects nonconforming parts based on more than defined critical 
characteristics.
    DoD Response: Agree. The revision does not preclude the rejection 
of nonconforming parts based solely on critical characteristics at 
destination or, when the conditions of the proposed change exist, at 
source.
    31. Comment: The rule should address instances where no Government 
inspection is required, especially when in-process system activities 
are performed.
    DoD Response: Do not agree. Government contract quality assurance 
activities, whether at source or destination, are required to perform 
the Government acceptance function and subsequent transfer of title. 
In-process assessments are a form of Government contract quality 
assurance at source. At times, the quality assurance activities may be 
extremely limited, such as when quality assurance is limited to kind, 
count, and condition assessments (inspections); however, they 
nonetheless occur.
    32. Comment: DoD should implement fast payment procedures for all 
contracts that require inspection at Government facilities.
    DoD Response: Not applicable. Conditions for use of fast payment 
procedures are outside the scope of this case.
    33. Comment: Recommend acceptance at source with inspection at 
destination, which will increase the fast payment procedure threshold 
and the expanded use of certificates of conformance to allow invoicing 
at shipment.
    DoD Response: Do not agree. DoD regulations and policy do not allow 
for acceptance prior to Government contract quality assurance 
activities. Fast payment provisions are outside the scope of this case. 
The conditions for use of certificates of conformance are not being 
modified, and the certificate of conformance continues to be a valuable 
acquisition tool.
    34. Comment: DoD should implement a joint contractor-Government 
process approach to the appropriate oversight level, with sampling 
techniques or self-oversight.
    DoD Response: Do not agree. Presently, Government contract quality 
assurance at source activities may be performed jointly with the 
contractor. The rule does not affect this activity.
    35. Comment: Will surplus contracts continue to be administered by 
the Defense Contract Management Agency?
    DoD Response: The comment is outside the scope of this case. 
Assignment of contract administration by the contracting activity is in 
accordance with FAR Part 42 and DFARS Part 242. Contract administration 
represents more than quality assurance services and is dependent on the 
terms of the individual contract.
    36. Comment: Will surplus contractors be required to re-package and 
re-label items prior to shipping? If so, how will DoD ensure 
traceability back to the original DoD contract and conformance to the 
surplus certification?
    DoD Response: Not applicable. Packaging and traceability 
requirements specified by individual contracts are outside the scope of 
this case.
    37. Comment: The rule should be amended to clearly state that it 
does not impose or otherwise change the inspection criteria currently 
adhered to by surplus contractors via 52.211-9000, Government Surplus 
Material DLAD (APR 2002).
    DoD Response: Do not agree. The DFARS applies to DoD as a whole. 
Unique department and agency implementation activities are outside the 
scope of the case.
    38. Comment: The memorandum of agreement provisions should be 
changed to allow negotiation at the contracting activity level instead 
of the department or agency.
    DoD Response: Do not agree. Departments and agencies may issue 
their own procedures to identify the appropriate authority for approval 
of a memorandum of agreement.
    39. Comment: Inspection locations should be specified in the 
solicitation.
    DoD Response: Not applicable. Terms of individual solicitations are 
outside the scope of this case. However, it is the obligation of the 
contracting officer to specify the terms and conditions that apply to a 
contract.
    40. Comment: The rule should be amended to require the Government 
to inspect material no later than 30 days following receipt and that 
payment be made no later than 60 days regardless of inspection 
occurrence.
    DoD Response: Not applicable. The comment relates to payment terms, 
which are outside the scope of this case.
    41. Comment: Provide the date when the new electronic payment 
system will be implemented.
    DoD Response: There is no new electronic payment system. However, 
if the respondent is referring to the new Wide Area WorkFlow-Receipt 
and Acceptance (WAWF-RA) system, it is available now and has already 
been widely deployed. Many DoD locations are already registered in 
WAWF-RA, and more are being continually added. However, because 
submission under a particular contract is dependent on the acceptance 
point designated for that contract being registered in WAWF-RA, 
availability may vary. If a company is unsure whether a particular DoD 
location is registered in WAWF-RA,

[[Page 8542]]

they should contact that activity to confirm WAWF-RA status.
    42. Comment: Implementation of the policy should be deferred until 
WAWF-RA is fully deployed by DoD; or the rule should be phased in to 
provide for destination acceptance for locations participating in WAWF-
RA to limit invoicing delays. Some companies would be adversely 
affected by delays in payment and the current cycle time (estimated as 
45 days for paper invoices and 37 electronically) could increase by 10 
days or more.
    DoD Response: Sufficient guidance is presently available to 
facilitate Government contract quality assurance at destination to 
include acceptance. Achieving department-wide implementation of WAWF-
RA, although anticipated to increase efficiencies, is not necessary to 
implement this rule.
    43. Comment: DoD should develop detailed metrics to accumulate real 
savings associated with the change.
    DoD Response: Do not agree. Development of metrics is outside the 
scope of this case.
    44. Comment: The rule should be based on unit costs instead of 
contract value.
    DoD Response: Do not agree. Cost is not the indicator of 
requirements for Government contract quality assurance at source. 
Therefore, the conditions for Government contract quality assurance at 
source as described in the rule are of primary importance.
    45. Comment: Discontinuing source inspections under $250,000 sends 
a clear signal that low risk equates to low value.
    DoD Response: Do not agree. This change does not signal a direct 
relationship between dollar value and risk, since it recognizes that 
Government contract quality assurance may be necessary and appropriate 
for items of any dollar value. The established criteria for 
accomplishment of Government contract quality assurance at source are 
intended to drive the decision.
    46. Comment: One respondent remarked that it will not bid on 
contracts with inspection/acceptance at destination, due to the 
criticality of obtaining acceptance documentation to permit invoicing 
and the difficulty of obtaining this documentation when acceptance is 
at destination.
    DoD Response: Sufficient guidance is currently available to 
facilitate Government contract quality assurance at destination to 
include acceptance. Full operational capability of Wide Area WorkFlow-
Receipt and Acceptance is expected to increase efficiencies, but is not 
necessary to implement this rule.
    47. Comment: The change will result in the delivery of 
nonconforming material and increase the administrative burden of buying 
activities.
    DoD Response: Do not agree. There is no evidence to support this 
assertion. Contractual obligations to provide conforming material are 
not lessened by this change. Contracting offices are obligated to 
ensure that contractors are responsive and responsible prior to 
contracting for supplies.
    48. Comment: The change increases the burden on the destination 
point without the required manpower, expertise, or equipment to perform 
destination inspection and acceptance.
    DoD Response: Do not agree. The destination quality assurance 
activities anticipated as a result of this revision should consist of 
the assessment of item kind, count, and physical condition. Destination 
activities normally assess kind, count, and condition of items 
delivered to them, even when this assessment has already been performed 
at source. If the exceptions described in the DFARS rule exist, 
Government contract quality assurance at source should be designated.
    49. Comment: Inspection at source decreases instances of improper 
completion of DD Forms 250.
    DoD Response: Do not agree. The Government quality assurance 
representative provides valuable assistance in these matters; however, 
accurate completion of DD Form 250 is the obligation of the contractor, 
in accordance with DFARS Appendix F. There is no evidence to indicate 
that instances of improper completion will increase as a result of this 
change.
    50. Comment: The integrity of higher-level packaging will be 
destroyed at destination inspection.
    DoD Response: Contracting offices will need to assess the effect 
regarding the integrity of higher-level packaging when determining 
where Government contract quality assurance will be performed and will 
need to adjust contract terms accordingly. If the packaging is unique 
to a supplier, or if the integrity of the packaging would be in 
question, this may constitute a specific acquisition concern that would 
meet the exception in the rule at 246.402(3)(ii)(C).
    51. Comment: The change will result in the closure of Defense 
Contract Management Agency offices, thus reducing activities associated 
with subcontractor surveillance.
    DoD Response: Do not agree. There is no evidence to support the 
assertion that this change will result in the closure of Defense 
Contract Management Agency offices or adversely impact abilities 
associated with the surveillance of subcontractor activities.
    52. Comment: The change will result in increased costs to the 
Government receipt point.
    DoD Response: Do not agree. Overall DoD costs will be reduced, 
because duplicate ``kind, count, and condition'' inspections will be 
eliminated. The only additional responsibilities imposed on destination 
activities are those associated with the execution and distribution of 
the DD Form 250. DoD deployment of Wide Area WorkFlow-Receipt and 
Acceptance should greatly relieve this burden.
    53. Comment: Delays in inspection will delay delivery to the 
military user.
    DoD Response: Do not agree. There is no evidence to support the 
assertion.
    54. Comment: Defense Contract (Criminal) Investigative Services 
should be solicited to review small-dollar contractors under 
investigation for fraudulent activities.
    DoD Response: The comment is outside the scope of this case.
    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 has prepared a final regulatory flexibility analysis consistent 
with 5 U.S.C. 604. The analysis is summarized below. A copy of the 
analysis may be obtained from the point of contact specified herein.
    This final rule amends the DFARS to eliminate requirements for 
Government contract quality assurance at source for contracts or 
delivery orders valued below $250,000 unless: (1) Mandated by DoD 
regulation; (2) required by a memorandum of agreement between the 
acquiring department or agency and the contract administration agency; 
or (3) the contracting officer determines that certain conditions exist 
that make contract quality assurance at source necessary. The objective 
of the rule is to reduce lower-risk contract quality assurance 
workload, allowing for redirection of limited labor resources to 
higher-risk work, while providing flexibility for exceptions where 
special attention is needed. Several respondents expressed concern 
about delays in payment that might be experienced due to the reduction 
in the number of source inspections. DoD implementation of Wide Area 
WorkFlow-Receipt and Acceptance, a web-based system for electronic 
invoicing, receipt, and acceptance, will significantly speed up

[[Page 8543]]

the acceptance and payment process and should offset any delays due to 
reductions in source inspections. Many DoD locations are already 
registered in Wide Area WorkFlow-Receipt and Acceptance, and more are 
being continually added. Since Wide Area WorkFlow-Receipt and 
Acceptance is well on the way toward full implementation, DoD believes 
that any economic impact on small entities will be minimal.

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 246

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

0
Therefore, 48 CFR Part 246 is amended as follows:
0
1. The authority citation for 48 CFR Part 246 continues to read as 
follows:

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

PART 246--QUALITY ASSURANCE

0
2. Section 246.402 is added to read as follows:


246.402  Government contract quality assurance at source.

    Do not require Government contract quality assurance at source for 
contracts or delivery orders valued below $250,000, unless--
    (1) Mandated by DoD regulation;
    (2) Required by a memorandum of agreement between the acquiring 
department or agency and the contract administration agency; or
    (3) The contracting officer determines that--
    (i) Contract technical requirements are significant (e.g., the 
technical requirements include drawings, test procedures, or 
performance requirements);
    (ii) The product being acquired--
    (A) Has critical characteristics;
    (B) Has specific features identified that make Government contract 
quality assurance at source necessary; or
    (C) Has specific acquisition concerns identified that make 
Government contract quality assurance at source necessary; and
    (iii) The contract is being awarded to--
    (A) A manufacturer or producer; or
    (B) A non-manufacturer or non-producer and specific Government 
verifications have been identified as necessary and feasible to 
perform.

0
3. Section 246.404 is added to read as follows:


246.404   Government contract quality assurance for acquisitions at or 
below the simplified acquisition threshold.

    Do not require Government contract quality assurance at source for 
contracts or delivery orders valued at or below the simplified 
acquisition threshold unless the criteria at 246.402 have been met.
[FR Doc. 05-3202 Filed 2-18-05; 8:45 am]
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