Defense Federal Acquisition Regulation Supplement; Levy on Payments to Contractors, 69489-69492 [E6-20394]
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Federal Register / Vol. 71, No. 231 / Friday, December 1, 2006 / Rules and Regulations
List of Subjects in 48 CFR Part 201
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Part 208
48 CFR Parts 212, 232, and 252
Defense Federal Acquisition
Regulation Supplement; Technical
Amendment
Therefore, 48 CFR part 201 is
amended as follows:
I
PART 201—FEDERAL ACQUISITION
REGULATIONS SYSTEM
Defense Acquisition
Regulations System, Department of
Defense (DoD).
AGENCY:
1. The authority citation for 48 CFR
part 201 continues to read as follows:
I
ACTION:
Authority: 41 U.S.C. 421 and 48 CFR
Chapter 1.
2. Section 201.602–2 is revised to read
as follows:
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations
System.
201.602–2
Responsibilities.
(1) Follow the procedures at PGI
201.602–2 regarding designation of a
contracting officer’s representative
(COR).
(2) A COR—
(i) Must be a Government employee,
unless otherwise authorized in agency
regulations;
(ii) Must be qualified by training and
experience commensurate with the
responsibilities to be delegated in
accordance with department/agency
guidelines;
(iii) May not be delegated
responsibility to perform functions at a
contractor’s location that have been
delegated under FAR 42.202(a) to a
contract administration office;
(iv) Has no authority to make any
commitments or changes that affect
price, quality, quantity, delivery, or
other terms and conditions of the
contract; and
(v) Must be designated in writing, and
a copy furnished the contractor and the
contract administration office—
(A) Specifying the extent of the COR’s
authority to act on behalf of the
contracting officer;
(B) Identifying the limitations on the
COR’s authority;
(C) Specifying the period covered by
the designation;
(D) Stating the authority is not
redelegable; and
(E) Stating that the COR may be
personally liable for unauthorized acts.
Final rule.
SUMMARY: DoD is making a technical
amendment to the Defense Federal
Acquisition Regulation Supplement
(DFARS) to update a reference number
within the DFARS text.
DATES:
Effective Date: December 1, 2006.
Ms.
Michele Peterson, Defense Acquisition
Regulations System,
OUSD(AT&L)DPAP(DARS), IMD 3C132,
3062 Defense Pentagon, Washington, DC
20301–3062. Telephone (703) 602–0311;
facsimile (703) 602–0350.
FOR FURTHER INFORMATION CONTACT:
This final
rule amends DFARS 208.7003–2(a) by
updating a reference to a section of the
Federal Acquisition Regulation.
SUPPLEMENTARY INFORMATION:
List of Subjects in 48 CFR Part 208
Michele P. Peterson,
Editor, Defense Acquisition Regulations
System.
Therefore, 48 CFR part 208 is
amended as follows:
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PART 208—REQUIRED SOURCES OF
SUPPLIES AND SERVICES
1. The authority citation for 48 CFR
part 208 continues to read as follows:
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Authority: 41 U.S.C. 421 and 48 CFR
Chapter 1.
208.7003–2
[Amended]
2. Section 208.7003–2 is amended in
paragraph (a) by removing ‘‘8.001’’ and
adding in its place ‘‘8.002’’.
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[DFARS Case 2004–D033]
Defense Federal Acquisition
Regulation Supplement; Levy on
Payments to Contractors
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Final rule.
AGENCY:
SUMMARY: DoD has adopted as final,
with changes, an interim rule amending
the Defense Federal Acquisition
Regulation Supplement (DFARS) to
address the effect of Internal Revenue
Service (IRS) levies on contract
payments. The rule requires DoD
contractors to promptly notify the
contracting officer if a levy may result
in an inability to perform a contract.
DATES: Effective Date: December 1, 2006.
FOR FURTHER INFORMATION CONTACT: Mr.
Bill Sain, Defense Acquisition
Regulations System,
OUSD(AT&L)DPAP(DARS), IMD 3C132,
3062 Defense Pentagon, Washington, DC
20301–3062. Telephone (703) 602–0293;
facsimile (703) 602–0350. Please cite
DFARS Case 2004–D033.
SUPPLEMENTARY INFORMATION:
A. Background
Government procurement.
[FR Doc. E6–20393 Filed 11–30–06; 8:45 am]
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69489
DoD published an interim rule at 70
FR 52031 on September 1, 2005,
addressing policy and procedures that
apply when an IRS levy may result in
a contractor’s inability to perform a DoD
contract. DoD received comments from
6 sources in response to the interim
rule. DoD considered all comments and
has incorporated the following changes
in the final rule:
DFARS 212.301(f)—Addition of a
prescription for use of the clause at
252.232–7010, Levies on Contract
Payments, in contracts for the
acquisition of commercial items.
DFARS 232.7101 and 252.232–7010—
Clarification that the requirement for the
contractor to notify the contracting
officer applies in situations where the
levy may result in an ‘‘inability to
perform the contract.’’ This change
eliminates the term ‘‘jeopardize contract
performance,’’ since that term may be
understood as establishing a different
standard than causing an inability to
perform.
DFARS 232.7102—Exclusion of
micro-purchases from the requirement
to use the clause at 252.232–7010.
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69490
Federal Register / Vol. 71, No. 231 / Friday, December 1, 2006 / Rules and Regulations
The following is a discussion of the
public comments and the issues relating
to the development of the final rule:
1. Comment: One respondent
recommended amendment of the rule at
232.7101 and 252.232–7010 to provide
that the contractor must notify the
procuring contracting officer (PCO) in
all instances when a levy is imposed.
This would ensure that the PCO is
aware of potential performance
problems before they occur. Once
notified of the levy, the PCO could
monitor the contractor’s performance
and perform surveillance of the
contractor’s financial condition.
DoD Response: DoD believes that
notification should be limited to
situations where the levy will be likely
to cause an inability to perform the
contract. To require reporting each time
a levy is imposed, even when the
contractor believes there will be no
impact on the contract, would not
provide useful data to the PCO, and
could lead to unnecessary
administrative effort on the part of the
Government, as well as the contractor.
The Paperwork Reduction Act (44
U.S.C. 3501, et seq.) requires that the
Government minimize the reporting
requirements incorporated into
regulations.
2. Comment: Two respondents
recommended amendment of the rule to
require that contractors notify both the
PCO and the administrative contracting
officer (ACO).
DoD Response: DoD believes that the
PCO is the best point of contact for this
process, but has revised the rule to
require that the contractor notify the
PCO, in writing, with a copy to the
ACO.
3. Comment: One respondent
commented that the rule unnecessarily
requires a mandatory report to the PCO
by the contractor (including a report of
‘‘no effect’’) regarding the assessment on
national security, even if the contractor
concludes that the levy will not create
an ‘‘inability to perform’’ and that the
withholding will have no effect on
national security. The respondent
explained that it did not interpret the
rule as requiring an automatic report
under the first requirement unless the
contractor concludes that the levy will
actually jeopardize contract
performance; however, the respondent
believed that there is an ambiguity in
the rule concerning the extent of the
reporting requirement, particularly
when the contract clause (at 252.232–
7010(b)) requires a mandatory report
only when ‘‘a levy is imposed . . . and
the levy will jeopardize contract
performance’’ because the contractor is
required to report on both the jeopardy
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to contract performance and whether
there will be any effect on national
security.
DoD Response: The contractor is
required to report to the contracting
officer if, and only if, the contractor
believes that the levy may cause an
inability to perform the contract. This
reporting requirement is necessary in
order to apprise the PCO of
circumstances that create barriers to
successful contract performance. The
contractor is also required (at DFARS
252.232–7010(b)(3)) to provide advice as
to whether the inability to perform may
adversely affect national security, with
rationale and adequate supporting
documentation.
4. Comment: One respondent
commented that the tests under the rule
that apply to the two requirements are
different. ‘‘Jeopardize contract
performance’’ may have a limited
impact, while ‘‘inability to perform’’ is
more difficult for the contractor to
assess.
DoD Response: The interim rule did
establish two different standards,
‘‘jeopardize contract performance’’ and
causing an ‘‘inability to perform.’’ The
Government’s interest is in knowing
when the levy may cause an inability to
perform, not necessarily in knowing of
each impediment that may jeopardize
operations and that can be overcome in
the normal course of business. To clarify
this requirement, the final rule now
consistently refers to situations where
the levy may result in an ‘‘inability to
perform.’’
5. Comment: One respondent
commented that, while DFARS
232.7101(b) requires the contracting
officer to notify the Director, Defense
Procurement and Acquisition Policy,
when the contractor’s inability to
perform may adversely affect national
security or may result in significant
increased costs to the Government,
neither the policy description nor the
clause requests information from the
contractor as to whether the levy will
have any impact on Government costs.
DoD Response: The assessment as to
whether an inability to perform on a
contract will lead to significantly
increased costs is an internal one for the
buying activity. The PCO and the PCO’s
customer would be able to assess, based
on such factors as cost/price analysis of
the affected contract, alternative sources
of supply, or existing inventories,
whether a probability exists for
significantly increased costs to the
Government. Therefore, the final rule
does not include a requirement for
contractor information on this factor.
6. Comment: One respondent
recommended that the contract clause
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be revised to specify, consistent with
DFARS 232.7101(c), that the contracting
officer will provide the notification
described in DFARS 252.232–7010(c).
The clause currently provides only that
DoD will provide a notification to the
contractor.
DoD Response: DFARS 252.232–
7010(c) has been revised to require that
the PCO notify the contractor, in
writing, of the DoD decision.
7. Comment: One respondent
recommended that DFARS Procedures,
Guidance, and Information (PGI) be
expanded to require notification by the
PCO to the procuring agency’s senior
procurement executive, concurrent with
the notification to the Director, Defense
Procurement and Acquisition Policy,
that is prescribed in the rule.
DoD Response: DoD agrees that senior
agency procurement leadership,
possibly including the senior
procurement executive, should be
included in the notification process.
Corresponding PGI coverage provides
that the contracting officer will notify
the Director, Defense Procurement and
Acquisition Policy, in accordance with
agency procedures. DoD believes that
the individual DoD components should
determine the specific routing of such
notifications in their internal guidance.
8. Comment: One respondent stated
that DFARS 232.7100, Scope of subpart,
should cite Internal Revenue Code 6331
and 6332, since those sections
established the Federal Payment Levy
Program.
DoD Response: The coverage in
DFARS Subpart 232.71, Levies on
Contract Payments, addresses a narrow
part of levies against payments,
specifically, the process for dealing with
collections against contract payments
that may cause an inability to perform.
Therefore, DoD believes that the current
citation is appropriately precise.
9. Comment: One respondent stated
that the rule should indicate when the
clause needs to be included in contracts,
e.g., greater than $100,000. Similarly,
another respondent recommended that
contracts below the simplified
acquisition threshold be excluded.
DoD Response: While DoD
understands that contracts below the
simplified acquisition threshold have a
reduced likelihood of impacting
national security, the possibility exists
that, in a critical situation, a levy could
lead to such a circumstance. Therefore,
DoD believes that the clause
prescription should apply to contracts
below the simplified acquisition
threshold, with the exception of micropurchases. DFARS 232.7102 has been
revised to exclude micro-purchases
from the clause prescription.
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10. Comment: Two respondents
requested clarification as to whether the
clause applies to contracts for the
acquisition of commercial items.
DoD Response: While DoD
understands that contracts for the
acquisition of commercial items have a
reduced likelihood of impacting
national security, the scope of
commercial items is very broad, and
such contracts can be very large, even
including critical items. Therefore, the
possibility exists that, in a given
situation, a levy could impact contract
performance that, in a certain
circumstance, could impact national
security. DoD believes that the clause
should be used in contracts for
commercial items above the micropurchase threshold. DFARS 212.301(f)
has been amended to incorporate a
prescription for inclusion of the clause
at 252.232–7010 in contracts for the
acquisition of commercial items.
11. Comment: One respondent
recommended that the clause
prescription permit the contracting
officer to waive (without significant
procedural requirements) the inclusion
of the clause in solicitations and
contracts when the contracting officer
believes the risk of a levy having an
adverse impact on performance is low.
DoD Response: While there may be
contracts that have a reduced likelihood
of impacting national security or leading
to significantly higher costs to the
Government in the event of an inability
to perform, the possibility exists that, in
a critical situation, a levy could lead to
such a circumstance. Therefore, DoD
did not make the suggested change.
12. Comment: One respondent
commented that the vast majority of
DoD contracts contain the clause at FAR
52.232–23, Assignment of Claims, with
Alternate I, which provides for a nosetoff commitment, and asked how
DFARS 252.232–7010, Levies on
Contract Payments, would interact with
FAR 52.232–23, with Alternate I.
DoD Response: Levies cannot be
applied against payments for contracts
that have been assigned in accordance
with the clause at FAR 52.232–23,
Assignment of Claims, with Alternate I,
unless the agency or the contracting
officer has excluded the no-setoff
commitment in accordance with DFARS
232.803(d).
13. Comment: Two respondents had
comments regarding the requirement for
assessing the impact of an inability to
perform on national security. One
indicated that this should be a judgment
for the Government, since contractors
cannot possibly know such things. The
other respondent indicated that this
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may be beyond the contractor’s
knowledge and capability.
DoD Response: The contractor
generally is not in a position to
determine the impact on national
security, and the rule assigns that
responsibility to DoD. However, the
policy at 232.7101, and the clause at
252.232–7010, call for advice from the
contractor as to whether national
security might be impacted. The advice
may be helpful to the buying activity in
developing a decision as to the impact
on national security. No change in the
rule is necessary.
14. Comment: One respondent
commented that the Background section
of the Federal Register notice should be
changed to make it consistent with
DFARS 232.7101, Policy and
Procedures. Specifically, that section
should be revised to indicate that the
contractor will notify the contracting
officer when the contractor believes a
levy imposed on a DoD contract
payment will ‘‘jeopardize contract
performance.’’ The respondent also
recommended that the Paperwork
Reduction Act section of the Federal
Register notice be revised for
consistency with DFARS 232.7101, to
indicate that the rule requires
contractors to provide certain
information to the Government when
levies ‘‘jeopardizing contract
performance and adversely affecting
national security’’ are imposed on DoD
contract payments.
DoD Response: As discussed in the
response to Comment 4 above, to avoid
confusion, the final rule eliminates use
of the term ‘‘jeopardize contract
performance’’ and now consistently
refers to requirements for the contractor
to notify the contracting officer when a
levy may result in an ‘‘inability to
perform.’’
15. Comment: One respondent
recommended that DoD initiate actions
to draft proposed legislation that will
require all Federal agencies to provide
notice by e-mail for all potential offsets
at least 30 days in advance of the target
offset date to certain contractor points of
contact established in the Central
Contractor Registration system. The
respondent maintains that Federal
agencies, and the Internal Revenue
Service in particular, have not been
compliant with the intent and spirit of
the Debt Collection Improvement Act of
1996, in making the offsets to recover
levies related to contract overpayment
and tax underpayments.
DoD Response: The comment is
beyond the scope of this DFARS case.
However, DoD notes that the Internal
Revenue Service issues a Collection Due
Process notice 30 days before collection
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69491
action, such as a levy. Therefore, the
contractor is already aware of the debt,
and DoD believes that further notice
should not be necessary.
16. Comment: One respondent
strongly encouraged DoD to review the
interaction between DoD and the
Federal Payment Levy Program and the
Treasury Offset Program, with a
particular focus on the procedural
requirements to notify the contractor, to
the maximum extent practicable, before
DoD notifies the Treasury Department of
a contract debt.
DoD Response: FAR 32.610, Demand
for Payment of Contract Debt, already
provides for issuance of a demand for
payment, and specifies that the
contractor has 30 days to make payment
without interest. DoD considers that the
existing FAR requirements provide
adequate notice to a contractor of a
contract debt.
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 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 the rule applies to only those
contractors that have a delinquent tax
debt. The number of contractors that fall
into this category is expected to be less
than 10 per year.
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. Although
the rule requires contractors to provide
certain information to the Government
when an IRS levy may result in an
inability to perform a contract, the
number of contractors subject to this
requirement is expected to be less than
10 per year.
List of Subjects in 48 CFR Parts 212,
232, and 252
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations
System.
Accordingly, the interim rule
amending 48 CFR parts 232 and 252,
which was published at 70 FR 52031 on
September 1, 2005, is adopted as a final
rule with the following changes:
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69492
Federal Register / Vol. 71, No. 231 / Friday, December 1, 2006 / Rules and Regulations
1. The authority citation for 48 CFR
Parts 212, 232, and 252 continues to
read as follows:
252.232–7010
Payments.
Authority: 41 U.S.C. 421 and 48 CFR
Chapter 1.
LEVIES ON CONTRACT PAYMENTS
(DEC 2006)
PART 212—ACQUISITION OF
COMMERCIAL ITEMS
*
I
*
2. Section 212.301 is amended by
adding paragraph (f)(xi) to read as
follows:
I
212.301 Solicitation provisions and
contract clauses for the acquisition of
commercial items.
(f) * * *
(xi) Use the clause at 252.232–7010,
Levies on Contract Payments, as
prescribed in 232.7102.
PART 232—CONTRACT FINANCING
3. Sections 232.7101 and 232.7102 are
revised to read as follows:
I
232.7101
Policy and procedures.
(a) The contracting officer shall
require the contractor to—
(1) Promptly notify the contracting
officer when a levy may result in an
inability to perform the contract; and
(2) Advise the contracting officer
whether the inability to perform may
adversely affect national security.
(b) The contracting officer shall
promptly notify the Director, Defense
Procurement and Acquisition Policy
(DPAP), when the contractor’s inability
to perform will adversely affect national
security or will result in significant
additional costs to the Government.
Follow the procedures at PGI
232.7101(b) for reviewing the
contractor’s rationale and submitting the
required notification.
(c) The Director, DPAP, will promptly
evaluate the contractor’s rationale and
will notify the IRS, the contracting
officer, and the payment office, as
appropriate, in accordance with the
procedures at PGI 232.7101(c).
(d) The contracting officer shall then
notify the contractor in accordance with
paragraph (c) of the clause at 252.232–
7010 and in accordance with the
procedures at PGI 232.7101(d).
232.7102
Contract clause.
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Use the clause at 252.232–7010,
Levies on Contract Payments, in all
solicitations and contracts other than
those for micro-purchases.
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*
*
*
*
*
*
(b) When a levy is imposed on a
payment under this contract and the
Contractor believes that the levy may
result in an inability to perform the
contract, the Contractor shall promptly
notify the Procuring Contracting Officer
in writing, with a copy to the
Administrative Contracting Officer, and
shall provide—
(1) The total dollar amount of the
levy;
(2) A statement that the Contractor
believes that the levy may result in an
inability to perform the contract,
including rationale and adequate
supporting documentation; and
(3) Advice as to whether the inability
to perform may adversely affect national
security, including rationale and
adequate supporting documentation.
(c) DoD shall promptly review the
Contractor’s assessment, and the
Procuring Contracting Officer shall
provide a written notification to the
Contractor including—
(1) A statement as to whether DoD
agrees that the levy may result in an
inability to perform the contract; and
(2)(i) If the levy may result in an
inability to perform the contract and the
lack of performance will adversely affect
national security, the total amount of
the monies collected that should be
returned to the Contractor; or
(ii) If the levy may result in an
inability to perform the contract but will
not impact national security, a
recommendation that the Contractor
promptly notify the IRS to attempt to
resolve the tax situation.
*
*
*
*
*
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BILLING CODE 5001–08–P
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
[DFARS Case 2003–D014]
Defense Federal Acquisition
Regulation Supplement; Contract
Pricing and Cost Accounting
Standards
4. Section 252.232–7010 is amended
by revising the clause date and
paragraphs (b) and (c) to read as follows:
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*
48 CFR Parts 215, 230, 252, and 253
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
I
*
Levies on Contract
Defense Acquisition
Regulations System, Department of
Defense (DoD).
AGENCY:
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ACTION:
Final rule.
SUMMARY: DoD has issued a final rule
amending the Defense Federal
Acquisition Regulation Supplement
(DFARS) to update text addressing
contract pricing matters and cost
accounting standards administration.
The rule implements statutory
provisions regarding exceptions to cost
or pricing data requirements and waiver
of cost accounting standards, and
relocates internal DoD procedures
relating to pricing considerations and
cost accounting standards to the DFARS
companion resource, Procedures,
Guidance, and Information.
DATES: Effective Date: December 1, 2006.
FOR FURTHER INFORMATION CONTACT: Mr.
Bill Sain, Defense Acquisition
Regulations System, OUSD (AT&L)
DPAP (DARS), IMD 3C132, 3062
Defense Pentagon, Washington, DC
20301–3062. Telephone (703) 602–0293;
facsimile (703) 602–0350. Please cite
DFARS Case 2003–D014.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule updates DFARS text
addressing contract pricing matters and
cost accounting standards
administration. The DFARS changes
include—
Æ Addition of text at 215.403–1 and
230.201–5 to implement Section 817 of
the National Defense Authorization Act
for Fiscal Year 2003 (Pub. L. 107–314)
regarding exceptions to cost or pricing
data requirements and waiver of cost
accounting standards.
Æ Deletion of 215.404–1(d), Cost
realism analysis, because FAR 15.404–1
contains sufficient policy on this
subject.
Æ Deletion of unnecessary
introductory text at redesignated
215.404–71–4(f), Facilities capital
employed, Values: Normal and
designated ranges.
Æ Relocation of the definition of
‘‘Acceptable estimating system’’ from
215.407–5–70(a)(1) to the contract
clause at 252.215–7002, Cost Estimating
System Requirements; elimination of
215.407–5–70(b)(1)(iii) and (iv) and
relocation of the language to the new
definition at 252.215–7002(a); and
deletion of duplicative language at
252.215–7002(b).
Æ Removal of 230.7000, Contract
facilities capital estimates; 230.7001,
Use of DD Form 1861; and 230.7002,
Preaward facilities capital applications;
and relocation of text on these subjects
to 215.404–71–4, Weighted guidelines
method—Facilities capital employed,
since these sections pertain to the
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]]>Agencies
[Federal Register Volume 71, Number 231 (Friday, December 1, 2006)]
[Rules and Regulations]
[Pages 69489-69492]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-20394]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212, 232, and 252
[DFARS Case 2004-D033]
Defense Federal Acquisition Regulation Supplement; Levy on
Payments to Contractors
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD has adopted as final, with changes, an interim rule
amending the Defense Federal Acquisition Regulation Supplement (DFARS)
to address the effect of Internal Revenue Service (IRS) levies on
contract payments. The rule requires DoD contractors to promptly notify
the contracting officer if a levy may result in an inability to perform
a contract.
DATES: Effective Date: December 1, 2006.
FOR FURTHER INFORMATION CONTACT: Mr. Bill Sain, Defense Acquisition
Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3C132, 3062 Defense
Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0293;
facsimile (703) 602-0350. Please cite DFARS Case 2004-D033.
SUPPLEMENTARY INFORMATION:
A. Background
DoD published an interim rule at 70 FR 52031 on September 1, 2005,
addressing policy and procedures that apply when an IRS levy may result
in a contractor's inability to perform a DoD contract. DoD received
comments from 6 sources in response to the interim rule. DoD considered
all comments and has incorporated the following changes in the final
rule:
DFARS 212.301(f)--Addition of a prescription for use of the clause
at 252.232-7010, Levies on Contract Payments, in contracts for the
acquisition of commercial items.
DFARS 232.7101 and 252.232-7010--Clarification that the requirement
for the contractor to notify the contracting officer applies in
situations where the levy may result in an ``inability to perform the
contract.'' This change eliminates the term ``jeopardize contract
performance,'' since that term may be understood as establishing a
different standard than causing an inability to perform.
DFARS 232.7102--Exclusion of micro-purchases from the requirement
to use the clause at 252.232-7010.
[[Page 69490]]
The following is a discussion of the public comments and the issues
relating to the development of the final rule:
1. Comment: One respondent recommended amendment of the rule at
232.7101 and 252.232-7010 to provide that the contractor must notify
the procuring contracting officer (PCO) in all instances when a levy is
imposed. This would ensure that the PCO is aware of potential
performance problems before they occur. Once notified of the levy, the
PCO could monitor the contractor's performance and perform surveillance
of the contractor's financial condition.
DoD Response: DoD believes that notification should be limited to
situations where the levy will be likely to cause an inability to
perform the contract. To require reporting each time a levy is imposed,
even when the contractor believes there will be no impact on the
contract, would not provide useful data to the PCO, and could lead to
unnecessary administrative effort on the part of the Government, as
well as the contractor. The Paperwork Reduction Act (44 U.S.C. 3501, et
seq.) requires that the Government minimize the reporting requirements
incorporated into regulations.
2. Comment: Two respondents recommended amendment of the rule to
require that contractors notify both the PCO and the administrative
contracting officer (ACO).
DoD Response: DoD believes that the PCO is the best point of
contact for this process, but has revised the rule to require that the
contractor notify the PCO, in writing, with a copy to the ACO.
3. Comment: One respondent commented that the rule unnecessarily
requires a mandatory report to the PCO by the contractor (including a
report of ``no effect'') regarding the assessment on national security,
even if the contractor concludes that the levy will not create an
``inability to perform'' and that the withholding will have no effect
on national security. The respondent explained that it did not
interpret the rule as requiring an automatic report under the first
requirement unless the contractor concludes that the levy will actually
jeopardize contract performance; however, the respondent believed that
there is an ambiguity in the rule concerning the extent of the
reporting requirement, particularly when the contract clause (at
252.232-7010(b)) requires a mandatory report only when ``a levy is
imposed . . . and the levy will jeopardize contract performance''
because the contractor is required to report on both the jeopardy to
contract performance and whether there will be any effect on national
security.
DoD Response: The contractor is required to report to the
contracting officer if, and only if, the contractor believes that the
levy may cause an inability to perform the contract. This reporting
requirement is necessary in order to apprise the PCO of circumstances
that create barriers to successful contract performance. The contractor
is also required (at DFARS 252.232-7010(b)(3)) to provide advice as to
whether the inability to perform may adversely affect national
security, with rationale and adequate supporting documentation.
4. Comment: One respondent commented that the tests under the rule
that apply to the two requirements are different. ``Jeopardize contract
performance'' may have a limited impact, while ``inability to perform''
is more difficult for the contractor to assess.
DoD Response: The interim rule did establish two different
standards, ``jeopardize contract performance'' and causing an
``inability to perform.'' The Government's interest is in knowing when
the levy may cause an inability to perform, not necessarily in knowing
of each impediment that may jeopardize operations and that can be
overcome in the normal course of business. To clarify this requirement,
the final rule now consistently refers to situations where the levy may
result in an ``inability to perform.''
5. Comment: One respondent commented that, while DFARS 232.7101(b)
requires the contracting officer to notify the Director, Defense
Procurement and Acquisition Policy, when the contractor's inability to
perform may adversely affect national security or may result in
significant increased costs to the Government, neither the policy
description nor the clause requests information from the contractor as
to whether the levy will have any impact on Government costs.
DoD Response: The assessment as to whether an inability to perform
on a contract will lead to significantly increased costs is an internal
one for the buying activity. The PCO and the PCO's customer would be
able to assess, based on such factors as cost/price analysis of the
affected contract, alternative sources of supply, or existing
inventories, whether a probability exists for significantly increased
costs to the Government. Therefore, the final rule does not include a
requirement for contractor information on this factor.
6. Comment: One respondent recommended that the contract clause be
revised to specify, consistent with DFARS 232.7101(c), that the
contracting officer will provide the notification described in DFARS
252.232-7010(c). The clause currently provides only that DoD will
provide a notification to the contractor.
DoD Response: DFARS 252.232-7010(c) has been revised to require
that the PCO notify the contractor, in writing, of the DoD decision.
7. Comment: One respondent recommended that DFARS Procedures,
Guidance, and Information (PGI) be expanded to require notification by
the PCO to the procuring agency's senior procurement executive,
concurrent with the notification to the Director, Defense Procurement
and Acquisition Policy, that is prescribed in the rule.
DoD Response: DoD agrees that senior agency procurement leadership,
possibly including the senior procurement executive, should be included
in the notification process. Corresponding PGI coverage provides that
the contracting officer will notify the Director, Defense Procurement
and Acquisition Policy, in accordance with agency procedures. DoD
believes that the individual DoD components should determine the
specific routing of such notifications in their internal guidance.
8. Comment: One respondent stated that DFARS 232.7100, Scope of
subpart, should cite Internal Revenue Code 6331 and 6332, since those
sections established the Federal Payment Levy Program.
DoD Response: The coverage in DFARS Subpart 232.71, Levies on
Contract Payments, addresses a narrow part of levies against payments,
specifically, the process for dealing with collections against contract
payments that may cause an inability to perform. Therefore, DoD
believes that the current citation is appropriately precise.
9. Comment: One respondent stated that the rule should indicate
when the clause needs to be included in contracts, e.g., greater than
$100,000. Similarly, another respondent recommended that contracts
below the simplified acquisition threshold be excluded.
DoD Response: While DoD understands that contracts below the
simplified acquisition threshold have a reduced likelihood of impacting
national security, the possibility exists that, in a critical
situation, a levy could lead to such a circumstance. Therefore, DoD
believes that the clause prescription should apply to contracts below
the simplified acquisition threshold, with the exception of micro-
purchases. DFARS 232.7102 has been revised to exclude micro-purchases
from the clause prescription.
[[Page 69491]]
10. Comment: Two respondents requested clarification as to whether
the clause applies to contracts for the acquisition of commercial
items.
DoD Response: While DoD understands that contracts for the
acquisition of commercial items have a reduced likelihood of impacting
national security, the scope of commercial items is very broad, and
such contracts can be very large, even including critical items.
Therefore, the possibility exists that, in a given situation, a levy
could impact contract performance that, in a certain circumstance,
could impact national security. DoD believes that the clause should be
used in contracts for commercial items above the micro-purchase
threshold. DFARS 212.301(f) has been amended to incorporate a
prescription for inclusion of the clause at 252.232-7010 in contracts
for the acquisition of commercial items.
11. Comment: One respondent recommended that the clause
prescription permit the contracting officer to waive (without
significant procedural requirements) the inclusion of the clause in
solicitations and contracts when the contracting officer believes the
risk of a levy having an adverse impact on performance is low.
DoD Response: While there may be contracts that have a reduced
likelihood of impacting national security or leading to significantly
higher costs to the Government in the event of an inability to perform,
the possibility exists that, in a critical situation, a levy could lead
to such a circumstance. Therefore, DoD did not make the suggested
change.
12. Comment: One respondent commented that the vast majority of DoD
contracts contain the clause at FAR 52.232-23, Assignment of Claims,
with Alternate I, which provides for a no-setoff commitment, and asked
how DFARS 252.232-7010, Levies on Contract Payments, would interact
with FAR 52.232-23, with Alternate I.
DoD Response: Levies cannot be applied against payments for
contracts that have been assigned in accordance with the clause at FAR
52.232-23, Assignment of Claims, with Alternate I, unless the agency or
the contracting officer has excluded the no-setoff commitment in
accordance with DFARS 232.803(d).
13. Comment: Two respondents had comments regarding the requirement
for assessing the impact of an inability to perform on national
security. One indicated that this should be a judgment for the
Government, since contractors cannot possibly know such things. The
other respondent indicated that this may be beyond the contractor's
knowledge and capability.
DoD Response: The contractor generally is not in a position to
determine the impact on national security, and the rule assigns that
responsibility to DoD. However, the policy at 232.7101, and the clause
at 252.232-7010, call for advice from the contractor as to whether
national security might be impacted. The advice may be helpful to the
buying activity in developing a decision as to the impact on national
security. No change in the rule is necessary.
14. Comment: One respondent commented that the Background section
of the Federal Register notice should be changed to make it consistent
with DFARS 232.7101, Policy and Procedures. Specifically, that section
should be revised to indicate that the contractor will notify the
contracting officer when the contractor believes a levy imposed on a
DoD contract payment will ``jeopardize contract performance.'' The
respondent also recommended that the Paperwork Reduction Act section of
the Federal Register notice be revised for consistency with DFARS
232.7101, to indicate that the rule requires contractors to provide
certain information to the Government when levies ``jeopardizing
contract performance and adversely affecting national security'' are
imposed on DoD contract payments.
DoD Response: As discussed in the response to Comment 4 above, to
avoid confusion, the final rule eliminates use of the term ``jeopardize
contract performance'' and now consistently refers to requirements for
the contractor to notify the contracting officer when a levy may result
in an ``inability to perform.''
15. Comment: One respondent recommended that DoD initiate actions
to draft proposed legislation that will require all Federal agencies to
provide notice by e-mail for all potential offsets at least 30 days in
advance of the target offset date to certain contractor points of
contact established in the Central Contractor Registration system. The
respondent maintains that Federal agencies, and the Internal Revenue
Service in particular, have not been compliant with the intent and
spirit of the Debt Collection Improvement Act of 1996, in making the
offsets to recover levies related to contract overpayment and tax
underpayments.
DoD Response: The comment is beyond the scope of this DFARS case.
However, DoD notes that the Internal Revenue Service issues a
Collection Due Process notice 30 days before collection action, such as
a levy. Therefore, the contractor is already aware of the debt, and DoD
believes that further notice should not be necessary.
16. Comment: One respondent strongly encouraged DoD to review the
interaction between DoD and the Federal Payment Levy Program and the
Treasury Offset Program, with a particular focus on the procedural
requirements to notify the contractor, to the maximum extent
practicable, before DoD notifies the Treasury Department of a contract
debt.
DoD Response: FAR 32.610, Demand for Payment of Contract Debt,
already provides for issuance of a demand for payment, and specifies
that the contractor has 30 days to make payment without interest. DoD
considers that the existing FAR requirements provide adequate notice to
a contractor of a contract debt.
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 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 the rule applies to only those contractors that have a
delinquent tax debt. The number of contractors that fall into this
category is expected to be less than 10 per year.
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. Although the rule requires contractors to provide certain
information to the Government when an IRS levy may result in an
inability to perform a contract, the number of contractors subject to
this requirement is expected to be less than 10 per year.
List of Subjects in 48 CFR Parts 212, 232, and 252
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
0
Accordingly, the interim rule amending 48 CFR parts 232 and 252, which
was published at 70 FR 52031 on September 1, 2005, is adopted as a
final rule with the following changes:
[[Page 69492]]
0
1. The authority citation for 48 CFR Parts 212, 232, and 252 continues
to read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 212--ACQUISITION OF COMMERCIAL ITEMS
0
2. Section 212.301 is amended by adding paragraph (f)(xi) to read as
follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
(f) * * *
(xi) Use the clause at 252.232-7010, Levies on Contract Payments,
as prescribed in 232.7102.
PART 232--CONTRACT FINANCING
0
3. Sections 232.7101 and 232.7102 are revised to read as follows:
232.7101 Policy and procedures.
(a) The contracting officer shall require the contractor to--
(1) Promptly notify the contracting officer when a levy may result
in an inability to perform the contract; and
(2) Advise the contracting officer whether the inability to perform
may adversely affect national security.
(b) The contracting officer shall promptly notify the Director,
Defense Procurement and Acquisition Policy (DPAP), when the
contractor's inability to perform will adversely affect national
security or will result in significant additional costs to the
Government. Follow the procedures at PGI 232.7101(b) for reviewing the
contractor's rationale and submitting the required notification.
(c) The Director, DPAP, will promptly evaluate the contractor's
rationale and will notify the IRS, the contracting officer, and the
payment office, as appropriate, in accordance with the procedures at
PGI 232.7101(c).
(d) The contracting officer shall then notify the contractor in
accordance with paragraph (c) of the clause at 252.232-7010 and in
accordance with the procedures at PGI 232.7101(d).
232.7102 Contract clause.
Use the clause at 252.232-7010, Levies on Contract Payments, in all
solicitations and contracts other than those for micro-purchases.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
4. Section 252.232-7010 is amended by revising the clause date and
paragraphs (b) and (c) to read as follows:
252.232-7010 Levies on Contract Payments.
* * * * *
LEVIES ON CONTRACT PAYMENTS (DEC 2006)
* * * * *
(b) When a levy is imposed on a payment under this contract and the
Contractor believes that the levy may result in an inability to perform
the contract, the Contractor shall promptly notify the Procuring
Contracting Officer in writing, with a copy to the Administrative
Contracting Officer, and shall provide--
(1) The total dollar amount of the levy;
(2) A statement that the Contractor believes that the levy may
result in an inability to perform the contract, including rationale and
adequate supporting documentation; and
(3) Advice as to whether the inability to perform may adversely
affect national security, including rationale and adequate supporting
documentation.
(c) DoD shall promptly review the Contractor's assessment, and the
Procuring Contracting Officer shall provide a written notification to
the Contractor including--
(1) A statement as to whether DoD agrees that the levy may result
in an inability to perform the contract; and
(2)(i) If the levy may result in an inability to perform the
contract and the lack of performance will adversely affect national
security, the total amount of the monies collected that should be
returned to the Contractor; or
(ii) If the levy may result in an inability to perform the contract
but will not impact national security, a recommendation that the
Contractor promptly notify the IRS to attempt to resolve the tax
situation.
* * * * *
[FR Doc. E6-20394 Filed 11-30-06; 8:45 am]
BILLING CODE 5001-08-P
