Defense Federal Acquisition Regulation Supplement; Excessive Pass-Through Charges (DFARS Case 2006-D057), 20758-20761 [E7-7905]
Download as PDF
<![CDATA[
20758
Federal Register / Vol. 72, No. 80 / Thursday, April 26, 2007 / Rules and Regulations
Acquisition System, and the disciplines
in the Defense Acquisition Guidebook.
(d) Source selection processes shall
be—
(1) Reviewed and approved by
cognizant organizations responsible for
oversight;
(2) Documented by the head of the
contracting activity or at the agency
level; and
(3) Periodically reviewed by outside
officials independent of that office or
agency.
(e) Legal review of documentation of
major acquisition system source
selection shall be conducted prior to
contract award, including the
supporting documentation of the source
selection evaluation board, source
selection advisory council, and source
selection authority.
(f) Procurement management reviews
shall determine whether clearance
threshold authorities are clear and that
independent review is provided for
acquisitions exceeding the simplified
acquisition threshold.
[FR Doc. E7–7911 Filed 4–25–07; 8:45 am]
BILLING CODE 5001–08–P
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 206 and 225
RIN 0750–AF62
Defense Federal Acquisition
Regulation Supplement; Deletion of
Obsolete Acquisition Procedures
(DFARS Case 2006–D046)
DoD has issued a final rule
amending the Defense Federal
Acquisition Regulation Supplement
(DFARS) to remove text relating to
obsolete requirements for maintenance
of paper-based solicitation mailing lists
and for furnishing of documents to
certain entities.
EFFECTIVE DATE: April 26, 2007.
FOR FURTHER INFORMATION CONTACT: Ms.
Amy Williams, Defense Acquisition
Regulations System, OUSD (AT&L)
DPAP (DARS), IMD 3C132, 3062
Defense Pentagon, Washington, DC
20301–3062. Telephone (703) 602–0328;
facsimile (703) 602–0350. Please cite
DFARS Case 2006–D046.
SUPPLEMENTARY INFORMATION:
pwalker on PROD1PC71 with RULES
VerDate Aug<31>2005
17:20 Apr 25, 2007
Jkt 211001
This final rule amends DFARS text as
follows:
Æ 206.303–1—Removes text
designating the Director of Defense
Procurement and Acquisition Policy as
the agency point of contact for
submission of certain justification and
approval documents to the U.S. Trade
Representative. This text is no longer
applicable, as the underlying Federal
Acquisition Regulation (FAR)
requirement for submission of these
documents to the U.S. Trade
Representative was removed by the
interim rule that was published at 69 FR
77870 on December 28, 2004, and
finalized at 71 FR 219 on January 3,
2006.
Æ 225.870–2 and 225.872–3—
Removes text addressing requirements
for inclusion of Canadian firms and
qualifying country sources on
solicitation mailing lists, and for
sending solicitations to the Canadian
Commercial Corporation as well as
Canadian firms appearing on the lists.
This text is no longer applicable, as
solicitation mailing lists have been
replaced by electronic tools such as the
Central Contractor Registration database
and the Federal Business Opportunities
Web site. The FAR was amended to
remove references to solicitation
mailing lists in the final rule published
at 68 FR 43855 on July 24, 2003.
This rule was not subject to Office of
Management and Budget review under
Executive Order 12866, dated
September 30, 1993.
List of Subjects in 48 CFR Parts 206 and
225
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations
System.
Therefore, 48 CFR parts 206 and 225
are amended as follows:
I 1. The authority citation for 48 CFR
parts 206 and 225 continues to read as
follows:
I
Authority: 41 U.S.C. 421 and 48 CFR
Chapter 1.
PART 206—COMPETITION
REQUIREMENTS
206.303 and 206.303–1
[Removed]
2. Sections 206.303 and 206.303–1 are
removed.
I
PART 225—FOREIGN ACQUISITION
225.870–2
[Amended]
3. Section 225.870–2 is amended as
follows:
I a. By removing paragraphs (a) through
(c); and
I b. By redesignating paragraphs (d) and
(e) as paragraphs (a) and (b)
respectively.
I
225.872–3
[Amended]
4. Section 225.872–3 is amended as
follows:
I a. By removing paragraph (a); and
I b. By redesignating paragraphs (b)
through (g) as paragraphs (a) through (f)
respectively.
I
[FR Doc. E7–7907 Filed 4–25–07; 8:45 am]
BILLING CODE 5001–08–P
B. Regulatory Flexibility Act
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Final rule.
AGENCY:
SUMMARY:
A. Background
DEPARTMENT OF DEFENSE
This rule will not have a significant
cost or administrative impact on
contractors or offerors, or a significant
effect beyond the internal operating
procedures of DoD. Therefore,
publication for public comment under
41 U.S.C. 418b is not required.
However, DoD will consider comments
from small entities concerning the
affected DFARS subparts in accordance
with 5 U.S.C. 610. Such comments
should cite DFARS Case 2006–D046.
Defense Acquisition Regulations
System
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.
PO 00000
Frm 00058
Fmt 4700
Sfmt 4700
48 CFR Parts 215, 231, and 252
RIN 0750–AF67
Defense Federal Acquisition
Regulation Supplement; Excessive
Pass-Through Charges (DFARS Case
2006–D057)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Interim rule with request for
comments.
AGENCY:
SUMMARY: DoD has issued an interim
rule amending the Defense Federal
Acquisition Regulation Supplement
(DFARS) to implement Section 852 of
the National Defense Authorization Act
for Fiscal Year 2007. Section 852
E:\FR\FM\26APR1.SGM
26APR1
Federal Register / Vol. 72, No. 80 / Thursday, April 26, 2007 / Rules and Regulations
requires DoD to prescribe regulations to
ensure that pass-through charges on
contracts or subcontracts that are
entered into for or on behalf of DoD are
not excessive in relation to the cost of
work performed by the relevant
contractor or subcontractor.
DATES: Effective date: April 26, 2007.
Comment date: Comments on the
interim rule should be submitted in
writing to the address shown below on
or before June 25, 2007, to be considered
in the formation of the final rule.
ADDRESSES: You may submit comments,
identified by DFARS Case 2006–D057,
using any of the following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail: dfars@osd.mil. Include
DFARS Case 2006–D057 in the subject
line of the message.
• Fax: (703) 602–0350.
• Mail: Defense Acquisition
Regulations System, Attn: Mr. John
McPherson, OUSD(AT&L)DPAP(CPF),
IMD 3C132, 3062 Defense Pentagon,
Washington, DC 20301–3062.
• Hand Delivery/Courier: Defense
Acquisition Regulations System, Crystal
Square 4, Suite 200A, 241 18th Street,
Arlington, VA 22202–3402.
Comments received generally will be
posted without change to https://
www.regulations.gov, including any
personal information provided.
FOR FURTHER INFORMATION CONTACT: Mr.
John McPherson, (703) 602–0296.
SUPPLEMENTARY INFORMATION:
pwalker on PROD1PC71 with RULES
A. Background
This interim rule implements Section
852 of the National Defense
Authorization Act for Fiscal Year 2007
(Public Law 109–364). Section 852
requires DoD to prescribe regulations to
ensure that pass-through charges on
contracts or subcontracts (or task or
delivery orders) that are entered into for
or on behalf of DoD are not excessive in
relation to the cost of work performed
by the relevant contractor or
subcontractor. To enable DoD to ensure
that pass-through charges are not
excessive, this interim rule contains a
solicitation provision and a contract
clause requiring offerors and contractors
to identify the percentage of work that
will be subcontracted and, when
subcontract costs will exceed 70 percent
of the total cost of work to be performed,
to provide information on indirect costs
and profit and value added with regard
to the subcontract work.
This rule was not subject to Office of
Management and Budget review under
VerDate Aug<31>2005
17:20 Apr 25, 2007
Jkt 211001
Executive Order 12866, dated
September 30, 1993.
B. Regulatory Flexibility Act
DoD does not expect this rule to have
a significant economic impact on a
substantial number of small entities
within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq.,
because DoD does not expect a
significant number of entities to propose
excessive pass-through charges under
DoD contracts or subcontracts, and the
information required from offerors and
contractors regarding pass-through
charges is minimal. Therefore, DoD has
not performed an initial regulatory
flexibility analysis. DoD invites
comments from small businesses and
other interested parties. DoD also will
consider comments from small entities
concerning the affected DFARS subparts
in accordance with 5 U.S.C. 610. Such
comments should be submitted
separately and should cite DFARS Case
2006–D057.
C. Paperwork Reduction Act
This interim rule contains a new
information collection requirement. The
Office of Management and Budget
(OMB) has approved the information
collection requirement for use through
October 31, 2007, under OMB Control
Number 0704–0443, in accordance with
the emergency processing procedures of
5 CFR 1320.13. DoD invites comments
on the following aspects of the interim
rule: (a) Whether the collection of
information is necessary for the proper
performance of the functions of DoD,
including whether the information will
have practical utility; (b) the accuracy of
the estimate of the burden of the
information collection; (c) ways to
enhance the quality, utility, and clarity
of the information to be collected; and
(d) ways to minimize the burden of the
information collection on respondents,
including the use of automated
collection techniques or other forms of
information technology. The following
is a summary of the information
collection requirement.
Title: Defense Federal Acquisition
Regulation Supplement (DFARS);
Excessive Pass-Through Charges.
Type of Request: New collection.
Number of Respondents: 12,650.
Responses per Respondent:
Approximately 1.
Annual Responses: 12,800.
Average Burden per Response: .51
hour.
Annual Burden Hours: 6,550.
Needs and Uses: DoD needs this
information to ensure that pass-through
charges under DoD contracts and
PO 00000
Frm 00059
Fmt 4700
Sfmt 4700
20759
subcontracts are not excessive, in
accordance with Section 852 of Public
Law 109–364. DoD contracting officers
will use the information to assess the
value added by a contractor or
subcontractor in relation to proposed,
billed, or claimed indirect costs or profit
on work performed by a subcontractor.
Affected Public: Businesses or other
for-profit institutions.
Respondent’s Obligation: Required to
obtain or retain benefits.
Frequency: On occasion.
Written comments and
recommendations on the proposed
information collection should be sent to
Ms. Hillary Jaffe at the Office of
Management and Budget, Desk Officer
for DoD, Room 10236, New Executive
Office Building, Washington, DC 20503,
with a copy to the Defense Acquisition
Regulations System, Attn: Mr. John
McPherson, OUSD(AT&L)DPAP(CPF),
IMD 3C132, 3062 Defense Pentagon,
Washington, DC 20301–3062.
Comments can be received from 30 to 60
days after the date of this notice, but
comments to OMB will be most useful
if received by OMB within 30 days after
the date of this notice.
To request more information on this
proposed information collection or to
obtain a copy of the proposal and
associated collection instruments,
please write to the Defense Acquisition
Regulations System, Attn: Mr. John
McPherson, OUSD(AT&L)DPAP(CPF),
IMD 3C132, 3062 Defense Pentagon,
Washington, DC 20301–3062.
D. Determination To Issue an Interim
Rule
A determination has been made under
the authority of the Secretary of Defense
that urgent and compelling reasons exist
to publish an interim rule prior to
affording the public an opportunity to
comment. This interim rule implements
Section 852 of the National Defense
Authorization Act for Fiscal Year 2007
(Public Law 109–364). Section 852
requires DoD to prescribe regulations,
not later than May 1, 2007, to ensure
that pass-through charges on contracts
or subcontracts (or task or delivery
orders) that are entered into for or on
behalf of DoD are not excessive in
relation to the cost of work performed
by the relevant contractor or
subcontractor. Comments received in
response to this interim rule will be
considered in the formation of the final
rule.
E:\FR\FM\26APR1.SGM
26APR1
20760
Federal Register / Vol. 72, No. 80 / Thursday, April 26, 2007 / Rules and Regulations
252.215–7003 Excessive pass-through
charges—identification of subcontract
effort.
List of Subjects in 48 CFR Parts 215,
231, and 252
Government procurement.
As prescribed in 215.408(3), use the
following provision:
Michele P. Peterson,
Editor, Defense Acquisition Regulations
System.
Therefore, 48 CFR parts 215, 231, and
252 are amended as follows:
I 1. The authority citation for 48 CFR
parts 215, 231, and 252 continues to
read as follows:
I
Authority: 41 U.S.C. 421 and 48 CFR
Chapter 1.
PART 215—CONTRACTING BY
NEGOTIATION
2. Section 215.408 is amended by
adding paragraph (3) to read as follows:
I
215.408 Solicitation provisions and
contract clauses.
*
*
*
*
*
(3) Use the provision at 252.215–7003,
Excessive Pass-Through Charges—
Identification of Subcontract Effort, and
the clause at 252.215–7004, Excessive
Pass-Through Charges, in all
solicitations and contracts (including
task or delivery orders) except for—
(i) Firm-fixed-price contracts awarded
on the basis of adequate price
competition;
(ii) Fixed-price contracts with
economic price adjustment, awarded on
the basis of adequate price competition;
(iii) Firm-fixed-price contracts for the
acquisition of a commercial item; or
(iv) Fixed-price contracts with
economic price adjustment, for the
acquisition of a commercial item.
EXCESSIVE PASS-THROUGH CHARGES—
IDENTIFICATION OF SUBCONTRACT
EFFORT (APR 2007)
(a) Definition. Excessive pass-through
charge, as used in this provision, is defined
in the clause of this solicitation entitled
‘‘Excessive Pass-Through Charges’’ (DFARS
252.215–7004).
(b) General. The offeror’s proposal shall
exclude excessive pass-through charges.
(c) Performance of work by the Contractor
or a subcontractor. (1) The offeror shall
identify in its proposal the percent of effort
it intends to perform, and the percent
expected to be performed by each
subcontractor, under the contract, task order,
or delivery order.
(2) If the offeror intends to subcontract
more than 70 percent of the total cost of work
to be performed under the contract, task
order, or delivery order, the offeror shall
identify in its proposal—
(i) The amount of the offeror’s indirect
costs and profit applicable to the work to be
performed by the subcontractor(s); and
(ii) A description of the value added by the
offeror as related to the work to be performed
by the subcontractor(s).
(3) If any subcontractor proposed under the
contract, task order, or delivery order intends
to subcontract to a lower-tier subcontractor
more than 70 percent of the total cost of work
to be performed under its subcontract, the
offeror shall identify in its proposal—
(i) The amount of the subcontractor’s
indirect costs and profit applicable to the
work to be performed by the lower-tier
subcontractor(s); and
(ii) A description of the value added by the
subcontractor as related to the work to be
performed by the lower-tier subcontractor(s).
(End of provision)
PART 231—CONTRACT COST
PRINCIPLES AND PROCEDURES
252.215–7004
charges.
Excessive pass-through
3. Sections 231.201–2 and 231.203 are
added to read as follows:
As prescribed in 215.408(3), use the
following clause:
231.201–2
EXCESSIVE PASS-THROUGH CHARGES
(APR 2007)
(a) Definitions. As used in this clause—
Excessive pass-through charge, with
respect to a Contractor or subcontractor that
adds no or negligible value to a contract or
subcontract, means a charge to the
Government by the Contractor or
subcontractor that is for indirect costs or
profit on work performed by a subcontractor
(other than charges for the costs of managing
subcontracts and applicable indirect costs
and profit based on such costs).
No or negligible value means the
Contractor or subcontractor cannot
demonstrate to the Contracting Officer that
its effort added substantive value to the
contract or subcontract in accomplishing the
work performed under the contract.
(b) General. The Government will not pay
excessive pass-through charges. The
I
Determining allowability.
(a) In addition to the requirements at
FAR 31.201–2(a), a cost is allowable
only when it complies with the clause
at 252.215–7004, Excessive PassThrough Charges.
231.203
Indirect costs.
pwalker on PROD1PC71 with RULES
(d) Excessive pass-through charges, as
defined in the clause at 252.215–7004,
are unallowable.
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
4. Sections 252.215–7003 and
252.215–7004 are added to read as
follows:
I
VerDate Aug<31>2005
17:20 Apr 25, 2007
Jkt 211001
PO 00000
Frm 00060
Fmt 4700
Sfmt 4700
Contracting Officer shall determine if
excessive pass-through charges exist.
(c) Performance of work by the Contractor
or a subcontractor. (1) If the Contractor
changes the amount of subcontract effort
identified in its proposal such that it exceeds
70 percent of the total cost of work to be
performed under the contract, task order, or
delivery order, the Contractor shall provide
the Contracting Officer with a description of
the value added by the Contractor as related
to the subcontract effort.
(2) If any subcontractor identified in the
proposal changes the amount of lower-tier
subcontractor effort such that it exceeds 70
percent of the total cost of the work to be
performed under its subcontract, the
Contractor shall provide the Contracting
Officer with a description of the value added
by the subcontractor as related to the work
to be performed by the lower-tier
subcontractor(s).
(3) If any subcontractor not identified in
the proposal subcontracts to a lower-tier
subcontractor more than 70 percent of the
total cost of work to be performed under its
subcontract, the Contractor shall provide the
Contracting Officer with a description of the
value added by the subcontractor as related
to the work to be performed by the lower-tier
subcontractor(s).
(d) Recovery of excessive pass-through
charges. If the Contracting Officer determines
that excessive pass-through charges exist—
(1) For fixed-price contracts, the
Government shall be entitled to a price
reduction for the amount of excessive passthrough charges included in the contract
price; and
(2) For other than fixed-price contracts, the
excessive pass-through charges are
unallowable in accordance with the
provisions in Subpart 31.2 of the Federal
Acquisition Regulation (FAR) and Subpart
231.2 of the Defense FAR Supplement.
(e) Access to records. (1) The Contracting
Officer, or authorized representative, shall
have the right to examine and audit all the
Contractor’s records (as defined at FAR
52.215–2(a)) necessary to determine whether
the Contractor proposed, billed, or claimed
excessive pass-through charges.
(2) For those subcontracts to which
paragraph (f) of this clause applies, the
Contracting Officer, or authorized
representative, shall have the right to
examine and audit all the subcontractor’s
records (as defined at FAR 52.215–2(a))
necessary to determine whether the
subcontractor proposed, billed, or claimed
excessive pass-through charges.
(f) Flowdown. The Contractor shall insert
the substance of this clause, including this
paragraph (f), in all subcontracts under this
contract, except for—
(1) Firm-fixed-price subcontracts awarded
on the basis of adequate price competition;
(2) Fixed-price subcontracts with economic
price adjustment, awarded on the basis of
adequate price competition;
(3) Firm-fixed-price subcontracts for the
acquisition of a commercial item; or
(4) Fixed-price subcontracts with economic
price adjustment, for the acquisition of a
commercial item.
E:\FR\FM\26APR1.SGM
26APR1
Federal Register / Vol. 72, No. 80 / Thursday, April 26, 2007 / Rules and Regulations
(End of clause)
[FR Doc. E7–7905 Filed 4–25–07; 8:45 am]
BILLING CODE 5001–08–P
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 219 and 252
RIN 0750–AE93
Defense Federal Acquisition
Regulation Supplement; Small
Business Programs (DFARS Case
2003–D047)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Final rule.
AGENCY:
SUMMARY: DoD has issued a final rule
amending Defense Federal Acquisition
Regulation Supplement (DFARS) text
pertaining to small business programs.
The rule updates and clarifies policy for
contracting with small business and
small disadvantaged business concerns
and relocates text to the DFARS
companion resource, Procedures,
Guidance, and Information.
EFFECTIVE DATE: April 26, 2007.
FOR FURTHER INFORMATION CONTACT: Ms.
Deborah Tronic, Defense Acquisition
Regulations System,
OUSD(AT&L)DPAP(DARS), IMD 3C132,
3062 Defense Pentagon, Washington, DC
20301–3062. Telephone (703) 602–0289;
facsimile (703) 602–0350. Please cite
DFARS Case 2003–D047.
SUPPLEMENTARY INFORMATION:
pwalker on PROD1PC71 with RULES
A. Background
This final rule amends DFARS Part
219 and corresponding contract clauses.
The DFARS changes—
• Update and clarify requirements for
contracting with small business and
small disadvantaged business concerns;
and
• Delete text containing procedures
for referring matters to the Small
Business Administration; procedures for
processing contract awards under the
8(a) Program; and information on the
DoD test program for negotiation of
comprehensive small business
subcontracting plans. Text on these
subjects has been relocated to the
DFARS companion resource,
Procedures, Guidance, and Information
(PGI), available at https://
www.acq.osd.mil/dpap/dars/pgi.
DoD published a proposed rule at 71
FR 9303 on February 23, 2006. Three
respondents submitted comments on the
VerDate Aug<31>2005
17:20 Apr 25, 2007
Jkt 211001
proposed rule. A discussion of the
comments is provided below.
1. Comment: One respondent stated
that the proposed changes to
subcontracting plan requirements at
DFARS 219.704(2) and 252.219–7003(g)
would create an ambiguity. These
changes proposed to amend text
requiring contractors to notify the
administrative contracting officer (ACO)
of any substitutions of ‘‘firms that are
not small, small disadvantaged, or
women-owned small businesses for the
firms listed in the subcontracting plan,’’
to instead indicate that the contractor
must notify the ACO of any
substitutions of small businesses
specifically identified in the
subcontracting plan. The respondent
stated that ACOs and contractors could
interpret this change to mean that
contractors would be required to
provide notification when substituting
any firm, even one that is a small
business concern, for one that is listed
in the subcontracting plan. The
respondent recommended that the rule
instead require contractors to notify the
ACO of any substitutions of ‘‘firms that
are not small business concerns’’ for the
firms listed in the subcontracting plan.
DoD Response: DoD agrees that the
language in the proposed rule could be
ambiguous. Therefore, the final rule has
been written to clarify the existing
policy, i.e., that the contractor must
notify the ACO of any substitutions of
firms that are not small business firms,
for the small business firms specifically
identified in the subcontracting plan.
2. Comment: One respondent
recommended deleting the proposed
text at 219.704(3), which contains a
reference to the procedures in DFARS
215.304 regarding evaluation of offers
that require a subcontracting plan. The
respondent recommended that the
proposed 219.704(3) be replaced with
text stating that offerors with approved
commercial or comprehensive
subcontracting plans are not required to
submit contract-specific goals, and that
those offerors will be evaluated based
on Standard Form 295 information and
Defense Contract Management Agency
evaluations of company-wide
performance under their small business
programs. In addition, the respondent
recommended that 219.704 state that
contracting officers may accept
commercial subcontracting plans for
both commercial item and
noncommercial item contracts, provided
the plan covers the entire production of
both commercial and noncommercial
items as set forth at FAR 52.219–9(g).
DoD Response: The issues addressed
in this comment go beyond the scope of
the changes being made under this
PO 00000
Frm 00061
Fmt 4700
Sfmt 4700
20761
DFARS case. DoD recognizes the
importance of the issues raised by the
respondent and is currently working
independently of this case to resolve
those issues. Any proposed changes to
the DFARS that might result would be
published under a separate case for
public comment.
3. Comment: One respondent stated
that deleting DFARS text and putting it
in PGI requires contracting officers to
research multiple locations to ensure
they are complying with all the
necessary requirements. The respondent
stated that deleting requirements would
be streamlining, not moving them to
another area which may cause
uncertainty and ambiguity.
DoD Response: DoD has moved nonregulatory requirements and guidance
that do not significantly impact the
public, from DFARS to PGI to facilitate
rapid dissemination of any future
changes, thus streamlining the process.
Where there is related text in PGI, a link
to this text is imbedded in DFARS.
Through these links, the user is able to
view the related PGI text side-by-side
with the DFARS text. PGI also contains
information on training, deviations,
policy memoranda, and other
information (e.g., guidebooks) that is not
available in the DFARS.
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 makes no significant
change to DoD policy for contracting
with small business and small
disadvantaged business concerns.
C. Paperwork Reduction Act
The Paperwork Reduction Act does
not apply, because the rule does not
impose any information collection
requirements that require the approval
of the Office of Management and Budget
under 44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 219 and
252
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations
System.
Therefore, 48 CFR parts 219 and 252
are amended as follows:
I 1. The authority citation for 48 CFR
parts 219 and 252 continues to read as
follows:
I
E:\FR\FM\26APR1.SGM
26APR1
]]>Agencies
[Federal Register Volume 72, Number 80 (Thursday, April 26, 2007)]
[Rules and Regulations]
[Pages 20758-20761]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-7905]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 215, 231, and 252
RIN 0750-AF67
Defense Federal Acquisition Regulation Supplement; Excessive
Pass-Through Charges (DFARS Case 2006-D057)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: DoD has issued an interim rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement Section 852 of
the National Defense Authorization Act for Fiscal Year 2007. Section
852
[[Page 20759]]
requires DoD to prescribe regulations to ensure that pass-through
charges on contracts or subcontracts that are entered into for or on
behalf of DoD are not excessive in relation to the cost of work
performed by the relevant contractor or subcontractor.
DATES: Effective date: April 26, 2007.
Comment date: Comments on the interim rule should be submitted in
writing to the address shown below on or before June 25, 2007, to be
considered in the formation of the final rule.
ADDRESSES: You may submit comments, identified by DFARS Case 2006-D057,
using any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: dfars@osd.mil. Include DFARS Case 2006-D057 in the
subject line of the message.
Fax: (703) 602-0350.
Mail: Defense Acquisition Regulations System, Attn: Mr.
John McPherson, OUSD(AT&L)DPAP(CPF), IMD 3C132, 3062 Defense Pentagon,
Washington, DC 20301-3062.
Hand Delivery/Courier: Defense Acquisition Regulations
System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA
22202-3402.
Comments received generally will be posted without change to http:/
/www.regulations.gov, including any personal information provided.
FOR FURTHER INFORMATION CONTACT: Mr. John McPherson, (703) 602-0296.
SUPPLEMENTARY INFORMATION:
A. Background
This interim rule implements Section 852 of the National Defense
Authorization Act for Fiscal Year 2007 (Public Law 109-364). Section
852 requires DoD to prescribe regulations to ensure that pass-through
charges on contracts or subcontracts (or task or delivery orders) that
are entered into for or on behalf of DoD are not excessive in relation
to the cost of work performed by the relevant contractor or
subcontractor. To enable DoD to ensure that pass-through charges are
not excessive, this interim rule contains a solicitation provision and
a contract clause requiring offerors and contractors to identify the
percentage of work that will be subcontracted and, when subcontract
costs will exceed 70 percent of the total cost of work to be performed,
to provide information on indirect costs and profit and value added
with regard to the subcontract work.
This rule was not subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
B. Regulatory Flexibility Act
DoD does not expect this rule to have a significant economic impact
on a substantial number of small entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because DoD does not
expect a significant number of entities to propose excessive pass-
through charges under DoD contracts or subcontracts, and the
information required from offerors and contractors regarding pass-
through charges is minimal. Therefore, DoD has not performed an initial
regulatory flexibility analysis. DoD invites comments from small
businesses and other interested parties. DoD also will consider
comments from small entities concerning the affected DFARS subparts in
accordance with 5 U.S.C. 610. Such comments should be submitted
separately and should cite DFARS Case 2006-D057.
C. Paperwork Reduction Act
This interim rule contains a new information collection
requirement. The Office of Management and Budget (OMB) has approved the
information collection requirement for use through October 31, 2007,
under OMB Control Number 0704-0443, in accordance with the emergency
processing procedures of 5 CFR 1320.13. DoD invites comments on the
following aspects of the interim rule: (a) Whether the collection of
information is necessary for the proper performance of the functions of
DoD, including whether the information will have practical utility; (b)
the accuracy of the estimate of the burden of the information
collection; (c) ways to enhance the quality, utility, and clarity of
the information to be collected; and (d) ways to minimize the burden of
the information collection on respondents, including the use of
automated collection techniques or other forms of information
technology. The following is a summary of the information collection
requirement.
Title: Defense Federal Acquisition Regulation Supplement (DFARS);
Excessive Pass-Through Charges.
Type of Request: New collection.
Number of Respondents: 12,650.
Responses per Respondent: Approximately 1.
Annual Responses: 12,800.
Average Burden per Response: .51 hour.
Annual Burden Hours: 6,550.
Needs and Uses: DoD needs this information to ensure that pass-
through charges under DoD contracts and subcontracts are not excessive,
in accordance with Section 852 of Public Law 109-364. DoD contracting
officers will use the information to assess the value added by a
contractor or subcontractor in relation to proposed, billed, or claimed
indirect costs or profit on work performed by a subcontractor.
Affected Public: Businesses or other for-profit institutions.
Respondent's Obligation: Required to obtain or retain benefits.
Frequency: On occasion.
Written comments and recommendations on the proposed information
collection should be sent to Ms. Hillary Jaffe at the Office of
Management and Budget, Desk Officer for DoD, Room 10236, New Executive
Office Building, Washington, DC 20503, with a copy to the Defense
Acquisition Regulations System, Attn: Mr. John McPherson,
OUSD(AT&L)DPAP(CPF), IMD 3C132, 3062 Defense Pentagon, Washington, DC
20301-3062. Comments can be received from 30 to 60 days after the date
of this notice, but comments to OMB will be most useful if received by
OMB within 30 days after the date of this notice.
To request more information on this proposed information collection
or to obtain a copy of the proposal and associated collection
instruments, please write to the Defense Acquisition Regulations
System, Attn: Mr. John McPherson, OUSD(AT&L)DPAP(CPF), IMD 3C132, 3062
Defense Pentagon, Washington, DC 20301-3062.
D. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense that urgent and compelling reasons exist to publish an
interim rule prior to affording the public an opportunity to comment.
This interim rule implements Section 852 of the National Defense
Authorization Act for Fiscal Year 2007 (Public Law 109-364). Section
852 requires DoD to prescribe regulations, not later than May 1, 2007,
to ensure that pass-through charges on contracts or subcontracts (or
task or delivery orders) that are entered into for or on behalf of DoD
are not excessive in relation to the cost of work performed by the
relevant contractor or subcontractor. Comments received in response to
this interim rule will be considered in the formation of the final
rule.
[[Page 20760]]
List of Subjects in 48 CFR Parts 215, 231, and 252
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
0
Therefore, 48 CFR parts 215, 231, and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 215, 231, and 252 continues
to read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 215--CONTRACTING BY NEGOTIATION
0
2. Section 215.408 is amended by adding paragraph (3) to read as
follows:
215.408 Solicitation provisions and contract clauses.
* * * * *
(3) Use the provision at 252.215-7003, Excessive Pass-Through
Charges--Identification of Subcontract Effort, and the clause at
252.215-7004, Excessive Pass-Through Charges, in all solicitations and
contracts (including task or delivery orders) except for--
(i) Firm-fixed-price contracts awarded on the basis of adequate
price competition;
(ii) Fixed-price contracts with economic price adjustment, awarded
on the basis of adequate price competition;
(iii) Firm-fixed-price contracts for the acquisition of a
commercial item; or
(iv) Fixed-price contracts with economic price adjustment, for the
acquisition of a commercial item.
PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES
0
3. Sections 231.201-2 and 231.203 are added to read as follows:
231.201-2 Determining allowability.
(a) In addition to the requirements at FAR 31.201-2(a), a cost is
allowable only when it complies with the clause at 252.215-7004,
Excessive Pass-Through Charges.
231.203 Indirect costs.
(d) Excessive pass-through charges, as defined in the clause at
252.215-7004, are unallowable.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
4. Sections 252.215-7003 and 252.215-7004 are added to read as follows:
252.215-7003 Excessive pass-through charges--identification of
subcontract effort.
As prescribed in 215.408(3), use the following provision:
EXCESSIVE PASS-THROUGH CHARGES--IDENTIFICATION OF SUBCONTRACT EFFORT
(APR 2007)
(a) Definition. Excessive pass-through charge, as used in this
provision, is defined in the clause of this solicitation entitled
``Excessive Pass-Through Charges'' (DFARS 252.215-7004).
(b) General. The offeror's proposal shall exclude excessive
pass-through charges.
(c) Performance of work by the Contractor or a subcontractor.
(1) The offeror shall identify in its proposal the percent of effort
it intends to perform, and the percent expected to be performed by
each subcontractor, under the contract, task order, or delivery
order.
(2) If the offeror intends to subcontract more than 70 percent
of the total cost of work to be performed under the contract, task
order, or delivery order, the offeror shall identify in its
proposal--
(i) The amount of the offeror's indirect costs and profit
applicable to the work to be performed by the subcontractor(s); and
(ii) A description of the value added by the offeror as related
to the work to be performed by the subcontractor(s).
(3) If any subcontractor proposed under the contract, task
order, or delivery order intends to subcontract to a lower-tier
subcontractor more than 70 percent of the total cost of work to be
performed under its subcontract, the offeror shall identify in its
proposal--
(i) The amount of the subcontractor's indirect costs and profit
applicable to the work to be performed by the lower-tier
subcontractor(s); and
(ii) A description of the value added by the subcontractor as
related to the work to be performed by the lower-tier
subcontractor(s).
(End of provision)
252.215-7004 Excessive pass-through charges.
As prescribed in 215.408(3), use the following clause:
EXCESSIVE PASS-THROUGH CHARGES (APR 2007)
(a) Definitions. As used in this clause--
Excessive pass-through charge, with respect to a Contractor or
subcontractor that adds no or negligible value to a contract or
subcontract, means a charge to the Government by the Contractor or
subcontractor that is for indirect costs or profit on work performed
by a subcontractor (other than charges for the costs of managing
subcontracts and applicable indirect costs and profit based on such
costs).
No or negligible value means the Contractor or subcontractor
cannot demonstrate to the Contracting Officer that its effort added
substantive value to the contract or subcontract in accomplishing
the work performed under the contract.
(b) General. The Government will not pay excessive pass-through
charges. The Contracting Officer shall determine if excessive pass-
through charges exist.
(c) Performance of work by the Contractor or a subcontractor.
(1) If the Contractor changes the amount of subcontract effort
identified in its proposal such that it exceeds 70 percent of the
total cost of work to be performed under the contract, task order,
or delivery order, the Contractor shall provide the Contracting
Officer with a description of the value added by the Contractor as
related to the subcontract effort.
(2) If any subcontractor identified in the proposal changes the
amount of lower-tier subcontractor effort such that it exceeds 70
percent of the total cost of the work to be performed under its
subcontract, the Contractor shall provide the Contracting Officer
with a description of the value added by the subcontractor as
related to the work to be performed by the lower-tier
subcontractor(s).
(3) If any subcontractor not identified in the proposal
subcontracts to a lower-tier subcontractor more than 70 percent of
the total cost of work to be performed under its subcontract, the
Contractor shall provide the Contracting Officer with a description
of the value added by the subcontractor as related to the work to be
performed by the lower-tier subcontractor(s).
(d) Recovery of excessive pass-through charges. If the
Contracting Officer determines that excessive pass-through charges
exist--
(1) For fixed-price contracts, the Government shall be entitled
to a price reduction for the amount of excessive pass-through
charges included in the contract price; and
(2) For other than fixed-price contracts, the excessive pass-
through charges are unallowable in accordance with the provisions in
Subpart 31.2 of the Federal Acquisition Regulation (FAR) and Subpart
231.2 of the Defense FAR Supplement.
(e) Access to records. (1) The Contracting Officer, or
authorized representative, shall have the right to examine and audit
all the Contractor's records (as defined at FAR 52.215-2(a))
necessary to determine whether the Contractor proposed, billed, or
claimed excessive pass-through charges.
(2) For those subcontracts to which paragraph (f) of this clause
applies, the Contracting Officer, or authorized representative,
shall have the right to examine and audit all the subcontractor's
records (as defined at FAR 52.215-2(a)) necessary to determine
whether the subcontractor proposed, billed, or claimed excessive
pass-through charges.
(f) Flowdown. The Contractor shall insert the substance of this
clause, including this paragraph (f), in all subcontracts under this
contract, except for--
(1) Firm-fixed-price subcontracts awarded on the basis of
adequate price competition;
(2) Fixed-price subcontracts with economic price adjustment,
awarded on the basis of adequate price competition;
(3) Firm-fixed-price subcontracts for the acquisition of a
commercial item; or
(4) Fixed-price subcontracts with economic price adjustment, for
the acquisition of a commercial item.
[[Page 20761]]
(End of clause)
[FR Doc. E7-7905 Filed 4-25-07; 8:45 am]
BILLING CODE 5001-08-P
