Defense Federal Acquisition Regulation Supplement; Performance-Based Payments (DFARS Case 2011-D045), 4638-4642 [2012-1498]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 77, Number 19 (Monday, January 30, 2012)]
[Proposed Rules]
[Pages 4638-4642]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1498]


-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 232 and 252

RIN 0750-AH54


Defense Federal Acquisition Regulation Supplement; Performance-
Based Payments (DFARS Case 2011-D045)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: DoD is proposing to amend the Defense Federal Acquisition

[[Page 4639]]

Regulation Supplement (DFARS) to provide detailed guidance and 
instructions on the use of the performance-based payments analysis 
tool.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before March 30, 2012, to be considered 
in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2011-D045, 
using any of the following methods:
    Regulations.gov: https://www.regulations.gov.
    Submit comments via the Federal eRulemaking portal by inserting 
``DFARS Case 2011-D045'' under the heading ``Enter keyword or ID'' and 
selecting ``Search.'' Select the link ``Submit a Comment'' that 
corresponds with ``DFARS Case 2011-D045.'' Follow the instructions 
provided at the ``Submit a Comment'' screen. Please include your name, 
company name (if any), and ``DFARS Case 2011-D045'' on your attached 
document. Follow the instructions for submitting comments.
    Email: dfars@osd.mil. Include DFARS Case 2011-D045 in the subject 
line of the message.
    Fax: (703) 602-0350.
    Mail: Defense Acquisition Regulations System, Attn: Mr. Mark 
Gomersall, OUSD (AT&L) DPAP (DARS), Room 3B855, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to https://www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, telephone (703) 
602-0302.

SUPPLEMENTARY INFORMATION:

I. Background

    This rule proposes to provide requirements for the use of the 
performance-based payments (PBP) analysis tool. The PBP analysis tool 
is a cash-flow model for evaluating alternative financing arrangements, 
and is required to be used by all contracting officers contemplating 
the use of performance-based payments on new fixed-price type contract 
awards resulting from solicitations issued on or after July 1, 2011.

II. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is a significant regulatory action and, therefore, was subject to 
review under section 6(b) of E.O. 12866, Regulatory Planning and 
Review, dated September 30, 1993. This rule is not a major rule under 5 
U.S.C. 804.

III. Regulatory Flexibility Act

    DoD has prepared an initial regulatory flexibility analysis 
consistent with 5 U.S.C. 603. A copy of the analysis may be obtained 
from the point of contact specified herein. The analysis is summarized 
as follows:
    This rule proposes to provide detailed guidance and instructions on 
the use of the performance-based payments (PBP) analysis tool. The 
objective of the rule is to amend the DFARS to provide requirements for 
the use of the PBP analysis tool. The PBP analysis tool is a cash-flow 
model for evaluating alternative financing arrangements, and is 
required to be used by all contracting officers contemplating the use 
of performance-based payments on new fixed-price type contract awards 
resulting from solicitations issued on or after July 1, 2011.
    DoD does not expect this proposed 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 requiring the use of the PBP analysis tool by all contracting 
officers contemplating the use of performance-based payments on new 
fixed-price type contract awards does not require contractors to expend 
significant effort or cost. Since performance-based payments are 
already the preferred Government financing method, this rule is not 
expected to increase the frequency of use of such financing situations. 
No known alternatives to the rule have been identified.
    At this time, DoD is unable to estimate the number of small 
entities to which this rule will apply. Therefore, DoD invites comments 
from small business concerns and other interested parties on the 
expected impact of this rule on small entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2011-D045) in 
correspondence.

IV. Paperwork Reduction Act

    The proposed rule contains new information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35). DoD invites public 
comments on the following aspects of the proposed rule: (a) Whether the 
proposed 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 proposed 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) 
Part 232, Contract Financing.
    Type of Request: New collection.
    Number of Respondents: 570.
    Responses per Respondent: 1.
    Annual Responses: 570.
    Average Burden per Response: 1.0 hours.
    Annual Burden Hours: 570.
    Needs and Uses: This information collection is necessary in order 
to use the PBP analysis tool, required by all contracting officers 
contemplating the use of performance-based payments on new fixed-price 
type contract awards.
    Affected Public: Businesses or other for-profit and not-for-profit 
institutions.
    Frequency: On occasion.
    Written comments and recommendations on the proposed information 
collection should be sent to Ms. Jasmeet Seehra at the Office of 
Management and Budget, Desk Officer for DoD, Room 10236, New Executive 
Office Building, Washington, DC 20503, or email Jasmeet_K._Seehra@omb.eop.gov, with a copy to the Defense Acquisition Regulations 
System, Attn: Mr. Mark Gomersall, OUSD (AT&L) DPAP (DARS), Room 3B855, 
3060 Defense Pentagon, Washington, DC 20301-3060. Comments can be 
received

[[Page 4640]]

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. Mark Gomersall, OUSD (AT&L) DPAP (DARS), Room 3B855, 
3060 Defense Pentagon, Washington, DC 20301-3060, or email 
dfars@osd.mil. Include DFARS Case 2011-D045 in the subject line of the 
message.

List of Subjects in 48 CFR Parts 232 and 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 232 and 252 are proposed for amendment as 
follows:
    1. The authority citation for 48 CFR parts 232 and 252 is revised 
to read as follows:

    Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

PART 232--CONTRACT FINANCING

    2. In section 232.1001, add paragraph (a) to read as follows:


232.1001   Policy.

    (a) As with all contract financing, the purpose of performance-
based payments is to assist the contractor in the payment of costs 
incurred during the performance of the contract. Therefore, 
performance-based payments should never exceed total cost incurred at 
any point during the contract. See PGI 232.1001 for additional 
information on use of performance-based payments.
    3. In section 232.1004, revise the section heading and add 
paragraph (b) to read as follows:


232.1004   Procedures.

    (b) Prior to using performance-based payments, the contracting 
officer shall--
    (i) Agree with the offeror on price using customary progress 
payments before negotiation begins on the use of performance-based 
payments, except for modifications to contracts that already use 
performance-based payments;
    (ii) Analyze the performance-based payments schedule using the 
performance-based payments (PBP) analysis tool. The PBP analysis tool 
is on the DPAP Web site in the Cost, Pricing, and Finance section, 
performance-based payments analysis tool, at https://www.acq.osd.mil/dpap/cpf/Performance_based_payments.html.
    (A) If performance-based payments are desired, the contractor shall 
submit a proposed performance-based payments schedule which includes 
all performance-based payments events, completion criteria, and event 
values, along with the expected expenditure profile. If performance-
based payments are deemed practical, the Government will evaluate and 
negotiate the details of the performance-based payments schedule.
    (B) For modifications to contracts that already use performance-
based payments financing, the basis for negotiation must include 
performance-based payments. The (PBP) analysis tool will be used in the 
same manner to help determine the price for the modification. The only 
difference is that the baseline assuming customary progress payments 
will reflect an objective profit rate instead of a negotiated profit 
rate;
    (iii) Negotiate the consideration to be received by the Government 
if the performance-based payments payment schedule will be more 
favorable to the contractor than customary progress payments;
    (iv) Obtain the approval of the business clearance approving 
official, or one level above the contracting officer, whichever is 
higher, for the negotiated consideration; and
    (v) Document in the contract file that the performance-based 
payments schedule provides a mutually beneficial settlement position 
that reflects adequate consideration to the Government for the improved 
contractor cash flow.
* * * * *
    4. Add section 232.1005 to read as follows:


232.1005   Contract clauses.

    The contracting officer shall include the following clauses in 
contracts that include performance-based payments:
    (a) For performance-based payments made on a whole-contract basis, 
use the clause at 252.232-70XX, Performance-Based Payments--Whole-
Contract Basis.
    (b) For performance-based payments made on a deliverable-item 
basis, use the clause at 252.232-70YY, Performance-Based Payments--
Deliverable-Item Basis.

PART 252-SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    5. Add sections 252.232-70XX and 252.232-70YY to read as follows:


252.232-70XX  Performance-Based Payments--Whole-Contract Basis.

    As prescribed in 232.1005(a), use the following clause:

Performance-Based Payments--Whole-Contract Basis (DATE)

    (a) Performance-based payments shall form the basis for the 
contract financing payments provided under this contract, and shall 
apply to the whole contract. The performance-based payments schedule 
(Contract Attachment ----) describes the basis for payment, to 
include identification of the individual payment events, evidence of 
completion, and amount of payment due upon completion of each event.
    (b)(i) At no time shall cumulative performance-based payments 
exceed cumulative contract cost incurred under this contract. To 
ensure compliance with this requirement, the Contractor shall, in 
addition to providing the information required by FAR 52.232-32, 
submit supporting information for all payment requests using the 
following format:

[[Page 4641]]

[GRAPHIC] [TIFF OMITTED] TP30JA12.000

    (ii) The Contractor shall not submit payment requests more 
frequently than monthly.
    (iii) Incurred cost is determined by the Contractor's accounting 
books and records.


(End of clause)


252.232-70YY  Performance-Based Payments--Deliverable-Item Basis.

    As prescribed in 232.1005(b), use the following clause:

Performance-Based Payments--Deliverable-Item Basis (DATE)

    (a) Performance-based payments shall form the basis for the 
contract financing payments provided under this contract and shall 
apply to Contract Line Items (CLINs) ----, ----, and ----. The 
performance-based payments schedule (Contract Attachment ----) 
describes the basis for payment, to include identification of the 
individual payment events, CLINs to which each event applies, 
evidence of completion, and amount of payment due upon completion of 
each event.
    (b)(i) At no time shall cumulative performance-based payments 
exceed cumulative contract cost incurred under CLINs ----, ----, and 
----. To ensure compliance with this requirement, the Contractor 
shall, in addition to providing the information required by FAR 
52.232-32, submit supporting information for all payment requests 
using the following format:

[[Page 4642]]

[GRAPHIC] [TIFF OMITTED] TP30JA12.001

    (ii) The Contractor shall not submit payment requests more 
frequently than monthly.
    (iii) Incurred cost is determined by the Contractor's accounting 
books and records.


(End of clause)

[FR Doc. 2012-1498 Filed 1-27-12; 8:45 am]
BILLING CODE 5001-06-P