Defense Federal Acquisition Regulation Supplement: Undefinitized Contract Action Definitization (DFARS Case 2015-D024), 30584-30587 [2018-14042]

Download as PDF 30584 Federal Register / Vol. 83, No. 126 / Friday, June 29, 2018 / Rules and Regulations Community Health Center, IHS/ABQ Alamo Health Center and Kenaitze Indian Tribe) filed on May 15, 2018, Bristol Bay Area Health Corporation filed on April 2, 2018, and Council of Athabascan Tribal Government filed on April 9, 2018 are dismissed as moot. 87. It is further ordered that, pursuant to 5 U.S.C. 801(a)(1)(A), the Commission shall send a copy of the Report and Order to Congress and to the Government Accountability Office pursuant to the Congressional Review Act. 88. It is further ordered that the Commission’s Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of the Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration. Federal Communications Commission. Katura Jackson, Federal Register Liaison Officer, Office of the Secretary. List of Subjects in 47 CFR Part 54 Communications common carriers, Health facilities, internet, Telecommunications. Final Rule For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 54 as follows: PART 54—UNIVERSAL SERVICE 1. The authority citation for part 54 continues to read as follows: ■ Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 254, 303(r), 403, and 1302 unless otherwise noted. 2. Amend § 54.675 by revising paragraph (a) to read as follows: ■ sradovich on DSK3GMQ082PROD with RULES § 54.675 Cap. (a) Amount of the annual cap. The aggregate annual cap on federal universal service support for health care providers shall be $571 million per funding year, of which up to $150 million per funding year will be available to support upfront payments and multi-year commitments under the Healthcare Connect Fund. (1) Inflation increase. In funding year 2018 and the subsequent funding years, the $571 million cap on federal universal support in the Rural Health Care Program shall be automatically increased annually to take into account increases in the rate of inflation as calculated in paragraph (a)(2) of this section. (2) Increase calculation. To measure increases in the rate of inflation for the VerDate Sep<11>2014 16:30 Jun 28, 2018 Jkt 244001 purposes of this paragraph (a), the Commission shall use the Gross Domestic Product Chain-type Price Index (GDP–CPI). To compute the annual increase as required by this paragraph (a), the percentage increase in the GDP–CPI from the previous year will be used. For instance, the annual increase in the GDP–CPI from 2017 to 2018 would be used for the 2018 funding year. The increase shall be rounded to the nearest 0.1 percent by rounding 0.05 percent and above to the next higher 0.1 percent and otherwise rounding to the next lower 0.1 percent. This percentage increase shall be added to the amount of the annual funding cap from the previous funding year. If the yearly average GDP–CPI decreases or stays the same, the annual funding cap shall remain the same as the previous year. (3) Public notice. When the calculation of the yearly average GDP– CPI is determined, the Wireline Competition Bureau shall publish a public notice in the Federal Register within 60 days announcing any increase of the annual funding cap based on the rate of inflation. (4) Amount of unused funds. All funds collected that are unused shall be carried forward into subsequent funding years for use in the Rural Health Care Program in accordance with the public interest and notwithstanding the annual cap. The Administrator shall report to the Commission, on a quarterly basis, funding that is unused from prior years of the Rural Health Care Program. (5) Application of unused funds. On an annual basis, in the second quarter of each calendar year, all funds that are collected and that are unused from prior years shall be available for use in the next full funding year of the Rural Health Care Program in accordance with the public interest and notwithstanding the annual cap as described in this paragraph (a). * * * * * [FR Doc. 2018–14073 Filed 6–28–18; 8:45 am] BILLING CODE 6712–01–P PO 00000 DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 215, 217, and 243 [Docket DARS–2016–0026] RIN 0750–AI99 Defense Federal Acquisition Regulation Supplement: Undefinitized Contract Action Definitization (DFARS Case 2015–D024) Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. AGENCY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to provide a more transparent means of documenting the impact of costs incurred during the undefinitized period of an undefinitized contract action on allowable profit. DATES: Effective June 29, 2018. FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, telephone 571–372– 6176. SUMMARY: SUPPLEMENTARY INFORMATION: I. Background DoD published a proposed rule in the Federal Register at 81 FR 73007 on October 21, 2016, to amend the DFARS to provide a more transparent means of documenting the impact of costs incurred during the undefinitized period of an undefinitized contract action (UCA), and to recognize when contractors demonstrate efficient management and internal cost control systems through the submittal of a timely, auditable proposal in furtherance of definitization of a UCA. In some cases, DoD contracting personnel have not documented their consideration of the reduced risk to the contractor of costs incurred during the undefinitized period of a UCA. While such costs generally present very little risk to the contractor, the contracting officer should consider the reasons for any delays in definitization in making their determination of the appropriate assigned value for contract type risk. II. Discussion and Analysis Two respondents submitted public comments in response to the proposed rule. DoD reviewed the public comments in the development of this final rule. An analysis of the comments is provided as follows: Frm 00060 Fmt 4700 Sfmt 4700 E:\FR\FM\29JNR1.SGM 29JNR1 Federal Register / Vol. 83, No. 126 / Friday, June 29, 2018 / Rules and Regulations A. Summary of Significant Changes 2. Costs Incurred Prior to Definitization The following changes were made to the language published in the proposed rule: 1. The term ‘‘auditable proposal’’ in 215.404–71–2 is revised as ‘‘qualifying proposal as defined in 217.7401(c)’’ for consistency with 10 U.S.C. 2326. 2. The instructions for completing blocks 24a and 24b have been revised for clarity. 3. The language at 215.404–71– 3(d)(2)(ii) is revised for clarity. Comment: One respondent stated that the requirements of DFARS 215.404– 71–3(d)(2), which direct contracting officers to assess the extent to which costs have been incurred prior to definitization of the UCA, are inconsistent with the tenets of the NDAA for FY 2017 and should also be deleted. Response: The requirements of DFARS 215.404–71–3(d)(2) are consistent with the requirements of section 811 of the NDAA for FY 2017, which are being implemented under DFARS case 2017–D022. B. Analysis of Public Comments sradovich on DSK3GMQ082PROD with RULES 1. Weighted Guidelines Revision Comment: One respondent did not see the need to change the current weighted guidelines form and structure to address unique requirements associated with establishing profit objectives for undefinitized contract actions, and therefore recommended no change to the current weighted guidelines application. The respondent asserted that the Government should comply with guidance provided by USD/AT&L, and the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, which stipulates that allowable profit should reflect the cost risk at the time that a contractor submits a qualifying proposal. The respondent stated that contractors should not be penalized for positive and efficient performance because they agreed to start work before final agreement on price, particularly when Government action or inaction is the cause of the delay. The respondent therefore asserted that profit should be based upon the risk at the time of the proposal and not at the time of negotiation. Response: The stated purpose of this rule is to provide a more transparent means of documenting the impact of costs incurred during the undefinitized period of a UCA, and to recognize when contractors demonstrate efficient management and internal cost control systems through the submittal of a timely, auditable proposal in furtherance of definitization of a UCA. Therefore, the weighted guidelines form is revised to provide a means of clearly demonstrating that the contracting officer has appropriately considered and documented the risk to the contractor during the undefinitized period, as well as the contractor’s due diligence in submitting a timely, auditable proposal. DFARS case 2017–D022 has been opened to implement section 811, Modified Restrictions on Undefinitized Contractual Actions, of the NDAA for FY 2017. VerDate Sep<11>2014 16:30 Jun 28, 2018 Jkt 244001 3. Management/Cost Control Weighted Guidelines Factor Adjustment Comment: One respondent expressed concern that the 1 percent adjustment to the management/cost control factor is tied to the contractor’s timely submission of an auditable proposal. The respondent stated that in many cases, industry submits timely, auditable proposals only to have the Government, usually after lengthy delay, deem them insufficient and request an updated proposal. This becomes an endless loop of auditing, requests for updated information (including actuals), more auditing, more requests for updated information, etc. Response: The adjustment to the management/cost control factor in the weighted guidelines is established to allow contracting officers to recognize when contractors demonstrate efficient management and internal cost control systems through the submittal of a timely, auditable proposal in furtherance of definitization of a UCA. It is incumbent on contractors to provide timely, auditable proposals in order to demonstrate their efficient management and internal cost control systems. 4. Timely UCA Definitization Comment: Both respondents expressed concern that the rule does not address the need for the Government to definitize UCAs in a timely manner. Response: To provide for enhanced management and oversight of UCAs, departments and agencies prepare and maintain semiannual Consolidated UCA Management Plans and UCA Management Reports to ensure contracting officers are actively and efficiently pursuing definitization of UCAs. Likewise, contractors are expected to submit timely, auditable proposals, including adequate supporting data in order to avoid unnecessary delays. PO 00000 Frm 00061 Fmt 4700 Sfmt 4700 30585 III. Applicability to Contracts at or Below the Simplified Acquisition Threshold (SAT) and for Commercial Items, Including Commercially Available Off-the-shelf (COTS) Items This rule amends the DFARS to provide a more transparent means of documenting the impact of costs incurred during the undefinitized period of an undefinitized contract action on allowable profit. The revisions do not add any new burdens or impact applicability of clauses and provisions at or below the simplified acquisition threshold, or to commercial items. IV. 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 not a significant regulatory action and, therefore, was not 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. V. Executive Order 13771 This rule is not an E.O. 13771, Reducing and Controlling Regulatory Costs, regulatory action, because this rule is not significant under E.O. 12866. VI. Regulatory Flexibility Act This 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. The objective of the rule is to gain visibility into the contracting officer’s rationale for the contract type risk values entered on the DD Form 1547, Record of Weighted Guidelines Application. The rule requires contracting officers to document in the price negotiation memorandum their rationale for assigning a specific contract type risk value. In addition, Item 24 on the DD Form 1547 is separated into Item 24a, Contract Type Risk (based on contractor incurred costs under a UCA) and Item 24b, Contract Type Risk (based on Government projected costs). This rule will not have a significant economic impact on a substantial number of small entities. This rule only E:\FR\FM\29JNR1.SGM 29JNR1 30586 Federal Register / Vol. 83, No. 126 / Friday, June 29, 2018 / Rules and Regulations changes processes that are internal to the Government by providing a more transparent means of documenting the impact of costs incurred during the undefinitized period of a UCA when calculating negotiation profit objectives. This rule does not revise the current regulatory requirements at DFARS 215.404–71–3(d)(2), which direct contracting officers to assess the extent to which costs have been incurred prior to definitization of the contract action. However, to recognize when contractors demonstrate efficient management and cost control through the submittal of a timely, auditable proposal in furtherance of definitization of a UCA, and the proposal demonstrates effective cost control from the time of award to the present, the contracting officer may add 1 percentage point to the value determined for management/cost control up to the maximum of 7 percent. There is no change to reporting or recordkeeping as a result of this rule. The rule does not duplicate, overlap, or conflict with any other Federal rules. There are no known significant alternative approaches to the rule that would meet the requirements. DoD considers the approach described in the proposed rule to be the most practical 215.404–71–2 and beneficial for both Government and industry. Performance risk. * VII. Paperwork Reduction Act The rule does not contain any 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). List of Subjects in 48 CFR Parts 215, 217, and 243 Government procurement. Amy G. Williams, Deputy, Defense Acquisition Regulations System. Therefore, 48 CFR parts 215, 217, and 243 are amended as follows: ■ 1. The authority citation for 48 CFR parts 215, 217, and 243 continues to read as follows: * * * * (e) * * * (2) * * * (iii) If the contractor demonstrates efficient management and cost control through the submittal of a timely, qualifying proposal (as defined in 217.7401(c)) in furtherance of definitization of an undefinitized contract action, and the proposal demonstrates effective cost control from the time of award to the present, the contracting officer may add 1 percentage point to the value determined for management/cost control up to the maximum of 7 percent. * * * * * 3. Amend section 215.404–71–3 by revising paragraphs (b) introductory text, (b)(1) through (3), and (d)(2) to read as follows: ■ Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. 215.404–71–3 Contract type risk and working capital adjustment. PART 215—CONTRACTING BY NEGOTIATION * * * * * (b) Determination. The following extract from the DD 1547 is annotated to explain the process. 2. Amend section 215.404–71–2 by adding paragraph (e)(2)(iii) to read as follows: ■ Assigned value Profit objective Item Contractor risk factors 24a ....... (1) (2)(i) (3) 24b ....... Contract Type Risk (based on incurred costs at the time of qualifying proposal submission). Contract Type Risk (based on Government estimated cost to complete) ................ (1) (2)(ii) (3) 24c ....... Totals .................................................................................................................. ........................ (3) (3) Costs financed Contractor risk factors 25 ......... sradovich on DSK3GMQ082PROD with RULES Item Working Capital (4) ........................................................................ (1) Select a value from the list of contract types in paragraph (c) of this section using the evaluation criteria in paragraph (d) of this section. See paragraph (d)(2) of this section. (2)(i) Insert the amount of costs incurred as of the date the contractor submits a qualifying proposal, such as under an undefinitized contract action, (excluding facilities capital cost of money) into the Block 24a column titled Base. (ii) Insert the amount of Government estimated cost to complete (excluding facilities capital cost of money) into the Block 24b column titled Base. (3) Multiply (1) by (2)(i) and (2)(ii), respectively for Blocks 24a and 24b. Add Blocks 24a and 24b and insert the totals in Block 24c. * * * * * VerDate Sep<11>2014 16:30 Jun 28, 2018 Jkt 244001 Length factor (5) (d) * * * (2) Mandatory. (i) The contracting officer shall assess the extent to which costs have been incurred prior to definitization of the contract action (also see 217.7404–6(a) and 243.204–70–6). When costs have been incurred prior to definitization, generally regard the contract type risk to be in the low end of the designated range. If a substantial portion of the costs have been incurred prior to definitization, the contracting officer may assign a value as low as 0 percent, regardless of contract type. (ii) Contracting officers shall document in the price negotiation memorandum the reason for assigning a specific contract type risk value, to include the extent to which any reduced cost risk during the undefinitized period PO 00000 Frm 00062 Fmt 4700 Sfmt 4700 Base Interest rate (6) Profit objective (7) (8) of performance was considered, in determining the negotiation objective. * * * * * PART 217—SPECIAL CONTRACTING METHODS 217.7404–6 [Amended] 4. Amend section 217.7404–6 by— a. In paragraph (b), removing ‘‘The contractor’s reduced cost risk for costs incurred’’ and adding in its place ‘‘Any reduced cost risk to the contractor for costs expected to be incurred’’ in its place; and ■ b. In paragraph (c), removing ‘‘contract file’’ and adding ‘‘price negotiation memorandum’’ in its place. ■ ■ E:\FR\FM\29JNR1.SGM 29JNR1 Federal Register / Vol. 83, No. 126 / Friday, June 29, 2018 / Rules and Regulations PART 243—CONTRACT MODIFICATIONS 243.204–70–6 [Amended] 5. Amend section 243.204–70–6 by— a. In paragraph (b), removing ‘‘The contractor’s reduced cost risk for costs incurred’’ and adding ‘‘Any reduced cost risk to the contractor for costs expected to be incurred’’ in its place; and ■ b. In paragraph (c), removing ‘‘contract action’’ and adding ‘‘unpriced change order’’ in its place and removing ‘‘contract file’’ and adding ‘‘price negotiation memorandum’’ in its place. ■ ■ [FR Doc. 2018–14042 Filed 6–28–18; 8:45 am] BILLING CODE 5001–06–P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 216, 247, and 252 [Docket DARS–2018–0031] RIN 0750–AJ91 Defense Federal Acquisition Regulation Supplement: Repeal of DFARS Clause ‘‘Requirements’’ (DFARS Case 2018–D030) Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. AGENCY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to remove a clause that is duplicative of an existing Federal Acquisition Regulation (FAR) clause. DATES: Effective June 29, 2018. FOR FURTHER INFORMATION CONTACT: Ms. Carrie Moore, telephone 571–372–6093. SUPPLEMENTARY INFORMATION: sradovich on DSK3GMQ082PROD with RULES SUMMARY: I. Background DoD is amending the DFARS to remove the DFARS clause 252.216– 7010, Requirements, the Alternate clause, the associated clause prescription at DFARS 216.506, and a cross-reference to the clause at DFARS 247.271–3(p). The DFARS clause is included in contracts for preparation of personal property for movement or storage, or for intra-city or intra-area movement; advises contractors that a requirements contract has been issued and how quantities work under the contract; that the delivery of items or performance of work is subject to the issuance of orders; and, that the Government shall order all VerDate Sep<11>2014 16:30 Jun 28, 2018 Jkt 244001 requirements covered by the contract from the contractor, unless certain circumstances apply. FAR clause, 52.216–21, Requirements, advises contractors of the same information in the DFARS clause, and also provides a date after which the contractor is not required to make any deliveries under the contract. The DFARS clause is no longer necessary, because the FAR clause applies to the situations in which the DFARS clause is prescribed for use and covers the information contained in the DFARS clause. As such, this DFARS clause is now redundant and can be removed. The removal of this DFARS clause supports a recommendation from the DoD Regulatory Reform Task Force. On February 24, 2017, the President signed Executive Order (E.O.) 13777, ‘‘Enforcing the Regulatory Reform Agenda,’’ which established a Federal policy ‘‘to alleviate unnecessary regulatory burdens’’ on the American people. In accordance with E.O. 13777, DoD established a Regulatory Reform Task Force to review and validate DoD regulations, including the DFARS. A public notification of the establishment of the DFARS Subgroup to the DoD Regulatory Reform Task Force, for the purpose of reviewing DFARS provisions and clauses, was published in the Federal Register at 82 FR 35741 on August 1, 2017, and requested public input. No public comments were received on this provision. Subsequently, the DoD Task Force reviewed the requirements of DFARS clause 252.216–7010, Requirements, and determined that the DFARS coverage was redundant and recommended removal. II. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Offthe-Shelf Items This rule does not add any new solicitation provisions or contract clauses. This rule only removes obsolete DFARS provision 252.216–7010, Requirements. Therefore, the rule does not impose any new requirements on contracts at or below the simplified acquisition threshold and for commercial items, including commercially available off-the-shelf items. III. Executive Orders 12866 and 13563 Executive Order (E.O.) 12866, Regulatory Planning and Review; and E.O. 13563, Improving Regulation and Regulatory Review, direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation PO 00000 Frm 00063 Fmt 4700 Sfmt 4700 30587 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. The Office of Management and Budget, Office of Information and Regulatory Affairs (OIRA), has determined that this is not a significant regulatory action as defined under section 3(f) of E.O. 12866 and, therefore, was not subject to review under section 6(b). This rule is not a major rule as defined at 5 U.S.C. 804(2). IV. Executive Order 13771 This rule is not an E.O. 13771, Reducing Regulation and Controlling Regulatory Costs, regulatory action, because this rule is not significant under E.O. 12866. V. Publication of This Final Rule for Public Comment Is Not Required by Statute The statute that applies to the publication of the Federal Acquisition Regulation (FAR) is the Office of Federal Procurement Policy statute (codified at title 41 of the United States Code). Specifically, 41 U.S.C 1707(a)(1) requires that a procurement policy, regulation, procedure or form (including an amendment or modification thereof) must be published for public comment if it relates to the expenditure of appropriated funds, and has either a significant effect beyond the internal operating procedures of the agency issuing the policy, regulation, procedure, or form, or has a significant cost or administrative impact on contractors or offerors. This final rule is not required to be published for public comment, because DoD is not issuing a new regulation; rather, this rule merely removes an obsolete clause from the DFARS. VI. Regulatory Flexibility Act Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under 41 U.S.C. 1707(a)(1) (see section V. of this preamble), the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable. Accordingly, no regulatory flexibility analysis is required and none has been prepared. VII. Paperwork Reduction Act The rule does not contain any information collection requirements that E:\FR\FM\29JNR1.SGM 29JNR1

Agencies

[Federal Register Volume 83, Number 126 (Friday, June 29, 2018)]
[Rules and Regulations]
[Pages 30584-30587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14042]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 215, 217, and 243

[Docket DARS-2016-0026]
RIN 0750-AI99


Defense Federal Acquisition Regulation Supplement: Undefinitized 
Contract Action Definitization (DFARS Case 2015-D024)

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

ACTION: Final rule.

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

SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to provide a more transparent 
means of documenting the impact of costs incurred during the 
undefinitized period of an undefinitized contract action on allowable 
profit.

DATES: Effective June 29, 2018.

FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, telephone 571-372-
6176.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD published a proposed rule in the Federal Register at 81 FR 
73007 on October 21, 2016, to amend the DFARS to provide a more 
transparent means of documenting the impact of costs incurred during 
the undefinitized period of an undefinitized contract action (UCA), and 
to recognize when contractors demonstrate efficient management and 
internal cost control systems through the submittal of a timely, 
auditable proposal in furtherance of definitization of a UCA. In some 
cases, DoD contracting personnel have not documented their 
consideration of the reduced risk to the contractor of costs incurred 
during the undefinitized period of a UCA. While such costs generally 
present very little risk to the contractor, the contracting officer 
should consider the reasons for any delays in definitization in making 
their determination of the appropriate assigned value for contract type 
risk.

II. Discussion and Analysis

    Two respondents submitted public comments in response to the 
proposed rule. DoD reviewed the public comments in the development of 
this final rule. An analysis of the comments is provided as follows:

[[Page 30585]]

A. Summary of Significant Changes

    The following changes were made to the language published in the 
proposed rule:
    1. The term ``auditable proposal'' in 215.404-71-2 is revised as 
``qualifying proposal as defined in 217.7401(c)'' for consistency with 
10 U.S.C. 2326.
    2. The instructions for completing blocks 24a and 24b have been 
revised for clarity.
    3. The language at 215.404-71-3(d)(2)(ii) is revised for clarity.

B. Analysis of Public Comments

1. Weighted Guidelines Revision
    Comment: One respondent did not see the need to change the current 
weighted guidelines form and structure to address unique requirements 
associated with establishing profit objectives for undefinitized 
contract actions, and therefore recommended no change to the current 
weighted guidelines application. The respondent asserted that the 
Government should comply with guidance provided by USD/AT&L, and the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, 
which stipulates that allowable profit should reflect the cost risk at 
the time that a contractor submits a qualifying proposal. The 
respondent stated that contractors should not be penalized for positive 
and efficient performance because they agreed to start work before 
final agreement on price, particularly when Government action or 
inaction is the cause of the delay. The respondent therefore asserted 
that profit should be based upon the risk at the time of the proposal 
and not at the time of negotiation.
    Response: The stated purpose of this rule is to provide a more 
transparent means of documenting the impact of costs incurred during 
the undefinitized period of a UCA, and to recognize when contractors 
demonstrate efficient management and internal cost control systems 
through the submittal of a timely, auditable proposal in furtherance of 
definitization of a UCA. Therefore, the weighted guidelines form is 
revised to provide a means of clearly demonstrating that the 
contracting officer has appropriately considered and documented the 
risk to the contractor during the undefinitized period, as well as the 
contractor's due diligence in submitting a timely, auditable proposal. 
DFARS case 2017-D022 has been opened to implement section 811, Modified 
Restrictions on Undefinitized Contractual Actions, of the NDAA for FY 
2017.
2. Costs Incurred Prior to Definitization
    Comment: One respondent stated that the requirements of DFARS 
215.404-71-3(d)(2), which direct contracting officers to assess the 
extent to which costs have been incurred prior to definitization of the 
UCA, are inconsistent with the tenets of the NDAA for FY 2017 and 
should also be deleted.
    Response: The requirements of DFARS 215.404-71-3(d)(2) are 
consistent with the requirements of section 811 of the NDAA for FY 
2017, which are being implemented under DFARS case 2017-D022.
3. Management/Cost Control Weighted Guidelines Factor Adjustment
    Comment: One respondent expressed concern that the 1 percent 
adjustment to the management/cost control factor is tied to the 
contractor's timely submission of an auditable proposal. The respondent 
stated that in many cases, industry submits timely, auditable proposals 
only to have the Government, usually after lengthy delay, deem them 
insufficient and request an updated proposal. This becomes an endless 
loop of auditing, requests for updated information (including actuals), 
more auditing, more requests for updated information, etc.
    Response: The adjustment to the management/cost control factor in 
the weighted guidelines is established to allow contracting officers to 
recognize when contractors demonstrate efficient management and 
internal cost control systems through the submittal of a timely, 
auditable proposal in furtherance of definitization of a UCA. It is 
incumbent on contractors to provide timely, auditable proposals in 
order to demonstrate their efficient management and internal cost 
control systems.
4. Timely UCA Definitization
    Comment: Both respondents expressed concern that the rule does not 
address the need for the Government to definitize UCAs in a timely 
manner.
    Response: To provide for enhanced management and oversight of UCAs, 
departments and agencies prepare and maintain semiannual Consolidated 
UCA Management Plans and UCA Management Reports to ensure contracting 
officers are actively and efficiently pursuing definitization of UCAs. 
Likewise, contractors are expected to submit timely, auditable 
proposals, including adequate supporting data in order to avoid 
unnecessary delays.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Items, Including Commercially 
Available Off-the-shelf (COTS) Items

    This rule amends the DFARS to provide a more transparent means of 
documenting the impact of costs incurred during the undefinitized 
period of an undefinitized contract action on allowable profit. The 
revisions do not add any new burdens or impact applicability of clauses 
and provisions at or below the simplified acquisition threshold, or to 
commercial items.

IV. 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 not a significant regulatory action and, therefore, was not 
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.

V. Executive Order 13771

    This rule is not an E.O. 13771, Reducing and Controlling Regulatory 
Costs, regulatory action, because this rule is not significant under 
E.O. 12866.

VI. Regulatory Flexibility Act

    This 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.
    The objective of the rule is to gain visibility into the 
contracting officer's rationale for the contract type risk values 
entered on the DD Form 1547, Record of Weighted Guidelines Application. 
The rule requires contracting officers to document in the price 
negotiation memorandum their rationale for assigning a specific 
contract type risk value. In addition, Item 24 on the DD Form 1547 is 
separated into Item 24a, Contract Type Risk (based on contractor 
incurred costs under a UCA) and Item 24b, Contract Type Risk (based on 
Government projected costs).
    This rule will not have a significant economic impact on a 
substantial number of small entities. This rule only

[[Page 30586]]

changes processes that are internal to the Government by providing a 
more transparent means of documenting the impact of costs incurred 
during the undefinitized period of a UCA when calculating negotiation 
profit objectives. This rule does not revise the current regulatory 
requirements at DFARS 215.404-71-3(d)(2), which direct contracting 
officers to assess the extent to which costs have been incurred prior 
to definitization of the contract action. However, to recognize when 
contractors demonstrate efficient management and cost control through 
the submittal of a timely, auditable proposal in furtherance of 
definitization of a UCA, and the proposal demonstrates effective cost 
control from the time of award to the present, the contracting officer 
may add 1 percentage point to the value determined for management/cost 
control up to the maximum of 7 percent.
    There is no change to reporting or recordkeeping as a result of 
this rule. The rule does not duplicate, overlap, or conflict with any 
other Federal rules.
    There are no known significant alternative approaches to the rule 
that would meet the requirements. DoD considers the approach described 
in the proposed rule to be the most practical and beneficial for both 
Government and industry.

VII. Paperwork Reduction Act

    The rule does not contain any 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).

List of Subjects in 48 CFR Parts 215, 217, and 243

    Government procurement.

Amy G. Williams,
Deputy, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 215, 217, and 243 are amended as follows:

0
1. The authority citation for 48 CFR parts 215, 217, and 243 continues 
to read as follows:

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

PART 215--CONTRACTING BY NEGOTIATION

0
2. Amend section 215.404-71-2 by adding paragraph (e)(2)(iii) to read 
as follows:


215.404-71-2   Performance risk.

* * * * *
    (e) * * *
    (2) * * *
    (iii) If the contractor demonstrates efficient management and cost 
control through the submittal of a timely, qualifying proposal (as 
defined in 217.7401(c)) in furtherance of definitization of an 
undefinitized contract action, and the proposal demonstrates effective 
cost control from the time of award to the present, the contracting 
officer may add 1 percentage point to the value determined for 
management/cost control up to the maximum of 7 percent.
* * * * *

0
3. Amend section 215.404-71-3 by revising paragraphs (b) introductory 
text, (b)(1) through (3), and (d)(2) to read as follows:


215.404-71-3   Contract type risk and working capital adjustment.

* * * * *
    (b) Determination. The following extract from the DD 1547 is 
annotated to explain the process.

----------------------------------------------------------------------------------------------------------------
                                                                                                      Profit
           Item                    Contractor risk factors        Assigned value       Base          objective
----------------------------------------------------------------------------------------------------------------
24a.......................  Contract Type Risk (based on                     (1)          (2)(i)             (3)
                             incurred costs at the time of
                             qualifying proposal submission).
24b.......................  Contract Type Risk (based on                     (1)         (2)(ii)             (3)
                             Government estimated cost to
                             complete).
                                                                 -----------------------------------------------
24c.......................     Totals...........................  ..............             (3)             (3)
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                                                      Profit
       Item            Contractor risk factors    Costs financed   Length factor   Interest rate     objective
----------------------------------------------------------------------------------------------------------------
25................  Working Capital (4).........             (5)             (6)             (7)             (8)
----------------------------------------------------------------------------------------------------------------

    (1) Select a value from the list of contract types in paragraph (c) 
of this section using the evaluation criteria in paragraph (d) of this 
section. See paragraph (d)(2) of this section.
    (2)(i) Insert the amount of costs incurred as of the date the 
contractor submits a qualifying proposal, such as under an 
undefinitized contract action, (excluding facilities capital cost of 
money) into the Block 24a column titled Base.
    (ii) Insert the amount of Government estimated cost to complete 
(excluding facilities capital cost of money) into the Block 24b column 
titled Base.
    (3) Multiply (1) by (2)(i) and (2)(ii), respectively for Blocks 24a 
and 24b. Add Blocks 24a and 24b and insert the totals in Block 24c.
* * * * *
    (d) * * *
    (2) Mandatory. (i) The contracting officer shall assess the extent 
to which costs have been incurred prior to definitization of the 
contract action (also see 217.7404-6(a) and 243.204-70-6). When costs 
have been incurred prior to definitization, generally regard the 
contract type risk to be in the low end of the designated range. If a 
substantial portion of the costs have been incurred prior to 
definitization, the contracting officer may assign a value as low as 0 
percent, regardless of contract type.
    (ii) Contracting officers shall document in the price negotiation 
memorandum the reason for assigning a specific contract type risk 
value, to include the extent to which any reduced cost risk during the 
undefinitized period of performance was considered, in determining the 
negotiation objective.
* * * * *

PART 217--SPECIAL CONTRACTING METHODS


217.7404-6   [Amended]

0
4. Amend section 217.7404-6 by--
0
a. In paragraph (b), removing ``The contractor's reduced cost risk for 
costs incurred'' and adding in its place ``Any reduced cost risk to the 
contractor for costs expected to be incurred'' in its place; and
0
b. In paragraph (c), removing ``contract file'' and adding ``price 
negotiation memorandum'' in its place.

[[Page 30587]]

PART 243--CONTRACT MODIFICATIONS


243.204-70-6   [Amended]

0
5. Amend section 243.204-70-6 by--
0
a. In paragraph (b), removing ``The contractor's reduced cost risk for 
costs incurred'' and adding ``Any reduced cost risk to the contractor 
for costs expected to be incurred'' in its place; and
0
b. In paragraph (c), removing ``contract action'' and adding ``unpriced 
change order'' in its place and removing ``contract file'' and adding 
``price negotiation memorandum'' in its place.

[FR Doc. 2018-14042 Filed 6-28-18; 8:45 am]
 BILLING CODE 5001-06-P