Defense Federal Acquisition Regulation Supplement: Undefinitized Contract Action Definitization (DFARS Case 2015-D024), 30584-30587 [2018-14042]
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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:
■
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§ 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
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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).
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[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:
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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
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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.
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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.
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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
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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:
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(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.
*
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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
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(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 .........
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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.
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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
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Base
Interest
rate
(6)
Profit
objective
(7)
(8)
of performance was considered, in
determining the negotiation objective.
*
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*
*
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.
■
■
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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:
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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
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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
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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
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]]>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]
=======================================================================
-----------------------------------------------------------------------
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
