Defense Federal Acquisition Regulation Supplement: Use of the Government Property Clause (DFARS Case 2015-D035), 18161-18163 [2019-08481]

Download as PDF Federal Register / Vol. 84, No. 83 / Tuesday, April 30, 2019 / Rules and Regulations including construction design. Data from the Federal Procurement Data System shows that, during FY 2017 and FY 2018, DoD awarded an average of 229 contracts per year for architectengineer services to an average of 190 unique small entities per year. In FY 2017 and FY 2018, DoD awarded approximately 30 contracts per year for architect-engineer services valued at more than the prior threshold of $400,000 and less than the new threshold of $1 million. This rule requires future contracts in this range to be awarded pursuant to FAR part 19 setaside procedures. DoD also awarded approximately 284 contracts per year for architect-engineer services valued at more than $1 million. This rule makes it possible for future contracts at those dollar values to be awarded pursuant to FAR part 19 set-aside procedures. There are more than 27,000 small entities listed in Small Business Administration’s Dynamic Small Business Search that provide architectengineer services. Of these entities, approximately 270 could benefit from this rule. This rule does not impose any new reporting, recordkeeping, or other compliance requirements for small entities. There are no known, significant alternatives that would meet the requirements of the applicable statute. VI. 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). Government procurement. PART 219—SMALL BUSINESS PROGRAMS 1. The authority citation for part 219 continues to read as follows: ■ Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. 2. Revise section 219.502–1 to read as follows: amozie on DSK9F9SC42PROD with RULES ■ 219.502–1 Requirements for setting aside acquisitions. 17:09 Apr 29, 2019 Jkt 247001 219.502–2 Comment: The respondent recommends that DFARS 245.107 be left ‘‘as is’’ and that contracting officers should insert FAR clause 52.245–1 into purchase orders for repair based on the type and cost of property to be repaired. Response: A determination for when provisions and clauses are used is driven primarily by the goods or services being procured and the type of contract being contemplated. Tying the use of FAR 52.245–1 to only some forms of Government-furnished property (GFP) and not others would be impractical given the variety of property classes, types, values, uses, and conditions. Discretion, in the case of inserting FAR clause 52.245–1 in purchase orders for repair, has led to inconsistent treatment of GFP. Moreover, the discretionary use of FAR 52.245–1 has been shown to drive process inconsistency, compromise accountability, and promote nonstandard processes. This complicates the administration of contracts, particularly upon contract closeout when proper disposition and adjudication of remaining Government property is crucial. [Amended] 3. Amend section 219.502–2, in paragraph (a)(iii), by removing ‘‘of under $400,000’’ and adding ‘‘under $1 million (10 U.S.C. 2855)’’ in its place. ■ [FR Doc. 2019–08486 Filed 4–29–19; 8:45 am] BILLING CODE 5001–06–P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Part 245 [Docket DARS–2016–0035] RIN 0750–AJ11 Defense Federal Acquisition Regulation Supplement: Use of the Government Property Clause (DFARS Case 2015–D035) Defense Acquisition Regulations System, Department of Defense (DoD). AGENCY: ACTION: Final rule. DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to expand the prescription for using the Federal Acquisition (FAR) Government property clause. SUMMARY: DATES: Effective April 30, 2019. FOR FURTHER INFORMATION CONTACT: Ms. I. Background Therefore, 48 CFR part 219 is amended as follows: VerDate Sep<11>2014 B. Analysis of Public Comments SUPPLEMENTARY INFORMATION: Jennifer Lee Hawes, Regulatory Control Officer, Defense Acquisition Regulations System. Do not set aside acquisitions for supplies that were developed and financed, in whole or in part, by Canadian sources under the U.S.Canadian Defense Development Sharing Program. Kimberly Bass, telephone 571–372– 6174. List of Subjects in 48 CFR Part 219 18161 DoD published a proposed rule in the Federal Register at 81 FR 73002 on October 21, 2016, to amend DFARS 245.107(1)(i) to require the use of FAR clause 52.245–1, Government Property, in all purchase orders for repair, maintenance, overhaul, or modification of Government property, regardless of the unit acquisition cost of the items to be repaired. One respondent submitted comments in response to the proposed rule. II. Discussion and Analysis A. Summary of Significant Changes From the Proposed Rule There are no changes from the proposed rule. PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 1. Support for Continued Discretionary Use of the FAR Clause 2. Training for Contracting Officers Comment: The respondent also stated that appropriate training should be provided to contracting officers on use of the Government property clause, rather than require a blanket prescription that fails to incorporate materiality. Response: The purpose of this rule is to achieve greater accountability of GFP, decrease the risk of misuse or loss of Government property, and mitigate potential ownership issues. As stated previously, tying the use of FAR clause 52.245–1 to a specific property class or type would be impractical given the variety of property types, values, uses, and conditions. By extension, training contracting officers on the potential materiality of asset types relative to the use FAR clause 52.245–1 would be unrealistic and ultimately exacerbate the accountability gap this rule seeks to close. 3. Impact to Small Business Comment: The respondent states the rule would adversely impact small business participation in repair, maintenance, and calibration activities, and that small businesses would be required to implement costly property systems to comply with the Government E:\FR\FM\30APR1.SGM 30APR1 18162 Federal Register / Vol. 84, No. 83 / Tuesday, April 30, 2019 / Rules and Regulations property clause and associated DFARS clauses invoked by its use. Response: Many small businesses that do business with the Federal Government have well-established property management systems by virtue of existing purchase orders for repair or other contracts that contain FAR clause 52.245–1. Further, many of the requirements contained in FAR 52.245– 1, e.g., receiving reports, discrepancy reports and property records, are typical commercial practices, and so not unduly burdensome. For example, customary commercial practice is to create receiving reports and keep records for incoming assets regardless of the source of such assets. In addition, the policy at FAR 45.103(b) permits contractors to use their own existing property management procedures, practices, and systems to account for and manage Government property. 4. Need for Further Analysis by DoD Comment: The respondent states that DoD should perform further analysis to ensure that its proposal is cost effective, and that the Government should ensure that cost savings from greater tracking of Government property included in contracts that meet the simplified acquisition threshold outweighs the increased cost of repair and possible contracting delays. Response: This rule is part of a larger DoD effort to resolve DoD’s material weakness relative to Government furnished property and accountability of assets is an important part of audit readiness. amozie on DSK9F9SC42PROD with RULES III. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Offthe-Shelf Items This rule applies to purchase orders awarded for repair, overhaul or maintenance of equipment, including, commercial items and commercially available off-the-shelf items. This includes purchase orders awarded under FAR part 12 procedures, where the value of repair, overhaul or maintenance services is at or below the simplified acquisition threshold. This rule does not apply to contracts for the acquisition of supplies, to include commercial items and commercially available off-the-shelf 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 VerDate Sep<11>2014 17:09 Apr 29, 2019 Jkt 247001 (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. E.O. 13771 This final rule is not subject to E.O. 13771, because this rule is not significant under E.O. 12866. VI. Regulatory Flexibility Act A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., and is summarized as follows: The objective of this rule is to strengthen the management and accountability of Government-furnished property (GFP) by amending the Defense Federal Acquisition Regulation Supplement (DFARS) to require that Federal Acquisition Regulation (FAR) clause 52.245–1, Government Property, be incorporated in all DoD purchase orders involving repair, maintenance, overhaul, or modification of Government property. This rule is necessary because the current language at FAR 45.107 provides an exception whereby contracting officers can choose not to include the clause in purchase orders for repairs of GFP, when the unit acquisition cost of Government property to be repaired does not exceed the simplified acquisition threshold (SAT). Acquisition value alone, however, is not an indicator of the criticality or sensitivity of the property. As an example, the acquisition cost of individual items of firearms, body armor, night-vision equipment, computers, or cryptologic devices may be below the SAT, but the accountability requirements for these items are fairly stringent. Omission of the Government property clause in purchase orders for repairs of these types of items increases the risk of misuse or loss of the property and could call into dispute their ownership. There were no significant issues raised by the public in response to the initial regulatory flexibility analysis. This rule will apply to small businesses that are awarded purchase orders for repair of Government property, where such purchase orders did not previously contain FAR clause 52.245–1. According to data available in PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 the Federal Procurement Data System for fiscal year 2015, DoD awarded 735 purchase orders involving the repair of Government property at or below the SAT to 530 unique vendors, of which 328 (approximately 56% percent) were small businesses. Entities affected by this rule would be required to prepare a property record and receiving report for the GFP provided. Additionally, entities would be required to acknowledge receipt of assets in the Wide Area WorkFlow system. The professional skill sets required are those of mid-level administrative personnel. DoD did not identify any significant alternatives to the rule that would have less impact on small businesses and still achieve accountability of GFP and resolve potential risks of loss or disputes for the ownership of property acquired with Government funds. VII. Paperwork Reduction Act This rule contains information collection requirements that have been approved by the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35). This information collection requirement has been assigned OMB Control Number 0704–0557, entitled DFARS Part 245; Use of the Government Property Clause for Repair of Government-furnished Property. List of Subjects in 48 CFR Part 245 Government procurement. Jennifer Lee Hawes, Regulatory Control Officer, Defense Acquisition Regulations System. Therefore, 48 CFR 245 is amended as follows: PART 245—GOVERNMENT PROPERTY 1. The authority citation for part 245 continues to read as follows: ■ Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. 2. Amend section 245.107 by— a. Removing paragraph (6); b. Redesignating paragraphs (1) through (5) as paragraphs (2) through (6), respectively; and ■ c. Adding a new paragraph (1). The addition reads as follows: ■ ■ ■ 245.107 Contract clauses. (1)(i) In lieu of the prescription at FAR 45.107(d), use the clause at FAR 52.245–1, Government Property, in all purchase orders for repair, maintenance, overhaul, or modification of Government property regardless of the unit acquisition cost of the items to be repaired. E:\FR\FM\30APR1.SGM 30APR1 Federal Register / Vol. 84, No. 83 / Tuesday, April 30, 2019 / Rules and Regulations (ii) For negotiated fixed-price contracts awarded on a basis other than submission of certified cost or pricing data for which Government property is provided, use the clause at FAR 52.245– 18163 1, Government Property, without its Alternate I. * * * * * [FR Doc. 2019–08481 Filed 4–29–19; 8:45 am] amozie on DSK9F9SC42PROD with RULES BILLING CODE 5001–06–P VerDate Sep<11>2014 17:09 Apr 29, 2019 Jkt 247001 PO 00000 Frm 00031 Fmt 4700 Sfmt 9990 E:\FR\FM\30APR1.SGM 30APR1

Agencies

[Federal Register Volume 84, Number 83 (Tuesday, April 30, 2019)]
[Rules and Regulations]
[Pages 18161-18163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08481]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 245

[Docket DARS-2016-0035]
RIN 0750-AJ11


Defense Federal Acquisition Regulation Supplement: Use of the 
Government Property Clause (DFARS Case 2015-D035)

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 expand the prescription 
for using the Federal Acquisition (FAR) Government property clause.

DATES: Effective April 30, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Kimberly Bass, telephone 571-372-
6174.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 81 FR 
73002 on October 21, 2016, to amend DFARS 245.107(1)(i) to require the 
use of FAR clause 52.245-1, Government Property, in all purchase orders 
for repair, maintenance, overhaul, or modification of Government 
property, regardless of the unit acquisition cost of the items to be 
repaired. One respondent submitted comments in response to the proposed 
rule.

II. Discussion and Analysis

A. Summary of Significant Changes From the Proposed Rule

    There are no changes from the proposed rule.

B. Analysis of Public Comments

1. Support for Continued Discretionary Use of the FAR Clause
    Comment: The respondent recommends that DFARS 245.107 be left ``as 
is'' and that contracting officers should insert FAR clause 52.245-1 
into purchase orders for repair based on the type and cost of property 
to be repaired.
    Response: A determination for when provisions and clauses are used 
is driven primarily by the goods or services being procured and the 
type of contract being contemplated. Tying the use of FAR 52.245-1 to 
only some forms of Government-furnished property (GFP) and not others 
would be impractical given the variety of property classes, types, 
values, uses, and conditions. Discretion, in the case of inserting FAR 
clause 52.245-1 in purchase orders for repair, has led to inconsistent 
treatment of GFP. Moreover, the discretionary use of FAR 52.245-1 has 
been shown to drive process inconsistency, compromise accountability, 
and promote nonstandard processes. This complicates the administration 
of contracts, particularly upon contract closeout when proper 
disposition and adjudication of remaining Government property is 
crucial.
2. Training for Contracting Officers
    Comment: The respondent also stated that appropriate training 
should be provided to contracting officers on use of the Government 
property clause, rather than require a blanket prescription that fails 
to incorporate materiality.
    Response: The purpose of this rule is to achieve greater 
accountability of GFP, decrease the risk of misuse or loss of 
Government property, and mitigate potential ownership issues. As stated 
previously, tying the use of FAR clause 52.245-1 to a specific property 
class or type would be impractical given the variety of property types, 
values, uses, and conditions. By extension, training contracting 
officers on the potential materiality of asset types relative to the 
use FAR clause 52.245-1 would be unrealistic and ultimately exacerbate 
the accountability gap this rule seeks to close.
3. Impact to Small Business
    Comment: The respondent states the rule would adversely impact 
small business participation in repair, maintenance, and calibration 
activities, and that small businesses would be required to implement 
costly property systems to comply with the Government

[[Page 18162]]

property clause and associated DFARS clauses invoked by its use.
    Response: Many small businesses that do business with the Federal 
Government have well-established property management systems by virtue 
of existing purchase orders for repair or other contracts that contain 
FAR clause 52.245-1. Further, many of the requirements contained in FAR 
52.245-1, e.g., receiving reports, discrepancy reports and property 
records, are typical commercial practices, and so not unduly 
burdensome. For example, customary commercial practice is to create 
receiving reports and keep records for incoming assets regardless of 
the source of such assets. In addition, the policy at FAR 45.103(b) 
permits contractors to use their own existing property management 
procedures, practices, and systems to account for and manage Government 
property.
4. Need for Further Analysis by DoD
    Comment: The respondent states that DoD should perform further 
analysis to ensure that its proposal is cost effective, and that the 
Government should ensure that cost savings from greater tracking of 
Government property included in contracts that meet the simplified 
acquisition threshold outweighs the increased cost of repair and 
possible contracting delays.
    Response: This rule is part of a larger DoD effort to resolve DoD's 
material weakness relative to Government furnished property and 
accountability of assets is an important part of audit readiness.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule applies to purchase orders awarded for repair, overhaul 
or maintenance of equipment, including, commercial items and 
commercially available off-the-shelf items. This includes purchase 
orders awarded under FAR part 12 procedures, where the value of repair, 
overhaul or maintenance services is at or below the simplified 
acquisition threshold. This rule does not apply to contracts for the 
acquisition of supplies, to include commercial items and commercially 
available off-the-shelf 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. E.O. 13771

    This final rule is not subject to E.O. 13771, because this rule is 
not significant under E.O. 12866.

VI. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
and is summarized as follows:
    The objective of this rule is to strengthen the management and 
accountability of Government-furnished property (GFP) by amending the 
Defense Federal Acquisition Regulation Supplement (DFARS) to require 
that Federal Acquisition Regulation (FAR) clause 52.245-1, Government 
Property, be incorporated in all DoD purchase orders involving repair, 
maintenance, overhaul, or modification of Government property. This 
rule is necessary because the current language at FAR 45.107 provides 
an exception whereby contracting officers can choose not to include the 
clause in purchase orders for repairs of GFP, when the unit acquisition 
cost of Government property to be repaired does not exceed the 
simplified acquisition threshold (SAT). Acquisition value alone, 
however, is not an indicator of the criticality or sensitivity of the 
property. As an example, the acquisition cost of individual items of 
firearms, body armor, night-vision equipment, computers, or cryptologic 
devices may be below the SAT, but the accountability requirements for 
these items are fairly stringent. Omission of the Government property 
clause in purchase orders for repairs of these types of items increases 
the risk of misuse or loss of the property and could call into dispute 
their ownership.
    There were no significant issues raised by the public in response 
to the initial regulatory flexibility analysis.
    This rule will apply to small businesses that are awarded purchase 
orders for repair of Government property, where such purchase orders 
did not previously contain FAR clause 52.245-1. According to data 
available in the Federal Procurement Data System for fiscal year 2015, 
DoD awarded 735 purchase orders involving the repair of Government 
property at or below the SAT to 530 unique vendors, of which 328 
(approximately 56% percent) were small businesses.
    Entities affected by this rule would be required to prepare a 
property record and receiving report for the GFP provided. 
Additionally, entities would be required to acknowledge receipt of 
assets in the Wide Area WorkFlow system. The professional skill sets 
required are those of mid-level administrative personnel.
    DoD did not identify any significant alternatives to the rule that 
would have less impact on small businesses and still achieve 
accountability of GFP and resolve potential risks of loss or disputes 
for the ownership of property acquired with Government funds.

VII. Paperwork Reduction Act

    This rule contains information collection requirements that have 
been approved by the Office of Management and Budget under the 
Paperwork Reduction Act (44 U.S.C. chapter 35). This information 
collection requirement has been assigned OMB Control Number 0704-0557, 
entitled DFARS Part 245; Use of the Government Property Clause for 
Repair of Government-furnished Property.

List of Subjects in 48 CFR Part 245

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR 245 is amended as follows:

PART 245--GOVERNMENT PROPERTY

0
1. The authority citation for part 245 continues to read as follows:

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


0
2. Amend section 245.107 by--
0
a. Removing paragraph (6);
0
b. Redesignating paragraphs (1) through (5) as paragraphs (2) through 
(6), respectively; and
0
c. Adding a new paragraph (1).
    The addition reads as follows:


245.107  Contract clauses.

    (1)(i) In lieu of the prescription at FAR 45.107(d), use the clause 
at FAR 52.245-1, Government Property, in all purchase orders for 
repair, maintenance, overhaul, or modification of Government property 
regardless of the unit acquisition cost of the items to be repaired.

[[Page 18163]]

    (ii) For negotiated fixed-price contracts awarded on a basis other 
than submission of certified cost or pricing data for which Government 
property is provided, use the clause at FAR 52.245-1, Government 
Property, without its Alternate I.
* * * * *
[FR Doc. 2019-08481 Filed 4-29-19; 8:45 am]
BILLING CODE 5001-06-P