Defense Federal Acquisition Regulation Supplement: Modification of DFARS Clause “Cancellation or Termination of Orders” (DFARS Case 2018-D035), 18225-18228 [2019-08483]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 84, Number 83 (Tuesday, April 30, 2019)]
[Proposed Rules]
[Pages 18225-18228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08483]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 239 and 252

[Docket DARS-2019-0018]
RIN 0750-AJ97


Defense Federal Acquisition Regulation Supplement: Modification 
of DFARS Clause ``Cancellation or Termination of Orders'' (DFARS Case 
2018-D035)

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

[[Page 18226]]


ACTION: Proposed rule.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to modify the text of an existing DFARS 
clause to clarify DoD's liability in the event DoD cancels or 
terminates a telecommunications services order, and include the text of 
another DFARS clause to streamline terms and conditions for contractors 
subject to both of the clauses, pursuant to action taken by the DoD 
Regulatory Reform Task Force.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before July 1, 2019, to be considered in 
the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2018-D035, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``DFARS Case 2018-D035.'' Select ``Comment Now'' and follow 
the instructions provided to submit a comment. Please include ``DFARS 
Case 2018-D035'' on any attached documents.
    [cir] Email: [email protected]. Include DFARS Case 2018-D035 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Carrie 
Moore, OUSD (A&S) DPC/DARS, Room 3B941, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to https://www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Carrie Moore, telephone 571-372-
6093.

SUPPLEMENTARY INFORMATION:

I. Background

    This rule proposes to modify the DFARS clause 252.239-7007, 
Cancellation or Termination of Orders, to: (1) Clarify limitations on 
the Government's obligation to reimburse a Contractor for 
nonrecoverable costs when the Government cancels an order for 
telecommunications services; and (2) incorporate the information 
currently included in DFARS clause 252.239-7008, Reuse Arrangements. 
Combining these clauses will result in 252.239-7008 being removed from 
the DFARS.

II. Discussion and Analysis

    The clauses at DFARS 252.239-7007 and 252.239-7008 are both 
included in solicitations, contracts, and basic agreements for 
telecommunications services. The clause at 252.239-7007 provides 
contractors with terms and conditions that apply in the event the 
Government cancels any of the services ordered under the agreement or 
contract, while the clause at 252.239-7008 is provides contractors with 
terms and conditions for the reuse of equipment and facilities 
purchased under a telecommunications order that is cancelled or 
terminated by the Government. Since both clauses are included in the 
same contracts and both clauses establish terms and conditions for the 
cancellation or termination of telecommunications orders, the text of 
the two clauses can be combined, without changing the intent. This will 
help minimize the number of clauses contained in the contract and 
streamline content for the contractor.
    This rule also amends DFARS clause 252.239-7007 to clarify that the 
Government will not reimburse the contractor for certain costs incurred 
prior to the issuance of an order under a communication services 
agreement or other contractual document. This clarification intends to 
prevent the contractor from incurring costs in anticipation of, but 
prior to, the establishment of a formal agreement/contract for services 
and the award of an order for such services. This rule also establishes 
within the clause a cap, based on the recurring and nonrecurring 
charges included in the contract, on the Government's maximum liability 
for the cancellation or termination of services. The purpose of this 
clarification is to create an upfront mutual understanding of the 
maximum amount of reimbursement due to the contractor in the event of 
cancellation or termination.
    The modification of this DFARS text 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 notice 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. One public comment 
was received on these clauses. The respondent recommended DFARS clause 
252.239-7007 be removed from the DFARS, because the content of the 
clause is redundant to information provided in Federal Acquisition 
Regulation (FAR) part 15, Contracting by Negotiation. However, the 
purpose of the clause is to implement standardized policy across DoD 
that addresses critical issues associated with the acquisition of 
telecommunication services. FAR part 15 provides contracting officers 
with the processes and procedures related to the solicitation, 
evaluation, and award of competitive and noncompetitive negotiated 
acquisitions; it does not provide the guidance contained in the clause, 
which ensures that all DoD telecommunications services contractors are 
subject to the same and equal terms and conditions regarding the 
Government's cancellation or termination of services. As such, DFARS 
clause 252.239-7007 is necessary to support DoD's needs. Subsequently, 
the DoD Task Force reviewed the requirements of DFARS clauses 252.239-
7007 and 252.239-7008 and determined that the clauses could be 
clarified and combined, which is the basis for this proposed rule.

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

    This proposed rule does not create any new provisions or clauses. 
The rule combines two clauses on the same topic into a single clause 
and makes minor modifications to clarify current practices. This rule 
does not change the applicability of the affected clauses, which are 
included in solicitations and contracts for telecommunications 
services, including those valued at or below the simplified acquisition 
threshold or for commercial services.

IV. 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 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

[[Page 18227]]

flexibility. The Office of Management and Budget, Office of Information 
and Regulatory Affairs, 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).

V. Executive Order 13771

    This rule is not expected to be subject to E.O. 13771, because this 
rule is not a significant regulatory action under E.O. 12866.

VI. Regulatory Flexibility Act

    DoD does not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because the rule is not creating any new requirements or changing any 
existing requirements for contractors. However, an initial regulatory 
flexibility analysis has been performed and is summarized as follows:
    The Department of Defense is proposing to amend the Defense Federal 
Acquisition Regulation Supplement (DFARS) to modify the text of DFARS 
clause 252.239-7007, Cancellation or Termination of Orders, to: Clarify 
DoD's liability in the event DoD cancels or terminates a 
telecommunications services order, and incorporate the text of DFARS 
clause 252.239-7008, Reuse Arrangements. Combining the requirements of 
these two clauses permits DFARS 252.239-7008 to be removed from the 
DFARS.
    The objectives of this proposed rule are to: Streamline contract 
terms and conditions pertaining to telecommunications services; prevent 
costs from being incurred in anticipation of, but prior to, the 
establishment of a formal agreement or contract and award of an order 
for telecommunications services; and, to create an upfront mutual 
understanding of the maximum amount of reimbursement due to the 
contractor in the event of cancellation or termination. The 
modification of these DFARS clauses supports a recommendation from the 
DoD Regulatory Reform Task Force.
    This rule is not expected to have a significant economic impact on 
a substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because it is simply 
combining two existing clauses that address the same topic into a 
single comprehensive clause, and clarifies the current practices 
regarding DoD liability to reimburse telecommunication services 
contractors in certain circumstances.
    Based on fiscal year (FY) 2018 data from the Federal Procurement 
Data System, the Government awarded approximately 8,670 contracts and 
orders for services under the Product and Supply Code (PSC) D3--
Information Technology and Telecommunications. Of the 8,670 contracts 
and orders awarded, approximately 28 percent of the awards were made to 
1,050 unique small businesses entities. The PSC D3 does not break down 
further into information technology services and telecommunications 
services; therefore, the number of contracts and orders awarded in FY 
2018 exclusively for telecommunications services is estimated to be 
fewer than the number awarded in FY 2018 under PSC D3 in its entirety.
    This proposed rule does not include any new reporting, 
recordkeeping, or other compliance requirements for small businesses. 
This rule does not duplicate, overlap, or conflict with any other 
Federal rules. There are no known significant alternative approaches to 
the proposed rule that would meet the proposed objectives.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities. DoD will also consider comments from small entities 
concerning the existing regulations in subparts affected by this rule 
in accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 610 (DFARS Case 2018-D035) 
in correspondence.

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).

List of Subjects in 48 CFR Parts 239 and 252

    Government procurement.

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

    Therefore, 48 CFR parts 239 and 252 are proposed to be amended as 
follows:

0
1. The authority citation for parts 239 and 252 continues to read as 
follows:

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

PART 239--ACQUISITION OF INFORMATION TECHNOLOGY


239.7411   [Amended]

0
2. Amend section 239.7411 by--
0
a. In paragraph (a) introductory text, removing the em dash and 
replacing it with a period;
0
b. In paragraphs (a)(1) through (5), removing the semicolons and adding 
periods in their places; and
0
c. Removing paragraph (a)(6).

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Revise section 252.239-7007 to read as follows:


252.239-7007  Cancellation or Termination of Orders.

    As prescribed in 239.7411(a)(5), use the following clause:

Cancellation or Termination of Orders (Date)

    (a) Definitions: As used in this clause--
    Actual nonrecoverable costs means the installed costs of the 
facilities and equipment, less cost of reusable materials, and less 
net salvage value.
    Basic cancellation liability means the actual nonrecoverable 
cost, which the Government shall reimburse the Contractor at the 
time services are cancelled.
    Basic termination liability means the nonrecoverable cost 
amortized in equal monthly increments throughout the liability 
period.
    Installed costs means the actual cost of equipment and materials 
specifically provided or used, plus the actual cost of installing 
(including engineering, labor, supervision, transportation, rights-
of-way, and any other items which are chargeable to the capital 
accounts of the Contractor), less any costs the government may have 
directly reimbursed the Contractor under the Special Construction 
and Equipment Charges clause of this agreement/contract.
    Net salvage value means the salvage value less the cost of 
removal.
    (b) If the Government cancels any of the services ordered under 
this agreement/contract, before the services are made available to 
the Government, or terminates any of these services after they are 
made available to the Government, the Government will reimburse the 
Contractor for the actual nonrecoverable costs the Contractor has 
reasonably incurred in providing facilities and equipment for which 
the Contractor has no foreseeable reuse. The Government will not 
reimburse the Contractor for any actual nonrecoverable costs 
incurred after notice of award, but prior to execution of the order.
    (c) When feasible, the Contractor shall reuse cancelled or 
terminated facilities or equipment to minimize the charges to the 
Government.
    (d) If at any time the Government requires that 
telecommunications facilities or equipment be relocated within the 
Contractor's service area, the Government will have the option of 
paying the costs of

[[Page 18228]]

relocating the facilities or equipment in lieu of paying any 
termination or cancellation charge under this clause. The basic 
cancellation liability or basic termination liability applicable to 
the facilities or equipment in their former location shall continue 
to apply to the facilities and equipment in their new location. 
Monthly recurring charges shall continue to be paid during the 
period.
    (e) When there is another requirement or foreseeable reuse in 
place of cancelled or terminated facilities or equipment, no charge 
shall apply and the basic cancellation liability or basic 
termination liability shall be appropriately reduced. When feasible, 
the Contractor shall promptly reuse discontinued channels or 
facilities, including equipment for which the Government is 
obligated to pay a minimum service charge.
    (f) The amount of the Government's liability upon cancellation 
or termination of any of the services ordered under this agreement/
contract will be determined under applicable tariffs governing 
cancellation and termination charges that--
    (1) Are filed by the Contractor with a governmental regulatory 
body, as defined in the Orders For Facilities and Services clause of 
this agreement/contract;
    (2) Are in effect on the date of termination; and
    (3) Provide specific cancellation or termination charges for the 
facilities and equipment involved or show how to determine the 
charges.
    (g) The amount of the Government's liability upon cancellation 
or termination of any of the services ordered under this agreement/
contract that are not subject to a governmental regulatory body will 
be determined under a mutually agreed schedule in the communication 
services authorization (CSA) or other contractual document.
    (h) If no applicable tariffs are in effect on the date of 
cancellation or termination or set forth in the applicable CSA or 
other contractual document, the Government's liability will be 
determined under the following settlement procedures--
    (1) The Contractor agrees to provide the Contracting Officer, in 
such reasonable detail as the Contracting Officer may require, 
inventory schedules covering all items of property or facilities in 
the Contractor's possession, the cost of which is included in the 
Basic Cancellation or Termination Liability for which the Contractor 
has no foreseeable reuse.
    (2) The Contractor shall use its best efforts to sell property 
or facilities when the Contractor has no foreseeable reuse or when 
the Government has not exercised its option to take title under the 
Title to Telecommunications Facilities and Equipment clause of this 
agreement/contract. The Contractor shall apply any proceeds of the 
sale to reduce any payments by the Government to the Contractor 
under a cancellation or termination settlement.
    (3) The Contractor shall record actual nonrecoverable costs 
under established accounting procedures prescribed by the cognizant 
governmental regulatory authority or, if no such procedures have 
been prescribed, under generally accepted accounting procedures 
applicable to the provision of telecommunication services for public 
use.
    (4) The net salvage value shall be deducted from the 
Contractor's installed cost. In determining net salvage value the 
Contractor shall consider the foreseeable reuse of the facilities 
and equipment by the Contractor. The Contractor shall make allowance 
for the cost of dismantling, removal, reconditioning, and disposal 
of the facilities and equipment when necessary either for the sale 
of facilities or their reuse by the Contractor in another location.
    (5) Upon termination of services, the Government will reimburse 
the Contractor for the nonrecoverable cost less such costs amortized 
to the date services are terminated-and establish the liability 
period as mutually agreed to but not to exceed ten years. In the 
case of either a cancellation or a termination, the Government's 
presumed maximum liability will be capped by the unpaid nonrecurring 
charges and the monthly recurring charges (MRCs) set out in the 
contract/agreement. The presumed maximum liability for MRCs will be 
capped at MRCs for the minimum service period and any required 
notice period.
    (6) When the basic cancellation liability or basic termination 
liability established by the CSA or other contractual document is 
based on estimated costs, the Contractor agrees to settle on the 
basis of actual cost at the time of cancellation or termination.
    (7) The Contractor agrees that, if after settlement but within 
the termination liability period of the services, should the 
Contractor make reuse of equipment or facilities which were treated 
as nonreusable or nonsalvable in the settlement, the Contractor 
shall reimburse the Government for the value of the equipment or 
facilities.
    (8) The Contractor agrees to exclude--
    (i) Any costs that are not included in determining cancellation 
and termination charges under the Contractor's standard practices or 
procedures; and
    (ii) Charges not ordinarily made by the Contractor for similar 
facilities or equipment, furnished under similar circumstances.
    (i) The Government may, under such terms and conditions as it 
may prescribe, make partial payments and payments on account against 
costs incurred by the Contractor in connection with the cancelled or 
terminated portion of this agreement/contract. The Government may 
make these payments if the Contracting Officer determines that the 
total of the payments is within the amount the Contractor is 
entitled. If the total of the payments is in excess of the amount 
finally agreed or determined to be due under this clause, the 
Contractor shall pay the excess to the Government upon demand.
    (j) Failure to agree shall be a dispute concerning a question of 
fact within the meaning of the Disputes clause.


(End of clause)


252.239-7008   [Removed and Reserved]

0
4. Remove and reserve section 252.239-7008.

[FR Doc. 2019-08483 Filed 4-29-19; 8:45 am]
 BILLING CODE 5001-06-P