Defense Federal Acquisition Regulation Supplement: Contractor Purchasing System Review Threshold (DFARS Case 2017-D038), 25228-25229 [2019-11304]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Proposed Rules]
[Pages 25228-25229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11304]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 244

[Docket DARS-2019-0024]
RIN 0750-AJ48


Defense Federal Acquisition Regulation Supplement: Contractor 
Purchasing System Review Threshold (DFARS Case 2017-D038)

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

ACTION: Proposed rule.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to establish a DoD contractor purchasing 
system review dollar threshold that provides a regulatory basis for 
allowing DoD personnel to support other essential priorities and 
missions of greater contractual risk, while reducing regulatory impact 
on contractors.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before July 30, 2019, to be considered in 
the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2017-D038, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``DFARS Case 2017-D038.'' Select ``Comment Now'' and follow 
the instructions to submit a comment. Please include your name, company 
name (if any), and ``DFARS Case 2017-D038'' on any attached document.
    [cir] Email: [email protected]. Include DFARS Case 2017-D038 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Kimberly 
Bass, OUSD(A&S)DPAP/DARS, Room 3B941, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Instructions: 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: Kimberly Bass, telephone 571-372-6174.

SUPPLEMENTARY INFORMATION:

I. Background

    This proposed rule implements a recommendation from the Defense 
Contract Management Agency (DCMA) to raise the contractor purchasing 
system review (CPSR) threshold at Federal Acquisition Regulation 
44.302(a) from $25 million to $50 million. Currently, FAR 44.302(a) 
requires the administrative contracting officer (ACO) to determine 
whether a contractor's sales to the Government are expected to exceed 
$25 million during the next 12 months and, if so, perform a review to 
determine if a CPSR is needed. The ACO uses this dollar threshold in 
conjunction with the surveillance criteria cited at FAR 44.302(a), 
i.e., contractor past performance, and the volume, complexity, and 
dollar value of subcontracts. DCMA performs the preponderance of DoD 
CPSRs. Competitively awarded firm-fixed-price and competitively awarded 
fixed-price with economic price adjustment contracts and sales of 
commercial items pursuant to Part 12 are excluded from this 
requirement.
    FAR 44.302(a) specifically authorizes the head of the agency 
responsible for contract administration to raise or lower the $25 
million CPSR threshold if it is considered to be in the Government's 
best interest. The dollar threshold of $25 million cited at FAR 
44.302(a) has been unchanged since 1996. In 2016, the DCMA CPSR Group 
conducted an analysis to determine if raising the CPSR threshold would 
be beneficial. Based on the Group's findings, it was determined that 
adjusting the threshold upward to $50 million would appropriately 
account for inflation, reduce burden on small contractors, and allow a 
more efficient and effective use of CSPR resources to review larger 
contractors where more taxpayer dollars are at risk.

II. Discussion and Analysis

    This rule proposes to amend DFARS 244.302, Requirements, to 
establish within the DFARS a DoD CPSR dollar threshold of $50 million. 
With this threshold in place, it is estimated that DCMA ACOs can reduce 
the number of contractor reviews by approximately 20 percent, while 
reducing by only 2% the value of contract dollars covered by CSPRs. 
Thus, the Government will be adequately protected by the $50 million 
threshold.

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

    This rule does not add any new provisions or clauses or impact any 
existing provisions or clauses. The rule merely increases the DoD 
dollar threshold for conducting CPSRs to $50 million.

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

[[Page 25229]]

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 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., based 
on a review of historical data concerning the purchasing system, 
business system program. However, an initial regulatory flexibility 
analysis has been performed and is summarized as follows:
    DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to establish a DoD contractor purchasing 
system review (CPSR) dollar threshold.
    The objective of this rule is to create a new DFARS section at 
244.302 to establish a CPSR dollar threshold of $50 million. The 
threshold will be used in conjunction with other surveillance criteria 
cited at Federal Acquisition Regulation (FAR) 44.302(a), to include 
contractor past performance and the volume, complexity, and dollar 
value of subcontracts. The proposed rule establishes a DoD dollar 
threshold of $50 million for a formal CPSR; in effect, raising the 
current surveillance threshold of $25 million cited at FAR 44.302(a) 
for DoD contractors.
    In 2014, there were there were 667 unique entities for which 
administrative contracting officers (ACO) had recorded approved CPSR 
decisions in the Contract Business Analysis Repository. A 20% reduction 
in the number of CPSRs is expected to result from increasing the CPSR 
threshold from $25 million to $50 million for a total reduction of 
approximately 133 firms no longer meeting the criteria for a CPSR 
review. Contractor purchasing systems are eligible for a comprehensive 
follow-on review every three years. Based on this three-year review 
cycle, approximately 45 fewer contractors would be reviewed each year 
(133 firms/3-year cycle = 44.3, rounded to 45 fewer reviews conducted 
each year). Of the 45 entities, it is estimated that 35 of these 
contractors are large businesses and 10 are small entities.
    The $50 million dollar threshold should reduce the compliance 
burden for approximately 133 contractors, and permit a more prudent and 
efficient use of resources, prioritizing surveillance to the larger 
firms.
    For the approximately 133 contractors affected by this rule, there 
could be additional requirements for those firms to request consent to 
contract from the ACO, pursuant to FAR clause 52.244-2, Subcontracts. 
It is estimated that the annual number of consent to contract requests 
are approximately 12 per contractor.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules. There are no significant alternatives to the proposed 
rule that accomplish the stated objectives.
    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 2017-D038), in 
correspondence.

VII. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies. The 
rule contains information collection requirements cleared by the Office 
of Management and Budget under OMB control number 9000-0149, entitled 
``Subcontract Consent and Contractor's Purchasing System Review.'' The 
current clearance for OMB control number 9000-0149 already accounts for 
the reduction in burden associated with raising the DoD threshold for 
conducting CPSRs.

List of Subjects in 48 CFR Part 244

    Government procurement.

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

    Therefore, 48 CFR part 244 is proposed to be amended as follows:

PART 244--SUBCONTRACTING POLICIES AND PROCEDURES

0
1. The authority citation for 48 CFR part 244 continues to read as 
follows:

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

PART 244--SUBCONTRACTING POLICIES AND PROCEDURES

0
2. Section 244.302 is added to read as follows:


244.302  Requirements.

    (a) In lieu of the threshold at FAR 44.302(a), the ACO shall 
determine the need for a CPSR if a contractor's sales to the Government 
are expected to exceed $50 million during the next 12 months.

[FR Doc. 2019-11304 Filed 5-30-19; 8:45 am]
BILLING CODE 5001-06-P