Defense Federal Acquisition Regulation Supplement: Prompt Payments of Small Business Contractors (DFARS Case 2018-D068), 25225-25228 [2019-11309]
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Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Proposed Rules
G. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
This action does not have tribal
implications, as specified in Executive
Order 13175. This action only applies to
state and local monitoring agencies
operating NCore monitoring sites in
Core Based Statistical Areas of
1,000,000 people or more. No tribal
governments will be subject to the
PAMS monitoring requirements. Thus,
Executive Order 13175 does not apply
to this action.
H. Executive Order 13045: Protection of
Children From Environmental Health
Risks and Safety Risks
The EPA interprets Executive Order
13045 as applying only to those
regulatory actions that concern
environmental health or safety risks that
the EPA has reason to believe may
disproportionately affect children, per
the definition of ‘‘covered regulatory
action’’ in section 2–202 of the
Executive Order. This action is not
subject to Executive Order 13045
because it does not concern an
environmental health risk or safety risk.
I. Executive Order 13211: Actions
Concerning Regulations That
Significantly Affect Energy Supply,
Distribution, or Use
§ 58.13
Monitoring network completion.
*
*
*
*
*
(h) The Photochemical Assessment
Monitoring sites required under 40 CFR
part 58 Appendix D, section 5(a) must
be physically established and operating
under all of the requirements of this
part, including the requirements of
appendix A, C, D, and E of this part, no
later than June 1, 2021.
*
*
*
*
*
[FR Doc. 2019–11406 Filed 5–30–19; 8:45 am]
BILLING CODE 6560–50–P
Defense Acquisition Regulations
System
Defense Federal Acquisition
Regulation Supplement: Prompt
Payments of Small Business
Contractors (DFARS Case 2018–D068)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Proposed rule.
DoD is proposing to amend
the Defense Federal Acquisition
Regulation Supplement (DFARS) to
implement a section of the National
Defense Authorization Act for Fiscal
Year 2019 that provides for accelerated
payments to small business contractors
and subcontractors.
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 2018–D068,
using any of the following methods:
Æ Federal eRulemaking Portal: https://
www.regulations.gov. Search for
‘‘DFARS Case 2018–D068.’’ Select
‘‘Comment Now’’ and follow the
instructions provided to submit a
comment. Please include ‘‘DFARS Case
SUMMARY:
The EPA believes that this action is
not subject to Executive Order 12898 (59
FR 7629, February 16, 1994) because it
does not establish an environmental
health or safety standard.
List of Subjects in 40 CFR Part 58
Ambient air monitoring, Ozone,
Photochemical Assessment Monitoring
Stations, Precursor monitoring.
Dated: May 23, 2019.
Andrew R. Wheeler,
Administrator.
For the reasons stated in the
preamble, the Environmental Protection
Agency proposes to amend part 58 of
title 40, chapter I, of the Code of Federal
Regulations as follows:
2018–D068’’ on any attached
documents.
Æ Email: osd.dfars@mail.mil. Include
DFARS Case 2018–D068 in the subject
line of the message.
Æ Fax: 571–372–6094.
Æ Mail: Defense Acquisition
Regulations System, Attn: Jennifer D.
Johnson, 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.
Jennifer D. Johnson, telephone 571–
372–6100.
SUPPLEMENTARY INFORMATION:
I. Background
DEPARTMENT OF DEFENSE
AGENCY:
K. Executive Order 12898: Federal
Actions To Address Environmental
Justice in Minority Populations and
Low-Income Populations
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2. Section 58.13 is amended by
revising paragraph (h) to read as
follows:
■
RIN 0750–AK25
This rulemaking does not involve
technical standards.
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Authority: 42 U.S.C. 7403, 7405, 7410,
7414, 7601, 7611, 7614, and 7619.
[Docket DARS–2019–0025]
J. National Technology Transfer and
Advancement Act (NTTAA)
16:12 May 30, 2019
1. The authority citation for part 58
continues to read as follows:
■
48 CFR Parts 212, 232, and 252
This action is not subject to Executive
Order 13211, because it is not a
significant regulatory action under
Executive Order 12866.
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PART 58—AMBIENT AIR QUALITY
SURVEILLANCE
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This rule proposes to revise the
DFARS to implement section 852 of the
National Defense Authorization Act
(NDAA) for Fiscal Year (FY) 2019 (Pub.
L. 115–232). Section 852 provides for
accelerated payments to small business
contractors and to small business
subcontractors by accelerating payments
to their prime contractors. Specifically,
section 852 requires DoD, to the fullest
extent permitted by law, to establish an
accelerated payment date for small
business contractors, with a goal of 15
days after receipt of a proper invoice, if
a specific payment date is not
established by contract. For contractors
that subcontract with small businesses,
section 852 requires DoD, to the fullest
extent permitted by law, to establish an
accelerated payment date, with a goal of
15 days after receipt of a proper invoice,
if: (1) A specific payment date is not
established by contract, and (2) the
contractor agrees to make accelerated
payments to the subcontractor without
any further consideration from, or fees
charged to, the subcontractor.
The requirements of section 852 are
similar to current DoD policy and
practice regarding payments to small
business contractors and subcontractors.
DFARS 232.903 states DoD’s policy of
assisting small businesses by paying
them as quickly as possible after receipt
of invoices and proper documentation,
and before normal payment due dates
established in the contract. In practice,
the Defense Financial Accounting
Service (DFAS) currently provides
accelerated payments to nearly all DoD
contractors, as permitted by law.
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Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Proposed Rules
II. Discussion and Analysis
This rule proposes to amend DFARS
parts 212, 232, and 252 to implement
section 852 of the NDAA for FY 2019.
In part 232, this rule proposes to add
section 232.009, Providing accelerated
payments to small business
subcontractors, to address compliance
with section 852. The clause at Federal
Acquisition Regulation (FAR) 52.232–
40, Providing Accelerated Payments to
Small Business Subcontractors, already
includes most of the requirements of
section 852. Therefore, DoD will
continue to use the FAR clause, in order
to avoid unnecessary duplication.
However, this rule proposes to add a
new contract clause at DFARS 252.232–
7XXX, Accelerating Payments to Small
Business Subcontractors—Prohibition
on Fees and Consideration. In
accordance with section 852, this new
clause prohibits contractors from
requiring any further consideration
from, or charging fees to, their small
business subcontractors when making
accelerated payments under FAR
52.232–40. The rule proposes to add
this new clause to the list at section
212.301, Solicitation provisions and
contract clauses for the acquisition of
commercial items.
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III. Expected Impact of the Proposed
Rule
Current DoD policy, as stated in
DFARS 232.903, is to pay small
business contractors as quickly as
possible after receipt of invoices and
proper documentation. This rule
proposes to specify that DoD will
provide payment as quickly as possible,
to the fullest extent permitted by law,
with a goal of 15 days after receipt of
proper invoices and documentation, and
before normal payment due dates. For
items that ordinarily require payment in
less than 15 days (e.g., perishable food),
DoD will provide payment as quickly as
possible after receipt of proper invoices
and documentation, and before the
normal payment due date.
With few exceptions, DoD will
provide accelerated payments to small
business contractors and to other
contractors that agree to provide
accelerated payments to their small
business subcontractors without further
consideration or fees. DoD will not be
able to provide accelerated payments if
such payments put DoD at risk of a
violation of law.
DoD estimates that 40,282 contractors
(including 30,498 small businesses) will
receive accelerated payments each year,
based on data obtained from the Federal
Procurement Data System and input
from subject matter experts.
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Specifically, DoD awarded contracts to
an average of 40,689 unique entities
(including 30,806 small businesses)
each year from FY 2016 through FY
2018. Subject matter experts estimated
that DoD would not provide accelerated
payments to approximately 1 percent
(407, including 308 small businesses) of
these contractors because such
payments would put DoD at risk of a
violation of law. Therefore,
approximately 40,282 contractors
(including 30,498 small businesses) per
year would receive accelerated
payments.
The clause at FAR 52.232–40,
Providing Accelerated Payments to
Small Business Subcontractors,
currently requires contractors to provide
accelerated payments to their small
business subcontractors when the
Government provides accelerated
payments to the contractors. DoD
contracting officers are required to
include this clause in DoD contracts. As
a result, DoD contractors should already
be providing accelerated payments to
small business subcontractors.
In accordance with section 852 of the
NDAA for FY 2019, this rule proposes
to prohibit contractors from requiring
any further consideration from, or
charging fees to, their small business
subcontractors when making accelerated
payments. This prohibition will be
communicated to contractors in a new
contract clause at DFARS 252.232–
7XXX, Accelerating Payments to Small
Business Subcontractors—Prohibition
on Fees and Consideration. This
prohibition would benefit small
business subcontractors who have been
required to provide consideration or pay
fees to the prime contractor in order to
receive accelerated payments. Any costs
for prime contractors to implement the
prohibition on fees and consideration
are expected to be de minimis since
DoD expects that only a small number
of contractors have required such
consideration or fees from their small
business subcontractors.
It is not possible for DoD to estimate
the number of small business
subcontractors who have been required
to provide consideration or pay fees for
accelerated payments from prime
contractors, nor is it possible to estimate
the dollar value of the consideration
provided or fees paid. The lack of
available data makes it difficult to
predict the impact of the proposed rule.
Depending on the extent to which small
business subcontractors have been
required to provide consideration or pay
fees to receive accelerated payments, the
proposed prohibition could result in
cost savings. DoD invites public
comment regarding the number of small
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businesses required to provide such
consideration or fees to prime
contractors, the basis for such estimates,
and the cost impact of the consideration
or fees.
IV. Applicability to Contracts at or
Below the Simplified Acquisition
Threshold and for Commercial Items,
Including Commercially Available Offthe-Shelf Items
DoD intends to apply the
requirements of section 852 of the
NDAA for FY 2019 to contracts at or
below the simplified acquisition
threshold (SAT) and to contracts for the
acquisition of commercial items,
including commercially available offthe-shelf (COTS) items.
A. Applicability to Contracts at or Below
the SAT
41 U.S.C. 1905 governs the
applicability of laws to contracts or
subcontracts in amounts not greater
than the simplified acquisition
threshold. It is intended to limit the
applicability of laws to such contracts or
subcontracts. 41 U.S.C. 1905 provides
that if a provision of law contains
criminal or civil penalties, or if the FAR
Council makes a written determination
that it is not in the best interest of the
Federal Government to exempt contracts
or subcontracts at or below the SAT, the
law will apply to them. The Principal
Director, Defense Pricing and
Contracting (DPC), is the appropriate
authority to make comparable
determinations for regulations to be
published in the DFARS, which is part
of the FAR system of regulations.
Given that the requirements of section
852 of the NDAA for FY 2019 were
enacted to provide accelerated
payments to small business contractors
and subcontractors, and since
approximately 96 percent of DoD
contracts are valued at or below the
SAT, DoD intends to determine that it
is in the best interest of the Federal
Government to apply the rule to
contracts at or below the SAT. An
exception for contracts at or below the
SAT would exclude contracts intended
to be covered by the law, thereby
undermining the overarching public
policy purpose of the law.
B. Applicability to Contracts for the
Acquisition of Commercial Items,
Including COTS Items
10 U.S.C. 2375 governs the
applicability of laws to DoD contracts
and subcontracts for the acquisition of
commercial items, including COTS
items, and is intended to limit the
applicability of laws to contracts and
subcontracts for the acquisition of
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Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Proposed Rules
commercial items, including COTS
items. 10 U.S.C. 2375 provides that if a
provision of law contains criminal or
civil penalties, or if the Under Secretary
of Defense for Acquisition and
Sustainment (USD(A&S)) makes a
written determination that it is not in
the best interest of the Federal
Government to exempt commercial item
contracts, the provision of law will
apply to contracts for the acquisition of
commercial items. Due to delegations of
authority from USD(A&S), the Principal
Director, DPC, is the appropriate
authority to make this determination.
Given that the requirements of section
852 of the NDAA for FY 2019 were
enacted to provide accelerated
payments to small business contractors
and subcontractors, and since more than
half of DoD’s contractors are small
businesses providing commercial items,
including COTS items, DoD intends to
determine that it is in the best interest
of the Federal Government to apply the
rule to contracts for the acquisition of
commercial items, including COTS
items, as defined at FAR 2.101. An
exception for contracts for the
acquisition of commercial items,
including COTS items, would exclude
the contracts intended to be covered by
the law, thereby undermining the
overarching public policy purpose of
the law.
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V. 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.
VI. Executive Order 13771
This rule is not expected to be subject
to the requirements of E.O. 13771,
because this rule is not a significant
regulatory action under E.O. 12866.
VII. Regulatory Flexibility Act
DoD expects that this proposed rule
may have a significant economic impact
on a substantial number of small entities
within the meaning of the Regulatory
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Flexibility Act, 5 U.S.C. 601, et seq.
Therefore, an initial regulatory
flexibility analysis has been performed
and is summarized as follows:
DoD is proposing to amend the
DFARS to implement section 852 of the
National Defense Authorization Act
(NDAA) for Fiscal Year (FY) 2019 (Pub.
L. 115–232). Section 852 requires DoD,
to the fullest extent permitted by law, to
establish an accelerated payment date
for small business contractors, with a
goal of 15 days after receipt of a proper
invoice, if a specific payment date is not
established by contract. For contractors
that subcontract with small businesses,
section 852 requires DoD, to the fullest
extent permitted by law, to establish an
accelerated payment date, with a goal of
15 days after receipt of a proper invoice,
if—(1) a specific payment date is not
established by contract and (2) the
contractor agrees to make accelerated
payments to the subcontractor without
any further consideration from, or fees
charged to, the subcontractor.
The objective of the rule is to provide
accelerated payments to small business
contractors and subcontractors. The
legal basis is section 852 of the NDAA
for FY 2019.
According to data obtained from the
Federal Procurement Data System, DoD
awarded contracts to an average of
30,806 unique small entities each year
from FY 2016 through FY 2018. DoD
estimates that it may not be possible to
provide accelerated payments to
approximately 308 small contractors
(1%) because such payments would put
DoD at risk of a violation of law.
Therefore, approximately 30,498 small
contractors per year would receive
accelerated payments.
This rule does not impose any new
reporting, recordkeeping or other
compliance requirements for small
entities.
This rule does not duplicate, overlap,
or conflict with any other Federal rules.
There are no known alternatives that
would accomplish the stated objectives
of the applicable statute.
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–D068), in
correspondence.
VIII. Paperwork Reduction Act
The rule does not contain any
information collection requirements that
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25227
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 212,
232, and 252
Government procurement.
Jennifer Lee Hawes,
Regulatory Control Officer, Defense
Acquisition Regulations System.
Therefore, 48 CFR parts 212, 232, and
252 are proposed to be amended as
follows:
1. The authority citations for 48 CFR
part 212, 232, and 252 continue to read
as follows:
■
Authority: 41 U.S.C. 1303 ad 48 CFR
chapter 1.
PART 212—ACQUISITION OF
COMMERCIAL ITEMS
2. Amend section 212.301 by adding
paragraph (f)(xiii)(G) to read as follows:
■
212.301 Solicitation provisions and
contract clauses for the acquisition of
commercial items.
*
*
*
*
*
(f) * * *
(xiii) * * *
(G) Use the clause at 252.232–7XXX,
Accelerating Payments to Small
Business Subcontractors—Prohibition
on Fees and Consideration, as
prescribed in 232.009–2(2).
*
*
*
*
*
PART 232—CONTRACT FINANCING
3. Add sections 232.009, 232.009–1,
and 232.009–2 to read as follows:
■
232.009 Providing accelerated payments
to small business subcontractors.
232.009–1
General.
Section 852 of the National Defense
Authorization Act for Fiscal Year 2019
(Pub. L. 115–232) requires DoD to
provide accelerated payments to small
business contractors and subcontractors,
to the fullest extent permitted by law,
with a goal of 15 days.
232.009–2
Contract clause.
Use the clause at 252.232–7XXX,
Accelerating Payments to Small
Business Subcontractors—Prohibition
on Fees and Consideration, in
solicitations and contracts, including
those using FAR part 12 procedures for
the acquisition of commercial items,
that include the clause at FAR 52.232–
40, Providing Accelerated Payments to
Small Business Subcontractors.
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Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Proposed Rules
Proposed rule.
Subpart 232.9—Prompt Payment
ACTION:
4. Revise section 232.903 to read as
follows:
SUMMARY:
■
232.903
Responsibilities.
In accordance with section 852 of the
National Defense Authorization Act for
Fiscal Year 2019 (Pub. L. 115–232), DoD
shall assist small business concerns by
providing payment as quickly as
possible, to the fullest extent permitted
by law, with a goal of 15 days after
receipt of proper invoices and all
required documentation, including
acceptance, and before normal payment
due dates established in the contract
(see 232.906(a)).
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
5. Add section 252.232–7XXX to read
as follows:
■
252.232–7XXX Accelerating Payments to
Small Business Subcontractors—
Prohibition on Fees and Consideration.
As prescribed in 232.009–2, use the
following clause:
ACCELERATING PAYMENTS TO SMALL
BUSINESS SUBCONTRACTORS—
PROHIBITION ON FEES AND
CONSIDERATION (DATE)
(a) In accordance with section 852 of
Public Law 115–232, the contractor shall not
require any further consideration from or
charge fees to the small business
subcontractor when making accelerated
payments to subcontractors under the clause
at FAR 52.232–40, Providing Accelerated
Payments to Small Business Subcontractors.
(b) Include the substance of this clause,
including this paragraph (b), in all
subcontracts with small business concerns,
including those for the acquisition of
commercial items.
(End of clause)
[FR Doc. 2019–11309 Filed 5–30–19; 8:45 am]
BILLING CODE 5001–06–P
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:
Æ 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.
Æ Email: osd.dfars@mail.mil. Include
DFARS Case 2017–D038 in the subject
line of the message.
Æ Fax: 571–372–6094.
Æ 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:
DEPARTMENT OF DEFENSE
I. Background
Defense Acquisition Regulations
System
48 CFR Part 244
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[Docket DARS–2019–0024]
RIN 0750–AJ48
Defense Federal Acquisition
Regulation Supplement: Contractor
Purchasing System Review Threshold
(DFARS Case 2017–D038)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
AGENCY:
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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
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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 Offthe-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
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]]>Agencies
[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Proposed Rules]
[Pages 25225-25228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11309]
=======================================================================
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212, 232, and 252
[Docket DARS-2019-0025]
RIN 0750-AK25
Defense Federal Acquisition Regulation Supplement: Prompt
Payments of Small Business Contractors (DFARS Case 2018-D068)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: DoD is proposing to amend the Defense Federal Acquisition
Regulation Supplement (DFARS) to implement a section of the National
Defense Authorization Act for Fiscal Year 2019 that provides for
accelerated payments to small business contractors and subcontractors.
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 2018-D068, using
any of the following methods:
[cir] Federal eRulemaking Portal: https://www.regulations.gov.
Search for ``DFARS Case 2018-D068.'' Select ``Comment Now'' and follow
the instructions provided to submit a comment. Please include ``DFARS
Case 2018-D068'' on any attached documents.
[cir] Email: [email protected]. Include DFARS Case 2018-D068 in
the subject line of the message.
[cir] Fax: 571-372-6094.
[cir] Mail: Defense Acquisition Regulations System, Attn: Jennifer
D. Johnson, 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. Jennifer D. Johnson, telephone
571-372-6100.
SUPPLEMENTARY INFORMATION:
I. Background
This rule proposes to revise the DFARS to implement section 852 of
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019
(Pub. L. 115-232). Section 852 provides for accelerated payments to
small business contractors and to small business subcontractors by
accelerating payments to their prime contractors. Specifically, section
852 requires DoD, to the fullest extent permitted by law, to establish
an accelerated payment date for small business contractors, with a goal
of 15 days after receipt of a proper invoice, if a specific payment
date is not established by contract. For contractors that subcontract
with small businesses, section 852 requires DoD, to the fullest extent
permitted by law, to establish an accelerated payment date, with a goal
of 15 days after receipt of a proper invoice, if: (1) A specific
payment date is not established by contract, and (2) the contractor
agrees to make accelerated payments to the subcontractor without any
further consideration from, or fees charged to, the subcontractor.
The requirements of section 852 are similar to current DoD policy
and practice regarding payments to small business contractors and
subcontractors. DFARS 232.903 states DoD's policy of assisting small
businesses by paying them as quickly as possible after receipt of
invoices and proper documentation, and before normal payment due dates
established in the contract. In practice, the Defense Financial
Accounting Service (DFAS) currently provides accelerated payments to
nearly all DoD contractors, as permitted by law.
[[Page 25226]]
II. Discussion and Analysis
This rule proposes to amend DFARS parts 212, 232, and 252 to
implement section 852 of the NDAA for FY 2019. In part 232, this rule
proposes to add section 232.009, Providing accelerated payments to
small business subcontractors, to address compliance with section 852.
The clause at Federal Acquisition Regulation (FAR) 52.232-40, Providing
Accelerated Payments to Small Business Subcontractors, already includes
most of the requirements of section 852. Therefore, DoD will continue
to use the FAR clause, in order to avoid unnecessary duplication.
However, this rule proposes to add a new contract clause at DFARS
252.232-7XXX, Accelerating Payments to Small Business Subcontractors--
Prohibition on Fees and Consideration. In accordance with section 852,
this new clause prohibits contractors from requiring any further
consideration from, or charging fees to, their small business
subcontractors when making accelerated payments under FAR 52.232-40.
The rule proposes to add this new clause to the list at section
212.301, Solicitation provisions and contract clauses for the
acquisition of commercial items.
III. Expected Impact of the Proposed Rule
Current DoD policy, as stated in DFARS 232.903, is to pay small
business contractors as quickly as possible after receipt of invoices
and proper documentation. This rule proposes to specify that DoD will
provide payment as quickly as possible, to the fullest extent permitted
by law, with a goal of 15 days after receipt of proper invoices and
documentation, and before normal payment due dates. For items that
ordinarily require payment in less than 15 days (e.g., perishable
food), DoD will provide payment as quickly as possible after receipt of
proper invoices and documentation, and before the normal payment due
date.
With few exceptions, DoD will provide accelerated payments to small
business contractors and to other contractors that agree to provide
accelerated payments to their small business subcontractors without
further consideration or fees. DoD will not be able to provide
accelerated payments if such payments put DoD at risk of a violation of
law.
DoD estimates that 40,282 contractors (including 30,498 small
businesses) will receive accelerated payments each year, based on data
obtained from the Federal Procurement Data System and input from
subject matter experts. Specifically, DoD awarded contracts to an
average of 40,689 unique entities (including 30,806 small businesses)
each year from FY 2016 through FY 2018. Subject matter experts
estimated that DoD would not provide accelerated payments to
approximately 1 percent (407, including 308 small businesses) of these
contractors because such payments would put DoD at risk of a violation
of law. Therefore, approximately 40,282 contractors (including 30,498
small businesses) per year would receive accelerated payments.
The clause at FAR 52.232-40, Providing Accelerated Payments to
Small Business Subcontractors, currently requires contractors to
provide accelerated payments to their small business subcontractors
when the Government provides accelerated payments to the contractors.
DoD contracting officers are required to include this clause in DoD
contracts. As a result, DoD contractors should already be providing
accelerated payments to small business subcontractors.
In accordance with section 852 of the NDAA for FY 2019, this rule
proposes to prohibit contractors from requiring any further
consideration from, or charging fees to, their small business
subcontractors when making accelerated payments. This prohibition will
be communicated to contractors in a new contract clause at DFARS
252.232-7XXX, Accelerating Payments to Small Business Subcontractors--
Prohibition on Fees and Consideration. This prohibition would benefit
small business subcontractors who have been required to provide
consideration or pay fees to the prime contractor in order to receive
accelerated payments. Any costs for prime contractors to implement the
prohibition on fees and consideration are expected to be de minimis
since DoD expects that only a small number of contractors have required
such consideration or fees from their small business subcontractors.
It is not possible for DoD to estimate the number of small business
subcontractors who have been required to provide consideration or pay
fees for accelerated payments from prime contractors, nor is it
possible to estimate the dollar value of the consideration provided or
fees paid. The lack of available data makes it difficult to predict the
impact of the proposed rule. Depending on the extent to which small
business subcontractors have been required to provide consideration or
pay fees to receive accelerated payments, the proposed prohibition
could result in cost savings. DoD invites public comment regarding the
number of small businesses required to provide such consideration or
fees to prime contractors, the basis for such estimates, and the cost
impact of the consideration or fees.
IV. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf Items
DoD intends to apply the requirements of section 852 of the NDAA
for FY 2019 to contracts at or below the simplified acquisition
threshold (SAT) and to contracts for the acquisition of commercial
items, including commercially available off-the-shelf (COTS) items.
A. Applicability to Contracts at or Below the SAT
41 U.S.C. 1905 governs the applicability of laws to contracts or
subcontracts in amounts not greater than the simplified acquisition
threshold. It is intended to limit the applicability of laws to such
contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision
of law contains criminal or civil penalties, or if the FAR Council
makes a written determination that it is not in the best interest of
the Federal Government to exempt contracts or subcontracts at or below
the SAT, the law will apply to them. The Principal Director, Defense
Pricing and Contracting (DPC), is the appropriate authority to make
comparable determinations for regulations to be published in the DFARS,
which is part of the FAR system of regulations.
Given that the requirements of section 852 of the NDAA for FY 2019
were enacted to provide accelerated payments to small business
contractors and subcontractors, and since approximately 96 percent of
DoD contracts are valued at or below the SAT, DoD intends to determine
that it is in the best interest of the Federal Government to apply the
rule to contracts at or below the SAT. An exception for contracts at or
below the SAT would exclude contracts intended to be covered by the
law, thereby undermining the overarching public policy purpose of the
law.
B. Applicability to Contracts for the Acquisition of Commercial Items,
Including COTS Items
10 U.S.C. 2375 governs the applicability of laws to DoD contracts
and subcontracts for the acquisition of commercial items, including
COTS items, and is intended to limit the applicability of laws to
contracts and subcontracts for the acquisition of
[[Page 25227]]
commercial items, including COTS items. 10 U.S.C. 2375 provides that if
a provision of law contains criminal or civil penalties, or if the
Under Secretary of Defense for Acquisition and Sustainment (USD(A&S))
makes a written determination that it is not in the best interest of
the Federal Government to exempt commercial item contracts, the
provision of law will apply to contracts for the acquisition of
commercial items. Due to delegations of authority from USD(A&S), the
Principal Director, DPC, is the appropriate authority to make this
determination.
Given that the requirements of section 852 of the NDAA for FY 2019
were enacted to provide accelerated payments to small business
contractors and subcontractors, and since more than half of DoD's
contractors are small businesses providing commercial items, including
COTS items, DoD intends to determine that it is in the best interest of
the Federal Government to apply the rule to contracts for the
acquisition of commercial items, including COTS items, as defined at
FAR 2.101. An exception for contracts for the acquisition of commercial
items, including COTS items, would exclude the contracts intended to be
covered by the law, thereby undermining the overarching public policy
purpose of the law.
V. 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.
VI. Executive Order 13771
This rule is not expected to be subject to the requirements of E.O.
13771, because this rule is not a significant regulatory action under
E.O. 12866.
VII. Regulatory Flexibility Act
DoD expects that this proposed rule may 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. Therefore, an
initial regulatory flexibility analysis has been performed and is
summarized as follows:
DoD is proposing to amend the DFARS to implement section 852 of the
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019
(Pub. L. 115-232). Section 852 requires DoD, to the fullest extent
permitted by law, to establish an accelerated payment date for small
business contractors, with a goal of 15 days after receipt of a proper
invoice, if a specific payment date is not established by contract. For
contractors that subcontract with small businesses, section 852
requires DoD, to the fullest extent permitted by law, to establish an
accelerated payment date, with a goal of 15 days after receipt of a
proper invoice, if--(1) a specific payment date is not established by
contract and (2) the contractor agrees to make accelerated payments to
the subcontractor without any further consideration from, or fees
charged to, the subcontractor.
The objective of the rule is to provide accelerated payments to
small business contractors and subcontractors. The legal basis is
section 852 of the NDAA for FY 2019.
According to data obtained from the Federal Procurement Data
System, DoD awarded contracts to an average of 30,806 unique small
entities each year from FY 2016 through FY 2018. DoD estimates that it
may not be possible to provide accelerated payments to approximately
308 small contractors (1%) because such payments would put DoD at risk
of a violation of law. Therefore, approximately 30,498 small
contractors per year would receive accelerated payments.
This rule does not impose any new reporting, recordkeeping or other
compliance requirements for small entities.
This rule does not duplicate, overlap, or conflict with any other
Federal rules.
There are no known alternatives that would accomplish the stated
objectives of the applicable statute.
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-D068), in
correspondence.
VIII. 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 212, 232, and 252
Government procurement.
Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 212, 232, and 252 are proposed to be
amended as follows:
0
1. The authority citations for 48 CFR part 212, 232, and 252 continue
to read as follows:
Authority: 41 U.S.C. 1303 ad 48 CFR chapter 1.
PART 212--ACQUISITION OF COMMERCIAL ITEMS
0
2. Amend section 212.301 by adding paragraph (f)(xiii)(G) to read as
follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(f) * * *
(xiii) * * *
(G) Use the clause at 252.232-7XXX, Accelerating Payments to Small
Business Subcontractors--Prohibition on Fees and Consideration, as
prescribed in 232.009-2(2).
* * * * *
PART 232--CONTRACT FINANCING
0
3. Add sections 232.009, 232.009-1, and 232.009-2 to read as follows:
232.009 Providing accelerated payments to small business
subcontractors.
232.009-1 General.
Section 852 of the National Defense Authorization Act for Fiscal
Year 2019 (Pub. L. 115-232) requires DoD to provide accelerated
payments to small business contractors and subcontractors, to the
fullest extent permitted by law, with a goal of 15 days.
232.009-2 Contract clause.
Use the clause at 252.232-7XXX, Accelerating Payments to Small
Business Subcontractors--Prohibition on Fees and Consideration, in
solicitations and contracts, including those using FAR part 12
procedures for the acquisition of commercial items, that include the
clause at FAR 52.232-40, Providing Accelerated Payments to Small
Business Subcontractors.
[[Page 25228]]
Subpart 232.9--Prompt Payment
0
4. Revise section 232.903 to read as follows:
232.903 Responsibilities.
In accordance with section 852 of the National Defense
Authorization Act for Fiscal Year 2019 (Pub. L. 115-232), DoD shall
assist small business concerns by providing payment as quickly as
possible, to the fullest extent permitted by law, with a goal of 15
days after receipt of proper invoices and all required documentation,
including acceptance, and before normal payment due dates established
in the contract (see 232.906(a)).
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
5. Add section 252.232-7XXX to read as follows:
252.232-7XXX Accelerating Payments to Small Business Subcontractors--
Prohibition on Fees and Consideration.
As prescribed in 232.009-2, use the following clause:
ACCELERATING PAYMENTS TO SMALL BUSINESS SUBCONTRACTORS--PROHIBITION ON
FEES AND CONSIDERATION (DATE)
(a) In accordance with section 852 of Public Law 115-232, the
contractor shall not require any further consideration from or
charge fees to the small business subcontractor when making
accelerated payments to subcontractors under the clause at FAR
52.232-40, Providing Accelerated Payments to Small Business
Subcontractors.
(b) Include the substance of this clause, including this
paragraph (b), in all subcontracts with small business concerns,
including those for the acquisition of commercial items.
(End of clause)
[FR Doc. 2019-11309 Filed 5-30-19; 8:45 am]
BILLING CODE 5001-06-P
