Defense Federal Acquisition Regulation Supplement: Expediting Contract Closeout (DFARS Case 2017-D042), 27275-27277 [2021-10580]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 86, Number 96 (Thursday, May 20, 2021)]
[Rules and Regulations]
[Pages 27275-27277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10580]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 204, 212 and 252

[Docket DARS-2019-0047]
RIN 0750-AJ52


Defense Federal Acquisition Regulation Supplement: Expediting 
Contract Closeout (DFARS Case 2017-D042)

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

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to permit expedited contract 
closeout through a waiver by the contractor and the Government of 
entitlement to any residual dollar amounts that are due to either party 
at the time of contract closeout. The changes are necessary to 
establish an expedited contract closeout agreement that will save 
administrative costs for both the contractor and the Government.

DATES: Effective May 20, 2021.

FOR FURTHER INFORMATION CONTACT: Ms. Kimberly Ziegler, telephone 571-
372-6095.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 85 FR 
19719 on April 8, 2020, to implement an expedited contract closeout 
process in the DFARS. The rule adds a new contract clause at DFARS 
252.204-7022, Expediting Contract Closeout, and a prescription for the 
clause at DFARS 204.804-70. The clause will be used when the 
contracting officer intends to expedite the contract closeout process 
by having the contractor and the Government waive entitlement to a 
residual dollar amount up to $1,000 at the time of contract closeout. 
Four respondents submitted public comments in response to the proposed 
rule.

II. Discussion and Analysis

    DoD reviewed the public comments in the development of the final 
rule. One respondent provided a comment on the DoD budget that was 
outside the scope of this rule. A discussion of the remaining comments 
and the changes made to the rule as a result of those comments is 
provided, as follows:

A. Summary of Significant Changes From the Proposed Rule

    Minor edits were made to the final rule to account for baseline 
updates necessitated by publication of other DFARS interim or final 
rules. Edits were made to the proposed rule to clarify the Government's 
intent regarding the determination of a residual amount.

B. Analysis of Public Comments

1. General Support for the Rule
    Comment: Some respondents express support for the rule.
    Response: DoD acknowledges support for the rule.
2. Application of the Rule
    Comment: Some respondents support expanding the application of the 
expedited closeout process to other procurements, to include those 
issued under FAR parts 8, 15, and 16, and DoD-funded assisted 
acquisitions regardless of awarding agency.
    Response: The rule does not exclude DoD contracts or orders issued 
against DoD contracts. DoD does not have the authority to impose the 
expedited contract closeout clause on non-DoD contracts or assisted 
acquisitions conducted by non-DoD agencies.
3. Clarification of the Process
    Comment: Some respondents express concern about the bilateral 
agreement to waive the entitlement of up to $1,000 occurring in advance 
of contract closeout. A respondent recommends that the determination to 
invoke the clause and the expedited contract closeout process be 
mutually agreed by the Government and contractor at time of contract 
closeout.
    Response: Use of the clause is not mandatory. The rule permits 
contracting officers to insert the clause in solicitations and 
resulting contracts, at their discretion, unless the successful offeror 
indicates they do not agree to the inclusion of the clause in the 
resulting contract. The agreement to waive the entitlement at the time 
of contract award permits the Government and contractor to complete the 
applicable closeout procedures at FAR 4.804, without having to execute 
a bilateral contract modification to invoke the clause or close the 
contract. The Government and contractor should reach a bilateral 
agreement during the normal closeout processes in FAR 4.804. The text 
of the final rule is revised to clarify that completion of the contract 
closeout procedures at FAR 4.804 is required.

[[Page 27276]]

    Comment: Some respondents request clarification on how the residual 
amount will be determined.
    Response: Contracting officers are still required to complete all 
of the applicable closeout requirements at FAR 4.804 when executing the 
expedited contract closeout procedures under this rule. The closeout 
requirements at FAR 4.804 should result in a determination of any 
residual dollar amounts owed to either party at the end of the 
contract.
4. Integrity and Public Trust
    Comment: A respondent expresses concern that the proposed rule 
might negatively impact public trust because the waiver process may 
provide a mechanism for abuse by either contractors or the Government. 
Of specific concern is the potential for a contractor being permitted 
to provide less than the contract requires or, conversely, with the 
Government paying less than is legitimately owed under the contract 
price structure. The respondent expresses concern that public 
perception of the potential for abuse could outweigh the benefits of 
the intended cost efficiencies.
    Response: FAR 4.804-5 directs contracting officers to initiate 
contract closeout after receiving evidence of physical completion, as 
defined in FAR 4.804-4.
5. Initial Regulatory Flexibility Analysis
    Comment: A respondent questions whether the impact on small 
business was accurately reflected in the initial regulatory flexibility 
analysis and asserts that the numbers were not comprehensive enough to 
estimate the impact on small business.
    Response: See section VI of this preamble for revised and expanded 
analysis of the impact on small business.

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

    This rule creates a new clause at DFARS 252.204-7022, Expediting 
Contract Closeout. The objective of the rule is to establish an 
expedited contract closeout agreement and instructions that will save 
administrative costs for both the contractor and the Government. DoD 
plans to apply this clause to solicitations and contracts for 
acquisitions valued at or below the simplified acquisition threshold 
and to acquisitions of commercial items, including COTS items. These 
categories of acquisitions are those most likely to benefit from 
expedited contract closeout.

IV. Executive Order 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, 
or reducing costs, or 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.

V. Congressional Review Act

    As required by the Congressional Review Act (5 U.S.C. 801-808) 
before an interim or final rule takes effect, DoD will submit a copy of 
the interim or final rule with the form, Submission of Federal Rules 
under the Congressional Review Act, to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States. A 
major rule under the Congressional Review Act cannot take effect until 
60 days after it is published in the Federal Register. The Office of 
Information and Regulatory Affairs has determined that this rule is not 
a major rule as defined by 5 U.S.C. 804.

VI. Regulatory Flexibility Act

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA is summarized as follows:
    This rule amends the Defense Federal Acquisition Regulation 
Supplement (DFARS) to permit expedited contract closeout through the 
waiver of entitlement by the contractor and the Government to any 
residual contract dollar amount of $1,000 or less at the time of 
contract closeout. The new DFARS clause will apply to solicitations and 
contracts, to include contracts valued at or below the simplified 
acquisition threshold and contracts for commercial items and 
commercially available off-the-shelf (COTS) items.
    The objective of the rule is to avoid expending contractor and 
Government administrative resources in amounts greater than a residual 
contract dollar amount of $1,000 or less at the time of contract 
closeout.
    One public comment questioned whether the impact on small business 
was accurately reflected in the initial regulatory flexibility analysis 
(IRFA) and asserted that the numbers were not comprehensive enough to 
estimate the impact on small business. The IRFA estimated the impact 
based only upon those contracts administered by the Defense Contract 
Management Agency; however, the data did not identify the number of 
contracts awarded to small entities. Since the initial assessment, DoD-
wide data was obtained and a more comprehensive FRFA has been 
conducted. There were no changes made to the rule as a result of this 
comment and the expanded analysis.
    The rule will likely affect a large number of small entities that 
have been or will be awarded contracts, including those under FAR part 
12 procedures for the acquisition of commercial items, including COTS 
items. Data was obtained from the Electronic Data Access module of the 
Procurement Integrated Enterprise Environment for physically complete 
contracts that are eligible for closeout and have a residual contract 
balance that is less than $1,000 but more than $0. These actions were 
then compared to the Federal Procurement Data System to estimate the 
number of those contracts awarded to small entities; however, the data 
did not identify the number of unique small entities.
    As of the end of fiscal year 2020, the data indicates that there 
were an estimated 20,884 DoD contracts with total residual contract 
amounts valued at approximately $1,844,101 that meet the criteria for 
application of the rule. Of those 20,884 contracts, it is estimated 
that 14,840 contracts with residual contract value of approximately 
$1,294,859 were awarded to small entities. The data further reflects 
that approximately 9,292 contracts had a remaining balance due to the 
contractor of $1,000 or less and 5,548 contracts indicated a credit due 
to the Government of $1,000 or less.
    There are no known, significant, alternative approaches that would 
accomplish the objectives of the rule.

VII. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

[[Page 27277]]

List of Subjects in 48 CFR Parts 204, 212, and 252

    Government procurement.

Jennifer D. Johnson,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 204, 212, and 252 are amended as follows:

0
1. The authority citation for 48 CFR parts 204, 212, and 252 continues 
to read as follows:

    Authority:  41 US.C. 1303 and 48 CFR chapter 1.

PART 204--ADMINISTRATIVE AND INFORMATION MATTERS

0
2. Amend section 204.804 by adding paragraph (4) to read as follows:


204.804   Closeout of contract files.

* * * * *
    (4) When using the clause at 252.204-7022, Expediting Contract 
Closeout, to expedite contract closeout, determine the residual dollar 
amount upon completion of all applicable closeout requirements of FAR 
4.804.

0
3. Add section 204.804-70 to read as follows:


204.804-70   Contract clause.

    Use the clause at 252.204-7022, Expediting Contract Closeout, in 
solicitations and contracts, including solicitations and contracts 
using FAR part 12 procedures for the acquisition of commercial items, 
when the contracting officer intends to expedite contract closeout 
through the mutual waiver of entitlement to a residual dollar amount of 
$1,000 or less determined at the time of contract closeout.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
4. Amend section 212.301 by adding paragraph (f)(ii)(M) to read as 
follows:


212.301   Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (f) * * *
    (ii) * * *
    (M) Use the clause at 252.204-7022, Expediting Contract Closeout, 
as prescribed in 204.804-70.
* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
5. Add section 252.204-7022 to read as follows:


252.204-7022   Expediting Contract Closeout

    As prescribed in 204.804-70, use the following clause:

Expediting Contract Closeout (MAY 2021)

    (a) At the conclusion of all applicable closeout requirements of 
Federal Acquisition Regulation 4.804, the Government and Contractor 
shall mutually agree on the residual dollar amount remaining on the 
contract. Both the Government and Contractor agree to waive payment 
of any residual dollar amount of $1,000 or less to which either 
party may be entitled at the time of contract closeout.
    (b) A residual dollar amount includes all money owed to either 
party at the end of the contract and as a result of the contract, 
excluding amounts connected in any way with taxation or a violation 
of law or regulation.
    (c) For purposes of determining residual dollar amounts, offsets 
(e.g., across multiple contracts or orders) may be considered only 
to the extent permitted by law.


(End of clause)

[FR Doc. 2021-10580 Filed 5-19-21; 8:45 am]
BILLING CODE 5001-06-P