[Federal Register Volume 68, Number 190 (Wednesday, October 1, 2003)]
[Rules and Regulations]
[Pages 56561-56563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24629]
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DEPARTMENT OF DEFENSE
48 CFR Parts 226 and 252
[DFARS Case 2002-D033]
Defense Federal Acquisition Regulation Supplement; Indian
Incentive Program
AGENCY: Department of Defense (DoD).
ACTION: Interim rule with request for comments.
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SUMMARY: DoD has issued an interim rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement Section 8021 of
the DoD Appropriations Act for Fiscal Year 2003. Section 8021 revises
the criteria for application of the Indian Incentive Program to DoD
contracts.
DATES: Effective date: October 1, 2003.
Comment date: Comments on the interim rule should be submitted to
the address shown below on or before December 1, 2003, to be considered
in the formation of the final rule.
ADDRESSES: Respondents may submit comments directly on the World Wide
Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an
alternative, respondents may e-mail comments to: [email protected].
Please cite DFARS Case 2002-D033 in the subject line of e-mailed
comments.
Respondents that cannot submit comments using either of the above
methods may submit comments to: Defense Acquisition Regulations
Council, Attn: Ms. Angelena Moy, OUSD (AT&L) DPAP (DAR), IMD 3C132,
3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-
0350. Please cite DFARS Case 2002-D033.
At the end of the comment period, interested parties may view
public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.
FOR FURTHER INFORMATION CONTACT: Ms. Angelena Moy, (703) 602-1302.
SUPPLEMENTARY INFORMATION:
A. Background
The Indian Incentive Program provides for incentive payments to
contractors, and subcontractors at any tier, that use Indian
organizations and Indian-owned economic enterprises as subcontractors.
DoD implementation of the Indian Incentive Program is in DFARS Subpart
226.1 and the clause at 252.226-7001. Section 8021 of the DoD
Appropriations Act for Fiscal Year 2003 (Public Law 107-248) revises
the criteria for application of the Indian Incentive Program by
establishing a $500,000 threshold for contracts and subcontracts under
which incentives may be paid; by authorizing incentive payments for
subcontracts awarded to Native Hawaiian small business concerns; and by
adding contracts and subcontracts for commercial items to the Program.
This interim rule amends DFARS subpart 226.1 and the clause at 252.226-
7001 to implement section 8021 of Public Law 107-248.
In addition, this interim rule incorporates changes to the clause
at 252.226-7001 resulting from the proposed rule published at 67 FR
70389 on November 22, 2002, under DFARS Case 2002-D013. That proposed
rule removed references to specific contract types from the clause,
since the Indian Incentive Program applies to all contract types. Four
sources submitted comments on the proposed rule. A discussion of the
comments is provided below.
1. Comment: The rule should clarify that a contractor can receive a
separate equitable adjustment in addition to the incentive payment
under the clause. The equitable adjustment would apply if the cost of
subcontracting with an Indian organization exceeds the cost of
subcontracting with a non-Indian source. The 1996 version of the Indian
Incentive clause at FAR 52.226-1 substantiates this position.
DoD Response: Do not concur. 25 U.S.C. 1544 provides that ``a
contractor * * * may be allowed an additional amount of compensation
equal to 5 percent of the amount paid, or to be paid, to a
subcontractor or supplier, in carrying out the contract if such
subcontractor or supplier is an Indian organization or Indian-owned
economic enterprise * * *'' Section 8021 of Public Law 107-248
appropriates funds ``only for incentive payments authorized by * * * 25
U.S.C. 1544 * * *'' Accordingly, the clause at DFARS 252.226-7001
provides for an incentive payment of 5 percent of the amount of a
subcontract awarded to an Indian organization or Indian-owned economic
enterprise.
When the Indian Incentive Program was added to the FAR as an
interim rule on August 22, 1991 (56 FR 41736), the clause at 52.226-1
provided that a contract adjustment under the Program would be the
lesser of (1) the difference between the price of the subcontract
awarded to an Indian concern and the price of the otherwise low, non-
Indian offeror, or (2) 5 percent of the price of the subcontract
awarded to an Indian concern. When the FAR rule was finalized on July
26, 1996 (61 FR 39210), the clause was revised to eliminate the first
option and to specify the ``5 percent'' payment method as the
[[Page 56562]]
sole method of incentive payment under the Program. Confusion has
existed because the FAR and DFARS clauses have used the terms
``incentive'' and ``adjustment'' interchangeably. However, the statutes
and the implementing clauses historically have permitted only one type
of incentive payment per subcontract award. To clarify this point, DoD
has replaced the term ``adjustment'' with the term ``incentive'' each
place it appeared in the clause at 252.226-7001.
2. Comment: The requirement of DFARS 252.226-7001(d), that
prohibits an incentive payment from being made within 50 working days
of subcontract award, is arbitrary and should be deleted. The
contracting officer should have the flexibility to make a case-by-case
determination of when it is appropriate to make the incentive payment.
DoD Response: Concur. The interim rule eliminates the 50-day
waiting period.
This rule was not subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
B. Regulatory Flexibility Act
This 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. DoD has prepared an initial
regulatory flexibility analysis, which is summarized as follows:
This interim rule amends the DFARS to implement Section 8021 of the
DoD Appropriations Act for Fiscal Year 2003. Section 8021 does the
following: (1) Appropriates funds for implementation of the Indian
Incentive Program; (2) establishes a threshold of $500,000 for
contracts and subcontracts under which incentives may be paid; (3)
expands the Program to permit incentive payments for subcontract awards
to Native Hawaiian small business concerns; and (4) adds contracts and
subcontracts for commercial items to the Program, provided the
commercial items are produced or manufactured in whole or in part by an
Indian organization or enterprise or Native Hawaiian small business
concern. The rule will apply to contractors and subcontractors that
subcontract work under DoD contracts, and will pertain to subcontract
awards to Indian organizations, Indian-owned economic enterprises, and
Native Hawaiian small business concerns. The net effect on small
entities is unknown at this time. DoD knows of no alternatives that
would meet the requirements of Section 8021 of the DoD Appropriations
Act for Fiscal Year 2003.
A copy of the analysis may be obtained from the address specified
herein. DoD invites comments from small businesses and other interested
parties. DoD also will consider comments from small entities concerning
the affected DFARS subparts in accordance with 5 U.S.C. 610. Such
comments should be submitted separately and should cite DFARS Case
2002-D033.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the rule does
not impose any information collection requirements that require the
approval of the Office of Management and Budget under 44 U.S.C. 3501,
et seq.
D. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense that urgent and compelling reasons exist to publish an
interim rule prior to affording the public an opportunity to comment.
This interim rule implements Section 8021 of the DoD Appropriations Act
for Fiscal Year 2003 (Pub. L. 107-248). Section 8021 revises the
criteria for application of the Indian Incentive Program by
establishing a $500,000 threshold for contracts and subcontracts under
which incentives may be paid; by authorizing incentive payments for
subcontracts awarded to Native Hawaiian small business concerns; and by
adding contracts and subcontracts for commercial items to the Program.
Section 8021 became effective upon enactment, on October 23, 2002.
Comments received in response to this interim rule will be considered
in the formation of the final rule.
List of Subjects in 48 CFR Parts 226 and 252
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
0
Therefore, 48 CFR parts 226 and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 226 and 252 continues to
read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 226--OTHER SOCIOECONOMIC PROGRAMS
0
2. Sections 226.103 and 226.104 are revised to read as follows:
226.103 Procedures.
(f) The contracting officer shall--
(i) Submit a request for funding of the Indian incentive to the
Office of Small and Disadvantaged Business Utilization, Office of the
Under Secretary of Defense (Acquisition, Technology, and Logistics)
(OUSD(AT&L)SADBU), 1777 North Kent Street, Suite 9100, Arlington, VA
22209; and
(ii) Upon receipt of funding from OUSD(AT&L)SADBU, issue a contract
modification to add the Indian incentive funding for payment of the
contractor's request for adjustment as described in the clause at
252.226-7001, Utilization of Indian Organizations, Indian-Owned
Economic Enterprises, and Native Hawaiian Small Business Concerns.
226.104 Contract clause.
Use the clause at 252.226-7001, Utilization of Indian
Organizations, Indian-Owned Economic Enterprises, and Native Hawaiian
Small Business Concerns, in solicitations and contracts for supplies or
services exceeding $500,000 in value for which subcontracting
opportunities may exist.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
3. Section 252.212-7001 is amended as follows:
0
a. By revising the clause date to read ``(Oct 2003)''; and
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b. In paragraph (b) by adding, in numerical order, entry ``252.226-
7001'' to read as follows:
252.212-7001 Contract terms and conditions required to implement
statutes or Executive orders applicable to Defense acquisitions of
commercial items.
* * * * *
(b) * * *
252.226-7001 Utilization of Indian Organizations, Indian-Owned
Economic Enterprises, and Native Hawaiian Small Business Concerns (Oct
2003) (Section 8021 of Pub. L. 107-248).
* * * * *
0
4. Section 252.226-7001 is revised to read as follows:
252.226-7001 Utilization of Indian organizations, Indian-owned
economic enterprises, and native Hawaiian small business concerns.
As prescribed in 226.104, use the following clause:
Utilization of Indian Organizations, Indian-Owned Economic Enterprises,
and Native Hawaiian Small Business Concerns (Oct 2003)
(a) Definitions. As used in this clause--
[[Page 56563]]
Indian means any person who is a member of any Indian tribe,
band, group, pueblo, or community that is recognized by the Federal
Government as eligible for services from the Bureau of Indian
Affairs (BIA) in accordance with 25 U.S.C. 1452(c) and any
``Native'' as defined in the Alaska Native Claims Settlement Act (43
U.S.C. 1601).
Indian organization means the governing body of any Indian tribe
or entity established or recognized by the governing body of an
Indian tribe for the purposes of 25 U.S.C. chapter 17.
Indian-owned economic enterprise means any Indian-owned (as
determined by the Secretary of the Interior) commercial, industrial,
or business activity established or organized for the purpose of
profit, provided that Indian ownership constitutes not less than 51
percent of the enterprise.
Indian tribe means any Indian tribe, band, group, pueblo, or
community, including native villages and native groups (including
corporations organized by Kenai, Juneau, Sitka, and Kodiak) as
defined in the Alaska Native Claims Settlement Act, that is
recognized by the Federal Government as eligible for services from
BIA in accordance with 25 U.S.C. 1452(c).
Interested party means a contractor or an actual or prospective
offeror whose direct economic interest would be affected by the
award of a subcontract or by the failure to award a subcontract.
Native Hawaiian small business concern means an entity that is--
(1) A small business concern as defined in section 3 of the
Small Business Act (15 U.S.C. 632) and relevant implementing
regulations; and
(2) Owned and controlled by a Native Hawaiian as defined in 25
U.S.C. 4221(9).
(b) The Contractor shall use its best efforts to give Indian
organizations, Indian-owned economic enterprises, and Native
Hawaiian small business concerns the maximum practicable opportunity
to participate in the subcontracts it awards, to the fullest extent
consistent with efficient performance of the contract.
(c) The Contracting Officer and the Contractor, acting in good
faith, may rely on the representation of an Indian organization,
Indian-owned economic enterprise, or Native Hawaiian small business
concern as to its eligibility, unless an interested party challenges
its status or the Contracting Officer has independent reason to
question that status.
(d) In the event of a challenge to the representation of a
subcontractor, the Contracting Officer will refer the matter to--
(1) For matters relating to Indian organizations or Indian-owned
economic enterprises: U.S. Department of the Interior, Bureau of
Indian Affairs, Attn: Chief, Division of Contracting and Grants
Administration, 1849 C Street NW, MS-2626-MIB, Washington, DC 20240-
4000. The BIA will determine the eligibility and will notify the
Contracting Officer.
(2) For matters relating to Native Hawaiian small business
concerns: Department of Hawaiian Home Lands, PO Box 1879, Honolulu,
HI 96805. The Department of Hawaiian Home Lands will determine the
eligibility and will notify the Contracting Officer.
(e) No incentive payment will be made--
(1) While a challenge is pending; or
(2) If a subcontractor is determined to be an ineligible
participant.
(f)(1) The Contractor, on its own behalf or on behalf of a
subcontractor at any tier, may request an incentive payment in
accordance with this clause.
(2) The incentive amount that may be requested is 5 percent of
the estimated cost, target cost, or fixed price included in the
subcontract at the time of award to the Indian organization, Indian-
owned economic enterprise, or Native Hawaiian small business
concern.
(3) In the case of a subcontract for commercial items, the
Contractor may receive an incentive payment only if the
subcontracted items are produced or manufactured in whole or in part
by an Indian organization, Indian-owned economic enterprise, or
Native Hawaiian small business concern.
(4) The Contractor has the burden of proving the amount claimed
and shall assert its request for an incentive payment prior to
completion of contract performance.
(5) The Contracting Officer, subject to the terms and conditions
of the contract and the availability of funds, will authorize an
incentive payment of 5 percent of the estimated cost, target cost,
or fixed price included in the subcontract awarded to the Indian
organization, Indian-owned economic enterprise, or Native Hawaiian
small business concern.
(6) If the Contractor requests and receives an incentive payment
on behalf of a subcontractor, the Contractor is obligated to pay the
subcontractor the incentive amount.
(g) The Contractor shall insert the substance of this clause,
including this paragraph (g), in all subcontracts exceeding $500,000
for which further subcontracting opportunities may exist.
[FR Doc. 03-24629 Filed 9-30-03; 8:45 am]
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