[Federal Register Volume 70, Number 176 (Tuesday, September 13, 2005)]
[Proposed Rules]
[Pages 53977-53979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-17949]
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OFFICE OF MANAGEMENT AND BUDGET
48 CFR Part 9904
Office of Federal Procurement Policy; Cost Accounting Standards
Board; CAS Exemption for Contracts Executed and Performed Entirely
Outside the United States, Its Territories, and Possessions
AGENCY: Cost Accounting Standards Board, Office of Federal Procurement
Policy, OMB.
ACTION: Staff Discussion Paper (SDP); request for comments.
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SUMMARY: The Cost Accounting Standards (CAS) Board, Office of Federal
Procurement Policy, invites public comments on the staff discussion
paper regarding a provision that provides an exemption from CAS for
contracts that are executed and performed entirely outside the United
States, its territories, and possessions.
DATES: Comments must be in writing and must be received by November 14,
2005.
ADDRESSES: Due to delays in OMB's receipt and processing of mail,
[[Page 53978]]
respondents are strongly encouraged to submit comments electronically
to ensure timely receipt. Electronic comments may be submitted to
[email protected]. Please put the full body of your comments in the
text of the electronic message and also as an attachment readable in
either MS Word or Corel WordPerfect. Please include your name, title,
organization, postal address, telephone number, and e-mail address in
the text of the message. Comments may also be submitted via facsimile
to (202) 395-5105.
FOR FURTHER INFORMATION CONTACT: David Capitano, Cost Accounting
Standards Board (telephone: 703-847-7486).
SUPPLEMENTARY INFORMATION:
A. Regulatory Process
The Board's rules, regulations and Standards are codified at 48 CFR
Chapter 99. The Office of Federal Procurement Policy Act, 41 U.S.C.
422(g)(1), requires the Board, prior to the establishment of any new or
revised Cost Accounting Standard (CAS), to complete a prescribed
rulemaking process. The process generally consists of the following
four steps:
1. Consult with interested persons concerning the advantages,
disadvantages and improvements anticipated in the pricing and
administration of government contracts as a result of the adoption of a
proposed Standard (e.g., promulgation of a Staff Discussion Paper.)
2. Promulgate an Advance Notice of Proposed Rulemaking (ANPRM).
3. Promulgate a Notice of Proposed Rulemaking (NPRM).
4. Promulgate a Final Rule.
This Staff Discussion Paper (SDP) is issued by the Board as step
one of the four-step process. The Board notes that the exemption at 48
CFR 9903.201-1(b)(14) is not subject to the four-step process required
by 41 U.S.C. 422(g)(1) because it is not a standard. Thus, there is no
requirement for the Board to follow the four-step process for this
promulgation. Nevertheless, the Board believes following the four-step
process is beneficial for this issue. However, the issuance of this SDP
is not intended to establish any precedence for use of the four-step
process in promulgating CAS rules and regulations other than standards.
B. Background and Summary
The Office of Federal Procurement Policy, Cost Accounting Standards
Board, is releasing a SDP regarding the exemption at 48 CFR 9903.201-
1(b)(14). The purpose of the SDP is to solicit public views with
respect to the Board's consideration of whether the exemption at 48 CFR
9903.201-1(b)(14) should be revised or eliminated. Respondents are
encouraged to identify and comment on any issues not addressed in this
SDP that they believe are important to the subject. This SDP reflects
research accomplished to date by the staff of the Cost Accounting
Standards Board in the respective subject area.
C. Public Comments
Interested persons are invited to participate by submitting data,
views or arguments with respect to this SDP, including but not limited
to the questions listed in the SDP. All comments must be in writing or
by E-mail, and submitted to the mailing or E-mail addresses indicated
in the ADDRESSES section.
David H. Safavian,
Chair, Cost Accounting Standards Board.
Cost Accounting Standards Board Staff Discussion Paper (SDP)
48 CFR 9903.201-1(b)(14)
Exemption for Contracts Entirely Executed and Performed Outside the
United States
Background
Purpose
48 CFR 9903.201-1(b) provides a list of categories of contracts and
subcontracts that are exempt from all CAS requirements (CAS
exemptions). Paragraph (14) of this provision provides an exemption for
``Contracts and subcontracts to be executed and performed entirely
outside the United States, its territories, and possessions.'' The
purpose of this SDP is to explore whether this exemption should be
revised or eliminated.
History of Exemption
The original CAS Board (the Board) was established by Section 2168
of the Defense Production Act of 1950 (DPA). Section 2163 of the DPA,
entitled ``Territorial Application of Act,'' provided that Sections
2061 through 2170 of the act ``shall be applicable to the United
States, its territories and possessions, and the District of Columbia''
(United States). Since the provisions of the DPA were applicable only
within the United States, the CAS Board's rules, regulations and
standards were also applicable only within the United States.
On May 29, 1973, Mr. Van Cleve, General Counsel to the CAS Board,
wrote to Mr. Jack Kendig, DCAA, reiterating the Board's lack of
authority over contracts executed and performed entirely outside the
United States. These comments were made during the CAS Board's early
deliberations of what contracts were, or were not, under its purview:
``As you are aware, the CASB has previously recognized that its
authorizing legislation is a part of Defense Production Act and that
pertinent provisions of that Act apply to the activities of the
Board. We consider that the above provision [Section 713 of the Act]
does exclude from the Board's jurisdiction any contracts which are
executed and performed in their entirety outside of the United
States, its territories and possessions.
To the extent the Board has dealt with foreign contracts, it has
been assumed that either the document was executed in the United
States or that some part of performance occurred within the United
States which would, of course, bring the contract within the scope
of the Board's authority.'' [Reference added for clarification]
On June 29, 1973, the Deputy Assistant Secretary of Defense for
Procurement advised the CAS Board that based on Mr. Van Cleve's May 29,
1973 opinion, DOD was revising ASPR 3-1204 (Contract Clauses) to add
contracts and subcontracts executed and performed entirely outside the
United States to the list of exclusions from CAS. On September 24,
1973, Defense Procurement Circular No. 115 amended ASPR 3-1204 to
provide for this CAS exclusion. As amended, ASPR 3-1204 read as
follows:
3-1204 Contract Clause. The Cost Accounting Standards clause set
forth in 7-104.83 shall be inserted in all negotiated contracts
exceeding $100,000, except when the price is based on established
catalog or market prices of commercial items sold in substantial
quantities to the general public or is set by law or regulation. In
addition to the foregoing exceptions, the clause shall not be
included in the following contracts:
* * * * *
(vi) contracts which are executed and performed in their
entirety outside the United States, its territories and possessions.
In 1980, the CAS Board ceased to exist under the DPA. CAS
administration was undertaken by the Department of Defense until the
CAS Board was re-established in 1988 under the Office of Federal
Procurement Policy (OFPP) Act.
In 1991, the new CAS Board decided to review the exemption from CAS
for contracts and subcontracts executed and performed entirely outside
the United States, its territories and possessions at FAR 30.201-1(14).
The exemption was retained and incorporated in the current CAS Board's
recodified rules and regulations at 48 CFR 9903.201-1(b)(14) on April
17, 1992 (57 FR 14148).
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Key Questions for Consideration
The CAS Board is soliciting comments on this issue from interested
parties. In particular, the Board is interested in comments related to
the following issues:
1. Any statute that would require the CAS Board to retain this
exemption. If any such statute exists, provide the specific statute and
language that contain this requirement.
2. How this exemption does or does not promote the CAS Board's
primary objective of achieving ``(1) an increased degree of uniformity
in cost accounting practices among Government contractors in like
circumstances, and (2) consistency in cost accounting practices in like
circumstances by individual government contractor over periods of
time.''
3. The significance of the location of contract execution to CAS
applicability.
4. The significance of the location of contract performance to CAS
applicability.
5. The advantages and disadvantages of exempting contracts and
subcontracts from CAS that are executed and performed entirely outside
the U.S.
6. Contracting situations in which the exemption has historically
been utilized.
[FR Doc. 05-17949 Filed 9-12-05; 8:45 am]
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