[Federal Register Volume 76, Number 41 (Wednesday, March 2, 2011)]
[Proposed Rules]
[Pages 11411-11414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4525]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Part 217
RIN 0750-AG89
Defense Federal Acquisition Regulation Supplement; Multiyear
Contracting (DFARS Case 2009-D026)
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 update and clarify the requirements
for multiyear contracting. No statutory changes are incorporated in
this proposed rule.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before May 2, 2011, to be considered in
the formation of the final rule.
ADDRESSES: Submit comments identified by DFARS Case 2009-D026, using
any of the following methods:
[cir] Regulations.gov: http://www.regulations.gov. Follow the
instructions for submitting comments.
[cir] E-mail: [email protected]. Include DFARS Case 2009-D026 in the
subject line of the message.
[cir] Fax: (703) 602-0350.
[cir] Mail: Defense Acquisition Regulations System, Attn: Manual
Quinones, OUSD (AT&L) DPAP (DARS), Room 3B855, 3060 Defense Pentagon,
Washington, DC 20301-3060.
Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To
confirm receipt of your comment(s), please check http://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: Manual Quinones, Telephone (703) 602-
1302.
SUPPLEMENTARY INFORMATION:
I. Background
This DFARS case was initiated by DoD based on an internal DoD
policy decision to perform a comprehensive review of DFARS subpart
217.1, Multiyear Contracting to update and clarify the requirements
relating to multiyear contracting. This effort includes reorganizing
existing coverage for multiyear acquisitions, such as the co-location
of basic congressional notification requirements under 217.170,
General. Additionally, the contents of 217.173, Multiyear contracts for
weapons systems and 217.174, Multiyear contracts that employ economic
order quantity procurement, are merged into 217.170, General, and
217.172, Multiyear contracts for supplies. The requirements governing
multiyear contracts for military family housing, currently at
217.171(b), are separated out and highlighted as a new section 217.173,
entitled ``Multiyear contracting for military family housing.''
Citations to the United States Code, relevant DoD regulations, and the
Federal Acquisition Regulation have been updated. No changes to
existing DoD policy, including implementation of any statutorily
mandated acquisition-related thresholds, are being made in this rule.
II. Executive Order 12866
This rule was not subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993. This rule is not
a major rule under 5 U.S.C. 804.
III. Regulatory Flexibility Act
DoD does not expect this rule to have an economic impact on small
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C.
601, et seq., because the rule does not change the existing
requirements of subpart 217.1. Further, these requirements are
primarily internal procedures for DoD. Therefore, DoD has not performed
an initial regulatory flexibility analysis.
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 2009-D026) in
correspondence.
IV. Paperwork Reduction Act
This rule does not impose 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 Part 217
Government procurement.
Mary Overstreet,
Editor, Defense Acquisition Regulations System.
Therefore, 48 CFR part 217 is proposed to be amended as follows:
PART 217--SPECIAL CONTRACTING METHODS
1. The authority citation for 48 CFR part 217 continues to read as
follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
2. Section 217.170 is amended by--
a. Redesignating paragraphs (a), (b), (c), (d), and (e) as
paragraphs (b), (c), (d), (e), and (f), respectively;
b. Adding a new paragraph (a);
c. Amending redesignated paragraph (b) by removing ``Public Law
105-56'' and adding in its place ``Pub. L. 105-56,'' and removing
``Section'' and adding in its place ``section'';
d. Amending redesignated paragraph (c) by removing
``217.172(f)(2)'' and adding in its place ``217.172(g)(2)'';
e. Revising redesignated paragraph (d); and
f. Revising redesignated paragraph (f).
The additions and revisions read as follows:
217.170 General.
(a) This section explains the general rules that are common to all
multiyear contracts.
* * * * *
(d) The head of the agency must provide written notice to the
congressional defense committees at least 10 days before termination of
any multiyear contract (10 U.S.C. 2306b(1)(6), 10 U.S.C. 2306c(d)(3),
section 8008(a) of Pub. L. 105-56, and similar sections in subsequent
DoD appropriations acts).
* * * * *
(f)(1) DoD must provide notification to the congressional defense
committees at least 30 days before entering into a multiyear contract
for certain procurements, including those expected to--
(i) Employ an unfunded contingent liability in excess of $20
million (see 10 U.S.C. 2306b(1)(1)(B)(i)(II), 10 U.S.C. 2306(d)(1), and
section 8008(a) of Pub.
[[Page 11412]]
L. 105-56 and similar sections in subsequent DoD appropriations acts);
(ii) Employ economic-order-quantity procurement in excess of $20
million in any one year of the contract (see 10 U.S.C.
2306b(1)(1)(B)(i)(I));
(iii) Involve a contract for advance procurement leading to a
multiyear contract that employs economic order quantity procurement in
excess of $20 million in any one year (see 10 U.S.C. 2306b(1)(1)(B)(ii)
and section 8008(a) of Pub. L. 105-56 and similar sections in
subsequent DoD appropriations acts); or
(iv) Include a cancellation ceiling in excess of $100 million (see
10 U.S.C. 2306c(d)(4), 10 U.S.C. 2306b(g), and section 8008(a) of Pub.
L. 105-56 and similar sections in subsequent DoD appropriations acts).
(2) A DoD component must submit a request for authority to enter
into a multiyear contract described in paragraphs (f)(1)(i) through
(iv) of this section as part of the component's budget submission for
the fiscal year in which the multiyear contract will be initiated. DoD
will include the request, for each candidate it supports, as part of
the President's Budget for that year and in the Appendix to that budget
as part of proposed legislative language for the appropriations bill
for that year (section 8008(b) of Pub. L. 105-56).
(3) If the advisability of using a multiyear contract becomes
apparent too late to satisfy the requirements in paragraph (f)(2) of
this section, the request for authority to enter into a multiyear
contract must be--
(i) Formally submitted by the President as a budget amendment; or
(ii) Made by the Secretary of Defense, in writing, to the
congressional defense committees (section 8008(b) of Pub. L. 105-56).
(4) Agencies must establish reporting procedures to meet the
congressional notification requirements of paragraph (f)(1) of this
section. The head of the agency must submit a copy of each notice to
the Director of Defense Procurement and Acquisition Policy, Office of
the Under Secretary of Defense (Acquisition, Technology, and Logistics)
(OUSD (AT&L) DPAP) and to the Deputy Under Secretary of Defense
(Comptroller) (Program/Budget) (OUSD(C)(P/B)).
(5) If the budget for a contract that contains a cancellation
ceiling in excess of $100 million does not include proposed funding for
the costs of contract cancellation up to the cancellation ceiling
established in the contract--
(i) The notification required by paragraph (f)(1) of this section
shall include--
(A) The cancellation ceiling amounts planned for each program year
in the proposed multiyear contract, together with the reasons for the
amounts planned;
(B) The extent to which costs of contract cancellation are not
included in the budget for the contract; and
(C) A financial risk assessment of not including budgeting for
costs of contract cancellation (10 U.S.C. 2306b(g) and 10 U.S.C.
2306c(d)); and
(ii) The head of the agency shall provide copies of the
notification to the Office of Management and Budget at least 14 days
before contract award.
3. Section 217.171 is revised to read as follows:
217.171 Multiyear contracts for services.
(a) The head of the agency may enter into a multiyear contract for
a period of not more than five years for the following types of
services (and items of supply relating to such services), even though
funds are limited by statute to obligation only during the fiscal year
for which they were appropriated (10 U.S.C. 2306c). Covered services
are--
(1) Operation, maintenance, and support of facilities and
installations;
(2) Maintenance or modification of aircraft, ships, vehicles, and
other highly complex military equipment;
(3) Specialized training requiring high-quality instructor skills
(e.g., training for pilots and aircrew members or foreign language
training);
(4) Base services (e.g., ground maintenance, in-plane refueling,
bus transportation, and refuse collection and disposal); and
(5) Environmental remediation services for--
(i) An active military installation;
(ii) A military installation being closed or realigned under a base
closure law as defined in 10 U.S.C. 2667(h)(2); or
(iii) A site formerly used by DoD.
(b) The head of the agency must be guided by the following
principles when entering into a multiyear contract for services:
(1) The portion of the cost of any plant or equipment amortized as
a cost of contract performance should not exceed the ratio between the
period of contract performance and the anticipated useful commercial
life of the plant or equipment. As used in this section, ``useful
commercial life'' means the commercial utility of the facilities rather
than the physical life, with due consideration given to such factors as
the location, specialized nature, and obsolescence of the facilities.
(2) Consider the desirability of obtaining an option to extend the
term of the contract for a reasonable period not to exceed three years
at prices that do not include charges for plant, equipment, or other
nonrecurring costs already amortized.
(3) Consider the desirability of reserving the right to take title,
under the appropriate circumstances, to the plant or equipment upon
payment of the unamortized portion of the cost.
(c) Before entering into a multiyear contract for services, the
head of the agency must make a written determination that--
(1) There will be a continuing requirement for the services
consistent with current plans for the proposed contract period;
(2) Furnishing the services will require--
(i) A substantial initial investment in plant or equipment; or
(ii) The incurrence of substantial contingent liabilities for the
assembly, training, or transportation of a specialized work force; and
(3) Using a multiyear contract will promote the best interests of
the United States by encouraging effective competition and promoting
economies in operations.
4. Section 217.172 is revised to read as follows:
217.172 Multiyear contracts for supplies.
(a) This section applies to all multiyear contracts for supplies,
including weapon systems and other multiyear acquisitions specifically
authorized by law (10 U.S.C. 2306b).
(b) The head of the agency may enter into a multiyear contract for
supplies if, in addition to the conditions listed in FAR 17.105-1(b),
the use of such a contract will promote the national security of the
United States (10 U.S.C. 2306b(a)(6)).
(c) Multiyear contracts in amounts exceeding $500 million must be
specifically authorized by law (10 U.S.C. 2306b and 10 U.S.C. 2306c). A
multiyear supply contract may be authorized by an appropriations act or
a law other than an appropriations act (10 U.S.C. 2306b(i)(3) and
(1)(3)).
(d) The head of the agency shall not enter into a multiyear
contract unless--
(1) The Secretary of Defense has submitted to Congress a budget
request for full funding of units to be procured through the contract;
and
(2) In the case of a contract for procurement of aircraft, the
budget request includes full funding of procurement funds for
production beyond advance procurement activities of aircraft units to
be produced in the fiscal year covered by the budget.
(e)(1) The head of the agency must not enter into or extend a
multiyear contract
[[Page 11413]]
that exceeds $500 million (when entered into or extended until the
Secretary of Defense identifies the contract and any extension in a
report submitted to the congressional defense committees (10 U.S.C.
2306b(1)(5)).
(2) In addition, for contracts equal to or greater than $500
million, the head of the contracting activity must determine that the
conditions required by paragraphs (g)(2)(i) through (vii) of this
section will be met by such contract, in accordance with the
Secretary's certification and determination required by paragraph
(g)(2) of this section (10 U.S.C. 2306b(a)(1)(7)).
(f) The head of the agency may enter into a multiyear contract
for--
(1) A weapon system and associated items, services, and logistics
support for a weapon system; and
(2) Advance procurement of components, parts, and materials
necessary to manufacture a weapon system, including advance procurement
to achieve economic lot purchases or more efficient production rates
(see 217.172(g)(4) and (5) regarding economic order quantity
procurements). Before initiating an advance procurement, the
contracting officer must verify that it is consistent with DoD policy
(e.g., the full funding policy in Volume 2A, chapter 1, of DoD 7000.14-
R, Financial Management Regulation).
(g) The head of the agency shall ensure that the following
conditions are satisfied before awarding a multiyear contract under the
authority described in paragraph (b) of this section:
(1) The multiyear exhibits required by DoD 7000.14-R, Financial
Management Regulation, are included in the agency's budget estimate
submission and the President's budget request.
(2) The Secretary of Defense certifies to Congress in writing, by
no later than March 1 of the year in which the Secretary requests
legislative authority to enter into such contracts, that each of the
conditions in paragraphs (g)(2)(i) through (vii) of this section is
satisfied (10 U.S.C. 2306b(i)(1)(A) through (G)).
(i) The Secretary has determined that each of the requirements in
FAR 17.105, paragraphs (b)(1) through (b)(5) will be met by such
contract and has provided the basis for such determination to the
congressional defense committees (10 U.S.C. 2306b(i)(1)(A)).
(ii) The Secretary's determination under paragraph (g)(2)(i) of
this section was made after the completion of a cost analysis performed
by the Defense Cost and Resource Center of the Department of Defense
and such analysis supports the findings (10 U.S.C. 2306b(i)(1)(B)).
(iii) The system being acquired pursuant to such contract has not
been determined to have experienced cost growth in excess of the
critical cost growth threshold pursuant to 10 USC 2433(d) within five
years prior to the date the Secretary anticipates such contract (or a
contract for advance procurement entered into consistent with the
authorization for such contract) will be awarded (10 U.S.C.
2306b(i)(1)(C)).
(iv) A sufficient number of end items of the system being acquired
under such contract have been delivered at or within the most current
estimates of the program acquisition unit cost or procurement unit cost
for such system to determine that current estimates of such unit costs
are realistic (10 U.S.C. 2306b(i)(1)(D)).
(v) Sufficient funds will be available in the fiscal year in which
the contract is to be awarded to perform the contract, and the future-
years defense program for such fiscal year will include the funding
required to execute the program without cancellation (10 U.S.C.
2306b(i)(1)(E)).
(vi) The contract is a fixed price type contract (10 U.S.C.
2306b(i)(1)(F)).
(vii) The proposed multiyear contract provides for production at
not less than minimum economic rates, given the existing tooling and
facilities. The head of the agency shall submit to USD(C)(P/B)
information supporting the agency's determination that this requirement
has been met (10 U.S.C. 2306b(i)(1)(G)).
(viii) The head of the agency shall submit information supporting
this certification to USD(C)(P/B) for transmission to Congress through
the Secretary of Defense.
(A) The head of the agency shall, as part of this certification,
give written notification to the congressional defense committees of--
(1) The cancellation ceiling amounts planned for each program year
in the proposed multiyear contract, together with the reasons for the
amounts planned;
(2) The extent to which costs of contract cancellation are not
included in the budget for the contract; and
(3) A financial risk assessment of not including the budgeting for
costs of contract cancellation (10 U.S.C. 2306b(g)); and
(B) The head of the agency shall provide copies of the notification
to the Office of Management and Budget at least 14 days before contract
award.
(3) The contract is for the procurement of a complete and usable
end item (10 U.S.C. 2306b(i)(4)(A)).
(4) Funds appropriated for any fiscal year for advance procurement
are obligated only for the procurement of those long-lead items that
are necessary in order to meet a planned delivery schedule for complete
major end items that are programmed under the contract to be acquired
with funds appropriated for a subsequent fiscal year (including an
economic order quantity of such long-lead items when authorized by law
(10 U.S.C. 2306b(i)(4)(B)).
(5) The Secretary may make the certification under paragraph (g)(2)
of this section notwithstanding the fact that one or more of the
conditions of such certification are not met if the Secretary
determines that, due to exceptional circumstances, proceeding with a
multiyear contract under this section is in the best interest of the
Department of Defense and the Secretary provides the basis for such
determination with the certification (10 U.S.C. 2306b(i)(5)).
(6) The Secretary of Defense may not delegate this authority to
make the certification under paragraph (g)(2) of this section or the
determination under paragraph (g)(5) of this section to an official
below the level of the Under Secretary of Defense for Acquisition,
Technology, and Logistics (10 U.S.C. 2306b(i)(6)).
(7) The Secretary of Defense shall send a notification containing
the findings of the agency head under FAR 17.105(b), and the basis for
such findings, 30 days prior to the award of a multiyear contract or a
defense acquisition program that has been specifically authorized by
law (10 U.S.C. 2306b(i)(7)).
(8) All other requirements of law are met and there are no other
statutory restrictions on using a multiyear contract for the specific
system or component (10 U.S.C. 2306b(i)(2)). One such restriction may
be the achievement of specified cost savings. If the agency finds,
after negotiations with the contractor(s), that the specified savings
cannot be achieved, the head of the agency shall assess the savings
that, nevertheless, could be achieved by using a multiyear contract. If
the savings are substantial, the head of the agency may request relief
from the law's specific savings requirement. The request shall--
(i) Quantify the savings that can be achieved;
(ii) Explain any other benefits to the Government of using the
multiyear contract;
(iii) Include details regarding the negotiated contract terms and
conditions; and
(iv) Be submitted to OUSD(AT&L)DPAP for transmission to Congress
via the Secretary of Defense and the President.
[[Page 11414]]
(h) The Secretary of Defense may instruct the head of the agency
proposing a multiyear contract to include in that contract negotiated
priced options for varying the quantities of end items to be procured
over the life of the contract (10 U.S.C. 2306b(j)).
5. Section 217.173 is revised to read as follows:
217.173 Multiyear contracts for military family housing.
The head of the agency may enter into multiyear contracts for
periods up to four years for supplies and services required for
management, maintenance, and operation of military family housing and
may pay the costs of such contracts for each year from annual
appropriations for that year (10 U.S.C. 2829).
217.174 [Removed]
6. Section 217.174 is removed.
[FR Doc. 2011-4525 Filed 3-1-11; 8:45 am]
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