[Federal Register: March 1, 2010 (Volume 75, Number 39)]
[Rules and Regulations]               
[Page 9114-9116]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Defense Acquisition Regulations System

48 CFR Part 217

Defense Federal Acquisition Regulation Supplement; Additional 
Requirements Applicable to Multiyear Contracts (DFARS Case 2008-D023)

AGENCY: Defense Acquisition Regulations System. Department of Defense 

ACTION: Interim rule with request for comments.


SUMMARY: DoD is issuing this interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement Section 811 of 
the National Defense Authorization Act (NDAA) for Fiscal Year 2008. 
Section 811 is applicable to multiyear contracts for the procurement of 
major systems of DoD. This interim rule also implements section 8008 of 
the Fiscal Year 2007 Defense Appropriations Act, and the same language 
in subsequent DoD appropriations acts. Section 8008 specifically 
addresses multiyear procurement of aircraft.

DATES: Effective March 1, 2010. Comments on the interim rule should be 
submitted to the address shown below on or before April 30, 2010 to be 
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2008-D023, 
using any of the following methods:

[[Page 9115]]

    [cir] Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    [cir]  E-mail: dfars@osd.mil. Include DFARS Case 2008-D023 in the 
subject line of the message.
    [cir] Fax: (703) 602-0350.
    [cir] Mail: Defense Acquisition Regulations Council, Attn: Ms. 
Meredith Murphy, OUSD (AT&L) DPAP (DARS), 3060 Defense Pentagon, Room 
3B855, Washington, DC 20301-3060.
    [cir] Hand Delivery/Courier: Defense Acquisition Regulations 
Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 
    Comments received generally will be posted without change to http:/
/www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Ms. Meredith Murphy, 703-602-1302.


A. Background

    Section 811 of the National Defense Authorization Act (NDAA) for 
Fiscal Year 2008 amends 10 U.S.C. 2306b and is applicable to multiyear 
contracts for the procurement of major systems of DoD. Section 811 
imposes several additional requirements applicable to multiyear 
contracts for the acquisition of property, including deletion of one 
requirement, but the addition of six new requirements that the 
Secretary of Defense must certify in writing in the year he requests 
legislative authority to enter into a multiyear contract. Section 811 
requires the Secretary of Defense to certify in writing, by no later 
than March 1 of the year in which the Secretary requests legislative 
authority to enter into a multiyear contract with respect to Major 
Defense Acquisition Programs (MDAPs), that the Secretary of Defense has 
made certain cost savings determinations with regard to such contract.
    DoD has revised DFARS 217.1 accordingly. The revision to the DFARS 
does not include 2306b(a)(1)-(5), which was not revised by Section 811, 
and which is covered at Federal Acquisition Regulation (FAR) 17.105-
1(b). These FAR paragraphs remain applicable to DOD, National 
Aeronautics and Space Administration, and the Coast Guard.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD does not expect this rule to 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., because the rule 
relates primarily to internal operating procedures of DoD and will not 
have a significant cost or administrative impact on contractors or 
offerors. 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 
    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 2008-D023) in 

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.

List of Subjects in 48 CFR Parts 217

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

Therefore, 48 CFR part 217 is amended as follows:
1. The authority citation for 48 CFR part 217 continues to read as 

    Authority:  41 U.S.C. 421 and 48 CFR Chapter 1.


2. Section 217.170 is amended by
a. Redesignating existing paragraphs (b), (c), and (d) as paragraphs 
(c), (d), and (e), respectively; and
b. Adding new paragraph (b) to read as follows:

217.170   General.

* * * * *
    (b) Any requests for increased funding or reprogramming for 
procurement of a major system under a multiyear contract authorized 
under this section shall be accompanied by an explanation of how the 
request for increased funding affects the determinations made by the 
Secretary of Defense under 217.172(e)(2) (10 U.S.C. 2306b(i)(1)).
* * * * *

3. Section 217.172 is amended by:
a. Redesignating paragraphs (c) through (h) as paragraphs (d) through 
b. Adding new paragraph (c); and
c. Revising newly redesignated paragraphs (d) and (f).
    The addition and revisions read as follows:

217.172   Multiyear contracts for supplies.

* * * * *
    (c) 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; 
    (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.
    (d)(1) The head of the agency must not enter into or extend a 
multiyear contract 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 (f)(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 
(e)(2) of this section (10 U.S.C. 2306b(a)(1)(7)).
* * * * *
    (f) 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 (f)(2)(i) through (vii) of this section are 
satisfied (10 U.S.C. 2306b(i)(1)(A)-(G)).
    (i) The Secretary has determined that each of the requirements in 
FAR 17.105, paragraphs (b)(1) through (6) 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 (f)(2)(i) of 
this section was made after the completion of a cost analysis performed 
by the Cost Assessment and Program Evaluation

[[Page 9116]]

(CAPE) 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 section 10 U.S.C. 2433(d) 
within 5 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. 
    (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) During the fiscal year in which such contract is to be awarded, 
sufficient funds will be available to perform the contract in such 
fiscal year, 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. 
    (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.
    (ix) In the case of a contract with a cancellation ceiling in 
excess of $100 million, if the budget for the contract does not include 
proposed funding for the costs of contract cancellation up to the 
cancellation ceiling established in the contract--
    (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 in accordance with the procedures at PGI 217.1.
    (3) If the value of a multiyear contract for a particular system or 
component exceeds $500 million, use of a multiyear contract is 
specifically authorized by--
    (i) An appropriations act (10 U.S.C. 2306b(l)(3)); and
    (ii) A law other than an appropriations act (10 U.S.C. 
    (4) The contract is for the procurement of a complete and usable 
end item (10 U.S.C. 2306b(i)(4)(A)).
    (5) 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)).
    (6) The Secretary may make the certification under paragraph (f)(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)).
    (7) The Secretary of Defense may not delegate this authority to 
make the certification under 217.172(f)(2) or the determination under 
217.172(f)(6) to an official below the level of the Under Secretary of 
Defense for Acquisition, Technology, and Logistics (10 U.S.C. 
    (8) 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)).
    (9) 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.

[FR Doc. 2010-2703 Filed 2-26-10; 8:45 am]