[Federal Register: April 8, 2010 (Volume 75, Number 67)]
[Rules and Regulations]               
[Page 18034-18035]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08ap10-15]                         

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 234 and 235

RIN 0750-AF79

 
Defense Federal Acquisition Regulation Supplement; Research and 
Development Contract Type Determination (DFARS Case 2006-D053)

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

ACTION: Final rule.

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SUMMARY: DoD is adopting as final, without change, an interim rule that 
requires the Milestone Decision Authority (MDA) for a major defense 
acquisition program (MDAP) to select the contract type for a 
development program that is consistent with the level of program risk 
in accordance with section 818 of the National Defense Authorization 
Act (NDAA) for Fiscal Year 2007.

DATES: Effective Date: April 8, 2010.

FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, 703-602-0302. 
Please cite DFARS case 2006-D053.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD published an interim rule at 73 FR 4117 on January 24, 2008, to 
implement section 818 of the National Defense Authorization Act for 
Fiscal Year 2007 (Pub. L. 109-364). Section 818 requires DoD to modify 
regulations regarding the determination of contract type for 
development programs. Such regulations require the Milestone Decision 
Authority (MDA) for a major defense acquisition program (MDAP) to 
select the contract type for a development program that is consistent 
with the level of program risk. The MDA may select a fixed-price type 
contract, including a fixed-price incentive contract; or a cost-type 
contract, provided certain written determination requirements are 
satisfied.
    The interim rule added a new section at DFARS 234.004 to implement 
the requirements of section 818 of Public Law 109-364, applicable to 
MDAPs, and

[[Page 18035]]

updated the policy at 235.006 to address requirements for other than 
MDAPs.
    Two sources submitted comments on the interim rule. DoD's single 
response to both comments is provided following the comments.
    1. Comment: One respondent suggested that the interim rule appears 
to be requiring written determinations on MDAPs and non-MDAPs that are 
exactly the opposite of one another. For MDAPS, 234.004(iii) requires a 
written determination by the MDA at the time of Milestone B approval if 
a fixed-price contract is not selected, and for non-MDAPs, 
235.006(b)(i)(A)(3) requires a written determination if a fixed-price 
contract is selected for a developmental program. The respondent 
indicated that it is hard for him to understand the logic that would 
discourage the use of fixed-price development contracts for non-major 
programs, but would encourage their use for major programs. Moreover, 
he suggested that fixed-price development contracts are likely to be a 
source of numerous requests for equitable adjustments or claims, and 
concluded that instituting such a policy would be challenging and ill-
timed even for a robust, experienced, and disciplined workforce.
    2. Comment: The respondent stated that the interim rule appears to 
introduce additional burdens on DoD program managers and contracting 
personnel to justify the decision to issue a shipbuilding contract on a 
cost-type basis. The respondent believes that, when selecting a 
contract type for any program, DoD's focus should be on ``whether a 
product, system, or item is still developing or has reached maturity.'' 
Further, although they are MDAPs, the respondent believes that the 
first several ships of a new class should be viewed as developmental 
products that are procured most efficiently through cost-type contracts 
because of the inherently high level of risk and uncertainty associated 
with them. Therefore, for the first several ships of a class, the 
burden placed upon the MDA should most often be to explain why a fixed-
price contract type is selected rather than why a cost-type contract is 
selected. For this reason, the respondent believes that the interim 
rule is flawed since the requirements should be in reverse order when 
applied to shipbuilding contracts.
    DoD Response: For MDAPs, the procedures in DFARS 234.004 are 
mandated by section 818 of the FY07 NDAA. For other than MDAPs, DoD 
determined that it would be in the best interest of the Government to 
retain the policy in DFARS 235.006 for a written determination if a 
fixed-price contract is selected for a development program. Therefore, 
DoD has made no change to the language set forth in the interim rule, 
and is adopting the interim rule as a final rule without change.
    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 certifies that this rule will not 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 to internal DoD considerations and documentation requirements 
relating to the selection of contract type for development programs. No 
comments were received in response to publication of the interim rule 
with respect to any impact on small entities.

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 234 and 235

    Government procurement.

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

Interim Rule Adopted as Final Without Change

0
Accordingly, the interim rule amending 48 CFR parts 234 and 235, which 
was published at 73 FR 4117 on January 24, 2008, is adopted as a final 
rule without change.

[FR Doc. 2010-7259 Filed 4-7-10; 8:45 am]
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