[Federal Register: September 16, 2005 (Volume 70, Number 179)]
[Proposed Rules]
[Page 54694-54695]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



48 CFR Part 216

[DFARS Case 2003-D078]

Defense Federal Acquisition Regulation Supplement; Types of

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.


SUMMARY: DoD is proposing to amend the Defense Federal Acquisition
Regulation Supplement (DFARS) to update text on the selection and use
of contract types. This proposed rule is a result of a transformation
initiative undertaken by DoD to dramatically change the purpose and
content of the DFARS.

DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before November 15, 2005, to be
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2003-D078,
using any of the following methods:
    [cir] Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.
    [cir] Defense Acquisition Regulations Web Site: http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm.
 Follow the instructions for

submitting comments.
    [cir] E-mail: dfars@osd.mil. Include DFARS Case 2003-D078 in the
subject line of the message.
    [cir] Fax: (703) 602-0350.
    [cir] Mail: Defense Acquisition Regulations Council, Attn: Ms.
Robin Schulze, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon,
Washington, DC 20301-3062.
    [cir] Hand Delivery/Courier: Defense Acquisition Regulations
Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA
    All comments received will be posted to http://emissary.acq.osd.mil/dar/dfars.nsf

FOR FURTHER INFORMATION CONTACT: Ms. Robin Schulze, (703) 602-0326.


A. Background

    DFARS Transformation is a major DoD initiative to dramatically
change the purpose and content of the DFARS. The objective is to
improve the efficiency and effectiveness of the acquisition process,
while allowing the acquisition workforce the flexibility to innovate.
The transformed DFARS will contain only requirements of law, DoD-wide
policies, delegations of FAR authorities, deviations from FAR
requirements, and policies/procedures that have a significant effect
beyond the internal operating procedures of DoD or a significant cost
or administrative impact on contractors or offerors. Additional
information on the DFARS Transformation initiative is available at

    This proposed rule is a result of the DFARS Transformation
initiative. The proposed DFARS changes--
    [cir] Streamline text on the use of economic price adjustment
    [cir] Increase, from 3 to 5 years, the standard maximum ordering
period under basic ordering agreements;
    [cir] Delete obsolete text on the use of cost-plus-fixed-fee
contracts for environmental restoration;
    [cir] Delete unnecessary text on design stability and use of
incentive provisions; and
    [cir] Delete procedures for selecting contract type and for use of
special economic price adjustment clauses, incentive contracts, and
basic ordering agreements. Text on these subjects will be relocated to
the new DFARS companion resource, Procedures, Guidance, and Information
(PGI). Additional information on PGI is available at http://www.acq.osd.mil/dpap/dars/pgi

    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
updates and streamlines DFARS text on the use of various contract
types, but makes no significant change to DoD contracting policy.
Therefore, DoD has not performed an initial regulatory flexibility
analysis. 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

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 Part 216

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
    Therefore, DoD proposes to amend 48 CFR part 216 as follows:
    1. The authority citation for 48 CFR part 216 continues to read as

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


216.104  [Removed]

    2. Section 216.104 is removed.
    3. Section 216.104-70 is revised to read as follows:

216.104-70  Research and development.

    Follow the procedures at PGI 216.104-70 for selecting the
appropriate research and development contract type.
    4. Section 216.203-4 is revised to read as follows:

[[Page 54695]]

216.203-4  Contract clauses.

    (1) Generally, use the clauses at FAR 52.216-2, Economic Price
Adjustment--Standard Supplies, FAR 52.216-3, Economic Price
Adjustment--Semistandard Supplies, and FAR 52.216-4, Economic Price
Adjustment--Labor and Material, only when--
    (i) The total contract price exceeds the simplified acquisition
threshold; and
    (ii) Delivery or performance will not be completed within 6 months
after contract award.
    (2) Follow the procedures at PGI 216.203-4 when using an economic
price adjustment clause based on cost indexes of labor or material.
    5. Section 216.306 is amended by revising paragraph (c)(ii) to read
as follows:

216.306  Cost-plus-fixed-fee contracts.

    (c) * * *
    (ii) The prohibition in paragraph (c)(i) of this section does not
apply to contracts specifically approved in writing, setting forth the
reasons therefor, in accordance with the following:
    (A) The Secretaries of the military departments are authorized to
approve such contracts that are for environmental work only, provided
the environmental work is not classified as construction, as defined by
10 U.S.C. 2801.
    (B) The Secretary of Defense or designee must approve such
contracts that are not for environmental work only or are for
environmental work classified as construction.
    6. Sections 216.402-2 through 216.403-2 are revised to read as

216.402-2  Technical performance incentives.

    See PGI 216.402-2 for guidance on establishing performance

216.403  Fixed-price incentive contracts.

216.403-2  Fixed-price incentive (successive targets) contracts.

    See PGI 216.403-2 for guidance on the use of fixed-price incentive
(successive targets) contracts.

216.404  [Removed]

    7. Section 216.404 is removed.
    8. Section 216.405-1 is revised to read as follows:

216.405-1  Cost-plus-incentive-fee contracts.

    See PGI 216.405-1 for guidance on the use of cost-plus-incentive-
fee contracts.
    9. Section 216.405-2 is revised to read as follows:

216.405-2  Cost-plus-award-fee contracts.

    (b) Application. The cost-plus-award-fee (CPAF) contract may
include provisional award fee payments. A provisional award fee payment
is a payment made within an evaluation period prior to a final
evaluation for that period. The contracting officer may include
provisional award fee payments in a CPAF contract on a case-by-case
basis, provided those payments--
    (i) Are made no more frequently than monthly;
    (ii) Are limited to no more than--
    (A) For the initial award fee evaluation period, 50 percent of the
award fee available for that period; and
    (B) For subsequent award fee evaluation periods, 80 percent of the
evaluation score for the prior evaluation period times the award fee
available for the current period, e.g., if the contractor received 90
percent of the award fee available for the prior evaluation period,
provisional payments for the current period shall not exceed 72 percent
(90 percent x 80 percent) of the award fee available for the current
    (iii) Are superceded by an interim or final award fee evaluation
for the applicable evaluation period. If provisional payments have
exceeded the payment determined by the evaluation score for the
applicable period, the contracting officer shall collect the debt in
accordance with FAR 32.606; and
    (iv) May be discontinued, or reduced in such amounts deemed
appropriate by the contracting officer, when the contracting officer
determines that the contractor will not achieve a level of performance
commensurate with the provisional payment. The contracting officer
shall notify the contractor in writing of any discontinuance or
reduction in provisional award fee payments.
    (c) Limitations.
    (i) The CPAF contract shall not be used--
    (A) To avoid--
    (1) Establishing cost-plus-fixed-fee contracts when the criteria
for cost-plus-fixed-fee contracts apply; or
    (2) Developing objective targets so a cost-plus-incentive-fee
contract can be used; or
    (B) For either engineering development or operational system
development acquisitions that have specifications suitable for
simultaneous research and development and production, except a CPAF
contract may be used for individual engineering development or
operational system development acquisitions ancillary to the
development of a major weapon system or equipment, where--
    (1) It is more advantageous; and
    (2) The purpose of the acquisition is clearly to determine or solve
specific problems associated with the major weapon system or equipment.
    (ii) Do not apply the weighted guidelines method to CPAF contracts
for either the base (fixed) fee or the award fee.
    (iii) The base fee shall not exceed 3 percent of the estimated cost
of the contract exclusive of the fee.
    (S-70) See PGI 216.405-2 for guidance on the use of CPAF contracts.
    10. Section 216.470 is revised to read as follows:

216.470  Other applications of award fees.

    See PGI 216.470 for guidance on other applications of award fees.
    11. Section 216.703 is revised to read as follows:

216.703  Basic ordering agreements.

    (c) Limitations. The period during which orders may be placed
against a basic ordering agreement may not exceed 5 years.
    (d) Orders. Follow the procedures at PGI 216.703(d) for issuing
orders under basic ordering agreements.

[FR Doc. 05-18473 Filed 9-15-05; 8:45 am]