[Federal Register: December 20, 2005 (Volume 70, Number 243)]
[Rules and Regulations]               
[Page 75412-75414]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20de05-18]                         


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DEPARTMENT OF DEFENSE

48 CFR Part 232

[DFARS Case 2003-D043]

 
Defense Federal Acquisition Regulation Supplement; Contract 
Financing

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to update text pertaining to 
contract financing. This rule is a result of a transformation 
initiative undertaken by DoD to dramatically change the purpose and 
content of the DFARS.

EFFECTIVE DATE: December 20, 2005.

FOR FURTHER INFORMATION CONTACT: Mr. Bill Sain, Defense Acquisition 
Regulations System, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense 
Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0293; 
facsimile (703) 602-0350. Please cite DFARS Case 2003-D043.

SUPPLEMENTARY INFORMATION:

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 
http://www.acq.osd.mil/dpap/dars/dfars/transformation/index.htm.

    This final rule is a result of the DFARS Transformation initiative. 
The DFARS changes include--
     Relocation of text addressing general contract financing 
payment issues from 232.906 to 232.007.
     Deletion of unnecessary text at 232.071 on the composition 
and responsibilities of the DoD Contract Finance Committee, and 
deletion of references to the Committee at 232.070(a) and 232.617(a).
     Deletion of text at 232.108 on financial consultation, and 
deletion of text at 232.207 on specifying amounts to be charged to 
foreign military sales accounts in approvals of financing requests. 
These issues are adequately addressed in the FAR.
     Deletion of text at 232.206(d) on instructions for 
distribution of financing payments to multiple appropriations accounts. 
Guidance on this subject is now included in section 204.7108 of the new 
DFARS companion resource, Procedures, Guidance, and Information (PGI), 
available at http://www.acq.osd.mil/dpap/dars/pgi.

     Amendment of 232.404(a)(9) to increase, from $500 to 
$2,500, the dollar value at or below which the requirements of FAR 
Subpart 32.4, Advance Payments for Non-Commercial Items, do not apply 
to high school and college publications for military recruitment 
efforts.
     Clarification of text at 232.501-3(b) on limitation of the 
Government's liability when the contract price exceeds the funds 
obligated under the contract.
     Deletion of unnecessary text at 232.605(b) regarding 
integrated accounting at DoD installations.
     Relocation of text on payment due dates, from 232.905(1) 
and (2), to 232.904 and 232.906, respectively.
     Deletion of unnecessary text at 232.905(f)(6) on 
electronic notification to the payment office of Government acceptance 
and approval. Electronic submission and processing of payment requests 
is addressed in Subpart 232.70.
     Addition of text at 232.906(a)(i) to address the 
requirement for contracting officers to insert the standard due date 
for interim payments on cost-reimbursement contracts for services.
     Deletion of unnecessary text at 232.1007 on specifying 
amounts to be charged to foreign military sales accounts.
     Deletion of text at 232.1108 on mandatory use of the 
Governmentwide commercial purchase card. This issue is addressed in 
213.270.
     Deletion of informational and procedural text at 
232.070(c), 232.409-1, 232.410, 232.501-2, 232.606, 232.610, 232.670, 
and 232.671. This text has been relocated to the new DFARS companion 
resource, Procedures, Guidance, and Information (PGI), available at 
http://www.acq.osd.mil/dpap/dars/pgi.

    DoD published a proposed rule at 70 FR 23827 on May 5, 2005. No 
comments were received in response to the proposed rule. DoD has 
adopted the proposed rule as a final rule, with minor editorial changes 
at 232.007(a) and 232.906(a)(ii).
    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 final 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 updates, streamlines, and clarifies DFARS text, but 
makes no significant change to DoD contract financing policy.

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 232

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

0
Therefore, 48 CFR part 232 is amended as follows:
0
1. The authority citation for 48 CFR part 232 continues to read as 
follows:

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

PART 232--CONTRACT FINANCING

0
2. Section 232.007 is added to read as follows:


232.007  Contract financing payments.

    (a) DoD policy is to make contract financing payments as quickly as 
possible. Generally, the contracting officer shall insert the standard 
due dates of 7 days for progress payments, and 14 days for performance-
based payments and interim payments on cost-type contracts, in the 
appropriate paragraphs of the respective payment clauses. For interim 
payments on cost-reimbursement contracts for services, see 
232.906(a)(i).
    (b) The contracting officer should coordinate contract financing 
payment terms with offices that will be involved in the payment process 
to ensure that specified terms can be met. Where justified, the 
contracting officer may insert a due date greater than, but not less 
than, the standard. In determining payment terms, consider--
    (i) Geographical separation;
    (ii) Workload;
    (iii) Contractor ability to submit a proper request; and
    (iv) Other factors that could affect timing of payment.

0
3. Section 232.070 is amended by revising paragraphs (a) and (c) to 
read as follows:

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232.070  Responsibilities.

    (a) The Director of Defense Procurement and Acquisition Policy and Acquisition Policy, 
Office of the Under Secretary of Defense (Acquisition, Technology, and 
Logistics) (OUSD(AT&L)DPAP) is responsible for ensuring uniform 
administration of DoD contract financing, including DoD contract 
financing policies and important related procedures. Agency discretion 
under FAR part 32 is at the DoD level and is not delegated to the 
departments and agencies. Proposals by the departments and agencies, to 
exercise agency discretion, shall be submitted to OUSD(AT&L)DPAP.
* * * * *
    (c) See PGI 232.070(c) for information on department/agency 
contract financing offices.


232.071  [Removed and Reserved]

0
4. Section 232.071 is removed and reserved.


232.108  [Removed]

0
5. Section 232.108 is removed.


232.206  [Amended]

0
6. Section 232.206 is amended by removing paragraph (d).


232.207  [Removed]

0
7. Section 232.207 is removed.

0
8. The heading of Subpart 232.4 is revised to read as follows:

Subpart 232.4--Advance Payments for Non-Commercial Items


232.404  [Amended]

0
9. Section 232.404 is amended in paragraph (a)(9) by removing ``$500'' 
and adding in its place ``$2,500''.

0
10. Section 232.409-1 is revised to read as follows:


232.409-1  Recommendation for approval.

    Follow the procedures at PGI 232.409-1 for preparation of the 
documents required by FAR 32.409-1(e) and (f).

0
11. Section 232.410 is revised to read as follows:


232.410  Findings, determination, and authorization.

    If an advance payment procedure is used without a special bank 
account, follow the procedures at PGI 232.410.

0
12. Section 232.501-2 is revised to read as follows:


232.501-2  Unusual progress payments.

    Follow the procedures at PGI 232.501-2 for approval of unusual 
progress payments.

0
13. Section 232.501-3 is amended by revising paragraph (b) introductory 
text to read as follows:


232.501-3  Contract price.

    (b) The contracting officer may approve progress payments when the 
contract price exceeds the funds obligated under the contract, provided 
the contract limits the Government's liability to the lesser of--
* * * * *


232.503-15  [Amended]

0
14. Section 232.503-15 is amended in paragraph (d) introductory text, 
in the first sentence, by removing ``252.242-7004(f)(7)'' and adding in 
its place ``252.242-7004(e)(7)''.


232.605  [Amended]

0
15. Section 232.605 is amended in paragraph (b) by removing the second 
sentence.

0
16. Section 232.606 is revised to read as follows:


232.606  Debt determination and collection.

    When transferring a case to the contract financing office, follow 
the procedures at PGI 232.606.

0
17. Section 232.610 is revised to read as follows:


232.610  Demand for payment of contract debt.

    When issuing a demand for payment of a contract debt, follow the 
procedures at PGI 232.610.


232.616  [Amended]

0
18. Section 232.616 is amended by removing ``(232.108(1))'' and adding 
in its place ``(see 232.070(c))''.

0
19. Section 232.617 is revised to read as follows:


232.617  Contract clause.

    (a) The Director of Defense Procurement and Acquisition Policy and Acquisition Policy, 
Office of the Under Secretary of Defense (Acquisition, Technology, and 
Logistics), may exempt the contracts in FAR 32.617(a)(2) through (5) 
and other contracts, in exceptional circumstances, from the 
administrative interest charges required by this subpart.
    (7) Other exceptions are--
    (A) Contracts for instructions of military or ROTC personnel at 
civilian schools, colleges, and universities;
    (B) Basic agreements with telephone companies for communications 
services and facilities, and purchases under such agreements; and
    (C) Transportation contracts with common carriers for common 
carrier services.

0
20. Section 232.670 is revised to read as follows:


232.670  Transfer of responsibility for debt collection.

    Follow the procedures at PGI 232.670 for transferring 
responsibility for debt collection.

0
21. Section 232.671 is revised to read as follows:


232.671  Bankruptcy reporting.

    Follow the procedures at PGI 232.671 for bankruptcy reporting.

0
22. Section 232.903 is revised to read as follows:


232.903  Responsibilities.

    DoD policy is to assist small disadvantaged business concerns by 
paying them as quickly as possible after invoices are received and 
before normal payment due dates established in the contract (see 
232.906(a)).

0
23. Section 232.904 is added to read as follows:


232.904  Determining payment due dates.

    (d) In most cases, Government acceptance or approval can occur 
within the 7-day constructive acceptance period specified in the FAR 
Prompt Payment clauses. Government payment of construction progress 
payments can, in most cases, be made within the 14-day period allowed 
by the Prompt Payment for Construction Contracts clause. While the 
contracting officer may specify a longer period because the period 
specified in the contract is not reasonable or practical, such change 
should be coordinated with the Government offices responsible for 
acceptance or approval and for payment. Reasons for specifying a longer 
period include but are not limited to: the nature of the work or 
supplies or services, inspection or testing requirements, shipping and 
acceptance terms, and resources available at the acceptance activity. A 
constructive acceptance period of less than the cited 7 or 14 days is 
not authorized.


232.905  [Removed]

0
24. Section 232.905 is removed.
0
25. Section 232.906 is revised to read as follows:


232.906  Making payments.

    (a)(i) Generally, the contracting officer shall insert the standard 
due date of 14 days for interim payments on cost-reimbursement 
contracts for services in the clause at FAR 52.232-25, Prompt Payment, 
when using the clause with its Alternate I.
    (ii) The restrictions of FAR 32.906 prohibiting early payment do 
not apply

[[Page 75414]]

to invoice payments made to small disadvantaged business concerns. 
However, contractors shall not be entitled to interest penalties if the 
Government fails to make early payment.


232.1007 and 232.1108  [Removed]

    26. Sections 232.1007 and 232.1108 are removed.

[FR Doc. 05-24218 Filed 12-19-05; 8:45 am]

BILLING CODE 5001-08-P