[Federal Register: December 20, 2005 (Volume 70, Number 243)]
[Proposed Rules]               
[Page 75440-75444]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20de05-31]                         

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

48 CFR Parts 215, 230, 252, and 253

[DFARS Case 2003-D014]

 
Defense Federal Acquisition Regulation Supplement; Contract 
Pricing and Cost Accounting Standards

AGENCY: Department of Defense (DoD).

[[Page 75441]]


ACTION: Proposed rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to update text addressing contract 
pricing matters and cost accounting standards administration. 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 February 21, 2006, to be 
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2003-D014, 
using any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 

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

submitting comments.
     E-mail: dfars@osd.mil. Include DFARS Case 2003-D014 in the 
subject line of the message.
     Fax: (703) 602-0350.
     Mail: Defense Acquisition Regulations System, Attn: Mr. 
Bill Sain, OUSD (AT&L) DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, 
Washington, DC 20301-3062.
     Hand Delivery/Courier: Defense Acquisition Regulations 
System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 
22202-3402.
    All comments received will be posted to http://emissary.acq.osd.mil/dar/dfars.nsf
.


FOR FURTHER INFORMATION CONTACT: Mr. Bill Sain, (703) 602-0293.

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 proposed rule is a result of the DFARS Transformation 
initiative. The proposed DFARS changes include:
     Addition of text at 215.403-1(c) and 230.201-5(a)(1) to 
implement Section 817 of the National Defense Authorization Act for 
Fiscal Year 2003 (Pub. L. 107-314) regarding exceptions to cost or 
pricing data requirements and waiver of cost accounting standards.
     Deletion of 215.404-1(d), Cost realism analysis, because 
FAR 15.404-1 contains sufficient policy on this subject.
     Deletion of unnecessary introductory text at redesignated 
215.404-71-4(f), Facilities capital employed, Values: Normal and 
designated ranges.
     Deletion of the definition of ``Acceptable estimating 
system'' from 215.407-5-70(a)(1), and relocation of the definition to 
the contract clause at 252.215-7002, Cost Estimating System 
Requirements; addition of a cross-reference in 215.407-5-70(a)(1) to 
the relocated definition; elimination of 215.407-5-70(b)(1)(iii) and 
(iv) and relocation of the language to the new definition at 252.215-
7002(a); and deletion of duplicative language at 252.215-7002(b).
     Revision of 230.201-5(a)(1)(A) to address the authority of 
the Director, Defense Procurement and Acquisition Policy and Acquisition Policy, to grant cost 
accounting standards waivers, in accordance with Section 802 of the 
National Defense Authorization Act for Fiscal Year 2000 (Pub. L. 106-
65).
     Removal of 230.7000, Contract facilities capital 
estimates; 230.7001, Use of DD Form 1861; 230.7002, Preaward facilities 
capital applications; and 230.7004-2, DD Form 1861, and relocation of 
text on these subjects to 215.404-4, Profit, since these sections 
pertain to the calculation of weighted guidelines for profit, rather 
than cost accounting standards.
     Elimination of 230.7003, Postaward facilities capital 
applications, and 230.7004-1, Forms CASB-CMF, since these sections 
duplicate CAS 414, Cost of Money as an Element of the Cost of 
Facilities Capital; FAR 31.205-10, Cost of Money; and the implementing 
contract clauses.
     Elimination of the definitions at 230.7100(a) and (b), 
since these definitions are provided in the cost accounting standards 
(CAS); elimination of the definition at 230.7100(c), because it 
conflicts with CAS; and elimination of the definition at 230.7100(d), 
because it is unnecessary.
     Elimination of 230.7101, Calculations, and 230.7102, 
Determining imputed cost of money, because they are adequately covered 
in CAS 417, Cost of Money as an Element of the Cost of Capital Assets 
Under Construction (48 CFR 9904.417).
     Removal of 230.7103, Preaward capital employed 
application, and relocation of that coverage to 215.404-73(b)(2)(i), 
Offsets for facilities capital cost of money, since it applies to 
offsets in determining profit, rather than cost accounting standards.
     Relocation of the following text 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
.

     215.403-1(c)(1), Adequate price competition.
     215.403-5, Instructions for submission of cost or pricing 
data or information other than cost or pricing data.
     215.404-2, Information to support proposal analysis.
     215.404-3, Subcontract pricing considerations.
     215.404-70, DD Form 1547, Record of Weighted Guidelines 
Method Application.
     215.404-71-2(b), (d), and (e), Performance risk.
     215.404-71-3(b), (d), (e), and (f)(3), Contract type risk 
and working capital adjustment.
     215.404-71-4, Facilities capital employed (partial 
relocation).
     215.404-71-5(b) and (c), Cost efficiency factor.
     215.404-76, Reporting profit and fee statistics.
     215.406-1, Prenegotiation objectives.
     215.406-3, Documenting the negotiation.
     215.407-4, Should-cost review.
     215.407-5-70(e) and (f), Estimating systems `` Disclosure, 
maintenance, and review requirements.
     215.470(b) and (c), Estimated data prices, except that the 
first sentence of (b) remains in DFARS, and is revised for clarity.
     230.201-5(a)(1), Waiver (partial relocation).
     253.215-70, DD Form 1547, Record of Weighted Guidelines 
Application.
    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

[[Page 75442]]

within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et 
seq., because the rule updates, clarifies, and relocates DFARS text, 
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 will also 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 2003-D014.

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 215, 230, 252, and 253

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
    Therefore, DoD proposes to amend 48 CFR Parts 215, 230, 252, and 
253 as follows:
    1. The authority citation for 48 CFR Parts 215, 230, 252, and 253 
continues to read as follows:

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

PART 215--CONTRACTING BY NEGOTIATION

    2. Section 215.403-1 is revised to read as follows:


215.403-1  Prohibition on obtaining cost or pricing data.

    (c) See PGI 215.403-1(c) for guidance on standards for exceptions 
from cost or pricing data requirements.
    (3) Commercial items. By November 30th of each year, the 
departments and agencies shall provide a report to the Director, 
Defense Procurement and Acquisition Policy and Acquisition Policy (DPAP), ATTN: DPAP/Policy, 
of all commercial item exceptions granted under FAR 15.403-1(b)(3), 
during the previous fiscal year, for any contract, subcontract, or 
modification expected to have a value of $15,000,000 or more. See PGI 
215.403-1(c)(3) for the format and guidance for the report. The 
Director, DPAP, will submit a consolidated report to the congressional 
defense committees.
    (4) Waivers. (A) The head of the contracting activity may apply the 
exceptional circumstances authority when a determination is made that:
    (1) The property or services cannot reasonably be obtained under 
the contract, subcontract, or modification, without the granting of the 
waiver;
    (2) The price can be determined to be fair and reasonable without 
the submission of certified cost or pricing data; and
    (3) There are demonstrated benefits to granting the waiver.
    (B) By November 30th of each year, the departments and agencies 
shall provide a report to the Director, DPAP, ATTN: DPAP/Policy, of all 
waivers granted under FAR 15.403-1(b)(4), during the previous fiscal 
year, for any contract, subcontract, or modification expected to have a 
value of $15,000,000 or more. See PGI 215.403-1(c)(4)(B) for the format 
and guidance for the report. The Director, DPAP, will submit a 
consolidated report to the congressional defense committees.
    (C) DoD has waived the requirement for submission of cost or 
pricing data for the Canadian Commercial Corporation and its 
subcontractors.
    (D) DoD has waived cost or pricing data requirements for nonprofit 
organizations (including educational institutions) on cost-
reimbursement-no-fee contracts. The contracting officer shall require:
    (1) Submission of information other than cost or pricing data to 
the extent necessary to determine price reasonableness and cost 
realism; and
    (2) Cost or pricing data from subcontractors that are not nonprofit 
organizations when the subcontractor's proposal exceeds the cost or 
pricing data threshold at FAR 15.403-4(a)(1).
    3. Section 215.403-5 is revised to read as follows:


215.403-5  Instructions for submission of cost or pricing data or 
information other than cost or pricing data.

    When the solicitation requires contractor compliance with the 
Contractor Cost Data Reporting System, follow the procedures at PGI 
215.403-5.


215.404-1  [Amended]

    4. Section 215.404-1 is amended by removing paragraph (d).
    5. Sections 215.404-2 and 215.404-3 are revised to read as follows:


215.404-2  Information to support proposal analysis.

    See PGI 215.404-2 for guidance on obtaining field pricing or audit 
assistance.


215.404-3  Subcontract pricing considerations.

    Follow the procedures at PGI 215.404-3 when reviewing a 
subcontractor's proposal.
    6. Section 215.404-4 is amended by revising paragraph (b)(1) 
introductory text to read as follows:


215.404-4  Profit.

    (b) * * *
    (1) Contracting officers shall use a structured approach for 
developing a prenegotiation profit or fee objective on any negotiated 
contract action when cost or pricing data is obtained, except for cost-
plus-award-fee contracts (see 215.404-74, 216.405-2, and FAR 16.405-2) 
or contracts with Federally Funded Research and Development Centers 
(FFRDCs) (see 215.404-75). There are three structured approaches--
* * * * *
    7. Section 215.404-70 is revised to read as follows:


215.404-70  DD Form 1547, Record of Weighted Guidelines Method 
Application.

    Follow the procedures at PGI 215.404-70 for use of DD Form 1547 
whenever a structured approach to profit analysis is required.
    8. Section 215.404-71-2 is amended by revising paragraphs (b), (d), 
and (e) to read as follows:


215.404-71-2  Performance risk.

* * * * *
    (b) Determination. See PGI 215.404-71-2(b) for guidance on 
determining the risk factors to be included in DD Form 1547.
* * * * *
    (d) Evaluation criteria for technical. See PGI 215.404-71-2(d) for 
guidance on evaluation criteria and examples of when above and below 
normal values should be applied.
    (e) Evaluation criteria for management/cost control. See PGI 
215.404-71-2(e) for guidance on evaluation criteria and examples of 
when above and below normal values should be applied.
    9. Section 215.404-71-3 is amended by revising paragraphs (b), (d), 
(e), and (f)(3) to read as follows:


215.404-71-3  Contract type risk and working capital adjustment.

* * * * *
    (b) Determination. See PGI 215.404-71-3(b) for guidance on 
determining the risk factors to be included in DD Form 1547.
* * * * *
    (d) Evaluation criteria. See PGI 215.404-71-3(d) for guidance on 
evaluation criteria and examples of

[[Page 75443]]

when above and below normal values should be applied.
    (e) Costs financed. See PGI 215.404-71-3(e) for guidance for 
determining the amount included in DD Form 1547.
    (f) * * *
    (3) An example is available at PGI 215.404-71-3(f)(3).
    10. Section 215.404-71-4 is revised to read as follows:


215.404-71-4  Facilities capital employed.

    (a) Description. This factor focuses on encouraging and rewarding 
capital investment in facilities that benefit DoD. It recognizes both 
the facilities capital that the contractor will employ in contract 
performance and the contractor's commitment to improving productivity.
    (b) Contract facilities capital estimates. The contracting officer 
shall estimate the facilities capital cost of money and capital 
employed using:
    (1) An analysis of the appropriate Forms CASB-CMF and cost of money 
factors (48 CFR 9904.414 and FAR 31.205-10); and
    (2) DD Form 1861, Contract Facilities Capital Cost of Money.
    (c) Use of DD Form 1861. See PGI 215.404-71-4(c) for information on 
the purpose of DD Form 1861 and instructions for completion of the 
form.
    (d) Preaward facilities capital applications. Follow the procedures 
at PGI 215.404-71-4(d) for establishing cost and price objectives.
    (e) Determination. See PGI 215.404-71-4(e) for guidance on 
determining the amounts and values to be included in DD Form 1547.
    (f) Values: Normal and designated ranges.

------------------------------------------------------------------------
           Asset type                Normal value      Designated range
------------------------------------------------------------------------
Land............................  0%................  N/A.
Buildings.......................  0%................  N/A.
Equipment.......................  17.5%.............  10% to 25%.
------------------------------------------------------------------------

    (g) Evaluation criteria. See PGI 215.404-71-4(g) for guidance on 
evaluation criteria and examples of when above and below normal values 
should be applied.
    11. Section 215.404-71-5 is amended by revising paragraph (b) and 
removing paragraph (c). The revised text reads as follows:


215.404-71-5  Cost efficiency factor.

* * * * *
    (b) See PGI 215.404-71-5(b) for guidance on appropriate use of the 
special cost efficiency factor.
    12. Section 215.404-73 is amended by revising paragraph (b)(2)(i) 
to read as follows:


215.404-73  Alternate structured approaches.

* * * * *
    (b) * * *
    (2) * * *
    (i) The contracting officer shall reduce the overall prenegotiation 
profit objective by the amount of facilities capital cost of money 
under Cost Accounting Standard 414, Cost of Money as an Element of the 
Cost of Facilities Capital (48 CFR 9904.414). Cost of money under CAS 
417, Cost of Money as an Element of the Cost of Capital Assets Under 
Construction (48 CFR 9904.417), should not be used to reduce the 
overall prenegotiation profit objective. The profit amount in the 
negotiation summary of the DD Form 1547 must be net of the offset.
* * * * *
    13. Sections 215.404-76, 215.406-1, and 215.406-3 are revised to 
read as follows:


215.404-76  Reporting profit and fee statistics.

    Follow the procedures at PGI 215.404-76 for reporting profit and 
fee statistics.


215.406-1  Prenegotiation objectives.

    See PGI 215.406-1 for guidance on establishing prenegotiation 
objectives.


215.406-3  Documenting the negotiation.

    Follow the procedures at PGI 215.406-3 for documenting the 
negotiation.
    14. Section 215.407-4 is revised to read as follows:


215.407-4  Should-cost review.

    See PGI 215.407-4 for guidance on determining whether to perform a 
program or overhead should-cost review.
    15. Section 215.407-5-70 is amended by revising paragraphs (a)(1), 
(b)(1), (e), and (f) to read as follows:


215.407-5-70  Disclosure, maintenance, and review requirements.

    (a) * * *
    (1) Acceptable estimating system is defined in the clause at 
252.215-7002, Cost Estimating System Requirements.
* * * * *
    (b) * * *
    (1) DoD policy is that all contractors have acceptable estimating 
systems that consistently produce well-supported proposals that are 
acceptable as a basis for negotiation of fair and reasonable prices.
* * * * *
    (e) Review procedures. Follow the procedures at PGI 215.407-5-70(e) 
for establishing and conducting estimating system reviews.
    (f) Disposition of survey team findings. Follow the procedures at 
PGI 215.407-5-70(f) for disposition of the survey team findings.
* * * * *
    16. Section 215.470 is amended by revising paragraph (b), removing 
paragraph (c), and redesignating paragraph (d) as paragraph (c). The 
revised text reads as follows:


215.470  Estimated data prices.

* * * * *
    (b) When data are required to be delivered under a contract, 
include DD Form 1423, Contract Data Requirements List, in the 
solicitation. See PGI 215.470(b) for guidance on the use of DD Form 
1423.
* * * * *

PART 230--COST ACCOUNTING STANDARDS ADMINISTRATION

    17. Section 230.201-5 is revised to read as follows:


230.201-5  Waiver.

    (a)(1)(A) The military departments and the Director, Defense 
Procurement and Acquisition Policy, Office of the Under Secretary of 
Defense (Acquisition, Technology, and Logistics):
    (1) May grant CAS waivers that meet the conditions in FAR 30.201-
5(b)(1); and
    (2) May grant CAS waivers that meet the conditions in FAR 30.201-
5(b)(2), provided the cognizant Federal agency official granting the 
waiver determines that:
    (i) The property or services cannot reasonably be obtained under 
the contract, subcontract, or modification, as applicable, without 
granting the waiver;
    (ii) The price can be determined to be fair and reasonable without 
the application of the Cost Accounting Standards; and
    (iii) There are demonstrated benefits to granting the waiver.
    (B) Follow the procedures at PGI 230.201-5(a)(1) for submitting 
waiver requests to the Director, Defense Procurement and Acquisition Policy and Acquisition 
Policy.
    (2) The military departments shall not delegate CAS waiver 
authority below the individual responsible for issuing contracting 
policy for the department.
    (e) By November 30th of each year, the military departments shall 
provide a report to the Director, Defense Procurement and Acquisition Policy and Acquisition 
Policy,

[[Page 75444]]

ATTN: DPAP/Policy, of all waivers granted under FAR 30.201-5(a), during 
the previous fiscal year, for any contract, subcontract, or 
modification expected to have a value of $15,000,000 or more. See PGI 
230.201-5(e) for the format and guidance for the report. The Director, 
Defense Procurement and Acquisition Policy and Acquisition Policy, will submit a consolidated 
report to the CAS Board and the congressional defense committees.

Subparts 230.70 and 230.71--[Removed]

    18. Subparts 230.70 and 230.71 are removed.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    19. Section 252.215-7002 is amended as follows:
    a. By revising the clause date;
    b. In paragraph (a), by revising the paragraph heading and adding a 
definition of ``Acceptable estimating system''; and
    c. By revising paragraph (b). The revised and added text reads as 
follows:


252.215-7002  Cost estimating system requirements.

* * * * *

COST ESTIMATING SYSTEM REQUIREMENTS (XXX 2005)

    (a) Definitions.
    Acceptable estimating system means an estimating system that--
    (1) Is maintained, reliable and consistently applied;
    (2) Produces verifiable, supportable and documented cost estimates 
that are an acceptable basis for negotiation of fair and reasonable 
prices;
    (3) Is consistent with and integrated with the Contractor's related 
management systems; and
    (4) Is subject to applicable financial control systems.
* * * * *
    (b) General. The Contractor shall establish, maintain, and comply 
with an acceptable estimating system.
* * * * *

PART 253--FORMS

    20. Section 253.215-70 is revised to read as follows:


253.215-70  DD Form 1547, Record of Weighted Guidelines Application.

    Follow the procedures at PGI 253.215-70 for completing DD Form 
1547.

[FR Doc. 05-24219 Filed 12-19-05; 8:45 am]

BILLING CODE 5001-08-P