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SUBPART 217.1--MULTIYEAR CONTRACTING

(Revised May 10, 2016)

 

 



 217.103 Definitions.
 217.170 General.
 217.171 Multiyear contracts for services.
 217.172 Multiyear contracts for supplies.
 217.173 Multiyear contracts for military family housing.
 217.174 Multiyear contracts for electricity from renewable energy sources.


217.103  Definitions.

As used in this subpart--

 

“Advance procurement” means an exception to the full funding policy that allows acquisition of long lead time items (advance long lead acquisition) or economic order quantities (EOQ) of items (advance EOQ acquisition) in a fiscal year in advance of that in which the related end item is to be acquired.  Advance procurements may include materials, parts, components, and effort that must be funded in advance to maintain a planned production schedule.

 

“Congressional defense committees,” means—

 

      (1)  The Committee on Armed Services of the Senate;

 

      (2)  The Committee on Appropriations of the Senate;

 

      (3)  The Subcommittee on Defense of the Committee on Appropriations of the Senate;

 

      (4)  The Committee on Armed Services of the House of Representatives ;

 

      (5)  The Committee on Appropriations of the House of Representatives; and

 

      (6)  The Subcommittee on Defense of the Committee on Appropriations of the House of Representatives.

 

“Military installation” means a base, camp, post, station, yard, center, or other activity under the jurisdiction of the Secretary of a military department or, in the case of an activity in a foreign country, under the operational control of the Secretary of a military department or the Secretary of Defense (10 U.S.C. 2801(c)(4)).

 

217.170  General.

 

      (a)  Before awarding a multiyear contract, the head of the agency must compare the cost of that contract to the cost of an annual procurement approach, using a present value analysis.  Do not award the multiyear contract unless the analysis shows that the multiyear contract will result in the lower cost (10 U.S.C. 2306b(l)(7); section 8008(a) of Pub. L. 105-56, and similar sections in subsequent DoD appropriations acts).

 

      (b)  The head of the agency must provide written notice to the congressional defense committees at least 30 days before termination of any multiyear contract (section 8010 of Division C, Title VIII, of the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 113-235), and similar sections in subsequent DoD appropriations acts).

 

      (c)  Every multiyear contract must comply with FAR 17.104(c), unless an exception is approved through the budget process in coordination with the cognizant comptroller.

 

      (d)(1)  DoD must provide notification to the congressional defense committees at least 30 days before entering into a multiyear contract for certain procurements, including those expected to—

 

                    (i)  Employ an unfunded contingent liability in excess of $20 million (see 10 U.S.C. 2306b(l)(1)(B)(i)(II), 10 U.S.C. 2306c(d)(1), and section 8008(a) of Pub. L. 105-56 and similar sections in subsequent DoD appropriations acts);

 

                    (ii)  Employ economic order quantity procurement in excess of $20 million in any one year of the contract (see 10 U.S.C. 2306b(l)(1)(B)(i)(I)) and section 8008(a) of Pub. L. 105-56 and similar sections in subsequent DoD appropriations acts);

 

                    (iii)  Involve a contract for advance procurement leading to a multiyear contract that employs economic order quantity procurement in excess of $20 million in any one year (see 10 U.S.C. 2306b(l)(1)(B)(ii)and section 8008(a) of Pub. L. 105- 56 and similar sections in subsequent DoD appropriations acts); or

 

                    (iv)  Include a cancellation ceiling in excess of $135.5 million (see 10 U.S.C. 2306c(d)(4) and 10 U.S.C. 2306b(g)(1).

 

              (2)  A DoD component must submit a request for authority to enter into multiyear contracts described in paragraphs (d)(1)(i) through (iv) of this section as part of the component’s budget submission for the fiscal year in which the multiyear contract will be initiated. DoD will include the request, for each candidate it supports, as part of the President’s Budget for that year and in the Appendix to that budget as part of proposed legislative language for the appropriations bill for that year (section 8008(b) of Pub. L. 105-56).

 

              (3)  If the advisability of using a multiyear contract becomes apparent too late to satisfy the requirements in paragraph (d)(2) of this section, the request for authority to enter into a multiyear contract must be—

 

                    (i)  Formally submitted by the President as a budget amendment; or

 

                    (ii)  Made by the Secretary of Defense, in writing, to the congressional defense committees (section 8008(b) of Pub. L. 105-56).

 

              (4)  Agencies must establish reporting procedures to meet the congressional notification requirements of paragraph (d)(1) of this section. The head of the agency must submit a copy of each notice to the Director of Defense Procurement and Acquisition Policy, Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics) (OUSD(AT&L)DPAP), and to the Deputy Under Secretary of Defense (Comptroller) (Program/Budget) (OUSD(C)(P/B)).

 

              (5)  If the budget for a contract that contains a cancellation ceiling in excess of $135.5 million does not include proposed funding for the costs of contract cancellation up to the cancellation ceiling established in the contract—

 

                    (i)  The notification required by paragraph (d)(1) of this section shall include—

 

                            (A)  The cancellation ceiling amounts planned for each program year in the proposed multiyear contract, together with the reasons for the amounts planned;

 

                            (B)  The extent to which costs of contract cancellation are not included in the budget for the contract; and

 

                            (C)  A financial risk assessment of not including budgeting for costs of contract cancellation (10 U.S.C. 2306b(g) and 10 U.S.C. 2306c(d)); and

 

                    (ii)  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.

 

217.171  Multiyear contracts for services.

 

      (a)  The head of the agency may enter into a multiyear contract for a period of not more than 5 years for the following types of services (and items of supply relating to such services), even though funds are limited by statute to obligation only during the fiscal year for which they were appropriated (10 U.S.C. 2306c(a)). Covered services are—

 

              (1)  Operation, maintenance, and support of facilities and installations;

 

              (2)  Maintenance or modification of aircraft, ships, vehicles, and other highly complex military equipment;

 

              (3)  Specialized training requiring high quality instructor skills (e.g., training for pilots and aircrew members or foreign language training);

 

              (4)  Base services (e.g., ground maintenance, in-plane refueling, bus transportation, and refuse collection and disposal); and

 

              (5)  Environmental remediation services for—

 

                    (i)  An active military installation;

 

                    (ii)  A military installation being closed or realigned under a base closure law as defined in 10 U.S.C. 2667(h)(2); or

 

                    (iii)  A site formerly used by DoD (10 U.S.C. 2306c(b)).

 

      (b)  The head of the agency must be guided by the following principles when entering into a multiyear contract for services:

 

              (1)  The portion of the cost of any plant or equipment amortized as a cost of contract performance should not exceed the ratio between the period of contract performance and the anticipated useful commercial life of the plant or equipment.  As used in this section, "useful commercial life" means the commercial utility of the facilities rather than the physical life, with due consideration given to such factors as the location, specialized nature, and obsolescence of the facilities.

 

              (2)  Consider the desirability of obtaining an option to extend the term of the contract for a reasonable period not to exceed 3 years at prices that do not include charges for plant, equipment, or other nonrecurring costs already amortized.

 

              (3)  Consider the desirability of reserving the right to take title, under the appropriate circumstances, to the plant or equipment upon payment of the unamortized portion of the cost (10 U.S.C. 2306c(c)).

 

      (c)  Before entering into a multiyear contract for services, the head of the agency must make a written determination that¾

 

              (1)  There will be a continuing requirement for the services consistent with current plans for the proposed contract period;

 

              (2)  Furnishing the services will require¾

 

                    (i)  A substantial initial investment in plant or equipment; or

 

                    (ii)  The incurrence of substantial contingent liabilities for the assembly, training, or transportation of a specialized work force; and

 

              (3)  Using a multiyear contract will promote the best interests of the United States by encouraging effective competition and promoting economies in operations (10 U.S.C. 2306c(a)).

 

      (d)  The head of an agency may not initiate a multiyear contract for services if the value of the multiyear contract exceeds $678.5 million unless a law specifically provides authority for the contract (10 U.S.C. 2306c(d)(2)).

 

217.172  Multiyear contracts for supplies.

 

      (a)  This section applies to all multiyear contracts for supplies, including weapon systems and other multiyear acquisitions specifically authorized by law (10 U.S.C. 2306b).

 

      (b)  The head of the agency may enter into a multiyear contract for supplies if, in addition to the conditions listed in FAR 17.105-1(b), the use of such a contract will promote the national security of the United States (10 U.S.C. 2306b(a)(6)).

 

      (c)  Multiyear contracts in amounts exceeding $678.5 million must be specifically authorized by law in an act other than an appropriations act (10 U.S.C. 2306b(i)(1)).

 

      (d)  The head of the agency may not initiate a multiyear procurement contract for any system (or component thereof) if the value of the multiyear contract would exceed $678.5 million unless authority for the contract is specifically provided in an appropriations act (10 U.S.C. 2306b(l)(3)).

 

      (e)  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;

 

              (3)  Cancellation provisions in the contract do not include consideration of recurring manufacturing costs of the contractor associated with the production of unfunded units to be delivered under the contract;

 

              (4)  The contract provides that payments to the contractor under the contract shall not be made in advance of incurred costs on funded units; and

 

              (5)  The contract does not provide for a price adjustment based on a failure to award a follow-on contract (section 8010 of Division C, Title VIII, of the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 113-235) and similar sections in subsequent DoD appropriations acts).

 

      (f)(1)  The head of the agency must not enter into or extend a multiyear contract that exceeds $678.5 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(l)(5)).

 

              (2)  In addition, for contracts equal to or greater than $678.5 million, the head of the contracting activity must determine that the conditions required by paragraphs (h)(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 (h)(2) of this section.

 

      (g)  The head of the agency may enter into a multiyear contract for—

 

              (1)  A weapon system and associated items, services, and logistics support for a weapon system (10 U.S.C. 2306b(h)(1)); and

 

              (2)  Advance procurement of components, parts, and materials necessary to manufacture a weapon system, including advance procurement to achieve economic lot purchases or more efficient production rates (see 217.172(h)(3) and (4) of this section regarding economic order quantity procurements) (10 U.S.C. 2306b(h)(2)). Before initiating an advance procurement, the contracting officer must verify that it is consistent with DoD policy (e.g., the full funding policy in Volume 2A, chapter 1, of DoD 7000.14-R, Financial Management Regulation).

 

  (h)  The head of the agency shall ensure that the following conditions are satisfied before awarding a multiyear contract for a defense acquisition program that has been specifically authorized by law to be carried out using multiyear contract authority:

 

              (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 30 days before entry into such contracts, that each of the conditions in paragraphs (h)(2)(i) through (vii) of this section is satisfied (10 U.S.C. 2306b(i)(3).

 

                    (i)  The Secretary has determined that each of the requirements in FAR 17.105-1, paragraphs (b)(1) through (b)(5), 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)(3)(A)).

 

                    (ii)  The Secretary’s determination under paragraph (h)(2)(i) of this section was made after the completion of a cost analysis performed by the Defense Cost and Resource Center of the Department of Defense and such analysis supports the findings (10 U.S.C. 2306b(i)(3)(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 10 USC 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. 2306b(i)(3)(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)(3)(D)).

 

                    (v)  Sufficient funds will be available in the fiscal year in which the contract is to be awarded to perform the contract, 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)(3)(E)).

 

                    (vi)  The contract is a fixed price type contract (10 U.S.C. 2306b(i)(3)(F)).

 

                    (vii)  The proposed multiyear contract provides for production at not less than minimum economic rates, given the existing tooling and facilities (10 U.S.C. 2306b(i)(3)(G)). The head of the agency shall submit to OUSD(C)(P/B) information supporting the agency’s determination that this requirement has been met.

 

                    (viii)  The head of the agency shall submit information supporting this certification to OUSD(C)(P/B) for transmission to Congress through the Secretary of Defense.

 

                            (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.

 

              (3)  The contract is for the procurement of a complete and usable end item (10 U.S.C. 2306b(i)(5)(A)).

 

              (4)  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)(5)(B)).

 

              (5)  The Secretary may make the certification under paragraph (h)(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)(6)).

 

              (6)  The Secretary of Defense may not delegate this authority to make the certification under paragraph (h)(2) of this section or the determination under paragraph (h)(5) of this section to an official below the level of the Under Secretary of Defense for Acquisition, Technology, and Logistics (10 U.S.C. 2306b(i)(7)).

 

              (7)  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. 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 (10 U.S.C. 2306b(i)(4)). 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.

 

      (i)  The Secretary of Defense may instruct the head of the agency proposing a multiyear contract to include in that contract negotiated priced options for varying the quantities of end items to be procured over the life of the contract (10 U.S.C. 2306b(j)).

 

      (j)  Any requests for increased funding or reprogramming for procurement of a major system under a multiyear contract 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(h)(2) (10 U.S.C. 2306b(m)).

 

217.173  Multiyear contracts for military family housing.

The head of the agency may enter into multiyear contracts for periods up to 4 years for supplies and services required for management, maintenance, and operation of military family housing and may pay the costs of such contracts for each year from annual appropriations for that year (10 U.S.C. 2829).

 

217.174  Multiyear contracts for electricity from renewable energy sources.

 

      (a)  The head of the contracting activity may enter into a contract for a period not to exceed 10 years for the purchase of electricity from sources of renewable energy, as that term is defined in section 203(b)(2) of the Energy Policy Act of 2005 (42 U.S.C. 15852(b)(2)).

 

      (b)  Limitations.  The head of the contracting activity may exercise the authority in paragraph (a) of this section to enter into a contract for a period in excess of five years only if the head of the contracting activity determines, on the basis of a business case analysis (see PGI 217.1 (DFARS/PGI view), Supplemental Information TAB, for a business case analysis template and guidance) prepared by the requiring activity, that—

 

              (1)  The proposed purchase of electricity under such contract is cost effective; and

 

              (2)  It would not be possible to purchase electricity from the source in an economical manner without the use of a contract for a period in excess of five years.

 

      (c)  Nothing in this section shall be construed to preclude the DoD from using other multiyear contracting authority of DoD to purchase renewable energy.

 

 


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