[Federal Register Volume 59, Number 72 (Thursday, April 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8988]


[[Page Unknown]]

[Federal Register: April 14, 1994]


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

DEPARTMENT OF DEFENSE

48 CFR Part 225

 

Defense Federal Acquisition Regulation Supplement; Offset 
Administrative Costs

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for public comments.

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

SUMMARY: The Department of Defense is proposing amendment of the 
Defense FAR Supplement to change the criteria for contractor recovery 
under foreign military sale contracts of the contractor's offset 
administrative costs.

DATES: Comments on the proposed DFARS rule should be submitted in 
writing to the address shown below on or before June 13, 1994 to be 
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to The 
Defense Acquisition Regulations Council, Attn: Ms. Alyce Sullivan, 
OUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 604-5971. Please cite DFARS Case 93-
D004 in all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT:
Ms. Alyce Sullivan, (703) 604-5930.

SUPPLEMENTARY INFORMATION:

A. Background

    DFARS 225.7303-2(a) is amended to revise the language on offset 
administrative costs. The revision originated based on a Defense 
Security Assistance Agency (DSAA) procedural change. DSAA will issue a 
corresponding revision to the Security Assistance Management Manual. In 
addition to the revision of offset administrative costs, the language 
currently in 225.7303-2(a) (1) and (2) has been combined to make it 
more clear and all subparagraphs under 225.7303-2(a) have been 
renumbered accordingly.

B. Regulatory Flexibility Act

    The proposed rule is not expected to have 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 it 
eliminates a procedural requirement for contractor recovery of offset 
administrative costs, under foreign military sale contracts. An initial 
regulatory flexibility analysis has therefore not been performed. 
Comments are invited from small businesses and other interested 
parties. Comments from small entities concerning the affected DFARS 
sections will also be considered in accordance with section 610 of the 
Act. Such comments must be submitted separately and cite DFARS Case 94-
610 in correspondence.

C. Paperwork Reduction Act

    The proposed rule does not impose any reporting or recordkeeping 
requirements which require the approval of OMB under 44 U.S.C. 3501, et 
seq.

List of Subjects in 48 CFR Part 225

    Government procurement.
Claudia L. Naugle,
Deputy Director, Defense Acquisition Regulations Council.

    Therefore, it is proposed that 48 CFR part 225 be amended as 
follows:
    1. The authority citation for 48 CFR part 225 continues to read as 
follows:

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

PART 225--FOREIGN ACQUISITION

    2. Section 225.7303-2 is amended by revising paragraph (a) to read 
as follows:


225.7303-2  Cost of doing business with a foreign government or an 
international organization.

    (a) In pricing FMS contracts where non-U.S. Government prices as 
described in 225.7303-1 do not exist, recognize the reasonable and 
allocable costs of doing business with a foreign government or 
international organization, even though such costs might not be 
recognized in the same amounts in pricing other defense contracts. 
Examples of such costs include, but are no limited to--
    (1) Selling expenses (not otherwise limited by FAR part 31), e.g.--
    (i) Maintaining international sales and service organizations;
    (ii) Sales commissions and fees in accordance with FAR subpart 3.4;
    (iii) Sales promotions, demonstrations, and related travel for 
sales to foreign governments. Paragraph 126.8 of the International 
Traffic in Arms Regulations (ITAR) (22 CFR part 121) may require 
Government approval for these costs to be allowable. If Government 
approval is required for promotion or demonstration costs to be 
allowable, the approval must be obtained.
    (iv) Configuration studies and related technical services 
undertaken as a direct selling effort to a foreign country.
    (2) Product support and post-delivery service expenses, such as--
    (i) Operations or maintenance training, training or tactics films, 
manuals, or other related data; and
    (ii) Technical field services provided in a foreign country related 
to accident investigations, weapon system problems, operations/tactics 
enhancement, and related travel to foreign countries.
    (3) Offset administrative costs.
    (i) A U.S. defense contractor may recover costs incurred to 
administer specific requirements of its offset agreement with a foreign 
government or international organization if the foreign military sale 
Letter of Offer and Acceptance is financed wholly with customer cash or 
repayable foreign military finance credits.
    (ii) The U.S. Government assumes no obligation to satisfy or 
administer the offset requirement or to bear any of the associated 
costs.
    (iii) Some examples of offset administrative costs are--
    (A) In-house and/or purchased: organizational, administrative and 
technical support, including offset staffing; quality assurance, 
manufacturing, purchasing support; data acquisition; proposal, 
transaction and report preparation; broker/trading services; legal 
support; and similar support activities;
    (B) Off-shore operations for technical representative and 
consultant activities, office operations, customer and industry 
interface, capability surveys;
    (C) Marketing assistance and related technical assistance, transfer 
of technical information and relating training;
    (D) Employee travel and subsistence costs; and
    (E) Taxes and duties.
    (4) Costs that are the subject of advance agreement under the 
appropriate provisions of FAR part 31; or where the advance 
understanding places a limit on the amounts of cost that will be 
recognized as allowable in defense contract pricing, and the agreement 
contemplated that it will apply only to DoD contracts for the U.S. 
Government's own requirements (as distinguished from contracts for 
FMS).
* * * * *
[FR Doc. 94-8988 Filed 4-13-94; 8:45 am]
BILLING CODE 3810-01-M