[Federal Register Volume 59, Number 116 (Friday, June 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14320]


[[Page Unknown]]

[Federal Register: June 17, 1994]


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DEPARTMENT OF DEFENSE

48 CFR Part 215

 

Defense Federal Acquisition Regulation Supplement; Overhead 
Should-Cost Reviews

AGENCY: Department of Defense (DoD). Q02
ACTION: Proposed rule with request for public comments.

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SUMMARY: The Department of Defense is proposing changes to the Defense 
Federal Acquisition Regulation Supplement (DFARS) to provide criteria 
for when DoD activities should consider performing should-cost reviews.

DATES: Comments on the proposed DFARS rule should be submitted in 
writing to the address shown below on or before August 16, 1994 to be 
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to Defense 
Acquisition Regulations Directorate, Attn: IMD 3D139, PDUSD(A&T), 3062 
Defense Pentagon, Washington, DC 20301-3062. Telefax number (703) 604-
5971. Please cite DFARS Case 92-D010 in all correspondence related to 
this issue.

FOR FURTHER INFORMATION CONTACT:
Mrs. Alyce Sullivan, (703) 604-5929.

SUPPLEMENTARY INFORMATION: 

A. Background

    This proposed rule originated based on a recommendation in the 
General Accounting Office (GAO) report dated October 30, 1991, entitled 
``Economy and Efficiency Audits Can Help Reduce Overhead Costs,'' which 
recommends that regulations be revised to provide guidance for the use 
of overhead should-cost reviews. The proposed rule modifies DFARS 
215.810 to supplement the FAR rule published for public comment on 
April 6, 1994 (59 FR 16388). It provides specific criteria for when DoD 
activities should consider performing should-cost reviews.

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 contracts 
awarded to small entities normally are not subject to program or 
overhead should-cost reviews. 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 additional 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 215

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

    Therefore, it is proposed that 48 CFR part 215 be amended as 
follows:
    1. The authority citation for 48 CFR part 215 continues to read as 
follows:

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

PART 215--CONTRACTING BY NEGOTIATION

    2. Section 215.810 is revised to read as follows:


215.810  Should-cost review.

    3. Section 215.810-2 is added to read as follows:


215.810-2  Program should-cost review.

    (b) DoD contracting activities should consider performing a program 
should-cost review before award of a definitive major systems contract 
exceeding $100 million.
    4. Section 215.810-3 is added to read as follows:


215.810-3  Overhead should-cost review.

    (b)(i) The Defense Contract Management Command/Defense Logistics 
Agency (DCMC/DLA), or the military department responsible for 
performing contract administration functions (e.g., Navy SUPSHIP), 
should consider performing an overhead should-cost review of a 
contractor business unit (as defined in FAR 31.001) when all the 
following conditions exist--
    (A) Projected annual sales to DoD exceed $1 billion;
    (B) Projected DoD vs. total business exceeds 30 percent;
    (C) High level of sole-source DoD contracts;
    (D) Significant volume of proposal activity anticipated; and
    (E) Production or development of major weapon system or program 
anticipated.
    (ii) The head of the contracting activity may request an overhead 
should-cost review for a business unit which does not meet the criteria 
in paragraph (b)(i) of this subsection.
    (iii) Overhead should-cost reviews are labor intensive and require 
participation by the buying activities, contract administration, and 
contract audit elements. The extent of availability of military 
department, contract administration, and contract audit resources to 
support DCMC/DLA-led teams should be considered when determining 
whether a review will be conducted. Overhead should-cost reviews 
generally shall not be conducted at a contractor business segment more 
frequently than every three years.

[FR Doc. 94-14320 Filed 6-16-94; 8:45 am]
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