[Federal Register Volume 59, Number 191 (Tuesday, October 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24461]


[[Page Unknown]]

[Federal Register: October 4, 1994]


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DEPARTMENT OF DEFENSE

48 CFR Part 225

 

Defense Federal Acquisition Regulation Supplement; Offset 
Administrative Costs

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: The Director of Defense Procurement has issued a final rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to change the criteria for contractor recovery of offset administrative 
costs under foreign military sales.

EFFECTIVE DATE: September 28, 1994.

FOR FURTHER INFORMATION CONTACT:
LTC Ed King, (703) 604-5929.

SUPPLEMENTARY INFORMATION:

A. Background

    This revision originated based on a Defense Security Assistance 
Agency (DSAA) procedural change on offset administrative costs. A 
proposed rule was published at 59 FR 17756 on April 14, 1994. The 
proposed rule is adopted as final without change. DSAA will issue a 
corresponding revision to the Security Assistance Manual.

B. Regulatory Flexibility Act

    The Department of Defense certifies that this final rule will not 
have a significant economic impact on a substantial number of small 
entities under the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because it is unlikely that a substantial number of small entities have 
foreign military sales contracts. No comments were received on the 
impact of this rule on small entities during the public comment period.

C. Paperwork Reduction Act

    The final 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.
    Accordingly, 48 CFR Part 225 is 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 Chapter 1.

PART 225--FOREIGN ACQUISITION

    2. Section 225.7303-2(a) is revised to read as follows:


Sec. 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 Sec. 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 not 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 related 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 requirement (as distinguished from contracts for FMS).
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[FR Doc. 94-24461 Filed 10-3-94; 8:45 am]
BILLING CODE 5000-04-M