[Federal Register Volume 60, Number 107 (Monday, June 5, 1995)]
[Rules and Regulations]
[Pages 29491-29504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13061]



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DEPARTMENT OF DEFENSE

48 CFR Parts 202, 203, 206, 207, 209, 215, 217, 219, 225, 226, 228, 
231, 232, 235, 237, 242, 244, 245, 247, 249, 251, 252, 253, and 
Appendix C to Chapter 2

[Defense Acquisition Circular (DAC) 91-7]


Defense Federal Acquisition Regulation Supplement; Miscellaneous 
Amendments

AGENCY: Department of Defense (DoD).

ACTION: Final rules.

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SUMMARY: Defense Acquisition Circular (DAC) 91-7 amends the Defense FAR 
Supplement (DFARS) to revise, finalize, or add language on competitive 
prototyping, contractor accounting controls, award to foreign 
controlled contractors, terrorist countries, debarment and suspension, 
small purchases in support of contingency operations, greatest value 
sources, predetermined indirect cost rates, undefinitized contract 
actions, small disadvantaged business, historically black colleges and 
universities and minority institutions, Indian tribal or Alaska native 
corporations, North American Free Trade Agreement, valves and machine 
tools, restriction on procurement of goods, aircraft fuel cells, 
lifeboat survival systems, performance outside the United States, 
offset [[Page 29492]] administrative costs, preference for local and 
small businesses, preference for local residents, surety bonds, 
limitation on allowable individual compensation, restructuring costs 
under defense contracts, indirect costs of institutions of higher 
learning, research and development definitions, manufacturing science 
and technology program, research and development contracting, Federally 
Funded Research and Development Centers, streamlined research and 
development contracting procedures test, personal services contracts, 
services at installations being closed, production surveillance, 
contractor insurance/pension reviews, best value--stevedoring, 
returnable cylinders, reflagging or repair work, screening threshold 
for contractor inventory, notification of proposed program termination 
of reduction, and Government supply sources.

DATES: Effective date May 17, 1995.

FOR FURTHER INFORMATION CONTACT:
Ms. Lucile Martin, Defense Acquisition Regulations Directorate, 
PDUSD(A&T)DP(DAR), 3062 Defense Pentagon, Washington, DC 20302-3062, 
telephone (703) 602-0131.

SUPPLEMENTARY INFORMATION: 

A. Background

    This Defense Acquisition Circular (DAC) 91-7 includes 39 rules and 
miscellaneous editorial amendments. Twelve of the rules in the DAC 
(Item XXIII, III, VI, VII, XIV, XVIII, XX, XXII, XXVI, XXVIII, XXIX, 
and XXX) were published previously in the Federal Register and thus are 
not included as part of this rulemaking notice. These 12 rules are 
being published in the DAC to revise the looseleaf edition of DFARS to 
conform to the previously published revisions.

C. Regulatory Flexibility Act

DAC 91-7, Items, I, XXI, XXV, XXXV

    The Regulatory Flexibility Act does not apply because these rules 
are not significant revisions within the meaning of Public Law 98-577. 
However, comments from small entities will be considered in accordance 
with section 610 of the Act. Such comments must be submitted 
separately. Please cite DFARS Case 95-610 in correspondence.

DAC 91-7, Items II, IV, V, VII, IX, X, XIII, XV, XVI, XVII, XXIV, 
XXXII, XXXIV, XXXVI, XXXVII, XXXIX

    DoD certifies that these rules will not have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act because:
    Item II--The rule emphasizes existing requirements for contractors 
to ensure that cost data is reliable and contract costs are properly 
allocated.
    Item IV--The rule only applies to solicitations and contracts with 
an estimated or actual value exceeding $5,000,000.
    Item V--The rule only applies to contractors and subcontractors 
that are debarred, suspended, or proposed for debarment.
    Item VII--The rule clarified DoD's existing policy regarding 
contractor selection of subcontractors based on greatest value.
    Item IX--The rule clarifies the existing regulatory language 
regarding statutory restrictions on the use of undefinitized contract 
actions.
    Item X--The rule updates the definitions of SDB and HBCU, and 
eliminates the requirement for an offeror that represents itself as an 
SDB, HBCU, or MI, to maintain its status as such as the time of 
contract award.
    Item XIII--The rule implements statutory restrictions on the 
acquisition of machine tool accessories of foreign manufacture.
    Item XV--The rule implements statutory restrictions on the 
acquisition of fuel cells of foreign manufacture.
    Item XVI--The rule implements statutory restrictions on the 
acquisition of lifeboat survival systems of foreign manufactures or 
assembly.
    Item XVII--The rule only applies to contracts that exceed $500,000 
and involve performance outside the United States.
    Item XXIV--The rule prohibits DoD from placing certain limitations 
on the reimbursement of indirect costs to institutions of higher 
learning.
    Item XXXII--The rule merely simplifies the method used by the 
Government to determine when on-site production surveillance will be 
performed on a contract.
    Item XXXIV--The rule is consistent with the policy at FAR 15.605 
regarding selection of a source whose proposal offers the greatest 
value to the Government.
    Item XXXVI--The rule implements statutory restrictions on foreign 
performance of certain reflagging or repair work.
    Item XXXVII--The rule merely raises the dollar threshold for 
Government screening of excess contractor inventory prior to disposal.
    Item XXXIX--The rule uses standard commercial terms for payment 
within 30 days, for contractor purchases from Government supply 
sources.

DAC 91-7, Items XI, XII, XIX, XXVII, XXXI, XXXIII, XXXVIII

    The Regulatory Flexibility Act applies. A final regulatory analysis 
has been performed and is available by writing the Defense Acquisition 
Regulations Directorate, ATTN: Ms. Michele Peterson, PDUSD(A&T)DP(DAR), 
3062 Defense Pentagon, Washington, DC 20301-3062.

D. Paperwork Reduction Act

DAC 91-7, Items I, II, V, VII, IX, X, XI, XV, XVI, XIX, XXI, XXIV, XXV, 
XXXI, XXXII, XXXIV, XXXV, XXXVI, XXXVII, XXXVIII, XXXIX

    The Paperwork Reduction Act does not apply because the revisions in 
this rulemaking notice do not contain and/or affect information 
collection requirements which require the approval of OMB under 44 
U.S.C. 3501 et seq.

DAC 91-7, Items IV, XII, XIII, XVII, XXVII, XXXIII

    The Paperwork Reduction Act applies. OMB has improved the 
information collection requirements. The following OMB control numbers 
apply:

Item IV--No. 0704-0372
Item XII--No. 0704-0361
Item XIII--No. 0704-0350
Item XVII--No. 0704-0355
Item XXVII--No. 0704-0188 and 0704-0264
Item XXXIII--No. 0704-0250
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.

    Defense Acquisition Circular (DAC) 91-7 amends the Defense FAR 
Supplement (DFARS) 1991 edition, prescribes procedures to be followed, 
and provides informational interest items. The amendments, procedures, 
and information are summarized as follows:

Item I--Competitive Prototyping

    This final rule deletes the language at DFARS 207.105(b)(2)(v), 
which addressed competitive prototyping for major acquisition programs 
as required by 10 U.S.C. 2438. Section 3006 of the Federal Acquisition 
Streamlining Act of 1994 (Pub. L. 103-355) repealed 10 U.S.C. 2438.

Item II--Contractor Accounting Controls

    This final rule amends DFARS 209.104-1, 232.503-6, 242.302, and 
253.209-1, and adds a new subpart at 242.75, to provide policies and 
procedures applicable to contractor [[Page 29493]] accounting systems 
and related internal controls. Contractors receiving cost-reimbursement 
or incentive type contracts, or contracts which provide for progress 
payments based on costs or on a percentage or stage of completion, must 
maintain an accounting system and related internal controls which 
provide reasonable assurance that (1) Applicable laws and regulations 
are complied with; (2) the accounting system and cost data are 
reliable; (3) risk of misallocations and mischarges are minimized; and 
(4) contract allocations and charges are consistent with invoice 
procedures.

Item III--Award to Foreign Controlled Contractors

    This final rule was issued by Departmental Letter 94-013, effective 
September 29, 1994. The rule revises and finalizes the interim rule 
published as Item VII of DAC 91-5. The rule implements 10 U.S.C. 2536, 
which prohibits award of a DoD contract under a national security 
program to an entity controlled by a foreign government, if access to 
proscribed information is required to perform the contract. The final 
rule differs from the interim rule in that it (1) revises the 
definition of ``entity controlled by a foreign government'' at DFARS 
252.209-7002 as required by Section 842 of the Fiscal Year 1994 Defense 
Authorization Act (Pub. L. 103-160); (2) revises the definition of 
``effectively owned or controlled'' at 252.209-7002 for clarity; (3) 
revises the definition of ``foreign government'' at 252.209-7002 for 
consistency with the regulations at 31 CFR Chapter V, issued by the 
Treasury Department Office of Foreign Assets Control; and (4) makes 
minor clarifying revisions at 209.101, 209.104-1(g)(ii), 225.702, and 
252.209-7002(b).

Item IV--Terrorist Countries

    The interim rule issued by Departmental Letter 94-014 on September 
29, 1994, is converted to a final rule without change. The rule 
implements Section 843 of the Fiscal Year 1994 Defense Authorization 
Act (Public Law 103-160). Section 843 requires offerors and contractors 
under DoD solicitations and contracts exceeding $5,000,000 to report 
commercial transactions conducted with the government of a terrorist 
country. The rule adds new language at DFARS 209.104-1(g)(iii), a new 
provision at 252.209-7003, and a new clause at 252.209-7004. The rule 
also revises the provision at 252.209-7001 for consistency with the 
terminology used in the new provision and clause.
Item V--Debarment and Suspension

    This final rule adds a new subsection at DFARS 209.405-1 to place 
restrictions on the issuance of orders under indefinite quantity and 
Federal Supply Schedule contracts in instances where the contractor has 
been debarred, suspended, or proposed for debarment. The rule also 
clarifies that the restriction at FAR 9.405-1(b), against renewal or 
extension of existing contracts or consent to subcontracts with 
contractors debarred, suspended, or proposed for debarment, also 
applies to the exercise of options.

Item VI--Small Purchases in Support of Contingency Operations

    This final rule was issued by Departmental Letter 94-015, effective 
September 29, 1994. The rule amends DFARS 213.000, 213.101, 213.404, 
and 213.505 to fully implement DoD's authority to use simplified 
procedures for acquisitions in support of contingency operations. The 
rule provides for the use of simplified procedures for acquisitions of 
$100,000 or less, for contracts to be awarded and performed outside the 
United States in support of a contingency operation as defined in 10 
U.S.C. 101(a)(13).

Item VII--Greatest Value Sources

    This final rule (1) adds language at DFARS 215.806-1(a) (1) to 
clarify DoD policy regarding the selection of subcontractors based on 
greatest value; (2) adds language at 244.202-2 regarding consideration 
of greatest value when consent to subcontract is required; and (3) 
revises Section C-207.5 of Appendix C to establish more definitive 
criteria for Government personnel to consider when evaluating 
contractor vendor rating systems during a Contractor Purchasing System 
Review.

Item VIII--Predetermined Indirect Cost Rates

    This final rule was issued by Departmental Letter 94-018, effective 
October 18, 1994. The rule adds language at DFARS 216.307, 242.705-3, 
and 252.216-7002 to implement revisions made to OMB Circular A-21, Cost 
Principles for Educational Institutions, on July 26, 1993. The revised 
circular provides that indirect cost rates for educational institutions 
may be predetermined for a period of up to four years when cost 
experience and other pertinent facts are sufficient to assess the 
probable level of indirect costs during subsequent accounting periods.

Item IX--Undefinitized Contract Actions

    This final rule revises DFARS 217.7404-3(a)(2), 217.7404-4, and 
217.7404-5 to clarify the policy and procedures implementing 10 U.S.C. 
2326(b) with regard to limitations on the use of undefinitized contract 
actions.

Item X--Small Disadvantaged Business, Historically Black Colleges and 
Universities and Minority Institutions

    The interim rule published as Item XLVII of DAC 91-6 is converted 
to a final rule without change. The rule implements Subsections 811 
(a), (b), and (c) of the Fiscal Year 1994 Defense Authorization Act 
(Pub. L. 103-160). Subsections 811 (a) and (b) of Pub. L. 103-160 
revise the definitions of historically black colleges and universities 
(HBCU) and minority institutions (MI). Subsection 811(c) deletes the 
requirement for an offeror, that represents itself on a DoD 
solicitation as a small disadvantaged business, HBCU, or MI, to 
maintain its status as such at the time of award. The implementing 
DFARS language can be found at 219.301(a), 226.7005(a)(1), 252.219-
7003(a), 252.219-7006(a), 252.226-7000 (a) and (b), and 252.226-
7001(a).

Item XI--Indian Tribal or Alaska Native Corporation

    The interim rule issued by Departmental Letter 94-009 on May 3, 
1994, is revised and finalized. The rule implements Section 8051 of the 
Fiscal Year 1994 Defense Appropriations Act (Pub. L. 103-139) and 
Section 8012 of the Fiscal Year 1995 Defense Appropriations Act (Pub. 
L. 103-335). Sections 8051 and 8012 provide that, notwithstanding any 
other provision of law, a qualified Indian Tribal Corporation or Alaska 
Native Corporation furnishing the product of a responsible small 
business concern shall not be denied the opportunity to compete for and 
be awarded a contract under the Small Disadvantaged Business (SDB) 
preference programs. The final rule differs from the interim rule in 
that it adds references to Section 8012 of Pub. L. 103-335 at DFARS 
219.502-2-70(a)(1)(ii), 252.219-700(f)(2), 252.219-7002(c), and 
252.219-7006(d)(2).
Item XII--North American Free Trade Agreement

    The interim rule published as Item XVIII of DAC 91-6 is revised and 
finalized. The rule incorporates Buy American Act and Balance of 
Payment Program waivers required by the North American Free Trade 
Agreement [[Page 29494]] (NAFTA) Implementation Act of 1993 (Pub. L. 
103-182). The final rule differs from the interim rule in that it 
amends the provision at DFARS 252.225-7035, the clause at 252.225-7036, 
and the clause prescription at 225.408(a)(4)(B), to recognize the 
$25,000 threshold for application of NAFTA to Canadian end products.

Item XIII--Valves and Machine Tools

    This final rule adds a new provision at DFARS 252.225-7040, Machine 
Tool List, and corresponding prescriptive language at 225.7004-2(b) and 
225.7004-6(c). The provision at DFARS 252.225-7040 requires offerors to 
identify the country of manufacture and the cost of machine tool 
accessories to be provided under a contract, if the accessories are not 
listed in the schedule as separate line items and are not of U.S. or 
Canadian origin. This information will facilitate evaluation of machine 
tool accessories by supply class, as required by 10 U.S.C. 2534, to 
determine if foreign source restrictions apply.

Item XIV--Restriction on Procurement of Goods

    This interim rule was issued by Departmental Letter 95-009, 
effective April 10, 1995. The rule revises DFARS Subpart 225.70 and the 
clauses at 252.225-7017 and 252.225-7029, to implement 10 U.S.C. 2534 
as amended by Section 814 of the Fiscal Year 1995 Defense Authorization 
Act (Pub. L. 103-337) and Section 4102(i) of the Federal Acquisition 
Streamlining Act of 1994 (Pub. L. 103-355). Section 814 revises the 
existing foreign source restrictions for machine tools and valves, 
buses, chemical weapons antidote, air circuit breakers, and 
antifriction bearings, by uniformly permitting acquisition of Canadian 
items, and by expanding and standardizing the waiver criteria. Section 
4102(I) exempts acquisitions below the simplified acquisition threshold 
from these restrictions.

Item XV--Aircraft Fuel Cells

    The interim rule published as Item XLIV of DAC 91-6 is revised and 
finalized. The rule implements Section 8090 of the Fiscal Year 1994 
Defense Appropriations Act (Pub. L. 103-139) and Section 8075 of the 
Fiscal Year 1995 Defense Appropriations Act (Pub. L. 103-335). Sections 
8090 and 8075 prohibit the use of fiscal year 1994 or 1995 funds to 
purchase aircraft fuel cells unless such cells are produced or 
manufactured in the United States by a domestic-operated entity. The 
final rule differs from the interim rule in that it amends the language 
at DFARS 225.7021-1 and 225.7021-3(a) to address fiscal year 1995 
requirements.

Item XVI--Lifeboat Survival System

    The interim rule published as Item XLVI of DAC 91-6 is revised and 
finalized. The rule implements Section 8124 of the Fiscal Year 1994 
Defense Appropriations Act (Pub. L. 103-139) and Section 8093 of the 
Fiscal Year 1995 Defense Appropriations Act (Pub. L. 103-335). Sections 
8124 and 8093 prohibit the purchase of a totally enclosed lifeboat 
survival system unless 50 percent or more of the system's components 
are manufactured in the United States, and 50 percent or more of the 
labor in the final manufacture and assembly of the system is performed 
in the United States. The final rule differs from the interim rule in 
that it adds a reference to Pub. L. 103-335 at DFARS 225.7022-1.

Item XVII--Performance Outside the United States

    The interim rule published as Item XXIX of DAC 91-5 is revised and 
finalized. The rule implements 10 U.S.C. 2410g, which requires offerors 
and contractors to provide the Government with advance notification of 
contract performance outside the United States and Canada in certain 
instances. The final rule differs from the interim rule in that (1) 
Detailed reporting requirements are deleted from the clause at DFARS 
252.225-7026; (2) DD Form 2139, which was deleted by DAC 91-5, is 
reinstated with a new title and revised to include the reporting 
requirements deleted from the clause at DFARS 252.225-7026; and (3) 
editorial changes are made at 225.7202 and 252.225-7026(b)(3).

Item XVIII--Offset Administrative Costs

    This final rule was issued by Departmental Letter 94-012, effective 
September 28, 1994. The rule revises DFARS 225.7303-2 to change the 
criteria for contractor recovery of offset administrative costs under 
foreign military sale contracts. The change eliminates the requirement 
for inclusion of specific information regarding offset costs in Letters 
of Offer and Acceptance for foreign military sales. A corresponding 
revision has been made to DoD 5105.38-M, Security Assistance Management 
Manual.

Item XIX--Preference for Local and Small Businesses

    The interim rule issued as Item XLV of DAC 91-6 is revised and 
finalized. The rule implements Section 2912 of the Fiscal Year 1994 
Defense Authorization Act (Pub. L. 103-160). Section 2912 requires DoD, 
when entering into contracts as part of the closure or realignment of a 
military installation under a base closure law, to give preference, to 
the greatest extent practicable, to qualified businesses located in the 
vicinity of the installation and to small business and small 
disadvantaged business concerns. The final rule differs from the 
interim rule in that it (1) Revises the definition of ``vicinity'' at 
DFARS 226.7101 to permit modification of the definition by the agency 
head; and (2) clarifies the procedures at 226.7103 to address criteria 
for consideration of awards to contractors under the section 8(a) 
program.

Item XX--Preference for Local Residents

    This interim rule was issued by Departmental Letter 95-003, 
effective January 26, 1995. The rule amends DFARS Subpart 226.71 to 
implement Section 817 of the Fiscal Year 1995 Defense Authorization Act 
(Pub. L. 103-337). Section 817 authorizes the Secretary of Defense to 
give preference to entities that plan to hire local residents, when 
entering into contracts for services to be performed at a military 
installation that is affected by closure or alignment under a base 
closure law.

Item XXI--Surety Bonds

    This final rule amends DFARS 228.102-1 to implement Section 323 of 
the Fiscal Year 1995 Defense Authorization Act (Pub. L. 103-337). 
Section 323 extends the authority to issue surety bonds for certain 
environmental programs through December 31, 1999.
Item XXII--Limitation on Allowable Individual Compensation

    This interim rule was issued by Departmental Letter 94-019, 
effective December 14, 1994. The rule amends DFARS 231.205, 231.303, 
231.603, and 231.703 to implement Section 8117 of the Fiscal Year 1995 
Defense Appropriations Act (Pub. L. 103-335). Section 8117 limits 
allowable costs for individual compensation to $250,000 per year. This 
limitation applies to contracts that are awarded after April 15, 1995, 
and that are funded with Fiscal Year 1995 appropriations.

Item XXIII--Restructuring Costs Under Defense Contracts

    This interim rule was issued by Departmental Letter 94-020, 
effective December 29, 1994. The rule adds new sections at DFARS 
231.205-70, 242.1202, and 242.1204 to implement [[Page 29495]] Section 
818 of the Fiscal Year 1995 Defense Authorization Act (Pub. L. 103-
337). Section 818 restricts DoD from reimbursing restructuring costs 
associated with a business combination undertaken by a defense 
contractor unless certain conditions are met.

Item XXIV--Indirect Costs of Institutions of Higher Learning

    The interim rule issued by Departmental Letter 94-010 on May 5, 
1994, is converted to a final rule without change. The rule adds a new 
section at DFARS 231.303 to implement Section 841 of the Fiscal Year 
1994 Defense Authorization Act (Pub. L. 103-160). Section 481 prohibits 
DoD from placing any limitation on the reimbursement of otherwise 
allowable indirect costs incurred by an institution of higher learning, 
unless that same limitation is applied uniformly to all other 
organizations performing similar work under DoD contracts.

Item XXV--Research and Development Definitions

    This final rule amends DFARS 235.001 to incorporate the definitions 
of the categories of research and development found in DoD 7000.14-R, 
Financial Management Regulation.

Item XXVI--Manufacturing Science and Technology Program

    This interim rule was issued by Departmental Letter 95-002, 
effective January 17, 1995. The rule adds language at DFARS 235.006 (a) 
and (b)(iv) to implement Section 256 of the Fiscal Year 1995 Defense 
Authorization Act (Pub. L. 103-337). Section 256 requires the use of 
competitive procedures in awarding contracts under the Manufacturing 
Science and Technology Program, and use of a cost-sharing arrangement 
for these contracts unless an alternative arrangement is approved by 
the Secretary of Defense.

Item XXVII--Research and Development Contracting

    This final rule revises DFARS 235.010(b) to provide updated 
information regarding the Defense Technical Information Center (DTIC). 
The rule also adds two new clauses at DFARS 252.235-7010, 
Acknowledgment of Support and Disclaimer, and DFARS 252.235-7011, Final 
Scientific or Technical Report Requirement. The clause at 252.235-7010 
requires contractors to include an acknowledgment of the Government's 
support in the publication of any material based on or developed under 
a Government contract. The clause at 252.235-7011 requires contractors 
to provide DTIC with two copies of scientific or technical reports 
delivered under a Government contract.

Item XXVIII--Federally Funded Research and Development Centers (FFRDCs)

    This interim rule was issued by Departmental Letter 95-005, 
effective March 3, 1995. The rule adds a new section at DFARS 235.017-1 
to implement Section 217 of the Fiscal Year 1995 Defense Authorization 
Act (Pub. L. 103-337). Section 217 allows DoD-sponsored FFRDCs that 
function primarily as research laboratories to respond to solicitations 
and announcements for programs which promote research, development, 
demonstration, or transfer of technology.

Item XXIX--Streamlined Research and Development Contracting Procedures 
Test

    This final rule was issued by Departmental Letter 94-017, effective 
October 4, 1994, and Departmental Letter 95-008, effective March 21, 
1995. The rule adds a new subpart at DFARS 235.70 to establish 
streamlined research and development contracting procedures for use by 
selected DoD contracting offices under a test program. The test will be 
conducted for a 20-month period extending from October 1, 1994, to May 
31, 1996.

Item XXX--Personal Service Contracts

    This interim rule was issued by Departmental Letter 95-001, 
effective January 5, 1995. The rule adds language at DFARS 206.102(d) 
and revises DFARS 237.104(b)(ii) to implement Section 712 of the Fiscal 
Year 1994 Defense Authorization Act (Pub. L. 103-160) and Section 704 
of the Fiscal Year 1995 Defense Authorization Act (Pub. L. 103-337). 
Section 712 requires the Secretary of Defense to establish procedures 
for entering into personal service contracts under 10 U.S.C. 1091 to 
carry out health care responsibilities in medical/dental treatment 
facilities. Section 704 provides authority for the Secretary of Defense 
to enter into personal service contracts under 10 U.S.C. 1091 to 
provide the services of clinical counselors, family advocacy program 
staff, and victim's services representatives.
Item XXXI--Services at Installations Being Closed

    The interim rule issued by Departmental Letter 94-011 on July 8, 
1994, is revised and finalized. The rule implements Section 2907 of the 
Fiscal Year 1994 Defense Authorization Act (Pub. L. 103-160). Section 
2907 permits the Secretary of Defense to contract with local 
governments for police, fire protection, airfield operation, or other 
community services at military installations being closed under Title 
II of the Defense Authorization Amendments and Base Closure and 
Realignment Act (Pub. L. 100-526) and the Defense Base Closure and 
Realignment Act of 1990 (Pub. L. 101-510). The final rule differs from 
the interim rule in that it adds a new paragraph at DFARS 237.7401(d) 
to clarify that Subpart 222.71, Right of First Refusal of Employment, 
applies to contracts with local governments unless it conflicts with 
the local government's civil service selection procedures.

Item XXXII--Production Surveillance

    This final rules revises DFARS 242.1104 to simplify the criteria 
for determining the extent of production surveillance to be performed 
under a contract. Category 1, 2, and 3 surveillance criteria are 
eliminated and replaced with streamlined surveillance requirements.

Item XXXIII--Contractor Insurance/Pension Reviews

    This final rule revises DFARS 242.7302(a) to increase the dollar 
threshold for performance of Contractor Insurance/Pension Reviews from 
$10,000,000 to $40,000,000. The rule also adds language at 242.7302(d) 
to clarify the criteria for determining a contractor's eligibility for 
insurance/pension review.

Item XXXIV--Best Value--Stevedoring

    The interim rule issued by Departmental Letter 94-016, effective 
September 29, 1994, is converted to a final rule without change. The 
rule revises DFARS 247.270-5 and 247.270-6 to permit contracting 
officers to consider factors other than cost or price when evaluating 
offers for stevedoring services.

Item XXXV--Returnable Cylinders

    This final rule revises the clause at DFARS 252.247-7021 and the 
corresponding prescriptive language at 247.305-70 to delete references 
to use of the clause for acquisitions involving returnable cylinders. 
The clause at DFARS 252.247-7021 now applies to returnable containers 
other than cylinders as the clause at FAR 52.247-66 applies to 
returnable cylinders. References to a 30-day rent-free Government use 
period are also deleted from the clause to facilitate tailoring of this 
time period to the circumstances of the acquisition. [[Page 29496]] 

Item XXXVI--Reflagging or Repair Work

    The interim rule published as Item XLIII of DAC 91-6 is revised and 
finalized. The rule implements Section 315 of the Fiscal Year 1994 
Defense Authorization Act (Pub. L. 103-160). Section 315 places 
restrictions on the performance of reflagging or repair work on vessels 
used under time charter contracts. The final rule differs from the 
interim rule in that it revises the language at DFARS 247.571(c) and 
252.247-7025 to further clarify the restrictions on the performance of 
reflagging or repair work.

Item XXXVII--Screening Threshold

    This final rule amends DFARS 245.608-70 to raise the dollar 
threshold for screening serviceable and unusable contractor inventory, 
with no national stock number, through the Contractor Inventory 
Redistribution System. The threshold is raised form $500 to $1,000 
(except for furniture) to coincide with the threshold at FAR 45.608-2.

Item XXXVIII--Notification of Proposed Program Termination or Reduction

    The interim rule published as Item XXXVIII of DAC 91-6 is revised 
and finalized. The rule implements Section 1372 of the Fiscal Year 1994 
Defense Authorization Act (Pub. L. 103-160) as amended by Section 1142 
of the Fiscal Year 1995 Defense Authorization Act (Pub. L. 103-337). 
Section 1372 requires the Secretary of Defense to provide certain 
notices regarding the proposed termination or substantial reduction of 
major defense programs. The final rule differs from the interim rule in 
that it makes clarifying revisions at DFARS 249.7003(b)(1) and 252.249-
7002(c)(1), and changes the notification periods at 249.7003(b) (2) and 
(3) from 90 days to 60 days, as required by Section 1142 of Pub. L. 
103-337.

Item XXXIX--Government Supply Sources

    This final rule amends DFARS 251.102, adds a new section at 
251.105, and amends the clause at 252.251-7000 to clarify that, when a 
contractor is authorized to use Government supply sources (1) Payments 
to the Government for such supplies are due within 30 days of the 
Government's invoice; (2) contractors must pay interest on late 
payments to the Government; and (3) a contractor's failure to pay may 
result in loss of authorization to use Government supply sources.

Item XL--Editorials

    (Note: The asterisked items are revisions being made only in the 
looseleaf edition of DFARS.)

    (a) The definition of ``contracting activity'' at DFARS Section 
202.101 is amended to update the contracting activity names that appear 
under the NAVY heading.
    (b) The definition of ``contracting activity'' at DFARS Section 
202.101 is amended by adding under the heading United States Special 
Operations Command and after the word ``Headquarters,'' the words 
``United States Special Operations Command'' that were inadvertently 
removed in DAC 91-6.
    (c) DFARS 203.502--2 is amended by revising paragraph (h)(ii) to 
read ``Naval Criminal Investigative Service.''
    *(d) DFARS 204.7202-2(b)(2)(iii)(B) to amended to revise ``Nay'' to 
read ``Navy.''
    (e) DFARS 206.302-5(c)(i)(B) is amended to revise the parenthetical 
reference ``(Acquisition)'' to read ``(Acquisition & Technology).''
    *(f) DFARS 215.804-3(b)(1)(B)(3) is amended to revise ``submisson'' 
to read ``submission.''
    (g) DFARS 225.603(b)(i)(D) and (b)(ii) are amended to revise the 
address for DCMAO, New York.
    *(h) DFARS 225.872-5(a) is amended to revise ``bee'' to read 
``been.''
    (i) DFARS 225.872-5(a) is amended to reflect the correct title of 
the Deputy Director of Defense Procurement (Foreign Contracting).
    (j) DFARS 225.872-6(b) is amended to reflect the correct title of 
the Deputy Director of Defense Procurement (Foreign Contracting).
    *(k) DFARS 225.7001(c) is amended to revise ``speciality'' to read 
``specialty.''
    *(l) DFARS Table of Contents for section 226.71 is amended to 
revise the title to read: ``Preference for Local and Small 
Businesses.''
    *(m) DFARS Table of Contents for section 232 is amended to reflect 
the proper sequence of Subparts 232.7 and 232.8.
    (n) DFARS 232.108(1)(i) is revised to update the Army finance 
office designation.
    (o) DFARS 235.006(b)(i)(C)(1)(iii) is revised to clarify the 
references to applicable statutes.
    (p) DFARS 235.015-70(d)(3)(ii) is amended by revising the word 
``which'' to read ``who.''
    (q) DFARS 237.7302 is amended to revise the reference ``10 U.S.C. 
2304(a)(i)'' to read ``10 U.S.C. 2304(a)(1).''
    *(r) DFARS 252 Table of Contents is amended to revise the title for 
clause number 252.225-7018.
    (s) DFARS 252.225-7009(f)(2)(iv) is amended to revise the address 
for DCMAO, New York.
    (t) DFARS 252.225-7010(e) is amended to revise the address for 
DCMAO, New York.
    (u) DFARS 252.225-7037(f)(2)(iv) is amended to revise the address 
for DCMAO, New York.
    *(v) DFARS 253 is amended to update DD Form 879, DD Form 1155 and 
DD Form 1155C-1.
    *(w) DFARS 253 is amended to delete the following obsolete forms: 
DD Form 1114, DD Form 1568, DD Form 1592, and DD Form 2025. DD Form 
1568 has been replaced by Standard form 1146. The other forms have no 
replacement.

Interim Rules Adopted as Final Without Changes

PARTS 209 AND 252--[AMENDED]

    The interim rule that was published at 59 FR 51130 on October 7, 
1994, is adopted as final without change.

PARTS 219, 226, AND 252--[AMENDED]

    The interim rule that was published as Item XLVII of DAC 91-6 at 59 
FR 27662 on May 27, 1994, is adopted as final without change.

PART 231--[AMENDED]

    The interim rule that was published at 59 FR 26143 on May 19, 1994, 
is adopted as final without change.

PART 247--[AMENDED]

    The interim rule that was published at 59 FR 50851 on October 6, 
1994, is adopted as final without change.

Interim Rules Adopted as Final With Changes

PARTS 206, 222, 226, 237, AND 252--[AMENDED]

    The interim rule that was published at 59 FR 36088 on July 15, 1994 
is adopted as final with minor editorial amendments at sections 
226.7200(a), 237.7400, 237.7401, 237.7402, and with the addition of 
237.7401(d).

PARTS 219 AND 226--[AMENDED]

    The interim rule that was published at 59 FR 12191 on March 16, 
1994, as corrected at 59 FR 15501 on April 1, 1994, is adopted as final 
with amendments at sections 226.7101 and 226.7103.

[[Page 29497]]

PARTS 219 AND 252--[AMENDED]

    The interim rule that was published at 59 FR 24958 on May 13, 1994, 
is adopted as final with revisions at 219.502-2-70, 252.219-7001, 
252.219-7002, and 252.219-7006.

PARTS 225 AND 252--[AMENDED]

    The interim rule that was published at 59 FR 1288 on January 10, 
1994, as corrected at 59 FR 8041 on February 17, 1994 and at 59 FR 
39974 on August 5, 1994, is adopted as final with amendments at 
sections 225.408, 252.225-7035, and 252.225-7036.

PARTS 225 AND 252--[AMENDED]

    The interim rule that was published as Item XLIV of DAC 91-6 at 59 
FR 11729 on March 14, 1994, as corrected at 59 FR 38931 on August 1, 
1994, is adopted as final with amendments at sections 225.7021-1 and 
225.7021-3.

PARTS 225 AND 252--[AMENDED]

    The interim rule that was published as Item XLVI of DAC 91-6 at 59 
FR 19146 on April 22, 1994, is adopted as final with amendments at 
section 225.7022-1.

PARTS 225, 252, AND 253--[AMENDED]

    The interim rule that was published a Item XXIX of DAC 91-5 at 58 
FR 28458 on May 13, 1993, is adopted as final with amendments at 
225.7202 and 252.225-7026. In addition, DD Form 2139 is reinstated with 
a new title and revised.

PARTS 247 AND 252--[AMENDED]

    The interim rule was published as Item XLIV of DAC 91-6 at 59 FR 
27662 on May 27, 1994, is adopted as final with amendments at 247.571, 
247.573, and 252.247-7025.

PARTS 249 AND 252--[AMENDED]

    The interim rule that was published as Item XXXVIII of DAC 91-6 at 
59 FR 27662 on May 27, 1994, is adopted as final with amendments at 
249.7003 and 252.249-7002.

List of Subjects in 48 CFR Parts 202, 203, 206, 207, 209, 215, 217, 
219, 225, 226, 228, 231, 232, 235, 237, 242, 244, 245, 247, 249, 251, 
252, 253, and Appendix C to Chapter 2

    Government procurement.

Amendments to 48 CFR Chapter 2 (Defense Far Supplement)

    48 CFR Chapter 2 (the Defense FAR Supplement) is amended as set 
forth below.
    1. The authority for 48 CFR parts 202, 203, 206, 207, 209, 215, 
217, 291, 225, 226, 228, 231, 232, 235, 237, 242, 244, 245, 247, 249, 
251, 252, 253, and Appendix C to Chapter 2 is revised to read as 
follows:

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

PART 202--DEFINITIONS OF WORDS AND TERMS


202.101  [Amended]

    2. Section 202.101 is amended by revising in the definition 
entitled Contracting activity under the heading Navy, the entry 
``Deputate, Acquisition Policy, Integrity and Accountability, Office of 
the Assistant Secretary of the Navy (Research, Development, and 
Acquisition)'' to read ``Deputy, Acquisition Policy, Integrity and 
Accountability, Office of the Assistant Secretary of the Navy 
(Research, Development, and Acquisition)''.

PART 203--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST


203.502-2  [Amended]

    3. Section 203.502-2 is amended by revising in paragraph (h)(ii) 
the phrase ``Naval Investigative Service'' to read ``Naval Criminal 
Investigative Service.''

PART 206--COMPETITION REQUIREMENTS


206.302-5  [Amended]

    4. Section 206.302-5 is amended by revising in paragraph (c)(i)(B) 
the phrase ``Office of the Under Secretary of Defense for Acquisition'' 
to read ``Office of the Under Secretary of Defense (Acquisition & 
Technology).''
    5. Section 206.304 is amended by revising paragraphs (a)(4)(A)(2) 
and (a)(4)(B) to read as follows:


206.304  Approval of the justification.

    (a)(4)(A) * * *
    (1) * * *
    (2) In the case of the Under Secretary of Defense (Acquisition & 
Technology) (USD(A&T)), to--
 * * * * *
    (B) For proposed contracts over $50 million, this authority is not 
delegable, except in the case of the USD(A&T) who may delegate as 
specified in paragraph (a)(4)(A)(2) of this section.

PART 207--ACQUISITION PLANNING


207.105  [Amended]

    6. Section 207.105 is amended by removing paragraph (b)(2)(v).

PART 209--CONTRACTOR QUALIFICATIONS


209.103  [Amended]

    7. Section 209.103(a)(i)(c) is amended by revising the reference 
``Under Secretary of Defense (Acquisition)'' to read ``Under Secretary 
of Defense (Acquisition & Technology).''
    8. Section 209.104-1 is amended by revising paragraph (e) to read 
as follows:


209.104-1  General standards.

    (e) For cost-reimbursement or incentive type contracts, or 
contracts which provide for progress payments based on costs or on a 
percentage or stage of completion, the prospective contractor's 
accounting system and related internal controls must provide reasonable 
assurance that--
    (i) Applicable laws and regulations are complied with;
    (ii) The accounting system and cost data are reliable;
    (iii) Risk of misallocations and mischarges are minimized; and
    (iv) Contract allocations and charges are consistent with invoice 
procedures.
 * * * * *
    9. Section 209.405-1 is added to read as follows:


209.405-1  Continuation of current contracts.

    (a) Unless the agency head makes a written determination that a 
compelling reason exists to do so, ordering activities shall not--
    (i) Place orders exceeding the guaranteed minimum under indefinite 
quantity contracts: or
    (ii) When the agency is an optional user, place orders against 
Federal Supply Schedule contracts.
    (b) This includes exercise of options.

PART 215--CONTRACTING BY NEGOTIATION

    10. Section 215.806-1 is amended by revising paragraph (a)(1) to 
read as follows:


215.806-1  General.

 * * * * *
    (a)(1) Contractor and subcontractor proposals may reflect the 
selection of sources whose proposals offer the greatest value to the 
Government in terms of performance and other factors. If the selection 
is based on greatest value rather than lowest price, the analysis 
supporting subcontractor [[Page 29498]] selection should include a 
discussion of the factors considered in the selection (see also FAR 
15.605(c) and 215.605(c)). If the contractor's analysis is not 
adequate, return it for correction of deficiencies.
 * * * * *

PART 217--SPECIAL CONTRACTING METHODS

    11. Section 217.7404-3 is amended by revising paragraph (a)(2) to 
read as follows:


217.7404-3  Definitization schedule.

    (a) * * *
    (1) * * *
    (2) The date on which the amount of funds obligated under the 
contract action is equal to more than 50 percent of the not-to-exceed 
price.
 * * * * *
    12. Section 217.7404-4 is revised to read as follows:


217.7404-4  Limitations on obligations.

    The Government shall not obligate more than 50 percent of the not-
to-exceed price before definitization. However, if a contractor submits 
a qualifying proposal before 50 percent of the not-to-exceed price has 
been obligated by the Government, then the limitation on obligations 
before definitization may be increased to no more than 75 percent (see 
232.102-70 for coverage on provisional delivery payments).
    13. Section 217.7404-5 is revised to read as follows:


217.7404-5  Exceptions.

    (a) The limitations in 217.7404-2, 217.7404-3, and 217.7404-4 do 
not apply to UCAs for the purchase of initial spares.
    (b) The head of an agency may waive the limitations in 217.7404-2, 
217.7404-3, and 217.7404-4 for UCAs if the head of the agency 
determines that the waiver is necessary to support a contingency 
operation.

PART 219--SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS

    14. Section 219.502-2-70 is amended by revising paragraph 
(a)(1)(ii) to read as follows:


219.502-2-70  Total set-asides for small disadvantaged business 
concerns.

    (a) * * *
    (1) * * *
    (i) * * *
    (ii) In the case of an SDB regular dealer owned by an Indian tribe, 
including an Alaska Native Corporation, will provide the supplies of a 
small business for contracts awarded during fiscal years 1994 and 1995, 
as provided in Section 8051 of Pub. L. 103-139 and Section 8012 of Pub. 
L. 103-335; or,
* * * * *

PART 225--BUY AMERICAN ACT--CONSTRUCTION MATERIALS

    15. Section 225.408 is amended by revising paragraph (a)(4)(B) to 
read as follows:


225.408  Solicitation provision and contract clause.

    (a)(1) * * *
* * * * *
    (4)(A) * * *
    (B)(i) Use the clause in all solicitations and contracts for the 
items listed at 225.403-70, when the estimated value is $50,000 or more 
and the Trade Agreements Act does not apply. Include the clause in 
solicitations for multiple line items if any line item is subject to 
NAFTA.
    (ii) Use the clause with its Alternate I when the estimated value 
is between $25,000 and $50,000.
* * * * *


225.603  [Amended]

    16. Section 225.603 is amended in paragraph (b)(i)(D) by revising 
the phrase ``Commander, DCMAO New York, ATTN: Customs Division, 
International Logistics Office, 201 Varick Street, New York, NY 10014--
'' to read ``Commander, DCMAO New York, ATTN Customs Team, DCMDN-GNIC, 
207 New York Avenue, Staten Island, NY 10305-5013--''.


225.603  [Amended]

    17. Section 225.603 is amended in paragraph (b)(ii) by revising the 
phrase ``Chief, Customs Division, International Logistics Office, DCMAO 
New York'' to read ``Customs Team, DCMDN-GNIC, DCMAO New York''.


225.872-5  [Amended]

    18. Section 225.872-5(a) is amended by revising ``Foreign 
Contracting Directorate, Office of the Director of Defense 
Procurement'' to read ``Deputy Director of Defense Procurement (Foreign 
Contracting).''


225.872-6  [Amended]

    19. Section 225.872-6(b) is amended by revising ``Foreign 
Contracting Directorate, Office of the Director of Defense 
Procurement'' to read ``Deputy Director of Defense Procurement (Foreign 
Contracting).''
    20. Section 225.7004-2 is amended by revising paragraph (b) to read 
as follows:


225.7004-2  Applicability.

* * * * *
    (b) Machine tool accessories classified under FSC 3460 or 3461 are 
not components under 225.7004-5. Where a solicitation for machine tools 
includes machine tool accessories, list known machine tool accessories 
which are not separate line items in the provision at 252.225-7040, 
Machine Tool List. Identify accessories which are separate line items 
in the schedule. The contracting activity must exercise judgment in 
determining whether an item is an accessory or a component. This 
determination should be based on the use of the item in the machine 
tool being purchased.
* * * * *
    21. Section 225.7004-6 is amended by adding paragraph (c) to read 
as follows:


225.7004-6  Contract clauses.

* * * * *
    (c) Use the provision at 252.225-7040, Machine Tool List, in all 
solicitations for machine tools which contain the clause at 252.225-
7017 except where--
    (1) All machine tool accessories are listed as separate line items; 
and
    (2) The solicitation does not allow offerors to provide accessories 
which are not specifically required by the specifications.
    22. Section 225.7021-1 is revised to read as follows:


225.7021-1  Restriction.

    In accordance with Section 8090 of the Fiscal Year 1994 Defense 
Appropriations Act (Pub. L. 103-139) and Section 8075 of the Fiscal 
Year 1995 Defense Appropriations Act (Pub. L. 103-335), do not purchase 
aircraft fuel cells unless they are produced or manufactured in the 
United States by a domestic-operated entity.
    23. Section 225.7021-3 is revised to read as follows:


225.7021-3  Contract clause.

    Unless a waiver has been granted in accordance with 225.7021-2, use 
the clause at 252.225-7038, Restriction on Acquisition of Aircraft Fuel 
Cells, in all solicitations and contracts which--
    (a) Use fiscal year 1994 or 1995 funds; and
    (b) Require delivery of aircraft fuel cells.
    24. Section 225.7022-1 is revised to read as follows:


225.7022-1  Restriction.

    In accordance with Section 8124 of the Fiscal Year 1994 Defense 
Appropriations Act (Pub. L. 103-139) and Section 8093 of the Fiscal 
Year 1995 Defense Appropriations Act (Pub. [[Page 29499]] L. 103-335), 
do not purchase a totally enclosed lifeboat survival system, which 
consists of the lifeboat and associated davits and winches, unless 50 
percent or more of the components are manufactured in the United 
States, and 50 percent or more of the labor in the final manufacture 
and assembly of the entire system is performed in the United States.
    25. Section 225.7202 is amended by revising ``OUSD(A)DP(FC)'' to 
read ``OUSD(A&T)DP(FC).''

PART 226--OTHER SOCIOECONOMIC PROGRAMS

    26-28. Section 226.7101 is revised to read as follows:


226.7101  Definition.

    Vicinity, as used in this subpart, means the county or counties in 
which the military installation to be closed or realigned is located 
and all adjacent counties, unless otherwise defined by the agency head.
    29. Section 226.7103 is revised to read as follows:


226.7103  Procedure.

    In considering acquisitions for award through the section 8(a) 
program (subpart 219.8 and FAR subpart 19.8) or in making set-aside 
decisions under subpart 219.5 and FAR subpart 19.5 for acquisitions in 
support of a base closure or realignment, the contracting officer 
shall--
    (a) Determine whether there is a reasonable expectation that offers 
will be received from responsible business concerns located in the 
vicinity of the military installation that is being closed or 
realigned.
    (b) If offers can not be expected from business concerns in the 
vicinity, proceed with section 8(a) or set-aside consideration as 
otherwise indicated in part 219 and FAR part 19.
    (c) If offers can be expected from business concerns in the 
vicinity--
    (1) Consider section 8(a) only if the 8(a) contractor is located in 
the vicinity.
    (2) Set aside the acquisition for small disadvantaged business only 
if one of the expected offers is from a small disadvantaged business 
located in the vicinity.
    (3) Set aside the acquisition for small business only if one of the 
expected offers is from a small business located in the vicinity.


226.7200  [Amended]

    30 and 31. Section 226.7200 is amended by revising in paragraph (a) 
the word ``established'' to read ``establishes.''

PART 228--BONDS AND INSURANCE

    32. Section 228.102-1 is amended by revising the introductory 
paragraph to read as follows:


228.102-1  General.

    For Defense Environmental Restoration Program construction 
contracts entered into pursuant to 10 U.S.C. 2701 and executed between 
December 5, 1991, and December 31, 1999--
* * * * *
PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES


231.205-70  [Amended]

    33. Section 231.205-70(b)(4) is amended to revise in the second 
sentence the word ``repositioning'' to read ``repositionings.''


231.703  [Amended]

    34. Section 231.703 is amended to revise in paragraph (1) the 
reference ``231.603(a)'' to read ``231.603(1).''

PART 232--CONTRACT FINANCING


232.108  [Amended]

    35. Section 232.108 is amended by revising in paragraph (1)(i) the 
phrase ``Army--Chief of Contract Financing, Office of the Comptroller'' 
to read ``Army--Office, Assistant Secretary of the Army (Financial 
Management)''.
    36. Section 232.503-6 is amended by adding a new paragraph (b) to 
read as follows:


232.503-6  Suspension or reduction of payments.

    (b) Contractor noncompliance.
    See also 242.7503.
* * * * *

PART 235--RESEARCH AND DEVELOPMENT CONTRACTING

    37. Section 235.001 is revised to read as follows:


235.001  Definitions.

    The following terms are defined in DoD 7000.14-R, Financial 
Management Regulation. As used in this part--
    Advanced development means all effort directed toward projects 
which have moved into the development of hardware for test. The prime 
proof of this type of effort is proof of design concept rather than the 
development of hardware. Projects in this category have a potential 
military application.
    Basic research means all effort of scientific study and 
experimentation directed toward increasing knowledge and understanding 
in those fields of the physical, engineering, environmental, and life 
sciences related to long-term national security needs, It provides 
fundamental knowledge required for the solution of military problems. 
It forms a part of the base for--
    (1) Subsequent exploratory and advanced developments in defense 
related technologies; and
    (2) New or improved military functional capabilities in areas such 
as communications, detection, tracking, surveillance, propulsion, 
mobility, guidance and control, navigation, energy conversion, 
materials and structures, and personnel support.
    Demonstration/validation means those efforts necessary to evaluate 
integrated technologies in as realistic an operating environment as 
possible to assess the performance or cost reduction potential of 
advanced technology. The demonstration/validation phase is system 
specific and also includes advanced technology demonstrations that help 
expedite technology transition from the laboratory to operational use.
    Engineering and manufacturing development means those projects in 
full-scale engineering development but which have not yet received 
approval for production or had production funds included in the DoD 
budget submission for the budget or subsequent fiscal year. This area 
is characterized by major line item projects where program control is 
exercised by review of individual projects.
    Exploratory development means all effort directed toward the 
solution of specific military problems, short of major development 
projects. This type of effort may vary from fairly fundamental applied 
research to quite sophisticated bread-board hardware, study, 
programming, and planning efforts. It would thus include studies, 
investigations, and minor development effort. The dominant 
characteristic of this category of effort is that it be pointed toward 
specific military problem areas with a view toward developing and 
evaluating the feasibility and practicability of proposed solutions and 
determining their parameters.
    Management and support means all effort directed toward support of 
installations and operations required for general research and 
development use. This includes military construction of a general 
nature unrelated to specific programs, maintenance support of 
laboratories, operation and maintenance of test ranges, and maintenance 
of test aircraft and ships. Costs of laboratory personnel, either in-
house or contracted, would be assigned to projects or as a line item in 
the research, exploratory development, or advanced development 
[[Page 29500]] program areas, as appropriate. Management and support is 
not ``research and development'' except in exceptional cases. For 
example, construction of recreational facilities at an installation is 
not ``research and development'' work, even if the installation is used 
only for research and development work.
    Operational system development means those projects still in full-
scale engineering development, but which have received approval for 
production through Defense Acquisition Board or other action, or 
production funds have been included in the DoD budget submission for 
the budget or subsequent year. All items in this area are major line 
item projects which appear as RDT&E costs of weapons systems elements 
in other programs. Program control is exercised by review of the 
individual projects.
    Research and development ordinarily covers only the following 
categories--
    (1) Basic research;
    (2) Exploratory development;
    (3) Advanced development;
    (4) Demonstration/validation;
    (5) Engineering and manufacturing development; and
    (6) Operational system development.
    38. Section 235.006 is amended by revising paragraph 
(b)(i)(C)(1)(iii) to read as follows:


235.006  Contracting methods and contract type.

* * * * *
    (b)(i) * * *
    (C) * * *
    (1) * * *
    (iii) The development of a major system (as defined in FAR 34.001) 
or subsystem thereof, it the contract is over $25 million, or is over 
$10 million and is funded with FY90 funds (Pub. L. 101-165, Section 
9048), FY91 funds (Pub. L. 101-511, Section 8038), FY92 funds (Pub. L. 
102-172, Section 8037), or FY93 funds (Pub. L. 102-396, Section 9037).
* * * * *
    39. Section 235.010 is revised to read as follows:


235.010  Scientific and technical reports.

    (b) The Defense Technical Information Center (DTIC) is responsible 
for collecting all scientific or technological observations, findings, 
recommendations, and results derived from DoD endeavors, including both 
in-house and contracted efforts. The DTIC has eligibility and 
registration requirements for use of its services. Requests for 
eligibility and registration information should be addressed to DTIC-
BCS, Cameron Station, Alexandria, VA 22304-6145.


235.015-70  [Amended]

    40. Section 235.015-70(d)(3)(ii) is amended by revising the second 
occurrence of the word ``which'' to read ``who.''
    41. Section 235.071 is amended by adding paragraphs (c) and (d) to 
read as follows:


235.071  Additional contract clauses.

    (a) * * *
    (b) * * *
    (c) Use the clause at 252.235-7010, Acknowledgement of Support and 
Disclaimer, in solicitations and contracts for research and 
development.
    (d) Use the clause at 252.235-7011, Final Scientific or Technical 
Report, in solicitations and contracts for research and development.
    42. Section 235.017-1 is added to read as follows:


235.017-1  Sponsoring agreements.

    (c)(4) DoD-sponsored FFRDCs that function primarily as research 
laboratories may respond to solicitations and announcements for 
programs which promote research, development, demonstration, or 
transfer of technology (Section 217, Pub. L. 103-337).

PART 237--SERVICE CONTRACTING


237.7302  [Amended]

    43. Section 237.7302 is amended by revising in the last sentence 
the reference ``10 U.S.C. 2304(a)(i)'' to read ``10 U.S.C. 
2304(a)(1).''


237.7400  [Amended]

    44. Section 237.7400 is amended by revising the reference ``(Pub. 
L. 100-536)'' to read ``(Pub. L. 100-526).''
    45. Section 237.7401 is amended in paragraph (c) by revising 
``govenrment'' to read ``government;'' by revising the word ``is'' to 
read ``are''; and by adding a new paragraph (d) to read as follows:


237.7401  Policy.

* * * * *
    (d) Includes the requirement of subpart 222.71, Right of First 
Refusal of Employment, unless it conflicts with the local government's 
civil service selection procedures.


237.7402  [Amended]

    46. Section 237.7402 is amended by revising the word ``subject'' to 
read ``subpart.''

PART 242--CONTRACT ADMINISTRATION

    47. Section 242.302 is amended by adding a new paragraph (a)(7) to 
read as follows:


242.302  Contract administration functions.

    (a)(4) * * *
    (7) See 242.7503 for ACO responsibilities with regard to receipt of 
an audit report identifying significant accounting system or related 
internal control deficiencies.
* * * * *
    48. Section 242.1104 is revised to read as follows:


242.1104  Surveillance requirements.

    (a)(i) As a minimum, contracts will receive pre-delivery telephonic 
surveillance.
    (ii) Contracts in the following categories will receive pre-
delivery on-site production surveillance:
    (A) Contracts assigned criticality designator A (see FAR 42.1105).
    (B) Contracts specifically identified for special surveillance by 
the contracting officer.
    (C) Any contract where telephonic surveillance reveals actual or 
anticipated delinquency unless the contract administration office, in 
coordination with the contracting officer, decides that on-site 
surveillance is not warranted.
    49. Section 242.7302 is amended by revising paragraph (a) and by 
adding paragraph (d) to read as follows:


242.7302  Requirements.

    (a) A CIPR shall be conducted for each contractor whose qualifying 
sales to the Government exceeded $40 million during the contractor's 
preceding fiscal year. Qualifying sales are sales for which certified 
cost or pricing data were required under 10 U.S.C. 2306, as implemented 
in FAR 15.804 (unless exempt in accordance with FAR 15.804-3), or which 
are cost-reimbursement type contracts. Sales include prime contracts, 
subcontracts, and modifications to such contracts and subcontracts.
* * * * *
    (d) Reviews of selected insurance and pension elements may be 
conducted for contractors not meeting the criteria in paragraph (a) of 
this section if significant problems have been identified.
    50. A new subpart 242.75 is added to read as follows:

Sec.
242.7500  Scope of subpart.
242.7501  Definition.
242.7502  Policy.
242.7503  Procedures.

Subpart 242.75--Contractor Accounting Systems and Related Controls


242.7500  Scope of subpart.

    This subpart provides policies and procedures applicable to 
contractor [[Page 29501]] accounting systems and related internal 
controls.


242.7501  Definition.

    Internal controls means those policies and procedures established 
by contractor management to provide reasonable assurance that 
applicable laws and regulations are complied with and that actual and 
estimated costs are equitably allocated within the accounting system.


242.7502  Policy.

    Contractors receiving cost-reimbursement or incentive type 
contracts, or contracts which provide for progress payments based on 
costs or on a percentage or stage of completion, shall maintain an 
accounting system and related internal controls throughout contract 
performance which provide reasonable assurance that--
    (a) Applicable laws and regulations are complied with;
    (b) The accounting system and cost data are reliable;
    (c) Risk of misallocations and mischarges are minimized; and
    (d) Contract allocations and charges are consistent with invoice 
procedures.


242.7503  Procedures.

    (a) Upon receipt of an audit report identifying significant 
accounting system or related internal control deficiencies, the ACO 
will--
    (1) Provide a copy of the report to the contractor and allow 30 
days, or a reasonable extension, for the contractor to respond;
    (2) If the contractor agrees with the report, the contractor has 60 
days from the date of initial notification to correct any identified 
deficiencies or submit a corrective action plan showing milestones and 
actions to eliminate the deficiencies.
    (3) If the contractor disagrees, the contractor should provide 
rationale in its written response.
    (4) The ACO will consider whether it is appropriate to suspend a 
percentage of progress payments or reimbursement of costs proportionate 
to the estimated cost risk to the Government, considering audit reports 
or other relevant input, until the contractor submits a corrective 
action plan acceptable to the ACO and corrects the deficiencies. (See 
FAR 32.503-6 (a) and (b) and FAR 42.302(a)(7)).

PART 244--SUBCONTRACTING POLICIES AND PROCEDURES

    51. Subpart 244.2 is added to read as follows:


244.2  Consent to subcontracts.

Sec.
244.202  Contracting officer's evaluation.
244.202-2  Considerations.


242.2  Consent to subcontracts.


244.202  Contracting officer's evaluation.


244.202-2  Considerations.

    (a) Where other than lowest price is the basis for subcontractor 
selection, has the contractor adequately substantiated the selection as 
offering the greatest value to the Government?

PART 245--GOVERNMENT PROPERTY

    52. Section 245.608-70 is amended by revising paragraph (a)(3) to 
read as follows:


245.608-70  Contractor inventory redistribution system (CIRS).

    (a) * * *
    (3) Has a line item acquisition value in excess of $1,000 ($500 for 
furniture) but no national stock number.
* * * * *

PART 247--TRANSPORTATION

    53. Section 247.305-70 is revised to read as follows:


247.305-70  Returnable containers other than cylinders.

    Use the clause at 252.247-7021, Returnable Containers Other Than 
Cylinders, in solicitations and contracts for supplies involving 
contractor-furnished returnable reels, spools, drums, carboys, liquid 
petroleum gas containers, or other returnable containers if the 
contractor is to retain title to the containers.
    54. Section 247.571 is amended by revising paragraph (c); by 
removing paragraph (d); and by redesignating paragraph (e) as paragraph 
(d) to read as follows:


247.571  Policy.

* * * * *
    (c)(1) Any vessel used under a time charter contract for the 
transportation of supplies shall have any reflagging or repair work, as 
defined in the clause at 252.247-7205, Reflagging or Repair Work, 
performed in the United States or its territories, if the reflagging or 
repair work is performed--
    (i) On a vessel for which the contractor submitted an offer in 
response to the solicitation for the contract; and
    (ii) Prior to acceptance of the vessel by the Government.
    (2) The Secretary of Defense may waive this requirement if the 
Secretary determines that such waiver is critical to the national 
security of the United States.
* * * * *
    55. Section 247.573 is amended by revising paragraph (d) to read as 
follows:


247.573  Solicitation provision and contract clauses.

* * * * *
    (d) Use the clause at 252.247-7025, Reflagging or Repair Work, in 
all time charter solicitations and contracts for the use of a vessel 
for the transportation of supplies, unless a waiver has been granted in 
accordance with 247.571(c).

PART 249--TERMINATION OF CONTRACTS


249.7003  [Amended]

    56. Section 249.7003 is amended by inserting in paragraph (b)(1) 
the word ``major'' between the words ``which'' and ``defense;'' by 
revising in paragraph (d)(2) introductory text the number ``90'' to 
read ``60;'' by revising in paragraph (b)(3) introductory text the 
number ``90'' to read ``60;'' and by removing in paragraph (b)(3) 
introductory text the word ``provided.''

PART 251--USE OF GOVERNMENT SOURCES BY CONTRACTORS

    57. Section 251.102 is amended to revise paragraph (e) introductory 
text and to add a new paragraph (f) to read as follows:


251.102  Authorization to use Government supply sources.

    (e) Use the format in Table 51-1, Authorization to Purchase from 
Government Supply Sources. Specify the terms of the purchase, including 
contractor acceptance of any Government materiel, payment terms, and 
the addresses required by paragraph (f) of the clause at 252.251-7000, 
Ordering from Government Supply Sources.
* * * * *
    (f) The authorizing agency shall also be responsible for promptly 
considering requests of the DoD supply source for authority to refuse 
to honor requisitions from a contractor which is indebted to the DoD 
and has failed to pay proper invoices in a timely manner.
* * * * *
    58. Section 251.105 is added to read as follows:


251.105  Payment for shipments.

    Contractor payments for purchases from DoD supply sources are due 
within 30 days of the date of a proper invoice (see FAR 32.902 for 
definition of ``due [[Page 29502]] date'' and ``payment date;'' also 
see FAR 32.905(e)).

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.209-7004  [Amended]

    59. and 60. Section 252.209-7004 is amended by revising in 
paragraph (b)(5) the symbol ``PDUSD(A&T)(DPFC)'' to read 
``OUSD(A&T)DP(FC).''
    61. Section 252.219-7001 is amended by revising the clause date 
``(May 1994)'' ``(May 1995)''; and by revising paragraph (f)(2) to read 
as follows:
252.219-7001  Notice of partial small business set-aside with 
preferential consideration for small disadvantaged business concerns.

* * * * *
    (f) * * *
    (2) A manufacturer or regular dealer, which claims preference as 
a small disadvantaged business and submits an offer in its own name, 
agrees to furnish in performing this contract only end items 
manufactured or produced by small disadvantaged business concerns in 
the United States, except, as provided in Section 8051 of Pub. L. 
103-139 and Section 8012 of Pub. L. 103-335, for contracts awarded 
during fiscal years 1994 and 1995, a small disadvantaged business 
manufacturer or regular dealer owned by an Indian tribe, including 
an Alaska Native Corporation, agrees to furnish only end items 
manufactured or produced by small business concerns in the United 
States.
* * * * *
    62. Section 252.219-7002 is amended by revising the clause date 
``(MAY 1994)'' to read ``(MAY 1995)''; and by revising paragraph (c) to 
read as follows:


252.219-7002  Notice of small disadvantaged business set-aside.

* * * * *
    (c) Agreement.
    A small disadvantaged business manufacturer or regular dealer, 
submitting an offer in its own name, agrees to furnish in performing 
this contract only end items manufactured or produced by small 
disadvantaged business concerns in the United States, except, as 
provided in Section 8051 of Pub. L. 103-139 and Section 8012 of Pub. 
L. 103-335, for contracts awarded during fiscal years 1994 and 1995, 
a small disadvantaged business manufacturer or regular dealer owned 
by an Indian tribe, including an Alaska Native Corporation, agrees 
to furnish only end items manufactured or produced by small business 
concerns in the United States.
* * * * *
    63. Section 252.219-7006 is amended by revising the clause date 
``(MAY 1994)'' to read ``(MAY 1995)''; and by revising paragraph (d)(2) 
to read as follows:


252.219-7006  Notice of evaluation preference for small disadvantaged 
business concerns.

* * * * *
    (d) * * *
    (2) A small disadvantaged business, historically black college 
or university, or minority institution regular dealer submitting an 
offer in its own name agrees to furnish in performing this contract 
only end items manufactured or produced by small disadvantaged 
business concerns, historically black colleges or universities, or 
minority institutions in the United States, except, as provided in 
Section 8051 of Pub. L. 103-139 and Section 8012 of Pub. L. 103-335, 
for contracts awarded during fiscal years 1994 and 1995, a small 
disadvantaged business manufacturer or regular dealer owned by an 
Indian tribe, including an Alaska Native Corporation, agrees to 
furnish only end items manufactured or produced by small business 
concerns in the United States.
* * * * *


252.225-7009  [Amended]

    64. Section 252.225-7009 is amended to revise in paragraph 
(f)(2)(iv) the phrase ``Customs Division, International Logistics 
Office, 201 Varick Street, New York, New York 10014'' to read ``Customs 
Team, DCMDN-GNIC, 207 New York Avenue, Staten Island, New York, 10305-
5013.''


252.225-7010  [Amended]

    65. Section 252.225-7010 is amended to revise in paragraph (e) 
introductory text the phrase ``Chief, Customs Division, International 
Logistics Office, 201 Varick Street, New York, New York 10014'' to read 
``Customs Team, DCMDN-GNIC, 207 New York Avenue, Staten Island, New 
York, 10305-5013.''
    66. Section 252.225-7026 is amended by revising the clause date 
``(APR 1993)'' to read ``(MAY 1995)''; by revising paragraph (b)(3); by 
adding a new paragraph (b)(4); and by revising paragraph (d) to read as 
follows:


252.225-7026  Reporting of contract performance outside the United 
States.

* * * * *
    (b) * * *
    (1) * * *
    (2) * * *
    (3) The Contractor shall submit reports required by paragraph 
(a)(3) of this clause within 10 days of the end of each Government 
quarter to--Deputy Director of Defense Procurement (Foreign 
Contracting) OUSD(A&T)DP(FC) Washington, DC 20301-3060
    (4) The Offeror/Contractor shall submit reports on DD Form 2139, 
Report of Contract Performance Outside the United States. Computer-
generated reports are acceptable, provided the report contains all 
information required by DD Form 2139. Copies of DD Form 2139 may be 
obtained from the Contracting Officer.
    (c) * * *
    (d) Information required.
    Information to be reported on the part of this contract 
performed outside the United States (or outside the United States 
and Canada for reports required by paragraphs (a)(1) and (a)(2) of 
this clause) includes that for--
    (i) Subcontracts;
    (ii) Purchases; and
    (iii) Intracompany transfers when transfers originate in a 
foreign location.

    67. Section 252.225-7035 is amended by revising the clause date 
``(JAN 1994)'' read ``(MAY 1995)''; and by revising paragraph 
(c)(2)(ii) to read as follows:


252.225-7035  Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program Certificate.

* * * * *
    (c) * * *
    (2) * * *
    (i) * * *
    (ii) The Offeror certifies that the following supplies are 
qualifying country (except Canada) end products:
* * * * *
    68. Section 252.225-7036 is amended by adding a new Alternate I 
(MAY 1995) to read as follows:


252.225-7036  North American Free Trade Agreement Implementation Act.

* * * * *

ALTERNATE I (MAY 1995)

    As prescribed in 225.408(a)(4)(B)(ii), add the following 
paragraph (a)(7) to the basic clause, and substitute the following 
paragraph (c) in place of paragraph (c) of the basic clause:
    (a)(7) ``Canadian end product,'' means an article that--
    (i) Is wholly the growth, product, or manufacturer of Canada; or
    (ii) Has, in the case of an article which consists in whole or 
in part of materials from another country or instrumentality, been 
substantially transformed in Canada into a new and different article 
of commerce with a name, character, or use distinct from that of the 
article or articles from which it was transformed. The term includes 
services (except transportation services) incidental to its supply; 
provided, that the value of those incidental services does not 
exceed that of the product itself. It does not include service 
contracts as such.
    (c) The Contractor agrees to deliver under this contract only 
U.S. made end products unless, in its offer, it specified delivery 
of qualifying country, NAFTA country, or non-NAFTA country end 
products in the Buy American Act-North American Free Trade Agreement 
Implementation Act-Balance of Payments Program Certificate 
provision. An offer certifying that a qualifying country end product 
or a Canadian end product will be supplied requires the Contractor 
to supply a qualifying country end product or a Canadian end 
product, whichever is certified, or, at the Contractor's option, a 
U.S. made end product. [[Page 29503]] 


252.225-7037  [Amended]

    69. Section 252.225-7037 is amended to revise in paragraph 
(f)(2)(iv) the phrase ``Customs Division, International Logistics 
Office, 201 Varick Street, New York, NY 10014'' to read ``Customs Team, 
DCMDN-GNIC, 207 New York Avenue, Staten Island, New York 10305-5013.''
    70. Section 252.225-7040 is added to read as follows:


252.225-7040  Machine tool list.

    As prescribed in 225.7004-5(c), use the following provision:

Machine Tool List (May 1995)

    The Government has identified those items listed as machine tool 
accessories which are not listed in the schedule as separate line 
items. The Offeror must also list any accessories to be provided 
which are not specifically required by the specifications. Where the 
machine tool accessory is not of U.S. or Canadian origin, as defined 
in the Preference for United States and Canadian Valves and Machine 
Tools clause of this solicitation, indicate the country in which the 
accessory was manufactured and the cost of the accessory.

------------------------------------------------------------------------
                                         Country of                     
  Line Item No.       Accessory          manufacture           Cost     
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------

(End of provision)
    71. Section 252.235-7010 is added to read as follows:


252.235-7010  Acknowledgment of support and disclaimer.

    As prescribed in 235.071(c), use the following clause:

Acknowledgment of Support and Disclaimer (May 1995)

    (a) The Contractor shall include an acknowledgment of the 
Government's support in the publication of any material based on or 
developed under this contract, stated in the following terms: This 
material is based upon work supported by the (name of contracting 
agency(ies)) under Contract No. (Contracting agency(ies) contract 
number(s)).
    (b) All material, except scientific articles or papers published 
in scientific journals, must, in addition to any notices or 
disclaimers by the Contractor, also contain the following 
disclaimer: Any opinions, findings and conclusions or 
recommendations expressed in this material are those of the 
author(s) and do not necessarily reflect the views of the (name of 
contracting agency(ies)).

(End of clause)

    72. Section 252.235-7011 is added to read as follows:

252.235-7011  Final scientific or technical report.

    As prescribed in 235.071(d), use the following clause:

Final Scientific or Technical Report (May 1995)

    The Contractor shall submit two copies of the approved 
scientific or technical report delivered under this contract to the 
Defense Technical Information Center (DTIC), Attn: DTIC-)OC, Cameron 
Station, Alexandria, VA 22304-6145. The Contractor shall include a 
completed Standard Form 298, Report Documentation Page, with each 
copy of the report. For submission of reports in other than paper 
copy, contact the Defense Technical Information Center, Attn: DTIC-
OC, Cameron Station, Alexandria, VA 22304-6145.

(End of clause)
252.237-7022  [Amended]

    73. Section 252.237-7022 is amended by revising the clause date 
``(JUL 1994)'' to read ``(MAY 1995)'' and by revising at their second 
occurrence the words ``the local'' to read ``such.''
    74. Section 252.247-7021 is revised to read as follows:

252.247-7021  Returnable containers other than cylinders.

    As prescribed in 247.305-70, use the following clause:

Returnable Containers Other Than Cylinders (May 1995)

    (a) Returnable container, as used in this clause, includes 
reels, spools, drums, carboys, liquid petroleum gas containers, and 
other returnable containers when the Contractor retains title to the 
container.

    (b) Returnable containers shall remain the Contractor's property 
but shall be loaned without charge to the Government for a period of 
______(insert number of days) calendar days after delivery to the 
f.o.b. point specified in the contract. Beginning with the first day 
after the loan period expires, to and including the day the 
containers are delivered to the Contractor (if the original delivery 
was f.o.b. origin) or are delivered or are made available for 
delivery to the Contractor's designated carrier (if the original 
delivery was f.o.b. destination), the Government shall pay the 
Contractor a rental of $______ (insert dollar amount for rental) per 
container per day, computed separately for containers for each type, 
size, and capacity, and for each point of delivery named in the 
contract. No rental shall accrue to the Contractor in excess of the 
replacement value per container specified in paragraph (c) of this 
clause.
    (c) For each container lost or damaged beyond repair while in 
the Government's possession, the Government shall pay to the 
Contractor the replacement value as follows, less the allocable 
rental paid for that container:

----------------------------------------------------------------------
(Insert the container types, sizes, capacities, and associated 
replacement values.)

    These containers shall become Government property.
    (d) If any lost container is located within ______ (insert 
number of days) calendar days after payment by the Government, it 
may be returned to the Contractor by the Government, and the 
Contractor shall pay to the Government the replacement value, less 
rental computed in accordance with paragraph (b) of this clause, 
beginning at the expiration of the loan period specified in 
paragraph (b) of this clause, and continuing to the date on which 
the container was delivered to the Contractor.

(End of clause)
    75. Section 252.247-7025 is revised to read as follows:


252.247-7025  Reflagging or repair work.

    As prescribed in 247.573(d), use the following clause:
Reflagging or Repair Work (May 1995)
    (a) Definition.
    Reflagging or repair work, as used in this clause, means work 
performed on a vessel--
    (1) To enable the vessel to meet applicable standards to become 
a vessel of the United States; or
    (2) To convert the vessel to a more useful military 
configuration.
    (b) Requirement. Unless the Secretary of Defense waives this 
requirement, reflagging or repair work shall be performed in the 
United States or its territories, if the reflagging or repair work 
is performed--
    (1) On a vessel for which the Contractor submitted an offer in 
response to the solicitation for this contract; and
    (2) Prior to acceptance of the vessel by the Government.
(End of clause)
    76. Section 252.249-7002 is amended by revising the clause date 
``(MAY 1994)'' to read ``(MAY 1995)'' and by revising paragraph (c)(1) 
to read as follows:
252.249-7002  Notification of proposed program termination or 
reduction.
* * * * *
    (c) * * *
    (1) Each employee representative of the Contractor's employees 
whose work is related to the program and who may be impacted in the 
event of a termination or substantial reduction; or
* * * * *
    77. Section 252.251-7000 is amended by revising the clause date 
``(DEC 1991)'' to read ``(MAY 1995)''; by revising paragraph (d)(4); 
and by adding a new paragraph (f) to read as follows:
252.251-7000  Ordering from Government supply sources.
* * * * *
    (d) * * *
    (1) * * *
    (2) * * *
    (3) * * * [[Page 29504]] 
    (4) Pay invoices from Government supply sources promptly. For 
purchases made from DoD supply sources, this means within 30 days of 
the date of a proper invoice (see also Defense Federal Acquisition 
Regulation Supplement (DFARS) 251.105). For purposes of computing 
interest for late Contractor payments, the Government's invoice is 
deemed to be a demand for payment in accordance with the Interest 
clause of this contract. The Contractor's failure to pay may also 
result in the DoD supply source refusing to honor the requisition 
(see DFARS 251.102(f)) or in the Contracting Officer terminating the 
Contractor's authorization to use DoD supply sources. In the event 
the Contracting Officer decides to terminate the authorization due 
to the Contractor's failure to pay in a timely manner, the 
Contracting Officer shall provide the Contractor with prompt written 
notice of the intent to terminate the authorization and the basis 
for such action. The Contractor shall have 10 days after receipt of 
the Government's notice in which to provide additional information 
as to why the authorization should not be terminated. Such 
termination shall not provide the Contractor with an excusable delay 
for failure to perform or complete the contract in accordance with 
the terms of the contract, and the Contractor shall be solely 
responsible for any increased costs.
    (e) * * *
    (f) Government invoices shall be submitted to the Contractor's 
billing address, and Contractor payments shall be sent to the 
Government remittance address specified below:

Contractor's Billing Address (include point of contact and telephone 
number):

Government Remittance Address (include point of contact and 
telephone number):

(End of clause)

PART 253--FORMS

    78. Section 253.209-1 is amended by revising paragraph (a)(i)(E) to 
read as follows:


253.209-1  Responsible prospective contractors.

    (a) * * *
    (i) * * *
    (E) Accounting system and related internal controls. An 
assessment by the auditor of the adequacy of the prospective 
contractor's accounting system and related internal controls as 
defined in 242.7501, Definition. Normally, a contracting officer 
will request an accounting system review when soliciting and 
awarding cost-reimbursement or incentive type contracts, or 
contracts which provide for progress payments based on costs or on a 
percentage or stage of completion.
* * * * *


253.215-70  [Amended]

    79. At the end of section 253.215-70, Form 253.303-2139, Report of 
Contract Performance Outside the United States, is added in numerical 
order to the DFARS Form List.

Appendix C to Chapter 2

    80. Appendix C to Chapter 2, Section C-207.5 is amended by revising 
paragraph (b) to read as follows:
    C-207.5  Subcontractor responsibility and vendor performance rating 
system (IIG5).

    (a) * * *
    (b) Vendor performance rating systems. Contractor vendor 
performance rating systems may be a valuable element in the 
contractor's selection of subcontractors that offer the greatest 
value to the Government. State in the report whether the contractor 
has a vendor rating system. If the contractor has a system in place, 
evaluate its effectiveness in selecting sources. Consider whether 
the system--

(1) Allows consistency of comparisons among competing 
subcontractors;
(2) Protects rating information;
(3) Provides appropriate documentation for each element rated;
(4) Allows adequate opportunities for new subcontractors to compete;
(5) Provides for evaluations by appropriate functional areas; and
(6) Is kept current and accurate.

[FR Doc. 95-13061 Filed 6-2-95; 8:45 am]
BILLING CODE 3810-01-M