[Federal Register Volume 60, Number 151 (Monday, August 7, 1995)]
[Proposed Rules]
[Pages 40146-40149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19318]



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DEPARTMENT OF DEFENSE

48 CFR Parts 209, 216, 217, 246, and 252

[DFARS Case 95-D702]


Defense Federal Acquisition Regulation Supplement; Contract Award 
(Proposed)

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comment.

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SUMMARY: This proposed rule is issued pursuant to the Federal 
Acquisition Streamlining Act of 1994 (``the Act''). The Director of 
Defense Procurement is proposing to amend the Defense Federal 
Acquisition Regulation Supplement concerning contractor qualifications, 
special contracting methods, and quality assurance as a result of 
changes made to Title 10 U.S.C. by Sections 1505, 2401, and 2402 of the 
Act.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before October 6, 1995, to be considered 
in the formulation of a final rule.


[[Page 40147]]

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, PDUSD(A&T)DP(DAR), IMD 3D139, 
3062 Defense Pentagon, Washington, DC 20301-3062. Telefax number (703) 
602-0350. Please cite DFARS Case 95-D702 in all correspondence related 
to this issue.

FOR FURTHER INFORMATION CONTACT:
Ms. Melissa D.Rider, DFARS FASTA Implementation Secretariat, at (703) 
614-1634. Please cite DFARS case 95-D702.

SUPPLEMENTARY INFORMATION:

A. Background

    The Federal Acquisition Streamlining Act of 1994, Pub. L. 103-355 
(``the Act''), dated October 13, 1994, provides authorities that 
streamline the acquisition process and minimize burdensome government-
unique requirements. Major changes that can be expected in the 
acquisition process as a result of the Act's implementation include 
changes in the areas of Commercial Item Acquisition, Simplified 
Acquisition Procedures, the Truth in Negotiations Act, and introduction 
of the Federal Acquisition Computer Network (FACNET).
    DFARS Case 95-D702 addresses five defense-unique sections of the 
Act: Section 1505, Restrictions on Undefinitized Contractual Actions; 
Section 2401, Clarification of Provision Relating to Quality Control of 
Certain Spare Parts; Section 2402, Contractor Guarantees Regarding 
Weapons Systems; Section 3061, Regulations on Procurement, Production, 
Warehousing, and Supply Distribution Functions; and Section 10004, Data 
Collection Through the Federal Procurement Data System. A discussion of 
the changes associated with each section follows:
    Section 1505, Restrictions on Undefinitized Contractual Actions--
Subsection 1505(a) of the Act requires that the limitation on 
expenditures be changed to reflect limitations on obligations, for 
underfinitized contractual actions (UCAs). This was done because the 
Government cannot control when funds are expended by the contractor but 
can control when funds are obligated on a contract. Subsection 1505(b) 
of the Act allows the head of agency to waive the UCA restrictions, if 
necessary to support a contingency operation. DFARS changes resulting 
from Subsections 1505 (a) and (b) were published as Item IX of Defense 
Acquisition Circular 91-7 (60 FR 29491) on June 5, 1995. Therefore, 
this proposed rule contains no DFARS changes to implement Subsections 
1505 (a) and (b), Subsection 1505(c) of the Act exempts contracts 
within the simplified acquisition threshold from UCA restrictions. This 
proposed rule implements Subsection 1505(c) at DFARS 217.7402(b). The 
proposed rule also changes other portions of DFARS Parts 216 and 217 to 
consolidate requirements involving UCAs. A new DFARS clause, modeled on 
the clause at FAR 52.216-25, Contract Definitization, is proposed to 
provide a standard clause for DoD use in all UCAs.
    Section 2401, Clarification of Provision Relating to Qualify 
Control of Certain Spare Parts--This Section of the Act requires that 
the DoD qualification requirements that were used to qualify an 
original production part be used on all subsequent acquisitions of that 
part unless the Secretary determines in writing that other sufficiently 
similar requirements exist that should be used instead, or that the 
original requirements were unnecessary. The proposed rule amends DFARS 
Subpart 209.2, Qualification Requirements, to add this requirement, but 
allows the requiring activity to make the determination. This is 
consistent with the approval levels cited in other on-going FAR cases 
on specifications and standards and qualification requirements (QPL/
QSL) and supports, in general, the empowerment of lower echelons of the 
acquisition workforce, when and where appropriate (in this case the 
requiring activity).
    Section 2402, Contractor Guarantees Regarding Weapons Systems--This 
Section of the Act requires that acquisition regulations be modified to 
include guidelines for negotiating reasonable, cost effective 
contractor guarantees,procedures for administering such guarantees, and 
guidelines for determining when waivers of requirements for warranties 
are appropriate. The proposed rule adds language at DFARS 246.770-2(b) 
that discusses the logical process of constructing a rational warranty 
for a weapon system. The coverage provides the reader with a good 
source of detailed information--the DSMC Warranty Guidebook. The 
proposed rule balances the need for specific guidance with the need to 
minimize DFARS coverage. This Section of the Act also eliminated 
Congressional reporting requirements for other than major weapon 
systems. Therefore, minor changes have been made at DFARS 246.770-8 to 
delete language pertaining to reporting requirements. The title of the 
Under Secretary of Defense (Acquisition and Technology) has been 
corrected at DFARS 246.770-8(a).
    Section 3061, Regulations on Procurement, Production, Warehousing, 
and Supply Distribution Functions--This section of the Act amends 10 
U.S.C. 2202 to vest the Secretary of Defense with the authority to 
prescribe regulations governing the performance within DoD of 
procurement, production, warehousing, and supply distribution, and 
related functions. Given that existing FAR coverage of Subpart 1.3 
already vests the Secretary of Defense with this authority, especially 
when one considers that 5 U.S.C. allows agency heads, such as the 
Secretary of Defense, to structure the internal administrative 
procedures of his/her agency to support, among other things, the 
procurement process, no DFARS change has been made to implement this 
Section of the Act.
    Section 10004, Data Collection Through the Federal Procurement Data 
System. No changes are proposed to implement this Section of the Act in 
the DFARS. FAR changes associated with this Section were included in 
FAR Case 94-701, which was published as a proposed rule on January 9, 
1995 (60 FR 2472).

B. Regulatory Flexibility Act

    The proposed rule is not expected to have a 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: the new 
section at DFARS 209.206-70 pertains to internal Government procedures 
for determining qualification requirements; the revisions to DFARS 
Parts 216 and 217 and the new contract clause merely consolidate and 
standardize existing requirements pertaining to underfinitized contract 
actions; and the revisions to DFARS 246.770 pertain to internal 
Government considerations regarding to use of warranties. An initial 
regulatory flexibility analysis has therefore not been performed. 
Comments from small entities concerning the affected DFARS subparts 
will be considered in accordance with Section 610 of the Act. Such 
comments must be submitted separately and cite DFARS Case 95-D702 in 
correspondence.
C. The Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
rule will not impose any additional reporting or record keeping 
requirements that require Office of Management and Budget approval 
under 44 U.S.C. 3501, et seq.

[[Page 40148]]


List of Subjects in 48 CFR Parts 209, 216, 217, 246, and 252

    Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.

    Therefore, 48 CFR 209, 216, 217, 246, and 252 are proposed to be 
amended as follows:

PART 209--CONTRACTOR QUALIFICATIONS

    1. The authority citation for 48 CFR Parts 209, 216, 217, 246, and 
252 is revised to read as follows:

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

    2. Section 209.206-70 is added to read as follows:


209.206-70  Quality control of critical aircraft and ship spare parts.

    In accordance with 10 U.S.C. 2383, a contractor supplying any spare 
or repair part, that is critical to the operation of an aircraft or 
ship, is required to provide a part that meets all appropriate 
qualification and quality requirements as may be specified in the 
solicitation and made available to prospective offerors. The 
qualification requirements shall be identical to the DoD qualification 
requirements that were used to qualify the original production part, 
unless it is determined by the head of the requiring activity, in 
writing, that--
    (a) There are other requirements sufficiently similar to those 
requirements that should be used instead; or
    (b) Any or all such requirements are unnecessary.

PART 216--TYPES OF CONTRACTS

    3. Section 216.603-4 is revised to read as follows:


216.603-4  Contract clauses.

    (b)(2) See 217.7405(a) for additional guidance regarding use of the 
clause at FAR 52.216-24, Limitation of Government Liability.
    (3) Use the clause at 252.217-XXXX, Contract Definitization, in 
accordance with its prescription at 217.7405(b), instead of the clause 
at FAR 52.216-25, Contract Definitization.
    4. Section 216.703 is amended by revising paragraph (c) to read as 
follows:


216.703  Basic ordering agreements.

    (c) Limitations. The period during which orders may be placed 
against a basic ordering agreement may not exceed three years. The 
contracting officer, with the approval of the chief of the contracting 
office, may grant extensions for up to two years. No single extension 
shall exceed one year. See subpart 217.74 for additional limitations on 
the use of undefinitized orders under basic ordering agreements.
* * * * *

PART 217--SPECIAL CONTRACTING METHODS

    5. Section 217.202 is amended by adding paragraph (3) to read as 
follows:


217.202  Use of options.

* * * * *
    (3) See subpart 217.74 for limitations on the use of undefinitized 
options.
    6. Section 217.7402 is amended by revising paragraph (b) to read as 
follows:


217.7402  Exceptions.

* * * * *
    (b) Purchases at or below the simplified acquisition threshold;
* * * * *


217.7404-3  [Amended]

    7. Section 217.7404-3 is amended in the introductory text of 
paragraph (a) by revising the word ``earliest'' to read ``earlier.''
    8. Section 217.7405 is revised to read as follows:
Sec. 217.7405  Contract clauses.

    (a) Use the clause at FAR 52.216-24, Limitation of Government 
Liability, in all UCAs, solicitations associated with UCAs, basic 
ordering agreements, indefinite delivery contracts, and any other type 
of contract providing for the use of UCAs.
    (b) Use the clause at DFARS 252.217-XXXX, Contract Definitization, 
in all UCAs, solicitations associated with UCAs, basic ordering 
agreements, indefinite delivery contracts, and any other type of 
contract providing for the use of UCAs. Insert the applicable 
information in paragraphs (a), (b), and (d) of the clause. If, at the 
time of entering into the UCA, the contracting officer knows that the 
definitive contract action will be based on adequate price competition 
or otherwise will meet the criteria of FAR 15.804-3 for not requiring 
submission of cost or pricing data, the words ``and cost or pricing 
data'' may be deleted from paragraph (a) of the clause.

PART 246--QUALITY ASSURANCE

    9. Section 246.770-2 is amended by redesignating paragraphs (b) and 
(c) as (c) and (d), respectively, by adding a new paragraph (b), and by 
revising newly designated paragraph (c) to read as follows:


246.770-2  Policy.

* * * * *
    (b) Contracting officers and program managers shall consider the 
following when developing and negotiating weapon system warranty 
provisions:
    (1) Warranties may not be appropriate in all situations, and a 
waiver should be sought if a warranty would not be cost-effective or 
would otherwise be inconsistent with the national defense. In drafting 
warranty provisions, the drafters must ensure they understand the 
planned operational, maintenance, and supply concepts of the weapon 
system to be fielded, and must structure a warranty that matches those 
concepts. A warranty plan should be prepared in consonance with 
development of the warranty provisions early in the weapon system's 
life cycle. The plan should contain program warranty strategy, terms of 
the warranty, administration and enforcement requirements, and should 
be coordinated with the user and support activities.
    (2) A cost/benefit analysis must be accomplished in support of each 
warranty (see 246.770-7). The cost/benefit analysis compares all costs 
associated with the warranty to the expected benefits. An estimate 
shall be made of the likelihood of defects and the estimated cost of 
correcting such defects. Also, if substantive changes are required to 
the planned operational, maintenance, or supply concepts, any increased 
costs should be weighed against the expected benefits in deciding 
whether a warranty is cost-effective.
    (3) The Warranty Guidebook prepared by the Defense Systems 
Management College, Fort Belvoir, VA 22060-5426, is a valuable 
reference that can assist in the development, negotiation, and 
administration of an effective weapon system warranty.
    (c) Contracting officers may require warranties that provide 
greater coverage and remedies than specified in paragraph (a) of this 
subsection.
    10. Section 246.770-8 is amended by removing paragraph (b)(2), 
redesignating paragraph (b)(3) as (b)(2), and revising the introductory 
texts of paragraphs (a), (c), and (c)(2) to read as follows:


246.770-8   Waiver and notification procedures.

    (a) The Secretary of Defense has delegated waiver authority within 
the limits specified in 10 U.S.C. 2403. The waiving authority for the 
defense agencies is the Under Secretary of Defense (Acquisition and 
Technology). Submit defense agency waiver requests to the Director, 
Defense Procurement, for processing. The waiving authority 

[[Page 40149]]
for the military department is the Secretary of the department with 
authority to redelegate no lower than an Assistant Secretary. The 
waiving authority may waive one or more of the weapons system 
warranties required by 246.770-2 if--
* * * * *
    (c) Departments and agencies shall issue procedures for processing 
waivers and notifications to Congress.
* * * * *
    (2) Notifications shall include--
* * * * *

PART 252--CONTRACT CLAUSES


252.217-7027  [Removed]

    11. Section 252.217-7027 is removed.
    12. Section 252.217-XXXX is added to read as follows:


252.217-XXXX  Contract Definitization.

    As prescribed in 217.7405(b), use the following clause:

Contract Definitization (XXX XXXX)

    (a) A (insert specific type of contract action) is contemplated. 
The Contractor agrees to begin promptly negotiating with the 
Contracting Officer the terms of a definitive contract that will 
include (1) all clauses required by the Federal Acquisition 
Regulation (FAR) on the date of execution of the undefinitized 
contract action, (2) all clauses required by law on the date of 
execution of the definitive contract action, and (3) any other 
mutually agreeable clauses, terms, and conditions. The Contractor 
agrees to submit a (insert type of proposal; e.g., fixed-priced or 
cost-and-fee) proposal and cost or pricing data supporting its 
proposal.
    (b) The schedule for definitizing this contract action is as 
follows (insert target date for definitization of the contract 
action and dates for submission of proposal, beginning of 
negotiations, and, if appropriate, submission of the make-or-buy and 
subcontracting plans and cost or pricing data):

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    (c) If agreement on a definitive contract action to supersede 
this undefinitized contract action is not reached by the target date 
in paragraph (b) of this clause, or within any extension of it 
granted by the Contracting Officer, the Contracting Officer may, 
with the approval of the head of the contracting activity, determine 
a reasonable price or fee in accordance with subpart 15.8 and part 
31 of the FAR, subject to Contractor appeal as provided in the 
Disputes clause. In any event, the Contractor shall proceed with 
completion of the contract, subject only to the Limitation of 
Government Liability clause.
    (1) After the Contracting Officer's determination of price or 
fee, the contract shall be governed by--
    (i) All clauses required by the FAR on the date of execution of 
this undefinitized contract action for either fixed-price or cost-
reimbursement contracts, as determined by the Contracting Officer 
under this paragraph (c);
    (ii) All clauses required by law as of the date of the 
Contracting Officer's determination; and
    (iii) Any other clauses, terms, and conditions mutually agreed 
upon.
    (2) To the extent consistent with subparagraph (c)(1) of this 
clause, all clauses, terms, and conditions including included in 
this undefinitized contract action shall continue in effect, except 
those that by their nature apply only to an undefinitized contract 
action.
    (d) The definitive contract resulting from this undefinitized 
contract action will include a negotiated (insert ``cost/price 
ceiling '' or ``firm-fixed price'') in no event to exceed (insert 
the not-to-exceed amount).

(End of Clause)

[FR Doc. 95-19318 Filed 8-4-95; 8:45 am]
BILLING CODE 5000-04-M