[Federal Register Volume 61, Number 236 (Friday, December 6, 1996)]
[Rules and Regulations]
[Pages 64636-64637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31099]


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DEPARTMENT OF DEFENSE
48 CFR Parts 249 and 252

[DFARS Case 96-D320]


Defense Federal Acquisition Regulation Supplement; Notice of 
Termination

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: The Director of Defense Procurement has issued an interim rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to implement Section 824 of the National Defense Authorization Act for 
fiscal Year 1997 (Pub. L. 104-201). Section 824 streamlines the 
statutory requirements for providing notification to contractors 
regarding contract terminations or reductions that are expected to 
occur as a result of reduced funding levels under major defense 
programs.

EFFECTIVE DATE: December 6, 1996. Comments on the interim rule should 
be submitted in writing to the address shown below on or before 
February 4, 1997, to be considered in the formulation of the final 
rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, Attn: Mr. Richard G. Layser, 
PDUSD (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 602-0350.
    Please cite DFARS Case 96-D320 in all correspondence related to 
this issue.

FOR FURTHER INFORMATION CONTACT:
Mr. Rick Layser, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule implements Section 824 of the National Defense 
Authorization Act for Fiscal Year 1997 (Pub. L. 104-201). Section 824 
of Public Law 104-201 amends Section 4471 of Public Law 102-484 (10 
U.S.C. 2501 note) to streamline requirements for providing notices to 
contractors and subcontractors that may be adversely affected by 
substantial reductions in funding levels under major defense programs. 
The changes include: (1) Elimination of the requirement for notices 
pertaining to funding reductions that may occur as a result of the 
submission of the President's budget; (2) elimination of the 
requirement for publication of notices of anticipated program 
termination or reduction in the Federal Register; and (3) an increase 
in the time period, from 45 to 60 days, within which contractors must 
provide notice of anticipated contract termination or reduction to 
affected subcontractors after receiving notice from the Government.

B. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense to issue this rule as an interim rule. Urgent and compelling 
reasons exist to promulgate this rule without prior opportunity for 
public comment. This rule implements Section 824 of the National 
Defense Authorization Act for Fiscal Year 1997 (Pub. L. 104-201). 
Section 824 became effective upon enactment on September 23, 1996. This 
interim rule is necessary to ensure that DoD contracting activities 
become aware of the amended statutory requirements for providing 
notification to contractors regarding anticipated contract termination 
or reduction. However, comments received in response to the publication 
of this interim rule will be considered in formulating the final rule.

C. Regulatory Flexibility Act

    The interim rule may 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 rule 
revises requirements for providing notification to contractors and 
subcontractors regarding contract terminations or reductions that are 
expected to occur under major defense programs. An initial regulatory 
flexibility analysis has been prepared and is summarized as follows: 
This interim rule amends the Defense Federal Acquisition Regulation 
Supplement (DFARS) to implement Section 824 of the National Defense 
Authorization Act for Fiscal Year 1997 (Pub. L. 104-201). Section 824 
streamlines the statutory requirements for providing notification to 
contractors and subcontractors regarding contract terminations or 
reductions that are expected to occur as a result of reduced funding 
levels under major defense programs. The rule will apply to all large 
and small entities that have, under a major defense program, a prime 
contract, a first-tier subcontract of $500,000 or more, or a lower-tier 
subcontract of $100,000 or more, that is expected to be terminated or 
substantially reduced as a result of reduced funding levels in an 
appropriations act. It is not feasible to predict the number of small 
entities that may be affected. However, according to statistics from 
the DD Form 350 data base maintained by Department of Defense (DoD) 
Washington Headquarters Services, DoD awarded approximately 35,400 
prime contracts exceeding $100,000 to small entities during fiscal year 
1995. This rule imposes no additional reporting, recordkeeping, or 
compliance requirements on offerors or contractors. This rule does not 
duplicate, overlap, or conflict with any other Federal rules. 
Consideration was given to delaying the notification requirements until 
the time of execution of the contract termination modification. 
However, this alternative would not ensure full compliance with the 
applicable statute, which requires DoD to notify its contractors of 
anticipated contract termination or reduction not later than 60 days 
after the enactment of an appropriations act. Comments are invited from 
small businesses and other interested parties. Comments from small 
entities concerning the affected DFARS subparts also will be considered 
in accordance with Section 610 of the Act. Such comments should be 
submitted separately and cite DFARS Case 96-D320 in correspondence.

D. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the interim rule 
does not impose any new reporting or recordkeeping requirements which 
require Office of Management and Budget approval under 44 U.S.C. 3501, 
et seq.

List of Subjects in 48 CFR Parts 249 and 252

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

    Therefore, 48 CFR Parts 249 and 252 are amended as follows:
    1. The authority citation for 48 CFR Parts 249 and 252 continues to 
read as follows:


[[Page 64637]]


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

PART 249--TERMINATION OF CONTRACTS

    2. Section 249.7003 is revised to read as follows:


249.7003  Notification of anticipated contract terminations or 
reductions.

    (a) Section 1372 of the National Defense Authorization Act for 
Fiscal Year 1994 (Pub. L. 103-160) and Section 824 of the National 
Defense Authorization Act for Fiscal Year 1997 (Pub. L. 104-201) are 
intended to help establish benefit eligibility under the Job Training 
Partnership Act (29 U.S.C. 1661 and 1662) for employees of DoD 
contractors and subcontractors adversely affected by termination or 
substantial reductions in major defense programs.
    (b) Departments and agencies are responsible for establishing 
procedures to:
    (1) Identify which contracts (if any) under major defense programs 
will be terminated or substantially reduced as a result of the funding 
levels provided in an appropriations act.
    (2) Within 60 days of the enactment of such an act, provide notice 
of the anticipated termination of or substantial reduction in the 
funding of affected contracts)
    (i) Directly to the Secretary of Labor; and
    (ii) Through the contracting officer to each prime contractor.
    (c) Use the clause at 25.249-7002, Notification of Anticipated 
Contract Termination or Reduction, in all contracts under a major 
defense program.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    3. Section 252.249-7002 is revised to read as follows:


252.249-7002  Notification of Anticipated Contract Termination or 
Reduction.

    As prescribed in 249.7003(c), use the following clause:

NOTIFICATION OF ANTICIPATED CONTRACT TERMINATION OR REDUCTION

(DEC 1996)

    (a) Definitions.
    Major defense program means a program that is carried out to 
produce or acquire a major system (as defined in 10 U.S.C. 2302(5)) 
(see also DoD 5000.2-R, Mandatory Procedures for Major Defense 
Acquisition Programs (MDAPs) and Major Automated Information System 
(MAIS) Acquisition Programs).
    Substantial reduction means a reduction of 25 percent or more in 
the total dollar value of funds obligated by the contract.
    (b) Section 1372 of the National Defense Authorization Act for 
Fiscal Year 1994 (Pub. L. 103-160) and Section 824 of the National 
Defense Authorization Act for Fiscal Year 1997 (Pub. L. 104-201) are 
intended to help establish benefit eligibility under the Job 
Training Partnership Act (29 U.S.C. 1661 and 1662) for employees of 
DoD contractors and subcontractors adversely affected by contract 
terminations or substantial reductions under major defense programs.
    (c) Notice to employees and state and local officials. Within 2 
weeks after the Contracting Officer notifies the Contractor that 
contract funding will be terminated or substantially reduced, the 
Contractor shall provide notice of such anticipated termination or 
reduction to--
    (1) Each employee representative of the Contractor's employees 
whose work is directly related to the defense contract; or
    (2) If there is no such representative, each such employee;
    (3) The State dislocated worker unit or office described in 
section 311(b)(2) of the Job Training Partnership Act (29 U.S.C. 
1661(b)(2)); and
    (4) The chief elected official of the unit of general local 
government within which the adverse effect may occur.
    (d) Notice to subcontractors. Not later than 60 days after the 
Contractor receives the Contracting Officer's notice of the 
anticipated termination or reduction, the Contractor shall--
    (1) Provide notice of the anticipated termination or reduction 
to each first-tier subcontractor with a subcontract of $500,000 or 
more; and
    (2) Require that each such subcontractor--
    (i) Provide notice to each of its subcontractors with a 
subcontract of $100,000 or more; and
    (ii) Impose a similar notice and flowdown requirement to 
subcontractors with subcontracts of $100,000 or more.
    (e) The notice provided an employee under paragraph (c) of this 
clause shall have the same effect as a notice of termination to the 
employee for the purposes of determining whether such employee is 
eligible for training, adjustment assistance, and employment 
services under section 325 or 325A of the Job Training Partnership 
Act (29 U.S.C. 1662d, 1662d-1). If the Contractor has specified that 
the anticipated contract termination or reduction is not likely to 
result in plant closure or mass layoff, as defined in 29 U.S.C. 
2101, the employee shall be eligible only for services under section 
314(b) and paragraphs (1) through (14), (16), and (18) of section 
314(c) of the Job Training Partnership Act (29 U.S.C. 1661c(b) and 
paragraphs (1) through (14), (16), and (18) of section 1661c(c)).
      (End of clause)

[FR Doc. 96-31099 Filed 12-5-96; 8:45 am]
BILLING CODE 5000-04-M