[Federal Register Volume 61, Number 236 (Friday, December 6, 1996)]
[Rules and Regulations]
[Pages 64635-64636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31100]


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DEPARTMENT OF DEFENSE

48 CFR Part 231

[DFARS Case 96-D334]


Defense Federal Acquisition Regulation Supplement; Restructuring 
Costs

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 8115 of the National Defense Appropriations Act 
for Fiscal Year 1997 (Pub. L. 104-208) concerning the reimbursement of 
external restructuring costs associated with a business combination.

DATES: Effective date: December 6, 1996.
    Comment date: 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: Ms. Sandra G. Haberlin, 
PDUSD (A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 602-0350. Please cite DFARS Case 96-
D334 in all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT:
Ms. Sandra G. Haberlin, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule amends DFARS 231.205-70, External restructuring 
costs, to implement Section 8115 of the National Defense Appropriations 
Act for Fiscal Year 1997 (Pub. L. 104-208). Section 8115 restricts DoD 
from using fiscal year 1997 funds to reimburse external restructuring 
costs associated with a business combination undertaken by a defense 
contractor unless certain conditions are met. These conditions include 
either that (1) the audited savings for DoD resulting from the 
restructuring will be at least twice the costs; or (2) the savings for 
DoD will exceed the costs allowed and the Secretary of Defense 
determines that the business combination will result in the 
preservation of a critical capability that might otherwise be lost to 
the Department.

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 8115 of the National 
Defense Appropriations Act for Fiscal Year 1997 (Pub. L. 104-208), 
which was effective upon enactment on September 30, 1996. However, 
comments received in response to the publication of this rule will be 
considered in formulating the final rule.

C. Regulatory Flexibility Act

    The interim 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 most 
contracts awarded to small entities use simplified acquisition 
procedures or are awarded on a competitive fixed-price basis, and do 
not require application of the cost principle contained in this rule. 
In addition, this rule only applies to those entities that incur 
restructuring costs associated with a business combination under 
contracts funded by fiscal year 1997 funds. An Initial Regulatory 
Flexibility Analysis has, therefore, not been performed. Comments are 
invited from small businesses and other interested parties. Comments 
from small entities concerning the affected DFARS subpart also will be 
considered in accordance with Section 610 of the Act. Such comments 
must be submitted separately and cite DFARS Case 96-D334 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 Part 231

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

    Therefore, 48 CFR Part 231 is amended as follows:
    1. The authority citation for 48 CFR Part 231 continues to read as 
follows:

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

PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES

    2. Section 231.205-70 is amended by revising paragraph (a), and by 
adding paragraphs (c) (3) and (d) (10) to read as follows:


231.205-70  External restructuring costs.

    (a) Scope. This subsection prescribes policies and procedures for 
allowing contractor external restructuring costs when net savings would 
result for DoD. This subsection also implements Section 818 of the 
National Defense Authorization Act for Fiscal Year 1995 (Pub. L. 103-
337) and Section 8115 of the National Defense Appropriations Act for 
Fiscal Year 1997 (Pub. L. 104-208).
* * * * *
    (c) * * *
    (3) Additionally, for business combinations that occur after 
September 30, 1996, no fiscal year 1997 appropriated funds may be 
obligated or expended to reimburse a contractor for restructuring costs 
associated with external restructuring activities unless--
    (i) The audited savings for DoD resulting from the restructuring 
will

[[Page 64636]]

exceed the costs allowed by a factor of at least two to one; or
    (ii) The savings for DoD resulting from the restructuring will 
exceed the costs allowed, and the Secretary of defense determines that 
the business combination will result in the preservation of a critical 
capability that might otherwise be lost to DoD.
    (d) * * *
    (10) Consult with the Director of Defense Procurement, Office of 
the Under Secretary of Defense (Acquisition & Technology), when 
231.205-70(c)(3)(ii) applies.
* * * * *
[FR Doc. 96-31100 Filed 12-5-96; 8:45 am]
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