[Federal Register Volume 62, Number 12 (Friday, January 17, 1997)]
[Rules and Regulations]
[Pages 2616-2617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1039]
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DEPARTMENT OF DEFENSE
48 CFR Parts 225 and 252
[DFARS Case 96-D021]
Defense Federal Acquisition Regulation Supplement; Contingent
Fees--Foreign Military Sales
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 conform to changes adopted in the Federal Acquisition Regulation
(FAR), pertaining to elimination of requirements for Government review
of a prospective contractor's contingent fee arrangements.
DATES: Effective date: January 17, 1997.
Comment date: Comments on the interim rule should be submitted in
writing to the address shown below on or before March 18, 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. Amy Williams, PDUSD
(A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-
3062. Telefax number (703) 602-0350. Please cite DFARS Case 96-D021 in
all correspondence related to this issue.
FOR FURTHER INFORMATION CONTACT:
Ms. Amy Williams, (703) 602-0131.
SUPPLEMENTARY INFORMATION:
A. Background
This interim rule amends DFARS 225.73, 252.212-7001, and 252.225-
7027 to conform to the FAR revisions published as Item I of Federal
Acquisition Circular 90-40 (61 FR 39188, July 26, 1996), which removed
requirements for prospective contractors to provide certain information
to the Government regarding contingent fee arrangements. This interim
rule makes the associated DFARS changes related to contingent fees
under contracts for foreign military sales.
B. Regulatory Flexibility Act
This 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 the rule
removes requirements for contracting officer review of contingent fee
arrangements under foreign military sales contracts, but does not
change the policy pertaining to the allowability of contingent fees
under these contracts. An Initial Regulatory Flexibility Analysis has,
therefore, not been prepared. 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 5 U.S.C. 610. Such comments should be submitted
separately and should cite DFARS Case 96-D021 in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because this interim
rule does not contain any information collection requirements that
require approval by the Office of Management and Budget under 44 U.S.C.
3501, et seq.
D. Determination to Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense that urgent and compelling reasons exist to publish this
interim rule prior to affording the public an opportunity to comment.
This interim rule conforms the DFARS to changes already adopted in the
FAR. Federal Acquisition Circular 90-40 (FAR Case 93-009) eliminated
the clause at FAR 52.203-4, Contingent Fee Representation and
Agreement; the
[[Page 2617]]
Standard Form 119, Statement of Contingent or Other Fees; and the
associated requirements in FAR Subpart 3.4 relating to review and
evaluation of contingent fees. This interim rule makes the associated
DFARS changes related to contingent fees for foreign military sales.
Immediate publication of an interim rule is necessary because
compliance with the existing requirements of DFARS 225.7302 and
225.7303 is no longer feasible. Comments received in response to the
publication of this interim rule will be considered in formulating the
final rule.
List of Subjects in 48 CFR Parts 225 and 252
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, 48 CFR Parts 225 and 252 are amended as follows:
1. The authority citation for 48 CFR Parts 225 and 252 continues to
read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 225--FOREIGN ACQUISITION
225.7302 [Amended]
2. Section 225.7302 is amended by removing paragraph (a)(1), and by
redesignating paragraphs (a)(2) through (a)(5) as paragraphs (a)(1)
through (a)(4).
3. Section 225.7303-4 is revised to read as follows:
225.7303-4 Contingent fees.
(a) Contingent fees are allowable under defense contracts provided
that the fees are paid to a bona fide employee or a bona fide
established commercial or selling agency maintained by the prospective
contractor for the purpose of securing business (see FAR part 31 and
FAR subpart 3.4). For FMS, it is extremely difficult for DoD to verify
the services, or the value of the services. Therefore, the cost of
allowable contingent fees (as defined in FAR subpart 3.4) is limited to
$50,000.
(b) Under DoD 5105.38-M, Security Assistance Management Manual,
Letters of Offer and Acceptance for requirements for the governments of
Australia, Taiwan, Egypt, Greece, Israel, Japan, Jordan, Republic of
Korea, Kuwait, Pakistan, Philippines, Saudi Arabia, Turkey, Thailand,
or Venezuela (Air Force) must provide that all U.S. Government
contracts resulting from the Letters of Offer prohibit the payment of
contingent fees unless the payments have been identified and payment
approved in writing by the foreign customer before contract award. (See
225.7308(a).)
4. Section 225.7308 is amended by revising paragraph (a) to read as
follows:
225.7308 Contract clauses.
(a) Use the clause at 252.225-7027, Restriction on Contingent Fees
for Foreign Military Sales, in all solicitations and contracts for
foreign military sales.
* * * * *
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
5. Section 252.212-7001 is amended by revising the clause date to
read ``(JAN 1997)'', and by removing the entry ``252.225-7027
Limitation on Sales Commissions and Fees (12 U.S.C. 2779)'' and
inserting in its place the entry ``252.225-7027 Restriction on
Contingent Fees for Foreign Military Sales (22 U.S.C. 2779)''.
6. Section 252.225-7027 is revised to read as follows:
252.225-7027 Restriction on Contingent Fees for Foreign Military
Sales.
As prescribed in 225.7308(a), use the following clause. Insert in
paragraph (b) of the clause the name(s) of any foreign country
customer(s) listed in 225.7303-4(b).
Restriction on Contingent Fees for Foreign Military Sales (Jan 1997)
Contingent fees, as defined in the Covenant Against Contingent
Fees clause of this contract, are not an allowable cost, and the
contract price (including any subcontracts) shall not include any
direct or indirect cost of contingent fees for Contractor (or
subcontractor) sales representatives for solicitation or promotion
or otherwise to secure the conclusion of the sale of any of the
supplies or services called for by this contract, unless--
(a) The amount of contingent fee per foreign military sale does
not exceed $50,000; and
(b) For sales to the Government(s) of ____________, the
contingent fees have been identified and payment approved in writing
by the named Government(s) before contract award.
(End of clause)
[FR Doc. 97-1039 Filed 1-16-97; 8:45 am]
BILLING CODE 5000-04-M