[Federal Register Volume 62, Number 108 (Thursday, June 5, 1997)]
[Proposed Rules]
[Pages 30831-30832]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14624]


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DEPARTMENT OF DEFENSE

48 CFR Parts 225 and 252

[Docket No. 96-D021]


Defense Federal Acquisition Regulation Supplement; Contingent 
Fees-Foreign Military Sales

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

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SUMMARY: The Director of Defense Procurement is proposing to amend the 
Defense Federal Acquisition Regulation supplement (DFARS) to permit 
payment of contingent fees in excess of $50,000 per foreign military 
sale case under a government contract, if the foreign customer approves 
the payment in writing before contract award.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before August 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. 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 rule proposes amendments to the interim rule published in the 
Federal Register on January 17, 1997 (62 FR 2616). The interim rule 
amended DFARS Subpart 225.73 and the clauses at 252.212-7001 and 
252.225-7027 for conformance with revisions made to the Federal 
Acquisition Regulation pertaining to contingent fee arrangements. As a 
result of public comments received on the interim rule, this proposed 
rule removes the prohibition on payment of contingent fees exceeding 
$50,000 for foreign military sales, and instead permits payment of 
contingent fees exceeding $50,000 per foreign military sale case if the 
foreign customer agrees to such fees in writing before contract award.

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 most 
firms that pay or receive contingent fees on foreign military sales are 
not small business concerns. 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 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 proposed 
rule does not impose any information collection requirements that 
require Office of Management and Budget approval under 44 U.S.C. 3501, 
et seq.

List of Subjects in 48 CFR Parts 225 and 252

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

    Therefore, it is proposed that 48 CFR Parts 225 and 252 be 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

    2. Section 225.7303-4 is revised to read as follows:
225.7303-4 Contingent fees.
    (a) Except as provided in paragraph (b) of this subsection, 
contingent fees are generally 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).
    (b) (1) 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 shall prohibit the 
payment of contingent fees unless the payments have been identified and 
approved in writing by the foreign

[[Page 30832]]

customer before contract award (see 225.7308(a)).
    (2) For FMS to countries not listed in paragraph (b)(1) of this 
subsection, no payment of contingent fees in excess of $50,000 per FMS 
case shall be made under a U.S. Government contract, unless payment has 
been identified and approved in writing by the foreign customer before 
contract award.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    3. 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)(1) 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

    (a) Except as provided in paragraph (b) of this clause, 
contingent fees, as defined in the Covenant Against Contingent Fees 
clause of this contract, are generally an allowable cost, provided 
that the fees are paid to a bona fide employee or to established 
commercial selling agencies maintained by the Contractor for the 
purpose of securing business.
    (b) For Foreign military sales, unless the contingent fees have 
been identified and payment approved in writing by the foreign 
customer before contract award, the following contingent fees are 
unallowable costs under the contract:
    (1) For sales to the Government(s) of ____________, contingent 
fees in any amount.
    (2) For sales to Governments not listed in paragraph(b)(1) of 
this clause, contingent fees in excess of $50,000 per foreign 
military sale case.

(End of clause)

[FR Doc. 97-14624 Filed 6-4-97; 8:45 am]
BILLING CODE 5000-04-M