[Federal Register Volume 63, Number 45 (Monday, March 9, 1998)]
[Rules and Regulations]
[Pages 11522-11552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5272]


      

[[Page 11521]]

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Part III





Department of Defense





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48 CFR Parts 201, et al.



Defense Federal Acquisition Regulation Supplement; Miscellaneous 
Amendments; Interim and Final Rules

  Federal Register / Vol. 63, No. 45 / Monday, March 9, 1998 / Rules 
and Regulations  

[[Page 11522]]



DEPARTMENT OF DEFENSE

48 CFR Parts 201, 202, 204, 209, 212, 214, 215, 216, 217, 219, 223, 
225, 226, 227, 229, 231, 232, 233, 234, 235, 236, 237, 239, 241, 
242, 243, 250, 252, 253, and Appendices G and I to Chapter 2

[Defense Acquisition Circular 91-13]


Defense Federal Acquisition Regulation Supplement; Miscellaneous 
Amendments

AGENCY: Department of Defense (DoD).

ACTION: Interim and final rules.

-----------------------------------------------------------------------

SUMMARY: Defense Acquisition Circular 91-13 amends the Defense Federal 
Acquisition Regulation Supplement (DFARS) to revise, finalize, or add 
language on the Defense Acquisition Regulations System, acquisition of 
commercial items, multiyear contracting, interagency acquisitions under 
the Economy Act, small business programs, the environment, foreign 
acquisition, utilization of Indian organizations, foreign patent 
interchange agreements, taxes, contract cost principles and procedures, 
contract financing, disputes and appeals, major system acquisition, 
research and development contracting, construction and architect-
engineer contracts, service contracting, acquisition of information 
technology, acquisition of utility services, contract administration, 
extraordinary contractual actions, and contract reporting.

DATES: Effective date: March 9, 1998.
    Comment date: Comments on the interim rule (Item XXIII: Sections 
236.102, 236.274, 236.570, 252.236-7010, and 252.236-7012) should be 
submitted in writing to the address shown below on or before May 8, 
1998 to be considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments on the 
interim rule (Item XXII) 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. E-
mail comments submitted over the Internet should be addressed to: 
[email protected]. Please cite DFARS Case 97-D307 in all correspondence 
related to this rule. E-mail comments should cite DFARS Case 97-D307 in 
the subject line.

FOR FURTHER INFORMATION CONTACT: Item XXIII--Ms. Amy Williams, (703) 
602-0131.
    All other items--Ms. Susan Buckmaster, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    Defense Acquisition Circular (DAC 91-13) includes 31 rules and 
miscellaneous editorial amendments. Eight of the rules (Items II, III, 
IV, V, XIII, XVI, XVII, and XXIX) were published previously in the 
Federal Register and thus are not included as part of this notice of 
amendments to the Code of Federal Regulations. These eight rules are 
included in the DAC to incorporate the previously published amendments 
into the loose-leaf edition of the DFARS.

B. Determination to Issue an Interim Rule

DAC 91-13, Item XXIII

    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 rule amends the DFARS to implement Section 112 of the Military 
Construction Appropriations Act for Fiscal Year 1998 (Public Law 105-
45). Section 112 provides that no military construction appropriations 
may be used to award, to a foreign contractor, any contract estimated 
to exceed $1,000,000 for military construction in the United States 
territories and possessions in the Pacific and on Kwajalein Atoll, or 
in countries bordering the Arabian Gulf; except for contract awards for 
which the lowest responsive and responsible bid of a United States firm 
exceeds the lowest responsive and responsible bid of a foreign firm by 
greater than 20 percent; and except for contract awards for military 
construction on Kwajalein Atoll for which the lowest responsive and 
responsible bid is submitted by a Marshallese firm. Section 112 was 
effective upon enactment on September 30, 1997. Comments received in 
response to the publication of this interim rule will be considered in 
formulating the final rule.

C. Regulatory Flexibility Act

DAC 91-13, Items I, VII, VIII, IX, XII, XV, XXI, XXII, XXV, XXVI, and 
XXVII

    These final rules do not constitute significant revisions within 
the meaning of Federal Acquisition Regulation 1.501 and Public Law 98-
577, and publication for public comment is not required. However, 
comments from small entities concerning the affected DFARS subparts 
will be considered in accordance with Section 610 of the Regulatory 
Flexibility Act (5 U.S.C. 610). Please cite the applicable DFARS case 
number in correspondence.

DAC 91-13, Items VI, XI, XIV, XVIII, XX, XXIV, and XXXI

    DoD certifies that these rules will not 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:
    Item VI, Multiyear Contracting and Other Miscellaneous Provisions--
The rule primarily reorganizes and clarifies existing DFARS guidance 
pertaining to multiyear contracting, updates internal Government 
operating procedures for processing Economy Act orders, and makes minor 
amendments to reflect existing statutory and regulatory requirements.
    Item XI, Duty-Free Entry--The rule does not constitute a change in 
policy but is a clarification of implementing procedures pertaining to 
duty-free entry of supplies and the North American Free Trade 
Agreement.
    Item XIV, Contingent Fees--Foreign Military Sales--Most firms that 
pay or receive contingent fees on foreign military sales are not small 
business concerns.
    Item XVIII, Cost Reimbursement Rules for Indirect Costs--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 FAR or DFARS cost principles.
    Item XX, Earned Value Management Systems--The rule only applies to 
contractors for certain major defense programs, and eliminates the 
requirement that such contractors use a unique management control 
system for DoD contracts.
    Item XXIV, Architect-Engineer Selection Process--The rule 
streamlines, but does not significantly alter, the process for 
selection of firms for architect-engineer contracts.
    Item XXXI, Reporting of Contract Performance Outside the United 
States--Most contractors that submit reports of contract performance 
outside the United States are not small business concerns.

DAC 91-13, Item XXIII

    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 
DFARS changes contained in this rule apply only to contracts for 
military construction on Kwajalein Atoll that are estimated to exceed 
$1,000,000; DoD awards approximately two such

[[Page 11523]]

contracts annually. 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 97-D307 in correspondence.

DAC 91-13, Items X, XIX, XXVIII, and XXX

    A final regulatory flexibility analysis has been performed for each 
of these rules. A copy of the analyses may be obtained from the address 
specified herein. Please cite the applicable DFARS case number in 
correspondence. The analyses are summarized as follows:
Item X, Buy American Act Exception for Information Technology Products 
(DFARS Case 97-D022)
    This final rule implements the determination by the Under Secretary 
of Defense (Acquisition and Technology) (USD(A&T)) that it is not in 
the public interest to apply the restrictions of the Buy American Act 
to U.S. made information technology products, in acquisitions subject 
to the Trade Agreements Act. The legal basis for the rule is 41 U.S.C. 
10a, which provides an exception to the requirements of the Buy 
American Act if the head of the agency determines that application of 
the restrictions is not in the public interest. The objective of the 
rule is to reduce burdensome recordkeeping and tracking requirements 
imposed on U.S. manufacturers of information technology products and to 
remove the competitive disadvantage imposed on some U.S. manufacturers 
of information technology products, when competing with foreign 
offerors of eligible information technology products against an offeror 
of an information technology product that qualifies as a domestic 
product under the Buy American Act. In acquisitions subject to the 
Trade Agreements Act, the rule provides that offers of U.S. made 
information technology products in Federal Supply Group 70 or 74 will 
be evaluated without regard to whether the product qualifies as a 
domestic product. The different rules of origin under the Buy American 
Act and the Trade Agreements Act result in disproportionately 
burdensome recordkeeping requirements on firms offering information 
technology products, because eligible offers under the Trade Agreements 
Act are exempt from the Buy American Act, but offers of U.S. made 
products are not exempt. This rule will relieve U.S. manufacturers of 
information technology products from the burden of researching and 
documenting the origin of components for information technology 
products, because the Buy American Act component test no longer 
applies. The rule will also simplify the evaluation of offers because, 
for acquisitions subject to the determination, there is only one class 
of U.S. made products, and no preference for domestic products. There 
were no public comments in response to the initial regulatory 
flexibility analysis prepared for the proposed rule published in the 
Federal Register at 62 FR 47407 on September 9, 1997. The rule will 
apply to all offerors/contractors offering information technology 
products in Federal Supply Group 70 or 74 to DoD, in acquisitions 
valued at $190,000 or more. Based on DD Form 350 data from the 
Washington Headquarters Services, in fiscal year 1996, DoD awarded 735 
contracts meeting these criteria to 612 contractors, of which 214 were 
small businesses. The final rule does not impose any new reporting or 
recordkeeping requirements. The rule will result in a reduction of 
paperwork burden on offerors. There are no significant alternatives to 
the rule that would accomplish the stated objectives yet reduce any 
negative impact on small entities. This rule is expected to have a 
generally positive impact on small entities, because USD(A&T) has 
determined that removal of the competitive disadvantage for some U.S. 
made information technology end products, and the removal of burdensome 
requirements on U.S. manufacturers to separately track domestic and 
foreign components, outweighs the possible increase in use of foreign 
components.
Item XIX, Finance (DFARS Case 95-D710)
    This final rule supplements the FAR rules published as Item VII of 
Federal Acquisition Circular 90-32 on September 18, 1995 (60 FR 48272), 
and Items I and IV of Federal Acquisition Circular 90-33 on September 
26, 1995 (60 FR 49707 and 60 FR 49728). These DFARS revisions include 
the addition of 232.2, Commercial Item Purchase Financing, and 232.10, 
Performance-Based Payments; the deletion of 232.173, Reduction or 
Suspension of Contract Payments Upon Finding of Fraud, and 232.970, 
Payment of Subcontractors, since equivalent coverage is now provided in 
the FAR; and a number of editorial changes to reflect revisions made in 
the FAR. One of the issues raised by several respondents relates to the 
prompt payment periods specified in the rule: 30 days for commercial 
advance payments, and 14 days for commercial interim and performance-
based payments. The respondents advocate the 7 days now allowed for 
progress payments. The DoD Contract Finance Committee made an 
assessment that no changes should be made to the prompt payment times 
in the DFARS rule. The payment period (14 days) for performance-based 
payments reflects the likely additional time required for verification 
of the contractor's claimed performance and analysis of what often will 
be a relatively extensive compilation of performance events. Thus, more 
time is allowed than for cost-based progress payments (7 days). The 
commercial advance payments period reflects the anticipated timing of 
most such requests. These requests for payment are expected to occur at 
the beginning of the contract, possibly being keyed to the actual 
contract signing date. Thus, a 30-day period has been allowed to enable 
the payment office to receive the contract, enter it into the payment 
office computer system, and process the contractor's request for 
payment. The commercial interim payment normally is expected to be 
submitted during the life of the contract, and after the payment office 
is prepared to process payment of such requests. A 14-day payment 
period has been adopted as a payment time reasonably capable of 
accommodating the wide diversity anticipated for commercial payment 
terms. The prompt payment periods established in the DFARS are shorter 
than the equivalent standard prompt payment periods (30 days) in FAR 
32.906, and, thus, are more beneficial for small entities than the 
existing FAR policy. A second issue raised by several respondents 
concerns the provisions relating to the list of financial and other 
information that the Government must obtain to determine the financial 
responsibility of contractors. One respondent indicated its ``concern 
with the substantial burdens that will be placed on the contracting 
officer and offeror.'' The requirement, stated in section 232.072 of 
the rule, was transferred verbatim from DFARS 232.172. This DFARS rule 
makes no policy change, only an editorial change to move the DFARS 
language to correspond to certain changes made to the FAR. In addition, 
the contracting officer is only required to obtain information 
sufficient to make a determination of the contractor's

[[Page 11524]]

financial responsibility. The changes made to the DFARS by this rule 
will apply to large and small entities whose DoD contracts include 
performance-based or commercial (advance or interim) type of financing. 
For the 11 months of available fiscal year 1997 DD Form 350 data 
(October 1996 through August 1997), less than 0.5 percent of small 
business contracts (98 out of a total of 40,102) used commercial or 
performance-based financing. Accordingly, the final rule does not 
impact a significant number of small entities. The rule imposes no 
reporting, recordkeeping, or other compliance requirements. Various 
alternatives involving shorter prompt payment periods were considered, 
but, as previously explained, were rejected since their implementation 
would be exceptionally costly and burdensome on payment offices.
Item XXVIII, Certification of Requests for Equitable Adjustment (DFARS 
Case 97-D302)
    This rule finalizes, with changes, the interim rule published in 
the Federal Register on July 11, 1997 (62 FR 37146). The interim rule 
amended the DFARS to implement 10 U.S.C. 2410(a), which requires 
contractors to certify that requests for equitable adjustment that 
exceed the simplified acquisition threshold are made in good faith and 
that the supporting data are accurate and complete. There were no 
comments in response to the initial regulatory flexibility analysis 
prepared for the interim rule. The primary impact of the rule relates 
to requests in the range of $100,000 to $500,000, because requests in 
excess of $500,000 generally require submission of cost or pricing data 
and certification thereof. Many of the firms requesting equitable 
adjustment in amounts of $100,000 to $500,000 are construction 
contractors. It is estimated that the rule will affect approximately 
330 small entities annually. Accounting skills will be necessary to 
provide the cost data to support the certification. The rule minimizes 
the economic impact on small entities, because the certification 
requirements of the rule apply only to requests exceeding the 
simplified acquisition threshold, and because the certification is 
limited to only that which is specifically required by 10 U.S.C. 
2410(a). There is no other known alternative that would be consistent 
with the stated objective yet further reduce the burden on small 
entities.
Item XXX, Specialty Metals--Agreements With Qualifying Countries (DFARS 
Case 97-D007)
    This final rule amends the clause at DFARS 252.225-7014 to make the 
exception in the clause consistent with the Berry Amendment (10 U.S.C. 
2241 Note) and with the existing DFARS text at 225.7001-2(i). The 
objective of the rule is to clearly and accurately implement the Berry 
Amendment, which provides an exception to domestic source restrictions 
for the procurement of specialty metals, where such procurement is 
necessary in furtherance of agreements with foreign governments in 
which both governments agree to remove barriers to purchase of supplies 
produced in the other country. There were no public comments in 
response to the initial regulatory flexibility analysis or the proposed 
rule published in the Federal Register at 62 FR 23741 on May 1, 1997. 
The clause at DFARS 252.225-7014, Preference for Domestic Specialty 
Metals, is prescribed for use in all solicitations and contracts 
exceeding the simplified acquisition threshold that require delivery of 
an article containing specialty metals. The clause is prescribed for 
use with its Alternate I if the article containing specialty metals is 
for one of certain major programs. The basic clause only restricts the 
direct acquisition of specialty metals by the prime contractor, whereas 
Alternate I flows down the restriction to subcontractors at any tier. 
The rule does not affect the already unrestricted sources of specialty 
metals when acquiring qualifying country end products or when acquiring 
components including specialty metals for use in an end product for 
other than a major program. The rule does loosen the restriction on 
domestic specialty metals for prime contractors providing domestic or 
nonqualifying country end products, permitting them to incorporate 
specialty metals melted in a qualifying country (for both major and 
nonmajor programs); or qualifying country components containing 
specialty metals of unrestricted source for use in end products for 
major programs. Because the components subject to increased foreign 
competition are at a subcontract level, it is not possible to more 
specifically identify the items or whether they are produced by small 
business concerns. The rule imposes no new reporting, recordkeeping, or 
compliance requirements on offerors or contractors. One alternative 
considered was to require that the specialty metals incorporated in 
articles manufactured in a qualifying country also be melted in a 
qualifying country. This approach could slightly reduce the extent of 
foreign competition facing domestic entities. However, this approach 
appeared to go beyond the requirements of the statute being 
implemented.

D. Paperwork Reduction Act

DAC 91-13, Items I, VI, VII, VIII, IX, XII, XIV, XV, XVIII, XIX, XX, 
XXI, XXII, XXIV, XXV, XXVI, XXVII, and XXX

    The Paperwork Reduction Act does not apply, because these rules 
contain no information collection requirements that require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

DAC 91-13, Items X, XI, XXIII, XXVIII, and XXXI

    The Paperwork Reduction Act applies. The Office of Management and 
Budget (OMB) has approved the information collection requirements as 
follows:

------------------------------------------------------------------------
                Item                           OMB Control No.          
------------------------------------------------------------------------
X..................................  0704-0187; 0704-0259               
XI.................................  0704-0229                          
XXIII..............................  0704-0255                          
XXVIII.............................  0704-0397                          
XXXI...............................  0704-0229                          
------------------------------------------------------------------------

E. Summary of Amendments

    Defense Acquisition Circular (DAC) 91-13 amends the Defense Federal 
Acquisition Regulation Supplement (DFARS) 1991 edition. The amendments 
are summarized as follows:

Item I--Approval of Nonstatutory Certification Requirements (DFARS Case 
97-D301)

    This final rule adds a new section at DFARS 201.107 and amends 
201.304 to implement Section 29 of the Office of Federal Procurement 
Policy Act (41 U.S.C. 425), as amended by Section 4301 of the Clinger-
Cohen Act of 1996 (Public Law 104-106). Section 29 provides that a 
requirement for a certification by a contractor or offeror may not be 
included in a procurement regulation of an executive agency unless the 
certification requirement is specifically imposed by statute or 
approved in writing by the head of the executive agency.

Item II--Contract Action Reporting (DFARS Case 97-D013)

    This final rule was issued by Departmental Letter 97-016, effective 
October 1, 1997 (62 FR 44221, August 20, 1997). The rule amends DFARS 
204.670-2, 253.204-70 and 253.204-71 to revise DD Form 350 and DD Form

[[Page 11525]]

1057 contract action reporting requirements for compliance with the 
Clinger-Cohen Act of 1996 (Public Law 104-106) and to enhance data 
collection procedures.

Item III--Data Universal Numbering System (DUNS) Number (DFARS Case 97-
D019)

    This final rule was issued by Departmental Letter 97-020, effective 
October 1, 1997 (62 FR 48181, September 15, 1997). The rule amends 
DFARS 204.72 and 253.204-70 to replace guidance on use of DUNS numbers 
with references to the FAR guidance on that subject, and to remove 
guidance on locally developed coding systems that are no longer used.

Item IV--Single Process Initiative (DFARS Case 97-D014)

    This interim rule was issued by Departmental Letter 97-017, 
effective August 20, 1997 (62 FR 44223, August 20, 1997). The rule adds 
guidance at DFARS 211.273 and 242.302(a) (S-70), and a contract clause 
at 252.211-7005, to implement the policy set forth in OUSD(A&T) 
memorandum dated April 30, 1997, as it relates to the Single Process 
Initiative (SPI) and new contracts. The rule encourages offerors to 
propose the use of nongovernment specifications and industrywide 
practices that meet the intent of military or Federal specifications 
and standards, and establishes that, in procurements of previously 
developed items, SPI processes shall be considered valid replacements 
for military or Federal specifications or standards, absent a specific 
determination to the contrary.

Item V--Truth in Negotiations and Related Changes (DFARS Case 95-D708)

    This final rule was issued by Departmental Letter 97-015, effective 
July 29, 1997 (62 FR 40471, July 29, 1997). The rule amends DFARS parts 
204, 215, 216, 232, 239, and 252 to update requirements pertaining to 
the submission of cost or pricing data. The rule also removes 
requirements pertaining to work measurement systems, as Section 2201(b) 
of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-
355) repealed 10 U.S.C. 2406, which was the primary statute governing 
work measurement systems.

Item VI--Multiyear Contracting and Other Miscellaneous Provisions 
(DFARS Case 95-D703)

    This final rule removes obsolete language at DFARS 216.301-3; 
revises subpart 217.1 to reorganize and clarify guidance on multiyear 
contracting; revises Subpart 217.5 to update guidance on processing 
interagency orders under the Economy Act; adds guidance at 233.204-70 
and 250.102-70 pertaining to statutory limitations on Congressionally 
directed payment of a claim or request for equitable adjustment or 
relief; and amends subpart 237.2 to reflect the current numbering of 
FAR subpart 37.2.

Item VII--Qualified Nonprofit Agencies for the Blind or Severely 
Disabled (DFARS Case 97-D310)

    This final rule amends DFARS 219.703 to implement Section 835 of 
the National Defense Authorization Act for Fiscal Year 1998 (Public Law 
105-85). Section 835 amends 10 U.S.C. 2410d to extend, through 
September 30, 1999, the authority for contractors to claim credit 
toward their small business subcontracting goals for subcontracts 
awarded to qualified nonprofit agencies for the blind or severely 
disabled.

Item VIII--Pilot Mentor-Protege Program (DFARS Case 97-D322)

    This final rule amends DFARS 219.7104 and Appendix I to implement 
Section 821 of the National Defense Authorization Act for Fiscal Year 
1998 (Public Law 105-85). Section 821 extends to September 30, 1999, 
the date by which an interested company must apply for participation as 
a mentor firm under the DoD Pilot Mentor-Protege Program; and extends 
to September 30, 2000, the date by which a mentor firm must incur costs 
in order to be eligible for reimbursement under the Program.

Item IX--Recovered Material Certification (DFARS Case 97-D031)

    This final rule amends DFARS 223.404 to reflect the FAR revisions 
that were published as Item V of Federal Acquisition Circular 97-01. 
The FAR revisions eliminated the requirement for agencies other than 
the Environmental Protection Agency (EPA) to specify minimum recovered 
material content standards for designated items, and eliminated the 
requirement for contractors to provide annual certifications under the 
clause at FAR 52.223-9, Certification and Estimate of Percentage of 
Recovered Material Content for EPA Designated Items.

Item X--Buy American Act Exception for Information Technology Products 
(DFARS Case 97-D022)

    This final rule adds a new provision at DFARS 252.225-7020, Trade 
Agreements Certificate, and a new clause at 252.225-7021, Trade 
Agreements, and makes other amendments in parts 212, 225, and 252 to 
implement the determination made by the Under Secretary of Defense 
(Acquisition and Technology), on May 16, 1997, that it is not in the 
public interest to apply the restrictions of the Buy American Act to 
U.S. made information technology products, in acquisitions subject to 
the Trade Agreements Act.

Item XI--Duty-Free Entry (DFARS Case 96-D020)

    This final rule amends DFARS Parts 225, 242, and 252 to clarify 
guidance regarding duty-free entry of supplies and implementation of 
the North American Free Trade Agreement.

Item XII--Trade Agreements Threshold (DFARS Case 97-D040)

    This final rule amends DFARS 225.408(a) to increase, from $50,000 
to $53,150, the threshold for use of the clause at 252.225-7036, North 
American Free Trade Agreement Implementation Act. The increase is based 
on the cumulative rate for the Producer Price Index for Finished Goods, 
as reported by the U.S. Bureau of Labor Statistics, and as notified to 
the NAFTA parties by the U.S. Department of State.

Item XIII--Application of Berry Amendment (DFARS Case 96-D333)

    This final rule was issued by Departmental Letter 97-018, effective 
September 8, 1997 (62 FR 47153, September 8, 1997). The rule revises 
and finalizes the interim rule published as Item XXII of DAC 91-12, 
which implemented Section 8109 of the National Defense Appropriations 
Act for Fiscal Year 1997 (Public Law 104-208). Section 8109 provides 
that, in applying the domestic source restrictions of the Berry 
Amendment, the term ``synthetic fabric and coated synthetic fabric'' 
shall be deemed to include all textile fibers and yarns that are for 
use in such fabrics; and that the domestic source restrictions of the 
Berry Amendment shall apply to contracts and subcontracts for the 
procurement of commercial items. The final rule differs from the 
interim rule in that it amends DFARS 225.7002 and 252.225-7012 to 
expand the list of products that are exempt from the Berry Amendment 
restrictions on synthetic fabrics.

Item XIV--Contingent Fees--Foreign Military Sales (DFARS Case 96-D021)

    The interim rule published as Item XXVII of DAC 91-12 is revised 
and finalized. The rule amends DFARS guidance pertaining to contingent 
fees for foreign military sales. The final rule differs from the 
interim rule in that it revises DFARS 225.7303-4 and

[[Page 11526]]

252.225-7027 to permit payment of contingent fees exceeding $50,000 
under foreign military sales contracts if the foreign customer agrees 
to such fees in writing before contract award.

Item XV--Subcontracting Plans--Indian Incentives (DFARS Case 97-D309)

    This final rule amends DFARS Subpart 226.1 to implement Section 
8024 of the National Defense Appropriations Act for Fiscal Year 1998 
(Public Law 105-56). Section 8024 provides that incentive payments 
under the Indian Incentive Program shall be available only to 
contractors that have submitted subcontracting plans pursuant to 15 
U.S.C. 637, including comprehensive subcontracting plans submitted in 
accordance with the DoD test program.

Item XVI--Cost Principles (DFARS Case 95-D714)

    This final rule was issued by Departmental Letter 97-019, effective 
September 8, 1997 (62 FR 47154, September 8, 1997). The rule amends 
DFARS Part 231 to implement Section 7202 of the Federal Acquisition 
Streamlining Act of 1994 (Public Law 103-355). Section 7202 prohibits 
the expenditure of funds to assist any DoD contractor in preparing any 
material, report, list, or analysis with respect to the actual or 
projected economic or employment impact in a particular State or 
congressional district of an acquisition program for which all 
research, development, testing, and evaluation has not been completed.

Item XVII--Allowability of Costs for Restructuring Bonuses (DFARS Case 
97-D312)

    This interim rule was issued by Departmental Letter 97-021, 
effective November 26, 1997 (62 FR 63035, November 26, 1997). The rule 
amends DFARS 231.205-6 to implement Section 8083 of the National 
Defense Appropriations Act for Fiscal Year 1998 (Public Law 105-56). 
Section 8083 prohibits the use of fiscal year 1998 funds to reimburse a 
contractor for costs paid by the contractor to an employee for a bonus 
or other payment in excess of the normal salary paid by the contractor 
to the employee, when such payment is part of restructuring costs 
associated with a business combination.

Item XVIII--Cost Reimbursement Rules for Indirect Costs (DFARS Case 96-
D303)

    This final rule removes the cost principle at DFARS 231.205-71 
pertaining to defense capability preservation agreements. Section 1027 
of the National Defense Authorization Act for Fiscal Year 1998 (Public 
Law 105-85) repealed the statute upon which this cost principle was 
based (Section 808 of Public Law 104-106).

Item XIX--Finance (DFARS Case 95-D710)

    This final rule amends DFARS Part 232 to conform to the FAR 
revisions published as Item VII of FAC 90-32 and Items I and IV of FAC 
90-33, which implemented provisions of the Federal Acquisition 
Streamlining Act of 1994 (Public Law 103-355). The rule adds a new 
subpart 232.2, Commercial Item Purchase Financing, and a new subpart 
232.10, Performance-Based Payments; removes 232.173, Reduction or 
Suspension of Contract Payments Upon Finding of Fraud, and 232.970, 
Payment of Subcontractors, as equivalent guidance is now provided in 
FAR Part 32; and moves guidance pertaining to responsibility of 
contractors from 232.172 to 232.072, with no change in policy.

Item XX--Earned Value Management Systems (DFARS Case 96-D024)

    The interim rule published in Item XXXIII of DAC 91-12 is revised 
and finalized. The rule amends DFARS Parts 234, 242, and 252 to 
recognize industry-standard guidelines for earned value management 
systems as an alternative to DoD-unique cost/schedule control systems 
under DoD contracts. The final rule differs from the interim rule in 
that it makes minor clarifying amendments at 234.005-70, 242.1107-70, 
and 252.234-7000; amends 252.234-7001 to clarify the timing of the 
initial application of the earned value management system and the 
integrated baseline reviews; and amends 252.242-7005 for consistency 
with the industry standard, Guidelines for Earned Value Management 
Systems.

Item XXI--Research and Development Definitions (DFARS Case 97-D021)

    This final rule revises DFARS 235.001 to update the definitions 
pertaining to research and development, for consistency with the terms 
defined in DoD 7000.14-R, Financial Management Regulation.

Item XXII--Report of 10-Year Term Contracts (DFARS Case 97-D303)

    This final rule removes DFARS 235.002, which required departments 
and agencies to notify Congress of any research and development 
contract with a period of performance exceeding 10 years. Section 
1062(c) of the National Defense Authorization Act for Fiscal Year 1996 
(Public Law 104-106) repealed the statute upon which this requirement 
was based (10 U.S.C. 2352).

Item XXIII--Construction in Foreign Countries (DFARS Case 97-D307)

    This interim rule amends DFARS Part 236 and adds a new provision at 
252.236-7012 to implement Section 112 of the Military Construction 
Appropriations Act for Fiscal Year 1998 (Public Law 105-45). Section 
112 provides that no military construction appropriations may be used 
to award, to a foreign contractor, any contract estimated to exceed 
$1,000,000 for military construction in the United States territories 
and possessions in the Pacific and on Kwajalein Atoll, or in countries 
bordering the Arabian Gulf, except for: (1) Contract awards for which 
the lowest responsive and responsible bid of a United States firm 
exceeds the lowest responsive and responsible bid of a foreign firm by 
more than 20 percent, and (2) contract awards for military construction 
on Kwajalein Atoll for which the lowest responsive and responsible bid 
is submitted by a Marshallese firm.

Item XXIV--Architect-Engineer Selection Process (DFARS Case 97-D015)

    This final rule revises DFARS 236.602 to streamline the process for 
selection of firms for architect-engineer contracts. The rule 
eliminates requirements for formal constitution and minimum size of 
preselection boards; eliminates special approval requirements for 
selection of firms for contracts exceeding $500,000; and changes the 
criteria for inclusion of firms on a preselection list from ``the 
maximum practicable number of qualified firms'' to ``the qualified 
firms that have a reasonable chance of being considered as most highly 
qualified by the selection board.''

Item XXV--Overseas Architect-Engineer Services (DFARS Case 97-D034)

    This final rule amends DFARS 236.609-70 to clarify the prescription 
for use of the provision at 252.236.-7011, Overseas Architect-Engineer 
Services--Restriction to United States Firms. The provision is used in 
solicitations for architect-engineer contracts that are funded with 
military construction appropriations; estimated to exceed $500,000; and 
to be performed in Japan, in any North Atlantic Treaty Organization 
member country, or in countries bordering the Arabian Gulf.

[[Page 11527]]

Item XXVI--Uncompensated Overtime (DFARS Case 97-D037)

    This final rule removes DFARS 237.102, 237.170, and 252.237-7019. 
This guidance has been superseded by the guidance on performance-based 
contracting and uncompensated overtime at FAR 37.102, 37.115, and 
52.237-10. A related editorial change is made at DFARS 215.608(a)(1).

Item XXVII--Telecommunications Services (DFARS Case 97-D305)

    This final rule revises the guidance on multiyear contracting for 
telecommunications resources at DFARS 239.7405 to reflect the 
elimination of the Federal Information Resources Management Regulations 
(FIRMR), and revisions made to the Federal Property Management 
Regulations (FPMR), as a result of the Information Technology 
Management Reform Act of 1996 (Public Law 104-106).

Item XXVIII--Certification of Requests for Equitable Adjustment (DFARS 
Case 97-D302)

    The interim rule issued by Departmental Letter 97-014 on July 11, 
1997, is revised and finalized. The rule implements 10 U.S.C. 2410(a), 
as amended by Section 2301 of the Federal Acquisition Streamlining Act 
of 1994 (Public Law 103-355). 10 U.S.C. 2410(a) requires contractors to 
certify that requests for equitable adjustment that exceed the 
simplified acquisition threshold are made in good faith and that the 
supporting data are accurate and complete. The final rule differs from 
the interim rule in that it amends DFARS 243.204-70 to clarify that the 
certification required by 10 U.S.C. 2410(a) is different from the 
certification of a claim under the Contract Disputes Act; and amends 
252.243-7002 to clarify requirements for contractor disclosure of facts 
to support a certification of a request for equitable adjustment.

Item XXIX--Designation of Hong Kong (DFARS Case 97-D023)

    This final rule was issued by Departmental Letter 97-013, effective 
July 11, 1997 (62 FR 37147, July 11, 1997). The rule amends DFARS 
252.225-7007 to add Hong Kong as a designated country under the Trade 
Agreements Act of 1979, as directed by the U.S. Trade Representative.

Item XXX--Specialty Metals--Agreements with Qualifying Countries (DFARS 
Case 97-D007)

    This final rule amends the clause at DFARS 252.225-7014, Preference 
for Domestic Specialty Metals, to specify that the requirements of the 
clause do not apply to specialty metals melted, or incorporated in 
articles manufactured, in a qualifying country listed in DFARS 225.872-
1.

Item XXXI--Reporting of Contract Performance Outside the United States 
(DFARS Case 97-D029)

    This final rule amends the clause at DFARS 252.225-7026, Reporting 
of Contract Performance Outside the United States, to increase the 
reporting threshold from $25,000 to the simplified acquisition 
threshold, under contracts exceeding $500,000. The rule also increases 
the threshold for incorporation of the clause in first-tier 
subcontracts from $100,000 to $500,000.

Editorial Revisions

    (1) DFARS 201.201-1 is amended to reflect the issuance of DoDI 
5000.63, Defense Acquisition Regulations (DAR) System.
    (2) DFARS 202.101 is amended to update the list of Army contracting 
activities and to show the correct title ``Under Secretary of Defense 
(Acquisition & Technology)'' in the definition of ``Head of the 
agency.''
    (3) DFARS 204.7003(a)(1)(i) is amended to change the designation of 
the last paragraph from ``(L)'' to ``(M)'' (this revision is made only 
in the loose-leaf edition of the DFARS).
    (4) DFARS 209.403 is amended to reflect the change in name of the 
``Defense Mapping Agency'' to the ``National Imagery and Mapping 
Agency.''
    (5) DFARS 214.202-5 is amended to show the correct number of the 
clause ``Brand Name or Equal.''
    (6) DFARS Subparts 216.4 and 216.5 are amended to conform to the 
current numbering of the corresponding FAR subparts.
    (7) DFARS 227.676 and 229.101 are amended to update the telephone 
and telefax numbers of the United States European Command.
    (8) DFARS Part 241 is amended to conform to the current numbering 
of FAR Part 41 and to update other FAR references. Corresponding 
amendments are made at DFARS 252.241-7000 and 252.241-7001.
    (9) DFARS 252.212-7001 is amended to remove references to DFARS 
252.242-7002 and 252.249-7001, which were deleted in DAC 91-12.
    (10) DFARS 252.229-7004 is amended to correct a typographical error 
in the clause title.
    (11) DFARS Appendix G is amended to update activity and names and 
addresses.

    Note: This DAC incorporates, into the loose-leaf edition of the 
DFARS, revisions previously issued by Departmental Letters 97-13 
through 97-21. DFARS revisions contained in Departmental Letter 97-
12 and departmental letters issued after 97-21 will be covered in a 
future DAC.

List of Subjects in 48 CFR Parts 201, 202, 204, 209, 212, 214, 215, 
216, 217, 219, 223, 225, 226, 227, 229, 231, 232, 233, 234, 235, 236, 
237, 239, 241, 242, 243, 250, 252, and 253

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

Interim Rules Adopted as Final With Changes

PARTS 225 AND 252--[AMENDED]

    The interim rule that was published at 62 FR 30831 on June 5, 1997, 
is adopted as final with amendments at sections 225.7303-4 and 252.225-
7027, as set forth below (see amendatory instructions 40 and 86).

PARTS 234, 242, AND 252--[AMENDED]

    The interim rule that was published at 62 FR 9990 on March 5, 1997, 
is adopted as final with amendments at sections 234.005-70, 242.1107-
70, 252.234-7000, 252.234-7001, and 252.242-7005, as set forth below 
(see amendatory instructions 53, 72, 90, 91, and 97).

PARTS 235, 243, AND 252--[AMENDED]

    The interim rule that was published at 62 FR 37146 on July 11, 
1997, is adopted as final with amendments at sections 243.204-70 and 
252.243-7002, as set forth below (see amendatory instructions 73 and 
98).

Amendments to 48 CFR Chapter 2 (Defense Federal Acquisition Regulation 
Supplement)

    48 CFR Chapter 2 (the Defense Federal Acquisition Regulation 
Supplement) is amended as follows:
    1. The authority citation for 48 CFR parts 201, 202, 204, 209, 212, 
214, 215, 216, 217, 219, 223, 225, 226, 227, 229, 231, 232, 233, 234, 
235, 236, 237, 239, 241, 242, 243, 250, 252, 253, and Appendices G and 
I to subchapter I continues to read as follows:

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

[[Page 11528]]

PART 201--FEDERAL ACQUISITION REGULATIONS SYSTEM

    2. Section 201.107 is added to read as follows:


201.107  Certifications.

    In accordance with Section 29 of the Office of Federal Procurement 
Policy Act (41 U.S.C. 425), a new requirement for a certification by a 
contractor or offeror may not be included in the DFARS unless--
    (1) The certification requirement is specifically imposed by 
statute; or
    (2) Written justification for such certification is provided to the 
Secretary of Defense by the Under Secretary of Defense (Acquisition and 
Technology), and the Secretary of Defense approves in writing the 
inclusion of such certification requirement.
    3. Section 201.201-1 is amended by revising paragraphs (c) and 
(d)(i)I. to read as follows:


201.201-1  The two councils.

    (c) The composition and operation of the DAR Council is prescribed 
in DoDI 5000.63, Defense Acquisition Regulations (DAR) System.
    (d)(i) * * *

    I. PROBLEM: Succinctly state the problem created by current FAR 
and/or DFARS coverage and describe the factual and/or legal reasons 
necessitating the change to the regulation.
* * * * *
    4. Section 201.304 is amended by revising the introductory text and 
paragraphs (1), (2), (3), and (5) to read as follows:


201.304  Agency control and compliance procedures.

    Departments and agencies and their component organizations may 
issue acquisition regulations as necessary to implement or supplement 
the FAR or DFARS.
    (1)(i) Approval of the Under Secretary of Defense (Acquisition and 
Technology) (USD(A&T)) is required before including in a department/
agency or component supplement, or any other contracting regulation 
document such as a policy letter or clause book, any policy, procedure, 
clause, or form that--
    (A) Has a significant effect beyond the internal operating 
procedures of the agency; or
    (B) Has a significant cost or administrative impact on contractors 
or offerors.
    (ii) Except as provided in paragraph (2) of this section, the 
USD(A&T) has delegated authority to the Director of Defense Procurement 
(USD(A&T)DP) to approve or disapprove the policies, procedures, 
clauses, and forms subject to paragraph (1)(i) of this section.
    (2) In accordance with Section 29 of the Office of Federal 
Procurement Policy Act (41 U.S.C. 425), a new requirement for a 
certification by a contractor or offeror may not be included in a 
department/agency or component procurement regulation unless--
    (i) The certification requirement is specifically imposed by 
statute; or
    (ii) Written justification for such certification is provided to 
the Secretary of Defense by USD(A&T), and the Secretary of Defense 
approves in writing the inclusion of such certification requirement.
    (3) Approval of USD(A&T)DP is required for any class deviation (as 
defined in FAR Subpart 1.4) from the FAR or DFARS, before its inclusion 
in a department/agency or component supplement or any other contracting 
regulation document such as a policy letter or clause book.
* * * * *
    (5) Departments and agencies shall submit request for the Secretary 
of Defense, USD(A&T), and USD(A&T)DP approvals required by this section 
through the Director of the DAR Council.
* * * * *

PART 202--DEFINITIONS OF WORDS AND TERMS

    5. Section 202.101 is amended in the definition of ``Contracting 
activity'' by revising the text under the heading ``ARMY''; and in the 
second sentence of the definition of ``Head of the agency'' by adding, 
in the parenthetical, after the word ``Acquisition'', the phrase ``& 
Technology''. The revised text reads as follows:


202.101  Definitions.

* * * * *

ARMY

Contract Support Agency
Office of the Deputy Chief of Staff for Research, Development and 
Acquisition, Headquarters, U.S. Army Materiel Command
Aviation and Missile Command
Industrial Operations Command
Communications-Electronics Command
Troop Support Agency
Tank-Automotive and Armaments Command
Training and Doctrine Command
Forces Command
Health Services Command
Military District of Washington
U.S. Army, Europe
National Guard Bureau
Corps of Engineers
Information Systems Command
Medical Research and Development Command
U.S. Army, Pacific
Military Traffic Management Command
Space and Strategic Defense Command
Eighth U.S. Army
Intelligence and Security Command
U.S. Army, South
Defense Supply Service-Washington
Directorate of Information Systems for Command, Control, 
Communications and Computers, Office of the Secretary of the Army
U.S. Army Special Operations Command
* * * * *

PART 204--ADMINISTRATIVE MATTERS


204.805  [Amended]

    6. Section 204.805 is amended in the first sentence of paragraph 
(5), in the parenthetical, by removing ``15.804-2'' and inserting in 
its place ``15.403-4''.

PART 209--CONTRACTOR QUALIFICATIONS


209.403  [Amended]

    7. Section 209.403 is amended in the definition of ``Debarring 
official'', in paragraph (1), by removing the entry ``Defense Mapping 
Agency--The General Counsel'' and inserting in its place the entry 
``National Imagery and Mapping Agency--The General Counsel''.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

    8. Section 212.301 is amended by redesigning paragraph (f)(i)(C) as 
paragraph (f)(i)(D) and by adding a new paragraph (f)(i)(C) to read as 
follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f)(i) * * *
    (C) 252.225-7020, Trade Agreements Certificate.
* * * * *

PART 214--SEALED BIDDING


214.205-5  [Amended]

    9. Section 214.202-5 is amended in paragraph (d) by revising the 
reference ``252.210-7000'' to read ``252.211-7003''.

PART 215--CONTRACTING BY NEGOTIATION


215.608  [Amended]

    10. Section 215.608 is amended in the first sentence of paragraph 
(a)(1), in the parenthetical, by removing the reference ``237.170'' and 
inserting in its place the reference ``FAR 37.115''.


215.805-5  [Amended]

    11. Section 215.805-5 is amended in paragraphs (a)(1)(A)(1) and 
(a)(1)(A)(2)

[[Page 11529]]

by removing the reference ``15.804-2(a)(1)'' and inserting in its place 
the reference ``15.403-4(a)(1)''.

PART 216--TYPES OF CONTRACTS


216.203-4  [Amended]

    12. Section 216.203-4 is amended in paragraph (d)(xvi) by removing 
the reference ``15.804-1'' and inserting in its place the reference 
``15.403-1''.


216.301 and 216.301-3  [Removed]

    13. Sections 216.301 and 216.301-3 are removed.


216.403-70  [Removed]

    14. Section 216.403-70 is removed.
    15. Section 216.404 is revised to read as follows:


216.404  Fixed-price contracts with award fees.

    Award-fee provisions may be used in fixed-price contracts as 
provided in 216.470


216.404-1  [Redesignated]

    16. Section 216.404-1 is redesignated as section 216.405-1.


216.404-2  [Redesignated]

    17. Section 216.404-2 is redesignated as section 216.405-2.
    18. Section 216.405 is added to read as follows:


216.405  Cost-reimbursement incentive contracts.


216.501  [Amended]

    19. Section 216.501 is amended in the introductory text of 
paragraph (a)(i) and in the first sentence of paragraph (a)(ii) by 
revising ``indefinite delivery'' to read ``indefinite-delivery''.
    20. Sections 216.505 and 216.506 are revised to read as follows:


216.505  Ordering.

    Orders placed under indefinite-delivery contracts may be issued on 
DD Form 1155, Order for Supplies or Services.


216.506  Solicitation provisions and contract clauses.

    (d) If the contract is for the preparation of personal property for 
shipment or storage (see 247.271-4), substitute paragraph (f) at 
252.247-7015, Requirements, for paragraph (f) of the clause at FAR 
52.216-21, Requirements.

PART 217--SPECIAL CONTRACTING METHODS

    21. Subpart 217.1 is revised to read as follows:

Subpart 217.1--Multiyear Contracting

Sec.
217.103  Definitions.
217.170  All multiyear contracts.
217.171  Multiyear contracts for services.
217.172  Multiyear contracts for supplies.
217.173  Multiyear contracts for weapon systems.
217.174  Mulityear contracts that employ economic order quantity 
procurement.

Subpart 217.1--Mulityear Contracting


217.103  Definitions.

    Advance procurement, as used in this subpart, means an exception to 
the full funding policy that allows acquisition of long lead time items 
(advance long lead acquisition) or economic order quantities (EOQ) of 
items (advance EOQ acquisition) in a fiscal year in advance of that in 
which the related end item is to be acquired. Advance procurements may 
include materials, parts, components, and effort that must be funded in 
advance to maintain a planned production schedule.


217.170  All multiyear contracts.

    (a) Before a multiyear contract is awarded, the cost of that 
contract shall be compared against the cost of an annual procurement 
approach, using a present value analysis. The multiyear contract shall 
not be awarded unless the analysis shows that it results in the lowest 
cost (Section 9021 of Pub. L. 101-165 and similar sections in 
subsequent Defense appropriations acts).
    (b) The head of the agency shall provide written notice to the 
Committees on Appropriations and National Security in the House of 
Representatives and in the Senate at least 10 days before termination 
of any multiyear contract (Section 9021 of Pub. L. 101-165 and similar 
sections in subsequent Defense appropriations acts).
    (c) The Secretary of Defense may instruct the head of the agency 
proposing a multiyear contract to include in that contract negotiated 
priced options for varying the quantities of end items to be procured 
over the life of the contract (10 U.S.C. 2306b(j)).
    (d) Every multiyear contract must comply with FAR 17.104(c), unless 
an exception is approved through the budget process in coordination 
with the cognizant comptroller.


217.171  Multiyear contracts for services.

    (a) 10 U.S.C. 2306(g). (1) DoD may enter into multiyear 
acquisitions for the following services (and items of supply relating 
to such services), even though funds are limited by statute to 
obligation only during the fiscal year for which they were 
appropriated:
    (i) Operation, maintenance, and support of facilities and 
installations.
    (ii) Maintenance or modification of aircraft, ships, vehicles, and 
other highly complex military equipment.
    (iii) Specialized training requiring high quality instructor skills 
(e.g., training for pilots and other aircrew members or foreign 
language training).
    (iv) Base services (e.g., ground maintenance, in-plane refueling, 
bus transportation, and refuse collection and disposal).
    (2) This authority may be used as long as the contract does not 
extend beyond 5 years.
    (b) 10 U.S.C. 2829. (1) The head of the agency may enter into 
multiyear contracts for supplies and services required for management, 
maintenance, and operation of military family housing and may pay the 
costs of such contracts for each year from annual appropriations for 
that year.
    (2) This authority may be used as long as the contract does not 
extend beyond 4 years.
    (c) Award of a multiyear contract for services requires a written 
determination by the head of the agency (10 U.S.C. 2306(g)(1)) that--
    (1) There will be a continuing need for the services and incidental 
supplies;
    (2) Furnishing the services and incidental supplies will require--
    (i) A substantial initial investment in plant or equipment; or
    (ii) The incurrence of substantial contingent liabilities for the 
assembly, training, or transportation of a specialized work force; and
    (3) Using a multiyear contract will be in the best interest of the 
United States by encouraging effective competition and promoting 
economical business operations (e.g., economic lot purchases and more 
efficient production rates).


217.172  Multiyear contracts for supplies.

    (a) This section applies to all multiyear contracts for supplies, 
including weapon systems. For policies that apply only to multiyear 
contracts for weapon systems, see 217.173.
    (b) A multiyear contract for supplies may be used if, in addition 
to the conditions listed in FAR 17.105-1(b), the use of such a contract 
will promote the national security of the United States.
    (c) The head of the agency shall provide written notice to the 
Committees on Appropriations and National Security in the House of 
Representatives and in the Senate at least 30 days before the 
contracting officer awards a multiyear contract

[[Page 11530]]

including an unfunded contingent liability in excess of $20 million 
(Section 9021 of Pub. L. 101-165 and similar sections in subsequent 
Defense appropriations acts).
    (d) Agencies shall establish reporting procedures to meet the 
requirements of paragraph (c) of this section. Submit copies of the 
notifications to the Director of Defense Procurement, Office of the 
Under Secretary of Defense (Acquisition and Technology) (OUSD(A&T)DP), 
and to the Deputy Under Secretary of Defense (Comptroller) (Program/
Budget) (OUSD(C)(P/B)).


217.173  Multiyear contracts for weapon systems.

    (a) As authorized by 10 U.S.C. 2306b(a) and subject to the 
conditions in paragraph (b) of this section, the head of the agency may 
enter into a multiyear contract for--
    (1) A weapon system and associated items, services, and logistics 
support for a weapon system; and
    (2) Advance procurement of components, parts, and materials 
necessary to manufacture a weapon system, including advance procurement 
to achieve economic lot purchases or more efficient production rates 
(see 217.174 regarding economic order quantity procurement).
    (b) The following conditions must be satisfied before a multiyear 
contract may be awarded under the authority described in paragraph (a) 
of this section:
    (1) The multiyear exhibits required by DoD 7000.14-R, Financial 
Management Regulation, are included in the agency's budget estimate 
submission and the President's budget request.
    (2) The Secretary of Defense certifies to Congress that the current 
5-year defense program fully funds the support costs associated with 
the multiyear program (10 U.S.C. 2306b(i)(1)(A)). Information 
supporting this certification shall be submitted to USD(C)(P/B) for 
transmission to Congress through the Secretary of Defense.
    (3) The proposed multiyear contract provides for production at not 
less than minimum economic rates, given the existing tooling and 
facilities (10 U.S.C. 2306b(i)(1)(B)). Information supporting the 
agency's determination that this requirement has been met shall be 
submitted to USD(C)(P/B) with the information supporting the 
certification required by paragraph (b)(2) of this section.
    (4) If the value of the multiyear contract exceeds $500,000,000, 
the applicable Defense appropriations act specifically provides that a 
multiyear contract may be used to procure the particular system or 
system component (Section 9021 of Pub. L. 101-165 and similar sections 
in subsequent Defense appropriations acts).
    (5) All other requirements of law are met and there are no other 
statutory restrictions on using a multiyear contract for the specific 
system or component (Section 9021 of Pub. L. 101-165 and similar 
sections in subsequent Defense appropriations acts). One such 
restriction may be the achievement of specified cost savings. If the 
agency finds, after negotiations with the contractor(s), that the 
specified savings cannot be achieved, the head of the agency shall 
assess the savings that, nevertheless, could be achieved by using a 
multiyear contract. If the savings are substantial, the head of the 
agency may request relief from the law's specific savings requirement. 
The request shall--
    (i) Quantify the savings that can be achieved;
    (ii) Explain any other benefits to the Government of using the 
multiyear contract;
    (iii) Include details regarding the negotiated contract terms and 
conditions; and
    (iv) Be submitted to OUSD(A&T)DP for transmission to Congress via 
the Secretary of Defense and the President (10 U.S.C. 2306b(i)(2)).


217.174  Multiyear contracts that employ economic order quantity 
procurement.

    (a) The head of the agency shall provide written notice to the 
Committees on Appropriations and National Security in the House of 
Representatives and in the Senate at least 30 days before awarding--
    (1) A multiyear contract providing for economic order quantity 
purchases in excess of $20 million in any year; or
    (2) A contract for advance procurement leading to a mulityear 
contract that employs economic order quantity procurement in excess of 
$20 million in any year (Section 9021 of Pub. L. 101-165 and similar 
sections in subsequent Defense appropriations acts).
    (b) Before initiating an advance procurement, the contracting 
officer shall verify that it is consistent with DoD policy (e.g., Part 
3 of DoD 5000.2-R, Mandatory Procedures for Major Defense Acquisition 
Programs (MDAPs) and Major Automated Information System (MAIS) 
Acquisition Programs, and the full funding policy in Volume 2A, Chapter 
1, of DoD 7000.14-R, Financial Management Regulation).
    22. Subpart 217.5 is revised to read as follows:

Subpart 217.5--Interagency Acquisitions Under the Economy Act

Sec.
217.503  Determinations and findings requirements.
217.504  Ordering procedures.


217.503  Determinations and findings requirements.

    (c) If requested, the contracting officer who normally would 
contract for the requesting activity should advise in the determination 
process.


217.504  Ordering procedures.

    (a) When the requesting agency is within DoD, a copy of the 
executed D&F shall be furnished to the servicing agency as an 
attachment to the order. When a DoD contracting office is acting as the 
servicing agency, a copy of the executed D&F shall be obtained from the 
requesting agency and placed in the contract file for the Economy Act 
order.

PART 219--SMALL BUSINESS PROGRAMS

    23. Section 219.703 is amended in paragraph (a) by revising the 
introductory text to read as follows:


291.703  Eligibility requirements for participating in the program.

    (a) Qualified nonprofit agencies for the blind and other severely 
disabled, that have been approved by the Committee for Purchase from 
People Who Are Blind or Severely Disabled under the Javits-Wagner-O'Day 
Act (41 U.S.C. 46-48), are eligible to participate in the program as a 
result of 10 U.S.C. 2410d and Section 9077 of Pub. L. 102-396 and 
similar sections in subsequent Defense appropriations acts. Under this 
authority, subcontracts awarded to such entities may be counted toward 
the prime contractor's small business subcontracting goal through 
fiscal year 1999.
* * * * *


219.7104  [Amended]

    24. Section 719.7104 is amended in the last sentence of paragraph 
(b) and in paragraph (d) by revising the date ``October 1, 1999'' to 
read ``October 1, 2000''.

PART 223--ENVIRONMENT, CONSERVATION, OCCUPATIONAL SAFETY, AND DRUG-
FREE WORKPLACE

    25. Section 223.404 is amended by revising paragraph (b)(3) 
introductory text and paragraph (b)(4) to read as follows:

[[Page 11531]]

223.404  Procedures.

    (b)(3) A contract for an EPA designated item that does not meet the 
EPA minimum recovered material standards shall not be awarded before 
approval of the written determination required by FAR 23.404(b)(3). The 
approving official shall be--
* * * * *
    (4) Departments and agencies shall centrally collect information 
submitted in accordance with the clause at FAR 52.223-9 for reporting 
to the cognizant activity in the Office of the Secretary of Defense.

PART 225--FOREIGN ACQUISITION

    26. Section 225.000-70 is amended by revising paragraphs (c), (j), 
and (m) to read as follows:


225.000-70  Definitions.

* * * * *
    (c) Domestic end product has the meaning given in the clauses at 
252.225-7001, Buy American Act and Balance of Payments Program; 
252.225-7007, Buy American Act--Trade Agreements--Balance of Payments 
Program; and 252.225-7036, Buy American Act--North American Free Trade 
Agreement Implementation Act--Balance of Payments Program, instead of 
the meaning in FAR 25.101.
* * * * *
    (j) Qualifying country component and qualifying country end product 
are defined in the clauses at 252.225-7001, Buy American Act and 
Balance of Payments Program; 252.225-7007, Buy American Act--Trade 
Agreements--Balance of Payments Program; and 252.225-7036, Buy American 
Act--North American Free Trade Agreement Implementation Act--Balance of 
Payments Program. ``Qualifying country end product'' is also defined in 
the clause at 252.225-7021, Trade Agreements.
* * * * *
    (m) U.S. made end product is defined in the clause at 252.225-7007, 
Buy American Act--Trade Agreements--Balance of Payments Program and; 
252.225-7021, Trade Agreements.
    27. Section 225.000-71 is amended by revising paragraphs (a)(1)(i) 
and (c)(2) to read as follows:


225.000-71  General guidelines.

* * * * *
    (a) * * *
    (1) * * *
    (i) Defense authorization or appropriations acts (see Subpart 
225.70); or
* * * * *
    (c) * * *
    (2) If the product is an eligible product under Subpart 225.4, 
evaluate the offer under FAR 25.402, 225.105, and 225.402.
* * * * *
    28. Section 225.102 is amended by revising paragraph (a)(3)(A); by 
redesignating paragraphs (a)(3)(B) and (a)(3)(C) as paragraphs 
(a)(3)(C) and (a)(3)(D), respectively; and by adding a new paragraph 
(a)(3)(B) to read as follows:


225.102  Policy.

    (a) * * *
    (3)(A) Specific public interest exceptions for DoD for certain 
countries are in 225.872.
    (B) The Under Secretary of Defense (Acquisition and Technology) has 
determined that, for procurements subject to the Trade Agreements Act, 
it is inconsistent with the public interest to apply the Buy American 
Act to information technology products in Federal Supply Group 70 or 74 
that are substantially transformed in the United States.
* * * * *
    29. Section 225.105 is amended by revising the introductory text 
and paragraphs (1), (2), and (3); and in Table 25-1 by revising 
Examples 2 and 3 to read as follows:


225.105  Evaluating offers.

    Use the following procedures instead of those in FAR 25.105. These 
procedures do not apply to acquisitions of information technology end 
products in Federal Supply Group 70 or 74 that are subject to the Trade 
Agreements Act.
    (1) Treat offers of eligible end products under acquisitions 
subject to the Trade Agreements Act or NAFTA as if they were qualifying 
country offers. As used in this section, the term ``nonqualifying 
country offer'' may also apply to an offer that is not an eligible 
offer under a trade agreement (see Example 4 in Table 25-1, 
Evaluation).
    (2) Except as provided in paragraph (3) of this section, evaluate 
offers by adding a 50 percent factor to the price (including duty) of 
each nonqualifying country offer (see Example 1 in Table 25-1, 
Evaluation).
    (i) Nonqualifying country offers include duty in the offered price. 
When applying the factor, evaluate based on the inclusion of duty, 
whether or not duty is to be exempted. If award is made on the 
nonqualifying country offer and duty is to be exempted through 
inclusion of the clause at FAR 52.225-10, Duty-Free Entry, award at the 
offered price minus the amount of duty identified in the provision at 
252.225-7003, Information for Duty-Free Entry Evaluation. See Example 
1, Alternate II, in Table 25-1, Evaluation.
    (ii) When a nonqualifying country offer includes more than one line 
item, apply the 50 percent factor--
    (A) On an item-by-item basis; or
    (B) On a group of items, if the solicitation specifically provides 
for award on a group basis.
    (3) When application of the factor would not result in the award of 
a domestic end product, i.e., when no domestic offers are received (see 
Example 3 of Table 25-1, Evaluation) or when a qualifying country offer 
is lower than the domestic offer (see Example 2 of Table 25-1, 
Evaluation), evaluate nonqualifying country offers without the 50 
percent factor.
    (i) If duty is to be exempted through inclusion of the clause at 
FAR 52.225-10, Duty-Free Entry, evaluate the nonqualifying country 
offer exclusive of duty by reducing the offered price by the amount of 
duty identified in the clause at 252.225-7003, Information for Duty-
Free Entry Evaluation (see Examples 2 and 3, Alternate II, of Table 25-
1, Evaluation). If award is made on the nonqualifying country offer, 
award at the offered price minus duty.
    (ii) If duty is not to be exempted, evaluate the nonqualifying 
country offer inclusive of duty. (See Examples 2 and 3, Alternate I, of 
Table 25-1, Evaluation.)
* * * * *

                         Table 25-1.--Evaluation                        
                                                                        
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
                                                                        
*                  *                  *                  *              
                  *                  *                  *               
                                Example 2                               
------------------------------------------------------------------------
Alternate I: Duty Not Exempted for Nonqualifying Country                
 Offers:                                                                
    Nonqualifying Country Offer (including $100 duty)......       $6,000
    Domestic Offer.........................................        8,500
    Qualifying Country Offer...............................        7,800
                                                                        

[[Page 11532]]

                                                                        
  Award on Nonqualifying Country Offer. Since the qualifying country    
offer is lower than the domestic offer, the nonqualifying country offer 
is evaluated without the factor. Since duty is not being exempted for   
nonqualifying country offers, the offer is evaluated and award is made  
at the price inclusive of duty ($6,000).                                
                                                                        
Alternate II: Duty Exempted:                                            
    Nonqualifying Country Offer (including $1,000 duty)....     $880,500
    Domestic Offer.........................................      950,000
    Qualifying Country Offer...............................      880,000
                                                                        
  Award on Nonqualifying Country Offer. Again, the qualifying country   
offer is lower than the domestic offer. The nonqualifying country offer 
is, therefore, evaluated without the factor. Since duty is being        
exempted for nonqualifying country offers, the duty identified by the   
offeror is subtracted from the offered price, which is evaluated and    
awarded at $879,500.                                                    
------------------------------------------------------------------------
                                Example 3                               
------------------------------------------------------------------------
Alternate I: Duty Not Exempted for Nonqualifying Country                
 Offers:                                                                
    Nonqualifying Country Offer (including $150 duty)......       $9,600
    Qualifying Country Offer...............................        9,500
                                                                        
  Award on Qualifying Country Offer. Since no domestic offers are       
received, the nonqualifying country offer is evaluated without the      
evaluation factor. Since duty is not being exempted and would be paid by
the Government, the nonqualifying country offer is evaluated inclusive  
of duty.                                                                
                                                                        
Alternate II: Duty Exempted:                                            
    Nonqualifying Country Offer (including $1,000 duty)....     $880,500
    Qualifying Country Offer...............................      880,000
                                                                        
  Award on Nonqualifying Country Offer. Since no domestic offers are    
received, the nonqualifying country offer is evaluated without the      
evaluation factor. Since duty is being exempted, duty is subtracted from
the nonqualifying country offer, which is evaluated and awarded at      
$879,500.                                                               
                                                                        
*                  *                  *                  *              
                  *                  *                  *               
------------------------------------------------------------------------

    30. Section 225.109 is amended in paragraph (a) by revising the 
last sentence; in the introductory text of paragraph (d) by removing 
the word ``which'' and inserting in its place the word ``that''; and by 
revising paragraph (d)(i) to read as follows:


225.109  Solicitation provisions and contract clauses.

    (a) * * * Use the provision in any solicitation that includes the 
clause at 252.225-7001, Buy American Act and Balance of Payments 
Program.
* * * * *
    (d) * * *
    (i) Do not use the clause if an exception to the Buy American Act 
or Balance of Payments Program is known to apply or if using the clause 
at 252.225-7007, Buy American Act--Trade Agreements--Balance of 
Payments Program; 252.225-7021, Trade Agreements; or 252.225-7036, Buy 
American Act--North American Free Trade Agreement Implementation Act--
Balance of Payments Program.
* * * * *
    31. Section 225.109-70 is revised to read as follows:


225.109-70  Additional provisions and clauses.

    (a) Use the clause at 252.225-7002, Qualifying Country Sources as 
Subcontractors, in solicitations and contracts that include one of the 
following clauses:
    (1) 252.225-7001, Buy American Act and Balance of Payments Program.
    (2) 252.225-7007, Buy American Act--Trade Agreements--Balance of 
Payments Program.
    (3) 252.225-7021, Trade Agreements.
    (4) 252.225-7036, Buy American Act--North American Trade Agreement 
Implementation Act--Balance of Payments Program.
    (b) When only domestic end products are acceptable, the 
solicitation must make a statement to that effect.
    32. Section 225.302 is amended by revising paragraphs (a)(iii) and 
(a)(iv); by adding a new paragraph (a)(v); in paragraph (b)(i) under 
the heading ``ARMY'' by removing the entry ``Deputy Chief of Staff for 
Procurement U.S. Army Material Command'' and inserting in its place the 
entry ``Deputy Chief of Staff for Research, Development and 
Acquisition, Headquarters, U.S. Army Material Command''; and in 
paragraph (b)(i) by removing the heading ``DEFENSE MAPPING AGENCY'' and 
inserting in its place the heading ``NATIONAL IMAGERY AND MAPPING 
AGENCY''. The revised and added text reads as follows:


225.302  Policy.

    (a) * * *
    (iii) Do not apply to qualifying country end products;
    (iv) Do not apply to articles, materials, or supplies produced or 
manufactured in Panama when purchased by and for the use of U.S. forces 
in Panama; and
    (v) For acquisitions subject to the Trade Agreements Act, do not 
apply to information technology products in Federal Supply Group 70 or 
74 that are substantially transformed in the United States.
* * * * *
    33. Section 225.402 is amended by revising paragraph (a)(1) to read 
as follows:


225.402  Policy.

    (a) * * *
    (1) See 225.105 for evaluation of eligible products and U.S. made 
end products, except when acquiring information technology end products 
in Federal Supply Group 70 or 74 that are subject to the Trade 
Agreements Act.
* * * * *
    34. Section 225.408 is revised to read as follows:


225.408  Solicitation provisions and contract clauses.

    (a)(i) Use the provision at 252.225-7006, Buy American Act--Trade 
Agreements--Balance of Payments Program Certificate, instead of the 
provision at FAR 52.225-8, Buy American Act--Trade Agreements--Balance 
of Payments Program Certificate, in all solicitations that include the 
clause at 252.225-7007, Buy American Act--Trade Agreements--Balance of 
Payments Program.
    (ii) Except as provided in paragraph (a)(iv) of this section, use 
the clause at 252.225-7007, Buy American--Trade Agreements--Balance of 
Payment Program, instead of the clause at FAR 52.225-9, Buy American 
Act-Trade Agreements-Balance of Payment Program. The clause need not be 
used where purchase from foreign sources is

[[Page 11533]]

restricted (see 225.403(c)(1)(B)). The clause may be used where the 
contracting officer anticipates a waiver of the restriction. For 
procurements by the U.S. Army Corps of Engineers, use the clause with 
its Alternate I.
    (iii) Use the provision at 252.225-7020, Trade Agreements 
Certificate, in all solicitations that include the clause at 252.225-
7021, Trade Agreements.
    (iv) Use the clause at 252.225-7021, Trade Agreements, instead of 
the clause at FAR 52.225-9, Buy American Act--Trade Agreements--Balance 
of Payments Program, when acquiring information technology products in 
Federal Supply Group 70 or 74. For procurements by the U.S. Army Corps 
of Engineers, use the clause with its Alternate I.
    (v)(A) Use the provision at 252.225-7035, Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of Payment 
Program Certificate, instead of the provision at FAR 52.225-20, Buy 
American Act--North American Free Trade Agreement Implementation Act--
Balance of Payments Program Certificate, in all solicitations that 
include the clause at 252.225-7036, Buy American Act--North American 
Free Trade Agreement Implementation Act--Balance of Payments Program.
    (B)(1) Use the basic provision when the basic clause at 252.225-
7036 is used.
    (2) Use the provision with its Alternate I when the clause at 
252.225-7036 is used with its Alternate I.
    (vi)(A) Use the clause at 252.225-7036, Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of Payments 
Program, instead of the clause at FAR 52.225-21, Buy American Act--
North American Free Trade Agreement Implementation Act--Balance of 
Payments Program. The clause need not be used where purchase from 
foreign sources is restricted (see 225.403(c)(1)(B)). The clause may be 
used where the contracting officer anticipates a waiver of the 
restriction.
    (B)(1) Use the clause in all solicitations and contracts for the 
items listed at 225.403-70, when the estimated value is $53,150 or more 
and the Trade Agreements Act does not apply. Include the clause in 
solicitations for multiple line items if any line item is subject to 
NAFTA.
    (2) Use the clause with its Alternate I when the estimated value is 
between $25,000 and $53,150.
    (C) Application of the procedures in 225.402(a) and the acquisition 
of noneligible and eligible products under the same solicitation may 
result in the application of the North American Free Trade Agreement 
Implementation Act to only some of the items solicited. In such case, 
indicate in the schedule those items covered by the Act.
    35. Section 225.602 is amended by revising the introductory text of 
paragraph (3) to read as follows:


225.602  Policy.

* * * * *
    (3) Unless the supplies are entitled to duty-free treatment under a 
special category in the Harmonized Tariff Schedule of the United States 
(e.g., the Caribbean Basin Economic Recovery Act or NAFTA), or unless 
the supplies already have entered into the customs territory of the 
United States and duty already has been paid, DoD will issue duty-free 
entry certificates for--
* * * * *
    36. Section 225.603 is amended by redesignating the text preceding 
paragraph (b) as paragraph (a); by revising newly designated paragraph 
(a); and in paragraph (b)(i)(D) introductory text, paragraph (b)(i)(E), 
and twice in paragraph (b)(ii) by removing ``DCMAO'' and inserting in 
its place ``DCMC''. The revised text reads as follows:


225.603  Procedures.

    (a) General.
    (i) Preaward.
    (A) Unless duty was paid prior to submission of the offer, an offer 
of domestic end products with no nonqualifying country components, an 
offer of qualifying country end products, or an offer of eligible 
products under the Trade Agreements Act or NAFTA, should not include 
duty.
    (B) Offers of U.S. made end products with nonqualifying country 
components, and offers that are neither qualifying country offers nor 
offers of eligible products under a trade agreement, should contain 
applicable duty.
    (C) Exclude from the evaluation of domestic end products, or 
information technology end products in Federal Supply Group 70 or 74 in 
acquisitions subject to the Trade Agreements Act, any duty for 
nonqualifying country components listed in the provision at 252.225-
7003, Information for Duty-Free Entry Evaluation, for which duty-free 
entry will be granted.
    (D) Except for acquisitions of information technology end products 
in Federal Supply Group 70 or 74 subject to the Trade Agreements Act, 
apply the evaluation procedures for the Buy American Act in accordance 
with 225.105.
    (ii) Award. Exclude duty from the contract price for supplies (end 
products or components) that are to be accorded duty-free entry. If 
duty-free entry is granted to the successful offeror in accordance with 
the clause at FAR 52.225-10, Duty-Free Entry, and the clause at 
252.225-7003, Information for Duty-Free Entry Evaluation, request that 
the offeror provide the list of foreign supplies that are subject to 
such duty-free entry, and list such supplies in the contract clause at 
252.225-7008, Supplies to be Accorded Duty-Free Entry.
    (iii) Postaward.
    (A) Issue duty-free entry certificates for all qualifying country 
supplies in accordance with the policy at 225.602(3)(i) and the clause 
at 252.225-7009, Duty-Free Entry--Qualifying Country Supplies (End 
Products and Components); for all eligible products subject to trade 
agreements in accordance with the policy at 225.602(3)(ii) and the 
clause at 252.225-7037, Duty-Free Entry--Eligible End Products; and for 
other foreign supplies in accordance with the policy at 225.602(3)(iii) 
on contracts containing the clause at FAR 52.225-10, Duty-Free Entry; 
or (following to the extent practicable the procedures required by the 
clause at FAR 52.225-10, Duty-Free Entry, and the clause at 252.225-
7010, Duty-Free Entry--Additional Provisions) on other contracts--
    (1) That fall within one of the following categories:
    (i) Direct purchases of foreign supplies under a DoD prime 
contract, whether title passes at point of origin or at destination in 
the United States, provided the contract states that the final price is 
exclusive of duty.
    (ii) Purchases of foreign supplies by a domestic prime contractor 
under a cost-reimbursement type contract or by a cost-reimbursement 
type subcontractor (where no fixed-price prime or fixed-price 
subcontract intervenes between the purchaser and the Government), 
whether title passes at point of origin or at destination in the United 
States. If a fixed-price prime or fixed-price subcontract intervenes, 
follow the criteria stated in paragraph (a)(iii)(A)(1)(iii) of this 
section.
    (iii) Purchases of foreign supplies by a fixed-price domestic prime 
contractor, a fixed-price subcontractor, or a cost-type subcontractor 
where a fixed-prime contract or fixed-price subcontract intervenes, 
provided the fixed-price prime contract and, where applicable, fixed-
price subcontract prices are, or are amended to be, exclusive of duty.
    (2) For which the supplies so purchased will be delivered to the

[[Page 11534]]

Government or incorporated in Government-owned property or in an end 
product to be furnished to the Government, and for which duty will be 
paid if such supplies or any portion are used for other than the 
performance of the Government contract or disposed of other than for 
the benefit of the Government in accordance with the contract terms; 
and
    (3) For which such acquisition abroad is authorized by the terms of 
the contract or subcontract or by the contracting officer.
    (B) Under a fixed-price contract, negotiate an equitable reduction 
in the contract price if duty-free entry is granted for any 
nonqualifying country component not listed in the Schedule as duty-
free, even if contract award was based on furnishing a domestic 
component or a qualifying country component.
* * * * *
    37. Section 225.605-70 is revised to read as follows:


225.605-70  Additional solicitation provisions and contract clauses.

    (a) Use the clause at 252.225-7009, Duty-Free Entry--Qualifying 
Country Supplies (End Products and Components), in solicitations and 
contracts for supplies and in solicitations and contracts for services 
involving the furnishing of supplies, except for solicitations and 
contracts for supplies for exclusive use outside the United States.
    (b) Use the clause at 252.225-7037, Duty-Free Entry--Eligible End 
Products, in solicitations and contracts for supplies and services when 
the clause at 252.225-7007, Buy American Act--Trade Agreements--Balance 
of Payments Program; 252.225-7021, Trade Agreements; or 252.225-7036, 
Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program, is used.
    (c) Use the clause at 252.225-7010, Duty-Free Entry--Additional 
Provisions, in solicitations and contracts that include the clause at 
FAR 52.225-10, Duty-Free Entry.
    (d) Use the provision at 252.225-7003, Information for Duty-Free 
Entry Evaluation, in solicitations that include the clause at FAR 
52.225-10, Duty-Free Entry. Use the provision with its Alternate I when 
the clause at 252.225-7021, Trade Agreements, is used.
    (e) Use the clause at 252.225-7008, Supplies to be Accorded Duty-
Free Entry, in solicitations and contracts that provide for duty-free 
entry and that include the clause at FAR 52.225-10, Duty-Free Entry.
    38. Section 225.872-4 is amended by revising the last sentence of 
the introductory text of paragraph (c), and paragraph (c)(2)4, to read 
as follows:


225.872-4  Evaluation of offers.

* * * * *
    (c) * * * If the offer, as evaluated, is low or otherwise eligible 
for award, the contracting officer shall request an exemption of the 
Buy American Act/Balance of Payments Program as inconsistent with the 
public interest, unless another exception such as the Trade Agreements 
Act applies.
* * * * *
    (2) * * *

    4. To achieve the above objectives, the solicitation contained 
the (title and number of the Buy American Act clause contained in 
the contract). Offers were solicited from other sources and the 
offer received for (qualifying country end item) is found to be 
otherwise eligible for award.
* * * * *


225.7011-4  [Amended]

    39. Section 225.7011-4 is amended in paragraph (b)(3) by removing 
the reference ``15.5'' and inserting in its place the reference 
``15.6''.
    40. 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 DoD contracts, provided 
the fees are determined by the contracting officer to be fair and 
reasonable and 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 and Acceptance prohibit 
the reimbursement of contingent fees as an allowable cost under the 
contract, unless the payments have been identified and approved in 
writing by the foreign customer before contract award (see 
225.7308(a)).
    (2) For FMS to countries not listed in paragraph (b)(1) of this 
subsection, contingent fees exceeding $50,000 per FMS case shall be 
unallowable under DoD contracts, unless payment has been identified and 
approved in writing by the foreign customer before contract award.

PART 226--OTHER SOCIOECONOMIC PROGRAMS

    41. Section 226.103 is revised to read as follows:


226.103  Procedures.

    (f) The contracting officer shall submit a request for funding of 
the Indian incentive to the Office of Small and Disadvantaged Business 
Utilization, Office of the Under Secretary of Defense for Acquisition 
and Technology, OUSD(A&T)SADBU, Room 2A340, 3061 Defense Pentagon, 
Washington, DC 20301-3061. Upon receipt of funding from OUSD(A&T)SADBU, 
the contracting officer shall issue a contract modification to add the 
Indian incentive funding for payment of the contractor's request for 
equitable adjustment as described at FAR 52.226-1, Utilization of 
Indian Organizations and Indian-Owned Economic Enterprises.
    42. Section 226.104 is added to read as follows:


226.104  Contract clause.

    (a) Also use the clause at FAR 52.226-1, Utilization of Indian 
Organizations and Indian-Owned Economic Enterprises, in contracts--
    (i) With contractors that have comprehensive subcontracting plans 
approved under the test program described at 219.702(a); and
    (ii) That contain the clause at 252.219-7004, Small, Small 
disadvantaged and Women-Owned Small Business Subcontracting Plan (Test 
Program).

PART 227--PATENTS, DATA, AND COPYRIGHTS

    43. Section 227.676 is amended by revising paragraph (b) to read as 
follows:


227.676  Foreign patent interchange agreements.

* * * * *
    (b) Assistance with patent rights and royalty payments in the 
United States European Command (USEUCOM) area of responsibility is 
available from HQ USEUCOM, ATTN: ECLA, Unit 30400, Box 1000, APO AE 
09128; Telephone: DSN 430-8001/7263, Commercial 49-0711-680-8001/7263; 
Telefax: 49-0711-680-5732.

PART 229--TAXES

    44. Section 229.101 is amended in paragraph (d)(i) by revising the 
last sentence to read as follows:

[[Page 11535]]

229.101  Resolving tax problems.

* * * * *
    (d)(i) * * * For further information contact HQ USEUCOM, ATTN: 
ECLA, Unit 30400, Box 1000, APO AE 09128; Telephone: DSN 430-8001/7263, 
Commercial 49-0711-680-8001/7263; Telefax. 49-0711-680-5732.
* * * * *

PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES


231.205-71  [Removed]

    45. Section 231.205-71 is removed.

PART 232--CONTRACT FINANCING

    46. Sections 232.006, 232,006-5, 232.070, 232.071, 232.072, 
232.072-1, 232.072-2 and 232.072-3 are added to read as follows:


232.006  Reduction or suspension of contract payments upon finding of 
fraud.


232.006-5  Reporting.

    Departments and agencies in accordance with department/agency 
procedures, shall prepare and submit to the Under Secretary of Defense 
(Acquisition and Technology), through the Director of Defense 
Procurement, annual reports (Report Control Symbol DD-ACQ(A) 1891) 
containing the information required by FAR 32.006-5.


232.070  Responsibilities.

    (a) The Director of Defense Procurement, Office of the Under 
Secretary of Defense (Acquisition and Technology) (OUSD(A&T)DP) is 
responsible for ensuring uniform administration of DoD contract 
financing, including DoD contract financing policies and important 
related procedures. Agency discretion under FAR Part 32 is at the DoD 
level and is not delegated to the departments and agencies. Proposals 
by the departments and agencies, to exercise agency discretion, shall 
be submitted to OUSD(A&T)DP through the DoD Contract Finance Committee 
(see 232.071).
    (b) Departments and agencies are responsible for their day-to-day 
contract financing operations. Refer specific cases involving financing 
policy or important procedural issues to OUSD(A&T)DP for consideration 
through the department/agency Contract Finance Committee members (also 
see Subpart 204.1 for deviation request and approval procedures).
    (c) The Under or Assistant Secretary, or other designated official, 
responsible for the comptroller function within the department or 
agency is the focal point for financing matters at the department/
agency headquarters. Departments and agencies may establish contract 
financing offices at operational levels.
    (1) Department/agency contract financing offices are--
    (i) Army: Office of the Assistant Secretary of the Army (Financial 
Management);
    (ii) Navy: Office of the Assistant Secretary of the Navy (Financial 
Management and Comptroller), Office of Financial Operations;
    (iii) Air Force: Air Force Contract Financing Office (SAF/FMPB);
    (iv) Defense agencies: Office of the agency comptroller.
    (2) Contract financing offices should participate in--
    (i) Developing regulations for contract financing;
    (ii) Developing contract provisions for contract financing; and
    (iii) Resolving specific cases that involve unusual contract 
financing requirements.


232.071  Contract Finance Committee.

    (a) The Contract Finance Committee consists of--
    (1) A representative of OUSD(A&T)DP, serving as the Chair;
    (2) A representative of the Comptroller of the Department of 
Defense;
    (3) A representative of the Defense Finance and Accounting Service;
    (4) A representative of the Civilian Agency Acquisition Council 
(for matters pertaining to the FAR);
    (5) A representative of the National Aeronautics and Space 
Administration (for matters pertaining to the FAR);
    (6) An advisory consultant from the Defense Contract Audit Agency; 
and
    (7) Two representatives of each military department and the Defense 
Logistics Agency (one representing contracting and one representing the 
contract finance office).
    (b) The Committee--
    (1) Advises and assists OUSD(A&T)DP in ensuring proper and uniform 
application of policies, procedures, and forms;
    (2) Is responsible for formulating, revising, and promulgating 
uniform contract financing regulations;
    (3) May recommend to the Secretary of Defense through OUSD(A&T)DP 
further policy directives on financing; and
    (4) Meets at the request of the Chair or a member.


232.072  Financial responsibility of contractors.

    Use the policies and procedures in this section in determining the 
financial capability of current or prospective contractors.


232.072-1  Required financial reviews.

    The contracting officer shall perform a financial review when the 
contracting officer does not otherwise have sufficient information to 
make a positive determination of financial responsibility. In addition, 
the contracting officer shall consider performing a financial review--
    (a) Prior to award of a contract, when--
    (1) The contractor is on a list requiring preaward clearance or 
other special clearance before award;
    (2) The contractor is listed on the Consolidated List of 
Contractors Indebted to the Government (Hold-Up List), or is otherwise 
known to be indebted to the Government;
    (3) The contractor may receive Government assets such as contract 
financing payments or Government property;
    (4) The contractor is experiencing performance difficulties on 
other work; or
    (5) The contractor is a new company or a new supplier of the item.
    (b) At periodic intervals after award of a contract, when--
    (1) Any of the conditions in paragraphs (a)(2) through (a)(5) of 
this subsection are applicable; or
    (2) There is any other reason to question the contractor's ability 
to finance performance and completion of the contract.


232.072-2  Appropriate information.

    (a) The contracting officer shall obtain the type and depth of 
financial and other information that is required to establish a 
contractor's financial capability or disclose a contractor's financial 
condition. While the contracting officer should not request information 
that is not necessary for protection for the Government's interests, 
the contracting officer must insist upon obtaining the information that 
is necessary. The unwillingness or inability of a contractor to present 
reasonably requested information in a timely manner, especially 
information that a prudent business person would be expected to have 
and to use in the professional management of a business, may be a 
material fact in the determination of the contractor's responsibility 
and prospects for contract completion.
    (b) The contracting officer shall obtain the following information 
to the extent required to protect the Government's interest. In 
addition, if the contracting officer concludes that information not 
listed in paragraphs (b)(1) through (b)(10) of this subsection is 
required to comply with 232.072-1, that

[[Page 11536]]

information should be requested. The information must be for the 
person(s) who are legally liable for contract performance. If the 
contractor is not a corporation, the contracting officer shall obtain 
the required information for each individual/joint venturer/partner:
    (1) Balance sheet and income statement--
    (i) For the current fiscal year (interim);
    (ii) For the most recent fiscal year and, preferably, for the 2 
preceding fiscal years. These should be certified by an independent 
public accountant or by an appropriate officer of the firm; and
    (iii) Forecasted for each fiscal year for the remainder of the 
period of contract performance.
    (2) Summary history of the contractor and its principal managers, 
disclosing any previous insolvencies--corporate or personal, and 
describing its products or services.
    (3) Statement of all affiliations disclosing--
    (i) Material financial interests of the contractor;
    (ii) Material financial interests in the contractor;
    (iii) Material affiliations of owners, officers, directors, major 
stockholders; and
    (iv) The major stockholders if the contractor is not a widely-
traded, publicly-held corporation.
    (4) Statement of all forms of compensation to each officer, 
manager, partner, joint venturer, or proprietor, as appropriate--
    (i) Planned for the current year;
    (ii) Paid during the past 2 years; and
    (iii) Deferred to future periods.
    (5) Business base and forecast that--
    (i) Shows, by significant markets, existing contracts and 
outstanding offers, including those under negotiation; and
    (ii) Is reconcilable to indirect cost rate projections.
    (6) Cash forecast for the duration of the contract (see 232.072-3).
    (7) Financing arrangement information that discloses--
    (i) Availability of cash to finance contract performance;
    (ii) Contractor's exposure to financial crisis from creditor's 
demands;
    (iii) Degree to which credit security provisions could conflict 
with Government title terms under contract financing;
    (iv) Clearly stated confirmations of credit with no unacceptable 
qualifications;
    (v) Unambiguous written agreement by a creditor if credit 
arrangements include deferred trade payments or creditor 
subordinations/repayment suspensions.
    (8) Statement of all state, local, and Federal tax accounts, 
including special mandatory contributions, e.g., environmental 
superfund.
    (9) Description and explanation of the financial effect of issues 
such as--
    (i) Leases, deferred purchase arrangements, or patent or royalty 
arrangements;
    (ii) Insurance, when relevant to the contract;
    (iii) Contemplated capital expenditures, changes in equity, or 
contractor debt load;
    (iv) Pending claims either by or against the contractor;
    (v) Contingent liabilities such as guarantees, litigation, 
environmental, or product liabilities;
    (vi) Validity of accounts receivable and actual value of inventory, 
as assets; and
    (vii) Status and aging of accounts payable.
    (10) Significant ratios such as--
    (i) Inventory to annual sales;
    (ii) Inventory to current assets;
    (iii) Liquid assets to current assets;
    (iv) Liquid assets to current liabilities;
    (v) Current assets to current liabilities; and
    (vi) Net worth to net debt.


232.072-3  Cash flow forecasts.

    (a) A contractor must be able to sustain a sufficient cash flow to 
perform the contract. When there is doubt regarding the sufficiency of 
a contractor's cash flow, the contracting officer should require the 
contractor to submit a cash flow forecast covering the duration of the 
contract.
    (b) A contractor's inability of refusal to prepare and provide cash 
flow forecasts or to reconcile actual cash flow with previous forecasts 
is a strong indicator of serious managerial deficiencies or potential 
contract cost or performance problems.
    (c) Single or one-time cash flow forecasts are of limited 
forecasting power. As such, they should be limited to preaward survey 
situations. Reliability of cash flow forecasts can be established only 
by comparing a series of previous actual cash flows with the 
corresponding forecasts and examining the causes of any differences.
    (d) Cash flow forecasts must--
    (1) Show the origin and use of all material amounts of cash within 
the entire business unit responsible for contract performance, period 
by period, for the length of the contract (or until the risk of a cash 
crisis ends); and
    (2) Provide an audit trail to the data and assumptions used to 
prepare it.
    (e) Cash flow forecasts can be no more reliable than the 
assumptions on which they are based. Most important of these 
assumptions are--
    (1) Estimated amounts and timing of purchases and payments for 
materials, parts, components, subassemblies, and services;
    (2) Estimated amounts and timing of payments of purchase or 
production of capital assets, test facilities, and tooling;
    (3) Amounts and timing of fixed cash charges such as debt 
installments, interest, rentals, taxes, and indirect costs;
    (4) Estimated amounts and timing of payments for projected labor, 
both direct and indirect;
    (5) Reasonableness of projected manufacturing and production 
schedules;
    (6) Estimated amounts and timing of billings to customers 
(including progress payments), and customer payments;
    (7) Estimated amounts and timing of cash receipts from lenders or 
other credit sources, and liquidation of loans; and
    (8) Estimated amount and timing of cash receipt from other sources.
    (f) The contracting officer should review the assumptions 
underlying the cash flow forecasts. In determining whether the 
assumptions are reasonable and realistic, the contracting officer 
should consult with--
    (1) The contractor;
    (2) Government personnel in the areas of finance, engineering, 
production, cost, and price analysis; or
    (3) Prospective supply, subcontract, and loan or credit sources.
    47. Subpart 232.1 is revised to read as follows:

Subpart 232.1--Non-Commercial Item Purchase Financing

Sec.
232.102  Description of contract financing methods.
232.102-70  Provisional delivery payments.
232.108  Financial consultation.


232.102  Description of contract financing methods.

    (e)(2) Progress payments based on percentage or stage of completion 
are authorized only for contracts for construction (as defined in FAR 
36.102), shipbuilding, and ship conversion, alteration, or repair. 
However, percentage or state of completion methods of measuring 
contractor performance may be used for performance-based payments in 
accordance with FAR Subpart 32.10.


232.102-70  Provisional delivery payments.

    (a) The contracting officer may establish provisional delivery 
payments

[[Page 11537]]

to pay contractors for the costs of supplies and services delivered to 
and accepted by the Government under the following contract actions if 
undefinitized:
    (1) Letter contracts contemplating a fixed-price contract.
    (2) Orders under basic ordering agreements.
    (3) Spares provisioning documents annexed to contracts.
    (4) Unpriced equitable adjustments on fixed-price contracts.
    (5) Orders under indefinite-delivery contracts.
    (b) Provisional delivery payments shall be--
    (1) Used sparingly;
    (2) Priced conservatively; and
    (3) Reduced by liquidating previous progress payments in accordance 
with the Progress Payments clause.
    (c) Provisional delivery payments shall not--
    (1) Include profit;
    (2) Exceed funds obligated for the undefinitized contract action; 
or
    (3) Influence the definitized contract price.


232.108  Financial consultation.

    See 232.070 for offices to be consulted regarding financial matters 
with DoD.
    48. Subpart 232.2 is added to read as follows:

Subpart 232.2--Commercial Item Purchase Financing

Sec.
232.202-4  Security for Government financing.
232.206  Solicitation provisions and contract clauses.
232.207  Administration and payment of commercial financing 
payments.


232.202-4  Security for Government financing.

    (a)(2) When determining whether an offeror's financial condition is 
adequate security, see 232.072-2 and 232.072-3 for guidance. It should 
be noted that an offeror's financial condition may be sufficient to 
make the contractor responsible for award purposes, but may not be 
adequate security for commercial contract financing.


232.206  Solicitation provisions and contract clauses.

    (d) Instructions for multiple appropriations. If the contract 
contains foreign military sales requirements, the contracting officer 
shall provide instructions for distribution of the contract financing 
payments to each country's account.
    (f) Prompt payment for commercial purchase payments. The 
contracting officer shall incorporate the following standard prompt 
payment terms for commercial item contract financing:
    (i) Commercial advance payments: The contractor entitlement date 
specified in the contract, or 30 days after receipt by the designated 
billing office of a proper request for payment, whichever is later.
    (ii) Commercial interim payments: The contractor entitlement date 
specified in the contract, or 14 days after receipt by the designated 
billing office of a proper request for payment, whichever is later. The 
prompt payment standards for commercial delivery payments shall be the 
same as specified in FAR Subpart 32.9 for invoice payments for the item 
delivered.
    (g) Installment payment financing for commercial items. Installment 
payment financing shall not be used for DoD contracts, unless market 
research has established that this form of contract financing is both 
appropriate and customary in the commercial marketplace. When 
installment payment financing is used, the contracting officer shall 
use the ceiling percentage of contract price that is customary in the 
particular marketplace (not to exceed the maximum rate established in 
FAR 52.232-30).


232.207  Administration and payment of commercial financing payments.

    (b)(2) If the contract contains foreign military sales 
requirements, each approval shall specify the amount of contract 
financing to be charged to each country's account.


232.502-1-71  [Amended]

    49. Section 232.502-1-71 is amended in paragraph (b)(3) by removing 
the reference ``15.801'' and inserting in its place the reference 
``15.401''.


232.970 through 232.970-2  [Removed]

    50. Sections 232.970 through 232.970-2 are removed.
    51. Subpart 232.10 is added to read as follows:

Subpart 232.10--Performance-Based Payments

Sec.
232.1001  Policy.
232.1004  Procedure.
232.1007  Administration and payment of performance-based payments.


232.1001  Policy.

    (d) The contracting officer shall use the following standard prompt 
payment terms for performance-based payments: The contractor 
entitlement date, if any, specified in the contract, or 14 days after 
receipt by the designated billing office of a proper request for 
payment, whichever is later.


232.100  Procedure.

    (c) Instructions for multiple appropriations. If the contract 
contains foreign military sales requirements, the contracting officer 
shall provide instructions for distribution of the contract financing 
payments to each country's account.


232.1007   Administration and payment of performance-based payments.

    (b)(2) If the contract contains foreign military sales 
requirements, each approval shall specify the amount of contract 
financing to be charged to each country's account.

PART 233--PROTESTS, DISPUTES, AND APPEALS

    52. Section 233.204-70 is added to read as follows:


233.204-70  Limitations on payment.

    See 10 U.S.C. 2410(b) for limitations on Congressionally directed 
payment of a claim under the Contract Disputes Act of 1978, a request 
for equitable adjustment to contract terms, or a request for relied 
under Pub. L. 85-804.

PART 234--MAJOR SYSTEM ACQUISITION


234.005-70  [Amended]

    53. Section 234.005-70 is amended in the first sentence by 
inserting the phrase ``paragraph (b) of'' after the phrase ``in 
accordance with''.

PART 235--RESEARCH AND DEVELOPMENT CONTRACTING

    54. Section 235.001 is revised to read as follows:


235.001  Definitions.

    As defined in DoD 7000.14-R, Financial Management Regulations, and 
as used in this part--
    (a) Basic research (Category 6.1) means all effort of scientific 
study and experimentation directed toward increasing knowledge and 
understanding in those fields of the physical, engineering, 
environmental, and life sciences related to long-term national security 
needs. It provides farsighted, high-payoff research, including critical 
enabling technologies that provide the basis for technological 
progress. It forms a part of the base for:
    (1) Subsequent applied research (exploratory development); and 
advanced technology developments in Defense-related technologies; and
    (2) New and improved military functional capabilities in areas such 
as communications, detection, tracking, surveillance, propulsion, 
mobility, guidance and control, navigation,

[[Page 11538]]

energy conversion, materials and structures, and personnel support.
    (b) Applied research (Category 6.2) means effort that translates 
promising basic research into solutions for broadly defined military 
needs, short or major development projects. This type of effort may 
vary from fairly fundamental applied research to sophisticated bread-
broad hardware, study, programming, and planning efforts that establish 
the initial feasibly and practicality of proposed solutions to 
technologies challenges. It includes studies, investigations, and 
nonsystem specific development efforts. The dominant characteristic of 
this category of effort is that it be pointed toward specific military 
needs with a view toward developing and evaluating the feasibility and 
practicability of proposed solutions and determining their parameters.
    (c) Advanced technology development (Category 6.3A) means all 
efforts that have moved into the development and integration of 
hardware for field experiments and tests. The results of this type of 
effort are proof of technological feasibility and assessment of 
operability and producibility rather than the development of hardware 
for Service use. Projects in this category have a direct relevance to 
identified military needs. Advanced technology development is system 
specific (particularly for major platforms, i.e., aircraft, ships, 
missiles, and tanks, etc.) and includes advanced technology development 
that is used to demonstrate the general military utility or cost 
reduction potential of technology when applied to different types of 
military equipment or techniques. Advanced technology developments also 
includes evaluation and synthetic environment and proof-of-principle 
demonstrations in field exercises to evaluate system upgrades or 
provide new operational capabilities.
    (d) Demonstration and validation (Category 6.3B) means all efforts 
necessary to evaluate integrated technologies in as realistic an 
operating environment as possible to assess the performance or cost 
reduction potential of advanced technology. The demonstration and 
validation phase is system specific and also includes advanced 
technology demonstrations that help expedite technology transition from 
the laboratory to operational use.
    (e) Engineering and manufacturing development (Category 6.4) means 
those projects in engineering and manufacturing development for Service 
use but that have not received approval for full-rate production. This 
area is characterized by major line item projects, and program control 
will be exercised by review of individual projects. Engineering 
development includes engineering and manufacturing development projects 
consistent with the definitions within DoDD 5000.1.
    (f) Management support (Category 6.5) means research and 
development effort directed toward support of installations or 
operations required for general research and development use. Included 
would be test ranges, military construction, maintenance support of 
laboratories, operation and maintenance of test aircraft and ships, and 
studies and analyses in support of the research and development 
program. Costs of laboratory personnel, either in-house or contractor-
operated, would be assigned to appropriate projects or as a line item 
in the basic research, applied research, or advanced technology 
development program areas, as appropriate.
    (g) Operational system development (Category 6.6) means those 
development projects, in support of development acquisition programs or 
upgrades, still in engineering and manufacturing development (DoDD 
5000.1) but that have received approval for production through Defense 
Acquisition Board or other action, or for which production funds have 
been included in the DoD budget submission for the budget or subsequent 
fiscal year. All items in this area are major line item projects that 
appear as research, development, test, and evaluation costs of weapon 
system elements in other programs. Program control will be exercised by 
review of individual projects.
    (h) Research and development ordinarily covers only the following 
categories:
    (1) Basic research.
    (2) Applied research.
    (3) Technology development.
    (4) Demonstration/validation.
    (5) Engineering and manufacturing development.
    (6) Operational system development.


235.002  [Removed]

    55. Section 235.002 is removed.

PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

    56. Section 236.102 is amended by redesignating paragraphs (3) and 
(4) as paragraphs (4) and (5), respectively, and by adding a new 
paragraph (3) to read as follows:


236.102  Definitions.

* * * * *
    (3) Marshallese firm is defined in the provision at 252.236-7012, 
Military Construction on Kwajalein Atoll--Evaluation Preference.
* * * * *
    57. Section 236.274 is amended by revising paragraph (a) to read as 
follows:


236.274  Construction in foreign countries.

    (a) In accordance with Section 112 of Pub. L. 105-45, military 
construction contracts funded with military construction 
appropriations, that are estimated to exceed $1,000,000 and are to be 
performed in the United States territories and possessions in the 
Pacific and on Kwajalein Atoll, or in countries bordering the Arabian 
Gulf, shall be awarded only to United States firms, unless--
    (1) The lowest responsive and responsible offer of a United States 
firm exceeds the lowest responsive and responsible offer of a foreign 
firm by more than 20 percent; or
    (2) The contract is for military construction on Kwajalein Atoll 
and the lowest responsive and responsible offer is submitted by a 
Marshallese firm.
* * * * *
    58. Section 236.570 is amended by revising paragraph (c) to read as 
follows:


236.570  Additional provisions and clauses.

* * * * *
    (c) Use the following provisions in solicitations for military 
construction contracts that are funded with military construction 
appropriations and are estimated to exceed $1,000,000:
    (1) 252.236-7010, Overseas Military Construction--Preference for 
United States Firms, when contract performance will be in a United 
States territory or possession in the Pacific or in a country bordering 
the Arabian Gulf.
    (2) 252.236-7012, Military Construction on Kwajalein Atoll--
Evaluation Preference, when contract performance will be on Kwajalein 
Atoll.
* * * * *
    59. Sections 236.602-2 and 236.602-4 are revised to read as 
follows:


236.602-2  Evaluation boards.

    (a) Preselection boards may be used to identify to the section 
board the qualified firms that have a reasonable chance of being 
considered as most highly qualified by the selection board.


236.602-4  Selection authority.

    (a) The selection authority shall be at a level appropriate for the 
dollar value and nature of the proposed contract.
    (c) A finding that some of the firms on the selection report are 
unqualified does not preclude approval of the report, provided that a 
minimum of three most highly qualified firms remains. The

[[Page 11539]]

reasons for finding a firm or firms unqualified must be recorded.
    60. Section 236.609-70 is amended by revising paragraph (b) to read 
as follows:


236.609-70  Additional provision and clause.

* * * * *
    (b) Use the provision at 252.236-7011, Overseas Architect-Engineer 
Services--Restriction to United States Firms, in solicitations for A-E 
contracts that are--
    (1) Funded with military construction appropriations;
    (2) Estimated to exceed $500,000; and
    (3) To be performed in Japan, in any North Atlantic Treaty 
Organization member country, or in countries bordering the Arabian 
Gulf.

PART 237--SERVICE CONTRACTING


237.102  [Removed]

    61. Section 237.102 is removed.
    62. Section 237.104 is amended by revising paragraph (f)(i) to read 
as follows:


237.104  Personal services contracts.

* * * * *
    (f)(i) Payment to each expert or consultant for personal services 
under 5 U.S.C. 3109 shall not exceed the highest rate fixed by the 
Classification Act Schedules for grade GS-15 (see 5 CFR 304.105(a)).
* * * * *


237.170 through 237.170-3  [Removed]

    63. Sections 237.170 through 237.170-3 are removed.
    64. Section 237.201 is added to read as follows:


237.201  Definitions.

    Advisory and assistance services.
    (c) Engineering and technical services.
    Engineering and technical services consist of--
    (i) Contract field services, which are engineering and technical 
services provided on site at Defense locations by the trained and 
qualified engineers and technicians of commercial or industrial 
companies;
    (ii) Contract plant services, which are engineering and technical 
services provided by the trained and qualified engineers and 
technicians of a manufacturer of military equipment or components in 
the manufacturer's own plants and facilities; and
    (iii) Field service representatives, who are employees of a 
manufacturer of military equipment or components that provide a liaison 
or advisory service between their company and the military users of 
their company's equipment or components.
    65. Section 237.203 is revised to read as follows:


237.203  Policy.

    (1) Every contract for engineering and technical services, alone or 
as part of an end item, shall--
    (i) Show those services as a separately priced line item;
    (ii) Contain definitive specifications for the services; and
    (iii) Show the work-months involved.
    (2) Agency heads may authorize personal service contracts for 
contract field services to meet an unusual essential mission need. The 
authorization will be for an interim period only.


237.203-70  [Redesignated and Amended]

    66. Section 237.203-70 is redesignated as section 237.270 and 
amended in paragraph (b) by revising ``one year'' to read ``1-year'' 
and by revising ``two'' to read ``2''.


237.205 and 237.206  [Redesignated]

    67. Sections 237.205 and 237.206 are redesignated as sections 
237.271 and 237.272 respectively.

PART 239--ACQUISITION OF INFORMATION TECHNOLOGY

    68. Section 239.7405 is revised to read as follows:


239.7405  Multiyear contracting authority for telecommunications 
resources.

    (a) The General Services Administration (GSA) has exclusive 
multiyear contracting authority for telecommunications resources. 
However, GSA may delegate this authority in certain instances (see 
Federal Property Management Regulations (FPMR) 101-35.6).
    (b) In accordance with FPMR 101-35.6, executive agencies may enter 
into multiyear contracts for telecommunications resources if--
    (1) The agency notifies GSA prior to using GSA's multiyear 
contracting authority;
    (2) The contract life, including options, does not exceed 10 years; 
and
    (3) The agency complies with OMB budget and accounting procedures 
relating to appropriated funds.


239.7406  [Amended]

    69. Section 239.7406 is amended in the introductory text of 
paragraph (c) by removing reference ``15.804-2'' and adding in its 
place the reference ``15.403-4''; and by removing the reference 
``15.804-5'' and adding in its place the reference ``15.403-3''.
    70. Part 241 is revised to read as follows:

PART 241--ACQUISITION OF UTILITY SERVICES

Subpart 241.1--General

Sec.
241.101  Definitions.
241.102  Applicability.

Subpart 241.2--Acquiring Utility Services

241.201  Policy.
241.202  Procedures.
241.203  GSA assistance.
241.205  Separate contracts.
241.270  Preaward contract review.

Subpart 241.5--Solicitation Provisions and Contract Clauses

241.501-70  Additional clauses.

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

Subpart 241.1--General


241.101  Definitions.

    As used in this part--
    Definite term contract means a contract for utility services for a 
definite period of not less than one nor more than ten years.
    Dual service area means a geographical area in which two or more 
utility suppliers are authorized under State law to provide services.
    Indefinite term contract means a month-to-month contract for 
utility services which may be terminated by the Government upon proper 
notice.
    Independent regulatory body means the Federal Energy Regulatory 
Commission, a state-wide agency, or an agency with less than state-wide 
jurisdiction when operating pursuant to state authority. The body has 
the power to fix, establish, or control the rates and services of 
utility suppliers.
    Nonindependent regulatory body means a body that regulates a 
utility supplier which is owned or operated by the same entity that 
created the regulatory body, e.g., a municipal utility.
    Regulated utility supplier means a utility supplier regulated by an 
independent regulatory body.
    Service power procurement officer means for the--
    Army, the Chief of Engineers;
    Navy, the Commander, Naval Facilities Engineering Command;
    Air Force, the head of a contracting activity; and
    Defense Logistics Agency, the Executive Director of Contracting.


241.102  Applicability.

    (a) This part applies to purchase of utility services from 
nonregulated and regulated utility suppliers. It includes the 
acquisition of liquefied petroleum gas as a utility service when 
purchased from regulated utility suppliers.

[[Page 11540]]

    (b)(7) This part does not apply to third party financed projects. 
However, it may be used for any purchased utility services directly 
resulting from such projects, including those authorized by--
    (A) 10 U.S.C. 2394 for energy, fuels, and energy production 
facilities for periods not to exceed 30 years;
    (B) 10 U.S.C. 2394a for renewable energy for periods not to exceed 
25 years;
    (C) 10 U.S.C. 2689 for geothermal resources that result in energy 
production facilities;
    (D) 10 U.S.C. 2809 for potable and waste water treatment plants for 
periods not to exceed 32 years; and
    (E) 10 U.S.C. 2812 for lease/purchase of energy production 
facilities for periods not to exceed 32 years.

Subpart 241.2--Acquiring Utility Services


241.201  Policy.

    (1) Except as provided in FAR 41.201, DoD, as a matter of comity, 
will comply with the current regulations, practices and decisions of 
independent regulatory bodies which are subject to judicial appeal. 
This policy does not extend to regulatory bodies whose decisions are 
not subject to appeal nor does it extend to nonindependent regulatory 
bodies.
    (2) Purchases of utility services outside the United States may 
use--
    (i) Formats and technical provisions consistent with local 
practice; and
    (ii) Dual language forms and contracts.
    (3) Rates established by an independent regulatory body are 
considered ``prices set by law or regulation'' and do not require 
submission of cost or pricing data (see FAR Subpart 15.4).


241.202  Procedures.

    (a)(i) Competitive proposals.
    When a new major utility service load develops or a new military 
installation is established, the contracting officer shall--
    (A) Determine whether more than one supplier can provide the 
required utility services.
    (1) Competition may be possible where dual franchises exist or 
where no franchise exists.
    (2) Competition should also be considered when an installation is 
served by one supplier and other potential suppliers exist even though 
one supplier has entered into a General Services Administration area-
wide contract.
    (B) Where competition exists, solicit competitive proposals from 
all potential suppliers.
    (ii) Periodic reviews for competition.
    Conduct periodic review of ongoing contracts to determine the 
availability of competition. If available, evaluate the need to rewrite 
the contract considering--
    (A) The possible loss of rights vested in the Government under the 
existing contract;
    (B) The age and quality of the contract; and
    (C) The number of contract modifications and the ease of 
administration with the existing contract documents.
    (iii) Connection and service charges.
    The Government may pay a connection charge when required to cover 
the cost of the necessary connecting facilities. A connection charge 
based on the estimated labor cost of installing and removing the 
facility shall not include salvage cost. A lump-sum connection charge 
shall be no more than the agreed cost of the connecting facilities less 
net salvage. The order of precedence for contractual treatment of 
connection and service charges is--
    (A) No connection charge.
    (B) Termination liability. Use when an obligation is necessary to 
secure the required services. The obligation must be not more than the 
agreed connection charge, less any net salvage material costs. Use of a 
termination liability instead of a connection charge requires the 
approval of the service power procurement officer or designee.
    (C) Connection charge, refundable. Use a refundable connection 
charge when the supplier refuses to provide the facilities based on 
lack of capital or published rules which prohibit providing up-front 
funding. The contract should provide for refund of the connection 
charge within five years unless a longer period or omission of the 
refund requirement is authorized by the service power procurement 
officer or designee.
    (D) Connection and service charges, nonrefundable. The Government 
may pay certain nonrefundable, nonrecurring charges including service 
initiation charges, a contribution in aid of construction, membership 
fees, and charges required by the supplier's rules and regulations to 
be paid by the customer. If possible, consider sharing with other than 
Government users the use of (and costs for) facilities when large 
nonrefundable charges are required.
    (iv) Construction and labor requirements. (A) Do not use the 
connection charge provisions for the installation of Government-owned 
distribution lines and facilities. The acquisition of such facilities 
must be authorized by legislation and accomplished in accordance with 
FAR Part 36. Also, do not use the connection charge provisions for the 
installation of new facilities related to the supplier's production and 
general ``backbone'' system unless authorized by legislation.
    (B) Construction labor standards ordinarily do not apply to 
construction accomplished under the connection charge provisions of 
this part. However, if installation includes construction of a public 
building or public work as defined in FAR 36.102, construction labor 
standards may apply.


241.203  GSA assistance.

    The General Services Administration (GSA) has delegated to DoD the 
authority to enter into utility service contracts (see FAR 41.103); 
therefore, contracting officers need not seek assistance or approval 
from GSA.


241.205  Separate contracts.

    (a)(i) Requests for proposals shall state the anticipated service 
period in terms of months or years. Where the period extends beyond the 
current fiscal year, evaluate offers of incentives for a definite term 
contract.
    (ii) The solicitation may permit offerors the choice of proposing 
on the basis of--
    (A) A definite term not to exceed the anticipated service period; 
or
    (B) An indefinite term contract.
    (iii) Where the expected service period is less than the current 
fiscal year, the solicitation shall be on the basis of an indefinite 
term contract.
    (iv) Contracts for utility services for leased premises shall 
identify the lease document on the face of the contract.
    (d) Use an indefinite term utility service contract when it is 
considered to be in the Government's best interest to--
    (i) Have the right to terminate on a 30-day (or longer) notice. A 
notice of up to one year may be granted by an installation if needed to 
obtain a more favorable rate, more advantageous conditions, or for 
other valid reasons; or
    (ii) Grant the supplier the right to terminate the contract when of 
benefit to the Government in the form of lower rates, larger discounts 
or more favorable terms and conditions.


241.270  Preaward contract review.

    Departments/agencies shall conduct their owned preaward contract 
reviews.

Subpart 241.5--Solicitation Provision and Contract Clauses


241.501-70  Additional clauses.

    (a) If the Government must execute a superseding contract and 
capital credits, connection charge credits, or

[[Page 11541]]

termination liability exist, use the clause at 252.241-7000, 
Superseding Contract.
    (b) Use the clause at 252.241-70001, Government Access, when the 
clause at FAR 52.241-5, Contractor's Facilities, is used.

PART 242--CONTRACT ADMINISTRATION

    71. Section 242.302 is amended by revising paragraphs (a)(4)(A) and 
(a)(19) to read as follows:


242.302  Contract administration functions.

    (a)(4) * * *
    (A) Contractor estimating systems (see FAR 15.407-5); and
* * * * *
    (19) Also negotiate and issue contract modifications reducing 
contract prices in connection with the provisions of paragraph (b) of 
the clause at FAR 52.225-10, Duty-Free Entry.
* * * * *
    72. Section 242.1107-70 is revised to read as follows:


242.1107-70  Solicitation provision and contract clause.

    (a) Use the clause at 252.242-7005, Cost/Schedule Status Report, in 
solicitations and contracts for other than major systems that require 
cost/schedule status reports (i.e., when the Contract Data Requirements 
List includes DI-MGMT-81467 in accordance with DoD 5000.2-R).
    (b) Use the provision at 252.242-7006, Cost/Schedule Status Report 
Plans, in solicitation for other than major systems that require cost/
schedule status reports.

PART 243--CONTRACT MODIFICATIONS

    73. Section 243.204-70 is amended in paragraph (b) by revising the 
reference ``15.804-2(a)(1)(iii)'' to read ``15.403-4(a)(1)(iii)'' and 
by adding paragraph (c) to read as follows:


243.204-70  Certification of requests for equitable adjustment.

* * * * *
    (c) The certification required by 10 U.S.C. 2410(a), as implemented 
in the clause at 252.243-7002, is different from the certification 
required by the Contract Disputes Act of 1978 (41 U.S.C. 605(c)). If 
the contractor has certified a request for equitable adjustment in 
accordance with 10 U.S.C. 2410(a), and desires to convert the request 
to a claim under the Contract Disputes Act, the contractor shall 
certify the claim in accordance with FAR Subpart 33.2.

PART 250--EXTRAORDINARY CONTRACTUAL ACTIONS

    74. Section 250.102-70 is added to read as follows:


250.102-70  Limitations on payment.

    See 10 U.S.C. 2410b for limitations on Congressionally directed 
payment of a request for equitable adjustment to contract terms or a 
request for relief under Pub. L. 85-804.


250.201  [Amended]

    75. Section 250.201 is amended in paragraph (b) by revising the 
reference ``FAR subpart 50.2'' to read FAR Subpart 50.4''.

PART 252--SOLICITATION PROVISIONS AND CONTRAST CLAUSES

    76. Section 252.212-7001 is amended by revising the clause date; 
and in paragraph (b) by revising the entries at 252.225-7001, 252.225-
7007, and 252.225-7036; by adding, in numerical order, an entry at 
252.225-7021; and by removing the entries at 252.242-7002 and 252.249-
7001. The revised and added text reads as follows:


252.212-7001  Contract terms and conditions required to implement 
statutes or Executive Orders applicable to Defense Acquisitions of 
commercial items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes of 
Executive Orders Applicable to Defense Acquisitions of Commercial Items 
(Mar 1998)

* * * * *
    (b) * * *
    ________  252.225-7001  Buy American Act and Balance of Payments 
Program (41 U.S.C. 10a-10d, E.O. 10582).
    ________  252.225-7007  Buy American Act--Trade Agreements--
Balance of Payments Program (____Alternate I) (41 U.S.C. 10a-10d, 19 
U.S.C. 2501-2518, and 19 U.S.C. 3301 note).
* * * * *
    ________  252.225-7021  Trade Agreements (____Alternate I) (19 
U.S.C. 2501-2518 and 19 U.S.C. 3301 note).
* * * * *
    ________  252.225-7036  Buy American Act--North American Free 
Trade Agreement Implementation Act--Balance of Payment Program (____ 
Alternate I) (41 U.S.C. 10a-10d and 19 U.S.C. 3301 note).
* * * * *
    77. Section 252.225-7001 is revised to read as follows:


252.225-7001  Buy American Act and Balance of Payments Program.

    As prescribed in 225.109(d), use the following clause:

Buy American Act and Balance of Payments Program (Mar 1998)

    (a) Definitions.
    As used in this clause--
    (1) Components means those articles, materials, and supplies 
directly incorporated into end products.
    (2) Domestic end product means--
    (i) An unmanufactured end product that has been mined or 
produced in the United States; or
    (ii) An end product manufactured in the United States if the 
cost of its qualifying country components and its components that 
are mined, produced, or manufactured in the United States exceeds 50 
percent of the cost of all its components. The cost of components 
shall include transportation costs to the place of incorporation 
into the end product and U.S. duty (whether or not a duty-free entry 
certificate may be issued). A component shall be considered to have 
been mined, produced, or manufactured in the United States 
(regardless of its source in fact) if the end product in which it is 
incorporated is manufactured in the United States and the component 
is of a class or kind--
    (A) Determined to be not mined, produced, or manufactured in the 
United States in sufficient and reasonably available commercial 
quantities and of a satisfactory quality; or
    (B) That the Secretary concerned determines would be 
inconsistent with the public interest to apply the restrictions of 
the Buy American Act.
    (3) End product means those articles, materials, and supplies to 
be acquired for public use under the contract. For this contract, 
the end products are the line items to be delivered to the 
Government (including supplies to be acquired by the Government for 
public use in connection with service contracts, but excluding 
installation and other services to be performed after delivery).
    (4) Nonqualifying country end product means an end product that 
is neither a domestic end product nor a qualifying country end 
product.
    (5) Qualifying country means any country set forth in subsection 
225.872-1 of the Defense Federal Acquisition Regulation Supplement.
    (6) Qualifying country component means an item mined, produced, 
or manufactured in a qualifying country.
    (7) Qualifying country end product means--
    (i) An unmanufactured end product mined or produced in a 
qualifying country; or
    (ii) An end product manufactured in a qualifying country if the 
cost of the components mined, produced, or manufactured in the 
qualifying country and its components mined, produced, or 
manufactured in the United States exceeds 50 percent of the cost of 
all its components.
    (b) This clause implements the Buy American Act (41 U.S.C. 
Section 10a-d) in a manner that will encourage a favorable 
international balance of payments by providing a preference to 
domestic end products over other end products, except for end 
products which are qualifying country end products.

[[Page 11542]]

    (c) The Contractor agrees that it will deliver only domestic end 
products unless, in its offer, it specified delivery of other end 
products in the Buy American Act--Balance of Payments Program 
Certificate provision of the solicitation. An offer certifying that 
a qualifying country end product will be supplied requires the 
Contractor to deliver a qualifying country end product or a domestic 
end product.
    (d) The offered price of qualifying country end products should 
not include custom fees or duty. The offered price of nonqualifying 
country end products, and products manufactured in the United States 
that contain nonqualifying country components, must include all 
applicable duty. The award price will not include duty for end 
products or components that are to be accorded duty-free entry. 
Generally, when the Buy American Act is applicable, each 
nonqualifying country offer is adjusted for the purpose of 
evaluation by adding 50 percent of the offer, inclusive of duty.

(End of clause)

    78. Section 252.225-7003 is revised to read as follows:


252.225-7003  Information for duty-free entry evaluation.

    As prescribed in 225.605-70(d), use the following provision:

Information for Duty-Free Entry Evaluation (Mar 1998)

    (a) Does the offeror propose to furnish--
    (1) A domestic end product with nonqualifying country components 
for which the offeror requests duty-free entry; or
    (2) A foreign end product consisting of end items, components, 
or material of foreign origin other than those for which duty-free 
entry is to be accorded pursuant to the Duty-Free Entry--Qualifying 
Country Supplies (End Products and Components) clause or, if 
applicable, the Duty-Free Entry--Eligible End Products clause of 
this solicitation?
    Yes (  )      No (  )
    (b) If the answer in paragraph (a) is yes, answer the following 
questions:
    (1) Are such foreign supplies now in the United States?
    Yes (  )      No (  )
    (2) Has the duty on such foreign supplies been paid?
    Yes (  )      No (  )
    (3) If the answer to paragraph (b)(2) is no, what amount is 
included in the offer to cover such duty?$________________
    (c) If the duty has not been paid, the Government may elect to 
make award on a duty-free basis. If so, the offered price will be 
reduced in the contract award by the amount specified in paragraph 
(b)(3). The Offeror agrees to identify, at the request of the 
Contracting Officer, the foreign supplies which are subject to duty-
free entry.

(End of provision)
    Alternate I (Mar 1998). As prescribed in 225.605-70(d), 
substitute the following paragraph (a) for paragraph (a) of the 
basic clause:
    (a) Does the offeror propose to furnish a U.S. made end product 
with nonqualifying country components for which the offeror requests 
duty-free entry?
    Yes (  )      No (  )

    79. Section 252.225-7006 is amended by revising the introductory 
text, the clause date, paragraphs (a) and (c)(1)(i), the introductory 
text of paragraph (c)(2), and paragraph (c)(2)(vi) to read as follows:


252.225-7006  Buy American Act--Trade Agreements--Balance of Payments 
Program Certificate.

    As prescribed in 225.408(a)(i), use the following provision:

Buy American Act--Trade Agreements--Balance of Payments Program 
Certificate (Mar 1998)

    (a) Definitions. Caribbean Basin country end product, designated 
country end product, domestic end product NAFTA country end product, 
nondesignated country end product, qualifying country end product, 
and U.S. made end product have the meanings given in the Buy 
American Act--Trade Agreements--Balance of Payments Program clause 
of this solicitation.
* * * * *
    (c) * * *
    (1) * * *
    (i) Each end product, except the end products listed in 
paragraph (c)(2) of this provision, is a domestic end product; and
* * * * *
    (2) The Offeror must identify all end products that are not 
domestic end products.
* * * * *
    (vi) The following supplies are other nondesignated country end 
products.


------------------------------------------------------------------------
         Insert line item  number             Insert country of  origin 
------------------------------------------------------------------------
                                                                        
                                                                        
                                                                        
------------------------------------------------------------------------

(End of provision)

    80. Sections 252.225-7007 and 252.225-7008 are revised to read as 
follows:


252.225-7007  Buy American Act--trade agreements--Balance of Payments 
Program.

    As prescribed in 225.408(a)(ii), use the following clause:

Buy American Act--Trade Agreements--Balance of Payments Program (Mar 
1998)

    (a) Definitions. As used in this clause--
    (1) Caribbean Basin country means--

Antigua and Barbuda
Aruba
Bahamas
Barbados
Belize
British Virgin Islands
Costa Rica
Dominica
Dominican Republic
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Montserrat
Netherlands Antilles
Nicaragua
Panama
St. Kitts-Nevis
St. Lucia
St. Vincent and the Grenadines
Trinidad and Tobago

    (2) Caribbean Basin country end product--
    (i) Means an article that--
    (A) Is wholly the growth, product, or manufacture of a Caribbean 
Basin country; or
    (B) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a Caribbean Basin country into a new 
and different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (ii) Excludes products, other than petroleum and any product 
derived from petroleum, that are not granted duty-free treatment 
under the Caribbean Basin Economic Recovery Act (19 U.S.C 2703(b)). 
These exclusions presently consist of--
    (A) Textiles and apparel articles that are subject to textile 
agreements;
    (B) Footwear, handbags, luggage, flat goods, work gloves, and 
leather wearing apparel not designated as eligible articles for the 
purpose of the Generalized System of Preferences under Title V of 
the Trade Act of 1974;
    (C) Tuna, prepared or preserved in any manner in airtight 
containers; and
    (D) Watches and watch parts (including cases, bracelets, and 
straps) of whatever type, including, but not limited to, mechanical, 
quartz digital, or quartz analog, if such watches or watch parts 
contain any material that is the product of any country to which 
Harmonized Tariff Schedule column 2 rates of duty apply.
    (3) Components means those articles, materials, and supplies 
directly incorporated into end products.
    (4) Designated country means--

Aruba
Austria
Bangladesh
Belgium
Benin
Bhutan
Botswana
Burkina Faso
Burundi
Canada
Cape Verde
Central; African Republic
Chad
Comoros
Denmark
Djibouti

[[Page 11543]]

Equatorial Guinea
Finland
France
Gambia
Germany
Greece
Guinea
Guinea-Bissau
Haiti
Hong Kong
Ireland
Israel
Italy
Japan
Kiribati
Lesotho
Liechtenstein
Luxembourg
Malawi
Maldives
Mali
Mozambique
Nepal
Netherlands
Niger
Norway
Portugal
Republic of Korea
Rwanda
Sao Tome and Principe
Sierra Leone
Singapore
Somalia
Spain
Sweden
Switzerland
Tanzania U.R.
Togo
Tuvalu
Uganda
United Kingdom
Vanuatu
Western Samoa
Yemen

    (5) Designated country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the 
designated country; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a designated country into a new and 
different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (6) Domestic end product means--
    (i) An unmanufactured end product that has been mined or 
produced in the United States; or
    (ii) An end product manufactured in the United States if the 
cost of its qualifying country components and its components that 
are mined, produced, or manufactured in the United States exceeds 50 
percent of the cost of all its components. The cost of components 
shall include transportation costs to the place of incorporation 
into the end product and U.S. duty (whether or not a duty-free entry 
certification may be issued). A component shall be considered to 
have been mined, produced, or manufactured in the United States 
(regardless of its source in fact) if the end product in which it is 
incorporated is manufactured in the United States and the component 
is of a class or kind--
    (A) Determined to be not mined, produced, or manufactured in the 
United States in sufficient and reasonably available commercial 
quantities and of a satisfactory quality; or
    (B) That the Secretary concerned determines would be 
inconsistent with the public interest to apply the restrictions of 
the Buy American Act.
    (7) End product means those articles, materials, and supplies to 
be acquired for public use under the contract. For this contract, 
the end products are the line items to be delivered to the 
Government (including supplies to be acquired by the Government for 
public use in connection with service contracts, but excluding 
installation and other services to be performed after delivery).
    (8) NAFTA country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the NAFTA 
country; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a NAFTA country into a new and 
different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (9) Nondesignated country end product means any end product that 
is not a U.S. made end product or a designated country end product.
    (10) North American Free Trade Agreement (NAFTA) country means 
Canada or Mexico.
    (11) Qualifying country means any country set forth in 
subsection 225.872-1 of the Defense Federal Acquisition Regulation 
Supplement.
    (12) Qualifying country component means an item mined, produced, 
or manufactured in a qualifying country.
    (13) Qualifying country end product means--
    (i) An unmanufactured end product mined or produced in a 
qualifying country; or
    (ii) An end product manufactured in a qualifying country if the 
cost of the components mined, produced, or manufactured in the 
qualifying country and its components mined, produced or 
manufactured in the United States exceeds 50 percent of the cost of 
all its components.
    (14) United States means the United States, its possessions, 
Puerto Rico, and any other place subject to its jurisdiction, but 
does not include leased bases or trust territories.
    (15) U.S. made end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the United 
States; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in the United States into a new and 
different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed.
    (b) Unless otherwise specified, the Trade Agreements Act of 1979 
(19 U.S.C. 2501 et seq.), the North American Free Trade Agreement 
Implementation Act of 1993 (19 U.S.C. 3301 note), and the Caribbean 
Basin Initiative apply to all items in the Schedule.
    (c)(1) The Contractor agrees to deliver under this contract only 
domestic end products unless, in its offer, it specified delivery of 
U.S. made, qualifying country, designated country, Caribbean Basin 
country, NAFTA country, or other nondesignated country end products 
in the Buy American Act--Trade Agreements--Balance of Payments 
Program Certificate provision of the solicitation.
    (2) The Contractor may not supply a nondesignated country end 
product unless--
    (i) It is a qualifying country end product, a Caribbean Basin 
country end product, or a NAFTA country end product;
    (ii) The Contracting Officer has determined that offers of U.S. 
made end products or qualifying, designated, NAFTA, or Caribbean 
Basin country end products from responsive, responsible offerors are 
either not received or are insufficient to fill the Government's 
requirements; or
    (iii) A national interest waiver has been granted under section 
302 of the Trade Agreements Act of 1979.
    (d) The offered price of qualifying country end products and the 
offered price of designated country end products, NAFTA country end 
products, and Caribbean Basin country end products, for line items 
subject to the Trade Agreements Act or the North American Free Trade 
Agreement Implementation Act, should not include custom fees or 
duty. The offered price of end products listed in paragraph 
(c)(2)(vi) of the Buy American Act--Trade Agreements--Balance of 
Payments Program Certificate provision of the solicitation, or the 
offered price of U.S. made end products that contain nonqualifying 
country components, must include all applicable duty. The award 
price will not include duty for end products or components that are 
to be accorded duty-free entry. Generally, each offer of a U.S. made 
end product that does not meet the definition of ``domestic end 
product'' is adjusted for the purpose of evaluation by adding 50 
percent of the offered price, inclusive of duty.

(End of clause)
    Alternate I (Mar 1998). As prescribed in 225.408(a)(ii), delete 
Singapore from the list of designated countries in paragraph (a)(4) 
of the basic clause.


252.225-7008  Supplies to be accorded duty-free entry.

    As prescribed in 225.605-70(e), use the following clause:

[[Page 11544]]

Supplies To Be Accorded Duty-Free Entry (Mar 1998)

    In accordance with paragraph (b) of the Duty-Free Entry clause 
of this contract, in addition to duty-free entry for all qualifying 
country supplies (end products and components) and all eligible end 
products subject to applicable trade agreements (if this contract 
contains the Buy American Act--Trade Agreements--Balance of Payments 
Program clause or the Buy American Act--North American Free Trade 
Agreement Implementation Act--Balance of Payments Program clause), 
the following foreign end products that are neither qualifying 
country end products nor eligible end products under a trade 
agreement, and the following nonqualifying country components, are 
accorded duty-free entry.

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

(End of clause)

    81. Section 252.225-7009 is amended by revising the section 
heading, the introductory text, the clause title and date, and 
paragraphs (a), (b), (c), (f)(2)(iv), (f)(2)(vii), and (g) to read as 
follows:


252.225-7009  Duty-free entry--qualifying country supplies (end 
products and components).

    As prescribed in 225.605-70(a), use the following clause:

Duty-Free Entry--Qualifying Country Supplies (End Products and 
Components) (Mar 1998)

    (a) Definitions. Qualifying country and qualifying country end 
products have the meaning given in the Buy American Act and Balance 
of Payments Program clause, Buy American Act--Trade Agreements--
Balance of Payments Program clause, Buy American Act--North American 
Free Trade Agreement Implementation Act--Balance of Payments Program 
clause, or Trade Agreements clause of this contract.
    (b) The requirements of this clause apply to this contract and 
subcontracts, including purchase orders, that involve supplies to be 
accorded duty-free entry whether placed--
    (1) Directly with a foreign concern as a prime contract; or
    (2) As a subcontract or purchase order under a contract with a 
domestic concern.
    (c) Except as otherwise approved by the Contracting Officer, or 
unless supplies were imported into the United States before the date 
of this contract or, in the case of supplies imported by a first or 
lower tier subcontractor, before the date of the subcontract, no 
amount is or will be included in the contract price for duty for--
    (1) End items that are qualifying country end products; or
    (2) Components (including, without limitation, raw materials and 
intermediate assemblies) produced or made in qualifying countries, 
that are to be incorporated in the end items to be delivered under 
this contract, provided that the end items are manufactured in the 
United States or in a qualifying country.
* * * * *
    (f) * * *
    (2) * * *
    (iv)(A) For direct shipments to a U.S. military installation, 
the notation:
    UNITED STATES GOVERNMENT, DEPARTMENT OF DEFENSE Duty-Free Entry 
to be claimed pursuant to Section XXII, Chapter 98, Subchapter VIII, 
Item 9808.00.30 of the Harmonized Tariff Schedule of the United 
States. Upon arrival of shipment at the appropriate port of entry, 
District Director of Customs, please release shipment under 19 CFR 
part 142 and notify Commander, Defense Contract Management Command 
(DCMC) New York, ATTN: Customs Team, DCMDN-GNIC, 207 New York 
Avenue, Staten Island, New York, 10305-5013, for execution of 
Customs Forms 7501, 7501A, or 7506 and any required duty-free entry 
certificates.
    (B) In cases where the shipment will be consigned to other than 
a military installation, e.g., a domestic contractor's plant, the 
shipping document notation shall be altered to insert the name and 
address of the contractor, agent or broker who will notify 
Commander, Defense Contract Management Command (DCMC) New York, for 
execution of the duty-free certificate.
* * * * *
    (vii) Activity Address Number of the contract administration 
office actually administering the prime contract, e.g., for DCMC 
Dayton, S3605A.
    (g) Preparation of customs forms. (1) Except for shipments 
consigned to a military installation, the Contractor shall prepare, 
or authorize an agent to prepare, any customs forms required for the 
entry of foreign supplies in connection with DoD contracts into the 
United States, its possessions, or Puerto Rico. The completed 
customs forms shall be submitted to the District Director of Customs 
with a copy to DCMC NY for execution of any required duty-free entry 
certificates. Shipments consigned directly to a military 
installation will be released in accordance with 10.101 and 10.102 
of the U.S. Customs regulations.
    (2) For shipments containing both supplies that are to be 
accorded duty-free entry and supplies that are not, the Contractor 
shall identify on the customs forms those items that are eligible 
for duty-free entry.
* * * * *
    82. Section 252.225-7010 is amended by revising the introductory 
text, the clause date, the introductory text of paragraph (c), the 
first sentence of the introductory text of paragraph (e), paragraph 
(e)(3), and in the second sentence of paragraph (f) by removing 
``DCMAO'' and inserting in its place ``DCMC''. The revised text reads 
as follows:


252.225-7010  Duty-free entry--additional provisions.

    As prescribed in 225.605-70(c), use the following clause:

Duty-Free Entry--Additional Provisions (Mar 1998)

* * * * *
    (c) In addition to any data required by paragraph (b)(1) of the 
Duty-Free Entry clause, the Contractor shall furnish the following 
for all foreign supplies to be imported pursuant to paragraph (a) or 
(b) of the Duty-Free Entry clause. The Contractor shall furnish this 
information to the Contracting Officer administering the prime 
contract immediately upon award of any contract or subcontract 
involving supplies to be accorded duty-free entry.
* * * * *
    (e) To properly complete the shipping document instructions as 
required by paragraph (f) of the Duty-Free Entry clause, the 
Contractor shall insert Defense Contract Management Command (DCMC) 
New York, ATTN: Customs Team, DCMDN-GNIC, 207 New York Avenue, 
Staten Island, New York 10305-5013, as the cognizant contract 
administration office (for paragraph (f) only) in those cases when 
the shipment is consigned directly to a military installation. * * *
    (3) Activity address number of the contract administration 
office actually administering the prime contract, e.g., for DCMC 
Dayton, S3605A.
* * * * *
    83. Section 252.225-7014 is amended by revising the clause date and 
paragraphs (a) and (c)(2), the Alternate I date, and paragraph (c)(2) 
of Alternate I to read as follows:


252.225-7014  Preference for domestic specialty metals.

* * * * *

Preference for Domestic Specialty Metals (Mar 1998)

    (a) Definitions.
    As used in this clause--
    (1) Qualifying country means any country set forth in subsection 
225.872-1 of the Defense Federal Acquisition Regulation Supplement.
    (2) Specialty metals means--
    (i) Steel--
    (A) Where the maximum alloy content exceeds one or more of the 
following limits: manganese, 1.65 percent; silicon, 0.60 percent; or 
copper, 0.60 percent; or
    (B) That contains more than 0.25 percent of any of the following 
elements: aluminum, chromium, cobalt, columbium, molybdenum, nickel, 
titanium, tungsten, or vanadium;
    (ii) Metal alloys consisting of nickel, iron-nickel, and cobalt 
base alloys containing a total of other alloying metals (except 
iron) in excess of 10 percent;
    (iii) Titanium and titanium alloys; or
    (iv) Zirconium and zirconium base alloys.
* * * * *
    (c) * * *
    (2) The specialty metal is melted in a qualifying country or is 
incorporated in an article manufactured in a qualifying country;
* * * * *
    Alternate I (Mar 1998)
* * * * *

[[Page 11545]]

    (c) * * *
    (2) The specialty metal is melted in a qualifying country or is 
incorporated in an article manufactured in a qualifying country; or
* * * * *
    84. Sections 252.225-7020 and 252.225-7021 are added to read as 
follows:


252.225-7020  Trade Agreements Certificate.

    As prescribed in 225.408(a)(iii), use the following provision:

Trade Agreements Certificate (Mar 1998)

    (a) Definitions. Caribbean Basin country end product, designated 
country end product, NAFTA country end product, nondesignated 
country end product, qualifying country end product, and U.S. made 
end product have the meanings given in the Trade Agreements clause 
of this solicitation.
    (b) Evaluation. Offers will be evaluated in accordance with the 
policies and procedures of part 225 of the Defense Federal 
Acquisition Regulation Supplement. Offers of foreign end products 
that are not U.S. made, qualifying country, designated country, 
Caribbean Basin country, or NAFTA country end products will not be 
considered for award, unless the Contracting Officer determines that 
there are not offers of such end products; or the offers of such end 
products are insufficient to fulfill the requirements; or a national 
interest exception to the Trade Agreements Act is granted.
    (c) Certifications. (1) The offeror certifies that each end 
product to be delivered under this contract, except those listed in 
paragraph (c)(2) of this provision, is a U.S. made, qualifying 
country, designated country, Caribbean Basin country, or NAFTA 
country end product.
    (2) The following supplies are other nondesignated country end 
products:


------------------------------------------------------------------------
         insert line item  number             insert country of  origin 
------------------------------------------------------------------------
                                                                        
                                                                        
                                                                        
------------------------------------------------------------------------

(End of provision)


252.225-7021  Trade Agreements.

    As prescribed in 225.408(a)(iv), use the following clause:

Trade Agreements (Mar 1998)

    (a) Definitions. As used in this clause--
    (1) Caribbean Basin country means--

Antigua and Barbuda
Aruba
Bahamas
Barbados
Belize
British Virgin Islands
Costa Rica
Dominica
Dominican Republic
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Montserrat
Netherlands Antilles
Nicaragua
Panama
St. Kitts-Nevis
St. Lucia
St. Vincent and the Grenadines
Trinidad and Tobago

    (2) Caribbean Basin country end product--
    (i) Means an article that--
    (A) Is wholly the growth, product, or manufacture of a Caribbean 
Basin country; or
    (B) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a Caribbean Basin country into a new 
and different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (ii) Excludes products, other than petroleum and any product 
derived from petroleum, that are not granted duty-free treatment 
under the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(b)). 
These exclusions presently consist of--
    (A) Textiles and apparel articles that are subject to textile 
agreements;
    (B) Footwear, handbags, luggage, flat goods, work gloves, and 
leather wearing apparel not designated as eligible articles for the 
purpose of the Generalized System of Preferences under Title V of 
the Trade Act of 1974;
    (C) Tuna, prepared or preserved in any manner in airtight 
containers; and
    (D) Watches and watch parts (including cases, bracelets, and 
straps) of whatever type, including, but not limited to, mechanical, 
quartz digital, or quartz analog, if such watches or watch parts 
contain any material that is the product of any country to which 
Harmonized Tariff Schedule column 2 rates of duty apply.
    (3) Components means those articles, materials, and supplies 
directly incorporated into end products.
    (4) Designated country means--

Aruba
Austria
Bangladesh
Belgium
Benin
Bhutan
Botswana
Burkina Faso
Burundi
Canada
Cape Verde
Central African Republic
Chad
Comoros
Denmark
Dijbouti
Equatorial Guinea
Finland
France
Gambia
Germany
Greece
Guinea
Guinea-Bissau
Haiti
Hong Kong
Ireland
Israel
Italy
Japan
Kiribati
Lesotho
Liechtenstein
Luxembourg
Malawi
Maldives
Mali
Mozambique
Nepal
Netherlands
Niger
Norway
Portugal
Republic of Korea
Rwanda
Sao Tome and Principe
Sierra Leone
Singapore
Somalia
Spain
Sweden
Switzerland
Tanzania U.R.
Togo
Tuvalu
Uganda
United Kingdom
Vanuatu
Western Samoa
Yemen

    (5) Designated country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the 
designated country; into a new and different article of commerce 
with a name, character, or use distinct from that of the article or 
articles from which it was so transformed. The term refers to a 
product offered for purchase under a supply contract, but for 
purposes of calculating the value of the end product includes 
services (except transportation services) incidental to its supply, 
provided that the value of those incidental services does not exceed 
the value of the product itself.
    (6) End product means those articles, materials, and supplies to 
be acquired for public use under the contract. For this contract, 
the end products are the line items to be delivered to the 
Government (including supplies to be acquired by the Government for 
pubic use in connection with service contracts, but excluding 
installation and other services to be performed after delivery).
    (7) NAFTA country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the NAFTA 
country; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been

[[Page 11546]]

substantially transformed in a NAFTA country into a new and 
different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (8) Nondesignated country end product means any end product that 
is not a U.S. made end product or a designated country end product.
    (9) North American Free Trade Agreement (NAFTA) country means 
Canada or Mexico.
    (10) Qualifying country means any country set forth in 
subsection 225.872-1 of the Defense Federal Acquisition Regulation 
Supplement.
    (11) Qualifying country end product means--
    (i) An unmanufactured end product mined or produced in a 
qualifying country; or
    (ii) An end product manufactured in a qualifying country if the 
cost of the components mined, produced, or manufactured in the 
qualifying country and its components mined, produced, or 
manufactured in the United States exceeds 50 percent of the cost of 
all its components.
    (12) United States means the United States, its possessions, 
Puerto Rico, and any other place subject to its jurisdiction, but 
does not include leased bases or trust territories.
    (13) U.S. made end product means an article that--
    (i) Is wholly the growth, product, or manufacture of the United 
States; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in the United States into a new and 
different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed.
    (b) Unless otherwise specified, the Trade Agreements Act of 1979 
(19 U.S.C. 2501, et seq.), the North American Free Trade Agreement 
Implementation Act of 1993 (19 U.S.C. 3301 note), and the Caribbean 
Basin Initiative apply to all items in the Schedule.
    (c)(1) The Contractor agrees to deliver under this contract only 
U.S. made, qualifying country, designated country, Caribbean Basin 
country or NAFTA country end product unless, in its offer, it 
specified delivery of other nondesignated country end products in 
the Trade Agreements Certificate provision of the solicitation.
    (2) The Contractor may not supply a nondesignated country end 
product other than a qualifying country end product, a Caribbean 
Basin country end product, or a NAFTA country end product, unless--
    (i) The Contracting Officer has determined that offers of U.S. 
made end products or qualifying, designated, Caribbean Basin, or 
NAFTA country end products from responsive, responsible offerors are 
either not received or are insufficient to fill the Government's 
requirements; or
    (ii) A national interest waiver has been granted under section 
302 of the Trade Agreements Act of 1979.
    (d) The offered price of end products listed in paragraph (c)(2) 
of the Trade Agreements Certificate provision of the solicitation 
must include all applicable duty, whether or not a duty-free entry 
certificate will be granted. The offered price of qualifying 
country, designated country, Caribbean Basin country, or NAFTA 
country end products, for line items subject to the Trade Agreements 
Act or the North American Free Trade Agreement Implementation Act, 
should not include custom fees or duty. The offered price of U.S. 
made end products should not include duty for qualifying country 
components.

(End of clause)

    Alternate I (Mar 1998). As prescribed in 225.408(a)(iv), delete 
Singapore from the list of designated countries in paragraph (a)(4) 
of the basic clause.

    85. Section 252.225-7026 is amended by revising the clause date, 
the introductory text of paragraph (a)(3), and paragraph (c); and by 
redesignating paragraphs (d)(i), (d)(ii), and (d)(iii), as paragraphs 
(d)(1), (d)(2), and (d)(3), respectively. The revised text reads as 
follows:


252.225-7026  Reporting of contract performance outside the United 
States.

* * * * *

Reporting of Contract Performance Outside the United States (Mar 1998)

    (a) * * *
    (3) Contracts exceeding $500,000, when any part that exceeds the 
simplified acquisition threshold in Part 2 of the Federal 
Acquisition Regulation will be performed outside the United States, 
unless a foreign place of performance is--
* * * * *
    (c) Flowdown requirements. (1) The Contractor shall include a 
clause substantially the same as this one in all first-tier 
subcontracts exceeding $500,000, except subcontracts for commercial 
items, construction, ores, natural gases, utilities, petroleum 
products and crudes, timber (logs), or subsistence.
    (2) The Contractor shall provide the prime contract number to 
subcontractors for reporting purposes.
* * * * *
    86. 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 (Mar 1998)

    (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 
the fees are paid to a bona fide employee of the Contractor or to a 
bona fide established commercial or selling agency 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 under this 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 exceeding $50,000 per foreign military 
sale case.

(End of clause)

    87. Sections 252.225-7035, 252.225-7036, and 252.225-7037 are 
revised to read as follows:


252.225-7035  Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program Certificate.

    As prescribed in 225.408(a)(v), use the following provision:

Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program Certificate (MAR 1998)

    (a) Definitions. ``Domestic end product,'' ``foreign end 
product,'' ``NAFTA country end product,'' and ``qualifying country 
end product'' have the meanings given in the Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of 
Payments Program clause of this solicitation.
    (b) Evaluation. Offers will be evaluated in accordance with the 
policies and procedures of Part 225 of the Defense Federal 
Acquisition Regulation Supplement. For line items subject to the 
North American Free Trade Agreement Implementation Act, offers of 
qualifying country end products or NAFTA country end products will 
be evaluated without regard to the restrictions of the Buy American 
Act or the Balance of Payments Program.
    (c) Certifications. (1) The offeror certifies that--
    (i) Each end product, except the end products listed in 
paragraph (c)(2) of this provision, is a domestic end product; and
    (ii) Components of unknown origin are considered to have been 
mined, produced, or manufactured outside the United States or a 
qualifying country.
    (2) The Offeror must identify all end products that are not 
domestic end products.
    (i) The Offeror certifies that the following supplies are 
qualifying country (except Canada) end products:

------------------------------------------------------------------------
         insert line item  number             insert country of  origin 
------------------------------------------------------------------------
                                                                        
                                                                        
                                                                        
------------------------------------------------------------------------


[[Page 11547]]

    (ii) The Offeror certifies that the following supplies qualify 
as NAFTA country end products:

------------------------------------------------------------------------
         insert line item  number             insert country of  origin 
------------------------------------------------------------------------
                                                                        
                                                                        
                                                                        
------------------------------------------------------------------------

    (iii) The following supplies are other foreign end products:

------------------------------------------------------------------------
         insert line item  number             insert country of  origin 
------------------------------------------------------------------------
                                                                        
                                                                        
                                                                        
------------------------------------------------------------------------

(End of provision)

    Alternate I (Mar 1998)
    As prescribed in 225.408(a)(v)(B)(2), substitute the phrase 
``Canadian end product'' for the phrase ``NAFTA country end 
product'' in paragraph (a); and substitute the phrase ``Canadian end 
products'' for the phrase ``NAFTA country end products'' in 
paragraphs (b) and (c)(2)(ii) of the basic clause.


252.225-7036  Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program

    As prescribed in 225.408(a)(vi),use the following clause:

Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program (Mar 1998)

    (a) Definitions. As used in this clause--
    (1) Components means those articles, materials, and supplies 
directly incorporated into end products.
    (2) Domestic end product means--
    (i) An unmanufactured end product that has been mined or 
produced in the United States; or
    (ii) An end product manufactured in the United States if the 
cost of its qualifying country components and its components that 
are mined, produced, or manufactured in the United States exceeds 50 
percent of the cost of all its components. The cost of components 
shall include transportation costs to the place of incorporation 
into the end product and U.S. duty (whether or not a duty-free entry 
certificate may be issued). A component shall be considered to have 
been mined, produced, or manufactured in the United States 
(regardless of its source in fact) if the end product in which it is 
incorporated is manufactured in the United States and the component 
is of a class or kind--
    (A) Determined to be not mined, produced, or manufactured in the 
United States in sufficient and reasonably available commercial 
quantities and of a satisfactory quality; or
    (B) That the Secretary concerned determines would be 
inconsistent with the public interest to apply the restrictions of 
the Buy American Act.
    (3) End product means those articles, materials, and supplies to 
be acquired for public use under the contract. For this contract, 
the end products are the line items to be delivered to the 
Government (including supplies to be acquired by the Government for 
public use in connection with service contracts, but excluding 
installation and other services to be performed after delivery).
    (4) Foreign end product means an end product other than a 
domestic end product.
    (5) North American Free Trade Agreement (NAFTA) country means 
Canada or Mexico.
    (6) NAFTA country end product means an article that--
    (i) Is wholly the growth, product, or manufacture of a NAFTA 
country; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in a NAFTA country into a new and 
different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed. The term refers to a product offered for purchase under 
a supply contract, but for purposes of calculating the value of the 
end product includes services (except transportation services) 
incidental to its supply, provided that the value of those 
incidental services does not exceed the value of the product itself.
    (7) Qualifying country means any country set forth in subsection 
225.872-1 of the Defense Federal Acquisition Regulation Supplement.
    (8) Qualifying country component means an item mined, produced, 
or manufactured in a qualifying country.
    (9) Qualifying country end product means--
    (i) An unmanufactured end product mined or produced in a 
qualifying country; or
    (ii) An end product manufactured in a qualifying country if the 
cost of the components mined, produced, or manufactured in the 
qualifying country and its components mined, produced, or 
manufactured in the United States exceeds 50 percent of the cost of 
all its components.
    (b) Unless otherwise specified, the North American Free Trade 
Agreement Implementation Act of 1993 (19 U.S.C. 3301 note) applies 
to all items in the Schedule.
    (c) The Contractor agrees to deliver under this contract only 
domestic end products unless, in its offer, it specified delivery of 
qualifying country, NAFTA country, or other foreign end products in 
the Buy American Act--North American Free Trade Agreement 
Implementation Act--Balance of Payments Program Certificate 
provision of the solicitation. An offer certifying that a qualifying 
country end product or a NAFTA country end product will be supplied 
requires the Contractor to supply a qualifying country end product 
or a NAFTA country end product, whichever is certified, or, at the 
Contractor's option, a domestic end product.
    (d) The offered price of qualifying country end products, or 
NAFTA country end products for line items subject to the North 
American Free Trade Agreement Implementation Act, should not include 
custom fees or duty. The offered price of foreign end products 
listed in paragraph (c)(2)(iii) of the Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of 
Payments Program Certificate provision of the solicitation, or the 
offered price of domestic end products that contain nonqualifying 
country components, must include all applicable duty. The award 
price will not include duty for end products or components that are 
to be accorded duty-free entry. Generally, each foreign end product 
listed in paragraph (c)(2)(iii) of the Buy American Act--North 
American Free Trade Agreement Implementation Act--Balance of 
Payments Program Certificate provision of the solicitation is 
adjusted for the purpose of evaluation by adding 50 percent of the 
offered price, inclusive of duty.

(End of clause)
    Alternate I (Mar 1998)
    As prescribed in 225.408(a)(vi)(B)(2), substitute the following 
paragraphs (a)(4), (c), and (d) for paragraphs (a)(4), (c), and (d) 
of the basic clause:
    (a)(4) Canadian end product, means an article that--
    (i) Is wholly the growth, product, or manufacture of Canada; or
    (ii) In the case of an article that consists in whole or in part 
of materials from another country or instrumentality, has been 
substantially transformed in Canada into a new and different article 
of commerce with a name, character, or use distinct from that of the 
article or articles from which it so was so transformed. The term 
refers to a product offered for purchase under a supply contract, 
but for purposes of calculating the value of the end product 
includes services (except transportation services) incidental to its 
supply, provided that the value of those incidental services does 
not exceed that of the product itself.
    (c) The Contractor agrees to deliver under this contract only 
domestic end products unless, in its offer, it specified delivery of 
qualifying country, Canadian, or other foreign end products in the 
Buy American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program Certificate provision of the 
solicitation. An offer certifying that a qualifying country end 
product or a Canadian end product will be supplied requires the 
Contractor to supply a qualifying country end product or a Canadian 
end product, whichever is certified, or, at the Contractor's option, 
a domestic end product.
    (d) The offered price of qualifying country end products, or 
Canadian end products for line items subject to the North American 
Free Trade Agreement Implementation Act, should not include custom 
fees or duty. The offered price of foreign end products listed in 
paragraph (c)(2)(iii) of the Buy American Act--North American Free 
Trade Agreement Implementation Act--Balance of Payments Program 
Certificate provision of the solicitation, or the offered price of 
domestic end products that contain nonqualifying country components, 
must include all applicable duty. The award price will not include 
duty for end products or components that are to be accorded duty-
free entry. Generally, each foreign end product listed in

[[Page 11548]]

paragraph (c)(2)(iii) of the Buy American Act--North American Free 
Trade Agreement Implementation Act--Balance of Payments Program 
Certificate provision of the solicitation is adjusted for the 
purpose of evaluation by adding 50 percent of the offered price, 
inclusive of duty.


252.225-7037  Duty-Free Entry--Eligible End Products.

    As prescribed in 225.605-70(b), use the following clause:

Duty-Free Entry--Eligible End Products (Mar 1998)

    (a) Definition. Eligible end product, as used in this clause, 
means--
    (1) Designated country end product, Caribbean Basin country end 
product, or NAFTA country end product, as defined in the Trade 
Agreements clause of this contract;
    (2) NAFTA country end product, as defined in the Buy American 
Act--North American Free Trade Agreement Implementation Act--Balance 
of Payments Program clause of this contract; or
    (3) Canadian end product, as defined in Alternate I of the Buy 
American Act--North American Free Trade Agreement Implementation 
Act--Balance of Payments Program clause of this contract.
    (b) The requirements of this clause apply to this contract and 
subcontracts, including purchase orders, that involve delivery of 
eligible end products to be accorded duty-free entry whether 
placed--
    (1) Directly with a foreign concern as a prime contract; or
    (2) As a subcontract or purchase order under a contract with a 
domestic concern.
    (c) Except as otherwise approved by the Contracting Officer, no 
amount is or will be included in the contract price for duty for 
eligible end products.
    (d) The Contractor warrants that--
    (1) All eligible end products, for which duty-free entry is to 
be claimed under this clause, are intended to be delivered to the 
Government; and
    (2) The Contractor will pay any applicable duty to the extent 
that such eligible end products, or any portion thereof (if not 
scrap or salvage) are diverted to nongovernmental use, other than as 
a result of a competitive sale made, directed, or authorized by the 
Contracting Officer.
    (e) The Government agrees to execute duty-free certificates and 
to afford such assistance as appropriate to obtain the duty-free 
entry of eligible end products for which the shipping documents bear 
the notation specified in paragraph (f) of this clause, except as 
the Contractor may otherwise agree.
    (f) All shipping documents submitted to Customs, covering 
eligible end products for which duty-free entry certificates are to 
be issued under this clause, shall--
    (1) Consign the shipments to the appropriate--
    (i) Military department in care of the Contractor, including the 
Contractor's delivery address; or
    (ii) Military installation; and
    (2) Include the following information--
    (i) Prime contract number, and delivery order if applicable;
    (ii) Number of the subcontract/purchase order for foreign 
supplies if applicable;
    (iii) Identification of carrier;
    (iv)(A) For direct shipments to a U.S. military installation, 
the notation:
    UNITED STATES GOVERNMENT, DEPARTMENT OF DEFENSE Duty-Free Entry 
to be claimed pursuant to Section XXII, Chapter 98, Subchapter VIII, 
Item 9808.00.30 of the Harmonized Tariff Schedule of the United 
States. Upon arrival of shipment at the appropriate port of entry, 
District Director of Customs, please release shipment under 19 CFR 
part 142, and notify Commander, Defense Contract Management Command 
(DCMC) New York, ATTN: Customs Team, DCMDN-GNIC, 207 New York 
Avenue, Staten Island, New York 10305-5013, for execution of Customs 
Forms 7501, 7501A, or 7506 and any required duty-free entry 
certificates.
    (B) In cases where the shipment will be consigned to other than 
a military installation, e.g., a domestic contractor's plant, the 
shipping document notation shall be altered to insert the name and 
address of the contractor, agent or broker who will notify 
Commander, DCMC, NY, for execution of the duty-free certificate. 
(Note: In those instances where the shipment will be consigned to a 
contractor's plant and no duty-free entry certificate is required, 
the contractor or its agent shall claim duty-free entry under NAFTA 
or other trade agreement and shall comply with the U.S. Customs 
Service requirements. No notification to Commander, CDMC, NY, is 
required.
    (v) Gross weight in pounds (if freight is based on space 
tonnage, state cubic feet in addition to gross shipping weight);
    (vi) Estimated value in U.S. dollars; and
    (vii) Activity Address Number of the contract administration 
office actually administering the prime contract, e.g., for DCMC 
Dayton, S3605A.
    (g) Preparation of customs forms. (1) Except for shipments 
consigned to a military installation, the Contractor shall prepare, 
or authorize an agent to prepare, any customs forms required for the 
entry of eligible end products in connection with DoD contracts into 
the United States, its possessions, or Puerto Rico. The completed 
customs forms shall be submitted to the District Director of Customs 
with a copy to DCMC NY for execution of any required duty-free entry 
certificates. Shipments consigned directly to a military 
installation will be released in accordance with 10.101 and 10.102 
of the U.S. Customs regulations.
    (2) For shipments containing both supplies that are to be 
accorded duty-free entry and supplies that are not, the Contractor 
shall identify on the customs forms those items that are eligible 
for duty-free entry.
    (h) The Contractor agrees--
    (1) To prepare (if this contract is placed directly with a 
foreign supplier), or to instruct the foreign supplier to prepare, a 
sufficient number of copies, of the bill of lading (or other 
shipping document) so that at least two of the copies accompanying 
the shipment will be available for use by the District Director of 
Customs at the port of entry;
    (2) To consign the shipment as specified in paragraph (f) of 
this clause; and
    (3) To mark the exterior of all packages as follows:
    (i) ``UNITED STATES GOVERNMENT, DEPARTMENT OF DEFENSE;'' and
    (ii) The activity address number of the contract administration 
office actually administering the prime contract.
    (i) The Contractor agrees to notify the Contracting Officer 
administering the prime contract in writing of any purchase under 
the contract of eligible end products to be accorded duty-free entry 
that are to be imported into the United States for delivery to the 
Government or for incorporation in end items to be delivered to the 
Government. The notice shall be furnished to the contract 
administration office immediately upon award to the supplier of the 
eligible end products. The notice shall contain--
    (1) Prime contractor's name, address, and CAGE code;
    (2) Prime contract number, and delivery order number if 
applicable;
    (3) Total dollar value of the prime contract or delivery order;
    (4) Expiration date of the prime contract or delivery order;
    (5) Foreign supplier's name and address;
    (6) Number of the subcontract/purchase order for eligible end 
products;
    (7) Total dollar value of the subcontract for eligible end 
products;
    (8) Expiration date of the subcontract for eligible end 
products;
    (9) List of items purchased;
    (10) An agreement by the Contractor that any applicable duty 
shall be paid by the Contractor to the extent that such eligible end 
products are diverted to nongovernmental use other than as a result 
of a competitive sale made, directed, or authorized by the 
Contracting Officer; and
    (11) The scheduled delivery date(s).

(End of clause)


252.229-7004  [Amended]

    88. Section 252.229-7004 is amended in the clause title by revising 
the word ``CONTRACT'' to read ``CONTRACTOR''.


252.232-7006  [Removed and Reserved]

    89. Section 252.232-7006 is removed and reserved.


252.234-7000  [Amended]

    90. Section 252.234-7000 is amended in the introductory text by 
revising the reference ``234.005-71'' to read ``234.005-71(a)''; by 
revising the clause date to read ``(MAR 1998)''; and at the end of 
paragraph (a) by removing the word ``Government'' and inserting in its 
place the phrase ``Department of Defense''.
    91. Section 252.234-7001 is revised to read as follows:


252.234-7001  Earned value management system.

    As prescribed in 234.005-71(b), use the following clause:

[[Page 11549]]

Earned Value Management System (Mar 1998)

    (a) In the performance of this contract, the Contractor shall 
use an earned value management system (EVMS) that has been 
recognized by the cognizant Administrative Contracting Officer (ACO) 
as complying with the criteria provided in DoD 5000.2-R, Mandatory 
Procedures for Major Defense Acquisition Programs (MDAPs) and Major 
Automated Information System (MAIS) Acquisition Programs.
    (b) If, at the time of award, the Contractor's EVMS has not been 
recognized by the cognizant ACO as complying with EVMS criteria (or 
the Contractor does not have an existing cost/schedule control 
system that has been accepted by the Department of Defense), the 
Contractor shall apply the system to the contract and shall be 
prepared to demonstrate to the ACO that the EVMS complies with the 
EVMS criteria referenced in paragraph (a) of this clause.
    (c) The Government may require integrated baseline reviews. Such 
reviews shall be scheduled as early as practicable and should be 
conducted within 180 calendar days after (1) contract award, (2) the 
exercise of significant contract options, or (3) the incorporation 
of major modifications. The objective of the integrated baseline 
review is for the Government and the Contractor to jointly assess 
areas, such as the Contractor's planning, to ensure complete 
coverage of the statement of work, logical scheduling of the work 
activities, adequate resourcing, and identification of inherent 
risks.
    (d) Unless a waiver is granted by the ACO, Contractor-proposed 
EVMS changes require approval of the ACO prior to implementation. 
The ACO shall advise the Contractor of the acceptability of such 
changes within 30 calendar days after receipt of the notice of 
proposed changes from the Contractor. If the advance approval 
requirements are waived by the ACO, the Contractor shall disclose 
EVMS changes to the ACO at least 14 calendar days prior to the 
effective date of implementation.
    (e) The Contractor agrees to provide access to all pertinent 
records and data requested by the ACO or duly authorized 
representative. Access is to permit Government surveillance to 
ensure that the EVMS complies, and continues to comply, with the 
criteria referenced in paragraph (a) of this clause.
    (f) The Contractor shall require the following subcontractors to 
comply with the requirements of this clause:

(Contracting Officer to insert names of subcontractors selected for 
application of EVMS criteria in accordance with 252.234-7000(c).)

----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(End of clause)


252.236-7010  [Amended]

    92. Section 252.236-7010 is amended in the introductory text by 
revising the reference ``236.570(c)'' to read ``236.570(c)(1)''.
    93. Section 252.236-7012 is added to read as follows:


252.236-7012  Military construction on Kwajalein Atoll--evaluation 
preference.

    As prescribed in 236.570(c)(2), use the following provision:

Military Construction on Kwajalein Atoll--Evaluation Preference (Mar 
1998)

    (a) Definitions. As used in this provision--
    (1) Marshallese firm means a local firm incorporated in the 
Marshall Islands, or otherwise legally organized under the laws of 
the Marshall Islands, that--
    (i) Is more than 50 percent owned by citizens of the Marshall 
Islands; or
    (ii) Complies with the following:
    (A) The firm has done business in the Marshall Islands on a 
continuing basis for not less than 3 years prior to the date of 
issuance of this solicitation;
    (B) Substantially all of the firm's directors of local 
operations, senior staff, and operating personnel are resident in 
the Marshall Islands or are U.S. citizens; and
    (C) Most of the operating equipment and physical plant are in 
the Marshall Islands.
    (2) United States firm means a firm incorporated in the United 
States that complies with the following:
    (i) The corporate headquarters are in the United States;
    (ii) The firm has filed corporate and employment tax returns in 
the United States for a minimum of 2 years (if required), has filed 
State and Federal income tax returns (if required) for 2 years, and 
has paid any taxes due as a result of these filings; and
    (iii) The firm employs United States citizens in key management 
positions.
    (b) Evaluation. Offers from firms that do not qualify as United 
States firms or Marshallese firms will be evaluated by adding 20 
percent to the offer, unless application of the factor would not 
result in award to a United States firm.
    (c) Status. The offeror is ________ a United States firm; 
________ a Marshallese firm; ________ Other.

(End of provision)


252.237-7019  [Removed and Reserved]

    94. Section 252.237-7019 is removed and reserved.


252.241-7000  [Amended]

    95. Section 252.241-7000 is amended in the introductory text by 
revising the reference ``241.007-70(a)'' to read ``241.501-70(a)''.


252.241-7001  [Amended]

    96. Section 252.241-7001 is amended in the introductory text by 
revising the reference ``241.007-70(b)'' to read ``241.501-70(b)''.
    97. Section 252.242-7005 is amended by revising the clause date and 
paragraphs (b)(4) and (d) to read as follows:


252.242-7005  Cost/Schedule Status Report.

* * * * *

Cost/Schedule Status Report (Mar 1998)

* * * * *
    (b) * * *
    (4) Establishing constraints to preclude subjective adjustment 
of data to ensure that performance measurement remains realistic. 
The total allocated budget may exceed the contract budget base only 
after consultation with the Contracting Officer. For cost-
reimbursement contracts, the contract budget base shall exclude 
changes for cost growth increase, other than for authorized changes 
to the contract scope; and
* * * * *
    (d) The Government may require integrated baseline reviews. Such 
reviews shall be scheduled as early as practicable and should be 
conducted within 180 calendar days after (1) contract award, (2) the 
exercise of significant contract options, or (3) the incorporation 
of major modifications. The objective of the integrated baseline 
review is for the Government and the Contractor to jointly assess 
areas, such as the Contractor's planning, to ensure complete 
coverage of the statement of work, logical scheduling of the work 
activities, adequate resourcing, and identification of inherent 
risks.
* * * * *
    98. Section 252.243-7002 is revised to read as follows:


252.243-7002  Requests for equitable adjustment.

    As prescribed in 243.205-72, use the following clause:

Requests for Equitable Adjustment (Mar 1998)

    (a) The amount of any request for equitable adjustment to 
contract terms shall accurately reflect the contract adjustment for 
which the Contractor believes the Government is liable. The request 
shall include only costs for performing the change, and shall not 
include any costs that already have been reimbursed or that have 
been separately claimed. All indirect costs included in the request 
shall be properly allocable to the change in accordance with 
applicable acquisition regulations.
    (b) In accordance with 10 U.S.C. 2410(a), any request for 
equitable adjustment to contract terms that exceeds the simplified 
acquisition threshold shall bear, at the time of submission, the 
following certificate executed by an individual authorized to 
certify the request on behalf of the Contractor:
    I certify that the request is made in good faith, and that the 
supporting data are accurate and complete to the best of my 
knowledge and belief.

----------------------------------------------------------------------
(Official's Name)
----------------------------------------------------------------------
(Title)

    (c) The certification in paragraph (b) of this clause requires 
full disclosure of all relevant facts, including----
    (1) Cost or pricing data if required in accordance with 
subsection 15.403-4 of the Federal Acquisition Regulation (FAR); and
    (2) Information other than cost or pricing data, in accordance 
with subsection 15.403-3 of the FAR, including actual cost data and 
data to support any estimated costs, even if cost or pricing data 
are not required.

[[Page 11550]]

    (d) The certification requirement in paragraph (b) of this 
clause does not apply to----
    (1) Requests for routine contract payments; for example, 
requests for payment for accepted supplies and services, routine 
vouchers under a cost-reimbursement type contract, or progress 
payment invoices; or
    (2) Final adjustment under an incentive provision of the 
contract.

(End of clause)

PART 253--FORMS

    99. Section 253.204-70 is amended by revising paragraphs 
(c)(4)(xi)(A) and (c)(4)(xi)(C) to read as follows:


253.204-70  DD Form 350, Individual Contracting Action Report.

* * * * *
    (c) * * *
    (4) * * *
    (xi) * * *
    (A) Code Y--Yes--Obtained. Enter code Y when cost or pricing data 
were obtained (see FAR 15.403-4) and certified in accordance with FAR 
15.406-2.
* * * * *
    (C) Code W--Not Obtained--Waived. Enter code W when cost or pricing 
data were not obtained because the requirement was waived (see FAR 
15.403-1(c)(4)).
* * * * *

Appendix G to Chapter 2 [Amended]

    100. Appendix G to Chapter 2 is amended in Part 1, Section G-101, 
paragraph (c), under the heading ``AIR FORCE'', by revising the symbol 
``SAF/AQCO'' to read ``SAF/AQCP''.
    101. Appendix G to Chapter 2 is amended in Part 2 by removing entry 
DAAB24; by revising entry DACA81; and by adding, in alpha-numerical 
order, entries DAJN01, DAJN02, and DASW02 to read as follows:
PART 2--ARMY ACTIVITY ADDRESS NUMBERS
* * * * *
DACA81, CA81, CN  USA Engineer District, Far East, APO AP 96205-0610
* * * * *
DAJN01, JN01, 1B  U.S. Southern Command, Contracting Office, HQCMDT, 
7955 NW 12th Street, Suite 450, Miami, FL 33126-1823
DAJN02, JN02, 8V  Fort Buchanan Contracting Office, Attn: AFZK-DOC, 
Fort Buchanan, PR 00934-5049
* * * * *
DASW02, SW02, 1W  Joint Visual Information Activity, Attn: SAM-OPV-
JC, 601 North Fairfax Street, Room 334, Alexandria, VA 22314-2007
* * * * *
    102. Appendix G to Chapter 2 is amended in Part 5 by removing entry 
F04704 R9; and by revising entry FA2550 to read as follows:
PART 5--AIR FORCE ACTIVITY ADDRESS NUMBERS
* * * * *
FA2550  50 CONS, 66 Falcon Parkway, Ste 49, Falcom AFB, CO 80912-
6649
* * * * *
    103. Appendix G to Chapter 2 is amended by revising Part 6 to read 
as follows:
PART 6--DEFENSE LOGISTICS AGENCY ACTIVITY ADDRESS NUMBERS
SP0100  Defense Personnel Support Center, TW  Directorate of 
Clothing & Textiles, 2800 South 20th Street, Philadelphia, PA 19101-
8419
SP0103 W7  Defense Personnel Support Center, Installation Support, 
2800 South 20th Street, Philadelphia, PA 19101-8419
SP0200 TX  Defense Personnel Support Center, Directorate of Medical 
Materiel, 2800 South 20th Street, Philadelphia, PA 19101-8419
SP0300 UE  Defense Personnel Support Center, Directorate of 
Subsistence, 2800 South 20th Street, Philadelphia, PA 19101-8419
SP0302 W6  Defense Subsistence Region Pacific, Attn: DSR-Pacific, 
2155 Mariner Square Loop, Alameda, CA 94501-1022
SP0303 U6  Defense Subsistence Region Europe, DSR Europe, APO AE 
09052
SP0400 TY  Defense Supply Center Richmond, Business Operations, 800 
Jefferson Davis Highway, Richmond, VA 23297-5770
SP0410 XH  Defense Supply Center Richmond, Base Spt Div, Dir of Spec 
Proc, 8000 Jefferson Davis Highway, Richmond, VA 23297-5312
SP0411 TY  Defense Supply Center Richmond, Proc Br (ESOC), Customer 
Asst Ctr, 8000 Jefferson Davis Highway, Richmond, VA 23297-5871
SP0413 TY  Defense Supply Center Richmond, Spec Purchase Br, Prod 
Ctr Spt Div, 8000 Jefferson Davis Highway, Richmond, VA 23297-5864
SP0414 TY  Defense Supply Center Richmond, SASPS Phase I Br, Prod 
Ctr Spt Div, 8000 Jefferson Davis Highway, Richmond, VA 23297-5863
SP0420 XK  Defense Supply Center Richmond, DODDS Div, Dir Of Spec 
Proc, 8000 Jefferson Davis Highway, Richmond, VA 23297-5313
SP0430 TY  Defense Supply Center Richmond, Proc Br, Product Center 
5, 8000 Jefferson Davis Highway, Richmond, VA 23297-5813
SP0440 TY  Defense Supply Center Richmond, Proc Br, Product Center 
7, 8000 Jefferson Davis Highway, Richmond, VA 23297-5834
SP0441 TY  Defense Supply Center Richmond, Proc Br, Product Center 
6, 8000 Jefferson Davis Highway, Richmond, VA 23297-5822
SP0450 TY  Defense Supply Center Richmond, Proc Br, Product Center 
4, 8000 Jefferson Davis Highway, Richmond, VA 23297-5800
SP0451 TY  Defense Supply Center Richmond, Proc Br, Product Center 
2, 8000 Jefferson Davis Highway, Richmond, VA 23297-5772
SP0454 TY  Defense Supply Center Richmond, Proc Br, Product Center 
4, Enhanced Vendor Delivery Program, 8000 Jefferson Davis Highway, 
Richmond, VA 23297-5800
SP0460 TY3  Defense Supply Center Richmond, Proc Br, Product Center 
1, 8000 Jefferson Davis Highway, Richmond, VA 23297-5772
SP0461 TY  Defense Supply Center Richmond, Special Purchase Branch 
(SPUR), 8000 Jefferson Davis Highway, Richmond, VA 23297-5864
SP0480 TY  Defense Supply Center Richmond, Aircraft Engines, 8000 
Jefferson Davis Highway, Richmond, VA 23297-5876
SP0490 TY  Defense Supply Center Richmond, Proc Br, Product Center 
1, 8000 Jefferson Davis Highway, Richmond, VA 23297-5846
SP0499  Defense Supply Center Richmond-FCIM, 8000 Jefferson Davis 
Highway, Richmond, VA 23297-5770
SP0500 TZ, WU  Defense Industrial Supply Center, 700 Robbins Avenue, 
Philadelphia, PA 19111-5096
SP0510 W2  Defense Industrial Supply Center, Base Operating Support 
System, 700 Robbins Avenue, Philadelphia, PA 19111-5096
SP0520  Defense Industrial Supply Center, Product Verification 
Testing Acquisition, 700 Robbins Avenue, Philadelphia, PA 19111-5096
SP0599  Defense Industrial Supply Center-FCIM, 700 Robbins Avenue, 
Philadelphia, PA 19111-5096
SP0600 UA  Defense Fuel Supply Center, 8725 John, J. Kingman Road, 
Suite 2533, Fort Belvoir, VA 22304-6160
SP0700 UB, UZ  Defense Supply Center Columbus, PO Box 32990, 
Columbus, OH 43216-3990
SP0701  Defense Supply Center Columbus, Attn: DSCC-OT, Bldg 20, 
Fourth Floor, Columbus, OH 43216-5000
SP0710 YL  Defense Supply Center Columbus, Base Contracting, PO Box 
16704, Columbus, OH 43216-5010
SP0720 YM  Defense Supply Center Columbus, Lumber Solicitations/
Awards, PO Box 16704, Columbus, OH 43216-5010
SP0730 WZ  Defense Supply Center Columbus, Military 
Interdepartmental PR MIPR Division, PO Box 3990, Columbus, OH 43216-
5000
SP0740 XJ  Defense Supply Center Columbus, Aerospace Solicitations/
Awards, PO Box 3990, Columbus, OH 43216-5000
SP0750 UB  Defense Supply Center Columbus, Land Solicitations/
Awards, PO Box 16704, Columbus, OH 43216-5010
SP0760 UB  Defense Supply Center Columbus, Maritime Solicitations/
Awards, PO Box 16704, Columbus, OH 43216-5010
SP0770 UB  Defense Supply Center Columbus, Commodities 
Solicitations/Awards, PO Box 16704, Columbus, OH 43216-5010

[[Page 11551]]

SP0780  Defense Supply Center Columbus, Government Furnished 
Property Account, ATTN: DSCC-PAPB GFP, Building 20 A2N, 3990 E Broad 
Street, Columbus, OH 43216-5000
SP0799  Defense Supply Center Columbus-FCIM, PO Box 3990, Columbus, 
OH 43216-5000
SP0833VS  Defense National Stockpile Center, 8725 John J. Kingman 
Road, Suite 3339, Fort Belvoir, VA 22060-6223
SP0900UD  Defense Supply Center Columbus, Equipment, PO Box 16704, 
Dayton, OH 43216-5010
SP0905  Defense Supply Center Columbus, PO Box 16704, Dayton, OH 
43216-5010
SP0910U7  Defense Supply Center Columbus, Base Contracting Section, 
PO Box 16704, Dayton, OH 43216-5010
SP0920W4  Defense Supply Center Columbus, Electro Mechanical, PO Box 
16704, Dayton, OH 43216-5010
SP0930  Defense Supply Center Columbus, Switches, PO Box 16704, 
Dayton, OH 43216-5000
SP0935  Defense Supply Center Columbus, Connectors, PO Box 16704, 
Dayton, OH 43216-5000
SP0960  Defense Supply Center Columbus, Active Devices, PO Box 
16704, Dayton, OH 43216-5000
SP0970  Defense Supply Center Columbus, PO Box 16704, Dayton, OH 
43216-5000
SP0980  Defense Supply Center Columbus, Tailored Logistics 
Acquisitions, PO Box 16704, Dayton, OH 43216-5000
SP0999  Defense Supply Center Columbus-FCIM, PO Box 16704, Dayton, 
OH 43216-5000
SP3100WX  Defense Distribution Region East, Office of Contracting, 
New Cumberland, PA 17070-5001
SP3200TV  Defense Distribution Region West, Office of Contracting, 
Building S-4, Lathrop, CA 95330-5000
SP3500UN  Defense Distribution Region East, Office of Contracting, 
New Cumberland, PA 17070-5001
SP4400X1  Defense Reutilization Marketing Service, 74 Washington 
Avenue North, Battle Creek, MI 49017-3092
SP4410X1  Defense Reutilization Marketing Service, Special Contracts 
Division, Attn: DRMS-PO, 74 Washington Avenue North, Battle Creek, 
MI 49017-3092
SP4420XI  Defense Reutilization Marketing Service, Attn: DRMS-PMG, 
APO AE 09096
SP4700YK  DLA Administrative Support Center, Office of Contracting, 
8725 John J. Kingman Road, Suite 0119, Fort Belvoir, VA 22060-6220
SP4800  Defense Logistics Agency, Office of Small and Disadvantaged, 
Business Utilization, 8725 John J. Kingman Road, Suite 1127, Fort 
Belvoir, VA 22060-6221
SAS01A UY  DCMC Pacific--Australia, Unit 11009, APO AP 96551
SBL00A MJ  DCMC Northern Europe--Belgium, PSC 82, Box 002, APO AE 
09724
SCN01A WV  DCMC Americas, 275 Bank Street, Suite 200, Ottawa, Canada 
K2P 2L6
SGR18A  DCMC Southern Europe, CMR 410, Box 764, APO AP 09096
SJP10A Y9  DCMC Pacific--Japan, PSC 477, Box 39, FPO AP 96306-2739
SKR08A R1  DCMC Pacific, Unit 2000, APO AE 96214-5000
SML04A XC  DCMC Pacific--Kuala Lumpur, American Embassy, APO AP 
96535-5000
SPR01A QF  DCMC Americas--Puerto Rico, Box DLA NSGA, FPO AA 34053-
0007
SSA20A  DCMC Southern Europe--Spain, PSC 61, Box 3000, APO AE 09642-
5000
SSN05A  DCMC Pacific--Singapore, PSC 470, Box 2700, FPO AP 96534-
2100
SSR01A YE  DCMC Southern Europe--Israel, American Embassy Unit 7228, 
APO AE 09830-7228
SSU01A U4  DCMC Saudi Arabia--Air DCMCI Unit 61305, APO AE 09803-
1305
SSU03A US  DCMC Saudi Arabia--Land, DCMCI Unit 61301, APO AE 09803-
1301
STA21A  DCMC Southern Europe--Italy (Brindisi), PSC 817, Box 61, FPO 
AE 09622-0061
STA23A  DCMC Southern Europe--Italy, Unit 31401, Box 71, APO AE 
09630-0071
STR02A TQ  DCMC Southern Europe--Turkey, Unit 9050, APO AE 09822-
9050
SUK12A VN  DCMC Northern Europe, PSC 821, Box 55, APO AE 09421-0055
SUK14A  DCMC Northern Europe--UK Bristol, Unit 4825, APO AE 09456-
4825
SUK15A  DCMC Northern Europe--UK Rochester, PSC 30, Box 100, APO AE 
09447-0100
SZA01A  DCMC Pacific--New Zealand, PSC 467, Box 298, FPO AP 96531-
2000
S0101A  DCMC Birmingham, 1910 Third Avenue North, Room 201, 
Birmingham, AL 35203-2376
S0102A WA  DCMC Pemco Aeroplex Birmingham, PO Box 12447, Birmingham, 
AL 35202-2447
S0302A WY  DCMC Phoenix, 215 North 7th Street, Phoenix, AZ 85034-
1012
S0305A SR  DCMC Hughes Tucson, PO Box 11337, Bldg 801, M/5 D-4, 
Tucson, AZ 85734-1337
S0506A WL  DCMD West, 222 North Sepulveda Boulevard, El Segundo, CA 
90245-4320
S0507A XR  DCMC San Francisco, 1265 Borregas Avenue, Sunnyvale, CA 
94089
S0512AYC  DCMC Van Nuys, 6230 Van Nuys Boulevard, Van Nuys, CA 
91401-2713
S0513AUG  DCMC Santa Ana, 34 Civic Center Plaza, PO Box C-12700, 
Santa Ana, CA 92712-2700
S0514AVH  DCMC San Diego, 7675 Dagget Street, Suite 200, San Diego, 
CA 92111-2241
S0520AVR  DCMC San Francisco--ULDP San Jose, M/SX65, PO Box 367, San 
Jose, CA 95103-0367
S0530AX9  DCMC McDonnell Douglas, 5301 Bolsa Avenue, Huntington 
Beach, CA 92647-2099
S0539AQT  DCMC Hughes, Los Angeles, PO Box 92463, Los Angeles, CA 
90009-2463
S0542ARY  DCMC Rockwell, Canoga Park, PO Box 7922, Canoga Park, CA 
91303-7922
S0543AQX  DCMC Lockheed Martin Missiles & Space, PO Box 3504, 
Sunnyvale, CA 94088-3504
S0544ATC  DCMC McDonnell Douglas, 1570 Hughes Way, Mail Code 54-79, 
Long Beach, CA 90846-0001
S0546AQR  DCMC Northrop, Gumman Hawthorne, One Northrop Avenue, 
Hawthorne, CA 90250-3277
S0602AVK  DCMC Denver, Orchard Place 2, Suite 200, 5975 Greenwood 
Plaza Boulevard, Englewood, CO 80111-4715
S0605ARE  DCMC Lockheed Martin Astronautics, PO Box 179, Denver, CO 
80201-0179
S0701AWB  DCMC Hartford, 130 Darlin Street, East Hartford, CT 06108-
3234
S0702AUP  DCMC Stratford, 550 Main Street, Stratford, CT 06497-7593
S0703AXT  DCMC Hamilton Standard, 1 Hamilton Road, Windsor Locks, CT 
06096-0463
S0707ALF  DCMC Sikorsky, 6900 Main Street, Stratford, CT 06497-9131
S0708AT5  DCMC Pratt & Whitney, East Hartford, 400 Main Street, Mail 
Stop 104-08, East Hartford, CT 06108-0969
S1002AWW  DCMC Orlando, 3555 Maguire Boulevard, Orlando, FL 32803-
3726
S1005AXL  DCMC Lockheed Martin, Orlando, 5600 Sand Lake Road, MP49, 
Orlando, FL 32819-8907
S1009AV1  DCMC Orlando-Harris, 1425 Troutman Boulevard, NE, Palm 
Bay, FL 32905-4102
S1011AT2  DCMC Pratt & Whitney, West Palm Beach, PO Box 109600, West 
Palm Beach, FL 33410-9600
S1103AY1  DCMC Atlanta, 805 Walker Street, Marietta, GA 30060-2789
S1104A  DCMC Atlanta-Rockwell, PO Box 1356, Duluth, GA 30136-1357
S1109AZ4  DCMC Clearwater, Gadsen Building, Suite 200, 9549 Koger 
Blvd., St. Petersburg, FL 33702-2455
S1110A Z5  DCMC Grumman, St. Augustine, 5000 US Highway 1, North, PO 
Drawer 3447, St. Augustine, FL 32085-3447
S1111A RK  DCMC Lockheed Martin Marietta, 86 South Cobb Drive, Bldg 
B-2, Marietta, GA 30063-0260
S1211A U8  DCMC Aircraft Program Management Officer, 805 Walker 
Street, Marietta, GA 30060-2789
S1221A X5  DCMC Grumman Melbourne, PO Box 9650, Melbourne, FL 32902-
9650
S1403A YP  DCMC Chicago, PO Box 66911, Chicago, IL 60666-0911
S1501A WG  DCMC Indianapolis, 8899 East 56th Street, Indianapolis, 
IN 46249-5701
S1505A X2   DCMC Indianapolis-Hughes, Defense Communications, 1616 
Directors Row, Fort Wayne, IN 46808-1286
S1510A Z9  DCMC Pacific-Honolulu, Box 64110, Camp HM Smith, 
Honolulu, HI 96861-4110
S1701A YD  DCMC Wichita, U.S. Courthouse, Suite B-34, 401 North 
Market, Wichita, KS 67202-2095
S1903A   DCMC Michoud-Stennis, 138000 Old Gentilly Hwy, Building 
350, PO Box 29503, New Orleans, LA 70189-0503
S2103A S2  DCMC Westinghouse Baltimore, PO Box 1693, M/S 1285, 
Baltimore, MD 21203-1693
S2202A UT  DCMC East, 495 Summer Street, Boston, MA 02210-2184
S2203A XX  DCMC Boston-GTE, Government Systems Corp, 200 First 
Avenue, Needham, MA 02194-9123
S2205A XF  DCMC Raytheon, 2 Wayside Avenue, Burlington, MA 01803-
0901
S2206A Y3  DCMC Boston, 495 Summer Street, Boston, MA 02210-2138

[[Page 11552]]

S2207A7Q  DCM GE Lynn, 1000 Western Avenue, Lynn, MA 01910-0445
S2208A NJ  DCMC Lockheed Martin Defense Systems, 100 Plastics 
Avenue, Pittsfield, MA 01201-3677
S2209A SQ  DCMC Boston-Textron Systems Division, 201 Lowell Street, 
Wilmington, MA 01887-2941
S2303A VW  DCMC Grand Rapids, Riverview Center Building, 678 Front 
Street, Grand Rapids, MI 49504-5352
S2305A Y7  DCMC Detroit, U.S. Army Tank-Automotive Command, ATTN: 
DCMDE-GJD, Warren, MI 48397-5000
S2401A WQ  DCMC Twin Cities, 3001 Metro Drive, Bloomington, MN 
55425-1573
S2404A UR  DCMC Baltimore, 200 Towsontown Boulevard, West, Towson, 
MD 21204-5299
S2605A XS  DCMC St Louis, 1222 Spruce Street, St. Louis, MO 63103-
2812
S2606A JZ  DCMC McDonnell Douglas, St. Louis, P.O. Box 516, St. 
Louis, MO 63166-0516
S3001A YS  DCMC Lockheed Martin Sanders, P.O. Box 0868, NHQ-539, 
Nashua, NH 03061-0868
S3101A WT  DCMC Springfield, Building 1, ARDEC, Picatinny, NJ 07806-
5000
S3102A UU  DCMC Allied Signal, Route 46, Mail Stop 1-37, Teterboro, 
NJ 07608-1173
S3109A WC  DCMC Springfield-GEC/Kearfott, 164 Totowa Road, MS 11A30, 
Wayne, NJ 07474-0975
S3110A X7  DCMC Lockheed Martin Delaware Valley, Mail Stop AE 2-W, 1 
Federal Street, Camden, NJ 08102-1013
S3306A XU  DCMC Syracuse, 615 Erie Boulevard West, Syracuse, NY 
13402-2408
S3309A VX  DCMC Long Island, 605 Stewart Avenue, Garden City, NY 
11530-4761
S3310A  DCMC New York, 207 New York City Avenue, Staten Island, NY 
10305-5013
S3315A YR  DCMC Lockheed Martin, Federal Systems, Owego, 1801 State 
Route 17C, Owego, NY 13827-3998
S3316A KK  DCMC Grumman Bethpage, Bethpage, NY 11714-3593
S3317A NH  DCMC Lockheed Martin Tactical, Defense Systems, East, 365 
Lakeville Road, Great Neck, NY 11020-1696
S3619A SB  DCMC GE Aircraft Engines, Evendale, Mail Drop N-1, 
Cincinnati,OH 45215-6303
S3603A VB  DCMC Cleveland, Admiral Kidd Building, 555 East 88th 
Street, Bratenahl, OH 44108-1068
S3605A VL  DCMC Dayton, Gentile Station, 1001 Hamilton Street, 
Dayton, OH 45444-5300
S3613A YB  DCMC Cleveland-Westinghouse, 18901 Euclid Avenue, Plant 
2, Cleveland, OH 44117-1388
S3616A X6  DCMC Cleveland-Lockheed Martin, Tactical Defense Systems, 
Akron, 1210 Massillon Road, Akron, OH 44315-0001
S3618A YF  DCMC General Dynamics Lima, 1155 Buckeye Road, Lima, OH 
45804-1898
S3620A VA  DCMC International, 8725 John J. Kingman Road, Fort 
Belvoir VA 22060-6221
S3911A X3  DCMC Pittsburgh, Federal Building, Room 1612, 1000 
Liberty Avenue, Pittsburgh, PA 15222-4190
S3912A XM  DCMC Reading, 1125 Berkshire Blvd, Suite 160, Wyomissing, 
PA 19610-1249
S3915A XD  DCMC Philadelphia, South 20th Street, Philadelphia, PA 
19101-7699
S3916A TU  DCMC Boeing Helicopters, PO Box 16859, Philadelphia, PA 
19142-0859
S4201A XY  DCMC United Defense Limited Partnership, PO Box 15512, 
York, PA 17405-1512
S4402A Z7  DCMC Dallas, 1200 Main Street, Dallas, TX 75202-4399
S4404A XN  DCMC San Antonio, 615 East Houston, PO Box 1040, San 
Antonio, TX 78294-1040
S4407A WN  DCMC E-Systems Greenville, PO Box 6379, Greenville, TX 
75403-6379
S4408A XZ  DCMC Texas Instruments, PO Box 660246, MS 256, Dallas, TX 
75266-0246
S4418A WI  DCMC Bell Helicopter Textron, PO Box 1605, Fort Worth, TX 
76101-1605
S4419A SL  DCMC Lockheed, Fort Worth, PO Box 371, Fort Worth, TX 
76101-0371
S4420A WP  DCMC Lockheed Martin Vought Systems, PO Box 655907, M/S 
4915, Dallas, TX 75265-5907
S4503A R6  DCMC Thiokol, PO Box 524, Mail Stop Z-10, Brigham City, 
UT 84302-0524
S4801A XW  DCMC Seattle, Corporate Campus East III, 3009 112th Ave, 
NE, Suite 200, Bellevue, WA 98004-8019
S4804A SP  DCMC Boeing, Seattle, PO Box 3707, Seattle, WA 98124-2207
S4807A WM  DCMC Stewart and Stevenson, Inc., PO Box 457, Sealy, TX 
77474-0457

Appendix I to Chapter 2 [Amended]

    104. Appendix I to Chapter 2 is amended in section I-102, 
paragraphs (a) and (b), and in section I-103, paragraph (a), by 
revising the date ``September 30, 1998'' to read ``September 30, 
1999''.
    105. Appendix I to Chapter 2 is amended in section I-103, in the 
introductory text of paragraph (b) and in paragraph (c), by revising 
the date ``September 30, 1999'' to read ``September 30, 2000''.
    106. Appendix I to Chapter 2 is amended in section I-109, in 
paragraph (e)(3), by revising the date ``October 1, 1999, to read 
``October 1, 2000''.

[FR Doc. 98-5272 Filed 3-6-98; 8:45 am]
BILLING CODE 5000-04-M