[Federal Register Volume 63, Number 145 (Wednesday, July 29, 1998)]
[Rules and Regulations]
[Pages 40374-40375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20187]


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DEPARTMENT OF DEFENSE

48 CFR Part 242

[DFARS Case 97-D012]


Defense Federal Acquisition Regulation Supplement; Contractor 
Insurance/Pension Reviews

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: The Director of Defense Procurement has issued a final rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to revise guidance pertaining to the conduct of Contractor Insurance/
Pension Reviews (CIPRs). The rule clarifies requirements for conducting 
a CIPR, eliminates the requirement to conduct a CIPR at least every 2 
years, and requires the performance of a special CIPR under certain 
circumstances.

EFFECTIVE DATE: July 29, 1998.

FOR FURTHER INFORMATION CONTACT:
Rick Layser, Defense Acquisition Regulations Council, PDUSD (A&T) DP 
(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. 
Telephone (703) 602-0131; telefax (703) 602-0350. Please cite DFARS 
Case 97-D012.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule revises the guidance in DFARS Subpart 242.73 
pertaining to the conduct of CIPRs. A proposed rule was published in 
the Federal Register on August 20, 1997 (62 FR 44249). Ten respondents 
submitted comments on the proposed rule. All comments were considered 
in the development of the final rule.

B. Regulatory Flexibility Act

    The Department of Defense certifies that this final rule 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 the rule applies only to contractors whose annual 
qualifying sales to the Government exceed $40 million, and no small 
entities are known to meet this criterion.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the final rule 
does not impose any information collection requirements that require 
the approval of the Office of Management and Budget under 44 U.S.C. 
3501, et seq.

List of Subjects in 48 CFR Part 242

    Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
    Therefore, 48 CFR Part 242 is amended as follows:
    1. The authority citation for 48 CFR Part 242 continues to read as 
follows:

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

PART 242--CONTRACT ADMINISTRATION

    2. Sections 242.7301 and 242.7303 are revised to read as follows:


242.7301  General.

    (a) The administrative contracting officer (ACO) is responsible for 
determining the allowability of insurance/pension costs in Government 
contracts. Defense Logistics Agency (DLA) insurance/pension specialists 
and Defense Contract Audit Agency (DCAA) auditors assist ACOs in making 
these determinations by conducting CIPRs.
    (1) A CIPR is an in-depth evaluation of a contractor's--
    (i) Insurance program;
    (ii) Pension plans;
    (iii) Other deferred compensation plans; and
    (iv) Related policies, procedures, practices, and costs.
    (2) A special CIPR is a joint DLA/DCAA review that concentrates on 
specific areas of the contractor's insurance program, pension plan, or 
other deferred compensation plan.
    (b) DLA is the DoD Executive Agency for the performance of all 
CIPRs conducted under 242.7302.


242.7302  Requirements.

    (a)(1) A CIPR shall be conducted only when--
    (i) A contractor has $40 million of qualifying sales to the 
Government during the contractor's preceding fiscal year; and
    (ii) The ACO, with advice from DLA insurance/pension specialists 
and DCAA auditors, determines a CIPR is needed based on a risk 
assessment of the contractor's past experience and current 
vulnerability.
    (2) Qualifying sales are sales for which cost or pricing data were 
required under 10 U.S.C. 2306a, as implemented in FAR 15.403, or that 
are contracts priced on other than a firm-fixed-price or fixed-price 
with economic price adjustment basis. Sales include prime contracts, 
subcontracts, and modifications to such contracts and subcontracts.
    (b) A special CIPR shall be performed for a contractor (including, 
but not limited to, a contractor meeting the requirements in paragraph 
(a) of this section) when any of the following circumstances exists, 
but only if the circumstance(s) may result in a material impact on 
Government contract costs:
    (1) Information reveals a deficiency in the contractor's insurance/
pension program.
    (2) The contractor proposes or implements changes in its insurance, 
pension, or deferred compensation plans.
    (3) The contractor is involved in a merger, acquisition, or 
divestiture.
    (4) The Government needs to follow up on contractor implementation 
of prior CIPR recommendations.

[[Page 40375]]

    (c) The DCAA auditor shall use relevant findings and 
recommendations of previously performed CIPRs in determining the scope 
of any audits of insurance and pension costs.
    (d) When a Government organization believes that a review of the 
contractor's insurance/pension program should be performed, that 
organization should provide a recommendation for a review to the ACO. 
If the ACO concurs, the review should be performed as part of an ACO-
initiated special CIPR or as part of a CIPR already scheduled for the 
near future.


242.7303   Responsibilities.

    (a) The ACO is responsible for--
    (1) Determining the need for a CIPR under 242.7302;
    (2) Requesting and scheduling the reviews with the appropriate DLA 
activity;
    (3) Notifying the contractor of the proposed date and purpose of 
the review, and obtaining any preliminary data needed by the DLA 
insurance/pension specialist or the DCAA auditor;
    (4) Reviewing the CIPR report, advising the contractor of the 
recommendations contained therein, considering contractor comments, and 
rendering a decision on those recommendations;
    (5) providing other interested contracting officers copies of 
documents related to the CIPR;
    (6) Ensuring adequate follow-up on all CIPR recommendations; and
    (7) Performing contract administration responsibilities related to 
Cost Accounting Standards administration as described in FAR Subparts 
30.2 and 30.6.
    (b) The DLA insurance/pension specialist is responsible for--
    (1) Preparing and maintaining the schedule of CIPRs to be performed 
during the next 12 months and providing the military departments and 
DCAA a copy of the schedule;
    (2) Issuing a technical report on the contractor's insurance/
pension plans for incorporation into the final CIPR report based on an 
analysis of the contractor's pension program, insurance program, and 
other related data;
    (3) Leading the team that conducts the review. Another individual 
may serve as the team leader when both the insurance/pension specialist 
and the individual agree. The team leader is responsible for--
    (i) Maintaining complete documentation for CIPR reports;
    (ii) To the extent possible, resolving discrepancies between audit 
reports and CIPR draft reports prior to releasing the final CIPR 
report;
    (iii) Preparing and distributing the final CIPR report;
    (iv) Providing the final audit report and/or the insurance/pension 
specialist's report as an attachment to the CIPR report; and
    (v) Preparing a draft letter for the administrative contracting 
officer's use in notifying the contractor of CIPR results; and
    (4) When requested, advising administrative contracting officers 
and other Government representatives concerning contractor insurance/
pension matters.
    (c) The DCAA auditor is responsible for--
    (1) Participating as a member of the CIPR team or serving as the 
team leader (see paragraph (b)(3) of this section);
    (2) Issuing an audit report for incorporation into the final CIPR 
report based on an analysis of the contractor's books, accounting 
records, and other related data; and
    (3) Performing contract audit responsibilities related to Cost 
Accounting Standards administration as described in FAR Subparts 30.2 
and 30.6.

[FR Doc. 98-20187 Filed 7-28-98; 8:45am]
BILLING CODE 5000-04-M