[Federal Register Volume 64, Number 73 (Friday, April 16, 1999)]
[Rules and Regulations]
[Pages 18829-18830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9561]


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DEPARTMENT OF DEFENSE

48 CFR Part 235

[DFARS Case 98-D306]


Defense Federal Acquisition Regulation Supplement; Manufacturing 
Technology Program

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: The Director of Defense Procurement has issued an interim rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to implement Section 213 of the Strom Thurmond National Defense 
Authorization Act of Fiscal Year 1999. Section 213 requires that, for 
each contract entered into on a cost-sharing basis under the 
Manufacturing Technology Program, the ratio of contract recipient cost 
to Government cost must be determined by competitive procedures.

DATES: Effective date: April 16, 1999.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before June 15, 1999, to be 
considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to Defense 
Acquisition Regulations Council, Attn: Ms. Melissa Rider, PDUSD (A&T) 
DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. 
Telefax (703) 602-0350.
    E-mail comments submitted over the Internet should be addressed to: 
[email protected]
    Please cite DFARS Case 98-D306 in all correspondence related to 
this issue. E-mail comments should cite DFARS Case 98-D306 in the 
subject line.

FOR FURTHER INFORMATION CONTACT: Ms. Melissa Rider, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule amends DFARS guidance concerning the 
Manufacturing Technology Program to implement Section 213 of the Strom 
Thurmond National Defense Authorization Act for Fiscal Year 1999 
(Public Act 105-261). Section 213 amends 10 U.S.C. 2525(d) to require 
that, for each contract entered into on a cost-sharing basis under the 
Manufacturing Technology Program, the ratio of contract recipient cost 
to Government cost must be determined by competitive procedures; and 
that the Secretary of Defense may delegate the authority to approve use 
of other than a cost-sharing contract under the Program only to the 
Under Secretary of Defense (Acquisition and Technology) of a service 
acquisition executive. On January 9, 1999, the Secretary of Defense 
delegated this authority to the Under Secretary of Defense (Acquisition 
and Technology).
    The rule also removes guidance from DFARS 235.006 pertaining to the 
Manufacturing Technology Program, as the guidance has been relocated to 
a new section at 235.006-70; and removes obsolete language from 235.006 
pertaining to prior years' appropriations acts.

B. Regulatory Flexibility Act

    This interim rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the only 
new requirement for offerors or contractors is a requirement for the 
inclusion of a cost-sharing ratio in proposals for contracts under the 
Manufacturing Technology Program. This change is not expected to 
significantly alter the procedures for award of contracts under the 
Manufacturing Technology Program, as the DFARS already requires the use 
of cost-sharing arrangements and competitive procedures for contracts 
under the Program. 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 98-D306 in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the 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.

D. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to publish this 
interim rule prior to affording the public an opportunity to comment. 
This interim rule implements Section 213 of the Strom Thurmond National 
Defense Authorization Act for Fiscal Year 1999 (Public Law 105-261) 
pertaining to the Manufacturing Technology Program. Section 213 became 
effective on October 17, 1998. Comments received in response to the 
publication of this interim rule will be considered in the formation of 
the final rule.

List of Subjects in 48 CFR Part 235

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

    Therefore, 48 CFR Part 235 is amended as follows:
    1. The authority citation for 48 CFR Part 235 continues to read as 
follows:

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

PART 235--RESEARCH AND DEVELOPMENT CONTRACTING

    2. Section 235.006 is revised to read as follows:

[[Page 18830]]

235.006  Contracting methods and contract type.

    (b)(i) Do not award a fixed-price type contract for a development 
program effort unless--
    (A) The level of program risk permits realistic pricing;
    (B) The use of a fixed-price type contract permits an equitable and 
sensible allocation of program risk between the Government and the 
contractor; and
    (C) A written determination that the criteria of paragraphs 
(b)(i)(A) and (B) of this section have been met is executed--
    (1) By the Under Secretary of Defense (Acquisition and Technology) 
(USD (A&T)) for--
    (i) Research and development for non-major systems, if the contract 
is over $25 million;
    (ii) The lead ship of a class; or
    (iii) The development of a major system (as defined in FAR 2.101) 
or subsystem thereof, if the contract is over $25 million; or
    (2) By the contracting officer for any development not covered by 
paragraph (b)(i)(C)(1) of this section.
    (ii) Obtain USD (A&T) approval of the Government's prenegotiation 
position before negotiations begin, and obtain USD (A&T) approval of 
the negotiated agreement with the contractor before the agreement is 
executed, for any action that is--
    (A) An increase of more than $250 million in the price or ceiling 
price of fixed-price type development contract, or a fixed-price type 
contract for the lead ship of a class;
    (B) A reduction in the amount of work under a fixed-price type 
development contract or a fixed-price type contract for the lead ship 
of a class, when the value of the work deleted is $100 million or more; 
or
    (C) A repricing of fixed-price type production options to a 
development contract, or a contract for the lead ship of a class that 
increases the price or ceiling price by more than $250 million for 
equivalent quantities.
    (iii) Notify the USD (A&T) of an intent not to exercise a fixed-
price production option on a development contract for a major weapon 
system reasonably in advance of the expiration of the option exercise 
period.
    3. Section 235.006-70 is added to read as follows:


235.006-70  Manufacturing Technology Program

    (a) This subsection implements 10 U.S.C. 2525(d).
    (b) Award all contract under the Manufacturing Technology Program 
(see DoDI 4200.15, Manufacturing Technology Program) using competitive 
procedures.
    (c)(1) Use a cost-sharing arrangement (see FAR 16.303) for 
contracts awarded under the Manufacturing Technology Program, unless 
the USD (A&T) makes a determination that the contract is for a program 
that--
    (i) Is not likely to have any immediate and direct commercial 
application;
    (ii) Is of sufficiently high risk to discourage cost sharing by 
non-Federal Government sources; or
    (iii) Will be carried out by an institution of higher education.
    (2) Document the contract file with the rationale for any 
determination made in accordance with paragraph (c)(1) of this 
subsection.
    (d) For each contract entered into on a cost-sharing basis, 
determine the ratio of contractor cost to Government cost by 
competitive procedures, i.e., each offeror must propose the ratio as 
part of its proposal. If only one offer is received, negotiate the 
ratio that provides the best value to the Government.
[FR Doc. 99-9561 Filed 4-15-99; 8:45 am]
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