[Federal Register Volume 66, Number 235 (Thursday, December 6, 2001)]
[Rules and Regulations]
[Pages 63336-63338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30264]


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DEPARTMENT OF DEFENSE

48 CFR Part 217

[DFARS Case 2000-D303/304]


Defense Federal Acquisition Regulation Supplement; Multiyear 
Contracting

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement Sections 802 and 
806 of the National Defense Authorization Act for Fiscal Year 2001. 
Sections 802 and 806 amend requirements pertaining to multiyear 
contracting.

EFFECTIVE DATE: December 6, 2001.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra Haberlin, Defense 
Acquisition Regulations Council, OUSD (AT&L) DP (DAR), IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0289; 
facsimile (703) 602-0350. Please cite DFARS Case 2000-D303/304.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 802 of the National Defense Authorization Act for Fiscal 
Year 2001 (Pub. L. 106-398) relocated provisions relating to multiyear 
contracts for services from 10 U.S.C. 2306(g) to a new 10 U.S.C. 2306c. 
Section 806 of Public Law 106-398 amended 10 U.S.C. 2306b to add 
reporting requirements pertaining to multiyear contracts for property. 
This final rule updates DFARS Subpart 217.1 to reflect current 
statutory requirements pertaining to multiyear contracts.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

[[Page 63337]]

B. Regulatory Flexibility Act

    This final rule does not constitute a significant revision within 
the meaning of FAR 1.501 and Public Law 98-577 and publication for 
public comment is not required. However, DoD will consider comments 
from small entities concerning the affected DFARS subpart in accordance 
with 5 U.S.C. 610. Such comments should cite DFARS Case 2000-D303/304.

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.

List of Subjects in 48 CFR Part 217

    Government procurement.

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

    Therefore, 48 CFR Part 217 is amended as follows:

    1. The authority citation for 48 CFR part 217 continues to read as 
follows:

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

PART 217--SPECIAL CONTRACTING METHODS

    2. Sections 217.170 through 217.172 are revised to read as follows:


217.170  General.

    (a) Before awarding a multiyear contract, the head of the agency 
must compare the cost of that contract to the cost of an annual 
procurement approach, using a present value analysis. Do not award the 
multiyear contract unless the analysis shows that the multiyear 
contract will result in the lower cost (10 U.S.C. 2306b(l)(7); Section 
8008(a) of Public Law 105-56 and similar sections in subsequent DoD 
appropriations acts).
    (b) The head of the agency must provide written notice to the 
congressional defense committees at least 10 days before termination of 
any multiyear contract (10 U.S.C. 2306b(l)(6); 10 U.S.C. 2306c(d)(3); 
Section 8008(a) of Public Law 105-56 and similar sections in subsequent 
DoD appropriations acts).
    (c) 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.
    (d)(1) DoD must receive authorization from, or provide notification 
to, Congress before entering into a multiyear contract for certain 
procurements, including those expected to--
    (i) Exceed $500 million (see 217.171(a)(5); 217.172(c); and 
217.173(b)(4));
    (ii) Employ economic order quantity procurement in excess of $20 
million in any one year (see 217.174(a)(1));
    (iii) Employ an unfunded contingent liability in excess of $20 
million (see 217.171(a)(4)(i) and 217.172(d)(1));
    (iv) Involve a contract for advance procurement leading to a 
multiyear contract that employs economic order quantity procurement in 
excess of $20 million in any one year (see 217.174(a)(2)); or
    (v) Include a cancellation ceiling in excess of $100 million (see 
217.171(a)(4)(ii) and 217.172(d)(2)).
    (2) A DoD component must submit a request for authority to enter 
into multiyear contracts described in paragraphs (d)(1)(i) through (iv) 
of this section as part of the component's budget submission for the 
fiscal year in which the multiyear contract will be initiated. DoD will 
include the request, for each candidate it supports, as part of the 
President's Budget for that year and in the Appendix to that budget as 
part of proposed legislative language for the appropriations bill for 
that year (Section 8008(b) of Public Law 105-56).
    (3) If the advisability of using a multiyear contract becomes 
apparent too late to satisfy the requirements in paragraph (d)(2) of 
this section, the request for authority to enter into a multiyear 
contract must be--
    (i) Formally submitted by the President as a budget amendment; or
    (ii) Made by the Secretary of Defense, in writing, to the 
congressional defense committees. (Section 8008(b) of Public Law 105-
56)
    (4) Agencies must establish reporting procedures to meet the 
congressional notification requirements of paragraph (d)(1) of this 
section. The head of the agency must submit a copy of each notice to 
the Director of Defense Procurement, Office of the Under Secretary of 
Defense (Acquisition, Technology, and Logistics) (OUSD (AT&L) DP), and 
to the Deputy Under Secretary of Defense (Comptroller) (Program/Budget) 
(OUSD (C) (P/B)).


217.171  Multiyear contracts for services.

    (a) 10 U.S.C. 2306c. (1) The head of the agency may enter into a 
multiyear contract for a period of not more than 5 years for the 
following types of 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 aircrew members or foreign language 
training).
    (iv) Base services (e.g., ground maintenance, in-plane refueling, 
bus transportation, and refuse collection and disposal).
    (2) The head of the agency must be guided by the following 
principles when entering into a multiyear contract for services:
    (i) The portion of the cost of any plant or equipment amortized as 
a cost of contract performance should not exceed the ratio between the 
period of contract performance and the anticipated useful commercial 
life of the plant or equipment. As used in this section, ``useful 
commercial life'' means the commercial utility of the facilities rather 
than the physical life, with due consideration given to such factors as 
the location, specialized nature, and obsolescence of the facilities.
    (ii) Consider the desirability of obtaining an option to extend the 
term of the contract for a reasonable period not to exceed 3 years at 
prices that do not include charges for plant, equipment, or other 
nonrecurring costs already amortized.
    (iii) Consider the desirability of reserving the right to take 
title, under the appropriate circumstances, to the plant or equipment 
upon payment of the unamortized portion of the cost.
    (3) Before entering into a multiyear contract for services, the 
head of the agency must make a written determination that--
    (i) There will be a continuing requirement for the services 
consistent with current plans for the proposed contract period;
    (ii) Furnishing the services will require--
    (A) A substantial initial investment in plant or equipment; or
    (B) The incurrence of substantial contingent liabilities for the 
assembly, training, or transportation of a specialized work force; and
    (iii) Using a multiyear contract will promote the best interests of 
the United States by encouraging effective competition and promoting 
economies in operations.
    (4) The head of the agency must provide written notice to the 
congressional defense committees at least 30 days before award of a

[[Page 63338]]

multiyear contract for services that include--
    (i) An unfunded contingent liability in excess of $20 million 
(Section 8008(a) of Public Law 105-56 and similar sections in 
subsequent DoD appropriations acts); or
    (ii) A cancellation ceiling in excess of $100 million.
    (5) The head of the agency must not initiate a multiyear contract 
for services exceeding $500 million unless a law specifically provides 
authority for the contract.
    (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) The head of the agency may use this authority only if the term 
of the contract does not exceed 4 years.


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) The head of the agency may enter into a multiyear contract for 
supplies 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 must not enter into or extend a 
multiyear contract that exceeds $500 million (when entered into or when 
extended) until the Secretary of Defense identifies the contract and 
any extension in a report submitted to the congressional defense 
committees (10 U.S.C. 2306b(l)(5)).
    (d) The head of the agency must provide written notice to the 
congressional defense committees at least 30 days before award of a 
multiyear contract that includes--
    (1) An unfunded contingent liability in excess of $20 million (10 
U.S.C. 2306b(l)(1); Section 8008(a) of Public Law 105-56 and similar 
sections in subsequent DoD appropriations acts); or
    (2) A cancellation ceiling in excess of $100 million (10 U.S.C. 
2306b(g)).
    (e) 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)).

    3. Section 217.174 is revised to read as follows:


217.174  Multiyear contracts that employ economic order quantity 
procurement.

    (a) The head of the agency must provide written notice to the 
congressional defense committees at least 30 days before awarding--
    (1) A multiyear contract providing for economic order quantity 
procurement in excess of $20 million in any one year; or
    (2) A contract for advance procurement leading to a multiyear 
contract that employs economic order quantity procurement in excess of 
$20 million in any one year. (10 U.S.C. 2306b(l)(1); Section 8008(a) of 
Public Law 105-56 and similar sections in subsequent DoD appropriations 
acts)
    (b) Before initiating an advance procurement, the contracting 
officer must verify that it is consistent with DoD policy (e.g., 
Chapter 2 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).
[FR Doc.01-30264 Filed 12-5-01; 8:45 am]
BILLING CODE 5000-04-U