[Federal Register Volume 67, Number 105 (Friday, May 31, 2002)]
[Rules and Regulations]
[Pages 38023-38024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13358]


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

DEPARTMENT OF DEFENSE

48 CFR Part 244

[DFARS Case 2000-D028]


Defense Federal Acquisition Regulation Supplement; Subcontract 
Commerciality Determinations

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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

SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to clarify the 
responsibilities of contractors and administrative contracting officers 
regarding determinations as to whether a subcontract item meets the 
definition of ``commercial item'' specified in the Federal Acquisition 
Regulation (FAR).

EFFECTIVE DATE: May 31, 2002.

FOR FURTHER INFORMATION CONTACT: Mr. Rick Layser, Defense Acquisition 
Regulations Council, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense 
Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0293; 
facsimile (703) 602-0350. Please cite DFARS Case 2000-D028.

SUPPLEMENTARY INFORMATION:   

A. Background

    This final rule amends the DFARS to specify that--
    (1) The contractor will determine whether a particular subcontract 
item meets the definition of ``commercial item''; and
    (2) When conducting a contractor purchasing system review (CPSR), 
the administrative contracting officer will review the adequacy of 
rationale documenting commercial item determinations to ensure 
compliance with the definition of ``commercial item'' in FAR 2.101.
    DoD published a proposed rule at 66 FR 47159 on September 11, 2001. 
Three sources submitted comments on the proposed rule. A summary of the 
comments and the DoD response is provided below:
    Comment: Amend DFARS subpart 244.3 to add a requirement for the 
administrative contracting officer, when performing a CPSR, to 
ascertain whether the contractor is requiring its subcontractors to 
provide any form of cost or pricing data. This will provide insight as 
to whether prime contractors are correctly adhering to the definition 
of a commercial item.
    DoD Response: The recommended additional requirement is beyond the 
intent of this DFARS rule. The intent of the rule is to clarify the 
responsibilities of contractors and administrative contracting officers 
regarding commercial item determinations for subcontracts, not to add 
new requirements for the performance of CPSRs. FAR subpart 44.3, as 
supplemented by this DFARS rule, provides sufficient policy regarding 
the extent of CPSRs.
    Comment: The rule introduces additional confusion to the process of 
conducting CPSRs, which are now done on a risk evaluation basis. The 
rule does not have a threshold for the value of the prime contract or 
the subcontract. The rule will result in significant additional effort 
on the part of the buying organization to justify and support the 
commercial item determination for the subcontract.
    DoD Response: Do not concur. In accordance with FAR 44.302, a CPSR 
is not performed for a specific contract. Rather, when a contractor's 
sales to the Government are expected to exceed $25 million during the 
next 12 months, the administrative contracting officer must perform a 
review to determine if a CPSR is needed. This rule does not change the 
CPSR process or increase the amount of Government oversight. The 
Government already had the authority to review all aspects of 
subcontracts that are subject to review as part of the CPSR. 
Documentation for commercial item determinations should be part of a 
contractor's normal business procedures; therefore, this rule should 
not result in significant additional effort.
    Comment: Amend DFARS 244.402 to clarify that subcontractors are 
responsible for making commerciality determinations for lower-tier 
subcontracts.
    DoD Response: The additional clarification is unnecessary, as the 
Government does not have privity of contract with subcontractors, and 
DoD administrative contracting officers do not review lower-tier 
subcontracts when conducting CPSRs.
    Comment: The reference to FAR 15.403-1(c)(3) is unnecessary in that 
it pertains to the exceptions from obtaining cost or pricing data and 
does not clarify responsibilities for commercial item determinations.
    DoD Response: The reference to FAR 15.403-1(c)(3) is relevant in 
situations where subcontract items are improperly designated as 
commercial and, as a result, are improperly exempted from cost or 
pricing data requirements. As outlined in FAR 44.305-3, recurring 
noncompliance with FAR 15.403 is a condition for withholding or 
withdrawing a contractor*s purchasing system approval. The language in 
DFARS 244.402(a) has been modified to make the point of the FAR 
reference clearer.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD 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 merely clarifies responsibilities regarding commercial 
item determinations for subcontracts.

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 244

    Government procurement.

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

    Therefore, 48 CFR part 244 is amended as follows:
    1. The authority citation for 48 CFR part 244 continues to read as 
follows:

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

PART 244--SUBCONTRACTING POLICIES AND PROCEDURES

    2. Section 244.303 is added to read as follows:


244.303  Extent of review.

    Also review the adequacy of rationale documenting commercial item 
determinations to ensure compliance with the definition of ``commercial 
item'' in FAR 2.101.
    3. Section 244.402 is added to read as follows:


244.402  Policy requirements.

    (a) Contractors shall determine whether a particular subcontract 
item meets the definition of a commercial item. This requirement does 
not affect the contracting officer's responsibilities or determinations 
made under FAR 15.403-1(c)(3). Contractors are expected to exercise 
reasonable business judgment in making such

[[Page 38024]]

determinations, consistent with the guidelines for conducting market 
research in FAR part 10.

[FR Doc. 02-13358 Filed 5-30-02; 8:45am]
BILLING CODE 5001-08-P