[Federal Register Volume 67, Number 105 (Friday, May 31, 2002)]
[Rules and Regulations]
[Pages 38020-38022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13359]


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DEPARTMENT OF DEFENSE

48 CFR Parts 213, 247, and 252

[DFARS Case 2000-D014]


Defense Federal Acquisition Regulation Supplement; Ocean 
Transportation by U.S.-Flag Vessels

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 specify that requirements 
for use of U.S.-flag vessels, in the transportation of supplies by sea, 
apply to contracts at or below the simplified acquisition threshold as 
well as those that exceed the simplified acquisition threshold.

EFFECTIVE DATE: May 31, 2002.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, (703) 602-0328.

SUPPLEMENTARY INFORMATION:

A. Background

    The clause at DFARS 252.247-7023, Transportation of Supplies by 
Sea, contains requirements for use of U.S.-flag vessels when 
transporting supplies by sea under a DoD contract. The clause requires 
a contractor to (1) submit any request for use of other than U.S.-flag 
vessels in writing to the contracting officer;
    (2) provide a copy of the bill of lading to the contracting officer 
and the Maritime Administration after each shipment of supplies by sea; 
(3) provide with the final invoice a representation as to whether ocean 
transportation and U.S.-flag vessels were used in performance of the 
contract; and (4) include the clause in subcontracts for construction 
supplies, noncommercial items, and certain commercial items.
    Prior to this rule, the DFARS exempted contracts and subcontracts 
at or below the simplified acquisition threshold from use of the clause 
at DFARS 252.247-7023. In accordance with 10 U.S.C. 2631, Supplies: 
Preference to United States Vessels, this rule eliminates the 
exemption. However, the rule prescribes an alternate version of the 
clause for contracts and subcontracts at or below the simplified 
acquisition threshold. The alternate version excludes the requirement 
for a contractor or subcontractor to provide a representation regarding 
ocean transportation with its final invoice.
    DoD published a proposed rule at 66 FR 47153 on September 11, 2001. 
Five sources submitted comments on the proposed rule. A summary of the 
comments and the DoD response is provided below:
    Comment: The rule is contrary to Section 4101 of the Federal 
Acquisition Streamlining Act of 1994 (FASA) (Public Law 103-355; 41 
U.S.C. 429), which requires the Federal Acquisition Regulation (FAR) to 
include 10 U.S.C. 2631 in a list of laws that are inapplicable to 
contracts and subcontracts at or below the simplified acquisition 
threshold unless the Federal Acquisition Regulatory Council makes a 
written determination that it would not be in the best interest of the 
Federal Government to exempt such contracts and subcontracts.
    DoD Response: The list of laws referred to by the respondent 
applies to laws enacted after FASA. 10 U.S.C. 2631 has been in 
existence since 1904. There is no statutory authority to exempt 10 
U.S.C. 2631 for contracts or subcontracts at or below the simplified 
acquisition threshold. In addition, the policy in this DFARS rule is 
consistent with the FAR rule published at 65 FR 24324 on April 25, 
2000, which applies the preference for U.S.-flag vessels to contracts 
awarded using simplified acquisition procedures.
    Comment: The rule is contrary to Section 4201(a) of FASA (41 U.S.C. 
427(a)), which requires that the FAR provide special simplified 
procedures for purchases of property and services for amounts not 
greater than the simplified acquisition threshold. Compliance with 10 
U.S.C. 2631 for such purchases of property would impose unreasonable 
administrative burdens on affected contractors and subcontractors.
    DoD Response: The rule is consistent with the provisions of 41 
U.S.C. 427 in that it seeks to avoid overly burdensome reporting 
requirements for acquisitions at or below the simplified acquisition 
threshold. The rule does not require use of the provision at DFARS 
252.247-7022, Representation of Extent of Transportation by Sea, or the 
clause at DFARS 252.247-7024, Notification of Transportation of 
Supplies by Sea, in acquisitions at or below the simplified acquisition 
threshold. Additionally, the rule limits the requirements of the clause 
at DFARS 252.247-7023, Transportation of Supplies by Sea, in contracts 
and subcontracts at or below the simplified acquisition threshold by 
excluding from those contracts and subcontracts the requirement for a 
contractor or subcontractor to provide a representation regarding ocean 
transportation with its final invoice.
    Comment: DFARS 247.573(a)(2) exempts solicitations valued at or 
below

[[Page 38021]]

the simplified acquisition threshold from the requirement for offerors 
to represent whether or not ocean transportation will be used in 
performance of the contract. This representation (252.247-7022) helps 
to ensure that an offeror is cognizant of requirements for use of U.S.-
flag vessels and that the contracting officer is aware of requirements 
for ocean transportation. Elimination of this representation is likely 
to increase incidents of non-compliance with Cargo Preference laws and 
adversely impact the U.S.-flag merchant marine. In addition, the new 
Alternate III for the clause at 252.247-7023, Transportation of 
Supplies by Sea, eliminates the following requirements for contracts 
and subcontracts at or below the simplified acquisition threshold: (1) 
The requirement for a contractor to provide a representation regarding 
ocean transportation with its final invoice; (2) The requirement for 
the Government to reject and return an invoice that does not contain 
the required representation; and (3) The right of the Government to 
equitably adjust the contract for unauthorized use of non-U.S.-flag 
vessels. Elimination of these requirements diminishes the ability of 
the contracting officer to monitor and enforce compliance with Cargo 
Preference laws.
    DoD Response: Due to the increased potential for use of ocean 
transportation in contracts exceeding the simplified acquisition 
threshold, the DFARS requires contractors to provide multiple 
representations and requires contracting officers to determine whether 
ocean transportation will be required during the solicitation phase of 
an acquisition. These actions ensure that the contracting officer has 
the information needed to perform the appropriate level of oversight 
for high dollar value acquisitions. Since only a very limited number of 
procurements at or below the simplified acquisition threshold will 
require ocean transportation, the type of representations required 
above the simplified acquisition threshold would create an unnecessary 
burden on the majority of contractors receiving contracts at or below 
the threshold. Therefore, DoD believes that the costs of enforcing 
these requirements in contracts with an anticipated value at or below 
the simplified acquisition threshold would far outweigh the benefits 
and would be contrary to the provisions of 41 U.S.C. 427. DoD believes 
that the rule is an appropriate balance between the need to enforce the 
Cargo Preference laws and the need to impose minimal burden on 
contractors and subcontractors (many small businesses) when the value 
of the contract or subcontract does not exceed the simplified 
acquisition threshold.
    Comment: The rule removes DFARS 247.572-1(c), which (1) requires 
the contracting officer to ask each offeror if it will transport 
supplies by sea, (2) requires a contractor that did not anticipate 
transportation of supplies by sea when it submitted its offer to notify 
the Government if it later intends to use ocean transportation, and (3) 
requires the contractor to use U.S.-flag vessels in the transportation 
of supplies by sea and comply with other requirements of the clause at 
252.247-7023, Transportation of Supplies by Sea. Elimination of these 
requirements will decrease Government oversight and will allow offerors 
and contractors to circumvent the requirements of the Cargo Preference 
laws.
    DoD Response: The DFARS still contains these requirements. The text 
at DFARS 247.572-1(c) was removed because it was redundant of the 
policy found at DFARS 247.571(a), 247.573(a), 252.247-7022, 252.247-
7023, and 252.247-7024.
    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 most entities that provide ocean transportation of freight are 
not small businesses, and the rule minimizes the information required 
from offerors and contractors for acquisitions valued at or below the 
simplified acquisition threshold.

C. Paperwork Reduction Act

    The Paperwork Reduction Act applies. This rule increases the number 
of contractors subject to the information collection requirements in 
paragraphs (d) and (e) of the clause at DFARS 252.247-7023. DoD 
estimates that this change will increase paperwork burden by 
approximately 240 hours. The Office of Management and Budget (OMB) has 
approved this information collection for use through July 31, 2004, 
under OMB Control Number 0704-0245.

List of Subjects in 48 CFR Parts 213, 247, and 252

    Government procurement.

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

    Therefore, 48 CFR Parts 213, 247, and 252 are amended as follows:
    1. The authority citation for 48 CFR Parts 213, 247, and 252 
continues to read as follows:

PART 213--SIMPLIFIED ACQUISITION PROCEDURES

    2. Section 213.301 is amended in paragraph (2)(i)(E) by removing 
the word ``and'', and by adding paragraph (2)(i)(G) to read as follows:


213.301  Governmentwide commercial purchase card.

* * * * *
    (2) * * *
    (i) * * *
    (G) Does not require transportation of supplies by sea; and
* * * * *

PART 247--TRANSPORTATION


247.572-1  [Amended]

    3. Section 247.572-1 is amended by removing paragraph (c) and 
redesignating paragraph (d) as paragraph (c).

    4. Section 247.573 is amended by revising paragraph (b)(1) and 
adding paragraph (b)(4) to read as follows:


247.573  Solicitation provision and contract clauses.

* * * * *
    (b)(1) Use the clause at 252.247-7023, Transportation of Supplies 
by Sea, in all solicitations and resultant contracts, except those for 
direct purchase of ocean transportation services.
* * * * *
    (4) Use the clause with its Alternate III in solicitations and 
contracts with an anticipated value at or below the simplified 
acquisition threshold.
* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.212-7001  [Amended]

    5. Section 252.212-7001 is amended as follows:
    a. By revising the clause date to read ``(MAY 2002)''; and
    b. In paragraph (b), in the entry ``252.247-2023'', by removing 
``(MAR 2000)'' the first time it appears and adding in its place ``(MAY 
2002)''.

[[Page 38022]]


    6. Section 252.247-7023 is amended by revising the clause date, 
paragraph (e) introductory text, paragraph (f) introductory text, and 
paragraph (h), and by adding Alternate III to read as follows:


252.247-7023  Transportation of Supplies by Sea.

* * * * *

Transportation of Supplies by Sea (May 2002)

* * * * *
    (e) The Contractor shall, within 30 days after each shipment 
covered by this clause, provide the Contracting Officer and the 
Maritime Administration, Office of Cargo Preference, U.S. Department 
of Transportation, 400 Seventh Street SW., Washington, DC 20590, one 
copy of the rated on board vessel operating carrier's ocean bill of 
lading, which shall contain the following information:
* * * * *
    (f) The Contractor shall provide with its final invoice under 
this contract a representation that to the best of its knowledge and 
belief--
* * * * *
    (h) In the award of subcontracts for the types of supplies 
described in paragraph (b)(2) of this clause, the Contractor shall 
flow down the requirements of this clause as follows:
    (1) The Contractor shall insert the substance of this clause, 
including this paragraph (h), in subcontracts that exceed the 
simplified acquisition threshold in part 2 of the Federal 
Acquisition Regulation.
    (2) The Contractor shall insert the substance of paragraphs (a) 
through (e) of this clause, and this paragraph (h), in subcontracts 
that are at or below the simplified acquisition threshold in part 2 
of the Federal Acquisition Regulation.
* * * * *

Alternate III (May 2002)

    As prescribed in 247.573(b)(4), substitute the following 
paragraph (f) for paragraphs (f), (g), and (h) of the basic clause:
    (f) The Contractor shall insert the substance of this clause, 
including this paragraph (f), in subcontracts that are for a type of 
supplies described in paragraph (b)(2) of this clause.

[FR Doc. 02-13359 Filed 5-30-02; 8:45 am]
BILLING CODE 5001-08-P