[Federal Register Volume 68, Number 31 (Friday, February 14, 2003)]
[Proposed Rules]
[Page 7491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3576]


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DEPARTMENT OF DEFENSE

48 CFR Part 252

[DFARS Case 2002-D016]


Defense Federal Acquisition Regulation Supplement; Liability for 
Loss Under Vessel Repair and Alteration Contracts

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to increase a contractor's liability for 
loss or damage under vessel repair and alteration contracts, from 
$5,000 to $50,000 per incident. The increased dollar ceiling is based 
on adjustments for inflation and the need to provide a financial 
incentive for contractors to minimize loss or damage.

DATES: DoD will consider all comments received by April 15, 2003.

ADDRESSES: Respondents may submit comments directly on the World Wide 
Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an 
alternative, respondents may e-mail comments to: [email protected]. 
Please cite DFARS Case 2002-D016 in the subject line of e-mailed 
comments.
    Respondents that cannot submit comments using either of the above 
methods may submit comments to: Defense Acquisition Regulations 
Council, Attn: Ms. Sandra Haberlin, OUSD(AT&L)DPAP(DAR), IMD 3C132, 
3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-
0350. Please cite DFARS Case 2002-D016.
    At the end of the comment period, interested parties may view 
public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra Haberlin, (703) 602-0289.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD uses the clause at DFARS 252.217-7012, Liability and Insurance, 
in master agreements for repair and alteration of vessels. The clause 
holds a contractor liable for loss or damage resulting from defective 
contractor workmanship and materials. For any other contractor-incurred 
loss or damage, the contractor bears the first $5,000 of loss or damage 
from each occurrence or incident.
    This rule proposes to increase the contractor's liability ceiling 
from $5,000 to $50,000, because--
    1. The $5,000 ceiling dates back to 1982. This dollar ceiling is 
outdated after considering inflation; and
    2. An analysis of contractor-incurred damages for a period of 3 
years indicates that 70 percent of the incidents were below $50,000. 
DoD anticipates that this increase will incentive contractors to reduce 
the number of such incidents. Improved contractor performance will not 
only reduce the vessel ``down time'' for maintenance and repair, but 
will also make more efficient use of scarce maintenance dollars that 
would otherwise be used to pay for the damage between the $5,000 and 
the $50,000 ceilings.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    This rule may 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. DoD has prepared an Initial 
Regulatory Flexibility Analysis (IRFA), which is summarized as follows:
    This rule proposes to increase a contractor's liability from $5,000 
to $50,000 for loss or damage to a Government vessel, materials, or 
equipment. The rule will apply to small entities that have a master 
agreement with DoD for repair and alteration of vessels. There is no 
available estimate of the total number of small entities that will be 
subject to the rule. However, the Naval Sea Systems Command (NAVSEA), 
which is responsible for the maintenance and repair of the majority of 
vessels, has collected data indicating that, during the period from May 
1997 to October 2002, there were 61 occurrences of contractor-caused 
damages. Of those, 13 occurrences (21 percent) were attributed to small 
entities. The proposed rule does not impose any reporting, 
recordkeeping, or other compliance requirements and does not duplicate, 
overlap, or conflict with any other Federal rules. This rule will 
impact small entities, since they will need to increase their insurance 
coverage from $5,000 to $50,000. DoD considered using a ceiling of less 
than $50,000, but believes the $50,000 ceiling to be appropriate 
because--
    1. This ceiling would capture a majority of claims, since a NAVSEA 
study shows that 70 percent of claims incurred during a recent 3-year 
period were for amounts less than $50,000; and
    2. This increase should incentivize contractors to reduce the 
number of such occurrences, thereby reducing vessel ``down-time'' for 
maintenance and repair and making more efficient use of scarce 
maintenance dollars.
    A copy of the IRFA may be obtained from the address specified 
herein. DoD invites comments from small businesses and other interested 
parties. DoD also will consider comments from small entities concerning 
the affected DFARS subparts in accordance with 5 U.S.C. 610. Such 
comments should be submitted separately and should cite DFARS Case 
2002-D016.

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 252

    Government procurement.

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

    Therefore, DoD proposes to amend 48 CFR Part 252 as follows:
    1. The authority citation for 48 CFR Part 252 continues to read as 
follows:

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

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.217-7012  [Amended]

    2. Section 252.217-7012 is amended as follows:
    a. By revising the clause date to read ``(XXX 2003)''; and
    b. In paragraph (b)(6), by removing ``$5,000'' and adding in its 
place ``$50,000''.

[FR Doc. 03-3576 Filed 2-13-03; 8:45 am]
BILLING CODE 5001-08-P