[Federal Register Volume 69, Number 61 (Tuesday, March 30, 2004)]
[Rules and Regulations]
[Pages 16481-16483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7044]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 3

RIN 0790-AG97


Transactions Other Than Contracts, Grants, or Cooperative 
Agreements for Prototype Projects

AGENCY: Office of the Secretary, DoD.

ACTION: Final rule.

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SUMMARY: This final rule implements section 822 of the National Defense 
Authorization act for Fiscal Year 2002, Public Law 107-107, 115 Stat. 
1182. Section 822 provides for award of a follow-on production contract 
to traditional Defense contractors, without further competition, when 
the other transaction (OT) agreement for the prototype project provided 
for at least one-third non-Federal cost-share, consistent with law, and 
the OT agreement for the prototype project

[[Page 16482]]

satisfies certain additional conditions of law.

DATES: The final rule is effective March 30, 2004. This final rule will 
become effective for solicitations issued on March 30, 2004, or those 
issued 30 days after March 30, 2004. This final rule may be used for 
new prototype awards that result from solicitations issued prior to 
March 30, 2004.

FOR FURTHER INFORMATION CONTACT: David Boyd, (703) 697-6710.

SUPPLEMENTARY INFORMATION: 

Background and Purpose

    Section 845 of the National Defense Authorization Act for Fiscal 
Year 1994, Public Law 103-160, 107 Stat. 1721, as amended, authorizes 
the Secretary of a Military Department, the Director of Defense 
Advanced Research Projects Agency and any other official designated by 
the Secretary of Defense, to enter into transactions other than 
contracts, grants or cooperative agreements in certain situations for 
prototype projects that are directly relevant to weapons or weapon 
systems proposed to be acquired or developed by the Department of 
Defense. Such transactions are commonly referred to as ``other 
transaction'' agreements for prototype projects. To the extent that a 
particular statute or regulation is limited in its applicability to the 
use of a procurement contract, it would generally not apply to ``other 
transactions'' for prototype projects.
    Use of OT authority is authorized by law in the absence of the 
significant participation of a nontraditional Defense contractor, when 
at least one-third of the costs of the prototype project are to be 
provided by non-Federal parties to the agreement. The authority granted 
by section 822 of the National Defense Authorization Act for Fiscal 
Year 2002 provides for the authority to continue such prototype 
projects into production without competition in certain circumstances. 
The circumstances are identified in this rule. Additionally, a rule 
will be issued to the Defense Federal Acquisition Regulation Supplement 
that exempts such production contracts from further competition, 
notwithstanding the requirements of section 2304 of title 10, United 
States Code.
    In implementing the law, the Department clarifies that the number 
of production units and target prices proposed for production must be 
evaluated during the competition for the prototype project. This is 
consistent with the law's competition requirement and is the basis for 
being exempted from the need for further competition for the stated 
production quantity.
    A proposed rule was published in the Federal Register for public 
comment on May 20, 2003 (68 FR 27497). No comments were received.

Regulatory Evaluation

Executive Order 12866, ``Regulatory Planning and Review''

    It has been determined that this rule is not a significant rule as 
defined under section 3(f)(1) through 3(f)(4) of Executive Order 12866.

Unfunded Mandates Reform Act (Sec. 202, Pub. L. 104-4)

    It has been certified that this rule does not contain a Federal 
mandate that may result in the expenditure by State, local and tribal 
governments, in aggregate, or by the private sector, of $100 million or 
more in any one year.

Pub. L. 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)

    It has been certified that this rule is not subject to the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) because it would not, 
if promulgated, have a significant economic impact on a substantial 
number of small entities. The rule does not require additional 
recordkeeping or other significant expense by project participants.

Pub. L. 96-511, ``Paperwork Reduction Act of 1995'' (44 U.S.C. 3501 et 
seq.)

    It has been certified that this rule does not impose any reporting 
or record keeping requirements under the Paperwork Reduction Act of 
1995.

Federalism (Executive Order 13132)

    It has been certified that this rule does not have federalism 
implications, as set forth in Executive Order 13132.

List of Subjects in 32 CFR Part 3

    Government procurement, Transactions for prototype projects.


0
Accordingly, 32 CFR part 3 is amended to read as follows:

PART 3--TRANSACTIONS OTHER THAN CONTRACTS, GRANTS, OR COOPERATIVE 
AGREEMENTS FOR PROTOTYPE PROJECTS

0
1. The authority citation for 32 CFR part 3 contiinues to read as 
follows:

    Authority: Section 845 of Public Law (103-160, 107 Stat. 1721, 
as amended.


Sec.  3.4  [Amended]

0
2. Section 3.4 is amended to add new definitions in aphabetical order 
to read as follows:
* * * * *
    Contracting Officer. A person with the authority to enter into, 
administer, and/or terminate contracts and make related determinations 
and findings as defined in Chapter 1 of Title 48, CFR, Federal 
Acquisition Regulation, Section 2.101(b).
* * * * *
    Project Manager. The government manager for the prototype project.
* * * * *

0
3. New Sec.  3.9 is added to read as follows:


Sec.  3.9  Follow-on production contracts.

    (a) Authority. A competitively awarded OT agreement for a prototype 
project that satisfies the condition set forth in law that requires 
non-Federal parties to the OT agreement to provide at least one-third 
of the costs of the prototype project may provide for the award of a 
follow-on production contract to the awardee of the OT prototype 
agreement for a specific number of units at specific target prices, 
without further competition.
    (b) Conditions. The Agreements Officer must do the following in the 
award of the prototype project:
    (1) Ensure non-Federal parties to the OT prototype agreement offer 
at least one-third of the costs of the prototype project pursuant to 
subsection (d)(1)(B)(i), 10 U.S.C. 2371 note.
    (2) Use competition to select parties for participation in the OT 
prototype agreement and evaluate the proposed quantity and target 
prices for the follow-on production units as part of that competition.
    (3) Determine the production quantity that may be procured without 
further competition, by balancing of the level of the investment made 
in the project by the non-Federal parties with the interest of the 
Federal Government in having competition among sources in the 
acquisition of the product or products prototyped under the project.
    (4) Specify the production quantity and target prices in the OT 
prototype agreement and stipualte in the agreement that the Contracting 
Officer for the follow-on contract may award a production contract 
without further competition if the awardee successfully completes the 
prototype project and agrees to production quantities and prices that 
do not exceed those specified in the OT prototype agreement (see part 
206.001 of the Defense Federal Acquisition Regulation Supplement).
    (c) Limitation. As a matter of policy, establishing target prices 
for production units should only be considered when the risk of the 
prototype project permits realistic production pricing without placing 
undue risks on the awardee.

[[Page 16483]]

    (d) Documentation. (1) The Agreements Officer will need to provide 
information to the Contracting Officer from the agreement and award 
file that the conditions set forth in paragraph (b) of this section 
have been satisfied.
    (2) The information shall contain, at a minimum:
    (i) The competitive procedures used;
    (ii) How the production quantities and target prices were evaluated 
in the competition;
    (iii) The percentage of cost-share; and
    (iv) The production quantities and target prices set forth in the 
OT agreement.
    (3) The Project Manager will provide evidence of successful 
completion of the prototype project to the Contracting Officer.

    Dated: March 12, 2004.
Patricia L. Toppings,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 04-7044 Filed 3-29-04; 8:45 am]
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