[Federal Register Volume 69, Number 180 (Friday, September 17, 2004)]
[Rules and Regulations]
[Pages 55989-55991]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21015]


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DEPARTMENT OF DEFENSE

48 CFR Parts 226 and 252

[DFARS Case 2002-D033]


Defense Federal Acquisition Regulation Supplement; Indian 
Incentive Program

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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[[Page 55990]]

SUMMARY: DoD has adopted as final, with changes, an interim rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to implement DoD Appropriations Act provisions pertaining to the Indian 
Incentive Program. The Program permits incentive payments to 
contractors, and subcontractors at any tier, that use Indian 
organizations, Indian-owned economic enterprises, and Native Hawaiian 
small business concerns as subcontractors.

EFFECTIVE DATE: September 17, 2004.

FOR FURTHER INFORMATION CONTACT: Ms. Donna Hairston-Benford, Defense 
Acquisition Regulations Council, OUSD (AT&L)DPAP(DAR),IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0289; 
facsimile (703) 602-0350. Please cite DFARS Case 2002-D033.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD published an interim rule at 68 FR 56561 on October 1, 2003, to 
implement Section 8021 of the DoD Appropriations Act for Fiscal Year 
2003 (Public Law 107-248). Section 8021 revised the criteria for 
application of the Indian Incentive Program by establishing a >$500,000 
threshold for contracts and subcontracts under which incentives may be 
paid; by authorizing incentive payments for subcontracts awarded to 
Native Hawaiian small business concerns; and by adding contracts and 
subcontracts for commercial items to the Program. Section 8021 of the 
DoD Appropriations Act for Fiscal Year 2004 (Public Law 108-87) and 
Section 8021 of the DoD Appropriations Act for Fiscal Year 2005 (Public 
Law 108-287) contain similar provisions.
    Fourteen sources submitted comments on the interim rule. A 
discussion of the comments is provided below. Differences between the 
interim and final rules are addressed in the response to Comments 1 and 
6.
    1. Comment: Revise requirements for use of the Indian incentive 
clause at DFARS 252.226-7001, to require inclusion of the clause in all 
contracts and subcontracts exceeding $500,000, instead of the present 
requirement for inclusion of the clause in contracts and subcontracts 
exceeding $500,000 when ``subcontracting opportunities may exist.'' 
This change would eliminate the possibility that a subcontracting 
opportunity might be overlooked.
    DoD Response: Concur. The recommended change has been made in the 
final rule at 226.104 and 252.226-7001(g).
    2. Comment: The rule should include the statutory requirement for 
inclusion of the incentive clause in subcontracts exceeding $500,000 at 
any tier.
    DoD Response: The rule requires inclusion of the clause, including 
the flowdown requirement, in all subcontracts exceeding $500,000. This 
covers all subcontracts exceeding $500,000 at all tiers.
    3. Comment: The $500,000 threshold for inclusion of the incentive 
clause in contracts and subcontracts is restrictive and should be 
lowered to $100,000 or less.
    DoD Response: Do not concur. The $500,000 threshold is consistent 
with the Appropriations Act provisions.
    4. Comment: With regard to the requirement for subcontracted 
commercial items to be produced or manufactured in whole or in part by 
a Native firm, the phrase ``produced or manufactured in whole or in 
part'' should be clarified. Solutions offered were: Use of the 
manufacturing standards established by the North American Industry 
Classification System (NAICS) codes; use of a percentage such as that 
contained in the nonmanufacturer rule at FAR 19.102(f)(2); or a 
reference to the Small Business Administration regulations at 13 CFR 
121.406.
    DoD Response: Do not concur. Placing such a restriction on the 
eligibility of a subcontract awarded to a Native firm would be without 
statutory basis.
    5. Comment: Can an Indian business provide a non-commercial item as 
a reseller for the actual manufacturer?
    DoD Response: Neither the Appropriations Act provisions nor the 
DFARS rule place any manufacturing conditions on non-commercial items 
subcontracted under the Program.
    6. Comment: The rule should clarify that Alaska Native Corporations 
are eligible for participation in Program.
    DoD Response: The rule already provides for participation of Alaska 
Native Corporations, through the definitions of ``Indian'' and 
``Indian-owned economic enterprise'' in the clause at 252.226-7001. 
Minor changes have been made to the definition of ``Indian'' to clarify 
this point.
    7. Comment: Are businesses owned by individual Federally recognized 
American Indians eligible for participation in the Program, as well as 
those businesses owned by Federally recognized tribes and 
organizations?
    DoD Response: Yes. The definitions at 252.226-7001 provide for 
participation by Indian-owned businesses that are individually owned or 
tribally owned.
    8. Comment: The Indian Incentive Program should also be applied to 
DoD Family Housing Privatization contracts. Presently, the incentive 
clause cannot be included in these contracts, because the privatization 
contracts are not considered DoD contracts.
    DoD Response: This comment is outside the scope of the DFARS rule. 
Therefore, no change has been made to the rule as a result of this 
comment.
    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 a final 
regulatory flexibility analysis. A copy of the analysis may be obtained 
from the point of contact specified herein. The analysis is summarized 
as follows:
    This rule amends the DFARS to implement Section 8021 of the DoD 
Appropriations Act for Fiscal Year 2003 (Public Law 107-248), Section 
8021 of the DoD Appropriations Act for Fiscal Year 2004 (Public Law 
108-87), and Section 8021 of the DoD Appropriations Act for Fiscal Year 
2005 (Public Law 108-287) pertaining to the Indian Incentive Program. 
The Program permits incentive payments to contractors, and 
subcontractors at any tier, that use Indian organizations, Indian-owned 
economic enterprises, and Native Hawaiian small business concerns as 
subcontractors. DoD received no comments on the initial regulatory 
flexibility analysis. However, as a result of comments received on the 
interim rule, the final rule includes a change that prescribes use of 
the Indian incentive clause at DFARS 252.226-7001 in all contracts and 
subcontracts exceeding $500,000, rather than in only those exceeding 
$500,000 for which subcontracting opportunities are deemed to exist at 
the time of award of the contract or subcontract. The rule requires 
that maximum practicable opportunity be provided for Indian 
organizations, Indian-owned economic enterprises, and Native Hawaiian 
small business concerns to receive subcontract awards; and provides 
that a contractor or subcontractor that awards a subcontract to such an 
entity may receive an incentive payment of 5 percent of the amount of 
the subcontract. There are no practical alternatives that would 
accomplish the objectives of the applicable statutes.

[[Page 55991]]

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 Parts 226 and 252

    Government procurement.

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

0
Accordingly, the interim rule amending 48 CFR parts 226 and 252, which 
was published at 68 FR 56561 on October 1, 2003, is adopted as a final 
rule with the following changes:

0
1. The authority citation for 48 CFR parts 226 and 252 continues to 
read as follows:

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

PART 226--OTHER SOCIOECONOMIC PROGRAMS


226.104  [Amended]

0
2. Section 226.104 is amended by removing the phrase ``for which 
subcontracting opportunities may exist''.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Section 252.212-7001 is amended as follows:
0
a. By revising the clause date to read ``(SEP 2004)''; and
0
b. In paragraph (b) by revising entry ``252.226-7001'' to read as 
follows:


252.212-7001  Contract Terms and Conditions Required to Implement 
Statutes or Executive Orders Applicable to Defense Acquisitions of 
Commercial Items.

* * * * *
    (b) * * *
    ----252.226-7001 Utilization of Indian Organizations, Indian-Owned 
Economic Enterprises, and Native Hawaiian Small Business Concerns (SEP 
2004) (Section 8021 of Public Law 107-248 and similar sections in 
subsequent DoD appropriations acts).
* * * * *

0
4. Section 252.226-7001 is amended as follows:
0
a. By revising the clause date to read ``(SEP 2004)'';
0
b. In paragraph (a) by revising the definition of ``Indian''; and
0
c. By revising paragraph (g) to read as follows:


252.226-7001  Utilization of Indian Organizations, Indian-Owned 
Economic Enterprises, and Native Hawaiian Small Business Concerns.

* * * * *
    (a) * * *
    Indian means--
    (1) Any person who is a member of any Indian tribe, band, group, 
pueblo, or community that is recognized by the Federal Government as 
eligible for services from the Bureau of Indian Affairs (BIA) in 
accordance with 25 U.S.C. 1452(c); and
    (2) Any ``Native'' as defined in the Alaska Native Claims 
Settlement Act (43 U.S.C. 1601 et seq.).
* * * * *
    (g) The Contractor shall insert the substance of this clause, 
including this paragraph (g), in all subcontracts exceeding $500,000.

[FR Doc. 04-21015 Filed 9-16-04; 8:45 am]
BILLING CODE 5001-08-P