[Federal Register Volume 69, Number 210 (Monday, November 1, 2004)]
[Rules and Regulations]
[Pages 63331-63332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-24288]



48 CFR Part 231

[DFARS Case 2003-D036]

Defense Federal Acquisition Regulation Supplement; Cost 
Principles and Procedures

AGENCY: Department of Defense (DoD).

ACTION: Final rule.


SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to update text pertaining to 
contract cost principles. This rule is a result of a transformation 
initiative undertaken by DoD to dramatically change the purpose and 
content of the DFARS.

DATES: Effective November 1, 2004.

FOR FURTHER INFORMATION CONTACT: Mr. Thaddeus Godlewski, Defense 
Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-2022; 
facsimile (703) 602-0350. Please cite DFARS Case 2003-D036.


A. Background

    DFARS Transformation is a major DoD initiative to dramatically 
change the purpose and content of the DFARS. The objective is to 
improve the efficiency and effectiveness of the acquisition process, 
while allowing the acquisition workforce the flexibility to innovate. 
The transformed DFARS will contain only requirements of law, DoD-wide 
policies, delegations of FAR authorities, deviations from FAR 
requirements, and policies/procedures that have a significant effect 
beyond the internal operating procedures of DoD or a significant cost 
or administrative impact on contractors or offerors. Additional 
information on the DFARS Transformation initiative is available at 
    This final rule is a result of the DFARS Transformation initiative. 
The DFARS changes--
     Delete the text at DFARS 231.205-10, Cost of money, 
because it is redundant of the text in DFARS Subpart 230.70, Facilities 
Capital Employed for Facilities in Use.
     Clarify the text at DFARS 231.205-22, Legislative lobbying 
costs, to specify that these costs are statutorily unallowable.
     Revise the text at DFARS 231.205-70, External 
restructuring costs, to--
    1. Eliminate unnecessary references to fiscal years 1995, 1997, and 
1998 legislation.
    2. Delete text at 231.205-70(c)(1)(iv)(A) and (B) regarding 
business combinations that occurred on or before November 18, 1997. 
This text is unnecessary, because external restructurings normally must 
be initiated within 3 years of a business combination.
    3. Delete text at 231.205-70(d), Procedures and ACO 
responsibilities. This text has been relocated to the new DFARS 
companion resource, Procedures, Guidance, and Information (PGI). A 
final rule addressing the purpose and structure of PGI is published 
elsewhere in this issue of the Federal Register under DFARS Case 2003-
D090, Procedures, Guidance, and Information. PGI is available at http://www.acq.osd.mil/dpap/dars/index.htm.
    DoD published a proposed rule at 69 FR 8154 on February 23, 2004. 
DoD received no comments on the proposed rule. Therefore, DoD has 
adopted the proposed rule as a final rule without change.
    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 clarifies existing DFARS text, and deletes DFARS text 
that is redundant, outdated, or procedural, but makes no significant 
change to contracting policy.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the rule does 
not impose any information collection requirements that require the 

[[Page 63332]]

of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 231

    Government procurement.

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

Therefore, 48 CFR part 231 is amended as follows:
1. The authority citation for 48 CFR part 231 continues to read as 

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


231.205-10  [Removed]

2. Section 231.205-10 is removed.

3. Section 231.205-22 is revised to read as follows:

231.205-22  Legislative lobbying costs.

    (a) Costs associated with preparing any material, report, list, or 
analysis on the actual or projected economic or employment impact in a 
particular State or congressional district of an acquisition program 
for which all research, development, testing, and evaluation has not 
been completed also are unallowable (10 U.S.C. 2249).

4. Section 231.205-70 is amended by revising paragraphs (a), (c), and 
(d) to read as follows:

231.205-70  External restructuring costs.

    (a) Scope. This subsection--
    (1) Prescribes policies and procedures for allowing contractor 
external restructuring costs when savings would result for DoD; and
    (2) Implements 10 U.S.C. 2325.
* * * * *
    (c) Limitations on cost allowability.
    (1) Restructuring costs associated with external restructuring 
activities shall not be allowed unless--
    (i) Such costs are allowable in accordance with FAR Part 31 and 
DFARS Part 231;
    (ii) An audit of projected restructuring costs and restructuring 
savings is performed;
    (iii) The cognizant administrative contracting officer (ACO) 
reviews the audit report and the projected costs and projected savings, 
and negotiates an advance agreement in accordance with paragraph (d) of 
this subsection; and
    (iv) For business combinations that occur after November 18, 1997, 
the Under Secretary of Defense (Acquisition, Technology, and Logistics) 
or the Principal Deputy determines in writing that the audited 
projected savings for DoD resulting from the restructuring will exceed 
    (A) The costs allowed by a factor of at least two to one; or
    (B) The cost allowed, and the business combination will result in 
the preservation of a critical capability that might otherwise be lost 
to DoD.
    (2) The audit, review, certification, and determination required by 
paragraph (c)(1) of this subsection shall not apply to any business 
combination for which payments for restructuring costs were made before 
August 15, 1994, or for which the cognizant ACO executed an advance 
agreement establishing cost ceilings based on audit/negotiation of 
detailed cost proposals for individual restructuring projects before 
August 15, 1994.
    (d) Procedures and ACO responsibilities. As soon as it is known 
that the contractor will incur restructuring costs for external 
restructuring activities, the cognizant ACO shall follow the procedures 
at PGI 231.205-70(d).
* * * * *
[FR Doc. 04-24288 Filed 10-29-04; 8:45 am]