[Federal Register Volume 70, Number 86 (Thursday, May 5, 2005)]
[Proposed Rules]
[Pages 23827-23829]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-9004]


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DEPARTMENT OF DEFENSE

48 CFR Part 232

[DFARS Case 2003-D043]


Defense Federal Acquisition Regulation Supplement; Contract 
Financing

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 update text pertaining to contract 
financing. This proposed rule is a result of a transformation 
initiative undertaken by DoD to dramatically change the purpose and 
content of the DFARS.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before July 5, 2005, to be considered in 
the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2003-D043, 
using any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Defense Acquisition Regulations Web Site: http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. Follow the instructions for 
submitting comments.
     E-mail: [email protected]. Include DFARS Case 2003-D043 in the 
subject line of the message.
     Fax: (703) 602-0350.
     Mail: Defense Acquisition Regulations Council, Attn: Mr. 
Bill Sain, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, 
Washington, DC 20301-3062.
     Hand Delivery/Courier: Defense Acquisition Regulations 
Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 
22202-3402.
    All comments received will be posted to http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Mr. Bill Sain, (703) 602-0293.

SUPPLEMENTARY INFORMATION:

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

[[Page 23828]]

requirements, and policies/procedures that have a significant impact 
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 
http://www.acq.osd.mil/dpap/dfars/transf.htm.
    This proposed rule is a result of the DFARS Transformation 
initiative. The proposed DFARS changes include--
     Relocation of text addressing general contract financing 
payment issues from 232.906 to 232.007.
     Deletion of unnecessary text at 232.071 on the composition 
and responsibilities of the DoD Contract Finance Committee, and 
deletion of references to the Committee at 232.070(a) and 232.617(a).
     Deletion of text at 232.108 on financial consultation, and 
deletion of text at 232.207 on specifying amounts to be charged to 
foreign military sales accounts in approvals of financing requests. 
These issues are adequately addressed in the FAR.
     Deletion of text at 232.206(d) on instructions for 
distribution of financing payments to multiple appropriations accounts. 
Text on this subject was proposed for inclusion in the new DFARS 
companion resource, Procedures, Guidance, and Information (PGI), in the 
proposed rule published at 69 FR 35564 on June 25, 2004, under DFARS 
Case 2003-D009, Payment and Billing Instructions.
     Amendment of 232.404(a)(9) to increase, from $500 to 
$2,500, the dollar value at or below which the requirements of FAR 
Subpart 32.4, Advance Payments for Non-Commercial Items, do not apply 
to high school and college publications for military recruitment 
efforts.
     Clarification of text at 232.501-3(b) on limitation of the 
Government's liability when the contract price exceeds the funds 
obligated under the contract.
     Deletion of unnecessary text at 232.605(b) regarding 
integrated accounting at DoD installations.
     Relocation of text on payment due dates, from 232.905(1) 
and (2), to 232.904 and 232.906, respectively.
     Deletion of unnecessary text at 232.905(f)(6) on 
electronic notification to the payment office of Government acceptance 
and approval. Electronic submission and processing of payment requests 
is addressed in Subpart 232.70.
     Addition of text at 232.906(a)(i) to address the 
requirement for contracting officers to insert the standard due date 
for interim payments on cost-reimbursement contracts for services.
     Deletion of unnecessary text at 232.1007 on specifying 
amounts to be charged to foreign military sales accounts.
     Deletion of text at DFARS 232.1108 on mandatory use of the 
Governmentwide commercial purchase card. This issue is addressed in 
213.270.
     Deletion of informational and procedural text at 
232.070(c), 232.409-1, 232.410, 232.501-2, 232.606, 232.610, 232.670, 
and 232.671. This text will be relocated to the new DFARS companion 
resource, Procedures, Guidance, and Information (PGI), available at 
http://www.acq.osd.mil/dpap/dars/pgi.
    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 does not expect this rule to 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 or provides guidance for contracting 
officers. Therefore, DoD has not performed an initial regulatory 
flexibility analysis. 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 2003-D043.

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 232

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
    Therefore, 48 CFR part 232 is proposed to be amended as follows:

PART 232--CONTRACT FINANCING

    1. The authority citation for 48 CFR part 232 continues to read as 
follows:

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

    2. Section 232.007 is added to read as follows:


232.007  Contract financing payments.

    (a) DoD policy is to make contract financing payments as quickly as 
possible. Generally, the contracting officer shall insert the standard 
due dates of 7 days for progress payments, and 14 days for performance-
based payments and interim payments on cost-type contracts, in the 
appropriate paragraphs of the respective payment clauses. However, for 
interim payments on cost-reimbursement contracts for services, see 
232.906(a)(i).
    (b) The contracting officer should coordinate contract financing 
payment terms with offices that will be involved in the payment process 
to ensure that specified terms can be met. Where justified, the 
contracting officer may insert a due date greater than, but not less 
than, the standard. In determining payment terms, consider--
    (i) Geographical separation;
    (ii) Workload;
    (iii) Contractor ability to submit a proper request; and
    (iv) Other factors that could affect timing of payment.
    3. Section 232.070 is amended by revising paragraphs (a) and (c) to 
read as follows:


232.070  Responsibilities.

    (a) The Director of Defense Procurement and Acquisition Policy, 
Office of the Under Secretary of Defense (Acquisition, Technology, and 
Logistics) (OUSD(AT&L)DPAP) is responsible for ensuring uniform 
administration of DoD contract financing, including DoD contract 
financing policies and important related procedures. Agency discretion 
under FAR Part 32 is at the DoD level and is not delegated to the 
departments and agencies. Proposals by the departments and agencies, to 
exercise agency discretion, shall be submitted to OUSD(AT&L)DPAP.
* * * * *
    (c) See PGI 232.070(c) for information on department/agency 
contract financing offices.


232.071  [Removed and Reserved]

    4. Section 232.071 is removed and reserved.


232.108  [Removed]

    5. Section 232.108 is removed.


232.206  [Amended]

    6. Section 232.206 is amended by removing paragraph (d).


232.207  [Removed]

    7. Section 232.207 is removed.
    8. The heading of Subpart 232.4 is revised read as follows:

[[Page 23829]]

Subpart 232.4--Advance Payments for Non-Commercial Items


232.404  [Amended]

    9. Section 232.404 is amended in paragraph (a)(9) by removing 
``$500'' and adding in its place ``$2,500.''
    10. Section 232.409-1 is revised to read as follows:


Sec.  232.409-1  Recommendation for approval.

    Follow the procedures at PGI 232.409-1 for preparation of the 
documents required by FAR 32.409-1(e) and (f).
    11. Section 232.410 is revised to read as follows:


Sec.  232.410  Findings, determination, and authorization.

    If an advance payment procedure is used without a special bank 
account, follow the procedures at PGI 232.410.
    12. Section 232.501-2 is revised to read as follows:


Sec.  232.501-2  Unusual progress payments.

    Follow the procedures at PGI 232.501-2 for approval of unusual 
progress payments.
    13. Section 232.501-3 is amended by revising paragraph (b) 
introductory text to read as follows:


232.501-3  Contract price.

    (b) The contracting officer may approve progress payments when the 
contract price exceeds the funds obligated under the contract, provided 
the contract limits the Government's liability to the lesser of--
* * * * *


232.503-15  [Amended]

    14. Section 232.503-15 is amended in paragraph (d) introductory 
text, in the first sentence, by removing ``252.242-7004(f)(7)'' and 
adding in its place ``252.242-7004(e)(7)'.


232.605  [Amended]

    15. Section 232.605 is amended in paragraph (b) by removing the 
second sentence.
    16. Section 232.606 is revised to read as follows:


232.606  Debt determination and collection.

    When transferring a case to the contract financing office, follow 
the procedures at PGI 232.606.
    17. Section 232.610 is revised to read as follows:


232.610  Demand for payment of contract debt.

    When issuing a demand for payment of a contract debt, follow the 
procedures at PGI 232.610.


232.616  [Amended]

    18. Section 232.616 is amended by removing ``(232.108(1))'' and 
adding in its place ``(see 232.070(c))'.
    19. Section 232.617 is revised to read as follows:


232.617  Contract clause.

    (a) The Director of Defense Procurement and Acquisition Policy, 
Office of the Under Secretary of Defense (Acquisition, Technology, and 
Logistics), may exempt the contracts in FAR 32.617(a)(2) through (5) 
and other contracts, in exceptional circumstances, from the 
administrative interest charges required by this subpart.
    (7) Other exceptions are--
    (A) Contracts for instructions of military or ROTC personnel at 
civilian schools, colleges, and universities;
    (B) Basic agreements with telephone companies for communications 
services and facilities, and purchases under such agreements; and
    (C) Transportation contracts with common carriers for common 
carrier services.
    20. Section 232.670 is revised to read as follows:


232.670  Transfer of responsibility for debt collection.

    Follow the procedures at PGI 232.670 for transferring 
responsibility for debt collection.
    21. Section 232.671 is revised to read as follows:


232.671  Bankruptcy reporting.

    Follow the procedures at PGI 232.671 for bankruptcy reporting.
    22. Section 232.903 is revised to read as follows:


232.903  Responsibilities.

    DoD policy is to assist small disadvantaged business concerns by 
paying them as quickly as possible after invoices are received and 
before normal payment due dates established in the contract (see 
232.906(a)).
    23. Section 232.904 is added to read as follows:


232.904  Determining payment due dates.

    (d) In most cases, Government acceptance or approval can occur 
within the seven day constructive acceptance period specified in the 
FAR Prompt Payment clauses. Government payment of construction progress 
payments can, in most cases, be made within the 14 day period allowed 
by the Prompt Payment for Construction Contracts clause. While the 
contracting officer may specify a longer period because the period 
specified in the contract is not reasonable or practical, such change 
should be coordinated with the Government offices responsible for 
acceptance or approval and for payment. Reasons for specifying a longer 
period include but are not limited to: the nature of the work or 
supplies or services, inspection or testing requirements, shipping and 
acceptance terms, and resources available at the acceptance activity. A 
constructive acceptance period of less than the cited 7 or 14 days is 
not authorized.


232.905  [Removed]

    24. Section 232.905 is removed.
    25. Section 232.906 is revised to read as follows:


232.906  Making payments.

    (a)(i) Generally, the contracting officer shall insert the standard 
due date of 14 days for interim payments on cost-reimbursement 
contracts for services in the clause at FAR 52.232-25, Prompt Payment, 
when using the clause with its Alternate I.
    (ii) The restrictions of FAR 32.906 prohibiting early payment do 
not apply to invoice payments made to small disadvantaged business 
concerns. Contractors shall not, however, be entitled to interest 
penalties if invoice payments are not made before the normal payment 
due dates established in the contract.


232.1007 and 232.1108  [Removed]

    26. Sections 232.1007 and 232.1108 are removed.
[FR Doc. 05-9004 Filed 5-4-05; 8:45 am]
BILLING CODE 5001-08-P