[Federal Register Volume 70, Number 99 (Tuesday, May 24, 2005)]
[Rules and Regulations]
[Pages 29640-29643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-10225]


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DEPARTMENT OF DEFENSE

48 CFR Parts 207, 208, 216, 217, and 237

[DFARS Case 2002-D024]


Defense Federal Acquisition Regulation Supplement; Approval of 
Service Contracts and Task and Delivery Orders

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: DoD has issued an interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement Section 801(b) 
of the National Defense Authorization Act for Fiscal Year 2002 and 
Section 854 of the National Defense Authorization Act for Fiscal Year 
2005. Section 801(b) requires DoD to establish and implement a 
management structure for the procurement of services. Section 854 
requires DoD agencies to comply with certain review and approval 
requirements before using a non-DoD contract to procure supplies or 
services in amounts exceeding the simplified acquisition threshold.

DATES: Effective date: May 24, 2005.
    Comment date: Comments on the interim rule should be submitted to 
the address shown below on or before July 25, 2005, to be considered in 
the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2002-D024, 
using any of the following methods:
    [cir] Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    [cir] Defense Acquisition Regulations Web Site: http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. Follow the instructions for 
submitting comments.
    [cir] E-mail: [email protected]. Include DFARS Case 2002-D024 in the 
subject line of the message.
    [cir] Fax: (703) 602-0350.
    [cir] Mail: Defense Acquisition Regulations Council, Attn: Ms. 
Robin Schulze, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, 
Washington, DC 20301-3062.
    [cir] Hand Delivery/Courier: Defense Acquisition Regulations 
Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 
22202-3402.

[[Page 29641]]

    All comments received will be posted to http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Ms. Robin Schulze, (703) 602-0326.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD published an interim rule at 68 FR 56563 on October 1, 2003, to 
implement Section 801(b) of the National Defense Authorization Act for 
Fiscal Year 2002 (Public Law 107-107). The rule established 
requirements for DoD to obtain certain approvals before acquiring 
services through use of a DoD contract or task order that is not 
performance based, or through any contract or task order that is 
awarded by an agency other than DoD.
    Section 854 of the National Defense Authorization Act for Fiscal 
Year 2005 (Public Law 108-375) placed additional restrictions on the 
use of contracts awarded by an agency other than DoD. Section 854 
provides that a DoD agency may not procure goods or services through a 
contract entered into by a non-DoD agency for an amount exceeding the 
simplified acquisition threshold, unless the procurement is 
accomplished in accordance with review and approval procedures 
prescribed by the agency head.
    Seventeen sources submitted comments on the interim rule published 
on October 1, 2003. This second interim rule contains changes resulting 
from public comments; changes implementing Section 854 of Public Law 
108-375; and changes implementing the requirements of a DoD policy 
memorandum dated October 29, 2004, on the proper use of non-DoD 
contracts for the acquisition of supplies and services. A discussion of 
the comments received on the interim rule published on October 1, 2003, 
is provided below:
    1. Comment: Several respondents requested clarification of the 
rule's applicability. Some were concerned that rule restricts the 
ability of DoD agencies to use the General Services Administration 
(GSA) Federal Supply Schedule program as well as other multi-agency 
contract programs, and that the rule will cause delays in acquiring 
necessary products and services. Some respondents requested revision of 
the rule to exclude orders placed by DoD agencies under these programs. 
One respondent recommended establishment of a blanket approval for 
certain non-DoD acquisition providers. Some respondents were concerned 
that the language specifying a ``Prohibition'' on the acquisition of 
services was overly restrictive.
    DoD Response: The rule is not intended to prohibit DoD use of non-
DoD contracts. DoD recognizes that, in many cases, use of non-DoD 
contracts is an effective way to accomplish acquisitions in support of 
DoD's mission. The intent of the rule is to require appropriate review 
and oversight of DoD acquisitions under non-DoD contracts to ensure 
that such acquisitions are in the best interest of DoD and comply with 
all applicable statutory and regulatory requirements. The rule has been 
revised to further clarify its applicability and review requirements. 
In addition, the text formerly at 237.170-2, Prohibition on acquisition 
of services, has been removed, as it was considered to be unnecessary 
and subject to misinterpretation.
    2. Comment: Two respondents requested establishment of a minimum 
dollar threshold for application of the rule. One respondent believed 
it is in DoD's best interest to establish a contract value threshold of 
greater than $3 million. The respondent stated that the benefits are 
not believed to outweigh the costs of imposing performance-based 
requirements on all contracts and task orders. Another respondent 
suggested using the simplified acquisition threshold as a minimum 
dollar threshold for actions that require approvals if purchased 
outside of DoD and if the statement of work is not performance based.
    DoD Response: The rule has been revised to specify the simplified 
acquisition threshold as the threshold above which review and approval 
is required for orders issued under non-DoD contracts, as required by 
Section 854 of Public Law 108-375. The thresholds for review and 
approval of service contracts that are not performance based, which 
were specified in the interim rule published on October 1, 2003, are 
still considered to be appropriate and are included in this second 
interim rule. The rule provides sufficient flexibility for DoD 
departments and agencies to establish review programs commensurate with 
management structures.
    3. Comment: One respondent stated that additional approvals should 
not be required of a DoD agency when it is awarding performance-based 
task orders against Federal Supply Schedules and Governmentwide 
acquisition contracts; and that approval requirements should be the 
same when DoD awards a contract or task order for services that is not 
performance-based, whether placed against a DoD contract, a Federal 
Supply Schedule, or a Governmentwide acquisition contract. Another 
respondent asked whether approval must be obtained for a task order 
issued against other agency's contract when the statement of work is 
already contained within the contract and may not be performance based.
    DoD Response: Approval in accordance with agency procedures, 
established within the requirements of the DFARS rule, is needed for 
any acquisition of services that is not performance based and for 
acquisitions under non-DoD contracts. Both approval requirements must 
be met.
    4. Comment: One respondent recommended an exemption for healthcare 
personal services contracts awarded under the authority of 10 U.S.C. 
1091 and DFARS 237.104, because use of performance-based contracting 
may not always be practical for these services.
    DoD Response: Section 801(b) does not exempt any categories of 
services from its requirements. Although there may be certain 
categories of services that may not always be appropriate for 
performance-based contracting, DoD does not want to preclude the 
possibility of using such an approach in those situations where it is 
deemed appropriate.
    5. Comment: Several respondents requested that the Economy Act be 
addressed. One respondent recommended that the Economy Act procedures 
be updated to include a requirement for a statement in the 
determination and findings to verify that the contract work statement 
is performance based.
    DoD Response: Requirements for interagency acquisitions under the 
Economy Act are addressed in FAR Subpart 17.5 and DFARS Subpart 217.5. 
No changes to those requirements are needed for implementation of this 
rule.
    6. Comment: One respondent requested that the interim rule be 
withdrawn and reissued as a proposed rule to allow for industry 
feedback. The respondent stated that the interim rule negatively 
impacts the DoD procurement process, undermines GSA ordering 
procedures, and adversely affects GSA vendors and DoD customers.
    DoD Response: The first interim rule and this second interim rule 
implement statutory requirements. Therefore, to meet those statutory 
requirements, DoD considers immediate implementation to be necessary. 
However, as with any interim rule, the public is provided an 
opportunity to comment and DoD must consider all comments.

[[Page 29642]]

    7. Comment: One respondent requested amendment of the rule to 
address use of the Intra-Governmental Transaction (IGT) portal to 
track, monitor, and report the types of services acquired by DoD. It 
was also suggested that DoD establish a Service Acquisition Agency 
Review Board that would negotiate Service Level Agreements with outside 
agencies and a Contract Vehicle Review Board that would evaluate 
outside contract vehicles and provide a list of approved vehicles for 
use by all DoD branches.
    DoD Response: These comments are considered to be outside the scope 
of this case.
    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 
contains internal DoD approval requirements, intended to ensure that 
acquisitions of supplies and services are accomplished in accordance 
with existing statutes and regulations. 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 2002-D024.

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.

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to publish an 
interim rule prior to affording the public an opportunity to comment. 
This interim rule implements Section 854 of the National Defense 
Authorization Act for Fiscal Year 2005 (Public Law 108-375). Section 
854 requires DoD agencies to comply with certain review and approval 
requirements before using a non-DoD contract to procure supplies or 
services in amounts exceeding the simplified acquisition threshold. 
Section 854 became effective on April 26, 2005. Comments received in 
response to this interim rule will be considered in the formation of 
the final rule.

List of Subjects in 48 CFR Parts 207, 208, 216, 217, and 237

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

0
Therefore, 48 CFR Parts 207, 208, 216, 217, and 237 are amended as 
follows:
0
1. The authority citation for 48 CFR Parts 207, 208, 216, 217, and 237 
continues to read as follows:

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

PART 207--ACQUISITION PLANNING

0
2. Section 207.105 is amended by adding paragraph (b)(4) to read as 
follows:


207.105  Contents of written acquisition plans.

* * * * *
    (b) * * *
    (4) Acquisition considerations. When supplies or services will be 
acquired by placing an order under a non-DoD contract (e.g., a Federal 
Supply Schedule contract), regardless of whether the order is placed by 
DoD or by another agency on behalf of DoD, address the method of 
ensuring that the order will be consistent with DoD statutory and 
regulatory requirements applicable to the acquisition and the 
requirements for use of DoD appropriated funds.
* * * * *

PART 208--REQUIRED SOURCES OF SUPPLIES AND SERVICES

0
3. Section 208.404 is amended by redesignating paragraph (a) as 
paragraph (a)(ii) and by adding paragraph (a)(i) to read as follows:


208.404  Using schedules.

    (a)(i) Departments and agencies shall comply with the review and 
approval requirements established in accordance with Subpart 217.78 
when placing orders for supplies or services in amounts exceeding the 
simplified acquisition threshold.
* * * * *

PART 216--TYPES OF CONTRACTS

0
4. Section 216.505 is amended by designating the existing text as 
paragraph (2) and by adding paragraph (1) to read as follows:


216.505  General.

    (1) Departments and agencies shall comply with the review and 
approval requirements established in accordance with Subpart 217.78 
when placing orders under non-DoD contracts in amounts exceeding the 
simplified acquisition threshold.
* * * * *

PART 217--SPECIAL CONTRACTING METHODS

0
5. Subpart 217.78 is added to read as follows:

Subpart 217.78--Contracts or Delivery Orders Issued by a Non-DoD 
Agency

Sec.
217.7800 Scope of subpart.
217.7801 Definitions.
217.7802 Policy.


217.7800  Scope of subpart.

    This subpart--
    (a) Implements Section 854 of the National Defense Authorization 
Act for Fiscal Year 2005 (Public Law 108-375); and
    (b) Prescribes policy for the acquisition of supplies and services 
through the use of contracts or orders issued by non-DoD agencies.


217.7801  Definitions.

    As used in this subpart--
    Assisted acquisition means a contract awarded or a task or delivery 
order placed on behalf of DoD by a non-DoD agency.
    Direct acquisition means a task or delivery order placed by a DoD 
official under a contract awarded by a non-DoD agency.


217.7802  Policy.

    Departments and agencies shall establish and maintain procedures 
for reviewing and approving orders placed for supplies and services 
under non-DoD contracts, whether through direct acquisition or assisted 
acquisition, when the amount of the order exceeds the simplified 
acquisition threshold. These procedures shall include--
    (a) Evaluating whether using a non-DoD contract for the acquisition 
is in the best interest of DoD. Factors to be considered include--
    (1) Satisfying customer requirements;
    (2) Schedule;
    (3) Cost effectiveness (taking into account discounts and fees); 
and
    (4) Contract administration (including oversight);
    (b) Determining that the tasks to be accomplished or supplies to be 
provided are within the scope of the contract to be used;

[[Page 29643]]

    (c) Reviewing funding to ensure that it is used in accordance with 
appropriation limitations;
    (d) Providing unique terms, conditions, and requirements to the 
assisting agency for incorporation into the order or contract as 
appropriate to comply with all applicable DoD-unique statutes, 
regulations, directives, and other requirements; and
    (e) Collecting data on the use of assisted acquisition for 
analysis.

PART 237--SERVICE CONTRACTING

0
6. Section 237.170-2 is revised to read as follows:


237.170-2  Approval requirements.

    (a) Acquisition of services through a contract or task order that 
is not performance based.
    (1) For acquisitions at or below $50,000,000, obtain the approval 
of the official designated by the department or agency.
    (2) For acquisitions exceeding $50,000,000, obtain the approval of 
the senior procurement executive.
    (b) Acquisition of services through use of a contract or task order 
issued by a non-DoD agency. Comply with the review and approval 
requirements established in accordance with Subpart 217.78 when 
acquiring services through use of a contract or task order issued by a 
non-DoD agency.


237.170-3  [Removed]

0
7. Section 237.170-3 is removed.

[FR Doc. 05-10225 Filed 5-23-05; 8:45 am]
BILLING CODE 5001-08-P