[Federal Register Volume 70, Number 142 (Tuesday, July 26, 2005)]
[Rules and Regulations]
[Pages 43074-43075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-14625]


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DEPARTMENT OF DEFENSE

48 CFR Part 231

[DFARS Case 2004-D026]


Defense Federal Acquisition Regulation Supplement; Business 
Restructuring Costs--Delegation of Authority To Make Determinations 
Relating to Payment

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 819 of 
the National Defense Authorization Act for Fiscal Year 2005. Section 
819 contains changes concerning delegation of authority to make 
determinations relating to payment of defense contractors for business 
restructuring costs.

DATES: Effective date: July 26, 2005.
    Comment date: Comments on the interim rule should be submitted to 
the address shown below on or before September 26, 2005 to be 
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2004-D026, 
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 2004-D026 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

    10 U.S.C. 2325(a)(1), Limitation on Payment of Restructuring Costs, 
prohibits DoD from reimbursing a defense contractor for restructuring 
costs arising from a business combination that occurs after November 
18, 1997, unless the Secretary of Defense determines in writing either: 
(i) That the amount of projected savings for DoD associated with the 
restructuring will be at least twice the amount of the costs allowed; 
or (ii) that the amount of projected savings for DoD associated with 
the restructuring will exceed the amount of the costs allowed and that 
the business combination will result in the preservation of a critical 
capability that otherwise might be lost to DoD.
    10 U.S.C. 2325(a)(2) previously prohibited the Secretary of Defense 
from delegating the authority to make such written savings 
determinations below the level of an Assistant Secretary of Defense. 
The Secretary of Defense delegated the authority to make such 
determinations to the Under Secretary of Defense (Acquisition, 
Technology, and Logistics) (USD(AT&L)), or his Principal Deputy. 
Section 819 of the National Defense Authorization Act for Fiscal Year 
2005 (Public Law 108-375) amended 10 U.S.C. 2325(a)(2) to permit the 
Director of the Defense Contract Management Agency to make the required 
written determination of savings when restructuring costs are expected 
to be less than $25 million over a 5-year period.
    To implement Section 819, this interim rule adds paragraph 
(c)(4)(ii) to DFARS 231.205-70, External restructuring costs. The rule 
also makes changes to DFARS 231.205-70(b)(4), (c), and (e)(6) to remove 
unnecessary references to USD(AT&L) certifications for pre-November 19, 
1997, business combinations; and makes editorial changes to DFARS 
231.205-70(e)(6) to clarify the existing requirement for projected 
restructuring costs and savings to be computed on a present value 
basis.
    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 cost 
principle addressed in this rule applies only to DoD contractors that 
incur restructuring costs for external restructuring activities. 
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 subpart in accordance with 5 U.S.C. 610. 
Such comments should be submitted separately and should cite DFARS Case 
2004-D026.

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 819 of the National Defense 
Authorization Act for Fiscal Year 2005 (Pub. L. 108-375). Section 819 
amended 10 U.S.C. 2325 to permit delegation of authority to the 
Director of the Defense Contract Management Agency for determinations 
relating to payment of

[[Page 43075]]

defense contractors for business restructuring costs. Section 819 
became effective upon enactment on October 28, 2004. Comments received 
in response to this interim rule will be considered in the formation of 
the final rule.

List of Subjects in 48 CFR Part 231

    Government procurement.

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

0
Therefore, 48 CFR part 231 is amended as follows:

PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES

0
1. The authority citation for 48 CFR part 231 continues to read as 
follows:

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


0
2. Section 231.205-70 is amended as follows:
0
a. In paragraph (b)(4) by revising the last sentence; and
0
b. By revising paragraph (c), the heading of paragraph (e), and 
paragraph (e)(6) to read as follows:


231.205-70  External restructuring costs.

* * * * *
    (b) * * *
    (4) * * * For purposes of this definition, if restructuring costs 
associated with external restructuring activities allocated to DoD 
contracts are less than $2.5 million, the costs shall not be subject to 
the audit, review, and determination requirements of paragraph (c)(4) 
of this subsection; instead, the normal rules for determining cost 
allowability in accordance with FAR part 31 shall apply.
* * * * *
    (c) Limitations on cost allowability. Restructuring costs 
associated with external restructuring activities shall not be allowed 
unless--
    (1) Such costs are allowable in accordance with FAR part 31 and 
DFARS part 231;
    (2) An audit of projected restructuring costs and restructuring 
savings is performed;
    (3) 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
    (4)(i) The official designated in paragraph (c)(4)(ii) of this 
subsection determines in writing that the audited projected savings, on 
a present value basis, for DoD resulting from the restructuring will 
exceed either--
    (A) The costs allowed by a factor of at least two to one; or
    (B) The costs allowed, and the business combination will result in 
the preservation of a critical capability that might otherwise be lost 
to DoD.
    (ii)(A) If the amount of restructuring costs is expected to exceed 
$25 million over a 5-year period, the designated official is the Under 
Secretary of Defense (Acquisition, Technology, and Logistics) or the 
Principal Deputy. This authority may not be delegated below the level 
of an Assistant Secretary of Defense.
    (B) For all other cases, the designated official is the Director of 
the Defense Contract Management Agency. The Director may not delegate 
this authority.
* * * * *
    (e) Information needed to obtain a determination.
* * * * *
    (6) The cognizant ACO's recommendation for a determination. This 
recommendation must clearly indicate one of the following, consistent 
with paragraph (c)(4)(i) of this subsection:
    (i) The audited projected savings for DoD will exceed the costs 
allowed by a factor of at least two to one on a present value basis.
    (ii) The business combination will result in the preservation of a 
critical capability that might otherwise be lost to DoD, and the 
audited projected savings for DoD will exceed the costs allowed on a 
present value basis.
* * * * *
[FR Doc. 05-14625 Filed 7-25-05; 8:45 am]
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