[Federal Register Volume 71, Number 14 (Monday, January 23, 2006)]
[Proposed Rules]
[Pages 3446-3448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-701]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 201, 205, 211, 216, 217, 219, 223, 225, 228, 232, 236, 
237, and 252

[DFARS Case 2004-D022]
RIN 0750-AF16


Defense Federal Acquisition Regulation Supplement; Inflation 
Adjustment of Acquisition-Related Thresholds

AGENCY: Defense Acquisition Regulations System, 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 adjust acquisition-related thresholds 
for inflation. Section 807 of the National Defense Authorization Act 
for Fiscal Year 2005 requires periodic adjustment of statutory 
acquisition-related dollar thresholds for inflation, except those 
established by the Davis-Bacon Act, the Service Contract Act, or trade 
agreements. This proposed rule also amends other acquisition-related 
thresholds that are based on policy rather than statute.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before March 24, 2006, to be considered 
in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2004-D022, 
using any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include DFARS Case 2004-D022 in the 
subject line of the message.
     Fax: (703) 602-0350.
     Mail: Defense Acquisition Regulations System, Attn: Ms. 
Amy Williams, OUSD(AT&L)DPAP(DARS), IMD 3C132, 3062 Defense Pentagon, 
Washington, DC 20301-3062.
     Hand Delivery/Courier: Defense Acquisition Regulations 
System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 
22202-3402.
    Comments received will be posted without change to http://www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, (703) 602-0328.

SUPPLEMENTARY INFORMATION: 

A. Background

    This proposed rule implements Section 807 of the National Defense 
Authorization Act for Fiscal Year 2005 (Pub. L. 108-375). Section 807 
provides for adjustment of statutory acquisition-related dollar 
thresholds every 5 years, except for those established by the Davis-
Bacon Act, the Service Contract Act, or trade agreements. This case 
presented an opportunity to review all acquisition-related dollar 
thresholds, including those that are non-statutory. The proposed rule 
published at 70 FR 73415 on December 12, 2005 (FAR Case 2004-033), 
contained comparable changes to acquisition-related dollar thresholds 
in the FAR.

Definition of Acquisition-Related Threshold

    The statute defines an acquisition-related threshold as a dollar 
threshold that is specified in law as a factor in defining the scope of 
the applicability of a policy, procedure, requirement, or restriction 
provided in that law to the procurement of property or services by an 
executive agency, as determined by the FAR Council. The statute also 
impacts acquisition-related thresholds in the DFARS, since the DFARS is 
part of the FAR System. Acquisition-related thresholds are generally 
tied to the value of a contract, subcontract, or modification. Examples 
of thresholds that are not viewed as ``acquisition-related'' are 
thresholds relating to claims, penalties, withholding, payments, 
required levels of insurance, small business size standards, and 
liquidated damages.

Acquisition-Related Thresholds Not Subject to Escalation Adjustment 
Under This Proposed Rule

    The statute does not permit escalation of acquisition-related 
thresholds established by the Davis Bacon Act, the Service Contract 
Act, or trade agreements. Additionally, the statute does not authorize 
the escalation of thresholds set by Executive order or by the 
implementing agency, unless the Executive order or agency regulations 
are first amended.

Analysis of Statutory Acquisition-Related Thresholds

    A matrix showing the thresholds reviewed in preparation of this 
proposed rule is available at http://www.acq.osd.mil/dpap/dars/dfars/changenotice/index.htm#2004-D022. The statute requires adjustment of 
acquisition-related thresholds for inflation using the Consumer Price 
Index (CPI) for all-urban consumers. Acquisition-related thresholds in

[[Page 3447]]

statutes that were in effect on October 1, 2000, are subject to 5 years 
of inflation. For purposes of this proposed rule, the matrix includes 
calculation of escalation based on the CPI from December 1999 to 
December 2004 (the most recent available data when the proposed rule 
was in preparation), which calculates as 13.07 percent. Acquisition-
related thresholds in statutes that took effect after October 1, 2000, 
are escalated proportionately for the number of months between the 
effective date of the statute and October 1, 2005. The final rule will 
be adjusted to the actual CPI data for October 2000 through October 
2005.
    After the escalation factor is applied to the acquisition-related 
threshold, the threshold must be rounded as follows:

< $10,000--Nearest $500
$10,000-<$100,000--Nearest $5,000
$100,000-<$1,000,000--Nearest $50,000
$1,000,000 or more--Nearest $500,000

    At the current rate of inflation, this means that thresholds of 
$1,000, $10,000, $100,000, and $1,000,000, although subject to 
inflation calculation, will not actually be changed until 2010, because 
the inflation is insufficient to overcome the rounding requirements.

Analysis of Non-Statutory Acquisition-Related Thresholds

    No statutory authorization is required to escalate thresholds that 
were set as policy within the DFARS. Policy acquisition-related 
thresholds have been escalated using the same formula applied to the 
statutory thresholds.

Further Explanation of Proposed Changes

    217.170-217.174. The thresholds relating to economic order quantity 
($20 million), unfunded contingent liability ($20 million), and 
multiyear contracts for systems or components ($500 million) are 
repeated annually in the Defense Appropriations Act and, therefore, 
cannot be escalated unless correspondingly increased in the 
Appropriations Act. The $500 million threshold relating to multiyear 
contracts for services does not appear in the annual appropriations 
acts and, therefore, is proposed for escalation. The $100 million 
threshold relating to a contract cancellation ceiling does not appear 
in annual appropriations acts, but was the basis for additional 
requirements in Section 814 of the National Defense Authorization Act 
for Fiscal Year 2005 (Pub. L. 108-375). Therefore, the $100 million 
threshold is not proposed for escalation.
    223.803(2). This text is proposed for deletion, as it applies only 
to contracts awarded before June 1, 1993, and the underlying statute 
has been repealed.
    228.102-1. The threshold of $25,000 is proposed for escalation to 
$30,000, for consistency with the proposed change to FAR 28.102-1 
published at 70 FR 73415 on December 12, 2005. The $100,000 threshold 
at 228.102-1(1) was not implemented until June 2003, and, therefore, is 
not proposed for escalation.
    232.404(a)(9). This threshold was increased from $500 to $2,500 in 
the final DFARS rule published at 70 FR 75412 on December 20, 2005. The 
threshold is now proposed for escalation to $3,000, for consistency 
with the micro-purchase threshold of $3,000 included in the proposed 
FAR rule published at 70 FR 73415 on December 12, 2005.
    237.170-2. This approval requirement implements Section 801(b) of 
the National Defense Authorization Act for Fiscal Year 2002 (Pub. L. 
107-107), but the threshold is not set by statute. The threshold of $50 
million was derived from the justification and approval (J&A) threshold 
for DoD senior procurement executive approval at FAR 6.304(a)(4). This 
J&A threshold is now $75 million and was proposed for escalation to 
$77.5 million in the proposed FAR rule published at 70 FR 73415 on 
December 12, 2005. Therefore, this proposed rule includes a 
corresponding increase at DFARS 237.170-2.
    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 
adjustment of acquisition-related dollar thresholds is intended to keep 
pace with inflation and thus maintain the status quo. 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 2004-D022.

C. Paperwork Reduction Act

    The proposed changes to the DFARS do not impose any new information 
collection requirements that require the approval of the Office of 
Management and Budget (OMB) under 44 U.S.C. 3501, et seq. The 
information collection requirements of the provision and clauses at 
252.225-7003, 252.225-7004, and 252.225-7006 are approved for use 
through May 31, 2007, under OMB Clearance Number 0704-0229.

List of Subjects in 48 CFR Parts 201, 205, 211, 216, 217, 219, 223, 
225, 228, 232, 236, 237, and 252

    Government procurement.

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

    Therefore, DoD proposes to amend 48 CFR parts 201, 205, 211, 216, 
217, 219, 223, 225, 228, 232, 236, 237, and 252 as follows:
    1. The authority citation for 48 CFR parts 201, 205, 211, 216, 217, 
219, 223, 225, 228, 232, 236, 237, and 252 continues to read as 
follows:

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

PART 201--FEDERAL ACQUISITION REGULATIONS SYSTEM

    2. Section 201.109 is added to read as follows:


201.109  Statutory acquisition-related dollar thresholds-adjustment for 
inflation.

    (d) A matrix showing calculation of the most recent escalation 
adjustments of statutory acquisition-related dollar thresholds is 
available at PGI 201.109.

PART 205--PUBLICIZING CONTRACT ACTIONS


205.303  [Amended]

    3. Section 205.303 is amended by removing ``$5 million'' and adding 
in its place ``$5.5 million'' as follows:
    a. In paragraph (a)(i) introductory text, in the first and second 
sentences;
    b. In paragraph (a)(i)(A), in the second sentence; and
    c. In paragraph (a)(i)(B), in the first and second sentences.

PART 211--DESCRIBING AGENCY NEEDS


211.503  [Amended]

    4. Section 211.503 is amended in paragraph (b), in the first and 
second sentences, by removing ``$500,000'' and adding in its place 
``$550,000''.

PART 216--TYPES OF CONTRACTS


216.203-4  [Amended]

    5. Section 216.203-4 is amended in paragraph (c)(2), in the first 
sentence, by removing ``$50,000'' and adding in its place ``$55,000''.

[[Page 3448]]

PART 217--SPECIAL CONTRACTING METHODS

    6. Section 217.170 is amended by revising paragraph (d)(1)(i) to 
read as follows:


217.170  General.

* * * * *
    (d)(1) * * *
    (i) Exceed $500 million for supplies (see 217.172(c) and 
217.172(e)(4)) or $565.5 million for services (see 217.171(a)(6));
* * * * *


217.171  [Amended]

    7. Section 217.171 is amended in paragraph (a)(6) by removing 
``$500 million'' and adding in its place ``$565.5 million''.

PART 219--SMALL BUSINESS PROGRAMS


219.502-2  [Amended]

    8. Section 219.502-2 is amended in paragraph (a)(i) by removing 
``$2 million'' and adding in its place ``$2.5 million''.

PART 223--ENVIRONMENT, ENERGY AND WATER EFFICIENCY, RENEWABLE 
ENERGY TECHNOLOGIES, OCCUPATIONAL SAFETY, AND DRUG-FREE WORKPLACE

    9. Section 223.803 is revised to read as follows:


223.803  Policy.

    No DoD contract may include a specification or standard that 
requires the use of a class I ozone-depleting substance or that can be 
met only through the use of such a substance unless the inclusion of 
the specification or standard is specifically authorized at a level no 
lower than a general or flag officer or a member of the Senior 
Executive Service of the requiring activity in accordance with Section 
326, Public Law 102-484 (10 U.S.C. 2301 (repealed) note). This 
restriction is in addition to any imposed by the Clean Air Act and 
applies after June 1, 1993, to all DoD contracts, regardless of place 
of performance.

PART 225--FOREIGN ACQUISITION


225.7204  [Amended]

    10. Section 225.7204 is amended as follows:
    a. In paragraphs (a) and (b) by removing ``$10 million'' and adding 
in its place ``$11.5 million''; and
    b. In paragraph (c) by removing ``$500,000'' and adding in its 
place ``$550,000''.

PART 228--BOND INSURANCE


228.102-1  [Amended]

    11. Section 228.102-1 is amended in the second sentence of the 
introductory text and in paragraph (1) by removing ``$25,000'' and 
adding in its place ``$30,000''.

PART 232--CONTRACT FINANCING


232.404  [Amended]

    12. Section 232.404 is amended in paragraph (a)(9) by removing 
``$2,500'' and adding in its place ``$3,000''.


232.502-1  [Amended]

    13. Section 232.502-1 is amended in paragraph (b)(1) by removing 
``$50,000'' and adding in its place ``$55,000''.

PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS


236.601  [Amended]

    14. Section 236.601 is amended in paragraph (1)(ii) by removing 
``$500,000'' and adding in its place ``$550,000''.

PART 237--SERVICE CONTRACTING


237.170-2  [Amended]

    15. Section 237.170-2 is amended in paragraphs (a)(1) and (2) by 
removing ``$50,000,000'' and adding in its place ``$77.5 million''.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    16. Section 252.209-7004 is amended by revising the clause date and 
paragraph (a) to read as follows:


252.209-7004  Subcontracting with firms that are owned or controlled by 
the government of a terrorist country.

* * * * *

Subcontracting With Firms That Are Owned or Controlled by the 
Government of a Terrorist Country (XXX 2006)

    (a) Unless the Government determines that there is a compelling 
reason to do so, the Contractor shall not enter into any subcontract in 
excess of $30,000 with a firm, or a subsidiary of a firm, that is 
identified in the Excluded Parties List System as being ineligible for 
the award of Defense contracts or subcontracts because it is owned or 
controlled by the government of a terrorist country.
* * * * *


252.225-7003  [Amended]

    17. Section 252.225-7003 is amended as follows:
    a. By revising the clause date to read ``(XXX 2006)'';
    b. In paragraph (b)(1) by removing ``$10 million'' and adding in 
its place ``$11.5 million''; and
    c. In paragraph (b)(2)(i) by removing ``$500,000'' and adding in 
its place ``$550,000''.


252.225-7004  [Amended]

    18. Section 252.225-7004 is amended as follows:
    a. By revising the clause date to read ``(XXX 2006)''; and
    b. In paragraph (b)(1) by removing ``$500,000'' and adding in its 
place ``$550,000''.


252.225-7006  [Amended]

    19. Section 252.225-7006 is amended as follows:
    a. By revising the clause date to read ``(XXX 2006)''; and
    b. In paragraph (f)(1) by removing ``$500,000'' and adding in its 
place ``$550,000''.


252.232-7009  [Amended]

    20. Section 252.232-7009 is amended as follows:
    a. By revising the clause date to read ``(XXX 2006)''; and
    b. By removing ``$2,500'' and adding in its place ``$3,000''.


252.249-7002  [Amended]

    21. Section 252.249-7002 is amended as follows:
    a. By revising the clause date to read ``(XXX 2006)''; and
    b. In paragraph (d)(1) by removing ``$500,000'' and adding in its 
place ``$550,000''.

 [FR Doc. E6-701 Filed 1-20-06; 8:45 am]
BILLING CODE 5001-08-P