[Federal Register Volume 71, Number 54 (Tuesday, March 21, 2006)]
[Rules and Regulations]
[Pages 14100-14101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-2643]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 207

[DFARS Case 2004-D021]


Defense Federal Acquisition Regulation Supplement; Contractor 
Performance of Acquisition Functions Closely Associated With Inherently 
Governmental Functions

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD has adopted as final, with changes, an interim rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to implement Section 804 of the National Defense Authorization Act for 
Fiscal Year 2005. Section 804 places limitations on the award of 
contracts for the performance of acquisition functions closely 
associated with inherently governmental functions.

DATES: Effective March 21, 2006.

FOR FURTHER INFORMATION CONTACT: Ms. Robin Schulze, Defense Acquisition 
Regulations System, OUSD (AT&L) DPAP (DARS), IMD 3C132, 3062 Defense 
Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0326, 
facsimile (703) 602-0350. Please cite DFARS Case 2004-D021.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD published an interim rule at 70 FR 14572 on March 23, 2005, to 
implement Section 804 of the National Defense Authorization Act for 
Fiscal Year 2005. Section 804 places limitations on the award of 
contracts for the performance of acquisition functions closely 
associated with inherently governmental functions.
    Three sources submitted comments on the interim rule. A discussion 
of the comments is provided below.
    1. Comment: One respondent recommended revision of the text at 
207.503(S-70)(1) to replace the phrase ``functions closely associated 
with inherently governmental functions that are listed at FAR 
7.503(d)'' with the phrase ``services and actions that are listed at 
FAR 7.503(d).'' Since 10 U.S.C. 2383(b)(3) states that the phrase 
``functions closely associated with inherently governmental functions'' 
means those functions described in FAR 7.503(d), use of the FAR 
reference would meet the letter of the law and would avoid introducing 
a new phrase in the DFARS.
    DoD Response: DoD believes that use of the phrase ``functions 
closely associated with inherently governmental functions,'' along with 
the reference to FAR 7.503(d), more clearly describes the requirements 
of the rule. Therefore, DoD has made no change to the rule as a result 
of this comment.
    2. Comment: One respondent recommended amending the text at 
207.503(S-70)(1)(i)(B) to remove the word ``supervise'' and replace it 
with the phrase ``provide oversight to'' to prevent a conflict with 
Office of Federal Procurement Policy (OFPP) Policy Letter 92-1, 
Inherently Governmental Functions. The respondent stated that OFPP 
Policy Letter 92-1 cautions against exercising ``such control over 
contractor activities to convert the contract * * * to a personal 
services contract,'' and that use of the word ``supervise,'' could be 
understood by Federal officials that they are to interact with 
contractor employees in the same way they supervise Federal employees.
    DoD Response: It should be noted that OMB Circular No. A-76 dated 
May 29, 2003, supersedes OFPP Policy Letter 92-1. However, DoD agrees 
that the term ``supervise'' could be subject to differing 
interpretations and could lead to an inappropriate contract 
relationship. Therefore, DoD has amended the rule to replace the term 
``supervise'' with the term ``oversee.''
    3. Comment: One respondent stated that, given the importance of 
this issue, DoD should provide further guidance concerning the 
circumstances under which contracting officers may make a determination 
under 207.503(S-70)(1)(i)(A), that appropriate DoD personnel cannot 
reasonably be made available to perform the functions.
    DoD Response: DoD does not believe that additional guidance is 
necessary. The availability decision must be made on a case-by-case 
basis, and DoD contracting officers should retain the flexibility to 
make informed decisions to meet mission needs.
    4. Comment: One respondent expressed support for the rule, since 
the rule places some controls on the award of contracts for the 
performance of jobs closely associated with the Federal Government's 
purchases of goods and services. The respondent believes that the 
Government should protect

[[Page 14101]]

inherently governmental functions, and recommended that DoD require 
contracting officers to provide written justifications of decisions 
made under this DFARS rule and that those justifications be made 
publicly available on the World Wide Web.
    DoD Response: In accordance with FAR Subpart 4.8, the Government 
contract file should document the basis for an acquisition and the 
relevant decisions made by the contracting officer. DoD does not 
believe it is necessary to post the determinations made in accordance 
with this rule on the World Wide Web.
    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 has prepared a final regulatory flexibility analysis consistent 
with 5 U.S.C. 604. A copy of the analysis may be obtained from the 
point of contact specified herein. The analysis is summarized as 
follows:
    The objective of the rule is to ensure proper management and 
oversight of contracts for functions that generally are not considered 
to be inherently governmental, but may approach being in that category 
because of the nature of the function, the manner in which the 
contractor performs the contract, or the manner in which the Government 
administers contractor performance. The impact of the rule on small 
entities is unknown at this time. DoD agencies will implement the 
requirements of the rule in making decisions whether to enter into, and 
in the administration of, contracts for performance of the acquisition 
functions closely associated with inherently governmental functions 
that are listed in section 7.503(d) of the Federal Acquisition 
Regulation. DoD received no comments on the initial regulatory 
flexibility analysis. As a result of comments received on the interim 
rule, the final rule contains a minor change to clarify that Government 
personnel ``oversee'' but do not ``supervise'' contractor personnel.

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 207

    Government procurement.

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

0
Accordingly, the interim rule amending 48 CFR part 207, which was 
published at 70 FR 14572 on March 23, 2005, is adopted as a final rule 
with the following change:

PART 207--ACQUISITION PLANNING

0
1. The authority citation for 48 CFR part 207 continues to read as 
follows:

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


207.503  [Amended]

0
2. Section 207.503 is amended in paragraph (S-70)(1)(i)(B) by removing 
``supervise'' and adding in its place ``oversee''.

[FR Doc. 06-2643 Filed 3-20-06; 8:45 am]
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