[Federal Register Volume 71, Number 192 (Wednesday, October 4, 2006)]
[Rules and Regulations]
[Pages 58539-58540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-16401]



[[Page 58539]]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 225

RIN 0750-AF23


Defense Federal Acquisition Regulation Supplement; Buy American 
Act Exemption for Commercial Information Technology (DFARS Case 2005-
D011)

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

ACTION: Final rule.

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SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement provisions of 
annual appropriations acts that authorize an exemption from the Buy 
American Act for the acquisition of commercial information technology.

Dates: Effective Date: October 4, 2006.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition 
Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3C132, 3062 Defense 
Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0328; 
facsimile (703) 602-0350. Please cite DFARS Case 2005-D011.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 535 of Division F of the Consolidated Appropriations Act, 
2004 (Pub. L. 108-199); Section 517 of Division H of the Consolidated 
Appropriations Act, 2005 (Pub. L. 108-447); and Section 717 of the 
Consolidated Appropriations Act, 2006 (Pub. L. 109-115) provide an 
exemption from the Buy American Act for the acquisition of information 
technology that is a commercial item. This final rule amends the 
acquisition procedures in DFARS Part 225 to reflect the exemption, 
which previously had been implemented through the issuance of annual 
DoD-wide class deviations.
    DoD published a proposed rule at 71 FR 18694 on April 12, 2006. 
Five sources submitted comments on the proposed rule. Three of the 
respondents supported the rule. A discussion of the other comments is 
provided below.
    1. Comment. One respondent recommended that application of the Buy 
American Act restrictions to non-sensitive electrical and electronic 
products be reevaluated in the context of both the increasingly global 
economy and potential savings to the Government.
    DoD Response. Revision of the application of the Buy American Act 
to electrical/electronic products would require statutory change and, 
therefore, is outside the scope of this DFARS case.
    2. Comment. One respondent requested that the rule clearly apply as 
an exemption to the Berry Amendment requirements of the clause at DFARS 
252.225-7014, Preference for Domestic Specialty Metals, for commercial 
information technology.
    DoD Response. The appropriations act provisions contain authority 
only for an exemption from the Buy American Act (41 U.S.C. 10a-d). 
Therefore, DoD is unable to adopt this recommendation for an exemption 
from the Berry Amendment (10 U.S.C. 2533a).
    3. Comment. One respondent disagreed with the rule, due to the 
security risk associated with foreign entities potentially gaining 
access to DoD information systems.
    DoD Response. The policy in the rule is required by statute. The 
appropriations act provisions state that the restrictions of the Buy 
American Act ``shall not apply'' to the acquisition of information 
technology that is a commercial item. This policy has been in effect 
since May 2004, through the issuance of annual DoD-wide class 
deviations. Security of information technology is addressed in DFARS 
Subpart 239.71, which requires agencies to ensure that information 
assurance is provided for information technology in accordance with 
current policies, procedures, and statutes, to include--
    (1) The National Security Act;
    (2) The Clinger-Cohen Act;
    (3) National Security Telecommunications and Information Systems 
Security Policy No. 11;
    (4) Federal Information Processing Standards;
    (5) DoD Directive 8500.1, Information Assurance; and
    (6) DoD Instruction 8500.2, Information Assurance Implementation.
    Therefore, DoD has adopted the proposed rule as a final rule 
without change.
    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:
    This final rule amends the DFARS to implement provisions of annual 
appropriations acts that authorize an exemption from the Buy American 
Act for the acquisition of information technology that is a commercial 
item. The objective of the rule is to promote Government access to 
commercial information technology, by eliminating the application of 
domestic source requirements to the acquisition of such information 
technology. The rule applies to (1) All offerors responding to DoD 
solicitations for commercial information technology where the Buy 
American Act previously applied (generally, acquisitions between the 
micropurchase threshold of $2,500 and the World Trade Organization 
Government Procurement Agreement (WTO GPA) threshold of $193,000); and 
(2) manufacturers of components of commercial information technology 
products. Based on DD Form 350, Individual Contracting Action Report, 
data for Product Service Codes 7010 through 7050, which include ADP 
Equipment Software, Supplies, and Support Equipment, DoD awarded 
approximately 8,170 contracts to small business concerns for the 
acquisition of commercial information technology during fiscal year 
2005. Of those contracts, 7,850 were under $175,000, which was the WTO 
GPA threshold in 2005. The potential negative impact of increased 
competition from offerors of foreign products is expected to have 
minimal impact in the range of $2,500 to $100,000, because these awards 
are generally set aside for small business concerns. Furthermore, there 
will be a positive impact due to a reduction in administrative burden, 
since offerors and contractors will no longer need to track the origin 
of components to determine if an information technology product 
complies with Buy American Act requirements. The DD Form 350 system 
does not provide data at the subcontract level. However, manufacturers 
of domestic components of information technology products may face 
increased competition from manufacturers of foreign components as a 
result of this rule. There are no practical alternatives that would 
accomplish the objectives of the statutory requirements.

C. Paperwork Reduction Act

    This rule will reduce the information collection requirements that 
have been approved by the Office of Management and Budget, under 
Control Number 0704-0229, for use through May 31, 2007. Under this 
clearance, 36,175 annual burden hours have been approved for the 
provision at DFARS 252.225-7000, Buy American Act--Balance of Payments 
Program Certificate; and 1,000 annual burden

[[Page 58540]]

hours have been approved for the provision at DFARS 252.225-7035, Buy 
American Act--Free Trade Agreements--Balance of Payments Program 
Certificate. DoD estimates that the rule will result in a 5 percent 
reduction in the burden hours for the provision at DFARS 252.225-7000 
(1,800 hours) and a 50 percent reduction in the burden hours for the 
provision at DFARS 252.225-7035 (500 hours).

List of Subjects in 48 CFR Part 225

    Government procurement.

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

0
 Therefore, 48 CFR Part 225 is amended as follows:

PART 225--FOREIGN ACQUISITION

0
1. The authority citation for 48 CFR Part 225 continues to read as 
follows:

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

0
2. Section 225.1101 is amended by revising paragraph (2)(iii), 
paragraph (10)(i) introductory text, and paragraph (10)(ii) to read as 
follows:


Sec.  225.1101  Acquisition of supplies.

* * * * *
    (2) * * *
    (iii) An exception to the Buy American Act or Balance of Payments 
Program applies (see FAR 25.103, 225.103, and 225.7501); or
* * * * *
    (10)(i) Except as provided in paragraph (10)(ii) of this section, 
use the clause at 252.225-7036, Buy American Act--Free Trade 
Agreements--Balance of Payments Program, instead of the clause at FAR 
52.225-3, Buy American Act--Free Trade Agreements--Israeli Trade Act, 
in solicitations and contracts for the items listed at 225.401-70, when 
the estimated value equals or exceeds $25,000, but is less than 
$193,000, and a Free Trade Agreement applies to the acquisition.
* * * * *
    (ii) Do not use the clause if--
    (A) Purchase from foreign sources is restricted (see 
225.401(a)(2)), unless the contracting officer anticipates a waiver of 
the restriction; or
    (B) Acquiring information technology that is a commercial item, 
using fiscal year 2004 or subsequent funds (Section 535 of Division F 
of the Consolidated Appropriations Act, 2004 (Pub. L. 108-199), and the 
same provision in subsequent appropriations acts).
* * * * *

0
3. Section 225.7501 is amended by revising paragraphs (a)(2)(iv) and 
(v) and adding paragraph (a)(2)(vi) to read as follows:


Sec.  225.7501  Policy.

* * * * *
    (a) * * *
    (2) * * *
    (iv) An industrial gas;
    (v) A brand drug specified by the Defense Medical Materiel Board; 
or
    (vi) Information technology that is a commercial item, using fiscal 
year 2004 or subsequent funds (Section 535 of Division F of the 
Consolidated Appropriations Act, 2004 (Pub. L. 108-199), and the same 
provision in subsequent appropriations acts);
* * * * *
 [FR Doc. E6-16401 Filed 10-3-06; 8:45 am]
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