[Federal Register Volume 72, Number 126 (Monday, July 2, 2007)]
[Proposed Rules]
[Pages 35960-35961]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-12763]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212 and 225

RIN 0750-AF74


Defense Federal Acquisition Regulation Supplement; Waiver of 
Specialty Metals Restriction for Acquisition of Commercially Available 
Off-the-Shelf Items (DFARS Case 2007-D013)

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 waive application of 10 U.S.C. 2533b 
for acquisitions of commercially available off-the-shelf (COTS) items. 
10 U.S.C. 2533b, established by section 842 of the National Defense 
Authorization Act for Fiscal Year 2007, places restrictions on the 
acquisition of specialty metals not melted or produced in the United 
States.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before August 1, 2007, to be considered 
in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2007-D013, 
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 2007-D013 in the subject 
line of the message.
    Fax: (703) 602-7887.
    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 generally 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

    Section 842(a) of the National Defense Authorization Act for Fiscal 
Year 2007 (Pub. L. 109-364) establishes a new specialty metals domestic 
source restriction, which is codified at 10 U.S.C. 2533b. A proposed 
rule is being developed to comprehensively implement 10 U.S.C. 2533b in 
the DFARS. However, this proposed rule is being published separately in 
order to expedite the exercise of a statutory exception to the 
requirements of 10 U.S.C. 2533b for COTS items.
    As defined in subsection (c) of 41 U.S.C. 431 (Section 35 of the 
Office of Federal Procurement Policy Act), ``COTS item''--
    (i) Means any item of supply that is--
    (A) A commercial item;
    (B) Sold in substantial quantities in the commercial marketplace; 
and
    (C) Offered to the Government, without modification, in the same 
form in which it is sold in the commercial marketplace; and
    (ii) Does not include bulk cargo, as defined in section 3 of the 
Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural 
products and petroleum products.
    41 U.S.C. 431(a) requires that the acquisition regulations list the 
provisions of law that are inapplicable to contracts and subcontracts 
for COTS items. Covered provisions of law must be included on that list 
unless the Administrator of the Office of Federal Procurement Policy 
(OFPP) makes a written determination that it would not be in the best 
interest of the United States to exempt such contracts from the 
applicability of that provision of law. Covered provisions of law are 
those that, as determined by OFPP, impose on contractors Government-
unique policies, procedures, requirements, or restrictions, except 
for--
    [cir] A provision of law that provides for criminal or civil 
penalties; or
    [cir] A provision of law that specifically refers to 41 U.S.C. 431, 
and states that the law is nevertheless applicable to COTS items.
    10 U.S.C. 2533b does not provide for criminal or civil penalties; 
nor does it refer to 41 U.S.C. 431 and state that the law is 
nevertheless applicable to COTS items. Accordingly, this proposed 
rule--
    [cir] Creates a new DFARS section 212.570 to list 10 U.S.C. 2533b 
as inapplicable to contracts and subcontracts for the acquisition of 
COTS items; and
    [cir] Includes acquisitions of COTS items containing specialty 
metals as an exception at DFARS 225.7002-2.
    Exercise of this statutory COTS waiver is critical to DoD's access 
to the commercial marketplace. Manufacturers make component purchasing 
decisions based on factors such as cost, quality, availability, and 
maintaining the state of the art--not the country in which specialty 
metals in the components were melted. In addition, many commercial 
items commonly acquired in large quantities by DoD, such as computers, 
commercial-off-the shelf engines, and semi-conductors, may contain a 
small percentage of components made of specialty metals, subjecting the 
manufacturers to costly and burdensome, if not impossible, tracking 
requirements. Many manufacturers of COTS items are unwilling to change 
their existing processes, inventory systems, or facilities and incur 
the significant expense associated with tracking the sourcing of 
specialty metals in the components of a COTS item in order to generate 
sales to DoD, which typically represent a very small percentage of 
overall revenue for COTS items.
    Section 2533b permits DoD to process a domestic non-availability 
determination, but such process poses difficulties for DoD in meeting 
mission-sensitive requirements in a timely manner. In order for DoD to 
be able to support a determination, a contractor must--
    (1) Work with its suppliers at every tier to identify non-compliant 
parts from among potentially hundreds of thousands of parts;
    (2) Determine that it cannot find a compliant source, either 
because lead times are longer than the contract permits, or because 
sufficient quantity is not available; and
    (3) Research whether and by when it can become compliant.
    Once the information on noncompliant parts and their 
nonavailability is provided to DoD, the Department must conduct a 
validation review and develop a report to document the determination. 
All of these efforts taken together may entail thousands of hours of 
work, at considerable cost to the taxpayer, and a significant addition 
in lead time to the acquisition cycle.
    For all of these reasons, an exemption from 10 U.S.C. 2533b for 
COTS items is in the best interest of the Government.
    This rule was not subject to Office of Management and Budget review 
under

[[Page 35961]]

Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    This rule is not expected 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 
manufacturers of COTS items have not generally changed their 
manufacturing and purchasing practices based on DoD regulations. The 
burden generally falls on the Government to forego purchase of the item 
or to process a domestic nonavailability determination requested by the 
prime contractor. So far, only large contractors have had the resources 
to request a domestic nonavailability determination. If there is any 
impact of this proposed rule, it should be beneficial, because small 
businesses providing COTS items, many of whom are subcontractors, will 
not have to--
    [cir] Rely on the prime contractor to request a domestic 
nonavailability determination from the Government; or
    [cir] Face the decision whether to cease doing business with the 
Government or set up systems to track and segregate all DoD parts that 
contain specialty metals.
    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 
2007-D013.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. 3501, et seq.) does not 
apply, because the proposed rule contains no information collection 
requirements.

List of Subjects in 48 CFR Parts 212 and 225

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
    Therefore, DoD proposes to amend 48 CFR parts 212 and 225 as 
follows:
    1. The authority citation for 48 CFR parts 212 and 225 continues to 
read as follows:

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

PART 212--ACQUISITION OF COMMERCIAL ITEMS

    2. Section 212.570 is added to read as follows:


212.570  Applicability of certain laws to contracts and subcontracts 
for the acquisition of commercially available off-the-shelf items.

    10 U.S.C. 2533b, Requirement to buy strategic materials critical to 
national security from American sources, is not applicable to contracts 
and subcontracts for the acquisition of commercially available off-the-
shelf items as defined in 41 U.S.C. 431(c).

PART 225--FOREIGN ACQUISITION

    3. Section 225.7002-2 is amended by adding paragraph (q) to read as 
follows:


225.7002-2  Exceptions.

* * * * *
    (q) Acquisitions of commercially available off-the-shelf items 
containing specialty metals.
[FR Doc. E7-12763 Filed 6-29-07; 8:45 am]
BILLING CODE 5001-08-P