[Federal Register Volume 75, Number 133 (Tuesday, July 13, 2010)]
[Rules and Regulations]
[Pages 40711-40714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16892]



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Part III





Department of Defense





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Defense Acquisition Regulations System



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48 CFR Parts 205, 210, 212, et al.



Defense Federal Acquisition Regulation Supplements; Interim and Final 
Rules

Federal Register / Vol. 75 , No. 133 / Tuesday, July 13, 2010 / Rules 
and Regulations

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212, 232, and 252

RIN 0750-AG56


Defense Federal Acquisition Regulation Supplement; Payments in 
Support of Emergencies and Contingency Operations (DFARS Case 2009-
D020)

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

ACTION: Interim rule with request for comments.

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SUMMARY: DoD is issuing an interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to bring DoD into compliance 
with OMB implementation of the Prompt Payment Act by exempting military 
contingencies, and certain payments related to emergencies and the 
release or threatened release of hazardous substances.

DATES: Effective Date: July 13, 2010.
    Comment date: Comments on this interim rule should be submitted in 
writing to the address shown below on or before September 13, 2010, to 
be considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2009-D020, 
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 2009-D020 in the subject 
line of the message.
    Fax: 703-602-0350.
    Mail: Defense Acquisition Regulations System, Attn: Mr. Julian E. 
Thrash, OUSD (AT&L) DPAP/DARS, Room 3B855, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Mr. Julian E. Thrash, 703-602-0310.

SUPPLEMENTARY INFORMATION:

A. Background

    This rule implements the full authority granted by 5 CFR 1315.1 for 
payments covered by 5 CFR 1315.1(b)(2) that are either certified for 
payment in an operational area, or are contingent upon the receipt of 
necessary supporting documentation (i.e., contract, invoice, receiving 
report) emanating from an operational area.
    5 CFR part 1315 exempts Prompt Payment Act compliance for payments 
related to emergencies (defined in the Disaster Relief Act of 1974, 
Pub. L. 93-288, as amended (42 U.S.C. 5121, et seq.); contingency 
operations (as defined in 10 U.S.C. 101(a)(13)); and the release/
threatened release of hazardous substances (as defined in 4 U.S.C. 
9606, Section 106). DoD requires the flexibility provided by 5 CFR 
1315, Exemption from the Prompt Payment Act, because of the potential 
for unstable environments during emergencies and contingency 
operations.
    This DFARS change will provide DoD needed flexibility in limited 
circumstances. The head of the contracting activity shall make 
subsequent determinations, after consultation with the cognizant 
comptroller, as the operational area evolves into a more stable 
business environment to enable the provisions of FAR 32.9 to apply.
    This DFARS change adds section 232.901, Applicability, which 
provides criteria that the head of the contracting activity will use in 
determining when conditions exist that limit normal business operations 
during emergencies and contingency operations. It also adds DFARS 
232.908, Contract clauses, which prescribes the use of the new clause 
252.232-7011, Payments in Support of Emergencies and Contingency 
Operations. A conforming change is also required to 212.301, 
Solicitation provisions and contract clauses for the acquisition of 
commercial items.
    This rule was subject to review under Section 6(b) of Executive 
Order 12866, Regulatory Planning and Review, dated September 30, 1993. 
This rule is not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    DoD does not expect this rule to have a significant economic impact 
on small entities within the meaning of the Regulatory Flexibility Act, 
5 U.S.C. 601, et seq. However, an initial regulatory flexibility 
analysis has been performed as follows:
    This initial regulatory flexibility analysis has been prepared 
consistent with 5 U.S.C. 604.

1. Reasons for the Action

    On May 22, 2008, the Department of Defense Inspector General (DoD 
IG) issued the results of an audit, Report No. D-2008-098, entitled 
``Internal Controls Over Payments Made in Iraq, Kuwait, and Egypt.'' 
The audit report cited inconsistencies in FAR 32.9, DFARS 232.9, and 5 
CFR in regard to compliance with the Prompt Payment Act for military 
contingency operations. The report further recommended that DoD 
establish procedures to address contingency operations.
    During emergencies and contingency operations, the operational area 
can be so fluid and dynamic that carrying out normal business practices 
can be extremely challenging. It is necessary for the head of the 
contracting activity (HCA) to have the authority to appropriately 
respond to emergency and contingency operations accordingly whenever 
limited operational conditions exist. This includes the payment of 
contractors.
    This interim rule will bring DoD into compliance with OMB 
implementation of the Prompt Payment Act, which exempts military 
contingencies.

2. Objectives of, and Legal Basis for, the Rule

    The objectives of this rule allow the HCA to make a determination 
of whether stable business operations exist in theater, which allows 
the Prompt Payment Act to apply in an emergency and contingency 
operation. If stable conditions don't exist, then the HCA is authorized 
to apply the clause at 252.232-7011. When this clause is used, it will 
be used instead of the appropriate payment clause at FAR 52.232-25, 
52.232-26, or 52.232-27. DFARS 232.901 will require the HCA to make 
subsequent determinations as the operational area evolves into a more 
stable environment to enable the provisions of the Prompt Payment Act 
to apply. It will also require the contracting officer to notify, by 
contract modification, each contractor that has a contract containing 
DFARS clause 252.232.7011, that it is no longer applicable, and the 
applicable FAR Prompt Payment clause in the contract applies.

3. Description of and Estimate of the Number of Small Entities to Which 
the Rule Will Apply

    This interim rule will have an economic impact on small entities. 
It is expected the rule will initially be applied to contracts 
supporting Afghanistan. Currently, normal business operations are 
hindered in Afghanistan due to the uncertain environment and 
instability in the region. It may be impractical for U.S. forces to 
adequately match receipt of necessary supporting documentation (i.e., 
contract, invoice, and receiving report) in such an operational area. 
It is expected that the HCA for Afghanistan could exempt

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``payments made in the theater of operations'' from Prompt Payment Act 
interest and interest penalties.
    A review of Federal Procurement Data System (FPDS) data for FY08 
shows that of the 140 awards made to U.S. firms, only 21 were made to 
small business entities. This total represents 15% of all awards made 
during this time period. Therefore, the overall impact of this rule is 
not expected to have a significant aggregate economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. However, a regulatory 
flexibility analysis was completed because there is an economic impact 
to consider.

4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Rule, Including an Estimate of the 
Classes of Small Entities Which Will Be Subject to the Requirement and 
the Type of Professional Skills Necessary for Preparation of the Report 
or Record

    There is no reporting requirement established by this rule. See 
preceding item 3 regarding an estimate of the effect on small entities 
that will be subject to this requirement.

5. Relevant Federal Rules Which May Duplicate, Overlap, or Conflict 
With the Rule

    This rule does not duplicate, overlap, or conflict with any other 
Federal rules.

6. Description of any Significant Alternatives to the Rule Which 
Accomplish the Stated Objectives of Applicable Statutes and Which 
Minimize Any Significant Economic Impact of the Rule on Small Entities

    There are no significant alternatives which accomplish the stated 
objectives. This rule will bring DoD into compliance with OMB 
implementation of the Prompt Payment Act, which exempts military 
contingencies.
    DoD invites comments from small businesses and other interested 
parties on the expected impact of this rule on small entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C 610 (DFARS case 2009-D020), in 
correspondence.

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. 
Specifically, during emergencies and contingency operations, the 
operational area can be so fluid and dynamic that carrying out normal 
business practices can become impractical. It is necessary for the head 
of the contracting activity to have the authority to incorporate the 
Payments in Support of Emergencies and Contingency Operations clause 
provided by 252.232-7011, when an unstable business environment exists. 
This case brings DoD into compliance with OMB implementation of the 
Prompt Payment Act, which exempts military contingencies under 5 CFR 
1315.1(b)(2).

List of Subjects in 48 CFR Parts 212, 232, and 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

0
Therefore, 48 CFR parts 212, 232, and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 212, 232, and 252 continues 
to read as follows:

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

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
2. Section 212.301 is amended by adding paragraph (f)(xiv) to read as 
follows:


212.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f) * * *
    (xiv) Use the clause at 252.232-7011, Payments in Support of 
Emergencies and Contingency Operations, as prescribed in 232.908.

PART 232--CONTRACT FINANCING

0
3. Section 232.901 is added to read as follows:


232.901  Applicability.

    (1) FAR subpart 32.9, Prompt Payment, does not apply when--
    (i) There is--
    (A) An emergency, as defined in the Disaster Relief Act of 1974;
    (B) A contingency operation (see FAR 2.101(b)); or
    (C) The release or threatened release of hazardous substances (as 
defined in 4 U.S.C. 9606, Section 106); and
    (ii) The head of the contracting activity has made a determination, 
after consultation with the cognizant comptroller, that conditions 
exist that limit normal business operations; and
    (iii) Payments will be made in the operational area or made 
contingent upon receiving supporting documentation (i.e., contract, 
invoice, and receiving report) from the operational area.
    (2) Criteria limiting normal business operations during emergencies 
and contingency operations that restrict the use of FAR 32.9 may 
include such conditions as--
    (i) Support infrastructure, hardware, communications capabilities, 
and bandwidth are not consistently available such that normal business 
operations can be carried out;
    (ii) Support resources, facilities, and banking needs are not 
consistently available for use as necessary in carrying out normal 
business operations;
    (iii) Military mission priorities override the availability of 
appropriately skilled personnel in support of back-office operations;
    (iv) Mobility impairments and security concerns restrict free 
movement of personnel and documents necessary for timely processing;
    (v) Foreign vendors are not familiar with or do not understand DoD 
contract requirements (i.e., proper invoice, receiving documentation, 
and contracting terms); or
    (vi) Documents received in support of payment requests and 
shipments require language translations that cannot be performed and 
documented within normal business processing times.
    (3) Subsequent Determinations. The head of the contracting activity 
shall make subsequent determinations, after consultation with the 
cognizant comptroller, as the operational area evolves into either a 
more stable or less stable environment.
    (i) If the head of the contracting activity determines that the 
operational area has evolved into a more stable environment, the 
contracting officer shall notify, by issuance of a contract 
modification, each contractor performing in the operational area under 
review. The modification deactivates clause 252.232-7011 and activates 
the applicable FAR Prompt Payment clause in the contract.
    (ii) If after deactivation of clause 252.232-7011, the head of the

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contracting activity subsequently determines that the operational area 
has evolved into a less stable environment, the head of the contracting 
activity will make a determination that conditions exist that limit 
normal business operations. The contracting officer will then 
reactivate clause 252.232-7011 by issuance of a contract modification.

0
4. Section 232.908 is added to read as follows:


232.908  Contract clauses

    Use the clause at 252.232-7011, Payments in Support of Emergencies 
and Contingency Operations, in solicitations and contracts in addition 
to the approved clause prescribed in FAR 32.908 in acquisitions that 
meet the applicability criteria at 232.901(1).

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
5. Section 252.232-7011 is added to read as follows:


252.232-7011  Payments in Support of Emergencies and Contingency 
Operations.

    As prescribed in section 232.908, use the following clause:

PAYMENTS IN SUPPORT OF EMERGENCIES AND CONTINGENCY OPERATIONS (JUL 
2010)

    (a) Definitions of pertinent terms are set forth in sections 
2.101, 32.001, and 32.902 of the Federal Acquisition Regulation.
    (b) Notwithstanding any other payment clause in this contract, 
the Government will make invoice payments under the terms and 
conditions specified in this clause. The Government considers 
payment as being made on the day a check is dated or the date of an 
electronic funds transfer
    (c) Invoice payments.
    (1) Due date.
    (i) Payment will be made as soon as possible once a proper 
invoice is received and matched with the contract and the receiving/
acceptance report.
    (ii) If the contract does not require submission of an invoice 
for payment (e.g., periodic lease payments), the due date will be as 
specified in the contract.
    (2) Contractor's invoice. The Contractor shall prepare and 
submit invoices to the designated billing office specified in the 
contract. A proper invoice should include the items listed in 
paragraphs (c)(2)(i) through (c)(2)(x) of this clause.
    (i) Name and address of the Contractor.
    (ii) Invoice date and invoice number. (The Contractor should 
date invoices as close as possible to the date of the mailing or 
transmission.)
    (iii) Contract number or other authorization for supplies 
delivered or services performed (including order number and contract 
line item number).
    (iv) Description, quantity, unit of measure, unit price, and 
extended price of supplies delivered or services performed.
    (v) Shipping and payment terms (e.g., shipment number and date 
of shipment, discount for prompt payment terms). Bill of lading 
number and weight of shipment will be shown for shipments on 
Government bills of lading.
    (vi) Name and address of Contractor official to whom payment is 
to be sent (must be the same as that in the contract or in a proper 
notice of assignment).
    (vii) Name (where practicable), title, phone number, and mailing 
address of person to notify in the event of a defective invoice.
    (viii) Taxpayer Identification Number (when required). The 
taxpayer identification number is required for all payees subject to 
the U.S. Internal Revenue Code.
    (ix) Electronic funds transfer banking information.
    (A) The Contractor shall include electronic funds transfer 
banking information on the invoice only if required elsewhere in 
this contract.
    (B) If electronic funds transfer banking information is not 
required to be on the invoice, in order for the invoice to be a 
proper invoice, the Contractor shall have submitted correct 
electronic funds transfer banking information in accordance with the 
applicable solicitation provision (e.g., 52.232-38, Submission of 
Electronic Funds Transfer Information with Offer), contract clause 
(e.g., 52.232-33, Payment by Electronic Funds Transfer--Central 
Contractor Registration, or 52.232-34, Payment by Electronic Funds 
Transfer-Other Than Central Contractor Registration), or applicable 
agency procedures.
    (C) Electronic funds transfer banking information is not 
required if the Government waived the requirement to pay by 
electronic funds transfer.
    (x) Any other information or documentation required by the 
contract (e.g., evidence of shipment).
    (3) Discounts for prompt payment. The designated payment office 
will take cost-effective discounts if the payment is made within the 
discount terms of the contract.
    (4) Contract financing payment. If this contract provides for 
contract financing, the Government will make contract financing 
payments in accordance with the applicable contract financing 
clause.
    (5) Overpayments. If the Contractor becomes aware of a duplicate 
contract financing or invoice payment or that the Government has 
otherwise overpaid on a contract financing or invoice payment, the 
Contractor shall--
    (i) Remit the overpayment amount to the payment office cited in 
the contract along with a description of the overpayment, including 
the--
    (A) Circumstances of the overpayment (e.g., duplicate payment, 
erroneous payment, liquidation errors, date(s) of overpayment);
    (B) Affected contract number and delivery order number, if 
applicable;
    (C) Affected contract line item or subline item, if applicable; 
and
    (D) Contractor point of contact; and
    (ii) Provide a copy of the remittance and supporting 
documentation to the Contracting Officer.
    (d) This clause is applicable until otherwise notified by the 
Contracting Officer. Upon notification by issuance of a contract 
modification, the appropriate FAR Prompt Payment clause in the 
contract becomes applicable.

(End of clause)

[FR Doc. 2010-16892 Filed 7-12-10; 8:45 am]
BILLING CODE 5001-08-P