[Federal Register Volume 79, Number 121 (Tuesday, June 24, 2014)]
[Rules and Regulations]
[Pages 35700-35701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14584]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 237

RIN 0750-AI05


Defense Federal Acquisition Regulation Supplement: Private Sector 
Notification Requirements of In-Sourcing Actions (DFARS Case 2012-D036)

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 a section of the National Defense Authorization Act (NDAA) 
for Fiscal Year 2012 regarding private sector notification of in-
sourcing actions.

DATES: Effective June 24, 2014.

FOR FURTHER INFORMATION CONTACT: Ms. Janetta Brewer, telephone 571-372-
6104.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD published an interim rule in the Federal Register at 78 FR 
65218 on October 31, 2013, to establish procedures for the timely 
notification of any contractor that performs a function that the 
Secretary plans to convert (in-source) to performance by DoD civilian 
employees and provide the congressional defense committees a copy of 
any such notification. One respondent submitted comments in response to 
the interim rule.

II. Discussion and Analysis

    DoD reviewed the public comments in the development of the final 
rule. A discussion of the comments is provided below. No changes were 
made to the final rule based on the public comments; however, one 
editorial change is being made to clarify a reference.

A. Analysis of Public Comments

    Comment: The respondent commented that, while the interim rule 
requires the contracting officer to notify an affected incumbent 
contractor about an in-sourcing decision within 20 business days of 
receiving the decision from the in-sourcing program official, the rule 
does not specifically address how soon DoD can commence the in-sourcing 
action after issuing the notice. The respondent stated the rule should 
require issuance of the in-sourcing notice in a reasonable amount of 
time prior to DoD's commencement of the in-sourcing action.
    Response: No action was taken as a result of this comment. DoD 
guidance at DFARS 237.102-79 and in the memorandum at DFARS Procedures, 
Guidance and Information 237.102-79, reflects that the in-sourcing of 
contracted services falls into the following three categories of 
justification (1) inherently Governmental functions (2) work closely 
associated with inherently Governmental functions, critical in nature, 
and unauthorized personal services, and (3) cost-based in-sourcing 
decisions. The nature of the contracts in these three categories is 
such that it is essential for the Government to have the ability to 
take in-sourcing actions once notification is provided to affected 
incumbent contractors.
    Comment: The respondent suggested including specific details of the 
rationale for the in-sourcing decision in the notice to the contractors 
to ensure meaningful insight about the rationale.
    Response: No action was taken on this comment as DoD included 
language requiring that a summary of why the service is being insourced 
be included in the notice and therefore, as written, the rule fulfills 
the objective of transparency and accountability.

B. Other Changes

    Editorial changes were made to clarify where the OASD memorandum 
``Private Sector Notification Requirements in Support of In Sourcing 
Actions,'' dated January 29, 2013, can be found in the DFARS Procedures 
Guidance and Information.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and

[[Page 35701]]

equity). E.O. 13563 emphasizes the importance of quantifying both costs 
and benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This is not a significant regulatory action and, 
therefore, was not subject to review under section 6(b) of E.O. 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
and is summarized as follows:
    This final rule amends DFARS 237.102-79 to implement section 938 of 
the National Defense Authorization Act (NDAA) for Fiscal Year 2012 
regarding private sector notification of in-sourcing actions. Section 
938 of the NDAA requires the Secretary of Defense to establish 
procedures for the timely notification of any contractor who performs a 
function that the Secretary plans to convert (in-source) to performance 
by DoD civilian employees and provide the congressional defense 
committees a copy of any such notification. The rule requires the 
contracting officer to notify an affected incumbent contractor about an 
in-sourcing decision within 20 business days of receiving the decision 
from the in-sourcing program official.
    The public did not raise any issues in response to the initial 
regulatory flexibility analysis. This rule is not expected to have a 
significant economic impact on a substantial number of small entities. 
The final rule has very limited application and only potentially 
applies to entities that have contracts with DoD agencies performing 
services that fall into the following three categories for potential 
justification for in-sourcing: (1) Inherently Governmental functions 
(2) work closely associated with inherently Governmental functions, 
critical in nature, and unauthorized personal services, and (3) cost-
based in-sourcing decisions. During the acquisition planning phase, 
requirements are scrutinized under FAR subpart 7.5 to preclude contract 
awards for inherently Governmental functions and unauthorized personal 
service contracts. Because of this prohibition and screening of 
requirements, it is expected that this rule will not have a significant 
impact on a substantial number of contracts evaluated under category 
(1) for inherently Governmental functions or under category (2) for 
unauthorized personal services. Effective March 2013, data fields were 
added to FPDS to capture award information for contract actions that 
are (1) critical functions, i.e. a function that is necessary to the 
agency being able to effectively perform and maintain control its 
mission and operations, and (2) functions closely associated with 
inherently Governmental functions. FPDS data was reviewed for a full 
one-year period (March 2013 through February 2014) for awards coded as 
critical functions or functions closely associated with inherently 
Governmental functions. The FPDS data reviewed reflected that only 
7,786 contracts and task orders for critical functions or functions 
closely associated with inherently Governmental functions were awarded 
to small entities, compared to a total of 71,274 awards for other 
functions that were made to small entities during this same period. 
(The data reflect awards greater than the simplified action threshold 
of $150,000.) It is unknown as to how many of the 7,786 awards made to 
small entities may be evaluated and justified for future in-sourcing 
action. There is no FPDS data available to evaluate the potential 
universe of actions that might fall under the third category of cost-
based in-sourcing decisions.
    There are no projected reporting, recordkeeping, and other 
compliance requirements associated with this rule. The rule does not 
duplicate, overlap, or conflict with any other Federal rules. DoD was 
unable to identify any significant alternatives consistent with the 
stated objectives of the statute.

V. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Part 237

    Government procurement.

Amy G. Williams,
Deputy, Defense Acquisition Regulations System.

    Accordingly, the interim rule amending 48 CFR part 237, which was 
published in the Federal Register at 78 FR 65218 on October 31, 2013, 
is adopted as a final rule with the following change:

PART 237--SERVICE CONTRACTING

0
1. The authority citation for 48 CFR part 237 continues to read as 
follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.


0
2. Amend section 237.102-79 by revising the last sentence in the 
paragraph to read as follows:


237.102-79  Private sector notification requirements in support of in-
sourcing actions.

    * * * See the OASD (RFM) memorandum entitled ``Private Sector 
Notification Requirements in Support of In-sourcing Actions,'' dated 
January 29, 2013, for further information, which is available at PGI 
237.102-79.


[FR Doc. 2014-14584 Filed 6-23-14; 8:45 am]
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