[Federal Register Volume 81, Number 126 (Thursday, June 30, 2016)]
[Rules and Regulations]
[Pages 42557-42559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15256]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212 and 252

[Docket DARS-2016-0015]
RIN 0750-AI93


Defense Federal Acquisition Regulation Supplement: Pilot Program 
on Acquisition of Military Purpose Nondevelopmental Items (DFARS Case 
2016-D014)

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

ACTION: Interim rule.

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SUMMARY: DoD is issuing an interim rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2016 that changes 
the criteria for the pilot program on acquisition of military purpose 
nondevelopmental items.

DATES: Effective June 30, 2016.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before August 29, 2016 to be 
considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2016-D014, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Submit comments 
via the Federal eRulemaking portal by entering ``DFARS Case 2016-D014'' 
under the heading ``Enter keyword or ID'' and selecting ``Search.'' 
Select the link ``Submit a Comment'' that corresponds with ``DFARS Case 
2016-D014.'' Follow the instructions provided at the ``Submit a 
Comment'' screen. Please include your name, company name (if any), and 
``DFARS Case 2016-D014'' on your attached document.
    [cir] Email: [email protected]. Include DFARS Case 2016-D014 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Mr. 
Dustin Pitsch, OUSD(AT&L)DPAP/DARS, Room 3B941, 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. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Mr. Dustin Pitsch, telephone 571-372-
6090.

SUPPLEMENTARY INFORMATION:

I. Background

    This interim rule revises the DFARS to implement section 892 of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2016 
(Pub. L. 114-92). Section 892 amends section 866 of the NDAA for FY 
2011 (Pub. L. 111-383) to modify the criteria for use of the pilot 
program on acquisition of military purpose nondevelopmental items. 
Section 892 removes the requirements under the program for the use of 
competitive procedures and for awards to be made to nontraditional 
defense contractors. Section 892 also increases the threshold for use 
of the pilot program to contracts up to $100 million.
    Section 866 was implemented in DFARS rule 2011-D034, Pilot Program 
on Acquisition of Military Purpose Nondevelopmental Items (77 FR 2653), 
which allowed for the creation of the pilot program to test whether the 
streamlined procedures, similar to those available for commercial 
items, can serve as an effective incentive for nontraditional defense 
contractors to channel investment and innovation into areas that are 
useful to DoD and provide items developed exclusively at private 
expense to meet validated military requirements. The DFARS changes 
proposed by this rule will allow for increased opportunities to utilize 
the pilot program.

II. Discussion and Analysis

    This rule amends DFARS subpart 212.71 by--
     Deleting the term ``nontraditional defense contractor'' 
and the associated definition;
     Removing the requirement that pilot program contracts be 
awarded using competitive procedures;
     Increasing the maximum contract award value threshold for 
use of the pilot program from $53.5 million to $100 million; and
     Revising the prescription for the provision at 252.212-
7002 for use only when the pilot program will be used.
    Conforming changes are made to DFARS provision 252.212-7002, Pilot 
Program for Acquisition of Military-Purpose Nondevelopmental Items, to 
include removal of the requirement at paragraph (c) for offerors to 
represent by submission of an offer that the firm is a nontraditional 
contractor.
    This rule also makes one editorial change to provide at DFARS 
212.7101 the full text of the definitions of ``military-purpose 
nondevelopmental items'' and ``nondevelopmental items.''

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    DoD does not intend to apply the requirements of section 892 of the 
NDAA for FY 2016 to contracts at or below the simplified acquisition 
threshold (SAT) or for the acquisition of commercial items, including 
commercially available off-the-shelf (COTS) items.

A. Applicability to Contracts at or Below the SAT

    41 U.S.C. 1905 governs the applicability of laws to contracts or 
subcontracts in amounts not greater than the simplified acquisition 
threshold. It is intended to limit the applicability of laws to such 
contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision 
of law contains criminal or civil penalties, or if the FAR Council 
makes a written determination that it is not in the best interest of 
the Federal Government to exempt contracts or subcontracts at or below 
the SAT, the law will apply to them. The Director, Defense Procurement 
and Acquisition Policy (DPAP), is the appropriate authority to make 
comparable determinations for regulations to be published in the DFARS, 
which is part of the FAR system of regulations. DoD

[[Page 42558]]

did not make that determination. Therefore, this rule does not apply 
below the simplified acquisition threshold.

B. Applicability to Contracts for the Acquisition of Commercial Items, 
Including COTS Items

    41 U.S.C. 1906 governs the applicability of laws to contracts for 
the acquisition of commercial items, and is intended to limit the 
applicability of laws to contracts for the acquisition of commercial 
items. 41 U.S.C. 1906 provides that if a provision of law contains 
criminal or civil penalties, or if the FAR Council makes a written 
determination that it is not in the best interest of the Federal 
Government to exempt commercial item contracts, the provision of law 
will apply to contracts for the acquisition of commercial items. 
Likewise, 41 U.S.C. 1907 governs the applicability of laws to COTS 
items, with the Administrator for Federal Procurement Policy the 
decision authority to determine that it is in the best interest of the 
Government to apply a provision of law to acquisitions of COTS items in 
the FAR. The Director, DPAP, is the appropriate authority to make 
comparable determinations for regulations to be published in the DFARS, 
which is part of the FAR system of regulations. DoD did not make that 
determination. While FAR part 12 commercial procedures may be used to 
acquire military purpose nondevelopmental items under this pilot 
program, the rule will not apply to the acquisition of commercial 
items.

IV. 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 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.

V. Regulatory Flexibility Act

    DoD does not expect this rule 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. However, an initial 
regulatory flexibility analysis has been performed and is summarized as 
follows:
    This rule is necessary to implement section 892 of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2016.
    The objective of the rule is to modify the criteria for the pilot 
program at DFARS subpart 212.71, Pilot Program for the Acquisition of 
Military Purpose Nondevelopmental Items, to increase the opportunities 
for use of the program. The rule removes the criteria that contracts 
must be awarded to ``nontraditional defense contractors'' and awards 
must be made using competitive procedures. The rule also increases the 
dollar threshold for the program to allow use on procurements up to 
$100 million.
    The changes to the pilot program will have a positive economic 
impact on small businesses that did not meet the definition of 
``nontraditional defense contractors'' and have developed products that 
could be applied to a military purpose. According to data available in 
the Federal Procurement Data System for FY 2015, 6,514 unique small 
businesses were awarded a DoD contract in excess of the certified cost 
and pricing threshold ($750,000) and therefore did not meet the 
definition of ``nontraditional defense contractor.'' Prior to the 
changes made by this rule these small businesses were not eligible for 
an award under the pilot program. These small businesses will now be 
able to participate in the pilot program if they are developing a 
military purpose nondevelopmental item.
    This rule does not impose any new reporting, recordkeeping or other 
compliance requirements. The rule does not duplicate, overlap, or 
conflict with any other Federal rules. No significant alternatives were 
identified during the development of this rule.
    DoD invites comments from small business concerns 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 2016-D014) in 
correspondence.

VI. 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).

VII. 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 promulgate this 
interim rule without prior opportunity for public comment. This interim 
rule implements section 892 of the NDAA for FY 2016 (Pub. L. 114-92), 
which amended section 866 of the NDAA for FY 2011 (Pub. L. 111-383) 
to--
     Modify criteria for use of the pilot program in order to 
increase opportunities for use;
     Remove the requirements under the program to use 
competitive procedures;
     Remove requirements for awards to be made to 
nontraditional defense contractors; and
     Increase the threshold for use of the program to contracts 
up to $100 million.
    The purpose of the pilot program is to test whether the streamlined 
procedures, similar to those available for commercial items, can serve 
as an effective incentive for nontraditional defense contractors to 
channel investment and innovation into areas that are useful to DoD and 
provide items developed exclusively at private expense to meet 
validated military requirements. This action is necessary because the 
pilot program expires on December 31, 2019, and, in order to realize 
any of the benefits from the statutory modifications made by this rule 
prior to the expiration of the pilot program, the changes made by this 
rule must take effect immediately. However, pursuant to 41 U.S.C. 1707 
and FAR 1.501-3(b), DoD will consider public comments received in 
response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 212 and 252

    Government procurement.

Jennifer L. Hawes,
Editor, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 212 and 252 are amended as follows:

0
1. The authority citation for 48 CFR parts 212 and 252 continues to 
read as follows:

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

[[Page 42559]]

PART 212--ACQUISITION OF COMMERCIAL ITEMS


212.7100  [Amended]

0
2. Section 212.7100 is amended by removing ``(Pub. L. 111-383)'' and 
adding ``(Pub. L. 111-383), as modified by section 892 of the National 
Defense Authorization Act for Fiscal Year 2016 (Pub. L. 114-92)'' in 
its place.
0
3. Section 212.7101 is revised to read as follows:


212.7101  Definitions.

    As used in this subpart--
    Military-purpose nondevelopmental item means a nondevelopmental 
item that meets a validated military requirement, as determined in 
writing by the responsible program manager, and has been developed 
exclusively at private expense. An item shall not be considered to be 
developed at private expense if development of the item was paid for in 
whole or in part through--
    (1) Independent research and development costs or bid and proposal 
costs, per the definition in FAR 31.205-18, that have been reimbursed 
directly or indirectly by a Federal agency or have been submitted to a 
Federal agency for reimbursement; or
    (2) Foreign government funding.
    Nondevelopmental item is defined in FAR 2.101 and also includes 
previously developed items of supply that require modifications other 
than those customarily available in the commercial marketplace if such 
modifications are consistent with the requirement at 212.7102-1(c)(1).


212.7102-1  [Amended]

0
4. Amend section 212.7102-1 by--
0
a. In the introductory text, removing ``The contracting officer may 
enter into contracts with nontraditional defense contractors for'' and 
adding ``The contracting officer may utilize this pilot program to 
enter into contracts for'' in its place;
0
b. Removing paragraph (a);
0
c. Redesignating paragraphs (b) through (e) as paragraphs (a) through 
(d), respectively;
0
d. In the newly redesignated paragraph (b), removing ``$53.5 million'' 
and adding ``$100 million'' in its place; and
0
e. In the newly redesignated paragraph (c)(2), removing ``(d)(1)'' and 
adding ``(c)(1)'' in its place.


212.7103  [Amended]

0
5. Amend 212.7103 by removing ``in all solicitations'' and adding ``in 
solicitations'' in its place, and removing ``for this pilot program'' 
and adding ``and plan to use the pilot program'' in its place.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.212-7002  [Amended]

0
6. Amend section 252.212-7002 by--
0
a. Removing the clause date ``(JUN 2012)'' and adding ``(JUN 2016)'' in 
its place;
0
b. In paragraph (a)--
0
i. For the definition of ``nondevelopmental item'', removing ``FAR 
2.101 and for the purpose of this subpart also includes'' and adding 
``FAR 2.101 and also includes'' in its place, and removing ``of DFARS 
212.7102-2(d)(1)'' and adding ``at DFARS 212.7102-1(c)(1)'' in its 
place; and
0
ii. Removing the definition of ``nontraditional defense contractor'';
0
c. In paragraph (b), removing ``Nondevelopmental Items,'' and adding 
``Nondevelopmental Items, as modified by section 892 of the National 
Defense Authorization Act for Fiscal Year 2016 (Pub. L. 114-92),'' in 
its place; and
0
d. Removing paragraph (c).

[FR Doc. 2016-15256 Filed 6-29-16; 8:45 am]
 BILLING CODE 5001-06-P