[Federal Register Volume 81, Number 185 (Friday, September 23, 2016)]
[Rules and Regulations]
[Pages 65563-65565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22569]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 216 and 236

[Docket DARS-2016-0006]
RIN 0750-AI87


Defense Federal Acquisition Regulation Supplement: Prohibition on 
Use of Any Cost-Plus System of Contracting for Military Construction 
and Military Family Housing Projects (DFARS Case 2015-D040)

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

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2012 that amended 
title 10 of the United States Code by prohibiting any form of cost-plus 
contracting for military construction projects or military family 
housing projects.

DATES: Effective September 23, 2016.

FOR FURTHER INFORMATION CONTACT: Mr. Tom Ruckdaschel, telephone 571-
372-6088.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD published a proposed rule in the Federal Register at 81 FR 
17050 on March 25, 2016. This final rule implements section 2801 of the 
National Defense Authorization Act for Fiscal Year 2012 (Pub. L. 112-
81). Section 2801 amends 10 U.S.C. 2306 by prohibiting any form of 
cost-plus contracting for military construction projects or military 
family housing projects. Three respondents submitted public comments in 
response to the proposed rule.

II. Discussion and Analysis

    DoD reviewed the public comments in the development of the final 
rule. A discussion of the comments and the changes made to the rule as 
a result of those comments is provided, as follows:

A. Summary of Significant Changes from the Proposed Rule

    There are minor changes to the DFARS text from the proposed rule

[[Page 65564]]

based on the public comments. A list of the specific cost-reimbursement 
contract types prohibited has been included at DFARS 216.301-3, 
Limitations. At DFARS 236.215 the terminology was expanded to state 
``contracts in connection with a military construction project or 
military family housing project'' in lieu of ``contracts for 
construction.'' Additionally, at DFARS 236.271, the reference to 
236.271 to the prohibition on use of ``cost-plus'' contracts was 
revised to refer to ``cost-reimbursement'' contracts.

B. Analysis of Public Comments

1. Support for the Rule
    Comment: One respondent expressed support for the proposed rule, 
indicating that a blanket prohibition on cost-plus contracting in 
military construction and family housing projects is in the best 
interest of all parties, including small businesses and taxpayers.
    Response: Noted.
2. Opposition to the Rule
    Comment: One respondent opposed a blanket prohibition of cost-plus 
contracts stating that the rule excludes advances and innovations in 
the marketplace by prohibiting the selection of this form of 
contracting for construction projects.
    Response: DoD does not have discretion in this rule as the 
prohibition is statutory and required by 10 U.S.C. 2306(c).
3. Term ``Cost-plus Contract''
    Comment: One respondent expressed concern that the term ``cost-plus 
contract,'' as used in the proposed rule is nonstandard within title 48 
of the Code of Federal Regulation, and as such should be further 
defined.
    Response: In the context of the proposed DFARS revisions, ``cost-
plus'' was interpreted as meaning those ``cost-reimbursement'' contract 
types defined in Federal Acquisition Regulation 16.304, 16.305, and 
16.306. Further delineation, however, is added to DFARS 216.301-3 to 
list the specific contract types prohibited: Cost-plus-fixed-fee, cost-
plus-award-fee, and cost-plus-incentive-fee. Additionally, the 
reference in DFARS 236.271 to use of any cost-plus contract is revised 
to refer to the list of cost-reimbursement contracts at DFARS 216.301-
3.
4. Cross Reference to Statute
    Comment: One respondent proposed that DoD remove the cross 
reference to 10 U.S.C. 2306(c) as the prohibition should remain 
notwithstanding any future changes that might be made to 10 U.S.C. 
2306(c).
    Response: It is a DFARS drafting convention to indicate in the 
regulations if they are based on a statute. This is helpful when 
considering future amendments to, or deviations from, the regulations. 
If the statute changes, appropriate changes to the regulations may be 
required.

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 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

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA is summarized as follows:
    The purpose of this rule is to amend the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement section 2801 of 
the National Defense Authorization Act for Fiscal Year 2012, which 
amends 10 U.S.C. 2306, to prohibit any form of cost-plus contracting 
for military construction projects or military family housing projects.
    No comments were received from the public regarding the initial 
regulatory flexibility analysis.
    There is minimal impact anticipated on small entities as a result 
of the proposed rule. Based on data available in the Federal 
Procurement Data System, there were only 19 cost-reimbursement type 
construction contracts awarded in fiscal year 2015, two of which were 
awarded to small businesses. There is already a general prohibition at 
DFARS 216.306 on certain cost-plus-fixed-fee contracts funded by a 
military construction appropriations act. The proposed rule expands 
this prohibition to all cost-plus contract types in connection with a 
military construction project or a military family housing project.
    There are no new projected reporting, recordkeeping, and other 
compliance requirements of the rule.
    There are no known significant alternatives to the rule that would 
meet the requirements of the statute.

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).

List of Subjects in 48 CFR Parts 216 and 236

    Government procurement.

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

    Therefore, 48 CFR parts 216 and 236 are amended as follows:

0
1. The authority citation for 48 CFR parts 216 and 236 continues to 
read as follows:

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

PART 216--TYPES OF CONTRACTS

0
2. Add section 216.301-3 to read as follows:


216.301-3   Limitations.

    For contracts in connection with a military construction project or 
a military family housing project, contracting officers shall not use 
cost-plus-fixed-fee, cost-plus-award-fee, or cost-plus-incentive-fee 
contract types (10 U.S.C. 2306(c)). This applies notwithstanding a 
declaration of war or the declaration by the President of a national 
emergency under section 201 of the National Emergencies Act (50 U.S.C. 
1621) that includes the use of the Armed Forces.

0
3. Amend section 216.306 by adding introductory text to paragraph (c) 
to read as follows:


216.306   Cost-plus-fixed-fee contracts.

    (c) Limitations. For contracts in connection with a military 
construction project or military family housing project, see the 
prohibition at 216.301-3.
* * * * *

PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

0
4. Add section 236.215 to read as follows:

[[Page 65565]]

236.215   Special procedures for cost-reimbursement contracts for 
construction.

    For contracts in connection with a military construction project or 
military family housing project, see the prohibition at 216.301-3.

0
5. Revise section 236.271 to read as follows:


236.271  Cost-plus-fixed-fee contracts.

    Annual military construction appropriations acts restrict the use 
of cost-plus-fixed-fee contracts (see 216.306(c)). See also 216.301-3 
regarding the prohibition on the use of certain cost-reimbursement 
contracts in connection with a military construction project or 
military family housing project.

[FR Doc. 2016-22569 Filed 9-22-16; 8:45 am]
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