[Federal Register Volume 83, Number 165 (Friday, August 24, 2018)]
[Proposed Rules]
[Pages 42831-42850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18238]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 232, 242, and 252

[Docket DARS-2018-0042]
RIN 0750-AJ28


Performance-Based Payments and Progress Payments (DFARS Case 
2017-D019)

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

ACTION: Proposed rule; notice of meeting.

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SUMMARY: DoD is proposing to implement a section of the National 
Defense Authorization Act for Fiscal Year 2017, which addresses the 
preference for performance-based payments, and to streamline the 
performance-based payment process. DoD is also proposing to amend the 
Defense Federal Acquisition Regulation Supplement (DFARS) to revise 
progress payments and performance-based payments policies for DoD 
contracts in order to increase its business effectiveness and 
efficiency as well as to provide an opportunity for both small and 
other than small entities to qualify for increased customary progress 
payment rates and maximum performance-based payment rates based on 
whether the offeror/contractor has met certain performance criteria.
    DOD believes the proposed rule will eliminate the unintended 
consequences of not updating its contract financing policies (which, in 
turn will save hundreds of millions of dollars for the taxpayers), will 
improve contractor performance, and will distinguish and meaningfully 
recognize high performing companies and divisions of companies, as the 
case may be.
    This rule proposes to relieve the administrative burden on 
contractors by deleting the current regulations relating to 
performance-based payments at DFARS subpart 232.10 and the associated 
clauses at DFARS 252.232-7012, Performance-Based Payments--Whole 
Contract Basis, and 252.232-7013, Performance-Based Payments--
Deliverable Item Basis. This rule also removes the requirement to 
negotiate consideration due the Government for providing the contractor 
with the improved cash flow when utilizing performance-based payments.
    In addition to the request for written comments on this proposed 
rule, DoD will hold a public meeting to hear the views of interested 
parties.

[[Page 42832]]


DATES: Comment Date: Comments on the proposed rule should be submitted 
in writing to the address shown below on or before October 23, 2018, to 
be considered in the formation of a final rule.
    Public Meeting Date: The public meeting will be held on September 
14, 2018, from 9 a.m. to 12 p.m. EST. Registration to attend this 
meeting must be received by September 6, 2018. Further information for 
the public meeting may be found under the heading SUPPLEMENTARY 
INFORMATION.

ADDRESSES: Public Meeting: The public meeting will be held at the Mark 
Center Auditorium, 4800 Mark Center Drive, Alexandria, VA 22350-3603. 
The Mark Center Auditorium is located on level B-1 of the building.
    Submission of Comments: Submit comments identified by DFARS Case 
2017-D019, using any of the following methods:
    [cir] Federal eRulemaking Portal: http://www.regulations.gov. 
Search for ``DFARS Case 2017-D019.'' Select ``Comment Now'' and follow 
the instructions provided to submit a comment. Please include ``DFARS 
Case 2017-D019'' on any attached documents.
    [cir] Email: [email protected]. Include DFARS Case 2017-D019 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
G. Williams, OUSD (A&S) DPC/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: Ms. Amy Williams, DPC/DARS, at 571-
372-6106.

SUPPLEMENTARY INFORMATION: 

I. Public Meeting

    DoD is hosting a public meeting to obtain views of experts and 
interested parties in Government and the private sector regarding 
revising policies and procedures with regard to customary progress 
payment rates and maximum performance-based payment rates for DoD 
contracts.
    Registration: Individuals wishing to attend the public meeting must 
register by September 6, 2018, to ensure adequate room accommodations 
and to facilitate security screening and entry to the Mark Center. 
Individuals desiring to attend the meeting must register at this 
website,  https://www.acq.osd.mil/dpap/dars/performance-based_payments_and_progress_payments.html, by providing the following 
information:
    (1) Company or organization name.
    (2) Full name, valid email address, and telephone number of each 
person planning to attend, and whether the individual is a U.S. 
citizen. For each person, the Pentagon Force Protection Agency will 
send additional instructions to the email address provided at the time 
of registration in order for the individual to be approved for entry to 
the Mark Center.
    (3) Name, title, organizational affiliation of presenter, if 
desiring to make a presentation, limited to a 5-minute presentation per 
company or organization. This limitation may be subject to adjustment, 
depending on the number of entities requesting to present, in order to 
ensure adequate time for discussion.
    Once registered, attendees will be prompted by the Pentagon Force 
Protection Agency on building entry requirements.
    One valid government-issued photo identification card (i.e., 
driver's license or passport) will be required in order to enter the 
building.
    Attendees are encouraged to arrive at least 45 minutes early to 
accommodate security procedures. Public parking is not available at the 
Mark Center.
    Presentations: If you wish to make a presentation, please submit an 
electronic copy of your presentation to [email protected] no later 
than September 10, 2018. When submitting presentations, provide 
presenter's name, organization affiliation, telephone number, and email 
address on the cover page. Please submit presentations only and cite 
``Public Meeting, DFARS Case 2017-D019'' in all correspondence related 
to the public meeting. There will be no transcription at the meeting. 
The submitted presentations will be the only record of the public 
meeting.
    Special accommodations: The public meeting is physically accessible 
to people with disabilities. Requests for reasonable accommodations, 
sign language interpretation or other auxiliary aids should be directed 
to Daniel Weinstein at 571-372-6105, at least 10 working days prior to 
the meeting date.
    The TTY number for further information is: 1-800-877-8339. When the 
operator answers the call, let them know the agency is the Department 
of Defense; the point of contact is Daniel Weinstein at 571-372-6105.
    Correspondence and Comments: Please cite ``Public Meeting, DFARS 
Case 2017-D019'' in all correspondence related to this public meeting. 
The submitted presentations will be the only record of the public 
meeting. To have a presentation considered as a public comment for the 
formation of the final rule, the presentation, or pertinent excerpts, 
must be submitted separately as a written comment as instructed in the 
paragraph titled ``Submission of Comments'' in ADDRESSES.

II. Background

A. Purpose

    The fundamental purpose of the rule change is to increase the 
effectiveness and efficiency of the Department of Defense in five 
domains while recognizing that its cash flow policy was outdated and 
costly to the tax payers. The five domains are:
     On Time or Accelerated Contract Deliveries;
     Contractor Quality;
     Contractor Business Systems;
     Increasing Contract Opportunities for Small Business and 
for the Blind and Severely Disabled; and
     Receipt of Timely Quality Proposals.
    The present progress payment rate was established in an economic 
environment when interest rates were significantly higher than the 
historic lows that have been experienced over the past several years. 
As a result of the aforementioned, and because DoD desires to take an 
enterprise-wide view of contractor performance and to recognize and 
distinguish performance among the companies with which it deals, DoD is 
proposing to modify the customary progress payment rate for large 
businesses. DoD recognizes that small businesses do not have the 
borrowing power that large businesses have and, therefore, is not 
proposing a change to the basic customary progress payment for small 
business, which is 90 percent. In modifying the customary rate for 
large business, DoD is proposing to allow large and small business to 
achieve progress payment rates greater than the customary rates.
    The goal would be that a significant majority of the large and 
small businesses would eventually meet the desired level of enterprise-
wide performance.
    In the case of large business, for progress payments, a two-step 
process:
    1. Modify the customary progress payment rate to 50 percent 
(effectively updating the premises of the Defense

[[Page 42833]]

Financial and Investment Review (DFAIR) study to address today's 
business and market environment).
    2. Establish opportunities for recognizing contractor behaviors 
that align themselves with the performance objectives established in 
the five business domains that are important to the DoD such that large 
business contractors could potentially increase the rate determined in 
Step 1 and receive progress payments that can be as high as 95 percent 
of contract cost. The increased customary progress payment rate will be 
established for each company or company division as the case may be.

B. Brief History

    The most comprehensive review of Government financing was the DFAIR 
study. One key recommendation from the DFAIR study was that ``interest 
cost should remain an unallowable cost and progress payment rates 
should be reset in the future based on changes in interest rates.'' 
Between the DFAIR study in 1985 and 2001, the customary progress 
payment rate for other than small business was changed five times and 
was usually a somewhat delayed reaction to changes in interest rates in 
prior years. In 2001, the customary rate was increased from 75 percent 
to 80 percent and has remained unchanged ever since.
    In the rule making process it is customary to analyze the impact of 
the proposed rule versus the status quo and that traditional analysis 
is included in the regulatory cost analysis (see section V. of this 
preamble). However, DoD has been providing financing in excess of that 
warranted based on the historically low interest rates in effect since 
2008. By modifying the customary progress payment rate to 50 percent, 
it will result in savings hundreds of millions of dollars to the 
taxpayers by eliminating an unintended consequence of the past practice 
associated with providing contract financing in excess of what was 
necessary. In the future, contractors will have the opportunity to earn 
increased contract financing benefit through improved performance.

III. Discussion and Analysis

    DoD is proposing to amend DFARS parts 232, 242, and 252 to revise 
how contract financing, in the form of progress payments and 
performance-based payments, is calculated and determined for DoD 
contracts.

A. Current FAR and DFARS

    1. Progress payments. Currently, FAR 52.232-16, Progress Payments, 
sets a customary progress payment rate of 80 percent, except the rate 
is 85 percent for a small business, unless it is a letter contract. 
There is a statutory cap of 80 percent for letter contracts. DFARS 
252.232-7004, DoD Progress Payment Rates, currently increases the FAR 
customary progress payment rate for small businesses to 90 percent 
(except for letter contracts).
    2. Performance-based payments. FAR 52.232-28, Invitation to Propose 
Performance-Based Payments, sets a maximum performance-based rate of 90 
percent of the contract price if on a whole contract basis, or 90 
percent of the delivery item price if on a delivery item basis. DFARS 
232.1004 provides procedures for analysis of proposed performance-based 
payments using the performance-based payments analysis tool, and also 
requires that the contractor provide consideration to the Government, 
if the performance-based payments payment schedule will be more 
favorable to the contractor than customary progress payments. DFARS 
232.1005-70 prescribes the use of the provision at DFARS 252.232-7012, 
Performance-Based Payments--Whole Contract Basis, or the provision at 
DFARS 252.232-7013, Performance-Based Payments--Deliverable Item Basis.

B. Proposed Changes

    1. Progress payments (DFARS 232.501-1(a) and 52.232-7004). DoD 
proposes a customary progress payment rate of 50 percent for other than 
small businesses and retains the 90 percent rate for small businesses, 
but provides criteria by which contractors can achieve a customary 
progress payment rate of up to 95 percent. However, if a contractor or 
any of its principals has within the preceding Government fiscal year 
been convicted of or had a civil judgment rendered against the 
contractor or any of its principals for commission of fraud or a 
criminal offense in connection with obtaining, attempting to obtain, or 
performing a public (Federal, State, or local) contract or subcontract; 
violation of Federal or State antitrust statutes relating to the 
submission of offers; or commission of embezzlement, theft, forgery, 
bribery, falsification or destruction of records, making false 
statements, tax evasion, violating Federal criminal tax laws, or 
receiving stolen property, then the contractor will not be eligible for 
any incentives and the customary progress payment rate will be 25 
percent for that contractor.
    On December 1 of each year, a contractor, or higher-level owner of 
a contractor, may submit a representation as to which criteria it meets 
and request a higher customary progress payment rate. Based on the 
representation received, the Director of Defense Pricing and 
Contracting will determine the appropriate customary progress payment 
rate for the following calendar year, and that data will be entered 
into the Contract Business Analysis Repository (CBAR) by December 31.
    If a contractor fails to submit by the December 1 deadline, then 
the rate for that contractor in CBAR will be 50 percent if the offeror 
is other than a small business and 90 percent if the offeror is a small 
business, unless the rate is 25 percent as provided in DFARS 232.501-
1(a)(ii). If the offeror subsequently submits a representation after 
the December 1 deadline, any increase in rates will not be effective in 
CBAR until 30 days after submission.
    The rate may be adjusted at any time during the year if it is 
subsequently determined that the representation provided by a 
contractor was not accurate.
    2. Performance-based payments (DFARS 232.1004(b)(2) and 252.232-
70YY). For maximum performance-based payments, DoD proposes rates and 
procedures comparable to those for determining the customary progress 
payment rate. The same representation will be used to determine both 
the customary progress payment rate and the maximum performance-based 
payment rate.
    DoD proposes to amend DFARS 232.1004 to remove the procedures for 
analysis of proposed performance-based payments using the performance-
based payments analysis tool, and also removes the requirement that the 
contractor provide consideration to the Government, if the performance-
based payments payment schedule will be more favorable to the 
contractor than customary progress payments. The current solicitation 
provisions at DFARS 252.232-7012 and 252.232-7013 are no longer 
required and will be removed, thus reducing burden on contractors.
    3. Corrective action requests (DFARS 242.302(a)). One of the 
criteria to qualify for higher customary progress payments or maximum 
performance-based payments is that the offeror/contractor does not have 
any open level III or level IV corrective action requests. Because the 
DFARS does not currently address corrective action requests, a 
paragraph has been added at DFARS 242.302(a) to explain the different 
levels of corrective action requests.
    4. Withholding of payments (DFARS 242.7000 and 252.242-7005). DFARS 
242.7000, Contractor business system deficiencies, and 252.242-7005, 
Contractor Business Systems, provide

[[Page 42834]]

for withholding of payments (including progress and performance-based 
payments) when there are significant deficiencies in a required 
business system. However, the contracting officer will not withhold 
progress or performance-based payments from a contract that includes 
the clause 252.232-7004 or the provision 252.232-70YY, unless the 
contractor is receiving progress payments or performance-based payments 
under the contract at a rate specified in CBAR that includes the 10 
percent incentive based on having acceptable business systems without 
significant deficiencies.
    5. Preference for performance-based payments. This rule also 
proposes to implement section 831 of the National Defense Authorization 
Act for Fiscal Year 2017, which modifies 10 U.S.C. 2307(b) to address 
preference for performance-based payments.

IV. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Items, Including Commercially 
Available Off-the-Shelf (COTS) Items

    This rule proposes to amend the clause at DFARS 252.232-7004, DoD 
Progress Payment Rates, and adds a new provision at DFARS 252.232-70YY, 
DoD Maximum Performance-Based Payment Rates. DFARS 252.232-7004 is used 
with FAR clause 52.232-16, Progress Payments, and DFARS 252.232-70YY is 
used with FAR provision 52.232-28, Invitation to Propose Performance-
Based Payments. The FAR provision and clause are not prescribed for use 
in contracts for the acquisition of commercial items or for 
acquisitions at or below the SAT. The DFARS provision and clause, 
therefore, will not be applied to commercial items or to contact 
actions at or below the simplified acquisition threshold.

V. Expected Costs and Benefits

    This rule proposes to amend the DFARS to implement changes to the 
progress payment and performance-based payment policies for DoD 
contracts by amending the section on customary progress payment rates 
at DFARS 232.501-1; adding new procedures for performance-based 
payments at 232.1003; amending the clause at 252.232-7004, DoD 
Customary Progress Payment Rates, and adding a new provision at 
252.232-70YY, DoD Maximum Performance-Based Payment Rates. This rule 
also proposes to delete the clauses at DFARS 252.232-7012, Performance-
Based Payments--Whole Contract Basis, and 252.232-7013, Performance-
Based Payments--Deliverable Item Basis.
    This rule will impact all offerors/contractors (large or small) 
seeking DoD contracts that offer progress payments or performance-based 
payments. Although there are added costs associated with submission of 
an annual representation, the contractors/offerors that can meet the 
criteria will qualify for substantial savings on interest payments, due 
to increased Government financing.
    The expected benefits are that the modified approach to the 
establishment of a performance-based cash flow environment will enable 
DoD to take an enterprise-wide view of contractor performance and to 
recognize and distinguish performance among the companies with which it 
deals. The goal would be that a significant majority of the large and 
small businesses would eventually meet the desired level of enterprise-
wide performance. As a result of the improved industrial performance, 
DOD's efficiency and effectiveness will be improved thereby increasing 
the lethality of its fighting force and positively reforming DOD's 
business practices.
    A. Summary of Expected Costs to the Public. DoD has performed a 
regulatory cost analysis on this rule. The following is a summary of 
the estimated net public costs in millions, calculated in 2016 dollars 
in perpetuity at a 7-percent discount rate.

Annualized at 7 percent: $5.5 million
Present Value at 7 percent: $78.8 million

    B. Summary of Expected Transfers. The following is a summary of the 
expected transfer of interest costs/savings from the Government to the 
public, due to an expected net increase in progress payment and 
performance-based payment rates paid by the Government.
    1. Reduced Interest Payments by Contractors:

Annualized at 7 percent: $60.2 million
Present Value at 7 percent: $859.6 million
    2. Increased Interest Payments by Government:

Annualized at 7 percent: $30.2 million
Present Value at 7 percent: $431.8 million

    To access the complete Regulatory Cost Analysis, go to the Federal 
eRulemaking Portal at www.regulations.gov, search for ``DFARS Case 
2017-D019'', click ``Open Docket'', and view ``Supporting Documents''.

VI. 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 an economically significant regulatory action and, therefore, 
was subject to review under section 6(b) of E.O. 12866, Regulatory 
Planning and Review, dated September 30, 1993. This rule is a major 
rule under 5 U.S.C. 804.

VII. Executive Order 13771

    This proposed rule is subject to E.O. 13771, Reducing Regulation 
and Controlling Regulatory Costs, because this rule is a significant 
regulatory action under E.O. 12866. If finalized as proposed, this rule 
would be an E.O. 13771 regulatory action. The E.O. 13771 status will be 
informed by public comment, so please share any data and/or analysis 
that would relate to the rule's potential to be considered a 
deregulatory action. Details on the expected costs and benefits can be 
found in section V of this preamble.

VIII. Regulatory Flexibility Act

    DoD expects that this proposed rule may 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. Therefore, an 
initial regulatory flexibility analysis has been prepared and is 
summarized as follows:
    This rule revises progress payments and performance-based payments 
policies for DoD contracts, basing the payment rate on whether the 
offeror/contractor has met certain performance criteria. This rule also 
implements section 831 of the National Defense Authorization Act for 
Fiscal Year (FY) 2017, which modifies 10 U.S.C. 2301(b) to address 
preference for performance-based payments.
    The objective of this rule is to increase the effectiveness and 
efficiency of DoD in five domains: on time or accelerated contract 
deliveries, contractor quality, contractor business systems, increasing 
contract opportunities for small businesses and for the blind and 
severely disables, and receipt of timely quality proposals. The 
statutory basis is 41 U.S.C. 1303 and 10 U.S.C. 2301(b).
    This rule will apply to small entities that receive either progress 
payments or performance-based payments for

[[Page 42835]]

noncommercial fixed-price contracts. There were 1,938 unique small 
entities receiving progress payments or performance-based payments in 
FY 2017.
    The rule provides an opportunity to submit a representation as to 
whether a small entity meets certain performance criteria, in order to 
obtain higher progress payments or performance-based payments. DoD 
estimates that the professional skill set necessary to prepare the 
representation annually will approximate 25 percent at the journeyman 
level, 60 percent at the senior level, and 15 percent at the executive/
attorney level. DoD estimates an average of 13 hours per response from 
small entities. The rule also removes a burden of approximately one 
hour per entity, associated with paragraph (b) of DFARS subpart 32.10 
and the associated clauses at DFARS 252.232-7012 and 252.232-7013, 
which this rule proposes to delete.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    DoD did not identify any significant alternatives that would meet 
the objectives of the rule. However, the rule provides certain 
advantages for small entities as the basic customary progress payment 
rate for small entities remains at 90 percent, with possible increase 
up to 95 percent. So, small entities can continue to get the same rate, 
even if they do not submit a representation or meet the criteria. Small 
entities are only asked to represent with regard to three criteria: 
timely delivery or performance, contractor quality, and contractor 
business systems.
    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 2017-D019), in 
correspondence.

IX. Paperwork Reduction Act

    The rule contains 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). Accordingly, DoD has submitted a 
request for approval of a revised information collection requirement 
0704-0359, Defense Federal Acquisition Regulation Supplement (DFARS) 
Part 232, Contract Financing, and associated clauses at DFARS 252.232, 
to the Office of Management and Budget.

A. Public Reporting Burden

    1. Public reporting burden for the collection of information 
proposed by this DFARS case 2017-D019 is estimated to average 28.8 
hours per response, including the time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information.
    The annual reporting burden estimated as follows:
    Respondents: 3,200.
    Responses per respondent: 1.
    Total annual responses: 3,200.
    Preparation hours per response: 28.8 hours.
    Total response Burden Hours: 92,027 hours.
    2. In addition, this information collection includes a pre-existing 
burden related to DFARS clause 252.232-7007 (800 hours, 1 response per 
respondent, 800 responses, 1 hour per response, for a total of 8,000 
hours). Therefore, the total burden for 0704-0359, rounded, is as 
follows:
    Respondents: 4,000.
    Responses per respondent: 1.
    Total annual responses: 4,000.
    Preparation hours per response: 24 hours.
    Total response Burden Hours: 93,000 hours.

B. Request for Comments Regarding Paperwork Burden

    Written comments and recommendations on the proposed information 
collection, including suggestions for reducing this burden, should be 
sent to Ms. Jasmeet Seehra at the Office of Management and Budget, Desk 
Officer for DoD, Room 10236, New Executive Office Building, Washington, 
DC 20503, or email [email protected], with a copy to the 
Defense Acquisition Regulations System, Attn: Ms. Amy G. Williams, OUSD 
(A&S) DPC/DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 
20301-3060. Comments can be received from 30 to 60 days after the date 
of this notice, but comments to OMB will be most useful if received by 
OMB within 30 days after the date of this notice.
    Public comments are particularly invited on: whether this 
collection of information is necessary for the proper performance of 
functions of the DFARS, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    To request more information on this proposed information collection 
or to obtain a copy of the proposal and associated collection 
instruments, please write to the Defense Acquisition Regulations 
System, Attn: Ms. Amy G. Williams, OUSD (A&S) DPC/DARS, Room 3B941, 
3060 Defense Pentagon, Washington, DC 20301-3060, or email 
[email protected]. Include DFARS Case 2017-D019 in the subject line of 
the message.
    This rule also affects the information collection requirements at 
DFARS subpart 232.10 (and associated clauses at DFARS 252.232-7012 and 
252.232-7013, currently approved under OMB Control Number 0704-0359. 
This rule proposes to remove these requirements.

List of Subjects in 48 CFR Parts 232, 242, and 252

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 232, 242, and 252 are proposed to be 
amended as follows:

0
1. The authority citation for parts 232, 242, and 252 continues to read 
as follows:

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

PART 232--CONTRACT FINANCING

0
2. Revise section 232.501-1 to read as follows:


232.501-1  Customary progress payment rates.

    (a) Except for undefinitized contract actions as provided at FAR 
32.501-1(d), in lieu of the customary progress payment rates specified 
at FAR 32.501-1(a), the customary progress payment rates for DoD 
solicitations issued on or after January 1, 2019, and resultant 
contracts, including contracts that contain foreign military sales 
(FMS) requirements, are 50 percent for other than small businesses and 
90 percent for small businesses, unless a different rate is specified 
for the contractor in the Contract Business Analysis Repository (CBAR) 
at [details TBD].
    (i) Contractors can qualify for an increased customary progress 
payment rate of up to 95 percent, based on the following criteria:
    (A) Other than small businesses:

[[Page 42836]]



------------------------------------------------------------------------
 Additional  percentage                      Criteria
------------------------------------------------------------------------
10.....................  Met the contract delivery dates for contract
                          end items and contract data requirements lists
                          or performance milestone schedule, as the case
                          may be, at least 95 percent of the time during
                          the preceding Government fiscal year (October
                          1 through September 30).
10.....................  Does not have open level III or IV corrective
                          action requests. See 242.302(a).
10.....................  All applicable contractor business systems are
                          acceptable, without significant deficiencies.
7.5....................  At least 95 percent of the time during the
                          preceding Government fiscal year, when
                          responding to solicitations that required
                          submission of certified cost or pricing data,
                          met the due date in the request for proposal
                          and complied with the Proposal Adequacy
                          Checklist (252.215-7009).
5......................  Has met its small business subcontracting goals
                          during the preceding Government fiscal year.
2.5....................  Has provided subcontracting opportunities for
                          AbilityOne [details TBD].
------------------------------------------------------------------------

    (B) Small businesses:

------------------------------------------------------------------------
 Additional  percentage                      Criteria
------------------------------------------------------------------------
2......................  Met the contract delivery dates for contract
                          end items and contract data requirements lists
                          or performance milestone schedule, as the case
                          may be, at least 95 percent of the time during
                          the preceding Government fiscal year (October
                          1 through September 30).
2......................  Does not have open level III or IV corrective
                          action requests. See 242.302(a).
1......................  All applicable contractor business systems are
                          acceptable, without significant deficiencies.
------------------------------------------------------------------------

    (ii) However, if a contractor or any of its principals has within 
the preceding Government fiscal year been convicted of or had a civil 
judgment rendered against the contractor or any of its principals for 
commission of fraud or a criminal offense in connection with obtaining, 
attempting to obtain, or performing a public (Federal, State, or local) 
contract or subcontract; violation of Federal or State antitrust 
statutes relating to the submission of offers; or commission of 
embezzlement, theft, forgery, bribery, falsification or destruction of 
records, making false statements, tax evasion, violating Federal 
criminal tax laws, or receiving stolen property, the contractor will 
not be eligible for any of the above incentives and the customary 
progress payment rate will be 25 percent for that contractor.
    (iii)(A) On or before December 1 of each year, except as provided 
in paragraph (a)(ii) of this section, a contractor, or a higher-level 
owner of a contractor, may submit to [email address TBD] a 
representation as to which criteria specified in paragraph (a)(i) of 
this section the contractor meets, and request a higher customary 
progress payment rate on that basis.
    (1) If a representation is made on behalf of multiple business 
segments, the representation must address the criteria in paragraph 
(a)(i) of this section for each business segment for which higher 
customary progress payment rates are requested.
    (2) If the size status of a contractor varies dependent upon the 
North American Industry Classification System (NAICS) code of the 
acquisition, the contractor may submit a representation and request for 
higher customary progress payment rates that addresses the rates for 
both a small business and an other than small business.
    (3) A separate representation is not required to also request a 
higher maximum performance-based payment rate (see 232.1001(b)(2)).
    (B) The representation is required to be executed by a person 
authorized to sign for the entity submitting the representation and 
must at a minimum include--
    (1) The unique entity identifier and Commercial and Government 
Entity (CAGE) code(s) of the contractor;
    (2) Size status of the contractor (small, other than small, or 
varies dependent upon the NAICS code of the acquisition); and
    (3) Identification of the criteria for which the contractor is 
requesting increase in the customary progress payment rate for the 
following calendar year. It is not necessary to submit supporting data 
with the representation, but the contractor is required to provide such 
data upon request.
    (iv) Based on the representation received, the Director, Defense 
Pricing and Contracting, will determine the appropriate customary 
progress payment rate(s) for the following calendar year. DoD will 
enter the customary progress payment rate(s) into CBAR by December 31.
    (v) If a contractor fails to submit by the December 1 deadline, 
then the rate for that contractor in CBAR will be 50 percent if the 
contractor is other than a small business and 90 percent if the 
contractor is a small business, unless the rate is 25 percent as 
provided in (a)(ii) of this section. If the contractor subsequently 
submits a representation after the December 1 deadline, any increase in 
rates will not be effective in CBAR until 30 days after submission.
    (vi) The rate(s) may be adjusted at any time during the year if the 
Director, Defense Pricing and Contracting, subsequently determines that 
the representation provided by a contractor was not accurate.
0
3. Add new section 232.502-4 heading to read as follows:


232.502-4  Contract clauses.

0
4. Amend section 232.502-4-70 by revising paragraph (b) to read as 
follows:


232.502-4-70  Additional clauses.

* * * * *
    (b) Use the clause at 252.232-7004, DoD Customary Progress Payment 
Rates, in solicitations and contracts that include FAR 52.232-16. Do 
not use Alternate I of FAR 52.232-16.
0
5. Amend section 232.503-6 by revising paragraph (b) to read as 
follows:


232.503-6  Suspension or reduction of payments.

    (b) Contractor noncompliance.
    (i) If the Director, Defense Pricing and Contracting, subsequently 
determines that the representation in accordance with 232.501-1(a) is 
inaccurate, the progress payment rate in CBAR will be adjusted.
    (ii) See also 242.7502(c).
* * * * *
0
6. Amend section 232.1001 by revising paragraph (a) to read as follows:

[[Page 42837]]

232.1001  Policy.

    (a) In accordance with 10 U.S.C. 2307(b)(2), performance-based 
payments shall not be conditioned upon costs incurred in contract 
performance, but on the achievement of performance outcomes.
* * * * *
0
7. Amend section 232.1004 by--
0
a. Revising paragraph (b); and
0
b. Adding a new paragraph (S-70).
    The revision and addition read as follows:


232.1004  Procedures.

    (b) Establishing performance-based finance payment amounts.
    (2) In lieu of the 90 percent maximum rate specified in the FAR for 
performance-based payments, the maximum rates for DoD performance-based 
payments in solicitations issued on or after January 1, 2019, are 50 
percent for other than small businesses and 90 percent for small 
businesses, unless a different rate is specified for the offeror in the 
Contract Business Analysis Repository [details TBD].
    (A) Offerors can qualify for an increased maximum performance-based 
payment rate of up to 95 percent, based on the following criteria:
    (1) Other than small businesses:

------------------------------------------------------------------------
 Additional  percentage                      Criteria
------------------------------------------------------------------------
10.....................  Met the contract delivery dates for contract
                          end items and contract data requirements lists
                          or performance milestone schedule, as the case
                          may be, at least 95 percent of the time during
                          the preceding Government fiscal year (October
                          1 through September 30).
10.....................  Does not have open level III or IV corrective
                          action requests. See 242.302(a).
10.....................  All applicable contractor business systems are
                          acceptable, without significant deficiencies.
7.5....................  At least 95 percent of the time during the
                          preceding Government fiscal year, when
                          responding to solicitations that required
                          submission of certified cost or pricing data,
                          met the due date in the request for proposal
                          and complied with the Proposal Adequacy
                          Checklist (252.215-7009).
5......................  Has met its small business subcontracting goals
                          during the preceding Government fiscal year.
2.5....................  Has provided subcontracting opportunities for
                          the blind and severely disabled [details TBD].
------------------------------------------------------------------------

    (2) Small businesses:

------------------------------------------------------------------------
 Additional  percentage                      Criteria
------------------------------------------------------------------------
2......................  Met the contract delivery dates for contract
                          end items and contract data requirements lists
                          or performance milestone schedule, as the case
                          may be, at least 95 percent of the time during
                          the preceding Government fiscal year (October
                          1 through September 30).
2......................  Does not have open level III or IV corrective
                          action requests. See 242.302(a).
1......................  All applicable contractor business systems are
                          acceptable, without significant deficiencies.
------------------------------------------------------------------------

    (B) However, if an offeror or any of its principals has within the 
preceding Government fiscal year been convicted of or had a civil 
judgment rendered against the offeror or any of its principals for 
commission of fraud or a criminal offense in connection with obtaining, 
attempting to obtain, or performing a public (Federal, State, or local) 
contract or subcontract; violation of Federal or State antitrust 
statutes relating to the submission of offers; or commission of 
embezzlement, theft, forgery, bribery, falsification or destruction of 
records, making false statements, tax evasion, violating Federal 
criminal tax laws, or receiving stolen property, the offeror will not 
be eligible for any of the above incentives and the maximum 
performance-based payment rate will be 25 percent for that offeror.
    (C)(1) On December 1 of each year, except as provided in paragraph 
(b)(2)(B) of this section, an offeror, or a higher-level owner of an 
offeror, may submit to [email address TBD] a representation as to which 
criteria specified in paragraph (b)(2)(A) of this section the offeror 
meets, and request a higher customary progress payment rate on that 
basis.
    (i) If a representation is made on behalf of multiple business 
segments, the representation must address the criteria in paragraph 
(b)(2)(A) of this section for each business segment for which higher 
customary progress payment rates are requested.
    (ii) If the size status of an offeror varies dependent upon the 
North American Industry Classification System (NAICS) code of the 
acquisition, the offeror may submit a representation and request for a 
higher customary progress payment rate that addresses the rates for 
both a small business and an other than small business.
    (iii) A separate representation is not required to also request a 
higher maximum performance-based payment rate (see 232.501-1(a)).
    (2) The representation is required to be executed by a person 
authorized to sign for the entity submitting the representation and 
must at a minimum include--
    (i) The unique entity identifier and Commercial and Government 
Entity (CAGE) code(s) of the offeror;
    (ii) Size status of the offeror (small, other than small, or varies 
dependent upon the NAICS code of the acquisition); and
    (iii) Identification of the criteria for which the offeror is 
requesting increase in the customary progress payment rate for the 
following calendar year. It is not necessary to submit supporting data 
with the representation, but the offeror is required to provide such 
data upon request.
    (D) Based on the representation received, the Director, Defense 
Pricing and Contracting, will determine the appropriate maximum 
performance-based payment rate(s) for the following calendar year. DoD 
will enter the maximum performance-based payment rate(s) into CBAR by 
December 31.
    (E) If an offeror fails to submit by the December 1 deadline, then 
the rate for that offeror in CBAR will be 50 percent if the offeror is 
other than a small business and 90 percent if the offeror is a small 
business, unless the rate is 25 percent as provided in (b)(2)(B) of 
this section. If the offeror subsequently submits a representation 
after the December 1 deadline, any increase in

[[Page 42838]]

rates will not be effective in CBAR until 30 days after submission.
    (F) The rate(s) may be adjusted at any time during the year if the 
Director, Defense Pricing and Contracting, subsequently determines that 
the representation provided by an offeror was not accurate.
* * * * *
    (S-70) Eligibility for performance-based payments. Nontraditional 
defense contractors and other private sector companies shall be 
eligible for performance-based payments, consistent with best 
commercial practices. In accordance with 10 U.S.C. 2307(b), a 
contractor's accounting system shall be in compliance with Generally 
Accepted Accounting Principles in order to receive performance-based 
payments. 10 U.S.C. 2307 does not grant the Defense Contract Audit 
Agency the authority to audit compliance with Generally Accepted 
Accounting Principles.
0
8. Revise section 232.1005-70 to read as follows:


232.1005-70  Solicitation provision.

    Use the provision 252.232-70YY, DoD Maximum Performance-Based 
Payment Rates, in solicitations that include FAR 52.232-28, Invitation 
to Propose Performance-Based Payments.

PART 242--CONTRACT ADMINISTRATION AND AUDIT SERVICES

0
9. Amend section 242.302 by adding paragraph (a) text to read as 
follows:


242.302  Contract administration functions.

    (a) Government personnel performing contract administration duties 
outlined in FAR 42.302(a) and this paragraph issue a corrective action 
request when contractual noncompliance is independently identified. The 
Defense Contract Management Agency had identified four levels of 
corrective action requests.
    (i) Level I is issued for noncompliances that are minor in nature, 
are promptly corrected by the contractor, and present no need for root 
cause determination or further preventive action.
    (ii) Level II is issued for noncompliances that are not promptly 
correctable and warrant root cause analysis and preventive action, or 
need action by the contractor to determine if other product/services 
are affected.
    (iii) Level III is issued to the contractor's management 
responsible for the company or business segment to call attention to a 
serious noncompliance, a significant deficiency pursuant to 252.242-
7005(b), a failure to respond to a lower level corrective action 
request, or to remedy recurring noncompliance.
    (iv) Level IV is issued to the contractor's segment or corporate 
management and when the contractual noncompliance(s) is of a serious 
nature or when a Level III corrective action request has been 
ineffective.
    (v) For additional information on corrective action requests, see 
PGI 242.302(a).
* * * * *
0
10. Amend section 242.7000 by revising the first sentence in paragraph 
(b)(1) to read as follows:

242.7000  Contractor business system deficiencies.

    (b) * * *
    (1) In accordance with agency procedures, identify one or more 
covered contracts containing the clause at 252.242-7005, Contractor 
Business Systems, from which payments will be withheld, except that, if 
a contract includes the clause 252.232-7004, DoD Customary Progress 
Payments, or the provision 252.232-70YY, DoD Maximum Performance-Based 
Payments, the contracting officer shall not withhold progress payments 
or performance based payments from that contract unless the contractor 
is receiving progress payments or performance-based payments under the 
contract at a rate specified in Contract Business Analysis Repository 
that includes the 10 percent incentive based on having acceptable 
business systems without significant deficiencies (see 232.501-1(a)). * 
* *
* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
11. Revise section 252.232-7004 to read as follows:

252.232-7004  DoD Customary Progress Payment Rates.

    As prescribed in 232.502-4-70(b), use the following clause:

DoD Customary Progress Payment Rates (Date)

    (a) The Progress Payments clause of this contract is modified to 
change each mention of the progress payment rate and liquidation 
rate in paragraphs (a)(1), (a)(6), and (b) to 50 percent if the 
Contractor is other than a small business and 90 percent if the 
Contractor is a small business, unless a different rate is specified 
for the Contractor in the Contract Business Analysis Repository 
(CBAR) at [details TBD]. The limitations on undefinitized contract 
actions in paragraph (k) of the Progress Payments clause remain at a 
maximum of 80 percent for both the progress payment rate and the 
liquidation rate, notwithstanding any higher rate specified in CBAR.
    (b) If the Contractor has a satisfactory record of performance, 
the Contractor can qualify for an increased customary progress 
payment rate of up to 95 percent, based on the following criteria:
    (1) If the Contractor is other than a small business:

------------------------------------------------------------------------
 Additional  percentage                      Criteria
------------------------------------------------------------------------
10.....................  Met the contract delivery dates for contract
                          end items and contract data requirements lists
                          or performance milestone schedule, as the case
                          may be, at least 95 percent of the time during
                          the preceding Government fiscal year (October
                          1 through September 30).
10.....................  Does not have open level III or IV corrective
                          action requests. See DFARS 242.302(a).
10.....................  All applicable contractor business systems are
                          acceptable, without significant deficiencies.
7.5....................  At least 95 percent of the time during the
                          preceding Government fiscal year, when
                          responding to solicitations that required
                          submission of certified cost or pricing data,
                          met the due date in the request for proposal
                          and complied with the Proposal Adequacy
                          Checklist (252.215-7009).
5......................  Has met its small business subcontracting goals
                          during the preceding Government fiscal year.
2.5....................  Has provided subcontracting opportunities for
                          AbilityOne [details TBD].
------------------------------------------------------------------------


[[Page 42839]]

    (2) If the Contractor is a small business:

------------------------------------------------------------------------
 Additional  percentage                      Criteria
------------------------------------------------------------------------
2......................  Met the contract delivery dates for contract
                          end items and contract data requirements lists
                          or performance milestone schedule, as the case
                          may be, at least 95 percent of the time during
                          the preceding Government fiscal year (October
                          1 through September 30).
2......................  Does not have open level III or IV corrective
                          action requests. See DFARS 242.302(a).
1......................  All applicable contractor business systems are
                          acceptable, without significant deficiencies.
------------------------------------------------------------------------

    (c) However, if the Contractor or any of its principals has 
within the preceding Government fiscal year been convicted of or had 
a civil judgment rendered against the Contractor or any of its 
principals for commission of fraud or a criminal offense in 
connection with obtaining, attempting to obtain, or performing a 
public (Federal, State, or local) contract or subcontract; violation 
of Federal or State antitrust statutes relating to the submission of 
offers; or commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
tax evasion, violating Federal criminal tax laws, or receiving 
stolen property, the Contractor will not be eligible for any of the 
above incentives and the customary progress payment rate will be 25 
percent.
    (d)(1) On December 1 of each year, except as provided in 
paragraph (c) of this clause, the Contractor, or a higher-level 
owner of the Contractor, may submit to [email address TBD] a 
representation as to which criteria specified in paragraph (b) of 
this clause the Contractor meets, and request a higher customary 
progress payment rate on that basis.
    (i) If a representation is made on behalf of multiple business 
segments, the representation shall address the criteria in paragraph 
(b) of this clause for each business segment for which higher 
customary progress payment rates are requested. Business segments 
that meet the same criteria may be grouped together.
    (ii) If the size status of the Contractor varies dependent upon 
the North American Industry Classification System (NAICS) code of 
the acquisition, the Contractor may submit a representation and 
request for a higher customary progress payment rate that addresses 
the rates for both a small business and an other than small 
business.
    (iii) A separate representation is not required to also request 
a higher maximum performance-based payment rate (see DFARS 
232.1004(b)(2)).
    (2) The representation shall be executed by a person authorized 
to sign for the entity submitting the representation and shall at a 
minimum include--
    (i) The unique entity identifier and Commercial and Government 
Entity (CAGE) code(s) of the Contractor;
    (ii) The size status of the Contractor (small, other than small, 
or varies dependent upon the NAICS code of the acquisition); and
    (iii) Identification of the criteria for which the Contractor is 
requesting increase in the customary progress payment rate for the 
following calendar year. It is not necessary to submit supporting 
data with the representation, but the Contractor is required to 
provide such data upon request.
    (3) The template in paragraph (h) of this clause may be used for 
the submission of the request and representation.
    (e) Based on the representation received, the Director, Defense 
Pricing and Contracting, will determine the appropriate customary 
progress payment rate(s) for the following calendar year. DoD will 
enter the customary progress payment rate(s) into CBAR by December 
31.
    (f) If the Contractor fails to submit by the December 1 
deadline, then the rate for the Contractor in CBAR will be 50 
percent if the Contractor is other than a small business and 90 
percent if the Contractor is a small business, except as provided in 
paragraph (c) of this clause. If the Contractor subsequently submits 
a representation after the December 1 deadline, any increase in 
rates will not be effective in CBAR until 30 days after submission.
    (g) The rate(s) may be adjusted at any time during the year if 
the Director, Defense Pricing and Contracting, subsequently 
determines that the representation provided by a contractor was not 
accurate.
    (h) Template.
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[[Page 42841]]


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[[Page 42842]]


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[[Page 42843]]


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(End of clause)


252.232-7012  [Removed and Reserved]

0
12. Remove and reserve section 252.232-7012.


252.232-7013  [Removed and Reserved]

0
13. Remove and reserve section 252.232-7013.
0
14. Add new section 252.232-70YY to read as follows:


252.232-70YY  DoD Maximum Performance-Based Payment Rates.

    As prescribed in 232.1005-70, use the following provision:

DoD Maximum Performance-Based Payment Rates (Date)

    (a) The Invitation to Propose Performance-Based Payments 
provision in this solicitation is modified to change the maximum 
performance-based payment rate in paragraph (c)(2)(iii) of that 
provision to 50 percent if the Offeror is other than small business 
and 90 percent if the Offeror is a small business, unless a 
different rate is specified for the Offeror in the Contract Business 
Analysis Repository (CBAR) at [details TBD].
    (b) If the Offeror has a satisfactory record of performance, the 
Offeror can qualify for an increased maximum performance-based 
payment rate of up to 95 percent, based on the following criteria:
    (1) If the Offeror is other than small business:

------------------------------------------------------------------------
 Additional  percentage                      Criteria
------------------------------------------------------------------------
10.....................  Met the contract delivery dates for contract
                          end items and contract data requirements lists
                          or performance milestone schedule, as the case
                          may be, at least 95 percent of the time during
                          the preceding Government fiscal year (October
                          1 through September 30).
10.....................  Does not have open level III or IV corrective
                          action requests. See DFARS 242.302(a).
10.....................  All applicable contractor business systems are
                          acceptable, without significant deficiencies.
7.5....................  At least 95 percent of the time during the
                          preceding Government fiscal year, when
                          responding to solicitations that required
                          submission of certified cost or pricing data,
                          met the due date in the request for proposal
                          and complied with the Proposal Adequacy
                          Checklist (252.215-7009).
5......................  Has met its small business subcontracting goals
                          during the preceding Government fiscal year.
2.5....................  Has provided subcontracting opportunities for
                          AbilityOne [details TBD].
------------------------------------------------------------------------

    (2) If the Offeror is a small business:

------------------------------------------------------------------------
 Additional  percentage                      Criteria
------------------------------------------------------------------------
2......................  Met the contract delivery dates for contract
                          end items and contract data requirements lists
                          or performance milestone schedule, as the case
                          may be, at least 95 percent of the time during
                          the preceding Government fiscal year (October
                          1 through September 30).
2......................  Does not have open level III or IV corrective
                          action requests. See DFARS 242.302(a).
1......................  All applicable contractor business systems are
                          acceptable, without significant deficiencies.
------------------------------------------------------------------------

    (c) However, if the Offeror or any of its principals has within 
the preceding Government fiscal year been convicted of or had a 
civil judgment rendered against the Offeror or any of its principals 
for commission of fraud or a criminal offense in connection with 
obtaining, attempting to obtain, or performing a public (Federal, 
State, or local) contract or subcontract; violation of Federal or 
State antitrust statutes relating to the submission of offers; or 
commission of embezzlement, theft, forgery, bribery, falsification 
or destruction of records, making false statements, tax evasion, 
violating Federal criminal tax laws, or receiving stolen property, 
the Offeror will not be eligible for any of the above incentives and 
the maximum performance-based payment rate will be 25 percent.
    (d)(1) On December 1 of each year, except as provided in 
paragraph (c) of this provision, the Offeror, or a higher-level 
owner of the Offeror, may submit to [email address TBD] a 
representation as to which criteria specified in paragraph (b) of 
this provision it meets, and request a higher maximum performance-
based payment rate on the basis of the applicable criteria.
    (i) If a representation is made on behalf of multiple business 
segments, the representation shall address the criteria in paragraph 
(b) of this provision for each business segment for which higher 
customary progress payment rates are requested. Business segments 
that meet the same criteria may be grouped together.
    (ii) If the size status of the Offeror varies dependent upon the 
North American Industry Classification System (NAICS) code of the 
acquisition, the Offeror may submit a representation and request for 
a higher customary progress payment rate that addresses the rates 
for both a small business and an other than small business.
    (iii) A separate representation is not required to also request 
a higher customary progress payment rate (see DFARS 232.501-1(a)).
    (2) The representation shall be executed by a person authorized 
to sign for the entity submitting the representation and shall at a 
minimum include--
    (i) The unique entity identifier and Commercial and Government 
Entity (CAGE) code(s) of the Offeror;
    (ii) The size status of the Offeror (small, other than small, or 
varies dependent upon the NAICS code of the acquisition); and

[[Page 42845]]

    (iii) Identification of the criteria for which the Offeror is 
requesting increased maximum performance-based payment rate for the 
following calendar year. It is not necessary to submit supporting 
data with the representation, but the Offeror shall provide such 
data upon request.
    (3) The template in paragraph (h) of this clause may be used for 
the submission of this request and representation.
    (e) Based on the representation received, the Director, Defense 
Pricing and Contracting, will determine the appropriate maximum 
performance-based payment rate(s) for the following calendar year. 
DoD will enter the maximum performance-based payment rate(s) into 
CBAR by December 31.
    (f) If the Offeror fails to submit by the December 1 deadline, 
then the rate for the Offeror in CBAR will be 50 percent if the 
Offeror is other than a small business and 90 percent if the Offeror 
is a small business, except as provided in paragraph (c) of this 
provision. If the Offeror subsequently submits a representation 
after the December 1 deadline, any increase in rates will not be 
effective in CBAR until 30 days after submission.
    (g) The rate(s) may be adjusted at any time during the year if 
the Director, Defense Pricing and Contracting, subsequently 
determines that the representation provided by the Offeror was not 
accurate.
    (h) Template.
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[[Page 42847]]


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[[Page 42849]]


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(End of provision)

0
15. Amend section 252.242-7005 by--
0
a. Removing the clause date of ``(FEB 2012)'' and adding ``(DATE)'' in 
its place;
0
b. In paragraph (d)(2) removing ``withhold payments'' and adding 
``withhold payments, except as provided in paragraph (e) of this 
clause'' in its place;
0
c. Redesignating paragraphs (e) and (f) as paragraphs (f) and (g); and
0
d. Adding a new paragraph (e) to read as follows:


Sec.  252.242-7005  Contractor Business Systems.

* * * * *
    (e) The requirements in paragraphs (f) and (g) of this clause 
regarding withholding of amounts due from progress payments and 
performance-based payments do not apply unless the Contractor is 
receiving progress payments or performance-based payments under this 
contract at a rate specified in CBAR that includes the 10 percent 
incentive based on having acceptable business systems without 
significant deficiencies.
* * * * *
[FR Doc. 2018-18238 Filed 8-23-18; 8:45 am]
 BILLING CODE 5001-06-C