[Federal Register Volume 84, Number 32 (Friday, February 15, 2019)]
[Proposed Rules]
[Pages 4429-4431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02530]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 215 and 217

[Docket DARS-2019-0004]
RIN 0750-AJ72


Defense Federal Acquisition Regulation Supplement: Undefinitized 
Contract Actions (DFARS Case 2018-D008)

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

ACTION: Proposed rule.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to implement a section of the National 
Defense Authorization Act for Fiscal Year 2017 and a section of the 
National Defense Authorization Act for Fiscal Year 2018 to revise 
requirements for definitizing undefinitized contract actions.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before April 16, 2019, to be considered 
in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2018-D008, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: http://www.regulations.gov. 
Search for ``DFARS Case 2018-D008.'' Select ``Comment Now'' and follow 
the instructions provided to submit a comment. Please include ``DFARS 
Case 2018-D008'' on any attached documents.

[[Page 4430]]

    [cir] Email: [email protected]. Include DFARS Case 2018-D008 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. Amy 
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, telephone 571-372-
6106.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD is proposing to revise the DFARS to implement section 811 of 
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017 
(Pub. L. 114-328) and section 815 of the NDAA for FY 2018 (Pub. L. 115-
91). Section 811 modifies restrictions on undefinitized contractual 
actions (UCA) regarding risk based profit, time for definitization, and 
foreign military sales. Section 815 establishes limitations on 
unilateral definitizations of UCAs over $50 million.

II. Discussion and Analysis

    This rule proposes to make the following amendments to DFARS:
     If a UCA is definitized after the end of the 180-day 
period beginning on the date the contractor submits a qualifying 
proposal, the head of the agency shall ensure profit reflects the cost 
risk of the contractor as such risk existed on the date the contractor 
submitted the qualifying proposal.
     The definitization of a UCA may not be extended by more 
than 90 days beyond the maximum 180-day definitization schedule 
negotiated in the UCA without a written determination by the Secretary 
of the military department concerned, the head of the defense agency 
concerned, the commander of the combatant command concerned, or the 
Under Secretary of Defense for Acquisition and Sustainment, that it is 
in the best interests of the military department, the defense agency, 
the combatant command, or the Department of Defense, respectively, to 
continue the action.
     Contracting officers of the Department of Defense may not 
enter into a UCA for a foreign military sale unless the contract action 
provides for definitization within 180 days and the contracting officer 
obtains approval from the head of the contracting activity. The head of 
the agency may waive this requirement if necessary to support a 
contingency or humanitarian or peacekeeping operation.
     Contracting officers may not unilaterally definitize a UCA 
with a value greater than $50 million until--
    [cir] The end of the 180-day period beginning on the date on which 
the contractor submits a qualifying proposal to definitize the 
contractual terms, specifications, and price; or the date on which the 
amount of funds expended under the contractual action is equal to more 
than 50 percent of the negotiated overall not-to-exceed price for the 
contractual action;
    [cir] The service acquisition executive for the military department 
that awarded the contract or the Under Secretary of Defense for 
Acquisition and Sustainment if the contract was awarded by a defense 
agency or other component of the Department of Defense, approves the 
definitization in writing;
    [cir] The contracting officer provides a copy of the written 
approval to the contractor; and
    [cir] A period of 30 calendar days has elapsed after the written 
approval is provided to the contractor.
     The definition of ``qualifying proposal'' is being amended 
to align with the statutory definition at 10 U.S.C. 2306, which is a 
proposal that contains sufficient information to enable DoD to conduct 
a ``meaningful audit'' instead of a ``complete and meaningful audit.''

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

    This rule does not propose to create any new provisions or clauses 
or impact any existing provisions or clauses.

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. Executive Orders 13771

    This rule is not expected to be an E.O. 13771 regulatory action, 
because this rule is not significant under E.O. 12866.

VI. Regulatory Flexibility Act

    DoD does not expect this proposed 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:
    DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to modify requirements on undefinitized 
contractual actions (UCAs) regarding calculations of risk-based profit 
objectives, timing for definitizations, foreign military sales, and 
limitations on unilateral definitizations of UCAs over $50 million, in 
accordance with recently enacted statutory requirements.
    The objective is to implement section 811 of the National Defense 
Authorization Act (NDAA) for Fiscal Year (FY) 2017 (Pub. L. 114-328) 
and section 815 of the NDAA for FY 2018 (Pub. L. 115-91).
    With regard to potential profit impacts, DoD estimates that this 
rule will impact approximately 470 contracts per year, primarily 
awarded to other than small entities, where definitization is extended 
beyond 180 days after receipt of a qualifying proposal.
    The proposed rule does not include additional reporting or record 
keeping requirements.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules. There are no known significant alternative approaches to 
the rule that would meet the requirements.
    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 2018-D008), in 
correspondence.

[[Page 4431]]

VII. 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 215 and 217

    Government procurement.


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

    Therefore, 48 CFR parts 215 and 217 are proposed to be amended as 
follows:

0
1. The authority citation for 48 CFR parts 215 and 217 continues to 
read as follows:

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

PART 215--CONTRACTING BY NEGOTIATION

0
2. In section 215.404-71-3, revise paragraph (d)(2)(i) to read as 
follows:


215.404-71-3  Contract type risk and working capital adjustment.

* * * * *
    (d) * * *
    (2) * * *
    (i) The contracting officer shall assess the extent to which costs 
have been incurred prior to definitization of the contract action (also 
see 217.7404-6(a) and 243.204-70-6). When costs have been incurred 
prior to definitization, generally regard the contract type risk to be 
in the low end of the designated range. If a substantial portion of the 
costs have been incurred prior to definitization, the contracting 
officer may assign a value as low as 0 percent, regardless of contract 
type. However, if a contractor submits a qualifying proposal to 
definitize an undefinitized contract action and the contracting officer 
for such action definitizes the contract after the end of the 180-day 
period beginning on the date on which the contractor submitted the 
qualifying proposal (as defined in 217.7401(c)), the profit allowed on 
the contract shall accurately reflect the cost risk of the contractor 
as such risk existed on the date the contractor submitted the 
qualifying proposal.
* * * * *

PART 217--SPECIAL CONTRACTING METHODS


217.7401  [Amended]

0
3. In section 217.7401, amend paragraph (c) introductory text by 
removing ``complete and''.


217.7402  [Amended]

0
4. Amend section 217.7402 by--
0
a. Removing paragraph (a)(1);
0
b. Redesignating paragraphs (a)(2) through (4) as paragraphs (a)(1) 
through (3); and
0
c. In the newly redesignated paragraphs (a)(1) and (2), remove the 
semicolons and replace them with periods.
0
5. Revise section 217.7404 to read as follows:


217.7404  Limitations.

    See PGI 217.7404 for additional guidance on obtaining approval to 
authorize use of an undefinitized contact action, documentation 
requirements, and other limitations on their use.
    (a) Foreign military sales contracts. (1) A contracting officer may 
not enter into a UCA for a foreign military sale unless--
    (i) The contract action provides for agreement upon contractual 
terms, specifications, and price by the end of the 180-day period 
beginning on the date on which the contractor submits a qualifying 
proposal; and
    (ii) The contracting officer obtains approval from the head of the 
contracting activity to enter into a UCA in accordance with 217.7404-1.
    (2) The head of an agency may waive the requirements of paragraph 
(a)(1) of this section, if a waiver is necessary in order to support 
any of the following operations:
    (i) A contingency operation.
    (ii) A humanitarian or peacekeeping operation.
    (b) Unilateral definitization by a contracting officer. Any UCA 
with a value greater than $50 million may not be unilaterally 
definitized until--
    (1) The earlier of--
    (i) The end of the 180-day period, beginning on the date on which 
the contractor submits a qualifying proposal to definitize the 
contractual terms, specifications, and price; or
    (ii) The date on which the amount of funds expended under the 
contractual action is equal to more than 50 percent of the negotiated 
overall not-to-exceed price for the contractual action;
    (2) The service acquisition executive for the military department 
that awarded the contract or the Under Secretary of Defense for 
Acquisition and Sustainment if the contract was awarded by a defense 
agency or other component of the Department of Defense, approves the 
definitization in writing;
    (3) The contracting officer provides a copy of the written approval 
to the contractor; and
    (4) A period of 30 calendar days has elapsed after the written 
approval is provided to the contractor.
0
6. Amend section 217.7404-3 by revising paragraph (a)(1) to read as 
follows:


217.7404-3  Definitization schedule.

    (a) * * *
    (1) The date that is 180 days after the contractor submits a 
qualifying proposal. This date may not be extended beyond an additional 
90 days without a written determination by the Secretary of the 
military department concerned, the head of the defense agency 
concerned, the commander of the combatant command concerned, or the 
Under Secretary of Defense for Acquisition and Sustainment that it is 
in the best interests of the military department, the defense agency, 
the combatant command, or the Department of Defense, respectively, to 
continue the action; or
* * * * *


217.7404-5  [Amended]

0
7. Amend section 217.7404-5, in paragraph (b) introductory text, by 
removing ``217.7404-2'' and adding ``217.7404(a), 217.7404-2'' in its 
place.
0
8. Amend section 217.7404-6 by revising paragraph (a) to read as 
follows:


217.7404-6  Allowable profit.

* * * * *
    (a) Any reduced cost risk to the contractor for costs incurred 
during contract performance before negotiation of the final price. 
However, if a contractor submits a qualifying proposal to definitize a 
UCA and the contracting officer for such action definitizes the 
contract after the end of the 180-day period beginning on the date on 
which the contractor submitted the qualifying proposal, the profit 
allowed on the contract shall accurately reflect the cost risk of the 
contractor as such risk existed on the date the contractor submitted 
the qualifying proposal;
* * * * *
[FR Doc. 2019-02530 Filed 2-14-19; 8:45 am]
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