[Federal Register Volume 84, Number 83 (Tuesday, April 30, 2019)]
[Proposed Rules]
[Pages 18225-18228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08483]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 239 and 252
[Docket DARS-2019-0018]
RIN 0750-AJ97
Defense Federal Acquisition Regulation Supplement: Modification
of DFARS Clause ``Cancellation or Termination of Orders'' (DFARS Case
2018-D035)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
[[Page 18226]]
ACTION: Proposed rule.
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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition
Regulation Supplement (DFARS) to modify the text of an existing DFARS
clause to clarify DoD's liability in the event DoD cancels or
terminates a telecommunications services order, and include the text of
another DFARS clause to streamline terms and conditions for contractors
subject to both of the clauses, pursuant to action taken by the DoD
Regulatory Reform Task Force.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before July 1, 2019, to be considered in
the formation of a final rule.
ADDRESSES: Submit comments identified by DFARS Case 2018-D035, using
any of the following methods:
[cir] Federal eRulemaking Portal: http://www.regulations.gov.
Search for ``DFARS Case 2018-D035.'' Select ``Comment Now'' and follow
the instructions provided to submit a comment. Please include ``DFARS
Case 2018-D035'' on any attached documents.
[cir] Email: [email protected]. Include DFARS Case 2018-D035 in
the subject line of the message.
[cir] Fax: 571-372-6094.
[cir] Mail: Defense Acquisition Regulations System, Attn: Carrie
Moore, 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. Carrie Moore, telephone 571-372-
6093.
SUPPLEMENTARY INFORMATION:
I. Background
This rule proposes to modify the DFARS clause 252.239-7007,
Cancellation or Termination of Orders, to: (1) Clarify limitations on
the Government's obligation to reimburse a Contractor for
nonrecoverable costs when the Government cancels an order for
telecommunications services; and (2) incorporate the information
currently included in DFARS clause 252.239-7008, Reuse Arrangements.
Combining these clauses will result in 252.239-7008 being removed from
the DFARS.
II. Discussion and Analysis
The clauses at DFARS 252.239-7007 and 252.239-7008 are both
included in solicitations, contracts, and basic agreements for
telecommunications services. The clause at 252.239-7007 provides
contractors with terms and conditions that apply in the event the
Government cancels any of the services ordered under the agreement or
contract, while the clause at 252.239-7008 is provides contractors with
terms and conditions for the reuse of equipment and facilities
purchased under a telecommunications order that is cancelled or
terminated by the Government. Since both clauses are included in the
same contracts and both clauses establish terms and conditions for the
cancellation or termination of telecommunications orders, the text of
the two clauses can be combined, without changing the intent. This will
help minimize the number of clauses contained in the contract and
streamline content for the contractor.
This rule also amends DFARS clause 252.239-7007 to clarify that the
Government will not reimburse the contractor for certain costs incurred
prior to the issuance of an order under a communication services
agreement or other contractual document. This clarification intends to
prevent the contractor from incurring costs in anticipation of, but
prior to, the establishment of a formal agreement/contract for services
and the award of an order for such services. This rule also establishes
within the clause a cap, based on the recurring and nonrecurring
charges included in the contract, on the Government's maximum liability
for the cancellation or termination of services. The purpose of this
clarification is to create an upfront mutual understanding of the
maximum amount of reimbursement due to the contractor in the event of
cancellation or termination.
The modification of this DFARS text supports a recommendation from
the DoD Regulatory Reform Task Force. On February 24, 2017, the
President signed Executive Order (E.O.) 13777, ``Enforcing the
Regulatory Reform Agenda,'' which established a Federal policy ``to
alleviate unnecessary regulatory burdens'' on the American people. In
accordance with E.O. 13777, DoD established a Regulatory Reform Task
Force to review and validate DoD regulations, including the DFARS. A
public notice of the establishment of the DFARS Subgroup to the DoD
Regulatory Reform Task Force, for the purpose of reviewing DFARS
provisions and clauses, was published in the Federal Register at 82 FR
35741 on August 1, 2017, and requested public input. One public comment
was received on these clauses. The respondent recommended DFARS clause
252.239-7007 be removed from the DFARS, because the content of the
clause is redundant to information provided in Federal Acquisition
Regulation (FAR) part 15, Contracting by Negotiation. However, the
purpose of the clause is to implement standardized policy across DoD
that addresses critical issues associated with the acquisition of
telecommunication services. FAR part 15 provides contracting officers
with the processes and procedures related to the solicitation,
evaluation, and award of competitive and noncompetitive negotiated
acquisitions; it does not provide the guidance contained in the clause,
which ensures that all DoD telecommunications services contractors are
subject to the same and equal terms and conditions regarding the
Government's cancellation or termination of services. As such, DFARS
clause 252.239-7007 is necessary to support DoD's needs. Subsequently,
the DoD Task Force reviewed the requirements of DFARS clauses 252.239-
7007 and 252.239-7008 and determined that the clauses could be
clarified and combined, which is the basis for this proposed rule.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-The-Shelf Items
This proposed rule does not create any new provisions or clauses.
The rule combines two clauses on the same topic into a single clause
and makes minor modifications to clarify current practices. This rule
does not change the applicability of the affected clauses, which are
included in solicitations and contracts for telecommunications
services, including those valued at or below the simplified acquisition
threshold or for commercial services.
IV. Executive Orders 12866 and 13563
Executive Order (E.O.) 12866, Regulatory Planning and Review; and
E.O. 13563, Improving Regulation and Regulatory Review, 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
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flexibility. The Office of Management and Budget, Office of Information
and Regulatory Affairs, has determined that this is not a significant
regulatory action as defined under section 3(f) of E.O. 12866 and,
therefore, was not subject to review under section 6(b). This rule is
not a major rule as defined at 5 U.S.C. 804(2).
V. Executive Order 13771
This rule is not expected to be subject to E.O. 13771, because this
rule is not a significant regulatory action 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.,
because the rule is not creating any new requirements or changing any
existing requirements for contractors. However, an initial regulatory
flexibility analysis has been performed and is summarized as follows:
The Department of Defense is proposing to amend the Defense Federal
Acquisition Regulation Supplement (DFARS) to modify the text of DFARS
clause 252.239-7007, Cancellation or Termination of Orders, to: Clarify
DoD's liability in the event DoD cancels or terminates a
telecommunications services order, and incorporate the text of DFARS
clause 252.239-7008, Reuse Arrangements. Combining the requirements of
these two clauses permits DFARS 252.239-7008 to be removed from the
DFARS.
The objectives of this proposed rule are to: Streamline contract
terms and conditions pertaining to telecommunications services; prevent
costs from being incurred in anticipation of, but prior to, the
establishment of a formal agreement or contract and award of an order
for telecommunications services; and, to create an upfront mutual
understanding of the maximum amount of reimbursement due to the
contractor in the event of cancellation or termination. The
modification of these DFARS clauses supports a recommendation from the
DoD Regulatory Reform Task Force.
This rule is not expected 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., because it is simply
combining two existing clauses that address the same topic into a
single comprehensive clause, and clarifies the current practices
regarding DoD liability to reimburse telecommunication services
contractors in certain circumstances.
Based on fiscal year (FY) 2018 data from the Federal Procurement
Data System, the Government awarded approximately 8,670 contracts and
orders for services under the Product and Supply Code (PSC) D3--
Information Technology and Telecommunications. Of the 8,670 contracts
and orders awarded, approximately 28 percent of the awards were made to
1,050 unique small businesses entities. The PSC D3 does not break down
further into information technology services and telecommunications
services; therefore, the number of contracts and orders awarded in FY
2018 exclusively for telecommunications services is estimated to be
fewer than the number awarded in FY 2018 under PSC D3 in its entirety.
This proposed rule does not include any new reporting,
recordkeeping, or other compliance requirements for small businesses.
This rule does not duplicate, overlap, or conflict with any other
Federal rules. There are no known significant alternative approaches to
the proposed rule that would meet the proposed objectives.
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-D035)
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).
List of Subjects in 48 CFR Parts 239 and 252
Government procurement.
Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 239 and 252 are proposed to be amended as
follows:
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1. The authority citation for parts 239 and 252 continues to read as
follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 239--ACQUISITION OF INFORMATION TECHNOLOGY
239.7411 [Amended]
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2. Amend section 239.7411 by--
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a. In paragraph (a) introductory text, removing the em dash and
replacing it with a period;
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b. In paragraphs (a)(1) through (5), removing the semicolons and adding
periods in their places; and
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c. Removing paragraph (a)(6).
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
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3. Revise section 252.239-7007 to read as follows:
252.239-7007 Cancellation or Termination of Orders.
As prescribed in 239.7411(a)(5), use the following clause:
Cancellation or Termination of Orders (Date)
(a) Definitions: As used in this clause--
Actual nonrecoverable costs means the installed costs of the
facilities and equipment, less cost of reusable materials, and less
net salvage value.
Basic cancellation liability means the actual nonrecoverable
cost, which the Government shall reimburse the Contractor at the
time services are cancelled.
Basic termination liability means the nonrecoverable cost
amortized in equal monthly increments throughout the liability
period.
Installed costs means the actual cost of equipment and materials
specifically provided or used, plus the actual cost of installing
(including engineering, labor, supervision, transportation, rights-
of-way, and any other items which are chargeable to the capital
accounts of the Contractor), less any costs the government may have
directly reimbursed the Contractor under the Special Construction
and Equipment Charges clause of this agreement/contract.
Net salvage value means the salvage value less the cost of
removal.
(b) If the Government cancels any of the services ordered under
this agreement/contract, before the services are made available to
the Government, or terminates any of these services after they are
made available to the Government, the Government will reimburse the
Contractor for the actual nonrecoverable costs the Contractor has
reasonably incurred in providing facilities and equipment for which
the Contractor has no foreseeable reuse. The Government will not
reimburse the Contractor for any actual nonrecoverable costs
incurred after notice of award, but prior to execution of the order.
(c) When feasible, the Contractor shall reuse cancelled or
terminated facilities or equipment to minimize the charges to the
Government.
(d) If at any time the Government requires that
telecommunications facilities or equipment be relocated within the
Contractor's service area, the Government will have the option of
paying the costs of
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relocating the facilities or equipment in lieu of paying any
termination or cancellation charge under this clause. The basic
cancellation liability or basic termination liability applicable to
the facilities or equipment in their former location shall continue
to apply to the facilities and equipment in their new location.
Monthly recurring charges shall continue to be paid during the
period.
(e) When there is another requirement or foreseeable reuse in
place of cancelled or terminated facilities or equipment, no charge
shall apply and the basic cancellation liability or basic
termination liability shall be appropriately reduced. When feasible,
the Contractor shall promptly reuse discontinued channels or
facilities, including equipment for which the Government is
obligated to pay a minimum service charge.
(f) The amount of the Government's liability upon cancellation
or termination of any of the services ordered under this agreement/
contract will be determined under applicable tariffs governing
cancellation and termination charges that--
(1) Are filed by the Contractor with a governmental regulatory
body, as defined in the Orders For Facilities and Services clause of
this agreement/contract;
(2) Are in effect on the date of termination; and
(3) Provide specific cancellation or termination charges for the
facilities and equipment involved or show how to determine the
charges.
(g) The amount of the Government's liability upon cancellation
or termination of any of the services ordered under this agreement/
contract that are not subject to a governmental regulatory body will
be determined under a mutually agreed schedule in the communication
services authorization (CSA) or other contractual document.
(h) If no applicable tariffs are in effect on the date of
cancellation or termination or set forth in the applicable CSA or
other contractual document, the Government's liability will be
determined under the following settlement procedures--
(1) The Contractor agrees to provide the Contracting Officer, in
such reasonable detail as the Contracting Officer may require,
inventory schedules covering all items of property or facilities in
the Contractor's possession, the cost of which is included in the
Basic Cancellation or Termination Liability for which the Contractor
has no foreseeable reuse.
(2) The Contractor shall use its best efforts to sell property
or facilities when the Contractor has no foreseeable reuse or when
the Government has not exercised its option to take title under the
Title to Telecommunications Facilities and Equipment clause of this
agreement/contract. The Contractor shall apply any proceeds of the
sale to reduce any payments by the Government to the Contractor
under a cancellation or termination settlement.
(3) The Contractor shall record actual nonrecoverable costs
under established accounting procedures prescribed by the cognizant
governmental regulatory authority or, if no such procedures have
been prescribed, under generally accepted accounting procedures
applicable to the provision of telecommunication services for public
use.
(4) The net salvage value shall be deducted from the
Contractor's installed cost. In determining net salvage value the
Contractor shall consider the foreseeable reuse of the facilities
and equipment by the Contractor. The Contractor shall make allowance
for the cost of dismantling, removal, reconditioning, and disposal
of the facilities and equipment when necessary either for the sale
of facilities or their reuse by the Contractor in another location.
(5) Upon termination of services, the Government will reimburse
the Contractor for the nonrecoverable cost less such costs amortized
to the date services are terminated-and establish the liability
period as mutually agreed to but not to exceed ten years. In the
case of either a cancellation or a termination, the Government's
presumed maximum liability will be capped by the unpaid nonrecurring
charges and the monthly recurring charges (MRCs) set out in the
contract/agreement. The presumed maximum liability for MRCs will be
capped at MRCs for the minimum service period and any required
notice period.
(6) When the basic cancellation liability or basic termination
liability established by the CSA or other contractual document is
based on estimated costs, the Contractor agrees to settle on the
basis of actual cost at the time of cancellation or termination.
(7) The Contractor agrees that, if after settlement but within
the termination liability period of the services, should the
Contractor make reuse of equipment or facilities which were treated
as nonreusable or nonsalvable in the settlement, the Contractor
shall reimburse the Government for the value of the equipment or
facilities.
(8) The Contractor agrees to exclude--
(i) Any costs that are not included in determining cancellation
and termination charges under the Contractor's standard practices or
procedures; and
(ii) Charges not ordinarily made by the Contractor for similar
facilities or equipment, furnished under similar circumstances.
(i) The Government may, under such terms and conditions as it
may prescribe, make partial payments and payments on account against
costs incurred by the Contractor in connection with the cancelled or
terminated portion of this agreement/contract. The Government may
make these payments if the Contracting Officer determines that the
total of the payments is within the amount the Contractor is
entitled. If the total of the payments is in excess of the amount
finally agreed or determined to be due under this clause, the
Contractor shall pay the excess to the Government upon demand.
(j) Failure to agree shall be a dispute concerning a question of
fact within the meaning of the Disputes clause.
(End of clause)
252.239-7008 [Removed and Reserved]
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4. Remove and reserve section 252.239-7008.
[FR Doc. 2019-08483 Filed 4-29-19; 8:45 am]
BILLING CODE 5001-06-P