[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Rules and Regulations]
[Pages 25186-25188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11308]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 201, 209, and 252

[Docket DARS-2018-0059]
RIN 0750-AJ85


Defense Federal Acquisition Regulation Supplement: Applicability 
of Inflation Adjustment of Acquisition-Related Thresholds (DFARS Case 
2018-D023)

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

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule to amend the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2018 to require that 
inflation adjustments of statutory acquisition-related thresholds under 
41 U.S.C. 1908 apply to existing contracts and subcontracts in effect 
on the date of the adjustment that contain the adjusted clauses.

DATES: Effective May 31, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Heather Kitchens, telephone 571-
372-6104.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 83 FR 
65618 on December 21, 2018, to revise the DFARS to implement section 
821 of the National Defense Authorization Act (NDAA) for Fiscal Year 
(FY) 2018 (Pub. L. 115-91). Section 821 amends 41 U.S.C. 1908(d) to 
require inflation adjustments of statutory acquisition-related 
thresholds under 41 U.S.C. 1908 apply to existing contracts and 
subcontracts in effect on the date of the adjustment. Section 821 adds 
the words ``and shall apply, in the case of the procurement of property 
or services by contract, to a contract, and any subcontract at any tier 
under the contract, in effect on that date without regard to the date 
of award of the contract or subcontract'' at the end of 41 U.S.C. 
1908(d).
    41 U.S.C. 1908, Inflation adjustment of acquisition-related dollar 
thresholds, requires an adjustment every five years of acquisition-
related thresholds for inflation using the Consumer Price Index for All 
Urban Consumers (CPI-U), except for the Construction Wage Rate 
Requirements statute (formerly known as the Davis-Bacon Act), Service 
Contract Labor Standards statute (formerly known as the Service 
Contract Act), and trade agreements thresholds.
    There were no public comments submitted in response to the proposed 
rule. There are no changes made to the final rule except for conforming 
changes to the current version of the DFARS.

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

    This rule does not create any new provisions or clauses or impact 
any existing provisions or clauses, except for moving dollar values of 
thresholds in the stated clauses to DFARS text locations and adding 
references to the DFARS text locations in these clauses.

III. Executive Orders 12866 and 13563

    Executive Order (E.O.s) 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 
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 is not a 
major rule under 5 U.S.C. 804.

V. Executive Order 13771

    This final rule is not 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 final 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, a final 
regulatory flexibility analysis has been performed and is summarized as 
follows:
    DoD is amending the Defense Federal Acquisition Regulation 
Supplement (DFARS) to implement section 821 of the National Defense 
Authorization Act (NDAA) for Fiscal Year (FY) 2018. Section 821 amends 
41 U.S.C. 1908(d) by including a statement that the inflation adjusted 
acquisition-related dollar thresholds apply to existing contracts and 
subcontracts in effect on the date of the adjustment.
    There were no comments made by the public in response to the 
initial regulatory flexibility analysis.
    This rule will likely affect, to some extent, all small business 
concerns that submit offers or are awarded contracts by the Federal 
Government. For Fiscal Year 2017, there were 106,438 unique vendors in 
the Federal Procurement Data System (FPDS) identified as small business 
concerns.
    This rule is not expected to have any significant economic impact 
on small business concerns, because this rule: (1) Is not creating any 
new requirements with which small entities must comply, and (2) is only 
establishing the framework to apply the inflation adjustments of 
statutory acquisition-related thresholds under 41 U.S.C. 1908 to 
existing contracts and subcontracts in effect on the date of the 
adjustment. The rule will have minimal impact on small businesses when 
responding to solicitations where an inflation-adjusted threshold 
applies. Any impacts of this rule will have a positive impact on small 
business entities.
    The next inflation adjustment to the thresholds will be implemented 
through a future DFARS rule. The inflation adjustments are intended to 
maintain the status quo by adjusting for changes in the value of the 
dollar. Often any impact on small business concerns will be beneficial 
by preventing burdensome requirements from applying to small dollar 
value acquisitions, which are the acquisitions for which small business 
concerns are most likely to participate.
    The 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 requirements of the applicable 
statute.

VI. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

[[Page 25187]]

List of Subjects in 48 CFR Parts 201, 209, and 252

    Government procurement.

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

    Therefore, 48 CFR parts 201, 209, and 252 are amended as follows:

0
1. The authority citation for parts 201, 209, and 252 continues to read 
as follows:

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

PART 201--FEDERAL ACQUISITION REGULATIONS SYSTEM

0
2. Amend section 201.109 by--
0
a. Redesignating paragraph (a) as paragraph (a)(ii); and
0
b. Adding a new paragraph (a)(i).
    The addition reads as follows:


201.109  Statutory acquisition-related dollar thresholds-adjustment for 
inflation.

    (a)(i) 41 U.S.C. 1908(d) requires the adjustment for inflation of 
all statutory acquisition-related dollar thresholds in the DFARS be 
applied to contracts and subcontracts without regard to the date of 
award of the contract or subcontract, except thresholds based on the 
Wage Rate Requirements statute, the Service Contract Labor Standards 
statute, or established by the United States Trade Representative 
pursuant to the Trade Agreement Act, which are not escalated by the 
statute.
* * * * *

PART 209--CONTRACTOR QUALIFICATION

0
3. Amend section 209.571-1 by revising the definitions of ``Lead system 
integrator'' and ``Major subcontractor'' to read as follows:


209.571-1  Definitions.

* * * * *
    Lead system integrator includes lead system integrator with system 
responsibility and lead system integrator without system 
responsibility.
    (i) Lead system integrator with system responsibility means a prime 
contractor for the development or production of a major system, if the 
prime contractor is not expected at the time of award to perform a 
substantial portion of the work on the system and the major subsystems.
    (ii) Lead system integrator without system responsibility means a 
prime contractor under a contract for the procurement of services, the 
primary purpose of which is to perform acquisition functions closely 
associated with inherently governmental functions (see section 7.503(d) 
of the Federal Acquisition Regulation) with respect to the development 
or production of a major system.
    Major subcontractor means a subcontractor that is awarded a 
subcontract that equals or exceeds--
    (i) Both the certified cost or pricing data threshold and 10 
percent of the value of the contract under which the subcontract is 
awarded; or
    (ii) $55 million.
* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Amend section 252.203-7004 by--
0
a. Removing the clause date of ``(OCT 2016)'' and adding ``(MAY 2019)'' 
in its place; and
0
b. Revising paragraphs (a) and (d).
    The revisions read as follows:


252.203-7004  Display of Hotline Posters.

* * * * *
    (a) Definition. As used in this clause--
    United States means the 50 States, the District of Columbia, and 
outlying areas.
* * * * *
    (d) Subcontracts. The Contractor shall include the substance of 
this clause, including this paragraph (d), in all subcontracts that 
exceed the threshold specified in Defense Federal Acquisition 
Regulation Supplement 203.1004(b)(2)(ii) on the date of subcontract 
award, except when the subcontract is for the acquisition of a 
commercial item.
* * * * *


252.209-7004  [Amended]

0
5. Amend section 252.209-7004 by--
0
a. Removing the clause date of ``(OCT 2015)'' and adding ``(MAY 2019)'' 
in its place;
0
b. In paragraph (a), removing ``$35,000'' and adding ``the threshold 
specified in Federal Acquisition Regulation 9.405-2(b) on the date of 
subcontract award'' in its place.

0
6. Amend section 252.209-7009 by--
0
a. Removing the clause date of ``(OCT 2015)'' and adding ``(MAY 2019)'' 
in its place; and
0
b. Revising paragraph (a).
    The revision reads as follows:


252.209-7009  Organizational Conflict of Interest--Major Defense 
Acquisition Program.

* * * * *
    (a) Definition. As used in this clause--
    Major subcontractor means a subcontractor that is awarded a 
subcontract that equals or exceeds--
    (1) Both the certified cost or pricing data threshold and 10 
percent of the value of the contract under which the subcontract is 
awarded; or
    (2) The threshold specified in the definition of ``major 
subcontractor'' at Defense Federal Acquisition Regulation Supplement 
209.571-1 on the date of subcontract award.
* * * * *

0
7. Amend section 252.219-7003 by--
0
a. Removing the clause date of ``(DEC 2018)'' and adding ``(MAY 2019)'' 
in its place;
0
b. Revising paragraphs (a) and (g); and
0
c. In Alternate I--
0
i. Removing the clause date of ``(DEC 2018)'' and adding ``(MAY 2019)'' 
in its place; and
0
ii. Revising paragraphs (a) and (g).
    The revisions read as follows:


252.219-7003  Small Business Subcontracting Plan (DoD Contracts)

* * * * *
    (a) Definition. As used in this clause--
    Summary Subcontract Report (SSR) Coordinator means the individual 
who is registered in the Electronic Subcontracting Reporting System 
(eSRS) at the Department of Defense level and is responsible for 
acknowledging receipt or rejecting SSRs submitted under an individual 
subcontracting plan in eSRS for the Department of Defense.
* * * * *
    (g) Include the clause at Defense Federal Acquisition Regulation 
Supplement (DFARS) 252.219-7004, Small Business Subcontracting Plan 
(Test Program), in subcontracts with subcontractors that participate in 
the Test Program described in DFARS 219.702-70, if the subcontract is 
expected to exceed the applicable threshold specified in Federal 
Acquisition Regulation 19.702(a), and to have further subcontracting 
opportunities.
* * * * *
    Alternate I. * * *
    (a) Definition. As used in this clause--
    Summary Subcontract Report (SSR) Coordinator means the individual 
who is registered in the Electronic Subcontracting Reporting System 
(eSRS) at the Department of Defense level and is responsible for 
acknowledging receipt or rejecting SSRs submitted under an individual 
subcontracting plan in eSRS for the Department of Defense.
* * * * *
    (g) Include the clause at Defense Federal Acquisition Regulation 
Supplement (DFARS) 252.219-7004, Small Business Subcontracting Plan 
(Test Program), in subcontracts with subcontractors that participate in 
the

[[Page 25188]]

Test Program described in DFARS 219.702-70, if the subcontract is 
expected to exceed the applicable threshold specified in Federal 
Acquisition Regulation 19.702(a), and to have further subcontracting 
opportunities.
* * * * *

0
8. Amend section 252.219-7004 by--
    Revising the section heading;
0
a. Removing the clause date of ``(APR 2018)'' and adding ``(MAY 2019)'' 
in its place;
0
b. Revising paragraph (g) introductory text.
0
c. In paragraph (g)(1), removing ``252.219-7003'' and adding ``Defense 
Federal Acquisition Regulation Supplement (DFARS) 252.219-7003'' in its 
place;
0
d. In paragraph (g)(2), removing ``252.219-7003'' and adding ``DFARS 
252.219-7003'' in its place; and
0
e. In paragraph (g)(3), removing ``252.219-7004'' and adding ``DFARS 
252.219-7004'' in its place.
    The revisions read as follows:


252.219-7004  Small Business Subcontracting Plan (Test Program).

* * * * *
    (g) Subcontracts. The Contractor shall include in subcontracts that 
offer subcontracting opportunities, are expected to exceed the 
applicable threshold specified in FAR 19.702(a) on the date of 
subcontract award, and are required to include the clause at FAR 
52.219-8, Utilization of Small Business Concerns, the clauses at--
* * * * *

0
9. Amend section 252.225-7004 by--
0
a. Removing the clause date of ``(OCT 2015)'' and adding ``(MAY 2019)'' 
in its place;
0
b. Revising paragraphs (a) and (b)(1).
    The revisions read as follows:


252.225-7004  Report of Intended Performance Outside the United States 
and Canada--Submission after Award.

* * * * *
    (a) Definition. As used in this clause--
    United States means the 50 States, the District of Columbia, and 
outlying areas.
    (b) * * *
    (1) Exceeds the threshold specified in Defense Federal Acquisition 
Regulation Supplement 225.870-4(c)(2)(i)(A)(1) on the date of award of 
this contract; and
* * * * *

0
10. Amend section 252.249-7002 by--
0
a. Revising the section heading;
0
b. Removing the clause date of ``(OCT 2015)'' and adding ``(MAY 2019)'' 
in its place;
0
c. Revising paragraph (a); and
0
d. Revising paragraphs (d)(1) and (d)(2).
    The revisions read as follows:


252.249-7002  Notification of Anticipated Contract Termination or 
Reduction.

* * * * *
    (a) Definition. As used in this clause--
    Major defense program means a program that is carried out to 
produce or acquire a major system (as defined in 10 U.S.C. 2302(5)).
* * * * *
    (d) * * *
    (1) Provide notice of the anticipated termination or reduction to 
each first-tier subcontractor with a subcontract that equals or exceeds 
the threshold specified in Defense Federal Acquisition Regulation 
Supplement (DFARS) 225.870-4(c)(2)(i)(A)(1) at the time of the notice; 
and
    (2) Require that each such subcontractor--
    (i) Provide notice to each of its subcontractors with a subcontract 
that equals or exceeds the threshold specified in DFARS 225.870-
4(c)(2)(i)(C) at the time of the notice; and
    (ii) Impose a similar notice and flowdown requirement to 
subcontractors with subcontracts that equal or exceed the threshold 
specified in DFARS 225.870-4(c)(2)(i)(C) at the time of the notice.
* * * * *
[FR Doc. 2019-11308 Filed 5-30-19; 8:45 am]
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