[Federal Register Volume 84, Number 178 (Friday, September 13, 2019)]
[Rules and Regulations]
[Pages 48496-48498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19557]



[[Page 48495]]

Vol. 84

Friday,

No. 178

September 13, 2019

Part IV





Department of Defense





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Defense Acquisition Regulations System





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48 CFR Parts 204, 209, 212, 213, et al.





Defense Federal Acquisition Regulation Supplement: Modification of 
DFARS Clause ``Cancellation or Termination of Orders'' (DFARS Case 
2018-D035); Case 2018-D045); Case 2019-D012); Modification of DFARS 
Clause ``Trade Agreements'' (DFARS Case 2019-D016); Modification of 
DFARS Clause ``Readjustment of Payments'' (DFARS Case 2019-D017); 
Modification of DFARS Clause ``Reporting and Payment of Royalties'' 
(DFARS Case 2019-D018); Repeal of DFARS Provision ``Award to Single 
Offeror'' (DFARS Case 2019-D017; Repeal of DFARS Clause ``Returnable 
Containers Other Than Cylinders'' (DFARS Case 2019-D025); Update to 
Performance Information System References (DFARS Case 2019-D033); 
Update to Performance Information System References (DFARS Case 2019-
D033); Appendix A, Armed Services Board of Contract Appeals, Part 1--
Charter; Technical Amendments; Final Rules;





Defense Federal Acquisition Regulation Supplement: Modification of 
DFARS Clause ``Tax Relief'' (DFARS Case 2018-D049); Validation of 
Proprietary and Technical Data (DFARS Case 2018-D069); Proposed Rules

  Federal Register / Vol. 84, No. 178 / Friday, September 13, 2019 / 
Rules and Regulations  

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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).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending 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 service order and include 
the text of another DFARS clause to streamline terms and conditions for 
contractors subject to both clauses, pursuant to action taken by the 
DoD Regulatory Reform Task Force.

DATES: Effective September 13, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Carrie Moore, telephone 571-372-
6093.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD published a proposed rule in the Federal Register at 84 FR 
18225 on April 30, 2019, to modify the DFARS clause 252.239-7007, 
Cancellation or Termination of Orders, in order to: (1) Clarify the 
limitations of 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 
included in DFARS 252.239-7008, Reuse Arrangements. Combining these 
clauses results in 252.239-7008 being removed from the DFARS. The rule 
implements a recommendation of the DoD Regulatory Reform Task Force 
established under Executive Order (E.O.) 13777, ``Enforcing the 
Regulatory Reform Agenda.''
    No public comments were received in response to the proposed rule. 
No changes from the proposed rule are made in the final rule.

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. The rule 
combines two clauses into a single clause and makes minor modifications 
to clarify current practices. This rule does not change the 
applicability of the affected clauses.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and E.O. 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.

IV. Executive Order 13771

    This rule is not subject to E.O. 13771, because this rule is not a 
significant regulatory action under E.O. 12866.

V. Regulatory Flexibility Act

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA is summarized as follows:
    DoD is amending 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 these two clauses permits DFARS 252.239-7008 to be removed 
from the DFARS.
    The objectives of this 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 implements a recommendation from 
the DoD Regulatory Reform Task Force under E.O. 13771.
    No public comments were received in response to the initial 
regulatory flexibility analysis.
    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% of the awards were made to 1,050 
unique small businesses entities. The PSC D3 does not breakdown 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 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 rule 
that would meet the stated objectives.

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 amended as follows:

[[Page 48497]]


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1. The authority citation for 48 CFR 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]

0
2. Amend section 239.7411 by--
0
a. In paragraph (a) introductory text, removing the em dash and adding 
a period in its place;
0
b. In paragraphs (a)(1) through (5), removing the semicolons and adding 
periods in their places; and
0
c. Removing paragraph (a)(6).

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Revise section 252.239-7007 to read as follows:


252.239-7007  Cancellation or Termination of Orders.

    As prescribed in 239.7411(a), use the following clause:
Cancellation or Termination of Orders (SEP 2019)
    (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 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 which--
    (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, which 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 non-
recurring charges and the monthly recurring charges set out in the 
contract/agreement. The presumed maximum liability for monthly 
recurring charges shall be capped at monthly recurring charges 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 which 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.

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    (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]

0
4. Remove and reserve section 252.239-7008.

[FR Doc. 2019-19557 Filed 9-12-19; 8:45 am]
 BILLING CODE 5001-06-P