[Federal Register Volume 85, Number 68 (Wednesday, April 8, 2020)]
[Proposed Rules]
[Pages 19716-19719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06733]


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DEPARTMENT OF DEFENSE

48 CFR Parts 203, 205, 211, 212, 217, 219, 225, 228, 236, 237, 246, 
250, and 252

[Docket DARS-2020-0002]
RIN 0750-AK76


Defense Federal Acquisition Regulation Supplement: Inflation 
Adjustment of Acquisition-Related Thresholds (DFARS Case 2019-D036)

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 further implement 41 U.S.C. 1908, 
Inflation adjustment of acquisition-related dollar thresholds. This 
statute requires an adjustment every five years of acquisition-related 
thresholds for inflation using the Consumer Price Index for all urban 
consumers, except for the Construction Wage Rate Requirements statute 
(Davis-Bacon Act), Service Contract Labor Standards statute, and trade 
agreements thresholds. DoD is also proposing to use the same 
methodology to adjust some nonstatutory DFARS acquisition-related 
thresholds in 2020.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before June 8, 2020, to be considered in 
the formation of the final rule.

ADDRESSES: Submit comments identified by DFARS Case 2019-D036, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: http://www.regulations.gov. 
Search for ``DFARS Case 2019-D036.'' Select ``Comment Now'' and follow 
the instructions to submit a comment. Please include your name, company 
name (if any), and ``DFARS Case 2019-D036'' on any attached document.
    [cir] Email: [email protected]. Include DFARS Case 2019-D036 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. 
Kimberly R. Ziegler, OUSD(A&S)DPC/DARS, Room 3B941, 3060 Defense 
Pentagon, Washington, DC 20301-3060.
    Instructions: 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. Kimberly R. Ziegler, telephone 
571-372-6095.

SUPPLEMENTARY INFORMATION: 

I. Background

    This rule proposes to amend multiple DFARS parts to further 
implement 41 U.S.C. 1908. Section 1908 requires an adjustment every 
five years (on October 1 of each year evenly divisible by five) of 
statutory acquisition-related thresholds for inflation, using the 
Consumer Price Index (CPI) for all urban consumers, except for the 
Construction Wage Rate Requirements statute (Davis-Bacon Act), Service 
Contract Labor Standards statute, and trade agreements thresholds (see 
Federal Acquisition Regulation (FAR) 1.109). As a matter of policy, DoD 
is also proposing to use the same methodology to adjust some 
nonstatutory DFARS acquisition-related thresholds on October 1, 2020. 
FAR case 2019-013 proposes comparable changes to acquisition-related 
thresholds in the FAR.
    This is the fourth review of DFARS acquisition-related thresholds 
since the statute was enacted on October 28, 2004 (section 807 of the 
National Defense Authorization Act for FY 2004). The last review was 
conducted under DFARS case 2014-D025. The final rule was published 
under that case in the Federal

[[Page 19717]]

Register on June 26, 2015 (80 FR 36903), effective October 1, 2015. DoD 
subsequently published a correction to DFARS case 2014-D025 on August 
3, 2015 at 80 FR 45899.

II. Discussion and Analysis

A. What is an acquisition-related threshold?

    This case builds on the review of DFARS thresholds in 2005, 2010, 
and 2015, using the same interpretation of an acquisition-related 
threshold. 41 U.S.C. 1908 is applicable to ``a dollar threshold that is 
specified in law as a factor in defining the scope of the applicability 
of a policy, procedure, requirement, or restriction provided in that 
law to the procurement of property or services by an executive agency, 
as the [FAR] Council determines.'' There are other thresholds in the 
DFARS that, while not specified in law, nevertheless meet all the other 
criteria. These thresholds may have their origin in Executive order or 
regulation. Therefore, the FAR Council has determined, that in this 
case, ``acquisition-related threshold'' has a broader meaning, i.e., a 
threshold that is specified in law, Executive order, or regulation as a 
factor in defining the scope of the applicability of a policy, 
procedure, requirement, or restriction provided in that law, Executive 
order, or regulation to the procurement of property or services by an 
Executive agency. Acquisition-related thresholds are generally tied to 
the value of a contract, subcontract, or modification.
    Examples of thresholds that are not ``acquisition-related,'' as 
defined in this case, are thresholds relating to claims, penalties, 
withholding, payments, required levels of insurance, small business 
size standards, liquidated damages, protests, etc. This report does not 
address thresholds that are not acquisition-related.

B. What acquisition-related thresholds are not subject to escalation 
adjustment under this case?

    41 U.S.C. 1908 does not permit escalation of acquisition-related 
thresholds established by the Construction Wage Rate Requirements 
statute (Davis-Bacon Act), the Service Contract Labor Standards 
statute, or the United States Trade Representative pursuant to the 
authority of the Trade Agreements Act of 1979.
    Also, the statute does not authorize DoD to escalate thresholds 
originating in Executive order or the implementing agency (such as the 
Department of Labor or the Small Business Administration), unless the 
Executive order or agency regulations are first amended.

C. How does DoD analyze escalation of a statutory acquisition-related 
threshold?

    If an acquisition-related threshold is based on statute, the matrix 
at https://www.acq.osd.mil/dpap/dars/pgi/pgi_htm/current/PGI201_1.htm 
identifies the statute, and the statutory threshold, including the 
original threshold and any subsequent revisions to it.
    With the exception of thresholds set by the Construction Wage Rate 
Requirements statute (Davis-Bacon Act), the Service Contract Labor 
Standards statute, and trade agreements, 41 U.S.C. 1908 requires 
adjustment of the acquisition-related thresholds for inflation using 
the Consumer Price Index (CPI) for all-urban consumers. Acquisition-
related thresholds in statutes that were in effect on October 1, 2000, 
are only subject to escalation from that date forward. Acquisition-
related thresholds in statutes that took effect after October 1, 2000, 
are escalated from the date that they took effect. For purposes of this 
proposed rule, the matrix includes calculation of escalation based on 
the estimated CPI value for March 2020 (currently estimated at 258.6) 
divided by the CPI for the date of enactment of the statute or 
regulation (October 2000, for statutes enacted prior to October 1, 
2000). DoD will subsequently adjust as necessary before issuance of the 
final rule.
    Once the escalation factor is applied to the acquisition-related 
threshold, then statutory thresholds must be rounded as follows:

<$10,000 to nearest $500
$10,000-<$100,000 to nearest $5,000
$100,000-<$1 million to nearest $50,000
$1 million-<$10 million to nearest $500,000
$10 million-<$100 million to nearest $5 million
$100 million-<$1 billion to nearest $50 million

    Note that since the last adjustment in 2015, the calculation 
formula for over $1 million was revised in 41 U.S.C. 1908.
    The calculations in this proposed rule are all based on the base 
year amount, because escalated amounts in the 2015 rule were subject to 
rounding and using those amounts as the base would distort future 
calculations.
    In 2015, some thresholds, although subject to inflation 
calculation, did not actually change, because the inflation in 2015 was 
insufficient to overcome the rounding requirements--i.e., the 
escalation factor, when applied, did not cause the escalated values to 
be high enough to round to the next higher value. However, for the FY 
2020 calculations, some thresholds that did not escalate in 2015 have 
increased through other statutory actions or will now escalate because 
of five additional years of inflation. Likewise, some thresholds that 
were escalated in 2015 will not escalate in 2020.
    This proposed rule is based on a projected CPI of 258.6 for March 
2020. If the actual CPI for March 2020 is higher than 258.6, then 
additional statutory thresholds may be subject to escalation in the 
final rule, even though not included in the proposed rule.

D. How does DoD analyze a nonstatutory acquisition-related threshold?

    No statutory authorization is required to escalate thresholds that 
are policy-based within the DFARS. For consistency, escalation of the 
DoD policy acquisition-related thresholds is generally recommended 
using the same formula applied to the statutory thresholds, unless a 
reason has been provided for not doing so.

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, 
nor does it change the applicability of any existing provisions or 
clauses included in solicitations and contracts valued at or below the 
simplified acquisition threshold, or for commercial items, including 
COTS items.

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.

[[Page 19718]]

V. Executive Order 13771

    The rule is not 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 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 
maintains the status quo by adjusting thresholds for actual 
inflationary increases in the CPI. However, an initial regulatory 
flexibility analysis has been performed and is summarized as follows:
    This rule proposes to amend the Defense Federal Acquisition 
Regulation Supplement to implement 41 U.S.C. 1908 and to amend other 
acquisition-related dollar thresholds that are based on policy rather 
than statute in order to adjust for the changing value of the dollar. 
41 U.S.C. 1908 requires adjustment every five years of statutory 
acquisition-related dollar thresholds, except for Construction Wage 
Rate Requirements statute (Davis-Bacon Act), Service Contract Labor 
Standards statute, and trade agreements thresholds. While reviewing all 
statutory acquisition-related thresholds, this case presented an 
opportunity to also review all nonstatutory acquisition-related 
thresholds in the DFARS that are based on policy.
    The objective of the case is to maintain the status quo, by 
adjusting acquisition-related thresholds for inflation. The legal basis 
is 41 U.S.C. 1908. The statute does not authorize escalation of 
thresholds originating in Executive orders or the implementing agency 
(such as the Department of Labor or the Small Business Administration), 
unless the Executive order or agency regulations are first amended.
    This rule will likely affect to some extent all small business 
concerns that submit offers or are awarded contracts by DoD. However, 
most of the threshold changes proposed in this rule are not expected to 
have any significant economic impact on small business concerns because 
they are intended to maintain the status quo by adjusting for changes 
in the value of the dollar. Data generated from the Federal Procurement 
Data System (FPDS) for fiscal years 2017 through 2019, indicates that 
DoD has awarded an average of 1,494,202 contracts to 56,851 unique 
small entities during the three-year period. It is assumed that all 
56,851 unique small entities may be affected by this rule, however, the 
impact will most likely be beneficial, by preventing burdensome 
requirements from applying to more and more acquisitions, as the dollar 
loses value.
    The rule does not impose any new reporting, recordkeeping, or 
compliance requirements. Changes in thresholds for approved information 
collection requirements are intended to maintain the status quo and 
prevent those requirements from increasing over time.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    There are no practical alternatives that will accomplish the 
objectives of the statute.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by the 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 2019-D036), in 
correspondence.

VII. Paperwork Reduction Act

    The Paperwork Reduction Act does apply. The proposed changes to the 
DFARS do not impose new information collection requirements that 
require the approval of the Office of Management and Budget (OMB) under 
44 U.S.C. 3501, et seq. By adjusting the thresholds for inflation, the 
status quo for the current information collection requirements are 
maintained under OMB clearance numbers 0704-0229, DFARS Part 225, 
Foreign Acquisition and related clauses and 0704-0286, DFARS Part 205, 
Publicizing Contract Actions and Provision of Information to 
Cooperative Agreement Holders.

List of Subjects in 48 CFR Parts 203, 205, 211, 212, 217, 219, 225, 
228, 236, 237, 246, 250, and 252

    Government Procurement.

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

    Therefore, 48 CFR parts 203, 205, 211, 212, 217, 219, 225, 228, 
236, 237, 246, 250, and 252 are proposed to be amended as follows:

0
1. The authority citation for 48 CFR parts 203, 205, 211, 212, 217, 
219, 225, 228, 236, 237, 246, 250, and 252 continues to read as 
follows:

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

PART 203--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST


203.1004   [Amended]

0
2. Amend section 203.1004 in paragraph (b)(2)(ii) by removing ``$5.5 
million'' and adding ``$6 million'' in its place.

PART 205--PUBLICIZING CONTRACT ACTIONS


205.303   [Amended]

0
3. Amend section 205.303 by removing ``$7 million'' everywhere it 
appears and adding ``$7.5 million'' in its place.


205.470   [Amended]

0
4. Amend section 205.470 by removing ``$1,000,000'' and adding ``$1.5 
million'' in its place.

PART 211--DESCRIBING AGENCY NEEDS


211.503   [Amended]

0
5. Amend section 211.503 in paragraph (b) by removing ``$700,000'' and 
adding ``$750,000'' in its place in two places.

PART 212--ACQUISITION OF COMMERCIAL ITEMS


212.271   [Amended]

0
6. Amend section 212.271 by removing ``$40,000'' and adding ``$45,000'' 
in its place.

PART 217--SPECIAL CONTRACTING METHODS


217.170   [Amended]

0
7. Amend section 217.170 in paragraphs (d)(1)(iv) and (d)(5) 
introductory text by removing ``$135.5 million'' and adding ``$150 
million'' in both places.


217.171   [Amended]

0
8. Amend section 217.171 in paragraph (d) by removing ``$678.5 
million'' and adding ``$750 million'' in its place.


217.172   [Amended]

0
9. Amend section 217.172 in paragraphs (c), (d), and (f)(1) and (2) by 
removing ``$678.5 million'' and adding ``$750 million'' in each place.

PART 219--SMALL BUSINESS PROGRAMS


219.502-2   [Amended]

0
10. Amend section 219.502-2 in paragraph (a)(i) by removing ``$2.5 
million'' and adding ``$3 million'' in its place.

PART 225--FOREIGN ACQUISITION


225.7204  [Amended]

0
11. Amend section 225.7204 in paragraphs (a) and (b) by removing 
``$13.5 million'' and adding ``$15 million'' in each place.

[[Page 19719]]

225.7703-2  [Amended]

0
12. Amend section 225.7703-2 by--
0
a. In paragraph (b)(2)(i) by removing ``$93 million'' and adding ``$100 
million'' in its place; and
0
b. In paragraph (b)(2)(ii) introductory text by removing ``Director, 
Defense Procurement and Acquisition Policy'' and adding ``Principal 
Director, Defense Pricing and Contracting'' in its place and by 
removing ``$93 million'' and adding ``$100 million'' in its place.

PART 228--BONDS AND INSURANCE


228.102-1  [Amended]

0
13. Amend section 228.102-1, in the introductory text and paragraph 
(1), by removing ``$35,000'' and adding ``$40,000'' in its place in 
both places.

PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS


236.303-1  [Amended]

0
14. Amend section 236.303-1 in paragraph (a)(4)(i) introductory text 
and (a)(4)(ii) by removing ``$4 million'' and adding ``$4.5 million'' 
in its place in both places.

PART 237--SERVICE CONTRACTING


237.170-2  [Amended]

0
15. Amend section 237.170-2 in paragraphs (a)(1) and (2) by removing 
``$93 million'' and adding ``$100 million'' in its place in both 
places.

PART 246--QUALITY ASSURANCE

0
16. Amend section 246.402 introductory text by removing ``$300,000'' 
and adding ``$350,000'' in its place.

PART 250--EXTRAORDINARY CONTRACTUAL ACTIONS AND THE SAFETY ACT


250.102-1  [Amended]

0
17. Amend section 250.102-1 in paragraph (b) by removing ``$70,000'' 
and adding ``$75,000'' in its place.


250.102-1-70  [Amended]

0
18. Amend section 250.102-1-70 in paragraph (b)(1) by removing 
``$70,000'' and adding ``$75,000'' in its place.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.225-7003  [Amended]

0
19. Amend section 252.225-7003 by--
0
a. Removing the clause date ``(OCT 2015)'' and adding ``(DATE)'' in its 
place; and
0
b. In paragraph (b)(1), removing ``$13.5 million'' and adding ``$15 
million'' in its place; and
0
c. In paragraph (b)(2)(i) removing ``$700,000'' and adding ``$750,000'' 
in its place.

[FR Doc. 2020-06733 Filed 4-7-20; 8:45 am]
BILLING CODE 5001-06-P