[Federal Register Volume 85, Number 109 (Friday, June 5, 2020)]
[Proposed Rules]
[Pages 34569-34576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11754]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 204, 212, and 252

[Docket DARS-2020-0007]
RIN 0750-AK30


Defense Federal Acquisition Regulation Supplement: Data 
Collection and Inventory for Services Contracts (DFARS Case 2018-D063)

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 to implement a section of the United States Code 
that requires the collection of data on certain DoD service contracts.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before August 4, 2020, to be considered 
in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2018-D063, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Search for 
``DFARS Case 2018-D063'' under the heading ``Enter keyword or ID'' and 
select ``Search.'' Select ``Comment Now'' and follow the instructions 
provided to submit a comment. Please include ``DFARS Case 2018-D063'' 
on any attached document.
    [cir] Email: [email protected]. Include DFARS Case 2018-D063 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. 
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).

[[Page 34570]]


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

SUPPLEMENTARY INFORMATION: 

I. Background

    Under Defense Federal Acquisition Regulation System (DFARS) case 
2012-D051, DoD published a proposed rule in the Federal Register at 79 
FR 32522 on June 5, 2014, to implement section 807 of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2008 (10 U.S.C. 
2330a). Section 807 required DoD to: Establish a data collection system 
that provides certain data on the purchasing of services by DoD, and 
submit to Congress an annual inventory of service contracts awarded by 
or on behalf of the DoD. The proposed rule required contractors to 
enter the contract data required by the statute into a DoD-unique 
database, Enterprise Contractor Manpower Reporting Application (ECMRA). 
Fourteen respondents submitted comments in response to the proposed 
rule.
    Subsequently, section 812 of the NDAA for FY 2017 amended 10 U.S.C. 
2330a to narrow the scope of contracts to which the data collection 
requirement applies. As a result, DFARS Case 2012-D051 was closed and 
rolled into this new DFARS case to implement 10 U.S.C. 2330a, as 
amended.
    Under a similar but different statute, Federal agencies, other than 
DoD, are required by Federal Acquisition Regulation (FAR) subpart 4.17 
to report annually on activities performed by service contractors. 
Since the publication of the proposed rule DFARS case 2012-D051, DoD 
has elected to adopt the approach used by other Federal agencies to 
collect service contract data. The approach uses the Federal 
Procurement Data System (FPDS), an existing source of contract 
information for the Federal Government, to provide a majority of the 
information required by 10 U.S.C. 2330a. The data that is not available 
in FPDS is entered annually by the contractor in the System for Award 
Management (SAM). Adopting a Governmentwide approach to collecting 
service contract data reduces burden on both industry and DoD, improves 
data integrity and accuracy, and reforms DoD's business practices for 
greater performance and affordability.

II. Discussion and Analysis

A. Discussion of Proposed Rule

    This rule proposes to revise the DFARS to implement 10 U.S.C. 
2330a, as amended by section 812 of the NDAA for FY 2017. This rule 
will require contractors to report data in SAM on an annual basis when 
they are awarded a DoD contract or task order that is valued in excess 
of $3 million and is for logistics management services, equipment 
related services, knowledge-based services, or electronics and 
communications services.
    When applicable, contractors will be required to annually report: 
(1) The total dollar amount invoiced for, and (2) the total number of 
direct labor hours expended on services performed under the contract or 
task order during the preceding fiscal year. The total number of direct 
labor hours reported to SAM should be the total of both the contractor 
hours and its subcontractors' hours. A new basic DFARS clause and an 
alternate I clause have been created to advise applicable contractors 
of the policy and requirements for reporting data in SAM.

B. Analysis of Public Comments

    DoD reviewed the public comments received in response to DFARS Case 
2012-D051. A discussion of the comments is provided as follows:
1. Exemptions
    Comment: Several respondents recommended that the rule exempt 
certain areas including: Research and development projects; architect 
and engineering services; telecommunications and transmission and 
internet; and actions using criteria similar to the Service Contract 
Labor Standards exemptions in FAR 22.1003-4(d)(1).
    Response: This rule implements 10 U.S.C. 2330a, as amended by 
section 812 of the NDAA for FY 2017, which requires reporting for only 
four service acquisition portfolio groups: Logistics management 
services, equipment related services, knowledge-based services, and 
electronics and communications services. No further exemptions are 
available under the law.
    Comment: Several respondents recommended that contracted services 
that meet the definition of commercial items be exempt from ECMRA 
reporting.
    Response: The intent of the statute is to enhance DoD's ability to 
manage the total force, inclusive of military, civilian, and contractor 
personnel. Specifically, section 2330a requires the military 
departments and defense agencies to ensure that the inventory of 
contracts for services required by the statute is used to inform 
strategic workforce planning decisions under 10 U.S.C. 129a, develop 
budget justification materials for services in accordance with 10 
U.S.C. 235, and ensure services contracts are not for the performance 
of inherently governmental functions. An exception for services that 
meet the definition of a commercial item would exclude significant sums 
expended by DoD on commercial service acquisitions intended to be 
covered by the law. Therefore, services meeting the definition of a 
commercial item are not exempt from the reporting requirement.
    Comment: Several respondents recommended that firm fixed-price 
service contracts be exempt from the ECMRA reporting requirement, 
because these contracts acquire services in their entirety, not as 
individuals (full-time equivalents).
    Response: In accordance with paragraph (b) of 10 U.S.C. 2330a, the 
data required to be collected under the statute includes service 
contracts and orders that contain firm fixed-prices for the specific 
tasks to be performed. Therefore, firm fixed-price contracts for the 
applicable services are not exempt under the proposed rule.
    Comment: One respondent recommended that the rule exempt DoD 
intelligence community agency contracts, because the existing exemption 
for ``classified services'' is not sufficient to cover the exempt 
contracts entered into by DoD intelligence community agencies.
    Response: The statute does not provide for exemptions to the 
reporting requirement; therefore, the proposed rule does not provide 
for exemptions, in order to comply with the law.
    Comment: One respondent recommended that, due to the difficulty in 
tracking labor for service contracts where contractor employees may 
spend only small fractions of their time servicing the Government 
contract (such as refuse collection and software as a service), the 
rule should be changed to exempt such contracts by using the criteria 
similar to the Service Contract Labor Standards exemptions (see FAR 
22.1003-4(d)(1)).
    Response: Title 10 U.S.C. 2330a, as amended by section 812 of the 
NDAA for FY 2017, now limits data collection to four service 
acquisition portfolio groups: Logistics management services, equipment 
related services, knowledge-based services, and electronics and 
communications services. Under this proposed rule, only service 
contracts with a total estimated value exceeding $3 million that are 
for services in one of the four portfolio groups must be reported in 
SAM.
    Comment: One respondent questioned whether Congress intended DoD to 
report contracts for services that are integrally related to supplies, 
or contracts where the services are a

[[Page 34571]]

relatively small dollar value in relation to the supplies.
    Response: Title 10 U.S.C. 2330a requires the collection of data on 
``each purchase of services by a military department or Defense 
Agency'' that meets a certain dollar threshold and is for certain 
services. The proposed rule clarifies that the requirement applies to 
contracts or orders that have a total estimated value, including 
options, exceeding $3 million and are for services in one of the four 
service acquisition portfolio groups.
2. Expansion of Reporting Requirement
    Comment: Two respondents suggested that the ECMRA reporting 
requirement be extended to contracts for services valued at or below 
the simplified acquisition threshold (SAT). Doing so would be 
consistent with the congressional intent in 10 U.S.C. 2330a for DoD to 
provide a total inventory of contracted for services.
    Response: Title 10 U.S.C. 2330a(a), as amended by section 812 of 
the NDAA for FY 2017, now only requires the collection of data on 
service contracts, under certain portfolio groups, that exceed $3 
million. This proposed rule implements the statutory threshold. 
Applying the rule to service contracts below $3 million is not 
necessary to implement the statute and would impose an unnecessary 
burden on the public and DoD.
    Comment: One respondent suggested that the final rule clarify that 
services provided ancillary to a lease or rental contract (such as auto 
repair and maintenance services incidental to a vehicle lease) are 
subject to ECMRA reporting requirement. The respondent also recommended 
that the final rule clarify that the ECMRA reporting requirements apply 
to contracts for destruction, demolition, and removal.
    Response: Title 10 U.S.C. 2330a(a), as amended by section 812 of 
the NDAA for FY 2017, specifies that the service acquisition portfolio 
group for equipment related services is included in the required 
reporting group. It is expected that contracts for equipment-related 
services with a total estimated value, including options, exceeding $3 
million will be reported in SAM.
3. Duplicative of Existing Systems
    Comment: Two respondents indicated that the rule is duplicative of 
the existing FAR rule on service contract reporting that applies to 
civilian agencies (see FAR subpart 4.17). Respondents stated that there 
should not be two parallel systems, one for civilian agencies and 
another for defense agencies, because this situation causes confusion 
and compliance problems within industry.
    Response: FAR subpart 4.17 does not apply to DoD. This proposed 
rule enables DoD to fulfill its obligation under 10 U.S.C. 2330a. Since 
publication of the proposed rule under 2012-D051, DoD has adopted the 
use of FPDS to collect a majority of the required data, in an effort to 
standardize the reporting process for contractors across the Federal 
Government.
    Comment: Several respondents suggested that the ECMRA system is 
duplicative of other Government systems, such as FPDS, which can also 
be used to estimate the data provided in the annual inventory of 
contracts for services.
    Response: DoD has adopted the service contract reporting process 
used by other Federal agencies and no longer require contractor 
reporting in ECMRA. This proposed rule will enable DoD to use FPDS to 
obtain a majority of the information required by 10 U.S.C. 2330a. FPDS 
does not provide data on the direct labor hours expended and dollar 
amounts invoiced for contracted services. Therefore, this proposed rule 
requires applicable contractors to enter the labor hours and dollar 
amounts in SAM, which is the process used by other Federal agencies, in 
accordance with FAR subpart 4.17.
    Comment: Two respondents suggested that the separate instances of 
ECMRA (Army, Navy, Air Force, and other DoD agencies) be combined into 
one DoD-wide ECMRA system.
    Response: The use of ECMRA is no longer necessary. This proposed 
rule requires contractors to enter information in SAM.
    Comment: Two respondents suggested that the rule is duplicative of 
existing DoD reporting requirements, such as: (1) The Army's contractor 
manpower reporting requirement; and (2) the Secretary of Defense 
Memorandum entitled ``Enterprise-wide Contractor Manpower Reporting 
Application,'' dated November 2012, that requires all new contracts for 
services to include a contract line item for contractor manpower 
reporting and a requirement in the performance work statement for 
contractor manpower reporting.
    Response: This rule will replace, not duplicate, the existing Army 
contract manpower reporting requirement and the requirements in the 
November 2012 Memorandum from the Under Secretary of Defense for 
Acquisition, Technology, and Logistics and the Acting Principal Deputy 
Under Secretary of Defense for Personnel and Readiness.
    Comment: Two respondents suggested that the rule exceeds the scope 
of congressional intent, because DoD is already using its internal 
records and systems to achieve the statutory objective of the inventory 
of contracts for services.
    Response: The rule does not exceed the scope of congressional 
intent, because existing systems and reports do not fully capture all 
of the data required by 10 U.S.C. 2330a.
4. Flow Down to Subcontracts
    Comment: Two respondents suggested that the requirement for 
subcontract reporting be changed. One respondent suggested that the 
prime contractor be required only to flow down the clause to 
subcontractors and relieved of the responsibility of reporting for 
subcontractors. The other respondent suggested that subcontractor data 
not be reported at all, as this is inconsistent with commercial 
practice.
    Response: The proposed rule does not contain a requirement to flow 
down a clause. Instead, this proposed rule requires contractors to 
include its subcontractor labor hours in the total number of labor 
hours the contractor reports annually to SAM. The proposed rule leaves 
the process for collecting subcontractor data up to the discretion of 
each contractor.
5. Need for Additional Resources
    Comment: One respondent suggested that more resources be provided 
to the Office of the Under Secretary of Defense for Personnel and 
Readiness workforce that administers and coordinates the inventory of 
contracts for services.
    Response: This suggestion is beyond the scope of the rule.
6. ECMRA Process
    Comment: One respondent noted that the ECMRA interface for the 
Fourth Estate (other DoD agencies and field activities) is not yet 
fully operational, in contrast to what is stated in the proposed rule. 
For example, there is no operational help desk support for Fourth 
Estate activities. The respondent suggests that the final rule should 
be delayed until ECMRA is consolidated into a common portal for all DoD 
agencies, or until the ECMRA instance for Fourth Estate activities is 
fully resourced.
    Response: The use of ECMRA is no longer necessary. This proposed 
rule requires contractors to enter information in SAM.
    Comment: One respondent questioned how the Government validates 
data provided by contractors in ECMRA. The respondent suggested that 
ECMRA be linked to Wide Area WorkFlow and that the contracting officer 
or the contracting

[[Page 34572]]

officer's representative be allowed to inspect payroll data in order to 
validate contractor data entered into ECMRA.
    Response: Agencies are responsible for ensuring the contractor 
submits information in SAM that is reasonable and consistent with 
available contract information. Agencies may use any contract data 
available, as appropriate and necessary, to meet this responsibility.
    Comment: One respondent suggested that the rule be clearer about 
how the ECMRA will protect nonpublic data, such as direct labor hours 
and cost data.
    Response: The use of ECMRA is no longer necessary.
    Comment: One respondent requested clarification on the procedures 
to follow when the services under one contract support two or more DoD 
services or agencies.
    Response: This proposed rule requires contractors to enter 
information in SAM, which is a single system able to collect all 
requisite data under this rule.
    Comment: One respondent suggested that ECMRA should have a built-in 
capability for an overall point of contact at each agency level who can 
gather and manage the ECMRA information and that data be gathered at a 
centralized location.
    Response: The use of ECMRA is no longer necessary. This proposed 
rule requires contractors to enter information in SAM, which is a 
Governmentwide system.
    Comment: One respondent noted that it is unduly restrictive to 
allow only one contractor user per contract to view the data for that 
contract in ECMRA.
    Response: The use of ECMRA is no longer necessary. This proposed 
rule requires contractors to enter information in SAM.
    Comment: One respondent suggested that the rule should clarify the 
contractor's responsibilities in the event that the Government-
populated information in ECMRA is incorrect.
    Response: The use of ECMRA is no longer necessary. This proposed 
rule requires contractors to enter information in SAM. Contractors may 
contact the SAM Helpdesk or the contracting officer in the event that 
data needs to be updated in SAM.
    Comment: One respondent suggested that the requiring activity, and 
not the contracting officer, be responsible for verifying the 
contractor's ECMRA compliance is documented.
    Response: In accordance with FAR 1.602-2, the contracting officer 
is responsible for ensuring compliance with the terms of the contract.
    Comment: A respondent suggested that a DD Form 1423, Contract Data 
Requirements List, be included as a requirement in the rule.
    Response: The proposed DFARS clauses convey the requirement for 
contractor reporting to SAM; therefore, a DD Form 1423 is not 
necessary.
7. Proposed Clause Changes
    Comment: One respondent requested clarification regarding the 
prescription for the clause at DFARS 252.237-70XX with regard to 
indefinite-delivery, indefinite-quantity contracts. The respondent 
asked whether the clause must be included only if the expected dollar 
value of the individual task or delivery orders will exceed the SAT or 
if the total dollar value of all the task or delivery orders issued 
under the contract will exceed the SAT.
    Response: The rule requires information reporting on each task 
order that meets the criteria and threshold for service contract 
reporting. The proposed rule does not require reporting at the contract 
level for indefinite-delivery contracts. The rule proposes a basic 
clause that applies to solicitations, contracts (other than indefinite-
delivery contracts), and task orders awarded under non-DoD indefinite-
delivery contracts; and an alternate clause that applies to DoD issued 
solicitations and contracts for indefinite-delivery type contracts. The 
basic clause and the alternate clause implement the reporting 
requirement for contracts and/or task orders that have a total 
estimated value, including options, exceeding $3 million and are for 
services in the four specified service acquisition portfolio groups. 
The basic clause advises contractors to report on the effort performed 
under the contract or the task order awarded under a non-DoD contract. 
The alternate clause advises the contractor to report on the effort 
performed under each task order awarded under a DoD indefinite-delivery 
contract that meets the criteria and threshold for service contract 
reporting.
    Comment: One respondent suggested that the rule include a link to 
the product service code (PSC) manual available at www.acquisition.gov, 
to aid contracting personnel in determining the types of services to 
which the proposed rule applies or does not apply.
    Response: The applicable PSCs will be identified in the DFARS 
Procedures, Guidance, and Information upon publication of the final 
rule.
    Comment: One respondent suggested that the rule require the 
contracting officer to prepare a determination designating specifically 
the services to which the ECMRA reporting requirement would apply.
    Response: It is not necessary for the contracting officer to 
prepare such a determination or provide further clarification to the 
contractor. This proposed rule only applies the requirement to report 
in SAM, via the DFARS clause, to those contracts and orders that meet 
the thresholds and criteria for service contract reporting, as 
expressed in 10 U.S.C. 2330a.
8. Definition Clarification
    Comment: One respondent noted that many terms, including ``direct 
labor hours'' and ``cost data,'' are not defined in the proposed rule.
    Response: This proposed rule only uses the term ``direct labor 
hours,'' which is defined in FAR 2.101.
    Comment: Two respondents recommended that the term ``services'' be 
better defined for the purposes of informing both the Government and 
contractor when the proposed rule applies and when the contractor is 
responsible for entering data into ECMRA.
    Response: This proposed rule only applies the requirement to report 
in SAM, via the DFARS clause, to those contracts and orders that meet 
or are expected to meet the thresholds and criteria for service 
contract reporting, as expressed in 10 U.S.C. 2330a. When awarded a 
contract, or task order placed under a non-DoD contract, this rule 
proposes a basic clause to notify contractors of the requirement to 
report in SAM on the effort performed under the award. When awarded an 
indefinite-delivery contract under which orders will be placed that may 
meet the thresholds and criteria for service contract reporting, this 
rule proposes an alternate clause to notify contractors of the 
requirement to report in SAM on the effort performed for a task order 
issued under the contract that meets the service contract reporting 
thresholds and criteria.
9. Major Rule
    Comment: One respondent suggested that the Government reconsider 
whether this is a major rule. Title 5 U.S.C. 804 defines a major rule 
as one which the Office of Management and Budget (OMB) determines will 
cause a major increase in costs or prices for individual industries, or 
have a significant adverse effect on competition, employment, 
investment, productivity, or innovation. This rule imposes new 
reporting requirements, particularly for commercial item contractors 
that provide professional services and supplies. These contractors 
would not have been previously subject to the type of manpower 
reporting required by this

[[Page 34573]]

rule. For small businesses, the need to build compliant procedures and 
automated systems could be a barrier to participating in the federal 
market. This is particularly the case when the cumulative effect of 
multiple and duplicative data reporting requirements is considered. The 
ultimate result over time will be a decrease in competition and 
innovation in the Federal market.
    Response: This rule is not a major rule in that it does not have a 
significant impact on competition, employment, investment, 
productivity, innovation, or on the ability of U.S. enterprises to 
compete with foreign enterprises. Similar reporting requirements for 
civilian agencies have appeared in FAR subpart 4.17 since 2014, so many 
contractors already have experience with this type of reporting 
requirement. The scope of this rule has been decreased, because 10 
U.S.C. 2330a, as amended by section 812 of the NDAA for FY 2017, limits 
data collection to four service acquisition portfolios and applies only 
to contracts and task orders exceeding $3 million in total estimated 
value, including options.
10. Initial Regulatory Flexibility Analysis
    Comment: Two respondents stated that the proposed reporting system 
did not have a goal of minimizing the burden to small business and that 
the constant flow of new regulations to businesses have little regard 
for the benefit to the Government or burden on businesses.
    Response: The burden applied to small businesses is the minimum 
consistent with applicable laws, Executive orders, regulations, and 
prudent business practices. The information collection requirement has 
been narrowly tailored to maximize the use of existing records already 
maintained by contractors and by the Government. To further minimize 
the impact, DoD is adopting the existing system and process used by the 
rest of the Government to obtain the requisite information from 
contractors, which maintains a familiar and consistent reporting 
requirement for contractors; and the information is collected 
electronically, help-desk support and user guides are available for 
SAM, and reporting requirements will be limited to a small number of 
data elements to facilitate ease of reporting and reduce contractor 
burden. In addition, the NDAA for FY 2017 raised the threshold for 
reporting to $3 million from the SAT and limited the data reporting to 
four service acquisition portfolio groups.
11. Paperwork Reduction Act
a. Government Systems Already in Place
    Comment: Two respondents stated that the Government has systems in 
place for collecting the required data and the rule would require 
duplicative contractor reporting that is not necessary for compliance. 
Two respondents noted that there will be two rules, one for DOD and the 
other non-DOD, which could potentially apply under a single contract 
vehicle and that determining which set of rules apply will be 
burdensome.
    Response: The rule will not require duplicative reporting by 
contractors. The DoD and non-DoD reporting requirements are based on 
separate statutes. Further, the information collection requirement 
associated with this DFARS Case 2018-D063, once cleared by OMB, will 
supersede the reporting requirements approved under OMB Control Number 
0704-0491, entitled ``DoD Inventory of Contracts for Services 
Compliance.'' Contracts awarded by DoD, or on behalf of DoD, will 
contain the proposed DFARS clauses.
b. Paperwork Reduction Act Constraints
    Comment: One respondent stated that the rule conflicts with 
Paperwork Reduction Act constraints on rulemaking, namely that the rule 
must: (1) Be necessary for the proper performance of the agency; (2) 
not be duplicative of information otherwise reasonably accessible to 
the agency; and (3) reduce, to the extent practicable and appropriate, 
the burden on persons who shall provide information to or for the 
agency.
    Response: The rule complies with the Paperwork Reduction Act. The 
information collection is necessary in order for DoD to meet the 
requirement of 10 U.S.C. 2330a, as amended, to collect certain service 
contract data and report annually to Congress. The rule is not 
duplicative of information otherwise reasonably accessible to DoD. DoD 
systems do not currently collect all of the data elements required by 
the statute.
    The information collection requirement has been narrowly tailored 
to minimize the impact of reporting and maximize the use of existing 
records already maintained by contractors and by the Government. To 
minimize the impact, the information will be collected electronically, 
help-desk support will be provided to users, and reporting requirements 
will be limited to a small number of data elements.
c. Burden Estimates
    Comment: Two respondents commented that the rule underestimates the 
number of contractors that will be impacted. One respondent indicated 
that the total estimated number of respondents of 13,269, including 
7,962 for small businesses, seems low, since the GSA Schedules alone 
have 20,000 contractors and 80% of the contractors are small 
businesses. One respondent stated that the estimate for the total 
number of annual responses of approximately 54,000 appears low. In 
addition, several respondents commented that the estimate of an average 
of 1.4 hours per response is too low, citing reasons such as: (1) The 
billions of dollars in services for which DoD contracts for annually 
and the corresponding volume of data required to be entered, (2) the 
limitation of the ECMRA bulk upload capability, or (3) the impact on 
response time resulting from the flow down of the reporting requirement 
to subcontractors. One respondent stated that the burden is 
disproportionally high for small businesses that are less likely to 
have the necessary internal infrastructure.
    Response: The estimated burdens for respondents and responses 
published in the previously proposed rule have been updated to reflect 
the revised requirements of 10 U.S.C. 2330a, as amended.

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

A. Background

    Consistent with the determinations that DoD made with regard to 
application of the requirements of section 846 of the NDAA for FY 2011, 
DoD does not intend to apply the requirements of 10 U.S.C. 2330a, as 
amended by section 812 of the NDAA for FY 2017, to contracts at or 
below the simplified acquisition threshold (SAT) or for commercially 
available off-the shelf items (COTS) items, but does intend to apply 
the rule to contracts for the acquisition of commercial items.
    Section 846 of the NDAA for FY 2011 and section 812 of the NDAA for 
FY 2017 are silent on applicability to contracts and subcontracts in 
amounts no greater than the SAT or for the acquisition of commercial 
items. Title 10 U.S.C. 2330a(a), as amended by section 812 of the NDAA 
for FY 2017, however, only requires the collection of data on service 
contracts, under certain portfolio groups, that exceed $3 million, 
which effectively precludes application

[[Page 34574]]

to acquisitions under the SAT. Also, the statute does not provide for 
civil or criminal penalties. Therefore, the statute does not apply to 
contracts or subcontracts in amounts not greater than the SAT or to the 
acquisition of commercial items unless the Principal Director, Defense 
Pricing and Contracting, makes a written determination as provided in 
41 U.S.C. 1905 and 10 U.S.C. 2375.

B. Applicability to Contracts for the Acquisition of Commercial Items, 
Excluding COTS Items

    Title 10 U.S.C. 2375 exempts contracts and subcontracts for the 
acquisition of commercial items, including COTS items, from provisions 
of law enacted after October 13, 1994, that, as determined by the Under 
Secretary of Defense for Acquisition and Sustainment (USD (A&S)), set 
forth policies, procedures, requirements, or restrictions for the 
acquisition of property or services unless--
     The provision of law--
    [cir] Provides for criminal or civil penalties;
    [cir] Requires that certain articles be bought from American 
sources pursuant to 10 U.S.C. 2533a or that strategic materials 
critical to national security be bought from American sources pursuant 
to 10 U.S.C. 2533b; or
    [cir] Specifically refers to 10 U.S.C. 2375 and states that it 
shall apply to contracts and subcontracts for the acquisition of 
commercial items (including COTS items); or
     USD(A&S) determines in writing that it would not be in the 
best interest of the Government to exempt contracts or subcontracts for 
the acquisition of commercial items from the applicability of the 
provision.
    This authority has been delegated to the Principal Director, 
Defense Pricing and Contracting.
    Consistent with 10 U.S.C. 2375, DoD has determined that it is in 
the best interest of the United States to apply the requirements of 10 
U.S.C. 2330a to the acquisition of commercials items, excluding COTS 
items. The intent of the statute is to enhance DoD's ability to manage 
the total force, inclusive of military, civilian, and contractor 
personnel. Specifically, section 2330a, as amended, requires the 
military departments and defense agencies to ensure that the inventory 
of contracts for services required by the statute is used to inform 
strategic workforce planning decisions under 10 U.S.C. 129a and develop 
budget justification materials for services in accordance with 10 
U.S.C. 235. An exception for services that meet the definition of a 
commercial item would exclude significant sums expended by DoD on 
contracted services intended to be covered by the law, thereby 
undermining the overarching public policy purpose of the law. 
Therefore, this rule will apply to the acquisition of commercial items, 
excluding COTS.

IV. Expected Cost Impact

    This rule will require a contractor to report data in SAM on an 
annual basis for a DoD contract or task order that is valued in excess 
of $3 million and is for logistics management services, equipment 
related services, knowledge-based services, or electronics and 
communications services.
    When applicable, contractors will be required to annually report 
the total dollar amount invoiced for and the total number of direct 
labor hours expended on services performed under the contract or task 
order during the preceding fiscal year. The total number of direct 
labor hours reported to SAM should be the total of both the contractor 
hours and its subcontractors' hours. Significant costs are avoided by 
using existing Government systems (FPDS and SAM) to collect elements of 
the required data.
    The following is a summary of the estimated public and Government 
costs calculated in perpetuity in 2016 dollars at a 7-percent discount 
rate:

----------------------------------------------------------------------------------------------------------------
                             Summary                                  Public        Government         Total
----------------------------------------------------------------------------------------------------------------
Present Value...................................................     $10,441,186      $7,830,886     $18,272,072
Annualized Costs................................................         730,883         548,162       1,279,045
----------------------------------------------------------------------------------------------------------------

    To access the full Regulatory Cost Analysis for this rule, go to 
the Federal eRulemaking Portal at www.regulations.gov, search for 
``DFARS Case 2018-D063,'' click ``Open Docket,'' and view ``Supporting 
Documents.''

V. 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.

VI. 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.

VII. 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 only requires annual reporting of two data items for a 
limited number and type of service contracts. 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 establish a data 
collection system that provides management information on each purchase 
of services by a military department or defense agency in excess of $3 
million for the following service acquisition portfolio groups: 
Logistics management services; equipment related services; knowledge-
based services; and, electronics and communications services.
    The objective of this proposed rule is to implement 10 U.S.C. 
2330a, as modified by section 812 of the National Defense Authorization 
Act (NDAA) for Fiscal Year (FY) 2017 (Pub. L. 114-328).
    Based on data from the Federal Procurement Data System for FY 2016 
through 2018, DoD awards annually an average of 4,386 service contracts 
and orders to 1,934 unique entities that have an estimated value 
greater than $3M and are within the four portfolio groups outlined in 
the rule. Of the 4,386 contracts and orders awarded annually, 
approximately 2,059 (47%) are made to 1,227 (63%) unique small 
businesses entities.

[[Page 34575]]

    This proposed rule requires all contractors that are awarded a 
contract or order in excess of $3 million for services in any of the 
four service acquisition portfolio groups to report contract data in 
SAM. The contractor is required to report the total amount invoiced for 
services performed during the preceding fiscal year and the number of 
direct labor hours, including subcontractor hours, expended on services 
performed during the preceding fiscal year. The Government estimates 
that a journeyman level contractor employee with basic knowledge of the 
contract would be required to enter the data. The contractor employee 
may also need to gather additional billing information from the 
organization in order to complete the data input in SAM.
    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 requirements of the applicable 
statute.
    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-
D063), in correspondence.

VIII. Paperwork Reduction Act

    The rule contains information collection requirements that require 
the approval of the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act (44 U.S.C. chapter 35). Accordingly, DoD has 
submitted a request for approval of a new information collection 
requirement concerning DFARS Case 2018-D063, Data Collection and 
Inventory for Services Contracts, to the Office of Management and 
Budget. Upon OMB clearance of this new collection and publication of 
the associated final DFARS rule, a related program clearance, OMB 
Control Number 0704-0491, DoD Enterprise-wide Contractor Manpower 
Reporting Application (ECMRA), will be discontinued.
    A. Public reporting burden for this collection of information is 
estimated to average 2 hours per response, including the time for 
gathering and maintaining the data and completing and reviewing the 
collection of information.
    The annual reporting burden estimated as follows:
    Respondents: 1,934.
    Responses per respondent: 2.267, approximately.
    Total annual responses: 4,386.
    Hours per response: 2 hours.
    Total response burden hours: 8,772.

B. Request for Comments Regarding Paperwork Burden

    Written comments and recommendations on the proposed information 
collection, including suggestions for reducing this burden, should be 
sent to Ms. Jasmeet Seehra at the Office of Management and Budget, Desk 
Officer for DoD, Room 10236, New Executive Office Building, Washington, 
DC 20503, or email [email protected], with a copy to the 
Defense Acquisition Regulations System, Attn: Carrie Moore 
OUSD(A&S)DPC/DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 
20301-3060. Comments can be received from 30 to 60 days after the date 
of this notification, but comments to OMB will be most useful if 
received by OMB within 30 days after the date of this notification.
    Public comments are particularly invited on: Whether this 
collection of information is necessary for the proper performance of 
functions of the DFARS, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    To request more information on this proposed information collection 
or to obtain a copy of the proposal and associated collection 
instruments, please write to the Defense Acquisition Regulations 
System, Attn: Carrie Moore, OUSD(A&S)DPC/DARS, Room 3B941, 3060 Defense 
Pentagon, Washington, DC 20301-3060, or email [email protected]. 
Include DFARS Case 2018-D063 in the subject line of the message.

List of Subjects in 48 CFR Parts 204, 212, and 252

    Government procurement.

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

    Therefore, 48 CFR parts 204, 212, and 252 are proposed to be 
amended as follows:

0
1. The authority citation for 48 CFR parts 204, 212, and 252 continue 
to read as follows:

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

PART 204--ADMINISTRATIVE AND INFORMATION MATTERS

0
2. Add subpart 204.17, consisting of 204.1700, 204.1703, and 204.1705, 
to read as follows:
Subpart 204.17--Service Contracts Inventory
Sec.
204.1700 Scope of subpart.
204.1703 Reporting requirements.
204.1705 Contract clauses.

Subpart 204.17--Service Contracts Inventory


204.1700   Scope of subpart.

    This subpart prescribes the requirement to report certain 
contracted services in accordance with 10 U.S.C. 2330a.


204.1703   Reporting requirements.

    (a) Thresholds. (i) Service contractor reporting of information is 
required in the System for Award Management (SAM) when a contract or 
order--
    (A) Has a total estimated value, including options, that exceeds $3 
million; and
    (B) Is for services in the following service acquisition portfolio 
groups (see PGI 204.1703 for a list of applicable product and service 
codes):
    (1) Logistics management services.
    (2) Equipment related services.
    (3) Knowledge-based services.
    (4) Electronics and communications services.
    (ii) Contractor reporting is required annually, by October 31, on 
the services performed under the contract or order, including any 
subcontracts, during the preceding Government fiscal year.
    (iii) For indefinite-delivery contracts, basic ordering agreements, 
and blanket purchase agreements--
    (A) Contractor reporting is required for each order issued under 
the contract or agreement that meets the requirements of paragraph 
(a)(i) of this section; and
    (B) Service contract reporting is not required for the basic 
contract or agreement.
    (b) Agency reporting responsibilities. In the event the agency 
believes that revisions to the contractor-reported information are 
warranted, the agency shall notify the contractor.


204.1705   Contract clauses.

    (a)(i) Use the basic or the alternate of the clause 252.204-70XX, 
Reporting Requirements for Contracted Services, in solicitations, 
contracts, agreements, and orders, including solicitations and

[[Page 34576]]

contracts using FAR part 12 procedures for the acquisition of 
commercial items, that--
    (A) Have a total estimated value, including options, that exceeds 
$3 million; and
    (B) Are for services in the following service acquisition portfolio 
groups--
    (1) Logistics management services;
    (2) Equipment related services;
    (3) Knowledge-based services; or
    (4) Electronics and communications services.
    (ii) Use the basic clause in solicitations and contracts, except 
solicitations and resultant awards of indefinite-delivery contracts, 
and orders placed under non-DoD contracts that meet the criteria in 
paragraph (a)(i) of this section; or
    (iii) Use the alternate I clause in solicitations and resultant 
awards of indefinite-delivery contracts, basic ordering agreements, and 
blanket purchase agreements, when one or more of the orders under the 
contract or agreement are expected to meet the criteria in paragraph 
(a)(i) of this section.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
3. Amend section 212.301 by adding paragraph (f)(ii)(j) to read as 
follows:


212.301   Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (f) * * *
    (ii) * * *
    (j) Use the clause at 252.204-70XX, Reporting Requirements for 
Contracted Services, to comply with 10 U.S.C. 2330a.
    (1) Use the basic clause as prescribed in 204.1705(a)(i) and (ii); 
and
    (2) Use the alternate I clause as prescribed in 204.1705 (a)(i) and 
(iii).
* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Add section 252.204-70XX to read as follows:


252.204-70XX   Reporting Requirements for Contracted Services.

    Basic. As prescribed in 204.1705(a)(i) and (ii), use the following 
clause:

Reporting Requirements for Contracted Services-Basic (DATE)

    (a) The contractor shall report annually, by October 31, at 
www.sam.gov, on the services performed under this contract or order, 
including any subcontracts, during the preceding Government fiscal 
year (October 1-September 30).
    (b) The Contractor shall report the following information for 
the contract or order:
    (1) The total dollar amount invoiced for services performed 
during the preceding Government fiscal year under the contract or 
order.
    (2) The number of Contractor direct labor hours, to include 
subcontractor direct labor hours, as applicable, expended on the 
services performed under the order or contract during the previous 
Government fiscal year.
    (c) The Government will review Contractor reported information 
for reasonableness and consistency with available contract 
information. In the event the Government believes that revisions to 
the Contractor reported information are warranted, the Government 
will notify the Contractor. Upon notification, the Contractor shall 
revise the reported information or provide the Government with a 
supporting rationale for the information.

(End of clause)

    Alternate I. As prescribed in 204.1705(a)(i) and (iii), use the 
following clause, which substitutes ``contract or agreement for each 
order'' in lieu of ``contract or order'' in paragraph (a) and ``order'' 
in lieu of ``contract or order'' in paragraphs (b) and (b)(1) and (2), 
and identifies the dollar threshold and service acquisition portfolio 
groups for which orders under the contract or agreement require service 
contract reporting.

Reporting Requirements for Contracted Services-Alternate I (DATE)

    (a) The contractor shall report annually, by October 31, at 
www.sam.gov, on services performed during the preceding Government 
fiscal year (October 1-September 30) under this contract or 
agreement for each order, including any subcontract, which exceeds 
$3 million for services in the following service acquisition 
portfolio groups:
    (1) Logistics management services.
    (2) Equipment related services.
    (3) Knowledge-based services.
    (4) Electronics and communications services.
    (b) The Contractor shall report the following information for 
the order:
    (1) The total dollar amount invoiced for services performed 
during the preceding Government fiscal year under the order.
    (2) The number of Contractor direct labor hours, to include 
subcontractor direct labor hours, as applicable, expended on the 
services performed under the order during the previous Government 
fiscal year.
    (c) The Government will review Contractor reported information 
for reasonableness and consistency with available contract 
information. In the event the Government believes that revisions to 
the Contractor reported information are warranted, the Government 
will notify the Contractor. Upon notification, the Contractor shall 
revise the reported information or provide the Government with a 
supporting rationale for the information.

(End of clause)

[FR Doc. 2020-11754 Filed 6-4-20; 8:45 am]
 BILLING CODE 5001-06-P