[Federal Register Volume 85, Number 189 (Tuesday, September 29, 2020)]
[Proposed Rules]
[Pages 60943-60945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21251]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212, 225, and 252

[Docket DARS-2020-0036]
RIN 0750-AL03


Defense Federal Acquisition Regulation Supplement: Source 
Restrictions on Auxiliary Ship Components (DFARS Case 2020-D017)

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 implement a statute that requires 
certain auxiliary ship components to be procured from a manufacturer in 
the national technology and industrial base.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before November 30, 2020, to be 
considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2019-D017, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Search for 
``DFARS Case 2020-D017'' under the heading ``Enter keyword or ID'' and 
selecting ``Search.'' Select ``Comment Now'' and follow the 
instructions provided to submit a comment. Please include ``DFARS Case 
2020-D017'' on any attached documents.
    [cir] Email: [email protected]. Include DFARS Case 2020-D017 in 
the subject line of the message.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. 
Kimberly Bass, OUSD (A&S) DPC/DARS, Room 3B941, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Kimberly Bass, telephone 571-372-
6174.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD is proposing to amend the DFARS to implement section 853 of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020. 
Section 853 amends 10 U.S.C. 2534, Miscellaneous limitations on the 
procurement of goods other than United States goods, to establish 
limitations on the procurement of large medium-speed diesel engines for 
contracts awarded for new construction of an auxiliary ship, unless the 
engines are manufactured in the national technology and industrial 
base, which includes the United States, Australia, Canada, and the 
United Kingdom.

II. Discussion and Analysis

    This proposed rule addresses the restrictions related to auxiliary 
ship components in DFARS section 225.7010, which already restricts 
contracting officers from acquiring certain components of naval 
vessels, to the extent they are unique to marine applications, unless 
the components are from the national industrial base. Paragraph 
225.7010-1(b) is added to include limitations on large medium-speed 
diesel engines for auxiliary ships for contracts awarded by the 
Secretary of a military department for new construction of an auxiliary 
ship using funds available for National Defense Sealift Fund programs 
or Shipbuilding and Conversion, Navy.
    Language is added at DFARS 225.7010-2, Exceptions, to state that 
the newly added restriction at 225.7010-1(b) does not apply to 
contracts or subcontracts that do not exceed the simplified acquisition 
threshold or to large medium-speed diesel engines for icebreakers or 
special mission ships.
    The waiver criteria at DFARS 225.7008 apply to the restrictions; 
therefore, a conforming change is made to DFARS 225.7010-3, Waiver, to 
add a pointer to the restrictions at 225.7010-1. An editorial change is 
also made to

[[Page 60944]]

DFARS 225.7010-4 to add cross-references to 225.7010-1(a).
    A new clause, DFARS 252.225-70XX, Restriction on Acquisition of 
Large Medium-Speed Diesel Engines, is added. The clause applies to 
acquisitions greater than the simplified acquisition threshold and to 
contracts using FAR part 12 procedures for the acquisition of 
commercial items that require large medium-speed diesel engines for new 
construction of auxiliary ships using funds available for National 
Defense Sealift Fund programs or Shipbuilding and Conversion, Navy. The 
restriction does not apply to large medium-speed diesel engines for 
icebreakers or special mission ships. DFARS 212.301 is amended to 
reflect that the clause will apply to commercial item acquisitions.
    DoD seeks public input and feedback on the content of the proposed 
rule and specifically in regard to a clarifying definition for ``large 
medium-speed diesel engines'' for auxiliary ships using funds available 
for National Defense Sealift Fund programs or Shipbuilding and 
Conversion, Navy. As noted in the statute, the term ``auxiliary ship'' 
does not include an icebreaker or a special mission ship.

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

    This rule proposes to create a new DFARS clause, 252.225-70XX, 
Restriction on Acquisition of Large Medium-Speed Diesel Engines. DoD 
does not intend to apply the requirements of section 853 of the NDAA 
for FY 2020 to contracts at or below the simplified acquisition 
threshold (SAT). Section 853 amends 10 U.S.C. 2534(a) to provide a 
limitation on components for auxiliary ships. 10 U.S.C. 2534 does not 
apply to a contract or subcontract for an amount that does not exceed 
the SAT (see paragraph (g)). Therefore this clause will not apply to 
acquisitions at or below the SAT. However the rule proposes to apply 
the clause to contracts for the acquisition of commercial items, 
including commercially available off-the-shelf (COTS) items.

A. Applicability to Contracts for the Acquisition of Commercial Items, 
Including COTS Items

    10 U.S.C. 2375 governs the applicability of laws to DoD contracts 
for the acquisition of commercial items, including COTS items, and is 
intended to limit the applicability of laws to contracts and 
subcontracts for the acquisition of commercial items, including COTS 
items. 10 U.S.C. 2375 provides that if a provision of law contains 
criminal or civil penalties, or if the Under Secretary of Defense for 
Acquisition and Sustainment (USD(A&S)) makes a written determination 
that it is not in the best interest of the Federal Government to exempt 
commercial item contracts, the provision of law will apply to contracts 
for the acquisition of commercial items 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 (DPC).

B. Applicability

    Section 853 of the NDAA for FY 2020 does not apply to contracts at 
or below the SAT and is silent on applicability to contracts and 
subcontracts for the acquisition of commercial items. Also, the statute 
does not provide for civil or criminal penalties. Therefore, it does 
not apply to contracts or subcontracts for the acquisition of 
commercial items unless the Principal Director, DPC, makes a written 
determination as provided in 10 U.S.C. 2375.
    DoD intends to determine that it is in the best interest of the 
Federal Government to apply the rule to contracts and subcontracts for 
the acquisition of commercial items, including COTS items, as defined 
at FAR 2.101. Not applying this rule to contracts and subcontracts for 
the acquisition of commercial items, including COTS items, would 
exclude contracts intended to be covered by this rule and undermine the 
overarching purpose of the rule to restrict the purchase of large 
medium-speed diesel engines for auxiliary ships, unless the engines are 
manufactured in the national technology and industrial base, which 
includes the United States, Australia, Canada, and the United Kingdom.

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.

V. Executive Order 13771

    This rule is not expected to be subject to E.O. 13771, because this 
rule is not significant under E.O. 12866.

VI. Regulatory Flexibility Act

    DoD does not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
Nevertheless, an initial regulatory flexibility analysis has been 
performed and summarized as follows:
    The rule amends the Defense Federal Acquisition Regulation 
Supplement (DFARS) to implement a statute that requires certain 
auxiliary ship components to be procured from a manufacturer in the 
national technology and industrial base, which includes the United 
States, Australia, Canada, and the United Kingdom, subject to 
exceptions.
    The objective and legal basis for the rule is to implement section 
853 of the National Defense Authorization Act (NDAA) for Fiscal Year 
(FY) 2020, which amends 10 U.S.C. 2534, Miscellaneous limitations on 
the procurement of goods other than United States goods. Section 853 
establishes limitations on procurement of large medium-speed diesel 
engines for contracts awarded by the Secretary of a military department 
using funds available for National Defense Sealift Fund programs or 
Shipbuilding and Conversion, Navy for new construction of an auxiliary 
ship using funds available for National Defense Sealift Fund programs 
or Shipbuilding and Conversion, Navy, unless manufactured

[[Page 60945]]

in the United States, Australia, Canada, or the United Kingdom.
    DoD reviewed Federal Procurement Data System (FPDS) data for fiscal 
years (FY) 2017, 2018, and 2019 (excluding contracts or subcontracts 
that do not exceed the simplified acquisition threshold or acquisitions 
of spare or repair parts needed to support naval vessels manufactured 
outside the United States; and large medium-speed diesel engines 
specifically for icebreakers or special mission ships). The FPDS data 
reflected that there were a total of 241 awards, of which 121 were made 
to small businesses, a median of 50 percent awarded to unique small 
entities over the last three fiscal years.
    It is expected that this rule will benefit small businesses. The 
rule will provide small businesses the opportunity to participate in 
the manufacture of auxiliary ship components in support of the national 
technology and industrial base.
    This rule does not include any new reporting, recordkeeping, or 
other compliance requirements for small businesses. The 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 requirements of the statute.
    DoD invites 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 2020-D017), in correspondence.

VII. 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 212, 225, and 252

    Government procurement.

Jennifer D. Johnson,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 212, 225, and 252 is proposed to be amended 
as follows:

0
1. The authority citation for 48 CFR parts 212, 225, and 252 continues 
to read as follows:

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

PART 12--ACQUISITION OF COMMERCIAL ITEMS

0
2. Amend section 212.301 by adding paragraph (f)(ix)(GG) to read as 
follows:


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

* * * * *
    (f) * * *
    (ix) * * *
    (GG) Use the clause at 252.225-70XX, Restriction on Acquisition of 
Large Medium-Speed Diesel Engines, as prescribed in 225.7010-5, to 
comply with 10 U.S.C. 2534(a)(6).

PART 225--FOREIGN ACQUISITION

0
3. Revise the section 225.7010 heading to read as follows:


225.7010   Restrictions on certain naval vessel and auxiliary ship 
components.

0
4. Revise section 25.7010-1 to read as follows:


225.7010-1   Restrictions.

    In accordance with 10 U.S.C. 2534, unless manufactured in the 
United States, Australia, Canada, or the United Kingdom, do not 
acquire--
    (a) The following components of naval vessels, to the extent they 
are unique to marine applications:
    (1) Gyrocompasses.
    (2) Electronic navigation chart systems.
    (3) Steering controls.
    (4) Pumps.
    (5) Propulsion and machinery control systems.
    (6) Totally enclosed lifeboats.
    (b) Large medium-speed diesel engines for auxiliary ships using 
funds available for National Defense Sealift Fund programs or 
Shipbuilding and Conversion, Navy.
0
5. Revise section 225.7010-2 to read as follows:


225.7010-2   Exceptions.

    (a) The restriction at 225.7010-1(a) does not apply to--
    (1) Contracts or subcontracts that do not exceed the simplified 
acquisition threshold; or
    (2) Acquisition of spare or repair parts needed to support 
components for naval vessels manufactured outside the United States. 
Support includes the purchase of spare gyrocompasses, electronic 
navigation chart systems, steering controls, pumps, propulsion and 
machinery control systems, or totally enclosed lifeboats, when those 
from alternate sources are not interchangeable.
    (b) The restriction at 225.7010-1(b) does not apply to--
    (1) Contracts or subcontracts that do not exceed the simplified 
acquisition threshold; or
    (2) Large medium-speed diesel engines for icebreakers or special 
mission ships.
0
6. Revise 225.7010-3 to read as follows:


225.7010-3   Waiver.

    The waiver criteria at 225.7008 apply to the restrictions at 
225.7010-1.
0
7. Amend section 225.7010-4 by--
0
a. Revising the section heading; and
0
b. In paragraphs (a) and (b), removing ``this restriction'' and adding 
``the restriction at 225-7010-1(a)'' in both places.
    The revision reads as follows:


225.7010-4   Implementation of restriction on certain naval vessel 
components.

* * * * *
0
8. Add section 225.7010-5 to read as follows:


225.7010-5   Contract clause.

    Use the clause at 252.225-70XX, Restriction on Acquisition of Large 
Medium-Speed Diesel Engines, in solicitations and contracts that exceed 
the simplified acquisition threshold, including solicitations and 
contracts using FAR part 12 procedures for the acquisition of 
commercial items, that require large medium-speed diesel engines for 
new construction of auxiliary ships using funds available for National 
Defense Sealift Fund programs or Shipbuilding and Conversion, Navy 
unless--
    (a) An exception at 225.7010-2(b)(2) applies; or
    (b) A waiver has been granted.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
9. Add section 252.225-7038 to read as follows:


252.225-7038   Restriction on Acquisition of Large Medium-Speed Diesel 
Engines.

    As prescribed in 225.7010-5, use the following clause:

Restriction on Acquisition of Large Medium-Speed Diesel Engines (Date)

    Unless otherwise specified in its offer, the Contractor shall 
deliver under this contract large medium-speed diesel engines 
manufactured in the United States, Australia, Canada, or the United 
Kingdom.

(End of clause)
[FR Doc. 2020-21251 Filed 9-28-20; 8:45 am]
BILLING CODE 5001-06-P