[Federal Register Volume 86, Number 129 (Friday, July 9, 2021)]
[Rules and Regulations]
[Pages 36229-36237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14429]
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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: Final rule.
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SUMMARY: DoD is issuing a final rule amending 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: Effective July 9, 2021.
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 85 FR
34569 on June 5, 2020, to implement 10 U.S.C. 2330a, as amended by
section 812 of the National Defense Authorization Act (NDAA) for Fiscal
Year (FY) 2017 (Pub. L. 114-328), which requires DoD to establish a
data collection system to provide certain management information with
regard to an awarded contract or task order that is valued in excess of
$3 million and is for the following service acquisition portfolio
groups: Logistics management services, equipment-related services,
knowledge-based services, or electronics and communications services.
DoD published a prior proposed rule under DFARS Case 2012-D051 in
the Federal Register at 79 FR 32522 on June 5, 2014, to implement 10
U.S.C. 2330a (section 807 of the NDAA for FY 2008), which required DoD
to establish a data collection system to provide certain data on the
purchasing of services by DoD and to submit to Congress an annual
inventory of services contracts awarded by or on behalf of DoD. The
proposed rule for DFARS Case 2012-D051 required contractors to enter
the required data into a DoD-unique system, Enterprise Contractor
Manpower Reporting Application (ECMRA). In response to public comments
received in response to the proposed rule for DFARS Case 2012-D051, DoD
made the following changes in the proposed rule for DFARS Case 2018-
D063:
DoD has adopted the service contract reporting process
used by other Federal agencies and no longer requires contractor
reporting in ECMRA. This change enables DoD to use the Federal
Procurement Data System (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, both the proposed and final rules require
applicable contractors to enter the labor hours and dollar amounts in
SAM, which is the process used by other Federal agencies, in accordance
with Federal Acquisition Regulation (FAR) subpart 4.17.
To relieve burden and minimize impact for contractors and
subcontractors, both the proposed and final rules require contractors
to report the total number of hours worked (both contractor and
subcontractor) under the contract for the entire fiscal year and does
not require a breakdown of those hours by employee type or by
subcontractor. The requirement to report subcontractor data is limited
to first-tier subcontractors, consistent with the FAR requirement for
service contract reporting. The proposed and final rules leave the
process for collecting subcontractor data up to the discretion of each
contractor; the rules do not prescribe a specific methodology that
contractors must use to gather this data on applicable subcontracts, or
prescribe a reporting requirement for subcontractors via the flow-down
of the contract clause.
The estimated burdens for respondents and responses
published in the proposed rule for DFARS Case 2021-D051 have been
updated to reflect the revised requirements of 10 U.S.C. 2330a, as
amended.
The following is a summary of the public comments received in
response to the proposed rule for DFARS Case 2012-D051:
A. 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: The proposed rule for DFARS Case 2018-D063 implements 10
U.S.C. 2330a, as amended by section 812 of the NDAA for FY 2017, which
[[Page 36230]]
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: 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. 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. 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 for DFARS
Case 2018-D063.
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 for DFARS Case
2012-D051 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 the proposed rule for DFARS Case 2018-
D063, 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 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 for DFARS Case 2018-D063 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.
B. 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 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. The proposed rule for DFARS Case 2018-D063 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.
C. 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. The proposed rule
for DFARS Case 2018-D063 enables DoD to fulfill its obligation under 10
U.S.C. 2330a. Since publication of the proposed rule under DFARS Case
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 requires contractor
reporting in ECMRA. This 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, the proposed rule for
DFARS Case 2018-D063 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
[[Page 36231]]
agencies) be combined into one DoD-wide ECMRA system.
Response: The use of ECMRA is no longer necessary. The proposed
rule for DFARS Case 2018-D063 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.
D. 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 for DFARS Case 2018-D063 does not
contain a requirement to flow down a clause. Instead, the 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.
E. 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.
F. 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. The proposed
rule for DFARS Case 2018-D063 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 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: The proposed rule for DFARS Case 2018-D063 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. The proposed
rule for DFARS Case 2018-D063 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. The proposed
rule for DFARS case 2018-D063 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. The proposed
rule for DFARS Case 2018-D063 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.
G. 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 for DFARS Case 2018-D063 does not require
reporting at the contract level for indefinite-delivery contracts. The
rule proposes a basic clause that
[[Page 36232]]
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. The proposed rule for DFARS Case 2018-D063 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.
H. 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 for DFARS Case 2012-D051 applies and
when the contractor is responsible for entering data into ECMRA.
Response: The proposed rule for DFARS Case 2018-D063 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.
I. 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 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.
J. 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.
K. Paperwork Reduction Act
1. 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,
[[Page 36233]]
will contain the proposed DFARS clauses.
2. 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.
3. 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.
As a result, this final rule amends the DFARS to require
contractors to annually report certain data on applicable contracts in
order to meet the data requirements of the statute and DoD's total
workforce management efforts. Three respondents submitted public
comments in response to this second proposed rule.
II. Discussion and Analysis
DoD reviewed the public comments in the development of the final
rule. A discussion of the comments and the changes made to the rule as
a result of those comments is provided, as follows:
A. Summary of Significant Changes From the Proposed Rule
No significant changes were made to the rule as a result of public
comments. Minor changes were made to clarify the intent of the rule in
regard to the requirement to report subcontract data. Public comments
requested clarification on whether the rule required contractors to
report direct labor hours and costs for all subcontracts that support
the contract or just those subcontracts awarded to directly perform
services under the contract, otherwise referred to as ``first-tier
subcontracts'' under the similar service contract inventory reporting
requirements at Federal Acquisition Regulation (FAR) 4.17. The intent
of the rule is to require contractors to report the direct labor hours
only for subcontracts the contractor directly awarded for the purpose
of acquiring services for performance of the prime contract, similar to
the subcontract reporting requirement at FAR 4.17. As a result, the
term ``first-tier'' was added as a modifier to the definition of
``subcontract'' and a definition of ``first-tier subcontract'' was
added to section 204.1701 and DFARS clause 252.204-7023, Reporting
Requirements for Contracted Services, and its alternate I.
B. Analysis of Public Comments
A discussion of the comments is provided as follows:
a. General Support
Comment: Two respondents expressed general support for the rule.
Response: DoD acknowledges support for the rule.
b. Exemptions to Rule
Comment: Two respondents recommended that commercial service
contracts be exempt from the rule, as companies providing commercial
services may not have a system to track labor hours by contract and/or
by subcontractor and may need to implement a new system to comply with
the rule. Alternately, a respondent recommended that specific contracts
or certain types of commercial contracts be exempt from the reporting
requirements for the rule.
Response: The statute requires DoD to collect data on specific
service purchases in excess of $3 million, regardless of contract type,
and does not provide for exemptions to the reporting requirement. As a
result, the rule applies to all contracts that meet the criteria at 10
U.S.C. 2330a(a) and does not provide for exemptions.
c. Usefulness of Data
Comment: A respondent advised that the rule weakens the utility of
service contract inventories by limiting them to staff augmentation
contracts and contracts closely associated with inherently governmental
functions, and preventing the adoption of the Enterprise-wide
Contractor Manpower Reporting Application (ECMRA).
Response: The rule implements the statute and supports DoD total
workforce management efforts by requiring reporting on contracts valued
in excess of $3 million for logistics management services, equipment-
related services, knowledge-based services, or electronics and
communications services. The rule does not further limit the reporting
requirement to only those contracts that are also staff augmentation
contracts or contracts for services closely associated with inherently
governmental functions.
The rule also incorporates the policy of Secretary of Defense
Memorandum, Revised Department of Defense Contractor Manpower Reporting
Initiative, dated October 16, 2019, jointly signed by the Under
Secretary of Defense (USD) for Acquisition and Sustainment and Acting
USD for Personnel and Readiness. The memo requires reporting of
manpower data relating to the performance of services be done in the
System for Award Management (SAM), instead of ECMRA, in order to be
consistent with the existing service contract reporting requirements of
the FAR.
Comment: A respondent expressed concern that the rule only requires
reporting on the aggregate labor hours performed under the contract
annually
[[Page 36234]]
and, because of this, DoD will not have the detailed information it
needs to determine whether contractors are performing inherently
governmental functions.
Response: The rule requires the collection of data that supplements
information already available to DoD. The rule assists in the
evaluation of DoD's workforce mix and the extent to which the
Department's needs are being met through contracted support. It is not
necessary to distinguish between the contractor and subcontractor labor
hours performed under a contract in order to meet the requirements of
the statute or support DoD's total workforce management efforts.
Comment: A respondent expressed concern that the rule's collection
of labor data cannot be meaningfully used by officials, as the annual
reporting cycle will not produce the timely, relevant data needed to
inform decision making.
Response: The rule implements the reporting cycle required by 10
U.S.C. 2330a. The statute requires DoD, by the end of the third quarter
of each fiscal year, to prepare an annual inventory of the activities
performed during the preceding fiscal year pursuant to staff
augmentation contracts and contracts closely associated with inherently
governmental functions. To support this requirement, the rule requires
contractors to input contract data for the preceding fiscal year in SAM
no later than October 31 of each fiscal year. The rule's October 31
deadline facilitates DoD's compilation and submission of the annual
inventory and summary before the third quarter of each fiscal year, as
required by 10 U.S.C. 2330a.
d. Difficulties Reporting Direct Labor Hour Data
Comment: Two respondents advised that the reporting requirement of
the rule may be difficult to meet, because many commercial services are
offered at a fixed price and are not broken down into direct labor
hours, and subcontractors may consider the data sensitive or
proprietary and be hesitant to provide it to contractors. A respondent
advised that, as a result of these issues, the rule may create cost and
competition implications for the supply chain because contractors may
have to create and price contractual requirements to obtain the
information from their subcontractors, and the number of available
vendors may be restricted if they choose not to provide the data
required by the rule.
As an alternative solution, two respondents recommended that the
rule limit the collection of data to the list explicitly identified at
10 U.S.C. 2330a(b). Respondents suggested that DoD could apply the
methodology used to determine military or civilian full-time
equivalents to the data at 10 U.S.C. 2330a(b) in order to fulfill the
inventory summary required by 10 U.S.C. 2330a(c).
Response: The statute requires that ``the number of contractor
employees, expressed as full-time equivalents for direct labor, using
direct labor hours and associated cost data collected from
contractors'' be provided for each contract included in the annual
inventory. This information is not included in the list of data at 10
U.S.C. 2330a(b).
While the Federal Procurement Data System provides DoD with a
majority of the requisite data, DoD cannot meet all of the statutory
data requirements of the inventory summary, or support the needs of
DoD's total workforce management efforts, using only the data listed at
10 U.S.C. 2330a(b). Therefore, this rule requires contractors to
provide direct labor hour and cost data to implement the statute and
support DoD workforce planning and analysis.
To relieve burden and minimize impact for contractors and
subcontractors, the rule requires contractors to report the total
number of hours (both contractor and subcontractor) worked under the
contract for the entire fiscal year and does not require a breakdown of
those hours by employee type or by subcontractor.
e. Reporting of Subcontractor Data
Comment: A respondent recommended that the requirement to report
subcontractor data be limited to first-tier subcontractors, which is
consistent with the current FAR requirements for civilian agencies.
Response: Concur. To reduce burden on and maintain consistency for
contractors, DoD intends for the reporting requirements and procedures
of this rule to be as similar as possible to the existing service
contract reporting requirements of the FAR. The intent of the rule is
for contractors to report the total number of direct labor hours
expended in performing the contracted services during the preceding
fiscal year. The total number of hours reported to SAM should represent
a combined total of the number of direct labor hours the contractor
itself expended performing the contracted services, and the total
number of direct labor hours any of the contractor's subcontractors
expended performing the contracted services. To clarify this intent,
the rule is amended to replace the term ``subcontract'' with ``first-
tier subcontract,'' based on the definition at FAR 4.1701.
Comment: A respondent recommended the rule be revised to
specifically authorize contractors to rely on the direct labor hour
data received from subcontractors when reporting total labor hours
annually in SAM.
Response: The rule simply requires the reporting of the direct
labor hours expended on the contracted service for the preceding fiscal
year. The rule does not prescribe or suggest a specific methodology
that contractors must use to gather this data on its applicable
subcontracts, or prescribe a reporting requirement for subcontractors
via the flow-down of the contract clause. Therefore, an amendment to
the rule to authorize a specific methodology for gathering the data is
not necessary.
III. 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 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 apply the rule to
contracts for the acquisition of commercial items.
A. Background
Section 812 of the NDAA for FY 2017 is silent on applicability to
contracts and subcontracts in amounts no greater than the SAT or for
the acquisition of commercial items. 10 U.S.C. 2330a(a), as amended by
section 812 of the NDAA for FY 2017, only requires the collection of
data on service contracts, under certain portfolio groups, that exceed
$3 million, which effectively precludes application 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
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
[[Page 36235]]
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;
[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
[cir] 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 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.
V. Congressional Review Act
As required by the Congressional Review Act (5 U.S.C. 801-808)
before an interim or final rule takes effect, DoD will submit a copy of
the interim or final rule with the form, Submission of Federal Rules
under the Congressional Review Act, to the U.S. Senate, the U.S. House
of Representatives, and the Comptroller General of the United States. A
major rule under the Congressional Review Act cannot take effect until
60 days after it is published in the Federal Register. The Office of
Information and Regulatory Affairs has determined that this rule is not
a major rule as defined by 5 U.S.C. 804(2).
VI. 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:
The objective of this 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), which requires DoD
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.
As a result, DoD is amending the Defense Federal Acquisition
Regulation Supplement (DFARS) to require contractors to annually report
certain data on applicable contracts in order to meet the data
requirements of the statute and DoD's total workforce management
efforts. No public comments were received in response to the initial
regulatory flexibility analysis.
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 $3 million and are within the four portfolio groups
outlined in the rule. Of the 4,386 contracts and orders awarded
annually, approximately 2,059 (47 percent) are made to 1,227 (63
percent) unique small entities.
This 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 the System for
Award Management (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 first-tier
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.
While this rule does not impose a significant economic impact on
small entities, DoD has taken steps to minimize the impact of the rule
on both small and large entities. Specifically, DoD now requires
reporting under the rule to be done in SAM, instead of the Enterprise-
wide Contractor Manpower Reporting Application (ECMRA). This change
permits contractors to report fewer data elements under the rule and
implements a data collection system that is familiar to contractors
under the existing service contract reporting requirements of the
Federal Acquisition Regulation.
VII. Paperwork Reduction Act
This rule contains information collection requirements that have
been approved by the Office of Management and Budget under the
Paperwork Reduction Act (44 U.S.C. chapter 35). This information
collection requirement has been assigned OMB Control Number 0704-0519,
entitled ``Defense Federal Acquisition Supplement (DFARS); Subpart
204.17, Service Contracts Inventory, and Associated Clause.''
List of Subjects in 48 CFR Parts 204, 212, and 252
Government procurement.
Jennifer D. Johnson,
Regulatory Control Officer, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 204, 212, and 252 are amended as follows:
0
1. The authority citation for parts 204, 212, and 252 continues to read
as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
[[Page 36236]]
PART 204--ADMINISTRATION AND INFORMATION MATTERS
0
2. Add subpart 204.17, consisting of 204.1700, 204.1701, 204.1703, and
204.1705, to read as follows:
SUBPART 204.17--SERVICE CONTRACTS INVENTORY
Sec.
204.1700 Scope of subpart.
204.1701 Definitions.
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.
204.1701 Definitions.
As used in this subpart--
First-tier subcontract means a subcontract awarded directly by the
contractor for the purpose of acquiring services for performance of a
prime contract. It does not include the contractor's supplier
agreements with vendors, such as long-term arrangements for materials
or supplies or services that benefit multiple contracts and/or the
costs of which are normally applied to a contractor's general and
administrative expenses or indirect costs.
204.1703 Reporting requirements.
(a) Thresholds. Service contractor reporting of information is
required in the System for Award Management (SAM) when a contract or
order--
(i) Has a total estimated value, including options, that exceeds $3
million; and
(ii) Is for services in the following service acquisition portfolio
groups (see PGI 204.1703 for a list of applicable product and service
codes):
(A) Logistics management services.
(B) Equipment-related services.
(C) Knowledge-based services.
(D) Electronics and communications services.
(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.
(S-70) Contractor reporting. (1) The basic and the alternate of the
clause at 252.204-7023, Reporting Requirements for Contracted Services,
require contractors to report annually, by October 31, on the services
performed under the contract or order, including any first-tier
subcontracts, during the preceding Government fiscal year.
(2) For indefinite-delivery contracts, basic ordering agreements,
and blanket purchase agreements--
(i) Contractor reporting is required for each order issued under
the contract or agreement that meets the requirements of paragraph (a)
of this section; and
(ii) Service contract reporting is not required for the basic
contract or agreement.
204.1705 Contract clauses.
(a)(i) Use the basic or the alternate of the clause 252.204-7023,
Reporting Requirements for Contracted Services, in solicitations,
contracts, agreements, and orders, including solicitations and
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.
(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.
(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)(N) to read as
follows:
* * * * *
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(f) * * *
(ii) * * *
(N) Use the clause at 252.204-7023, 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).
(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 252.204-7023 to read as follows:
252.204-7023 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 (Jul 2021)
(a) Definition. As used in this clause--
First-tier subcontract means a subcontract awarded directly by
the contractor for the purpose of acquiring services for performance
of a prime contract. It does not include the contractor's supplier
agreements with vendors, such as long-term arrangements for
materials or supplies or services that benefit multiple contracts
and/or the costs of which are normally applied to a contractor's
general and administrative expenses or indirect costs.
(b) The Contractor shall report annually, by October 31, at
https://www.sam.gov, on the services performed under this contract
or order, including any first-tier subcontracts, during the
preceding Government fiscal year (October 1-September 30).
(c) 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
first-tier subcontractor direct labor hours, as applicable, expended
on the services performed under the contract or order during the
previous Government fiscal year.
(d) The Government will review the Contractor's reported
information for reasonableness and consistency with available
contract information. In the event the Government believes that
revisions to the Contractor's 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 (b) and ``order''
in lieu of ``contract or order'' in paragraphs (c) and (c)(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 (Jul 2021)
(a) Definition. As used in this clause--
[[Page 36237]]
First-tier subcontract means a subcontract awarded directly by
the contractor for the purpose of acquiring services for performance
of a prime contract. It does not include the contractor's supplier
agreements with vendors, such as long-term arrangements for
materials or supplies or services that benefit multiple contracts
and/or the costs of which are normally applied to a contractor's
general and administrative expenses or indirect costs.
(b) The contractor shall report annually, by October 31, at
https://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 first-tier 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.
(c) 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
first-tier subcontractor direct labor hours, as applicable, expended
on the services performed under the order during the previous
Government fiscal year.
(d) The Government will review the Contractor's reported
information for reasonableness and consistency with available
contract information. In the event the Government believes that
revisions to the Contractor's 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. 2021-14429 Filed 7-8-21; 8:45 am]
BILLING CODE 5001-06-P