[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Proposed Rules]
[Pages 65505-65506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23277]



  Federal Register / Vol. 87, No. 208 / Friday, October 28, 2022 / 
Proposed Rules  

[[Page 65505]]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 242

[Docket DARS-2022-0025]
RIN 0750-AL20


Defense Federal Acquisition Regulation Supplement: Quick-Closeout 
Procedures Threshold (DFARS Case 2021-D001)

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 recommendation from the 
Government Accountability Office regarding quick-closeout procedures.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before December 27, 2022, to be 
considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2021-D001, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``DFARS Case 2021-D001.'' Select ``Comment'' and follow the 
instructions to submit a comment. Please include your name, company 
name (if any), and ``DFARS Case 2021-D001'' on any attached documents.
    [cir] Email: [email protected]. Include DFARS Case 2021-D001 in 
the subject line of the message.
    Comments received generally will be posted without change to 
https://www.regulations.gov, including any personal information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission 
to verify posting.

FOR FURTHER INFORMATION CONTACT: David E. Johnson, telephone 202-913-
5764.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD is proposing to amend the DFARS to implement a recommendation 
made by the Government Accountability Office (GAO) in GAO Report 17-
738, Federal Contracting: Additional Management Attention and Action 
Needed to Close Contracts and Reduce Audit Backlog, published in 
September 2017. In this report, GAO recommended that DoD develop a 
means for DoD-wide oversight into both components' progress in meeting 
goals on closing contracts and the status of contracts eligible for 
closeout. Additionally, the Advisory Panel on Streamlining and 
Codifying Acquisition Regulations (Section 809 Panel) recommended 
authorizing the settlement of final overhead rates when it is in the 
best interest of the Government and closing complete contracts 
regardless of dollar value or the percentage of unsettled direct and 
indirect costs allocable to the contracts (recommendation 58). The 
Section 809 Panel was established pursuant to section 809 of the 
National Defense Authorization Act for Fiscal Year 2016 (Pub. L. 114-
92) to deliver recommendations that could transform the defense 
acquisition system to meet the threats and demands of the 21st century.
    As a result of the GAO and Section 809 Panel recommendations, DoD 
proposes to update the quick-closeout procedures and expand contracts 
eligible for quick closeout. In lieu of the thresholds at Federal 
Acquisition Regulation (FAR) 42.708(a)(2)(i) and (ii), this proposed 
rule provides that cost amounts are insignificant when unsettled direct 
and indirect costs are less than $2 million on a contract, task order, 
or delivery order, regardless of the total contract, task order, or 
delivery order amount. Additionally, Defense Contract Management Agency 
(DCMA) administrative contracting officers may negotiate the settlement 
of direct and indirect costs for a specific contract, task order, or 
delivery order to be closed in advance of the determination of final 
direct costs and indirect rates set forth in FAR 42.705 regardless of 
the dollar value or percentage of unsettled direct or indirect costs 
allocable to the contract.

II. Discussion and Analysis

    This proposed rule establishes a DoD-specific threshold for quick-
closeout procedures. Instead of the threshold at FAR 42.708 of $1 
million or 10 percent of the total value, DoD contracting officers will 
use a threshold of $2 million for contracts, task orders, and delivery 
orders. DCMA administrative contracting officers may negotiate the 
settlement of direct and indirect costs prior to the determination of 
final direct costs and indirect rates regardless of dollar value or 
percent of unsettled direct or indirect costs allocable to the 
contract. The proposed changes at DFARS 242.708 will increase the 
number of DoD contracts subject to quick-closeout procedures.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT), for Commercial Products Including Commercially 
Available Off-the-Shelf (COTS) Items, and for Commercial Services

    This rule does not create any new solicitation provisions or 
contract clauses. It does not impact any existing solicitation 
provisions or contract clauses or their applicability to contracts 
valued at or below the SAT, for commercial services, or for commercial 
products including COTS items.

IV. Expected Impact of the Rule

    Presently, at FAR 42.708(a)(2), cost amounts are considered 
relatively insignificant when the total unsettled direct costs and 
indirect costs to be allocated to any contract, task order, or delivery 
order does not exceed the lesser of $1 million or 10 percent of the 
total contract, task order, or delivery order. The proposed rule 
establishes a DoD-specific threshold of $2 million. The proposed rule 
also allows DCMA administrative contracting officers to negotiate the 
settlement of direct and indirect costs to be closed in advance of the 
determination of final direct costs and indirect rates regardless of 
the dollar value or percentage.
    By establishing a higher threshold for DoD, this proposed rule 
expands the number of contracts subject to quick-closeout procedures. 
This rule will be beneficial to contractors and to the Government by 
promoting administrative efficiencies. DCMA administrative contracting 
officers' workflows will be expedited since settlement of costs may be 
negotiated prior to determination of final direct costs and indirect 
rates regardless of the dollar value or percent of unsettled direct or 
indirect costs allocable to the contract.

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

[[Page 65506]]

E.O. 12866, Regulatory Planning and Review, dated September 30, 1993.

VI. 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. This rule is not 
anticipated to be a major rule under 5 U.S.C. 804.

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 no additional administrative burden will be placed on small 
entities. However, an initial regulatory flexibility analysis has been 
performed and is summarized as follows:
    This rule proposes to revise the DFARS to implement changes to the 
indirect cost rate quick-closeout procedures. GAO Report 17-738, 
Federal Contracting: Additional Management Attention and Action Needed 
to Close Contracts and Reduce Audit Backlog, published September 2017 
recommended that DoD develop a means for Department-wide oversight into 
both components' progress in meeting goals on closing contracts and the 
status of contracts eligible for closeout. The Advisory Panel on 
Streamlining and Codifying Acquisition Regulations (Section 809 Panel) 
was established pursuant to section 809 of the National Defense 
Authorization Act for Fiscal Year 2016 (Pub. L. 114-92) to deliver 
recommendations that could transform the defense acquisition system to 
meet the threats and demands of the 21st century. Additionally, the 
Section 809 Panel recommended authorizing the settlement of final 
overhead rates when it is in the best interest of the Government and 
closing complete contracts regardless of dollar value or the percentage 
of unsettled direct and indirect costs allocable to the contracts 
(recommendation 58).
    This proposed rule states that the amount of unsettled direct costs 
and indirect costs to be allocated to the contract, task order, or 
delivery order will be considered relatively insignificant when the 
total unsettled direct costs or indirect costs to be allocated do not 
exceed $2 million. Additionally, DCMA administrative contracting 
officers may negotiate the settlement of direct and indirect costs for 
a specific contract, task order, or delivery order to be closed in 
advance of the determination of final direct costs and indirect rates 
set forth in FAR 42.705 regardless of the dollar value or percentage of 
unsettled direct or indirect costs allocable to the contract.
    The objective of the proposed rule is to implement the GAO and 
Section 809 Panel recommendations described above. The legal basis for 
the rule is 41 U.S.C. 1303.
    This proposed rule will likely affect small entities that have been 
or will be awarded contracts, task orders, and delivery orders valued 
over $2 million. Data was obtained from the Procurement Business 
Intelligence Service (PBIS) for contracts that were awarded in fiscal 
years 2019 through 2021 and eligible for quick-closeout procedures, 
were valued at more than $2 million, and contained one of the following 
FAR clauses:
     52.216-7, Allowable Cost and Payment (including Alternates 
I, II, IV);
     52.216-17, Incentive Price Revision--Successive Targets 
(including Alternate I);
     52.242-3, Penalties for Unallowable Costs; and
     52.242-4, Certification of Final Indirect Costs.
    Data from PBIS revealed DoD awarded contracts to an average of 832 
small businesses per year in fiscal years 2019 through 2021. Therefore, 
this proposed rule may apply to approximately 832 unique small 
entities.
    The proposed rule does not impose any new reporting, recordkeeping, 
or compliance requirements.
    The proposed rule does not duplicate, overlap, or conflict with any 
other Federal rules.
    DoD did not identify any significant alternatives that would 
minimize or reduce the significant economic impact on small entities, 
because this proposed rule is not expected to have a significant impact 
on small entities.
    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 2021-D001), in 
correspondence.

VIII. Paperwork Reduction Act

    This 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 Part 242

    Government procurement.

Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.

    Therefore, 48 CFR part 242 is proposed to be amended as follows:

PART 242--CONTRACT ADMINISTRATION AND AUDIT SERVICES

0
1. The authority citation for 48 CFR part 242 continues to read as 
follows:

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

0
2. Add section 242.708 to read as follows:


242.708   Quick-closeout procedure.

    (a) Defense Contract Management Agency administrative contracting 
officers are authorized to negotiate the settlement of direct and 
indirect costs for a specific contract, task order, or delivery order 
to be closed in advance of the determination of final direct costs and 
indirect rates set forth in FAR 42.705, regardless of the dollar value 
or percentage of unsettled direct or indirect costs allocable to the 
contract, task order, or delivery order.
    (2) In lieu of the thresholds at FAR 42.708(a)(2)(i) and (ii), the 
amount of unsettled direct costs and indirect costs to be allocated to 
the contract, task order, or delivery order will be considered 
relatively insignificant when the total unsettled direct costs and 
indirect costs to be allocated to any one contract, task order, or 
delivery order do not exceed $2 million, regardless of the total 
contract, task order, or delivery order amount.

[FR Doc. 2022-23277 Filed 10-27-22; 8:45 am]
BILLING CODE 5001-06-P