[Federal Register Volume 87, Number 241 (Friday, December 16, 2022)]
[Proposed Rules]
[Pages 77053-77055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26691]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 204, 232, and 252

[Docket DARS-2022-0029]
RIN 0750-AJ46


Defense Federal Acquisition Regulation Supplement: Payment 
Instructions (DFARS Case 2017-D036)

AGENCY: Defense Acquisition Regulation 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 provide payment instructions for 
certain contracts based on the type of item acquired and the type of 
payment.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before February 14, 2023, to be 
considered in the formation of a final rule.

ADDRESSES: Submit comments in response to DFARS Case 2017-D036 by any 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``DFARS Case 2017-D036''. Select ``Comment Now'' and follow 
the instructions provided to submit a comment. Please include ``DFARS 
Case 2017-D036'' on any attached document.
     Email: [email protected]. Include DFARS Case 2017-D036 in 
the subject line of the message.
    Comments received generally will be posted without change to 
https://www.regulation.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: Mr. David E. Johnson, telephone 202-
913-5764.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD is proposing to amend the DFARS to provide payment instructions 
for certain contracts based on the type of payment and item acquired. 
The proposed rule would require separate progress payment requests in 
order to segregate foreign military sales (FMS) and U.S. line items in 
progress payment requests. In addition, the proposed rule provides 
procedures for structuring progress payment requests for contracts with 
multiple production lots.
    The proposed rule consists of clarifications that require no 
additional effort by large or small entities. The rule provides 
contracting officers and contractors clearer instruction on information 
to include in payment instructions and payment requests for multiple 
lot purchases and combined FMS/U.S. acquisitions.

II. Discussion and Analysis

    A review of Procurement Data Standard validation results has shown 
that contracting officers are not consistently inserting required 
payment instructions into contracts. Further, the Defense Finance and 
Accounting Service (DFAS) reported that the payment instructions, if 
inserted, are often not appropriate for the given contract. Upon 
review, DoD found that the appropriate accounting treatment for 
payments can be determined by the type of payment and item acquired. In 
addition, DoD recognized the need to establish procedures for 
structuring progress payment requests for contracts with multiple 
production lots.
    DFARS 204.7109, Contract clauses, and the clause at DFARS 252.204-
7006, Billing Instructions, are being amended to change the 
applicability of contractor cost vouchers to cost-reimbursable, time-
and-material, and labor-hour contracts. The clause applicability was 
revised to align with payment instruction procedures provided in DFARS 
Procedures, Guidance, and Information 204.7108(b)(3). DFARS 252.204-
7006, Billing Instructions, clause title is also revised to ``Billing 
Instructions-Cost Vouchers''.
    The following revisions have been made to simplify the contracting 
officer's instructions to the payment office for progress payment 
funding allocations: DFARS 232.502-4-70, Additional clauses, and the 
new clause at 252.232-70XX, Progress Payments-Multiple Lots, provide 
the procedures for submitting progress payments for contracts with 
multiple production lots. In addition, DFARS 252.232-7002, Progress 
Payments for Foreign Military Sales Acquisitions, is revised to clarify 
the requirement for submitting separate progress payment requests for 
FMS and U.S. contract line items.

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

    The proposed rule clarifies payment instructions for certain 
contracts based on the type of item acquired and the type of payment by 
amending DFARS 252.204-7006 and 252.232-7002, and adding a new clause 
at 252.232-70XX. DoD plans to apply all three clauses to solicitations 
and contracts at or below the SAT. This rule does not apply to 
commercial services or commercial products, including COTS items.

IV. Expected Impact of the Rule

    Currently, payment instructions are being entered manually into 
DoD's payment systems due to a lack of clarity in the DFARS with regard 
to payment instructions. This proposed rule clarifies the payment 
instruction language in the DFARS. The clarifications in this proposed 
rule will reduce data errors and inoperability problems throughout 
DoD's business processes created by manual entry of payment 
instructions in the payment systems, as well as reducing the cost of 
data entry.

V. Executive Order 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.

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

[[Page 77054]]

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. 
However, an initial regulatory flexibility analysis has been performed 
and is summarized as follows:
    The purpose of this proposed rule is to provide clarifications on 
payment instructions for certain contracts based on the type of item 
acquired and the type of payment. DoD has found that the payment 
instructions often are not inserted when required and that payment 
instructions, if inserted, are often not appropriate for the contracts 
in question. An analysis of the issue showed that the appropriate 
accounting treatment for payments can be derived from the type of item 
acquired and the type of payment. In addition, the analysis highlighted 
the need to establish procedures for structuring progress payment 
requests for contracts with multiple production lots. The 
clarifications in this proposed rule will promote consistency with 
generally accepted accounting principles and reduce data errors created 
by manual entry of payment instructions in the payment systems.
    The objective of the proposed rule is to clarify payment 
instructions. The proposed rule includes clarifications to procedures 
for billing instructions when submitting cost vouchers and progress 
payment requests. The proposed rule clarifies instructions to 
contractors in the clauses at DFARS 252.204-7006, Billing Instructions, 
and 252.232-7002, Progress Payments for Foreign Military Sales 
Acquisitions. The proposed rule also includes a new contract clause at 
252.232-70XX, Progress Payments--Multiple Lots. The legal basis for the 
rule is 41 U.S.C. 1707.
    The proposed rule will apply to all small entities that will be 
awarded cost-reimbursement, time-and-material, or labor-hour contracts. 
However, the proposed rule requires negligible additional effort by 
contractors, including small entities, and it simply clarifies the 
identification and use of payment information elements in payment 
requests. According to data from the Federal Procurement Data System 
for fiscal years 2017 through 2019, approximately 446,845 cost-
reimbursement, time-and-material, and labor-hour contracts (60 percent 
of all awards) are awarded to 29,022 small businesses (60 percent of 
all awardees) each year. This proposed rule also applies to contracts 
that use multiple accounting classifications or that involve progress 
payments for multiple production lots. DoD cannot accurately quantify 
the number of contracts subject to the multiple-lot progress payments 
clause, but such contracts are likely few in number.
    The rule does not contain any new reporting, recordkeeping, or 
other compliance requirements for small entities.
    The 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 objectives of the rule.
    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 2017-D036), in 
correspondence.

VIII. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies to this 
rule regarding new DFARS clause 252.232-70XX, Progress Payments--
Multiple Lots. However, these changes to the DFARS do not impose 
additional information collection requirements to the paperwork burden 
previously approved under Office of Management and Budget (OMB) Control 
Number 9000-0010, titled Progress Payments, SF 1443.
    The rule affects information collection requirements in DFARS 
252.232-7002, Progress Payments for Foreign Military Sales 
Acquisitions, currently approved under OMB Control Number 0704-0321, 
titled DFARS Part 232, Contract Financing, and the Clause at 252.232-
7002, Progress Payments for Foreign Military Sales Acquisition. The 
impact, however, is negligible because the changed reporting 
requirement is not anticipated to increase the estimate of total burden 
hours; rather the requirement to submit separate payment requests by 
rate is merely replaced by a requirement to submit separate payment 
requests for FMS and U.S. line items in the contract.

List of Subjects in 48 CFR Parts 204, 232, and 252

    Government procurement.

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

    Therefore, 48 CFR parts 204, 232, and 252 are proposed to be 
amended as follows:

0
1. The authority citation for 48 CFR parts 204, 232, and 252 continues 
to read as follows:

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

PART 204--ADMINISTRATIVE AND INFORMATION MATTERS

0
2. Amend section 204.7109 by revising paragraph (b) to read as follows:


204.7109  Contract clauses.

* * * * *
    (b) Use the clause at 252.204-7006, Billing Instructions--Cost 
Vouchers, in solicitations and contracts when a cost-reimbursement 
contract, a time-and-materials contract, or a labor-hour contract is 
contemplated.

PART 232--CONTRACT FINANCING

0
3. Amend section 232.502-4-70 by adding paragraph (c).

    The addition reads as follows:


232.502-4-70  Additional clauses.

* * * * *
    (c) Use the clause at 252.232-70XX, Progress Payments--Multiple 
Lots, to authorize separate progress payment requests for multiple 
lots.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Amend section 252.204-7006--
0
a. By revising the section heading, clause title, and clause date; and
0
b. In the clause introductory text, removing ``payment'' and adding 
``payment using a cost voucher'' in its place.

    The revisions read as follows:


252.204-7006  Billing Instructions--Cost Vouchers.

* * * * *

Billing Instructions--Cost Vouchers (Date)

* * * * *
0
5. Revise section 252.232-7002 to read as follows:


252.232-7002  Progress Payments for Foreign Military Sales 
Acquisitions.

    As prescribed in 232.502-4-70(a), use the following clause:

[[Page 77055]]

Progress Payments for Foreign Military Sales Acquisitions (Date)

    If this contract includes foreign military sales (FMS) 
requirements, the Contractor shall--
    (a) Submit a separate progress payment request for the FMS and 
U.S. line items in the contract;
    (b) Submit a supporting schedule showing the amount of each 
request distributed to each country's requirements;
    (c) Identify in each progress payment request the contract 
requirements to which it applies (i.e., FMS or U.S.);
    (d) Calculate each request on the basis of the prices, costs 
(including costs to complete), subcontractor progress payments, and 
progress payment liquidations of the contract requirements to which 
it applies; and
    (e) Distribute costs among the countries in a manner acceptable 
to the Administrative Contracting Officer.


(End of clause)
0
6. Add section 252.232-70XX to read as follows:


252.232-70XX  Progress Payments--Multiple Lots.

    As prescribed in 232.502-4-70(c), use the following clause:

Progress Payments--Multiple Lots (Date)

    (a) Definitions. As used in this clause--
    Lot means one or more fixed price deliverable line items or 
deliverable subline items representing a single, severable group 
where the sum of the costs for each group is segregated and a single 
progress payment rate is used.
    Multiple lots means more than one lot on a single contract where 
progress payment proration is performed on a lot-wide, versus 
contract-wide, basis.
    (b) When submitting progress payment requests under the billing 
instructions in Federal Acquisition Regulation (FAR) clause 52.232-
16, Progress Payments, or Defense Federal Acquisition Regulation 
Supplement clause 252.232-7002, Progress Payments for Foreign 
Military Sales Acquisitions, of this contract, the Contractor 
shall--
    (1) Submit separate progress payment requests for each lot 
identified in the contract;
    (2) Identify the contract price for the lot as the sum of all 
fixed-priced line items identified to the lot, in accordance with 
FAR 32.501-3;
    (3) Identify the lot on each progress payment request to which 
the request applies;
    (4) Calculate each request on the basis of the price, costs 
(including the cost to complete), subcontractor progress payments, 
and progress payment liquidations of the lot to which it applies; 
and
    (5) Distribute costs among lots in a manner acceptable to the 
Administrative Contracting Officer.
    (c) Submit a separate progress payment request for U.S. and FMS 
requirements in accordance with the clause 252.232-7002, Progress 
Payments for Foreign Military Sales Acquisitions, of this contract.


(End of clause)

[FR Doc. 2022-26691 Filed 12-15-22; 8:45 am]
BILLING CODE 5001-06-P