[Federal Register Volume 88, Number 101 (Thursday, May 25, 2023)]
[Rules and Regulations]
[Pages 33831-33834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-11138]


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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 Regulations System, Department of Defense 
(DoD).

[[Page 33832]]


ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending 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: Effective May 25, 2023.

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

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD published a proposed rule in the Federal Register at 87 FR 
77053 on December 16, 2022, to amend the DFARS to provide payment 
instructions for certain contracts based on the type of item acquired 
and the type of payment. Two respondents submitted comments in response 
to the 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

    Language in the clause at DFARS 252.232-7002, Progress Payments for 
Foreign Military Sales Acquisitions, is changed for clarity. The term 
``subcontractor progress payments'' is changed to ``subcontract 
financing'' in the clauses at DFARS 252.232-7002, paragraph (d), and 
252.232-7018, Progress Payments--Multiple Lots, paragraph (b)(4).

B. Analysis of Public Comments

1. Data Underlying the Proposed Rule
    Comment: One respondent inquired about the set of data that 
underlies the proposed rule and whether such data adequately supports 
the proposed rule.
    Response: Such data has not been published for public comment, but 
it was gathered in the normal course of compiling operational 
statistics relating to the manual entry of payment instructions in DoD 
payment systems. This rule standardizes payment instructions and 
therefore eliminates the need for such manual entry. This in turn 
eliminates the possibility of both data-entry errors and application of 
incorrect payment instructions.
2. Possible Ambiguity in Instructions for Progress Payment Requests
    Comment: One respondent inquired whether paragraph (a) of the 
clause at DFARS 252.232-7002, Progress Payments for Foreign Military 
Sales Acquisitions, requires separate submission of foreign military 
sales (FMS) progress payment requests combined with U.S. sales progress 
payment requests, or rather that the clause requires submission of FMS 
progress payment requests separate from U.S. ones.
    Response: The intent is for FMS progress payment requests to be 
submitted separately from U.S. sales progress payment requests. The 
language in the clause at DFARS 252.232-7002 has been clarified in the 
final rule.
3. Prescription for the Clause at DFARS 252.232-70XX
    Comment: One respondent inquired whether the prescription for the 
clause at DFARS 252.232-70XX, Progress Payments--Multiple Lots, should 
explicitly limit application of the clause to fixed price contracts.
    Response: In accordance with Federal Acquisition Regulation 
32.500(a), only fixed-price contracts may provide for progress 
payments. The prescription limits application of the clause at DFARS 
252.232-7018 to contracts that provide for progress payments. DoD 
therefore declines the suggested change as unnecessary.
4. References to ``Subcontractor Progress Payments''
    Comment: One respondent recommends changing the term 
``subcontractor progress payments'' to ``subcontract financing'' in the 
clauses at DFARS 252.232-7002(d) and 252.232-70XX(b)(4) to better align 
with relevant language in the Federal Acquisition Regulation.
    Response: In the final rule, the term ``subcontractor progress 
payments'' is changed to ``subcontract financing'' in the clauses at 
DFARS 252.232-7002, paragraph (d), and 252.232-7018, paragraph (b)(4).

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

    This 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, Billing Instructions--Cost Vouchers, and 252.232-
7002, Progress Payments for Foreign Military Sales Acquisitions. 
Application of these clauses to contracts at or below the SAT and to 
commercial services, commercial products, and COTS items is unchanged. 
This final rule adds a new clause at 252.232-7018, Progress Payments--
Multiple Lots. DoD will apply this clause to solicitations and 
contracts at or below the SAT and will not apply the clause 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 regarding 
payment instructions. This rule clarifies the payment instruction 
language in the DFARS. The clarifications in this 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 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.

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. 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.

VII. 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:

[[Page 33833]]

    The purpose of this 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 rule will promote 
consistency with generally accepted accounting principles and reduce 
data errors created by manual entry of payment instructions in the 
payment systems.
    No public comments were received in response to the initial 
regulatory flexibility analysis.
    The rule will apply to all small entities that will be awarded 
cost-reimbursement, time-and-material, or labor-hour contracts. 
However, the rule requires negligible additional effort by contractors, 
including small entities, because 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 2020 through 2022, approximately 6,800 cost-
reimbursement, time-and-material, and labor-hour contracts (0.01% 
percent of all awards) are awarded to approximately 1,100 small 
businesses (3 percent of all awardees) each year. This 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.
    There are no known, significant, alternative approaches to the rule 
that would meet the objectives of the rule.

VIII. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies to this 
rule regarding new DFARS clause 252.232-7018, 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 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) to read as 
follows:


232.502-4-70  Additional clauses.

* * * * *
    (c) Use the clause at 252.232-7018, 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 heading, 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 (May 2023)

* * * * *

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:

Progress Payments for Foreign Military Sales Acquisitions (May 2023)

    If this contract includes foreign military sales (FMS) 
requirements, the Contractor shall--
    (a) Submit separate progress payment requests 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), subcontract financing, 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 252.232-7018 to read as follows:


252.232-7018  Progress Payments--Multiple Lots.

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

Progress Payments--Multiple Lots (May 2023)

    (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 (DFARS) clause 252.232-7002, Progress

[[Page 33834]]

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 financing, 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 DFARS clause 252.232-7002, 
Progress Payments for Foreign Military Sales Acquisitions, of this 
contract.
(End of clause)

[FR Doc. 2023-11138 Filed 5-24-23; 8:45 am]
BILLING CODE 5001-06-P