[Federal Register Volume 76, Number 75 (Tuesday, April 19, 2011)]
[Rules and Regulations]
[Pages 21810-21812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8947]
[[Page 21810]]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 202, 212, and 234
RIN 0750-AG23
Defense Federal Acquisition Regulation Supplement; Acquisition of
Commercial Items (DFARS Case 2008-D011)
AGENCY: Department of Defense (DoD).
ACTION: Final rule.
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SUMMARY: DoD is adopting as final, with minor editorial changes, an
interim rule amending the Defense Federal Acquisition Regulation
Supplement (DFARS) to implement sections 805 and 815 of the National
Defense Authorization Act for Fiscal Year 2008.
DATES: Effective Date: April 19, 2011.
FOR FURTHER INFORMATION CONTACT: Mr. Manuel Quinones, telephone 703-
602-8383.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published an interim rule at 74 FR 34263 on July 15, 2009 to
implement sections 805 and 815 of the National Defense Authorization
Act (NDAA) for Fiscal Year 2008 (Pub. L. 110-181). A correction to the
interim rule was published at 74 FR 35825 on July 21, 2009, to clarify
the types of services to which this rule applies, consistent with
subsections (c)(1)(A) and (c)(1)(C)(i) of section 805 of Public Law
110-181. Section 805 specified when time-and-materials or labor-hour
contracts may be used for commercial item acquisitions. Section 815
provided clarification regarding situations under which a major weapon
system, subsystems of major weapon systems, or components and spare
parts for major weapon systems may be acquired using procedures
established for the acquisition of commercial items. Section 815 also
clarified that the terms ``general public'' and ``nongovernmental
entities'', with regard to sales of commercial items, do not include
the Federal Government or a State, local, or foreign government.
II. Discussion and Analysis
Three respondents submitted comments on the interim rule, which are
discussed below.
A. Contracting Officer Guidance for Drafting Solicitations
Comment: One respondent stated that the final rule should provide
guidance on how contracting officers can prepare solicitations that
maximize the use of commercial items while obtaining sufficient
information to conduct price analysis.
DoD Response: The current provisions and clauses at DFARS 212.301
provide appropriate guidance to the contracting officer to assist with
the preparation of solicitations and contracts for commercial items.
Contracting officers receive formal instruction and on-going assistance
regarding how to conduct price analysis, to include guidance provided
at PGI 215.404-1. Therefore, additional guidance is not required.
B. Clarify and Separate Commercial Item and Price Determinations
Comment: One respondent stated that the rule should clarify that
commercial item determinations are separate from pricing
determinations.
DoD Response: There is currently sufficient coverage in the FAR to
assist contracting officers with making separate commercial and pricing
determinations. Contracting officers have the appropriate tools to
establish price reasonableness in accordance with FAR 13.106-3, FAR
14.408-2, and FAR subpart 15.4. The FAR provides guidance to allow
contracting officers, at their discretion, to request the offeror to
submit prices paid for the same or similar commercial items under
comparable terms and conditions by both Government and commercial
customers. Additionally, to further assist the contracting officer when
making a commercial item determination, FAR 12.209 instructs the
contracting officer to be familiar with ``customary commercial terms
and conditions when pricing commercial items.''
C. Submission of Pricing Information
Comment: One respondent stated that FAR part 12 solicitations
issued on a sole-source basis should specify that the pricing
information is to be submitted with the proposal.
DoD Response: It is at the discretion of the contracting officer to
specify in the solicitation the manner in which pricing information is
to be submitted.
Comment: One respondent stated that it is not appropriate to issue
a FAR part 15-type solicitation for commercial items and require the
offeror to request an exception to the requirement to submit cost and
pricing data.
DoD Response: The contracting officer determines the appropriate
process to utilize when acquiring products and services and may use FAR
part 15-type solicitations for commercial items. However, the
contracting officer may, at his or her discretion, use as appropriate
the streamlined procedures at FAR subpart 12.6 to reduce the time
required to solicit and award contracts for commercial items.
D. Exemption for Commercially-Available Off-the-Shelf (COTS) Items
Comment: One respondent agreed that COTS items should not be
subject to the procedures at DFARS 234.7002(b) and (c), and recommended
adding a more explicit statement, as paragraph (e), that ``COTS items
are exempt from the requirements of 234.7002.''
DoD Response: DoD maintains that the inclusion of the parenthetical
reference to a COTS is clear to the contracting officer and no
additional statement is needed.
E. Define Component, Spare Part, Subsystem, and No or Negligible Value
Comment: Three respondents requested that the terms ``component''
and ``spare part'' be defined. Two respondents requested that the
phrase ``no or negligible value'' be defined and clarified and one
respondent requested that the term ``subsystem'' be defined.
DoD Response: The term ``component'' is defined at FAR 2.101. The
term ``spare part'' is a commonly used term understood to mean any item
that is supplied as a replacement part of an end item. The term
``subsystem'' is also a commonly used term throughout the FAR and DFARS
that denotes a functional grouping of lower-tier components that
combine to perform a major function within an end item, such as
electrical power, altitude control, or propulsion. DoD maintains that
the phrase ``no or negligible value'' is self-explanatory and does not
require further clarification.
F. Emphasize the Conditions for Limited Cost Information
Comment: Two respondents stated the rule closely mirrors the
legislative language and recommended that the final rule be amended to
emphasize the conditions of the request for limited cost information.
DoD Response: The underlying basis for the rule is the legislation,
and when it is practical to do so, the implementing regulations will
contain language that is drawn from the legislation that does not
conflict with existing requirements established to ensure the
government is receiving fair and reasonable prices. The contracting
officer must make a determination that a component or spare part has
been appropriately identified as a commercial item. The amount of cost
information required by the contracting officer to make an evaluation
about the component or
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spare part is determined by the sufficiency of the information provided
by the prime contractor. FAR subpart 15.4 currently provides the
contracting officer with pricing policy and guidance regarding
obtaining pricing data. Contracting officers will ask for information
sufficient to determine if the price is fair and reasonable. Therefore,
additional guidance is not required.
G. Exemption From DFARS 234.7002 for Previously Acquired of Spare Parts
Comment: Two respondents requested clarification regarding how a
procurement of spare parts should be handled if DoD procured a
subsystem as a commercial item [using FAR part 12] years ago.
Additionally, clarification was requested that DFARS 234.7002 does not
apply to components or spare parts that have been previously procured
under FAR part 12.
DoD Response: DoD maintains that an item that was previously
procured as a commercial item, and defined as such, will continue to be
identified as commercial, unless there is a written determination by
the contracting officer that the item no longer meets the commercial
item definition. Though commercial items may evolve through technical
or performance advances, these items are still able to meet the
commercial item definition.
H. Price Determination for Subcontracts
Comment: One respondent asked who makes the pricing determination
if DoD is procuring through the subcontract. The respondent recommended
that language be added that ``the prime contractor is responsible for
determining reasonableness of price for components and spare parts
under subcontracts.''
DoD Response: The rule does not change the pricing determination
procedures for subcontractors used by the contracting officer. In
accordance with DFARS 244.402, prime contractors are responsible for
determining whether a particular subcontract item meets the definition
of a commercial item. This does not affect the contracting officer's
responsibilities to determine price reasonableness of prime contractors
and subcontractors at FAR 15.404-3. However, the contracting officer
may provide assistance to prime contractors being denied access to
lower-tier subcontractor records.
Comment: One respondent suggested that applying the rule at lower
tiers would be impracticable and could cause significant delays in the
negotiation and award of subcontracts that could adversely impact
performance of the prime contract.
DoD Response: The definition of commercial items is not limited
solely to items supplied directly from prime contractors. It also
extends to commercial items acquired by the prime contractor to be sold
to the Government from subcontractors at all tiers, including items
transferred from a contractor's division, affiliates, or subsidiaries.
The prime contractor has the responsibility to determine if a
subcontracted item meets the definition of a commercial item, as
defined in FAR 2.101.
Comment: One respondent stated that the rule is in potential
conflict with DFARS part 244. The respondent stated that if the rule
applies to subcontracts, it would conflict with the language at DFARS
244.402(a) that requires contractors to determine if the subcontract
item meets the definition of a commercial item.
DoD Response: The rule aligns with DFARS 244.402(a). It further
supports the contracting officer's responsibility to make the
commercial item determination for items acquired and the prime to flow
this requirement down to subcontractors.
I. Procedures for Applying the Rule
Comment: One respondent recommended that there be specific
procedures for applying the rule.
DoD Response: DoD maintains that the rule is clear in its
implementation of the statute. It informs the prime contractor and the
contracting officer of the procedures to be followed.
Comment: One respondent recommended that the solicitation and
contract clauses inform the contractor that the rule applies for
procurements constituting a major weapon system.
DoD Response: The rule at DFARS 234.7002(a) instructs the
contracting officer that the acquisition of a major weapon system may
be treated as a commercial item. The conditions required to make this
determination are outlined in the DFARS for the contracting officer.
Therefore, additional guidance is not required.
Comment: One respondent requested that the contracting officer be
prohibited from changing the determination unless there is a
substantial change in the nature of the work performed by the
subcontractor, if the item no longer meets the definition of commercial
items.
DoD Response: Contracting officers are required to fully and
adequately document the contract file regarding the market research
performed by the contracting officer as required by FAR 10.002(e). The
contracting officer is required to provide the rationale supporting his
or her determination that the commercial item definition at FAR 2.101
was satisfied. Therefore, the contracting officer must follow the
instructions regarding defining a commercial item from subcontractors.
The contracting officer must document any changes that warrant the non-
applicability of the definition of commercial items.
J. Reference Procedures in FAR 15.4 and DFARS 215.4
Comment: One respondent recommended that references to the
procedures in FAR part 15.4 and DFARS 215.4 be included.
DoD Response: The rule at DFARS 212.207(b)(iii)(B) refers the
contracting officer to the procedures at FAR 15.4 if the services to be
acquired are subject to FAR 15.4.
K. Contracting Officers Make Prompt Commercial Item Determination
Comment: One respondent recommended that contracting officers be
instructed to respond promptly to requests for determination if a
proposed item is a commercial item, and to provide the reason if it is
determined that the item is not commercial, to assist the contractor to
resolve the matter. Another respondent recommended encouraging
contracting officers and contractors to address requirements of the
rule prior to award of the prime contract.
DoD Response: FAR 2.101 defines a commercial item and provides the
contracting officer instructions regarding how to determine whether or
not an item is commercial. The commercial determination is made before
contract award. This determination is based on market research, an
analysis of the marketplace, and the Government's requirement. FAR part
12 provides the contracting officer specific guidance, policies, and
procedures regarding the acquisition of commercial items. The
contracting officer works within the timeframe required to procure the
item based upon the Government's need for the requirement.
III. Executive Order 12866 and Executive Order 13563
Executive Orders 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
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effects, distributive impacts, and equity). Executive Order 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 Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD certifies that this rule will not 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 the rule
reinforces existing requirements for the appropriate use of commercial
acquisition procedures and for ensuring that contract prices are fair
and reasonable.
V. Paperwork Reduction Act
The rule does not impose any information collection requirements
that require the approval of the Office of Management and Budget under
the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR Parts 202, 212, and 234
Government procurement.
Mary Overstreet,
Editor, Defense Acquisition Regulations System.
Therefore, the Defense Acquisition Regulations System confirms as
final the interim rule published at 74 FR 34263 on July 15, 2009, with
the following changes:
0
1. The authority citation for 48 CFR parts 202, 212, and 234 continues
to read as follows:
Authority: 41 U.S.C. 1303 and CFR chapter 1.
PART 202--DEFINITIONS OF WORDS AND TERMS
Sec. 202.101 [Amended]
0
2. Section 202.101 is amended in the definition for General public and
non-governmental entities by removing ``Section'' and adding in its
place ``section''.
PART 212--ACQUISITION OF COMMERCIAL ITEMS
Sec. 212.207 [Amended]
0
3. Section 212.207 paragraph (b) introductory text is amended by
removing ``Section'' and adding in its place ``section''.
[FR Doc. 2011-8947 Filed 4-18-11; 8:45 am]
BILLING CODE 5001-08-P