[Federal Register Volume 77, Number 12 (Thursday, January 19, 2012)]
[Rules and Regulations]
[Pages 2653-2655]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-970]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212 and 252
RIN 0750-AH27
Defense Federal Acquisition Regulation Supplement; Pilot Program
for Acquisition of Military-Purpose Nondevelopmental Items (DFARS Case
2011-D034)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD is adopting as final, without change, an interim rule
amending the Defense Federal Acquisition Regulation Supplement
establishing a pilot program to assess the feasibility and advisability
of acquiring military-purpose nondevelopmental items in accordance with
streamlined procedures.
DATES: Effective date: January 19, 2012.
FOR FURTHER INFORMATION CONTACT: Manuel Quinones, telephone (703) 602-
8383.
SUPPLEMENTARY INFORMATION:
I. Background
To implement section 866 of the National Defense Authorization Act
for Fiscal Year 2011, DoD published an interim rule in the Federal
Register at 76 FR 38048 on June 29, 2011, establishing a pilot program
to assess the feasibility and advisability of acquiring military-
purpose nondevelopmental items in accordance with streamlined
procedures. The authority for this pilot program expires on January 6,
2016. Under this pilot program, DoD may enter into contracts
[[Page 2654]]
with nontraditional defense contractors for the purpose of--
--Enabling DoD to acquire items that otherwise might not have been
available to DoD;
--Assisting DoD in the rapid acquisition and fielding of capabilities
needed to meet urgent operational needs; and
--Protecting the interests of the United States in paying fair and
reasonable prices for the item or items acquired.
This pilot program is designed to test whether the streamlined
procedures, similar to those available for commercial items, can serve
as an effective incentive for nontraditional defense contractors to (1)
channel investment and innovation into areas that are useful to DoD and
(2) provide items developed exclusively at private expense to meet
validated military requirements.
II. Discussion and Analysis of the Public Comments
DoD reviewed the public comments received from three respondents in
the development of the final rule. Two of the three respondents are
supportive of both the congressional intent and the interim rule. The
respondents submitted comments covering the following three categories:
(A) Definition of nontraditional defense contractor; (B) definition of
military-purpose nondevelopmental item; and (C) flow down of provision
to subcontractors. A discussion of the comments and responses are
provided as follows.
A. Definition of Nontraditional Defense Contractor
Two of the three respondents recommended revisions to the
definition of nontraditional defense contractor.
Comment: One respondent suggested expanding the definition of a
nontraditional defense contractor to mean an entity to include a
business unit, segment or wholly-owned subsidiary of an entity. The
respondent asserted that such clarifying language would permit a
commercial company that occasionally accepts a contract with certified
cost or pricing data requirements to participate in the pilot program
without being burdened by what are recognized to be onerous contractual
requirements.
Response: With regard to expanding the meaning of an entity to
include ``a business unit, segment or wholly-owned subsidiary of an
entity,'' the entity referred to in the interim rule is, in essence,
the legal entity that signs the contract with the Government. This
entity must meet all of the statutory requirements included in the
definition for a nontraditional defense contractor contained in the
contract clause, and changing the definition as requested would not be
consistent with that definition. Therefore, no changes have been made
to the final rule as a result of the comment.
Comment: Another respondent stated that the definitions are not
clear as to whether Congress intended to allow subcontractors of prime
contractors to be considered nontraditional defense contractors for
purposes of the rule. The respondent asked, in situations where the
prime contractor does not meet the definition of a nontraditional
defense contractor, whether each of the subcontractors to the prime
contractor will fail to meet the definition as well due to the
definition of nontraditional defense contractor applying to contracts
or subcontracts.
Response: The statutory definition of a nontraditional defense
contractor (10 U.S.C. 2302) outlines the criteria that must be met by a
prospective contractor to be eligible for the pilot program, which only
covers award to prime contractors. One criterion states the entity may
not be currently performing or has not performed ``any contract or
subcontracts'' for DoD that is subject to full coverage under cost
accounting standards. Entities that have performed as subcontractors to
traditional defense contractors are not necessarily excluded from
participating as a prime contractor under this pilot so long as the
subcontract requirements did not entail the disqualifying criteria
(i.e., full CAS coverage and certified cost and pricing data) and the
entity otherwise meets the criteria. No changes have been made to the
final rule as a result of this comment.
B. Definition of Military-Purpose Nondevelopmental Item
Comment: A respondent recommended amending the definition of the
term ``military-purpose nondevelopmental item'' by revising the
definitional criteria for determining whether an item meets the
definition, including the extent to which independent research and
development (IR&D) costs, and bid and proposal (B&P) costs, are
considered in such a determination. The respondent cited section
824(b)(2) of the National Defense Authorization Act (NDAA) for Fiscal
Year (FY) 2011, Pub. L. 111-383, as the basis for the recommended
change.
Response: The interim rule uses the statutory definition of the
term ``military purpose nondevelopmental item'' required by section 866
of the NDAA for FY 2011 and used only for purposes of this pilot
program. The substantive revisions to the definition as proposed by the
respondent would result in the Defense Federal Acquisition Regulation
Supplement (DFARS) definition being noncompliant with the statutory
definition and the criteria for applying the specialized procedures
authorized for this pilot program. It is also important to note that
the requirements for treatment of IR&D and B&P costs that are
established by section 824 of the NDAA for FY2011 are being addressed
through DFARS Case 2011-D022. No changes have been made to the final
rule as a result of this comment.
C. Flow Down of Provision to Subcontractors
Comment: A respondent stated that the interim rule (published as
DFARS subpart 212.71) fails to clearly address the common situation in
which a nontraditional defense contractor may simultaneously be a
subcontractor or supplier to a traditional defense contractor. The
respondent recommended the new DFARS rule make clear that it may and
should flow down through any prime contract, to the suppliers/
subcontractors.
Response: Unlike certain clauses, provisions are not flowed down to
subcontractors. Solicitation provisions are to be completed and
submitted by the prospective prime contractor with its offer.
Furthermore, it is irrelevant to the program if a nontraditional
defense contractor is simultaneously a subcontractor or supplier to a
traditional defense contractor. As previously stated, section 866 only
covers award to a prime contractor. No changes have been made to the
final rule as a result of this comment.
III. 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. This rule is not a major rule
under 5 U.S.C. 804.
[[Page 2655]]
IV. Regulatory Flexibility Act
A final regulatory flexibility analysis has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 604, and is
summarized as follows:
This rule implements a statutory requirement under section 866 of
the National Defense Authorization Act (NDAA) for Fiscal Year (FY)
2011. Section 866 authorized the Secretary of Defense to establish a
pilot program to assess the feasibility and advisability of acquiring
military-purpose nondevelopmental items.
The objective of this new DoD program is to permit DoD to enter
into contracts with nontraditional defense contractors for the purpose
of (1) Enabling DoD to acquire items that otherwise might not have been
available to DoD; (2) assisting DoD in the rapid acquisition and
fielding of capabilities needed to meet urgent operational needs; and
(3) protecting the interests of the United States in paying fair and
reasonable prices for the item or items acquired.
No public comments were received in response to the initial
regulatory flexibility analysis. The Chief Counsel for Advocacy of the
Small Business Administration did not file any comments in response to
this rule.
DoD is unable to estimate at this time the number of small entities
impacted by the rule, since this is a new pilot program and its purpose
is to identify and attract nontraditional defense contractors as
defined within the rule and section 866 of the National Defense
Authorization Act for Fiscal Year 2011.
There are no reporting, recordkeeping, or other compliance
requirements to small entities associated with this rule. Additionally,
there were no significant alternatives considered that met the stated
objectives of the applicable statute.
V. Paperwork Reduction Act
The 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 Parts 212 and 252
Government procurement.
Mary Overstreet,
Editor, Defense Acquisition Regulations System.
Interim Rule Adopted as Final Without Change
Accordingly, the interim rule amending 48 CFR parts 212 and 252,
which was published at 76 FR 38048 on June 29, 2011, is adopted as a
final rule without change.
[FR Doc. 2012-970 Filed 1-18-12; 8:45 am]
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