[Federal Register Volume 80, Number 102 (Thursday, May 28, 2015)]
[Rules and Regulations]
[Pages 30355-30360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12825]
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DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 243
[Docket ID: DOD-2013-OS-0130]
RIN 0790-AJ08
Ratemaking Procedures for Civil Reserve Air Fleet Contracts
AGENCY: USTRANSCOM, DoD.
ACTION: Final rule.
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SUMMARY: Section 366 of the National Defense Authorization Act for
Fiscal Year 2012 directs the Secretary of Defense to determine a fair
and reasonable rate of payment for airlift services provided to the
Department of Defense by air carriers who are participants in the Civil
Reserve Air Fleet Program. The Department of Defense (the Department or
DoD) is promulgating regulations to establish ratemaking procedures for
civil reserve air fleet contracts as required by Section 366(a) in
order to determine a fair and reasonable rate of payment.
DATES: This final rule is effective on June 29, 2015.
FOR FURTHER INFORMATION CONTACT: Mr. Richard Gates, Chief, Acquisition
Law, USTRANSCOM/TCJA, (618) 220-3982 or Mr. Jeff Beyer, Chief, Business
Support and Policy Division, USTRANSCOM/TCAQ, (618) 220-7021.
SUPPLEMENTARY INFORMATION:
Background
The Civil Reserve Air Fleet (CRAF) is a wartime readiness program,
based on the Defense Production Act of 1950, as amended, (50 U.S.C.
App. 2601 et seq.), and Executive Order 13603 (National Defense
Resource Preparedness), March 16, 2012, to ensure quantifiable,
accessible, and reliable commercial airlift capability to augment DoD
airlift and to assure a mobilization base of aircraft available to the
Department of Defense for use in the event of any level of national
emergency or defense-orientated situations. As a readiness program,
CRAF quantifies the number of passenger and cargo commercial assets
required to support various levels of wartime requirements and thus
allows DoD to account for their use when developing and executing
contingency operations and war plans. In addition, the CRAF program
identifies how DoD gains access to these commercial assets for
operations by defining the authorities and procedures for CRAF
activation. Finally, the program helps ensure that the DoD has reliable
lines of communication and a common understanding of procedures with
the carriers.
The United States Transportation Command (USTRANSCOM) negotiates
and structures award of aircraft service contracts with certificated
civilian air carriers willing to participate in the CRAF program in
order to ensure that a mobilization base of aircraft is capable of
responding to any level of defense-orientated situations.
The ability to set rates maintains the CRAF program's great
flexibility to have any air carrier in the program able to provide
aircraft within 24 hours of activation to fly personnel and cargo to
any location in the world at a set rate per passenger or ton mile,
regardless of where the air carrier normally operates. It also provides
the Secretary of Defense the ability to respond rapidly to assist in
emergencies and approved humanitarian operations, both in the United
States and overseas where delay could result in more than monetary
losses. The Government-set rate allows contracts to any location,
sometimes awarded within less than an hour, and provides substantial
commercial capability on short notice.
During the initial CRAF program years (between 1955 and 1962),
ratemaking to price DoD airlift service relied upon price competition
to meet its commercial airlift needs. This procurement method resulted
in predatory pricing issues and failed to provide service meeting
safety and performance requirements. Congressional Subcommittee
hearings held at the time determined price competition to be non-
compensatory and destructive to the industry. As a result, the
ratemaking process was implemented under the regulatory authority of
the Civil Aeronautics Board (CAB). Ratemaking continued under the CAB
until deregulation in 1980. At that time, civil air carriers and DoD's
contracting agency for long-term international airlift, the Military
Airlift Command (MAC), agreed by a memorandum of understanding (MOU)
that CAB methodologies by which rates for DoD airlift were established
produced fair and reasonable rates and furthered the objectives of the
CRAF program; and therefore, the parties agreed to continue to use CAB
methodologies for establishing MAC uniform negotiated rates under an
MOU renewed every five years. MAC became Air Mobility Command (AMC) on
June 1, 1992. Ratemaking continued under AMC until January 1, 2007,
when DoD's contracting authority for long-term international airlift
was transferred from AMC to USTRANSCOM. On December 31, 2011, the
National Defense
[[Page 30356]]
Authorization Act for Fiscal Year 2012 (FY12 NDAA) (Pub. L. 112-81) was
signed into law. Section 366 of the FY12 NDAA, codified at 10 U.S.C.
9511a, authorized and directed the Secretary of Defense to determine a
fair and reasonable rate of payment made to participants in the CRAF
program. This rule effectuates Section 366.
This rule broadly tracks the longstanding ratemaking procedures for
CRAF contracts in all substantial elements and the ratemaking
methodologies supporting the pricing of airlift services as described
in previous and current MOUs between certificated civilian air carriers
willing to participate in the CRAF program and USTRANSCOM and
USTRANSCOM predecessor entities.
In addition to compliance with this rule, CRAF participants,
consistent with past practice, will be expected to enter into a MOU
with USTRANSCOM where they will be expected to furnish USTRANSCOM, as a
condition of its continued participation in the CRAF program, with the
financial and operational information required by USTRANSCOM to
adequately make a determination of fairness and reasonableness of
price. This rule will have no impact on air operators or certificated
air carriers not participating in the CRAF program. Nor does it impact
non-CRAF services provided by CRAF participants.
Section 366, Ratemaking Procedures for Civil Reserve Air Fleet, is
being amended by adding a new section that authorizes the Secertary of
Defense to determine a fair and reasonable rate of payment for airlift
services provided to the Department of Defense by air carriers who are
participants in the Civil Reserve Air Fleet program; and authority to
prescribe regulations to implement rate making procedures.
USTRANSCOM published a proposed rule in the Federal Register on May
14, 2014 (79 FR 27516). The proposed rule effectuates Section 366 of
the FY12 NDAA, codified at 10 U.S.C. 9511a, which authorized and
directed the Secretary of Defense to determine a fair and reasonable
rate of payment made to participants in the CRAF program.
Comment and Responses
In the proposed rule, which published in the Federal Register on
May 14, 2014 (79 FR 27516-27521), USTRANSCOM provided the public a 60-
day comment period which ended July 14, 2014. USTRANSCOM received one
comment.
Comment: The comment recommends clarification to the introduction
provided in Sec. 243.8, Application of FAR Cost Principles. The
commentor believes the proposed rule, which states ``. . . procedures
differ from the following provisions . . .'' is ambiguous, and
recommended a clarification that portions of the cost principles
identified in that section are applicable and exceptions are
appropriate only when the unique ratemaking requirements of the CRAF
program prohibit their application. The commentor believes this change
will preserve allow-ability considerations in the cost principles not
affected by the unique CRAF program requirements.
Response: The Rule provides that USTRANSCOM may utilize principles
contained in the Federal Acquisition Regulations (FAR), as
supplemented, in establishing the rate of payment for aircraft
supporting CRAF. The Rule clearly notes that procedures used in
establishing rates differ from the provisions of FAR Part 31 and DFARS
Part 231 identified in Sec. 243.8. This is necessary because airline
accounting systems are established to report costs in accordance with
the Department of Transportation requirements found at 14 CFR part 241.
However, nothing in Sec. 243.8 limits in any manner, USTRANSCOM's use
or application of the identified cost principles or portions thereof,
as appropriate, in establishing fair and reasonable rates of payment.
No further clarification is required.
Description of the Regulation, by Section
Sections 243.1 through 243.3. Purpose, Applicability, and
Definitions. No further descriptions are provided in this section.
These sections of the regulation are self explanatory.
Section 243.4(a). In establishing fair and reasonable rate of
payments for airlift service contracts in support of CRAF, USTRANSCOM
may utilize the principles contained in the Federal Acquisition
Regulation, as supplemented. Specific differences are as noted at Sec.
243.8 of the regulation.
Sections 243.4(c) and (d) Analysis and Rates. Details for the
current ratemaking cycle can be located on FedBizOps under the Proposed
Uniform Rates and Rules and Final Uniform Rates and Rules, which can be
located at https://www.fbo.gov/index?s=opportunity&mode=form&id=3ae87338a903f3e6e43a2627941dbb1c&tab=core&_cview=1.
Sections 243.4(e)(1) through (e)(6) Components of the Rate.
Additional insight in this area is included in the current Memorandum
of Understanding (FY13 through FY17), which can be found at https://www.fbo.gov/index?s=opportunity&mode=form&id=3ae87338a903f3e6e43a2627941dbb1c&tab=core&_cview=1.
Section 243.4(f) Contingency Rates. Authority is reserved to the
Commander, USTRANSCOM, to implement a higher temporary rate if
USTRANSCOM determines that the established rate of payment is
insufficient to allow successful mission operations. These temporary
contingency rates are used at the Commander, USTRANSCOM's discretion
during conditions such as outbreak of war, armed conflict,
insurrection, civil or military strife, emergencies, or similar
conditions and are adjusted to reflect possible limited backhaul
opportunities. These rates would continue until it is determined by the
Commander, USTRANSCOM that such rates are no longer needed to ensure
mission accomplishment or sufficient data has been obtained to
establish a new rate, after which the contingency rates would cease.
Section 243.5 Commitment of Aircraft as a Business Factor. For the
purpose of rate making, the average fleet cost of aircraft proposed by
the carriers for the forecast year is used. Actual awards to CRAF
carriers are based upon the aircraft accepted into the CRAF program.
Aircraft are assigned to stages in a manner designed to spread the risk
among all carriers proportionate to the airline total commitment and
capability; as an example, all air carriers are required to have a
minimum of one aircraft in Stage I but each carrier's total aircraft in
Stage I cannot exceed ~15% of the passenger or cargo requirement.
Section 243.6 Exclusions from the uniform negotiated rate. No
further description is provided in this section. This section of the
regulation is self explanatory.
Section 243.7 Inapplicable provisions of law. Consistent with the
requirements of Section 366, this section provides that determining the
rate of payment for an airlift service contract will not be subject to
the provisions of Section 2306a of Title 10, United States Code,
entitled Cost or Pricing Data: Truth in Negotiations Act or subsections
(a) and (b) of Section 1502 of Title 41, United States Code, entitled
Cost Accounting Standards.
Section 243.8 Application of FAR cost principles. Some FAR cost
principles contained in FAR Part 31 and DFARS 231 are modified for use
in the ratemaking process. There are two primary reasons for this:
First, compliance with certain principles is not possible for
airline carriers. Airline accounting systems are established to report
costs in accordance with the Department of Transportation
[[Page 30357]]
requirements found at 14 CFR part 241. These requirements generally do
not allow carriers to assign costs directly to a final cost objective,
or contract. Contractors who do not assign costs directly to a contract
cannot comply with FAR 31.202. Additionally, 14 CFR part 241 directs an
air carrier to financially account for property taxes in General and
Administrative expense, whereas FAR 31.205-41(c) directs contractors to
account for these taxes directly to a final cost objective. Therefore,
simply by complying with requirements of 14 CFR part 241 (required by
the Department of Transportation), CRAF carriers cannot be in
compliance with certain principles at FAR 31 and DFARS 231.
Secondly, selected cost principles must be modified in order to
maintain uniformity across the industry when developing a uniform rate
of payment. An example of this can be found at FAR 31.205-11,
Depreciation. This principle requires contractors limit depreciation to
the amount used for financial accounting purposes and in a manner
consistent with depreciation policies and procedures followed in the
same segment of non-Government business. Under the Department's
ratemaking process, all depreciation values are pre-established in
order to maintain uniformity within the rate. These depreciation values
are as indicated in the MOU. Therefore, the FAR cost principle
outlining depreciation requirements cannot be applicable to the
ratemaking process.
Section 243.9 Carrier site visits. No further description is
provided in this section. This section of the regulation is self
explanatory.
Sections 243.10 and 243.11 Disputes and Appeals of USTRANSCOM
Contracting Officer Decisions regarding rates. The disputes and appeals
provision of the proposed ratemaking procedures follows long
established protocol that was previously reflected in MOUs executed
between CRAF air carrier participants and the government. In sum,
carriers with ratemaking concerns are required to first present their
concerns to the ratemaking team for resolution. If the matter is not
resolved by the ratemaking team, the carrier can in turn request
resolution by the USTRANSCOM contracting officer. If satisfactory
resolution is still absent, the carrier should address their matter to
the USTRANSCOM Ombudsman who is appointed to hear and facilitate
resolution of such issues. If needed, the Director of Acquisition,
USTRANSCOM, issues a final agency decision in unresolved matters
presented by any carrier still seeking satisfactory resolution of a
ratemaking issue.
Statutory Certification
Executive Order 12866 ``Regulatory Planning and Review'' and Executive
Order 13563 ``Improving Regulation and Regulatory Review''
Executive Orders (E.O.s) 12866 and 13563 directs 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.
It has been determined that 32 CFR part 243 is not an economically
significant regulatory action and is also not a major rule under 5
U.S.C. 804, nor is it a significant rule that requires review by OMB.
The rule does not:
(1) Have an annual affect to the economy in excess of $100 million
or more or adversely affect in a material way the economy; a section of
the economy; productivity; competition; jobs; the environment; public
health or safety; or State, local or tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another Agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs, or the rights and obligations of
recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
these Executive Orders.
Additionally, participation in the CRAF program is voluntary. All
willing carriers meeting the technical requirements of CRAF will
receive a contract. The final rule does not add additional requirements
to those that have been historically required by the CRAF contract and
ratemaking process. The final rule clarifies existing and historical
procedures utilized by USTRANSCOM for carriers participating in the
CRAF program.
Unfunded Mandates Reform Act of 1995 (Sec. 202, Pub. L. 104-4)
It has been certified that this rule does not contain a Federal
mandate that may result in the expenditure by State, local and tribal
governments, in aggregate, or by the private sector, of $100 million or
more in any one year.
Public Law 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601 et
seq.)
DoD certifies this final 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
does not change or add any policies or procedures. This rule merely
implements Section 366 of the National Defense Authorization Act for
Fiscal Year 2012 (Pub. L. 112-81) using historically established
ratemaking methodologies and procedures. According to the most recent
records, there are 28 certified civilian air carriers willing to
participate in the CRAF program for FY2013, of which 12 qualify as
small businesses. Because the rule does not change or add any policies
or procedures there is not a significant economic impact on a
substantial number of small entities and a regulatory flexibility
analysis was not performed. Furthermore, any airline meeting the CRAF
technical requirements, regardless of business size, will be awarded a
contract with rates of payment prescribed by this rule.
Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 35)
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.
Executive Order 13132 Federalism
Executive Order 13132 requires that Executive departments and
agencies identify regulatory actions that have significant federalism
implications. A regulation has federalism implications if it has
substantial direct effects on the States, on the relationship or
distribution of power between the Federal Government and the States, or
on the distribution of power and responsibilities among various levels
of government.
The provisions of this part, as required by 10 U.S.C. 9511a, have
no substantial direct effect on the States, on the relationship or
distribution of power between the Federal Government and the States, or
on the distribution of power and responsibilities among various levels
of government. Therefore, the Department has determined that the
proposed part has no federalism implications that warrant the
preparation of a Federalism Assessment in accordance with Executive
Order 13132.
[[Page 30358]]
List of Subjects in 32 CFR Part 243
Air fleet, Armed forces reserves, Contracts.
For the reasons set forth in the preamble, Title 32, Code of
Federal Regulations is amended by adding part 243 to read as follows:
PART 243--DEPARTMENT OF DEFENSE RATEMAKING PROCEDURES FOR CIVIL
RESERVE AIR FLEET CONTRACTS
Sec.
243.1 Purpose.
243.2 Applicability.
243.3 Definitions.
243.4 Ratemaking procedures for Civil Reserve Air Fleet contracts.
243.5 Commitment of aircraft as a business factor.
243.6 Exclusions from the uniform negotiated rate.
243.7 Inapplicable provisions of law.
243.8 Application of FAR cost principles.
243.9 Carrier site visits.
243.10 Disputes.
243.11 Appeals of USTRANSCOM Contracting Officer Decisions regarding
rates.
243.12 Required records retention.
Authority: Section 366 National Defense Authorization Act for
FY12 (Pub. L. 112-81)
10 U.S.C. Chap 931, Section 9511a.
Sec. 243.1 Purpose.
The Secretary of Defense (Secretary) is required to determine a
fair and reasonable rate of payment for airlift services provided to
the Department of Defense (DoD) by civil air carriers and operators
(hereinafter collectively referred to as ``air carriers'') who are
participants in the Civil Reserve Air Fleet program (CRAF). This
regulation provides the authority and methodology for such ratemaking
and designates the United Stated Transportation Command (USTRANSCOM) as
the rate setter for negotiated uniform rates for DoD airlift service
contracts in support of the CRAF. This methodology supports a viable
CRAF mobilization base that ensures sufficient capacity in time of war,
contingency and humanitarian relief efforts.
Sec. 243.2 Applicability.
This section governs all contracts with the Department of Defense
where awards to the air carriers, either through individual contracts
or teaming arrangements, are commensurate with the relative amount of
airlift capability committed to the Civil Reserve Air Fleet (CRAF).
Sec. 243.3 Definitions.
Air carrier. ``Air carrier'' is defined in 49 U.S.C. 40102(a)(2) as
``a citizen of the United States undertaking by any means, directly or
indirectly, to provide air transportation.'' Specifically to this
ratemaking procedure, individuals or entities that operate commercial
fixed and rotary wing aircraft in accordance with the Federal Aviation
Regulations (14 CFR chapter I) or equivalent regulations issued by a
country's Civil Aviation Authority (CAA) and which provide air
transportation services are included. Commercial air carriers under
contract with, or operating on behalf of, the DoD shall have a Federal
Aviation Administration (FAA) or CAA certificate. The policy contained
in this directive applies only to air carriers operating fixed wing
aircraft under CRAF international airlift services.
Aircraft class. Distinct categories of aircraft with similar broad
characteristics established for ratemaking purposes. These categories
include aircraft such as large passenger, medium passenger, large
cargo, etc. They are determined by USTRANSCOM and identified in
Published Uniform Rates and Rules for International Service Appendix A
(Published in FedBizOps).
Civil Reserve Air Fleet International Airlift Services. Those
services provided in support of the Civil Reserve Air Fleet contract,
whereby contractors provide personnel, training, supervision,
equipment, facilities, supplies and any items and services necessary to
perform international long-range and short-range airlift services
during peacetime and during CRAF activation in support of the
Department of Defense (DoD). Implements the Fly CRAF Act. See 49 U.S.C.
41106.
Civil Reserve Air Fleet (CRAF) Assured Business Guarantees. See 10
U.S.C. 9515.
Civil Reserve Air Fleet (CRAF) Program. The Civil Reserve Air Fleet
(CRAF) is a wartime readiness program, based on the Defense Production
Act of 1950, as amended, (50 U.S.C. App. 2601 et seq.), and Executive
Order 13603 (National Defense Resource Preparedness), March 16, 2012,
to ensure quantifiable, accessible, and reliable commercial airlift
capability to augment DoD airlift and to assure a mobilization base of
aircraft available to the Department of Defense for use in the event of
any level of national emergency or defense-orientated situations. As a
readiness program, CRAF quantifies the number of passenger and cargo
commercial assets required to support various levels of wartime
requirements and thus allows DoD to account for their use when
developing and executing contingency operations/war plans. The CRAF is
composed of U.S. registered aircraft owned or controlled by U.S. air
carriers specifically allocated (by FAA registration number) for this
purpose by the Department of Transportation. As used herein, CRAF
aircraft are those allocated aircraft, which the carrier owning or
otherwise controlling them, has contractually committed to the DoD,
under stated conditions, to meet varying emergency needs for civil
airlift augmentation of the military airlift capability. The
contractual commitment of the aircraft includes the supporting
resources required to provide the contract airlift. In return for a
commitment to the CRAF program, airlines are afforded access to day-to-
day business under various DoD contracts.
Historical Costs. Those allowable costs for airlift services for a
12 month period, gathered from Department of Transportation (DOT)
Uniform System of Accounts and Reports (USAR) (hereinafter referred to
as ``Form 41'') reporting (required by 14 CFR parts 217 and 241).
Long-range aircraft. Aircraft equipped with navigation,
communication, and life support systems/emergency equipment required to
operate in trans-oceanic airspace, and on international routes, for a
minimum distance of 3,500 nautical miles, while carrying a productive
payload (75 percent of the maximum payload it is capable of carrying.)
Additionally aircraft must be equipped and able to operate worldwide
(e.g. in EUROCONTROL and North Atlantic Minimum Navigation Performance
Specification airspace and possess the applicable VHF, Mode-S, RNP, and
RVSM communication and navigation capabilities.)
Memorandum of Understanding with attachment (MOU). A written
agreement between certificated air carriers willing to participate in
the CRAF program and USTRANSCOM with the purpose of establishing
guidelines to facilitate establishment of rates for airlift services
(e.g. passenger, cargo, combi, and aeromedical evacuation.)
Operational data. Those statistics that are gathered from DOT Form
41 reporting, USTRANSCOM reported monthly round trip (S-1) and one-way
(S-2) mileage reports, monthly fuel reports or other data deemed
necessary by the USTRANSCOM contracting officer.
Participating carriers. Any properly certified and DoD approved air
carrier in the CRAF program which complies with the conditions of the
MOU and executes a USTRANSCOM contract.
Projected rates. The estimated rates proposed by carriers based
upon historical cost and operational data as
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further described in Sec. 243.4(a) through (g).
Ratemaking methodologies. The methodologies agreed to by USTRANSCOM
and air carriers in the MOU for the treatment of certain cost elements
to determine the estimated price for the DoD for airlift services.
Short-range aircraft. Aircraft equipped for extended over-water
operations and capable of flying a minimum distance of 1,500 nautical
miles while carrying a productive payload (75 percent of the maximum
payload it is capable of carrying).
Sec. 243.4 Ratemaking procedures for Civil Reserve Air Fleet
contracts.
The ratemaking procedures contained within this section apply only
to Airlift Service contracts awarded based on CRAF commitment.
Competitively awarded contracts may be used by the Department of
Defense when it considers such contracts to be in the best interest of
the government. See Sec. Sec. 243.5(b) and 243.6 for exclusions to
ratemaking.
(a) Rates of payment for airlift services. USTRANSCOM may utilize
the principles contained in the Federal Acquisition Regulation (FAR),
as supplemented, in establishing fair and reasonable rate of payments
for airlift service contracts in support of CRAF. Specific exceptions
to FAR are noted in Sec. 243.8 of this rule. To facilitate uniformity
within the ratemaking process, USTRANSCOM will execute a MOU with air
carriers to institute the basis for methods upon which the rates will
be established. An updated MOU will be executed as warranted and
published for public comment on FedBizOps. Under the MOU, air carriers
agree to furnish historical cost and operational data, as well as their
projected rates for the ensuing fiscal year. USTRANSCOM will conduct a
review of air carriers' historical and projected costs and negotiate
with the carriers to establish rates using ratemaking methodologies
contained in the attachment to the MOU.
(b) Obtaining data from participating carriers. USTRANSCOM will
annually notify those participating carriers to provide data using the
USTRANSCOM cost package and related instructions. The data provided
includes pricing data, cost data, and judgmental information necessary
for the USTRANSCOM contracting officer to determine a fair and
reasonable price or to determine cost realism. Carriers will be
provided 60 calendar days to act upon the request.
(c) Analysis. (1) USTRANSCOM will consider carrier reported DOT
Form 41 costs as well as other applicable costs directly assigned to
performance in USTRANSCOM service. These costs will be reviewed and
analyzed by USTRANSCOM for allowability, allocability, and
reasonableness. Costs may also be audited by the Defense Contract Audit
Agency (DCAA), as necessary, in accordance with the DCAA Contract Audit
Manual 7640.01.
(2) To determine allocation of these costs to USTRANSCOM service,
USTRANSCOM considers carrier reported DOT Form 41 operational data, as
well as USTRANSCOM S-1, S-2 mileage reports, fuel reports, and other
relevant information requested by the contracting officer.
(d) Rates. Rates will be determined by aircraft class (e.g. large
passenger, medium passenger, large cargo, etc.) based on the average
efficiency of all participating carriers within the specified class.
Application of these rates, under varying conditions (e.g. ferry, one-
way, etc), are addressed in the Final Rates published in accordance
with Sec. 243.4(h).
(e) Components of the rate--(1) Return on Investment (ROI). ROI for
USTRANSCOM service is intended to adequately compensate carriers for
cost of capital. USTRANSCOM will apply a minimum return applied to the
carrier's total operating costs. If a full return on investment applied
to a carrier's capital investment base is provided in the MOU, the
carrier will receive whichever is greater.
(i) Full ROI. The full ROI will be computed using an optimal
capital structure of 45 percent debt and 55 percent equity. The cost-
of-debt and cost-of-equity are calculated from revenues of major
carriers as reported to the Department of Transportation.
(A) Cost-of-Debt (COD). COD will be calculated considering the Risk
Free Rate (RFR) plus the weighted debt spread, with the formula as
agreed upon in the MOU.
(B) Cost-of-Equity (COE). COE will be determined by a formula
agreed upon in the MOU, which considers RFR, weighted betas, annualized
equity risk premium and a future expected return premium.
(C) Owned/Capital/Long-Term Leased Aircraft. New airframes and
related support parts will receive full ROI on the net book value of
equipment at mid-point of forecast year. USTRANSCOM will apply the
economic service life standards to aircraft as indicated in paragraph
(e)(2) of this section.
(D) Short-term leased aircraft. As a return on annual lease
payments, short-term leased equipment will receive the Full ROI less
the cost of money rate per the Secretary of the Treasury under Public
Law 92-41 (85 Stat. 97), as provided by the Office of Management and
Budget, in accordance with the MOU.
(E) Working capital. Working capital will be provided in the
investment base at an established number of days provided in the MOU.
The investment base will be computed on total operating cash less non
cash expenses (depreciation) as calculated by USTRANSCOM.
(ii) Minimum Return. USTRANSCOM will determine minimum return
utilizing the Weighted Guidelines methodology as set forth in DFARS
Subpart 215.4, Contract Pricing, or successor and as provided in the
MOU.
(2) Depreciation. USTRANSCOM will apply economic life standards for
new aircraft at 14 years, 2 percent residual (narrowbody) and 16 years
and 10 percent residual (widebody) aircraft. USTRANSCOM will apply
economic life standards for used aircraft as indicated in the MOU.
(3) Utilization. Utilization considers the number of airborne hours
flown per aircraft per day. USTRANSCOM will calculate aircraft
utilization in accordance with the DOT Form 41 reporting and the MOU.
(4) Cost escalation. Escalation is the percentage increase or
decrease applied to the historical base year costs to reliably estimate
the cost of performance in the contract period. Yearly cost escalation
will be calculated in accordance with the MOU.
(5) Weighting of rate. Rates will be weighted based upon the direct
relationship between contract performance and cost incurred in
execution of the contract. The specific weighting will be as defined in
the MOU.
(6) Obtaining data from participating carriers. Carriers
participating in USTRANSCOM acquisitions subject to ratemaking shall
provide, other than certified cost and pricing data for USTRANSCOM,
rate reviews as required in the MOU.
(f) Contingency rate. Authority is reserved to the Commander,
USTRANSCOM, at his discretion, during conditions such as outbreak of
war, armed conflict, insurrection, civil or military strife, emergency,
or similar conditions, to use a temporary contingency rate in order to
ensure mission accomplishment. Any such temporary rate would terminate
at the Commander's discretion upon his determination that such rate is
no longer needed.
(g) Proposed rate. Once the data is analyzed and audit findings
considered,
[[Page 30360]]
USTRANSCOM will prepare a package setting forth proposed airlift rates
and supporting data. The proposed rates will be approved by the
USTRANSCOM contracting officer and posted publicly on FedBizOps for
comment. The comment period will be as specified in the proposed rate
package.
(h) Final rate. Upon closing of the comment period, comments and
supporting rationale will be addressed and individual negotiations
conducted between USTRANSCOM and the air carriers. After negotiations
have concluded, USTRANSCOM will prepare a rate package setting forth
final airlift rates for each aircraft class, along with supporting data
consisting of individual carrier cost elements. Comments and
disposition of those comments will be included in the final rate
package. The final rates will be approved by the USTRANSCOM contracting
officer and publicly posted on FedBizOps for use in the ensuing
contract.
Sec. 243.5 Commitment of aircraft as a business factor.
For the purpose of rate making, the average fleet cost of aircraft
proposed by the carriers for the forecast year is used. Actual awards
to CRAF carriers are based upon the aircraft accepted into the CRAF
program. The Secretary may, in determining the quantity of business to
be received under an airlift services contract for which the rate of
payment is determined in accordance with subsection (a) of 10 U.S.C.
9511a, use as a factor the relative amount of airlift capability
committed by each air carrier to the CRAF.
(a) Adjustments in commitment to target specific needs of the
contract period. The amount of business awarded in return for
commitment to the program under a CRAF contract may be adjusted prior
to the award of the contract to reflect increased importance of
identified aircraft categories (e.g., Aeromedical Evacuation) or
performance factors (e.g., flyer's bonus, superior on-time performers,
etc.). These adjustments will be identified in the solicitation.
(b) Exclusions of categories of business from commitment based
awards. Where adequate competition is available and USTRANSCOM
determines some part of the business is more appropriate for award
under competitive procedures, the rate-making will not apply. Changes
to areas of business will be reflected in the solicitation.
Sec. 243.6 Exclusions from the uniform negotiated rate.
Domestic CRAF is handled differently than international CRAF in
that aircraft committed does not factor into the amount of business
awarded during peacetime. If domestic CRAF is activated, carriers will
be paid in accordance with pre-negotiated prices that have been
determined fair and reasonable, not a uniform rate.
Sec. 243.7 Inapplicable provisions of law.
An airlift services contract for which the rate of payment is
determined in accordance with subsection (a) of 10 U.S.C. 9511a shall
not be subject to the provisions of 10 U.S.C. 2306a, or to the
provisions of subsections (a) and (b) of 41 U.S.C. 1502. Specifically,
contracts establishing rates for services provided by air carriers who
are participants in the CRAF program are not subject to the cost or
pricing data provision of the Truth in Negotiations Act (10 U.S.C.
2306a) or the Cost Accounting Standards (41 U.S.C. 1502). CRAF carriers
will, however, continue to submit data in accordance with the MOU and
the DOT, Form 41.
Sec. 243.8 Application of FAR cost principles.
In establishing fair and reasonable rate of payments for airlift
service contracts in support of CRAF, USTRANSCOM, in accordance with10
U.S.C. 9511a, procedures differ from the following provisions of FAR
Part 31 and DFARS Part 231, as supplemented:
FAR 31.202, Direct Costs
FAR 31.203, Indirect Costs
FAR 31.205-6, Compensation for Personal Services, subparagraphs (g),
(j), and (k)
FAR 31.205-10, Cost of Money
FAR 31.205-11, Depreciation
FAR 31.205-18, Independent Research and Development and Bid and
Proposal Costs
FAR 31.205-19, Insurance and Indemnification
FAR 31.205-26, Material Costs
FAR 31.205-40, Special Tooling and Special Test Equipment Costs
FAR 31.205-41, Taxes
DFARS 231.205-18, Independent research and development and bid and
proposal costs
Sec. 243.9 Carrier site visits.
USTRANSCOM may participate in carrier site visits, as required to
determine the reasonableness or verification of cost and pricing data.
Sec. 243.10 Disputes.
Carriers should first address concerns to the ratemaking team for
resolution. Ratemaking issues that are not resolved to the carrier's
satisfaction through discussions with the ratemaking team may be
directed to the USTRANSCOM contracting officer.
Sec. 243.11 Appeals of USTRANSCOM Contracting Officer Decisions
regarding rates.
If resolution of ratemaking issues cannot be made by the USTRANSCOM
contracting officer, concerned parties shall contact the USTRANSCOM
Ombudsman appointed to hear and facilitate the resolution of such
concerns. In the event a ratemaking issue is not resolved through the
ombudsman process, the carrier may request a final agency decision from
the Director of Acquisition, USTRANSCOM.
Sec. 243.12 Required records retention.
The air carrier is required to retain copies of data submitted to
support rate determination for a period identified in Subpart 4.7 of
the Federal Acquisition Regulation, Contractor Records Retention.
Dated: May 21, 2015.
Aaron Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2015-12825 Filed 5-27-15; 8:45 am]
BILLING CODE 5001-06-P