Proposed Rule2022-23280
Defense Federal Acquisition Regulation Supplement: Undefinitized Contract Actions (DFARS Case 2021-D003)
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Published
October 28, 2022
Issuing agencies
Defense DepartmentDefense Acquisition Regulations System
Abstract
DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) as recommended by the DoD Inspector General to refine the management of undefinitized contract actions.
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<title>Federal Register, Volume 87 Issue 208 (Friday, October 28, 2022)</title>
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[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Proposed Rules]
[Pages 65507-65509]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-23280]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 215, 217, and 252
[Docket DARS-2022-0026]
RIN 0750-AL22
Defense Federal Acquisition Regulation Supplement: Undefinitized
Contract Actions (DFARS Case 2021-D003)
AGENCY: Defense Acquisition Regulations 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) as recommended by the DoD Inspector
General to refine the management of undefinitized contract actions.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before December 27, 2022, to be
considered in the formation of a final rule.
ADDRESSES: Submit comments identified by DFARS Case 2021-D003, using
any of the following methods:
[cir] Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Search for ``DFARS Case 2021-D003.'' Select ``Comment'' and follow the
instructions to submit a comment. Please include your name, company
name (if any), and ``DFARS Case 2021-D003'' on any attached documents.
[cir] Email: <a href="/cdn-cgi/l/email-protection#91fee2f5bff5f7f0e3e2d1fcf0f8fdbffcf8fd"><span class="__cf_email__" data-cfemail="c8a7bbace6acaea9babb88a5a9a1a4e6a5a1a4">[email protected]</span></a>. Include DFARS Case 2021-D003 in
the subject line of the message.
Comments received generally will be posted without change to
<a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal information
provided. To confirm receipt of your comment(s), please check <a href="https://www.regulations.gov">https://www.regulations.gov</a>, approximately two to three days after submission
to verify posting.
FOR FURTHER INFORMATION CONTACT: David E. Johnson, telephone 202-913-
5764.
SUPPLEMENTARY INFORMATION:
I. Background
DoD is proposing to revise the DFARS to implement recommendations
to refine management of undefinitized contract actions (UCAs) as
addressed in the DoD Inspector General Audit of Military Department
Management of Undefinitized Contract Actions (Report No. DODIG-2020-
084). This report recommends changes to the DFARS to encourage
contractors to provide timely qualifying proposals, including the
possibility of the Government withholding a percentage of payments yet
to be paid under a UCA until it receives a qualifying proposal from the
contractor.
This proposed rule reinforces the contracting officer's existing
authority, notwithstanding FAR 52.216-26, Payments of Allowable Costs
Before Definitization, to withhold up to 5 percent of all subsequent
financing requests or take other appropriate actions when the
contractor does not submit qualifying proposals in accordance with the
contract definitization schedule. DoD contracting officers will
appropriately document contract files and apply contract risk factors
on DD Form 1547, Record of Weighted Guidelines, under this proposed
rule.
II. Discussion and Analysis
DFARS 215.404-71-3, Contract type risk and working capital
adjustment, generally regards the contract type risk to be in the low
end of the designated range when costs have been incurred prior to
definitization. This proposed rule adds, at 215.404-71-3, paragraph
(d)(2)(i), that when considering the reduced cost risks associated with
allowable incurred costs on an undefinitized contract action, it is
appropriate to apply separate contract risk factors for allowable
incurred costs and estimated costs to complete when completing the
contract risk factors section of DD Form 1547, Record of Weighted
Guidelines.
DFARS subpart 217.74 prescribes policies and procedures for the
management and oversight of undefinitized contract actions and related
approval requirements. DFARS 217.7404-3(b) currently states that if the
contractor does not submit a timely qualifying proposal, the
contracting officer may suspend or reduce progress payments or take
other appropriate action. This proposed rule revises the withholding
guidance to specify ``an amount necessary to protect the interests of
the Government, not to exceed 5 percent of all subsequent financing
requests,'' if the qualifying proposal is not submitted in accordance
with the contract definitization schedule. This proposed rule provides
examples of other appropriate actions to include documenting the
noncompliance in the contractor's past performance evaluation or
terminating the contract for default. This proposed rule adds that
contracting officers must ensure contract files are documented with
justification for withholding or not withholding payments when the
qualifying proposal was not submitted in accordance with the contract
definitization schedule.
This proposed rule adds to the clause at DFARS 252.217-7027,
Contract Definitization, that failure to meet the qualifying proposal
date in the contract definitization schedule could result in the
Government withholding an amount of up to 5 percent of all subsequent
requests for financing until the contracting officer determines that a
proposal is qualifying.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Services and Commercial Products,
Including Commercially Available Off-the-Shelf (COTS) Items
This rule amends the clause at DFARS 252.217-7027, Contract
Definitization. However, this rule does not impose any new requirements
on contracts at or below the SAT or for commercial services or
commercial products, including COTS items. The clause will continue to
not apply to acquisitions at or below the SAT and to acquisitions of
commercial services and commercial products, including COTS items.
IV. Expected Impact of the Rule
The proposed rule will incentivize contractors to submit qualifying
proposals according to the contract definitization schedule to avoid
the withholding of an amount of up to 5 percent of all subsequent
financing requests. DoD contracting officers will be required to
consider applying separate and differing contract risk factors to costs
incurred and estimated costs to complete, when completing the DD Form
1547, Record of Weighted Guidelines. Contracting officers will also be
required to document the contract file to show justification for
withholding or not withholding a portion of financing payment when the
qualifying proposal was not submitted according to the contract
definitization schedule.
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
[[Page 65508]]
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. 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.,
because no additional administrative burdens will be placed on small
entities. However, an initial regulatory flexibility analysis has been
performed and is summarized as follows:
DoD is proposing to amend the Defense Federal Acquisition
Regulation Supplement (DFARS) as recommended by the DoD Inspector
General Audit of Military Department Management of Undefinitized
Contract Actions (Report No. DODIG-2020-084) to refine the management
of undefinitized contract actions. This report recommends changes to
the DFARS to encourage contractors to provide timely qualifying
proposals, including the possibility of the Government withholding a
percentage of payments yet to be paid under an undefinitized contract
action until it receives a qualifying proposal from the contractor.
This proposed rule incentivizes contractors to submit qualifying
proposals in accordance with the contract definitization schedule; and,
notwithstanding FAR 52.216-26, Payments of Allowable Costs Before
Definitization, allows contracting officers to withhold an amount
necessary to protect the interests of the Government, not to exceed 5
percent of all subsequent financing requests, or take other appropriate
actions if a qualifying proposal is not submitted in accordance with
the contract definitization schedule. Contracting officers will
document in the contract file the justification for withholding or not
withholding payments if the qualifying proposal was not submitted in
accordance with the contract definitization schedule. This proposed
rule clarifies that, when considering the reduced cost risks associated
with allowable incurred costs on an undefinitized contract action, it
is appropriate to apply separate and differing contract risk factors
for allowable incurred costs and estimated costs to complete when
documenting the contract risk sections of DD Form 1547, Record of
Weighted Guidelines.
The objective of the proposed rule is to implement the
recommendations of the DoD Inspector General. The legal basis for the
rule is 41 U.S.C 1303.
This proposed rule will likely affect small entities that will be
awarded undefinitized contract actions. Data was obtained from the
Procurement Business Intelligence Service (PBIS) for all contracts and
modifications containing DFARS clause 252.217-7027, Contract
Definitization. Data from PBIS revealed DoD awarded a total of 2,162
contracts to 971 small businesses from fiscal year 2019 through fiscal
year 2021, which averages out to 324 small businesses per year.
Therefore, this proposed rule may apply to approximately 324 unique
small entities.
The rule does not impose any new reporting, recordkeeping, or
compliance requirements.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
DoD did not identify any significant alternatives that would
minimize or reduce the significant economic impact on small entities,
because this proposed rule is not expected to have a significant impact
on small entities.
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 2021-D003), in
correspondence.
VIII. Paperwork Reduction Act
This 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 215, 217, and 252
Government procurement.
Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 215, 217, and 252 are proposed to be
amended as follows:
0
1. The authority citation for 48 CFR parts 215, 217, and 252 continues
to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 215--CONTRACTING BY NEGOTIATION
0
2. Amend section 215.404-71-3 by revising paragraph (d)(2)(i) to read
as follows:
215.404-71-3 Contract type risk and working capital adjustment.
* * * * *
(d) * * *
(2) * * *
(i) The contracting officer shall assess the extent to which costs
have been incurred prior to definitization of the contract action (also
see 217.7404-6(a) and 243.204-70-6). When considering the reduced cost
risks associated with allowable incurred costs on an undefinitized
contract action, it is appropriate to apply separate contract risk
factors for allowable incurred costs and estimated costs to complete
when completing the contract risk sections of DD Form 1547, Record of
Weighted Guidelines. When costs have been incurred prior to
definitization, generally regard the contract type risk to be in the
low end of the designated range. If a substantial portion of the costs
has been incurred prior to definitization, the contracting officer may
assign a value as low as zero percent, regardless of contract type.
However, if a contractor submits a qualifying proposal to definitize an
undefinitized contract action and the contracting officer for such
action definitizes the contract after the end of the 180-day period
beginning on the date on which the contractor submitted the qualifying
proposal as defined in 217.7401, the profit allowed on the contract
shall accurately reflect the cost risk of the contractor as such risk
existed on the date the contractor submitted the qualifying proposal.
* * * * *
PART 217--SPECIAL CONTRACTING METHODS
0
3. Amend section 217.7404-3 by revising paragraph (b) to read as
follows:
217.7404-3 Definitization schedule.
* * * * *
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(b)(1) Submission of a qualifying proposal in accordance with the
definitization schedule is a material element of the contract. If the
contractor does not submit a qualifying proposal in accordance with the
contract definitization schedule, notwithstanding FAR 52.216-26,
Payments of Allowable Costs Before Definitization, the contracting
officer may withhold an amount necessary to protect the interests of
the Government, not to exceed 5 percent of all subsequent financing
requests, or take other appropriate actions (e.g., documenting the
noncompliance in the contractor's past performance evaluation or
terminating the contract for default).
(2) Contracting officers shall document in the contract file the
justification for withholding or not withholding payments if the
qualifying proposal was not submitted in accordance with the contract
definitization schedule.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
4. Revise section 252.217-7027 to read as follows:
252.217-7027 Contract definitization.
As prescribed in 217.7406(b), use the following clause:
Contract Definitization (Date)
(a) A ___ [insert specific type of contract action] is
contemplated. The Contractor agrees to begin promptly negotiating
with the Contracting Officer the terms of a definitive contract that
will include--
(1) All clauses required by the Federal Acquisition Regulation
(FAR) on the date of execution of the undefinitized contract action;
(2) All clauses required by law on the date of execution of the
definitive contract action; and
(3) Any other mutually agreeable clauses, terms, and conditions.
(b) The Contractor agrees to submit a ___ [insert type of
proposal; e.g., fixed-price or cost-and-fee] proposal and certified
cost or pricing data supporting its proposal. Notwithstanding FAR
52.216-26, Payments of Allowable Costs Before Definitization,
failure to meet the qualifying proposal date in the contract
definitization schedule could result in the Contracting Officer
withholding an amount up to 5 percent of all subsequent requests for
financing until the Contracting Officer determines that a proposal
is qualifying.
(c) The schedule for definitizing this contract action is as
follows [insert target date for definitization of the contract
action and dates for submission of proposal, beginning of
negotiations, and, if appropriate, submission of the make-or-buy and
subcontracting plans and certified cost or pricing data]:
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(d) If agreement on a definitive contract action to supersede
this undefinitized contract action is not reached by the target date
in paragraph (c) of this clause, or within any extension of it
granted by the Contracting Officer, the Contracting Officer may,
with the approval of the head of the contracting activity, determine
a reasonable price or fee in accordance with FAR subpart 15.4 and
part 31, subject to Contractor appeal as provided in the Disputes
clause. In any event, the Contractor shall proceed with completion
of the contract, subject only to the Limitation of Government
Liability clause.
(1) After the Contracting Officer's determination of price or
fee, the contract shall be governed by--
(i) All clauses required by the FAR on the date of execution of
this undefinitized contract action for either fixed-price or cost-
reimbursement contracts, as determined by the Contracting Officer
under this paragraph (d);
(ii) All clauses required by law as of the date of the
Contracting Officer's determination; and
(iii) Any other clauses, terms, and conditions mutually agreed
upon.
(2) To the extent consistent with paragraph (d)(1) of this
clause, all clauses, terms, and conditions included in this
undefinitized contract action shall continue in effect, except those
that by their nature apply only to an undefinitized contract action.
(e) The definitive contract resulting from this undefinitized
contract action will include a negotiated ___ [insert ``cost/price
ceiling'' or ``firm-fixed price''] in no event to exceed ___ [insert
the not-to-exceed amount].
(End of clause)
[FR Doc. 2022-23280 Filed 10-27-22; 8:45 am]
BILLING CODE 5001-06-P
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