Proposed Rule2022-26691
Defense Federal Acquisition Regulation Supplement: Payment Instructions (DFARS Case 2017-D036)
Primary source
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Published
December 16, 2022
Issuing agencies
Defense DepartmentDefense Acquisition Regulations System
Abstract
DoD is proposing to amend 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.
Full Text
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<title>Federal Register, Volume 87 Issue 241 (Friday, December 16, 2022)</title>
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[Federal Register Volume 87, Number 241 (Friday, December 16, 2022)]
[Proposed Rules]
[Pages 77053-77055]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-26691]
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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 Regulation 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) to provide payment instructions for
certain contracts based on the type of item acquired and the type of
payment.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before February 14, 2023, to be
considered in the formation of a final rule.
ADDRESSES: Submit comments in response to DFARS Case 2017-D036 by any
of the following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Search for ``DFARS Case 2017-D036''. Select ``Comment Now'' and follow
the instructions provided to submit a comment. Please include ``DFARS
Case 2017-D036'' on any attached document.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#503f23347e3436312223103d31393c7e3d393c"><span class="__cf_email__" data-cfemail="88e7fbeca6eceee9fafbc8e5e9e1e4a6e5e1e4">[email protected]</span></a>. Include DFARS Case 2017-D036 in
the subject line of the message.
Comments received generally will be posted without change to
<a href="https://www.regulation.gov">https://www.regulation.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: Mr. David E. Johnson, telephone 202-
913-5764.
SUPPLEMENTARY INFORMATION:
I. Background
DoD is proposing to amend the DFARS to provide payment instructions
for certain contracts based on the type of payment and item acquired.
The proposed rule would require separate progress payment requests in
order to segregate foreign military sales (FMS) and U.S. line items in
progress payment requests. In addition, the proposed rule provides
procedures for structuring progress payment requests for contracts with
multiple production lots.
The proposed rule consists of clarifications that require no
additional effort by large or small entities. The rule provides
contracting officers and contractors clearer instruction on information
to include in payment instructions and payment requests for multiple
lot purchases and combined FMS/U.S. acquisitions.
II. Discussion and Analysis
A review of Procurement Data Standard validation results has shown
that contracting officers are not consistently inserting required
payment instructions into contracts. Further, the Defense Finance and
Accounting Service (DFAS) reported that the payment instructions, if
inserted, are often not appropriate for the given contract. Upon
review, DoD found that the appropriate accounting treatment for
payments can be determined by the type of payment and item acquired. In
addition, DoD recognized the need to establish procedures for
structuring progress payment requests for contracts with multiple
production lots.
DFARS 204.7109, Contract clauses, and the clause at DFARS 252.204-
7006, Billing Instructions, are being amended to change the
applicability of contractor cost vouchers to cost-reimbursable, time-
and-material, and labor-hour contracts. The clause applicability was
revised to align with payment instruction procedures provided in DFARS
Procedures, Guidance, and Information 204.7108(b)(3). DFARS 252.204-
7006, Billing Instructions, clause title is also revised to ``Billing
Instructions-Cost Vouchers''.
The following revisions have been made to simplify the contracting
officer's instructions to the payment office for progress payment
funding allocations: DFARS 232.502-4-70, Additional clauses, and the
new clause at 252.232-70XX, Progress Payments-Multiple Lots, provide
the procedures for submitting progress payments for contracts with
multiple production lots. In addition, DFARS 252.232-7002, Progress
Payments for Foreign Military Sales Acquisitions, is revised to clarify
the requirement for submitting separate progress payment requests for
FMS and U.S. contract line items.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT), for Commercial Services, and for Commercial Products,
Including Commercially Available Off-the-Shelf (COTS) Items
The proposed 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 and 252.232-7002, and adding a new clause
at 252.232-70XX. DoD plans to apply all three clauses to solicitations
and contracts at or below the SAT. This rule does not apply 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 with regard
to payment instructions. This proposed rule clarifies the payment
instruction language in the DFARS. The clarifications in this proposed
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 Order 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
[[Page 77054]]
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.
However, an initial regulatory flexibility analysis has been performed
and is summarized as follows:
The purpose of this proposed 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 proposed rule will promote consistency with
generally accepted accounting principles and reduce data errors created
by manual entry of payment instructions in the payment systems.
The objective of the proposed rule is to clarify payment
instructions. The proposed rule includes clarifications to procedures
for billing instructions when submitting cost vouchers and progress
payment requests. The proposed rule clarifies instructions to
contractors in the clauses at DFARS 252.204-7006, Billing Instructions,
and 252.232-7002, Progress Payments for Foreign Military Sales
Acquisitions. The proposed rule also includes a new contract clause at
252.232-70XX, Progress Payments--Multiple Lots. The legal basis for the
rule is 41 U.S.C. 1707.
The proposed rule will apply to all small entities that will be
awarded cost-reimbursement, time-and-material, or labor-hour contracts.
However, the proposed rule requires negligible additional effort by
contractors, including small entities, and 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 2017 through 2019, approximately 446,845 cost-
reimbursement, time-and-material, and labor-hour contracts (60 percent
of all awards) are awarded to 29,022 small businesses (60 percent of
all awardees) each year. This proposed 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.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
There are no known, significant, alternative approaches to the
proposed rule that would meet the objectives of the rule.
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 2017-D036), in
correspondence.
VIII. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies to this
rule regarding new DFARS clause 252.232-70XX, 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 proposed to be
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).
The addition reads as follows:
232.502-4-70 Additional clauses.
* * * * *
(c) Use the clause at 252.232-70XX, 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 title, 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 (Date)
* * * * *
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:
[[Page 77055]]
Progress Payments for Foreign Military Sales Acquisitions (Date)
If this contract includes foreign military sales (FMS)
requirements, the Contractor shall--
(a) Submit a separate progress payment request 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), subcontractor progress payments, 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 252.232-70XX to read as follows:
252.232-70XX Progress Payments--Multiple Lots.
As prescribed in 232.502-4-70(c), use the following clause:
Progress Payments--Multiple Lots (Date)
(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 clause 252.232-7002, Progress 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 progress payments,
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 clause 252.232-7002, Progress
Payments for Foreign Military Sales Acquisitions, of this contract.
(End of clause)
[FR Doc. 2022-26691 Filed 12-15-22; 8:45 am]
BILLING CODE 5001-06-P
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</html>Indexed from Federal Register on December 16, 2022.
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