Rule2023-11138
Defense Federal Acquisition Regulation Supplement: Payment Instructions (DFARS Case 2017-D036)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 25, 2023
Effective
May 25, 2023
Issuing agencies
Defense DepartmentDefense Acquisition Regulations System
Abstract
DoD is issuing a final rule amending 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 88 Issue 101 (Thursday, May 25, 2023)</title>
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[Federal Register Volume 88, Number 101 (Thursday, May 25, 2023)]
[Rules and Regulations]
[Pages 33831-33834]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-11138]
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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 Regulations System, Department of Defense
(DoD).
[[Page 33832]]
ACTION: Final rule.
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SUMMARY: DoD is issuing a final rule amending 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: Effective May 25, 2023.
FOR FURTHER INFORMATION CONTACT: Mr. David E. Johnson, telephone 202-
913-5764.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 87 FR
77053 on December 16, 2022, to amend the DFARS to provide payment
instructions for certain contracts based on the type of item acquired
and the type of payment. Two respondents submitted comments in response
to the proposed rule.
II. Discussion and Analysis
DoD reviewed the public comments in the development of the final
rule. A discussion of the comments and the changes made to the rule as
a result of those comments is provided, as follows:
A. Summary of Significant Changes From the Proposed Rule
Language in the clause at DFARS 252.232-7002, Progress Payments for
Foreign Military Sales Acquisitions, is changed for clarity. The term
``subcontractor progress payments'' is changed to ``subcontract
financing'' in the clauses at DFARS 252.232-7002, paragraph (d), and
252.232-7018, Progress Payments--Multiple Lots, paragraph (b)(4).
B. Analysis of Public Comments
1. Data Underlying the Proposed Rule
Comment: One respondent inquired about the set of data that
underlies the proposed rule and whether such data adequately supports
the proposed rule.
Response: Such data has not been published for public comment, but
it was gathered in the normal course of compiling operational
statistics relating to the manual entry of payment instructions in DoD
payment systems. This rule standardizes payment instructions and
therefore eliminates the need for such manual entry. This in turn
eliminates the possibility of both data-entry errors and application of
incorrect payment instructions.
2. Possible Ambiguity in Instructions for Progress Payment Requests
Comment: One respondent inquired whether paragraph (a) of the
clause at DFARS 252.232-7002, Progress Payments for Foreign Military
Sales Acquisitions, requires separate submission of foreign military
sales (FMS) progress payment requests combined with U.S. sales progress
payment requests, or rather that the clause requires submission of FMS
progress payment requests separate from U.S. ones.
Response: The intent is for FMS progress payment requests to be
submitted separately from U.S. sales progress payment requests. The
language in the clause at DFARS 252.232-7002 has been clarified in the
final rule.
3. Prescription for the Clause at DFARS 252.232-70XX
Comment: One respondent inquired whether the prescription for the
clause at DFARS 252.232-70XX, Progress Payments--Multiple Lots, should
explicitly limit application of the clause to fixed price contracts.
Response: In accordance with Federal Acquisition Regulation
32.500(a), only fixed-price contracts may provide for progress
payments. The prescription limits application of the clause at DFARS
252.232-7018 to contracts that provide for progress payments. DoD
therefore declines the suggested change as unnecessary.
4. References to ``Subcontractor Progress Payments''
Comment: One respondent recommends changing the term
``subcontractor progress payments'' to ``subcontract financing'' in the
clauses at DFARS 252.232-7002(d) and 252.232-70XX(b)(4) to better align
with relevant language in the Federal Acquisition Regulation.
Response: In the final rule, the term ``subcontractor progress
payments'' is changed to ``subcontract financing'' in the clauses at
DFARS 252.232-7002, paragraph (d), and 252.232-7018, paragraph (b)(4).
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Services, and for Commercial
Products, Including Commercially Available Off-the-Shelf (COTS) Items
This 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, Billing Instructions--Cost Vouchers, and 252.232-
7002, Progress Payments for Foreign Military Sales Acquisitions.
Application of these clauses to contracts at or below the SAT and to
commercial services, commercial products, and COTS items is unchanged.
This final rule adds a new clause at 252.232-7018, Progress Payments--
Multiple Lots. DoD will apply this clause to solicitations and
contracts at or below the SAT and will not apply the clause 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 regarding
payment instructions. This rule clarifies the payment instruction
language in the DFARS. The clarifications in this 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 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.
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. The Office of
Information and Regulatory Affairs has determined that this rule is not
a major rule as defined by 5 U.S.C. 804.
VII. Regulatory Flexibility Act
A final regulatory flexibility analysis (FRFA) has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
The FRFA is summarized as follows:
[[Page 33833]]
The purpose of this 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 rule will promote
consistency with generally accepted accounting principles and reduce
data errors created by manual entry of payment instructions in the
payment systems.
No public comments were received in response to the initial
regulatory flexibility analysis.
The rule will apply to all small entities that will be awarded
cost-reimbursement, time-and-material, or labor-hour contracts.
However, the rule requires negligible additional effort by contractors,
including small entities, because 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 2020 through 2022, approximately 6,800 cost-
reimbursement, time-and-material, and labor-hour contracts (0.01%
percent of all awards) are awarded to approximately 1,100 small
businesses (3 percent of all awardees) each year. This 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.
There are no known, significant, alternative approaches to the rule
that would meet the objectives of the rule.
VIII. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies to this
rule regarding new DFARS clause 252.232-7018, 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 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) to read as
follows:
232.502-4-70 Additional clauses.
* * * * *
(c) Use the clause at 252.232-7018, 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 heading, 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 (May 2023)
* * * * *
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:
Progress Payments for Foreign Military Sales Acquisitions (May 2023)
If this contract includes foreign military sales (FMS)
requirements, the Contractor shall--
(a) Submit separate progress payment requests 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), subcontract financing, 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 252.232-7018 to read as follows:
252.232-7018 Progress Payments--Multiple Lots.
As prescribed in 232.502-4-70(c), use the following clause:
Progress Payments--Multiple Lots (May 2023)
(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 (DFARS) clause 252.232-7002, Progress
[[Page 33834]]
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 financing, 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 DFARS clause 252.232-7002,
Progress Payments for Foreign Military Sales Acquisitions, of this
contract.
(End of clause)
[FR Doc. 2023-11138 Filed 5-24-23; 8:45 am]
BILLING CODE 5001-06-P
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</html>Indexed from Federal Register on May 25, 2023.
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