Rule2023-15153
Defense Federal Acquisition Regulation Supplement: Source Restrictions on Auxiliary Ship Components (DFARS Case 2020-D017)
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Published
July 20, 2023
Effective
July 20, 2023
Issuing agencies
Defense DepartmentDefense Acquisition Regulations System
Abstract
DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a section of the National Defense Authorization Act for Fiscal Year 2020 that requires certain auxiliary ship components to be procured from a manufacturer in the national technology and industrial base.
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<title>Federal Register, Volume 88 Issue 138 (Thursday, July 20, 2023)</title>
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[Federal Register Volume 88, Number 138 (Thursday, July 20, 2023)]
[Rules and Regulations]
[Pages 46900-46903]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-15153]
[[Page 46899]]
Vol. 88
Thursday,
No. 138
July 20, 2023
Part III
Department of Defense
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Defense Acquisition Regulations System
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48 CFR Parts 202, 212, 225, et al.
Defense Federal Acquisition Regulations; Final Rules
Federal Register / Vol. 88, No. 138 / Thursday, July 20, 2023 / Rules
and Regulations
[[Page 46900]]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212, 225, and 252
[Docket DARS-2020-0036]
RIN 0750-AL03
Defense Federal Acquisition Regulation Supplement: Source
Restrictions on Auxiliary Ship Components (DFARS Case 2020-D017)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement a section of the
National Defense Authorization Act for Fiscal Year 2020 that requires
certain auxiliary ship components to be procured from a manufacturer in
the national technology and industrial base.
DATES: Effective July 20, 2023.
FOR FURTHER INFORMATION CONTACT: Kimberly Bass, telephone 703-717-3446.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 85 FR
60943 on September 29, 2020, and a correction at 85 FR 65787 on October
16, 2020, to amend the DFARS to implement section 853 of the National
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 (Pub. L.
116-92). Section 853 amends 10 U.S.C. 2534 (now 10 U.S.C. 4864),
Miscellaneous Limitations on the Procurement of Goods Other than United
States Goods, by establishing a limitation on the procurement of large
medium-speed diesel engines for contracts awarded for new construction
of an auxiliary ship, which requires the engines to be manufactured in
the national technology and industrial base. The national technology
and industrial base is defined at 10 U.S.C. 4801(1) to include the
United States, Australia, Canada, New Zealand, and the United Kingdom.
Section 853 also added paragraph (k) to clarify that the term auxiliary
ship does not include an icebreaker or a special mission ship.
All references to 10 U.S.C. 2534 in this final rule preamble and
DFARS text are updated to 10 U.S.C. 4864 to reflect the title 10
transfer accomplished by the final rule for DFARS Case 2022-D018,
Reorganization of Defense Acquisition Statutes, published at 87 FR
76988 and effective December 30, 2022.
One respondent submitted public 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
Changes are made to DFARS 225.7001, Definitions, and to the
contract clause at 252.225-7062, Restriction on Acquisition of Large
Medium-Speed Diesel Engines, to add a definition for large medium-speed
diesel engines. Additional changes are made to the clause at 252.225-
7062 to (1) designate the paragraph that includes the 10 U.S.C. 4864
limitation as paragraph (b), Restrictions; and (2) add the requirement
to include the substance of the clause in all subcontracts that exceed
the simplified acquisition threshold (SAT), including contracts for the
acquisition of commercial products and commercial services that require
large medium-speed diesel engines for new construction of auxiliary
ships.
DFARS 212.503(a)(vii) adds 10 U.S.C. 4864 to the list of laws that
are not applicable to contracts for the acquisition of commercial
products and commercial services, and states that 10 U.S.C. 4864 does
not apply to contracts valued at or below the SAT. At DFARS
212.504(a)(xii) clarifying language is added to state that the
limitation at 10 U.S.C. 4864 does not apply to subcontracts for
commercial products and commercial services valued at or below the SAT.
At DFARS 212.504(b), paragraph (iii) adds 10 U.S.C. 4864 to the list of
laws that have been eliminated for subcontracts at any tier for the
acquisition of commercial products, commercial services, or commercial
components and clarifies that the statute does not apply to
subcontracts valued at or below the SAT.
B. Analysis of Public Comments
1. Support for the Rule
Comment: The respondent expressed support for the rule and the
determination that it is in the best interest of the Government to
apply the new DFARS clause to contracts and subcontracts for commercial
items, including commercial off-the-shelf (COTS) items. The respondent
further stated that excluding the new rule from application to
contracts and subcontracts for commercial items would create a loophole
that would undermine the overarching intent of the statute and purpose
of the rule to restrict the purchase of large medium-speed diesel
engines for auxiliary ships, unless the engines are manufactured in the
national technology and industrial base.
Response: DoD acknowledges the respondent's support for the rule.
2. Clarifying Definition for ``Large Medium-Speed Diesel Engines''
Comment: The respondent recommended revising the definition for
large medium-speed diesel engines with the addition of the following
for clarity: A ``medium-speed diesel engine'' operates between 400 and
1200 rotations per minute (RPM). ``Large'' refers to the brake
horsepower (bHP) delivered starting at a minimum of 5,000 bHP (~3.75
MW).
Response: DoD concurs with the need for clarity concerning the
definition of ``large medium-speed diesel engine''. Accordingly, large
medium-speed diesel engines are defined as diesel engines whose
revolutions per minute (RPM) fall between 300 and 1500 RPM with a
displacement greater than 1500 cubic inches per cylinder. DoD considers
medium-speed diesel engines to fall within the range of 300 to 1500
RPMs based on purchasing experience and market research. Regarding the
definition of ``large'', DoD considers displacement, i.e., how much
volume can be pumped through the engine, as the appropriate factor for
engine size as opposed to brake horsepower that measures the power of
the engine. Based on this analysis, DoD determines that large marine
diesel engines have a displacement of 1500 cubic inches per cylinder or
more.
The following new definition for large medium-speed diesel engines
is added at DFARS 225.7001, Definitions, and to the clause at 252.225-
7062: ``Large medium-speed diesel engines means diesel engines whose
revolutions per minute (RPM) fall between 300 and 1500 RPM with a
displacement greater than 1500 cubic inches per cylinder.''
3. Recommended Clarification to DFARS 212.504(a)
Comment: The respondent recommended a minor clarifying revision to
DFARS 212.504(a) to reflect the determination that the proposed new
clause at DFARS 252.225-70XX should apply to commercial item
subcontracts. The respondent stated that currently, DFARS 212.504(a)
lists
[[Page 46901]]
statutory provisions that are not applicable to subcontracts at any
tier for the acquisition of commercial items or commercial components.
The respondent further stated that currently included in that list of
statutory provisions at DFARS 212.504(a), is 10 U.S.C. 2534, the
statute that implements section 853. While the proposed rule stated the
intent to apply the new DFARS 252.225-70XX clause to commercial item
subcontracts at all tiers, leaving DFARS 212.504(a) as currently
drafted may create confusion as to whether subcontracts for commercial
item large medium-speed diesel engines are subject to the restriction
imposed by the rule.
The respondent recommended a conforming edit to DFARS 212.504(a) to
apply the new restriction imposed by 10 U.S.C. 2534 for large medium-
speed diesel engines to commercial item subcontracts. The respondent
further recommended additional revisions to remove 10 U.S.C. 2534 from
its listing under DFARS 212.504(a) and add as a new listing under DFARS
212.504(b).
Response: DoD acknowledges the omission and concurs with revising
DFARS 212.504(a) to clarify the application of the new restriction
imposed by 10 U.S.C. 4864 to commercial product, commercial service,
and commercial component subcontracts that exceed the SAT, and
therefore include an additional reference at 212.504(b)(iii). Related
conforming changes are also made to DFARS 212.503. Accordingly, DoD has
revised the following:
1. DFARS 212.503(a)(vii)--added 10 U.S.C. 4864 to the list of laws
that are not applicable to contracts for the acquisition of commercial
products and commercial services, and that 10 U.S.C. 4864 does not
apply to contracts valued at or below the SAT.
2. DFARS 212.504(a)(xii)--added to the existing 10 U.S.C. 4864
reference the statement that the limitation does not apply to
subcontracts for commercial products, commercial services, or
commercial components valued at or below the SAT; and
3. DFARS 212.504(b)--added paragraph (iii) to state that 10 U.S.C.
4864 does not apply to subcontracts for commercial products, commercial
services, or commercial components valued at or below the SAT.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Products, Commercial Services, and
Commercially Available Off-the-Shelf (COTS) Items
This rule creates a new DFARS clause, 252.225-7062, Restriction on
Acquisition of Large Medium-Speed Diesel Engines. Section 853 amends 10
U.S.C. 4864(a) to provide a limitation on components for auxiliary
ships. 10 U.S.C. 4864 does not apply to a contract or subcontract for
an amount that does not exceed the SAT (see paragraph (g)). Therefore,
DoD will not apply this clause to acquisitions at or below the SAT.
However, DoD is applying this clause to contracts for the acquisition
of commercial products, commercial services, and COTS items.
A. Applicability to Contracts for the Acquisition of Commercial
Products, Commercial Services, and COTS Items
10 U.S.C. 3452 exempts contracts and subcontracts for the
acquisition of commercial products, commercial services, and COTS items
from provisions of law enacted after October 13, 1994, unless the Under
Secretary of Defense for Acquisition and Sustainment (USD(A&S)) makes a
written determination that it is not in the best interest of DoD to
exempt contracts for the procurement of commercial products and
commercial services from the applicability of the provision or contract
requirement, except for a provision of law that--
<bullet> Provides for criminal or civil penalties;
<bullet> Requires that certain articles be bought from American
sources pursuant to 10 U.S.C. 4862 (previously 10 U.S.C. 2533a) or that
strategic materials critical to national security be bought from
American sources pursuant to 10 U.S.C. 4863 (previously 10 U.S.C.
2533b); or
<bullet> Specifically refers to 10 U.S.C. 3452 and states that it
shall apply to contracts and subcontracts for the acquisition of
commercial products (including COTS items) and commercial services.
B. Determination
Section 853 of the NDAA for FY 2020 does not apply to contracts at
or below the SAT and is silent on applicability to contracts and
subcontracts for the acquisition of commercial products and commercial
services. Also, the statute does not provide for civil or criminal
penalties. Therefore, it does not apply to contracts or subcontracts
for the acquisition of commercial products and commercial services
unless a written determination is made. Due to delegations of
authority, the Principal Director, Defense Pricing and Contracting is
the appropriate authority to make this determination.
DoD has determined that it is in the best interest of the Federal
Government to apply the rule to contracts and subcontracts for the
acquisition of commercial products, commercial services, and COTS
items, as defined at Federal Acquisition Regulation (FAR) 2.101. Not
applying this rule to contracts and subcontracts for such acquisitions
would exclude contracts intended to be covered by this rule and
undermine the overarching purpose for the rule to restrict the purchase
of large medium-speed diesel engines for auxiliary ships, unless the
engines are manufactured in the national technology and industrial
base, which is defined at 10 U.S.C. 4801(1).
IV. Expected Impact of the Rule
This rule does not propose to add any new burden on the public. It
amends DFARS 225.7010, Restriction on certain naval vessel components,
and adds the contract clause 252.225-7062, Restriction on Acquisition
of Large Medium-Speed Diesel Engines, with flowdown to subcontractors
to include additional limitations on large medium-speed diesel engines
for auxiliary ships for contracts awarded by the Secretary of a
military department for new construction of an auxiliary ship using
funds available for National Defense Sealift Fund programs or
Shipbuilding and Conversion, Navy.
The domestic source restriction does not apply to--
(1) Contracts or subcontracts that do not exceed the simplified
acquisition threshold;
(2) The acquisition of spare or repair parts needed to support
components for naval vessels manufactured outside the United States;
and
(3) Large medium-speed diesel engines for icebreakers or special
mission ships.
Contracting officers will include the clause in solicitations and
contracts that exceed the SAT, including solicitations and contracts
using FAR part 12 procedures for the acquisition of commercial
products, commercial services, and COTS items, that require large
medium-speed diesel engines for new construction of auxiliary ships
using funds available for National Defense Sealift Fund programs or
Shipbuilding and Conversion, Navy, unless a waiver is granted or an
exception applies.
[[Page 46902]]
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 has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
and is summarized as follows:
The final rule is necessary to revise the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement a statute that
requires certain auxiliary ship components to be procured from a
manufacturer in the national technology and industrial base, subject to
exceptions. The national technology and industrial base is defined at
10 U.S.C. 4801(1) and currently includes the United States, Australia,
Canada, New Zealand, and the United Kingdom of Great Britain and
Northern Ireland.
The objective of the rule is to implement section 853 of the
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020,
which amends 10 U.S.C. 2534 (now 10 U.S.C. 4864), Miscellaneous
Limitations on the Procurement of Goods Other Than United States Goods,
that establishes limitations on auxiliary ship components for contracts
awarded for new construction of an auxiliary ship unless the components
are manufactured in the national technology and industrial base. The
rule includes additional limitations on large medium-speed diesel
engines for auxiliary ships for contracts awarded by the Secretary of a
military department for new construction of an auxiliary ship using
funds available for National Defense Sealift Fund programs or
Shipbuilding and Conversion, Navy.
No public comments were received in response to the initial
regulatory flexibility analysis.
DoD reviewed data from the Federal Procurement Data System (FPDS)
for FY 2017, 2018, and 2019 excluding (1) contracts or subcontracts
that do not exceed the simplified acquisition threshold, (2)
acquisitions of spare or repair parts needed to support naval vessels
manufactured outside the United States, and (3) large medium-speed
diesel engines specifically for icebreakers or special mission ships.
The review of the FPDS data revealed that there was a total of 241
awards, of which 121 were made to small businesses, a median of 50
percent awarded to small entities during those three fiscal years.
It is expected that this rule will benefit small businesses. The
rule will provide small businesses the opportunity to participate in
the manufacture of auxiliary ship components in support of the national
technology and industrial base.
This rule does not include any new reporting, recordkeeping, or
other compliance requirements for small entities.
DoD has not identified any alternative approaches to the rule that
would meet the requirements of the statute.
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 212, 225, and 252
Government procurement.
Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 212, 225, and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 212, 225, and 252 continues
to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 212--ACQUISITION OF COMMERCIAL PRODUCTS AND SERVICES
0
2. Amend section 212.301 by adding paragraph (f)(ix)(NN) to read as
follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial products and commercial services.
* * * * *
(f) * * *
(ix) * * *
(NN) Use the clause at 252.225-7062, Restriction on Acquisition of
Large Medium-Speed Diesel Engines, as prescribed in 225.7010-5, to
comply with 10 U.S.C. 4864.
* * * * *
0
3. Amend section 212.503 by--
0
a. Redesignating paragraphs (a)(vii) and (viii) as paragraphs (a)(viii)
and (ix), respectively; and
0
b. Adding new paragraph (a)(vii).
The addition reads as follows:
212.503 Applicability of certain laws to Executive agency contracts
for the acquisition of commercial products and commercial services.
(a) * * *
(vii) 10 U.S.C. 4864, Miscellaneous Limitations on the Procurement
of Goods Other Than United States Goods. 10 U.S.C. 4864 is not
applicable to contracts valued at or below the simplified acquisition
threshold.
* * * * *
0
4. Amend section 212.504 by revising paragraph (a)(xii) and adding
paragraph (b)(iii) to read as follows:
212.504 Applicability of certain laws to subcontracts for the
acquisition of commercial products and commercial services.
(a) * * *
(xii) 10 U.S.C. 4864, Miscellaneous Limitations on the Procurement
of Goods Other Than United States Goods. 10 U.S.C. 4864 is not
applicable to subcontracts valued at or below the simplified
acquisition threshold.
* * * * *
(b) * * *
(iii) 10 U.S.C. 4864, Miscellaneous Limitations on the Procurement
of Goods Other Than United States Goods. 10 U.S.C. 4864 is not
applicable to subcontracts at any tier valued at or below the
simplified acquisition threshold.
PART 225--FOREIGN ACQUISITION
0
5. Amend section 225.7001 by adding, in alphabetical order, the
definition of ``Large medium-speed diesel engines'' to read as follows:
[[Page 46903]]
225.7001 Definitions.
* * * * *
Large medium-speed diesel engines means diesel engines whose
revolutions per minute (RPM) fall between 300 and 1500 RPM with a
displacement greater than 1500 cubic inches per cylinder.
* * * * *
0
6. Revise section 225.7010 to read as follows:
225.7010 Restrictions on certain naval vessel and auxiliary ship
components.
0
7. Revise section 225.7010-1 to read as follows:
225.7010-1 Restrictions.
In accordance with 10 U.S.C. 4864, unless manufactured in the
United States, Australia, Canada, or the United Kingdom, do not
acquire:
(a) The following components of naval vessels to the extent they
are unique to marine applications:
(1) Gyrocompasses.
(2) Electronic navigation chart systems.
(3) Steering controls.
(4) Pumps.
(5) Propulsion and machinery control systems.
(6) Totally enclosed lifeboats.
(b) Large medium-speed diesel engines for new construction of
auxiliary ships using funds available for National Defense Sealift Fund
programs or Shipbuilding and Conversion, Navy.
0
8. Revise section 225.7010-2 to read as follows:
225.7010-2 Exceptions.
(a) The restriction at 225.7010-1(a) does not apply to--
(1) Contracts or subcontracts that do not exceed the simplified
acquisition threshold; or
(2) Acquisition of spare or repair parts needed to support
components for naval vessels manufactured outside the United States.
Support includes the purchase of spare gyrocompasses, electronic
navigation chart systems, steering controls, pumps, propulsion and
machinery control systems, or totally enclosed lifeboats, when those
from alternate sources are not interchangeable.
(b) The restriction at 225.7010-1(b) does not apply to--
(1) Contracts or subcontracts that do not exceed the simplified
acquisition threshold; or
(2) Large medium-speed diesel engines for icebreakers or special
mission ships.
0
9. Revise section 225.7010-3 to read as follows:
225.7010-3 Waiver.
The waiver criteria at 225.7008 apply to the restrictions at
225.7010-1.
0
10. Amend section 225.7010-4--
0
a. By revising the section heading; and
0
b. In paragraphs (a) and (b) by removing ``this restriction'' and
adding ``the restriction at 225.7010-1(a)'' in its place.
The revision reads as follows:
225.7010-4 Implementation of restriction on certain naval vessel
components.
* * * * *
0
11. Add section 225.7010-5 to read as follows:
225.7010-5 Contract clause.
Use the clause at 252.225-7062, Restriction on Acquisition of Large
Medium-Speed Diesel Engines, in solicitations and contracts that exceed
the simplified acquisition threshold, including solicitations and
contracts using FAR part 12 procedures for the acquisition of
commercial products and commercial services, that require large medium-
speed diesel engines for new construction of auxiliary ships using
funds available for National Defense Sealift Fund programs or
Shipbuilding and Conversion, Navy unless--
(a) An exception at 225.7010-2(b)(2) applies; or
(b) A waiver has been granted.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
12. Add section 252.225-7062 to read as follows:
252.225-7062 Restriction on Acquisition of Large Medium-Speed Diesel
Engines.
As prescribed in 225.7010-5, use the following clause:
Restriction on Acuisition of Large Medium-Speed Diesel Engines (Jul
2023)
(a) Definition. As used in this clause--
Large medium-speed diesel engines means diesel engines whose
revolutions per minute (RPM) fall between 300 and 1500 RPM with a
displacement greater than 1500 cubic inches per cylinder.
(b) Restriction. As required by 10 U.S.C. 4864, the Contractor
shall deliver under this contract large medium-speed diesel engines
manufactured in the United States, Australia, Canada, New Zealand,
or the United Kingdom.
(c) Subcontracts. The Contractor shall include the substance of
this clause, including this paragraph (c), in subcontracts that
exceed the simplified acquisition threshold, including subcontracts
for commercial products and commercial services, that require large
medium-speed diesel engines for new construction of auxiliary ships.
(End of clause)
[FR Doc. 2023-15153 Filed 7-19-23; 8:45 am]
BILLING CODE 5001-06-P
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