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[Federal Register Volume 77, Number 142 (Tuesday, July 24, 2012)]
[Rules and Regulations]
[Pages 43470-43473]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17588]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 215, 225, and 252

RIN 0750-AH42

Defense Federal Acquisition Regulation Supplement: Contracting 
With the Canadian Commercial Corporation (DFARS Case 2011-D049)

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 clarify the requirements 
for the Canadian Commercial Corporation to submit data other than 
certified cost or pricing data.

DATES: Effective date: July 24, 2012.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, telephone 571-372-
6106.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD published a proposed rule in the Federal Register at 76 FR 
61296 on October 4, 2011. DoD also issued a correction to a sentence in 
the Background Summary of the Federal Register notice on October 18, 
2011, at 76 FR 64297. One respondent submitted public comments in 
response to the proposed rule.
    With some exceptions, as provided at DFARS 225.870-1(c), the 
Canadian Commercial Corporation awards and administers DoD contracts 
with contractors located in Canada. DoD has waived the requirement for 
the Canadian Commercial Corporation and its subcontractors to submit 
certified cost or pricing data (see DFARS 215.403-1(c)(4)(C)). However, 
the purpose of this rule is to clarify that the requirement to submit 
data other than certified cost or pricing data has not been waived.

II. Discussion and Analysis

A. Summary of Significant Changes in the Final Rule as a Result of 
Public Comments

    1. DFARS 215.408(5) has been revised to raise the threshold for 
cost-reimbursement contracts from the simplified acquisition threshold 
to $700,000.
    2. DFARS 215.408(5) has also raised the level to which the head of 
the contracting activity can delegate approval authority for using the 
provision at 252.215-7003 and the clause at 252.215-7004 in accordance 
with 215.408(5)(i)(B) and (ii)(B), respectively, from one level above 
the contracting officer to two levels above the contracting officer.
    3. DFARS 225.870-4(c)(5) and 252.215-7003 now include the text at 
FAR 15.403-3(a)(4) to notify the contracting officer and the offerors 
that in order to be eligible for award, offerors must provide data 
necessary to determine that the price is fair and reasonable.
    4. The clause at 252.215-7004 has been revised to require data 
other than certified cost or pricing data for modifications only when 
they exceed the simplified acquisition threshold. The contracting 
officer may modify the clause to specify a higher threshold.

B. Analysis of Public Comments

 1. Use of Domestic Policies, Procedures, and Practices
    Comment: The respondent cited the Defence Production Sharing 
Agreement of 1956 and the need to apply Canadian domestic policies, 
practices, and procedures when conducting price analysis on a Canadian 
supplier.
    Response: Data other than certified cost or pricing data can be 
released in line with Canadian laws and

[[Page 43471]]

government contracting practices, policies, and procedures.
2. Information Necessary To Make a Determination of Fair and Reasonable 
Prices
    Comment: According to the respondent, under current defense 
procurement arrangements, Canada assumes the cost of investigating and 
verifying whether the prices on a procurement contract and its 
subsequent management are fair and reasonable. The respondent expressed 
concern over significant costs associated with investigation and 
verification of price reasonableness for companies and Government, so 
that duplication should be avoided. Nevertheless, the respondent 
acknowledged that DoD is ultimately responsible for making a final 
decision regarding the reasonableness of the prices it pays and that 
there may be some cases (such as sole source fixed-price contracts over 
$500 million and sole source cost-reimbursement contracts that exceed 
the simplified acquisition threshold) in which additional information 
may be needed. The respondent suggested modification to the DFARS rule 
to emphasize that the DoD contracting officer should not request more 
information than is necessary to determine that the price is fair and 
reasonable.
    Response: The principle that the contracting officer should not 
request more data than is necessary to determine that the price is fair 
and reasonable is stated in FAR 15.402(a)(3) and applies to all DoD 
requests for cost or pricing data. This DFARS rule reiterates at 
225.870-4(c)(2), and in paragraph (b)(iii) of both the new provision at 
252.215-7003 and the new clause at 252.215-7004, that the contracting 
officer shall only require submission of data other than certified cost 
or pricing data to the extent necessary to determine a fair and 
reasonable price.
    To avoid unnecessary duplication of effort, the provision and 
clause both provide that the Canadian Commercial Corporation shall 
provide to the contracting officer the analysis provided to the 
Canadian Commercial Corporation by Public Works and Government Services 
Canada (comparable to the analysis required at FAR 15.404-1) as well as 
profit rate or fee.
3. Requests for Information Other Than Certified Cost or Pricing Data
     Comment: The respondent recommended that approval should be 
required for any request of information other than certified cost or 
pricing data.
    Response: The DFARS rule does not require authorization when 
requesting data for sole source acquisitions that are--
     Cost-reimbursement, if the contract value is expected to 
exceed a dollar threshold of $700,000; or
     Fixed-price, if the contract value is expected to exceed 
$500 million.

    The respondent acknowledged that for such contracts additional 
requests for data other than certified cost or pricing data may be 
warranted. To require higher level approval of each such request would 
impose an unnecessary administrative burden. Higher level approval is 
required for any request for data other than certified cost or pricing 
data in solicitations and contracts other than those sole source 
acquisitions specified in the rule.
4. Level of Authorization for Requests for Additional Information
    Comment: The respondent recommended requiring the approval by the 
head of the contracting activity, or a delegate no lower than the 
Senior Executive Service level, before a contracting officer proceeds 
with any request for data other than certified cost or pricing data to 
the Canadian Commercial Corporation.
    Response: In response to this comment, DoD revised the final rule 
to restrict delegation of approval authority by the head of the 
contracting activity to a level no lower than two levels above the DoD 
contracting officer.
5. Application to Competitive Acquisitions in Which Two or More Offers 
Are Received
     Comment: The respondent stated that substantive investigation and 
cost verification of cost reasonableness is normally not required if a 
solicitation for goods or services is considered competitive. 
Therefore, the respondent recommended that requests for data other then 
certified cost or pricing data not be allowed on competitive 
acquisitions in which more than one offer is received. The respondent 
acknowledged that if only one offer is received, the acquisition may be 
treated the same as a sole source procurement, rather than a 
competitive procurement.
    Response: FAR 15.403-3 states that when adequate price competition 
exists, generally no additional data are necessary to determine the 
reasonableness of price. FAR 15.404-1 provides that comparison of 
proposed prices received in response to the solicitation normally 
establishes a fair and reasonable price. However, the FAR does not 
preclude the unusual circumstance in which additional data might be 
required (although preferably from a source other than the offeror). In 
such circumstances, the contracting officer may request the data with 
the higher level approval as specified in the final rule.
6. Modifications
    Comment: The respondent recommended a minimum threshold to limit 
the requests for data other than certified cost or pricing data to 
significant contract modifications.
    Response: DoD has modified the final rule to provide a threshold at 
least equal to the simplified acquisition threshold. The prescription 
advises that the request for data other than certified cost or pricing 
data should be used (1) for modifications that equal or exceed the 
simplified acquisition threshold; or (2) when questions of cost or 
price realism arise. The contracting officer can modify the clause to 
specify a higher threshold, based on the value and type of acquisition.
7. Compliance With Canadian law
    Comment: According to the respondent, any release of data by the 
Canadian Commercial Corporation must comply with Canadian law, 
regulations, and obligations, especially the Access to Information Act 
and the Privacy Act, as well as non-disclosure agreements with parties 
in a contractual relationship with the Government.
    Response: Award of a contract to a Canadian contractor via the 
Canadian Commercial Corporation is subject to the terms and conditions 
of the DFARS clause and to FAR 15.403-3(a)(4), which specifies that an 
offeror who does not comply with a requirement to submit data that the 
contracting officer has deemed necessary to determine price 
reasonableness or cost realism is ineligible for award unless the head 
of the contracting activity determines that it is in the best interest 
of the Government to make the award to that offeror.

III. 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

[[Page 43472]]

subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD certifies that 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 it only impacts Canadian business concerns. No domestic small 
business entities will be impacted by this rule. For the definition of 
``small business'', the Regulatory Flexibility Act refers to the Small 
Business Act, which in turn allows the U.S. Small Business 
Administration (SBA) Administrator to specify detailed definitions or 
standards (5 U.S.C. 601(3) and 15 U.S.C. 632(a)). The SBA regulations 
at 13 CFR 121.105 discuss who is a small business: ``(a)(1) Except for 
small agricultural cooperatives, a business concern eligible for 
assistance from SBA as a small business is a business entity organized 
for profit, with a place of business located in the United States, and 
which operates primarily within the United States or which makes a 
significant contribution to the U.S. economy through payment of taxes 
or use of American products, materials or labor.''

V. Paperwork Reduction Act

    The rule contains 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); however, these changes to the 
DFARS do not impose additional information collection requirements to 
the paperwork burden previously approved under OMB Control Number 9000-
0013, Cost or Pricing Data Requirements and Information Other Than Cost 
or Pricing Data.

List of Subjects in 48 CFR Parts 215, 225, and 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.
    Therefore, 48 CFR parts 215, 225, and 252 are amended as follows:

0
1. The authority citation for 48 CFR parts 215, 225, 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 215.403-1 by revising the heading and paragraph 
(c)(4)(C) to read as follows:

215.403-1  Prohibition on obtaining certified cost or pricing data (10 
U.S.C. 2306a and 41 U.S.C. chapter 35).

* * * * *
    (c) * * *
    (4) * * *
    (C) DoD has waived the requirement for submission of certified cost 
or pricing data for the Canadian Commercial Corporation and its 
subcontractors (but see 215.408(5) and 225.870-4(c)).
* * * * *

0
3. Amend section 215.408 by adding paragraph (5) to read as follows:

215.408  Solicitation provisions and contract clauses.

* * * * *
    (5) When contracting with the Canadian Commercial Corporation--
    (i) Use the provision at 252.215-7003, Requirement for Data Other 
Than Certified Cost or Pricing Data--
    (A) In solicitations for sole source acquisitions that are--
    (1) Cost-reimbursement, if the contract value is expected to exceed 
$700,000; or
    (2) Fixed-price, if the contract value is expected to exceed $500 
million; or
    (B) In other solicitations, if the head of the contracting 
activity, or designee no lower than two levels above the contracting 
officer, determines that data other than certified cost or pricing data 
is needed in order to determine that the price is fair and reasonable 
(see FAR 15.403-3(a)); and
    (ii)(A) Use the clause at 252.215-7004, Requirement for Data Other 
Than Certified Cost or Pricing Data--Modifications--Canadian Commercial 
Corporation--
    (1) In solicitations and contracts for sole source acquisitions 
that are--
    (i) Cost-reimbursement, if the contract value is expected to exceed 
$700,000; or
    (ii) Fixed-price, if the contract value is expected to exceed $500 
million; or
    (2) In other solicitations and contracts, if the head of the 
contracting activity, or designee no lower than two levels above the 
contracting officer, determines that it is reasonably certain that data 
other than certified cost or pricing data will be needed in order to 
determine that the price of modifications is fair and reasonable (see 
FAR 15.403-3(a)).
    (B) The contracting officer may specify a higher threshold in 
paragraph (b) of the clause.

PART 225--FOREIGN ACQUISITION

225.802-70  [Amended]

0
4. Amend section 225.802-70 in the second sentence by removing 
``Subpart'' and adding ''subpart'' in its place.

225.870-1  [Amended]

0
5. Amend section 225.870-1, paragraph (a), by removing ``Canadian 
Government'' each time it appears and adding ``Canadian government'' in 
its place.

0
6. Amend section 225.870-4 by redesignating paragraph (c) as paragraph 
(d) and adding new paragraph (c) to read as follows:

225.870-4  Contracting procedures.

* * * * *
    (c) Requirement for data other than certified cost or pricing data. 
(1) DoD has waived the requirement for submission of certified cost or 
pricing data for the Canadian Commercial Corporation and its 
subcontractors (see 215.403-1(c)(4)(C)).
    (2) The Canadian Commercial Corporation is not exempt from the 
requirement to submit data other than certified cost or pricing data, 
as defined in FAR 2.101. In accordance with FAR 15.403-3(a)(1)(ii), the 
contracting officer shall require submission of data other than 
certified cost or pricing data from the offeror, to the extent 
necessary to determine a fair and reasonable price.
    (3) The contracting officer shall use the provision at 252.215-
7003, Requirement for Data Other Than Certified Cost or Pricing Data--
Canadian Commercial Corporation, and the clause at 252.215-7004, 
Requirement for Data Other Than Certified Cost or Pricing Data--
Modifications--Canadian Commercial Corporation, as prescribed at 
215.408(5)(i) and (ii), respectively.
    (4) Except for contracts described in 225.870-1(c)(1) through (4), 
Canadian suppliers will provide required data other than certified cost 
or pricing data exclusively through the Canadian Commercial 
Corporation.
    (5) As specified in FAR 15.403-3(a)(4), an offeror who does not 
comply with a requirement to submit data that the contracting officer 
has deemed necessary to determine price reasonableness or cost realism 
is ineligible for award, unless the head of the contracting activity 
determines that it is in the best interest of the Government to make 
the award to that offeror, based on consideration of the following:
    (i) The effort made to obtain the data.
    (ii) The need for the item or service.

[[Page 43473]]

    (iii) Increased cost or significant harm to the Government if award 
is not made.
* * * * *

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
7. Add sections 252.215-7003 and 252.215-7004 to read as follows:

252.215-7003  Requirement for Submission of Data Other Than Certified 
Cost or Pricing Data--Canadian Commercial Corporation.

    As prescribed at 215.408(5)(i), use the following provision:

REQUIREMENT FOR SUBMISSION OF DATA OTHER THAN CERTIFIED COST OR PRICING 
DATA--CANADIAN COMMERCIAL CORPORATION (JUL 2012)

    (a) Submission of certified cost or pricing data is not 
required.
    (b) Canadian Commercial Corporation shall obtain and provide the 
following:
    (i) Profit rate or fee (as applicable).
    (ii) Analysis provided by Public Works and Government Services 
Canada to the Canadian Commercial Corporation to determine a fair 
and reasonable price (comparable to the analysis required at FAR 
15.404-1).
    (iii) Data other than certified cost or pricing data necessary 
to permit a determination by the U.S. Contracting Officer that the 
proposed price is fair and reasonable [U.S. Contracting Officer to 
insert description of the data required in accordance with FAR 
15.403-3(a)(1)].
    (c) As specified in FAR 15.403-3(a)(4), an offeror who does not 
comply with a requirement to submit data that the U.S. Contracting 
Officer has deemed necessary to determine price reasonableness or 
cost realism is ineligible for award unless the head of the 
contracting activity determines that it is in the best interest of 
the Government to make the award to that offeror.

(End of provision)

252.215-7004  Requirement for Submission of Data Other Than Certified 
Cost or Pricing Data--Modifications-Canadian Commercial Corporation.

    As prescribed at 215.408(5)(ii), use the following clause:

REQUIREMENT FOR SUBMISSION OF DATA OTHER THAN CERTIFIED COST OR PRICING 
DATA--MODIFICATIONS--CANADIAN COMMERCIAL CORPORATION (JUL 2012)

    (a) Submission of certified cost or pricing data is not 
required.
    (b) Canadian Commercial Corporation shall obtain and provide the 
following for modifications that exceed the simplified acquisition 
threshold [or higher dollar value specified by the U.S. Contracting 
Officer in the solicitation].
    (i) Profit rate or fee (as applicable).
    (ii) Analysis provided by Public Works and Government Services 
Canada to the Canadian Commercial Corporation to determine a fair 
and reasonable price (comparable to the analysis required at FAR 
15.404-1).
    (iii) Data other than certified cost or pricing data necessary 
to permit a determination by the U.S. Contracting Officer that the 
proposed price is fair and reasonable [U.S. Contracting Officer to 
insert description of the data required in accordance with FAR 
15.403-3(a)(1)].

(End of clause)

[FR Doc. 2012-17588 Filed 7-23-12; 8:45 am]
BILLING CODE 5001-06-P
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