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[Federal Register Volume 76, Number 41 (Wednesday, March 2, 2011)]
[Rules and Regulations]
[Pages 11361-11363]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4529]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 207

RIN 0750-AG45

Defense Federal Acquisition Regulation Supplement; Preservation 
of Tooling for Major Defense Acquisition Programs (DFARS Case 2008-
D042)

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 section 815 of 
the National Defense Authorization Act for Fiscal Year 2009. Section 
815 addresses the preservation of tooling for major defense acquisition 
programs.

DATES: Effective Date: March 2, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Meredith Murphy, 703-602-1302.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 815 of the National Defense Authorization Act for Fiscal 
Year 2009 (Pub. L. 110-417) impacts the acquisition planning process. 
Section 815, entitled ``Preservation of Tooling for Major Defense 
Acquisition Programs,'' mandates the publication of guidance requiring 
the ``preservation and storage of unique tooling associated with the 
production of hardware for a major defense acquisition program through 
the end of the service life of the end item associated with such a 
program.'' The statute states that the guidance must--
     Require that the milestone decision authority (MDA) 
approve a plan for the preservation and storage of ``such tooling prior 
to Milestone C approval;''
     Require the MDA to periodically review the plan to ensure 
that it remains adequate and in the best interest of DoD; and
     Provide a mechanism for the Secretary of Defense to waive 
the requirement under certain circumstances.
    DoD published a proposed rule in the Federal Register (75 FR 25159) 
on May

[[Page 11362]]

7, 2010, to address the new statutory requirements. The rule proposed 
to add a new paragraph (S-73) to DFARS 207.106, Additional requirements 
for major systems. The topic of subpart 207.1 is Acquisition Plans.

II. Discussion and Analysis

    The public comment period closed July 6, 2010. Four respondents 
submitted comments on six issues. A discussion of the comments is 
provided in the following paragraphs.

A. Rule May Not Fully Implement the Statute

    Comment: A respondent generally agreed with the proposed rule, but 
noted that it implemented only two of the three requirements of section 
815, omitting the key language requiring the ``milestone decision 
authority (to) periodically review the plan required by (section 
815(a)(1)) prior to the end of the service life of the end item, to 
ensure that the preservation and storage of such tooling remains 
adequate and in the best interest of the Department of Defense.'' The 
respondent stated that the periodic review requirement should be 
included in the proposed rule.
    In addition, the respondent believes that the proposed rule should 
require the contractor to develop adequate procedures for the 
preservation and storage of the special tooling and to document 
compliance.
    Response: No changes have been made to the rule in response to 
these comments for several reasons. First, the DFARS has not been used 
to outline MDA determinations in the past. The appropriate location for 
requirements being placed on MDAs is in the DoD 5000 series regulations 
and/or directives from senior DoD leaders. Further, the requirement at 
section 815(a)(2) has been implemented in a Deputy Secretary of Defense 
memorandum dated August 3, 2009, entitled ``Preservation and Storage of 
Tooling for Major Defense Acquisition Programs (MDAPs).'' The 
preservation policy, according to the memorandum, will be included in 
the next update to DoDI 5000.02.
    With regard to the second part of the respondent's comment, DoD 
notes that the clause at FAR 52.245-1, Government Property, requires 
the contractor to ``have a system to manage (control, use, preserve, 
protect, repair, and maintain) Government property in its possession.'' 
(See FAR 52.245-1(b).)

B. Rule Should Cover All Property

    Comment: One respondent commented that ``(i)ndustry agrees with the 
concept to sustain capability and supportability to the extent needed 
under major weapons systems.'' To that end, the respondent believes 
that this requirement should not be limited to special tooling, but 
should include ``all property, i.e., special test equipment, ground 
support equipment, machine tools and machines and other intangibles to 
maintain capability.''
    Response: DoD is fully compliant with section 815, which addresses 
only special tooling.
    With regard to tangible property, DoD notes that major systems 
acquisition contracts are required to include the clause at FAR 52.245-
1, Government Property, which incorporates a basic storage requirement 
applicable to more than just special tooling (see FAR 52.245-
1(f)(1)(viii)(A)). Further, in accordance with section 815, the MDA is 
required to ``approve a plan, including the identification of any 
contract clauses, facilities, and funding required, for the 
preservation and storage of such tooling prior to Milestone C 
approval.'' This requirement is fully addressed by the Deputy Secretary 
of Defense memorandum dated August 3, 2009, which states that ``MDAP 
Program Managers shall include a plan for preservation and storage of 
unique tooling as an annex to the Life Cycle Sustainment Plan (LCSP) 
submitted for Milestone Decision Authority (MDA) approval at Milestone 
C. The unique tooling annex shall include the identification of any 
contract clauses, facilities, and funding required for the preservation 
and storage of such tooling and shall describe how unique tooling 
retention will continue to be reviewed during the life of the 
program.''
    DoD considers ``intangibles,'' as the term relates to major systems 
acquisitions, to be a reference to technical data. A contractor's 
rights in technical data are fully addressed in FAR and DFARS parts 27 
and 227 respectively, and need not be addressed with the section 815 
coverage.

C. ``Unique Tooling''

    Comment: Two respondents noted that the statute and the August 3, 
2009, implementing memorandum use the term ``unique tooling,'' not 
``special tooling.'' Both recommended that DFARS 207.106(S-73) be 
revised to use the term ``unique tooling'' and to add a definition to 
that paragraph as follows: ``For DoD purposes, unique tooling shall 
mean special tooling as defined in Federal Acquisition Regulation 
2.101(b).''
    Response: DoD has determined that the use of ``special tooling'' in 
207.106(S-73) correctly implements the statute, and no change is 
necessary.
    Respondents agree that ``unique tooling'' and ``special tooling'' 
have the same meaning. However, there is no reason to use ``unique 
tooling'' in the coverage and then define it using a reference to FAR 
2.101. That would contravene the FAR drafting convention to use a 
single term consistently to express the same meaning.

D. Approval of Preservation Plan

    Comment: One respondent correctly noted that section 815 requires 
the MDA to approve the special tooling preservation plan prior to 
Milestone C approval (section 815(a)(1)). The respondent is concerned, 
however, with the lack of specificity about when the plan must be 
approved, claiming that it ``risks undermining the very purpose of the 
rule and its antecedent legislation.'' The respondent recommended 
modifying DFARS 207.106 to require, or at least encourage, DoD to draft 
such plans before a program is given Milestone B approval.
    Response: DoD has determined that DFARS is already fully compliant 
with the statute, and that no change is necessary. Further, while the 
plan must be approved prior to Milestone C approval, there is no limit 
in the regulations on how far in advance of Milestone C the special 
tooling preservation plan can be approved, as long as it is approved at 
a point in the system's life that is logical.

E. End of the Service Life of the Item

    Comment: One respondent noted that section 815(a) requires that the 
special tooling be preserved ``through the end of the service life of 
the end item associated with such a program.'' The respondent believes 
that ``end item'' refers to a ``component'' of the major system, not 
the major system itself. As noted by the respondent, it is possible 
that one component of a system may be replaced over the course of the 
production of the system as a whole, and it would be wasteful to 
maintain the special tooling for the now-obsolete component until 
production ends for the major system.
    Response: DoD agrees with the respondent that it is possible, even 
likely, that one or more individual components of a major system will 
be replaced over the life of the major system. However, DoD points out 
that DoD policies are focused at the system level, and the requirement 
in section 815 is for a plan for the preservation and storage of the 
tooling associated with the production of hardware for a major defense 
acquisition program. DoD thinks that any complete plan would include 
the possibility of replacement

[[Page 11363]]

upgraded components and would not contemplate maintaining and storing 
any special tooling for components that are no longer a part of the 
major system end item.

F. Repricing Ongoing Programs

    Comment: A respondent stated its belief that ``the final rule must 
allow contractors to reprice ongoing programs should the plans for 
preserving tooling for major defense acquisition programs add 
additional requirements on to existing programs.''
    Response: The comment is outside the scope of this case. Further, 
whenever new or additional requirements are added to a contract, it can 
only be accomplished via a bilateral modification and with equitable 
consideration. This contract rule is not unique to MDAPs or tooling-
preservation requirements. Therefore, this case need not address such a 
circumstance specifically with regard to the preservation of tooling. 
To do so would add inappropriate redundancy to the DFARS.

III. Executive Order 12866

    This is not a significant regulatory action and, therefore, was not 
subject to review by the Office of Management and Budget under 
Executive Order 12866, 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 the rule addresses internal DoD procedural matters. 
Specifically, this implementation of section 815 of the National 
Defense Authorization Act for Fiscal Year 2009, ``Preservation of 
Tooling for Major Defense Acquisition Programs,'' requires that--
    1. The DoD Milestone Decision Authority (MDA) approve a plan for 
the preservation and storage of unique tooling associated with the 
production of hardware for a major defense acquisition program through 
the end of the service life of the end item; and
    2. The MDA periodically review the plan to ensure that it remains 
adequate and in the best interest of DoD.

V. Paperwork Reduction Act

    The rule does not impose 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 Part 207

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

    Therefore, 48 CFR part 207 is amended as follows:

PART 207--ACQUISITION PLANNING

0
1. The authority citation for 48 CFR part 207 continues to read as 
follows:

    Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

0
2. Add paragraph (S-73) to section 207.106 to read as follows:

207.106  Additional requirements for major systems.

* * * * *
    (S-73) In accordance with section 815 of the National Defense 
Authorization Act for Fiscal Year 2009 (Pub. L. 110-417) and DoD policy 
requirements, acquisition plans for major weapons systems shall include 
a plan for the preservation and storage of special tooling associated 
with the production of hardware for major defense acquisition programs 
through the end of the service life of the related weapons system. The 
plan shall include the identification of any contract clauses, 
facilities, and funding required for the preservation and storage of 
such tooling. The Undersecretary of Defense for Acquisition, 
Technology, and Logistics (USD (AT&L)) may waive this requirement if 
USD (AT&L) determines that it is in the best interest of DoD.

[FR Doc. 2011-4529 Filed 3-1-11; 8:45 am]
BILLING CODE 5001-08-P
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