PGI 231.2 -CONTRACTS WITH COMMERCIAL

ORGANIZATIONS

Parent topic: PGI Part 231 - CONTRACT COST PRINCIPLES AND PROCEDURES

PGI 231.205 Selected costs..

PGI 231.205-70 External restructuring costs.

(d) Procedures and ACO responsibilities. The cognizant ACO shall—

(i) Promptly execute a novation agreement, if one is required, in accordance with FAR Subpart 42.12

and DFARS Subpart 242.12 and include the provision at DFARS 242.1204(i).

(ii) Direct the contractor to segregate restructuring costs and to suspend these amounts from any

billings, final contract price settlements, and overhead settlements until the determination in DFARS

231.205-70(c)(4)(i) is obtained.

(iii) Require the contractor to submit an overall plan of restructuring activities and an adequately

supported proposal for planned restructuring projects. The proposal must include a breakout by year

by cost element, showing the present value of projected restructuring costs and projected

restructuring savings.

(iv) Notify major buying activities of contractor restructuring actions and inform them about any

potential monetary impacts on major weapons programs, when known.

(v) Upon receipt of the contractor’s proposal, as soon as practicable, adjust forward pricing rates to

reflect the impact of projected restructuring savings. If restructuring costs are included in forward

pricing rates prior to execution of an advance agreement in accordance with paragraph (d)(viii) of

this subsection, the contracting officer shall include a repricing clause in each fixed-price action that

is priced based on the rates. The repricing clause must provide for a downward price adjustment to

remove restructuring costs if the determination required by DFARS 231.205-70(c)(4)(i) is not

obtained.

(vi) Upon receipt of the contractor’s proposal, immediately request an audit review of the

contractor’s proposal.

(vii) Upon receipt of the audit report, determine on a present value basis if—

(A) The audited projected restructuring savings for DoD will exceed the restructuring costs allowed

by a factor of at least two to one, as required by DFARS 231.205-70(c)(4)(i)(A); or

(B) If the audited projected restructuring savings will exceed the restructuring costs allowed in a

case where the business combination will result in the preservation of a critical capability that

otherwise might be lost to DoD, as required by DFARS 231.205-70(c)(4)(i)(B).

(viii) Negotiate an advance agreement with the contractor setting forth, at a minimum, a cumulative

cost ceiling for restructuring projects and, when necessary, a cost amortization schedule. The costs

may not exceed the amount of projected restructuring savings on a present value basis. The advance
agreement shall not be executed until the determination required by DFARS 231.205-70(c)(4)(i) is

obtained.

(ix)(A) Submit a recommendation for determination to—

(1) If DFARS 231.205-70(c)(4)(ii)(A) applies, submit the recommendation to the Office of the

Principal Director, Defense Pricing and Contracting (Price, Cost and Finance) via email at

osd.pentagon.ousd-a-s.mbx.dpc-pcf@mail.mil.

(2) If DFARS 231.205-70(c)(4)(ii)(B) applies, submit the recommendation to the Director of the

Defense Contract Management Agency, ATTN: HQ DCMA-OCB.

(B) Include the information described in DFARS 231.205-70(e).

(x) Consult with the Principal Director, Defense Pricing and Contracting, or with the Director of the

Defense Contract Management Agency, as appropriate, when DFARS 231.205-70(c)(4)(i)(B) applies.