32066 Federal Register / Vol. 65, No. 99 / Monday, May 22, 2000 / Proposed Rules

FOR FURTHER INFORMATION CONTACT: Ms.

Sandra G. Haberlin, (703) 602–0289.

SUPPLEMENTARY INFORMATION:

A. Background

On December 27, 1999, Item I of

Federal Acquisition Circular 97–15 (64

FR 72415) removed Subpart 23.1,

Pollution Control and Clean Air and

Water, from the FAR. Subpart 23.1

contained policy pertaining to entities

that are ineligible for contract award

due to a violation of the Clean Air Act

or the Clean Water Act. The FAR text

was deemed unnecessary, because

contracting officers can use the General

Services Administration List of Parties

Excluded from Federal Procurement and

Nonprocurement Programs to ensure

that they do not award contracts to

ineligible entities. In accordance with

Environmental Protection Agency

regulations at 40 CFR 32.215(b), FAR

Subpart 23.1 permitted an agency head

to except a contract from the prohibition

on award to a Clean Air Act or Clean

Water Act violator if it was in the

paramount interest of the United States

to do so. DFARS Subpart 223.1 limited

delegation of this exception authority to

a level no lower than an official who is

appointed by and with the advice of the

Senate.

This DFARS rule proposes to—

1. Remove the text from DFARS

Subpart 223.1, since FAR Subpart 23.1

no longer exists; and relocate the text to

DFARS 209.405(b), since the

corresponding text at FAR 9.405(b)

addresses matters relating to entities on

the List of Parties Excluded from

Federal Procurement and

Nonprocurement Programs;

2. Retain a limitation on delegation of

the exception authority, but lower the

permitted level of delegation to a level

no lower than a general or flag officer or

a member of the Senior Executive

Service; and

3. Designate the text already located at

DFARS 209.405 as 209.405(a), and

amend the text to clarify that the

provisions of 10 U.S.C. 2393 regarding

a ‘‘compelling reason’’ determination

apply only to the conduct of business

with entities that are debarred or

suspended.

This rule was not subject to Office of

Management and Budget review under

Executive Order 12866, dated

September 30, 1993.

B. Regulatory Flexibility Act

The proposed rule is not expected to

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 pertains only to the

exceptional situations where there is a

need to conduct business with entities

that are debarred or suspended or,

because of a violation of the Clean Air

Act or the Clean Water Act, are

ineligible for award. Therefore, an

initial regulatory flexibility analysis has

not been performed. Comments are

invited from small businesses and other

interested parties. Comments from small

entities concerning the affected DFARS

subparts also will be considered in

accordance with 5 U.S.C. 610. Such

comments should be submitted

separately and should cite DFARS Case

2000–D004.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the rule does not

impose any information collection

requirements that require the approval

of the Office of Management and Budget

under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 209 and

223

Government procurement.

Michele P. Peterson,

Executive Editor, Defense Acquisition

Regulations Council.

Therefore, 48 CFR Parts 209 and 223

are proposed to be amended as follows:

1. The authority citation for 48 CFR

Parts 209 and 223 continues to read as

follows:

Authority: 41 U.S.C. 421 and 48 CFR

Chapter 1.

PART 209—CONTRACTOR

QUALIFICATIONS

2. Section 209.405 is revised to read

as follows:

209.405 Effect of listing.

(a) Under 10 U.S.C. 2393(b), when a

department or agency determines that a

compelling reason exists for it to

conduct business with a contractor that

is debarred or suspended from

procurement programs, it must provide

written notice of the determination to

the General Services Administration,

Office of Acquisition Policy. Examples

of compelling reasons are—

(1) Only a debarred or suspended

contractor can provide the supplies or

services;

(2) Urgency requires contracting with

a debarred or suspended contractor;

(3) The contractor and a department

or agency have an agreement covering

the same events that resulted in the

debarment or suspension and the

agreement includes the department of

agency decision not to debar or suspend

the contractor; or

(4) The national defense requires

continued business dealings with the

debarred or suspended contractor.

(b)(i) The Procurement Cause and

Treatment Code ‘‘H’’ annotation in the

GSA List of Parties Excluded from

Federal Procurement and

Nonprocurement Programs identifies

contractors that are declared ineligible

for award of a contract or subcontract

because of a violation of the Clean Air

Act (42 U.S.C. 7606) or the Clean Water

Act (33 U.S.C. 1368).

(ii) Under the authority of 40 CFR

32.215(b), the agency head may grant an

exception permitting award to a Code

‘‘H’’ ineligible contractor if it is in the

paramount interest of the United States.

(A) The agency head may delegate

this exception authority to a level no

lower than a general or flag officer or a

member of the Senior Executive Service.

(B) The official granting the exception

must provide written notice to the

Environmental Protection Agency

debarring official.

PART 223—ENVIRONMENT,

CONSERVATION, OCCUPATIONAL

SAFETY, AND DRUG-FREE

WORKPLACE

Subpart 223.1 [Removed]

3. Subpart 223.1 is removed.

[FR Doc. 00–12414 Filed 5–19–00; 8:45 am]

BILLING CODE 5000–04–M

DEPARTMENT OF DEFENSE

48 CFR Part 215

[DFARS Case 2000–D300]

Defense Federal Acquisition

Regulation Supplement; Profit

incentives To Produce Innovative New

Technologies

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for

comments.

SUMMARY: The Acting Director of

Defense Procurement is proposing to

amend the Defense Federal Acquisition

Regulation Supplement (DFARS) to

implement Section 813 of the National

Defense Authorization Act for Fiscal

Year 2000. Section 813 requires DoD to

review its profit guidelines to consider

whether appropriate modifications,

such as placing increased emphasis on

technical risk as a factor for determining

appropriate profit margins, would

provide an increased profit incentive for

contractors to develop and produce

complex and innovative new

technologies.

Federal Register / Vol. 65, No. 99 / Monday, May 22, 2000 / Proposed Rules 32067

DATES: Comments on the proposed rule

should be submitted in writing to the

address shown below on or before July

21, 2000, to be considered in the

formation of the final rule.

ADDRESSES: Interested parties should

submit written comments on the

proposed rule to: Defense Acquisition

Regulations Council, Attn: Ms. Amy

Williams, PDUSD(AT&L) DP(DAR), IMD

3D139, 3062 Defense Pentagon,

Washington, DC 20301–3062. Telefax

(703) 602–0350.

E-mail comments submitted via the

Internet should be addressed to:

dfars@acq.osd.mil

Please cite DFARS Case 2000–D300 in

all correspondence related to this

proposed rule. E-mail correspondence

should cite DFARS Case 2000–D300 in

the subject line.

FOR FURTHER INFORMATION CONTACT: Ms.

Amy Williams, (703) 602–0288.

SUPPLEMENTARY INFORMATION:

A. Background

This rule proposes amendments to the

profit policy in DFARS Subpart 215.4 to

implement Section 813 of the National

Defense Authorization Act for Fiscal

Year 2000 (Public Law 106–65). DoD

published an advance notice of

proposed rulemaking on February 10,

2000 (65 FR 6574), posted a preliminary

draft on potential changes on the

Defense Procurement Internet web site,

and held a public meeting on February

23, 2000. Representatives from

Government and industry participated

in the public meeting.

The proposed rule amends the

weighted guidelines method of profit

computation at DFARS 215.404–71 to

combine the management and cost

control elements of the performance risk

factor; to establish a new ‘‘technology

incentive’’ range for technical risk; and,

based on comments received at the

public meeting, to slightly modify some

of the cost control standards. In

addition, the rule amends DFARS

215.404–4(b) to clarify that DoD

departments and agencies must use a

structured approach for developing a

prenegotiation profit or fee objective on

any negotiated contract action when

cost or pricing data is obtained.

This rule was not subject to Office of

Management and Budget review under

Executive Order 12866, dated

September 30, 1993.

B. Regulatory Flexibility Act

The proposed rule is not expected to

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 most contracts awarded to

small entities are below $500,000, are

based on adequate price competition, or

are for commercial items, and do not

require submission of cost or pricing

data. Therefore, an initial regulatory

flexibility analysis has not been

performed. Comments are invited from

small businesses and other interested

parties. Comments from small entities

concerning the affected DFARS subpart

also will be considered in accordance

with 5 U.S.C. 610. Such comments

should be submitted separately and

should cite DFARS Case 2000–D300.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the rule does not

impose any information collection

requirements that require the approval

of the Office of Management and Budget

under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 215

Government procurement.

Michele P. Peterson,

Executive Editor, Defense Acquisition

Regulations Council.

Therefore, 48 CFR part 215 is

proposed to be amended as follows:

1. The authority citation for 48 CFR

part 215 continues to read as follows:

Authority: 41 U.S.C. 421 and 48 CFR

Chapter 1.

PART 215—CONTRACTING BY

NEGOTIATION

2. Section 215.404–4 is amended by

revising paragraph (b)(1) introductory

text to read as follows:

215.404–4 Profit.

(b) * * * (1) Departments and

agencies must use a structured approach

for developing a prenegotiation profit or

fee objective on any negotiated contract

action when cost or pricing data is

obtained, except for cost-plus-award-fee

contracts (see 215.404–74) or contracts

with Federally Funded Research and

Development Centers (FFRDCs) (see

215.404–75). There are three structured

approaches—

* * * * *

3. Section 215.404–71–2 is revised to

read as follows:

215.404–71–2 Performance risk.

(a) Description. This profit factor

addresses the contractor’s degree of risk

in fulfilling the contract requirements.

The factor consists of two parts:

(1) Technical—the technical

uncertainties of performance.

(2) Management/cost control—the

degree of management effort

necessary—

(i) To ensure that contract

requirements are met; and

(ii) To reduce and control costs.

(b) Determination. The following

extract from the DD Form 1547 is

annotated to describe the process.

Item Contractor risk factors Assigned

weighting

Assigned

value

Base

(item 18)

Profit

objective

21. ............ Technical .................................................................................................. (1) (2) N/A N/A

22. ............ Management/Cost Control ....................................................................... (1) (2) N/A N/A

23. ............ Reserved ..................................................................................................

24. ............ Performance Risk (Composite) ................................................................ N/A (3) (4)( 5)

1Assign a weight (percentage) to each element according to its input to the total performance risk. The total of the two weights

equals 100 percent. 2Select a value for each element from the list in paragraph (c) of this subsection using the evaluation criteria in paragraphs

(d) and (e) of this subsection. 3Compute the composite as shown in the following example:

Assigned

weighting

(percent)

Assigned

value

(percent)

Weighted

value

(percent)

Technical .............................................................................................................................. 60 5.0 3.0

Management/Cost Control .................................................................................................... 40 4.0 1.6

32068 Federal Register / Vol. 65, No. 99 / Monday, May 22, 2000 / Proposed Rules

Assigned

weighting

(percent)

Assigned

value

(percent)

Weighted

value

(percent)

Composite Value .................................................................................................................. 100 ........................ 4.6

4 Insert the amount from Block 18 of the DD Form 1547. Block 18 is total contract costs, excluding general and administrative

expenses, contractor independent research and development and bid and proposal expenses, and facilities capital cost of money. 5Multiply (3) by (4).

(c) Values: Normal and designated ranges.

Normal value

(percnet)

Designated

range

(percent)j

Standard ....................... 4 2 to 6

Alternate ........................ 6 4 to 8

Technology Incentive .... 8 6 to 10

(1) Standard. The standard designated

range should apply to most contracts.

(2) Alternate. Contracting officers may

use the alternate designated range for

research and development and service

contractors when these contractors

require relatively low capital investment

in buildings and equipment when

compared to the defense industry

overall. If the alternate designated range

is used, do not give any profit for

facilities capital employed (see 215.404–

71–4(c)(3)).

(3) Technology incentive. For the

technical factor only, contracting

officers may use the technology

incentive range for acquisitions that

include development or production of

innovative new technologies.

(d) Evaluation criteria for technical.

(1) Review the contract requirements

and focus on the critical performance

elements in the statement of work or

specifications. Factors to consider

include—

(i) Technology being applied or

developed by the contractor;

(ii) Technical complexity;

(iii) Program maturity;

(iv) Performance specifications and

tolerances;

(v) Delivery schedule; and

(vi) Extent of a warranty or guarantee.

(2) Above normal conditions. (i) The

contracting officer may assign a higher

than normal value in those cases where

there is a substantial technical risk.

Indicators are—

(A) Items are being manufactured

using specifications with stringent

tolerance limits;

(B) The efforts require highly skilled

personnel or require the use of state-ofthe-art machinery;

(C) The services and analytical efforts

are extremely important to the

Government and must be performed to

exacting standards;

(D) The contractor’s independent

development and investment has

reduced the Government’s risk or cost;

(E) The contractor has accepted an

accelerated delivery schedule to meet

DoD requirements; or

(F) The contractor has assumed

additional risk through warranty

provisions.

(ii) Extremely complex, vital efforts to

overcome difficult technical obstacles

that require personnel with exceptional

abilities, experience, and professional

credentials may justify a value

significantly above normal.

(iii) The following may justify a

maximum value—

(A) Development or initial production

of a new item, particularly if

performance or quality specifications

are tight; or

(B) A high degree of development or

production concurrency.

(3) Below normal conditions. (i) The

contracting officer may assign a lower

than normal value in those cases where

the technical risk is low.

Indicators are—

(A) Acquisition is for off-the-shelf

items;

(B) Requirements are relatively

simple;

(C) Technology is not complex;

(D) Efforts do not require highly

skilled personnel;

(E) Efforts are routine;

(F) Programs are mature; or

(G) Acquisition is a follow-on effort or

a repetitive type acquisition.

(ii) The contracting officer may assign

a value significantly below normal for—

(A) Routine services;

(B) Production of simple items;

(C) Rote entry or routine integration of

Government-furnished information; or

(D) Simple operations with

Government-furnished property.

(4) Technology incentive range.

(i) The contracting officer may assign

values within the technology incentive

range when contracting performance

includes the introduction of new,

significant technological innovation.

Use the technology incentive range only

for the most innovative contract efforts.

Innovation may be in the form of—

(A) Development or application of

new technology that fundamentally

changes the characteristics of an

existing product or system and that

results in increased technical

performance, improved reliability, or

reduced costs; or

(B) New products or systems that

contain significant technological

advances over the products or systems

they are replacing.

(ii) When selecting a value within the

technology incentive range, the

contracting officer should consider the

relative value of the proposed

innovation to the acquisition as a whole.

When the innovation represents a minor

benefit, the contracting officer should

consider using values less than the

norm. For innovative efforts that will

have a major positive impact on the

product or program, the contracting

officer may use values above the norm.

(e) Evaluation criteria for

management/cost control.

(1) The contracting officer should

evaluate—

(i) The contractor’s management and

internal control systems using

contracting office information and

reviews made by field contract

administration offices or other DoD field

offices;

(ii) The management involvement

expected on the prospective contract

action;

(iii) The degree of cost mix as an

indication of the types of resources

applied and value added by the

contractor;

(iv) The contractor’s support of

Federal socioeconomic programs;

(v) The expected reliability of the

contractor’s cost estimates (including

the contractor’s cost estimating system);

(vi) The contractor’s cost reduction

initiatives (e.g., competition advocacy

programs, technical insertion programs,

obsolete parts control programs, dual

sourcing, square parts pricing reform,

value engineering);

(vii) The adequacy of the contractor’s

management approach to controlling

cost and schedule; and

(viii) Any other factors that affect the

contractor’s ability to meet the cost

targets (e.g., foreign currency exchange

rates and inflation rates).

(2) Above normal conditions. (i) The

contracting officer may assign a higher

than normal value when the

management effort is intense. Indicators

of this are—

(A) The contractor’s value added is

both considerable and reasonably

difficult;

Federal Register / Vol. 65, No. 99 / Monday, May 22, 2000 / Proposed Rules 32069

(B) The effort involves a high degree

of integration or coordination;

(C) The contractor has a substantial

record of active participation in Federal

socioeconomic programs;

(D) The contractor provides fully

documented and reliable cost estimates;

(E) The contractor has an aggressive

cost reduction program that has

demonstrable benefits;

(F) The contractor uses a high degree

of subcontract competition (e.g.,

agressive dual sourcing);

(G) The contractor has a proven

record of cost tracking and control; or

(H) The contractor aggressively seeks

process improvements to reduce costs.

(ii) The contracting officer may justify

a maximum value when the effort—

(A) Requires large scale integration of

the most complex nature;

(B) Involves major international

activities with significant management

coordination (e.g., offsets with foreign

vendors); or

(C) Has critically important

milestones.

(3) Below normal conditions. (i) The

contracting officer may assign a lower

than normal value when the

management effort is minimal.

Indicators of this are—

(A) The program is mature and many

end item deliveries have been made;

(B) The contractor adds minimum

value to an item;

(C) The efforts are routine and require

minimal supervision;

(D) The contractor provides poor

quality, untimely proposals;

(E) The contractor fails to provide an

adequate analysis of subcontractor costs;

(F) The contractor does not cooperate

in the evaluation and negotiation of the

proposal;

(G) The contractor’s cost estimating

system is marginal;

(H) The contractor has made minimal

effort to initiate cost reduction

programs;

(I) The contractor’s cost proposal is

inadequate; or

(J) The contractor has a record of cost

overruns or another indication of

unreliable cost estimates and lack of

cost control.

(ii) The following may justify a value

significantly below normal—

(A) Reviews performed by the field

contract administration offices disclose

unsatisfactory management and internal

control systems (e.g., quality assurance,

property control, safety, security); or

(B) The effort requires an unusually

low degree of management involvement.

4. Section 215.404–702 is amended by

adding paragraph (b)(1)(iii) to read as

follows:

215.404–72 Modified weighted guidelines

method for nonprofit organizations other

than FFRDCs.

* * * * *

(b) * * *

(1) * * *

(iii) Do not assign a value from the

technology incentive designated range.

* * * * *

[FR Doc. 00–12416 Filed 5–19–00; 8:45 am]

BILLING CODE 5000–04–M

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 1803 and 1852

NASA Inspector General Hotline

Posters

AGENCY: National Aeronautics and

Space Administration (NASA).

ACTION: Proposed rule.

SUMMARY: This is a proposed rule to

amend the NASA FAR Supplement

(NFS) to require NASA contractors to

display ‘‘hotline posters’’on contracts

exceeding $5,000,000 and performed at

contractor facilities in the United States.

DATES: Comments should be submitted

on or before July 21, 2000.

ADDRESSES: Interested parties should

submit written comments to Paul

Brundage, NASA Headquarters Office of

Procurement, Contract Management

Division (Code HK), Washington, DC

20456–0001. Comments may also be

submitted by email to

pbrundage@hq.nasa.gov.

FOR FURTHER INFORMATION CONTACT: Paul

Brundage, (202) 358–0481.

SUPPLEMENTARY INFORMATION:

A. Background

NASA’s Office of Inspector General

(IG) has requested that NASA

contractors be required to display

‘‘hotline posters’’ in contractor facilities

performing work on some NASA

contracts. Foreign contracts and

contracts less than $5,000,000 would be

exempt. This proposed rule would

require contractors to obtain from the

NASA IG ‘‘hotline posters’’ and to post

them in facilities where and when work

is performed on an applicable NASA

contract. By waiver from Part 12, NASA

might also impose this requirement on

a case-by-case basis in contracts for

commercial items when unusual

circumstances warrant. An example of

such circumstances might include

procurements involving extraordinary

concerns about the safety of human life.

B. Regulatory Flexibility Act

This proposed rule is not expected to

have a significant economic impact on

a substantial number of small business

entities within the meaning of the

Regulatory Flexibility Act (5 U.S.C. 601

et seq.) because it only affects small

business entities with contracts

exceeding $5,000,000 and the NASA IG

will provide the posters at no direct cost

to contractors.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because this proposed rule

does not impose information collection

requirements that require the approval

of the Office of Management and Budget

under 44 U.S.C. 3501, et seq.

Lists of Subjects in 48 CFR Parts 1803

and 1852

Government procurement.

Tom Luedtke,

Associate Administrator for Procurement.

Accordingly, 48 CFR Parts 1803 and

1852 are proposed to be amended as

follows:

1. The authority citation for 48 CFR

Parts 1803 and 1852 continues to read

as follows:

Authority: 42 U.S.C. 2473(c)(1).

PART 1803—IMPROPER BUSINESS

PRACTICES AND PERSONAL

CONFLICTS OF INTEREST

2. Add Subpart 1803.70 to read as

follows:

Subpart 1803.70—IG Hotline Posters

1803.7000 Policy.

1803.7001 Contract clause.

Subpart 1803.70—IG Hotline Posters

1803.7000 Policy.

NASA requires contractors to display

NASA hotline posters prepared by the

NASA Office of Inspector General on

those contracts specified in 1803.7001,

so that employees of the contractor

having knowledge of waste, fraud, or

abuse, can readily identify a means to

contact NASA’s IG.

1803.7001 Contract clause.

Contracting officers must insert the

provision at 1852.203–70, Display of

Inspector General Hotline Posters, in

solicitations and contracts expected to

exceed $5,000,000 and performed at

contractor facilities in the United States.