[Federal Register Volume 88, Number 188 (Friday, September 29, 2023)]
[Proposed Rules]
[Pages 67611-67612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20801]



Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / 
Proposed Rules

[[Page 67611]]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 207 and 234

[Docket DARS-2023-0030]
RIN 0750-AL82


Defense Federal Acquisition Regulation Supplement: Use of Fixed-
Price Contracts for Certain Major Defense Acquisition Programs (DFARS 
Case 2023-D009)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Proposed rule.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to implement a section of the National 
Defense Authorization Act for Fiscal Year 2023that limits the number of 
low-rate initial production lots associated with a major defense 
acquisition program under certain circumstances.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before November 28, 2023, to be 
considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2023-D009 using any 
of the following methods:
    [cir] Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``DFARS Case 2023-D009.'' Select ``Comment'' and follow the 
instructions to submit a comment. Please include ``DFARS Case 2023-
D009'' on any attached documents.
    [cir] Email: <a href="/cdn-cgi/l/email-protection#a1ced2c58fc5c7c0d3d2e1ccc0c8cd8fccc8cd"><span class="__cf_email__" data-cfemail="d9b6aabdf7bdbfb8abaa99b4b8b0b5f7b4b0b5">[email protected]</span></a>. Include DFARS Case 2023-D009 in 
the subject line of the message.
    Comments received generally will be posted without change to 
https://www.regulations.gov, including any personal information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission 
to verify posting.

FOR FURTHER INFORMATION CONTACT: Ms. Jeanette Snyder, 703-508-7524.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD is proposing to revise the DFARS to implement section 808 of 
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2023 
(Pub. L. 117-263). Section 808 amends section 818 of Public Law 109-364 
to limit the number of low-rate initial production lots associated with 
a major defense acquisition program to be procured to no more than one 
when the milestone decision authority authorizes the use of a fixed-
price type contract at Milestone B and the scope of the work includes 
both development and low-rate initial production. This limitation may 
be waived.

II. Discussion and Analysis

    This proposed rule adds new guidance to contracting officers at 
DFARS 234.004, paragraph (2)(v), to specify that the contracting 
officer shall not procure more than one low-rate initial production lot 
associated with a major defense acquisition program if--
    <bullet> The milestone decision authority authorizes the use of a 
fixed-price type contract at the time of Milestone B approval; and
    <bullet> The scope of work of the fixed-price type contract 
includes both development and low-rate initial production of items for 
such major defense acquisition program.
    This limitation may be waived by the service acquisition executive 
for the department concerned, delegable to no lower than one level 
above the contracting officer, if--
    <bullet> A written notification of the waiver, including rationale, 
is provided to the congressional defense committees no later than 30 
days after issuance of the waiver; and
    <bullet> A copy of the waiver and such congressional notification 
are included in the contract file.
    This rule also proposes to modify DFARS 207.106 to reference DFARS 
234.004 when selecting the contract type for a major defense 
acquisition program and to remove the reference to section 811 of the 
NDAA for FY 2013 (Pub. L. 112-239), since more than one NDAA applies 
requirements or restrictions to contract types for procurements 
associated with major defense acquisition programs.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule does not create any new solicitation provisions or 
contract clauses. It does not impact any existing solicitation 
provisions or contract clauses or their applicability to contracts 
valued at or below the simplified acquisition threshold, for commercial 
products including COTS items, or for commercial services.

IV. Expected Impact of the Rule

    As a result of this proposed rule, unless waived, the Government 
may not procure more than one low-rate initial production lot 
associated with a major defense acquisition program if, at the time of 
Milestone B approval, the milestone decision authority authorizes the 
use of a fixed-price type contract and the scope of work of the fixed-
price contract includes both development and low-rate initial 
production of items associated with such major defense acquisition 
program. This rule does not impact contractor operations; however, it 
may limit contractor risk assumed under such contracts. Development and 
initial production of an item likely involve the discovery and 
resolution of problems that are unknown beforehand. Risk to a 
contractor is higher when the contractor must propose prices for 
multiple production lots of an item before the development and initial 
production of that item are complete. By limiting the number of low-
rate initial production lots on a fixed-price contract that also 
includes development, this risk to the contractor may be reduced.

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, as amended.

VI. Regulatory Flexibility Act

    DoD does not expect this proposed rule, when finalized, 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 this rule only applies to certain fixed-price type 
contracts for major defense acquisition programs. However, an initial 
regulatory flexibility analysis has been performed and is summarized as 
follows:
    This proposed rule is necessary to implement section 808 of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2023 
(Pub. L. 117-263). Section 808 modifies section 818 of

[[Page 67612]]

Public Law 109-364 to limit the number of low-rate initial production 
lots associated with a major defense acquisition program to be procured 
to no more than one when the milestone decision authority authorizes 
the use of a fixed-price type contract at the time of Milestone B 
approval and the scope of the fixed-price contract includes both 
development and low-rate initial production.
    The objective of this proposed rule is to limit the number of low-
rate initial production lots associated with a major defense 
acquisition program to no more than one when the milestone decision 
authority authorizes the use of a fixed-price type contract at the time 
of Milestone B approval and the scope of the fixed-price contract 
includes both development and low-rate initial production. The legal 
basis for the rule is section 808 of the NDAA for FY 2023.
    Data is not available on the number of fixed-price type contracts 
for major defense acquisition programs that contain both development 
and low-rate initial production; therefore, data was pulled on 
contracts that include DFARS clause 252.234-7004, Cost and Software 
Data Reporting System, or its alternate I clause. This DFARS clause is 
required to be included in solicitations and contracts for major 
defense acquisition programs that exceed $50 million and its alternate 
I clause is required to be included in solicitations and contracts for 
major defense acquisition programs that are greater than $20 million, 
but less than or equal to $50 million under certain circumstances. 
According to the Procurement Business Intelligence Service, DoD awarded 
contracts for major defense acquisition programs to 162 unique small 
entities in FY 2020, 133 in FY 2021, and 116 in FY 2022. The average 
over the three-year period is 137 per fiscal year. Therefore, the 
number of small entities to which this rule may apply is 137.
    This proposed rule does not impose any new reporting, recordkeeping 
or other compliance requirements for small entities.
    This proposed rule does not duplicate, overlap, or conflict with 
any other Federal rules.
    There are no known alternatives that would accomplish the stated 
objectives of the applicable statute.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this proposed rule on 
small entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2023-D009), in 
correspondence.

VIII. Paperwork Reduction Act

    This proposed rule does not contain any new 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 207 and 234

    Government procurement.

Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 207 and 234 are proposed to be amended as 
follows:

0
1. The authority citation for parts 207 and 234 continues to read as 
follows:

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

PART 207--ACQUISITION PLANNING

0
2. In section 207.106, revise paragraph (S-74) to read as follows:


207.106  Additional requirements for major systems.

* * * * *
    (S-74) When selecting contract type for a major defense acquisition 
program, see 234.004.

PART 234--MAJOR SYSTEM ACQUISITION

0
3. Amend section 234.004 by adding new paragraph (2)(v) to read as 
follows:


234.004  Acquisition strategy.

* * * * *
    (2) * * *
    (v) In accordance with section 808 of the National Defense 
Authorization Act for Fiscal Year 2023 (Pub. L. 117-263)--
    (A) The contracting officer shall not procure more than one lot for 
low-rate initial production, as defined at 10 U.S.C. 4231, associated 
with a major defense acquisition program if--
    (1) The milestone decision authority authorizes the use of a fixed-
price type contract at the time of Milestone B approval; and
    (2) The scope of work of the fixed-price type contract includes 
both the development and low-rate initial production of items for such 
major defense acquisition program.
    (B) This limitation may be waived by the service acquisition 
executive for the department concerned, delegable to no lower than one 
level above the contracting officer, if--
    (1) A written notification of the waiver, including associated 
rationale, is provided to the congressional defense committees no later 
than 30 days after issuance of the waiver in accordance with agency 
procedures; and
    (2) A copy of the waiver and such congressional notification are 
included in the contract file.
* * * * *
[FR Doc. 2023-20801 Filed 9-28-23; 8:45 am]
 BILLING CODE 5001-06-P


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