Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Proposed Rules 67611 

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 FixedPrice Contracts for Certain Major 

Defense Acquisition Programs (DFARS 

Case 2023–D009) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Proposed rule. 

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 lowrate 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: 

Æ 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. 

Æ Email: osd.dfars@mail.mil. 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— 

• The milestone decision authority 

authorizes the use of a fixed-price type 

contract at the time of Milestone B 

approval; and 

• 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— 

• 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 

• 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 Offthe-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 


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67612 Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Proposed Rules 

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 fixedprice 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: 

■ 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 

■ 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 

■ 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 fixedprice 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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