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###### Department of Defense

###### Department of the Navy 

          - 48 CFR Part 5234 
          - [No. USN-2006-0069] 

# AGENCY:

Department of the Navy, DoD. 

# ACTION:

Advance notice of proposed rulemaking. 

# SUMMARY:

The Deputy for Acquisition Management, Office of the Assistant Secretary of the Navy (Research, Development and Acquisition) is issuing this advance notice of proposed rulemaking (ANPR) to solicit comments that can be used to assist the Department of the Navy (DON) in drafting a proposed Navy Marine Corps Acquisition Regulation Supplement contract clause or statement of work requirements that will incentivize contractors to pursue and implement CPI on DON major defense contracts. In particular, the primary focus will be to incentivize proactive business process improvement activities that identify increased efficiencies, cost avoidance, and cost savings, and provide the greatest motivation for contractors to share related savings with the DON to the maximum extent practicable. 

# DATES:

*Comment Date:*                         Interested parties should submit comments on or before March 19, 2007, to be considered in the formulation of any proposed rule.                     

                        The DON invites interested parties from both the private and public sector to provide comments on the effective use of incentives to encourage and reward contractor CPI initiatives aimed toward exceeding key objectives or performance parameters on DON major defense contracts. Comments are especially welcomed on the specific issues discussed in the                         **SUPPLEMENTARY INFORMATION**                         section of this notice. See, in particular, the questions posed under “Solicitation of Public Comment.”                     

# ADDRESSES:

Interested parties may submit comments, identified by docket number and title, by any of the following methods: 
      -  Federal eRulemaking Portal: http://www.regulations.gov.                          Follow the instructions for submitting comments.                     
      -  Mail:                          Federal Docket Management System Office, 1160 Defense Pentagon, Washington, DC 20301-1160.                     

*Instructions:*                         All submissions received must include the agency name, docket number, and title for this                         **Federal Register**                         document. The general policy for comments and other submissions from members of the public is to make these submissions available for public viewing on the Internet at                         *http://www.regulations.gov*                         as they are received without change, including any personal identifiers or contact information. Please cite “Continuous Process Improvements” in all correspondence related to this issue.                     

# FOR FURTHER INFORMATION CONTACT:

Department of the Navy, Office of the Assistant Secretary of the Navy (Research, Development & Acquisition), Deputy for Acquisition Management, Attn: Mr. Clarence Belton, Policy, 1000 Navy Pentagon, Room BF992, Washington, DC 20350-1000, telephone number 703-693-4006. 

# SUPPLEMENTARY INFORMATION:

## A. Background 

Companies that have implemented CPI methods and tools have significantly reduced waste and non-value added activities, improved cycle time, produced repeatable processes, reduced variation, and improved customer satisfaction. 

                    This process has led to improved products and services at a reduced cost. The Navy and Marine Corps, as customers of goods and services, should receive a fair share of the reduced costs. A contract clause should benefit companies that are aggressive in implementing CPI tools and methods with quantifiable improved output. The purpose of this ANPR is to solicit comments and suggestions on contract requirements aimed at motivating and                           ( print page 2251)                        rewarding contractors for implementing CPI. After consideration of the comments submitted in writing, the DON may publish a draft proposed rule for additional public comments.                 

## B. Solicitation of Public Comment 

The DON seeks to better understand how to incentivize contractors to incorporate best business practices related to CPI and how such contract requirements are used commercially and when their use would be in the best interest of the Government. The DON has developed questions to obtain this information as part of this ANPR. 

Accordingly, the DON invites the public to provide comments addressing the appropriate use of specific contract provisions to incentivize contractors to aggressively pursue and initiate CPI that identify increased efficiencies, cost avoidance, and cost savings. Comments are also requested on the use of solicitation provisions, source selection criteria, and performance incentives that will provide contractors with the greatest motivation to share related savings with the Government to the maximum extent practicable. The DON especially welcomes feedback to the following questions: 

1. What contractual mechanisms can the Government use to incentivize contractors to implement CPI? 

2. What are some of the contract provisions currently being used in supplier and other subcontracts to incentivize CPI? 

3. How can the Government motivate contractors who implement CPI to share in related savings to the maximum extent practicable? 

4. Are cost reimbursement or flexibly priced contracts more suitable for providing incentives for contractors to implement CPI that identify increased efficiencies, cost avoidance, and cost savings, and for providing the highest motivation to share in those related savings to the maximum extent practicable? Why or why not? What about firm fixed-priced contracts? 

Dated: January 11, 2007. 

M.A. Harvison, 

Lieutenant Commander, Judge Advocate General's Corps, U.S. Navy, Federal Register Liaison Officer.

[FR Doc. E7-612 Filed 1-17-07; 8:45 am] 

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