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[Federal Register Volume 76, Number 75 (Tuesday, April 19, 2011)]
[Proposed Rules]
[Pages 21852-21853]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8958]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 245

Defense Federal Acquisition Regulation Supplement; Responsibility 
and Liability for Government Property (DFARS Case 2010-D018)

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

ACTION: Proposed rule.

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SUMMARY: DoD is issuing a proposed rule to amend the Defense Federal 
Acquisition Regulation Supplement (DFARS) to extend the Government 
self-insurance policy to Government property provided under negotiated 
fixed-price contracts that are awarded on a basis other than submission 
of certified cost or pricing data.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before June 20, 2011, to be considered in 
the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2010-D018, 
using any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov.
    Submit comments via the Federal eRulemaking portal by inputting 
``DFARS Case 2010-D018'' under the heading ``Enter keyword or ID'' and 
selecting ``Search.'' Select the link ``Submit a Comment'' that 
corresponds with ``DFARS Case 2010-D018.'' Follow the instructions 
provided at the ``Submit a Comment'' screen. Please include your name, 
company name (if any), and ``DFARS Case 2010-D018'' on your attached 
document.
    [cir] E-mail: dfars@osd.mil. Include DFARS Case 2010-D018 in the 
subject line of the message.
    [cir] FAX: 703-602-0350.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Mrs. 
Jennifer Abi-Najm, OUSD (AT&L) DPAP (DARS), Room 3B855, 3060 Defense 
Pentagon, Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://regulations.gov, including any personal information provided. To 
confirm receipt of your comment, please check http://www.regulations.gov approximately two to three days after submission to 
verify posting, except allow 30 days for posting of comments submitted 
by mail.

FOR FURTHER INFORMATION CONTACT: Mrs. Jennifer Abi-Najm, 703-602-1013.

SUPPLEMENTARY INFORMATION:

I. Background

    This proposed rule will amend the DFARS to extend the Federal 
Acquisition Regulation (FAR) Government self-insurance policy for loss 
of Government property to negotiated fixed-price contracts awarded on a 
basis other than submission of certified cost or pricing data. FAR 
45.104, Responsibility and liability for Government property, provides 
that contractors are not held liable for loss of Government property 
occurring under the following types of contracts:
    (1) Cost-reimbursement contracts.
    (2) Time-and-materials contracts.
    (3) Labor-hour contracts.
    (4) Fixed-price contracts awarded on the basis of submission of 
certified cost or pricing data.
    An exception to the FAR 45.104 policy for Government assumption of 
risk of loss is for negotiated fixed-price contracts awarded on a basis 
other than submission of certified cost or pricing data. This rule 
proposes that DoD contractors not be held liable for loss of Government 
property under such contracts, and eliminates the use of Alternate I of 
the FAR clause at 52.245-1, Government Property. Use of Alternate I 
requires contractors to assume the risk and be responsible for loss of 
Government property.

II. Executive Order 12866 and Executive Order 13563

    Executive Orders 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). Executive 
Order 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 Executive 
Order 12866, Regulatory Planning and Review, dated September 30, 1993. 
This rule is not a major rule under 5 U.S.C. 804.

III. Regulatory Flexibility Act

    DoD has prepared an initial regulatory flexibility analysis 
consistent with 5 U.S.C. 603. A copy of the analysis may be obtained 
from the point of contact specified herein. The analysis is summarized 
as follows:

[[Page 21853]]

    The objective of this rule is to add negotiated fixed-priced 
contracts, awarded on a basis other than submission of certified cost 
or pricing data, to the list of contracts for which the Government is 
self-insuring and assumes risk of loss for Government property provided 
under such contracts. The basic premise of this case, that the 
Government should be self-insuring under contracts that provide 
Government property, is supported by the Government Accountability 
Office (GAO) policy contained in GAO publication, GAO-04-261SP 
Appropriations Law, and its decisions.
    The Government generally self-insures against contractor loss of 
Government property acquired or provided under most negotiated 
Government contracts. An exception to this policy at FAR 45.104 is for 
negotiated fixed-price contracts awarded on a basis other than 
submission of certified cost or pricing data. For those contracts, the 
contractor is liable for loss of Government property (except for 
reasonable fair wear and tear) invoked by use of FAR clause 52.245-1, 
Government Property, with its Alternate I.
    DoD has approximately 3,000 contractors with contracts that 
authorize furnishing some form of Government contract property. The 
majority of property (over 80 percent in terms of original acquisition 
value) is accountable to large businesses, with the remainder 
accountable to small entities.
    Any impact of this rule on small entities is expected to be 
beneficial. Large businesses with substantial cash reserves may be in a 
financial position that enables those firms to select a high insurance 
deductible in order to garner lower premiums by electing to become 
self-insuring for potential property loss up to the level of the 
deductible. Small entities may not have the financial capacity or 
capability to select a high insurance deductible in order to be self-
insuring up to the higher thresholds. The effect of small entities not 
being able to select higher deductible thresholds may be to incur 
higher insurance premiums, which might negatively impact their ability 
to compete. The Government assuming the liability for loss of 
Government property under negotiated fixed-price contracts awarded on a 
basis other than submission of certified cost or pricing data should 
provide some relief for the small entities concerning costs to acquire 
insurance against risk of loss.
    DoD invites comments from small businesses and other interested 
parties on the expected impact of this 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 2010-D018), in 
correspondence.

IV. Paperwork Reduction Act

    This rule does not impose any 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 Part 245

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

    Therefore, 48 CFR part 245 is proposed to be amended as follows:

PART 245-GOVERNMENT PROPERTY

    1. The authority citation for 48 CFR part 245 continues to read as 
follows:

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

    2. Section 245.104 is added to subpart 245.1 to read as follows:

245.104  Responsibility and liability for Government property.

    (a) In addition to the contract types listed at FAR 45.104, 
contractors are not held liable for loss of Government property under 
negotiated fixed-price contracts awarded on a basis other than 
submission of certified cost or pricing data.
    3. Section 245.107 is revised to read as follows:

245.107  Contract clauses.

    (1) Use the clause at 252.245-7000, Government-Furnished Mapping, 
Charting, and Geodesy Property, in solicitations and contracts when 
mapping, charting, and geodesy property is to be furnished.
    (2) Use the clause at 252.245-7001, Tagging, Labeling, and Marking 
of Government-Furnished Property, in solicitations and contracts that 
contain the clause at FAR 52.245-1, Government Property.
    (3) Use the clause at 252.245-7002, Reporting Loss of Government 
Property, in solicitations and contracts that contain the clause at FAR 
52.245-1, Government Property.
    (4) For negotiated fixed-price contracts awarded on a basis other 
than submission of certified cost or pricing data for which Government 
property is provided, use the clause at FAR 52.245-1, Government 
Property, without its Alternate I.

[FR Doc. 2011-8958 Filed 4-18-11; 8:45 am]
BILLING CODE 5001-08-P
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