Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 42831 

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 2017–D011), in 

correspondence. 

VII. Paperwork Reduction Act 

The rule does not contain 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 Parts 225 and 

252 

Government procurement. 

Jennifer Lee Hawes, 

Regulatory Control Officer, Defense 

Acquisition Regulations System. 

Therefore, 48 CFR parts 225 and 252 

are proposed to be amended as follows: 

■ 1. The authority citation for 48 CFR 

parts 225 and 252 continues to read as 

follows: 

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

chapter 1. 

PART 225—FOREIGN ACQUISITION 

■ 2. Amend section 225.7002–2 by 

revising paragraph (a) to read as follows: 

225.7002–2 Exceptions. 

* * * * * 

(a) Acquisitions at or below the 

simplified acquisition threshold, except 

for athletic footwear purchased by DoD 

for use by members of the Army, Navy, 

Air Force, or Marine Corps upon their 

initial entry into the Armed Forces 

(section 817 of the National Defense 

Authorization Act for Fiscal Year 2017 

(Pub. L. 114–328)). 

* * * * * 

225.7002–3 [Amended] 

■ 3. Amend section 225.7002–3, in 

paragraph (a) by removing ‘‘commercial 

items, that exceed the simplified 

acquisition threshold’’ and adding 

‘‘commercial items’’ in its place. 

225.7004–1 [Amended] 

■ 4. Amend section 225.7004–1 by 

removing ‘‘United States or Canada’’ 

and adding ‘‘United States, Australia, 

Canada, or the United Kingdom’’ in its 

place. 

225.7004–3 [Amended] 

■ 5. Amend section 225.7004–3 by: 

■ a. In paragraph (a) by removing 

‘‘United States or Canada’’ and adding 

‘‘United States, Australia, Canada, or the 

United Kingdom’’ in its place wherever 

it appears. 

■ b. In paragraphs (a), (b), and (c) by 

removing ‘‘United States and Canada’’ 

and adding ‘‘United States, Australia, 

Canada, or the United Kingdom’’ in its 

place wherever it appears. 

225.7005–1 [Amended] 

■ 6. Amend section 225.7005–1, in the 

introductory text and paragraph (b), by 

removing ‘‘United States or Canada’’ 

and adding ‘‘United States, Australia, 

Canada, or the United Kingdom’’ in its 

place in both places. 

225.7006–1 [Amended] 

■ 7. Amend section 225.7006–1 by 

removing ‘‘United States or Canada’’ 

and adding ‘‘United States, Australia, 

Canada, or the United Kingdom’’ in its 

place. 

■ 8. Revise section 225.7006–3 to read 

as follows: 

225.7006–3 Waiver. 

The waiver criteria at 225.7008(a) 

apply to this restriction. 

225.7006–4 [Amended] 

■ 9. Amend section 225.7006–4 by: 

■ a. In paragraph (a)(2), removing ‘‘A 

waiver has been granted, other than the 

waiver for the United Kingdom, which 

has been incorporated into the 

provision’’ and adding ‘‘A waiver has 

been granted’’ in its place; and 

■ b. In paragraph (b)(2), removing ‘‘A 

waiver has been granted, other than the 

waiver for the United Kingdom, which 

has been incorporated into the clause’’ 

and adding ‘‘A waiver has been 

granted’’ in its place. 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

252.225–7037 [Amended] 

■ 10. Amend section 252.225–7037 by: 

■ a. Removing the provision date of 

‘‘(JUN 2012)’’ and adding ‘‘(DATE)’’ in 

its place; and 

■ b. In paragraphs (a) and (b), removing 

‘‘outlying areas, Canada,’’ and adding 

‘‘outlying areas, Australia, Canada,’’ in 

its place in both places. 

252.225–7038 [Amended] 

■ 11. Amend section 252.225–7038 by: 

■ a. Removing the provision date of 

‘‘(JUN 2005)’’ and adding ‘‘(DATE)’’ in 

its place; and 

■ b. Removing ‘‘outlying areas, 

Canada,’’ and adding ‘‘outlying areas, 

Australia, Canada,’’ in its place. 

[FR Doc. 2018–18245 Filed 8–23–18; 8:45 am] 

BILLING CODE 6820–ep–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 232, 242, and 252 

[Docket DARS–2018–0042] 

RIN 0750–AJ28 

Performance-Based Payments and 

Progress Payments (DFARS Case 

2017–D019) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Proposed rule; notice of 

meeting. 

SUMMARY: DoD is proposing to 

implement a section of the National 

Defense Authorization Act for Fiscal 

Year 2017, which addresses the 

preference for performance-based 

payments, and to streamline the 

performance-based payment process. 

DoD is also proposing to amend the 

Defense Federal Acquisition Regulation 

Supplement (DFARS) to revise progress 

payments and performance-based 

payments policies for DoD contracts in 

order to increase its business 

effectiveness and efficiency as well as to 

provide an opportunity for both small 

and other than small entities to qualify 

for increased customary progress 

payment rates and maximum 

performance-based payment rates based 

on whether the offeror/contractor has 

met certain performance criteria. 

DOD believes the proposed rule will 

eliminate the unintended consequences 

of not updating its contract financing 

policies (which, in turn will save 

hundreds of millions of dollars for the 

taxpayers), will improve contractor 

performance, and will distinguish and 

meaningfully recognize high performing 

companies and divisions of companies, 

as the case may be. 

This rule proposes to relieve the 

administrative burden on contractors by 

deleting the current regulations relating 

to performance-based payments at 

DFARS subpart 232.10 and the 

associated clauses at DFARS 252.232– 

7012, Performance-Based Payments— 

Whole Contract Basis, and 252.232– 

7013, Performance-Based Payments— 

Deliverable Item Basis. This rule also 

removes the requirement to negotiate 

consideration due the Government for 

providing the contractor with the 

improved cash flow when utilizing 

performance-based payments. 

In addition to the request for written 

comments on this proposed rule, DoD 

will hold a public meeting to hear the 

views of interested parties. 


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42832 Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 

DATES: Comment Date: Comments on 

the proposed rule should be submitted 

in writing to the address shown below 

on or before October 23, 2018, to be 

considered in the formation of a final 

rule. 

Public Meeting Date: The public 

meeting will be held on September 14, 

2018, from 9 a.m. to 12 p.m. EST. 

Registration to attend this meeting must 

be received by September 6, 2018. 

Further information for the public 

meeting may be found under the 

heading SUPPLEMENTARY INFORMATION. 

ADDRESSES: Public Meeting: The public 

meeting will be held at the Mark Center 

Auditorium, 4800 Mark Center Drive, 

Alexandria, VA 22350–3603. The Mark 

Center Auditorium is located on level 

B–1 of the building. 

Submission of Comments: Submit 

comments identified by DFARS Case 

2017–D019, using any of the following 

methods: 

Æ Federal eRulemaking Portal: http:// 

www.regulations.gov. Search for 

‘‘DFARS Case 2017–D019.’’ Select 

‘‘Comment Now’’ and follow the 

instructions provided to submit a 

comment. Please include ‘‘DFARS Case 

2017–D019’’ on any attached 

documents. 

Æ Email: osd.dfars@mail.mil. Include 

DFARS Case 2017–D019 in the subject 

line of the message. 

Æ Fax: 571–372–6094. 

Æ Mail: Defense Acquisition 

Regulations System, Attn: Ms. Amy G. 

Williams, OUSD (A&S) DPC/DARS, 

Room 3B941, 3060 Defense Pentagon, 

Washington, DC 20301–3060. 

Comments received generally will be 

posted without change to http://

www.regulations.gov, including any 

personal information provided. To 

confirm receipt of your comment(s), 

please check 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: Ms. 

Amy Williams, DPC/DARS, at 571–372– 

6106. 

SUPPLEMENTARY INFORMATION: 

I. Public Meeting 

DoD is hosting a public meeting to 

obtain views of experts and interested 

parties in Government and the private 

sector regarding revising policies and 

procedures with regard to customary 

progress payment rates and maximum 

performance-based payment rates for 

DoD contracts. 

Registration: Individuals wishing to 

attend the public meeting must register 

by September 6, 2018, to ensure 

adequate room accommodations and to 

facilitate security screening and entry to 

the Mark Center. Individuals desiring to 

attend the meeting must register at this 

website, https://www.acq.osd.mil/ 

dpap/dars/performance-based_

payments_and_progress_

payments.html, by providing the 

following information: 

(1) Company or organization name. 

(2) Full name, valid email address, 

and telephone number of each person 

planning to attend, and whether the 

individual is a U.S. citizen. For each 

person, the Pentagon Force Protection 

Agency will send additional 

instructions to the email address 

provided at the time of registration in 

order for the individual to be approved 

for entry to the Mark Center. 

(3) Name, title, organizational 

affiliation of presenter, if desiring to 

make a presentation, limited to a 5- 

minute presentation per company or 

organization. This limitation may be 

subject to adjustment, depending on the 

number of entities requesting to present, 

in order to ensure adequate time for 

discussion. 

Once registered, attendees will be 

prompted by the Pentagon Force 

Protection Agency on building entry 

requirements. 

One valid government-issued photo 

identification card (i.e., driver’s license 

or passport) will be required in order to 

enter the building. 

Attendees are encouraged to arrive at 

least 45 minutes early to accommodate 

security procedures. Public parking is 

not available at the Mark Center. 

Presentations: If you wish to make a 

presentation, please submit an 

electronic copy of your presentation to 

osd.dfars@mail.mil no later than 

September 10, 2018. When submitting 

presentations, provide presenter’s name, 

organization affiliation, telephone 

number, and email address on the cover 

page. Please submit presentations only 

and cite ‘‘Public Meeting, DFARS Case 

2017–D019’’ in all correspondence 

related to the public meeting. There will 

be no transcription at the meeting. The 

submitted presentations will be the only 

record of the public meeting. 

Special accommodations: The public 

meeting is physically accessible to 

people with disabilities. Requests for 

reasonable accommodations, sign 

language interpretation or other 

auxiliary aids should be directed to 

Daniel Weinstein at 571–372–6105, at 

least 10 working days prior to the 

meeting date. 

The TTY number for further 

information is: 1–800–877–8339. When 

the operator answers the call, let them 

know the agency is the Department of 

Defense; the point of contact is Daniel 

Weinstein at 571–372–6105. 

Correspondence and Comments: 

Please cite ‘‘Public Meeting, DFARS 

Case 2017–D019’’ in all correspondence 

related to this public meeting. The 

submitted presentations will be the only 

record of the public meeting. To have a 

presentation considered as a public 

comment for the formation of the final 

rule, the presentation, or pertinent 

excerpts, must be submitted separately 

as a written comment as instructed in 

the paragraph titled ‘‘Submission of 

Comments’’ in ADDRESSES. 

II. Background 

A. Purpose 

The fundamental purpose of the rule 

change is to increase the effectiveness 

and efficiency of the Department of 

Defense in five domains while 

recognizing that its cash flow policy was 

outdated and costly to the tax payers. 

The five domains are: 

• On Time or Accelerated Contract 

Deliveries; 

• Contractor Quality; 

• Contractor Business Systems; 

• Increasing Contract Opportunities 

for Small Business and for the Blind and 

Severely Disabled; and 

• Receipt of Timely Quality 

Proposals. 

The present progress payment rate 

was established in an economic 

environment when interest rates were 

significantly higher than the historic 

lows that have been experienced over 

the past several years. As a result of the 

aforementioned, and because DoD 

desires to take an enterprise-wide view 

of contractor performance and to 

recognize and distinguish performance 

among the companies with which it 

deals, DoD is proposing to modify the 

customary progress payment rate for 

large businesses. DoD recognizes that 

small businesses do not have the 

borrowing power that large businesses 

have and, therefore, is not proposing a 

change to the basic customary progress 

payment for small business, which is 90 

percent. In modifying the customary 

rate for large business, DoD is proposing 

to allow large and small business to 

achieve progress payment rates greater 

than the customary rates. 

The goal would be that a significant 

majority of the large and small 

businesses would eventually meet the 

desired level of enterprise-wide 

performance. 

In the case of large business, for 

progress payments, a two-step process: 

1. Modify the customary progress 

payment rate to 50 percent (effectively 

updating the premises of the Defense 


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Financial and Investment Review 

(DFAIR) study to address today’s 

business and market environment). 

2. Establish opportunities for 

recognizing contractor behaviors that 

align themselves with the performance 

objectives established in the five 

business domains that are important to 

the DoD such that large business 

contractors could potentially increase 

the rate determined in Step 1 and 

receive progress payments that can be as 

high as 95 percent of contract cost. The 

increased customary progress payment 

rate will be established for each 

company or company division as the 

case may be. 

B. Brief History 

The most comprehensive review of 

Government financing was the DFAIR 

study. One key recommendation from 

the DFAIR study was that ‘‘interest cost 

should remain an unallowable cost and 

progress payment rates should be reset 

in the future based on changes in 

interest rates.’’ Between the DFAIR 

study in 1985 and 2001, the customary 

progress payment rate for other than 

small business was changed five times 

and was usually a somewhat delayed 

reaction to changes in interest rates in 

prior years. In 2001, the customary rate 

was increased from 75 percent to 80 

percent and has remained unchanged 

ever since. 

In the rule making process it is 

customary to analyze the impact of the 

proposed rule versus the status quo and 

that traditional analysis is included in 

the regulatory cost analysis (see section 

V. of this preamble). However, DoD has 

been providing financing in excess of 

that warranted based on the historically 

low interest rates in effect since 2008. 

By modifying the customary progress 

payment rate to 50 percent, it will result 

in savings hundreds of millions of 

dollars to the taxpayers by eliminating 

an unintended consequence of the past 

practice associated with providing 

contract financing in excess of what was 

necessary. In the future, contractors will 

have the opportunity to earn increased 

contract financing benefit through 

improved performance. 

III. Discussion and Analysis 

DoD is proposing to amend DFARS 

parts 232, 242, and 252 to revise how 

contract financing, in the form of 

progress payments and performancebased payments, is calculated and 

determined for DoD contracts. 

A. Current FAR and DFARS 

1. Progress payments. Currently, FAR 

52.232–16, Progress Payments, sets a 

customary progress payment rate of 80 

percent, except the rate is 85 percent for 

a small business, unless it is a letter 

contract. There is a statutory cap of 80 

percent for letter contracts. DFARS 

252.232–7004, DoD Progress Payment 

Rates, currently increases the FAR 

customary progress payment rate for 

small businesses to 90 percent (except 

for letter contracts). 

2. Performance-based payments. FAR 

52.232–28, Invitation to Propose 

Performance-Based Payments, sets a 

maximum performance-based rate of 90 

percent of the contract price if on a 

whole contract basis, or 90 percent of 

the delivery item price if on a delivery 

item basis. DFARS 232.1004 provides 

procedures for analysis of proposed 

performance-based payments using the 

performance-based payments analysis 

tool, and also requires that the 

contractor provide consideration to the 

Government, if the performance-based 

payments payment schedule will be 

more favorable to the contractor than 

customary progress payments. DFARS 

232.1005–70 prescribes the use of the 

provision at DFARS 252.232–7012, 

Performance-Based Payments—Whole 

Contract Basis, or the provision at 

DFARS 252.232–7013, PerformanceBased Payments—Deliverable Item 

Basis. 

B. Proposed Changes 

1. Progress payments (DFARS 

232.501–1(a) and 52.232–7004). DoD 

proposes a customary progress payment 

rate of 50 percent for other than small 

businesses and retains the 90 percent 

rate for small businesses, but provides 

criteria by which contractors can 

achieve a customary progress payment 

rate of up to 95 percent. However, if a 

contractor or any of its principals has 

within the preceding Government fiscal 

year been convicted of or had a civil 

judgment rendered against the 

contractor or any of its principals for 

commission of fraud or a criminal 

offense in connection with obtaining, 

attempting to obtain, or performing a 

public (Federal, State, or local) contract 

or subcontract; violation of Federal or 

State antitrust statutes relating to the 

submission of offers; or commission of 

embezzlement, theft, forgery, bribery, 

falsification or destruction of records, 

making false statements, tax evasion, 

violating Federal criminal tax laws, or 

receiving stolen property, then the 

contractor will not be eligible for any 

incentives and the customary progress 

payment rate will be 25 percent for that 

contractor. 

On December 1 of each year, a 

contractor, or higher-level owner of a 

contractor, may submit a representation 

as to which criteria it meets and request 

a higher customary progress payment 

rate. Based on the representation 

received, the Director of Defense Pricing 

and Contracting will determine the 

appropriate customary progress 

payment rate for the following calendar 

year, and that data will be entered into 

the Contract Business Analysis 

Repository (CBAR) by December 31. 

If a contractor fails to submit by the 

December 1 deadline, then the rate for 

that contractor in CBAR will be 50 

percent if the offeror is other than a 

small business and 90 percent if the 

offeror is a small business, unless the 

rate is 25 percent as provided in DFARS 

232.501–1(a)(ii). If the offeror 

subsequently submits a representation 

after the December 1 deadline, any 

increase in rates will not be effective in 

CBAR until 30 days after submission. 

The rate may be adjusted at any time 

during the year if it is subsequently 

determined that the representation 

provided by a contractor was not 

accurate. 

2. Performance-based payments 

(DFARS 232.1004(b)(2) and 252.232– 

70YY). For maximum performancebased payments, DoD proposes rates 

and procedures comparable to those for 

determining the customary progress 

payment rate. The same representation 

will be used to determine both the 

customary progress payment rate and 

the maximum performance-based 

payment rate. 

DoD proposes to amend DFARS 

232.1004 to remove the procedures for 

analysis of proposed performance-based 

payments using the performance-based 

payments analysis tool, and also 

removes the requirement that the 

contractor provide consideration to the 

Government, if the performance-based 

payments payment schedule will be 

more favorable to the contractor than 

customary progress payments. The 

current solicitation provisions at DFARS 

252.232–7012 and 252.232–7013 are no 

longer required and will be removed, 

thus reducing burden on contractors. 

3. Corrective action requests (DFARS 

242.302(a)). One of the criteria to 

qualify for higher customary progress 

payments or maximum performancebased payments is that the offeror/ 

contractor does not have any open level 

III or level IV corrective action requests. 

Because the DFARS does not currently 

address corrective action requests, a 

paragraph has been added at DFARS 

242.302(a) to explain the different levels 

of corrective action requests. 

4. Withholding of payments (DFARS 

242.7000 and 252.242–7005). DFARS 

242.7000, Contractor business system 

deficiencies, and 252.242–7005, 

Contractor Business Systems, provide 


sradovich on DSK3GMQ082PROD with PROPOSALS
42834 Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 

for withholding of payments (including 

progress and performance-based 

payments) when there are significant 

deficiencies in a required business 

system. However, the contracting officer 

will not withhold progress or 

performance-based payments from a 

contract that includes the clause 

252.232–7004 or the provision 252.232– 

70YY, unless the contractor is receiving 

progress payments or performancebased payments under the contract at a 

rate specified in CBAR that includes the 

10 percent incentive based on having 

acceptable business systems without 

significant deficiencies. 

5. Preference for performance-based 

payments. This rule also proposes to 

implement section 831 of the National 

Defense Authorization Act for Fiscal 

Year 2017, which modifies 10 U.S.C. 

2307(b) to address preference for 

performance-based payments. 

IV. Applicability to Contracts at or 

Below the Simplified Acquisition 

Threshold (SAT) and for Commercial 

Items, Including Commercially 

Available Off-the-Shelf (COTS) Items 

This rule proposes to amend the 

clause at DFARS 252.232–7004, DoD 

Progress Payment Rates, and adds a new 

provision at DFARS 252.232–70YY, 

DoD Maximum Performance-Based 

Payment Rates. DFARS 252.232–7004 is 

used with FAR clause 52.232–16, 

Progress Payments, and DFARS 

252.232–70YY is used with FAR 

provision 52.232–28, Invitation to 

Propose Performance-Based Payments. 

The FAR provision and clause are not 

prescribed for use in contracts for the 

acquisition of commercial items or for 

acquisitions at or below the SAT. The 

DFARS provision and clause, therefore, 

will not be applied to commercial items 

or to contact actions at or below the 

simplified acquisition threshold. 

V. Expected Costs and Benefits 

This rule proposes to amend the 

DFARS to implement changes to the 

progress payment and performancebased payment policies for DoD 

contracts by amending the section on 

customary progress payment rates at 

DFARS 232.501–1; adding new 

procedures for performance-based 

payments at 232.1003; amending the 

clause at 252.232–7004, DoD Customary 

Progress Payment Rates, and adding a 

new provision at 252.232–70YY, DoD 

Maximum Performance-Based Payment 

Rates. This rule also proposes to delete 

the clauses at DFARS 252.232–7012, 

Performance-Based Payments—Whole 

Contract Basis, and 252.232–7013, 

Performance-Based Payments— 

Deliverable Item Basis. 

This rule will impact all offerors/ 

contractors (large or small) seeking DoD 

contracts that offer progress payments or 

performance-based payments. Although 

there are added costs associated with 

submission of an annual representation, 

the contractors/offerors that can meet 

the criteria will qualify for substantial 

savings on interest payments, due to 

increased Government financing. 

The expected benefits are that the 

modified approach to the establishment 

of a performance-based cash flow 

environment will enable DoD to take an 

enterprise-wide view of contractor 

performance and to recognize and 

distinguish performance among the 

companies with which it deals. The goal 

would be that a significant majority of 

the large and small businesses would 

eventually meet the desired level of 

enterprise-wide performance. As a 

result of the improved industrial 

performance, DOD’s efficiency and 

effectiveness will be improved thereby 

increasing the lethality of its fighting 

force and positively reforming DOD’s 

business practices. 

A. Summary of Expected Costs to the 

Public. DoD has performed a regulatory 

cost analysis on this rule. The following 

is a summary of the estimated net public 

costs in millions, calculated in 2016 

dollars in perpetuity at a 7-percent 

discount rate. 

Annualized at 7 percent: $5.5 million 

Present Value at 7 percent: $78.8 

million 

B. Summary of Expected Transfers. 

The following is a summary of the 

expected transfer of interest costs/ 

savings from the Government to the 

public, due to an expected net increase 

in progress payment and performancebased payment rates paid by the 

Government. 

1. Reduced Interest Payments by 

Contractors: 

Annualized at 7 percent: $60.2 million 

Present Value at 7 percent: $859.6 

million 

2. Increased Interest Payments by 

Government: 

Annualized at 7 percent: $30.2 million 

Present Value at 7 percent: $431.8 

million 

To access the complete Regulatory 

Cost Analysis, go to the Federal 

eRulemaking Portal at 

www.regulations.gov, search for 

‘‘DFARS Case 2017–D019’’, click ‘‘Open 

Docket’’, and view ‘‘Supporting 

Documents’’. 

VI. 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 an economically 

significant regulatory action and, 

therefore, was subject to review under 

section 6(b) of E.O. 12866, Regulatory 

Planning and Review, dated September 

30, 1993. This rule is a major rule under 

5 U.S.C. 804. 

VII. Executive Order 13771 

This proposed rule is subject to E.O. 

13771, Reducing Regulation and 

Controlling Regulatory Costs, because 

this rule is a significant regulatory 

action under E.O. 12866. If finalized as 

proposed, this rule would be an E.O. 

13771 regulatory action. The E.O. 13771 

status will be informed by public 

comment, so please share any data and/ 

or analysis that would relate to the 

rule’s potential to be considered a 

deregulatory action. Details on the 

expected costs and benefits can be 

found in section V of this preamble. 

VIII. Regulatory Flexibility Act 

DoD expects that this proposed rule 

may 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. 

Therefore, an initial regulatory 

flexibility analysis has been prepared 

and is summarized as follows: 

This rule revises progress payments 

and performance-based payments 

policies for DoD contracts, basing the 

payment rate on whether the offeror/ 

contractor has met certain performance 

criteria. This rule also implements 

section 831 of the National Defense 

Authorization Act for Fiscal Year (FY) 

2017, which modifies 10 U.S.C. 2301(b) 

to address preference for performancebased payments. 

The objective of this rule is to 

increase the effectiveness and efficiency 

of DoD in five domains: on time or 

accelerated contract deliveries, 

contractor quality, contractor business 

systems, increasing contract 

opportunities for small businesses and 

for the blind and severely disables, and 

receipt of timely quality proposals. The 

statutory basis is 41 U.S.C. 1303 and 10 

U.S.C. 2301(b). 

This rule will apply to small entities 

that receive either progress payments or 

performance-based payments for 


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Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 42835 

noncommercial fixed-price contracts. 

There were 1,938 unique small entities 

receiving progress payments or 

performance-based payments in FY 

2017. 

The rule provides an opportunity to 

submit a representation as to whether a 

small entity meets certain performance 

criteria, in order to obtain higher 

progress payments or performancebased payments. DoD estimates that the 

professional skill set necessary to 

prepare the representation annually will 

approximate 25 percent at the 

journeyman level, 60 percent at the 

senior level, and 15 percent at the 

executive/attorney level. DoD estimates 

an average of 13 hours per response 

from small entities. The rule also 

removes a burden of approximately one 

hour per entity, associated with 

paragraph (b) of DFARS subpart 32.10 

and the associated clauses at DFARS 

252.232–7012 and 252.232–7013, which 

this rule proposes to delete. 

The rule does not duplicate, overlap, 

or conflict with any other Federal rules. 

DoD did not identify any significant 

alternatives that would meet the 

objectives of the rule. However, the rule 

provides certain advantages for small 

entities as the basic customary progress 

payment rate for small entities remains 

at 90 percent, with possible increase up 

to 95 percent. So, small entities can 

continue to get the same rate, even if 

they do not submit a representation or 

meet the criteria. Small entities are only 

asked to represent with regard to three 

criteria: timely delivery or performance, 

contractor quality, and contractor 

business systems. 

DoD invites comments from small 

business concerns 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 2017–D019), in 

correspondence. 

IX. Paperwork Reduction Act 

The rule contains 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). 

Accordingly, DoD has submitted a 

request for approval of a revised 

information collection requirement 

0704–0359, Defense Federal Acquisition 

Regulation Supplement (DFARS) Part 

232, Contract Financing, and associated 

clauses at DFARS 252.232, to the Office 

of Management and Budget. 

A. Public Reporting Burden 

1. Public reporting burden for the 

collection of information proposed by 

this DFARS case 2017–D019 is 

estimated to average 28.8 hours per 

response, including the time for 

reviewing instructions, searching 

existing data sources, gathering and 

maintaining the data needed, and 

completing and reviewing the collection 

of information. 

The annual reporting burden 

estimated as follows: 

Respondents: 3,200. 

Responses per respondent: 1. 

Total annual responses: 3,200. 

Preparation hours per response: 28.8 

hours. 

Total response Burden Hours: 92,027 

hours. 

2. In addition, this information 

collection includes a pre-existing 

burden related to DFARS clause 

252.232–7007 (800 hours, 1 response 

per respondent, 800 responses, 1 hour 

per response, for a total of 8,000 hours). 

Therefore, the total burden for 0704– 

0359, rounded, is as follows: 

Respondents: 4,000. 

Responses per respondent: 1. 

Total annual responses: 4,000. 

Preparation hours per response: 24 

hours. 

Total response Burden Hours: 93,000 

hours. 

B. Request for Comments Regarding 

Paperwork Burden 

Written comments and 

recommendations on the proposed 

information collection, including 

suggestions for reducing this burden, 

should be sent to Ms. Jasmeet Seehra at 

the Office of Management and Budget, 

Desk Officer for DoD, Room 10236, New 

Executive Office Building, Washington, 

DC 20503, or email Jasmeet_K._Seehra@

omb.eop.gov, with a copy to the Defense 

Acquisition Regulations System, Attn: 

Ms. Amy G. Williams, OUSD (A&S) 

DPC/DARS, Room 3B941, 3060 Defense 

Pentagon, Washington, DC 20301–3060. 

Comments can be received from 30 to 60 

days after the date of this notice, but 

comments to OMB will be most useful 

if received by OMB within 30 days after 

the date of this notice. 

Public comments are particularly 

invited on: whether this collection of 

information is necessary for the proper 

performance of functions of the DFARS, 

and will have practical utility; whether 

our estimate of the public burden of this 

collection of information is accurate, 

and based on valid assumptions and 

methodology; ways to enhance the 

quality, utility, and clarity of the 

information to be collected; and ways in 

which we can minimize the burden of 

the collection of information on those 

who are to respond, through the use of 

appropriate technological collection 

techniques or other forms of information 

technology. 

To request more information on this 

proposed information collection or to 

obtain a copy of the proposal and 

associated collection instruments, 

please write to the Defense Acquisition 

Regulations System, Attn: Ms. Amy G. 

Williams, OUSD (A&S) DPC/DARS, 

Room 3B941, 3060 Defense Pentagon, 

Washington, DC 20301–3060, or email 

osd.dfars@mail.mil. Include DFARS 

Case 2017–D019 in the subject line of 

the message. 

This rule also affects the information 

collection requirements at DFARS 

subpart 232.10 (and associated clauses 

at DFARS 252.232–7012 and 252.232– 

7013, currently approved under OMB 

Control Number 0704–0359. This rule 

proposes to remove these requirements. 

List of Subjects in 48 CFR Parts 232, 

242, and 252 

Government procurement. 

Jennifer Lee Hawes, 

Regulatory Control Officer, Defense 

Acquisition Regulations System. 

Therefore, 48 CFR parts 232, 242, and 

252 are proposed to be amended as 

follows: 

■ 1. The authority citation for parts 232, 

242, and 252 continues to read as 

follows: 

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

chapter 1. 

PART 232—CONTRACT FINANCING 

■ 2. Revise section 232.501–1 to read as 

follows: 

232.501–1 Customary progress payment 

rates. 

(a) Except for undefinitized contract 

actions as provided at FAR 32.501–1(d), 

in lieu of the customary progress 

payment rates specified at FAR 32.501– 

1(a), the customary progress payment 

rates for DoD solicitations issued on or 

after January 1, 2019, and resultant 

contracts, including contracts that 

contain foreign military sales (FMS) 

requirements, are 50 percent for other 

than small businesses and 90 percent for 

small businesses, unless a different rate 

is specified for the contractor in the 

Contract Business Analysis Repository 

(CBAR) at [details TBD]. 

(i) Contractors can qualify for an 

increased customary progress payment 

rate of up to 95 percent, based on the 

following criteria: 

(A) Other than small businesses: 


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Additional 

percentage Criteria 

10 .................. Met the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedule, 

as the case may be, at least 95 percent of the time during the preceding Government fiscal year (October 1 through September 30). 

10 .................. Does not have open level III or IV corrective action requests. See 242.302(a). 

10 .................. All applicable contractor business systems are acceptable, without significant deficiencies. 

7.5 ................. At least 95 percent of the time during the preceding Government fiscal year, when responding to solicitations that required submission of certified cost or pricing data, met the due date in the request for proposal and complied with the Proposal Adequacy Checklist (252.215–7009). 

5 .................... Has met its small business subcontracting goals during the preceding Government fiscal year. 

2.5 ................. Has provided subcontracting opportunities for AbilityOne [details TBD]. 

(B) Small businesses: 

Additional 

percentage Criteria 

2 .................... Met the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedule, 

as the case may be, at least 95 percent of the time during the preceding Government fiscal year (October 1 through September 30). 

2 .................... Does not have open level III or IV corrective action requests. See 242.302(a). 

1 .................... All applicable contractor business systems are acceptable, without significant deficiencies. 

(ii) However, if a contractor or any of 

its principals has within the preceding 

Government fiscal year been convicted 

of or had a civil judgment rendered 

against the contractor or any of its 

principals for commission of fraud or a 

criminal offense in connection with 

obtaining, attempting to obtain, or 

performing a public (Federal, State, or 

local) contract or subcontract; violation 

of Federal or State antitrust statutes 

relating to the submission of offers; or 

commission of embezzlement, theft, 

forgery, bribery, falsification or 

destruction of records, making false 

statements, tax evasion, violating 

Federal criminal tax laws, or receiving 

stolen property, the contractor will not 

be eligible for any of the above 

incentives and the customary progress 

payment rate will be 25 percent for that 

contractor. 

(iii)(A) On or before December 1 of 

each year, except as provided in 

paragraph (a)(ii) of this section, a 

contractor, or a higher-level owner of a 

contractor, may submit to [email 

address TBD] a representation as to 

which criteria specified in paragraph 

(a)(i) of this section the contractor 

meets, and request a higher customary 

progress payment rate on that basis. 

(1) If a representation is made on 

behalf of multiple business segments, 

the representation must address the 

criteria in paragraph (a)(i) of this section 

for each business segment for which 

higher customary progress payment 

rates are requested. 

(2) If the size status of a contractor 

varies dependent upon the North 

American Industry Classification 

System (NAICS) code of the acquisition, 

the contractor may submit a 

representation and request for higher 

customary progress payment rates that 

addresses the rates for both a small 

business and an other than small 

business. 

(3) A separate representation is not 

required to also request a higher 

maximum performance-based payment 

rate (see 232.1001(b)(2)). 

(B) The representation is required to 

be executed by a person authorized to 

sign for the entity submitting the 

representation and must at a minimum 

include— 

(1) The unique entity identifier and 

Commercial and Government Entity 

(CAGE) code(s) of the contractor; 

(2) Size status of the contractor (small, 

other than small, or varies dependent 

upon the NAICS code of the 

acquisition); and 

(3) Identification of the criteria for 

which the contractor is requesting 

increase in the customary progress 

payment rate for the following calendar 

year. It is not necessary to submit 

supporting data with the representation, 

but the contractor is required to provide 

such data upon request. 

(iv) Based on the representation 

received, the Director, Defense Pricing 

and Contracting, will determine the 

appropriate customary progress 

payment rate(s) for the following 

calendar year. DoD will enter the 

customary progress payment rate(s) into 

CBAR by December 31. 

(v) If a contractor fails to submit by 

the December 1 deadline, then the rate 

for that contractor in CBAR will be 50 

percent if the contractor is other than a 

small business and 90 percent if the 

contractor is a small business, unless 

the rate is 25 percent as provided in 

(a)(ii) of this section. If the contractor 

subsequently submits a representation 

after the December 1 deadline, any 

increase in rates will not be effective in 

CBAR until 30 days after submission. 

(vi) The rate(s) may be adjusted at any 

time during the year if the Director, 

Defense Pricing and Contracting, 

subsequently determines that the 

representation provided by a contractor 

was not accurate. 

■ 3. Add new section 232.502–4 

heading to read as follows: 

232.502–4 Contract clauses. 

■ 4. Amend section 232.502–4–70 by 

revising paragraph (b) to read as follows: 

232.502–4–70 Additional clauses. 

* * * * * 

(b) Use the clause at 252.232–7004, 

DoD Customary Progress Payment Rates, 

in solicitations and contracts that 

include FAR 52.232–16. Do not use 

Alternate I of FAR 52.232–16. 

■ 5. Amend section 232.503–6 by 

revising paragraph (b) to read as follows: 

232.503–6 Suspension or reduction of 

payments. 

(b) Contractor noncompliance. 

(i) If the Director, Defense Pricing and 

Contracting, subsequently determines 

that the representation in accordance 

with 232.501–1(a) is inaccurate, the 

progress payment rate in CBAR will be 

adjusted. 

(ii) See also 242.7502(c). 

* * * * * 

■ 6. Amend section 232.1001 by 

revising paragraph (a) to read as follows: 


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232.1001 Policy. 

(a) In accordance with 10 U.S.C. 

2307(b)(2), performance-based payments 

shall not be conditioned upon costs 

incurred in contract performance, but 

on the achievement of performance 

outcomes. 

* * * * * 

■ 7. Amend section 232.1004 by— 

■ a. Revising paragraph (b); and 

■ b. Adding a new paragraph (S–70). 

The revision and addition read as 

follows: 

232.1004 Procedures. 

(b) Establishing performance-based 

finance payment amounts. 

(2) In lieu of the 90 percent maximum 

rate specified in the FAR for 

performance-based payments, the 

maximum rates for DoD performancebased payments in solicitations issued 

on or after January 1, 2019, are 50 

percent for other than small businesses 

and 90 percent for small businesses, 

unless a different rate is specified for 

the offeror in the Contract Business 

Analysis Repository [details TBD]. 

(A) Offerors can qualify for an 

increased maximum performance-based 

payment rate of up to 95 percent, based 

on the following criteria: 

(1) Other than small businesses: 

Additional 

percentage Criteria 

10 .................. Met the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedule, 

as the case may be, at least 95 percent of the time during the preceding Government fiscal year (October 1 through September 30). 

10 .................. Does not have open level III or IV corrective action requests. See 242.302(a). 

10 .................. All applicable contractor business systems are acceptable, without significant deficiencies. 

7.5 ................. At least 95 percent of the time during the preceding Government fiscal year, when responding to solicitations that required submission of certified cost or pricing data, met the due date in the request for proposal and complied with the Proposal Adequacy Checklist (252.215–7009). 

5 .................... Has met its small business subcontracting goals during the preceding Government fiscal year. 

2.5 ................. Has provided subcontracting opportunities for the blind and severely disabled [details TBD]. 

(2) Small businesses: 

Additional 

percentage Criteria 

2 .................... Met the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedule, 

as the case may be, at least 95 percent of the time during the preceding Government fiscal year (October 1 through September 30). 

2 .................... Does not have open level III or IV corrective action requests. See 242.302(a). 

1 .................... All applicable contractor business systems are acceptable, without significant deficiencies. 

(B) However, if an offeror or any of its 

principals has within the preceding 

Government fiscal year been convicted 

of or had a civil judgment rendered 

against the offeror or any of its 

principals for commission of fraud or a 

criminal offense in connection with 

obtaining, attempting to obtain, or 

performing a public (Federal, State, or 

local) contract or subcontract; violation 

of Federal or State antitrust statutes 

relating to the submission of offers; or 

commission of embezzlement, theft, 

forgery, bribery, falsification or 

destruction of records, making false 

statements, tax evasion, violating 

Federal criminal tax laws, or receiving 

stolen property, the offeror will not be 

eligible for any of the above incentives 

and the maximum performance-based 

payment rate will be 25 percent for that 

offeror. 

(C)(1) On December 1 of each year, 

except as provided in paragraph 

(b)(2)(B) of this section, an offeror, or a 

higher-level owner of an offeror, may 

submit to [email address TBD] a 

representation as to which criteria 

specified in paragraph (b)(2)(A) of this 

section the offeror meets, and request a 

higher customary progress payment rate 

on that basis. 

(i) If a representation is made on 

behalf of multiple business segments, 

the representation must address the 

criteria in paragraph (b)(2)(A) of this 

section for each business segment for 

which higher customary progress 

payment rates are requested. 

(ii) If the size status of an offeror 

varies dependent upon the North 

American Industry Classification 

System (NAICS) code of the acquisition, 

the offeror may submit a representation 

and request for a higher customary 

progress payment rate that addresses the 

rates for both a small business and an 

other than small business. 

(iii) A separate representation is not 

required to also request a higher 

maximum performance-based payment 

rate (see 232.501–1(a)). 

(2) The representation is required to 

be executed by a person authorized to 

sign for the entity submitting the 

representation and must at a minimum 

include— 

(i) The unique entity identifier and 

Commercial and Government Entity 

(CAGE) code(s) of the offeror; 

(ii) Size status of the offeror (small, 

other than small, or varies dependent 

upon the NAICS code of the 

acquisition); and 

(iii) Identification of the criteria for 

which the offeror is requesting increase 

in the customary progress payment rate 

for the following calendar year. It is not 

necessary to submit supporting data 

with the representation, but the offeror 

is required to provide such data upon 

request. 

(D) Based on the representation 

received, the Director, Defense Pricing 

and Contracting, will determine the 

appropriate maximum performancebased payment rate(s) for the following 

calendar year. DoD will enter the 

maximum performance-based payment 

rate(s) into CBAR by December 31. 

(E) If an offeror fails to submit by the 

December 1 deadline, then the rate for 

that offeror in CBAR will be 50 percent 

if the offeror is other than a small 

business and 90 percent if the offeror is 

a small business, unless the rate is 25 

percent as provided in (b)(2)(B) of this 

section. If the offeror subsequently 

submits a representation after the 

December 1 deadline, any increase in 


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rates will not be effective in CBAR until 

30 days after submission. 

(F) The rate(s) may be adjusted at any 

time during the year if the Director, 

Defense Pricing and Contracting, 

subsequently determines that the 

representation provided by an offeror 

was not accurate. 

* * * * * 

(S–70) Eligibility for performancebased payments. Nontraditional defense 

contractors and other private sector 

companies shall be eligible for 

performance-based payments, consistent 

with best commercial practices. In 

accordance with 10 U.S.C. 2307(b), a 

contractor’s accounting system shall be 

in compliance with Generally Accepted 

Accounting Principles in order to 

receive performance-based payments. 10 

U.S.C. 2307 does not grant the Defense 

Contract Audit Agency the authority to 

audit compliance with Generally 

Accepted Accounting Principles. 

■ 8. Revise section 232.1005–70 to read 

as follows: 

232.1005–70 Solicitation provision. 

Use the provision 252.232–70YY, DoD 

Maximum Performance-Based Payment 

Rates, in solicitations that include FAR 

52.232–28, Invitation to Propose 

Performance-Based Payments. 

PART 242—CONTRACT 

ADMINISTRATION AND AUDIT 

SERVICES 

■ 9. Amend section 242.302 by adding 

paragraph (a) text to read as follows: 

242.302 Contract administration functions. 

(a) Government personnel performing 

contract administration duties outlined 

in FAR 42.302(a) and this paragraph 

issue a corrective action request when 

contractual noncompliance is 

independently identified. The Defense 

Contract Management Agency had 

identified four levels of corrective 

action requests. 

(i) Level I is issued for 

noncompliances that are minor in 

nature, are promptly corrected by the 

contractor, and present no need for root 

cause determination or further 

preventive action. 

(ii) Level II is issued for 

noncompliances that are not promptly 

correctable and warrant root cause 

analysis and preventive action, or need 

action by the contractor to determine if 

other product/services are affected. 

(iii) Level III is issued to the 

contractor’s management responsible for 

the company or business segment to call 

attention to a serious noncompliance, a 

significant deficiency pursuant to 

252.242–7005(b), a failure to respond to 

a lower level corrective action request, 

or to remedy recurring noncompliance. 

(iv) Level IV is issued to the 

contractor’s segment or corporate 

management and when the contractual 

noncompliance(s) is of a serious nature 

or when a Level III corrective action 

request has been ineffective. 

(v) For additional information on 

corrective action requests, see PGI 

242.302(a). 

* * * * * 

■ 10. Amend section 242.7000 by 

revising the first sentence in paragraph 

(b)(1) to read as follows: 

242.7000 Contractor business system 

deficiencies. 

(b) * * * 

(1) In accordance with agency 

procedures, identify one or more 

covered contracts containing the clause 

at 252.242–7005, Contractor Business 

Systems, from which payments will be 

withheld, except that, if a contract 

includes the clause 252.232–7004, DoD 

Customary Progress Payments, or the 

provision 252.232–70YY, DoD 

Maximum Performance-Based 

Payments, the contracting officer shall 

not withhold progress payments or 

performance based payments from that 

contract unless the contractor is 

receiving progress payments or 

performance-based payments under the 

contract at a rate specified in Contract 

Business Analysis Repository that 

includes the 10 percent incentive based 

on having acceptable business systems 

without significant deficiencies (see 

232.501–1(a)). * * * 

* * * * * 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 11. Revise section 252.232–7004 to 

read as follows: 

252.232–7004 DoD Customary Progress 

Payment Rates. 

As prescribed in 232.502–4–70(b), use 

the following clause: 

DoD Customary Progress Payment 

Rates (Date) 

(a) The Progress Payments clause of this 

contract is modified to change each mention 

of the progress payment rate and liquidation 

rate in paragraphs (a)(1), (a)(6), and (b) to 50 

percent if the Contractor is other than a small 

business and 90 percent if the Contractor is 

a small business, unless a different rate is 

specified for the Contractor in the Contract 

Business Analysis Repository (CBAR) at 

[details TBD]. The limitations on 

undefinitized contract actions in paragraph 

(k) of the Progress Payments clause remain at 

a maximum of 80 percent for both the 

progress payment rate and the liquidation 

rate, notwithstanding any higher rate 

specified in CBAR. 

(b) If the Contractor has a satisfactory 

record of performance, the Contractor can 

qualify for an increased customary progress 

payment rate of up to 95 percent, based on 

the following criteria: 

(1) If the Contractor is other than a small 

business: 

Additional 

percentage Criteria 

10 .................. Met the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedule, 

as the case may be, at least 95 percent of the time during the preceding Government fiscal year (October 1 through September 30). 

10 .................. Does not have open level III or IV corrective action requests. See DFARS 242.302(a). 

10 .................. All applicable contractor business systems are acceptable, without significant deficiencies. 

7.5 ................. At least 95 percent of the time during the preceding Government fiscal year, when responding to solicitations that required submission of certified cost or pricing data, met the due date in the request for proposal and complied with the Proposal Adequacy Checklist (252.215–7009). 

5 .................... Has met its small business subcontracting goals during the preceding Government fiscal year. 

2.5 ................. Has provided subcontracting opportunities for AbilityOne [details TBD]. 


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(2) If the Contractor is a small business: 

Additional 

percentage Criteria 

2 .................... Met the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedule, 

as the case may be, at least 95 percent of the time during the preceding Government fiscal year (October 1 through September 30). 

2 .................... Does not have open level III or IV corrective action requests. See DFARS 242.302(a). 

1 .................... All applicable contractor business systems are acceptable, without significant deficiencies. 

(c) However, if the Contractor or any of its 

principals has within the preceding 

Government fiscal year been convicted of or 

had a civil judgment rendered against the 

Contractor or any of its principals for 

commission of fraud or a criminal offense in 

connection with obtaining, attempting to 

obtain, or performing a public (Federal, State, 

or local) contract or subcontract; violation of 

Federal or State antitrust statutes relating to 

the submission of offers; or commission of 

embezzlement, theft, forgery, bribery, 

falsification or destruction of records, making 

false statements, tax evasion, violating 

Federal criminal tax laws, or receiving stolen 

property, the Contractor will not be eligible 

for any of the above incentives and the 

customary progress payment rate will be 25 

percent. 

(d)(1) On December 1 of each year, except 

as provided in paragraph (c) of this clause, 

the Contractor, or a higher-level owner of the 

Contractor, may submit to [email address 

TBD] a representation as to which criteria 

specified in paragraph (b) of this clause the 

Contractor meets, and request a higher 

customary progress payment rate on that 

basis. 

(i) If a representation is made on behalf of 

multiple business segments, the 

representation shall address the criteria in 

paragraph (b) of this clause for each business 

segment for which higher customary progress 

payment rates are requested. Business 

segments that meet the same criteria may be 

grouped together. 

(ii) If the size status of the Contractor varies 

dependent upon the North American 

Industry Classification System (NAICS) code 

of the acquisition, the Contractor may submit 

a representation and request for a higher 

customary progress payment rate that 

addresses the rates for both a small business 

and an other than small business. 

(iii) A separate representation is not 

required to also request a higher maximum 

performance-based payment rate (see DFARS 

232.1004(b)(2)). 

(2) The representation shall be executed by 

a person authorized to sign for the entity 

submitting the representation and shall at a 

minimum include— 

(i) The unique entity identifier and 

Commercial and Government Entity (CAGE) 

code(s) of the Contractor; 

(ii) The size status of the Contractor (small, 

other than small, or varies dependent upon 

the NAICS code of the acquisition); and 

(iii) Identification of the criteria for which 

the Contractor is requesting increase in the 

customary progress payment rate for the 

following calendar year. It is not necessary to 

submit supporting data with the 

representation, but the Contractor is required 

to provide such data upon request. 

(3) The template in paragraph (h) of this 

clause may be used for the submission of the 

request and representation. 

(e) Based on the representation received, 

the Director, Defense Pricing and 

Contracting, will determine the appropriate 

customary progress payment rate(s) for the 

following calendar year. DoD will enter the 

customary progress payment rate(s) into 

CBAR by December 31. 

(f) If the Contractor fails to submit by the 

December 1 deadline, then the rate for the 

Contractor in CBAR will be 50 percent if the 

Contractor is other than a small business and 

90 percent if the Contractor is a small 

business, except as provided in paragraph (c) 

of this clause. If the Contractor subsequently 

submits a representation after the December 

1 deadline, any increase in rates will not be 

effective in CBAR until 30 days after 

submission. 

(g) The rate(s) may be adjusted at any time 

during the year if the Director, Defense 

Pricing and Contracting, subsequently 

determines that the representation provided 

by a contractor was not accurate. 

(h) Template. 

BILLING CODE 5001–06–P 


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sradovich on DSK3GMQ082PROD with PROPOSALSEP24AU18.323</GPH>

Company Letterhead 

I, [print name and title] , request customary progress ----~~----------------------~---

payment/maximum performance based payment rate(s) as follows: 

1.a. Name and address of company: 

b. Unique Entity Identifier 

c. Commercial and Government Entity (CAGE) Code(s). 

d. Size status. Fill out Table A if other than small 

business. Fill out Table B if a small business. If size 

status varies dependent upon NAICS code, fill out both tables. 

Table A- Other than small business: 

Enter "Yes" if 50 percent 

meet the plus 

criteria, "No" additional 

if do not percentage 

meet. 

10 percent 

10 percent 

Criteria 

Met the dates in the delivery or 

performance schedule in the 

contract at least 95 percent of 

the time during the preceding 

Government fiscal year (October 

1 through September 30). 

Does not have open level III or 
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sradovich on DSK3GMQ082PROD with PROPOSALSEP24AU18.324</GPH>

10 percent 

IV corrective action requests. 

See DFARS 242.302(a). 

All applicable contractor 

business systems are acceptable, 

without significant 

deficiencies. 

7.5 percent At least 95 percent of the time 

during the preceding Government 

fiscal year, when responding to 

solicitations that required 

submission of certified cost or 

pricing data, met the due date 

in the request for proposal and 

complied with the Proposal 

Adequacy Checklist (252.215-

7009) . 

5 percent Has met its small business 

subcontracting goals during the 

preceding Government fiscal 

year. 

2.5 percent Has provided subcontracting 

opportunities for AbilityOne 

[details TBD] . 
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sradovich on DSK3GMQ082PROD with PROPOSALSEP24AU18.325</GPH>

Total customary progress payment/maximum performance-based 

payment rate requested as an other than small business: 

Table B - Small business: 

Enter "Yes" if 90 percent 

meet the plus 

criteria, "No" additional 

if do not percentage 

meet. 

2 percent 

2 percent 

1 percent 

Criteria 

Met the contract delivery dates 

for contract end items and 

contract data requirements 

lists or performance milestone 

schedule, as the case may be, 

at least 95 percent of the time 

during the preceding Government 

fiscal year (October 1 through 

September 30). 

Does not have open level III or 

IV corrective action requests. 

See DFARS 242.302(a). 

All applicable contractor 

business systems are 
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sradovich on DSK3GMQ082PROD with PROPOSALSEP24AU18.326</GPH>

acceptable, without significant 

deficiencies. 

Total customary progress payment/maximum performance-based 

payment rate requested as a small business: 

2. Repeat above information for any additional companies for 

which increased customary progress payment/maximum performancebased payment rates are requested. Business segments that meet 

the same criteria may be grouped together. 

The above identified entity (entities) and any of the 

principals thereof have not within the preceding Government 

fiscal year been convicted of or had a civil judgment rendered 

against any entity or any of its principals for commission of 

fraud or a criminal offense in connection with obtaining, 

attempting to obtain, or performing a public (Federal, State, 

or local) contract or subcontract; violation of Federal or 

State antitrust statutes relating to the submission of offers; 

or commission of embezzlement, theft, forgery, bribery, 

falsification or destruction of records, making false 

statements, tax evasion, violating Federal criminal tax laws, 

or receiving stolen property. 

I represent, to the best of my knowledge and belief, that all 

of the above information is accurate. 
42844 Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 

(End of clause) 

252.232–7012 [Removed and Reserved] 

■ 12. Remove and reserve section 

252.232–7012. 

252.232–7013 [Removed and Reserved] 

■ 13. Remove and reserve section 

252.232–7013. 

■ 14. Add new section 252.232–70YY to 

read as follows: 

252.232–70YY DoD Maximum 

Performance-Based Payment Rates. 

As prescribed in 232.1005–70, use the 

following provision: 

DoD Maximum Performance-Based 

Payment Rates (Date) 

(a) The Invitation to Propose PerformanceBased Payments provision in this solicitation 

is modified to change the maximum 

performance-based payment rate in 

paragraph (c)(2)(iii) of that provision to 50 

percent if the Offeror is other than small 

business and 90 percent if the Offeror is a 

small business, unless a different rate is 

specified for the Offeror in the Contract 

Business Analysis Repository (CBAR) at 

[details TBD]. 

(b) If the Offeror has a satisfactory record 

of performance, the Offeror can qualify for an 

increased maximum performance-based 

payment rate of up to 95 percent, based on 

the following criteria: 

(1) If the Offeror is other than small 

business: 

Additional 

percentage Criteria 

10 .................. Met the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedule, 

as the case may be, at least 95 percent of the time during the preceding Government fiscal year (October 1 through September 30). 

10 .................. Does not have open level III or IV corrective action requests. See DFARS 242.302(a). 

10 .................. All applicable contractor business systems are acceptable, without significant deficiencies. 

7.5 ................. At least 95 percent of the time during the preceding Government fiscal year, when responding to solicitations that required submission of certified cost or pricing data, met the due date in the request for proposal and complied with the Proposal Adequacy Checklist (252.215–7009). 

5 .................... Has met its small business subcontracting goals during the preceding Government fiscal year. 

2.5 ................. Has provided subcontracting opportunities for AbilityOne [details TBD]. 

(2) If the Offeror is a small business: 

Additional 

percentage Criteria 

2 .................... Met the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedule, 

as the case may be, at least 95 percent of the time during the preceding Government fiscal year (October 1 through September 30). 

2 .................... Does not have open level III or IV corrective action requests. See DFARS 242.302(a). 

1 .................... All applicable contractor business systems are acceptable, without significant deficiencies. 

(c) However, if the Offeror or any of its 

principals has within the preceding 

Government fiscal year been convicted of or 

had a civil judgment rendered against the 

Offeror or any of its principals for 

commission of fraud or a criminal offense in 

connection with obtaining, attempting to 

obtain, or performing a public (Federal, State, 

or local) contract or subcontract; violation of 

Federal or State antitrust statutes relating to 

the submission of offers; or commission of 

embezzlement, theft, forgery, bribery, 

falsification or destruction of records, making 

false statements, tax evasion, violating 

Federal criminal tax laws, or receiving stolen 

property, the Offeror will not be eligible for 

any of the above incentives and the 

maximum performance-based payment rate 

will be 25 percent. 

(d)(1) On December 1 of each year, except 

as provided in paragraph (c) of this 

provision, the Offeror, or a higher-level 

owner of the Offeror, may submit to [email 

address TBD] a representation as to which 

criteria specified in paragraph (b) of this 

provision it meets, and request a higher 

maximum performance-based payment rate 

on the basis of the applicable criteria. 

(i) If a representation is made on behalf of 

multiple business segments, the 

representation shall address the criteria in 

paragraph (b) of this provision for each 

business segment for which higher customary 

progress payment rates are requested. 

Business segments that meet the same criteria 

may be grouped together. 

(ii) If the size status of the Offeror varies 

dependent upon the North American 

Industry Classification System (NAICS) code 

of the acquisition, the Offeror may submit a 

representation and request for a higher 

customary progress payment rate that 

addresses the rates for both a small business 

and an other than small business. 

(iii) A separate representation is not 

required to also request a higher customary 

progress payment rate (see DFARS 232.501– 

1(a)). 

(2) The representation shall be executed by 

a person authorized to sign for the entity 

submitting the representation and shall at a 

minimum include— 

(i) The unique entity identifier and 

Commercial and Government Entity (CAGE) 

code(s) of the Offeror; 

(ii) The size status of the Offeror (small, 

other than small, or varies dependent upon 

the NAICS code of the acquisition); and 


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Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 42845 

(iii) Identification of the criteria for which 

the Offeror is requesting increased maximum 

performance-based payment rate for the 

following calendar year. It is not necessary to 

submit supporting data with the 

representation, but the Offeror shall provide 

such data upon request. 

(3) The template in paragraph (h) of this 

clause may be used for the submission of this 

request and representation. 

(e) Based on the representation received, 

the Director, Defense Pricing and 

Contracting, will determine the appropriate 

maximum performance-based payment 

rate(s) for the following calendar year. DoD 

will enter the maximum performance-based 

payment rate(s) into CBAR by December 31. 

(f) If the Offeror fails to submit by the 

December 1 deadline, then the rate for the 

Offeror in CBAR will be 50 percent if the 

Offeror is other than a small business and 90 

percent if the Offeror is a small business, 

except as provided in paragraph (c) of this 

provision. If the Offeror subsequently 

submits a representation after the December 

1 deadline, any increase in rates will not be 

effective in CBAR until 30 days after 

submission. 

(g) The rate(s) may be adjusted at any time 

during the year if the Director, Defense 

Pricing and Contracting, subsequently 

determines that the representation provided 

by the Offeror was not accurate. 

(h) Template. 

BILLING CODE 5001–06–P 


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42846 Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 


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Company Letterhead 

I, [print name and title] , request customary progress ----~----------------------~----

payment/maximum performance based payment rate(s) as follows: 

l.a. Name and address of company: 

b. Unique Entity Identifier: 

c. Commercial and Government Entity (CAGE) code(s): 

d. Size status. Fill out Table A if other than a small 

business. Fill out Table B if a small business. If size 

status varies dependent upon NAICS code, fill out both tables. 

Table A- Other than small business: 

Enter "Yes" if 50 percent 

meet the plus 

criteria, "No" additional 

if do not percentage 

meet. 

10 percent 

Criteria 

Met the contract delivery dates 

for contract end items and 

contract data requirements lists 

or performance milestone 

schedule, as the case may be, at 

least 95 percent of the time 

during the preceding Government 
Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 42847 


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10 percent 

10 percent 

fiscal year (October 1 through 

September 30). 

Does not have open level III or 

IV corrective action requests. 

See DFARS 242.302(a). 

All applicable contractor 

business systems are acceptable, 

without significant 

deficiencies. 

7.5 percent At least 95 percent of the time 

during the preceding Government 

fiscal year, when responding to 

solicitations that required 

submission of certified cost or 

pricing data, met the due date 

in the request for proposal and 

complied with the Proposal 

Adequacy Checklist (252.215-

7009) . 

5 percent Has met its small business 

subcontracting goals during the 

preceding Government fiscal 

year. 
42848 Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 


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2.5 percent Has provided subcontracting 

opportunities for AbilityOne 

[details TBD] . 

Total customary progress payment/maximum performance-based 

payment rate requested as an other than small business: . ---

Table B - Small business: 

Enter "Yes" if 

meet the 

90 percent Criteria 

plus 

criteria, "No" additional 

if do not meet. percentage 

2 percent 

2 percent 

Met the contract delivery dates 

for contract end items and 

contract data requirements 

lists or performance milestone 

schedule, as the case may be, 

at least 95 percent of the time 

during the preceding Government 

fiscal year (October 1 through 

September 30). 

Does not have open level III or 

IV corrective action requests. 

See DFARS 242.302(a). 
Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 42849 


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1 percent All applicable contractor 

business systems are 

acceptable, without significant 

deficiencies. 

Total customary progress payment/maximum performance-based 

payment rate requested as a small business: . -------

2. Repeat above information for any additional companies for 

which increased customary progress payment/maximum performancebased payment rates are requested. Business segments that meet 

the same criteria may be grouped together. 

The above identified entity(entities) and any of the principals 

thereof have not within the preceding Government fiscal year 

been convicted of or had a civil judgment rendered against any 

entity or any of its principals for commission of fraud or a 

criminal offense in connection with obtaining, attempting to 

obtain, or performing a public (Federal, State, or local) 

contract or subcontract; violation of Federal or State 

antitrust statutes relating to the submission of offers; or 

commission of embezzlement, theft, forgery, bribery, 

falsification or destruction of records, making false 

statements, tax evasion, violating Federal criminal tax laws, 

or receiving stolen property. 
42850 Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules 

(End of provision) 

■ 15. Amend section 252.242–7005 by— 

■ a. Removing the clause date of ‘‘(FEB 

2012)’’ and adding ‘‘(DATE)’’ in its 

place; 

■ b. In paragraph (d)(2) removing 

‘‘withhold payments’’ and adding 

‘‘withhold payments, except as 

provided in paragraph (e) of this clause’’ 

in its place; 

■ c. Redesignating paragraphs (e) and (f) 

as paragraphs (f) and (g); and 

■ d. Adding a new paragraph (e) to read 

as follows: 

§ 252.242–7005 Contractor Business 

Systems. 

* * * * * 

(e) The requirements in paragraphs (f) 

and (g) of this clause regarding 

withholding of amounts due from 

progress payments and performancebased payments do not apply unless the 

Contractor is receiving progress 

payments or performance-based 

payments under this contract at a rate 

specified in CBAR that includes the 10 

percent incentive based on having 

acceptable business systems without 

significant deficiencies. 

* * * * * 

[FR Doc. 2018–18238 Filed 8–23–18; 8:45 am] 

BILLING CODE 5001–06–C 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Part 236 

[Docket DARS–2018–0039] 

RIN 0750–AJ75 

Defense Federal Acquisition 

Regulation Supplement: Exemption 

From Design-Build Selection 

Procedures (DFARS Case 2018–D011) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Proposed rule. 

SUMMARY: DoD is proposing to amend 

the Defense Federal Acquisition 

Regulation Supplement to implement a 

section of the National Defense 

Authorization Act for Fiscal Year 2018 

that allows for more than five offerors 

on solicitations issued using two-phase 

design-build selection procedures for 

indefinite-delivery, indefinite-quantity 

contracts that exceed $4 million. 

DATES: Comments on the proposed rule 

should be submitted in writing to the 

address shown below on or before 

October 23, 2018, to be considered in 

the formation of a final rule. 

ADDRESSES: Submit comments 

identified by DFARS Case 2018–D011, 

using any of the following methods: 

Æ Federal eRulemaking Portal: http:// 

www.regulations.gov. Search for 

‘‘DFARS Case 2018–D011’’. Select 

‘‘Submit a Comment Now’’ and follow 

the instructions provided to submit a 

comment. Please include ‘‘DFARS Case 

2018–D011’’ on any attached document. 

Æ Email: osd.dfars@mail.mil. Include 

DFARS Case 2018–D011 in the subject 

line of the message. 

Æ Fax: 571–372–6094. 

Æ Mail: Defense Acquisition 

Regulations System, Attn: Ms. Heather 

Kitchens, OUSD(A&S)DPC/DARS, Room 

3B941, 3060 Defense Pentagon, 

Washington, DC 20301–3060. 

Comments received generally will be 

posted without change to http://

www.regulations.gov, including any 

personal information provided. To 

confirm receipt of your comment(s), 

please check 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: Ms. 

Heather Kitchens, telephone 571–372– 

6104. 

SUPPLEMENTARY INFORMATION: 

I. Background 

This rule proposes to revise the 

DFARS to implement section 823 of the 

National Defense Authorization Act for 

Fiscal Year 2018 (Pub. L. 115–91). 

Section 823 amends 10 U.S.C. 2305a to 

allow for more than the maximum 

number of five offerors when a 

solicitation is issued using two-phase 

design-build selection procedures for an 

indefinite-delivery, indefinite-quantity 

(IDIQ) contract that exceeds $4 million. 

Prior to the amendments made by 

section 823, 10 U.S.C. 2305a required 

the head of the contracting activity to 

approve the contracting officer’s 

justification that it is in the best interest 

of the Government to exceed the 

maximum number of five offerors that 

may be selected to submit phase-two 

proposals, if certain conditions apply. 

Section 823 eliminates the requirement 

for such a justification when the 

solicitation is for an IDIQ contract that 

exceeds $4 million. 

II. Discussion and Analysis 

The two-phase design-build selection 

procedures authorized by 10 U.S.C. 

2305a are implemented at Federal 

Acquisition Regulation (FAR) subpart 

36.3. The statutory requirement for a 

contracting officer to justify exceeding 

the maximum number of five offerors is 

implemented at FAR 36.303–1(a)(4). 

This rule proposes to implement section 

823 by adding a new DFARS section 

236.303–1(a)(4), to be used in lieu of the 

procedures at FAR 36.303–1(a)(4). The 

new DFARS section implements 10 

U.S.C. 2305a, as amended by section 

823, by providing— 

• The new authority to exceed the 

five offeror maximum when the 

solicitation is for an IDIQ contract that 

exceeds $4 million; 

• The authority to exceed the five 

offeror maximum when the contracting 

officer’s decision is approved by the 

head of the contracting activity when 

the solicitation is for a contract that 

exceeds $4 million; and 

• A statement that the number of 

offerors is at the contracting officer’s 

discretion when the solicitation is for a 

contract that does not exceed $4 

million. 


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