27516 Federal Register / Vol. 79, No. 93 / Wednesday, May 14, 2014 / Proposed Rules 

of publication of the Treasury decision 

adopting these rules as final regulations 

in the Federal Register. 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2014–11115 Filed 5–9–14; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

32 CFR Part 243 

[Docket ID: DOD–2013–OS–0130] 

RIN 0790–AJ08 

Ratemaking Procedures for Civil 

Reserve Air Fleet Contracts 

AGENCY: USTRANSCOM, DoD. 

ACTION: Proposed rule. 

SUMMARY: Section 366 of the National 

Defense Authorization Act for Fiscal 

Year 2012 directs the Secretary of 

Defense to determine a fair and 

reasonable rate of payment for airlift 

services provided to the Department of 

Defense by air carriers who are 

participants in the Civil Reserve Air 

Fleet Program. The Department of 

Defense (the Department or DoD) 

proposes to promulgate regulations to 

establish ratemaking procedures for 

civil reserve air fleet contracts as 

required by Section 366(a) in order to 

determine a fair and reasonable rate of 

payment. 

DATES: Comments must be received no 

later than July 14, 2014. 

ADDRESSES: You may submit comments, 

identified by docket number and or 

Regulatory Information 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, 4800 Mark Center Drive, 

2nd Floor, East Tower, Suite 02G09, 

Alexandria, VA 22350–3100. 

Instructions: All submissions received 

must include the agency name and 

docket number or RIN 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. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Dwight Moore, Chief, Fiscal and Civil 

Law, USTRANSCOM/TCJA, (618) 220– 

3982 or Mr. Jeff Beyer, Chief, Business 

Support and Policy Division, 

USTRANSCOM/TCAQ, (618) 220–7021. 

SUPPLEMENTARY INFORMATION: 

Background 

The Civil Reserve Air Fleet (CRAF) is 

a wartime readiness program, based on 

the Defense Production Act of 1950, as 

amended, (50 U.S.C. App. 2601 et seq.), 

and Executive Order 13603 (National 

Defense Resource Preparedness), March 

16, 2012, to ensure quantifiable, 

accessible, and reliable commercial 

airlift capability to augment DoD airlift 

and to assure a mobilization base of 

aircraft available to the Department of 

Defense for use in the event of any level 

of national emergency or defenseorientated situations. As a readiness 

program, CRAF quantifies the number of 

passenger and cargo commercial assets 

required to support various levels of 

wartime requirements and thus allows 

DoD to account for their use when 

developing and executing contingency 

operations and war plans. In addition, 

the CRAF program identifies how DoD 

gains access to these commercial assets 

for operations by defining the 

authorities and procedures for CRAF 

activation. Finally, the program helps 

ensure that the DoD has reliable lines of 

communication and a common 

understanding of procedures with the 

carriers. 

The United States Transportation 

Command (USTRANSCOM) negotiates 

and structures award of aircraft service 

contracts with certificated civilian air 

carriers willing to participate in the 

CRAF program in order to ensure that a 

mobilization base of aircraft is capable 

of responding to any level of defenseorientated situations. 

The ability to set rates maintains the 

CRAF program’s great flexibility to have 

any air carrier in the program able to 

provide aircraft within 24 hours of 

activation to fly personnel and cargo to 

any location in the world at a set rate 

per passenger or ton mile, regardless of 

where the air carrier normally operates. 

It also provides the Secretary of Defense 

the ability to respond rapidly to assist 

in emergencies and approved 

humanitarian operations, both in the 

United States and overseas where delay 

could result in more than monetary 

losses. The Government-set rate allows 

contracts to any location, sometimes 

awarded within less than an hour, and 

provides substantial commercial 

capability on short notice. 

During the initial CRAF program 

years (between 1955 and 1962), 

ratemaking to price DoD airlift service 

relied upon price competition to meet 

its commercial airlift needs. This 

procurement method resulted in 

predatory pricing issues and failed to 

provide service meeting safety and 

performance requirements. 

Congressional Subcommittee hearings 

held at the time determined price 

competition to be non-compensatory 

and destructive to the industry. As a 

result, the ratemaking process was 

implemented under the regulatory 

authority of the Civil Aeronautics Board 

(CAB). Ratemaking continued under the 

CAB until deregulation in 1980. At that 

time, civil air carriers and DoD’s 

contracting agency for long-term 

international airlift, the Military Airlift 

Command (MAC), agreed by a 

memorandum of understanding (MOU) 

that CAB methodologies by which rates 

for DoD airlift were established 

produced fair and reasonable rates and 

furthered the objectives of the CRAF 

program; and therefore, the parties 

agreed to continue to use CAB 

methodologies for establishing MAC 

uniform negotiated rates under an MOU 

renewed every five years. MAC became 

Air Mobility Command (AMC) on June 

1, 1992. Ratemaking continued under 

AMC until January 1, 2007, when DoD’s 

contracting authority for long-term 

international airlift was transferred from 

AMC to USTRANSCOM. On December 

31, 2011, the National Defense 

Authorization Act for Fiscal Year 2012 

(FY12 NDAA) was signed into law. 

Section 366 of the FY12 NDAA, codified 

at 10 U.S.C. § 9511a, authorized and 

directed the Secretary of Defense to 

determine a fair and reasonable rate of 

payment made to participants in the 

CRAF program. This proposed 

rulemaking effectuates Section 366. 

This proposed rulemaking broadly 

tracks the longstanding ratemaking 

procedures for CRAF contracts in all 

substantial elements and the ratemaking 

methodologies supporting the pricing of 

airlift services as described in previous 

and current MOUs between certificated 

civilian air carriers willing to participate 

in the CRAF program and 

USTRANSCOM and USTRANSCOM 

predecessor entities. 

In addition to compliance with this 

rule, CRAF participants, consistent with 

past practice, will be expected to enter 

into a MOU with USTRANSCOM where 

they will be expected to furnish 

USTRANSCOM, as a condition of its 

continued participation in the CRAF 

program, with the financial and 

operational information required by 

USTRANSCOM to adequately make a 

determination of fairness and 

reasonableness of price. This 

rulemaking will have no impact on air 

operators or certificated air carriers not 


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participating in the CRAF program. Nor 

does it impact non-CRAF services 

provided by CRAF participants. 

Section 366, Ratemaking Procedures 

for Civil Reserve Air Fleet, provides in 

pertinent part: 

In General. Chapter 931 of Title 10, 

United States Code, is amended by 

inserting after section 9511 the 

following new section: 

‘‘§ 9511(a) Civil Reserve Air Fleet 

Contracts: Payment Rate 

(a) Authority—The Secretary of 

Defense shall determine a fair and 

reasonable rate of payment for airlift 

services provided to the Department of 

Defense by air carriers who are 

participants in the Civil Reserve Air 

Fleet program. 

(b) Regulations—The Secretary of 

Defense shall prescribe regulations for 

purposes of subsection (a). The 

Secretary may exclude from the 

applicability of those regulations any 

airlift services contract made through 

the use of competitive procedures. 

(c) Commitment of Aircraft as a 

Business Factor.—The Secretary may, in 

determining the quantity of business to 

be received under an airlift services 

contract for which the rate of payment 

is determined in accordance with 

subsection (a), use as a factor the 

relative amount of airlift capability 

committed by each air carrier to the 

Civil Reserve Air Fleet. 

(d) Inapplicable Provisions of Law.— 

An airlift services contract for which the 

rate of payment is determined in 

accordance with subsection (a) shall not 

be subject to the provisions of Section 

2306a of this title or the provisions of 

subsections (a) and (b) of Section 1502 

of Title 41.’’ 

Description of the Regulation, by 

Section: 

Sections 243.1 through 243.3. 

Purpose, Applicability, and Definitions. 

No further descriptions are provided in 

this section. These sections of the 

regulation are self explanatory. 

Section 243.4(a). In establishing fair 

and reasonable rate of payments for 

airlift service contracts in support of 

CRAF, USTRANSCOM may utilize the 

principles contained in the Federal 

Acquisition Regulation, as 

supplemented. Specific differences are 

as noted at § 243.8 of the regulation. 

Sections 243.4(c) and (d) Analysis and 

Rates. Details for the current ratemaking 

cycle can be located on FedBizOps 

under the Proposed Uniform Rates and 

Rules and Final Uniform Rates and 

Rules, which can be located at https:// 

www.fbo.gov/index?s=opportunity

&mode=form&id=3ae87338a903f3e

6e43a2627941dbb1c&tab=core&_

cview=1. 

Sections 243.4(e)(1) through (e)(6) 

Components of the Rate. Additional 

insight in this area is included in the 

current Memorandum of Understanding 

(FY13 through FY17), which can be 

found at https://www.fbo.gov/index?

s=opportunity&mode=form&id=3ae87

338a903f3e6e43a2627941dbb1c

&tab=core&_cview=1. 

Section 243.4(f) Contingency Rates. 

Authority is reserved to the 

Commander, USTRANSCOM, to 

implement a higher temporary rate if 

USTRANSCOM determines that the 

established rate of payment is 

insufficient to allow successful mission 

operations. These temporary 

contingency rates are used at the 

Commander, USTRANSCOM’s 

discretion during conditions such as 

outbreak of war, armed conflict, 

insurrection, civil or military strife, 

emergencies, or similar conditions and 

are adjusted to reflect possible limited 

backhaul opportunities. These rates 

would continue until it is determined 

by the Commander, USTRANSCOM that 

such rates are no longer needed to 

ensure mission accomplishment or 

sufficient data has been obtained to 

establish a new rate, after which the 

contingency rates would cease. 

Section 243.5 Commitment of Aircraft 

as a Business Factor. For the purpose of 

rate making, the average fleet cost of 

aircraft proposed by the carriers for the 

forecast year is used. Actual awards to 

CRAF carriers are based upon the 

aircraft accepted into the CRAF 

program. Aircraft are assigned to stages 

in a manner designed to spread the risk 

among all carriers proportionate to the 

airline total commitment and capability; 

as an example, all air carriers are 

required to have a minimum of one 

aircraft in Stage I but each carrier’s total 

aircraft in Stage I cannot exceed ∼15% 

of the passenger or cargo requirement. 

Section 243.6. Exclusions from the 

uniform negotiated rate. No further 

description is provided in this section. 

This section of the regulation is self 

explanatory. 

Section 243.7 Inapplicable provisions 

of law. Consistent with the requirements 

of Section 366, this section provides 

that determining the rate of payment for 

an airlift service contract will not be 

subject to the provisions of Section 

2306a of Title 10, United States Code, 

entitled Cost or Pricing Data: Truth in 

Negotiations Act or subsections (a) and 

(b) of Section 1502 of Title 41, United 

States Code, entitled Cost Accounting 

Standards. 

Section 243.8 Application of FAR cost 

principles. Some FAR cost principles 

contained in FAR Part 31 and DFARS 

231 are modified for use in the 

ratemaking process. There are two 

primary reasons for this: 

First, compliance with certain 

principles is not possible for airline 

carriers. Airline accounting systems are 

established to report costs in accordance 

with the Department of Transportation 

requirements found at 14 CFR Part 241. 

These requirements generally do not 

allow carriers to assign costs directly to 

a final cost objective, or contract. 

Contractors who do not assign costs 

directly to a contract cannot comply 

with FAR 31.202. Additionally, 14 CFR 

Part 241 directs an air carrier to 

financially account for property taxes in 

General and Administrative expense, 

whereas FAR 31.205–41(c) directs 

contractors to account for these taxes 

directly to a final cost objective. 

Therefore, simply by complying with 

requirements of 14 CFR Part 241 

(required by the Department of 

Transportation), CRAF carriers cannot 

be in compliance with certain principles 

at FAR 31 and DFARS 231 due to the 

difference in financial accounting 

practices for these taxes. 

Secondly, selected cost principles 

must be modified in order to maintain 

uniformity across the industry when 

developing a uniform rate of payment. 

An example of this can be found at FAR 

31.205–11, Depreciation. This principle 

requires contractors limit depreciation 

to the amount used for financial 

accounting purposes and in a manner 

consistent with depreciation policies 

and procedures followed in the same 

segment of non-Government business. 

Under the Department’s ratemaking 

process, all depreciation values are preestablished in order to maintain 

uniformity within the rate. These 

depreciation values are as indicated in 

the MOU. Therefore, the FAR cost 

principle outlining depreciation 

requirements cannot be applicable to 

the ratemaking process. 

Section 243.9. Carrier site visits. No 

further description is provided in this 

section. This section of the regulation is 

self explanatory. 

Sections 243.10 and 243.11 Disputes 

and Appeals of USTRANSCOM 

Contracting Officer Decisions regarding 

rates. The disputes and appeals 

provision of the proposed ratemaking 

procedures follows long established 

protocol that was previously reflected in 

MOUs executed between CRAF air 

carrier participants and the government. 

In sum, carriers with ratemaking 

concerns are required to first present 

their concerns to the USTRANSCOM 

ratemaking team for resolution. If the 

matter is not resolved by the ratemaking 


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team, the carrier can in turn request 

resolution by the USTRANSCOM 

contracting officer. If satisfactory 

resolution does not result, the carrier 

should address their matter to the 

USTRANSCOM Ombudsman who is 

appointed to hear and facilitate 

resolution of such issues. If requested by 

the carrier, the Director of Acquisition, 

USTRANSCOM, will issue a final 

agency decision on matters unresolved 

by the USTRANSCOM Ombudsman. 

Regulatory Procedures 

Executive Order 12866 ‘‘Regulatory 

Planning and Review’’ and Executive 

Order 13563 ‘‘Improving Regulation and 

Regulatory Review’’ 

Executive Orders (E.O.s) 12866 and 

13563 directs 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. It has been determined that 

32 CFR part 243 is not an economically 

significant regulatory action and is also 

not a major rule under 5 U.S.C. § 804. 

The rule does not: 

(1) Have an annual affect to the 

economy in excess of $100 million or 

more or adversely affect in a material 

way the economy; a section of the 

economy; productivity; competition; 

jobs; the environment; public health or 

safety; or State, local or tribal 

governments or communities; 

(2) Create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another Agency; 

(3) Materially alter the budgetary 

impact of entitlements, grants, user fees, 

or loan programs, or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in these Executive Orders. 

Additionally, participation in the 

CRAF program is voluntary. All willing 

carriers meeting the technical 

requirements of CRAF will receive a 

contract for transportation services. The 

proposed rule does not add additional 

requirements to those that have been 

historically required by the CRAF 

carrier’s contract and ratemaking 

process. The proposed rule clarifies 

existing and historical procedures 

utilized by USTRANSCOM for carriers 

participating in the CRAF program. 

Unfunded Mandates Reform Act of 1995 

(Sec. 202, Pub. L. 104–4) 

It has been certified that this rule does 

not contain a Federal mandate that may 

result in the expenditure by State, local 

and tribal governments, in aggregate, or 

by the private sector, of $100 million or 

more in any one year. 

Public Law 96–354, ‘‘Regulatory 

Flexibility Act’’ (5 U.S.C. 601 et seq.) 

DoD certifies this proposed rule will 

not have a significant economic impact 

on a substantial number of small entities 

within the meaning of the Regulatory 

Flexibility Act, 5 U.S.C. 601, et seq, 

because the rule does not change or add 

any policies or procedures. This rule 

implements Section 366 of the National 

Defense Authorization Act for Fiscal 

Year 2012 (Pub. L. 112–81) using 

historically established ratemaking 

methodologies and procedures. 

According to the most recent records, 

there are 28 certified civilian air carriers 

willing to participate in the CRAF 

program for FY2013, of which 12 

qualify as small businesses. Because the 

rule does not change or add any policies 

or procedures there is not a significant 

economic impact on a substantial 

number of small entities and a 

regulatory flexibility analysis was not 

performed. Furthermore, any airline 

meeting the CRAF technical 

requirements, regardless of business 

size, will be awarded a contract with 

rates of payment prescribed by this rule. 

Public Law 96–511, ‘‘Paperwork 

Reduction Act’’ (44 U.S.C. Chapter 35) 

The proposed 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. 

Executive Order 13132 Federalism 

Executive Order 13132 requires that 

Executive departments and agencies 

identify regulatory actions that have 

significant federalism implications. A 

regulation has federalism implications if 

it has substantial direct effects on the 

States, on the relationship or 

distribution of power between the 

Federal Government and the States, or 

on the distribution of power and 

responsibilities among various levels of 

government. 

The provisions of this part, as 

required by 10 U.S.C. § 9511a, have no 

substantial direct effect on the States, on 

the relationship or distribution of power 

between the Federal Government and 

the States, or on the distribution of 

power and responsibilities among 

various levels of government. Therefore, 

the Department has determined that the 

proposed part has no federalism 

implications that warrant the 

preparation of a Federalism Assessment 

in accordance with Executive Order 

13132. 

List of Subjects in 32 CFR Part 243 

Air fleet, Armed forces reserves, 

Contracts. 

■ For the reasons set forth in the 

preamble, Title 32, Code of Federal 

Regulations is proposed to be amended 

by adding part 243 to read as follows: 

PART 243—DEPARTMENT OF 

DEFENSE RATEMAKING 

PROCEDURES FOR CIVIL RESERVE 

AIR FLEET CONTRACTS 

Sec. 

243.1 Purpose. 

243.2 Applicability. 

243.3 Definitions. 

243.4 Ratemaking procedures for Civil 

Reserve Air Fleet contracts. 

243.5 Commitment of aircraft as a business 

factor. 

243.6 Exclusions from the uniform 

negotiated rate. 

243.7 Inapplicable provisions of law. 

243.8 Application of FAR cost principles. 

243.9 Carrier site visits. 

243.10 Disputes. 

243.11 Appeals of USTRANSCOM 

Contracting Officer Decisions regarding 

rates. 

243.12 Required Records Retention. 

Authority: Section 366 National Defense 

Authorization Act for FY12 (Pub. L. 112–81) 

10 U.S.C. Chap 931, Section 9511a. 

§ 243.1 Purpose. 

The Secretary of Defense (Secretary) is 

required to determine a fair and 

reasonable rate of payment for airlift 

services provided to the Department of 

Defense (DoD) by civil air carriers and 

operators (hereinafter collectively 

referred to as ‘‘air carriers’’) who are 

participants in the Civil Reserve Air 

Fleet program (CRAF). This regulation 

provides the authority and methodology 

for such ratemaking and designates the 

United Stated Transportation Command 

(USTRANSCOM) as the rate setter for 

negotiated uniform rates for DoD airlift 

service contracts in support of the 

CRAF. This methodology supports a 

viable CRAF mobilization base that 

ensures sufficient capacity in time of 

war, contingency and humanitarian 

relief efforts. 

§ 243.2 Applicability. 

This section governs all contracts 

with the Department of Defense where 

awards to the air carriers, either through 

individual contracts or teaming 

arrangements, are commensurate with 

the relative amount of airlift capability 


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committed to the Civil Reserve Air Fleet 

(CRAF). 

§ 243.3 Definitions. 

The following definitions apply to 

this part: 

Air carrier. ‘‘Air carrier’’ is defined in 

49 U.S.C. § 40102(a)(2) as ‘‘a citizen of 

the United States undertaking by any 

means, directly or indirectly, to provide 

air transportation.’’ Specifically to this 

ratemaking procedure, individuals or 

entities that operate commercial fixed 

and rotary wing aircraft in accordance 

with the Federal Aviation Regulations 

(14 CFR Chapter I) or equivalent 

regulations issued by a country’s Civil 

Aviation Authority (CAA) and which 

provide air transportation services are 

included. Commercial air carriers under 

contract with, or operating on behalf of, 

the DoD shall have a Federal Aviation 

Administration (FAA) or CAA 

certificate. The policy contained in this 

directive applies only to air carriers 

operating fixed wing aircraft under 

CRAF international airlift services. 

Aircraft class. Distinct categories of 

aircraft with similar broad 

characteristics established for 

ratemaking purposes. These categories 

include aircraft such as large passenger, 

medium passenger, large cargo, etc. 

They are determined by USTRANSCOM 

and identified in Published Uniform 

Rates and Rules for International 

Service Appendix A (Published in 

FedBizOps). 

Civil Reserve Air Fleet International 

Airlift Services. Those services provided 

in support of the Civil Reserve Air Fleet 

contract, whereby contractors provide 

personnel, training, supervision, 

equipment, facilities, supplies and any 

items and services necessary to perform 

international long-range and short-range 

airlift services during peacetime and 

during CRAF activation in support of 

the Department of Defense (DoD). 

Implements the Fly CRAF Act. See 49 

U.S.C. 41106. 

Civil Reserve Air Fleet (CRAF) 

Assured Business Guarantees. See 10 

U.S.C. 9515. 

Civil Reserve Air Fleet (CRAF) 

Program. The Civil Reserve Air Fleet 

(CRAF) is a wartime readiness program, 

based on the Defense Production Act of 

1950, as amended, (50 U.S.C. App. 2601 

et seq.), and Executive Order 13603 

(National Defense Resource 

Preparedness), March 16, 2012, to 

ensure quantifiable, accessible, and 

reliable commercial airlift capability to 

augment DoD airlift and to assure a 

mobilization base of aircraft available to 

the Department of Defense for use in the 

event of any level of national emergency 

or defense-orientated situations. As a 

readiness program, CRAF quantifies the 

number of passenger and cargo 

commercial assets required to support 

various levels of wartime requirements 

and thus allows DoD to account for their 

use when developing and executing 

contingency operations/war plans. 

The CRAF is composed of U.S. 

registered aircraft owned or controlled 

by U.S. air carriers specifically allocated 

(by FAA registration number) for this 

purpose by the Department of 

Transportation. As used herein, CRAF 

aircraft are those allocated aircraft, 

which the carrier owning or otherwise 

controlling them, has contractually 

committed to the DoD, under stated 

conditions, to meet varying emergency 

needs for civil airlift augmentation of 

the military airlift capability. The 

contractual commitment of the aircraft 

includes the supporting resources 

required to provide the contract airlift. 

In return for a commitment to the CRAF 

program, airlines are afforded access to 

day-to-day business under various DoD 

contracts. 

Historical Costs. Those allowable 

costs for airlift services for a 12 month 

period, gathered from Department of 

Transportation (DOT) Uniform System 

of Accounts and Reports (USAR) 

(hereinafter referred to as ‘‘Form 41’’) 

reporting (required by 14 CFR parts 217 

and 241). 

Long-range aircraft. Aircraft equipped 

with navigation, communication, and 

life support systems/emergency 

equipment required to operate in transoceanic airspace, and on international 

routes, for a minimum distance of 3,500 

nautical miles, while carrying a 

productive payload (75 percent of the 

maximum payload it is capable of 

carrying.) Additionally aircraft must be 

equipped and able to operate worldwide 

(e.g. in EUROCONTROL and North 

Atlantic Minimum Navigation 

Performance Specification airspace and 

possess the applicable VHF, Mode-S, 

RNP, and RVSM communication and 

navigation capabilities.) 

Memorandum of Understanding with 

attachment (MOU). A written agreement 

between certificated air carriers willing 

to participate in the CRAF program and 

USTRANSCOM with the purpose of 

establishing guidelines to facilitate 

establishment of rates for airlift services 

(e.g. passenger, cargo, combi, and 

aeromedical evacuation.) 

Operational Data. Those statistics that 

are gathered from DOT Form 41 

reporting, USTRANSCOM reported 

monthly round trip (S–1) and one-way 

(S–2) mileage reports, monthly fuel 

reports or other data deemed necessary 

by the USTRANSCOM contracting 

officer. 

Participating Carriers. Any properly 

certified and DoD approved air carrier 

in the CRAF program which complies 

with the conditions of the MOU and 

executes a USTRANSCOM contract. 

Projected Rates. The estimated rates 

proposed by carriers based upon 

historical cost and operational data as 

further described in § 243.4(a)–(g). 

Ratemaking Methodologies. The 

methodologies agreed to by 

USTRANSCOM and air carriers in the 

MOU for the treatment of certain cost 

elements to determine the estimated 

price for the DoD for airlift services. 

Short-range aircraft. Aircraft 

equipped for extended over-water 

operations and capable of flying a 

minimum distance of 1,500 nautical 

miles while carrying a productive 

payload (75 percent of the maximum 

payload it is capable of carrying). 

§ 243.4 Ratemaking procedures for Civil 

Reserve Air Fleet contracts. 

The ratemaking procedures contained 

within this section apply only to Airlift 

Service contracts awarded based on 

CRAF commitment. Competitively 

awarded contracts may be used by the 

Department of Defense when it 

considers such contracts to be in the 

best interest of the government. See 

§ 243.5(b) and § 243.6 for exclusions to 

ratemaking. 

(a) USTRANSCOM may utilize the 

principles contained in the Federal 

Acquisition Regulation (FAR), as 

supplemented, in establishing fair and 

reasonable rate of payments for airlift 

service contracts in support of CRAF. 

Specific exceptions to FAR are noted in 

§ 243.8 of this rule. To facilitate 

uniformity within the ratemaking 

process, USTRANSCOM will execute a 

MOU with air carriers to institute the 

basis for methods upon which the rates 

will be established. An updated MOU 

will be executed as warranted and 

published for public comment on 

FedBizOps. Under the MOU, air carriers 

agree to furnish historical cost and 

operational data, as well as their 

projected rates for the ensuing fiscal 

year. USTRANSCOM will conduct a 

review of air carriers’ historical and 

projected costs and negotiate with the 

carriers to establish rates using 

ratemaking methodologies contained in 

the attachment to the MOU. 

(b) Obtaining data from Participating 

Carriers. USTRANSCOM will annually 

notify those participating carriers to 

provide data using the USTRANSCOM 

cost package and related instructions. 

The data provided includes pricing 

data, cost data, and judgmental 

information necessary for the 

USTRANSCOM contracting officer to 


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determine a fair and reasonable price or 

to determine cost realism. Carriers will 

be provided 60 calendar days to act 

upon the request. 

(c) Analysis. 

(1) USTRANSCOM will consider 

carrier reported DOT Form 41 costs as 

well as other applicable costs directly 

assigned to performance in 

USTRANSCOM service. These costs 

will be reviewed and analyzed by 

USTRANSCOM for allowability, 

allocability, and reasonableness. Costs 

may also be audited by the Defense 

Contract Audit Agency (DCAA), as 

necessary, in accordance with the 

DCAA Contract Audit Manual 7640.01. 

(2) To determine allocation of these 

costs to USTRANSCOM service, 

USTRANSCOM considers carrier 

reported DOT Form 41 operational data, 

as well as USTRANSCOM S–1, S–2 

mileage reports, fuel reports, and other 

relevant information requested by the 

contracting officer. 

(d) Rates. Rates will be determined by 

aircraft class (e.g. large passenger, 

medium passenger, large cargo, etc.) 

based on the average efficiency of all 

participating carriers within the 

specified class. Application of these 

rates, under varying conditions (e.g. 

ferry, one-way, etc), are addressed in the 

Final Rates published in accordance 

with § 243.4(h). 

(e) Components of the rate. 

(1) Return on Investment (ROI). ROI 

for USTRANSCOM service is intended 

to adequately compensate carriers for 

cost of capital. USTRANSCOM will 

apply a minimum return applied to the 

carrier’s total operating costs. If a full 

return on investment applied to a 

carrier’s capital investment base is 

provided in the MOU, the carrier will 

receive whichever is greater. 

(i) Full ROI. The full ROI will be 

computed using an optimal capital 

structure of 45 percent debt and 55 

percent equity. The cost-of-debt and 

cost-of-equity are calculated from 

revenues of major carriers as reported to 

the Department of Transportation. 

(A) Cost-of-Debt (COD). COD will be 

calculated considering the Risk Free 

Rate (RFR) plus the weighted debt 

spread, with the formula as agreed upon 

in the MOU. 

(B) Cost-of-Equity (COE). COE will be 

determined by a formula agreed upon in 

the MOU, which considers RFR, 

weighted betas, annualized equity risk 

premium and a future expected return 

premium. 

(C) Owned/Capital/Long-Term Leased 

Aircraft. New airframes and related 

support parts will receive full ROI on 

the net book value of equipment at midpoint of forecast year. USTRANSCOM 

will apply the economic service life 

standards to aircraft as indicated in 

paragraph (e)(2) of this section. 

(D) Short-term Leased Aircraft. As a 

return on annual lease payments, shortterm leased equipment will receive the 

Full ROI less the cost of money rate per 

the Secretary of the Treasury under Pub. 

L. 92–41 (85 Stat. 97), as provided by 

the Office of Management and Budget, 

in accordance with the MOU. 

(E) Working Capital. Working capital 

will be provided in the investment base 

at an established number of days 

provided in the MOU. The investment 

base will be computed on total 

operating cash less non cash expenses 

(depreciation) as calculated by 

USTRANSCOM. 

(ii) Minimum Return. USTRANSCOM 

will determine minimum return 

utilizing the Weighted Guidelines 

methodology as set forth in DFARS 

Subpart 215.4, Contract Pricing, or 

successor and as provided in the MOU. 

(2) Depreciation. USTRANSCOM will 

apply economic life standards for new 

aircraft at 14 years, 2 percent residual 

(narrowbody) and 16 years and 10 

percent residual (widebody) aircraft. 

USTRANSCOM will apply economic 

life standards for used aircraft as 

indicated in the MOU. 

(3) Utilization. Utilization considers 

the number of airborne hours flown per 

aircraft per day. USTRANSCOM will 

calculate aircraft utilization in 

accordance with the DOT Form 41 

reporting and the MOU. 

(4) Cost Escalation. Escalation is the 

percentage increase or decrease applied 

to the historical base year costs to 

reliably estimate the cost of performance 

in the contract period. Yearly cost 

escalation will be calculated in 

accordance with the MOU. 

(5) Weighting of Rate. Rates will be 

weighted based upon the direct 

relationship between contract 

performance and cost incurred in 

execution of the contract. The specific 

weighting will be as defined in the 

MOU. 

(6) Obtaining Data From Participating 

Carriers. Carriers participating in 

USTRANSCOM acquisitions subject to 

ratemaking shall provide, other than 

certified cost and pricing data for 

USTRANSCOM, rate reviews as 

required in the MOU. 

(f) Contingency Rate. Authority is 

reserved to the Commander, 

USTRANSCOM, at his discretion, 

during conditions such as outbreak of 

war, armed conflict, insurrection, civil 

or military strife, emergency, or similar 

conditions, to use a temporary 

contingency rate in order to ensure 

mission accomplishment. Any such 

temporary rate would terminate at the 

Commander’s discretion upon his 

determination that such rate is no longer 

needed. 

(g) Proposed Rate. Once the data is 

analyzed and audit findings considered, 

USTRANSCOM will prepare a package 

setting forth proposed airlift rates and 

supporting data. The proposed rates will 

be approved by the USTRANSCOM 

contracting officer and posted publicly 

on FedBizOps for comment. The 

comment period will be as specified in 

the proposed rate package. 

(h) Final Rate. Upon closing of the 

comment period, comments and 

supporting rationale will be addressed 

and individual negotiations conducted 

between USTRANSCOM and the air 

carriers. After negotiations have 

concluded, USTRANSCOM will prepare 

a rate package setting forth final airlift 

rates for each aircraft class, along with 

supporting data consisting of individual 

carrier cost elements. Comments and 

disposition of those comments will be 

included in the final rate package. The 

final rates will be approved by the 

USTRANSCOM contracting officer and 

publicly posted on FedBizOps for use in 

the ensuing contract. 

§ 243.5 Commitment of aircraft as a 

business factor. 

For the purpose of rate making, the 

average fleet cost of aircraft proposed by 

the carriers for the forecast year is used. 

Actual awards to CRAF carriers are 

based upon the aircraft accepted into 

the CRAF program. The Secretary may, 

in determining the quantity of business 

to be received under an airlift services 

contract for which the rate of payment 

is determined in accordance with 

subsection (a) of 10 U.S.C. 9511a, use as 

a factor the relative amount of airlift 

capability committed by each air carrier 

to the CRAF. 

(a) Adjustments in commitment to 

target specific needs of the contract 

period. The amount of business 

awarded in return for commitment to 

the program under a CRAF contract may 

be adjusted prior to the award of the 

contract to reflect increased importance 

of identified aircraft categories (e.g., 

Aeromedical Evacuation) or 

performance factors (e.g., flyer’s bonus, 

superior on-time performers, etc.). 

These adjustments will be identified in 

the solicitation. 

(b) Exclusions of categories of 

business from commitment based 

awards. Where adequate competition is 

available and USTRANSCOM 

determines some part of the business is 

more appropriate for award under 

competitive procedures, the rate-making 

will not apply. Changes to areas of 


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 93 / Wednesday, May 14, 2014 / Proposed Rules 27521 

business will be reflected in the 

solicitation. 

§ 243.6 Exclusions from the uniform 

negotiated rate. 

Domestic CRAF is handled differently 

than international CRAF in that aircraft 

committed does not factor into the 

amount of business awarded during 

peacetime. If domestic CRAF is 

activated, carriers will be paid in 

accordance with pre-negotiated prices 

that have been determined fair and 

reasonable, not a uniform rate. 

§ 243.7 Inapplicable provisions of law. 

An airlift services contract for which 

the rate of payment is determined in 

accordance with subsection (a) of 10 

U.S.C. 9511a shall not be subject to the 

provisions of 10 U.S.C. 2306a, or to the 

provisions of subsections (a) and (b) of 

41 U.S.C. 1502. Specifically, contracts 

establishing rates for services provided 

by air carriers who are participants in 

the CRAF program are not subject to the 

cost or pricing data provision of the 

Truth in Negotiations Act (10 U.S.C. 

2306a) or the Cost Accounting 

Standards (41 U.S.C. 1502). CRAF 

carriers will, however, continue to 

submit data in accordance with the 

MOU and the DOT, Form 41. 

§ 243.8 Application of FAR cost principles. 

In establishing fair and reasonable 

rate of payments for airlift service 

contracts in support of CRAF, 

USTRANSCOM, in accordance with 10 

U.S.C. 9511a, procedures differ from the 

following provisions of FAR Part 31 and 

DFARS Part 231, as supplemented: 

(a) FAR 31.202, Direct Costs. 

(b) FAR 31.203, Indirect Costs. 

(c) FAR 31.205–6, Compensation for 

Personal Services, subparagraphs (g), (j), 

and (k). 

(d) FAR 31.205–10, Cost of Money. 

(e) FAR 31.205–11, Depreciation. 

(f) FAR 31.205–18, Independent 

Research and Development and Bid and 

Proposal Costs. 

(g) FAR 31.205–19, Insurance and 

Indemnification. 

(h) FAR 31.205–26, Material Costs. 

(i) FAR 31.205–40, Special Tooling 

and Special Test Equipment Costs. 

(j) FAR 31.205–41, Taxes. 

(k) DFARS 231.205–18, Independent 

research and development and bid and 

proposal costs. 

§ 243.9 Carrier site visits. 

USTRANSCOM may participate in 

carrier site visits, as required to 

determine the reasonableness or 

verification of cost and pricing data. 

§ 243.10 Disputes. 

Carriers should first address concerns 

to the ratemaking team for resolution. 

Ratemaking issues that are not resolved 

to the carrier’s satisfaction through 

discussions with the ratemaking team 

may be directed to the USTRANSCOM 

contracting officer. 

§ 243.11 Appeals of USTRANSCOM 

Contracting Officer Decisions regarding 

rates. 

If resolution of ratemaking issues 

cannot be made by the USTRANSCOM 

contracting officer, concerned parties 

shall contact the USTRANSCOM 

Ombudsman appointed to hear and 

facilitate the resolution of such 

concerns. In the event a ratemaking 

issue is not resolved through the 

ombudsman process, the carrier may 

request a final agency decision from the 

Director of Acquisition, USTRANSCOM. 

§ 243.12 Required records retention. 

The air carrier is required to retain 

copies of data submitted to support rate 

determination for a period identified in 

subpart 4.7 of the Federal Acquisition 

Regulation, Contractor Records 

Retention (48 CFR 4.7). 

Dated: May 9, 2014. 

Aaron Siegel, 

Alternate OSD Federal Register Liaison 

Officer, Department of Defense. 

[FR Doc. 2014–11070 Filed 5–13–14; 8:45 am] 

BILLING CODE 5001–06–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2014–0259] 

RIN 1625–AA00 

Safety Zone, Fireworks Display, Lake 

Michigan; Winnetka, IL 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

establish a safety zone in Lake 

Michigan, Winnetka, Illinois. This 

proposed safety zone is necessary to 

protect the surrounding public and 

vessels from the hazards associated with 

a fireworks display. This safety zone is 

intended to restrict vessels from a 

portion of Lake Michigan due to hazards 

associated with a fireworks display. 

DATES: Comments and related material 

must be received by the Coast Guard on 

or before June 13, 2014. 

ADDRESSES: You may submit comments 

identified by docket number USCG– 

2014–0259 using any one of the 

following methods: 

(1) Federal eRulemaking Portal: 

http://www.regulations.gov. 

(2) Fax: 202–493–2251. 

(3) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue SE., Washington, DC 20590– 

0001. 

(4) Delivery: Same as mail address 

above, between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. The telephone number is 202– 

366–9329. 

See the ‘‘Public Participation and 

Request for Comments’’ portion of the 

SUPPLEMENTARY INFORMATION section 

below for instructions on submitting 

comments. To avoid duplication, please 

use only one of these four methods. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call or 

email Petty Officer Joseph McCollum, 

U.S. Coast Guard Sector Lake Michigan; 

telephone 414–747–7148, email 

Joseph.P.McCollum@uscg.mil. If you 

have questions on viewing or submitting 

material to the docket, call Cheryl 

Collins, Program Manager, Docket 

Operations, telephone 1–800–647–5527. 

SUPPLEMENTARY INFORMATION: 

Table of Acronyms 

DHS Department of Homeland Security 

FR Federal Register 

NPRM Notice of Proposed Rulemaking 

A. Public Participation and Request for 

Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related materials. All 

comments received will be posted 

without change to http://

www.regulations.gov and will include 

any personal information you have 

provided. 

1. Submitting Comments 

If you submit a comment, please 

include the docket number for this 

rulemaking (USCG–2014–0259), 

indicate the specific section of this 

document to which each comment 

applies, and provide a reason for each 

suggestion or recommendation. You 

may submit your comments and 

material online at http://

www.regulations.gov, or by fax, mail, or 

hand delivery, but please use only one 

of these means. If you submit a 

comment online, it will be considered 

received by the Coast Guard when you 

successfully transmit the comment. If 

you fax, hand deliver, or mail your 

comment, it will be considered as 

having been received by the Coast 

Guard when it is received at the Docket 

Management Facility. We recommend 


emcdonald on DSK67QTVN1PROD with PROPOSALS