[Federal Register Volume 74, Number 144 (Wednesday, July 29, 2009)]
[Proposed Rules]
[Pages 37669-37671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17955]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 215, 217, and 243

RIN 0750-AG27


Defense Federal Acquisition Regulation Supplement; Management of 
Unpriced Change Orders (DFARS Case 2008-D034)

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

ACTION: Proposed rule with request for comments.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to address requirements for DoD 
management and oversight of unpriced change orders in a manner 
consistent with the management and oversight requirements that apply to 
other undefinitized contract actions.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before September 28, 2009, to be 
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2008-D034, 
using any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    E-mail: <a href="/cdn-cgi/l/email-protection#ec888a8d9e9fac839f88c2818580"><span class="__cf_email__" data-cfemail="a2c6c4c3d0d1e2cdd1c68ccfcbce">[email protected]</span></a>. Include DFARS Case 2008-D034 in the subject 
line of the message.
    Fax: 703-602-7887.
    Mail: Defense Acquisition Regulations System, Attn: Ms. Cassandra 
Freeman, OUSD (AT&L) DPAP (DARS), IMD 3D139, 3062 Defense Pentagon, 
Washington, DC 20301-3062.
    Hand Delivery/Courier: Defense Acquisition Regulations System, 
Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-
3402.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Ms. Cassandra Freeman, 703-602-8383.

SUPPLEMENTARY INFORMATION: 

A. Background

    DFARS Subpart 217.74 prescribes policies and procedures for the 
management and oversight of undefinitized contract actions. Unpriced 
change orders, issued in accordance with FAR Part 43 and DFARS Part 
243, are presently excluded from the scope of

[[Page 37670]]

DFARS Subpart 217.74. In recognition of the need for full 
accountability of unpriced change orders, this proposed rule adds 
policy addressing management, oversight, and limitations on the use of 
unpriced change orders, similar to the policy that applies to other 
undefinitized contract actions.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD does not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because the proposed rule reinforces existing requirements for 
appropriate management and timely definitization of contract actions. 
Therefore, DoD has not performed an initial regulatory flexibility 
analysis. DoD invites comments from small businesses and other 
interested parties. DoD also will consider comments from small entities 
concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. 
Such comments should be submitted separately and should cite DFARS Case 
2008-D034.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply, because the proposed 
rule does not contain any information collection requirements that 
require the approval of the Office of Management and Budget under 44 
U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 215, 217, and 243

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

    Therefore, DoD proposes to amend 48 CFR Parts 215, 217, and 243 as 
follows:
    1. The authority citation for 48 CFR Parts 215, 217, and 243 
continues to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 215--CONTRACTING BY NEGOTIATION


215.404-71-3  [Amended]

    2. Section 215.404-71-3 is amended in paragraph (d)(2), in the 
first sentence, by revising the parenthetical to read ``(also see 
217.7404-6(a) and 243.204-70-6)''.

PART 217--SPECIAL CONTRACTING METHODS

    3. Section 217.7401 is amended in paragraph (a)(2) by adding a 
second sentence and in paragraph (d) by adding a third sentence to read 
as follows:


217.7401  Definitions.

* * * * *
    (a) * * *
    (2) * * * For policy relating to definitization of change orders, 
see 243.204-70.
* * * * *
    (d) * * * For policy relating to definitization of change orders, 
see 243.204-70.
    4. Section 217.7402 is revised to read as follows:


217.7402  Exceptions.

    (a) The following undefinitized contract actions (UCAs) are not 
subject to this subpart. However, the contracting officer shall apply 
the policy and procedures to them to the maximum extent practicable 
(also see paragraph (b) of this section):
    (1) UCAs for foreign military sales.
    (2) Purchases at or below the simplified acquisition threshold.
    (3) Special access programs.
    (4) Congressionally mandated long-lead procurement contracts.
    (b) If the contracting officer determines that it is impracticable 
to adhere to the policy and procedures of this subpart for a particular 
contract action in one of the categories in paragraph (a)(1), (3), or 
(4) of this section, the contracting officer shall provide prior 
notice, through agency channels, to the Deputy Director, Defense 
Procurement and Acquisition Policy (Contract Policy and International 
Contracting), 3060 Defense Pentagon, Washington, DC 20301-3060.

PART 243--CONTRACT MODIFICATIONS

    5. Section 243.204 is revised to read as follows:


243.204  Administration.

    Follow the procedures at PGI 243.204 for administration of change 
orders.


243.204-70  [Redesignated as 243.204-71]

    6. Section 243.204-70 is redesignated as section 243.204-71.
    7. A new section 243.204-70 is added to read as follows:


243.204-70  Definitization of change orders.

    8. Sections 243.204-70-1 through 243.204-70-7 are added to read as 
follows:


243.204-70-1  Scope.

    (a) This subsection applies to unpriced change orders with an 
estimated value exceeding $5 million.
    (b) Unpriced change orders for foreign military sales and special 
access programs are not subject to this subsection, but the contracting 
officer shall apply the policy and procedures to them to the maximum 
extent practicable. If the contracting officer determines that it is 
impracticable to adhere to the policy and procedures of this subsection 
for an unpriced change order for a foreign military sale or a special 
access program, the contracting officer shall provide prior notice, 
through agency channels, to the Deputy Director, Defense Procurement 
and Acquisition Policy (Contract Policy and International Contracting), 
3060 Defense Pentagon, Washington, DC 20301-3060.


243.204-70-2  Price ceiling.

    Unpriced change orders shall include a not-to-exceed price.


243.204-70-3  Definitization schedule.

    (a) Unpriced change orders shall contain definitization schedules 
that provide for definitization by the earlier of--
    (1) The date that is 180 days after issuance of the change order 
(this date may be extended but may not exceed the date that is 180 days 
after the contractor submits a qualifying proposal); or
    (2) The date on which the amount of funds obligated under the 
change order is equal to more than 50 percent of the not-to-exceed 
price.
    (b) Submission of a qualifying proposal in accordance with the 
definitization schedule is a material element of the contract. If the 
contractor does not submit a timely qualifying proposal, the contacting 
officer may suspend or reduce progress payments under FAR 32.503-6, or 
take other appropriate action.


243.204-70-4  Limitations on obligations.

    (a) The Government shall not obligate more than 50 percent of the 
not-to-exceed price before definitization. However, if a contractor 
submits a qualifying proposal before 50 percent of the not-to-exceed 
price has been obligated by the Government, the limitation on 
obligations before definitization may be increased to no more than 75 
percent (see 232.102-70 for coverage on provisional delivery payments).
    (b) Obligations should be consistent with the contractor's 
requirements for the undefinitized period.

[[Page 37671]]

243.204-70-5  Exceptions.

    (a) The limitations in 243.204-70-2, 243.204-70-3, and 243.204-70-4 
do not apply to unpriced change orders for the purchase of initial 
spares.
    (b) The head of the agency may waive the limitations in 243.204-70-
2, 243.204-70-3, and 243.204-70-4 for unpriced change orders if the 
head of the agency determines that the waiver is necessary to support--
    (1) A contingency operation; or
    (2) A humanitarian or peacekeeping operation.


243.204-70-6  Allowable profit.

    When the final price of an unpriced change order is negotiated 
after a substantial portion of the required performance has been 
completed, the head of the contracting activity shall ensure the profit 
allowed reflects--
    (a) Any reduced cost risk to the contractor for costs incurred 
during contract performance before negotiation of the final price;
    (b) The contractor's reduced cost risk for costs incurred during 
performance of the remainder of the contract; and
    (c) The extent to which costs have been incurred prior to 
definitization of the contract action (see 215.404-71-3(d)(2)). The 
risk assessment shall be documented in the contract file.


243.204-70-7  Plans and reports.

    To provide for enhanced management and oversight of unpriced change 
orders, departments and agencies shall--
    (a) Include in the Consolidated Undefinitized Contract Action (UCA) 
Management Plan required by 217.7405, the actions planned and taken to 
ensure that unpriced change orders are definitized in accordance with 
this subsection; and
    (b) Include in the Consolidated UCA Management Report required by 
217.7405, each unpriced change order with an estimated value exceeding 
$5 million.

[FR Doc. E9-17955 Filed 7-28-09; 8:45 am]
BILLING CODE 5001-08-P


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