Source: http://farsite.hill.af.mil/reghtml/changes/dac/DCN20031114.htm
Timestamp: 2019-03-25 18:51:25
Document Index: 399926041

Matched Legal Cases: ['art 204', 'art 204', 'art 204', 'art 204', 'art 204', 'arts 204', 'arts 204', 'art 204', 'art 4', 'ART 213', 'art 32', 'arts 208', 'art 8', 'arts 208', 'art 8']

DCN20031114
48 CFR Part 204 and Appendix G to Chapter 2
[DFARS Case 2003-D005]
SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to prescribe the use of DoD activity address codes in the first six positions of solicitation and contract numbers. This change provides consistency in the method of identifying DoD activities and eliminates the need for maintenance of the list of DoD activity address numbers in DFARS appendix G.
A. Background This rule amends DFARS subpart 204.70 to prescribe the use of a contracting office's DoD activity address code in the first six positions of a solicitation or contract number, instead of the DoD activity address number found in DFARS appendix G. DoD activity address codes are maintained by the Defense Logistics Agency and are available at http://www.daas.dla.mil/daashome/.
This rule removes appendix G from the DFARS, as there is no longer a need for maintenance of DoD activity address numbers. The two-position codes in appendix G, that contracting offices use when placing an order against another activity's contract or agreement, are now available at a separate location on the Defense Acquisition Regulations Web page (http://www.acq.osd.mil/dp/dars/dfars.html). For reference purposes, archived versions of appendix G are available in the HTML version of the DFARS on the Defense Acquisition Regulations Web page, by using the ``Prior Version'' option shown at the beginning of each appendix G part.
DoD published a proposed rule at 68 FR 34879 on June 11, 2003. Four sources submitted comments on the proposed rule. A discussion of the comments is provided below. Differences between the proposed and final rules are addressed in the DoD Response to Comments 1 and 5 below. In addition, DoD has made editorial changes at 204.7005 to update address information.
1. Comment: The text at 204.7000(b) should be revised to clarify that the numbering requirements of DFARS subpart 204.70 do not apply to solicitations and orders that precede issuance of communication service authorizations.
DoD Response: Concur. The text at 204.7000(b) has been revised to incorporate this clarification.
2. Comment: Some of the DoDAACs are not six characters. Will the remaining characters be filled in with zeros? Will this result in duplicate DoDAACs for two different locations?
DoD Response: DFARS subpart 204.70 prescribes use of only those DoDAACs assigned to contracting activities, which are all six characters in length.
3. Comment: The rule should retain the existing language at 204.7000(b) that allows for optional procedures when assigning numbers to solicitations, contracts, and related instruments that will be completely administered by the purchasing office or the consignee. DoD Response: Optional procedures are no longer permitted, as a result of the interim FAR rule published at 68 FR 56679 on October 1, 2003 (FAC 2001-16, Item III), which requires agencies to assign a unique identifier to every procurement instrument.
4. Comment: DFARS 204.7001(b) requires that the basic procurement instrument identification number be unchanged for the life of the instrument. To prevent duplication of call and/or order numbers, this policy should be changed to allow contracting officers to re-issue contracts with new identification numbers for administrative purposes. DoD Response: The comment is outside the scope of this case. However, DoD is considering this concept under a separate case (DFARS Case 2003-D052).
5. Comment: DFARS 204.7002(c) requires that the major elements of a contract number be separated by dashes. This policy is reflective of a paper-based environment and should provide an exception for instances where the contract number is transmitted electronically.
DoD Response: Concur. The final rule amends 204.7002(c) to clarify that use of dashes is unnecessary in electronic transmission of contract numbers.
6. Comment: Does DoD plan to change the numbers of any existing contracts? We presume modifications to long-term contracts would be required to continue to carry the basic contract number. If contract numbers are not changed, the maintenance of DFARS appendix G could not be eliminated.
DoD Response: The rule does not require change to the numbers of existing contracts. This final rule removes appendix G from the DFARS. However, an archived version of appendix G is available through the Defense Acquisition Regulations web page for reference purposes.
7. Comment: Some military bases have multiple DoDAACs. We assume DoD will publish a list of the ones that will be used to identify contracts.
DoD Response: Each DoD component listed in DFARS 204.7005(c) will maintain a list of the DoDAACs it uses for contracts and will provide this information upon request.
8. Comment: DoDAACs should be maintained with the same rigor as the DoDAANs to ensure that shipments and payments are not delayed. DoD Response: The DoD Activity Address File, which contains all DoDAACs, is updated on a daily basis.
B. Regulatory Flexibility Act DoD certifies that this final 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 assignment of solicitation and contract numbers is an administrative function performed by the Government. The rule makes no change to the number of characters in a solicitation or contract number and, therefore, will not have a significant effect on the operation of automated systems.
Therefore, 48 CFR part 204 and appendix G to chapter 2 are amended as follows:
204.7002 [Amended]
3. Section 204.7002 is amended in paragraph (c) in the second sentence by adding, before the final period, the parenthetical ``(not necessary in electronic transmission)''.
4. Section 204.7003 is amended by revising paragraph (a)(1) to read as follows:
(1) Positions 1 through 6. The first six positions identify the department/agency and office issuing the instrument. Use the DoD Activity Address Code (DoDAAC) assigned to the issuing office. DoDAACs can be found at https://www.daas.dla.mil/daashome/.
5. Section 204.7004 is amended in paragraph (d)(2)(i) by revising the second sentence to read as follows:
6. Section 204.7005 is added to read as follows:
(a) The Defense Logistics Agency, Acquisition Policy Branch (J-3311), Fort Belvoir, VA 22060-6221, is the executive agent for maintenance of code assignments for use in the first two positions of an order number when an activity places an order against another activity's contract or agreement (see 204.7004(d)(2)). The executive agent distributes blocks of two-character order codes to department/agency monitors for further assignment.
(b) Contracting activities submit requests for assignment of or changes in two-character order codes to their respective monitors in accordance with department/agency procedures. Order code monitors--
(2) Provide notification of additions, deletions, or changes to--
(ii) The executive editor, Defense Acquisition Regulations, OUSD(AT&L)DPAP(DAR), 3062 Defense Pentagon, Washington, DC 20301-3062.
(c) Order code monitors are--
Army: Army Contracting Agency, Attn: SFCA-IT, 5109 Leesburg Pike, Suite 302, Falls Church, VA 22041-3201
Navy and Marine Corps: Office of the Assistant Secretary of the Navy (RD&A), 1000 Navy Pentagon, Room BF992, Washington, DC 20350-1000
Air Force: SAF/AQCX, 1060 Air Force Pentagon, Washington, DC 20330-1060
Defense Logistics Agency: Defense Logistics Agency, Acquisition Policy Branch (J-3311), John J. Kingman Road, Fort Belvoir, VA 22060-6221
Other Defense Agencies: Army Contracting Agency, Attn: SFCA-IT 5109 Leesburg Pike, Suite 302, Falls Church, VA 22041-3201
(d) Order code assignments can be found at http://www.acq.osd.mil/dp/dars/dfars.html
Appendix G to Chapter 2 [Removed and Reserved]
7. Appendix G to chapter 2 is removed and reserved.
[DFARS Case 2003-D040]
SUMMARY: DoD has issued an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to remove policy on Central Contractor Registration (CCR) that duplicates policy added to the Federal Acquisition Regulation (FAR) on October 1, 2003. This rule also addresses requirements for use of Commercial and Government Entity (CAGE) codes to accommodate DoD payment systems.
DATES: Effective date: November 14, 2003.
ADDRESSES: Respondents may submit comments directly on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@osd.mil. Please cite DFARS Case 2003-D040 in the subject line of e-mailed comments. Respondents that cannot submit comments using either of the above methods may submit comments to: Defense Acquisition Regulations Council, Attn: Ms. Angelena Moy, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. Please cite DFARS Case 2003-D040.
A. Background This interim rule supplements the final FAR rule published at 68 FR 56669 on October 1, 2003 (FAC 2001-16; Item I). The FAR rule contained requirements for contractors to register in the CCR database prior to award of any contract or agreement. Similar policy had been in the DFARS since March 31, 1998 (63 FR 15316). Since the DFARS policy has been superseded by the FAR policy, this interim rule removes most DFARS policy pertaining to CCR. However, there is still a need to address requirements for CAGE code information to accommodate DoD payment systems. Therefore, this interim rule retains DoD equirements for inclusion of CAGE codes on contracts and in the CCR database.
D. Determination To Issue an Interim Rule A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish an interim rule prior to affording the public an opportunity to comment. This interim rule removes DFARS text that has become obsolete as a result of policy on Central Contractor Registration that was added to the FAR on October 1, 2003. In addition, this rule addresses DoD requirements for inclusion of CAGE codes on contracts and in the CCR database. The FAR does not address CAGE code requirements, and DoD payment offices cannot match to CCR without CAGE code information. Comments received in response to this interim rule will be considered in the formation of the final rule.
Therefore, 48 CFR parts 204, 212, 213, and 252 are amended as follows:
1. The authority citation for 48 CFR Parts 204, 212, 213, and 252 continues to read as follows:
Sec. 204.203 Taxpayer identification information.
Sec. 204.603 [Removed]
Sec. 204.904 Reporting payment information to the IRS.
(2) Unless an exception in paragraph (1) of this section applies, provide as the last page of the copy of the contract sent to the payment office--
Sec. 204.905 [Removed]
Subpart 204.11--Central Contractor Registration
204.1104 Solicitation provision and contract clauses.
Sec. 204.1103 Procedures.
Sec. 204.1104 Solicitation provision and contract clauses.
Sec. 204.7202-1 Cage codes.
must register in the Central Contractor Registration (CCR) database
(see FAR Subpart 4.11) and does not have a CAGE code, DLIS will assign
a CAGE code when the prospective contractor submits its request for
registration in the CCR database. Foreign registrants must obtain a
North Atlantic Treaty Organization CAGE (NCAGE) code in order to
register in the CCR database. NCAGE codes may be obtained from the
Codification Bureau in the foreign registrant's country. Additional
information on obtaining NCAGE codes is available at http://www.dlis.dla.mil/Forms/Form_AC135.asp
Sec. 204.7207 Solicitation provision.
PART 213--SIMPLIFIED ACQUISITION PROCEDURES 213.106-3 [Removed]
Sec. 252.204-7004 Alternate A.
As prescribed in 204.1104, substitute the following paragraph
(a) for paragraph (a) of the clause at FAR 52.204-7:
``Central Contractor Registration (CCR) database'' means the primary Government repository for contractor information required for the conduct of business with the Government.
``Data Universal Numbering System (DUNS) number'' means the 9-digit number assigned by Dun and Bradstreet, Inc. (D&B) to identify
``Data Universal Numbering System +4 (DUNS+4) number'' means the DUNS number assigned by D&B plus a 4-character suffix that may be assigned by a business concern. (D&B has no affiliation with this 4-character suffix.) This 4-character suffix may be assigned at the discretion of the business concern to establish additional CCR records for identifying alternative Electronic Funds Transfer (EFT) accounts (see Subpart 32.11 of the Federal Acquisition Regulation) for the same parent concern.
(3) The Government has validated all mandatory data fields and has marked the records ``Active.''
[DFARS Case 2001-D013]
SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to address the use of provisional award fee payments under cost-plus-award-fee contracts. The rule provides for successfully performing contractors to receive a portion of award fees within an evaluation period prior to a final evaluation for that period.
Applicability date: The DFARS changes in this rule apply to solicitations issued on or after January 13, 2004. Contracting officers may, at their discretion, apply the DFARS changes to solicitations issued before January 13, 2004, provided award of the resulting contract(s) occurs on or after January 13, 2004. Contracting officers may, at their discretion, apply the DFARS changes to any existing contract with appropriate consideration.
FOR FURTHER INFORMATION CONTACT: Mr. Ted Godlewski, USD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-2022; facsimile (703) 602-0350. Please cite DFARS Case 2001-D013.
A. Background This final rule provides for the payment of provisional award fees within an evaluation period prior to a final evaluation for that period. The provisional payments would be based on (1) successful evaluations for prior evaluation periods, and (2) the expectation that payment of provisional fee amounts will not reduce the overall effectiveness of the award fee incentive. A training module on the use of provisional award fee payments is available on the Defense Acquisition University Web site at http://www.dau.mil, under ``Continuous Learning.''
DoD published a proposed rule at 67 FR 70388 on November 22, 2002. Seven respondents submitted comments on the proposed rule. A discussion of the comments is provided below. Differences between the proposed and final rules are explained in the DoD Response to Comments 5 and 10. 1. Comment: The proposed policy appears to conflict with the Defense Finance and Accounting Service (DFAS) DFAS-IN Regulation 37-1, Table 8-1, which states that award fee must not be obligated until its amount is determined. If provisional award fee is allowed, the DFAS regulation should be revised to preclude confusion.
DoD Response: Concur that there should be a ceiling; however, the rule already establishes a ceiling at 216.405-2(b)(3)(B)(1) and (2). The rule states that provisional award fee payments may not exceed 50 percent of the award fee available for the initial award fee period, and may not exceed 80 percent of the evaluation score for the prior evaluation period times the award fee available for the current period. Contracting officers are free to establish lower provisional award fee amounts if they deem it to be in the Government's best interests.
DoD Response: Partially concur. DoD agrees that provisional award fee payments may not be feasible or appropriate in all situations and, therefore, should be optional. The rule provides contracting officers the flexibility to determine where and how provisional award fee payments can best be employed. The rule reflects this position at DFARS 216.405-2(b)(3), which states ``The CPAF contract may include provisional award fee payments.'' (emphasis added) However, it is not prudent to cite examples of situations in which a provisional award fee payment would be appropriate, because examples may be misinterpreted as the only situations in which this type of payment may be used.
DoD Response: Provisional award fee payments do not turn an award fee contract into a fixed fee contract. The issue of entitlement is significantly different from the issue of timing. Provisional award fee payments only change the timing of the payments, not the entitlement to those payments. The contractor is incentivized, since the contractor must earn the award fee in exactly the same way as if there were no provisional award fee payments, i.e., entitlement to the award fee continues to be tied to contractor performance. Should the Government determine that the contractor is not entitled to the award fee, the contractor must return the provisional payments to the Government.
The ``Background'' information in the Federal Register notice of the proposed rule stated, ``Cost-reimbursement contracts containing award fees typically provide for an award fee payment no more frequently than every 6 months.'' However, the respondent's experience in working with cost-reimbursement contracts is that ``no more frequently'' is more appropriately ``no less frequently.'' Many of these contracts begin with 6-month evaluation periods. As complexity or dollar value increase, evaluation periods are reduced to as low as 3-months (quarterly).
Prior to awarding cost-reimbursement contracts, audits are requested to ensure that the contractor has a financial system in place to support adequately identifying cost and that the company has the financial capability to perform the contract. Normally the proposed award fee periods are identified in a solicitation, putting the contractor on notice of the Government's intent for award fee evaluation. Also, there is no prohibition against a contractor requesting contracting officer consideration for reducing the length of award fee periods should the contractor begin experiencing ``an undue financial burden.''
If a contracting officer implements this rule, it would result in an arbitrary determination of potential award fee earnings based on past performance. This practice would not only increase Government administration of the process, but could potentially allow a contractor the use of Government funds prior to a true determination of actual earnings with no consideration (such as interest) being afforded the Government, should the funds ultimately be credited back to the Government following a proper performance evaluation. Award fee should always be earned, not paid on a credit or assumptive basis in order to fulfill the intended purpose of award fee, which is to incentivize a contractor's performance. Unless the provisional payment is tied to some performance period, it could be construed as a form of advance payment. Also, since other remedies are available should a contractor (probably a large business) experience ``undue financial burden,'' no need exists for this provision.
This change would also create potential legal problems, especially in instances where DFARS 216.405-2(b)(3)(D) would be imposed. How does one protect the contracting officer determination from being appealed as being ``arbitrary and capricious,'' and how would such disputes alter or hinder ongoing contract performance until such matters are resolved?
With respect to the comment on modifying existing contracts to include the requirement for provisional award fee payments, such modification could only be considered if the contracting officer obtained adequate consideration. For future contracts, the rule relies upon agency procedures and contracting officer business judgment to determine if provisional award fee payments are appropriate for a particular contracting environment, rather than a ``one size fits all'' requirement.
As to the respondent's perceived legal problems, the provisional award fee payment requirement falls within the award fee provisions of the contract, including the requirements in the FAR. FAR 16.405-2(a) states ``* * * The amount of the award fee to be paid is determined by the Government's judgmental evaluation of the contractor's performance in terms of the criteria stated in the contract. This determination and the methodology for determining the award fee are unilateral decisions made solely at the discretion of the Government.'' Although the determinations are unilateral, the United States Court of Appeals in Burnside-Ott Aviation Training Center v. Dalton, Secretary of the Navy, 107F.3d 854 (Fed. Cir. 1997), held that disputes concerning the amount of the award fee are subject to the Contract Disputes Act. The Court
also held that award fee determinations could continue to be committed to the discretion of contracting officers under the terms of the contract and would be upheld as long as they were not arbitrary or capricious. Therefore, the rule cannot state that provisional award fee payments are or are not disputable, since that determination may depend on other factors.
However, should a dispute arise, such dispute would not alter or hinder ongoing contract performance. Paragraph (i) of the clause at FAR 52.233-1, Disputes, states ``The Contractor shall proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under the contract, and comply with any decision of the Contracting Officer.''
Since the contractor's ``track record'' of performance on the contract will be limited for the initial award fee evaluation, it may be difficult to conclude that the contractor's performance for the initial contract period reflects a reasonable expectation of the performance for subsequent periods. Thus, it would not be prudent to build a higher limitation (i.e., 80 percent) for the initial period.
10. Comment: The following sentence from the rule (DFARS 216.405-2(b)(3)) is misleading: ``A provisional award fee payment is a payment made within an evaluation period prior to an interim or final evaluation for that period.''
The fee determining official must make a determination that contractor performance warrants payment of the interim award fee amount. This ``interim evaluation'' may be confused with any interim performance evaluations called out in the award fee plan that are not linked to periodic billings (and which may or may not occur before a periodic award fee billing).
Suggest changing the sentence in the rule to read: ``A provisional award fee payment is a payment made within an evaluation period prior to the final determination for that period.''
DoD Response: Concur that the rule may not be clear as to the timing of a provisional award fee payment. The rule was intended to define a provisional award fee payment as any payment made prior to an evaluation for the period. The language in the proposed rule could be misinterpreted to mean that, when provisional payments are used, they must provide for payments prior to any interim evaluation period. The rule is intended to provide flexibility to contracting officers in determining when to permit provisional payments, rather than requiring such payments prior to interim evaluation periods. Therefore, the sentence has been revised to read: ``A provisional award fee payment is a payment made within an evaluation period prior to a final evaluation for that period.''
a. Concur. The proposed rule already contained language at 216.405-2(b)(3)(D) that ties the payment of provisional award fees to the contracting officer's determination that the contractor is performing at an.appropriate level commensurate with the proposed provisional award fee payment. This language has been retained in the final rule.
b. Concur. DoD has added a reference to FAR 32.606 in the final rule at 216.405-2(b)(3)(C). Also see the DoD Response to Comment 5. c. Do not concur. See the DoD Response to Comment 8.
14. Comment: Although there are procedures in the proposed rule for reimbursing the Government if the actual award fee determination is less than the provisional payment, the reality is that once received, the contractor is not going to be motivated to give the money back, thus leading to increased probability of disputes and potentially requiring significant additional time and effort to resolve. This type of ``tug of war'' will not add value to the contract administration process or to Government/contractor relationships.
DoD Response: As indicated in the DoD Response to Comment 14, it is anticipated that the overpayment of a provisional award fee payment will happen in a limited number of circumstances. However, when it does occur, it is expected that the contracting officer will have a reasonable basis for making such a decision. When the decision is based on a probability that the contractor is not going to earn the award fee, the contracting officer almost certainly will have obtained input from the award fee board or the fee determining official. However, there could be other instances, such as pending bankruptcy proceedings, which may make it necessary for the contracting officer to act without first consulting the award fee board or the fee determining official. In any case, it is anticipated that the contracting officer will use sound business judgment and will not make an ``arbitrary and capricious'' decision. If there is a dispute, the dispute would not alter or hinder ongoing contract performance, as explained in the DoD Response to Comment 8.
17. Comment: This proposed change blurs the line between a cost-plus-award-fee and a cost-plus-fixed-fee type contract. A cost-plus-award-fee contract should not be used when a cost-plus-fixed-fee contract is more appropriate, but since there is a 15% statutory fee limitation on a cost-plus-fixed-fee contract, but not on a cost-plus-award-fee contract, contractors may use this change as an increased opportunity for optimal fee by pushing the Government to use a cost-plus-award-fee contract when a more appropriate type would be cost-plus-fixed-fee. Because the contract types are distinctively different, the payment of fee on a cost-plus-award-fee contract was not intended to be handled the same way it is handled on a cost-plus-fixed-fee contract. This proposed change moves award fee payment from the realm of subjective evaluation of fee earned to a type of numerical calculation (which is based on projected performance). A policy of interim payments based on assessments of contractor performance and fee determining official concurrence
provides a much better framework than that set forth in the DFARS language.
18. Comment: There are some differences between one DoD department's guidance and the proposed DFARS language. For example, DFARS--
20. Comment: There is concern that the financial incentive/ motivation for outstanding performance will decrease if the contractor is paid a percentage of the potential award fee on a monthly basis prior to any type of formal evaluation/determination. What was once a true incentive contract is now a highbred cost-plus-fixed-fee type contract (with minimum incentive to control costs) with no financial tie into any type of performance based criteria (or at least not until much later in the award fee period).
21. Comment: This puts the Government in a position to deal with additional administrative burden (i.e., modifications to add funding to a contract--as well as documentation to confirm that the contractor is performing successfully on a monthly basis) to pay the contractor a percentage of the award fee on a frequent basis. The intent is to use provisional award fee payments on a case-by-case basis, but will this really be true?
DoD Response: Do not concur. The use of provisional award fee payments is entirely optional. DoD departments and agencies may choose not to employ provisional award fee payments when they believe such use would dilute the effectiveness of the award fee in a particular contract, is an undue administrative burden, or is otherwise not in the Government's best interests.
Under the rule, provisional award fee payments can be discontinued or reduced as deemed appropriate by the contracting officer. In applying this rule, it is anticipated that the contracting officer will have a reasonable basis for making such a decision. When the decision is based on a probability that the contractor is not going to earn the award fee, the contracting officer almost certainly will have obtained input from the award fee board or fee determining official. However, there could be other instances, such as pending bankruptcy proceedings, which may require the contracting officer to act without first consulting the award fee board or fee determining official. In any case, it is anticipated that the contracting officer will use sound business judgment and not make an arbitrary and capricious decision. For further information, see the DoD Response to Comment 6 (administrative and financial burden), Comment 9 (role of the fee determining official), Comment 8 (contractor disputes), Comment 5 (overpayments), and Comment 10 (timing of provisional payments).
22. Comment: The incentive effect and cash flow benefits of provisional award fee payments will be achieved only if the provisional award fee payment provision is introduced as a customary practice. Fee is paid during performance on cost-plus-fixed-fee and cost-plus-incentive-fee contracts, and it should be the same for cost-plus-award-fee contracts. Since the Government is protected from risk by the terms included in the provisional award fee payment provision, there should be no hesitancy in making its use a customary and desirable incentive feature. Successfully performing contractors should be able to benefit from the improved cash flow that provisional award fee payments facilitate. Establishing criteria that standardize use of the provisional award fee payment, subject to the contracting officer's determination of continued successful performance, will encourage use of this important new provision, while not diminishing the ability of the contracting officer to discontinue or reduce the provisional award fee payment if the contractor's performance warrants a reduction. Recommend changing the last sentence in 216.405-2(b)(3) of the proposed rule to read: ``The contracting officer should include provisional award fee payments in a cost-plus-award-fee contract when the period of performance for the contract exceeds 12 months, provided those payments * * *.''
23. Comment: DoD should strive to establish parity in how fee is billed for cost-plus-award-fee contracts, compared to how fee is billed under other incentive arrangements. Cost-plus-incentive-fee and fixed-price-incentive contracts both include provisions for billing target fee or profit at a rate consistent with contractor performance. Just as contemplated in the provisional award fee payment approach, there is a provision for adjusting the fee or profit if the contractor's performance is above or below the projected target. In the case of the cost-plus-award-fee contract, where there is no pre-set formula, the best indication of projected performance is the contractor's performance evaluation from prior periods. Successfully performing contractors should continue receiving provisional award fee payments at the level they have demonstrated in prior periods, similar to the target with appropriate adjustments made in cost-plus-incentive-fee and fixed-price-incentive-fee contracts. This approach poses no risk to the Government, since the contracting officer can reduce or eliminate the provisional award fee payment when performance is not commensurate with the provisional payment, and any overpayment is fully recoverable. Such an approach will also simplify administration of the provisional award fee payments. Recommend replacing paragraph 216.405-2(b)(3)(B)(1) of the proposed rule with the following: ``For subsequent award fee periods, the evaluation score for the prior evaluation period shall be used as the provisional award fee payment rate.''
24. Comment: Follow-on contracts represent a continuation of effort from the prior contract. Assuming successful performance on the prior contract, continuation of provisional award fee payments at the same rate experienced on the prior contract is appropriate, instead of reducing the rate to 50% for the first period of the follow-on contract. Suggest the following language be added to 216.405-2(b)(3)(B)(3): ``(3) For follow-on contracts, the rate for the initial period will be the same as that awarded in the last period of the immediately preceding contract.''
DoD Response: Concur that training is important. A training module on the use of provisional award fee payments is available on the Defense Acquisition University Web site at http://www.dau.mil, under ``Continuous Learning.''
(3) The CPAF contract may include provisional award fee payments. A provisional award fee payment is a payment made within an evaluation period prior to a final evaluation for that period. The contracting officer may include provisional award fee payments in a CPAF contract on a case-by-case basis, provided those payments--
(B) Are limited to no more than--
(2) For subsequent award fee evaluation periods, 80 percent of the evaluation score for the prior evaluation period times the award fee available for the current period, e.g., if the contractor received 90 percent of the award fee available for the prior evaluation period, provisional payments for the current period shall not exceed 72 percent (90 percent x 80 percent) of the award fee available for the current period;
[Federal Register: November 14, 2003 (Volume 68, Number 220)][Rules and Regulations
48 CFR Parts 208, 210, 219, and 252
SUMMARY: DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 811 of the National Defense Authorization Act for Fiscal Year 2002 and section 819 of the National Defense Authorization Act for Fiscal Year 2003. Sections 811 and 819 address requirements for conducting market research before purchasing a product listed in the Federal Prison Industries (FPI) catalog, and for use of competitive procedures if an FPI product is found to be noncomparable to products available from the private sector. Section 819 also addresses limitations on an inmate worker's access to information and on use of FPI as a subcontractor.
FOR FURTHER INFORMATION CONTACT: Ms. Michele Peterson, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0311; facsimile (703) 602-0350. Please cite DFARS Case 2002-D003.
A. Background Section 811 of the National Defense Authorization Act for Fiscal Year 2002 (Pub. L. 107-107) added 10 U.S.C. 2410n, providing that (1) before purchasing a product listed in the FPI catalog, DoD must conduct market research to determine whether the FPI product is comparable in price, quality, and time of delivery to products available from the private sector; (2) if the FPI product is not comparable in price, quality, and time of delivery, DoD must use competitive procedures to acquire the product; and (3) in conducting such a competition, DoD must consider a timely offer from FPI for award in accordance with the specifications and evaluation factors in the solicitation.
DoD Response: Concur. Section 208.670 of the rule prohibits such an
DoD Response: This point is clear from the definition of ``competitive procedures'' at 208.601-70, which permits use of the procedures in FAR 6.102, to include the use of multiple award schedule contracts.
7. Comment: The way the rule is written, if FPI's product is found to be noncomparable in price, quality, and delivery time, FPI is given a second chance to meet these criteria through the competition phase. The rule should be revised to eliminate the second redundant step.
DoD Response: Do not concur. The two-step process is consistent with 10 U.S.C. 2410n(b), which clearly establishes an ``if-then'' situation, i.e., if DoD makes a noncomparability determination, then competitive procedures must be used.
8. Comment: The rule should emphasize the two-step nature of the procedures, add a definition of ``comparable'' to 208.601-70, and clarify that DoD purchasers may request waiver if an FPI product has been determined to be comparable.
DoD Response: The rule is clear with regard to the two-step nature of the procedures. A definition of ``comparable'' is unnecessary, as this term is already used throughout the FAR and DFARS with its common dictionary meaning. If an FPI product is determined to be comparable to a private sector product, the rule requires use of the procedures in FAR subpart 8.6, which addresses clearance/waiver provisions. It is unnecessary to repeat these provisions in the DFARS.
10. Comment: The ``unilateral decision'' language at 208.602(a) should be removed. It does not provide any guidance to contracting officers in exercising their discretion.
13. Comment: The requirement in 208.602(a)(iv)(C)(1), to ``Establish and communicate to FPI the requirements and evaluation factors that will be used as the basis for selecting a source, so that an offer from FPI can be evaluated on the same basis as the schedule holder'' is too solicitous of FPI, exceeds the requirements of the law, and should be removed.
Accordingly, the interim rule amending 48 CFR parts 208 and 210 which was published at 67 FR 20687 on April 26, 2002, is adopted as a final rule with the following changes:
208.601-70 Definitions.
208.602 Policy.
(iv) If the FPI product is not comparable in one or more of the areas of price, quality, and time of delivery--
(A) Acquire the product using--
(C) When using a multiple award schedule issued under the procedures of FAR subpart 8.4--
For DoD, FPI clearances also are not required when--
208.670 Performance as a subcontractor.
Do not require a contractor, or subcontractor at any tier, to use FPI as a subcontractor for performance of a contract by any means, including means such as--
208.671 Protection of classified and sensitive information.
Do not enter into any contract with FPI that allows an inmate worker access to any--
219.502-70 Inclusion of Federal Prison Industries, Inc.
219.508 Solicitation provisions and contract clauses.
(c) Use the clause at FAR 52.219-6, Notice of Total Small Business
Set-Aside, with 252.219-7005, Alternate A, when the procedures of 208.602(a)(iv) apply to the acquisition.
252.219-7005 Alternate A.
252.219-7006 Alternate A.
End of DFARS Change Notice 20031114