Source: http://farsite.hill.af.mil/reghtml/changes/dac/DPN20141211.htm
Timestamp: 2017-10-17 11:14:46
Document Index: 12320961

Matched Legal Cases: ['art 204', 'ART 204', 'ART 204', 'art 204', 'art 1320', 'art 215', 'art 236']

DPN20141211
[FR Doc No: 2014-28817]
SUMMARY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to delete the requirement for DoD departments and agencies to certify every two years that no senior leader has performed multiple roles in the acquisition of a major weapon system or major service.
DATES: Effective December 11, 2014.
DFARS 203.170(a) implements a Defense Procurement and Acquisition Policy (DPAP) memorandum, dated September 17, 2008, which has now been rescinded because the necessary information is incorporated in the DFARS and the DFARS companion document, ``Procedures, Guidance, and Information (PGI).'' However, departments and agencies are no longer required to submit every two years to DPAP (Contract Policy and International Contracting) a certification that no senior leader has performed multiple roles in source selection for a major weapon system or major service acquisition.
``Publication of proposed regulations'', 41 U.S.C. 1707, is the statute that applies to the publication of the Federal Acquisition Regulation. Paragraph (a)(1) of the statute requires that a procurement policy, regulation, procedure or form (including an amendment or modification thereof) must be published for public comment if it relates to the expenditure of appropriated funds, and has either a significant effect beyond the internal operating procedures of the agency issuing the policy, regulation, procedure or form, or has a significant cost or administrative impact on contractors or offerors. This final rule is not required to be published for public comment, because it only affects the roles of senior leaders within the Department of Defense in source selection for a major weapon system or major service acquisition. These requirements affect only the internal operating procedures of the Government.
[FR Doc No: 2014-28819]
SUMMARY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to clarify and relocate text relating to state sponsors of terrorism (as identified by the Department of State), add an explicit representation, and conform the terminology.
This rule is part of DoD's retrospective plan, completed in August 2011, under Executive Order 13563, ``Improving Regulation and Regulatory Review.'' DoD's full plan and updates can be accessed at: http://www.regulations.gov/#!docketDetail;dct=FR+PR+N+O+SR;rpp=10;po=0;D=DOD-2011-OS-0036.
The number of domestic entities significantly impacted by this rule will be minimal, if any. For the definition of ``small business,'' the Regulatory Flexibility Act refers to the Small Business Act, which in turn allows the U.S. Small Business Administration (SBA) Administrator to specify detailed definitions or standards (5 U.S.C. 601(3) and 15 U.S.C. 632(a)). The SBA regulations at 13 CFR 121.105 discuss who is a small business: ``(a)(1) Except for small agricultural cooperatives, a business concern eligible for assistance from SBA as a small business is a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.''
The rule contains information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C chapter 35); however, these changes to the DFARS do not impose additional information collection requirements to the paperwork burden previously approved under OMB Control Number 0704-0187, entitled ``Information Collection in Support of the DoD Acquisition Process (Various Miscellaneous Requirements).'' This final rule removes provision 252.209-7001, Disclosure of Ownership or Control by the Government of a Terrorist Country, and replaces it with provision 252.225-7050, Disclosure of Ownership or Control by the Government of a Country that is a State Sponsor of Terrorism. The burden in clearance 0704-0187 previously associated with the provision 252.209-7001, which is now associated with provision 252.225-7050, remains unchanged and is estimated at 1 hour, because such disclosure occurs rarely, if ever. 10 U.S.C. prohibits award to a firm or a subsidiary of a firm if the government of country that is a state sponsor of terrorism has a significant interest in the firm or subsidiary, unless the Secretary of Defense grants a waiver.
(b)(i) The Procurement Cause and Treatment Code ``H'' annotation in the Exclusions section of the System for Award Management (SAM Exclusions) identifies contractor facilities where no part of a contract or subcontract may be performed because of a violation of the Clean Air Act (42 U.S.C. 7606) or the Clean Water Act (33 U.S.C. 1368).
8. Amend section 212.301 by--
225.701 [Amended]
``State sponsor of terrorism,'' as used in this section, is defined in the provision at 252.225-7050, Disclosure of Ownership or Control by the Government of a Country that is a State Sponsor of Terrorism.
(a) The contracting officer shall not award a contract of $150,000 or more to a firm when a foreign government that is a state sponsor of terrorism owns or controls, either directly or indirectly, a significant interest in--
a. Removing the clause date ``(AUG 2014)'' and adding ``(DEC 2014)'' in its place;
252.209-7001 [Removed and Reserved]
252.209-7002 [Amended]
13. Amend section 252.209-7002 introductory text by removing ``209.104-70(b)'' and adding ``209.104-70'' in its place.
Significant interest means--
(i) Ownership of or beneficial interest in 5 percent or more of the firm's or subsidiary's securities. Beneficial interest includes holding 5 percent or more of any class of the firm's securities in ``nominee shares,'' ``street names,'' or some other method of holding securities that does not disclose the beneficial owner;
State sponsor of terrorism means a country determined by the Secretary of State, under section 6(j)(1)(A) of the Export
Administration Act of 1979 (50 U.S.C. App. 2405(j)(1)(A)), to be a country the government of which has repeatedly provided support for acts of international terrorism. As of the date of this provision, state sponsors of terrorism include: Cuba, Iran, Sudan, and Syria.
(b) Prohibition on award. In accordance with 10 U.S.C. 2327, unless a waiver is granted by the Secretary of Defense, no contract may be awarded to a firm if the government of a country that is a state sponsor of terrorism owns or controls a significant interest in--
(c) Representation. Unless the Offeror submits with its offer the disclosure required in paragraph (d) of this provision, the Offeror represents, by submission of its offer, that the government of a country that is a state sponsor of terrorism does not own or control a significant interest in--
(2) The disclosure shall include--
[FR Doc No: 2014-28813]
SUMMARY: DoD has adopted as final, with minor editorial changes, an interim rule that amended the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a section of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2014 that prohibits acquisition of commercial satellite services from certain foreign entities.
DoD published an interim rule in the Federal Register at 79 FR 45662 on August 5, 2014, to implement section 1602 of the NDAA for FY 2014 (Pub. L. 113-66). Section 1602 prohibits award of a contract for commercial satellite services to a foreign entity if the Secretary of Defense reasonably believes that the foreign entity--
IV. Executive Orders 12866 and 13563 Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.
2. Amend section 212.301 in paragraph (f)(xlviii) by removing ``225.772-5'' and adding ``225.772-5, to comply with 10 U.S.C. 2279'' in its place.
3. Amending section 252.225-7049 by--
a. Removing the clause date of ``(AUG 2014)'' and adding ``(DEC 2014)'' in its place; and
b. In paragraph (b) introductory text, removing ``DFARS 225.71-4'' and adding ``DFARS 225.772-4'' in its place.
[FR Doc No: 2014-28814]
RIN 0750-AI44
SUMMARY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to remove duplicative Commercial and Government Entity (CAGE) code instructions and an associated clause.
DoD is amending the DFARS to remove text that is duplicative as a result of Federal Acquisition Regulation (FAR) final rule 2012-024, ``Commercial and Government Entity Code''. The FAR rule, which was published in the Federal Register at 79 FR 31187 on May 30, 2014, requires all offerors to obtain a CAGE code, which was previously only required for the DoD. The new FAR CAGE code requirement took effect on November 1, 2014, which made the DFARS language at subpart 204.72 and the clause at 252.204-7001 no longer necessary.
Add a reference at DFARS 204.18 to DFARS Procedures,
Guidance, and Information text.
Delete the clause at DFARS 252.204-7001, Commercial and
Government Entity (CAGE) Code Reporting.
``Publication of proposed regulations'', 41 U.S.C. 1707, is the statute which applies to the publication of the Federal Acquisition Regulation. Paragraph (a)(1) of the statute requires that a procurement policy, regulation, procedure or form (including an amendment or modification thereof) must be published for public comment if it relates to the expenditure of appropriated funds, and has either a significant effect beyond the internal operating procedures of the agency issuing the policy, regulation, procedure or form, or has a significant cost or administrative impact on contractors or offerors. This final rule is not required to be published for public comment, because the rule is removing unnecessary text that is now covered in the FAR. These requirements affect only the internal operating procedures of the Government.
SUBPART 204.18--COMMERCIAL AND GOVERNMENT ENTITY CODESec.
SUBPART 204.18--COMMERCIAL AND GOVERNMENT ENTITY CODE
Subpart 204.72 [Removed]
252.204-7001 [Removed and Reserved]
[FR Doc No: 2014-28811]
SUMMARY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to provide guidance to contractors for the submittal of forward pricing rate proposals.
DoD published a proposed rule at 78 FR 28790 on May 16, 2013, to revise the DFARS at 215.403-5 by adding instructions to contracting officers to request contractors to submit the proposed forward pricing rate proposal (FPRP) adequacy checklist at Table 215.403-1 with forward pricing rate proposals.
DoD reviewed the public comments in the development of the final rule. A discussion of the comments and the resultant changes are provided as follows:
Comment: One respondent stated that companies and the Government (the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA)) have over the years been successful in articulating positions for each side to understand and resolve rate positions through negotiation either at the contract level or at the business level through a Forward Pricing Rate Agreement (FPRA). The respondents indicated the existing regulations are adequate without any further modifications to support the process.
Response: The objective of this rule is to provide guidance to contractors for the submittal of FPRPs. This rule amends the DFARS at 215.403-5 by adding instructions to contracting officers to request contractors to submit the FPRP adequacy checklist with FPRPs. This guidance is intended to ensure submission of thorough, accurate, and complete proposals, provide consistency, and communicate common expectations to prevent rework and improve the efficiency of the negotiations process.
B. Audit Timeliness
Comment: Two respondents stated that the rule does not address the issues associated with the DCAA's inability to audit industry submissions in a timely fashion. The respondents believe that the perceived issues with contractor FPRP submissions are the result of DCAA's approach to FPRP audits and are not related to the adequacy of the FPRP submissions. One respondent stated that the additional requirements imposed by the FPRP adequacy checklist would also lengthen the already prolonged DCAA audit cycle for FPRPs and further erode timeliness and usefulness of audit reports.
Response: The purpose of the FPRP adequacy checklist is to promote the submission of thorough, accurate, and complete proposals; provide consistency; and communicate common expectations to prevent rework and improve the efficiency of the negotiations process. Establishment of common expectations for contractors and the Government will promote adequate initial submissions of proposals, which will shorten the acquisition cycle making for more efficient negotiations for both contractors and the Government.
C. Incurred Cost Audits
Comment: One respondent suggested that DCAA should begin auditing the most recent incurred cost submissions to gain a thorough understanding of the contractor's operations necessary to best opine on contractor forward pricing estimates. The respondent stated that DCAA is woefully behind on the contractually required (FAR 52.216-7, Allowable Cost and Payment clause) duty to audit contractor incurred cost submissions as promptly as practical. Contractors' historical incurred costs are key inputs for estimates for FPRPs.
Response: FAR 52.216-7(d)(2)(ii) requires that ``The appropriate Government representative and the Contractor shall establish the final indirect cost rates as promptly as practical, after receipt of the Contractor's proposal.'' The purpose of the FPRP adequacy checklist is to improve the efficiency of the FPRA negotiations process. The Government employs multiple avenues to obtain an appropriate understanding about the contractor's operations. The Government has a responsibility to perform appropriate review of contractor proposals to establish well-supported negotiation positions and to negotiate effectively to wisely use taxpayer money and to ensure that contract prices are fair and reasonable to both the contractor and the Government. Taxpayers receive a direct tangible benefit from the auditing of FPRPs. Meanwhile, DCAA is working to reduce the inventory of incurred cost audits to become current.
D. Business Systems Audits
Comment: DCAA should conduct better and more accurate transaction testing. DCAA has made business system audits a low priority and appears to be only conducting them sporadically. Unable to rely on contractor business systems and coupled with not having audited recent contractor incurred cost submissions, DCAA has made detailed testing of large samples of recent incurred cost transactions a part of their FPRP audit program.
Response: DoD agrees that contractor business systems and internal controls are the first line of defense against waste, fraud, and abuse. Weak control systems increase the risk of unallowable and unreasonable costs being charged to Government contracts. However, the purpose of this rule is to provide guidance to contractors for the submittal of FPRPs. DCAA's audit approach is to design appropriate tests of details in support of the proposed forward pricing rates, not to conduct incurred cost audits within FPRP audits. DCAA is working to reduce its backlog of incurred cost audits so that the agency can conduct the audits more promptly.
E. Reliance on Outside Audits
Comment: One respondent suggested that DCAA should balance independence with efficiency. DCAA is unwilling to rely on relevant auditing and analysis by others. Citing the belief that absolute independence is required, DCAA typically will not rely on the contractor's internal audit department, other Government oversight organizations such as the Defense Contract Management Agency (DCMA), or even other DCAA auditors.
Response: In order to comply with Generally Accepted Government Auditing Standards (GAGAS), DCAA's audit opinion must be derived from the results of sufficient audit procedures performed on the underlying contractor data. In most cases, DCAA is not provided the necessary access to the working papers supporting contractor internal audits. DCAA will work with DCMA and other contract administration offices (CAO's) to leverage the monitoring and analytical work they perform; however, DCAA cannot include CAO developed rates without applying adequate audit procedures to the underlying contractor data.
F. FPRP Adequacy Checklist Flexibility
Comment: Two respondents stated that the FPRP adequacy checklist should be more flexible to allow the Government and contractors to better explain and understand the FPRPs. The FPRP adequacy checklist does not provide for any tailoring by a company based upon the company's cost structure. Documentation necessary to audit rates at one contractor can be irrelevant to the rates at another contractor. Requiring companies to create additional documentation, much of which may be irrelevant to the FPRP and yet obligate DCAA to audit it, will not change the outcome of a rate negotiation, but is certain to create obstacles to the process.
Response: The FPRP adequacy checklist communicates common expectations for both contractors and the Government. The FPRP adequacy checklist topics are high level and generic, focused on the contractor communicating the rates proposed and their bases. Contractors provide checklist responses within the context of their accounting/estimating systems and the structure of their FPRP. The FPRP adequacy checklist is not geared to stimulate the contractor to create documentation other than the basic information that both the Government and contractor need to support and negotiate fair and reasonable rates and wisely use taxpayer monies.
Comment: One respondent stated that FPRPs should be a proposal by a company on how it is going to manage the risk of future performance. They represent forecasting future costs and the risk associated with those costs. Clearly, this formulation will vary by company and will be based on assumptions that the companies make and articulate as part of their proposals. The FPRP adequacy checklist does not take this core issue into consideration. It is generic in nature, not exhaustive, and does not account for the fact that some circumstances will not apply to a specific FPRP.
Response: The FPRP adequacy checklist is intended to be high level and generic, not exhaustive in nature, allowing each contractor to respond within the context of its proposal and estimating/accounting system structure. While a contractor will manage the risk of future costs, when the contractor is contracting with the Government there must be a basic understanding of the rates proposed and the bases of estimates so Government representatives can be good stewards of taxpayers' money when negotiating a fair and reasonable price. Where a specific FPRP adequacy checklist topic does not apply for a contractor, then that topic should be identified as ``Not Applicable.''
Comment: One respondent stated that a one size fits all FPRP adequacy checklist would not be effective to identify the appropriate information and data necessary to the Government for the audit or FPRA process because of the variety of cost elements and segment types.
Response: The FPRP adequacy checklist identifies common expectations for both the contractor and the Government with a focus on the proposed rates and the underlying bases of estimates. The goal is for the proposal to be adequate to support negotiations that will allow the Government contracting officer to ensure that the price is fair and reasonable. The Government will meet with the contractor upon receipt of an adequate proposal and, based upon the results of a walk-through meeting, identify appropriate evidence to support negotiations and audit.
G. FPRP Submittal Timing
Comment: The respondents claimed that the proposed rule creates unintended and harmful liabilities for contractors. Under the Truth in Negotiations Act (TINA), companies must provide the Government with pricing information that is current, accurate, and complete. Requiring companies to submit forward pricing rates at least 90 days in advance of their effective date directly conflicts with TINA and the False Claims Act. Intentional or knowing violation of TINA provisions are potentially false claims. In addition, key bases for estimates such as budgets or sales projections may simply not be available 90 days prior to submission of rate proposals. Beyond that, the budgetary and factual data upon which FPRPs are based (1) may simply not be available 90 days in advance, (2) may be subject to more current data, or (3) may be affected by certain large proposals that may require a resubmission of rates when a contract award would have a significant impact on bases/rates. One respondent requested a separate rule to address the requirement for submission of forward pricing rates at least 90 days in advance of the effective date of those rates, which would also address a waiver of liability/prosecution for civil or criminal penalties that might arise from compliance with the rule.
Response: Submitting FPRPs 90 days in advance of their effective date is reasonable. The parties (Government and contractor) need time to negotiate forward pricing rates prior to their effective date, which is often the start of the contractor's fiscal year. Prior to the start of their fiscal year, contractors have established strategic plans and put budgets in place to manage their businesses. The 90 day timeframe is not creating a conflict with the provisions of TINA. In accordance with FAR 42.1701, the contractor's FPRP shall include ``cost or pricing data that are accurate, complete, and current as of the date of submission'' and contractors are expected to communicate updates during the negotiation of the proposed rates. Per FAR 15.407-3, Forward pricing rate agreements, paragraph (a), ``All data submitted in connection with the FPRA, updated as necessary, form a part of the total data that the offeror certifies to be accurate, complete, and current at the time of the agreement on price for an initial contract or for a contract modification.'' Paragraph (b) states ``Conditions that may affect the agreement's validity shall be reported promptly to the ACO.'' (The ACO is the Government Administrative Contracting Officer.) It should be understood by the parties that the proposed rates are based on forecasts and contractors must provide updates whenever the validity of the agreement may be affected.
H. Incorporation of FAR Table 15-2 Into the FPRP Adequacy Checklist
Comment: A number of respondents stated that the incorporation of FAR Table 15-2 into the FPRP adequacy checklist is inappropriate. These comments included the following:
(1) The table is suited to contractor proposals for goods or services, and not to FPRPs. As a result of DCAA's application of Table 15-2, DCAA now requires significantly more data from contractors to demonstrate adequacy. This additional data is not tailored based on a risk assessment of the contractor's operations. Prior to the application of Table 15-2 to FPRPs, contractors and the Government had been more successful in achieving timely audits of contractors' FPRP submissions and negotiations of FPRAs.
(2) DoD should issue a separate rule addressing the checklist's incorporation of Table 15-2 requirements. By referencing Table 15-2 throughout, the FPRP adequacy checklist implicitly applies Table 15-2 to FPRPs. However, the table's requirements have not been applied as such under the current FAR. The respondent maintained that FAR Table 15-2 is only required when submitting ``certified'' cost or pricing data associated with a specific pricing action subject to TINA, such as a bid or proposal for a new contract award or contract modification. The respondent suggested that any attempt to require Table 15-2 for all FPRPs must go through proper, separate, rulemaking.
(3) Many elements of the proposed FPRP adequacy checklist are irrelevant to an FPRP submission. For example, the first item on the FPRP adequacy checklist reads, ``Is there a properly completed first page of the proposal or a summary format as specified by the contracting officer?'' This corresponds to Table 15-2. The respondent further pointed out that there is no solicitation, no contract, no profit or fee, no Government property used, and CAS applicability is already readily known by both the contractor and Government.
(4) One respondent stated that a fundamental issue that the GAO raised with DCAA audits was DCAA's lack of adherence to Generally Accepted Government Auditing Standards (GAGAS). The respondent believes that in response to the GAO report, DCAA took the position that the items listed on the proposed DFARS FPRP adequacy checklist have always been a requirement of Table 15-2. The respondent does not believe that Table 15-2 is applicable to an FPRP.
Response: To promote the submission of thorough, accurate, and complete proposals, this rule is communicating common expectations, that FPRPs include basic information which identifies the proposed rates and explains the bases of estimates, and requiring that the contractors communicate the inclusion of this basic information via an FPRP adequacy checklist. The goal of the FPRP adequacy checklist is to promote the initial submission of adequate proposals and to achieve a more efficient negotiation process for establishing forward pricing rates. While a contractor will not sign a ``Certificate of Current Cost or Pricing Data'' until award of a contract (or modification) for supplies or services, FAR 42.1701(b) requires the Contracting Officer to obtain the FPRP including cost or pricing data that are current, accurate and complete. The references in the proposed rule to FAR 15.408 Table 15-2 were intended to help offerors understand the minimum criteria to ensure their FPRPs adequately comply with each submission item. However, to remove any misunderstandings of the intent and content of the table submission items, the FPRP adequacy checklist references, including references to FAR 15.408 Table 15-2, have been removed in this final rule. Furthermore, item no. 1 of the FPRP adequacy checklist is revised to identify only those specific items required on the first page of a forward pricing rate proposal.
Comment: One respondent claimed that DoD has not complied with its obligations under the Paperwork Reduction Act and the implementing regulations in 5 CFR part 1320.
Response: The supporting data referenced by the respondent exceeds the information collection requirements established under this rule. The Paperwork Reduction Act estimates published with the proposed rule accurately reflect the contractors' costs to fulfill the information collection requirements of this rule.
J. Public Meetings
Comment: One respondent suggested that DoD and the public should engage in an interactive process to identify the real objectives of this rule and the best methods for achieving those solutions.
Response: The purpose of the rule is to provide guidance to contractors for the submittal of FPRPs that are thorough, accurate, and complete. The rule provides for consistency of submittals and establishes common expectations for a contractor and the Government to make negotiations more efficient. A meeting is not necessary given that the objective is clear.
K. Increased Administrative Efforts and Costs
Comment: One respondent stated that the proposed FPRP adequacy checklist also includes information beyond the scope of a basis of estimate (BOE). An example is the following submission item: ``Does the proposal include a comparison of prior forecasted costs to actual results in the same format as the proposal and an explanation/analysis of any differences?'' Such data and format are not relevant to the current BOE developed by the contractor. The respondent claimed that there is no benefit to the Government from requiring the contractor to provide duplicative information that was not used in the development of the BOE. Rather, contractors will incur additional costs to meet these administrative requirements.
Two respondents stated that there are many items within the proposed FPRP adequacy checklist that would add significant time and effort to the contractor's FPRP submission as well as require additional explanations to DCAA on the adequacy of the submittal against the FPRP adequacy checklist. The respondents suggested that DoD should consider the vast amounts of paperwork and data reformatting that would be required to comply with the proposed rule. It is not just questions that have to be answered; there would be an exponential increase when the questions are applied to each forward pricing rate. If adopted the rule would create an enormous volume of paper and data for the sole purpose of DCAA audit consumption. This would be done without any requirement for timely completion of audits. These additional efforts would increase contractor administrative costs and Government audit costs which run directly contrary to DoD's Better Buying Power memoranda.
Response: The purpose of the FPRP adequacy checklist is to ensure that FPRPs are complete and well-supported, and provide an adequate basis for Government analysis and negotiation. This will assist both parties by significantly reducing the need for fact finding, and allowing for more efficient proposal analysis by the Government. The FPRP adequacy checklist identifies those elements which would typically be included in a well-supported and complete FPRP. However, the FPRP adequacy checklist itself does not mandate development of content which is not appropriate for a specific proposal. The FPRP adequacy checklist includes a column which the contractor can use to briefly explain why a specific checklist item is not applicable. It should be noted that there is no intent for a separate instance of the FPRP adequacy checklist to be completed for each proposed rate. Rather, the contractor will submit a single completed FPRP adequacy checklist in support of the entire FPRP.
Forward pricing rates are projections of the future. It is fundamental to understand how accurately a contractor has been able to estimate past periods. A basic requirement for proposals for both supplies/services and FPRAs is the presentation of trend and budgetary data. The elements commented as not being relevant to the current BOE are important for Government representatives to consider when negotiating rates. The FPRP adequacy checklist recognizes that the support for out-year rates may be less detailed than for the base year, and/or that the estimating methodology for out-year rates may be different from the base year. The FPRP adequacy checklist merely leads the contractor to clearly document the estimating approaches used, the escalation applied, etc., so that the proposal submitted to the Government provides an adequate basis for analysis and negotiation.
Comment: One respondent stated that companies generally support forward pricing rates for periods ranging from one to ten years depending on the markets in which they compete. Generally, a five year period is customary in an FPRP. Checklists such as the one being proposed have a tendency to be applied literally by regulators without the benefit of the application of professional judgment. For a shipbuilding contractor that may have a ten year pricing window, the fidelity of the pricing estimates at the back end of the pricing window are not as robust as those in earlier years. This FPRP adequacy checklist would have contractors generate paper purely for the sake of complying with the checklist, without adding value to the acquisition process.
Response: Both contractors and Government representatives are expected to exercise professional judgment in using the FPRP adequacy checklist during the process. The contractor is expected to construct its proposal as fits its business scenario, explaining the bases and derivation of the rates for each proposed period and the underlying assumptions. Experience with FPRPs has demonstrated that out years are not well-supported even with the underlying strategic decisions which affected the pool and base estimates.
L. FPRP Risk Assessment
Comment: One respondent stated that, at their core, FPRPs represent the degree of risk that a company is willing to accept in proposals for pricing rates. They are developed using forecasts of future costs in which judgment is applied to address risk. That risk is subjective and will vary significantly by company and market conditions. The degree of risk is addressed by the assumptions that contractors articulate in their FPRP. The FPRP adequacy checklist misses the entire point of the contractors' risk assessment.
Response: The purpose of the FPRP adequacy checklist focuses on whether the FPRP is adequate with the proposed rates and the underlying bases of estimate identified and ready to be a foundation for negotiation with the Government. From this point the Government will engage with the contractor for a more thorough understanding of underlying contractor assumptions and the risk the contractor has designed. While some checklist items address assumptions/risk to some degree; the FPRP adequacy checklist is not designed to go into this level of detail. The checklist is designed to address risk at a higher level. Contractors' assignment of risk in estimating future cost is subjective depending on company and market conditions. Contractors can use their own judgment and risk factors to develop their future cost forecasts. However, the valuation of the risk or estimate should be based on available data and documented assumptions.
This rule amends the DFARS at 215.403-5 by adding instructions to contracting officers to request contractors to submit the FPRP adequacy checklist with FPRPs. The objective is to provide guidance to contractors for the submittal of FPRPs.
No significant issues were raised by the public comments in response to the initial regulatory flexibility analysis published with the proposed rule.
DoD does not expect this 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 only a small percentage of Government contractors are requested to submit an FPRP, as set forth at FAR 42.1701(a). The Government will ask only those contractors with a significant volume of Government contracts to submit such proposals.
The rule contains information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C chapter 35). OMB has cleared this information collection under OMB Control Number 0704-0497, titled DFARS part 215, Negotiation.
Table 215.403-1--Contractor Forward Pricing Rate Proposal Adequacy Checklist
If not provided, explain pages) (may use continuation pages)
1. Is there a properly completed first page of the proposal as specified by the contracting officer?
Proposal Cover Page.................
d. The page of the proposal that addresses_
e. The following statement: ``This forward pricing rate proposal reflects our estimates, as of the date of submission entered in (f) below and conforms with Table 215.403-1. By submitting this proposal, we grant the Contracting Officer and authorized representative(s) the right to examine those records, which include books, documents, accounting procedures and practices, and other data, regardless of type and form or whether such supporting information is specifically referenced or included in the proposal as the basis for each estimate, that will permit an adequate evaluation of the proposed rates and factors.'';
2. Summary of proposed direct and indirect and factors, including the proposed pool and base costs for each proposed indirect rate and factor.
Immediately following the proposal rates cover page.
3. Table of Contents or index.
b. For supporting documentation not provided with the proposal, does the basis of each estimate in the proposal include the location of the documentation and the point of contact (custodian) name, phone number, and email address? Does the proposal disclose known or anticipated changes in business activities or processes that could materially impact the proposed rates (if not previously provided)? For example_
4. a. Management initiatives to reduce costs;
5. Do proposed costs based on judgmental factors include an explanation of the estimating processes and methods used, including those used in projecting from known data?
6. Does the proposal show trends and budgetary data? Does the proposal provide an explanation of how the data, as well as any adjustments to the data, were used?
7. The proposal should reconcile to the supporting data referenced. If the proposal does not reconcile to the supporting data referenced, identify applicable page(s) and explain.
8. The proposal should be internally consistent. If the proposal is not internally consistent, identify applicable page(s) and explain.
Direct Labor Rates Methodology and Basis of Each Estimate
9. a. Does the proposal include an explanation of the methodology used to develop the direct labor rates and identify the basis of each estimate?
10. Does the proposal identify escalation factors for the out-year labor rates, the costs to which escalation is applicable, and the basis of each factor used?
11. Does the proposal identify planned or anticipated changes in the composition of labor rates, labor categories, union agreements, headcounts, or other factors that could significantly impact the direct labor rates?
12. Indirect Rates Methodology and Basis of Each Estimate.
13. Does the proposal identify indirect expenses by burden center, by cost element, by year (including any voluntary deletions, if applicable) in a format that is consistent with the accounting system used to accumulate actual expenses?
14. Does the proposal identify any contingencies?
15. Does the proposal identify planned or anticipated changes in the nature, type, or level of indirect costs, including fringe benefits?
16. Does the proposal identify corporate, home office, shared services, or other incoming allocated costs and the source for those costs, including location and point of contact (custodian) name, phone number, and email address?
17. Does the proposal separately identify all intermediate cost pools and provide a reconciliation to show where the costs will be allocated?
18. Does the proposal identify the escalation factors used to escalate indirect costs for the out-years, the costs to which escalation is applicable, and the basis of each factor used?
19. Does the proposal provide details of the development of the allocation base?
20. Does the proposal include or reference the supporting data for the allocation base such as program budgets, negotiation memoranda, proposals, contract values, etc.?
21. Does the proposal identify how the proposed allocation bases reconcile with its long range plans, strategic plan, operating budgets, sales forecasts, program budgets, etc.?
22. Cost of Money.
23. Does the proposal include a comparison of prior forecasted costs to actual results in the same format as the proposal and an explanation/analysis of any differences?
24. If this is a revision to a previous rate proposal or a forward pricing rate agreement, does the new proposal provide a summary of the changes in the circumstances or the facts that the contractor asserts require the change to the rates?
[FR Doc. 2014-28811 Filed 12-10-14; 8:45 am]
[FR Doc No: 2014-28815]
SUMMARY: DoD has adopted as final, without change, an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement sections of the Military Construction and Veterans Affairs, and Related Agencies Appropriations Act, 2014, that restricts use of military construction funds in various countries, including countries bordering the Arabian Sea.
Comment: The respondent disagreed with the substitution of ``Arabian Sea'' for the ``Arabian Gulf'' for the following reasons:
The respondent viewed the rule as a ``degradation of the intent of the law.''
The rule does not impose any new 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). However, it modifies the prescription for use of the provision at DFARS 252.236-7010, Overseas Military Construction--Preference for United States Firms, currently approved under OMB Clearance 0704-0255, Defense Federal Acquisition Regulation Supplement (DFARS) Part 236, Construction and Architect-Engineer Contracts, an amount of less than 8 hours. Any change in the burden hours due to the changed prescription is negligible.
[FR Doc No: 2014-28816]
SUMMARY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to eliminate the requirement for quarterly reporting of actual contract performance outside the United States.
DoD is retaining the provision at 252.225-7003, Report of Intended Performance Outside the United States and Canada--Submission with Offer, and the clause at 252.225-7004, Report of Intended Performance Outside the United States and Canada--Submission After Award, both of which are required by 10 U.S.C. 2410g.
``Publication of proposed regulations'', 41 U.S.C. 1707, is the statute which applies to the publication of the Federal Acquisition Regulation. Paragraph (a)(1) of the statute requires that a procurement policy, regulation, procedure or form (including an amendment or modification thereof) must be published for public comment if it relates to the expenditure of appropriated funds, and has either a significant effect beyond the internal operating procedures of the agency issuing the policy, regulation, procedure or form, or has a significant cost or administrative impact on contractors or offerors. This final rule is not required to be published for public comment, because this rule just eliminates obsolete text.
3. Amend section 225.7204 by--
a. In paragraph (a), adding the word ``and'' after the semicolon;
252.225-7006 [Removed and Reserved]