[Federal Register: December 1, 2006 (Volume 71, Number 231)]
[Rules and Regulations]
[Page 69492-69495]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01de06-18]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 215, 230, 252, and 253
[DFARS Case 2003-D014]
Defense Federal Acquisition Regulation Supplement; Contract
Pricing and Cost Accounting Standards
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD has issued a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to update text addressing
contract pricing matters and cost accounting standards administration.
The rule implements statutory provisions regarding exceptions to cost
or pricing data requirements and waiver of cost accounting standards,
and relocates internal DoD procedures relating to pricing
considerations and cost accounting standards to the DFARS companion
resource, Procedures, Guidance, and Information.
DATES: Effective Date: December 1, 2006.
FOR FURTHER INFORMATION CONTACT: Mr. Bill Sain, Defense Acquisition
Regulations System, OUSD (AT&L) DPAP (DARS), IMD 3C132, 3062 Defense
Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0293;
facsimile (703) 602-0350. Please cite DFARS Case 2003-D014.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule updates DFARS text addressing contract pricing
matters and cost accounting standards administration. The DFARS changes
include--
[cir] Addition of text at 215.403-1 and 230.201-5 to implement
Section 817 of the National Defense Authorization Act for Fiscal Year
2003 (Pub. L. 107-314) regarding exceptions to cost or pricing data
requirements and waiver of cost accounting standards.
[cir] Deletion of 215.404-1(d), Cost realism analysis, because FAR
15.404-1 contains sufficient policy on this subject.
[cir] Deletion of unnecessary introductory text at redesignated
215.404-71-4(f), Facilities capital employed, Values: Normal and
designated ranges.
[cir] Relocation of the definition of ``Acceptable estimating
system'' from 215.407-5-70(a)(1) to the contract clause at 252.215-
7002, Cost Estimating System Requirements; elimination of 215.407-5-
70(b)(1)(iii) and (iv) and relocation of the language to the new
definition at 252.215-7002(a); and deletion of duplicative language at
252.215-7002(b).
[cir] Removal of 230.7000, Contract facilities capital estimates;
230.7001, Use of DD Form 1861; and 230.7002, Preaward facilities
capital applications; and relocation of text on these subjects to
215.404-71-4, Weighted guidelines method--Facilities capital employed,
since these sections pertain to the
[[Page 69493]]
calculation of weighted guidelines for profit, rather than cost
accounting standards.
[cir] Elimination of 230.7003, Postaward facilities capital
applications, and 230.7004-1, Forms CASB-CMF, since these sections
duplicate Cost Accounting Standard (CAS) 414, Cost of Money as an
Element of the Cost of Facilities Capital; FAR 31.205-10, Cost of
Money; and the implementing contract clauses.
[cir] Elimination of the definitions of ``intangible capital
asset'' and ``tangible capital asset'' at 230.7100(a) and (b), since
these definitions are provided in the cost accounting standards;
elimination of the definition of ``cost of money rate'' at 230.7100(c),
because it conflicts with cost accounting standards; and elimination of
the definition of ``representative investment'' at 230.7100(d), because
it is unnecessary.
[cir] Elimination of 230.7101, Calculations, and 230.7102,
Determining imputed cost of money, because they are adequately covered
in CAS 417, Cost of Money as an Element of the Cost of Capital Assets
Under Construction (48 CFR 9904.417).
[cir] Removal of 230.7103, Preaward capital employed application,
and relocation of text on this subject to 215.404-73(b)(2)(i), Offsets
for facilities capital cost of money, since it applies to offsets in
determining profit, rather than cost accounting standards.
[cir] Relocation of the following text to the DFARS companion
resource, Procedures, Guidance, and Information (PGI), at http://www.acq.osd.mil/dpap/dars/pgi
.
[cir] 215.403-5, Instructions for submission of cost or pricing
data or information other than cost or pricing data.
[cir] 215.404-2, Information to support proposal analysis.
[cir] 215.404-3, Subcontract pricing considerations.
[cir] 215.404-70, DD Form 1547, Record of Weighted Guidelines
Method Application.
[cir] 215.404-76, Reporting profit and fee statistics.
[cir] 215.406-1, Prenegotiation objectives.
[cir] 215.406-3, Documenting the negotiation.
[cir] 215.407-4, Should-cost review.
[cir] 215.407-5-70(e) and (f), Estimating systems--Disclosure,
maintenance, and review requirements.
[cir] 215.470(b) and (c), Estimated data prices, except that the
first sentence of (b) remains in DFARS, and is revised for clarity.
[cir] 230.201-5(a)(1), Waiver (partial relocation).
[cir] 230.7004-2, DD Form 1861 (relocated to PGI 215.404-71-4(c),
consistent with the relocation of 230.7000, 230.7001, and 230.7002 to
DFARS 215.404-71-4.
[cir] 253.215-70, DD Form 1547, Record of Weighted Guidelines
Application.
DoD published a proposed rule at 70 FR 75440 on December 20, 2005.
One industry association submitted comments on the proposed rule. The
industry association questioned the proposed relocation of the weighted
guidelines profit analysis procedures from DFARS Subpart 15.4 to PGI,
since considerations that DoD contracting officers use to develop
profit objectives have a significant impact on industry. DoD agrees
with this comment and has retained the weighted guidelines procedures
in DFARS Subpart 215.4, with the exception of the text at 215.404-70,
which merely provides a general description of the DD Form 1547 and its
use, and the text at 215.404-76, which deals exclusively with internal
DoD reporting of profit and fee statistics.
Additional differences between the proposed and final rules
include--
215.403-1(c)(1)--This text, which addresses standards for
exceptions from cost or pricing data requirements, is retained in the
DFARS, since these standards affect industry.
215.403-1(c)(3)--This text is amended to clarify that the
determination as to whether a commercial item exception applies is made
by the contracting officer.
215.406-1--The reference to corresponding PGI text is revised to
indicate that the PGI procedures are mandatory.
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 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 the rule updates, clarifies, and relocates DFARS text, but
makes no significant change to DoD contracting policy.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply, because the rule does
not impose 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, 230, 252, and 253
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
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Therefore, 48 CFR Parts 215, 230, 252, and 253 are amended as follows:
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1. The authority citation for 48 CFR Parts 215, 230, 252, and 253
continues to read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 215--CONTRACTING BY NEGOTIATION
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2. Section 215.403-1 is amended as follows:
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a. By adding paragraph (c)(3);
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b. By redesignating paragraphs (c)(4)(A) and (B) as paragraphs
(c)(4)(C) and (D) respectively; and
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c. By adding new paragraphs (c)(4)(A) and (B) to read as follows:
215.403-1 Prohibition on obtaining cost or pricing data.
(c) * * *
(3) Commercial items. By November 30th of each year, departments
and agencies shall provide a report to the Director, Defense
Procurement and Acquisition Policy (DPAP), ATTN: DPAP/CPF, of all
contracting officer determinations that commercial item exceptions
apply under FAR 15.403-1(b)(3), during the previous fiscal year, for
any contract, subcontract, or modification expected to have a value of
$15,000,000 or more. See PGI 215.403-1(c)(3) for the format and
guidance for the report. The Director, DPAP, will submit a consolidated
report to the congressional defense committees.
(4) * * *
(A) The head of the contracting activity may, without power of
delegation, apply the exceptional circumstances authority when a
determination is made that--
(1) The property or services cannot reasonably be obtained under
the contract, subcontract, or modification, without the granting of the
waiver;
(2) The price can be determined to be fair and reasonable without
the submission of certified cost or pricing data; and
(3) There are demonstrated benefits to granting the waiver. See PGI
215.403-1(c)(4)(A) for guidance applicable to waivers for part of a
proposal and unpriced options.
(B) By November 30th of each year, departments and agencies shall
provide a report to the Director, DPAP, ATTN: DPAP/CPF, of all waivers
granted under
[[Page 69494]]
FAR 15.403-1(b)(4), during the previous fiscal year, for any contract,
subcontract, or modification expected to have a value of $15,000,000 or
more. See PGI 215.403-1(c)(4)(B) for the format and guidance for the
report. The Director, DPAP, will submit a consolidated report to the
congressional defense committees.
* * * * *
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3. Section 215.403-5 is revised to read as follows:
215.403-5 Instructions for submission of cost or pricing data or
information other than cost or pricing data.
When the solicitation requires contractor compliance with the
Contractor Cost Data Reporting System, follow the procedures at PGI
215.403-5.
215.404-1 [Amended]
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4. Section 215.404-1 is amended by removing paragraph (d).
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5. Sections 215.404-2 and 215.404-3 are revised to read as follows:
215.404-2 Information to support proposal analysis.
See PGI 215.404-2 for guidance on obtaining field pricing or audit
assistance.
215.404-3 Subcontract pricing considerations.
Follow the procedures at PGI 215.404-3 when reviewing a
subcontractor's proposal.
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6. Section 215.404-4 is amended by revising paragraph (b)(1)
introductory text to read as follows:
215.404-4 Profit.
(b) * * *
(1) Contracting officers shall use a structured approach for
developing a prenegotiation profit or fee objective on any negotiated
contract action when cost or pricing data is obtained, except for cost-
plus-award-fee contracts (see 215.404-74, 216.405-2, and FAR 16.405-2)
or contracts with Federally Funded Research and Development Centers
(FFRDCs) (see 215.404-75). There are three structured approaches--
* * * * *
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7. Section 215.404-70 is revised to read as follows:
215.404-70 DD Form 1547, Record of Weighted Guidelines Method
Application.
Follow the procedures at PGI 215.404-70 for use of DD Form 1547
whenever a structured approach to profit analysis is required.
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8. Section 215.404-71-4 is amended as follows:
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a. By redesignating paragraphs (b) through (d) as paragraphs (e)
through (g) respectively;
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b. By adding new paragraphs (b) through (d); and c. In newly designated
paragraph (f), by removing ``These are the normal values and ranges.
They apply to all situations.''. The added text reads as follows:
215.404-71-4 Facilities capital employed.
* * * * *
(b) Contract facilities capital estimates. The contracting officer
shall estimate the facilities capital cost of money and capital
employed using--
(1) An analysis of the appropriate Forms CASB-CMF and cost of money
factors (48 CFR 9904.414 and FAR 31.205-10); and
(2) DD Form 1861, Contract Facilities Capital Cost of Money.
(c) Use of DD Form 1861. See PGI 215.404-71-4(c) for obtaining
field pricing support for preparing DD Form 1861.
(1) Purpose. The DD Form 1861 provides a means of linking the Form
CASB-CMF and DD Form 1547, Record of Weighted Guidelines Application.
It--
(i) Enables the contracting officer to differentiate profit
objectives for various types of assets (land, buildings, equipment).
The procedure is similar to applying overhead rates to appropriate
overhead allocation bases to determine contract overhead costs.
(ii) Is designed to record and compute the contract facilities
capital cost of money and capital employed which is carried forward to
DD Form 1547.
(2) Completion instructions. Complete a DD Form 1861 only after
evaluating the contractor's cost proposal, establishing cost of money
factors, and establishing a prenegotiation objective on cost. Complete
the form as follows:
(i) List overhead pools and direct-charging service centers (if
used) in the same structure as they appear on the contractor's cost
proposal and Form CASB-CMF. The structure and allocation base units-of-
measure must be compatible on all three displays.
(ii) Extract appropriate contract overhead allocation base data, by
year, from the evaluated cost breakdown or prenegotiation cost
objective and list against each overhead pool and direct-charging
service center.
(iii) Multiply each allocation base by its corresponding cost of
money factor to get the facilities capital cost of money estimated to
be incurred each year. The sum of these products represents the
estimated contract facilities capital cost of money for the year's
effort.
(iv) Total contract facilities cost of money is the sum of the
yearly amounts.
(v) Since the facilities capital cost of money factors reflect the
applicable cost of money rate in Column 1 of Form CASB-CMF, divide the
contract cost of money by that same rate to determine the contract
facilities capital employed.
(d) Preaward facilities capital applications. To establish cost and
price objectives, apply the facilities capital cost of money and
capital employed as follows:
(1) Cost of Money. (i) Cost Objective. Use the imputed facilities
capital cost of money, with normal, booked costs, to establish a cost
objective or the target cost when structuring an incentive type
contract. Do not adjust target costs established at the outset even
though actual cost of money rates become available during the period of
contract performance.
(ii) Profit Objective. When measuring the contractor's effort for
the purpose of establishing a prenegotiation profit objective, restrict
the cost base to normal, booked costs. Do not include cost of money as
part of the cost base.
(2) Facilities Capital Employed. Assess and weight the profit
objective for risk associated with facilities capital employed in
accordance with the profit guidelines at 215.404-71-4.
* * * * *
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9. Section 215.404-73 is amended by revising paragraph (b)(2)(i) to
read as follows:
215.404-73 Alternate structured approaches.
* * * * *
(b) * * *
(2) * * *
(i) The contracting officer shall reduce the overall prenegotiation
profit objective by the amount of facilities capital cost of money
under Cost Accounting Standard (CAS) 414, Cost of Money as an Element
of the Cost of Facilities Capital (48 CFR 9904.414). Cost of money
under CAS 417, Cost of Money as an Element of the Cost of Capital
Assets Under Construction (48 CFR 9904.417), should not be used to
reduce the overall prenegotiation profit objective. The profit amount
in the negotiation summary of the DD Form 1547 must be net of the
offset.
* * * * *
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10. Section 215.404-76 is revised to read as follows:
215.404-76 Reporting profit and fee statistics.
Follow the procedures at PGI 215.404-76 for reporting profit and
fee statistics.
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11. Sections 215.406-1 and 215.406-3 are revised to read as follows:
[[Page 69495]]
215.406-1 Prenegotiation objectives.
Follow the procedures at PGI 215.406-1 for establishing
prenegotiation objectives.
215.406-3 Documenting the negotiation.
Follow the procedures at PGI 215.406-3 for documenting the
negotiation.
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12. Section 215.407-4 is revised to read as follows:
215.407-4 Should-cost review.
See PGI 215.407-4 for guidance on determining whether to perform a
program or overhead should-cost review.
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13. Section 215.407-5-70 is amended by revising paragraphs (a)(1),
(b)(1), (e), and (f) to read as follows:
215.407-5-70 Disclosure, maintenance, and review requirements.
(a) * * *
(1) Acceptable estimating system is defined in the clause at
252.215-7002, Cost Estimating System Requirements.
* * * * *
(b) * * *
(1) DoD policy is that all contractors have acceptable estimating
systems that consistently produce well-supported proposals that are
acceptable as a basis for negotiation of fair and reasonable prices.
* * * * *
(e) Review procedures. Follow the procedures at PGI 215.407-5-70(e)
for establishing and conducting estimating system reviews.
(f) Disposition of survey team findings. Follow the procedures at
PGI 215.407-5-70(f) for disposition of the survey team findings.
* * * * *
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14. Section 215.470 is amended by revising paragraph (b), removing
paragraph (c), and redesignating paragraph (d) as paragraph (c). The
revised text reads as follows:
215.470 Estimated data prices.
* * * * *
(b) When data are required to be delivered under a contract,
include DD Form 1423, Contract Data Requirements List, in the
solicitation. See PGI 215.470(b) for guidance on the use of DD Form
1423.
* * * * *
PART 230--COST ACCOUNTING STANDARDS ADMINISTRATION
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15. Section 230.201-5 is revised to read as follows:
230.201-5 Waiver.
(a)(1)(A) The military departments and the Director, Defense
Procurement and Acquisition Policy, Office of the Under Secretary of
Defense (Acquisition, Technology, and Logistics)--
(1) May grant CAS waivers that meet the conditions in FAR 30.201-
5(b)(1); and
(2) May grant CAS waivers that meet the conditions in FAR 30.201-
5(b)(2), provided the cognizant Federal agency official granting the
waiver determines that--
(i) The property or services cannot reasonably be obtained under
the contract, subcontract, or modification, as applicable, without
granting the waiver;
(ii) The price can be determined to be fair and reasonable without
the application of the Cost Accounting Standards; and
(iii) There are demonstrated benefits to granting the waiver.
(B) Follow the procedures at PGI 230.201-5(a)(1) for submitting
waiver requests to the Director, Defense Procurement and Acquisition
Policy.
(2) The military departments shall not delegate CAS waiver
authority below the individual responsible for issuing contracting
policy for the department.
(e) By November 30th of each year, the military departments shall
provide a report to the Director, Defense Procurement and Acquisition
Policy, ATTN: DPAP/CPF, of all waivers granted under FAR 30.201-5(a),
during the previous fiscal year, for any contract, subcontract, or
modification expected to have a value of $15,000,000 or more. See PGI
230.201-5(e) for format and guidance for the report. The Director,
Defense Procurement and Acquisition Policy, will submit a consolidated
report to the CAS Board and the congressional defense committees.
Subparts 230.70 and 230.71 [Removed]
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16. Subparts 230.70 and 230.71 are removed.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
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17. Section 252.215-7002 is amended as follows:
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a. By revising the clause date;
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b. In paragraph (a), by revising the paragraph heading and adding a
definition of ``Acceptable estimating system''; and
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c. By revising paragraph (b). The revised and added text reads as
follows:
252.215-7002 Cost Estimating System Requirements.
* * * * *
COST ESTIMATING SYSTEM REQUIREMENTS (DEC 2006)
(a) Definitions.
Acceptable estimating system means an estimating system that--
(1) Is maintained, reliable, and consistently applied;
(2) Produces verifiable, supportable, and documented cost estimates
that are an acceptable basis for negotiation of fair and reasonable
prices;
(3) Is consistent with and integrated with the Contractor's related
management systems; and
(4) Is subject to applicable financial control systems.
* * * * *
(b) General. The Contractor shall establish, maintain, and comply
with an acceptable estimating system.
* * * * *
PART 253--FORMS
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18. Section 253.215-70 is revised to read as follows:
253.215-70 DD Form 1547, Record of Weighted Guidelines Application.
Follow the procedures at PGI 253.215-70 for completing DD Form
1547.
[FR Doc. E6-20396 Filed 11-30-06; 8:45 am]
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