Defense Federal Acquisition Regulation Supplement: Treatment of Incurred Independent Research and Development Costs (DFARS Case 2017-D018)
| Published date | 29 September 2021 |
| Citation | 86 FR 53927 |
| Record Number | 2021-20938 |
| Section | Proposed rules |
| Court | Defense Acquisition Regulations System,Defense Department |
53927
Federal Register / Vol. 86, No. 186 / Wednesday, September 29, 2021 / Proposed Rules
(c) Subcontracts. Include the substance of
this clause, including this paragraph (c), in
all subcontracts with small business
concerns, including subcontracts with small
business concerns for the acquisition of
commercial items.
* * * * *
■9. Amend section 52.244–6 by—
■a. Revising the date of the clause; and
■b. Removing from paragraph
(c)(1)(xix) ‘‘(DEC 2013)’’ and adding
‘‘(DATE)’’ in its place.
The revision reads as follows:
52.244–6 Subcontracts for Commercial
Items.
* * * * *
Subcontracts for Commercial Items (DATE)
* * * * *
[FR Doc. 2021–20852 Filed 9–28–21; 8:45 am]
BILLING CODE 6820–EP–P
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 225, 231, 242, and 252
[Docket DARS–2019–0039]
RIN 0750–AJ27
Defense Federal Acquisition
Regulation Supplement: Treatment of
Incurred Independent Research and
Development Costs (DFARS Case
2017–D018)
AGENCY
: Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION
: Proposed rule.
SUMMARY
: DoD is proposing to amend
the Defense Federal Acquisition
Regulation Supplement (DFARS) to
implement a section of the National
Defense Authorization Act for Fiscal
Year 2017 that makes amendments
regarding the treatment of independent
research and development expenditures
and requires the Defense Contract Audit
Agency to provide an annual report to
Congress on independent research and
development and bid and proposal
expenditures.
DATES
: Comments on the proposed rule
should be submitted in writing to the
address shown below on or before
November 29, 2021, to be considered in
the formation of a final rule.
ADDRESSES
: Submit comments
identified by DFARS Case 2017–D018,
using any of the following methods:
ÆFederal eRulemaking Portal:
https://www.regulations.gov. Search for
‘‘DFARS Case 2017–D018.’’ Select
‘‘Comment’’ and follow the instructions
to submit a comment. Please include
your name, company name (if any), and
‘‘DFARS Case 2017–D018’’ on any
attached documents.
ÆEmail: osd.dfars@mail.mil. Include
DFARS Case 2017–D018 in the subject
line of the message.
Comments received generally will be
posted without change to https://
www.regulations.gov, including any
personal information provided. To
confirm receipt of your comment(s),
please check https://
www.regulations.gov, approximately
two to three days after submission to
verify posting.
FOR FURTHER INFORMATION CONTACT
: Mr.
David E. Johnson, telephone 571–372–
6115.
SUPPLEMENTARY INFORMATION
:
I. Background
Section 824 of the National Defense
Authorization Act (NDAA) for Fiscal
Year (FY) 2017 (Pub. L. 114–328)
amends 10 U.S.C. 2372 to require that
regulations may not infringe on the
independence of a contractor to choose
which technologies to pursue in its
independent research and development
(IR&D) program if the chief executive
officer (CEO) of the contractor
determines that IR&D expenditures will
advance the needs of DoD for future
technology and advanced capability.
Section 824 amends 10 U.S.C. 2372 to
remove the list that limits the
allowability of IR&D costs to seven
activities of potential interest to DoD. In
lieu of the list of activities of potential
interest to DoD, section 824 requires a
CEO determination that IR&D expenses
will advance the needs of DoD for future
technology and advanced capability.
Section 824 also decouples IR&D and
bid and proposal (B&P) costs by moving
the language pertaining to B&P costs out
of 10 U.S.C. 2372 and placing it in the
new 10 U.S.C. 2372a. This change
ensures that regulations pertaining to
B&P costs are separated from regulations
pertaining to IR&D costs.
Section 824 also amends 10 U.S.C.
2313a by adding a requirement for the
Defense Contract Audit Agency to
submit an annual report to Congress of
all incurred IR&D and B&P costs of
contractors in the prior Government
fiscal year.
II. Discussion and Analysis
In accordance with 10 U.S.C. 2372(d),
the rule adds language at DFARS
231.205–18(c)(iii)(A)(1) to require
contractor CEOs to determine that IR&D
expenditures will advance the needs of
DoD for future technology and advanced
capability. In addition, the rule adds a
requirement at DFARS 231.205–
18(iii)(c)(A)(2) for major contractors to
include a statement in the submission to
the Defense Technical Information
Center (DTIC) that the CEO of the
contractor has made the determination
required by 10 U.S.C. 2372. This
statement serves as evidence for DoD,
when determining whether IR&D costs
are allowable. Major contractors are
already required to upload IR&D
activities in DTIC in order to provide
DoD with information on the progress of
these activities; this rule simply adds a
requirement for those major contractors
to include a statement in the DTIC input
that the determination required by 10
U.S.C. 2372 has been made as a means
for DoD to know that those costs are
allowable.
Since the list of seven activities of
potential interest to DoD was deleted
from 10 U.S.C. 2372, the requirement for
the Defense Contract Management
Agency (DCMA) administrative
contracting officer (ACO) or corporate
ACO (CACO) to compare the IR&D
activities uploaded in DTIC to the list of
seven IR&D activities of potential
interest to DoD no longer exists.
Therefore, DFARS 242.771–3(a) is
modified to remove the ACO and CACO
responsibilities for determining if an
activity is of potential interest to DoD.
The rule also adds language to clarify
that IR&D and B&P costs will be
reported independently from other
incurred indirect costs in a new
paragraph at DFARS 231.205–18(c)(iv).
This change corresponds to 10 U.S.C.
2372(a) and 10 U.S.C. 2372a(a), which
require allowable IR&D and B&P costs to
be reported independently.
The proposed rule decouples IR&D
and B&P by stating ‘‘IR&D and B&P’’
instead of ‘‘IR&D/B&P’’ throughout the
text based on the amendment to 10
U.S.C. 2372, which segregates IR&D and
B&P costs. However, for the purposes of
calculating the threshold that requires
major contractors to submit IR&D
activities and statements regarding the
CEO determinations in DTIC, the rule
does not change the calculation, which
combines IR&D and B&P, to ensure the
definition of ‘‘major contractor’’ remains
the same.
DFARS 242.771–3(c)(1) is modified in
the proposed rule to change the content
of the communication from DoD to
contractors from the ‘‘planned or
expected DoD future needs’’ to the
‘‘planned or expected needs of DoD for
future technology and advanced
capability.’’ In addition, the
responsibilities of the Office of the
Under Secretary of Defense for Research
and Engineering are expanded to
include providing on the DTIC website
VerDate Sep<11>2014 17:01 Sep 28, 2021 Jkt 253001 PO 00000 Frm 00042 Fmt 4702 Sfmt 4702 E:\FR\FM\29SEP1.SGM 29SEP1
lotter on DSK11XQN23PROD with PROPOSALS1
53928
Federal Register / Vol. 86, No. 186 / Wednesday, September 29, 2021 / Proposed Rules
communities of interest on DoD’s future
needs. An email address for additional
information is also provided. This
change ensures that timely and
comprehensive information on DoD’s
planned or expected needs for future
technology and advanced capability is
being transmitted from DoD to
contractors, as required by 10 U.S.C.
2372(c)(2)(A).
To support DCAA’s compliance with
10 U.S.C. 2313a, the proposed rule adds
a contract clause at DFARS 252.242–
70XX, Independent Research and
Development and Bid and Proposal
Incurred Costs, which requires all
contractors with noncommercial awards
exceeding the simplified acquisition
threshold to provide an incurred cost
submission of IR&D and B&P costs for
the prior Government fiscal year to a
website for DCAA to access. The related
clause prescription is at DFARS
242.771–4.
III. Applicability to Contracts at or
Below the Simplified Acquisition
Threshold and for Commercial Items,
Including Commercially Available Off-
The-Shelf Items
This rule proposes to create a new
clause at DFARS 252.242–70XX,
Independent Research and Development
and Bid and Proposal Incurred Costs.
However, this clause does not impact
contracts at or below the simplified
acquisition threshold or contracts for
the acquisition of commercial items,
including commercially available off-
the-shelf items.
IV. Executive Orders 12866 and 13563
Executive Order (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.
V. Congressional Review Act
As required by the Congressional
Review Act (5 U.S.C. 801–808) before an
interim or final rule takes effect, DoD
will submit a copy of the interim or
final rule with the form, Submission of
Federal Rules under the Congressional
Review Act, to the U.S. Senate, the U.S.
House of Representatives, and the
Comptroller General of the United
States. A major rule under the
Congressional Review Act cannot take
effect until 60 days after it is published
in the Federal Register. This rule is not
anticipated to be a major rule under 5
U.S.C. 804.
VI. Regulatory Flexibility Act
DoD does not expect this proposed
rule to have a significant economic
impact on a substantial number of small
entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601,
et seq. However, an initial regulatory
flexibility analysis has been performed
and is summarized as follows:
DoD is proposing to amend the
DFARS to implement section 824 of the
National Defense Authorization Act
(NDAA) for Fiscal Year (FY) 2017 (Pub.
L. 114–328). Section 824 modifies 10
U.S.C. 2372 to require the chief
executive officer (CEO) of the contractor
to make a determination that
independent research and development
(IR&D) expenditures will advance the
needs of the Department of Defense for
future technology and advanced
capability. Section 824 also amends 10
U.S.C. 2313a to require the Defense
Contract Audit Agency (DCAA) to
submit an annual report to Congress on
incurred IR&D and bid and proposal
(B&P) costs for all contractors in the
prior Government fiscal year. The legal
basis for the amendment to the DFARS
is section 824 of the NDAA for FY 2017.
In accordance with 10 U.S.C. 2372(d),
the proposed rule adds language
applicable to contractors at DFARS
231.205–18(c)(iii)(A)(1) requiring the
CEO of the contractor to determine that
IR&D expenditures will advance the
needs of DoD for future technology and
advanced capability. The proposed rule
also adds, at DFARS 231.205–
18(iii)(A)(2), a requirement for major
contractors to include a statement in the
Defense Technical Information Center
(DTIC) submission that the CEO of the
contractor made the determination
required by 10 U.S.C. 2372. To support
DCAA’s compliance with 10 U.S.C.
2313a, the proposed rule includes a
contract clause that requires contractors
with noncommercial awards exceeding
the simplified acquisition threshold to
provide an incurred cost submission of
IR&D and B&P costs for the prior
Government fiscal year to a website for
DCAA to access.
The proposed rule will only apply to
small entities that have incurred IR&D
costs or B&P costs associated with
noncommercial DoD awards exceeding
the simplified acquisition threshold or
small businesses that have an IR&D
program and are considered to be a
major contractor, which is defined as
having annual expenditures of $1.1
million in combined IR&D and B&P
expenditures.
Based on an internal DoD website, on
average for FY 2017 through FY 2019,
there were 69 other than small business
major contractors that submitted IR&D
activities to DTIC. DoD does not have a
list of other than major contractors or
small entities that have IR&D programs.
As a result, the burden on the public for
developing a statement of the CEO
determination in DTIC is expected to be
close to 69 contractors. DoD expects a
minimal number of the contractors to be
small entities.
DoD determined that for FY 2020, a
total of 1,869 contractors submitted
incurred cost proposals to the
Government claiming IR&D or B&P
costs. This number represents the
estimated number of contractors that
will be required under the new clause
252.242–70XX, Independent Research
and Development and Bid and Proposal
Incurred Costs, to annually report IR&D
and B&P costs to the Defense Contract
Audit Agency. The ratio of small
entities to other than small entities is
unknown. However, DoD expects the
proposed rule will have minimal impact
on small entities.
This proposed rule does include new
reporting or recordkeeping requirements
for small entities. The annual reporting
burden is related to adding the
statement that the CEO has made a
determination to IR&D project
submissions in DTIC and submitting
IR&D and B&P incurred costs to a DCAA
website. It is expected that, if applicable
to a small entity, the CEO of the
contractor and an attorney of the
contractor would be required to support
including a statement that the CEO
made a determination with IR&D project
submissions in DTIC and a financial
analyst of the contractor would be
required to support submitting IR&D
and B&P incurred costs to a website. As
stated previously, it is expected that a
minimal number of small entities will
be impacted by the major contractor
requirement to upload to DTIC a
statement that the CEO made a
determination as there are currently no
known small entities classified as major
contractors. It is expected that fewer
than 1,869 small businesses would be
required to upload IR&D and B&P
incurred costs to a DCAA website.
The rule does not duplicate, overlap,
or conflict with any other Federal rules.
There are no known significant
alternative approaches to the proposed
rule that would meet the requirements
of the applicable statute.
VerDate Sep<11>2014 17:01 Sep 28, 2021 Jkt 253001 PO 00000 Frm 00043 Fmt 4702 Sfmt 4702 E:\FR\FM\29SEP1.SGM 29SEP1
lotter on DSK11XQN23PROD with PROPOSALS1
53929
Federal Register / Vol. 86, No. 186 / Wednesday, September 29, 2021 / Proposed Rules
DoD invites comments from small
business concerns and other interested
parties on the expected impact of this
rule on small entities.
DoD will also consider comments
from small entities concerning the
existing regulations in subparts affected
by this rule in accordance with 5 U.S.C.
610. Interested parties must submit such
comments separately and should cite 5
U.S.C. 610 (DFARS Case 2017–D018), in
correspondence.
VII. Paperwork Reduction Act
The Paperwork Reduction Act (44
U.S.C. chapter 35) applies. The rule
contains information collection
requirements that require the approval
of the Office of Management and Budget
(OMB) under the Paperwork Reduction
Act (44 U.S.C. chapter 35). Accordingly,
DoD plans to submit a request for
approval of a new information
collection requirement concerning
DFARS Case 2017–D018, Treatment of
Incurred Independent Research and
Development Costs, to OMB.
A1. DFARS 231.205–18(c)(iii)(A)(2)(iii)
Based on the proposed revisions to
DFARS 231.205–18(c)(iii)(A)(2)(iii), an
upward adjustment is being made to the
burden hours for reporting per response.
Public reporting burden for this
collection of information is estimated to
average 1 hour per response for
submission of the confirming statement
into DTIC that the chief executive
officer of the contractor has made a
determination that the expenditures will
advance the needs of DoD future
technology and advanced capability.
The annual reporting burden is
estimated as follows:
Respondents: 69.
Responses per respondent: 90,
approximately.
Total annual responses: 6,244.
Hours per response: 1.
Total annual burden hours: 6,244.
A2. DFARS 252.242–70XX, Independent
Research and Development and Bid and
Proposal Incurred Costs
Public reporting burden results from
the collection of information regarding
contractor submission of an annual
report of IR&D and B&P costs incurred
during performance of any DoD contract
in the prior Government fiscal year.
Reports are required no later than
December 31 each year. Approximately
0.25 hour per response is expected for
the contractor to submit incurred IR&D
and B&P costs for the prior Government
fiscal year to a website provided in the
clause that DCAA can access. The
annual reporting burden is estimated as
follows:
Respondents: 1,869.
Responses per respondent: 1.
Total annual responses: 1,869.
Hours per response: 0.25.
Total response Burden Hours: 467.
B. Request for Comments Regarding
Paperwork Burden
Written comments and
recommendations on the proposed
information collection, including
suggestions for reducing this burden,
should be sent to Ms. Susan Minson at
the Office of Management and Budget,
Desk Officer for DoD, Room 10236, New
Executive Office Building, Washington,
DC 20503, or email Susan_M_Minson@
omb.eop.gov, with a copy to the Defense
Acquisition Regulations System, Attn:
David E. Johnson, OUSD(A&S)DPC/
DARS, Room 3B938, 3060 Defense
Pentagon, Washington, DC 20301–3060.
Comments can be received from 30 to 60
days after the date of this notice, but
comments to OMB will be most useful
if received by OMB within 30 days after
the date of this notice.
Public comments are particularly
invited on: Whether this collection of
information is necessary for the proper
performance of functions of the DFARS,
and will have practical utility; whether
our estimate of the public burden of this
collection of information is accurate,
and based on valid assumptions and
methodology; ways to enhance the
quality, utility, and clarity of the
information to be collected; and ways in
which we can minimize the burden of
the collection of information on those
who are to respond, through the use of
appropriate technological collection
techniques or other forms of information
technology.
To request more information on this
proposed information collection or to
obtain a copy of the proposal and
associated collection instruments,
please write to the Defense Acquisition
Regulations System, Attn: David E.
Johnson, OUSD(A&S)DPC/DARS, Room
3B938, 3060 Defense Pentagon,
Washington, DC 20301–3060, or email
osd.dfars@mail.mil. Include DFARS
Case 2017–D018 in the subject line of
the message.
List of Subjects in 48 CFR Parts 225,
231, 242, and 252
Government procurement.
Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition
Regulations System.
Therefore, 48 CFR parts 225, 231, 242,
and 252 are proposed to be amended as
follows:
■1. The authority citation for parts 225,
231, 242, and 252 continues to read as
follows:
Authority: 41 U.S.C. 1303 and 48 CFR
chapter 1.
PART 225—FOREIGN ACQUISITION
■2. Amend section 225.7303–2 by
revising paragraphs (b) and (c) to read
as follows:
225.7303–2 Cost of doing business with a
foreign government or an international
organization.
* * * * *
(b) Costs not allowable under FAR
part 31 are not allowable in pricing FMS
contracts, except as noted in paragraphs
(c) and (e) of this section.
(c) The limitations for all contractors
described in 231.205–18(c)(iii) and (iv)
do not apply to FMS contracts, except
as provided in 225.7303–5. The
allowability of IR&D and B&P costs on
contracts for FMS not wholly paid for
from funds made available on a
nonrepayable basis is limited to the
contract’s allocable share of the
contractor’s total IR&D and total B&P
expenditures. In pricing contracts for
such FMS—
(1) Use the best estimate of reasonable
costs in forward pricing; and
(2) Use actual expenditures, to the
extent that they are reasonable, in
determining final cost.
* * * * *
PART 231—CONTRACT COST
PRINCIPLES AND PROCEDURES
■3. Revise section 231.205–18 to read
as follows:
231.205–18 Independent research and
development and bid and proposal costs.
(a) Definitions. As used in this
section—
Covered contract means a DoD prime
contract for an amount exceeding the
simplified acquisition threshold, except
for a fixed-price contract without cost
incentives. The term also includes a
subcontract for an amount exceeding the
simplified acquisition threshold, except
for a fixed-price subcontract without
cost incentives under such a prime
contract.
Covered segment means a product
division of the contractor that allocated
more than $1,100,000 in independent
research and development (IR&D) and
bid and proposal (B&P) costs to covered
contracts during the preceding fiscal
year. In the case of a contractor that has
no product divisions, the term means
that contractor as a whole. A product
division of the contractor that allocated
less than $1,100,000 in IR&D and B&P
VerDate Sep<11>2014 17:01 Sep 28, 2021 Jkt 253001 PO 00000 Frm 00044 Fmt 4702 Sfmt 4702 E:\FR\FM\29SEP1.SGM 29SEP1
lotter on DSK11XQN23PROD with PROPOSALS1
53930
Federal Register / Vol. 86, No. 186 / Wednesday, September 29, 2021 / Proposed Rules
costs to covered contracts during the
preceding fiscal year is not subject to
the limitations in paragraph (c) of this
section.
Major contractor means any
contractor whose covered segments
allocated a total of more than
$11,000,000 in IR&D and B&P costs to
covered contracts during the preceding
fiscal year. For purposes of calculating
the dollar threshold amounts to
determine whether a contractor meets
the definition of ‘‘major contractor,’’ do
not include contractor segments
allocating less than $1,100,000 of IR&D
and B&P costs to covered contracts
during the preceding fiscal year.
(c) Allowability. (i) Departments/
agencies shall not supplement this
regulation in any way that limits IR&D
and B&P cost allowability.
(ii) See 225.7303–2(c) for allowability
provisions affecting foreign military sale
contracts.
(iii)(A) For incurred IR&D costs to be
allowable—
(1) The chief executive officer (CEO)
of the contractor must have determined
that the expenditures will advance the
needs of DoD for future technology and
advanced capability (10 U.S.C. 2372(d))
(see 242.771–3); and
(2) For major contractors only—
(i) The IR&D projects generating the
IR&D costs must be reported to the
Defense Technical Information Center
(DTIC) using the DTIC’s online input
form and instructions at https://defense
innovationmarketplace.dtic.mil/
industry-portal/;
(ii) The DTIC inputs must be updated
at least annually, no later than 3 months
after the end of the contractor’s fiscal
year, and when the project is completed;
and
(iii) For each IR&D project beginning
on or after October 1, 2017, the DTIC
input must include a statement that the
CEO of the contractor determined that
the expenditures will advance the needs
of DoD for future technology and
advanced capability.
(B) The amount of IR&D costs
allowable under DoD contracts shall not
exceed the lesser of—
(1) Such contracts’ allocable share of
total incurred IR&D costs; or
(2) The total amount of incurred IR&D
costs that the CEO of the contractor has
determined will advance the needs of
DoD for future technology and advanced
capability.
(C) Contractors not meeting the
threshold of a major contractor are
encouraged to use the DTIC online input
form and instructions at https://defense
innovationmarketplace.dtic.mil/
industry-portal/ to report IR&D projects
in order to provide DoD with visibility
into the technical content of the
contractors’ IR&D projects.
(iv) Incurred IR&D and B&P costs
must be reported independently from
each other and other incurred indirect
costs.
PART 242—CONTRACT
ADMINISTRATION
■4. Amend section 242.302 by revising
paragraph (a)(9) to read as follows:
242.302 Contract administration functions.
(a) * * *
(9) For additional contract
administration functions related to IR&D
and B&P projects performed by major
contractors, see 242.771–3(a).
* * * * *
■5. Revise sections 242.771–1,
242.771–2, and 242.771–3 to read as
follows:
Sec.
* * * * *
242.771–1 Scope.
242.771–2 Policy.
242.771–3 Responsibilities.
* * * * *
242.771–1 Scope.
This section implements 10 U.S.C.
2372, Independent research and
development costs: Allowable costs; 10
U.S.C. 2372a, Bid and proposal costs:
Allowable costs; and 10 U.S.C. 2313a,
Defense Contract Audit Agency: annual
report.
242.771–2 Policy.
Defense contractors are encouraged to
engage in independent research and
development (IR&D) projects that will
advance the needs of DoD for future
technology and advanced capability (see
231.205–18(c)(iii)).
242.771–3 Responsibilities.
(a) The cognizant administrative
contracting officer (ACO) or corporate
ACO shall determine cost allowability
of IR&D and B&P costs as set forth in
231.205–18 and FAR 31.205–18.
(b) The Defense Contract Audit
Agency (DCAA) shall—
(1) For the DoD-wide B&P program,
submit an annual report to the Principal
Director, Defense Pricing and
Contracting, Office of the Under
Secretary of Defense for Acquisition and
Sustainment, as required by 10 U.S.C.
2372a(c); the Defense Contract
Management Agency or the military
department responsible for performing
contract administration functions is
responsible for providing DCAA with
statistical information, as necessary; and
(2) For IR&D and B&P costs incurred
under any DoD contract in the previous
Government fiscal year, submit an
annual report to the congressional
defense committees as required by 10
U.S.C. 2313a.
(c) The Office of the Under Secretary
of Defense for Research and Engineering
(OUSD(R&E)), is responsible for
establishing a regular method for
communication—
(1)(i) From DoD to contractors, of
timely and comprehensive information
regarding planned or expected needs of
DoD for future technology and advanced
capability, by posting information on
communities of interest and upcoming
meetings on the Defense Technical
Information Center (DTIC) website at
https://defenseinnovationmarketplace.
dtic.mil/communities-of-interest; and
(ii) From contractors to DoD, of brief
technical descriptions of contractor
IR&D projects; and
(2) By providing OUSD(R&E) contact
information: osd.pentagon.ousd-
re.mbx.communications@mail.mil.
■6. Add section 242.771–4 to subpart
242.7 to read as follows:
242.771–4 Contract clause.
Use the clause at 252.242–70XX,
Independent Research and Development
and Bid and Proposal Incurred Costs, in
solicitations and contracts that exceed
the simplified acquisition threshold.
PART 252—SOLICITATION
PROVISIONS AND CONTRACT
CLAUSES
■7. Add section 252.242–70XX to read
as follows:
252.242–70XX Independent Research and
Development and Bid and Proposal
Incurred Costs.
As prescribed in 242.771–4, use the
following clause:
Independent Research and
Development and Bid and Proposal
Incurred Costs (DATE)
(a) In order for the Defense Contract Audit
Agency to submit the annual report required
by 10 U.S.C. 2313a, the Contractor shall—
(1) Report to [website TBD] a consolidated
spreadsheet of all independent research and
development (IR&D) and bid and proposal
(B&P) costs incurred by the Contractor during
performance of any DoD contract in the
previous fiscal year, beginning October 1
through September 30; and
(2) Submit this report no later than
December 31 of each year.
(b) IR&D and B&P incurred costs shall be
reported separately and shall be reported by
costs attributable to—
(1) The Department of Defense (non-foreign
military sales);
(2) Foreign military sales; and
(3) Other.
VerDate Sep<11>2014 17:01 Sep 28, 2021 Jkt 253001 PO 00000 Frm 00045 Fmt 4702 Sfmt 4702 E:\FR\FM\29SEP1.SGM 29SEP1
lotter on DSK11XQN23PROD with PROPOSALS1
53931
Federal Register / Vol. 86, No. 186 / Wednesday, September 29, 2021 / Proposed Rules
(End of clause)
[FR Doc. 2021–20938 Filed 9–28–21; 8:45 am]
BILLING CODE 5001–06–P
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 225 and 252
[Docket DARS–2021–0018]
RIN 0750–AL29
Defense Federal Acquisition
Regulation Supplement: Modification
of Small Purchase Threshold
Exceptions (DFARS Case 2021–D010)
AGENCY
: Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION
: Proposed rule.
SUMMARY
: DoD is proposing to amend
the Defense Federal Acquisition
Regulation Supplement (DFARS) to
implement a section of the National
Defense Authorization Act for Fiscal
Year 2021, which reduces the dollar
threshold at which an acquisition is
excepted from certain source
restrictions.
DATES
: Comments on the proposed rule
should be submitted in writing to the
address shown below on or before
November 29, 2021, to be considered in
the formation of the final rule.
ADDRESSES
: Submit comments
identified by DFARS Case 2021–D010,
using any of the following methods:
ÆFederal eRulemaking Portal:
https://www.regulations.gov. Search for
‘‘DFARS Case 2021–D010.’’ Select
‘‘Comment’’ and follow the instructions
to submit a comment. Please include
your name, company name (if any), and
‘‘DFARS Case 2021–D010’’ on any
attached documents.
ÆEmail: osd.dfars@mail.mil. Include
DFARS Case 2021–D010 in the subject
line of the message.
Comments received generally will be
posted without change to https://
www.regulations.gov, including any
personal information provided. To
confirm receipt of your comment(s),
please check https://
www.regulations.gov, approximately
two to three days after submission to
verify posting.
FOR FURTHER INFORMATION CONTACT
: Ms.
Kimberly R. Ziegler, telephone 571–
372–6095.
SUPPLEMENTARY INFORMATION
:
I. Background
This rule proposes to amend DFARS
subpart 225.70 to implement section
817 of the National Defense
Authorization Act (NDAA) for Fiscal
Year (FY) 2021 (Pub. L. 116–283).
Section 817 amends 10 U.S.C. 2533a
(commonly known as the ‘‘Berry
Amendment’’), by reducing the dollar
threshold at which an acquisition is
excepted from the source restrictions of
the Berry Amendment from the
simplified acquisition threshold (SAT)
to an amount not to exceed $150,000.
DFARS 225.7002 identifies the
domestic source restrictions of 10 U.S.C.
2533a on food, clothing, fabrics, fibers,
hand or measuring tools, and flags,
unless an exception applies. DFARS
225.7002–2, Exceptions, has historically
referred to ‘‘actions at or below the
small purchase threshold,’’ rather than a
specific dollar value, as an exception to
the domestic source restrictions of the
Berry Amendment. As a result, each
time the SAT increased, the exception
threshold also increased to align with
the new SAT, to include the most recent
SAT increase to $250,000. Federal
Acquisition Regulation (FAR) Case
2018–004, published July 2, 2020 (85 FR
40064) raised the SAT at FAR 2.101
from $150,000 to $250,000.
II. Discussion and Analysis
The proposed rule implements
section 817 of the NDAA for FY 2021 by
revising the exception at DFARS
225.7002–2(a) from ‘‘at or below the
simplified acquisition threshold’’ to
‘‘not exceeding $150,000’’. The net
effect of this revision will be to increase
the number of acquisitions subject to the
domestic source requirements at DFARS
225.7002. Conforming changes will also
be made at DFARS 225.7002–2(j)(2),
225.7002–3(b) and (c), and the
associated contract clause 252.225–
7012, Preference for Certain Domestic
Commodities.
While the statute reduces the dollar
value of the current exception
threshold, it also authorizes the
adjustment of this statutory threshold
for inflation every five years, in
accordance with 41 U.S.C. 1908.
III. Applicability to Contracts at or
Below the Simplified Acquisition
Threshold (SAT) and for Commercial
Items, Including Commercially
Available Off-the-Shelf (COTS) Items
This rule proposes to amend the
applicability of the following DFARS
clauses: (1) 252.225–7006, Acquisition
of the American Flag; (2) 252.225–7012,
Preference for Certain Domestic
Commodities; and (3) 252.225–7015,
Restriction on Acquisition of Hand or
Measuring Tools. DoD does intend to
apply the rule to contracts valued above
$150,000 but at or below the SAT. The
clauses impacted by the rule are already
prescribed for use in solicitations and
contracts using FAR part 12 procedures
for the acquisition of commercial items,
including COTS items.
A. Applicability to Contracts at or Below
the Simplified Acquisition Threshold
41 U.S.C. 1905 governs the
applicability of laws to contracts or
subcontracts in amounts not greater
than the simplified acquisition
threshold. It is intended to limit the
applicability of laws to such contracts or
subcontracts. 41 U.S.C. 1905 provides
that if a provision of law contains
criminal or civil penalties, or if the
Federal Acquisition Regulatory Council
makes a written determination that it is
not in the best interest of the Federal
Government to exempt contracts or
subcontracts at or below the SAT, the
law will apply to them. The Principal
Director, Defense Pricing and
Contracting (DPC), is the appropriate
authority to make comparable
determinations for regulations to be
published in the DFARS, which is part
of the FAR system of regulations. DoD
does intend to make that determination.
Therefore, this rule will apply below the
simplified acquisition threshold.
B. Determination
DoD plans to apply the rule to
contracts valued above $150,000 but at
or below the SAT for the following
DFARS clauses: (1) 252.225–7006,
Acquisition of the American Flag; (2)
252.225–7012, Preference for Certain
Domestic Commodities; and (3)
252.225–7015, Restriction on
Acquisition of Hand or Measuring
Tools.
Not applying these clauses to
contracts valued above $150,000 but at
or below the SAT would exclude
contracts intended to be covered by this
rule and undermine the overarching
purpose of the rule, which is to increase
the number of acquisitions subject to the
domestic source restrictions at DFARS
225.7002 by reducing the volume of
procurements subject to the exception at
DFARS 225.7002–2(a). The clauses
already apply to commercial items,
including COTS items.
IV. Expected Impact of the Rule
DFARS 225.7002 identifies the
domestic source restrictions of 10 U.S.C.
2533a on food, clothing, fabrics, fibers,
hand or measuring tools, and flags,
unless an exception at DFARS
225.7002–2 applies. Acquisitions valued
VerDate Sep<11>2014 17:01 Sep 28, 2021 Jkt 253001 PO 00000 Frm 00046 Fmt 4702 Sfmt 4702 E:\FR\FM\29SEP1.SGM 29SEP1
lotter on DSK11XQN23PROD with PROPOSALS1
