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Federal Acquisition Regulation; Definition of Subcontract in FAR Subpart 15.4

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Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).


Final rule.


The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed on a final rule amending the Federal Acquisition Regulation (FAR) to exclude section 15.407-2 from application of the expanded definition of “subcontract” at FAR 15.401.


Effective Date: February 19, 2002.

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The FAR Secretariat, Room 4035, GS Building, Washington, DC, 20405, (202) 501-4755, for information pertaining to status or publication schedules. For clarification of content, contact Mr. Jeremy Olson, at (202) 501-3221. Please cite FAC 2001-02, FAR case 2000-017.

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A. Background

This final rule excludes section 15.407-2 from application of the expanded definition of “subcontract” at FAR 15.401. This definition of “subcontract” is derived from the Truth in Negotiations Act (10 U.S.C. 2306a(h)(2) and 41 U.S.C. 254b(h)(2)). Prior to the rewrite of Part 15, this definition applied only to Subpart 15.8, Price Negotiation, and did not apply to Subpart 15.7, Make-or-Buy Programs, or Subpart 15.9, Profit. The rewrite combined these three subparts into the new Subpart 15.4, Contract Pricing. However, application of the expanded definition creates a conflict with the definitions of “buy item” and “make item” in section 15.407-2, Make-or-buy programs. As defined in section 15.407-2, “buy item” means an item or work effort to be produced or performed by a subcontractor. “Make item” means an item or work effort to be produced or performed by the prime contractor or its affiliates, subsidiaries, or divisions. In this context, a transfer of commercial items between divisions, subsidiaries, or affiliates of a contractor is not considered to be a “subcontract.” This is not a significant regulatory action and, therefore, was not subject to Office of Management and Budget review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

The final rule does not constitute a significant FAR revision within the meaning of FAR 1.501 and Public Law 98-577, and publication for public comment is not required.

However, the Councils will consider comments from small entities concerning the affected FAR part 15 in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 601, et seq. (FAC 2001-02, FAR case 2000-017), in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the changes to the FAR do not impose information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

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List of Subjects in 48 CFR Part 15

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Dated: December 5, 2001.

Al Matera,

Director, Federal Acquisition Policy Division.

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Therefore, DoD, GSA, and NASA amend

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1. The authority citation for

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Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

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2. Amend section 15.401 in the definition of “Subcontract” by adding the parenthetical “(except as used in

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[FR Doc. 01-30543 Filed 12-17-01; 8:45 am]