Office of the Secretary, DoD.
This final rule implements section 822 of the National Defense Authorization act for Fiscal Year 2002, Public Law 107-107, 115 Stat. 1182. Section 822 provides for award of a follow-on production contract to traditional Defense contractors, without further competition, when the other transaction (OT) agreement for the prototype project provided for at least one-third non-Federal cost-share, consistent with law, and the OT agreement for the prototype project Start Printed Page 16482satisfies certain additional conditions of law.
The final rule is effective March 30, 2004. This final rule will become effective for solicitations issued on March 30, 2004, or those issued 30 days after March 30, 2004. This final rule may be used for new prototype awards that result from solicitations issued prior to March 30, 2004.Start Further Info
FOR FURTHER INFORMATION CONTACT:
David Boyd, (703) 697-6710.End Further Info End Preamble Start Supplemental Information
Background and Purpose
Section 845 of the National Defense Authorization Act for Fiscal Year 1994, Public Law 103-160, 107 Stat. 1721, as amended, authorizes the Secretary of a Military Department, the Director of Defense Advanced Research Projects Agency and any other official designated by the Secretary of Defense, to enter into transactions other than contracts, grants or cooperative agreements in certain situations for prototype projects that are directly relevant to weapons or weapon systems proposed to be acquired or developed by the Department of Defense. Such transactions are commonly referred to as “other transaction” agreements for prototype projects. To the extent that a particular statute or regulation is limited in its applicability to the use of a procurement contract, it would generally not apply to “other transactions” for prototype projects.
Use of OT authority is authorized by law in the absence of the significant participation of a nontraditional Defense contractor, when at least one-third of the costs of the prototype project are to be provided by non-Federal parties to the agreement. The authority granted by section 822 of the National Defense Authorization Act for Fiscal Year 2002 provides for the authority to continue such prototype projects into production without competition in certain circumstances. The circumstances are identified in this rule. Additionally, a rule will be issued to the Defense Federal Acquisition Regulation Supplement that exempts such production contracts from further competition, notwithstanding the requirements of section 2304 of title 10, United States Code.
In implementing the law, the Department clarifies that the number of production units and target prices proposed for production must be evaluated during the competition for the prototype project. This is consistent with the law's competition requirement and is the basis for being exempted from the need for further competition for the stated production quantity.
A proposed rule was published in the Federal Register for public comment on May 20, 2003 (68 FR 27497). No comments were received.
Executive Order 12866, “Regulatory Planning and Review”
It has been determined that this rule is not a significant rule as defined under section 3(f)(1) through 3(f)(4) of Executive Order 12866.
Unfunded Mandates Reform Act (Sec. 202, Pub. L. 104-4)
It has been certified that this rule does not contain a Federal mandate that may result in the expenditure by State, local and tribal governments, in aggregate, or by the private sector, of $100 million or more in any one year.
Pub. L. 96-354, “Regulatory Flexibility Act” (5 U.S.C. 601)
It has been certified that this rule is not subject to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) because it would not, if promulgated, have a significant economic impact on a substantial number of small entities. The rule does not require additional recordkeeping or other significant expense by project participants.
Pub. L. 96-511, “Paperwork Reduction Act of 1995” (44 U.S.C. 3501 et seq.)
It has been certified that this rule does not impose any reporting or record keeping requirements under the Paperwork Reduction Act of 1995.
Federalism (Executive Order 13132)
It has been certified that this rule does not have federalism implications, as set forth in Executive Order 13132.Start List of Subjects
List of Subjects in 32 CFR Part 3End List of Subjects Start Amendment Part
Accordingly,End Amendment Part Start Part
PART 3—TRANSACTIONS OTHER THAN CONTRACTS, GRANTS, OR COOPERATIVE AGREEMENTS FOR PROTOTYPE PROJECTSEnd Part Start Amendment Part
1. The authority citation forEnd Amendment Part
2. Section 3.4 is amended to add new definitions in aphabetical order to read as follows:End Amendment Part
Contracting Officer. A person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings as defined in Chapter 1 of Title 48, CFR, Federal Acquisition Regulation, Section 2.101(b).
Project Manager. The government manager for the prototype project.
3. New § 3.9 is added to read as follows:End Amendment Part
(a) Authority. A competitively awarded OT agreement for a prototype project that satisfies the condition set forth in law that requires non-Federal parties to the OT agreement to provide at least one-third of the costs of the prototype project may provide for the award of a follow-on production contract to the awardee of the OT prototype agreement for a specific number of units at specific target prices, without further competition.
(b) Conditions. The Agreements Officer must do the following in the award of the prototype project:
(1) Ensure non-Federal parties to the OT prototype agreement offer at least one-third of the costs of the prototype project pursuant to subsection (d)(1)(B)(i), 10 U.S.C. 2371 note.
(2) Use competition to select parties for participation in the OT prototype agreement and evaluate the proposed quantity and target prices for the follow-on production units as part of that competition.
(3) Determine the production quantity that may be procured without further competition, by balancing of the level of the investment made in the project by the non-Federal parties with the interest of the Federal Government in having competition among sources in the acquisition of the product or products prototyped under the project.
(4) Specify the production quantity and target prices in the OT prototype agreement and stipualte in the agreement that the Contracting Officer for the follow-on contract may award a production contract without further competition if the awardee successfully completes the prototype project and agrees to production quantities and prices that do not exceed those specified in the OT prototype agreement (see part 206.001 of the Defense Federal Acquisition Regulation Supplement).
(c) Limitation. As a matter of policy, establishing target prices for production units should only be considered when the risk of the prototype project permits realistic production pricing without placing undue risks on the awardee.Start Printed Page 16483
(d) Documentation. (1) The Agreements Officer will need to provide information to the Contracting Officer from the agreement and award file that the conditions set forth in paragraph (b) of this section have been satisfied.
(2) The information shall contain, at a minimum:
(i) The competitive procedures used;
(ii) How the production quantities and target prices were evaluated in the competition;
(iii) The percentage of cost-share; and
(iv) The production quantities and target prices set forth in the OT agreement.
(3) The Project Manager will provide evidence of successful completion of the prototype project to the Contracting Officer.
Dated: March 12, 2004.
Patricia L. Toppings,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 04-7044 Filed 3-29-04; 8:45 am]
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