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Proposed Rule

Defense Federal Acquisition Regulation Supplement; Payment and Billing Instructions

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Department of Defense (DoD).


Proposed rule with request for comments.


DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to improve payment and billing instructions in DoD contracts. This proposed rule is a result of a transformation initiative undertaken by Start Printed Page 35565DoD to dramatically change the purpose and content of the DFARS.


Comments on the proposed rule should be submitted in writing to the address shown below on or before August 24, 2004, to be considered in the formation of the final rule.


Respondents may submit comments via the Internet at​dar/​dfars.nsf/​pubcomm. As an alternative, respondents may e-mail comments to: Please cite DFARS Case 2003-D009 in the subject line of e-mailed comments.

Respondents that cannot submit comments using either of the above methods may submit comments to: Defense Acquisition Regulations Council, Attn: Mr. Thaddeus Godlewski, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-0350. Please cite DFARS Case 2003-D009.

At the end of the comment period, interested parties may view public comments on the Internet at​dar/​dfars.nsf.

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Mr. Thaddeus Godlewski, (703) 602-2022.

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A. Background

DFARS Transformation is a major DoD initiative to dramatically change the purpose and content of the DFARS. The objective is to improve the efficiency and effectiveness of the acquisition process, while allowing the acquisition workforce the flexibility to innovate. The transformed DFARS will contain only requirements of law, DoD-wide policies, delegations of FAR authorities, deviations from FAR requirements, and policies/procedures that have a significant effect beyond the internal operating procedures of DoD or a significant cost or administrative impact on contractors or offerors. Additional information on the DFARS Transformation initiative is available at​dp/​dars/​transf.htm.

This proposed rule is a result of the DFARS Transformation initiative. The proposed changes include—

  • Deletion of text at DFARS 204.201, 204.202, 204.7103-2, 204.7104-2, 204.7107, and 204.7108 addressing distribution of contracts and modifications; numbering of contract line items, subline items, and accounting classification references; and inclusion of payment instructions in contracts. Text on these subjects will be relocated to the new DFARS companion resource, Procedures, Guidance, and Information (PGI). In addition, PGI will contain a menu of standard payment instructions from which the contracting officer will make a selection for inclusion in Section G of the contract. A proposed rule describing the purpose and structure of PGI was published at 69 FR 8145 on February 23, 2004. Draft PGI text related to this proposed rule is available at​dpap/​dfars/​changes.htm.
  • Clarification of the definition of “accounting classification reference number” at DFARS 204.7101.
  • Amendment of DFARS 204.7103-1 to add text addressing contract type in the establishment of contract line items.
  • Amendment of DFARS 204.7106 to clarify that contract modifications decreasing the amount obligated shall not be issued unless sufficient unliquidated obligation exists or the purpose is to recover monies owed to the government.
  • Addition of a clause addressing contract line item information needed in contract financing and interim payment requests.
  • Amendment of Material Inspection and Receiving Report instructions to address electronic submissions.

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 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 the rule relates primarily to procedures that DoD contracting officers and payment offices must follow in structuring contracts and disbursing funds. Therefore, DoD has not performed an initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. DoD also will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2003-D009.

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.

Start List of Subjects

List of Subjects in 48 CFR Parts 204 and 252

  • Government procurement
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Michele P. Peterson,

Executive Editor, Defense Acquisition Regulations Council.

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Therefore, DoD proposes to amend 48 CFR parts 204, 252, and Appendix F to chapter 2 as follows:

1. The authority citation for 48 CFR parts 204, 252, and Appendix F to subchapter I continues to read as follows:

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Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

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2. Section 204.201 is revised to read as follows:


Follow the procedures at PGI 204.201 for the distribution of contracts and modifications.


3. Section 204.202 is removed.

4. Section 204.7101 is amended by revising the definition of Accounting classification reference number (ACRN) to read as follows:


Accounting classification reference number (ACRN) means any combination of a two position alpha/numeric code used as a method of relating the accounting classification citation to detailed line item information contained in the schedule.

* * * * *

5. Section 204.7103-1 is amended by redesignating paragraphs (b) through (d) as paragraphs (d) through (f), respectively; and by adding new paragraphs (b) and (c) to read as follows:

Criteria for establishing.
* * * * *

(b) All subline items and exhibit line items under one contract line item shall be the same contract type as the contract line item.

(c) For a contract that contains both fixed-price and cost-reimbursement line items, identify the contract type for each contract line item in Section B, Supplies or Services and Prices/Costs, to facilitate appropriate payment.

* * * * *

6. Section 204.7103-2 is revised to read as follows:

Numbering procedures.

Follow the procedures at PGI 204.7103-2 for numbering contract line items. Start Printed Page 35566

7. Section 204.7104-2 is revised to read as follows:

Numbering procedures.

Follow the procedures at PGI 204.7104-2 for numbering contract subline items.

8. Section 204.7106 is amended by adding paragraph (b)(3) to read as follows:

Contract modifications.
* * * * *

(b) * * *

(3) If the modification will decrease the amount obligated—

(i) There shall be coordination between the administrative and procuring contracting offices before issuance of the modification; and

(ii) The contracting officer shall not issue the modification unless sufficient unliquidated obligation exists or the purpose is to recover monies owed to the Government.

9. Section 204.7107 is revised to read as follows:

Contract accounting classification reference number (ACRN).

Follow the procedures at PGI 204.7107 for assigning ACRNs.

10. Sections 204.7108 and 204.7109 are added to read as follows:

Payment instructions.

Follow the procedures at PGI 204.7108 for inclusion of payment instructions in contracts.

Contract clause.

Use the clause at 252.204-7XXX, Billing Instructions, if Section G of the contract requires the contractor to identify the applicable contract line item(s) when the contractor submits a request for—

(a) A contract financing payment; or

(b)(1) An interim payment under a cost-reimbursement contract for services; and

(2) The contract includes the clause at FAR 52.232-25, Prompt Payment, with its Alternate I.

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11. Section 252.204-7XXX is added to read as follows:

Billing Instructions.

As prescribed in 204.7109, use the following clause:


When submitting a request for payment, the Contractor shall—

(a) Identify the contract line item(s) on the payment request that best reflect contract work performance; and

(b) Separately identify a payment amount for each contract line item that is included in the payment request.

(End of clause)

Appendix F—Material Inspection and Receiving Report

12. Appendix F to Chapter 2 is amended in Part 3 by revising section F-306 to read as follows:

Invoice instructions.

(a) Contractors shall submit payment requests in electronic form, unless an exception in 232.7002 applies. Contractor submission of the material inspection and receiving information required by this appendix by using the Wide Area WorkFlow-Receipt and Acceptance (WAWF-RA) electronic form (see paragraph (b)(1) of the clause at 252.232-7003) fulfills the requirement for an MIRR.

(b) If the contracting officer authorizes the contractor to submit an invoice in paper form, the Government encourages, but does not require, the contractor to use the MIRR as an invoice, in lieu of a commercial form. If commercial forms are used, identify the related MIRR shipment number(s) on the form. If using the MIRR as an invoice, prepare the MIRR and forward the required number of copies to the payment office as follows:

(1) Complete Blocks 5, 6, 19, and 20. Block 6 shall contain the invoice number and date. Column 20 shall be totaled.

(2) Mark in letters approximately one inch high, first copy: “ORIGINAL INVOICE, for all invoice submissions; and three copies: “INVOICE COPY,” when the payment office requires four copies. Questions regarding the appropriate number of copies (i.e., one or four) should be directed to the applicable payment office.

(3) Forward the appropriate number of copies to the payment office (Block 12 address), except when acceptance is at destination and a Navy finance office will make payment, forward to destination.

(4) Be sure to separate the copies of the MIRR used as an invoice from the copies of the MIRR used as a receiving report.

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[FR Doc. 04-14335 Filed 6-24-04; 8:45 am]