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Defense Federal Acquisition Regulation Supplement; Allowability of Costs To Lease Government Equipment for Display or Demonstration (DFARS Case 2007-D004)

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Defense Acquisition Regulations System, Department of Defense (DoD).


Final rule.


DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to address limitations on the allowability of contractor costs associated with the leasing of Government equipment for display or demonstration. The rule specifies that monies paid to the Government for the leasing of Government equipment are unallowable, except in the case of foreign military sales contracts.


Effective Date: December 24, 2009.

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Mr. Julian Thrash, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-0310; facsimile 703-602-0350. Please cite DFARS Case 2007-D004.

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A. Background

DoD Instruction 7230.08, Leases and Demonstrations of DoD Equipment, contains policy on the leasing of DoD equipment to defense contractors for demonstration to foreign governments or for display or demonstration at international trade shows and exhibitions. In addition to the leasing of equipment, contractors may obtain related support services from DoD. The Instruction provides that the contractor leasing the equipment may not recover the DoD charges associated with the lease, directly or indirectly through any U.S. Government contract, except to the extent chargeable to contracts for foreign military sales. For consistency with the policy in DoD Instruction 7230.08, this final rule adds DFARS text to address the limitations on the allowability of costs associated with the leasing of Government equipment.

DoD published a proposed rule at 72 FR 69176 on December 7, 2007. DoD received no comments on the proposed rule. Therefore, DoD has adopted the proposed rule as a final rule without change.

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 is consistent with existing DoD policy, and applies only in those situations where a contractor chooses to lease military equipment for display or demonstration purposes.

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.

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List of Subjects in 48 CFR Parts 225 and 231

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Amy G. Williams,

Editor, Defense Acquisition Regulations System.

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1. The authority citation for

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

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2. Section 225.7303-2 is amended by revising paragraph (b) and adding paragraph (e) to read as follows:

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Cost of doing business with a foreign government or an international organization.
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(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 subsection.

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(e) The limitations in 231.205-1 on allowability of costs associated with leasing Government equipment do not apply to FMS contracts.

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3. Section 231.205-1 is added to read as follows:

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Public relations and advertising costs.

(e) See 225.7303-2(e) for allowability provisions affecting foreign military sales contracts.

(f) Unallowable public relations and advertising costs also include monies paid to the Government associated with the leasing of Government equipment, including lease payments and reimbursement for support services, except for foreign military sales contracts as provided for at 225.7303-2.

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[FR Doc. E9-30295 Filed 12-23-09; 8:45 am]