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Defense Federal Acquisition Regulation Supplement; Research and Development Contract Type Determination (DFARS Case 2006-D053)

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AGENCY:

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

ACTION:

Final rule.

SUMMARY:

DoD is adopting as final, without change, an interim rule that requires the Milestone Decision Authority (MDA) for a major defense acquisition program (MDAP) to select the contract type for a development program that is consistent with the level of program risk in accordance with section 818 of the National Defense Authorization Act (NDAA) for Fiscal Year 2007.

DATES:

Effective Date: April 8, 2010.

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FOR FURTHER INFORMATION CONTACT:

Mr. Mark Gomersall, 703-602-0302. Please cite DFARS case 2006-D053.

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SUPPLEMENTARY INFORMATION:

A. Background

DoD published an interim rule at 73 FR 4117 on January 24, 2008, to implement section 818 of the National Defense Authorization Act for Fiscal Year 2007 (Pub. L. 109-364). Section 818 requires DoD to modify regulations regarding the determination of contract type for development programs. Such regulations require the Milestone Decision Authority (MDA) for a major defense acquisition program (MDAP) to select the contract type for a development program that is consistent with the level of program risk. The MDA may select a fixed-price type contract, including a fixed-price incentive contract; or a cost-type contract, provided certain written determination requirements are satisfied.

The interim rule added a new section at DFARS 234.004 to implement the requirements of section 818 of Public Law 109-364, applicable to MDAPs, and Start Printed Page 18035updated the policy at 235.006 to address requirements for other than MDAPs.

Two sources submitted comments on the interim rule. DoD's single response to both comments is provided following the comments.

1. Comment: One respondent suggested that the interim rule appears to be requiring written determinations on MDAPs and non-MDAPs that are exactly the opposite of one another. For MDAPS, 234.004(iii) requires a written determination by the MDA at the time of Milestone B approval if a fixed-price contract is not selected, and for non-MDAPs, 235.006(b)(i)(A)(3) requires a written determination if a fixed-price contract is selected for a developmental program. The respondent indicated that it is hard for him to understand the logic that would discourage the use of fixed-price development contracts for non-major programs, but would encourage their use for major programs. Moreover, he suggested that fixed-price development contracts are likely to be a source of numerous requests for equitable adjustments or claims, and concluded that instituting such a policy would be challenging and ill-timed even for a robust, experienced, and disciplined workforce.

2. Comment: The respondent stated that the interim rule appears to introduce additional burdens on DoD program managers and contracting personnel to justify the decision to issue a shipbuilding contract on a cost-type basis. The respondent believes that, when selecting a contract type for any program, DoD's focus should be on “whether a product, system, or item is still developing or has reached maturity.” Further, although they are MDAPs, the respondent believes that the first several ships of a new class should be viewed as developmental products that are procured most efficiently through cost-type contracts because of the inherently high level of risk and uncertainty associated with them. Therefore, for the first several ships of a class, the burden placed upon the MDA should most often be to explain why a fixed-price contract type is selected rather than why a cost-type contract is selected. For this reason, the respondent believes that the interim rule is flawed since the requirements should be in reverse order when applied to shipbuilding contracts.

DoD Response: For MDAPs, the procedures in DFARS 234.004 are mandated by section 818 of the FY07 NDAA. For other than MDAPs, DoD determined that it would be in the best interest of the Government to retain the policy in DFARS 235.006 for a written determination if a fixed-price contract is selected for a development program. Therefore, DoD has made no change to the language set forth in the interim rule, and is adopting the interim 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 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 relates to internal DoD considerations and documentation requirements relating to the selection of contract type for development programs. No comments were received in response to publication of the interim rule with respect to any impact on small entities.

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 234 and 235

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Ynette R. Shelkin,

Editor, Defense Acquisition Regulations System.

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Interim Rule Adopted as Final Without Change

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Accordingly, the interim rule amending

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[FR Doc. 2010-7259 Filed 4-7-10; 8:45 am]

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