[Federal Register Volume 65, Number 51 (Wednesday, March 15, 2000)]
[Rules and Regulations]
[Pages 13906-13911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6336]


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DEPARTMENT OF DEFENSE

Department of the Army

32 CFR Part 668


Report On Use of Employees of Non-Federal Entities to Provide 
Services to Department of the Army

AGENCY: Office of the Assistant Secretary of the Army (Manpower and 
Reserve Affairs), and Office of the Assistant Secretary of the Army 
(Acquisition, Logistics and Technology, Department of the Army, DoD.

ACTION: Interim rule.

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SUMMARY: The Department of the Army requests agency and public comments 
on its implementation of the recently enacted Section 343 of the FY 
2000 Department of Defense Authorization Act. Section 343 directs the 
Department of Defense to provide to Congress not later than March 1, 
2001, a report summarizing the number of direct labor and indirect 
labor work year equivalents performed by contractors providing services 
to the Department of Defense in the prior fiscal year (FY 2000), 
categorized by federal supply class or service code, appropriation 
supporting the services and major organizational element of the 
Department procuring the services. Since the Fiscal Year to be reported 
upon to Congress has already commenced, it is critical that this 
guidance be issued effective immediately to avoid extraordinary efforts 
by Government and contractor personnel attempting to collect 
significant reliable data retroactively.
    Section 2461(g) of title 10, United States Code, requires DoD to 
provide an annual report to Congress on the percentage of commercial 
functions performed by contractors as compared to in-house employees. 
Section 343 provides the data collection framework for the Army to 
improve the accuracy and credibility of its reporting under section 
2461(g) of title 10.

DATES: The effective date for this interim rule is March 15, 2000. 
Written comments on this interim rule must be submitted not later than 
May 15, 2000 to ensure consideration.

ADDRESSES: Comments concerning this interim rule should be submitted to 
the Office of the Assistant Secretary of the Army for Manpower & 
Reserve Affairs (ASA (M&RA), Attention SAMR-FMMR, Rm. 2A672, 
Washington, DC 20310, or contact the following persons by e-mail or 
phone as indicated below.

FOR FURTHER INFORMATION CONTACT: Dr. John Anderson, SAMR-FMMR, Phone 
703-614-8247, email: [email protected]; or John R. Conklin, 
SAAL-ZP, e-mail: [email protected].

SUPPLEMENTARY INFORMATION:
    1. Background: This interim rule implements section 343 of the FY 
2000 Department of Defense Authorization Act, Public Law 106-65 and 10 
U.S.C. 2461(g). In February 1997, the Assistant Secretary of the Army 
(Manpower and Reserve Affairs) included the reporting of contractor 
manpower as a milestone required to remedy a finding by the Secretary 
of Defense of material weakness in manpower requirements determination 
within the Army under the Federal Manager's Financial Integrity Act.
    2. From May to December, 1997, the Assistant Secretary of the Army 
(Manpower and Reserve Affairs) and the Assistant Secretary of the Army 
(Research, Development, and Acquisition) participated in a joint study 
to identify and estimate the work-year equivalents performed by 
contractors providing services to the Department of the Army during 
fiscal year 1996. The study used existing contract reporting systems, 
manually accessible data, and some queries to contractors, to identify 
expenditures on service contracts by Federal Supply Class (FSC) Service 
code function, organizational name and unit identification code of the 
Army element contracting for the services, and the

[[Page 13907]]

appropriations from which the contracted services were funded.
    3. The study sampled approximately 12.8 percent of the service 
contracts awarded in fiscal year 1996 for the purposes of obtaining 
direct and indirect man-hours, which were used to develop a planning 
factor for converting contract expenditures for specific groupings of 
FSC Service code functions into work-year equivalents for those 
functions. A commitment was made to not release the information 
provided by contractors for use in any governmental audits of the 
contractor or any other governmental purpose, since the information was 
being used solely for the purposes of improving Army manpower 
requirements planning and the accuracy of the report required by 
section 2461(g) of title 10. (i.e., the information provided by 
contractors on a voluntary basis was treated as proprietary 
information).
    4. The contractor manpower equivalent model developed from this 
study was presented to the Chief of Staff of the Army in July 1998, and 
a decision was made to use this information in the Total Army Analysis, 
the Army's planning process for determining and prioritizing its 
manpower requirements for its force structure and infrastructure. The 
estimated level of contract support of an Army organization within a 
function was used as an offset for purposes of allocating in-house 
resources to meet that organization's requirements. The estimated level 
of contract support of an Army organization also provided, for planning 
purposes, a gross estimate of the organization's total capabilities in 
various war-fighting and non-war-fighting scenarios.
    5. The contractor work year equivalents estimated from this model 
were also used to assist in establishing equitable competition targets 
among different Army organizations for purposes of implementing Defense 
Reform Initiative Directive 20, ``Review of Inherently Governmental 
Functions''. Army organizations were credited with the estimated 
contractor support work-year equivalents for purposes of determining 
the percentage of the in-house workforce in that organization that 
would be potentially subject to competition relative to the same 
function in other Army organizations.
    In January 1998 the Army compared Army contractor expenditures 
reflected in the Defense budget with the level of contract manpower 
used as the basis for estimating the contractor percentage required by 
section 2461(g) of title 10. The fiscal year 1997 section 2461(g) 
report for the Army reported 44,000 contract manpower equivalents 
(CMEs), as compared with over $21 billion in service contracts awarded 
by Army contracting offices during the same period. While recognizing 
that a small percentage of those services may not have been reportable 
under the CME report, the Army leadership determined to use the more 
comprehensive and credible Contractor Manpower Equivalent model 
developed for its Total Army Analysis as a basis for the FY 1998 
2461(g) report as an interim measure until a more accurate data 
collection methodology was established. (As a result, the Army reported 
269,000 CMEs in its fiscal year 1998 report, as compared to $24 billion 
service contract expenditures, thereby reducing the questionable 
disparity between contract expenditures and CMEs reported in the fiscal 
year 1997 report.)
    6. Implementation: It has been determined, after a review of 
numerous alternatives and Army lessons-learned, that the only way to 
collect the required information economically, in a timely way, 
accurately and credibly, with the least burden on the public and 
expense to the Government, is to request contemporaneous submission 
directly from affected contractors. Accordingly, the Army will direct 
Army contracting officers to include in new solicitations and 
contracts, and any existing contract bilaterally modified, a 
requirement that contractors providing services to the Army identify, 
itemize and report their direct labor hours of support and provide a 
related composite indirect labor rate so that we might estimate the 
relevant indirect hours. This submission is expected to be coincident 
with requests for payment (e.g., contract vouchers, invoices, or 
requests for progress payments). The information obtained will be 
transmitted directly to the Office of the Assistant Secretary of the 
Army (Manpower and Reserve Affairs). For security and convenience, a 
secure web site will be established for this purpose. This reporting 
requirement is not viewed as violating the objectives of performance 
based contracting since the reported labor hours are neither being 
requested for, nor viewed as a basis for, payment under the contract, 
but rather, are to be provided to meet Congressional reporting 
requirements and for internal Governmental manpower planning and 
management uses only.
    7. The reporting requirement has been tailored as narrowly as 
possible to comply with the law, allow the acquisition of useful data, 
and minimize any undue workload on respondents. It will be applied 
prospectively (i.e., to solicitations issued and contracts awarded (or 
modified, in the case of existing contracts) after the effective date 
of this interim rule); for reporting contemporaneous with normal 
billings by the contractor (and consistent with contractor accrual and 
allocation practices and systems), so as to minimize the impact on 
contractor operations and administrative costs, and to allow uniform 
reporting. However respondents under preexisting contracts modified 
during this period, will be asked to report from October 1, 1999, or 
the date the contract action began, whichever is later.
    8. Reporting will not be required if a contractor does not have an 
internal system for aggregating billable hours in the direct and 
indirect pools and does not otherwise have to provide this information 
to the Government. We believe that a global requirement to identify, 
collect, validate and report this information after the fact (e.g., at 
the end of the fiscal year) would necessitate burdensome additional 
record keeping and administrative efforts by contractors and Government 
personnel and would significantly degrade the quality and usefulness of 
the information collected. On the other hand, it is reasonable and not 
an undue burden on a contractor to provide labor hour information at 
the time that the contractor has readily available the labor hour 
records used, as a basis for meeting its payroll or charging the 
government for its services (or for tax purposes, or cost allocation in 
accordance with Generally Accepted Accounting Principles and 
practices).
    9. Consistent with the above, the reporting requirement will not be 
mandated under the following categories of contracts and situations:
    a. Contracts awarded under the authority of Part 12 of the Federal 
Acquisition Regulations (FAR).
    b. Contracts valued at $100,000 or below.
    c. When a contractor does not have an internal system for 
aggregating billable hours in the direct and indirect pools, or an 
internal payroll accounting system, and does not otherwise have to 
provide this information to the Government.
    d. Contracts awarded by the Army contracting office solely as a 
contracting agent in support of non-Army customer(s). (We are 
interested in labor hour data in support of Army at this time. (If the 
name and address of the organization receiving the benefit of the 
services is an Army organization, then the labor hour data is 
reportable as an Army requirement, even though the appropriations 
funding all or part of the requirement are not Army appropriations).

[[Page 13908]]

    10. The intent of the reporting requirement is to obtain direct and 
indirect labor hour data for services in support of the Army under 
contracts not covered by the above exclusions.
    11. The labor hour information provided will be protected as 
company proprietary data (when associated with contract number and 
contractor name) and will be required at a level of detail not greater 
than required for the intended use. The reports will include: the 
Federal Supply Class or Service Code pertinent to the services reported 
(this can be identified by the respondent from the lists found in the 
Procurement Coding Manual on the internet at http://web1.whs.osd.mil/peidhome/guide/mn02/mn02.htm); the complete appropriations data for the 
appropriations funding the line item(s)/contract/order; the name, 
complete address and location of the Army contracting office; the name 
and address of the Army organization receiving the benefit of the 
services (i.e., the most proximate Army customer reviewing and 
receiving work); the time period covered by the report; and the 
contract/order number and the associated (estimated) value. Information 
provided should be consistent with the contract terms and requirements 
and with other data provided to the Government by the reporting 
contractor (e.g., vouchers, invoices, requests for progress payment, or 
other reports to the Army).

Procedural Requirements

A. Information Collection Requirements

    This interim rule contains collection of information requirements. 
Information collection is required to provide documentation of various 
support services from contractors in compliance with Section 343 of 
Public Law 106-65 (FY 2000 National Defense Authorization Act), and 
Section 2461(g) of Title 10 United States Code (10 U.S.C. 2461(g)). The 
Paperwork Reduction Act of 1995, 44 U.S.C. 3507 (d) and 5 CFR 1320.11, 
require Federal agencies to submit collections of information contained 
in rules to the Office of Management and Budget (OMB) for review. To 
request more details pertaining to the collection of information 
requirements or to obtain a copy of the associated collection 
instruments, please write to the above address or call Department of 
the Army Reports Clearance Officer at (703) 614-0454.
    Title: Report required by National Defense Authorization Act for 
Fiscal Year 2000, Section 343; and to comply fully with the reporting 
requirements at 10 U.S.C. 2461(g).
    Needs and Uses: Section 343 of the FY2000 National Defense 
Authorization Act; Section 2461(g) of Title 10; and the Total Army 
Analysis. Army requires contract manpower data to remedy its declared 
material weakness in manpower requirements determinations and to 
improve the accuracy of related reports to Congress. Data will be used 
in the Total Army Analysis force structure planning, Functional Area 
Assessments, and to support HQDA decision-making. Data will also 
provide a more complete picture of organizations, functions and 
capabilities in war fighting and non-war fighting scenarios.
    Affected Public: Primarily business or other for profit.
    Annual Burden Hours: 33,928.
    Number of Respondents: 7,400.
    Responses Per Respondent: 55.24.
    Average Per Respondent: .083 hours.
    Frequency: Contemporaneous with submission of requests for payment 
(vouchers, invoices or requests for progress payment), usually monthly 
(dependent on contractor's internal systems for allocating costs and 
contract requirements).

B. Regulatory Flexibility Act

    The rule does not require the preparation of a regulatory 
flexibility analysis since it is not expected to have a significant 
economic impact on a substantial number of small entities (i.e. small 
and small disadvantaged businesses).

C. Unfunded Mandates Act

    The rule does not impose an enforceable duty among small 
governments (i.e. States and local governments).

D. Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act of 1995, the reporting 
provisions of this rule have been approved by the Office of Management 
and Budget (OMB) and assigned OMB control Number 0702-0112, with an 
expiration date of August 31, 2000.
    In compliance with Section 3506(c)(2)(A) of the Paperwork Reduction 
Act, the Office of the Assistant Secretary of the Army for Manpower & 
Reserve Affairs (ASA (M&RA)) announces a public information collection 
requirement as described in this rule and seeks public comment on the 
provisions thereof. Comments are invited on (1) whether the collection 
of information is necessary for the proper performance of the functions 
of the agency, including whether the information shall have practical 
utility; (2) the accuracy of the agency's estimates of burden of the 
information collection; (3) ways to enhance the quality, utility, and 
clarity of the information to be collected; and, (4) ways to minimize 
the burden of the information collection on respondents, including the 
use of automated collection techniques or other forms of information 
technology.
    Comments on these requirements should be submitted to the Office of 
the Assistant Secretary of the Army for Manpower & Reserve Affairs (ASA 
(M&RA)), Attention: SAMR-FMMR, Rm. 2A672, Washington, DC 20310-0111. 
When the Department of the Army promulgates the Final Rule, the 
Department will also respond to comments or the public regarding the 
information collection provision requirements of the rule.

E. Executive Order 12866 (Regulatory Planning and Review

    This is not a significant regulatory action in that it is not 
likely to result in a rule that will have an annual effect on the 
economy of $100 million or more or adversely affect productivity, the 
environment, public health or safety.

F. Executive Order 13132 (Federalism)

    It has been determined that this rule does not have sufficient 
Federalism implications to warrant the preparation of a Federalism 
Assessment. The provisions contained in this rule will have little or 
no direct effect on States or local governments.

G. Submission to Congress and the General Accounting Office (GAO)

    Pursuant to 5 U.S.C., Chapter 8, the rule will be forwarded to both 
Houses of Congress and the GAO in the final rule announcement together 
with the GAO prescribed special reporting form for this purpose.

List of Subjects in 32 CFR Part 668

    Government contracts, Reporting and recordkeeping requirements.

    Accordingly, Subchapter L consisting of part 668 is added to 32 CFR 
chapter V to read as follows:

SUBCHAPTER L--ARMY CONTRACTING

PART 668--CONTRACTOR MANHOUR REPORTING REQUIREMENT

Sec.
668.1   General.
668.2   Contract administration data.

    Authority: Sec. 343 of Pub. L. 106-65, 113 Stat. 569 (10 U.S.C. 
2461(g)).


Sec. 668.1  General.

    (a) Purpose. This part sets forth policies and procedures for 
reporting

[[Page 13909]]

requirements on labor work year equivalents performed by contractors in 
support of the Army.
    (b) Applicability. This requirement applies to all Department of 
the Army agencies, commands, and activities.
    (1) The following applies to all Army solicitations issued and 
contracts awarded, and to all bilateral modifications of existing Army 
contracts, after March 15, 2000 except the following:
    (i) Contracts awarded under the authority of Part 12 of the Federal 
Acquisition Regulation (48 CFR part 12).
    (ii) Contracts valued at $100,000 or below.
    (iii) When the contractor does not have an internal system for 
aggregating billable hours in the direct and indirect pools, or an 
internal payroll accounting system, and does not otherwise have to 
provide this information to the Government.
    (iv) Contracts awarded by the Army contracting office solely as a 
contracting agent in support of non-Army customer(s).
    (2) We are interested in labor hour data in support of Army at this 
time. For this purpose, if the name and address of the organization 
receiving the benefit of the services is an Army organization, then the 
labor hour data is reportable as an Army requirement, even though the 
appropriations funding all or part of the requirement are not Army 
appropriations.


Sec. 668.2  Contract administration data.

    The requirement in this section will be cited in Part I--The 
Schedule, in Section G, Contract Administration Data, or its 
equivalent, in solicitations or contracts not employing the standard 
contract format:
    (a) Report on Use of Employees of Non-Federal Entities to Provide 
Services to Department of the Army. The contractor is required to 
submit direct labor hours and a relevant composite indirect labor rate 
associated with the reporting period (generally contemporaneous with 
submission of a request for payment (e.g., voucher, invoice or request 
for progress payment)). The composite indirect labor rate will be used 
to grossly calculate the number of indirect hours associated with 
services reported in each period.
    (b) The information submitted will be treated as contractor 
proprietary information when associated with a contractor name or 
contract number. The Assistant Secretary of the Army (Manpower and 
Reserve Affairs) will oversee the aggregation of this information and 
will exclude contract number and contractor name from any use of this 
data. The planning factor(s) derived from this data by ASA (M&RA) and 
its contract support (if any) will be used solely for manpower planning 
purposes and will not be applied to specific acquisitions. Detailed 
data by contract number and name will not be released to any other 
governmental entity other than ASA (M&RA) and will only be used for the 
stated purposes (reporting and planning).
    (c) Reporting format: The information required should be reported 
electronically to the M&RA data collection point. The following 
information, per contract and/or task/delivery order, will be needed to 
complete all of the data fields under this data collection program:

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[GRAPHIC] [TIFF OMITTED] TR15MR00.000


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    (d) The information required shall be reported electronically to 
the ASA (M&RA) data collection point at the following secure web site 
drawing on the relevant data elements cited in paragraph (c) of this 
section: http://contractormanpower.us.army.mil

Robert Bartholomew III,
Acting Deputy Assistant Secretary (Force Management, Manpower and 
Resources).

Kenneth J. Oscar,
Deputy Assistant Secretary of the Army (Procurement).
[FR Doc. 00-6336 Filed 3-14-00; 8:45 am]
BILLING CODE 3710-08-P