[Federal Register Volume 67, Number 166 (Tuesday, August 27, 2002)]
[Rules and Regulations]
[Pages 54955-54957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21267]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 3
RIN 0790-AG92
Transactions Other Than Contracts, Grants, or Cooperative
Agreements for Prototype Projects
AGENCY: Office of the Secretary, DoD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule codifies the conditions for appropriate use
and defines a nontraditional Defense contractor consistent with section
803 of the Floyd D. Spence National Defense Authorization Act for
Fiscal Year 2001. Representatives of the military departments, Defense
agencies and other DoD activities, have agreed on a final rule that
amends the interim rule as a result of comments received. Audit policy
is still being discussed and will be addressed by a separate rule, as
appropriate.
EFFECTIVE DATE: This final rule is effective August 27, 2002.
FOR FURTHER INFORMATION CONTACT: Teresa Brooks, (703) 695-8567.
SUPPLEMENTARY INFORMATION:
Background and Purpose
Section 845 of the National Defense Authorization Act for Fiscal
Year 1994, Public Law 103-160, 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.
Part 3 to 32 CFR was established to codify policy pertaining to
prototype ``other transactions'' that have a significant impact on the
public and are subject to rulemaking. Additional guidance on prototype
``other transactions'' directed at Government officials can be found on
the Defense Procurement web site at: http://www.osd.dp.mil.
A proposed rule was published in the Federal Register for public
comment on November 21, 2001 (66 FR 58422-58425). A notice of public
meeting was published in the Federal Register on March 4, 2002 (67 FR
9632) and held on March 27, 2002. The proposed rule addressed
conditions on use of ``other transactions'' for prototype projects, the
nontraditional Defense contractor definition and audit policy. Comments
on the proposed rule were received from five respondents and
approximately 50 representatives of Government and industry attended
the public meeting. The majority of the written comments and discussion
at the public meeting focused on the audit policy and will be addressed
in a later rule. Only one respondent commented on the conditions of law
and none commented on the definition of a nontraditional Defense
contractor. The following summarizes the comments regarding the
conditions of law and the disposition.
A. Consistency of Terms
One respondent identified the use of undefined terms that are
confusing (e.g., ``subordinate element of the party or entities,''
``awardee'') and recommended expanding upon defined terms such a
business unit and segment. The respondent recommended defined terms be
consistently used through out the rule or definitions be added for
undefined terms.
Response: The DoD agrees. The final rule includes additional
definitions and made changes to ensure consistent use throughout the
rule.
B. Applicability of Limitations
One respondent(s) questioned whether the statement ``As a matter of
policy, these same restrictions apply any time cost sharing may be
recognized when using OTA'' was intended to apply to all OTAs, not just
OTAs for prototype projects. The respondent recommended it be deleted
from this rule and be included in a new rule that applies to all OTA.
Response: The DoD agrees the statement was confusing. The final
rule establishes ``Limitations on Cost-Sharing'' as a separate section
and clarifies that as a matter of policy, the cost-sharing limitations
will also be applied to other OT agreements for prototype projects that
provide for non-Federal cost-share.
[[Page 54956]]
Regulatory Evaluation
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, Public Law 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.
Public Law 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)
It has been certified that this part 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 record
keeping or other significant expense by project participants.
Public Law 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.
List of Subjects in 32 CFR part 3
Government procurement, Transactions for prototype projects.
Accordingly, part 3 of 32 CFR is amended as follows:
PART 3--TRANSACTIONS OTHER THAN CONTRACTS, GRANTS, OR COOPERATIVE
AGREEMENTS FOR PROTOTYPE PROJECTS
1. The authority citation for part 3 is revised to read as follows;
Authority: Sec. 845, Pub. L. 103-160, 107 Stat. 1547, as
amended.
2. Section 3.1 is revised to read as follows:
Sec. 3.1 Purpose.
This part consolidates rules that implement section 845 of the
National Defense Authorization Act for Fiscal Year 1994, Public Law
103-160, 107 Stat. 1547, as amended, and have a significant impact on
the public. Section 845 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.
Secs. 3.2, 3.3, and 3.4 [Redesignated as Secs. 3.3, 3.4, and 3.7]
3. Section 3.2, 3.3, and 3.4 are redesignated as Secs. 3.3, 3.4,
and 3.7, respectively.
4. New Sec. 3.2 is added to read as follows:
Sec. 3.2 Background.
``Other transactions'' is the term commonly used to refer to the 10
U.S.C. 2371 authority to enter into transactions other than contracts,
grants or cooperative agreements. ``Other transactions'' are generally
not subject to the Federal laws and regulations limited in
applicability to contracts, grants or cooperative agreements. As such,
they are not required to comply with the Federal Acquisition Regulation
(FAR) and its supplements (48 CFR).
5. Newly redesignated Sec. 3.4 is amended to add new definitions in
alphabetical order to read as follows:
Sec. 3.4 Definitions.
Agreements Officer. An individual with the authority to enter into,
administer, or terminate OTs for prototype projects and make related
determinations and findings.
Awardee. Any business unit that is the direct recipient of an OT
prototype agreement.
Business unit. Any segment of an organization, or an entire
business organization which is not divided into segments.
* * * * *
Nontraditional Defense contractor. A business unit that has not,
for a period of at least one year prior to the date of the OT
agreement, entered into or performed on:
(1) Any contract that is subject to full coverage under the cost
accounting standards prescribed pursuant to section 26 of the Office of
Federal Procurement Policy Act (41 U.S.C. 422) and the regulations
implementing such section; or
(2) Any other contract in excess of $500,000 to carry out prototype
projects or to perform basic, applied, or advanced research projects
for a Federal agency, that is subject to the Federal Acquisition
Regulation.
Segment. One of two or more divisions, product departments, plants,
or other subdivisions of an organization reporting directly to a home
office, usually identified with responsibility for profit and/or
producing a product or service.
Senior Procurement Executive. The following individuals:
(1) Department of the Army--Assistant Secretary of the Army
(Acquisition, Logistics and Technology);
(2) Department of the Navy--Assistant Secretary of the Navy
(Research, Development and Acquisition);
(3) Department of the Air Force--Assistant Secretary of the Air
Force (Acquisition);
(4) The Directors of Defense Agencies who have been delegated
authority to act as Senior Procurement Executive for their respective
agencies.
Subawardee. Any business unit of a party, entity or subordinate
element performing effort under the OT prototype agreement, other than
the awardee.
6. New Sec. 3.5 is added to read as follows:
Sec. 3.5 Appropriate use.
In accordance with statute, this authority may be used only when:
(a) At least one nontraditional Defense contractor is participating
to a significant extent in the prototype project; or
(b) No nontraditional Defense contractor is participating to a
significant extent in the prototype project, but at least one of the
following circumstances exists:
(1) At least one third of the total cost of the prototype project
is to be paid out of funds provided by non-Federal parties to the
transaction.
(2) The Senior Procurement Executive for the agency determines in
writing that exceptional circumstances justify the use of a transaction
that provides for innovative business arrangements or structures that
would not be feasible or appropriate under a procurement contract.
7. New Sec. 3.6 is added to read as follows:
Sec. 3.6 Limitations on cost-sharing.
(a) When a nontraditional Defense contractor is not participating
to a significant extent in the prototype project and cost-sharing is
the reason for using OT authority, then the non-Federal amounts counted
as provided, or to be provided, by the business units of an awardee or
subawardee participating in the performance of the OT agreement may not
include costs that were incurred before the date on
[[Page 54957]]
which the OT agreement becomes effective. Costs that were incurred for
a prototype project by the business units of an awardee or subawardee
after the beginning of negotiations, but prior to the date the OT
agreement becomes effective, may be counted as non-Federal amounts if
and to the extent that the Agreements Officer determines in writing
that:
(1) The awardee or subawardee incurred the costs in anticipation of
entering into the OT agreement; and
(2) It was appropriate for the awardee or subawardee to incur the
costs before the OT agreement became effective in order to ensure the
successful implementation of the OT agreement.
(b) As a matter of policy, these limitations on cost-sharing apply
any time cost-sharing may be recognized when using OT authority for
prototype projects.
8. Newly redesignated Sec. 3.7 is amended by revising the section
heading to read as follows:
Sec. 3.7 Comptroller General access.
* * * * *
Dated: August 14, 2002.
Patricia L. Toppings,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 02-21267 Filed 8-26-02; 8:45 am]
BILLING CODE 5001-08-M