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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: June 5, 2000

FROM: Barry McVay, CPCM

SUBJECT: Defense of Defense; Transactions Other Than Contracts, Grants, or Cooperative Agreements for Prototype Projects

SOURCE: Federal Register, June 5, 2000, Vol. 65, No. 108, page 35576

AGENCIES: Department of Defense (DOD)

ACTION: Interim Rule

SYNOPSIS: DOD is amending its regulations to require inclusion of a clause providing for Comptroller General access to records in transactions other than contracts, grants, or cooperative agreements for prototype projects ("other transactions") in excess of $5,000,000. The Comptroller General is the head of the General Accounting Office, the "watchdog" of Congress.

EDITOR'S NOTE: The National Defense Authorization Act for Fiscal Year 1994 (Public Law 103-160) authorizes the secretary of a military department, the director of Defense Advanced Research Projects Agency (DARPA), and any other official designated by the Secretary of Defense, to enter into "transactions other than contracts, grants or cooperative agreements for prototype projects that are directly relevant to weapons or weapon systems proposed to be acquired or developed by the Department of Defense." These are commonly referred to as "other transactions," and they are generally exempt from all the statutes and regulations that govern federal contracts and grants. The purpose of "other transactions" is to overcome the reluctance of many firms with significant technological advances and innovations to share their innovations with the government because of the significant statutory and regulatory requirements involved in government contracts and grants. When using "other transactions," DOD contracting officials are not required to include standard contract provisions that typically address such issues as financial management or intellectual property rights, but may structure the agreements as they consider appropriate.

This authority expires on September 30, 2001.

DATES: The interim rule will be effective July 5, 2000. Comments on the interim rule should be submitted on or before August 4, 2000.

ADDRESSES: Submit written comments to the Office of the Director, Defense Procurement, Attn: Ms. Teresa Brooks, PDUSD(A&T)/DP(DSPS), 3060 Defense Pentagon, Washington, DC 20301-3060; fax: 703-693-9616.

FOR FURTHER INFORMATION CONTACT: Teresa Brooks, 703-695-4258.

SUPPLEMENTAL INFORMATION: Section 801 of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106-65), Authority to Carry Out Certain Prototype Projects, establishes a requirement that an "other transaction" agreement for a prototype project that "provides for payments in a total amount in excess of $5,000,000 shall include a clause that provides for the Comptroller General...to examine the records of any party to the agreement or any entity that participates in the performance of the agreement."

Since "other transactions" have been exempt from all federal contract and grant statutes and regulations, the requirement in Section 801 is the first statutory requirement mandating conditions that must be included in an "other transactions" agreement. Therefore, DOD is adding to Title 32 of the Code of Federal Regulations, Chapter 1, Office of the Secretary of Defense, a Part 3, Transactions Other Than Contracts, Grants, or Cooperative Agreements for Prototype Projects, to implement the Section 801 requirement.

Part 3 consists of the following sections: 3.1, Purpose; 3.2, Applicability; 3.3, Definitions; and 3.4, Policy. The key section is 3.4, which states that:

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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