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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: August 27, 2002

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

SOURCE: Federal Register, August 27, 2002, Vol. 67, No. 166, page 52955

AGENCIES: Department of Defense (DOD)

ACTION: Final Rule

SYNOPSIS: DOD is revising the regulations pertaining to transactions other than contracts, grants, or cooperative agreements for prototype projects ("other transactions" (OTs)) to outline the conditions for appropriate use and to define a "nontraditional defense contractor."

EDITOR'S NOTE: The regulations for OTs are in Title 32 of the Code of Federal Regulations (CFR), Chapter 1, Office of the Secretary of Defense, Part 3, Transactions Other Than Contracts, Grants, or Cooperative Agreements for Prototype Projects. Additional guidance on OTs can be found at http://www.acq.osd.mil/dp/dsps/ot/dspsot.htm.

For more on the proposed rule being finalized, see the November 21, 2001, FEDERAL CONTRACTS DISPATCH "Defense of Defense; Comptroller General Access to Records for Transactions Other Than Contracts, Grants, or Cooperative Agreements for Prototype Projects."

For more on the public meeting held to discuss the November 21, 2001, proposed rule, see the March 4, 2002, FEDERAL CONTRACTS DISPATCH "Department of Defense (DOD); Meeting on Transactions Other Than Contracts, Grants, or Cooperative Agreements for Prototype Projects."

EFFECTIVE DATE: August 27, 2002.

FOR FURTHER INFORMATION CONTACT: Teresa Brooks, 703-695-8567.

SUPPLEMENTAL INFORMATION: Section 845 of the National Defense Authorization Act for Fiscal Year 1994 (Public Law 103-160) authorized 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" (OTs) and they are generally exempt from all the statutes and regulations that govern federal contracts and grants. The purpose of OTs 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 OTs, 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.

The Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398), Section 803, Clarification and Extension of Authority to Carry Out Certain Prototype Projects, identified conditions for appropriate use of the authority and defined a "nontraditional defense contractor."

On November 21, 2001, DOD published a proposed rule to revise 32 CFR Part 3 to outline the conditions for appropriate use of OTs, define a "nontraditional defense contractor," and provide audit policy which DOD had developed (at that time, 32 CFR Part 3 merely addressed the inclusion of a clause in OTs exceeding $5,000,000 authorizing the Comptroller General access to records). On March 27, 2002, DOD held a public meeting to discuss the proposed rule. Comments on the proposed rule were received from five respondents (3M Company, the American Bar Association (ABA), the Aerospace Industries Association (AIA), the Council of Defense and Space Industry Association (CODSIA), and the Integrated Dual-Use Commercial Contractors (IDCC)), and approximately 50 government and industry representatives attended the public meeting. Since the majority of the written comments and discussion at the public meeting focused on the audit policy, it will be addressed in a later rule. Only one respondent commented on the conditions for OT use and none commented on the definition of a "nontraditional defense contractor." However, based on the respondent's comments, the following changes were made:

The revised 32 CFR Part 3 now consists of the following:

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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