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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: February 23, 2004

SUBJECT: Defense Federal Acquisition Regulation Supplement (DFARS); Laws Inapplicable to Commercial Subcontracts

SOURCE: Federal Register, February 23, 2004, Vol. 69, No. 35, page 8151

AGENCIES: Department of Defense (DOD)

ACTION: Proposed Rule

SYNOPSIS: It is proposed that DFARS 212.504, Applicability of Certain Laws to Subcontracts for the Acquisition of Commercial Items, be amended to remove the Trade Agreements Act and the Buy American Act from the list of laws inapplicable to subcontracts for commercial items.

EDITOR'S NOTE: On February 11, 2003, DOD announced plans for conducting a "major transformation" of the DFARS (see the February 11, 2003, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS) Transformation"). The objective of the DFARS transformation is to improve the efficiency and effectiveness of the acquisition process while allowing the acquisition workforce the flexibility to innovate. The transformed DFARS will contain only requirements of law, DOD-wide policies, delegations of FAR authorities, deviations from Federal Acquisition Regulation (FAR) requirements, and policies and procedures that have a significant effect beyond the internal operating procedures of DOD or a significant cost or administrative impact on contractors or offerors. All mandatory and non-mandatory internal DOD procedures, non-mandatory guidance, and supplemental information will be contained in the DFARS companion document, the "Procedures, Guidance, and Information" (PGI).

This proposed rule is one of the first fourteen proposed changes implementing the DFARS Transformation. The other thirteen proposed changes are described in other FEDERAL CONTRACTS DISPATCHES published today.

Additional information on the DFARS Transformation initiative is available at http://www.acq.osd.mil/dpap/dfars/transf.htm.

DATES: Comments on the proposed rule must be submitted on or before April 23, 2004.

ADDRESSES: Respondents may submit comments directly on the web site at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@acq.osd.mil. Also, respondents who cannot submit comments through the web site or by e-mail may submit comments to Defense Acquisition Regulations Council, Attn: Amy Williams, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062, or by fax to 703-602-0350. Cite "DFARS Case 2003-D018" when making comments on this proposed rule.

FOR FURTHER INFORMATION CONTACT: Amy Williams, 703-602-0328.

SUPPLEMENTAL INFORMATION: This proposed rule would amend DFARS 212.504 to remove the Trade Agreements Act (paragraph (a)(xxiii)) and the Buy American Act (paragraph (a)(xxiv)) from the list of laws that "are not applicable to subcontracts at any tier for the acquisition of commercial items or commercial components." Inclusion of these laws on the list is unnecessary because the government does not apply the restrictions of the Buy American Act or the Trade Agreements Act at the subcontract level. The introduction to the proposed rule states:

      "The prime contractor is responsible for providing an end product that meets the requirements of the Acts. The Trade Agreements Act imposes no requirements as to the origin of components. Although the Buy American Act requires that the cost of domestic components exceed 50% of the cost of all components, the subcontracts for the components themselves need not comply with the Buy American Act. The domestic components need only to have been manufactured in the United States, without themselves satisfying a component test.
      "In some cases, inclusion of the Buy American Act on the list of laws inapplicable to subcontracts for commercial items has been misinterpreted to mean that commercial components do not count in the calculation of whether domestic components exceed 50% of the value of the components of an end item. This is an erroneous interpretation, because the prime contractor must still comply with the Buy American Act when using commercial components. In addition, inclusion of the Buy American Act and the Trade Agreements Act on the list has been misinterpreted to mean that the prime contractor need not comply with the acts for subcontracted end items. This is also erroneous because, in accordance with FAR 12.501 [Applicability], waiver of the Buy American Act or the Trade Agreements Act is not applicable if the prime contractor is reselling or distributing commercial items of another contractor without adding value."

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

Copyright 2004 by Panoptic Enterprises. All Rights Reserved.

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