DATE: May 5, 2005

SUBJECT: Defense Federal Acquisition Regulation Supplement (DFARS); Multiyear Contracting

SOURCE: Federal Register, May 9, 2005, Vol. 70, No. 88, page 24323

AGENCIES: Department of Defense (DOD)

ACTION: Interim Rule

SYNOPSIS: This interim rule amends DFARS Subpart 217.1, Multiyear Contracting, to implement Section 8008 of the Defense Appropriations Act for Fiscal Year 2005 (Public Law 108-287) and Section 814 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375), which establish new requirements pertaining to the funding of multiyear contracts.

EDITOR’S NOTE: For more on other acquisition-related provisions of Public Law 108-375, see the October 29, 2004, FEDERAL CONTRACTS DISPATCHEnactment of the National Defense Authorization Act for Fiscal Year 2005.”

DATES: The effective date for this interim rule is May 9, 2005. Comments on the interim rule must be submitted no later than July 8, 2005.

ADDRESSES: Respondents may submit comments directly on the Federal eRulemaking Portal at http://www.regulations.gov; on the web site at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm; by e-mail to: dfars@acq.osd.mil; by fax to 703-602-0350; by mail to Defense Acquisition Regulations Council, Attn: Robin Schulze, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; or by courier/hand to Defense Acquisition Regulations Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402. Cite "DFARS Case 2004-D024" when making comments on this interin rule.

FOR FURTHER INFORMATION CONTACT: Robin Schulze, 703-602-0326.

SUPPLEMENTARY INFORMATION: Section 8008 of Public Law 108-287 provides that DOD may not use fiscal year 2005 funds to award a multiyear contract unless: (1) the Secretary of Defense has submitted to Congress a budget request for full funding of units to be procured through the contract; (2) cancellation provisions in the contract do not include consideration of recurring manufacturing costs of the contractor associated with the production of unfunded units to be delivered under the contract; (3) the contract provides that payments to the contractor under the contract shall not be made in advance of incurred costs on funded units; and (4) the contract does not provide for a price adjustment based on a failure to award a follow-on contract.

Section 814 of Public Law 108-375 amended 10 U.S.C. 2306b and 10 U.S.C. 2306c to require that, for any multiyear contract with a cancellation ceiling exceeding $100 million that is not fully funded, the agency head must give written notification to the congressional defense committees of (1) the cancellation ceiling amounts planned for each program year in the proposed multiyear contract, together with the reasons for the amounts planned; (2) the extent to which costs of contract cancellation are not included in the budget for the contract; and (3) a financial risk assessment of not including budgeting for costs of contract cancellation.

This interim rule implements the requirements of Section 8008 by the addition of paragraphs (g) and (h) to DFARS 217.172, Multiyear Contracts for Supplies.

The interim rule implements the requirements of Section 814 by adding paragraph (a)(5) to DFARS 217.171, Multiyear Contracts for Services, and paragraph (e)(2)(ii) to DFARS 217.172. (EDITOR’S NOTE: To more closely align the structure of DFARS Subpart 217.1 with that of 10 U.S.C. 2306b(h), paragraph (b) of DFARS 217.173, Multiyear Contracts for Weapon Systems and Other Multiyear Acquisitions Specifically Authorized by Law, is relocated to DFARS 217.172 as paragraph (e). The Section 814 implementation language is inserted into the relocated text as subparagraph (e)(2)(ii). Because paragraph (b) has been removed from DFARS 217.173, its title is changed to "Multiyear Contracts for Weapon Systems.")

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953.

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