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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: October 25, 2002

SUBJECT: Defense Federal Acquisition Regulation Supplement (DFARS); Performance-Based Contracting Using FAR Part 12 Procedures

SOURCE: Federal Register, October 25, 2002, Vol. 67, No. 207, page 65512

AGENCIES: Department of Defense (DOD)

ACTION: Final Rule

SYNOPSIS: DOD is finalizing, with minor editorial changes, the interim rule that amended DFARS Part 212, Acquisition of Commercial Items, to implement Section 821(b) of the National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398), which permits DOD to treat certain performance-based service contracts and task orders as contracts for the procurement of commercial items.

EDITOR'S NOTE: For more on the interim rule being finalized, see the December 6, 2001, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); Performance-Based Contracting Using FAR Part 12 Procedures."

For more on the acquisition-related provisions of Public Law 106-398, see the November 2, 2000, FEDERAL CONTRACTS DISPATCH "Enactment of the National Defense Authorization Act of Fiscal Year 2001."

EFFECTIVE DATE: October 25, 2002.

FOR FURTHER INFORMATION CONTACT: Sandra Haberlin, Defense Acquisition Regulations Council, OUSD (AT&L) DP (DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; 703-602-0289; fax: 703-602-0350. Cite "DFARS Case 2000-D306" when referring to this final rule.

SUPPLEMENTAL INFORMATION: Paragraph (b) of Public Law 106-398, Section 821, Improvements in Procurements of Services, establishes an incentive for DOD use of performance-based service contracts. It permits a contracting officer to use the same procedures used for the acquisition of commercial items under Federal Acquisition Regulation (FAR) Part 12 for a performance-based service contract or task order if certain conditions are met. These conditions include:

1. The contract or task order must:
   1. Be firm-fixed-price;
   2. Have a value of $5 million or less;
   3. Set forth specifically each task to be performed;
   4. Define each task in measurable, mission-related terms; and
   5. Identify the specific end products or output to be achieved for each task;
   
   
2. The contractor must provide similar services at the same time to the general public under terms and conditions similar to those in the contract or task order; and
   
   
3. The procedures in FAR Subpart 13.5, Test Program for Certain Commercial Items, must not be used.

The contracting authority provided under Section 821(b) expires on October 30, 2003, three years after enactment of Public Law 106-398.

On December 6, 2001, an interim rule was published that implemented Section 821(b) by adding DFARS Subpart 212.1, Acquisition of Commercial Items -- General, which consists of DFARS 212.102, Applicability. DFARS 212.102 reflects the Section 821 conditions on the use of the authority. Four respondents submitted comments, and most of the changes are editorial. However, one commenter pointed out that paragraph (1) of DFARS 226.104, Contract Clause, precludes the use DFARS 252.226-7001, Utilization of Indian Organizations and Indian-Owned Economic Enterprises -- DOD Contracts, in any contract that uses FAR Part 12 procedures, so FAR Part 12 procedures cannot be used to award performance-based service contracts under the Indian Incentive Program. DOD agrees with the comment, so it is amending DFARS 226.104 to permit the use of DFARS 252.226-7001 in contracts for services that "qualify to use FAR Part 12 procedures solely through the authority in [DFARS] 212.102."

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

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