DATE: May 20, 2003

SUBJECT: Department of Defense; Follow-On Production Contracts to Awardees of "Other Transactions"

SOURCE: Federal Register, May 15, 2003, Vol. 68, No. 97, page 27497

AGENCIES: Department of Defense (DOD)

ACTION: Proposed Rule

SYNOPSIS: DOD is proposing to revise its regulations to implement Section 822 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107), which provides for award of a follow-on production contract to traditional defense contractors, without further competition, when the other transaction (OT) agreement for the prototype project provided for at least one-third non-federal cost-share.

EDITOR'S NOTE: The regulations for OTs ("transactions other than contracts, grants, or cooperative agreements for prototype projects") 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 on the Defense Procurement website at http://www.acq.osd.mil/dp/dsps/ot/dspsot.htm.

For more on a final rule published today that addresses OT audit policy, see today's FEDERAL CONTRACTS DISPATCH "Department of Defense; Audit Policy for 'Other Transactions'."

For more on the acquisition-related provisions of Public Law 107-107, see the January 2, 2002, FEDERAL CONTRACTS DISPATCH "Enactment of the National Defense Authorization Act for Fiscal Year 2002."

DATES: Comments on the proposed rule must be received by July 21, 2003.

ADDRESSES: Submit comments on the proposed rule to Office of the Director, Defense Procurement, Attn: David Boyd, OUSD(AT&L)/DPAP(P), 3060 Defense Pentagon, Washington, DC 20301-3060; fax: 703-614-1254.


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.

Use of OT authority is authorized by law in the absence of the significant participation of a nontraditional defense contractor, and when at least one-third of the costs of the prototype project are to be provided by non-federal parties to the agreement. The authority granted by Section 822 of Public Law 107-107 provides the authority to continue such prototype projects into production without competition in certain circumstances. In addition, the introduction to the proposed rule states that a rule will be issued to the Defense Federal Acquisition Regulation Supplement (DFARS) that exempts such production contracts from further competition.

This proposed rule would add 32 CFR 3.9, Follow-On Production Contracts, which would include the following provisions:

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

Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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