[Federal Register: November 30, 1998 (Volume 63, Number 229)] [Proposed Rules] [Page 65727-65728] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr30no98-29] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF DEFENSE 48 CFR Part 231 [DFARS Case 98-D019] Defense Federal Acquisition Regulation Supplement; Restructuring Savings Repricing Clause AGENCY: Department of Defense (DoD). ACTION: Proposed rule with request for comments. ----------------------------------------------------------------------- SUMMARY: The Director of Defense Procurement is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to specify that contracting officers should consider using a repricing clause in noncompetitive fixed-price contracts that are negotiated during the period between the time a business combination is announced and the time the contractor's forward pricing rates are adjusted to reflect the impact of restructuring. DATES: Comments on the proposed rule should be submitted in writing to the address specified below on or before January 29, 1999, to be considered in the formulation of the final rule. ADDRESSES: Interested parties should submit written comments on the proposed rule to: Defense Acquisition Regulations Council, Attn: Ms. Sandra G. Haberlin, PDUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telefax number (703) 602-0350. E- mail comments submitted over the Internet should be addressed to: dfars@acq.osd.mil. Please cite DFARS Case 98-D019 in all correspondence related to this issue. E-mail correspondence should cite DFARS Case 98- D019 in the subject line. FOR FURTHER INFORMATION CONTACT: Ms. Sandra G. Haberlin, (703) 602-0131. SUPPLEMENTARY INFORMATION: A. Background Since the late 1980's, defense contractors have been restructuring their business operations to increase efficiencies and become more competitive in the defense marketplace. Many of the restructuring activities result from business combinations (such as mergers or acquisitions), and often lead to reduced overall costs and future savings. However, a significant amount of time may lapse between the announcement of the merger or acquisition and the point at which the contractor reflects the restructuring savings in reduced overhead rates and contract prices. During this uncertain period, fixed-price contracts without a repricing or reopener clause are risky because, once awarded, they cannot be repriced. Projected restructuring savings are difficult to estimate and may be significant in amount. This rule proposes to amend DFARS 231.205-70, External restructuring costs, to specify that contracting officers should consider including a downward-only repricing clause in noncompetitive fixed-price contracts that are negotiated during the period between the time a business combination is announced and the time the contractor's forward pricing rates are adjusted to reflect the impact of restructuring. The repricing clause should ensure that DoD receives its appropriate share of restructuring savings. B. Regulatory Flexibility Act The proposed rule is not expected to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded to small entities use simplified acquisition procedures or are awarded on a competitive fixed-price basis, and do not require application of the cost principle contained in this rule. An initial regulatory flexibility analysis has, therefore, not been performed. Comments are invited from small businesses and other interested parties. Comments from small entities concerning the affected DFARS subpart also will be considered in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite 5 U.S.C. 601, et seq. (DFARS Case 98-D019), in correspondence. C. Paperwork Reduction Act The Paperwork Reduction Act does not apply because the proposed rule does not impose any information collection requirements that require Office of Management and Budget approval under 44 U.S.C. 3501, et seq. List of subjects in 48 CFR Part 231 Government procurement. Michele P. Peterson, Executive Editor, Defense Acquisition Regulations Council. Therefore, 48 CFR part 231 is proposed to be amended as follows: 1. The authority citation for 48 CFR part 231 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 231--CONTRACT COST PRINCIPLES AND PROCEDURES 2. Section 231.205-70 is amended by adding paragraph (f) to read as follows: 231.205-70 External restructuring costs. * * * * * (f) Contracting officer responsibilities. (1) The contracting officer, in consultation with the cognizant ACO, should consider including a repricing clause in noncompetitive fixed-price contracts that are negotiated during the period between-- (i) The time a business combination is announced; and (ii) The time the contractor's forward pricing rates are adjusted to reflect the impact of restructuring. (2) The repricing clause should provide for downward-only price adjustment to ensure that DoD receives its appropriate share of restructuring savings. [[Page 65728]] (3) The decision to use a repricing clause will depend upon the particular circumstances involved, including-- (i) When the restructuring will take place; (ii) When restructuring savings will begin to be realized; (iii) The contract performance period; and (iv) The size of the potential dollar impact on the contract. [FR Doc. 98-31696 Filed 11-27-98; 8:45 am] BILLING CODE 5000-04-M