83 FR 19645 - Defense Federal Acquisition Regulation Supplement: Promoting Voluntary Post-Award Disclosure of Defective Pricing (DFARS Case 2015-D030)

DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System

Federal Register Volume 83, Issue 87 (May 4, 2018)

DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to state that, in the interest of promoting voluntary contractor disclosures of defective pricing identified by the contractor after contract award, DoD contracting officers have discretion to request a limited-scope or full-scope audit, as appropriate for the circumstances.

[Federal Register Volume 83, Number 87 (Friday, May 4, 2018)]
[Rules and Regulations]
[Pages 19645-19647]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-09489]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 215

[Docket DARS-2015-0051]
RIN 0750-AI75


Defense Federal Acquisition Regulation Supplement: Promoting 
Voluntary Post-Award Disclosure of Defective Pricing (DFARS Case 2015-
D030)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to state that, in the 
interest of promoting voluntary contractor disclosures of defective 
pricing identified by the contractor after contract award, DoD 
contracting officers have discretion to request a limited-scope or 
full-scope audit, as appropriate for the circumstances.

DATES: Effective May 4, 2018.

[[Page 19646]]


FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, telephone 571-372-
6099.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 80 FR 
72669 on November 20, 2015, to amend the DFARS to indicate that DoD 
contracting officers have discretion to request a limited- or full-
scope audit, as appropriate for the circumstances, when contractors 
voluntarily disclose defective pricing after contract award. In 
response to the Better Buying Power 2.0 initiative on ``Eliminating 
Requirements Imposed on Industry where Costs Outweigh Benefits,'' 
contractors recommended several changes to 41 U.S.C. chapter 35, 
Truthful Cost or Pricing Data (formerly the Truth in Negotiations Act) 
and to the related DFARS guidance. Specifically, contractors 
recommended that DoD clarify policy guidance to reduce repeated 
submissions of certified cost or pricing data. Frequent submissions of 
such data are used as a defense against defective pricing claims by DoD 
after contract award, since data that are frequently updated are less 
likely to be considered outdated or inaccurate and, therefore, 
defective. Better Buying Power 3.0 called for a revision of regulatory 
guidance regarding the requirement for contracting officers to request 
an audit even if a contractor voluntarily discloses defective pricing 
after contract award.
    One respondent submitted a public comment in response to the 
proposed rule.

II. Discussion and Analysis

    DoD reviewed the public comment in the development of the final 
rule. A discussion of the comment and changes made to the rule as a 
result of the comment is provided, as follows:

A. Summary of Significant Changes From the Proposed Rule

    One change was made to the rule as a result of the public comment 
to remove the mandatory requirement to conduct an audit in all cases of 
a contractor's voluntary disclosure of defective pricing.

B. Analysis of Public Comment

    Comment: The respondent recommended that ``shall'' be replaced by 
the word ``may'' concerning the requirement to request a limited-scope 
audit as proposed at DFARS 215.407-1(c)(i). The respondent stated that 
the study entitled ``Eliminating Requirements Imposed on Industry where 
Costs Outweigh Benefits'' recommended that DoD not impose a mandatory 
requirement on itself to conduct an audit in all cases of a 
contractor's voluntary disclosure of defective pricing, because such a 
mandatory requirement provides no discretion for contracting officers 
not to request an audit if in their judgment an audit is not required 
by the circumstances. However, instead of removing this mandatory 
requirement as recommended by the study, the proposed rule would change 
the DFARS from ``shall request an audit. . .'' to ``shall request a 
limited scope audit. . . .'' Thus, the proposed language still provides 
a strong disincentive to contractors to voluntarily disclose defective 
pricing and it still imposes a mandatory requirement on contracting 
officers that may not be in the best interests of the DoD in all 
circumstances.
    Response: The final rule is revised to remove the mandatory 
requirement to conduct an audit in all cases of a contractor's 
voluntary disclosure of defective pricing. However, in order to 
calculate appropriate price reductions as required by 10 U.S.C. 
2306a(e), it is necessary that contracting officers, at a minimum, 
discuss the disclosure with the Defense Contract Audit Agency (DCAA) to 
determine the completeness of the contractor's voluntary disclosure and 
the accuracy of the contractor's cost impact calculation for the 
affected contract, and the potential impact on existing contracts, task 
or delivery orders, or other proposals the contractor has submitted to 
the Government. This discussion will assist the contracting officer in 
determining the involvement of DCAA, which could be a limited-scope 
audit (e.g., limited to the affected cost elements of the defective 
pricing disclosure), a full-scope audit, or technical assistance, as 
appropriate for the circumstances (e.g., nature or dollar amount of the 
defective pricing disclosure).

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    The requirement for submission of certified cost or pricing data 
does not apply to contracts at or below the simplified acquisition 
threshold or to commercial items, including commercially available off-
the-shelf items. Therefore, this rule is not applicable to those 
classes of contracts.

IV. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

V. Executive Order 13771

    This rule is not subject to E.O. 13771, Reducing Regulation and 
Controlling Regulatory Costs, because this rule is not a significant 
regulatory action under E.O. 12866.

VI. Regulatory Flexibility Act

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 691, et seq. 
The FRFA is summarized as follows:
    The objective of this rule is to amend the Defense Federal 
Acquisition Regulation Supplement (DFARS) to indicate that, in the 
interest of promoting voluntary contractor disclosures of defective 
pricing identified by the contractor after contract award, DoD 
contracting officers have discretion to request a limited-scope or 
full-scope audit, as appropriate for the circumstances. This rule will 
apply to all DoD contractors, including small entities, who are 
required to submit certified cost or pricing data.
    There were no significant issues raised by the public in response 
to the initial regulatory flexibility analysis.
    The number of small entities affected by this rule is unknown as 
this information is not available in the Federal Procurement Data 
System or other central repository. However, DoD anticipates that this 
rule could have a positive economic impact. If those small entities 
usually submit cost or pricing data frequently in order to avoid 
defective pricing claims, then this rule may encourage them to reduce 
the number of such submissions.
    There is no change to reporting or recordkeeping as a result of 
this rule. The rule does not duplicate, overlap, or conflict with any 
other Federal rules,

[[Page 19647]]

and there are no known significant alternative approaches to the rule 
that would meet the requirements.

VII. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Part 215

    Government procurement.

Amy G. Williams,
Deputy, Defense Acquisition Regulations System.
    Therefore, 48 CFR part 215 is amended as follows:

PART 215--CONTRACTING BY NEGOTIATION

0
1. The authority citation for part 215 continues to read as follows:

    Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

0
2. Add sections 215.407 and 215.407-1 to subpart 215.4 to read as 
follows:


215.407  Special cost or pricing areas.


215.407-1  Defective certified cost or pricing data.

    (c)(i) When a contractor voluntarily discloses defective pricing 
after contract award, the contracting officer shall discuss the 
disclosure with the Defense Contract Audit Agency (DCAA). This 
discussion will assist in the contracting officer determining the 
involvement of DCAA, which could be a limited-scope audit (e.g., 
limited to the affected cost elements of the defective pricing 
disclosure), a full-scope audit, or technical assistance as appropriate 
for the circumstances (e.g., nature or dollar amount of the defective 
pricing disclosure). At a minimum, the contracting officer shall 
discuss with DCAA the following:
    (A) Completeness of the contractor's voluntary disclosure on the 
affected contract.
    (B) Accuracy of the contractor's cost impact calculation for the 
affected contract.
    (C) Potential impact on existing contracts, task or deliver orders, 
or other proposals the contractor has submitted to the Government.
    (ii) Voluntary disclosure of defective pricing is not a voluntary 
refund as defined in 242.7100 and does not waive the Government 
entitlement to the recovery of any overpayment plus interest on the 
overpayments in accordance with FAR 15.407-1(b)(7).
    (iii) Voluntary disclosure of defective pricing does not waive the 
Government's rights to pursue defective pricing claims on the affected 
contract or any other Government contract.

[FR Doc. 2018-09489 Filed 5-3-18; 8:45 am]
 BILLING CODE 5001-06-P