Defense Federal Acquisition Regulation Supplement; Indian Incentive Program

AGENCY:

Department of Defense (DoD).

ACTION:

Final rule.

SUMMARY:

DoD has adopted as final, with changes, an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement DoD Appropriations Act provisions pertaining to the Indian Incentive Program. The Program permits incentive payments to contractors, and subcontractors at any tier, that use Indian organizations, Indian-owned economic enterprises, and Native Hawaiian small business concerns as subcontractors.

EFFECTIVE DATE:

September 17, 2004.

FOR FURTHER INFORMATION CONTACT:

Ms. Donna Hairston-Benford, Defense Acquisition Regulations Council, OUSD (AT&L)DPAP(DAR),IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0289; facsimile (703) 602-0350. Please cite DFARS Case 2002-D033.

SUPPLEMENTARY INFORMATION:

A. Background

DoD published an interim rule at 68 FR 56561 on October 1, 2003, to implement Section 8021 of the DoD Appropriations Act for Fiscal Year 2003 (Public Law 107-248). Section 8021 revised the criteria for application of the Indian Incentive Program by establishing a >$500,000 threshold for contracts and subcontracts under which incentives may be paid; by authorizing incentive payments for subcontracts awarded to Native Hawaiian small business concerns; and by adding contracts and subcontracts for commercial items to the Program. Section 8021 of the DoD Appropriations Act for Fiscal Year 2004 (Public Law 108-87) and Section 8021 of the DoD Appropriations Act for Fiscal Year 2005 (Public Law 108-287) contain similar provisions.

Fourteen sources submitted comments on the interim rule. A discussion of the comments is provided below. Differences between the interim and final rules are addressed in the response to Comments 1 and 6.

1. Comment: Revise requirements for use of the Indian incentive clause at DFARS 252.226-7001, to require inclusion of the clause in all contracts and subcontracts exceeding $500,000, instead of the present requirement for inclusion of the clause in contracts and subcontracts exceeding $500,000 when “subcontracting opportunities may exist.” This change would eliminate the possibility that a subcontracting opportunity might be overlooked.

DoD Response: Concur. The recommended change has been made in the final rule at 226.104 and 252.226-7001(g).

2. Comment: The rule should include the statutory requirement for inclusion of the incentive clause in subcontracts exceeding $500,000 at any tier.

DoD Response: The rule requires inclusion of the clause, including the flowdown requirement, in all subcontracts exceeding $500,000. This covers all subcontracts exceeding $500,000 at all tiers.

3. Comment: The $500,000 threshold for inclusion of the incentive clause in contracts and subcontracts is restrictive and should be lowered to $100,000 or less.

DoD Response: Do not concur. The $500,000 threshold is consistent with the Appropriations Act provisions.

4. Comment: With regard to the requirement for subcontracted commercial items to be produced or manufactured in whole or in part by a Native firm, the phrase “produced or manufactured in whole or in part” should be clarified. Solutions offered were: Use of the manufacturing standards established by the North American Industry Classification System (NAICS) codes; use of a percentage such as that contained in the nonmanufacturer rule at FAR 19.102(f)(2); or a reference to the Small Business Administration regulations at 13 CFR 121.406.

DoD Response: Do not concur. Placing such a restriction on the eligibility of a subcontract awarded to a Native firm would be without statutory basis.

5. Comment: Can an Indian business provide a non-commercial item as a reseller for the actual manufacturer?

DoD Response: Neither the Appropriations Act provisions nor the DFARS rule place any manufacturing conditions on non-commercial items subcontracted under the Program.

6. Comment: The rule should clarify that Alaska Native Corporations are eligible for participation in Program.

DoD Response: The rule already provides for participation of Alaska Native Corporations, through the definitions of “Indian” and “Indian-owned economic enterprise” in the clause at 252.226-7001. Minor changes have been made to the definition of “Indian” to clarify this point.

7. Comment: Are businesses owned by individual Federally recognized American Indians eligible for participation in the Program, as well as those businesses owned by Federally recognized tribes and organizations?

DoD Response: Yes. The definitions at 252.226-7001 provide for participation by Indian-owned businesses that are individually owned or tribally owned.

8. Comment: The Indian Incentive Program should also be applied to DoD Family Housing Privatization contracts. Presently, the incentive clause cannot be included in these contracts, because the privatization contracts are not considered DoD contracts.

DoD Response: This comment is outside the scope of the DFARS rule. Therefore, no change has been made to the rule as a result of this comment.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

This rule may 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. DoD has prepared a final regulatory flexibility analysis. A copy of the analysis may be obtained from the point of contact specified herein. The analysis is summarized as follows:

This rule amends the DFARS to implement Section 8021 of the DoD Appropriations Act for Fiscal Year 2003 (Public Law 107-248), Section 8021 of the DoD Appropriations Act for Fiscal Year 2004 (Public Law 108-87), and Section 8021 of the DoD Appropriations Act for Fiscal Year 2005 (Public Law 108-287) pertaining to the Indian Incentive Program. The Program permits incentive payments to contractors, and subcontractors at any tier, that use Indian organizations, Indian-owned economic enterprises, and Native Hawaiian small business concerns as subcontractors. DoD received no comments on the initial regulatory flexibility analysis. However, as a result of comments received on the interim rule, the final rule includes a change that prescribes use of the Indian incentive clause at DFARS 252.226-7001 in all contracts and subcontracts exceeding $500,000, rather than in only those exceeding $500,000 for which subcontracting opportunities are deemed to exist at the time of award of the contract or subcontract. The rule requires that maximum practicable opportunity be provided for Indian organizations, Indian-owned economic enterprises, and Native Hawaiian small business concerns to receive subcontract awards; and provides that a contractor or subcontractor that awards a subcontract to such an entity may receive an incentive payment of 5 percent of the amount of the subcontract. There are no practical alternatives that would accomplish the objectives of the applicable statutes.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 226 and 252

• Government procurement

Accordingly, the interim rule amending 48 CFR parts 226 and 252, which was published at 68 FR 56561 on October 1, 2003, is adopted as a final rule with the following changes:

1. The authority citation for 48 CFR parts 226 and 252 continues to read as follows:

Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 226—OTHER SOCIOECONOMIC PROGRAMS

2. Section 226.104 is amended by removing the phrase “for which subcontracting opportunities may exist”.

PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

3. Section 252.212-7001 is amended as follows:

a. By revising the clause date to read “(SEP 2004)”; and

b. In paragraph (b) by revising entry “252.226-7001” to read as follows:

4. Section 252.226-7001 is amended as follows:

a. By revising the clause date to read “(SEP 2004)”;

b. In paragraph (a) by revising the definition of “Indian”; and

c. By revising paragraph (g) to read as follows: