Report On Use of Employees of Non-Federal Entities to Provide Services to Department of the Army

AGENCY:

Office of the Assistant Secretary of the Army (Manpower and Reserve Affairs), and Office of the Assistant Secretary of the Army (Acquisition, Logistics and Technology, Department of the Army, DoD.

ACTION:

Interim rule.

SUMMARY:

The Department of the Army requests agency and public comments on its implementation of the recently enacted Section 343 of the FY 2000 Department of Defense Authorization Act. Section 343 directs the Department of Defense to provide to Congress not later than March 1, 2001, a report summarizing the number of direct labor and indirect labor work year equivalents performed by contractors providing services to the Department of Defense in the prior fiscal year (FY 2000), categorized by federal supply class or service code, appropriation supporting the services and major organizational element of the Department procuring the services. Since the Fiscal Year to be reported upon to Congress has already commenced, it is critical that this guidance be issued effective immediately to avoid extraordinary efforts by Government and contractor personnel attempting to collect significant reliable data retroactively.

Section 2461(g) of title 10, United States Code, requires DoD to provide an annual report to Congress on the percentage of commercial functions performed by contractors as compared to in-house employees. Section 343 provides the data collection framework for the Army to improve the accuracy and credibility of its reporting under section 2461(g) of title 10.

DATES:

The effective date for this interim rule is March 15, 2000. Written comments on this interim rule must be submitted not later than May 15, 2000 to ensure consideration.

ADDRESSES:

Comments concerning this interim rule should be submitted to the Office of the Assistant Secretary of the Army for Manpower & Reserve Affairs (ASA (M&RA), Attention SAMR-FMMR, Rm. 2A672, Washington, DC 20310, or contact the following persons by e-mail or phone as indicated below.

FOR FURTHER INFORMATION CONTACT:

Dr. John Anderson, SAMR-FMMR, Phone 703-614-8247, email: John.Anderson@hqda.army.mil; or John R. Conklin, SAAL-ZP, e-mail: John.Conklin@sarda.army.mil.

SUPPLEMENTARY INFORMATION:

1. Background: This interim rule implements section 343 of the FY 2000 Department of Defense Authorization Act, Public Law 106-65 and 10 U.S.C. 2461(g). In February 1997, the Assistant Secretary of the Army (Manpower and Reserve Affairs) included the reporting of contractor manpower as a milestone required to remedy a finding by the Secretary of Defense of material weakness in manpower requirements determination within the Army under the Federal Manager's Financial Integrity Act.

2. From May to December, 1997, the Assistant Secretary of the Army (Manpower and Reserve Affairs) and the Assistant Secretary of the Army (Research, Development, and Acquisition) participated in a joint study to identify and estimate the work-year equivalents performed by contractors providing services to the Department of the Army during fiscal year 1996. The study used existing contract reporting systems, manually accessible data, and some queries to contractors, to identify expenditures on service contracts by Federal Supply Class (FSC) Service code function, organizational name and unit identification code of the Army element contracting for the services, and the appropriations from which the contracted services were funded.

3. The study sampled approximately 12.8 percent of the service contracts awarded in fiscal year 1996 for the purposes of obtaining direct and indirect man-hours, which were used to develop a planning factor for converting contract expenditures for specific groupings of FSC Service code functions into work-year equivalents for those functions. A commitment was made to not release the information provided by contractors for use in any governmental audits of the contractor or any other governmental purpose, since the information was being used solely for the purposes of improving Army manpower requirements planning and the accuracy of the report required by section 2461(g) of title 10. (i.e., the information provided by contractors on a voluntary basis was treated as proprietary information).

4. The contractor manpower equivalent model developed from this study was presented to the Chief of Staff of the Army in July 1998, and a decision was made to use this information in the Total Army Analysis, the Army's planning process for determining and prioritizing its manpower requirements for its force structure and infrastructure. The estimated level of contract support of an Army organization within a function was used as an offset for purposes of allocating in-house resources to meet that organization's requirements. The estimated level of contract support of an Army organization also provided, for planning purposes, a gross estimate of the organization's total capabilities in various war-fighting and non-war-fighting scenarios.

5. The contractor work year equivalents estimated from this model were also used to assist in establishing equitable competition targets among different Army organizations for purposes of implementing Defense Reform Initiative Directive 20, “Review of Inherently Governmental Functions”. Army organizations were credited with the estimated contractor support work-year equivalents for purposes of determining the percentage of the in-house workforce in that organization that would be potentially subject to competition relative to the same function in other Army organizations.

In January 1998 the Army compared Army contractor expenditures reflected in the Defense budget with the level of contract manpower used as the basis for estimating the contractor percentage required by section 2461(g) of title 10. The fiscal year 1997 section 2461(g) report for the Army reported 44,000 contract manpower equivalents (CMEs), as compared with over $21 billion in service contracts awarded by Army contracting offices during the same period. While recognizing that a small percentage of those services may not have been reportable under the CME report, the Army leadership determined to use the more comprehensive and credible Contractor Manpower Equivalent model developed for its Total Army Analysis as a basis for the FY 1998 2461(g) report as an interim measure until a more accurate data collection methodology was established. (As a result, the Army reported 269,000 CMEs in its fiscal year 1998 report, as compared to $24 billion service contract expenditures, thereby reducing the questionable disparity between contract expenditures and CMEs reported in the fiscal year 1997 report.)

6. Implementation: It has been determined, after a review of numerous alternatives and Army lessons-learned, that the only way to collect the required information economically, in a timely way, accurately and credibly, with the least burden on the public and expense to the Government, is to request contemporaneous submission directly from affected contractors. Accordingly, the Army will direct Army contracting officers to include in new solicitations and contracts, and any existing contract bilaterally modified, a requirement that contractors providing services to the Army identify, itemize and report their direct labor hours of support and provide a related composite indirect labor rate so that we might estimate the relevant indirect hours. This submission is expected to be coincident with requests for payment (e.g., contract vouchers, invoices, or requests for progress payments). The information obtained will be transmitted directly to the Office of the Assistant Secretary of the Army (Manpower and Reserve Affairs). For security and convenience, a secure web site will be established for this purpose. This reporting requirement is not viewed as violating the objectives of performance based contracting since the reported labor hours are neither being requested for, nor viewed as a basis for, payment under the contract, but rather, are to be provided to meet Congressional reporting requirements and for internal Governmental manpower planning and management uses only.

7. The reporting requirement has been tailored as narrowly as possible to comply with the law, allow the acquisition of useful data, and minimize any undue workload on respondents. It will be applied prospectively (i.e., to solicitations issued and contracts awarded (or modified, in the case of existing contracts) after the effective date of this interim rule); for reporting contemporaneous with normal billings by the contractor (and consistent with contractor accrual and allocation practices and systems), so as to minimize the impact on contractor operations and administrative costs, and to allow uniform reporting. However respondents under preexisting contracts modified during this period, will be asked to report from October 1, 1999, or the date the contract action began, whichever is later.

8. Reporting will not be required if a contractor does not have an internal system for aggregating billable hours in the direct and indirect pools and does not otherwise have to provide this information to the Government. We believe that a global requirement to identify, collect, validate and report this information after the fact (e.g., at the end of the fiscal year) would necessitate burdensome additional record keeping and administrative efforts by contractors and Government personnel and would significantly degrade the quality and usefulness of the information collected. On the other hand, it is reasonable and not an undue burden on a contractor to provide labor hour information at the time that the contractor has readily available the labor hour records used, as a basis for meeting its payroll or charging the government for its services (or for tax purposes, or cost allocation in accordance with Generally Accepted Accounting Principles and practices).

9. Consistent with the above, the reporting requirement will not be mandated under the following categories of contracts and situations:

a. Contracts awarded under the authority of Part 12 of the Federal Acquisition Regulations (FAR).

b. Contracts valued at $100,000 or below.

c. When a contractor does not have an internal system for aggregating billable hours in the direct and indirect pools, or an internal payroll accounting system, and does not otherwise have to provide this information to the Government.

d. Contracts awarded by the Army contracting office solely as a contracting agent in support of non-Army customer(s). (We are interested in labor hour data in support of Army at this time. (If the name and address of the organization receiving the benefit of the services is an Army organization, then the labor hour data is reportable as an Army requirement, even though the appropriations funding all or part of the requirement are not Army appropriations).

10. The intent of the reporting requirement is to obtain direct and indirect labor hour data for services in support of the Army under contracts not covered by the above exclusions.

11. The labor hour information provided will be protected as company proprietary data (when associated with contract number and contractor name) and will be required at a level of detail not greater than required for the intended use. The reports will include: the Federal Supply Class or Service Code pertinent to the services reported (this can be identified by the respondent from the lists found in the Procurement Coding Manual on the internet at http://web1.whs.osd.mil/peidhome/guide/mn02/mn02.htm ); the complete appropriations data for the appropriations funding the line item(s)/contract/order; the name, complete address and location of the Army contracting office; the name and address of the Army organization receiving the benefit of the services (i.e., the most proximate Army customer reviewing and receiving work); the time period covered by the report; and the contract/order number and the associated (estimated) value. Information provided should be consistent with the contract terms and requirements and with other data provided to the Government by the reporting contractor (e.g., vouchers, invoices, requests for progress payment, or other reports to the Army).

Procedural Requirements

A. Information Collection Requirements

This interim rule contains collection of information requirements. Information collection is required to provide documentation of various support services from contractors in compliance with Section 343 of Public Law 106-65 (FY 2000 National Defense Authorization Act), and Section 2461(g) of Title 10 United States Code (10 U.S.C. 2461(g)). The Paperwork Reduction Act of 1995, 44 U.S.C. 3507 (d) and 5 CFR 1320.11, require Federal agencies to submit collections of information contained in rules to the Office of Management and Budget (OMB) for review. To request more details pertaining to the collection of information requirements or to obtain a copy of the associated collection instruments, please write to the above address or call Department of the Army Reports Clearance Officer at (703) 614-0454.

Title: Report required by National Defense Authorization Act for Fiscal Year 2000, Section 343; and to comply fully with the reporting requirements at 10 U.S.C. 2461(g).

Needs and Uses: Section 343 of the FY2000 National Defense Authorization Act; Section 2461(g) of Title 10; and the Total Army Analysis. Army requires contract manpower data to remedy its declared material weakness in manpower requirements determinations and to improve the accuracy of related reports to Congress. Data will be used in the Total Army Analysis force structure planning, Functional Area Assessments, and to support HQDA decision-making. Data will also provide a more complete picture of organizations, functions and capabilities in war fighting and non-war fighting scenarios.

Affected Public: Primarily business or other for profit.

Annual Burden Hours: 33,928.

Number of Respondents: 7,400.

Responses Per Respondent: 55.24.

Average Per Respondent: .083 hours.

Frequency: Contemporaneous with submission of requests for payment (vouchers, invoices or requests for progress payment), usually monthly (dependent on contractor's internal systems for allocating costs and contract requirements).

B. Regulatory Flexibility Act

The rule does not require the preparation of a regulatory flexibility analysis since it is not expected to have a significant economic impact on a substantial number of small entities (i.e. small and small disadvantaged businesses).

C. Unfunded Mandates Act

The rule does not impose an enforceable duty among small governments (i.e. States and local governments).

D. Paperwork Reduction Act

Pursuant to the Paperwork Reduction Act of 1995, the reporting provisions of this rule have been approved by the Office of Management and Budget (OMB) and assigned OMB control Number 0702-0112, with an expiration date of August 31, 2000.

In compliance with Section 3506(c)(2)(A) of the Paperwork Reduction Act, the Office of the Assistant Secretary of the Army for Manpower & Reserve Affairs (ASA (M&RA)) announces a public information collection requirement as described in this rule and seeks public comment on the provisions thereof. Comments are invited on (1) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (2) the accuracy of the agency's estimates of burden of the information collection; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and, (4) ways to minimize the burden of the information collection on respondents, including the use of automated collection techniques or other forms of information technology.

Comments on these requirements should be submitted to the Office of the Assistant Secretary of the Army for Manpower & Reserve Affairs (ASA (M&RA)), Attention: SAMR-FMMR, Rm. 2A672, Washington, DC 20310-0111. When the Department of the Army promulgates the Final Rule, the Department will also respond to comments or the public regarding the information collection provision requirements of the rule.

E. Executive Order 12866 (Regulatory Planning and Review

This is not a significant regulatory action in that it is not likely to result in a rule that will have an annual effect on the economy of $100 million or more or adversely affect productivity, the environment, public health or safety.

F. Executive Order 13132 (Federalism)

It has been determined that this rule does not have sufficient Federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in this rule will have little or no direct effect on States or local governments.

G. Submission to Congress and the General Accounting Office (GAO)

Pursuant to 5 U.S.C., Chapter 8, the rule will be forwarded to both Houses of Congress and the GAO in the final rule announcement together with the GAO prescribed special reporting form for this purpose.

List of Subjects in 32 CFR Part 668

• Government contracts
• Reporting and recordkeeping requirements

Accordingly, Subchapter L consisting of part 668 is added to 32 CFR chapter V to read as follows:

SUBCHAPTER L—ARMY CONTRACTING

PART 668—CONTRACTOR MANHOUR REPORTING REQUIREMENT

Authority: Sec. 343 of Pub. L. 106-65, 113 Stat. 569 (10 U.S.C. 2461(g)).