Government Contracts DFARS Rules Modify and Remove Contract Clauses
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Wednesday, October 9, 2019

DFARS Rules Modify and Remove Contract Clauses

By Government Contracts Editorial Staff

The Department of Defense has issued nine final rules that amend the Defense Federal Acquisition Regulation Supplement. All but one of the rules implement recommendations of the DoD Regulatory Reform Task Force established under Executive Order 13777, “Enforcing the Regulatory Reform Agenda.” Each rule has a September 13, 2019, effective date.

Cancellation or Termination of Orders. The DFARS Case 2018-D035 rule (¶70,017.03) modifies the clause at DFARS 252.239-7007, Cancellation or Termination of Orders, to clarify the limitations of the government's obligation to reimburse a contractor for nonrecoverable costs when the government cancels an order for telecommunications services. Specifically, the government will not reimburse the contractor for certain costs incurred prior to the issuance of an order under a communication services agreement or other contractual document. This clarification seeks to prevent the contractor from incurring costs in anticipation of, but prior to, the establishment of a formal agreement or contract for services and the award of an order for the services. The rule also revises DFARS 252.239-7007 to incorporate the information included in DFARS 252.239-7008, Reuse Arrangements, which the rule removes. The final rule made no changes to the proposed rule (¶70,020.431).

Facilities and Services Orders. The final rule in DFARS Case 2018-D045 (¶70,017.04) modifies the clause at DFARS 252.239-7004, Orders for Facilities and Services, and removes DFARS 252.239-7005, Rates, Charges, and Services. The rule incorporates that clause's requirements into DFARS 252.239-7004. These clauses are used in all solicitations, contracts, and basic agreements for telecommunications services. DFARS 252.239-7004 specifies how contractors must acknowledge the receipt of orders under the contract or agreement, while DFARS 252.239-7005 contained terms and conditions regarding charges for facilities and services. Both of these clauses could be combined without changing the intent of either clause. The rule also makes minor changes to simplify the clause text. The final rule did not make any changes to the proposed rule (¶70,020.432).

Patent Infringement. The DFARS Case 2019-D012 final rule (¶70,017.05) updates the pronouns used in the DFARS 252.227-7001 clause, Release of Past Infringement. This clause is included in contracts that contain patent release and settlement agreements, license agreements, and assignments. The clause addresses the release of claims or demands of certain inventions associated with the contract. Within the clause text the contractor was identified using the pronouns “he” or “him.” Current drafting convention simplifies and clarifies the clause language by referring to a contractor as “the contractor” in clause text. The DoD Regulatory Reform Task Force reviewed the requirements of DFARS 252.227-7001 and determined that the DFARS clause should be updated to conform to current drafting standards.

Trade Agreements. The DFARS Case 2019-D016 rule (¶70,017.06) updates a paragraph citation in the DFARS 252.225-7021 clause, Trade Agreements. This clause is included in solicitations and contracts for the acquisition of supplies subject to the World Trade Organization Government Procurement Agreement. The clause: provides pertinent definitions and country listings for designated and qualifying countries; requires contractors to deliver only U.S.-made, qualifying country, or designated country end items, unless otherwise stated in the contract; prohibits the contract price from including duty for products for which the contractor will claim duty-free entry; and provides information on applicable sections of the Harmonized Tariff Schedule of the United States. The rule amends DFARS 252.225-7021 to update an outdated citation in paragraph (e) of the basic clause and paragraph (f) of the alternate II clause. These paragraphs provide a link to the HTSUS and identify specific sections of the Schedule that provide more information on the duty-free status of articles specified in paragraph (a)(2)(ii)(A), which used to contain the definition of “Caribbean Basin country end product,” but this paragraph number no longer exists. Instead, the clause has been renumbered and all of the definitions in the clause are included in alphabetical order under paragraph (a). Accordingly, this rule removes the reference to paragraph (a)(2)(ii)(A) in the clause and replaces it with a reference to the definition of “Caribbean Basin country end product” in paragraph (a).

Readjustment of Payments. The DFARS Case 2019-D017 final rule (¶70,017.07) updates the clause at DFARS 252.227-7002, Readjustment of Payments, to clearly identify the government official a contractor should contact when applying the terms of the clause. DoD contracting activities include the clause in all contracts that contain patent release and settlement agreements, license agreements, and assignments, executed by the government, under which the government acquires rights, and provide for payment of a running royalty. The clause addresses royalty terms, conditions, and payments, and requires the contractor to notify “the Secretary” upon granting more favorable royalty terms to the government under another agreement. This rule updates the clause to identify the contracting officer, not the Secretary, as the individual to be notified under the clause. The intent of the rule is to clarify and simplify the notification required of contractors by the clause and avoid any miscommunication or misunderstanding between the government and contractor when complying with the clause.

Reporting and Payment of Royalties. The final rule in DFARS Case 2019-D018 (¶70,017.08) updates the clause at DFARS 252.227-7009, Reporting and Payment of Royalties, to amend the CO fill-in instructions contained in the clause. DFARS 252.227-7009 is available for use in all contracts that contain patent release and settlement agreements, license agreements, and assignments, executed by the government, under which the government acquires rights, and provide for payment of a running royalty. The clause addresses the terms and conditions for DoD reporting of annual royalties accrued under the contract and the contractor's resultant submission of a royalty payment request. This rule updates the parenthetical guidance to direct COs to insert the name of the designated office or CO, in accordance with agency procedures. As a result, this rule clarifies for contractors the source of the report provided under the clause and avoids any miscommunication or misunderstanding between the government and contractor when complying with the clause. The DoD Regulatory Reform Task Force reviewed the requirements of DFARS 252.227-7009 and determined that that only the instructions of the clause should be modified.

Award to Single Offeror. The DFARS Case 2019-D024 rule (¶70,017.09) removes the solicitation provision at DFARS 252.237-7002, Award to Single Offeror, which is no longer needed. The provision was included in solicitations for mortuary services that use sealed bidding procedures. The Alternate I provision was included in all solicitations for mortuary services that used negotiated procedures. However, the contents of this provision are contained in other parts of the solicitation. Specifically, DoD policy and DFARS 237.7001 require the solicitation and award of mortuary services to be accomplished using a requirements contract. FAR 16.503 advises that a requirements contract provides for filling all requirements of designated activities for supplies or services during a specified contract period from one contractor. FAR 52.216-21, Requirements, is included in all solicitations for and awards of requirements contracts, and advises offerors of the government's obligation. As such, only single awards can be made in response to a mortuary services solicitation and the disclosure of this information in the DFARS provision is redundant. The rule makes corresponding technical changes at DFARS 252.237-7003 through DFARS 252.237-7009 and DFARS 252.237-7011.

Returnable Containers. The rule in DFARS Case 2018-D025 (¶70,017.10) repeals the clause at DFARS 252.247-7021, Returnable Containers Other Than Cylinders. This clause was included in solicitations and contracts for supplies involving contractor-furnished reels, spools, or other returnable containers (other than cylinders) when the contractor would retain title to the containers. Upon review, DoD found that this clause is no longer used in transportation contracts and is very rarely used in other DoD contracts. Instead, the processes and procedures addressing the use, return, reimbursement, loss, and damage of returnable shipping containers are included in a performance work statement, when necessary. As these specifications are rarely needed and can be negotiated and incorporated into a contract's performance work statement, this DFARS clause is no longer necessary and can be removed.

PPIRS. The DFARS Case 2019-D033 rule (¶70,017.11) implements changes regarding the discontinued use of the Past Performance Information Retrieval System. The rule updates associated references to PPIRS for past performance information and replaces these references with the Contractor Performance Assessment Reporting System to implement changes following the official retirement of PPIRS and subsequent merger with the CPARS effective January 15, 2019. This rule also amends the DFARS to replace references to “Past Performance Information Retrieval System-Statistical Reporting” with “Supplier Performance Risk System” and update the associated web addresses. Accordingly, the rule amends DFARS 209.105-1, DFARS 212.301, DFARS 213.106-2, DFARS 213.106-2-70, and the clause at DFARS 252.213-7000.

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