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DoD Finalizes Rule on Management of Unpriced Change Orders

The Department of Defense has finalized, with changes, a proposed rule (70,020.257) amending the Defense Federal Acquisition Regulation Supplement to make requirements for DoD management and oversight of unpriced change orders consistent with those that apply to other undefinitized contract actions. DFARS Subpart 217.74 prescribes policies and procedures for the management and oversight of undefinitized contract actions. However, unpriced change orders issued under FAR Part 43 and DFARS Part 243 were previously excluded from the scope of DFARS Subpart 217.74.

New Section

The final rule (DFARS Case 2008-D034) addresses the need for full accountability and enhanced oversight of unpriced contractual actions, including unpriced change orders, by creating new DFARS 243.204-70, Definitization of change orders. The new section contains seven new provisions. Under DFARS 243.204-70-1, Scope, the new subsection applies to unpriced change orders with an estimated value exceeding $5 million, and to the maximum extent practicable, to unpriced change orders for foreign military sales and special access programs. Also, DFARS 243.204-70-2, Price ceiling, requires unpriced change orders to include a not-to-exceed price, DFARS 243.204-70-3 implements requirements for definitization schedules, and DFARS 243.204-70-4, Limitations on obligations, generally prohibits the government from obligating more than 50 percent of the not-to-exceed price before definitization. Exceptions to these limitations appear at DFARS 243.204-70-5. Allowable profit is addressed at DFARS 243.204-70-6, and reporting requirements are added at DFARS 243.204-70-7.

Conforming Changes

The final rule also makes conforming changes to DFARS 215.404-71-3, DFARS 217.7401, DFARS 217.7402, and DFARS 243.204, and redesignates former DFARS 243.204-70 as DFARS 243.204-71. Also, the final rule makes three changes that were not part of the proposed rule: the clause prescription at DFARS 217.7406 is revised; a cross-reference to this prescription is added at new DFARS 243.205-72; and a provision is added at DFARS 217.7405(c) expanding the content of Consolidated Undefinitized Contract Actions Management Reports. A related change to the DFARS companion resource, Procedures, Guidance, and Information, redesignates PGI 243.204-70 as PGI 243.204-71. The final rule has an effective date of August 10, 2010. For the text of the rule, see 70,016.584.




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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