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DoD Finalizes Rule on T&M and L-H Commercial Items Contracts

The Department of Defense has finalized, without change, a July 15, 2009, interim rule (70,016.516) addressing the conditions under which DoD may use a time-and-materials or labor-hour contract for the acquisition of commercial items. The DFARS Case 2008-D011 interim rule and a correction to that rule (70,016.522) amended the Defense Federal Acquisition Regulation Supplement to implement Sections 805 and 815 of the National Defense Authorization Act for Fiscal Year 2008 (PL 110-181). The interim rule added new DFARS 212.207, which authorizes the use of T&M and L-H contracts for commercial items only for services acquired for support of a commercial item, and for emergency repair services. T&M and L-H contracts are also authorized for other commercial services, but only when the agency head approves a contracting officer's determination that meets four requirements outlined in DFARS 212.207(b)(iii). In addition, the interim rule revised DFARS 234.7002 to specify when major weapon systems, subsystems, components, and parts may be treated as commercial items, and DFARS 234.7002(a) was amended to require --as another condition of procuring major weapon systems as commercial items --offerors to have submitted sufficient information for the evaluation of price reasonableness. Revised DFARS 234.7002(b) and new DFARS 234.7002(c) addressed the conditions under which subsystems of major weapons systems, and components and spare parts for major weapons systems, could be treated as commercial items. Another new provision, DFARS 234.7002(d), authorized COs to request offerors to submit prices paid for the same or similar commercial items, under comparable terms and conditions by both government and commercial customers, and other relevant information regarding the basis for price or cost. Finally, the rule modified the definitional provision at DFARS 202.101 to clarify, with regard to sales of commercial items, that the terms "general public" and "nongovernmental entities" do not include the federal government, or a state, local, or foreign government. For the text of the final rule, see 70,016.587.

Rule Unconfirmed

Shortly after the rule was published, DoD issued a notice delaying confirmation of the rule as final. DoD located timely comments that had not been addressed in finalizing the interim rule, and these public comments must be addressed in the formulation of a final rule. DoD will review the comments and either finalize the interim rule without change or publish a final rule, with changes, to address them. In the meantime, the interim rule remains unconfirmed as final and will remain in effect until further notice. For the text of the notice, which was issued August 27, 2010, see 70,016.589.




(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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