On May 19, 2010, the DAR Council published an interim Defense Federal Acquisition Regulation (DFARS) rule implementing the Franken Amendment.  “Wait!” we hear you saying.  “Didn’t Apogee Consulting, Inc. already publish an article entitled “DOD Implements the Franken Amendment”?  What’s going on here?

Well, it’s like this:  Previously, we reported that DOD has issued a “Class Deviation” implementing the Franken Amendment on various DOD contract actions, as discussed below.

1. An order valued at more than $1 million that uses FY 2010 funds, placed against an ID/IQ contract, is covered by the Franken restriction “regardless of whether the basic ID/IQ contract was covered.”
2. An order valued at more than $1 million that uses FY 2010 funds, placed against a GSA Schedule, is covered.
3. A contract modification adding more than $1 million in FY 2010 funds to a contract awarded before February 17, 2010, is not covered by the restriction. However, a “bilateral modification adding new [contract] work after February 17, 2010 to such a contract is covered” by the restriction.

But a Class Deviation does not a regulatory action make, so the DAR Council was required to publish a proposed rule for public comment.  Interestingly, the DAR Council chose not to publish a proposed rule, but instead to publish an interim rule.  What’s the difference?  A proposed rule is not binding on anybody.  Nothing happens until public comments are received and a final rule issue is issued in the Federal Register.  The final rule may or may not look like the proposed rule, depending on what public comments are received and how they are viewed by the rule-makers.  On the other hand, an interim rule goes into effect immediately, even while public comments are being received and reviewed.  If the comments have any influence, then a final rule may be issued that differs from the interim rule; otherwise, the interim rule is declared to be a final rule and that’s that.

We’ll assume you already know what the Franken Amendment is.  If not, click the second link above and you can review its origin and some of its history.  The interim rule adds a new subpart 222.74 (Restrictions on the Use of Mandatory Arbitration Agreements) to the DFARS.  It does not apply to the acquisition of commercial items, but it does apply to “covered subcontractors”.  It also applies to any contract, bilateral contract modification, or task/delivery order valued at more than $1 million that used FY 2010 appropriated funds. 

Helpfully, the DAR Council provided some examples to help determine what contract actions are (and are not covered) by the new rules.

• A new order that exceeds $1 million using funds appropriated or otherwise made available by the FY 10 DoD Appropriations Act, placed against an indefinite-delivery/indefinite-quantity contract for an applicable item or service, is covered by this restriction, regardless of whether the basic indefinite-delivery/indefinite-quantity contract was covered.
• A funding modification adding more than $1 million of funds appropriated or otherwise made available by the FY 10 DoD Appropriations Act to a contract that does not contain the clause at 252.222-7006 or 252.222-7999 (Deviation), is not covered.
• A bilateral modification adding new work that uses funds appropriated or otherwise made available by the FY 10 DoD Appropriations Act in excess of $1 million is covered.
• The award of a new order using funds appropriated or otherwise made available by the FY 10 DoD Appropriations Act with a value of $700,000 is not covered, since the value is under $1 million.
• A contract valued at $1.5 million awarded today, and only $10,000 in funds appropriated or otherwise made available by the FY 10 DoD Appropriations Act will be obligated, with the remaining balance being FY 11 funding, is not covered, because the total value of funds appropriated or otherwise made available by the FY 10 DoD Appropriations Act is less than $1 million.
• An entity or firm that does not have a contract in excess of $1 million appropriated or otherwise made available by the FY 10 DoD Appropriations Act is not affected by the clause. The term ‘contractor’ is narrowly applied only to the entity that has the contract. Unless a parent or subsidiary corporation is a party to the contract, it is not affected.

The restrictions mandated by the Franken Amendment are being implemented via solicitation and contract clause 252.222-706 (“Restrictions on the Use of Mandatory Arbitration Agreements”).  Readers can review the exact clause language in the first link, above.

As always, the public may submit comments at www.regulations.gov.  Details regarding how to address and submit a comment are found in the interim rule itself.