Revision:
March 10, 2006
(Previous
version as of March
10, 2006)
DCMA
Requirements:
INTERIM INSTRUCTION
NONCOMPLIANCE WITH THE
PREFERENCE FOR DOMESTIC SPECIALTY METALS CLAUSE,
DFARS 252.225-7014
Background:
The DFARS 252.225-7014 Clause, Preference for Domestic Specialty
Metals implements a portion of the “Berry
Amendment” (codified at 10 USC 2533a). It requires certain “specialty metals”
incorporated in articles delivered under DoD contracts be melted in the United States or a “qualifying country” (or incorporated in an article manufactured in a
qualifying country), unless specific exceptions apply or a Secretarial exception
of restrictions is granted. The
legislative history of the Berry Amendment indicates the purpose of the
amendment was and is to maintain and support the defense industrial base for
those items it covers. In the case of
specialty metals, the “Berry Amendment” recognizes the strategic importance of
maintaining a domestic smelting capability for certain important specialty
metals. The Defense Contract Management Agency has learned that
some items containing
foreign specialty metals that do not comply with DFARS restrictions are being delivered
under some DoD contracts. This instruction provides an
interim process for conditional acceptance of supplies required
by our customers until a long-term Departmental remedy can be
implemented by OSD.
Reporting Requirements:
DCMA Contract
Management Offices (CMOs) will identify to
DCMA HQ all suppliers (both prime contractors and subcontractors) that have
disclosed that items deliverable under, or to be incorporated into an item to
be delivered under, a DoD contract contain, or may contain, specialty metals that
do not comply with DFARS restrictions.
Note that the burden of disclosure rests on the prime contractors tendering
product for acceptance. Reporting will be through the DCMA
Specialty Metals Portal. A
consolidated list of those suppliers will be maintained there. The purpose is
to assist DCMA’s Contracting Officers (and Quality Assurance personnel) in
identifying potential issues in the contracts they are administering. Specific instructions for completing this reporting
requirement (and the list of suppliers) are found in the
"Noncompliant Suppliers" Tab on the aforementioned Portal.
Conditional Acceptance
Process for Products Containing Nonconforming Specialty Metals:
General Policy
DCMA will not accept
products containing nonconforming specialty metals unless notified in writing by
the procuring activity that an exception applies (Ref: DFARS 225.7002-2) or the
procuring activity authorizes DCMA to accept the product conditionally and, at
a minimum, withholds the cost of the lowest auditable non-compliant specialty
metal part plus appropriate burden from payments due against the contract. This
Conditional Acceptance option should be very limited in application. In order
to protect the Government’s interest:
-
The documentation that the contractor uses to
disclose the actual or potential noncompliance must specifically identify the
lowest part, assembly, configuration item, system, configuration baseline,
contract, and program; and
-
The contractor shall specifically
identify impacted Critical Safety Items (CSIs) along with the specialty metal
involved. Documented evidence that the affected CSI meets all performance
requirements should also be provided.
-
The procuring activity will
normally calculate the appropriate withhold with DCMA assistance. Upon
request, DCMA will determine the appropriate withhold in accordance with the instruction
provided below for “Calculation of Withholds.”
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The contractor shall attach a copy of the conditional
acceptance document (signed and dated by the PCO or ACO) authorizing the
conditional acceptance to the receiving report. The specific language to be
used is provided below in “Conditional Acceptance
& Withhold Language.” In addition to that language, all documents
authorizing conditional acceptance shall include on the “Subject” line; “Berry
Amendment Withhold” and the Contract Number. For Fixed-Price Contracts, the
document will also specify the total amount withheld (at the contract level)
for the items on that receiving report.
-
For Fixed-Price Contracts, the
contractor shall attach a schedule (signed by the PCO or ACO) specifically
identifying the amounts to be withheld at line item level (as discussed below in
“Identification of Withhold Amounts”) to the receiving
report.
-
By following this instruction for
preparing contractor invoices, invoicing can be performed in Wide Area Work
Flow (WAWF) and the contractor can continue to comply with electronic invoicing
requirements. See “Invoicing” below for more information.
-
DCMA Administrative Contracting
Officers will notify their local counsel of all potential noncompliance with DFARS 252.225-7014, Preference for domestic specialty metals, and obtain legal
coordination prior to authorizing any conditional
acceptances and providing pricing support for calculation of the withhold
amounts prepared by DCMA.
-
This instruction
can be generally applied to all contracts administered
by DCMA. Certain portions, e.g., Identification of
Affected Contracts, are only applicable to contracts administered with and paid through MOCAS.
Calculation of Withholds
Working with the PCO, DCMA should look to the lowest level subcontracted item
containing prohibited foreign specialty metal and subject to DFARS 252.225-7014,
Alternate I, flow down clause. The burdened cost of the offending specialty
metal part should include such factors as add-on’s for freight, material
handling and profit. Burdens will be applied at the prime contractor level and
will incorporate burdens from each applicable subcontract tier. This will be
the minimum amount to be withheld.
Other options
for calculating the amount to be withheld may be used or directed by the PCO.
For example, the PCO may consider the cost of rework, replacement, or
correction of the item to eliminate the nonconformance. The amount withheld
should be adequate to ensure the contractor will ultimately comply with the
terms and conditions of the contract.
If the
contractor has not identified specific part numbers from suppliers for items
containing nonconforming specialty metals, the amount withheld from the
contract or line item should cover all specialty metal parts contained in the
end item from the supplier of suspect parts.
The withhold
amount will NOT be calculated by determining the value of specialty metal in a
part or component. If the PCO decides to calculate the withhold amount in that
manner, the PCO will be required to sign all documents (e.g., Conditional
Acceptance Document, Schedule, etc.) relating to the conditional acceptance of
the items. Note that this is the calculation methodology most commonly
endorsed by Industry but it has not been accepted by DoD or DCMA.
Conditional Acceptance
& Withhold Language
The following language
will be used in all conditional
acceptance documents and attached to the receiving
report for all conditional acceptances of items containing nonconforming specialty
metals:
-
This
item is conditionally accepted with parts that have, or may have been,
manufactured with noncompliant specialty metals as described in [Identify letter or
other document from contractor disclosing the actual or potential noncompliance]
pending completion of the contractor’s investigation and Government
concurrence. The contractor remains liable for any noncompliance with 10
U.S.C. 2533a as implemented in DFARS clause 252.225-7014, Preference for
Domestic Specialty Metals, and Alternate I to the clause, where applicable. Further, acceptance
of this part does not constitute a waiver by the Government of any rights,
contractual, statutory, or otherwise, relating to any matter involving the
production or delivery of this part, and does not waive any claim by the United
States for fraud, false claims, or any other conduct on the part of any party
which may be actionable under law.
-
Payments due under this contract shall include a withhold in the amount of [Insert amount] based upon the contracting officer’s assent to the contractor’s representation
of the estimated cost of the nonconforming specialty metal parts, plus applicable
burden and profit.
(End)
Invoicing
For invoices
submitted through WAWF Web-Input, the contractor shall bill for the “revised” approved unit price (the net of the contract unit price reduced by the amount withheld) and include
in the Comment Section the words “Berry Amendment Withhold” and the contract
unit price. For invoices submitted by hard copy, the unit price shown must
match the contract price and the contractor shall include a comment line that
includes the words “Berry Amendment Withhold” and the amount of the approved
withhold. No means other than WAWF Web-Input or hard copy shall be used to
invoice for items accepted conditionally because of specialty metal
noncompliances.
Identification of Withhold Amounts
For Fixed-Price
Contracts, in addition to the “Conditional Acceptance & Withhold Language” above, a schedule (either included in the language above or separately
attached to the receiving report) specifically identifying the amounts to be withheld must be included with invoices.
Written approval by the PCO or ACO must be evident on this schedule. The
schedule must identify the amount to be withheld for every line item affected
and show the “revised” approved unit price. (Note: This information will
facilitate any future price reduction modifications required---withholds for
Specialty Metals noncompliances will not be uniquely recorded in MOCAS as a
result of the DFAS payment process.)
For Cost-Reimbursement
Contracts, the PCO or ACO must send written notice to the contractor directing
them not to bill the Government in the final voucher for withheld amounts ,
i.e., remove the withheld costs in accordance with the billing instructions
contained in the contract. (Whether the amounts withheld will be identified at
the contract level or line item level will depend on billing instructions
contained in the contract.) This notice need not be furnished to the payment
office, but the ACO should send a copy of the notice to the cognizant DCAA
auditor.
Contract
Financing Payments
There is no requirement under
this Conditional Acceptance Instruction to withhold any portion of interim payments
under Cost-Reimbursement Contracts or reduce contract financing payments.
Identification of Affected Contracts
A
consistent method of identifying contracts in MOCAS affected by specialty metal
nonconformance is required to provide visibility into this issue and facilitate
resolution and closeout.
-
For every contract affected, regardless
of contract type, the ACO will direct a DCMA “Trusted Agent” to insert a MOCAS
special provision code "Y," Specialty Metals Withholding Required.
- For every line item affected, on
Fixed-Price Contracts, the CMO will insert a special pay code and enter “SPC-Y”
to begin the description. Additional comments may be entered at the discretion
of the CMO. (Reference: Inputting
Special Payment Instructions)
- DFAS Columbus will establish a
special withhold code “TBD,” which will allow all “Berry Amendment”
disbursements to be identified by contract.
- There is no requirement to add
any comments into the MOCAS ACO Notebook feature.
Legal Review
CMOs must work
closely with their local counsel and Contract Integrity Center (CIC) Counsel on
all potential violations. All conditional acceptances and pricing support for
calculation of the withhold amounts prepared by DCMA will be coordinated
through the Office of Counsel prior to authorization of conditional acceptance
or approval of contract withholds.
Automation Requirements: MOCAS
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