DEPARTMENT OF THE NAVY OFFICE OF THE ASSISTANT SECRETARY (RESEARCH. DEVELOPMENT AND ACQUISITION) 1000 NAVY PENTAGON WASHINGTON DC

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1 DEPARTMENT OF THE NAVY OFFICE OF THE ASSISTANT SECRETARY (RESEARCH. DEVELOPMENT AND ACQUISITION) 1000 NAVY PENTAGON WASHINGTON DC FEB MEMORANDUM FOR DISTRIBUTION Subj: REQUEST FOR DEVIATION FROM FAR (c), INDIRECT COSTS Encl: (1) DPAP memo dated February 18, 2009 Enclosure (1) s provded for your mmedate mplementaton and acton, as approprate. The Drector of Defense Procurement (DDP) has extended the devaton contaned n DDP memorandum dated September 29, That memorandum authorzed all Department of Defense contractng actvtes to devate from the requrements of FAR (c) when costs dsallowed under FAR are requred to be ncluded n the ndrect cost base. Ths devaton was prevously extended untl September 30, Enclosure (1) extends ths devaton untl September 30, Please forward the enclosed memorandum to approprate contractng personnel. Dstrbuton: CMC (LB) MARCORSYSCOM (CT) MSC (N10) NAVAIRSYSCOM (2.0) NAVFACENGCOM (ACQ) NAVSEASYSCOM (02) NAVSUPSYSCOM (02) ONR (02) SPAWARSYSCOM (02) SSP (SPN) NAVICP (02) AGC DASN (A&LM)

2 OFFICE OF THE UNDER SECRETARY OF DEFENSE SOQO DEFENSE PENTAGON WASHINGTON. DC PO FEB ACQUISITION TECHNOLOGY AND LOGISTICS In reply refer to DAR Trackng Number: MEMORANDUM FOR COMMANDER, UNITED STATES SPECIAL OPERATIONS COMMAND (ATTN: ACQUISITION EXECUTIVE) COMMANDER, UNITED STATES TRANSPORTATION COMMAND (ATTN: ACQUISITION EXECUTJVE) DEPUTY ASSISTANT SECRETARY OF THE ARMY (POLICY AND PROCUREMENT), ASA (ALT) DEPUTY ASSISTANT SECRETARY OF THE NAVY (ACQUISITION & LOGISTICS MANAGEMENT), ASN (RDA) DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE (CONTRACTING), SAFIAQC DIRECTORS, DEFENSE AGENCIES DIRECTORS, DOD FIELD ACTIVITIES SUBJECT: Request for Devaton from FAR (c), Indrect Costs On September 26,2005, the Actng Drector of Defense Procurement and Acquston Polcy authorzed the attached devaton from the requrements of FAR (c) when costs dsallowed under FAR are requred to be ncluded n the ndrect cost base. Ths devaton expred September 30,2008. Ths memorandum extends the devaton unt 1 September 30,20 1 I. Any questons concernng ths memorandum should be addressed to Mr. Julan Thrash, Senor Procurement Analyst, at ulan.thrash:@.osd.ml. Attachments: 1. September 26,2005, Extenson 2. September 9,2002, Extenson 3. September 29, 1999, Orgnal Devaton.

3 OFFICE OF THE UNDER SECRmARY OF DEFENSE 3000 DEFENSE PENt'AGON WASHINGTON. DC SEP ACWISITIOH TECWNOLOGV AND LOGISTICS In reply refer to. DAR Trackng Number: MEMORANDUM FOR DEPUTY ASSISTANT SECRETARY OF THE ARMY (POLICY AND PROCUREMENT), ASA(ALT) DEPUTY ASSISTANT SECRETARY OF THE NAVY (ACQUISITION MANAGEMENT), ASNWA) DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE (CONTRACTING), SAF/AQC EXECUTIVE DIRECTOR LOGISTIC POLICY AND ACQUISITION DIRECTORS OF THE DEFENSE AGENCIES DIRECTORS OF THE DOD FIELD ACTMTIES SUBJECT: Class Devaton - F edd Acquston Regulaton (FAR) (c), Indrect Cosl On September 29,1999, the Drector of Defense Procurement authorzed the attached devaton from the requrements of FAR 3 I.203(c) when costs dsallowed under FAR are requred to be ncluded n the nhct cast base. The orgnal devaton expred September 30,2002. On September 9,2002, the Drector of Defense Procurtment authorzed an extenson of the orgnal devaton untl September 30,2005. Ths memorandum extmds that devaton untl Scptcmbcr 30,,2008. Any questons concernng ths memodurn should be addressed to Mr.Davd Captano, Senw Procurement Analyst, at or va e-mal at davd.caatano(bosd.ml. n Attachment: As stated Domenc C. Cpccho b Actng Drector, Dcfmse Procumnent and Acquston Polcy ',

4 OFFICE OF THE UNDER SECRFTARY OF DEFENSE ACW1~. mm-r AN0 LOOmTlcS joq) DEFENSE WNTAGON W A ~ O T O U OC. toso t -J000 sep9m Ia reply dct to DAR Trackn# Nurnbsr: MEMORANDUM FOR DXREIDRS OF DEFENSE AGWClES DEPUTY FOR ACQUISITION AND BUSINESS MANAGEMEW, ASN@D&A)IABM DEPUTY ASSISTANT SECRETARY OFTHE AIR FORCE (CO~crrr(sC), SAFIAQC ACI'INO DEPUTY ASSISTANT SECRETARY OF THE ARMY WLTCY AkJD. - R P ASA(ALT) EXKUWE DIRECTOR, LOG~~CS POLICY AND AcQurSl'TlON SUB- Ch6 kvaton - Fedd Acquotoa Regdoeon (FAR) (c). lndrcct COS~ On September 29, 1999, the Dtactor of Defense Rocunmcnt authorzed the sttsehed devaton hm the npurtmeotr of FAR 31.20Wc) den coats dsdlowed under FAR an requred to be nchrdcd n the ndrect cost be. The devaton expres on Scpttmba 30,2002. Ths mcmomutdum cxtcnb rhc devaton unt!.september 30,2005. Any qwtons concernng ths memmdum should be a&lmsed to Mr. Davd Captano, Sdor Procurement AnaIyst at or va emal at: davd.caplan~@osdml. 1 AtWmtnt: As stated

5 OFFICE OF THE UNDER SECRETARY OF DEFENSE PENTAGON WASHNGlON PC 203Qt-XKY) In reply refer to bar Treckng Number: KMONWDUM FOR DIRECTORS OF DEFENSE AGENCIES DEPUTY FOR ACQUISITION AND BUSINESS MANAw, ASN(mM) /Am DEPUTY ASSISTANT SECRETARY Of THE AfR FORCE (CONTRACTING I, SAP / AQC DEPUTY ASSISTANT SECRETARY OF THE ARMY (PROCUR-) EXECUTIVE DIRECTOR FOR PROCUREMENT MANAG-T {DLSC/DLA) SUBJECT: Class Devaton--Federal Acpusston Regulaton (FAR) (cI, Indrect Costs Effectve hedately, all Department of Defense contractng actvtes shall devate from the requrements of FAR (c) when costs dsal10w under FAR are requred to be ncluded n the ndrect cost base. Pror to Aprl IS, 1996, the Cost AcCOU~~~I~ Standard8 (CAS) measured, assgned, a d allocated the costs of tangble captal assets ucqured n cl busness cmnbnston under tho purchaae method of accountng on the has of far market value. Ths often roeulted n an ncrease n the wfue of the assets over the pre-busness combnaton book va3ue; the ncrease s cumlunly refarred to as the step-up amount. FAR dsallowed ths step-up amount. When assets that are valued at talr markec value are ncluded as part of the base for allocatng ndrect costs, CAS requres that ndrect expenses be allocated to the entre far market value, ncludng any step-up amopts. FAR (c) renders unallowable that share of the ndrect expenses that are allocable t o the dsallowed step-up amount. The purpose of FAR s ta assure that the amount of deprecaton of tangble assets and amottzatou of ntangble assets the Government pay8 fa not ncreased as a result of a busness combnaton. However, n tbs stuaton, contractors should not be pertalzed by havng ther ndrect cost recovery reduced. Thorefore,

6 - 1 am authorzng a devaton from F?kR 31.2U3Icl. ~hc? dev5aton.' relates only to the applcaton of FAR 31,2031~) to costs dsallow* under FAR Thus, when costs dsallowed under FAR are regored to be ncluded n the drect cost base. th4 ndrect expenses proportonate to those dra 1 lowed costs wll not be dsallowed on the baoc of FAR ~1. Ths devaton apples to all future contracts. It also apples to ndrect rates applcable to apan coot-renburcem~nt contracts, provded that the fnal ndrtct rates have not been establshed (see FAR as of the date of ths &orandurn., The dwaton also app;les to any other stuatons regurng tlltr ndrect costa bc settled before contract prces are e$tablshed, provded that the fnal ndrect cost rates have not Men establshed (see FAR ) as of the date of ths memorandum. 7%;~ class devaton s effectve through September. 30, CC: PSMC, Ft. Delvor I j +* Eleanot R. Spector Drector, Defense Procurement ' 1 j - I