B-208536 L/M, NOV 8, 1982, OFFICE OF GENERAL COUNSEL
Highlights
YOU ALSO SEEK COMMENTS ON THE CREATION OF A NEW DAR SEC. 4-1107 ENTITLED "CONTRACTOR ACQUISITION OF AUTOMATIC DATA PROCESSING EQUIPMENT (ADPE)" WHICH IS ESSENTIALLY A CONSOLIDATION OF CURRENT DAR SECS. 3 1100 AND 4-1104.13. THAT IS. BELIEVE THAT ADPE WHICH IS BECOMING OUTDATED DUE TO TECHNOLOGICAL ADVANCES SHOULD BE REPLACED ONLY IF JUSTIFIED BY A COST BENEFIT ANALYSIS. WE BELIEVE THAT SUBPARAGRAPH (E)(2) SHOULD PERMIT THE USE OF TECHNOLOGICAL LIFE AS A MEASURE OF THE USEFUL LIFE OF ADPE ONLY IF THE CONTRACTOR DEMONSTRATES THAT THE REPLACEMENT OF EXISTING FACILITIES WILL PRODUCE NET SAVINGS. PROPOSED DAR SEC. 4-1107.5(A)(1) REQUIRES THE ADMINISTRATIVE CONTRACTING OFFICER TO CONDUCT A REVIEW OF A CONTRACTOR'S ADPE SYSTEM IF THE TOTAL COST OF LEASED ADPE IS EXPECTED TO EXCEED $1 MILLION IN ANY 12-MONTH PERIOD AND MORE THAN 50 PERCENT OF THE COST IS EXPECTED TO BE ALLOCATED TO GOVERNMENT CONTRACTS.
B-208536 L/M, NOV 8, 1982, OFFICE OF GENERAL COUNSEL
PRECIS-UNAVAILABLE
MR. JAMES T. BRANNAN, OFFICE OF THE UNDER SECRETARY OF DEFENSE:
BY LETTER OF JULY 30, 1982 YOU REQUESTED OUR COMMENTS ON PROPOSED CHANGES TO DEFENSE ACQUISITION REGULATION (DAR) COST PRINCIPLES AND INTERNAL PROCEDURES RELATED TO CONTRACTOR-OWNED OR LEASED AUTOMATIC DATA PROCESSING EQUIPMENT (ADPE). SPECIFICALLY, YOU REQUEST OUR COMMENTS ON PROPOSED CHANGES TO DAR SEC. 15-205.48 THAT, AMONG OTHER THINGS, IMPOSE ADDITIONAL REQUIREMENTS FOR THE ALLOWABILITY OF SUCH COSTS AND RAISE THE THRESHOLD FOR CONTRACTING OFFICER APPROVAL OF ADPE COSTS. YOU ALSO SEEK COMMENTS ON THE CREATION OF A NEW DAR SEC. 4-1107 ENTITLED "CONTRACTOR ACQUISITION OF AUTOMATIC DATA PROCESSING EQUIPMENT (ADPE)" WHICH IS ESSENTIALLY A CONSOLIDATION OF CURRENT DAR SECS. 3 1100 AND 4-1104.13.
WITH THE FOLLOWING TWO QUALIFICATIONS, WE AGREE WITH THE PROPOSED CHANGES.
DAR SEC. 15-205.48(E)(2), AS PROPOSED, LISTS FOUR CIRCUMSTANCES UNDER WHICH A CONTRACTOR, IN DETERMINING THE ALLOWABLE COSTS RELATING TO OPERATING LEASES FOR ADPE, MAY ESTIMATE THE ANTICIPATED USEFUL LIFE OF THE ADPE ON THE BASIS OF ITS TECHNOLOGICAL LIFE, THAT IS, ON THE BASIS OF THE DURATION OF ITS UTILITY BEFORE BECOMING OBSOLETE IN WHOLE OR IN PART. BELIEVE THAT ADPE WHICH IS BECOMING OUTDATED DUE TO TECHNOLOGICAL ADVANCES SHOULD BE REPLACED ONLY IF JUSTIFIED BY A COST BENEFIT ANALYSIS. THEREFORE, WE BELIEVE THAT SUBPARAGRAPH (E)(2) SHOULD PERMIT THE USE OF TECHNOLOGICAL LIFE AS A MEASURE OF THE USEFUL LIFE OF ADPE ONLY IF THE CONTRACTOR DEMONSTRATES THAT THE REPLACEMENT OF EXISTING FACILITIES WILL PRODUCE NET SAVINGS.
PROPOSED DAR SEC. 4-1107.5(A)(1) REQUIRES THE ADMINISTRATIVE CONTRACTING OFFICER TO CONDUCT A REVIEW OF A CONTRACTOR'S ADPE SYSTEM IF THE TOTAL COST OF LEASED ADPE IS EXPECTED TO EXCEED $1 MILLION IN ANY 12-MONTH PERIOD AND MORE THAN 50 PERCENT OF THE COST IS EXPECTED TO BE ALLOCATED TO GOVERNMENT CONTRACTS. SUBPARAGRAPHS (A)(1)(I) AND (II) STATE THAT THE PURPOSE OF THE REVIEW IS TO EVALUATE THE REASONABLENESS OF THE CONTRACTOR'S ADPE CONFIGURATION FROM A TECHNICAL STANDPOINT, THE EXISTING ADPE CAPABILITY, AND THE NEED TO CONTINUE LEASING. WE BELIEVE THAT THE PROVISION SHOULD ADDITIONALLY REQUIRE THE ADMINISTRATIVE CONTRACTING OFFICER TO WEIGH THE ADPE COSTS AGAINST THE BENEFITS PROVIDED BY THE ADPE PRIOR TO APPROVING THE LEASE COSTS.