IV. Regulatory Flexibility Act

DoD expects that this interim rule may have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. Therefore, an initial regulatory flexibility analysis has been prepared and is summarized as follows:

This interim rule implements section 846 of the National Defense Authorization Act for Fiscal Year 2011 (Pub. L. 111-383), by providing regulatory coverage on utilization of domestic photovoltaic devices under certain covered contracts.

The objective of the rule is to promote utilization of domestic photovoltaic devices under an energy savings contract, a utility service contract, or a private housing contract, if such contract does not include DoD purchase of photovoltaic devices as end products, but will nevertheless result in DoD ownership of photovoltaic devices. According to the statute, DoD is deemed to own a photovoltaic device if the device is--

(1) Installed on DoD property or in a facility owned by DoD; and

(2) Reserved for the exclusive use of DoD for the full economic life of the device.

The legal basis for the rule is section 846 of the National Defense Authorization Act for Fiscal Year 2011.

This rule generally applies to other than small entities. When purchasing renewable power generated via on-site photovoltaic devices, DoD can either purchase the photovoltaic devices and thereby own, operate, and maintain the devices for their full economic life (already covered in DFARS part 225) or can do variations of the following:

a. Enter into an energy savings performance contract, which is a contracting method in which the contractor provides capital to facilitate energy savings projects and maintains them in exchange for a portion of the energy savings generated. Under this arrangement, the Government would take title to the devices during contract performance or at the conclusion of the contract. For example, the Defense Logistics Agency-Energy uses the master Department of Energy indefinite delivery-indefinite quantity contract and awards task orders off that contract. Of the 16 contractors, all are large businesses. There are subcontracting goals that each contractor has to meet, but the ultimate task order award is made to a large business.

b. Enter into a power purchase agreement, also referred to as a utility service contract, for the purchase of the power output of photovoltaic devices that are installed on DoD land or buildings, but owned, operated, and maintained by the contractor. At the conclusion of the contract, DoD would either require the contractor to dismantle and remove the photovoltaic equipment, abandon the equipment in place, or would re-compete the requirement and if the incumbent contractor is the successful offeror, the follow-on contract would allow for continued power purchase from the existing devices. If the incumbent contractor is not the successful offeror, the contractor would be required to dismantle and remove the devices. Prime contractors for this type of contract would generally be large businesses, based on the capital costs involved in these projects. However, many developers tend to subcontract out the majority of work to smaller companies.

We do not currently have data available on whether any of the manufacturers of photovoltaic devices are small entities. This rule will promote utilization of domestic photovoltaic devices, even when the Government does not take title to the devices.

The requirements of the rule will not apply below the simplified acquisition threshold.

Since the prime contractors subject to this rule are large businesses, the reporting requirements will not impact small entities. Since the photovoltaic devices are commercially available off-the-shelf items, there will be no requirement to track to the origin of the components, but just to inform the prime contractor of the place of manufacture.

The rule does not duplicate, overlap, or conflict with any other Federal rules.

DoD did not identify any significant alternatives that would accomplish the objectives of the statute.

DoD invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities.

DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (DFARS Case 2011-D046), in correspondence.