A. Definition of Nontraditional Defense Contractor

Two of the three respondents recommended revisions to the definition of nontraditional defense contractor.

Comment: One respondent suggested expanding the definition of a nontraditional defense contractor to mean an entity to include a business unit, segment or wholly-owned subsidiary of an entity. The respondent asserted that such clarifying language would permit a commercial company that occasionally accepts a contract with certified cost or pricing data requirements to participate in the pilot program without being burdened by what are recognized to be onerous contractual requirements.

Response: With regard to expanding the meaning of an entity to include "a business unit, segment or wholly-owned subsidiary of an entity," the entity referred to in the interim rule is, in essence, the legal entity that signs the contract with the Government. This entity must meet all of the statutory requirements included in the definition for a nontraditional defense contractor contained in the contract clause, and changing the definition as requested would not be consistent with that definition. Therefore, no changes have been made to the final rule as a result of the comment.

Comment: Another respondent stated that the definitions are not clear as to whether Congress intended to allow subcontractors of prime contractors to be considered nontraditional defense contractors for purposes of the rule. The respondent asked, in situations where the prime contractor does not meet the definition of a nontraditional defense contractor, whether each of the subcontractors to the prime contractor will fail to meet the definition as well due to the definition of nontraditional defense contractor applying to contracts or subcontracts.

Response: The statutory definition of a nontraditional defense contractor (10 U.S.C. 2302) outlines the criteria that must be met by a prospective contractor to be eligible for the pilot program, which only covers award to prime contractors. One criterion states the entity may not be currently performing or has not performed "any contract or subcontracts" for DoD that is subject to full coverage under cost accounting standards. Entities that have performed as subcontractors to traditional defense contractors are not necessarily excluded from participating as a prime contractor under this pilot so long as the subcontract requirements did not entail the disqualifying criteria (i.e., full CAS coverage and certified cost and pricing data) and the entity otherwise meets the criteria. No changes have been made to the final rule as a result of this comment.