New Specialty Metals Restriction 10 U.S.C. 2533b

1. New Specialty Metals Restriction • 10 U.S.C. 2533b • (as enacted by Section 842 of the John Warner National Defense Authorization Act for Fiscal Year 2007) • Department of Defense (DoD) Implementation • Presented by: Jack D. Olson • Assistant Counsel, DCMA Saint Louis • at NDIA Procurement Division • Annual Education Seminar • March 12, 2007

2. FY2007 National Defense Authorization ActPresident signed this into law on October 17, 2006 • Sec. 842(a) removes specialty metals from 10 U.S.C. 2533a (aka the Berry Amendment) and establishes a new 10 U.S.C. 2533b for specialty metals • Restriction applies to procurements of six major types of “end items, or components thereof,” not just to “specialty metals” • Retains the exception for Reciprocal Defense Procurement MOU “qualifying countries” identified in Defense Federal Acquisition Regulation Supplement (DFARS) 225.872 • Provides two additional exceptions: • De minimis specialty metal content in Commercially Available Electronic Components • One-Time Waiver under certain circumstances if the specialty metals were incorporated into items produced, manufactured, or assembled in the U.S. before the date of enactment of the Act, where final acceptance occurs after the date of enactment of the Act – Sec. 842(b) • Revised the domestic non-availability exception

3. DoD’s Implementation • Class Deviation – Restriction on Procurement of Specialty Metals (SM) - December 6, 2006 • Key Points • Requires flow down of the SM restriction to all tiers of subcontracts when acquiring aircraft, missile and space systems, ships, tank and automotive items, weapon systems, or ammunition • However, third tier or below spare parts and assemblies are not restricted if they are separately purchased by DoD • Requires SM acquired directly by DoD or by a Prime contractor for delivery to the Government to be compliant (applies to raw stock deliveries only) • Defines component, electronic component, de minimis, and automotive item • Explains One-Time Waiver and the revised Domestic Non-Availability Determination (DNAD) exception

4. Definitions • Component as defined in the deviation applies only to parts and assembled articles at the first and second tier that are incorporated directly into the end product. • Third tier or below parts and assemblies are not components. • Electronic Component means an assembled article that operates by controlling the flow of electrons or other electrically charged particles in electronic circuits, using interconnections of electrical devices such as resistors, inductors, capacitors, diodes, switches, transistors or integrated circuits. • de minimisis definedas 10 percent of the overall value of the lowest level commercially available electronic component, containing specialty metal, that is produced by the contractor or subcontractor at any tier • Automotive item means a self-propelled military transport vehicle, primarily intended for [military] personnel and cargo carrying, such as a car, truck or van • Does not include construction equipment, or other self propelled equipment such as cranes, ground support equipment

5. One-Time Waiver Authority – Sec. 842(b) – Available if specialty metals incorporated into items produced, manufactured, or assembled in the U.S. BEFORE date of enactment of new law (Oct. 17, 2006), under specific conditions: • Contracting officer (CO) determines Contractor is not in compliance with 2533b, and: • Not practical or economical to remove or replace the non-compliant specialty metals; • Contractor and subcontractor involved have an effective plan to ensure future compliance; and • Non-compliance is not knowing or willful; • The USD(AT&L) or SAE concerned approves the CO’s determination; and • FedBizOpps notification required within 15 days after contracting officer determination • Applicable to delivery of items where final acceptance occurs AFTER the date of enactment of the Act and BEFORE Sep 30, 2010 • Law recognizes that many suppliers have been inadvertently non-compliant particularly concerning commercial items • Contractors must have adequate procedures in place to ensure future compliance.

6. Domestic Non Availability Determination (DNAD) • USD(AT&L) or the Secretary of the Military Department concerned can grant a DNAD if compliant specialty metal cannot be procured as and when needed in the required form. • Factors to consider in determining that compliant specialty metal is not available: • Are compliant parts, assemblies or components available in required form as & when needed? • What are the costs and time delays if requalification of certain parts of the system is required? • What will impact be on the program’s delivery schedule, program costs and mission needs? • The exception should not be read to require that compliant specialty metal must be totally unavailable, i.e., cannot be obtained at any cost. • At some cost limit, any reasonable person would agree the metal is effectively “unavailable”. • Consider FAR 15.402 analysis: supplies & services must be purchased at fair & reasonable prices, when determining whether compliant specialty metal is effectively “unavailable”. • These “reasonable” limits should be drawn on a case-by-case basis, keeping in mind that Congress would not have imposed the restriction unless they expected DoD to incur some additional cost.

7. Domestic Non Availability Determination (DNAD) continued • A similar case-by-case approach can be used to determine whether delays associated with incorporating compliant specialty metal into items being procured results in the metals being unavailable “as and when needed”. • In some cases, DoD may be unable to obtain compliant specialty metal parts as and when needed, in the form that is required. • When considering whether specialty metal is available in the required form, we interpret the phrase “in the required form” to relate to specialty metal that is formed in some fashion into a part. • There are no definitive rules that can be applied across the board for DNADs. Each case must be evaluated on its own merits.

8. On the Horizon – DCMA PerspectiveCompliance is the Focus and End Result • OTW & DNAD define limits, CAPs address path to compliance • OTWs available only to Prime contractors; may address Sub/PO items if similar rationale • Delegations to DCMA for broad-based OTW approval • Withhold release not automatic; requires negotiation of consideration • Metals incorporated before Oct. 17; Delivery documents identify OTW, DNAD, etc. • DoD relies on Contractor OTW request & CAP, but performs post-approval verification • Future Class DNADs are under consideration • CCAs •RF Devices •Fasteners •Needle Bearings • Hardware (including racks, panels & enclosures) • Old vs. New contracts: Is FAR 46.407 an avenue to accept under Old contracts? • Ground support or test equipment not incorporated into end item • 3rd tier or lower parts and assemblies when separately purchased • Commercially available electronic components with de minimis content • Can we modify Old contracts with consideration to include New clauses? • Different laws for COTS vs. Commercial Items