NATO cooperative projects and U.K. levies

← All Insights

1. What the section implements

The Defense Federal Acquisition Regulation Supplement (DFARS) sets out rules for contracts under North Atlantic Treaty Organization (NATO) cooperative projects. The section implements 22 U.S.C. 2767 and 10 U.S.C. 2350b (DFARS 225.871-1). A cooperative project is a jointly managed arrangement that meets three conditions (DFARS 225.871-2(a)). It is described in a written agreement between the parties, and it is undertaken to further the objectives of standardization, rationalization and interoperability of the armed forces of NATO member countries (DFARS 225.871-2(a)(1) and DFARS 225.871-2(a)(2)).

The third condition is that it provides for one of three things (DFARS 225.871-2(a)(3)). The other participants may share with the United States the cost of research and development, testing, evaluation or joint production, including follow-on support. There may be concurrent production in the United States and in another member country of a defense article jointly developed. Or the United States may acquire a defense article or defense service from another member country. An other participant is a cooperative project participant other than the United States (DFARS 225.871-2(b)).

2. Authority to agree and contract

Departments and agencies that have the authority may enter into cooperative project agreements with NATO or with one or more NATO member countries under Department of Defense Directive 5530.3, International Agreements (DFARS 225.871-3(a)(1)). Under the governing laws and regulations, they may enter into contracts, or incur other obligations, on behalf of other participants without any charge to an appropriation or contract authorization (DFARS 225.871-3(a)(2)). Agency heads are authorized to solicit and award contracts to implement cooperative projects (DFARS 225.871-3(a)(3)).

3. Waiving acquisition laws

Contracts implementing cooperative projects shall comply with all applicable laws relating to Government acquisition, unless a waiver is granted (DFARS 225.871-3(b)). A waiver may be obtained if it is required by the terms of a written cooperative project agreement, will significantly further NATO standardization, rationalization and interoperability, and is approved by the appropriate Defense Department official.

For contracts or subcontracts placed outside the United States, the Deputy Secretary of Defense may waive any provision of law that specifically prescribes rules in four areas (DFARS 225.871-4(a)). They are procedures for the formation of contracts, terms and conditions for inclusion in contracts, and requirements or preferences for domestic goods or services. The third area covers goods grown, produced or manufactured in the United States or in U.S. Government-owned facilities, and services to be performed in the United States. The fourth is requirements regulating the performance of contracts.

Some laws cannot be waived (DFARS 225.871-4(b)). They are any provision of the Arms Export Control Act (22 U.S.C. 2751), and any provision of 10 U.S.C. 3201 to 3205. They also include the cargo preference laws of the United States, including the Military Cargo Preference Act of 1904 (10 U.S.C. 2631) and the Cargo Preference Act of 1954 (46 U.S.C. 1241(b)). Nor can a waiver reach any of the financial management responsibilities administered by the Secretary of the Treasury.

Waiver requests follow the procedures at the Procedures, Guidance and Information (PGI) 225.871-4 (DFARS 225.871-4(c)). The approval of the Deputy Secretary of Defense must be obtained before committing to make a waiver in a cooperative project agreement or in a contract (DFARS 225.871-4(d)).

4. Directed subcontracting and property

The Principal Director, Defense Pricing, Contracting, and Acquisition Policy may authorize the direct placement of subcontracts with particular subcontractors (DFARS 225.871-5(a)). Directed subcontracting is not authorized unless specifically addressed in the cooperative project agreement. Where the agreement cannot name specific subcontractors, it shall clearly state the general provisions for work sharing at the prime and subcontract level (DFARS 225.871-5(b)).

Property jointly acquired by the members of a cooperative project is disposed of under the procedures established in the agreement, or in a manner consistent with its terms (DFARS 225.871-6). The disposal proceeds without regard to any laws of the United States applicable to the disposal of property owned by the United States (DFARS 225.871-6).

5. Notifying Congress

Congressional notification is required when the Defense Department determines to award a contract or subcontract to a particular entity (DFARS 225.871-7(a)). It applies if that determination was not part of the certification made under 22 U.S.C. 2767(f) before the cooperative agreement was finalized (DFARS 225.871-7(a)). Departments and agencies provide a proposed notice to the Principal Director, Defense Pricing, Contracting, and Acquisition Policy in sufficient time to forward it to Congress before contract award (DFARS 225.871-7(a)(1)). The notice includes the reason it is necessary to designate a particular contractor or subcontractor (DFARS 225.871-7(a)(2)).

Notification is also required each time a statutory waiver is incorporated in a contract or contract modification, if that information was not provided in the certification before the agreement was finalized (DFARS 225.871-7(b)).

6. United Kingdom levies

The Defense Department and the United Kingdom have agreed to waive U.K. commercial exploitation levies and U.S. nonrecurring cost recoupment charges on a reciprocal basis (DFARS 225.873-1). For U.K. levies to be waived, the offeror or contractor must identify them, and the contracting officer shall request a waiver before award of the contract or subcontract under which the levies are charged. When a levy is identified in an offered or contract price, the contracting officer follows the procedures at PGI 225.873-2 (DFARS 225.873-2).

A separate DFARS determination treats the United Kingdom, along with other listed countries, as a qualifying country for purposes of the Buy American statute and the Balance of Payments Program (DFARS 225.872-1(a)). Those rules are covered in contracting with qualifying country sources.

7. Who decides what

Several officials have defined roles in the section. Agency heads are authorized to solicit and award the contracts that implement cooperative projects (DFARS 225.871-3(a)(3)). An acquisition law waiver must be approved by the appropriate Defense Department official, and a waiver for work placed outside the United States rests with the Deputy Secretary of Defense (DFARS 225.871-3(b)(3) and DFARS 225.871-4(a)). The Principal Director, Defense Pricing, Contracting, and Acquisition Policy may authorize directed subcontracting and receives proposed congressional notices (DFARS 225.871-5(a) and DFARS 225.871-7(a)(1)). Additional information on cooperative project agreements is in PGI 225.871-5 (DFARS 225.871-5(b)).

Key terms

Cooperative project	A jointly managed NATO arrangement under a written agreement.
Other participant	Any cooperative project participant other than the United States.
Statutory waiver	A Deputy Secretary of Defense waiver of certain acquisition laws for work abroad.
Directed subcontracting	Placement of subcontracts with named firms, allowed only where the agreement addresses it.
Commercial exploitation levy	A U.K. charge waived reciprocally with U.S. recoupment charges.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

How Sentfore supports this

Cooperative programs bring partners together in the field. Sentfore works at the delivery end of defense programs in difficult environments, providing secure movement, protective security, facilities and life support. Requirements can be sent through the contact page.