Specialty metals waivers and determinations

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1. Domestic nonavailability determinations

The specialty metals restriction in the Defense Federal Acquisition Regulation Supplement (DFARS) can be lifted by a domestic nonavailability determination (DFARS 225.7003-3(b)(5)). Such a determination is made by the Under Secretary of Defense for Acquisition and Sustainment, or an authorized official, and covers specialty metal in the items listed in DFARS 225.7003-2. It finds that domestic specialty metal cannot be acquired as and when needed at a fair and reasonable price in satisfactory quality, sufficient quantity and the required form.

Under 10 U.S.C. 4863(m)(4), required form means the form of the mill product, such as bar, billet, wire, slab, plate or sheet, in the grade appropriate for producing the finished end item (DFARS 225.7003-3(b)(5)). It can also mean a finished component assembled into an end item delivered under the contract. The rule itself is covered in what counts as a specialty metal.

2. Single contract and class determinations

The secretary of the military department concerned may make a determination that applies to only one contract, without power to redelegate (DFARS 225.7003-3(b)(5)(i)). The supporting documents must include the requiring activity’s written analysis of why, with specificity, alternatives that would avoid a determination are unacceptable. A determination for more than one contract, a class determination, requires the Under Secretary’s approval (DFARS 225.7003-3(b)(5)(ii)).

At least 30 days before making a class determination, the Under Secretary will, to the maximum extent practicable, publish a notice of intent on the governmentwide point of entry, SAM.gov (DFARS 225.7003-3(b)(5)(ii)(A)). The Under Secretary will also seek information from interested parties, including producers of specialty metal mill products. Both steps are taken consistently with protection of national security and confidential business information.

The Under Secretary will consider all information submitted in response (DFARS 225.7003-3(b)(5)(ii)(B)). Other relevant information that cannot be made public may also be considered. The determination and its rationale are made publicly available to the maximum extent consistent with national security and confidential business information.

3. Derivative articles

A commercial derivative military article is a Defense item made with the same facilities, a common supply chain and the same or similar processes as articles mainly in nongovernmental use (DFARS 225.7003-1). The restrictions at DFARS 225.7003-2(a) do not apply to such an item under a prime contract if two conditions are met (DFARS 225.7003-3(c)). The offeror must certify, and later show, that it and its subcontractors will contract to buy enough domestic specialty metal under the provision at DFARS 252.225-7010. And the Under Secretary or the military department secretary must determine that the item is a commercial derivative military article.

The contracting officer sends the offeror’s certification and a request for determination to the appropriate official, through agency channels, and tells the offeror when a decision is made. Defense agencies see procedures in the DFARS procedures, guidance and information (DFARS 225.7003-3(c)(2)). The compliance certificate provision at DFARS 252.225-7010 is used in solicitations that contain the clause at DFARS 252.225-7009 where the contracting officer anticipates that offers of commercial derivative military articles may be received (DFARS 225.7003-5(b)).

4. The 120 and 50 percent purchase tests

Under the clause at DFARS 252.225-7009, the contractor may comply for a commercial derivative military article by buying domestic specialty metal in the required form instead (DFARS 252.225-7009(d)(1)). The metal must be for use during contract performance in producing the military article and the related commercial article. That alternative requires that the contracting officer has told the contractor which items the government has found to be commercial derivative military articles. The contractor must also have certified the purchase commitment under DFARS 252.225-7010, for each item the government has found to be such an article.

The amount committed must be at least the contractor’s good faith estimate of the greater of two figures (DFARS 252.225-7009(d)(1)(ii)). One is 120 percent of the specialty metal needed to produce the commercial derivative military article, including subcontract work. The other is 50 percent of the specialty metal the contractor and subcontractors will buy in that period to produce both the military and the related commercial article. The specialty metal needed for the military article includes metal in any item, including commercially available off-the-shelf items (DFARS 252.225-7009(d)(2)).

5. The national security waiver

The Under Secretary may waive the restrictions by determining in writing that accepting the item is necessary to the national security interests of the United States (DFARS 225.7003-3(d)). This authority may not be delegated. The written determination must specify the quantity of end items and the time period it covers (DFARS 225.7003-3(d)(1)). It must go to the congressional defense committees before it is executed, except that for an urgent national security requirement it may go up to 7 days after.

After a waiver, the Under Secretary will make sure the contractor or subcontractor responsible for the noncompliant metal develops and carries out an effective plan for future compliance (DFARS 225.7003-3(d)(2)). The Under Secretary also decides whether the noncompliance was knowing and willful. If it was, the debarring and suspending official must consider suspension or debarment until the issues behind it are addressed. Because waivers are granted only when necessary to national security, the plan is a condition subsequent, not a condition precedent, to the waiver (DFARS 225.7003-3(d)(3)).

6. Flowing the clause down

The contractor must not flow down the commercial derivative military article paragraph, or the flowdown instruction that excludes it (DFARS 252.225-7009(e)(1)). It must insert the definitions, the restriction and the exceptions in subcontracts for items containing specialty metals, including subcontracts for commercial products (DFARS 252.225-7009(e)(2)). The contractor may change the clause only to identify the parties, apart from limited changes to manage the minimal content exception (DFARS 252.225-7009(e)(2)(ii)). The standing exceptions are covered in exceptions to the specialty metals rule.

Key terms

Domestic nonavailability determination	A finding that domestic specialty metal cannot be had as needed at a fair and reasonable price in quality, quantity and form.
Required form	The mill product form and grade, or finished component, needed for the end item.
Class determination	A determination for more than one contract, with notice at least 30 days ahead to the maximum extent practicable.
Commercial derivative military article	An item made on the same lines and supply chain as a mainly civilian article.
Condition subsequent	The compliance plan, required after a national security waiver rather than before it.

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.

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