[Federal Register: May 2, 2000 (Volume 65, Number 85)]
[Proposed Rules]
[Page 25613-25615]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02my00-27]
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Part III
Department of Defense
General Services Administration
National Aeronautics and Space Administration
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48 CFR Parts 32 and 52
Federal Acquisition Regulation; Advance Payments for Non-Commercial
Items; Proposed Rule
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 32 and 52
[FAR Case 1999-016]
RIN 9000-AI74
Federal Acquisition Regulation; Advance Payments for Non-
Commercial Items
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) are proposing to amend the
Federal Acquisition Regulation (FAR) to permit federally insured credit
unions to participate in the maintenance of special accounts for
advance payments.
DATES: Interested parties should submit comments in writing on or
before July 3, 2000, to be considered in the formulation of a final
rule.
ADDRESSES: Submit written comments to: General Services Administration,
FAR Secretariat (MVRS), 1800 F Street, NW, Room 4035, ATTN: Laurie
Duarte, Washington, DC 20405.
Submit electronic comments via the Internet to:
farcase.1999-016@gsa.gov
Please submit comments only and cite FAR case 1999-016 in all
correspondence related to this case.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC, 20405, at (202) 501-4755 for information
pertaining to status or publication schedules. For clarification of
content, contact Mr. Jeremy Olson, at (202) 501-0692. Please cite FAR
case 1999-016.
SUPPLEMENTARY INFORMATION:
A. Background
FAR 32.4, Advance Payments for Non-Commercial Items, requires,
unless exempted by FAR 32.409-3(e) or (f), that contractors deposit
advance payments in special accounts separate from their general or
other funds. FAR 32.411 and other FAR text exclude credit unions from
participating in the maintenance of these special accounts by requiring
that contractors establish these special accounts only at banks that
are members of the Federal Reserve System (FRS) or insured by the
Federal Deposit Insurance Corporation (FDIC). However, many credit
unions are federally insured through the National Credit Union
Administration (NCUA). Therefore, these credit unions are able to
provide the Government a measure of security for Federal funds advanced
to contractors, as well as those banks that are members of the FRS or
insured by FDIC.
The proposed rule amends FAR 32.4 and FAR 52.232-12 to change
certain terminology (e.g., change the word ``bank'' to financial
institution'') to provide contractors an additional option of
depositing advance payments in special accounts maintained by credit
unions insured by NCUA. This revision will foster competition among
financial institutions who are in the business of providing special
accounts for advance payment funds, without increasing the risk to the
Government.
This rule was not subject to Office of Management and Budget review
under Section 6(b) of Executive Order 12866, Regulatory Planning and
Review, dated September 30, 1993. This rule is not a major rule under 5
U.S.C. 804.
B. Regulatory Flexibility Act
The Councils do not expect this proposed rule to 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.,
because the rule only applies to the very limited number of contractors
that receive advance payments and deposit these payments in special
accounts. An Initial Regulatory Flexibility Analysis has, therefore,
not been performed. Comments are invited from small businesses and
other interested parties. The Councils will consider comments from
small entities concerning the affected FAR subparts 32 and 52 in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 601 et seq., (FAR case
1999-016), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed
changes to the FAR do not impose information collection requirements
that require the approval of the Office of Management and Budget under
44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 32 and 52:
Government procurement.
Dated: April 27, 2000.
Edward C. Loeb,
Director Federal Acquisition Policy Division.
Therefore, DoD, GSA, and NASA propose that 48 CFR parts 32 and 52
be amended as set forth below:
1. The authority citation for 48 CFR parts 32 and 52 continues to
read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 32--CONTRACT FINANCING
2. Revise paragraph (a)(1) of section 32.407 to read as follows:
32.407 Interest.
(a) * * *
(1) The published prime rate of the financial institution
(depository) in which the special account (see 32.409-3) is
established; or
* * * * *
32.408 [Amended]
3. Amend paragraph (b)(4) of section 32.408 by removing ``bank''
both times it appears and adding ``financial institution'' in its
place.
4. Amend section 32.409-3 as follows:
a. In paragraph (a) remove ``bank'' and add ``special'' in its
place;
b. In paragraphs (b)(2), (c)(2), and (e) remove ``bank''.
c. Revise paragraph (f)(1); and
d. In paragraph (g) remove ``bank'' both times it appears.
The revised text reads as follows:
32.409-3 Security, supervision, and covenants.
* * * * *
(f) * * *
(1) The use under a cost-reimbursement contract of Federal funds
deposited in the contractor's account at a financial institution
(without the contractor acquiring title to the funds); and
* * * * *
5. In section 32.410, revise the second sentence in paragraph
(a)(4) of the ``Findings, Determination, and Authorization for Advance
Payments Findings'' to read as follows:
32.410 Findings, determination, and authorization.
* * * * *
(a) * * *
(4) * * * The clause requires that all payments will be
deposited in a special account at the contractor's financial
institution and that the Government will have a paramount lien on
(i) the credit balance in the special account, (ii) any supplies
contracted for, and (iii) any material or other property acquired
for performance of the contract. * * *
* * * * *
[[Page 25615]]
6. The section heading and text of 32.411 is revised to read as
follows:
32.411 Agreement for special account at a financial institution.
The contracting officer shall use substantially the following form
of agreement for a special account for advance payments:
AGREEMENT FOR SPECIAL ACCOUNT
This agreement is entered into this ________ day of ________,
20________, between the United States of America, (the Government)
represented by the Contracting Officer executing this agreement,
________ [Insert the name of the Contractor], a ________ [Insert the
name of the State of incorporation] corporation (the Contractor),
and ________, a financial institution operating under the laws of
________, located at ________ the financial institution.
RECITALS
(a) Under date of ________, 20________, the Government and the
Contractor entered into Contract No. ________, or a related
supplemental agreement, providing for advance payments to the
Contractor. A copy of the advance payment terms was furnished to the
financial institution.
(b) The contract or supplemental agreement requires that amounts
advanced to the Contractor be deposited separate from the
Contractor's general or other funds, in a Special Account at a
member bank of the Federal Reserve System, any ``insured'' bank
within the meaning of the Act creating the Federal Deposit Insurance
Corporation (12 U.S.C. 1811), or a credit union insured by the
National Credit Union Administration. The parties agree to deposit
the amounts with the financial institution, which meets the
requirement.
(c) This Special Account is designated ``________ [Insert the
Contractor's name], ________ [Insert the name of the Government
agency] Special Account.''
COVENANTS
In consideration of the foregoing, and for other good and
valuable considerations, the parties agree to the following
conditions:
(a) The Government shall have a lien on the credit balance in
the account to secure the repayment of all advance payments made to
the Contractor. The lien is paramount to any lien or claim of the
financial institution regarding the account.
(b) The financial institution is bound by the terms of the
contract relating to the deposit and withdrawal of funds in the
Special Account, but is not responsible for the application of funds
withdrawn from the account. The financial institution shall act on
written directions from the Contracting Officer, the administering
office, or a duly authorized representative of either. The financial
institution is not liable to any party to this agreement for any
action that complies with the written directions. Any written
directions received by the financial institution through the
Contracting Officer on ________ [Insert the name of the agency]
stationery and purporting to be signed by, or by the direction of
________ or duly authorized representative, shall be, as far as the
rights, duties, and liabilities of the financial institution are
concerned, considered as being properly issued and filed with the
financial institution by the ________ [Insert the name of the
agency].
(c) The Government, or its authorized representatives, shall
have access to the books and records maintained by the financial
institution regarding the Special Account at all reasonable times
and for all reasonable purposes, including (but not limited to), the
inspection or copying of the books and records and any and all
pertinent memoranda, checks, correspondence, or documents. The
financial institution shall preserve the books and records for a
period of 6 years after the closing of this Special Account.
(d) In the event of the service of any writ of attachment, levy
of execution, or commencement of garnishment proceedings regarding
the Special Account, the financial institution will promptly notify
________ [Insert the name of the administering office].
(e) While this Special Account exists, the financial institution
shall inform the Government each month of the financial institutions
published prime interest rate and changes to the rate during the
month. The financial institution shall give this information to the
Contracting Officer on the last business day of the month. [This
covenant will not be included in the Special Account Agreements
covering interest-free advance payments.]
Each of the parties to this agreement has executed the agreement
on ________, 20________.
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[Signatures and Official Titles]
32.412 [Amended]
7. Amend paragraph (f) of section 32.412 by removing ``bank''.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
8. Amend section 52.232-12 as follows:
a. Revise the date of the clause;
b. Revise paragraph (b);
c. Remove ``bank'' from paragraphs (c) and (d);
d. Revise paragraph (f)(3);
e. Revise paragraph (g);
f. Remove ``bank'' from paragraphs (h), (k)(1) introductory text,
(k)(1)(iv), (k)(2)(i), and (m)(1) each time it appears.
g. Revise paragraph (p)(11);
h. Amend Alternate II by revising the date to read ``(DATE)''; and
removing ``bank'' from paragraph (c);
i. Amend Alternate V by revising the date to read ``(DATE)''; and
removing from the introductory paragraph ``bank''; and
j. Revise the heading of the clause in Alternate V and paragraph
(m)(11).
The revised text reads as follows:
52.232-12 Advance Payments.
* * * * *
ADVANCE PAYMENTS (DATE)
* * * * *
(b) Special account. Until (1) the Contractor has liquidated all
advance payments made under the contract and related interest
charges and (2) the administering office has approved in writing the
release of any funds due and payable to the Contractor, all advance
payments and other payments under this contract shall be made by
check payable to the Contractor marked for deposit only in the
Contractor's special account with the ________ [insert the name of
the financial institution]. None of the funds in the special account
shall be mingled with other funds of the Contractor. Withdrawals
from the special account may be made only by check of the Contractor
countersigned by the Contracting Officer or a Government
countersigning agent designated in writing by the Contracting
Officer.
* * * * *
(f) * * *
(3) If interest is required under the contract, the Contracting
Officer shall determine a daily interest rate based on the higher of
(i) the published prime rate of the financial institution
(depository) in which the special account is established or (ii) the
rate established by the Secretary of the Treasury under Pub. L. 92-
41 (50 U.S.C. App. 1215(b)(2)). The Contracting Officer shall revise
the daily interest rate during the contract period in keeping with
any changes in the cited interest rates.
* * * * *
(g) Financial institution agreement. Before an advance payment
is made under this contract, the Contractor shall transmit to the
administering office, in the form prescribed by the administering
office, an agreement in triplicate from the financial institution in
which the special account is established, clearly setting forth the
special character of the account and the responsibilities of the
financial institution under the account. The Contractor shall select
a financial institution that is a member bank of the Federal Reserve
System, an ``insured'' bank within the meaning of the Federal
Deposit Insurance Corporation Act (12 U.S.C. 1811), or is a credit
union insured by the National Credit Union Administration.
* * * * *
(p) * * *
(11) Deposit any of its fund except in a bank or trust company
insured by the Federal Deposit Insurance Corporation or a credit
union insured by the National Credit Union Administration;
* * * * *
ADVANCE PAYMENTS WITHOUT SPECIAL ACCOUNT (DATE)
* * * * *
(m) * * *
(11) Deposit any of its funds except in a bank or trust company
insured by the Federal Deposit Insurance Corporation or a credit
union insured by the National Credit Union Administration;
* * * * *
[FR Doc. 00-10906 Filed 5-1-00; 8:45 am]
BILLING CODE 6820-EP-U