[Federal Register: September 18, 2000 (Volume 65, Number 181)]
[Proposed Rules]
[Page 56453-56455]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18se00-34]
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Part VI
Department of Defense
General Services Administration
National Aeronautics and Space Administration
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48 CFR Parts 32 and 52
Federal Acquisition Regulation; Financing Policies; 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 2000-007]
RIN 9000-AI92
Federal Acquisition Regulation; Financing Policies
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 the use of performance-
based payments type of financing on fixed-price contracts prior to
definitization, and to establish a standard time period of 30 days that
contractors have to pay their vendors after the contractors have billed
the Government for incurred vendor costs.
DATES: Interested parties should submit comments in writing on or
before November 17, 2000 to be considered in the formulation of a final
rule.
ADDRESSES: Submit written comments to: General Services Administration,
FAR Secretariat (MVR), 1800 F Street, NW, Room 4035, ATTN: Laurie
Duarte, Washington, DC 20405.
Submit electronic comments via the Internet to: farcase.2000-
007@gsa.gov.
Please submit comments only and cite FAR case 2000-007 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 2000-007.
SUPPLEMENTARY INFORMATION:
A. Background
The Councils published a final rule in the Federal Register at 65
FR 16276, March 27, 2000, under FAR Case 1998-400, Progress Payments
and Related Financing Policies. The rule revised the policies and
procedures related to contract financing to make them easier to
understand and to minimize the burdens imposed on contractors and
contracting officers. This proposed FAR rule supplements the final
rule.
The proposed rule--
(1) Revises the requirement at FAR 32.1003(b) to permit
performance-based payments type of financing on fixed-price contracts
prior to definitization;
(2) Completely removes the ``paid cost rule'' restriction from the
payment clauses at FAR 52.216-26, Payments of Allowable Costs Before
Definitization, and FAR 52.232-7, Payments under Time-and-Materials and
Labor-Hour Contracts. The ``paid cost rule'' is the requirement that a
large business must actually pay (not just incur) costs for supplies
and services purchased directly for the contract and financing payments
to subcontractors before including the payments in its billings to the
Government. The intent of the final rule under FAR case 1998-400 was to
remove this restriction from all the payments clauses if contractors
met certain conditions. Inadvertently, this restriction was not removed
in its entirety from FAR 52.216-26(d)(2) and FAR 52.232-7(b)(3). The
proposed rule corrects for this oversight;
(3) Establishes a standard time period that contractors have to pay
their vendors after the contractors have billed the Government for
incurred vendor costs. As indicated in paragraph (2) above, the final
rule under FAR case 1998-400 revised the FAR to permit a large business
to include, in its billings, certain costs that it had incurred but not
actually paid, if the following conditions are met: the unpaid amounts
are paid (1) in accordance with the terms and conditions of a
subcontract or invoice; and (2) ordinarily prior to the submission of
the contractor's next payment request to the Government.
A large business prime contractor is allowed to submit cost
vouchers on a cost-reimbursement contract every 14 days, but can bill
no more frequently than every 30 days when billing progress payments on
a fixed-price contract. Therefore, contractors may need to maintain
several systems and procedures to accommodate the timing differences
for payments to vendors, depending on whether the costs are billed on a
cost-reimbursement or fixed-price type prime contract. To eliminate the
timing differences, the proposed FAR rule revises the second condition
to establish a single standard time period of 30 days; and
(4) It makes several editorial changes.
This is not a significant regulatory action and, therefore, was not
subject to 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 most contracts awarded to small entities have a dollar value
less than the simplified acquisition threshold, and, therefore, do not
have the progress payment or performance-based payment type of
financing. In addition, the ``paid cost rule'' restriction does not
apply to small entities. An Initial Regulatory Flexibility Analysis
has, therefore, not been performed. We invite comments from small
businesses and other interested parties. The Councils will consider
comments from small entities concerning the affected FAR parts 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
2000-007), 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: September 12, 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 part 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 (b)(2) of section 32.504 to read as follows:
32.504 Subcontracts under prime contracts providing progress payments.
* * * * *
(b) * * *
(2) Not later than 30 days after the submission of the contractor's
progress payment request to the Government.
* * * * *
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3. Revise the introductory text and paragraph (b) of section
32.1003 to read as follows:
32.1003 Criteria for use.
The contracting officer may only use performance-based payments if
the following conditions are met:
* * * * *
(b) The contract is a fixed-price type contract; and
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
4. Revise the date of the clause, the introductory text of
paragraph (b)(1)(ii), and paragraph (b)(1)(ii)(A) of section 52.216-7
to read as follows:
52.216-7 Allowable Cost and Payment.
* * * * *
Allowable Cost and Payment (Date)
* * * * *
(b) Reimbursing costs. (1) * * *
* * * * *
(ii) When the Contractor is not delinquent in paying costs of
contract performance in the ordinary course of business, costs
incurred, but not necessarily paid, for--
(A) Supplies and services purchased directly for the contract and
associated financing payments to subcontractors, provided payments will
be made--
(1) In accordance with the terms and conditions of a subcontract or
invoice; and
(2) Not later than 30 days after the submission of the Contractor's
payment request to the Government;
* * * * *
5. Revise the date of the clause, the introductory text of
paragraphs (d) and (d)(2), and paragraph (d)(2)(i) of section 52.216-26
to read as follows:
52.216-26 Payments of Allowable Costs Before Definitization.
* * * * *
Payments of Allowable Costs Before Definitization (Date)
* * * * *
(d) Allowable costs. For the purpose of determining allowable
costs, the term ``costs'' includes--
(1) * * *
(2) When the Contractor is not delinquent in payment of costs of
contract performance in the ordinary course of business, costs
incurred, but not necessarily paid, for--
(i) Supplies and services purchased directly for the contract and
associated financing payments to subcontractors, provided payments will
be made--
(A) In accordance with the terms and conditions of a subcontract or
invoice; and
(B) Not later than 30 days after the submission of the Contractor's
payment request to the Government;
* * * * *
6. In section 52.232-7 revise the date of the clause and paragraphs
(b)(3), (b)(4)(ii), and (b)(4)(ii)(B) to read as follows:
52.232-7 Payments Under Time-and-Materials and Labor-Hour Contracts.
* * * * *
Payments Under Time-and-Materials and Labor-Hour Contracts (Date)
* * * * *
(b) * * *
(3) The Government will reimburse the Contractor for supplies and
services purchased directly for the contract when the Contractor--
(i) Has made payments of cash, checks, or other forms of payment
for such purchased supplies or services; or
(ii) Will make such payments--
(A) In accordance with the terms and conditions of a subcontract or
invoice; and
(B) Not later than 30 days after the submission of the Contractor's
payment request to the Government.
(4) * * *
* * * * *
(ii) The Government will limit reimbursable costs in connection
with subcontracts to the amounts paid for supplies and services
purchased directly for the contract when the Contractor has made or
will make payments of cash, checks, or other forms of payment to the
subcontractor--
* * * * *
(B) Not later than 30 days after the submission of the Contractor's
payment request to the Government.
* * * * *
7. Revise the date of the clause and paragraph (a)(2) of section
52.232-16 to read as follows:
52.232-16 Progress Payments.
* * * * *
Progress Payments (Date)
* * * * *
(a) * * *
(2) The amount of financing and other payments for supplies and
services purchased directly for the contract are limited to the amounts
that have been paid by cash, check, or other forms of payment, or that
will be paid to subcontractors--
(i) In accordance with the terms and conditions of a subcontract or
invoice, and
(ii) Not later than 30 days after the submission of the
Contractor's payment request to the Government.
* * * * *
[FR Doc. 00-23912 Filed 9-15-00; 8:45 am]
BILLING CODE 6820-EP-U