[Federal Register: March 18, 2003 (Volume 68, Number 52)]
[Rules and Regulations]
[Page 13206-13208]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18mr03-27]
[[Page 13206]]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 32 and 52
[FAC 2001-13; FAR Case 2001-006; Item IV]
RIN 9000-AJ23
Federal Acquisition Regulation; Progress Payment Requests Under
Indefinite-Delivery Contracts
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) to require, under
indefinite-delivery contracts, the contractor to account for and submit
progress payment requests under individual orders as if each order
constitutes a separate contract, unless otherwise specified in the
contract.
DATES: Effective Date: April 17, 2003.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC, 20405, (202) 501-4755, for information
pertaining to status or publication schedules. For clarification of
content, contact Mr. Ralph De Stefano, at (202) 501-1758. Please cite
FAC 2001-13, FAR case 2001-006.
SUPPLEMENTARY INFORMATION:
A. Background
The Councils have agreed to amend the Federal Acquisition
Regulation (FAR) to require, under indefinite-delivery contracts, the
contractor to account for and submit progress payment requests under
individual orders as if each order constitutes a separate contract,
unless otherwise specified in the contract.
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 66 FR 57294, November 14, 2001. Eight respondents submitted
public comments. These comments are discussed below. The Councils
concluded that the proposed rule should be converted to a final rule,
with only minor editorial changes made to the proposed rule.
1. Time requirement. One respondent asked if the proposed rule
change would have a time requirement other than 60 days, and if so, how
that change would effect outside agencies. This question referenced an
existing policy addressing progress schedules and reports.
Councils' response: No change. The proposed change focuses on how
progress payments will be billed and processed on delivery orders under
indefinite-delivery type contracts. It does not impact any existing
timeframes.
2. Statement of work. One respondent asserted that the proposed
change would increase the difficulty in preparing a statement of work
to quantify a technical assistance contract.
Councils' response: No change. The proposed change would not impact
the preparation of statements of work.
3. Effect on costs. Two respondents disagreed with the proposed
change on the basis that existing FAR language contains the necessary
flexibility, and that the proposed language would reduce latitude of
the contracting officer, increase the costs of doing business with the
government, and generate more paper. Other points made were that the
inconsistency between FAR 32.503-5(c) and FAR 52.232-16 does not obtain
the desired effect because many offices follow single billing for each
task order, and that single billing for the entire contract is
preferable to keep costs lower.
Councils' response: No change. The proposed change would have
minimal impact on efficiency. The FAR currently requires that
contracting officers administer indefinite-delivery type contracts on a
delivery order basis. The vast majority of contractors comply with this
guidance; so adding this requirement to the clause will simply
eliminate an inconsistency between FAR guidance to contracting officers
and the contract clause. Furthermore, the existing requirement for
administering progress payments on a delivery-order basis is necessary
to maintain proper control over payment processing and liquidations.
Permitting progress payments on a whole contract basis would create
inefficiencies in payment approval and processing, making it more
difficult to ensure that progress payments are paid from the proper
appropriations, and add complexity to surveillance.
4. No inconsistency. One respondent stated that there is not an
inconsistency in the FAR between the coverage in FAR 32.503-5(c) and
FAR 52.232-16; that if there is a perceived inconsistency it does not
merit a revision to the Progress Payment clause; and that if any
revision to the FAR is necessary to resolve this perceived
inconsistency, then the FAR should be revised to delete all references
that imply that individual orders (under a contract) are to be treated
as separate contracts.
Councils' response: No change. The inconsistency between the
coverage in FAR 32.503-5(c) and the Progress Payment clause is clear.
FAR 32.503-5(c) provides that under indefinite delivery contracts the
contracting officer should administer progress payments made under each
individual order as if the order constituted a separate contract,
unless agency procedures provide otherwise. However, there is no
related language in the clause at FAR 52.232-16, so the contractor is
not currently required by contract to request progress payments on a
delivery order basis. Although contractors almost always comply with
the contracting officer's instructions regarding separation of progress
payments by order, a contractor may erroneously contend that it
incurred additional costs in complying with direction to prepare
progress payments on an indefinite-delivery contract as if each
delivery order were a separate contract. The Councils recommend adding
the proposed language to the clause to preclude future
misunderstandings.
With regard to the comment that FAR references implying that
individual orders should be treated as separate contracts should be
deleted, the Councils regard the existing requirements as necessary.
The necessity is borne of the need to recognize that funds are
typically obligated on the individual orders, and that individual
orders must be treated as if they were separate contracts in order to
effectively administer progress payments; and monitor production,
payment requests, delivery payments and liquidations.
5. Invoices. One respondent expressed concern that the proposed
changes would require submission of individual requests for payment of
invoices on indefinite-delivery service contracts. Currently, some
contractors submit single requests for payment under several task
orders.
Councils' response: No change. The proposed rule addresses progress
payment requests, not invoices. The rule does not address the
submission of invoices and does not prohibit agencies from permitting
their contractors to submit single invoices for multiple tasks. To the
extent that progress payments are involved, existing contract coverage
at 52.232-16, Progress Payments, acts to protect the Government's
interests.
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6. Agency procedures. One respondent submitted the following
comments:
a. The need for the rule is not evident, since the prescription in
FAR 32.502-4(e) directs contracting officers to provide special
contract instructions for severable work, where accounting segregation
is needed, and furthermore, FAR 32.503-5(c) provides guidance to treat
task orders under existing indefinite-delivery contracts as if they
were separate contracts.
Councils' response: No change. Although the prescription at FAR
32.502-4(c) directs that special contract instructions be provided for
severable work, the existing language at FAR 32.503-5(c) establishes a
default requirement for separate administration of progress payments on
delivery orders. There is a need for accompanying standard language in
the clause at FAR 52.232-16, rather than requiring that special
provisions be constructed for each occurrence of a fairly common
situation. If special instructions were determined to be the solution
to this inconsistency and those provisions were not written into a
contract through an oversight, then the inconsistency would be
incorporated into the contract. This would result in complications in
the administration and payment of progress payments under the affected
contract.
b. To fully implement the policy changes of the proposed rule, the
first sentence of existing coverage in FAR 32.503(c) should be revised
to add the phrase ``or the contract'' after the phrase ``unless agency
procedures.''
Councils' response: No change. The recommended language is
redundant because a provision should not be in the contract if it does
not comply with the procedures of the awarding agency.
c. In the second sentence of FAR 32.503(c), recommend changing ``if
the awarding agency wants the administration* * *'' to ``when the
awarding agency's procedures, the contract administration office's
procedures, or the contract* * *'' require the contract administration
to be on a basis other than order-by-order.
Councils' response: No change. The recommended language contains
potential conflicts, e.g., if the awarding agency procedures and the
contract administration office procedures are not in step. Furthermore,
the Councils regard referencing the contract in this sentence as
redundant, since an alternate procedure should not be in the contract
unless it complies with the awarding agency procedures. The central
point of the sentence under discussion is that progress payments will
be administered on an order-by-order basis if the contract is
administered by an agency other than the awarding agency, unless the
awarding agency has previously coordinated that alternate arrangement
with the administering agency. This point is diluted if an alternate
procedure can be established simply by putting it in the contract.
d. In FAR 52.232-16(l), the FAR Council recognizes the
appropriateness of special attention to the terms of the contract, but
fails to take into account special agency procedures that may exist,
and that are covered under existing FAR 32.503-5(c). To fully implement
the policy and maintain consistency within the FAR, we recommend
revising the phrase ``unless otherwise specified in the contract'' to
``unless agency procedures or the contract provide otherwise.''
Councils' response: No change. The Councils believe that the
language in the proposed rule for FAR 52.232-16 obtains the desired
affect, is consistent with the language in the proposed rule for FAR
32.503-5, and does effectively implement the policy. Specifically, by
limiting the exceptions in FAR 52.232-16(l) to other contractual
provisions, this language eliminates the potential for a requirement to
be expressed in agency procedures, but not executed in the contract
itself. This existing proposed rule enforces consistency between
regulation and contract.
7. Concurrence of the CAO. The respondent recommended that the case
be revised to require that the contracting officer obtain the
concurrence of the contract administration office if the awarding
agency wants the administration of progress payments to be on a basis
other than order-by-order. This change would remove any ambiguity with
regard to whether coordination with the contract administration office
constitutes concurrence.
Councils' response: No change. The Councils recognize that the term
``coordination'' may not always be construed to mean that the awarding
office will obtain the agreement of the administering office prior to
deciding that progress payments will be administered on a basis other
than order-by-order. However, the term ``coordinate'' provides more
flexibility, which may be appropriate at certain times.
8. Performance-based payments. One respondent stated that the FAR
should be revised to include a similar concept for performance-based
payments. Specifically, language should be inserted into FAR part 32.10
and FAR 52.323-32, Performance-Based Payments, to provide that, under
indefinite-delivery contracts, the performance-based payments would be
administered under each individual order as if the order constituted a
separate contract, unless agency procedures provide otherwise. In
addition to the language proposed for FAR 32.1007, this recommendation
includes accompanying proposed language to be inserted in the
Performance Based Payments clause at FAR 32.232-32. In addition, the
FAR should be revised to provide that, for indefinite-delivery
contracts, that performance-based payments be used only on individual
delivery orders or task orders, and not on the basic contract.
Councils' response: The Councils believe that these recommendations
are beyond the scope of the subject case.
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 Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not 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
type of financing.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the 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: March 12, 2003.
Laura G. Smith,
Director, Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 32 and 52 as set
forth below:
1. The authority citation for 48 CFR parts 32 and 52 continues to
read as follows:
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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. Amend section 32.503-5 by adding a sentence to the end of
paragraph (c) to read as follows:
32.503-5 Administration of progress payments.
* * * * *
(c) * * * When the contract will be administered by an agency other
than the awarding agency, the contracting officer shall coordinate with
the contract administration office if the awarding agency wants the
administration of progress payments to be on a basis other than order--
by-- order.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
3. Amend section 52.232-16 by--
a. Revising the date of the clause;
b. Adding paragraph (m);
c. Revising the date and introductory text of Alternate II;
d. Redesignating paragraphs (m) and (n) of Alternate II as (n) and
(o), respectively;
e. Revising the introductory text of the newly designated paragraph
(n), and paragraph (n)(3);
f. Revising the date and the introductory text of Alternate III;
and
g. Redesignating paragraph (m) of Alternate III as paragraph (n).
52.232-16 Progress Payments.
* * * * *
Progress Payments (April 2003)
* * * * *
(m) Progress payments under indefinite--delivery contracts. The
Contractor shall account for and submit progress payment requests
under individual orders as if the order constituted a separate
contract, unless otherwise specified in this contract.
(End of clause)
* * * * *
Alternate II (Apr 2003). If the contract is a letter contract,
add paragraphs (n) and (o). The amount specified in paragraph (o)
shall not exceed 80 percent of the maximum liability of the
Government under the letter contract. The contracting officer may
specify separate limits for separate parts of the work.
(n) The Contracting Officer will liquidate progress payments
made under this letter contract, unless previously liquidated under
paragraph (b) of this clause, using the following procedures:
(1) * * *
(2) * * *
(3) If this letter contract is partly terminated and partly
superseded by a contract, the Government will allocate the
unliquidated progress payments to the terminated and unterminated
portions as the Government deems equitable, and will liquidate each
portion under the relevant procedure in paragraphs (n)(1) and (n)(2)
of this clause.
* * * * *
Alternate III (Apr 2003). As prescribed in 32.502-4(d), add the
following paragraph (n) to the basic clause. If Alternate II is also
being used, redesignate the following paragraph as paragraph (p):
* * * * *
[FR Doc. 03-6375 Filed 3-17-03; 8:45 am]