[Federal Register: May 25, 2004 (Volume 69, Number 101)]
[Proposed Rules]
[Page 29837-29839]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25my04-19]
[[Page 29837]]
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Part III
Department of Defense
General Services Administration
National Aeronautics and Space Administration
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48 CFR Parts 14, 32, and 52
Federal Acquisition Regulation; Payment Withholding; Proposed Rule
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 14, 32, and 52
[FAR Case 2004-003]
RIN 9000-AJ94
Federal Acquisition Regulation; Payment Withholding
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule with request for comments.
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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) by removing the requirement that a
contracting officer withhold 5 percent of the payments due under a
time-and materials or labor-hour contract, unless otherwise prescribed
in the contract Schedule. The proposed rule would permit, but not
require, the contracting officer to withhold payment amounts if the
contracting officer determines the withholding to be necessary to
protect the Government's interests.
DATES: Interested parties should submit comments in writing on or
before July 26, 2004 to be considered in the formulation of a final
rule.
ADDRESSES: Submit printed comments to General Services Administration,
FAR Secretariat (MVA), 1800 F Street, NW., Room 4035, ATTN: Laurie
Duarte, Washington, DC 20405. Submit electronic comments via the
Internet to the U.S. Government's rulemaking website at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov
, or to GSA's e-mailbox at farcase.2004-003@gsa.gov.
Please submit comments only and cite FAR case 2004-003 in all
correspondence related to this case.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755
for information pertaining to status or publication schedules. For
clarification of content, contact Mr. Edward Loeb, Policy Advisor, at
(202) 501-0650. Please cite FAR case 2004-003.
SUPPLEMENTARY INFORMATION:
A. Background
Federal Acquisition Regulation (FAR) 52.232-7, Payments under Time-
and Materials and Labor-Hour Contracts, currently requires the
contracting officer to withhold 5 percent of the amounts due, up to a
maximum of $50,000, unless otherwise specified in the contract
Schedule. The Government retains the withhold amount until the
contractor executes and delivers, at the time of final payment, a
release discharging the Government from all liabilities, obligations,
and claims arising under the contract.
The rule proposes to add FAR 32.111(a)(7)(iii) to permit
contracting officers to use their judgment regarding whether to
withhold payments under time-and-materials and labor-hour contracts so
that the withhold would be applied only when necessary to protect the
Government's interests. The proposed rule makes it clear that,
normally, there should be no need to withhold payments when dealing
with contractors that typically comply with contractual release
requirements in a timely manner. This is in contrast to the current
requirement in time-and-materials and labor-hour contracts that
contracting officers must withhold payments unless other direction is
provided in the contract.
The rule also proposes to revise paragraph (a)(2) of the contract
clause at FAR 52.232-7, to state that the contracting officer may
(rather than shall) withhold 5 percent of the amounts due. The rule
also makes several related editorial changes to improve clarity and
structure.
The Councils are considering revising its policy because the
current withholding provisions are administratively burdensome and may,
in some situations, result in the withholding of amounts that exceed
reasonable amounts needed to protect the Government's interests. In
addition, the contractor is already incentivized to execute and deliver
the release discharging the Government from all liabilities,
obligations, and claims under the contract, since this release is a
condition of final payment.
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 the rule applies only to time and material and labor-hour
contracts with small business, representing approximately 2 percent of
all contracting. In addition, the rule eases the impact of the current
FAR by permitting the contracting officer to use judgment in deciding
whether to withhold payments, thus the number of contracts affected is
a subset of the 2 percent figure. This change is expected to have a
small but beneficial impact on small businesses. 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 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 2004-003), 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 14, 32, and 52
Government procurement.
Dated: May, 19, 2004.
Ralph De Stefano,
Acting Director, Acquisition Policy Division.
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 14, 32,
and 52 as set forth below:
1. The authority citation for 48 CFR parts 14, 32, and 52 is
revised to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 14--SEALED BIDDING
14.408-3 [Amended]
2. Amend section 14.408-3 in paragraph (b) by removing ``See
32.111(c)(1),'' and adding ``See 32.111(b)(1),'' in its place.
PART 32--CONTRACT FINANCING
3. Amend section 32.111 by--
a. Removing ``and'' at the end of paragraph (a)(5);
b. Removing the period at the end of paragraph (a)(6) and adding
``; and'' in its place;
c. Redesignating paragraph (b) as paragraph (a)(7);
d. Redesignating paragraphs (c) and (d) as (b) and (c),
respectively; and
e. Revising newly designated paragraph (a)(7) to read as follows:
[[Page 29839]]
32.111 Contract clauses for non-commercial purchases.
(a) * * *
(7) The clause at 52.232-7, Payments under Time-and-Materials and
Labor-Hour Contracts, in solicitations and contracts when a time-and-
materials or labor-hour contract is contemplated.
(i) If the nature of the work to be performed requires the
contractor to furnish material that is regularly sold to the general
public in the normal course of business by the contractor and the price
is under the limitations prescribed in 16.601(b)(3), the contracting
officer shall use the clause with its Alternate I.
(ii) If a labor-hour contract is contemplated, and if no specific
reimbursement for materials furnished is intended, the contracting
officer may use the clause with its Alternate II.
(iii) If the contracting officer determines that it is necessary to
withhold payment to protect the Government's interests, paragraph
(a)(2) of the clause permits the contracting officer to withhold 5
percent of the amounts due until a reserve is set aside in an amount
the contracting officer considers to be necessary, but not to exceed
$50,000. Normally, there should be no need to withhold payment for a
contractor with a record of timely submittal of the release discharging
the Government from all liabilities, obligations, and claims, as
required by paragraph (f) of the clause.
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
52.232-7 [Amended]
4. Amend section 52.232-7 by--
a. Removing ``32.111(b)'' and adding ``32.111(a)(7)'' in its place
in the introductory text of section 52.232-7.
b. Revising the date of the clause to read ``(XXX 2004)''.
c. Revising paragraph (a)(2) to read as follows:
52.232-7 Payments under Time-and-Materials and Labor-Hour Contracts.
(a) * * *
(2) Unless otherwise prescribed in the Schedule, the Contracting
Officer may withhold 5 percent of the amounts due under this paragraph
(a), but the total amount withheld shall not exceed $50,000. The
amounts withheld shall be retained until the Contractor executes and
delivers the release required by paragraph (f) of this clause.
* * * * *
5. In the introductory text of section 52.232-8, remove
``32.111(c)(1)'' and add ``32.111(b)(1)'' in its place.
6. In the introductory text of section 52.232-9, remove
``32.111(c)(2)'' and add ``32.111(b)(2)'' in its place.
7. In the introductory text of section 52.232-10, remove
``32.111(d)(1)'' and add ``32.111(c)(1)'' in its place.
8. In the introductory text of section 52.232-11, remove
``32.111(d)(2)'' and add ``32.111(c)(2)'' in its place.
[FR Doc. 04-11736 Filed 5-24-04; 8:45 am]