[Federal Register: June 18, 2004 (Volume 69, Number 117)]
[Rules and Regulations]
[Page 34226-34228]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jn04-24]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 2, 4, 12, 37, and 52
[FAC 2001-24; FAR Case 2004-004; Item I]
RIN 9000-AJ97
Federal Acquisition Regulation; Incentives for Use of
Performance-Based Contracting for Services
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comments.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on an interim
rule amending the Federal Acquisition Regulation (FAR) to implement
sections 1431 and 1433 of the National Defense Authorization Act for
Fiscal Year 2004 (Pub. L. 108-136). Section 1431 enacts Governmentwide
authority to treat performance-based contracts or task orders for
services as commercial items if certain conditions are met, and
requires agencies to report on performance-based contracts or task
orders awarded using this authority. Section 1433 amends the definition
of commercial item to add specific performance-based terminology and to
conform to the language added by section 1431.
DATES: Effective Date: June 18, 2004.
Comment Date: Interested parties should submit comments to the FAR
Secretariat at the address shown below on or before August 17, 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 Web site 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.2004-004@gsa.gov.
Please submit comments only and cite FAC 2001-24, FAR case 2004-
004, 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 Ms. Julia Wise, Procurement Analyst,
at (202) 208-1168. Please cite FAC 2001-24, FAR case 2004-004.
SUPPLEMENTARY INFORMATION:
A. Background
Section 1431 of the National Defense Authorization Act for Fiscal
Year 2004 (Pub. L. 108-136) enacts Governmentwide authority to treat
certain performance-based contracts or task orders for services as
commercial items if the--
(1) Value of the contract or task order is estimated not to exceed
$25,000,000;
(2) Contract or task order sets forth specifically each task to be
performed and, for each task--
a. Defines the task in measurable, mission-related terms;
b. Identifies the specific end products or output to be achieved;
and
c. Contains firm, fixed prices for specific tasks to be performed
or outcomes to be achieved; and
(3) Source of the services provides similar services to the general
public under terms and conditions similar to those offered to the
Federal Government.
Implementation of section 1431 also requires agencies to collect
and maintain reliable data sufficient to identify the contracts or task
orders treated as contracts for commercial items using the authority of
this section. The data will be collected using the Federal Procurement
Data System-Next Generation (FPDS-NG). By November 24, 2006, OMB will
be required to report to the Committees on Governmental Affairs and on
Armed Services of the Senate and the Committees on Government Reform
and on Armed Services of the House of Representatives on the
implementation of Section 1431. The report shall include data on the
use of such authority both Governmentwide and for each department and
agency. The authority of section 1431 expires on November 24, 2013, ten
years after enactment. Section 1433 also amends the definition of
commercial services to conform to the language added by section 1431 by
inserting performance-based terms for clarification. The implementation
of sections 1431 and 1433 will--
Revise the commercial items definition in FAR 2.101 and
52.202-1;
Add a new record requirement for reporting commercial
performance-based contracts or task orders to FAR 4.601;
Incorporate the conditions for using FAR Part 12 for any
performance-based contract or task order for services in FAR 12.102;
and
Add performance-based terms as required by section 1433,
and
Add a cross reference to FAR 12.102(g) in FAR 37.601.
The reference to the definition of performance-based contracting in
the proposed language is a change from the statutory requirement.
Section 1431 provides for a contract or task order to be treated as a
contract for commercial items if: ``The contract or task order sets
forth specifically each task to be performed and for each task--defines
the task in measurable, mission-related terms; identifies the specific
end products or output to be achieved; and contains firm, fixed prices
for specific tasks to be performed or outcomes to be achieved.''
However, the two requirements of law regarding how tasks, products, or
outputs are described are being implemented by requiring contracts or
task orders to meet the definition of performance-based contracting at
FAR 2.101. This language and that at 12.102 paragraphs (g)(1)(iv) and
(v) and in (g)(2) are to ensure consistency with the overarching policy
in FAR 37.601 that applies to performance-based contracting for
services.
Section 1431 recommends that the Federal Procurement Data System
(FPDS) or other reporting mechanism collect this data. The FPDS is the
only Governmentwide system that can potentially collect this data. This
system currently tracks performance-based contracts and task orders
awarded. A petition was made to the FPDS-NG Change Control Board to
incorporate a change to report data on services treated as commercial
items under the conditions stated in section 1431 when using
performance-based contracting techniques.
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 changes may 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 we have changed
procedures for award and
[[Page 34227]]
administration of contracts or task orders enabling the Government to
treat certain services as commercial items when the contract or task
order--
Is entered into on or before November 24, 2013;
Has a value of $25 million or less;
Meets the definition of performance-based contracting at
FAR 2.101;
Includes a quality assurance surveillance plan;
Includes performance incentives where appropriate;
Specifies a firm-fixed price for specific tasks to be
performed or outcomes to be achieved; and
Is awarded to an entity that provides similar services to
the general public under terms and conditions similar to those in the
contract or task order.
Therefore, we have prepared an Initial Regulatory Flexibility
Analysis that is summarized as follows:
The rule (1) amends the commercial items definition in FAR 2.101
and 52.202-1; (2) adds a new record requirement for reporting
commercial performance-based contracts or task orders to FAR 4.601;
(3) incorporates the conditions for using FAR Part 12 for any
performance-based contract or task order for services in FAR 12.102;
and (4) adds performance-based terms as required by section 1433,
and (5) adds a cross reference to FAR 12.102(g) in FAR 37.601. The
rule will apply to all large and small entities that seek award of
performance-based service contracts that are not commercial services
as defined by FAR 2.101 and 52.202-1. Although these changes were
made to implement section 1431 and 1433 of the National Defense
Authorization Act for Fiscal Year 2004 (P.L. 108-136), the impact of
these changes are positive and may provide (1) new contracting
opportunities to small businesses that otherwise would not have been
available if their services did not meet the definition of
commercial item in FAR 2.101 and 52.202-1; and (2) contracting
flexibility for the acquisition community when using PBC techniques.
The FAR Secretariat has submitted a copy of the IRFA to the
Chief Counsel for Advocacy of the Small Business Administration.
Interested parties may obtain a copy from the FAR Secretariat. The
Councils will consider comments from small entities concerning the
affected FAR Parts 2, 4, 12, 37, 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. (FAC 2001-24, FAR case 2004-004),
in correspondence.
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.
D. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense (DoD), the Administrator of General Services (GSA), and the
Administrator of the National Aeronautics and Space Administration
(NASA) that urgent and compelling reasons exist to promulgate this
interim rule without prior opportunity for public comment. This action
is necessary to implement sections 1431 and 1433 of the National
Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108-136) which
became effective November 24, 2003. However, pursuant to Public Law 98-
577 and FAR 1.501, the Councils will consider public comments received
in response to this interim rule in the formation of the final rule.
List of Subjects in 48 CFR Parts 2, 4, 12, 37, and 52
Government procurement.
Dated: June 10, 2004.
Ralph J. De Stefano,
Acting Director, Acquisition Policy Division.
0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 4, 12, 37, and 52
as set forth below:
0
1. The authority citation for 48 CFR parts 2, 4, 12, 37, 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 2--DEFINITIONS OF WORDS AND TERMS
0
2. Amend section 2.101 in paragraph (b) in the definition ``Commercial
item'' by revising the introductory text of paragraph (6) to read as
follows:
2.101 Definitions.
* * * * *
(b) * * *
Commercial item means--
* * * * *
(6) Services of a type offered and sold competitively in
substantial quantities in the commercial marketplace based on
established catalog or market prices for specific tasks performed or
specific outcomes to be achieved and under standard commercial terms
and conditions. This does not include services that are sold based on
hourly rates without an established catalog or market price for a
specific service performed or a specific outcome to be achieved. For
purposes of these services--
* * * * *
PART 4--ADMINISTRATIVE MATTERS
0
3. Amend section 4.601 by adding paragraph (d)(6) to read as follows:
4.601 Record requirements.
* * * * *
(d) * * *
(6) Contracts or task orders treated as commercial items pursuant
to 12.102(g).
* * * * *
PART 12--ACQUISITION OF COMMERCIAL ITEMS
0
4. Amend section 12.102 by adding paragraph (g) to read as follows:
12.102 Applicability.
* * * * *
(g)(1) In accordance with section 14313 of the National Defense
Authorization Act for Fiscal Year 2004 (Pub. L. 108-136) (41 U.S.C.
437), the contracting officer also may use Part 12 for any acquisition
performance-based contracting for services that does not meet the
definition of commercial item in FAR 2.101, if the contract or task
order--
(i) Is entered into on or before November 24, 2013;
(ii) Has a value of $25 million or less;
(iii) Meets the definition of performance-based contracting at FAR
2.101;
(iv) Includes a quality assurance surveillance plan;
(v) Includes performance incentives where appropriate;
(vi) Specifies a firm-fixed price for specific tasks to be
performed or outcomes to be achieved; and
(vii) Is awarded to an entity that provides similar services to the
general public under terms and conditions similar to those in the
contract or task order.
(2) In exercising the authority specified in paragraph (g)(1) of
this section, the contracting officer should tailor paragraph (a) of
the clause at FAR 52.212-4 as may be necessary to ensure the contract's
remedies adequately protect the Government's interests.
PART 37--SERVICE CONTRACTING
0
5. Revise section 37.601 to read as follows:
37.601 General.
(a) Performance-based contracting methods are intended to ensure
that required performance quality levels are achieved and that total
payment is related to the degree that services performed or outcomes
achieved meet contract standards. Performance-based contracts or task
orders--
[[Page 34228]]
(1) Describe the requirements in terms of results required rather
than the methods of performance of the work;
(2) Use measurable performance standards (i.e., in terms of
quality, timeliness, quantity, etc.) and quality assurance surveillance
plans (see 46.103(a) and 46.401(a));
(3) Specify procedures for reductions of fee or for reductions to
the price of a fixed-price contract when services are not performed or
do not meet contract requirements (see 46.407); and
(4) Include performance incentives where appropriate.
(b) See 12.102(g) for the use of Part 12 procedures for
performance-based contracting.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
6. Amend section 52.202-1 by revising the date of the clause and the
introductory text of paragraph (c)(6) of the clause to read as follows:
52.202-1 Definitions.
* * * * *
Definitions (Jun 2004)
* * * * *
(c) * * *
(6) Services of a type offered and sold competitively in
substantial quantities in the commercial marketplace based on
established catalog or market prices for specific tasks performed or
specific outcomes to be achieved and under standard commercial terms
and conditions. This does not include services that are sold based
on hourly rates without an established catalog or market price for a
specific service performed or a specific outcome to be achieved. For
purposes of these services--
* * * * *
[FR Doc. 04-13618 Filed 6-17-04; 8:45 am]