[Federal Register Volume 77, Number 144 (Thursday, July 26, 2012)]
[Proposed Rules]
[Pages 43780-43782]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-18276]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 8, 12, 16, and 52
[FAR Case 2011-025; Docket 2011-0025; Sequence 1]
RIN 9000-AM28
Federal Acquisition Regulation; Changes to Time-and-Materials and
Labor-Hour Contracts and Orders
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to provide additional guidance when
raising the ceiling price or otherwise changing the scope of work for a
time-and-materials (T&M) or labor-hour (LH) contract or order.
DATES: Interested parties should submit written comments to the
Regulatory Secretariat at one of the addressees shown below on or
before September 24, 2012 to be considered in the formation of the
final rule.
ADDRESSES: Submit comments in response to FAR Case 2011-025 by any of
the following methods:
Regulations.gov: http://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by searching for ``FAR Case
2011-025''. Select the link ``Submit a Comment'' that corresponds with
``FAR Case 2011-025.'' Follow the instructions provided at the ``Submit
a Comment'' screen. Please include your name, company name (if any),
and ``FAR Case 2011-025'' on your attached document.
Fax: 202-501-4067.
Mail: General Services Administration, Regulatory
Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street NE., 7th
Floor, Washington, DC 20417.
Instructions: Please submit comments only and cite FAR Case 2011-
025, in all correspondence related to this case. All comments received
will be posted without change to http://www.regulations.gov, including
any personal and/or business confidential information provided.
FOR FURTHER INFORMATION CONTACT:
Mr. Michael O. Jackson, Procurement Analyst, at 202-208-4949, for
clarification of content. For information pertaining to status or
publication schedules, contact the Regulatory Secretariat at 202-501-
4755. Please cite FAR Case 2011-025.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA are proposing to revise the FAR to implement a
policy that provides additional guidance to address actions required
when raising the ceiling price for a T&M or LH contract or order. FAR
Case 2009-043, ``Time-and-Materials and Labor-Hour Contracts for
Commercial Items'', was published as a final rule in the Federal
Register at 77 FR 194 on January 3, 2012. As a result of FAR case 2009-
043, the Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) were concerned that
contracting officers may erroneously conclude that a Determination and
Findings (D&F) is always sufficient to justify a change in the ceiling
price.
II. Discussion and Analysis
This FAR case provides additional guidance to address actions
required when raising the ceiling price or otherwise changing the
general scope of a T&M or LH contract or order. The case provides
guidance to address this issue for the respective parts of the FAR
addressing T&M and LH contracts or orders, such as FAR 8.404, 12.207,
and 16.601.
The Government Accountability Office stated within Matter of
Specialty Marine, Inc., B-293871, B-293871.2, 2004 Comp. Gen. Proc.
Dec. P130, (June 17, 2004) that: ``When a protester alleges that an
order is outside the scope of the contract, we analyze the protest in
essentially the same manner as those in which the protester argues that
a contract modification is outside the scope of the underlying
contract. The fundamental issue is whether issuance of the task or
delivery order in effect circumvents the general statutory requirement
under the Competition in Contracting Act (CICA) that agencies `obtain
full and open competition through the use of competitive procedures'
when procuring their requirements. See 10 U.S.C. 2304(a)(1)(A) (2000).
In determining whether a task or delivery order (or modification)
is outside the scope of the underlying contract, and thus falls within
CICA's competition requirement, our Office examines whether the order
is materially different from the original contract. Evidence of a
material difference is found by reviewing the circumstances attending
the original procurement; any changes in the type of work, performance
period, and costs between the contract as awarded and the order as
issued; and whether the original solicitation effectively advised
offerors of the potential for the type of orders issued. Overall, the
inquiry is whether the order is one which potential offerors would have
reasonably anticipated.''
The Councils propose the following changes:
FAR 8.404(h)(3)(iv). This paragraph is revised to require analysis
and documentation for changes in T&M or LH orders and to clarify that
changes in the general scope should be justified as non-competitive new
work. In addition, a clarification is added that if modifying an order
to add open market items, the contracting officer must also comply with
the requirements at FAR 8.402(f).
FAR 12.207(b)(1)(ii)(C). This paragraph is revised to require
analysis and documentation for changes in T&M or LH contracts or orders
and to clarify that changes in the general scope should be justified as
non-competitive new work. The new proposed language distinguishes
between changes that modify the general scope of a contract and changes
that modify the general scope of an order. For the changes that modify
the general scope of the contract, contracting officers are advised to
follow the procedures at FAR 6.303. For the changes that modify the
general scope of an order, contracting officers are advised to follow
the procedures at FAR 8.405-6 for orders issued under the Federal
Supply Schedules. For the orders issued under multiple award task and
delivery order contracts, contracting officers are advised to follow
the procedures at FAR 16.505(b)(2).
FAR 16.505(b)(4) and (5). These paragraphs are added to reference
[[Page 43781]]
additional requirements for cost reimbursement, T&M or LH orders.
FAR 16.601. This section is revised to require analysis and
documentation for changes in T&M or LH contracts or orders and to
clarify that changes in the general scope should be justified as non-
competitive new work. FAR 16.601(d) has also been amended to make it
clear that a D&F is required for T&M orders. This FAR change will
clarify that a T&M D&F is required for each non-commercial item T&M
order under a part 16 indefinite-delivery indefinite-quantity (IDIQ)
contract. This change is necessary both to keep part 16 parallel with
part 8 (which requires a D&F for each part 8 T&M order) and to clarify
an unintended lack of clarity in the 2006 FAR changes that rewrote much
of the T&M policies in the FAR (see FAC 2005-15, published in the
Federal Register at 71 FR 74656 on December 12, 2006). Currently, only
part 12 includes a direct requirement for T&M orders to be authorized
by a T&M D&F, but this applies only to commercial items. This FAR case
is adding a clarification to part 8 to repeat that policy to ensure
that part 8 T&M orders are also each authorized by a T&M D&F. With this
case, part 16 is also being changed to explicitly require T&M D&Fs for
orders.
FAR 16.601(e). The new proposed language distinguishes between
changes that modify the general scope of a contract and changes that
modify the general scope of an order. For the changes that modify the
general scope of the contract, contracting officers are advised to
follow the procedures at FAR 6.303. For the changes that modify the
general scope of an order, contracting officers are advised to follow
the procedures at FAR 8.405-6 for orders issued under the Federal
Supply Schedules. For the orders issued under multiple award task and
delivery order contracts, contracting officers are advised to follow
the procedures at FAR 16.505(b)(2).
III. Executive Order 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is not a significant regulatory action and, therefore, was not
subject to review under section 6(b) of E.O. 12866, Regulatory Planning
and Review, dated September 30, 1993. This rule is not a major rule
under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
The change 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. The Initial Regulatory
Flexibility Analysis (IRFA) is summarized as follows:
The purpose of this case is to clarify the procedures necessary
to raise the ceiling price of a time-and-materials (T&M) or labor-
hour (LH) contract or order.
In finalizing FAR rule 2009-043 ``Time-and-Materials and Labor-
Hour Contracts for Commercial Items'' it became apparent that the
guidance in the FAR on raising the ceiling price for a T&M or LH
contract or order was not clear or consistent throughout the FAR.
This case was opened to clarify the process and necessary
documentation when raising the ceiling price for these contracts or
orders.
This rule deals with the administration of T&M and LH contracts
and orders and most likely will not have a direct effect on
contractors. In FY 2011, the Federal Government awarded 23,023 T&M
and LH contracts and orders of which 6,315 went to small businesses.
This rule is not likely to affect how many large and small
businesses are awarded this type of contract.
This rule does not add any new information collection
requirements.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
No alternatives were determined that will accomplish the
objectives of the rule.
The Regulatory Secretariat will be submitting a copy of the Initial
Regulatory Flexibility Analysis (IRFA) to the Chief Counsel for
Advocacy of the Small Business Administration. A copy of the IRFA may
be obtained from the Regulatory Secretariat. The Councils invite
comments from small business concerns and other interested parties on
the expected impact of this rule on small entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by this rule
in accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 610 (FAR Case 2011-025) in
correspondence.
V. Paperwork Reduction Act
The proposed rule does not contain any information collection
requirements that require the approval of the Office of Management and
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR Parts 8, 12, 16, and 52
Government procurement.
Dated: July 20, 2012.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of
Acquisition Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 8, 12,
16, and 52 as follows:
1. The authority citation for 48 CFR parts 8, 12, 16, and 52 is
revised to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES
2. Amend section 8.404 by revising paragraph (h)(3)(iv) to read as
follows:
8.404 Use of Federal Supply Schedules.
* * * * *
(h) * * *
(3) * * *
(iv) Prior to an increase in the ceiling price of a time-and-
materials or labor-hour order, the ordering activity shall--
(A) Conduct an analysis of pricing and other relevant factors to
determine if the action is in the best interest of the Government and
document the order file;
(B) Follow the procedures at 8.405-6 for a change that modifies the
general scope of the order; and
(C) Comply with the requirements at 8.402(f) when modifying an
order to add open market items.
PART 12--ACQUISITION OF COMMERCIAL ITEMS
3. Amend section 12.207 by revising paragraph (b)(1)(ii)(C) to read
as follows:
12.207 Contract type.
* * * * *
(b)(1) * * *
(ii) * * *
(C) Prior to increasing the ceiling price of a time-and-materials
or labor-hour contract or order, shall--
(1) Conduct an analysis of pricing and other relevant factors to
determine if the action is in the best interest of the Government;
(2) Document the decision in the contract or order file; and
(3) When making a change that modifies the general scope of--
(i) A contract, follow the procedures at 6.303;
(ii) An order issued under the Federal Supply Schedules, follow the
procedures at 8.405-6; or
[[Page 43782]]
(iii) An order issued under multiple award task and delivery order
contracts, follow the procedures at 16.505(b)(2).
* * * * *
PART 16--TYPE OF CONTRACTS
16.504 [Amended]
4. Amend section 16.504 by removing from paragraph (a)(4)(v) ``(see
16.505(b)(6))'' and adding ``(see 16.505(b)(8))'' in its place.
5. Amend section 16.505 by--
a. Removing from paragraph (b)(1)(iv)(E) ``paragraph (b)(4)'' and
adding ``paragraph (b)(6)'' in its place;
b. Redesignating paragraphs (b)(4) through paragraphs (b)(6) as
paragraphs (b)(6) through (b)(8), respectively; and
c. Adding new paragraphs (b)(4) and (b)(5).
The additions read as follows:
16.505 Ordering.
* * * * *
(b) * * *
(4) For additional requirements for cost reimbursement orders see
16.301-3.
(5) For additional requirements for time-and-materials or labor-
hour orders, see 16.601(e).
* * * * *
6. Amend section 16.601 by--
a. Removing from paragraph (c)(2)(i) ``(see 16.601(e)(1))'' and
adding ``(see 16.601(f)(1))'' in its place;
b. Revising paragraph (d) introductory text and paragraph (d)(2);
c. Redesignating paragraph (e) as paragraph (f); and
d. Adding a new paragraph (e),
The revisions and addition read as follows.
16.601 Time-and-materials contracts.
* * * * *
(d) Limitations. A time-and-materials contract or order may be used
only if--
* * * * *
(2) The contract or order includes a ceiling price that the
contractor exceeds at its own risk. Also see 12.207(b) for further
limitations on use of time-and-materials or labor-hour contracts for
acquisition of commercial items.
(e) Post award requirements. Prior to an increase in the ceiling
price of a time-and-materials or labor-hour contract or order, the
contracting officer shall--
(1) Conduct an analysis of pricing and other relevant factors to
determine if the action is in the best interest of the Government;
(2) Document the decision in the contract or order file; and
(3) When making a change that modifies the general scope of--
(i) A contract, follow the procedures at 6.303;
(ii) An order issued under the Federal Supply Schedules, follow the
procedures at 8.405-6; or
(iii) An order issued under multiple award task and delivery order
contracts, follow the procedures at 16.505(b)(2).
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
52.216-29 [Amended]
7. Amend section 52.216-29 by removing from the introductory
paragraph ``16.601(e)(1)'' and adding ``16.601(f)(1)'' in its place.
52.216-30 [Amended]
8. Amend section 52.216-30 by removing from the introductory
paragraph ``16.601(e)(2)'' and adding ``16.601(f)(2)'' in its place.
52.216-31 [Amended]
9. Amend section 52.216-31 by removing from the introductory
paragraph ``16.601(e)(3)'' and adding ``16.601(f)(3)'' in its place.
[FR Doc. 2012-18276 Filed 7-25-12; 8:45 am]
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