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Title XIV—Services Acquisition Reform

The Services Acquisition Reform Act of 2003 (SARA)

Public Law 108-136

House Conference Report 108-354

SEC. 1432. AUTHORIZATION OF ADDITIONAL COMMERCIAL CONTRACT TYPES.

Section 8002(d) of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355; 108 Stat. 3387; 41 U.S.C. 264 note) is amended--

(1) by redesignating paragraph (1) as subparagraph (A) and in that subparagraph by striking `and';

(2) by redesignating paragraph (2) as subparagraph (B) and in that subparagraph by striking the period at the end and inserting `; and';

(3) by adding after subparagraph (B) (as so redesignated) the following new subparagraph:

`(C) subject to paragraph (2), authority for use of a time-and-materials contract or a labor-hour contract for the procurement of commercial services that are commonly sold to the general public through such contracts and are purchased by the procuring agency on a competitive basis.';

(4) by striking `USE OF FIRM, FIXED PRICE CONTRACTS- The' and inserting `PROVISIONS RELATING TO TYPES OF CONTRACTS FOR COMMERCIAL ITEMS- (1)'; and

(5) by adding at the end the following new paragraphs:

`(2) A time-and-materials contract or a labor-hour contract may be used pursuant to the authority referred to in paragraph (1)(C)--

`(A) only for a procurement of commercial services in a category of commercial services described in paragraph (3); and--

`(B) only if the contracting officer for such procurement--

`(i) executes a determination and findings that no other contract type is suitable;

`(ii) includes in the contract a ceiling price that the contractor exceeds at its own risk; and

`(iii) authorizes any subsequent change in the ceiling price only upon a determination, documented in the contract file, that it is in the best interest of the procuring agency to change such ceiling price.

`(3) The categories of commercial services referred to in paragraph (2) are as follows:

`(A) Commercial services procured for support of a commercial item, as described in section 4(12)(E) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(12)(E)).

`(B) Any other category of commercial services that is designated by the Administrator for Federal Procurement Policy in the Federal Acquisition Regulation for the purposes of this paragraph on the basis that--

`(i) the commercial services in such category are of a type of commercial services that are commonly sold to the general public through use of time-and-materials or labor-hour contracts; and

`(ii) it would be in the best interests of the Federal Government to authorize use of time-and-materials or labor-hour contracts for purchases of the commercial services in such category.'.

The House bill contained a provision (sec. 1442) that would amend section 8002(d) of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355) to provide that the federal acquisition regulations include authority for time and material contracts or labor hour contracts to be used for the acquisition of a commercial service commonly sold to the general public through such contracts.

The Senate amendment contained no similar provision.

The Senate recedes with an amendment that would place additional safeguards and limitations on the use of time-and-materials and labor-hour contracts for the procurement of commercial services.

The conferees note that section 821 of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398) establishes a statutory preference for performance-based contracts and performance-based task orders that contain firm fixed prices for the specific tasks to be performed. The provision recommended by the conferees does not change that preference. The provision would make a time-and-materials contract or a labor-hours contract an available option only if the contracting officer executes a determination and finding that no other contract type is suitable. A performance-based contract or task order that contains firm fixed prices for the specific tasks to be performed remains the preferred option for the acquisition of either commercial or non-commercial items.

The conferees direct the Comptroller General to review the use of this authority and to report to the Armed Services Committees of the Senate and the House of Representatives, the Governmental Affairs Committee of the Senate, and the Government Reform and Oversight Committee of the House of Representatives not later than one year after the date of enactment of this Act. The Comptroller General's report should address, at a minimum: the extent to which the authority provided in this provision has been used; the types of contracts for which the authority has been used; and the degree to which such use has been in compliance with the safeguards included in this section (including the requirement that time-and-materials contracts be used only where no other contract type is suitable).

House Report 108-117, Part 1

The section would provide that section 8002(d) of the Federal Acquisition Streamlining Act of 1994 (Public Law 103–355; 41 U.S.C. 264 note) be amended to provide that the Federal Acquisition Regulation (FAR) include a provision that would provide that time and material and labor-hour contracts could be used for commercial services that are commonly sold to the general public through such contracts. Time and material and labor-hour contracts are treated in the current Part 16 of the FAR as a separate contract type, as are fixed-price contracts and cost-reimbursement contracts. While section 8002(d) provides that the FAR is to prohibit the use of cost-type contracts for commercial items, there is no comparable prohibition applicable to time and material and labor-hour contracts. Section 402 would make clear that, under the appropriate circumstances, time and material and labor-hour contracts should be specifically authorized by the FAR for commercial services.