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established new requirements for 

agencies subject to Title 10, United 

States Code. As a matter of policy, this 

provision of law was applied to 

contracts awarded by all executive 

agencies. The rule requires that market 

research must be conducted before an 

agency places a task or delivery order in 

excess of the simplified acquisition 

threshold under an indefinite-delivery 

indefinite-quantity contract. In addition, 

a prime contractor with a contract in 

excess of $5 million for the procurement 

of items other than commercial items is 

required to conduct market research 

before making purchases that exceed the 

simplified acquisition threshold. Among 

other changes, the final rule also deletes 

the language added to FAR 52.244–6 

(Alternate I) and relocates it to a new 

FAR clause 52.210–1, Market Research. 

Item V—Socioeconomic Program Parity 

(FAR Case 2011–004) (Interim) 

This interim rule amends the FAR to 

implement section 1347 of the ‘‘Small 

Business Jobs Act of 2010’’ (Pub. L. 111– 

240) and the Small Business 

Administration regulations governing 

specific contracting and business 

assistance programs. Section 1347 

changed the word ‘‘shall’’ to ‘‘may’’ at 

section 31(b)(2)(B) of the Small Business 

Act (15 U.S.C. 657a(b)(2)(B), thereby 

permitting a contracting officer to use 

discretion when determining whether 

an acquisition will be restricted to a 

small business participating in the 8(a) 

Business Development Program, the 

Historically Underutilized Business 

Zone Program, or the Service-Disabled 

Veteran-Owned Small Business 

Program. 

Item VI—Use of Commercial Services 

Item Authority (FAR Case 2008–034) 

This final rule adopts, without 

change, an interim rule that 

implemented section 868 of the Duncan 

Hunter National Defense Authorization 

Act for Fiscal Year 2009 (Pub. L. 110– 

417). Section 868 provides that the FAR 

shall be amended with respect to the 

procurement of commercial services 

that are not offered and sold 

competitively in substantial quantities 

in the commercial marketplace, but are 

of a type offered and sold competitively 

in substantial quantities in the 

commercial marketplace. Such services 

may be considered commercial items 

only if the contracting officer has 

determined in writing that the offeror 

has submitted sufficient information to 

evaluate, through price analysis, the 

reasonableness of the price for these 

services. 

The rule details the information the 

contracting officer may consider in 

order to make this determination. The 

rule further details, when this 

determination cannot be made, the 

information which may be requested to 

determine price reasonableness. 

Item VII—Trade Agreements 

Thresholds (FAR Case 2009–040) 

This final rule adopts, without 

change, an interim rule that amended 

the FAR to adjust the thresholds for 

application of the World Trade 

Organization Government Procurement 

Agreement and the Free Trade 

Agreements as determined by the 

United States Trade Representative, 

according to a pre-determined formula 

under the agreements. 

Item VIII—Disclosure and Consistency 

of Cost Accounting Practices for 

Contracts Awarded to Foreign Concerns 

(FAR Case 2009–025) 

This final rule adopts, without 

change, the interim rule that amended 

the FAR to revise FAR 30.201–4(c), 

30.201–4(d)(1), 52.230–4, and 52.230–6 

to maintain consistency between FAR 

and Cost Accounting Standards (CAS) 

regarding the administration of the Cost 

Accounting Standard Board’s (CASB) 

rules, regulations and standards. This 

revision was necessitated by the CASB 

publishing a final rule in the Federal 

Register on March 26, 2008 (73 FR 

15939) which implemented the revised 

clause, Disclosure and Consistency of 

Cost Accounting Practices—Foreign 

Concerns, in CAS-covered contracts and 

subcontracts awarded to foreign 

concerns. 

Item IX—Compensation for Personal 

Services (FAR Case 2009–026) 

This final rule adopts, without 

change, the interim rule that amended 

the FAR to align the existing FAR 

31.205–6(q)(2)(i) through (vi) with the 

changes made in Cost Accounting 

Standards (CAS) Board standards 412 

‘‘Cost Accounting Standard for 

composition and measurement of 

pension cost,’’ and 415 ‘‘Accounting for 

the cost of deferred compensation.’’ 

Formerly, the applicable CAS standard 

for measuring, assigning, and allocating 

the costs of Employee Stock Ownership 

Plans (ESOPs) depended on whether the 

ESOP met the definition of a pension 

plan at FAR 31.001. Costs for ESOPs 

meeting the definition of a pension plan 

at FAR 31.001 were covered by CAS 

412, while the costs for ESOPs not 

meeting the definition of a pension plan 

at FAR 31.001 were covered by CAS 

415. Now, regardless of whether an 

ESOP meets the definitions of a pension 

plan at FAR 31.001, all costs of ESOPs 

are covered by CAS 415. 

Item X—Technical Amendments 

Editorial changes are made at FAR 

19.201, 52.212–3, and 52.212–5. 

Dated: March 4, 2011. 

Millisa Gary, 

Acting Director, Office of Governmentwide 

Acquisition Policy. 

Federal Acquisition Circular (FAC) 2005– 

50 is issued under the authority of the 

Secretary of Defense, the Administrator of 

General Services, and the Administrator for 

the National Aeronautics and Space 

Administration. 

Unless otherwise specified, all Federal 

Acquisition Regulation (FAR) and other 

directive material contained in FAC 2005–50 

is effective March 16, 2011, except for Item 

IV which is effective April 15, 2011, and Item 

II which is effective May 16, 2011. 

Dated: March 4, 2011. 

Amy G. Williams, 

Acting Deputy Director, Defense Procurement 

and Acquisition Policy (Defense Acquisition 

Regulations System). 

Dated: March 4, 2011. 

Joseph A. Neurauter, 

Deputy Associate Administrator and Senior 

Procurement Executive, Office of Acquisition 

Policy, U.S. General Services Administration. 

Dated: February 28, 2011. 

Sheryl J. Goddard, 

Acting Assistant Administrator for 

Procurement National Aeronautics and Space 

Administration. 

[FR Doc. 2011–5551 Filed 3–15–11; 8:45 am] 

BILLING CODE 6820–EP–P 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Parts 1, 2, 7, 16, 32, 42, and 50 

[FAC 2005–50; FAR Case 2008–030; Item 

I; Docket 2011–0082, Sequence 1] 

RIN 9000–AL78 

Federal Acquisition Regulation; Proper 

Use and Management of CostReimbursement Contracts 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Interim rule with request for 

comments. 

SUMMARY: DoD, GSA, and NASA are 

issuing an interim rule amending the 

Federal Acquisition Regulation (FAR) to 

implement section 864 of the Duncan 

Hunter National Defense Authorization 

Act for Fiscal Year 2009. This law aligns 


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with the Presidential Memorandum on 

Government Contracting, issued on 

March 4, 2009, which directed agencies 

to save $40 billion in contracting 

annually by Fiscal Year (FY) 2011 and 

to reduce the use of high-risk contracts. 

This rule provides regulatory guidance 

on the proper use and management of 

other than firm-fixed-price contracts 

(e.g., cost-reimbursement, time-andmaterial, and labor-hour). 

DATES: Effective Date: March 16, 2011. 

Comment Date: Interested parties 

should submit written comments to the 

Regulatory Secretariat on or before May 

16, 2011 to be considered in the 

formulation of a final rule. 

ADDRESSES: Submit comments 

identified by FAC 2005–50, FAR Case 

2008–030, by any of the following 

methods: 

• Regulations.gov: http:// 

www.regulations.gov. Submit comments 

via the Federal eRulemaking portal by 

inputting ‘‘FAR Case 2008–030’’ under 

the heading ‘‘Enter Keyword or ID’’ and 

selecting ‘‘Search.’’ Select the link 

‘‘Submit a Comment’’ that corresponds 

with ‘‘FAR Case 2008–030.’’ Follow the 

instructions provided at the ‘‘Submit a 

Comment’’ screen. Please include your 

name, company name (if any), and ‘‘FAR 

Case 2008–030’’ 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 FAC 2005–50, FAR Case 

2008–030, 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: For 

clarification of content, contact Lori 

Sakalos, Procurement Analyst, at (202) 

208–0498. For information pertaining to 

status or publication schedules, contact 

the Regulatory Secretariat at (202) 501– 

4755. Please cite FAC 2005–50, FAR 

Case 2008–030. 

SUPPLEMENTARY INFORMATION: 

I. Background 

This case implements section 864 of 

the Duncan Hunter National Defense 

Authorization Act for Fiscal Year 2009 

(Pub. L. 110–417), enacted October 14, 

2008. This law aligns with the 

President’s goal of reducing high-risk 

contracting as denoted in the March 4, 

2009, Presidential Memorandum on 

Government Contracting. 

Section 864 requires the FAR to be 

revised to address the use and 

management of cost-reimbursement 

contracts and identifies the following 

three areas that the Defense Acquisition 

Regulation Council and the Civilian 

Agency Acquisition Council (Councils) 

should consider in amending the FAR— 

(a) Circumstances when costreimbursement contracts are 

appropriate; 

(b) Acquisition plan findings to 

support the selection of a costreimbursement contract; and 

(c) Acquisition resources necessary to 

award and manage a costreimbursement contract. 

1. Guidance on Cost-reimbursement 

contracts. As required, the Councils 

included additional coverage at FAR 

subpart 16.1, Selecting Contract Types, 

and at subpart 16.3, CostReimbursement Contracts, to provide 

further guidance as to when, and under 

what circumstances, costreimbursement contracts are 

appropriate. Therefore, this rule makes 

the following changes: 

• FAR 16.103, Negotiating contract 

type, is amended to revise paragraph (d) 

to reflect additional documentation 

when other than a firm-fixed-price 

contract type is selected. 

• FAR 16.104, Factors in selecting 

contract types, is amended to add a new 

paragraph (e) to provide guidance to the 

contracting officer to consider 

combining contract types if the entire 

contract cannot be firm fixed-price. 

• FAR 16.301–2, Application, is 

amended to provide guidance to the 

contracting officer as to the 

circumstances in which to use costreimbursement contracts as well as 

outlining the rationale for 

documentation for selecting this 

contract type. 

• FAR 16.301–3, Limitations, is 

amended to (1) provide additional 

guidance to the contracting officer as to 

when a cost-reimbursement contract 

may be used, (2) ensure that all factors 

have been considered per FAR 16.104, 

and (3) ensure that adequate 

Government resources are available to 

award and manage this type of contract. 

• FAR 7.104(e) also requires the 

designation of a properly trained 

contracting officer’s representative 

(COR) (or contracting officer’s technical 

representative (COTR)) prior to award of 

the contract or order. 

2. Identification of acquisition plan 

findings. FAR 7.103, Agency-head 

responsibilities, is amended and 

renumbered to add new paragraphs 

7.103(d), 7.103(f), and 7.103(j) to ensure 

that acquisition planners document the 

file to support the selection of the 

contract type in accordance with FAR 

subpart 16.1; ensure that the statement 

of work is closely aligned with the 

performance outcomes and cost 

estimates; and obtain an approval and 

signature from the appropriate 

acquisition official at least one level 

above the contracting officer. FAR 

7.105(b)(5)(iv) was added to discuss the 

strategy to transition from costreimbursement contracts to firm-fixedprice contracts. Although FAR 

7.105(b)(5), Acquisition considerations, 

requires the acquisition plans to include 

a discussion of contract type selection 

and rationale, the Councils believe that 

a greater emphasis on the use of costreimbursement contracts should be 

added and included a new paragraph at 

FAR 7.105(b)(3), Contract type selection. 

Additionally, FAR 16.301–3(a) has been 

amended and renumbered. 

3. Acquisition workforce resources. 

The Councils recognize that assigning 

adequate and proper resources to 

support the solicitation, award, and 

administration of other than firm-fixedprice contracts (cost-reimbursement, 

time-and-material, and labor-hour) 

contract is challenging. There is also 

great concern that a lack of involvement 

in contract oversight by program offices 

is primarily present in other than firmfixed-price contracts. Therefore, from 

the outset, contracting officers should be 

assured, to the greatest extent 

practicable, that the right resources in 

number, kind, and availability be 

assigned to support other than firmfixed-price contracts. The Councils 

consider that greater accountability for 

the management and oversight of all 

contracts, especially other than firmfixed-price contracts, can be gained and 

improved by requiring that properly 

trained CORs or COTRs (see FAR 

2.101(b)(2), Definitions) be appointed 

before award. Therefore, FAR 7.104, 

General Procedures, and FAR 16.301– 

3(a)(4)(i) are amended to reflect that 

prior to award of a contract, especially 

on other than firm-fixed price contracts, 

at least one COR or COTR qualified in 

accordance with FAR 1.602–2 is 

designated. FAR 1.602–2, 

Responsibilities, is amended to add a 

new paragraph (d) outlining the 

requirement for the contracting officer 

to designate and authorize, in writing, a 

COR on contracts and orders, as 

appropriate. Additionally, a new section 

was added at FAR 1.604, Contracting 

officer’s representative, outlining the 

COR’s duties. 

4. Contract administration functions. 

A new paragraph was added at FAR 

42.302(a)(12) to require that the 

contracting officer determine the 

continuing adequacy of the contractor’s 


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accounting system during the entire 

period of contract performance. Also, 

paragraph (a)(12) was added to the list 

of functions at FAR 42.302(a) that 

cannot be retained and that must be 

delegated by the contracting officer 

when delegating contract administration 

functions to a contract administration 

office in accordance with FAR 

42.202(a). 

II. Executive Order 12866 

This is a significant regulatory action 

and, therefore, was 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. 

III. Regulatory Flexibility Act 

DoD, GSA, and NASA do not expect 

this interim 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 

section 864 affects only internal 

Government operations and requires the 

Government to establish internal 

guidance on the proper use and 

management of all contracts especially 

other than firm-fixed-price contracts 

(e.g., cost-reimbursement, time-andmaterial, and labor-hour) and does not 

impose any additional requirements on 

small businesses. 

Therefore, an Initial Regulatory 

Flexibility Analysis has not been 

performed. DoD, GSA, and NASA invite 

comments from small business entities 

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 the rule in 

accordance with 5 U.S.C. 610. Interested 

parties must submit such comments 

separately and should cite 5 U.S.C. 610 

(FAC 2005–50, FAR Case 2008–030) in 

correspondence. 

IV. Paperwork Reduction Act 

The changes to the FAR do not 

impose 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). 

V. 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 because section 864 

of the Duncan Hunter National Defense 

Authorization Act for Fiscal Year 2009, 

enacted October 14, 2008, directs that it 

must be implemented within 270 days 

from enactment. This rule is also urgent 

because this law requires the Inspector 

General to conduct a compliance review 

for each executive agency, one year after 

the regulations have been promulgated, 

on the use of cost-reimbursement 

contracts and include the results of their 

findings in the IG’s next semiannual 

report. However, pursuant to 41 U.S.C. 

1707 and FAR 1.501–3(b), DoD, GSA, 

and NASA 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 1, 2, 7, 

16, 32, 42, and 50 

Government procurement. 

Dated: March 4, 2011. 

Millisa Gary, 

Acting Director, Office of Governmentwide 

Acquisition Policy Division. 

Therefore, DoD, GSA, and NASA 

amend 48 CFR parts 1, 2, 7, 16, 32, 42, 

and 50 as set forth below: 

■ 1. The authority citation for 48 CFR 

parts 1, 2, 7, 16, 32, 42, and 50 

continues 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 1—FEDERAL ACQUISITION 

REGULATIONS SYSTEM 

■ 2. Amend section 1.602–2 by adding 

paragraph (d) to read as follows: 

1.602–2 Responsibilities. 

* * * * * 

(d) Designate and authorize, in 

writing, a contracting officer’s 

representative (COR) on all contracts 

and orders other than those that are 

firm-fixed price, and for firm-fixed-price 

contracts and orders as appropriate. 

However, the contracting officer is not 

precluded from retaining and executing 

the COR duties as appropriate. See 

7.104(e). A COR— 

(1) Must be a Government employee, 

unless otherwise authorized in agency 

regulations; 

(2) Shall be certified and maintain 

certification in accordance with the 

Office of Management and Budget 

memorandum entitled ‘‘The Federal 

Acquisition Certification for Contracting 

Officer Technical Representatives’’ 

dated November 26, 2007, or for DoD, 

DoD Regulations, as applicable; 

(3) Must be qualified by training and 

experience commensurate with the 

responsibilities to be delegated in 

accordance with department/agency 

guidelines; 

(4) May not be delegated 

responsibility to perform functions that 

have been delegated under 42.202 to a 

contract administration office, but may 

be assigned some duties at 42.302 by the 

contracting officer; 

(5) Has no authority to make any 

commitments or changes that affect 

price, quality, quantity, delivery, or 

other terms and conditions of the 

contract; and 

(6) Must be designated in writing, 

with copies furnished to the contractor 

and the contract administration office— 

(i) Specifying the extent of the COR’s 

authority to act on behalf of the 

contracting officer; 

(ii) Identifying the limitations on the 

COR’s authority; 

(iii) Specifying the period covered by 

the designation; 

(iv) Stating the authority is not 

redelegable; and 

(v) Stating that the COR may be 

personally liable for unauthorized acts. 

■ 3. Amend section 1.603 by revising 

the section heading to read as follows: 

1.603 Selection, appointment, and 

termination of appointment for contracting 

officers. 

* * * * * 

■ 4. Add section 1.604 to read as 

follows: 

1.604 Contracting Officer’s Representative 

(COR). 

A contracting officer’s representative 

(COR) assists in the technical 

monitoring or administration of a 

contract (see 1.602–2(d)). The COR shall 

maintain a file for each assigned 

contract. The file must include, at a 

minimum— 

(a) A copy of the contracting officer’s 

letter of designation and other 

documents describing the COR’s duties 

and responsibilities; 

(b) A copy of the contract 

administration functions delegated to a 

contract administration office which 

may not be delegated to the COR (see 

1.602–2(d)(4)); and 

(c) Documentation of COR actions 

taken in accordance with the delegation 

of authority. 

PART 2—DEFINITIONS OF WORDS 

AND TERMS 

■ 5. Amend section 2.101 in paragraph 

(b)(2) by adding, in alphabetical order, 

the definition ‘‘Contracting officer’s 

representative (COR)’’ to read as follows: 


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2.101 Definitions. 

* * * * * 

(b) * * * 

(2) * * * 

Contracting officer’s representative 

(COR) means an individual, including a 

contracting officer’s technical 

representative (COTR), designated and 

authorized in writing by the contracting 

officer to perform specific technical or 

administrative functions. 

* * * * * 

PART 7—ACQUISITION PLANNING 

■ 6. Amend section 7.102 by adding 

paragraph (a)(3) to read as follows: 

7.102 Policy. 

(a) * * * 

(3) Selection of appropriate contract 

type in accordance with part 16. 

* * * * * 

■ 7. Amend section 7.103 by— 

■ a. Redesignating paragraphs (e) 

through (w) as paragraphs (g) through 

(y); 

■ b. Redesignating paragraph (d) as 

paragraph (e); 

■ c. Adding a new paragraph (d); 

■ d. Revising newly redesignated 

paragraph (e); 

■ e. Adding a new paragraph (f); and 

■ f. Revising newly redesignated 

paragraph (j). 

The added and revised text reads as 

follows: 

7.103 Agency-head responsibilities. 

* * * * * 

(d) Ensuring that acquisition planners 

document the file to support the 

selection of the contract type in 

accordance with subpart 16.1. 

(e) Establishing criteria and 

thresholds at which increasingly greater 

detail and formality in the planning 

process is required as the acquisition 

becomes more complex and costly, 

including for cost-reimbursement and 

other high-risk contracts (e.g., other than 

firm-fixed-price contracts) requiring a 

written acquisition plan. A written plan 

shall be prepared for cost 

reimbursement and other high-risk 

contracts other than firm-fixed-price 

contracts, although written plans may 

be required for firm-fixed-price 

contracts as appropriate. 

(f) Ensuring that the statement of work 

is closely aligned with performance 

outcomes and cost estimates. 

* * * * * 

(j) Reviewing and approving 

acquisition plans and revisions to these 

plans to ensure compliance with FAR 

requirements including 7.104 and part 

16. For other than firm-fixed-price 

contracts, ensuring that the plan is 

approved and signed at least one level 

above the contracting officer. 

* * * * * 

■ 8. Amend section 7.104 by adding 

paragraph (e) to read as follows: 

7.104 General procedures. 

* * * * * 

(e) The planner shall ensure that a 

COR is nominated by the requirements 

official, and designated and authorized 

by the contracting officer, as early as 

practicable in the acquisition process. 

The contracting officer shall designate 

and authorize a COR as early as 

practicable after the nomination. See 

1.602–2(d). 

■ 9. Amend section 7.105 by— 

■ a. Removing from the first sentence of 

the introductory text the words ‘‘see 

paragraph (b)(19)’’ and adding the words 

‘‘see paragraph (b)(21)’’ in their place; 

■ b. Redesignating paragraphs (b)(3) 

through (b)(21) as paragraphs (b)(4) 

through (b)(22), respectively; 

■ c. Adding a new paragraph (b)(3); 

■ d. Removing from newly redesignated 

paragraph (b)(5)(i) the words ‘‘contract 

type selection (see part 16);’’; 

■ e. Removing from newly redesignated 

paragraph (b)(5)(ii)(A) the words ‘‘see 

7.103(t)’’ and adding the words ‘‘see 

7.103(v)’’ in its place; and 

■ f. Adding paragraph (b)(5)(iv). 

The added text reads as follows: 

7.105 Contents of written acquisition 

plans. 

* * * * * 

(b) * * * 

(3) Contract type selection. Discuss 

the rationale for the selection of contract 

type. For other than firm-fixed-price 

contracts, see 16.103(d) for additional 

documentation guidance. Acquisition 

personnel shall document the 

acquisition plan with findings that 

detail the particular facts and 

circumstances, (e.g., complexity of the 

requirements, uncertain duration of the 

work, contractor’s technical capability 

and financial responsibility, or 

adequacy of the contractor’s accounting 

system), and associated reasoning 

essential to support the contract type 

selection. The contracting officer shall 

ensure that requirements and technical 

personnel provide the necessary 

documentation to support the contract 

type selection. 

* * * * * 

(5) * * * 

(iv) For each contract (and order) 

contemplated, discuss the strategy to 

transition to firm-fixed-price contracts 

to the maximum extent practicable. 

During the requirements development 

stage, consider structuring the contract 

requirements, e.g., contract line items 

(CLINS), in a manner that will permit 

some, if not all, of the requirements to 

be awarded on a firm-fixed-price basis, 

either in the current contract, future 

option years, or follow-on contracts. 

This will facilitate an easier transition to 

a firm-fixed-price contact because a cost 

history will be developed for a recurring 

definitive requirement. 

* * * * * 

PART 16—TYPES OF CONTRACTS 

■ 10. Amend section 16.103 by revising 

paragraphs (d)(1) and (2) to read as 

follows: 

16.103 Negotiating contract type. 

* * * * * 

(d) * * * 

(1) Each contract file shall include 

documentation to show why the 

particular contract type was selected. 

This shall be documented in the 

acquisition plan, or if a written 

acquisition plan is not required, in the 

contract file. 

(i) Explain why the contract type 

selected must be used to meet the 

agency need. 

(ii) Discuss the Government’s 

additional risks and the burden to 

manage the contract type selected (e.g., 

when a cost-reimbursement contract is 

selected, the Government incurs 

additional cost risks, and the 

Government has the additional burden 

of managing the contractor’s costs). For 

such instances, acquisition personnel 

shall discuss— 

(A) How the Government identified 

the additional risks (e.g., pre-award 

survey, or past performance 

information); 

(B) The nature of the additional risks 

(e.g., inadequate contractor’s accounting 

system, weaknesses in contractor’s 

internal control, non-compliance with 

Cost Accounting Standards, or lack of or 

inadequate earned value management 

system); and 

(C) How the Government will manage 

and mitigate the risks. 

(iii) Discuss the Government 

resources necessary to properly plan for, 

award, and administer the contract type 

selected (e.g., resources needed and the 

additional risks to the Government if 

adequate resources are not provided). 

(iv) For other than a firm-fixed price 

contract, at a minimum the 

documentation should include— 

(A) An analysis of why the use of 

other than a firm-fixed-price contract 

(e.g., cost reimbursement, time and 

materials, labor hour) is appropriate; 

(B) Rationale that detail the particular 

facts and circumstances (e.g., 


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complexity of the requirements, 

uncertain duration of the work, 

contractor’s technical capability and 

financial responsibility, or adequacy of 

the contractor’s accounting system), and 

associated reasoning essential to 

support the contract type selection; 

(C) An assessment regarding the 

adequacy of Government resources that 

are necessary to properly plan for, 

award, and administer other than firmfixed-price contracts; and 

(D) A discussion of the actions 

planned to minimize the use of other 

than firm-fixed-price contracts on future 

acquisitions for the same requirement 

and to transition to firm-fixed-price 

contracts to the maximum extent 

practicable. 

(v) A discussion of why a level-ofeffort, price redetermination, or fee 

provision was included. 

(2) Exceptions to the requirements at 

(d)(1) of this section are— 

(i) Fixed-price acquisitions made 

under simplified acquisition 

procedures; 

(ii) Contracts on a firm-fixed-price 

basis other than those for major systems 

or research and development; and 

(iii) Awards on the set-aside portion 

of sealed bid partial set-asides for small 

business. 

* * * * * 

■ 11. Amend section 16.104 by— 

■ a. Redesignating paragraphs (e) 

through (k) as paragraphs (f) through (l), 

respectively; 

■ b. Adding a new paragraph (e); 

■ c. Removing from newly redesignated 

paragraph (f) the words ‘‘incentives to 

ensure’’ and adding the words 

‘‘incentives tailored to performance 

outcomes to ensure’’ in their place; 

■ d. Removing from newly redesignated 

paragraph (g) the words ‘‘price 

adjustment terms’’ and adding the words 

‘‘price adjustment or price 

redetermination clauses’’ in their place; 

and 

■ e. Revising newly redesignated 

paragraph (i). 

The added and revised text reads as 

follows: 

16.104 Factors in selecting contract types. 

* * * * * 

(e) Combining contract types. If the 

entire contract cannot be firm-fixedprice, the contracting officer shall 

consider whether or not a portion of the 

contract can be established on a firmfixed-price basis. 

* * * * * 

(i) Adequacy of the contractor’s 

accounting system. Before agreeing on a 

contract type other than firm-fixedprice, the contracting officer shall 

ensure that the contractor’s accounting 

system will permit timely development 

of all necessary cost data in the form 

required by the proposed contract type. 

This factor may be critical— 

(1) When the contract type requires 

price revision while performance is in 

progress; or 

(2) When a cost-reimbursement 

contract is being considered and all 

current or past experience with the 

contractor has been on a fixed-price 

basis. See 42.302(a)(12). 

* * * * * 

■ 12. Revise section 16.301–2 to read as 

follows: 

16.301–2 Application. 

(a) The contracting officer shall use 

cost-reimbursement contracts only 

when— 

(1) Circumstances do not allow the 

agency to define its requirements 

sufficiently to allow for a fixed-price 

type contract (see 7.105); or 

(2) Uncertainties involved in contract 

performance do not permit costs to be 

estimated with sufficient accuracy to 

use any type of fixed-price contract. 

(b) The contracting officer shall 

document the rationale for selecting the 

contract type in the written acquisition 

plan and ensure that the plan is 

approved and signed at least one level 

above the contracting officer (see 

7.103(j) and 7.105). If a written 

acquisition plan is not required, the 

contracting officer shall document the 

rationale in the contract file. See also 

16.103(d). 

■ 13. Amend section 16.301–3 by 

revising paragraph (a) to read as follows: 

16.301–3 Limitations. 

(a) A cost-reimbursement contract 

may be used only when— 

(1) The factors in 16.104 have been 

considered; 

(2) A written acquisition plan has 

been approved and signed at least one 

level above the contracting officer; 

(3) The contractor’s accounting 

system is adequate for determining costs 

applicable to the contract; and 

(4) Adequate Government resources 

are available to award and manage a 

contract other than firm-fixed-priced 

(see 7.104(e)) including— 

(i) Designation of at least one 

contracting officer’s representative 

(COR) qualified in accordance with 

1.602–2 has been made prior to award 

of the contract or order; and 

(ii) Appropriate Government 

surveillance during performance to 

provide reasonable assurance that 

efficient methods and effective cost 

controls are used. 

* * * * * 

PART 32—CONTRACT FINANCING 

32.1007 [Amended] 

■ 14. Amend section 32.1007 by 

removing from paragraph (a) ‘‘(see 

42.302(a)(12))’’ and adding ‘‘(see 

42.302(a)(13))’’ in its place. 

PART 42—CONTRACT 

ADMINISTRATION AND AUDIT 

SERVICES 

■ 15. Amend section 42.302 by— 

■ a. Removing from the introductory 

text of paragraph (a) the words 

‘‘paragraphs (a)(5), (a)(9), and (a)(11)’’ 

and adding the words ‘‘paragraphs (a)(5), 

(a)(9), (a)(11), and (a)(12)’’ in their place; 

■ b. Redesignating paragraphs (a)(12) 

through (a)(26) as paragraphs (a)(13) 

through (a)(27); and 

■ c. Adding a new paragraph (a)(12) to 

read as follows: 

42.302 Contract administration functions. 

(a) * * * 

(12) Determine the adequacy of the 

contractor’s accounting system. The 

contractor’s accounting system should 

be adequate during the entire period of 

contract performance. The adequacy of 

the contractor’s accounting system and 

its associated internal control system, as 

well as contractor compliance with the 

Cost Accounting Standards (CAS), affect 

the quality and validity of the contractor 

data upon which the Government must 

rely for its management oversight of the 

contractor and contract performance. 

* * * * * 

PART 50—EXTRAORDINARY 

CONTRACTURAL ACTIONS AND THE 

SAFETY ACT 

50.205–1 [Amended] 

■ 16. Amend section 50.205–1 by 

removing from the first sentence in 

paragraph (b) the words ‘‘(see FAR 

7.105(b)(19)(v))’’ and adding the words 

‘‘(see 7.105(b)(20)(v))’’ in their place. 

[FR Doc. 2011–5552 Filed 3–15–11; 8:45 am] 

BILLING CODE 6820–EP–P 


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