25614 Federal Register / Vol. 65, No. 85 / Tuesday, May 2, 2000 / Proposed Rules

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 32 and 52

[FAR Case 1999–016]

RIN 9000–AI74

Federal Acquisition Regulation;

Advance Payments for NonCommercial Items

AGENCIES: Department of Defense (DoD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Proposed rule.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council

(Councils) are proposing to amend the

Federal Acquisition Regulation (FAR) to

permit federally insured credit unions

to participate in the maintenance of

special accounts for advance payments.

DATES: Interested parties should submit

comments in writing on or before July

3, 2000, to be considered in the

formulation of a final rule.

ADDRESSES: Submit written comments

to: General Services Administration,

FAR Secretariat (MVRS), 1800 F Street,

NW, Room 4035, ATTN: Laurie Duarte,

Washington, DC 20405.

Submit electronic comments via the

Internet to:

farcase.1999–016@gsa.gov

Please submit comments only and cite

FAR case 1999–016 in all

correspondence related to this case.

FOR FURTHER INFORMATION CONTACT: The

FAR Secretariat, Room 4035, GS

Building, Washington, DC, 20405, at

(202) 501–4755 for information

pertaining to status or publication

schedules. For clarification of content,

contact Mr. Jeremy Olson, at (202) 501–

0692. Please cite FAR case 1999–016.

SUPPLEMENTARY INFORMATION:

A. Background

FAR 32.4, Advance Payments for

Non-Commercial Items, requires, unless

exempted by FAR 32.409–3(e) or (f), that

contractors deposit advance payments

in special accounts separate from their

general or other funds. FAR 32.411 and

other FAR text exclude credit unions

from participating in the maintenance of

these special accounts by requiring that

contractors establish these special

accounts only at banks that are members

of the Federal Reserve System (FRS) or

insured by the Federal Deposit

Insurance Corporation (FDIC). However,

many credit unions are federally

insured through the National Credit

Union Administration (NCUA).

Therefore, these credit unions are able

to provide the Government a measure of

security for Federal funds advanced to

contractors, as well as those banks that

are members of the FRS or insured by

FDIC.

The proposed rule amends FAR 32.4

and FAR 52.232–12 to change certain

terminology (e.g., change the word

‘‘bank’’ to financial institution’’) to

provide contractors an additional option

of depositing advance payments in

special accounts maintained by credit

unions insured by NCUA. This revision

will foster competition among financial

institutions who are in the business of

providing special accounts for advance

payment funds, without increasing the

risk to the Government.

This rule was not subject to Office of

Management and Budget 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 only applies to the very limited

number of contractors that receive

advance payments and deposit these

payments in special accounts. An Initial

Regulatory Flexibility Analysis has,

therefore, not been performed.

Comments are invited from small

businesses and other interested parties.

The Councils will consider comments

from small entities concerning the

affected FAR subparts 32 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., (FAR case 1999–016), 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 32 and

52:

Government procurement.

Dated: April 27, 2000.

Edward C. Loeb,

Director Federal Acquisition Policy Division.

Therefore, DoD, GSA, and NASA

propose that 48 CFR parts 32 and 52 be

amended as set forth below:

1. The authority citation for 48 CFR

parts 32 and 52 continues to read as

follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C.

chapter 137; and 42 U.S.C. 2473(c).

PART 32—CONTRACT FINANCING

2. Revise paragraph (a)(1) of section

32.407 to read as follows:

32.407 Interest.

(a) * * *

(1) The published prime rate of the

financial institution (depository) in

which the special account (see 32.409–

3) is established; or

* * * * *

32.408 [Amended]

3. Amend paragraph (b)(4) of section

32.408 by removing ‘‘bank’’ both times

it appears and adding ‘‘financial

institution’’ in its place.

4. Amend section 32.409–3 as follows:

a. In paragraph (a) remove ‘‘bank’’ and

add ‘‘special’’ in its place;

b. In paragraphs (b)(2), (c)(2), and (e)

remove ‘‘bank’’.

c. Revise paragraph (f)(1); and

d. In paragraph (g) remove ‘‘bank’’

both times it appears.

The revised text reads as follows:

32.409–3 Security, supervision, and

covenants.

* * * * *

(f) * * *

(1) The use under a costreimbursement contract of Federal

funds deposited in the contractor’s

account at a financial institution

(without the contractor acquiring title to

the funds); and

* * * * *

5. In section 32.410, revise the second

sentence in paragraph (a)(4) of the

‘‘Findings, Determination, and

Authorization for Advance Payments

Findings’’ to read as follows:

32.410 Findings, determination, and

authorization.

* * * * *

(a) * * *

(4) * * * The clause requires that all

payments will be deposited in a special

account at the contractor’s financial

institution and that the Government will

have a paramount lien on (i) the credit

balance in the special account, (ii) any

supplies contracted for, and (iii) any material

or other property acquired for performance of

the contract. * * *

* * * * *

Federal Register / Vol. 65, No. 85 / Tuesday, May 2, 2000 / Proposed Rules 25615

6. The section heading and text of

32.411 is revised to read as follows:

32.411 Agreement for special account at a

financial institution.

The contracting officer shall use

substantially the following form of

agreement for a special account for

advance payments:

AGREEMENT FOR SPECIAL ACCOUNT

This agreement is entered into this

llll day of llll, 20llll,

between the United States of America, (the

Government) represented by the Contracting

Officer executing this agreement, llll

[Insert the name of the Contractor], a

llll [Insert the name of the State of

incorporation] corporation (the Contractor),

and llll, a financial institution

operating under the laws of llll, located

at llll the financial institution.

RECITALS

(a) Under date of llll, 20llll, the

Government and the Contractor entered into

Contract No. llll, or a related

supplemental agreement, providing for

advance payments to the Contractor. A copy

of the advance payment terms was furnished

to the financial institution.

(b) The contract or supplemental

agreement requires that amounts advanced to

the Contractor be deposited separate from the

Contractor’s general or other funds, in a

Special Account at a member bank of the

Federal Reserve System, any ‘‘insured’’ bank

within the meaning of the Act creating the

Federal Deposit Insurance Corporation (12

U.S.C. 1811), or a credit union insured by the

National Credit Union Administration. The

parties agree to deposit the amounts with the

financial institution, which meets the

requirement.

(c) This Special Account is designated

‘‘llll [Insert the Contractor’s name],

llll [Insert the name of the Government

agency] Special Account.’’

COVENANTS

In consideration of the foregoing, and for

other good and valuable considerations, the

parties agree to the following conditions:

(a) The Government shall have a lien on

the credit balance in the account to secure

the repayment of all advance payments made

to the Contractor. The lien is paramount to

any lien or claim of the financial institution

regarding the account.

(b) The financial institution is bound by

the terms of the contract relating to the

deposit and withdrawal of funds in the

Special Account, but is not responsible for

the application of funds withdrawn from the

account. The financial institution shall act on

written directions from the Contracting

Officer, the administering office, or a duly

authorized representative of either. The

financial institution is not liable to any party

to this agreement for any action that complies

with the written directions. Any written

directions received by the financial

institution through the Contracting Officer on

llll [Insert the name of the agency]

stationery and purporting to be signed by, or

by the direction of llll or duly

authorized representative, shall be, as far as

the rights, duties, and liabilities of the

financial institution are concerned,

considered as being properly issued and filed

with the financial institution by the llll

[Insert the name of the agency].

(c) The Government, or its authorized

representatives, shall have access to the

books and records maintained by the

financial institution regarding the Special

Account at all reasonable times and for all

reasonable purposes, including (but not

limited to), the inspection or copying of the

books and records and any and all pertinent

memoranda, checks, correspondence, or

documents. The financial institution shall

preserve the books and records for a period

of 6 years after the closing of this Special

Account.

(d) In the event of the service of any writ

of attachment, levy of execution, or

commencement of garnishment proceedings

regarding the Special Account, the financial

institution will promptly notify llll

[Insert the name of the administering office].

(e) While this Special Account exists, the

financial institution shall inform the

Government each month of the financial

institutions published prime interest rate and

changes to the rate during the month. The

financial institution shall give this

information to the Contracting Officer on the

last business day of the month. [This

covenant will not be included in the Special

Account Agreements covering interest-free

advance payments.]

Each of the parties to this agreement has

executed the agreement on llll,

20llll.

lllllllllllllllllllll

[Signatures and Official Titles]

32.412 [Amended]

7. Amend paragraph (f) of section

32.412 by removing ‘‘bank’’.

PART 52—SOLICITATION PROVISIONS

AND CONTRACT CLAUSES

8. Amend section 52.232–12 as

follows:

a. Revise the date of the clause;

b. Revise paragraph (b);

c. Remove ‘‘bank’’ from paragraphs (c)

and (d);

d. Revise paragraph (f)(3);

e. Revise paragraph (g);

f. Remove ‘‘bank’’ from paragraphs

(h), (k)(1) introductory text, (k)(1)(iv),

(k)(2)(i), and (m)(1) each time it appears.

g. Revise paragraph (p)(11);

h. Amend Alternate II by revising the

date to read ‘‘(DATE)’’; and removing

‘‘bank’’ from paragraph (c);

i. Amend Alternate V by revising the

date to read ‘‘(DATE)’’; and removing

from the introductory paragraph

‘‘bank’’; and

j. Revise the heading of the clause in

Alternate V and paragraph (m)(11).

The revised text reads as follows:

52.232–12 Advance Payments.

* * * * *

ADVANCE PAYMENTS (DATE)

* * * * *

(b) Special account. Until (1) the

Contractor has liquidated all advance

payments made under the contract and

related interest charges and (2) the

administering office has approved in writing

the release of any funds due and payable to

the Contractor, all advance payments and

other payments under this contract shall be

made by check payable to the Contractor

marked for deposit only in the Contractor’s

special account with the llll [insert the

name of the financial institution]. None of

the funds in the special account shall be

mingled with other funds of the Contractor.

Withdrawals from the special account may be

made only by check of the Contractor

countersigned by the Contracting Officer or a

Government countersigning agent designated

in writing by the Contracting Officer.

* * * * *

(f) * * *

(3) If interest is required under the

contract, the Contracting Officer shall

determine a daily interest rate based on the

higher of (i) the published prime rate of the

financial institution (depository) in which

the special account is established or (ii) the

rate established by the Secretary of the

Treasury under Pub. L. 92–41 (50 U.S.C.

App. 1215(b)(2)). The Contracting Officer

shall revise the daily interest rate during the

contract period in keeping with any changes

in the cited interest rates.

* * * * *

(g) Financial institution agreement. Before

an advance payment is made under this

contract, the Contractor shall transmit to the

administering office, in the form prescribed

by the administering office, an agreement in

triplicate from the financial institution in

which the special account is established,

clearly setting forth the special character of

the account and the responsibilities of the

financial institution under the account. The

Contractor shall select a financial institution

that is a member bank of the Federal Reserve

System, an ‘‘insured’’ bank within the

meaning of the Federal Deposit Insurance

Corporation Act (12 U.S.C. 1811), or is a

credit union insured by the National Credit

Union Administration.

* * * * *

(p) * * *

(11) Deposit any of its fund except in a

bank or trust company insured by the Federal

Deposit Insurance Corporation or a credit

union insured by the National Credit Union

Administration;

* * * * *

ADVANCE PAYMENTS WITHOUT SPECIAL

ACCOUNT (DATE)

* * * * *

(m) * * *

(11) Deposit any of its funds except in a

bank or trust company insured by the Federal

Deposit Insurance Corporation or a credit

union insured by the National Credit Union

Administration;

* * * * *

[FR Doc. 00–10906 Filed 5–1–00; 8:45 am]

BILLING CODE 6820–EP–U