Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 12925 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

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

[FAC 2005–56; FAR Case 2008–030; Item 

II; 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: Final rule. 

SUMMARY: DoD, GSA, and NASA have 

adopted as final, with changes, an 

interim rule amending the Federal 

Acquisition Regulation (FAR) to 

implement a section of the Duncan 

Hunter National Defense Authorization 

Act for Fiscal Year 2009 that addresses 

the use and management of costreimbursement contracts. 

DATES: Effective Date: April 2, 2012 

FOR FURTHER INFORMATION CONTACT: Mr. 

William Clark, Procurement Analyst, at 

202–219–1813, for clarification of 

content. For information pertaining to 

status or publication schedules, contact 

the Regulatory Secretariat at 202–501– 

4755. Please cite FAC 2005–56, FAR 

Case 2008–030. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD, GSA, and NASA published an 

interim rule in the Federal Register at 

76 FR 14543 on March 16, 2011, to 

implement section 864 of the Duncan 

Hunter National Defense Authorization 

Act for Fiscal Year 2009 (NDAA) (Pub. 

L. 110–417) enacted on 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 of 

the law requires amending the FAR to 

address the use and management of 

cost-reimbursement contracts in the 

following three areas: 

1. Circumstances when costreimbursement contracts are 

appropriate. 

2. Acquisition plan findings to 

support the selection of a costreimbursement contract. 

3. Acquisition resources necessary to 

award and manage a costreimbursement contract. 

Six respondents submitted comments 

in response to the interim rule. 

II. Discussion and Analysis 

The Civilian Agency Acquisition 

Council and the Defense Acquisition 

Regulations Council (the Councils) 

reviewed the public comments in the 

development of the final rule. A 

discussion of the comments and the 

changes made to the rule as a result of 

those comments are provided as 

follows: 

Comment: One respondent expressed 

a preference for continued reliance on 

OMB Circular A–133 Audits of States, 

Local Governments and Non-Profit 

Organizations to determine and monitor 

the adequacy of an educational 

institution or nonprofit organization’s 

accounting system during the 

performance of cost-type contracts. 

Response: The rule does not prevent 

reliance on OMB Circular A–133 to 

determine and monitor the adequacy of 

an educational institution or nonprofit 

organization’s accounting system during 

the performance of cost-type contracts. 

Comment: A number of respondents 

asked for clarification of whether the 

appointment of a contracting officer’s 

representative (COR) is now mandatory 

for other than firm-fixed-price contracts. 

Response: A COR is required on all 

contracts and orders other than those 

that are firm-fixed-price, and for firmfixed-price contracts, as appropriate. 

The Government applies this 

requirement to all contract types except 

firm-fixed-price contracts. 

Comment: One respondent referenced 

FAR 16.103(d)(1) stating ‘‘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.’’ The respondent 

recommended clarifying the 

circumstances when a formal 

acquisition plan would not be required. 

Response: There are circumstances, 

such as low dollar thresholds or noncomplex contracts, which are set forth 

in agency procedures, when a formal 

acquisition plan is not required. 

However, if a written acquisition plan is 

not required, the contract type selection 

must still be documented in the contract 

file. 

Comment: One respondent expressed 

support for the interim rule and stated 

an opinion that cost-plus-incentive-fee 

is the best contract type for the 

Government and U.S. taxpayer, 

particularly when in a sole-source 

environment. 

Response: Contracting officers are 

required to determine the appropriate 

contract type that is in the best interests 

of the Government. 

Comment: One respondent 

recommended that the final rule be 

written so as to exempt research and 

development (R&D) contracts from the 

requirements. The respondent 

questioned the necessity of the 

documentation requirements set forth in 

this rule for R&D contracts. Further, the 

respondent questioned the necessity of 

assigning CORs to R&D contracts, since 

contracting officers generally retain 

such duties. 

Response: Section 864 does not 

provide for an exception for R&D 

contracts under this rule. Each contract 

file shall include documentation to 

show why the particular contract type 

was selected, in order to ensure the 

appropriate contract type is utilized. 

Specifically for high risk contracts such 

as R&D contracts it is necessary to 

discuss the Government’s additional 

risks and the burden to manage the 

contract type selected. Contracting 

officers are not precluded under this 

rule from retaining COR duties. 

Comment: One respondent 

recommended that the Councils reset 

the effective date of the interim rule to 

permit training and designation of CORs 

and revision of internal guidance and 

templates. 

Response: The statute does not 

provide for a grace period to permit 

training and designation of CORs and 

revision of internal guidance and 

templates. 

Comment: One respondent 

commented that the interim rule 

interferes with the contracting officer’s 

discretion in selecting the appropriate 

contract type, and imposes a 

documentation burden that may not be 

effective in actually reducing the risk to 

the Government. 

Response: The rule does not interfere 

with the contracting officer’s discretion 

to select the appropriate contract type. 

It merely clarifies when costreimbursement contracts are appropriate 

and requires the contracting officer to 

document the rationale for the decision. 

Comment: One respondent questioned 

the applicability of the rule to other 

than firm-fixed price contracts, and 

specifically for supply type contracts. 

The respondent questioned whether the 

term ‘‘other than firm-fixed price 

contracts’’ means only costreimbursement, time-and-material, and 

labor-hour contracts. 

Response: The term ‘‘other than firmfixed price contracts’’ means all contract 

types other than firm-fixed price 

contracts, including supply type 

contracts. 

mstockstill on DSK4VPTVN1PROD with RULES2

12926 Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 

Comment: One respondent 

recommended the contracting officer be 

required to make a written 

determination in order to retain and 

execute the COR duties. Further the 

respondent recommended delaying the 

designation of the COR until the 

contractor or potential contractor is 

identified and the terms and conditions 

of the contract are known. 

Response: Contracting officers are not 

required to make formal written 

determinations in order to retain their 

existing duties and responsibilities. 

However, when the appointment of 

CORs is necessary, in order to ensure 

adequate resources are available to 

monitor and manage other than firmfixed price contracts, CORs must be 

nominated as early as practicable. It 

would not be in the Government’s best 

interest to delay such appointments. 

III. Changes in the Final Rule 

The following changes were made in 

the final rule: 

(1) FAR 1.602–2(d) was revised to 

clarify that COR duties may be retained 

by contracting officers; the language has 

been revised and moved to the first 

sentence. 

(2) FAR 1.602–2(d)(1), (3), and (6) 

were modified to make administrative 

revisions. 

(3) At FAR 1.602–2(d)(2), the word 

‘‘current’’ has been added and the words 

‘‘dated November 26, 2007’’ have been 

removed. Additionally, the phrase ‘‘or 

for DoD, DoD Regulations as applicable’’ 

has been replaced by the phrase ‘‘or for 

DoD, in accordance with the current 

applicable DoD policy guidance.’’ 

(4) With regard to nomination of a 

COR, FAR 7.104(e) was modified to 

delete ‘‘and designated and authorized 

by the contracting officer’’ because it is 

redundant to language in the following 

sentence. 

(5) FAR 16.103(d)(1) was revised to 

make an administrative change. The 

phrase ‘‘in the contract file’’ was moved 

from the end of the sentence to the 

middle of the sentence for clarity. The 

words ‘‘by agency procedures’’ were 

also added for clarity. 

(6) Because the need to document the 

contract file with regard to selection of 

contract type is already adequately 

addressed in FAR 16.103(d)(1), FAR 

16.301–2(b) was revised to remove the 

next to last sentence, ‘‘If a written 

acquisition plan is not required, the 

contracting officer shall document the 

rationale in the contract file.’’ 

(7) FAR 16.301–3(a)(4) has been 

modified to add at the beginning ‘‘Prior 

to award of the contract or order,’’ with 

regard to the requirement for availability 

of adequate Government resources to 

award and manage a contract other than 

firm-fixed price. FAR 16.301–3(a)(4) is 

further modified to delete the previous 

(a)(4)(i) (designation of COR is 

addressed elsewhere) and make the old 

(a)(4)(ii) the second sentence of (a)(4). 

The previous (a)(4)(ii) language has been 

revised to read, ‘‘This includes 

appropriate Government surveillance 

during performance in accordance with 

1.602–2, to provide reasonable 

assurance that efficient methods and 

effective cost controls are used.’’ 

IV. Executive Orders 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. 

V. Regulatory Flexibility Act 

The Department of Defense, the 

General Services Administration, and 

the National Aeronautics and Space 

Administration certify that this final 

rule will not 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, a Final 

Regulatory Flexibility Analysis has not 

been performed. 

VI. Paperwork Reduction Act 

The final 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 1, 2, 7, 

16, 32, 42, and 50 

Government procurement. 

Dated: February 21, 2012. 

Laura Auletta, 

Director, Office of Governmentwide 

Acquisition Policy, Office of Acquisition 

Policy, Office of Governmentwide Policy. 

Interim Rule Adopted as Final With 

Changes 

Accordingly, the interim rule 

amending 48 CFR parts 1, 2, 7, 16, 32, 

42, and 50 which was published in the 

Federal Register at 76 FR 14543 on 

March 16, 2011, is adopted as final with 

the following changes: 

■ 1. The authority citation for 48 CFR 

parts 1, 7, and 16 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— 

■ a. Revising the introductory text of 

paragraph (d), and paragraphs (d)(1), 

(d)(2), and (d)(3); and 

■ b. Removing from paragraph (d)(6) 

‘‘Must’’ and adding ‘‘Shall’’ in its place. 

The revised text reads as follows: 

1.602–2 Responsibilities. 

* * * * * 

(d) Unless the contracting officer 

retains and executes the contracting 

officer’s representative (COR) duties, in 

accordance with agency procedures, 

designate and authorize, in writing, a 

COR on all contracts and orders other 

than those that are firm-fixed price, and 

for firm-fixed-price contracts and orders 

as appropriate. See 7.104(e). A COR— 

(1) Shall be a Government employee, 

unless otherwise authorized in agency 

regulations; 

(2) Shall be certified and maintain 

certification in accordance with the 

current Office of Management and 

Budget memorandum on the Federal 

Acquisition Certification for Contracting 

Officer Representatives (FAC-COR) 

guidance, or for DoD, in accordance 

with the current applicable DoD policy 

guidance; 

(3) Shall be qualified by training and 

experience commensurate with the 

responsibilities to be delegated in 

accordance with agency procedures; 

* * * * * 

PART 7—ACQUISITION PLANNING 

7.104 [Amended] 

■ 3. Amend section 7.104 by removing 

from paragraph (e) ‘‘, and designated 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 12927 

and authorized by the contracting 

officer,’’. 

PART 16—TYPES OF CONTRACTS 

■ 4. Amend section 16.103 by revising 

the second sentence of paragraph (d)(1) 

introductory text to read as follows: 

16.103 Negotiating contract type. 

* * * * * 

(d) * * * 

(1) * * * This shall be documented in 

the acquisition plan, or in the contract 

file if a written acquisition plan is not 

required by agency procedures. 

* * * * * 

16.301–2 [Amended] 

■ 5. Amend section 16.301–2 by 

removing the second sentence from 

paragraph (b). 

■ 6. Amend section 16.301–3 by— 

■ a. Removing from paragraph (a)(3) 

‘‘contract;’’ and adding ‘‘contract or 

order;’’ in its place; and 

■ b. Revising paragraph (a)(4). 

The revised text reads as follows: 

16.301–3 Limitations. 

(a) * * * 

(4) Prior to award of the contract or 

order, adequate Government resources 

are available to award and manage a 

contract other that firm-fixed-priced (see 

7.104(e)). This includes appropriate 

Government surveillance during 

performance in accordance with 

1.602–2, to provide reasonable 

assurance that efficient methods and 

effective cost controls are used. 

* * * * * 

[FR Doc. 2012–4481 Filed 3–1–12; 8:45 am] 

BILLING CODE 6820–EP–P 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Parts 5, 8, 16, 18, and 38 

[FAC 2005–56; FAR Case 2007–012; Item 

III; Docket 2011–0081, Sequence 1] 

RIN 9000–AL93 

Federal Acquisition Regulation: 

Requirements for Acquisitions 

Pursuant to Multiple-Award Contracts 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Final rule. 

SUMMARY: DoD, GSA, and NASA have 

adopted as final, with changes, an 

interim rule amending the Federal 

Acquisition Regulation (FAR) to 

implement a section of the Duncan 

Hunter National Defense Authorization 

Act for Fiscal Year 2009 to enhance 

competition in the purchase of supplies 

and services by all executive agencies 

under multiple-award contracts. 

DATES: Effective Date: April 2, 2012. 

FOR FURTHER INFORMATION CONTACT: Mr. 

William Clark, Procurement Analyst, at 

202–219–1813 for clarification of 

content. For information pertaining to 

status or publication schedules, contact 

the Regulatory Secretariat at 202–501– 

4755. Please cite FAC 2005–56, FAR 

Case 2007–012. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD, GSA, and NASA published an 

interim rule in the Federal Register at 

76 FR 14548 on March 16, 2011, to 

implement section 863 of the Duncan 

Hunter National Defense Authorization 

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

417), enacted on October 14, 2008. 

Section 863 mandated the development 

and publication of regulations in the 

FAR to enhance competition for the 

award of orders placed under multipleaward contracts. Section 863 specified 

enhancements that include— 

• Strengthening competition rules for 

placing orders under the Federal Supply 

Schedules (FSS) program and other 

multiple-award contracts to ensure both 

the provision of fair notice to contract 

holders and the opportunity for contract 

holders to respond (similar to the 

procedures implemented for section 803 

of the National Defense Authorization 

Act for Fiscal Year 2002 (Pub. L. 107– 

107)); and 

• Providing notice in FedBizOpps of 

certain orders placed under multipleaward contracts, including FSS. 

For each individual purchase of 

supplies or services in excess of the 

simplified acquisition threshold (SAT) 

that is made under a multiple-award 

contract, section 863 requires the 

provision of fair notice of intent to make 

a purchase (including a description of 

the work to be performed and the basis 

on which the selection will be made) to 

all contractors offering such supplies or 

services under the multiple-award 

contract. In addition, the statute 

requires that all contractors responding 

to the notice be afforded a fair 

opportunity to make an offer and have 

that offer fairly considered by the 

purchasing official. A notice may be 

provided to fewer than all contractors 

offering such supplies or services under 

a multiple-award contract if the notice 

is provided to as many contractors as 

practicable. When notice is provided to 

fewer than all the contractors, a 

purchase cannot be made unless— 

• Offers were received from at least 

three qualified contractors; or 

• A contracting officer determines in 

writing that no additional qualified 

contractors were able to be identified 

despite reasonable efforts to do so. 

These requirements may be waived on 

the basis of a justification, including a 

written determination identifying the 

statutory basis for an exception to fair 

opportunity, that is prepared and 

approved at the levels specified in the 

FAR. 

In considering the regulatory changes 

to strengthen the use of competition in 

task and delivery-order contracts, DoD, 

GSA, and NASA made changes 

consistent with the general competition 

principles addressed in the President’s 

March 4, 2009, Memorandum on 

Government Contracting (available at 

http://www.whitehouse.gov/ 

the_press_office/Memorandum-for-theHeads-of-Executive-Departments-andAgencies-Subject-Government), while 

still preserving the efficiencies of these 

contract vehicles. For this reason, the 

rule addressed several issues that were 

not expressly addressed in section 863, 

such as competition for the 

establishment and placement of orders 

under FSS blanket purchase agreements 

(BPAs). 

The FAR changes are applicable to 

task and delivery orders placed against 

multiple-award contracts including FSS 

and BPAs awarded under FSS pursuant 

to FAR subpart 8.4, and indefinitedelivery/indefinite-quantity contracts 

awarded pursuant to subpart 16.5. They 

do not apply to BPAs awarded pursuant 

to part 13. 

Seven respondents submitted 

comments on the interim rule. 

II. Discussion and Analysis 

The Civilian Agency Acquisition 

Council and the Defense Acquisition 

Regulations Council (the Councils) 

reviewed the comments in the 

development of the final rule. 

Respondents submitted comments 

covering the following nine categories: 

(1) Conformance with the Small 

Business Jobs Act; (2) The $103 million 

threshold reference; (3) Posting 

requirements; (4) Eliminate distinctions 

between single-award and multipleaward BPAs; (5) Competition 

requirements for establishing BPAs and 

allowing flexibility in establishing BPA 

ordering procedures; (6) BPA 

requirements and health-care programs; 

(7) Competition above the SAT is a 

mstockstill on DSK4VPTVN1PROD with RULES2