Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations 12695

37.501 Definition.

Best practices, as used in this subpart,

means techniques that agencies may use

to help detect problems in the

acquisition, management, and

administration of service contracts. Best

practices are practical techniques gained

from experience that agencies may use

to improve the procurement process.

37.502 Exclusions.

(a) This subpart does not apply to

services that are

(1) Obtained through personnel

appointments and advisory committees;

(2) Obtained through personal service

contracts authorized by statute;

(3) For construction as defined in

36.102; or

(4) Obtained through interagency

agreements where the work is being

performed by in-house Federal

employees.

(b) Services obtained under contracts

below the simplified acquisition

threshold and services incidental to

supply contracts also are excluded from

the requirements of this subpart.

However, good management practices

and contract administration techniques

should be used regardless of the

contracting method.

37.503 Agency-head responsibilities.

The agency head or designee should

ensure that—

(a) Requirements for services are

clearly defined and appropriate

performance standards are developed so

that the agency’s requirements can be

understood by potential offerors and

that performance in accordance with

contract terms and conditions will meet

the agency’s requirements;

(b) Service contracts are awarded and

administered in a manner that will

provide the customer its supplies and

services within budget and in a timely

manner;

(c) Specific procedures are in place

before contracting for services to ensure

compliance with OFPP Policy Letters

92–1, Inherently Governmental

Functions, 91–2, Service Contracting,

and 89–1, Conflicts of Interest Policies

Applicable to Consultants; and

(d) Strategies are developed and

necessary staff training is initiated to

ensure effective implementation of the

policies in 37.102.

37.504 Contracting officials’

responsibilities.

Contracting officials should ensure

that ‘‘best practices’’ techniques are

used when contracting for services and

in contract management and

administration (see OFPP Policy Letter

93–1).

[FR Doc. 97–6312 Filed 3–14–97; 8:45 am]

BILLING CODE 6820–EP–P

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 16 and 52

[FAC 90–46; FAR Case 93–603; Item IV]

RIN 9000–AH07

Federal Acquisition Regulation;

Performance Incentives for Fixed-Price

Contracts

AGENCIES: Department of Defense (DOD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Final rule.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council have

agreed on a final rule amending the

Federal Acquisition Regulation (FAR) to

permit the use of award-fee provisions

as performance incentives in fixed-price

contracts. This regulatory action was not

subject to Office of Management and

Budget review under Executive Order

12866, dated September 30, 1993. This

is not a major rule under 5 U.S.C. 804.

DATES: Effective May 16, 1997.

FOR FURTHER INFORMATION CONTACT: Mr.

Ralph DeStefano at (202) 501–1758 in

reference to this FAR case. For general

information, contact the FAR

Secretariat, Room 4037, GS Building,

Washington, DC 20405 (202) 501–4755.

Please cite FAC 90–46, FAR case 93–

603.

SUPPLEMENTARY INFORMATION:

A. Background

The FAR currently provides for the

use of performance incentives when

used with cost incentives. This FAR

revision allows the use of performance

incentives alone. This revision will

allow agencies to recognize and reward

contractors who exceed minimum

standards in terms of quality,

timeliness, technical ingenuity, and

effective management.

A proposed rule was published in the

Federal Register at 61 FR 31798, June

20, 1996. One comment was received

from one respondent. The comment was

considered in developing the final rule.

B. 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 the

rule merely authorizes the use of

performance incentives for contractors

under fixed-price contracts. The rule

authorizes the Government to reward a

contractor for exceeding minimum

performance standards.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the changes to the

FAR do not impose recordkeeping or

information collection requirements, or

collections of information from offerors,

contractors, or members of the public

which 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 16 and

52

Government procurement.

Dated: March 7, 1997.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, 48 CFR Parts 16 and 52 are

amended as set forth below:

1. The authority citation for 48 CFR

Parts 16 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 16—TYPES OF CONTRACTS

16.204 [Amended]

2. Section 16.204 is amended in the

last sentence by removing the citation

‘‘16.405’’ and inserting ‘‘16.406’’.

16.304 [Amended]

3. Section 16.304 is amended by

removing ‘‘16.404–1’’ and inserting

‘‘16.405–1’’.

16.305 [Amended]

4. Section 16.305 is amended by

removing ‘‘16.404–2’’ and inserting

‘‘16.405–2’’ each time it appears.

5. Section 16.401 is amended in

paragraph (c) by revising the first

sentence; and adding paragraph (d) to

read as follows:

16.401 General.

* * * * *

(c) The two basic categories of

incentive contracts are fixed-price

incentive contracts (see 16.403 and
12696 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations

16.404) and cost-reimbursement

incentive contracts (see 16.405). * * *

(d) Award-fee contracts are a type of

incentive contract.

16.402–1 [Amended]

6. Section 16.402–1 is amended in

paragraph (b) by removing ‘‘16.404–2’’

and inserting ‘‘16.405–2’’.

16.404 and 16.405 [Redesignated as

16.405 and 16.406]

7. Sections 16.404 and 16.405 are

redesignated as 16.405 and 16.406,

respectively.

8. A new section 16.404 is added to

read as follows:

16.404 Fixed-price contracts with award

fees.

(a) Award-fee provisions may be used

in fixed-price contracts when the

Government wishes to motivate a

contractor and other incentives cannot

be used because contractor performance

cannot be measured objectively. Such

contracts shall—

(1) Establish a fixed price (including

normal profit) for the effort. This price

will be paid for satisfactory contract

performance. Award fee earned (if any)

will be paid in addition to that fixed

price; and

(2) Provide for periodic evaluation of

the contractor’s performance against an

award-fee plan.

(b) A solicitation contemplating

award of a fixed-price contract with

award fee shall not be issued unless the

following conditions exist:

(1) The administrative costs of

conducting award-fee evaluations are

not expected to exceed the expected

benefits;

(2) Procedures have been established

for conducting the award-fee evaluation;

(3) The award-fee board has been

established; and

(4) An individual above the level of

the contracting officer approved the

fixed-price-award-fee incentive.

16.404–1 and 16.404–2 [Redesignated as

16.405–1 and 16.405–2].

9. Sections 16.404–1 and 16.404–2 are

redesignated as 16.405–1 and 16.405–2,

respectively.

10.–11. The newly designated section

16.406 is amended by revising the

introductory text of paragraph (e) to

read as follows:

16.406 Contract clauses.

* * * * *

(e) The contracting officer shall insert

an appropriate award-fee clause in

solicitations and contracts when an

award-fee contract is contemplated,

provided that the clause—

* * * * *

PART 52—SOLICITATION PROVISIONS

AND CONTRACT CLAUSES

12. Section 52.216–16 is amended by

revising the introductory paragraph, and

Alternate I introductory text to read as

follows:

52.216–16 Incentive Price Revision—Firm

Target.

As prescribed in 16.406(a), insert the

following clause:

* * * * *

Alternate I (APR 1984). As prescribed

in 16.406(a), add the following

paragraph (o) to the basic clause:

* * * * *

13. Section 52.216–17 is amended by

revising the introductory paragraph, and

Alternate I introductory text to read as

follows:

52.216–17 Incentive Price Revision

Successive Targets.

As prescribed in 16.406(b), insert the

following clause:

* * * * *

Alternate I (APR 1984). As prescribed

in 16.406(b), add the following

paragraph (q) to the basic clause:

* * * * *

[FR Doc. 97–6313 Filed 3–14–97; 8:45 am]

BILLING CODE 6820–EP–P

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 23 and 52

[FAC 90–46; FAR Case 92–054B; Item V]

RIN 9000–AH39

Federal Acquisition Regulation;

Federal Compliance With Right-ToKnow Laws and Pollution Prevention

Requirements

AGENCIES: Department of Defense (DOD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Interim rule with request for

comments.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council have

agreed on an interim rule amending the

Federal Acquisition Regulation (FAR) to

implement Executive Order 12856 of

August 3, 1993, ‘‘Federal Compliance

with Right-To-Know Laws and Pollution

Prevention Requirements.’’ This

Executive order requires that Federal

facilities comply with the planning and

reporting requirements of the Pollution

Prevention Act of 1990 (42 U.S.C.

13101–13109), and the Emergency

Planning and Community Right-toKnow Act of 1986 (42 U.S.C. 11001–

11050). This regulatory action was not

subject to Office of Management and

Budget review under Executive Order

12866, dated September 30, 1993, and is

not a major rule under 5 U.S.C. 804.

DATES: Effective Date: March 17, 1997.

Comment Date: Comments should be

submitted to the FAR Secretariat at the

address shown below on or before May

16, 1997.to be considered in the

formulation of a final rule.

ADDRESSES: Interested parties should

submit written comments to: General

Services Administration, FAR

Secretariat (MVR), 18th & F Streets,

NW., Room 4035, Attn: Ms. Beverly

Fayson, Washington, DC 20405.

E-Mail comments submitted over the

Internet should be addressed to:

92–054B@www.ARNET.gov

Please cite FAC 90–46, FAR case 92–

054B in all correspondence related to

this case.

FOR FURTHER INFORMATION CONTACT: Mr.

Paul Linfield at (202) 501–1757 in

reference to this FAR case. For general

information, contact the FAR

Secretariat, Room 4035, GS Building,

Washington, DC 20405 (202) 501–4755.

Please cite FAC 90–46, FAR case 92–

054B.

SUPPLEMENTARY INFORMATION:

A. Background

This interim rule implements

Executive Order 12856 of August 3,

1993, ‘‘Federal Compliance with RightTo-Know Laws and Pollution

Prevention Requirements.’’ The

Executive Order requires that Federal

facilities comply with the planning and

reporting requirements of the Pollution

Prevention Act of 1990 (PPA) and the

Emergency Planning and Community

Right-to-Know Act of 1986 (EPCRA).

The amendments at FAR Parts 23 and

52 require that contracts to be

performed on a Federal facility provide

for the contractor to supply to the

Federal agency all information the

Federal agency deems necessary to

comply with the reporting requirements

of the PPA and EPCRA.

B. Regulatory Flexibility Act

This interim rule 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.,

because this rule will apply to any

contractor that uses certain hazardous or