[Federal Register Volume 63, Number 99 (Friday, May 22, 1998)]
[Rules and Regulations]
[Pages 28285-28286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13778]


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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 1816


Revision to the NASA FAR Supplement on Technical Performance 
Incentive Guidance.

AGENCY: National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: This is a final rule amending the NASA FARSupplement (NFS) to 
correct inconsistencies on technical performance incentive guidance.

EFFECTIVE DATE: May 22, 1998.

FOR FURTHER INFORMATION CONTACT: Tom O'Toole, NASA Office of 
Procurement, Contract Management Division (Code HK), (202) 358-0478.

SUPPLEMENTARY INFORMATION:

Background

    NFS section 1816.402-270, NASA Technical Performance Incentives, 
requires the use of positive and negative performance incentives in 
hardware contracts greater than $25M unless waived in writing by the 
Center Director. New section 1816.402, Application of Predetermined, 
Formula-Type Incentives, was added as a final rule in the March 17, 
1998 Federal Register (63 FR 12997-12998). This section provided 
guidance on the appropriate selection and use of positive and negative 
performance incentives, but did not change the mandatory requirement in 
1816.402-270 which appears to preempt those guidelines in certain 
circumstances. This incongruity is rectified by adding language to 
1816.402-270 stating that NASA has considered the guidelines in 
1816.402 and has determined that performance incentives are appropriate 
for, and must be used in, hardware contracts greater than $25M. 
Additional administrative revisions are made to indicate that this 
policy does not apply to commercial acquisitions under FAR Part 12 and 
that negative incentives are not required for contracts which already 
require total contractor liability for product performance.

Impact

    NASA certifies that this regulation will not have a significant 
economic impact on a substantial number of small business entities 
under the RegulatoryFlexibility Act (5 U.S.C. 601 et seq.). This final 
rule does not impose any reporting requirements or recordkeeping 
requirements subject to the Paperwork Reduction Act.

List of Subjects in 48 CFR Part 1816

    Government procurement.
Deidre A. Lee,
Associate Administrator for Procurement.
    Accordingly, 48 CFR Part 1816 is amended as follows:

PART 1816--TYPES OF CONTRACTS

    1. The authority citation for 48 CFR Part 1816 continues to read as 
follows:

    Authority: 42 U.S.C. 2473(c)(1).

    2. In section 1816.402-270, paragraphs (a), (b), and (c) are 
revised to read as follows:


1816.402-270  NASA technical performance incentives.

    (a) Pursuant to the guidelines in 1816.402, NASA has determined 
that a performance incentive shall be included in all contracts based 
on performance-oriented documents (see FAR 11.101(a)), except those 
awarded under the commercial item procedures of FAR part 12, where the 
primary deliverable(s) is (are) hardware with a total value (including 
options) greater than $25 million. Any exception to this requirement 
shall be approved in writing by the Center Director. Performance 
incentives may be included in hardware contracts valued under $25 
million acquired under procedures other than FAR Part 12 at the 
discretion of the procurement officer upon consideration of the 
guidelines in 1816.402. Performance incentives, which are objective and 
measure hardware performance after delivery and acceptance, are 
separate from other incentives, such as cost or delivery incentives.
    (b) When a performance incentive is used, it shall be structured to 
be both positive and negative based on hardware performance after 
delivery and acceptance, unless the contract type requires complete 
contractor liability for product performance (e.g., fixed price). In 
this latter case, a negative incentive is not required. In structuring 
the incentives, the contract shall establish a standard level of 
performance based on the salient hardware performance requirement. This 
standard performance level is normally the contract's minimum 
performance requirement. No incentive amount is earned at this standard 
performance level. Discrete units of measurement based on the same 
performance parameter shall be identified for performance above and, 
when a negative incentive is used, below the standard. Specific 
incentive amounts shall be associated with each performance level from 
maximum beneficial performance (maximum positive incentive) to, when a 
negative incentive is included, minimal beneficial performance or total 
failure (maximum negative incentive). The relationship between any 
given incentive, either positive and negative, and its associated unit 
of measurement should reflect the value to the Government of that level 
of hardware performance. The contractor should not be rewarded for 
above-standard performance levels that are of no benefit to the 
Government.
    (c) The final calculation of the performance incentive shall be 
done when hardware performance, as defined in the contract, ceases or 
when the maximum positive incentive is reached. When hardware 
performance ceases below the standard established in the contract and a 
negative incentive is included, the Government shall calculate the 
amount due and the contractor shall pay the Government that amount. 
Once hardware performance exceeds the standard, the contractor may 
request payment of the incentive amount associated with a given level 
of performance, provided that such payments shall not be more frequent 
than monthly. When hardware performance ceases above the standard level 
of performance, or when the maximum positive incentive is reached, the 
Government shall calculate the final performance incentive earned and

[[Page 28286]]

unpaid and promptly remit it to the contractor.
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[FR Doc. 98-13778 Filed 5-21-98; 8:45 am]
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