2636 Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules and Regulations

and contract administration personnel

primarily base their evaluation of

forecasted costs on an analysis of

historical costs and trends. In contrast,

should-cost reviews do not assume that

a contractor’s historical costs reflect

efficient and economical operation.

Instead, these reviews evaluate the

economy and efficiency of the

contractor’s existing work force,

methods, materials, facilities, operating

systems, and management. These

reviews are accomplished by a multifunctional team of Government

contracting, contract administration,

pricing, audit, and engineering

representatives. The objective of shouldcost reviews is to promote both short

and long-range improvements in the

contractor’s economy and efficiency in

order to reduce the cost of performance

of Government contracts. In addition, by

providing rationale for any

recommendations and quantifying their

impact on cost, the Government will be

better able to develop realistic objectives

for negotiation.

(b) There are two types of should-cost

reviews—program should-cost review

(see 15.810–2) and overhead should-cost

review (see 15.810–3). These shouldcost reviews may be performed together

or independently. The scope of a

should-cost review can range from a

large-scale review examining the

contractor’s entire operation (including

plant-wide overhead and selected major

subcontractors) to a small-scale tailored

review examining specific portions of a

contractor’s operation.

15.810–2 Program should-cost review.

(a) Program should-cost review is

used to evaluate significant elements of

direct costs, such as material and labor,

and associated indirect costs, usually

incurred in the production of major

systems. When a program should-cost

review is conducted relative to a

contractor proposal, a separate audit

report on the proposal is required.

(b) A program should-cost review

should be considered, particularly in

the case of a major system acquisition

(see part 34), when—

(1) Some initial production has

already taken place;

(2) The contract will be awarded on

a sole-source basis;

(3) There are future year production

requirements for substantial quantities

of like items;

(4) The items being acquired have a

history of increasing costs;

(5) The work is sufficiently defined to

permit an effective analysis and major

changes are unlikely;

(6) Sufficient time is available to plan

and conduct the should-cost review

adequately; and

(7) Personnel with the required skills

are available or can be assigned for the

duration of the should-cost review.

(c) The contracting officer should

decide which elements of the

contractor’s operation have the greatest

potential for cost savings and assign the

available personnel resources

accordingly. While the particular

elements to be analyzed are a function

of the contract work task, elements such

as manufacturing, pricing and

accounting, management and

organization, and subcontract and

vendor management are normally

reviewed in a should-cost review.

(d) In acquisitions for which a

program should-cost review is

conducted, a separate program shouldcost review team report, prepared in

accordance with agency procedures, is

required. Field pricing reports are

required only to the extent that they

contribute to the combined team

position. The contracting officer shall

consider the findings and

recommendations contained in the

program should-cost review team report

when negotiating the contract price.

After completing the negotiation, the

contracting officer shall provide the

administrative contracting officer (ACO)

a report of any identified uneconomical

or inefficient practices, together with a

report of correction or disposition

agreements reached with the contractor.

The contracting officer shall establish a

follow-up plan to monitor the correction

of the uneconomical or inefficient

practices.

(e) When a program should-cost

review is planned, the contracting

officer should state this fact in the

acquisition plan (see subpart 7.1) and in

the solicitation.

15.810–3 Overhead should-cost review.

(a) An overhead should-cost review is

used to evaluate indirect costs, such as

fringe benefits, shipping and receiving,

facilities and equipment, depreciation,

plant maintenance and security, taxes,

and general and administrative

activities. It is normally used to evaluate

and negotiate a forward pricing rate

agreement (FPRA) with the contractor.

When an overhead should-cost review is

conducted, a separate audit report is

required.

(b) The following factors should be

considered when selecting contractor

sites for overhead should-cost reviews:

(1) Dollar amount of Government

business.

(2) Level of Government participation.

(3) Level of noncompetitive

Government contracts.

(4) Volume of proposal activity.

(5) Major system or program.

(6) Mergers, acquisitions, takeovers.

(7) Other conditions, e.g., changes in

accounting systems, management, or

business activity.

(c) The objective of the overhead

should-cost review is to evaluate

significant indirect cost elements indepth, identify inefficient and

uneconomical practices, and

recommend corrective action. If it is

conducted in conjunction with a

program should-cost review, a separate

overhead should-cost review report is

not required. However, the findings and

recommendations of the overhead

should-cost team, or any separate

overhead should-cost review report,

shall be provided to the ACO. The ACO

should use this information to form the

basis for the Government position in

negotiating a FPRA with the contractor.

The ACO shall establish a follow-up

plan to monitor the correction of the

uneconomical or inefficient practices.

[FR Doc. 96–1022 Filed 1–25–96; 8:45 am]

BILLING CODE 6820–EP–M

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Part 19

[FAC 90–37; FAR Case 92–606; Item IX]

RIN 9000–AG78

Federal Acquisition Regulation; SBA

Responsibility, Certificate of

Competency Requests

AGENCY: 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 to amend the

Federal Acquisition Regulation (FAR) to

reflect approval authority of the Small

Business Administration (SBA) regional

offices to issue Certificate of

Competency (COC) Determinations as

provided in 13 CFR Part 125. This

regulatory action was not subject to

Office of Management and Budget

review under Executive Order 12866,

dated September 30, 1993.
Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules and Regulations 2637

EFFECTIVE DATE: March 26, 1996.

FOR FURTHER INFORMATION CONTACT:

Ms. Linda Klein at (202) 501–3775 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 90–37, FAR case 92–

606.

SUPPLEMENTARY INFORMATION:

A. Background

FAR 19.602–2(b)(3) currently requires

that all COC requests over $500,000 be

forwarded to the SBA Central Office for

a decision on issuance. The issuance of

COC’s by the SBA is governed by 13

CFR Part 125, which authorizes regional

SBA offices to issue COC’s within their

delegated authority. This rule merely

reflects existing internal SBA

procedures.

B. Regulatory Flexibility Act

This final rule does not constitute a

significant FAR revision within the

meaning of FAR 1.501 and Public Law

98–577, and publication for public

comments is not required. Therefore,

the Regulatory Flexibility Act does not

apply. However, comments from small

entities concerning the affected subpart

will be considered in accordance with

Section 610 of the Act. Such comments

must be submitted separately and cite

FAC 90–37, FAR case 92–606, in

correspondence.

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 OMB

under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 19

Government procurement.

Dated: January 11, 1996.

Edward C. Loeb,

Acting Director, Office of Federal Acquisition

Policy.

Therefore, 48 CFR Part 19 is amended

as set forth below:

PART 19—SMALL BUSINESS

PROGRAMS

1. The authority citation for 48 CFR

Part 19 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).

2. Section 19.602–2 is amended as

follows:

(a) The paragraph designation ‘‘(a)’’ is

removed;

(b) Paragraph (b) is removed;

(c) Paragraph (c) is redesignated as (d)

and revised; and

(d) Paragraphs (a)(1) through (a)(3) are

redesignated as (a), (b), and (c),

respectively.

19.602–2 Issuing or denying a certificate

of competency (COC).

* * * * *

(d) Notify the concern and the

contracting officer that the COC is

denied or is being issued.

[FR Doc. 96–1023 Filed 1–25–96; 8:45 am]

BILLING CODE 6820–EP–M

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 19 and 52

[FAC 90–37; FAR Case 93–308; Item X]

RIN 9000–AG70

Federal Acquisition Regulation; Mentor

Prote ́ge ́ Program

AGENCIES: Department of Defense (DOD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Interim rule.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council have

agreed to an interim rule to allow

mentor firms under the Department of

Defense Pilot Mentor-Prote ́ge ́ Program to

be granted credit toward subcontracting

goals under small business

subcontracting plans entered into with

any executive agency. The rule also will

permit mentor firms to award

subcontracts on a noncompetitive basis

to prote ́ge ́ firms under Department of

Defense or other contracts. This

regulatory action was not subject to

Office of Management and Budget

review under Executive Order 12866,

dated September 30, 1993.

DATES: Effective Date: January 26, 1996.

Comment Due Date: To be considered

in the formulation of a final rule,

comments should be submitted to the

address given below on or before March

26, 1996.

ADDRESSES: Comments should be

submitted to: General Services

Administration, FAR Secretariat, 18th &

F Streets NW., Room 4037, Washington,

DC 20405.

FOR FURTHER INFORMATION CONTACT:

Ms. Linda Klein at (202) 501–3775 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 37, FAR case 93–308.

SUPPLEMENTARY INFORMATION:

A. Background

This rule implements Section 814(c)

of Public Law 102–190, which amended

the Small Business Act at 15 U.S.C.

637(d)(11) to authorize certain costs

incurred by a mentor firm under the

Department of Defense Mentor-Prote ́ge ́

Program to be credited toward

subcontracting goals for awards to small

disadvantaged businesses. This rule also

further implements Section 831(f)(2) of

Public Law 101–510 which permits

mentor firms to award subcontracts on

a noncompetitive basis to its prote ́ge ́s

under Department of Defense or other

contracts.

B. Regulatory Flexibility Act

The interim rule is not expected to

have 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 revisions apply to mentor

firms under the DOD Pilot MentorProte ́ge ́ Program, and these firms

generally are not small entities. An

Initial Regulatory Flexibility Analysis

has, therefore, not been performed.

Comments are invited from small

businesses and other interested parties.

Comments from small entities

concerning the affected FAR parts will

also be considered in accordance with 5

U.S.C. 610. Such comments must be

submitted separately and cite 5 U.S.C.

601, et seq. (FAC 90–37, FAR case 93–

308) in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the rule does not

impose any reporting or recordkeeping

requirements which require the

approval of the Office of Management

and Budget under 44 U.S.C. 3501, et

seq.

D. Determination to Issue an Interim

Rule

A determination has been made under

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, pursuant

to 41 U.S.C. 418b, urgent and

compelling reasons exist to publish an

interim rule prior to affording the public

an opportunity to comment. However,

public comments received in response