Source: http://farsite.hill.af.mil/reghtml/changes/fac/fac97_16.htm
Timestamp: 2019-03-20 01:43:18
Document Index: 690474815

Matched Legal Cases: ['art 19', 'art 19', 'art 19', 'art 19', 'art 36', 'art 19', 'art 19', 'art 19', 'art 19', 'arts 32', 'art 32', 'art 31', 'art 31', 'arts 1', 'arts 1', 'arts 1', 'arts 1']

[Federal Register: March 27, 2000 (Volume 65, Number 59)]
48 CFR Chapter 1 and Part 19 et al.
Federal Acquisition Circular 97-16 ; Introduction; Federal Acquisition Regulation; Small Business Competiveness Demonstration Program; Progress Payments and Related Financing Policies; Technical Amendments; Small Entity Compliance Guide; Interim and Final Rules
SUMMARY: This document summarizes the Federal Acquisition Regulation (FAR) rules issued by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council in this Federal Acquisition Circular FAC)97-16. The Councils drafted these FAR rules using plain language in accordance with the White House memorandum, Plain Language in Government Writing, dated June 1, 1998. The Councils wrote all new and revised text using plain language. A companion document, the Small
Entity Compliance Guide (SECG), follows this FAC. The FAC, including the SECG, is available via the Internet at http://www.arnet.gov/far.
Building, Washington, DC 20405, (202) 501-4755 for information pertaining to status or publication schedules. For clarification of content, contact the analyst whose name appears in the table below in relation to each FAR case or subject area. Please cite FAC 97-16 and specific FAR case number(s). Interested parties may also visit our website at http://www.arnet.gov/far.
Small Business Competitiveness Demonstration Program(Interim).
Progress Payments and)... Related Financing Policies.
1998-400 (98-400)
Federal Acquisition Circular 97 - 16 amends the FAR as specified below:
Item I--Small Business Competitiveness Demonstration Program (FAR Case 1999-012)
The interim rule--
--Advises the contracting officer to consider the 8(a) Program and HUBZone Program, in addition to small business set-asides, for acquisitions of $25,000 or less in one of the four designated industry groups that will not be set aside for emerging small business concerns.
--Adds FAR 19.1006, Exclusions, to specify acquisitions to which Subpart 19.10 does not apply. None of the Small Business Comp. Demo. policies and procedures apply to orders under the Federal Supply Schedule Program or to contracts awarded to educational and nonprofit institutions or governmental entities.
Item II--Progress Payments and Related Financing Policies (FAR Case 1998-400) (98-400)
--Emphasizes that performance-based payments are the preferred method of contract financing. Performance-based payments are contract financing payments made after achievement of predetermined goals, such as performance objectives or defined events. Contracting officers should consider performance-based payments and deem their use
impracticable before deciding to provide customary progress payments;
--Permits contracting officers to provide contract financing on contracts awarded to large businesses if the individual contract is $2 million or more. Previously, the threshold in the FAR for financing a contract with a large business was $1 million;
--Permits a large business to bill the Government for subcontract costs that the large business has incurred but not actually paid, if certain conditions are met. Previously, the FAR permitted only small business concerns to bill for subcontract costs that have been
incurred but not paid;
--Permits the contracting officer to use performance-based payments in contracts for research and development, and in contracts awarded through competitive negotiation procedures; and
--Is effective on March 27, 2000. However, it is mandatory only for solicitations issued on or after May 26, 2000. Contracting officers may, at their discretion, include the clauses and provisions in this rule in solicitations issued before that date.
Dated: March 20, 2000.Edward C. Loeb, Director, Federal Acquisition Policy Division. Federal Acquisition Circular Federal Acquisition Circular ( FAC ) 97 - 16 is issued under the authority of the Secretary of Defense, the Administrator of General Services, and the Administrator for the National Aeronautics and Space Administration.
All Federal Acquisition Regulation (FAR) changes and other directive material contained in FAC 97 - 16 are effective March 27, 2000. For Item II, the rule is mandatory for solicitations issued on or after May 26, 2000, but contracting officers may, at their discretion, include the clauses and provisions in solicitations issued before May 26, 2000. For Item I, the rule is applicable to solicitations issued on or after the rule's effective date.
Dated: March 15, 2000.R.D. Kerrins, Jr.,Acting Director, Defense Procurement.
Dated: March 20, 2000.Sue McIver,Acting Deputy Associate Administrator, Office of Acquisition Policy, General Services Administration. Dated: March 16 , 2000.Tom Luedtke, Associate Administrator for Procurement, National Aeronautics and Space
[ FAC 97-16 ; FAR Case 1999-012; Item I]
SUMMARY: The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed on an interim rule amending the Federal Acquisition Regulation (FAR) to implement the Office of Federal Procurement Policy (OFPP) and Small Business Administration (SBA) final policy directive to provide updated guidance on the Small Business Competitiveness Demonstration Program.
DATES: Effective Date: March 27, 2000.
Applicability Date: The FAR, as amended by this rule, is applicable to solicitations issued on or after March 27, 2000.
Comment Date: Interested parties should submit comments to the FAR Secretariat at the address shown below on or before May 26, 2000 to be considered in the formulation of a final rule.
Submit electronic comments via the Internet to: farcase.1999-012@gsa.gov. Please submit comments only and cite FAC 97 - 16 , FAR case 1999-012 in all correspondence related to this case.
Building, Washington, DC 20405, (202) 501-4755, for information pertaining to status or publication schedules. For clarification of content, contact Ms. Victoria Moss, Procurement Analyst, at (202) 501-4764. Please cite FAC 97 - 16 , FAR case 1999-012.
This interim rule amends FAR Subpart 19.10 to provide updated guidance regarding the Small Business Competitiveness Demonstration Program (Program). The Program was originally established in 1988 by Title VII of Public Law 100-656, as amended, and subsequently implemented in the FAR. As statutory amendments were made to the
Program, OFPP issued conforming modifications to its policy directive. With the enactment of Public Law 105-135, the Small Business Reauthorization Act of 1997, the Program was made permanent. The OFPP and SBA published a joint final policy directive on the Program in the Federal Register at 64 FR 29693, June 2, 1999. Specific guidance published in the OFPP and SBA final policy directive requires that DoD,
GSA, and NASA revise the FAR to provide this updated guidance.
This interim rule is not expected 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 merely makes ministerial changes to the existing language and does not change existing policy. Therefore, the Councils have not performed an
Initial Regulatory Flexibility Analysis. Comments are invited from small businesses and other interested parties. The Councils will consider comments from small entities concerning the affected FAR subpart 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 1999-012), in correspondence.
is necessary because this rule implements a joint OFPP/SBA policy directive that became effective on October 1, 1999. However, pursuant to Public Law 98-577 and FAR 1.501, the Councils will consider public comments received in response to this interim rule in the formation of the final rule.
Government procurement. Dated: March 20, 2000.Edward C. Loeb, Director, Federal Acquisition Policy Division.
2. Amend section 19.502-2 in paragraph (a) by revising the last sentence; and in paragraph (d) by removing ``(see 19.1006(b))'' and adding ``(see 19.1007(b))'' in its place. The revised text reads as follows:
(a) * * * The small business reservation does not preclude the award of a contract with a value not greater than $100,000 under Subpart 19.8, Contracting with the Small Business Administration, under 19.1007(c), Solicitations equal to or less than the ESB reserve amount, or under 19.1305, HUBZone set-aside procedures.
3. Amend section 19.1001 by revising the introductory paragraph to read as follows:
The Small Business Competitiveness Demonstration Program was established by the Small Business Competitiveness Demonstration Program Act of 1988, Public Law 100-656 (15 U.S.C. 644 note). The program is implemented by a joint OFPP and SBA Policy Directive and Implementation Plan, dated May 25, 1999. The program consists of two major components--
4. Amend section 19.1002 by revising the section heading and adding, in alphabetical order, the definition ``Emerging small business reserve amount'' to read as follows:
Emerging small business reserve amount, for the designated groups described in 19.1005, means a threshold established by the Office of Federal Procurement Policy of--
19.1003 [Amended]
5. Amend section 19.1003 by redesignating paragraphs (b) and (c) as (c) and (b), respectively.
6. Amend section 19.1005 by redesignating paragraphs (a)(3) and (a)(4) as (a)(4) and (a)(3), respectively, and revising newly designated (a)(4); and in paragraph (b) by removing ``shall designate'' and adding ``designates'' in its place. The revised text reads as follows:
(4) Architectural and engineering services (including surveying and mapping) under SIC code 7389, 8711, 8712, or 8713 (limited to FPDS service codes C111 through C216, C219, T002, T004, T008, T009, T014, and R404), which are awarded under the qualification-based selection procedures required by 40 U.S.C. 541, et seq. (the ``Brooks A-E Act'') (see Subpart 36.6).
19.1006 and 19.1007 [Redesignated as 19.1007 and 19.1008, respectively] [New 19.1006 added]
7a. Redesignate sections 19.1006 and 19.1007 as 19.1007 and 19.1008, respectively; and add a new section 19.1006 to read as follows:
7b. Revise the newly designated 19.1007 to read as follows:
(a) General. (1) All solicitations must include the applicable SIC code and size standards.
(b) Solicitations greater than the ESB reserve amount. (1) Solicitations for acquisitions in any of the four designated industry groups that have an anticipated dollar value greater than the emerging small business reserve amount must not be considered for small business set-asides under subpart 19.5. However, agencies may reinstate the use of small business set-asides as necessary to meet their assigned goals, but only within organizational units that failed to meet the small business participation goal.
(2) Acquisitions in the designated industry groups must continue to be considered for placement under the 8(a) Program (see subpart 19.8) and the HUBZone Program (see subpart 19.13).
(c) Solicitations equal to or less than the ESB reserve amount. (1) Solicitations for acquisitions in the four designated industry groups with an estimated value equal to or less than the emerging small business reserve amount must be set aside for ESBs, provided that the contracting officer determines that there is a reasonable expectation
of obtaining offers from two or more responsible ESBs that will be competitive in terms of market price, quality, and delivery. If no such reasonable expectation exists, the contracting officer must--
(i) For acquisitions $25,000 or less, proceed in accordance with subpart 19.5, 19.8, or 19.13; or
(2) If the contracting officer proceeds with the ESB set-aside and receives a quotation from only one ESB at a reasonable price, the contracting officer must make the award. If there is no quote from an ESB, or the quote is not at a reasonable price, then the contracting officer must cancel the ESB set-aside and proceed in accordance with
paragraph (c)(1)(i) or (ii) of this section.
7c. Amend the newly designated 19.1008 in paragraphs (a), (b), and (c) by removing ``The contracting officer shall insert'' and adding ``Insert'' in their place; and in paragraph (b) by removing ``19.1006(c)'' and adding ``19.1007(c)'' in its place.
[ FAC 97-16 ; FAR Case 1998-400 (98-400); Item II]
SUMMARY: The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed on a final rule amending the Federal Acquisition Regulation (FAR) to reduce the burdens imposed on contractors and contracting officers by the progress payment type of financing; to permit the use of performance-based payments in contracts for research and development, and contracts awarded through competitive negotiation procedures; to expand the use of subcontractor
performance-based and commercial financing payments; and to simplify and clarify related provisions.
Building, Washington, DC, 20405, (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 FAC 97-16 , FAR case 1998-400.
The Director of Defense Procurement at the Department of Defense established a special interagency team to review existing policies and procedures related to progress payments to make them easier to understand and to minimize the burdens imposed on contractors and contracting officers. This Progress Payment Rewrite Team considered for
revision or elimination those regulatory requirements pertaining to progress payments that were not required by statute, required to ensure adequately standardized Government business practices, or required to protect the public interest.
After reviewing progress payment policies and public comments received in response to the ANPR, the team identified potential changes to the FAR. They published a second ANPR in the Federal Register on March 5, 1998 (63 FR 11074), that solicited comments on the potential changes identified in the notice. The ANPR also announced a public
meeting, that was subsequently held on April 23, 1998. After considering written comments received in response to the two notices, and verbal comments provided during the public meeting, the Progress Payment Rewrite Team submitted a report including a draft proposed rule for consideration by the Councils.
The Councils reviewed the team's recommendations and published a proposed rule in the Federal Register on February 10, 1999 (64 FR 6758). Fifteen respondents submitted public comments to the proposed rule. Several respondents expressed concern that the use of performance-based payments in competitive negotiations may lengthen the
competitive process and complicate proposal evaluation. The Councils believe that potential procedural impacts are among the factors (along with such issues as the potential impact on small business competitiveness) that the contracting officer may consider when assessing the practicality of the use of performance-based payments
under FAR 32.1001. However, the Councils also believe that performance-based payments can be used effectively in competitive negotiations, and that their use may attract new sources, including small businesses, whose accounting systems do not support cost-based financing. Consequently, the Councils concluded the existing FAR prohibition
against use of performance-based payments in competitive negotiations is inappropriate. The final rule differs from the proposed rule by making a number of nonsubstantive, clarifying changes.
1. Ensure consideration of performance-based payments. The rule emphasizes that--
2. Increase the threshold for contract financing and establish a threshold for individual progress payment requests. To reduce the administrative burden that small dollar actions place on the contract administration and payment process, the final rule--
3. Eliminate the ``paid cost rule.'' Prior to implementation of this final rule, a large business was required to pay a subcontractor before including the payment in its billings to the Government. This is referred to as the ``paid cost rule.'' The final FAR rule allows a large business to include, in its billings, subcontract costs that it has incurred but not actually paid, provided the payment to the subcontractor will be made in accordance with the terms and conditions of a subcontract or invoice, and ordinarily prior to the submission of the contractor's next payment request to the Government.
7. Permit the use of performance-based payments in contracts for research and development, and in contracts awarded through competitive negotiation procedures. The rule removes the prohibition against using performance-based payments type of financing in contracts for research and development, and contracts awarded through competitive negotiation procedures.
8. Simplify and clarify. The rule also simplifies and clarifies the concept that, on a loss contract, application of the loss ratio constitutes the adjustment that ensures progress payments do not exceed the value of work performed; deletes the authorization for the
Department of Defense to establish customary progress payment rates for foreign military sales (FMS) and flexible progress payments that differ from the customary rates cited in FAR 32.501-1(a) (DoD no longer uses flexible progress payments and does not intend to establish alternate rates for FMS); and makes a number of editorial changes.
The Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration stated in the proposed rule that the rule was not expected 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 most contracts awarded to small entities have a dollar value less than the simplified acquisition threshold, and, therefore, do not require the progress payment or performance-based payment type of financing. However, some of the commentors expressed the concern that
elimination of the ``paid cost rule'' may have a significant impact on a substantial number of small entities. Accordingly, even though an Initial Regulatory Flexibility Analysis had not been done, the Councils prepared a Final Regulatory Flexibility Analysis (FRFA) as a result of those comments. The FRFA is summarized as follows:
The small entities that may be impacted by elimination of the ``paid cost rule'' are subcontractors to large businesses. That is, the current FAR requires large businesses to pay its subcontractors by cash or check before the large business can request payment from the Government under cost reimbursement contracts or progress payments for amounts owed to subcontractors. The final rule will permit prime contractors to request payment of those amounts from the Government when it incurs a cost based on a request for payment from its subcontractors.
In order to mitigate any potential impact this portion of the rule may have on small businesses, the Councils adopted a range of safeguards to provide further assurances that payments to subcontractors will not be delayed. These safeguards were adopted rather than merely applying the policies previously used for small businesses that permitted small business prime contractors to recognize subcontract costs immediately after they were incurred, even if they were not yet paid to the subcontractor. This final rule
requires that both large and small business prime contractors pay these incurred subcontract amounts in accordance with the terms of the subcontract and ordinarily before submittal of the next payment request sent to the Government.
2. Office of Management and Budget (OMB) Control Number 9000-0138. There is no net impact to the collection requirements currently approved under OMB Control No. 9000-0138. The increase in hours associated with the addition of the provision at FAR 52.232-28, Invitation to Propose Performance-Based Payments, is offset by the decrease in hours resulting from raising the contract dollar threshold for permitting performance-based payments. List of Subjects in 48 CFR Parts 32 and 52 Government procurement. Dated: March 20, 2000.Edward C. Loeb, Director, Federal Acquisition Policy Division.
(a) Prudent contract financing can be a useful working tool in Government acquisition by expediting the performance of essential contracts. Contracting officers must consider the criteria in this part in determining whether to include contract financing in solicitations and contracts. Resolve reasonable doubts by including contract financing in the solicitation. The contracting officer must--
(1) Provide Government financing only to the extent actually needed for prompt and efficient performance, considering the availability of private financing and the probable impact on working capital of the predelivery expenditures and production lead-times associated with the contract, or groups of contracts or orders (e.g., issued under
indefinite-delivery contracts, basic ordering agreements, or their equivalent);
(b) If the contractor is a small business concern, the contracting officer must give special attention to meeting the contractor's contract financing need. However, a contractor's receipt of a certificate of competency from the Small Business Administration has no bearing on the contractor's need for or entitlement to contract
(c) Subject to specific agency regulations and paragraph (d) of this section, the contracting officer--
(1) The contractor--
(2) If the contractor is not a small business concern--
(ii) For an indefinite-delivery contract, a basic ordering agreement or a similar ordering instrument, the contracting officer expects the aggregate value of orders or contracts that individually exceed the simplified acquisition threshold to have a total value of $2
million or more. The contracting officer must limit financing to those orders or contracts that exceed the simplified acquisition threshold.
(3) If the contractor is a small business concern--
3. Amend section 32.106 in the introductory paragraph by removing ``shall'' and adding ``must'' in its place; and by revising paragraphs (a) and (b) to read as follows:
(a) Private financing without Government guarantee. It is not intended, however, that the contracting officer require the contractor to obtain private financing--
7. Amend section 32.205 in the introductory text of paragraph (b) by removing ``shall'' each time it is used (twice) and adding ``must'' in its place; and by revising the first sentence of paragraph (c)(4) to read as follows:
(4) The contracting officer must calculate the time value of proposal-specified contract financing arrangements using as the interest rate the nominal discount rate specified in Appendix C of the Office of Management and Budget (OMB) Circular A-94, `Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs'', appropriate to the period of contract financing. * * *
(a) The customary progress payment rate is 80 percent, applicable to the total
costs of performing the contract. The customary rate for contracts with small business concerns is 85 percent.
(b) The contracting officer must--
(a)(1) Insert the clause at 52.232- 16 , Progress Payments, in--
(5) If an unusual progress payment rate is approved for a subcontract (see 32.504(c) and 32.501-2), modify paragraph (j)(6) of the clause to specify the new rate, the name of the subcontractor, and that the new rate shall be used for that subcontractor in lieu of the
customary rate.
(e) If the nature of the contract necessitates separate progress payment rates for portions of work that are clearly severable and accounting segregation would be maintained (e.g., annual production requirements), describe the application of separate progress payment rates in a supplementary special provision within the contract. The
contractor must submit separate progress payment requests and subsequent invoices for the severable portions of work in order to maintain accounting integrity.
32.503-1 Contractor requests.
Each contractor request for progress payment must--
14. Amend section 32.503-6 in paragraph (e)(3) by removing ``paragraph (a)(2)'' and adding ``paragraph (a)(3)'' in its place; and by revising paragraphs (f) and (g)(4) to read as follows:
Change orders and unpriced orders (to extent funds have been obligated)
Loss ratio factor --------------- = 83.3%
x 80.0%
Recognized costs applicable to undelivered items ($2,249,100-750,000)
* This amount must be the same as the contract price of the items delivered.
16 . Revise section 32.503-8 to read as follows:
32.503-8 Liquidation rates--ordinary method.
17. Amend section 32.503-10 in the introductory text of paragraph (a) by removing ``shall'' and adding ``must'' in its place; by revising paragraph (b)(1); in paragraph (b)(2) by removing ``shall'' and adding ``must'' in its place; and by revising paragraph (b)(3) to read as follows:
(i)If the progress payment rate is 80 percent, the minimum liquidation rate should be 72.7 percent, computed as follows:
$2,000,000 X 80%
------------------------ = 72.7%
$2,000,000 X 85%
-------------------------- = 77.3%
(a) Subcontracts may include either performance-based payments, provided they meet the criteria in 32.1003, or progress payments, provided they meet the criteria in subpart 32.5 for customary progress payments, but not both. Subcontracts for commercial purchases may include commercial item purchase financing terms, provided they meet
the criteria in 32.202-1.
(b) The contractor's requests for progress payments may include the full amount of commercial item purchase financing payments, performance-based payments, or progress payments to a subcontractor, whether paid or unpaid, provided that unpaid amounts are limited to amounts that the contractor will pay--
(c) If the contractor is considering making unusual progress payments to a subcontractor, the parties will be guided by the policies in 32.501-2. If the Government approves unusual progress payments for the subcontract, the contracting officer must issue a contract modification to specify the new rate in paragraph (j)(6) of the clause
at 52.232- 16 , Progress Payments, in the prime contract. This will allow the contractor to include the progress payments to the subcontractor in the cost basis for progress payments by the Government. This modification is not a deviation and does not require the clearance prescribed in 32.502-2(b).
(d) The contractor has a duty to ensure that financing payments to subcontractors conform to the standards and principles prescribed in paragraph (j) of the Progress Payments clause in the prime contract. Although the contracting officer should, to the extent appropriate, review the subcontract as part of the overall administration of
progress payments in the prime contract, there is no special requirement for contracting officer review or consent merely because the subcontract includes financing payments, except as provided in paragraph (c) of this section. However, the contracting officer must
ensure that the contractor has installed the necessary management control systems, including internal audit procedures.
(e) When financing payments are in the form of progress payments, the Progress Payments clause at 52.232- 16 requires that the subcontract include the substance of the Progress Payments clause in the prime contract, modified to indicate that the contractor, not the Government, awards the subcontract and administers the progress payments. The
following exceptions apply to wording modifications:
(1) The subcontract terms on title to property under progress payments shall provide for vesting of title in the Government, not the contractor, as in paragraph (d) of the Progress Payments clause in the prime contract. A reference to the contractor may, however, be substituted for ``Government'' in paragraph (d)(2)(iv) of the clause.
(2) In the subcontract terms on reports and access to records, the contractor shall not delete the references to ``Contracting Officer'' and ``Government'' in adapting paragraph (g) of the Progress Payments clause in the contract, but may expand the terms as follows:
(i) The term ``Contracting Officer'' may be changed to ``Contracting Officer or Prime Contractor.''
(ii) The term ``the Government'' may be changed to ``the Government or Prime Contractor.''
(f) When financing payments are in the form of performance-based payments, the Performance-Based Payments clause at 52.232-32 requires that the subcontract terms include the substance of the Performance-Based Payments clause, modified to indicate that the contractor, not the Government, awards the subcontract and administers the performance-based payments, and include appropriately worded modifications similar
to those noted in paragraph (e) of this section.
20. Amend section 32.1000--
a. In the introductory paragraph by removing the word ``non-commercial'' and adding ``noncommercial'' in its place;
b. At the end of paragraph (b) by adding ``or'' after the semicolon;
c. By removing paragraph (c) and redesignating paragraph(d) as paragraph (c); and
(c) Performance-based payments are fully recoverable, in the same manner as
progress payments, in the event of default. Except as provided in 32.1003(c), the contracting officer must not use performance-based payments when other forms of contract financing are provided.
32.1003 [Amended]
22. Amend section 32.1003 in paragraph (b) by removing ``(but see 32.1005(b))''.
Performance-based payments may be made either on a whole contract or on a deliverable item basis, unless otherwise prescribed by agency regulations. Financing payments to be made on a whole contract basis are applicable to the entire contract, and not to specific deliverable items. Financing payments to be made on a deliverable item basis are applicable to a specific individual deliverable item. (A deliverable item for these purposes is a separate item with a distinct unit price. Thus, a contract line item for 10 airplanes, with a unit price of $1,000,000 each, has 10 deliverable items--the separate planes. A contract line item for 1 lot of 10 airplanes, with a lot price of $10,000,000, has only one deliverable item--the lot.)
(a) Establishing performance bases. (1) The basis for performance-based payments may be either specifically described events (e.g., milestones) or some measurable criterion of performance. Each event or performance criterion that will trigger a finance payment must be an integral and necessary part of contract performance and must be
identified in the contract, along with a description of what constitutes successful performance of the event or attainment of the performance criterion. The signing of contracts or modifications, the exercise of options, or other such actions must not be events or criteria for performance-based payments. An event need not be a
critical event in order to trigger a payment, but the Government must be able to readily verify successful performance of each such event or performance criterion.
(2) Events or criteria may be either severable or cumulative. The successful completion of a severable event or criterion is independent of the accomplishment of any other event or criterion. Conversely, the successful accomplishment of a cumulative event or criterion is dependent upon the previous accomplishment of another event. A contract
may provide for more than one series of severable and/or cumulative performance events or criteria performed in parallel. The contracting officer must include the following in the contract:
(b) Establishing performance-based finance payment amounts. (1) The contracting officer must establish a complete, fully defined schedule of events or performance criteria and payment amounts when negotiating contract terms. If a contract action significantly affects the price, or event or performance criterion, the contracting officer responsible
for pricing the contract modification must adjust the performance-based payment schedule appropriately.
(2) Total performance-based payments must--
(3) The contract must specifically state the amount of each performance-based payment either as a dollar amount or as a percentage of a specifically identified price (e.g., contract price, or unit price of the deliverable item). The payment of contract financing has a cost to the Government in terms of interest paid by the Treasury to borrow funds to make the payment. Because the contracting officer has wide discretion as to the timing and amount of the performance-based payments, the contracting officer must ensure that--
(ii) Performance-based payment amounts are commensurate with the value of the performance event or performance criterion, and are not expected to result in an unreasonably low or negative level of contractor investment in the contract. To confirm sufficient investment, the contracting officer may request expenditure profile
information from offerors, but only if other information in the proposal, or information otherwise available to the contracting officer, is expected to be insufficient.
(c) Instructions for multiple appropriations. If there is more than one appropriation account (or subaccount) funding payments on the contract, the contracting officer must provide instructions to the Government payment office for distribution of financing payments to the respective funds accounts. Distribution instructions must be consistent
with the contract's liquidation provisions.
(d) Liquidating performance-based finance payments. Performance-based amounts must be liquidated by deducting a percentage or a designated dollar amount from the delivery payments. The contracting officer must specify the liquidation rate or
designated dollar amount in the contract. The method of liquidation must ensure complete liquidation no later than final payment.
(e) Competitive negotiated solicitations. (1) If a solicitation requests offerors to propose performance-based payments, the solicitation must specify--
(2) The contracting officer must--
(a) Insert the clause at 52.232-32, Performance-Based Payments, with the description of the basis for payment and liquidation as required in 32.1004 in--
32.1006 [Removed and Reserved]
25. Amend section 52.216-7 by--
b. In the introductory text of paragraph (b)(1) by removing ``subparagraph (2) below'' and adding ``paragraph (b)(2) of the clause'' in its place;
(A) Supplies and services purchased directly for the contract and associated financing payments to subcontractors, provided payments will be made--
(2) Accrued costs of Contractor contributions under employee pension plans shall be excluded until actually paid unless--
26. Amend section 52.216-26 by--
b. Removing ``shall'' and adding ``will'' in the introductory text of paragraph (a) of the clause; and
As prescribed in 16 .603-4(c), insert the following clause:
(2) When the Contractor is not delinquent in payment of costs of contract performance in the ordinary course of business, costs incurred, but not necessarily paid, for--
(i) Supplies and services purchased directly for the contract, provided payments will be made--
27. Amend section 52.232-7 by revising the date of the clause; in the introductory paragraph by removing ``shall'' and adding ``will'' in its place; and by revising paragraph (b) and Alternate I of the clause to read as follows:
(b) Materials and subcontracts. (1) The Contracting Officer will determine allowable costs of direct materials in accordance with Subpart 31.2 of the Federal Acquisition Regulation (FAR) in effect on the date of this contract. Direct materials, as used in this
clause, are those materials that enter directly into the end product, or that are used or consumed directly in connection with the furnishing of the end product.
(2) The Contractor may include reasonable and allocable material handling costs in the charge for material to the extent they are clearly excluded from the hourly rate. Material handling costs are comprised of indirect costs, including, when appropriate, general
and administrative expense allocated to direct materials in accordance with the Contractor's usual accounting practices consistent with Subpart 31.2 of the FAR.
(ii) The Government will limit reimbursable costs in connection with subcontracts to the amounts paid for items and services purchased directly for the contract only when the Contractor has made or will make payments of cash, checks, or other forms of payment to the subcontractor--
(5) To the extent able, the Contractor shall--
(ii) Take all cash and trade discounts, rebates, allowances, credits, salvage, commissions, and other benefits. When unable to take advantage of the benefits, the Contractor shall promptly notify the Contracting Officer and give the reasons. The Contractor shall give credit to the Government for cash and trade discounts, rebates,
scrap, commissions, and other amounts that have accrued to the benefit of the Contractor, or would have accrued except for the fault or neglect of the Contractor. The Contractor shall not deduct from gross costs the benefits lost without fault or neglect on the part of the Contractor, or lost through fault of the Government.
Alternate I (Mar 2000). If the nature of the work to be performed requires the Contractor to furnish material that the Contractor regularly sells to the general public in the normal course of business, and the price is under the limitations prescribed in 16 .601(b)(3), add the following paragraph (6) to paragraph (b) of the basic clause:
(b)(6) If the nature of the work to be performed requires the Contractor to furnish material that the Contractor regularly sells to the general public in the normal course of business, the price to be paid for such material, notwithstanding the other requirements of
this paragraph (b), shall be on the basis of an established catalog or list price, in effect when the material is furnished, less all applicable discounts to the Government, provided that in no event shall such price be in excess of the Contractor's sales price to its most favored customer for the same item in like quantity, or the current market price, whichever is lower.
28. Amend section 52.232- 16 by--
52.232- 16 Progress Payments.
(2) The amount of financing and other payments for supplies and services purchased directly for the contract are limited to the amounts that have been paid by cash, check, or other forms of payment, or that will be paid to subcontractors--
(iii) Subordinate all subcontractor rights concerning property to which the Government has title under the subcontract to the Government's right to require delivery of the property to the Government if-
(7) Concerning any proceeds received by the Government for property to which title has vested in the Government under the subcontract terms, the parties agree that the proceeds shall be applied to reducing any unliquidated financing payments by the
Government to the Contractor under this contract.
(8) If no unliquidated financing payments to the Contractor remain, but there are unliquidated financing payments that the Contractor has made to any subcontractor, the Contractor shall be subrogated to all the rights the Government obtained through the
terms required by this clause to be in any subcontract, as if all such rights had been assigned and transferred to the Contractor.
(9) To facilitate small business participation in subcontracting under this contract, the Contractor shall provide financing payments to small business concerns, in conformity with the standards for customary contract financing payments stated in FAR 32.113. The
Contractor shall not consider the need for such financing payments as a handicap or adverse factor in the award of subcontracts.
(2) The terms and conditions of the performance-based payments must--
(2) A listing of--
(f) The Government will adjust each proposed price to reflect the cost of providing the proposed performance-based payments to determine the total cost to the Government of that particular combination of price and performance-based financing. The Government
will make the adjustment using the procedure described in FAR 32.205(c).
48 CFR Parts 1, 6, 9, 15, and 52
[ FAC 97-16 ; Item III]
List of Subjects in 48 CFR Parts 1, 6, 9, 15, and 52
Government procurement. Dated: March 20, 2000. Edward C. Loeb, Director, Federal Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR Parts 1, 6, 9, 15, and 52 as set forth below:
1. The authority citation for 48 CFR Parts 1, 6, 9, 15, and 52 continues to read as follows:
2. Amend section 1.106 in the table following the introductory paragraph by adding entries 23.9, 52.223-13, and 52.223-14, and by revising entry 52.247-64 to read as follows:
3. Amend section 1.201-1(a) by removing ``1.102'' and adding ``1.103'' in its place.
1.304 [Amended]
4. Amend section 1.304(a) by removing ``1.301(c)'' and adding ``1.301(d)'' in its place.
5. In section 6.305 redesignate paragraphs (1) and (2) as (a) and (b), respectively; and in the newly redesignated paragraph (a) remove ``41 U.S.C. 303(f)(4)'' and add ``41 U.S.C. 253(f)(4)'' in its place.
6. Revise section 9.404 to read as follows:
(ii) The public may subscribe by writing the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by calling the Government Printing Office Inquiry and Order Desk at (202) 512-1800.
(2) The electronic version is updated daily and is available via--
7. Amend section 9.405 in paragraph (d)(4) by removing the word ``List'' and adding ``List of Parties Excluded from Federal Procurement and Nonprocurement Programs'' in its place.
8. Amend section 15.404-1 by revising the last sentence of paragraph (a)(7) to read as follows:
(7) * * * They are available via the internet at http://www.acq.osd.mil/dp/cpf.
9. Amend section 52.212-1 by revising the date of the clause to read ``(MAR 2000)''; and in paragraph (i)(2)(ii)(B) by removing ``http://www.dodssp.daps.mil'' and adding ``http://assist.daps.mil'' in its place.
52.217-9 [Amended]
10. Amend section 52.217-9 by revising the date of the clause to read ``(MAR 2000)''; and in paragraph (b) by removing ``provision'' and adding ``clause'' in its place.
52.219-23 [Amended]
11. Amend the introductory text of Alternate II in section 52.219-23 by removing ``(b)(i)'' both times it appears and adding ``(b)(1)(i)'' in their places.