Source: http://farsite.hill.af.mil/reghtml/changes/afac/afa92_45.htm
Timestamp: 2017-10-17 11:24:06
Document Index: 107675820

Matched Legal Cases: ['art 231', 'art 231', 'art 242', 'art 237', 'art 206', 'art 206', 'art 219', 'art 19', 'ART 231', 'art 31', 'art 231', 'ART 242', 'art 31', 'art 231', 'ART 206', 'art 5', 'ART 237']

AFAC 92-45
DEPARTMENT OF THE AIR FORCE     AFAC 92-45
Washington DC 20330     February 3, 1995
Item            Title                                                			           Pages
B1              Preference for Local Residents (DDP Memo,                	 B-1
26 Jan 1995; D.L. 95-003)
B2              Limitation on Allowable Individual Compen-              	 B-2
sation (DDP Memo, 14 Dec 1994; D.L. 94-019)
B3              Restructuring Costs Under Defense Contracts           	 B-3
(DDP Memo, 29 Dec 1994; D.L. 94-020)
B4              Manufacturing Science and Technology Program             	 B-4
(DDP Memo, 17 Jan 1995; D.L. 95-002)
B5              Personal Service Contracts (DDP Memo, 5 Jan                     	B-5
1995; D.L. 95-001)
B6              Class Deviation - Contracting with North                               	 B-6
Atlantic Treaty Organization (NATO) and
Non-NATO Countries (DDP Memo, 20 Jan 1995;
DAR Tracking Number 94-o0001
C1              DD FOrm 350 Coding for Block C3, Extent                 	C-1
Competed, for Awards to Nonprofit
Institutions (SAF/AQC Memo, 26 Jan 1995)
C2              Contract Debt Collection (DDP Memo, 13 Jan 1995)         	C-2
C3              Accounting for Impairment of Long-Lived Assets                 	C-3
(DDP Memo, 23 Jan 1995)
File this AFAC 92-45 Index (5 pages) with the AFACs.
No. of Printed Pages:  54
2       February 3, 1995        AFAC 92-45
GENERAL:  This AFAC Item implements the requirements of Section 817 the National Defense Authorization Act for Fiscal Year 1995 (Pub. L. 103-337).  Section 817 authorizes the Secretary of Defense to give preference to entities that plan to hire local residents, when entering into contracts for services to be performed at a military installation that is affected by closure or alignment under a base closure law.
POSTING INSTRUCTIONS:  Insert AFAC pages B-1.1 facing DFARS page 226.71-1.
MARKING INSTRUCTIONS:  Annotate "AFAC 92-45, B1" in the margin of DFARS Page 226.71-1 at 226.71.
EFFECTIVITY INSTRUCTIONS:  This AFAC item is effective from 26 Jan 95 until the change is published in a DAC.
GENERAL:  This AFAC Item implements Section 8117 of the Defense Appropriations Act for Fiscal Year 1995 (Pub. L. 103-335).  Section 8117 limits allowable costs for individual compensation to $250,000 per year.  This restriction applies to payments using funds appropriated in fiscal year 1995 under contracts awarded after 15 Apr 95.
(i) Pages B-2.1 facing DFARS page 231.2-1;
(ii) Page B-2.2 facing AFAC 92-40 page B-2.1 (posted in front of page 231.6-1);
(iii) Page B-2.3 facing DFARS page 231.6-1; and
(iv) Pages B-2.4 facing page 231.7-1.
MARKING INSTRUCTIONS:  Annotate "AFAC 92-45, B2" in the margin at each of the following locations in the DFARS.
(i) The Table of Contents for Part 231 after the reference to 231.205-22 (beside the annotated reference to AFAC 92-40, B2);
(ii) Page 231.2-1 at 231.205;
(iii) AFAC 92-40 page B-2.1 at 231.303;
(iv) DFARS page 231.6-1 at 231.603; and
AFAC 92-45      February 3, 1995        3
(v) Page 231.7-1 at 231.703.
EFFECTIVITY INSTRUCTIONS:  This AFAC Item is effective from 14 Dec 94 until the change is published in a DAC.
GENERAL:  This AFAC Item implements Section 818 of the National Defense Authorization Act for Fiscal Year 1995 (Pub. L. 103-337), which restricts the Department of Defense from reimbursing restructuring costs associated with a business combination undertaken by a defense contractor unless certain conditions are met.  This interim DFARS rule provides policies and procedures for allowing appropriate contractor costs which involve external restructuring activities.  The allowability of contractor costs associated with internal restructuring will be published separately.
(i) Page B-3.1 thru B-3.4 behind DFARS page 231.2-3;
(ii) Page B-3.5 facing page 242.12-1; and
(iii) Page B-3.6/B-3.7 after page 242.12-2.
MARKING INSTRUCTIONS:  Annotate "AFAC 92-45, B3" in the margin at each of the following locations in the DFARS:
(i) The Table of Contents for Part 231 after the reference to 231.205-22 (beside the annotated references to AFAC 92-40, B2 and AFAC 92-45, B2);
(ii) The Table of Contents for Part 242 at the reference to 242.1203;
(iii) Page 242.12-1 at 242.1203; and
(iv) Page 242.12-2 below 242.1203(f)(4)(B).
EFFECTIVITY INSTRUCTIONS:  This AFAC Item is effective from 29 Dec 94 until the change is published in a DAC.
GENERAL:  This AFAC Item implements Section 256 of the National Defense Authorization Act for Fiscal Year 1995 (Pub. L. 103-337).  Section 256 requires that competitive procedures be used in awarding contracts under the Manufacturing Science and Technology Program and that a cost sharing arrangement be used unless an alternative is approved by the Secretary of Defense.
4       February 3, 1995        AFAC 92-45
POSTING INSTRUCTIONS:  Insert AFAC pages B-4.1/B-4.2 between DFARS pages 235.0-2 and 235.0-3.
MARKING INSTRUCTIONS:  Annotate "AFAC 92-45, B4" in the margin at each of the following locations in the DFARS:
(i) Page 235.0-2 at 235.006; and
(ii) Page 235.0-3 after 235.006(b)(iii).
EFFECTIVITY INSTRUCTIONS:  This AFAC Item is effective from 17 Jan 95 until the change is published in a DAC.
GENERAL:  This AFAC Item implements Section 712 of the National Defense Authorization Act for Fiscal Year 1994 (Pub. L. 103-160) and Section 704 of the National Defense Authorization Act for Fiscal Year 1995 (Pub. L. 103-337).  Section 712 requires the Secretary of Defense to establish procedures for entering into personal service contracts under 10 U.S.C. 1091 to carry out health care responsibilities in medical/dental treatment facilities.  Section 704 provides authority for the Secretary of Defense to enter into personal service contracts under 10 U.S.C. 1091 to provide the services of clinical counselors, family advocacy program staff, and victim's services representatives.  This interim DFARS rule prescribes procedures to be used in awarding personal service contracts to individuals for health care services.
(i) Page B-5.1 facing DFARS page 206.2-1; and
(ii) Page B-5.2 thru B-5.4 between the Table of Contents for Part 237 and DFARS page 237.1-1.
MARKING INSTRUCTIONS:  Annotate "AFAC 92-45, B5" in the margin at each of the following locations in the DFARS:
(i) The Table of Contents for Part 206 at the reference to Subpart 206.2;
(ii) Page 206.2-1 at 206.2; and
(iii) Page 237.1-1 at 237.104(b)(ii).
EFFECTIVITY INSTRUCTIONS:  This AFAC Item is effective from 5 Jan 95 until the change is published in a DAC.
AFAC 92-45      February 3, 1995        5
GENERAL:  This AFAC Item disseminates a class deviation to Federal Acquisition Regulation (FAR) and Defense FAR Supplement (DFARS) clauses for contracts or agreements made by contracting activities outside the United States for the acquisition of support services and incidental supplies and construction.  The deviation does not apply to clauses that are based upon requirements of law.  The deviation is limited to contracts or agreements and does not extend to internal or administrative contracting procedures prescribed by the FAR or DFARS.
FILING INSTRUCTIONS:  File AFAC pages B-6 and B-6.1 with the AFACs.
MARKING INSTRUCTIONS:  Annotate "Deviation AFAC 92-45, B6" in the margin of DFARS Page 225.0-1 at 225.000.
EFFECTIVITY INSTRUCTIONS:  This AFAC Item expires 31 Jan 96 or until a change is published in a DAC.
Item C1--
GENERAL:  This AFAC Item disseminates SAF/AQC memorandum dated 26 Jan 95, which clarifies procedures concerning DD Form 350 coding for block C3, Extent Competed, for awards to nonprofit institutions.
FILING INSTRUCTIONS:  File AFAC pages C-1 and C-1.1 with the AFACs.
MARKING iNSTRUCTIONS:  None
Item C2--
GENERAL:  This AFAC Item disseminates Director, Defense Procurement (DDP) memorandum dated 13 Jan 95, which provides guidance concerning collection of contract debts.
FILING INSTRUCTIONS:  File AFAC pages C-2 and C-2.1 thru C-2.3 with the AFACs.
6       February 3, 1995        AFAC 92-45
Item C3--
GENERAL:  This AFAC Item disseminates DDP memorandum dated 23 Jan 95, which provides information concerning recognition of impairment losses related to long-lived assets.
FILING INSTRUCTIONS:  File AFAC pages C-3 and C-3.1 with the AFACs.
AFAC 92-45      February 3, 1995        B-1
TECHNOLOGY                                     January 26, 1995
DFARS Case:  94-D315
D. L. 95-003
SUBJECT:  Preference for Local Residents
We have amended the Defense Federal Acquisition Regulation Supplement (DFARS) to implement the requirements of Section 817 of the Fiscal Year 1995 Defense Authorization Act (Pub. L. 103-337).  Section 817 authorizes the Secretary of Defense to give preference to entities that plan to hire local residents, when entering into contracts for services to be performed at a military installation that is affected by closure or alignment under a base closure law.
B-1.1   February 3, 1995        AFAC 92_45
{226.7100}  Scope of subpart.
This subpart implements Section 2912 of the [F]iscal [Y]ear 1994 Defense Authorization Act, [(]Pub. L. 103-160[) and Section 817 of the Fiscal Year 1995 Defense Authorization Act (Pub. L 103-337)].
{226.7101}  Definition.
"Vicinity," as used in this subpart, means the county or counties in which the military installation to be closed or realigned is located and all adjacent counties.
{226.7102}  Policy.
{226.7103}  Procedure.
In making set-aside decisions under Subpart 219.5 and FAR Subpart 19.5 for acquisitions in support of a base closure or realignment, the contracting officer shall--
(c) If offers can be expected from business concerns in the vicinity-
(1) Set aside the acquisition for small disadvantaged business only if one of the expected offers is from a small disadvantaged business located in the vicinity.
[Added per AFAC 92-45]
[{226.7104 Other considerations.
Contracting officers shall consider including, as a factor in source selection, the extent to which offerors specifically identify and commit, in their proposals, to a plan to hire residents of the vicinity of the military installation that is being closed or realigned.]
AFAC 92-45      February 3, 1995        B-2
TECHNOLOGY                                     December 14, 1994
DFARS Case:  94-D318
D. L. 94-019
SUBJECT:  Limitation on Allowable Individual Compensation
We have amended the Defense Federal Acquisition Regulation Supplement (DFARS) to implement the equirements of Section 8117 of the Department of Defense Appropriations Act, 1995 (Public Law 103-335).  Section 8117 limits allowable costs for individual compensation to $250,000 per year.  This restriction applies to payments using funds appropriated in fiscal year 1995 under contracts awarded after April 15, 1995.
The interim rule is effective immediately and will be published in a future Defense Acquisition Circular.
B-2.1   February 3, 1995        AFAC 92-45
{231.205}     Selected costs.
{231.205-6} Compensation for personal services.
[(a)(2) Costs for individual compensation in excess of $250,000 per year are unallowable under DoD contracts tht are awarded after April 15, 1995, and are funded by fiscal year 1995 DoD appropriations (Public Law 103-335).]
B-2.2   February 3, 1995        AFAC 92-45
{231.303} Requirements.
[The limitation on allowable individual compensation at 231.205-6(a)(2) also applies to this Subpart.]
B-2.3   February 3, 1995        AFAC 92-45
{231.603}     Requirements.
[{a}] Under 10 U.S.C. 2324(e), the following costs are unallowable--
[(b) The limitation on allowable individual compensation at 231.205-6(a)(2) also applies to this subpart.]
B-2.4   February 3, 1995        AFAC 92-45
{231.703}     Requirements.
[(a)] Under 10 U.S.C. 2324(e), the costs cited in 231.603[(a)] are unallowable.
AFAC 92-45      February 3, 1995        B-3
TECHNOLOGY                                     December 29, 1994
DFARS Case:  94-D316
D. L. 94-020
SUBJECT:  Restructuring Costs Under Defense Contracts
Section 818 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103-337) restricts the Department of Defense from reimbursing restructuring costs associated with a business combination undertaken by a defense contractor unless certain conditions are met.  We have amended the Defense Federal Acquisition Regulation Supplement (DFARS) to implement the requirements of Section 818.
The attached interim DFARS rule provides policies and procedures for allowing appropriate contractor costs which involve external restructuring activities.  A proposed DFARS rule addressing the allowability of contractor costs associated with internal restructuring activities will be published separately.
AFAC 92-45      February 3, 1995        B-3.1
PART 231--CONTRACT COST PRINCIPLES AND
[{231.205-70} Restructuring Costs.
(a) Scope.  This subsection prescribes policies and procedures for allowing appropriate contractor restructuring costs when allowing such costs would result in net savings for DoD.  This subsection also implements Section 818 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103-337).
(b) Definitions.  As used in this subsection:
(1) "Business combination" means a transaction whereby assets or operations of two previously separate companies are combined, whether by merger, acquisition, or sale/purchase of assets.
(2) "External restructuring activities" means restructuring activities occurring after a business combination that involve facilities or workforce from both of the previously separate companies.
(3) "Internal restructuring activities" means restructuring activities occurring after a business combination that involve facilities or workforce from only one of the previously separate companies, or, when there has been no business combination, restructuring activities undertaken within one company.
(4) "Restructuring activities" means nonroutine nonrecurring, or extraordinary activities associated with the reduction of facilities or workforce, or consolidation of facilities or operations (including disposal or abandonment undertaken to effect such consolidation), in an effort to improve future operations and reduce overall costs.  Restructuring activities do not include routine or ongoing repositionings and redeployments of a contractor's productive facilities or workforce (e.g., normal plant rearrangement or employee relocation).
(5) "Restructuring costs" means the costs, including both direct and indirect, associated with restructuring activities.  Restructuring costs that may be allowed include, but are not limited to, severance pay for employees, early retirement incentive payments for employees, employee retraining costs,
B-3.2   February 3, 1995        AFAC 92-45
relocation expense for retained employees, and relocation and rearrangement of plant and equipment.
(6) "Restructuring savings" means cost reductions, including both direct and indirect cost reductions, that are directly associated with or result directly from restructuring activities.  Reassignments of cost to future periods are not restructuring savings.
(2) The certification required by 231.205-70(c)(1)(iv) shall not apply to any business combination for which payments for restructuring costs were made before August 15, 1994, or for which the cognizant ACO executed an advance agreement establishing cost ceilings based on audit/negotiation of detailed cost proposals for individual restructuring projects before August 15, 1994.
(3) Costs that may be incurred after a business combination but are not allowed in accordance with FAR Part 31 and DFARS Part 231 include, but are not limited to:
(i) Incorporation fees; costs of attorneys, accountants, brokers, promoters, organizers, management consultants, and investment counselors (see FAR 31. 205-27).
AFAC 92-45      February 3, 1995        B-3.3
(ii) The cost of any change in the contractor's financial structure (see FAR 31.205-27).
(iii) Interest or other costs of borrowing to finance the acquisition or merger (however represented) (see FAR 31.205-20).
(iv) When the purchase method of accounting for a business combination is used, increased depreciation, amortization, or cost of money attributable to increases in the book value of plant, equipment, and other tangible assets of the acquired company above the amount that would have been allowed if the business combination had not taken place (see FAR 31.205-52).
(v) Any costs for amortization, expensing, write-off, or write-down of goodwill (however represented) (see FAR 31.205-49).
(vi) Payments to employees of special compensation in excess of the contractor's normal severance pay practice if their employment terminates following a change in the management control over, or ownership of, the company or a substantial portion of its assets (see FAR 31.205-6(1)(1)).
(vii) Payments to employees of special compensation which is contingent upon the employee remaining with the contractor for a specified period of time following a change in the management control over, or ownership of, the company or a substantial portion of its assets (see FAR 31.205-6(1)(2)).
(d) Procedures and ACO responsibilities.  As soon as it is known that the contractor will incur restructuring costs associated with external restructuring activities, the cognizant ACO shall:
(1) Direct the contractor to segregate restructuring costs and to suspend these amounts from any billings, final contract price settlements, and overhead settlements until the certification in (c)(1)(iv) is obtained.
(2) Require the contractor to submit an overall plan of restructuring activities and an adequately supported proposal for planned restructuring projects.  The proposal must include a detailed breakout by year by cost element, showing the projected restructuring costs, both direct and indirect, and projected restructuring savings, both direct and indirect.
(3) Negotiate a Memorandum of Understanding with the contractor setting forth, at a minimum, the types and treatments of restructuring costs and the methodology to be used to demonstrate reduced costs to DoD.
B-3.4   February 3, 1995        AFAC 92-45
(5) Upon receipt of the contractor's proposal, immediately adjust forward pricing rates to reflect the impact of projected restructuring savings.  Pending execution of an advance agreement in accordance with 231.205-70(d)(8), restructuring costs may be included in forward pricing rates if a repricing clause is included in each fixed-price action that is priced based on the rates.  The repricing clause must provide for a downward price adjustment to remove restructuring costs if the certification required by 231.205-70(c)(1)(iv) is not obtained.
(8) Negotiate an advance agreement with the contractor setting forth, at a minimum, cost ceiling amounts on restructuring projects and, when necessary, a cost amortization schedule.  Cost ceilings may not exceed the amount of projected restructuring savings on a present value basis.  The advance agreement shall not be executed until the certification required by 231.205-70(c)(1)(iv) is obtained.
(9) Submit to the Director of Defense Procurement, Office of the Under Secretary of Defense (Acquisition & Technology), ATTN: OUSD(A&T)DP/CPF, a recommendation for certification of net benefit.  Include the information described in 231.205-70(e).
(6) The cognizant ACO's recommendation for certification.  This recommendation must clearly indicate that contractor projections of future cost savings resulting for DoD from the business combination are based on audited cost data and should result in overall reduced costs for the Department.]
B-3.5   February 3, 1995        AFAC 92-45
SUBPART 242.12--NOVATION AND CHANGE-OF-NAME-(sic)AGREEMENTS
[{242.1202} Responsibility for executing agreements.
The contracting officer responsible for processing and executing novation and change-of-name agreements shall ensure agreements are executed promptly.]
AFAC 92-45      February 3, 1995        B-3.6
[{242.1204} Agreement to recognize a successor in interest (novation agreement).
(ii) The Government recognizes that restructuring by the Transferee incidental to the acquisition/merger may be in the best interests of the Government.  Restructuring costs that are allowable under Part 31 of the Federal Acquisition Regulation (FAR) or Part 231 of the Defense Federal Acquisition Regulation Supplement (DFARS) may be reimbursed under flexibility-priced novated contracts, provided the Transferee
B-3.7   February 3, 1995        AFAC 92-45
demonstrates that the restructuring will reduce overall costs to the Department of Defense (DoD) and/or the National Aeronautics and Space Administration (NASA), and the requirements included in DFARS 231.205-70 are met.  These costs and the contracting parties' responsibilities shall be addressed in a Memorandum of Understanding to be negotiated between the cognizant contracting officer and the Transferee.  The Memorandum of Understanding will specify the types and treatment of restructuring costs and the methodology to be used to demonstrate reduced costs to DoD and/or NASA.  Restructuring costs shall not be allowed on novated contracts unless there is an audit of the restructuring proposal; a determination by the contracting officer of overall reduced costs to DoD/NASA; and an Advance Agreement setting forth cost ceiling amounts on restructuring projects and the period to which such costs shall be assigned."]
AFAC 92-45      February 3, 1995        B-4
TECHNOLOGY                                     January 17, 1995
DFARS Case:  94-D307
D. L. 95-002
SUBJECT:  Manufacturing Science and Technilogy Program
We have amended the Defense Federal Acquisition Regulation Supplement to implement section 256 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103-337).  Section 256 requires that competitive procedures be used in awarding contracts under the Manufacturing Science and Technology Program and that a cost-sharing arrangement be used unless an alternative is approved by the Secretary of Defense.
AFAC 92-45      February 3, 1995        B-4.1
{235.006}     Contracting methods and contract type.
[(a) All contracts under the Manufacturing Science and Technology Program shall be awarded using competitive procedures (10 U.S.C. 2525).  (See DoDD 5000.2, Defense Acquisition Management Policies and Procedures, and DoDI 4200.15, Manufacturing Technology Program.]
B-4.2   February 3, 1995        AFAC 92-45
[(b)(iv) A cost-sharing arrangement must be used for contracts awarded in support of the Manufacturing Science and Technology Program, unless an alternative is approved by the Secretary of Defense (10 U.S.C. 2525).  Approval by the Secretary of Defense to use other than a cost-sharing arrangement for the Manufactruing Science and Technology Program must be based on a determination that the technology--
(A) Is not likely to have any immediate and direct commeercial application; or
(B) Is of sufficiently high risk to discourage cost sharing by non-Federal Government sources.  (See DoDI 4200.15, Manufacturing Technology Program, and FAR 16.303.)]
AFAC 92-45      February 3, 1995        B-5
TECHNOLOGY                                     January 5, 1995
DFARS Case:  94-D302
D. L. 95-001
SUBJECT:  Personal Service Contracts
We have amended the Defense Acquisition Regulation Supplement (DFARS) to implement the requirements of Section 712 of the National Defense Authorization Act for Fiscal Year 1994 (Pub. L. 103-160) and Section 704 of the National Defense Authorization Act for Fiscal Year 1995 (Pub. L. 103-337).  Section 712 requires the Secretary of Defense to establish procedures for entering into personal service contracts under 10 U.S.C. 1091 to carry out health care responsibilities in medical/dental treatment facilities.  Section 704 provides authority for the Secretary of Defense to enter into personal service contracts under 10 U.S.C. 1091 to provide the services of clinical counselors, family advocacy program staff, victim's services representatives.
The attached interim DFARS rule prescribes procedures to be used in awarding personal service contracts to individuals for health care services.
B-5.1   February 3, 1995        AFAC 92-45
[SUBPART 206.1--FULL AND OPEN COMPETITION
{206.102} Use of competitive procedures.
The procedures in 237.104(b)(ii) are competitive procedures.]
B-5.2   February 3, 1995        AFAC 92-45
[Continued from page B-5.3
(G) Upon receipt from the facility of the ranked listing of applicants, the contracting officer shall either--
(1) Enter into negotiations with the highest ranked applicant.  If a mutually satisfactory contract cannot be negotiated, the contracting officer shall terminate negotiations with the highest ranked applicant and enter into negotiations with the next highest.
(H) In the event only one individual responds to an advertised requirement, the contracting officer is authorized to negotiate the contract award.  In this case, the individual must still meet the minimum qualifications of the requirement and the contracting officer must be able to make a determination that the price is fair and reasonable.
(I) If a fair and reasonable price cannot be obtained from a qualified individual, the requirement should be canceled and acquired using procedures other than those set forth in this sections.]
AFAC 92-45      February 3, 1995        B-5.3
[Continued from page B-5.4
procedures in this section are competitive (see 206.102(d)).
(C)  Approval requirements for--
(1) Direct health care personal service contracts (see 237.104(b)(ii)(A)(1) and a pay cap are in DoDI 6025.5, Personal Services Contracting Authority for Direct Health Care Providers.  Requests to enter into a personal service contract for direct health care services must be approved by the commander of the medical/dental treatment facility where the services will be performed.
(2) Services of clinical counselors, family advocacy program staff, and victim's services representatives (see 237.104(b)(ii)(A)(2)), shall be in accordance with agency procedures.
(E) The contracting officer must provide adequate advance notice of contracting opportunities to individuals residing in the area of the facility.  The notice must include the qualification criteria against which individuals responding will be evaluated.  The contracting officer shall solicit applicants through at least one local publication which serves the area of the facility.  Acquisitions under this section for personal service contracts are exempt from the posting and synopsis requirements of FAR Part 5.
(F) The contracting officer shall provide the qualifications of individuals responding to the notice to the commander of the facility for evaluation and ranking in accordance with agency procedures.  Individuals must be considered solely on the basis of the professional qualifications established for the particular personal services being acquired and the Government's estimate of reasonable rates, fees, or other costs.  The commander of the facility shall provide the contracting officer with rationale for the ranking of individuals, consistent with the required qualifications.
Continued on page B-5.2]
B-5.4   February 3, 1995        AFAC 92-45
SUBPART 237.1--SERVICE CONTRACTS - GENERAL
{237.104}     Personal services contracts.
(b)(i) *  *  *
(ii)    Personal service contracts for [ ] health care services are authorized by 10 U.S.C. 1091. [ ]
[(A) This authority may be used to acquire--
(2) Services of clinical counselors, family advocacy program staff, and victim's services representatives to members of the Armed Forces and covered beneficiaries who require such services, provided in medical treatment facilities or elsewhere.  Persons with whom a personal services contract may be entered into under this authority include clinical social workers, psychologists, psychiatrists, and other comparable professionals who have advanced degrees in counseling or related academic disciplines and who meet all requirements for State licensure and board certification requirements, if any, within their fields of specialization.
(B) Sources for personal service contracts with individuals under the authority of 10 U.S.C. 1091 shall be selected through the procedures in this section.  These procedures do not apply to contracts awarded to business entities other than individuals.  Selections made using the
Continued on page B-5.3]
AFAC 92-45      February 3, 1995        B-6
TECHNOLOGY                                                             January 20, 1995
SUBJECT:        Class Deviation - Contracting with North Atlantic Treaty Organization (NATO) and Non-NATO Countries
I authorize all military departments and defense agencies to deviate from Federal Acquisition Regulation (FAR) and Defense FAR Supplement (DFARS) clauses, except those clauses based upon requirements of law, for contracts or agreements made by contracting activities outside the United States for the acquisition of support services and incidental supplies, and construction.  This class deviation is limited to contracts or agreements:
(1) between the Government of the United States and other NATO governments; or
(2) between the Government of the United States and any government not a member of NATO from which the Department of Defense can acquire logistical support, supplies, and services under section 2341 of title 10, United States Code.  It includes countries that--
(a) have a defense alliance with the United States;
(b) permit the stationing of members of the armed forces in such county or the homeporting of naval vessels of the United States in such country;
(c) have agreed to preposition material of the United States in such country; or
(d) serve as the host country to military exercises which include elements of the armed forces or permits other military operations by the armed forces in such country;
(3) for which NATO and other non-NATO governments will not agree to the clauses.
B-6.1   February 3, 1995        AFAC 92-45
This deviation applies only to contract clauses and does not extend to internal or administrative contracting procedures prescribed by the FAR or DFARS.  In exercising this deviation authority, the contracting officer, in close coordination with legal counsel, shall incorporate clauses into the contract that protect the interests of the United States and are acceptable to both governments.
This class deviation is approved for a one-year period ending January 31, 1996, or until the DFARS is revised, whichever event occurs first.
AFAC 92-45      February 3, 1995        C-1
MEMORANDUM FOR ALMAJCOM-FOA-DRU (Directors of Contracting and
Competition Advocates)
FROM:  SAF/AQC
SUBJECT:        DD Form 350 Coding for Block C3, Extent Competed, for Awards to Nonprofit Institutions
We suspect that there might be some confusion about the proper DD Form 350 coding of contract awards to nonprofit institutions when the action is not competed.  Prior to DAC 88-14 in 1990, awards to nonprofit institutions were allowed to be coded "not available for competition."  This included awards to educational or other nonprofit institutions and federally funded research and development centers (FFRDCs).  However, DAC 88-14 changed the list at DFARS 253.204-70(c)(4)(iii) of what may be coded "B" in block C3, not available for competition, to include the following types of awards:
-Single source utility suppliers;
-Brand name commercial products for authorized resale;
-Qualified nonprofit agencies for the blind or handicapped when authorized or required by statute;
-Single source 8(a) firms when authorized or required by statute;
-Associated with international agreements;
-When the Director of Defense Procurement has determined that there is no opportunity for competition (we do not know of any applicable Air Force situations).
Awards for foreign military sales and awards to another Federal agency are not coded in Part C of the DD 350 but the database automatically includes those actions as not available for competition.
All other awards, including educational or other nonprofit institutions and FFRDCs, may only be coded "A," competed action; "C," follow-on to competed action; or "D," not competed.
C-1.1   February 3, 1995        AFAC 92-45
Directors of Contracting, please emphasize this to your contracting officers and contract review committees. Competition Advocates should note this when preparing command competition plans and forecasts of future competition statistics.
Questions about this may be directed to my action officer for competition advocacy, Anthony M. Lander, SAF/AQCX, DSN 224-5359,
e-mail landera@AQPO.HQ.AF.MIL.
CURTIS N. NEWILL III, COLONEL, USAF
AFAC 92-45      February 3, 1995        C-2
TECHNOLOGY                                     JAN 13 1995
SUBJECT:  Contract Debt Collection
The Inspector General has identified a number of problems associated with the contract debt collection process.  In order to ensure there is no confusion about procedures that must be followed, we have prepared the attached guidance.  Please ensure your contracting officers are furnished copies.
Roland A. Hanebrock
for Eleanor R. Spector
AFAC 92-45      February 3, 1995        C-2.1
CONTRACT DEBT COLLECTION
I.  DETERMINATION OF CONTRACT DEBTS
A.  RESPONSIBILITIES:
The contracting officer is responsible for determining the principal amount of most contract debts.  The Comptroller of the Department or agency concerned is responsible for accounting for debts, deciding on deferments, and collecting contract debts.
B.  ISSUANCE OF DEMANDS:
1.  Demands for payment shall be issued as soon as the contracting officer has determined the amount of refund due.  Such a determination is a final decision, and issuing "preliminary" decisions as a basis for demands for payment is prohibited.  If the contracting officer does not know the full extent of a debt (e.g., when there is a default termination), demand the amount known to be owed.  Inform the contractor of the incremental nature of the demand, and demand the remainder when the full amount becomes known.
2.  Demands for payment of debts shall be issued as business letters; they shall not be incorporated into contract modifications.  It is acceptable to include the demand in the contracting officer's final decision.  The demand shall comply with the requirements in FAR 32.610(b), and any other requirements of the FAR or DFARS related to the specific type of debt (e.g., FAR 15.804-7(b)(7) for defective pricing and FAR 30.602-2(c) for Cost Accounting Standards (CAS) noncompliances).   The demand shall direct the contractor to make payment for the debt to the payment office or, in the case of terminations for default, to the accounting office.
3.  Even though a debt will be the subject of a bilateral modification, the contracting officer must still issue a demand for payment.  The best practice is to send the demand letter with the bilateral modification to the contractor for signature.
4.  The contracting officer shall send a copy of each demand to the payment office and request acknowledgement of receipt.  Contracting officers shall provide the payment office with a distribution of the principal amount of the debt by appropriation, preferably attached to the payment office copy of the demand letter (sic)  The deobligation of funds on an SF 30 (Amendment of Solicitation/Modification of Contract) does not provide sufficient notice of debt disposition.
C-2.2   February 3, 1995        AFAC 92-45
5.  The contracting officer shall follow-up periodically with the payment office to ensure that contract debts have been collected and credited to the proper appropriations.
C.  DEBTS ARISING FROM DEFECTIVE PRICING OR CAS NONCOMPLIANCES:
1.  Unlike most contract debts which accrue interest only if not paid within 30 days of the date of the contracting officer's demand, debts arising from defective pricing and CAS noncompliances have interest charges from the date of overpayment by the Government to the date of repayment by the contractor (see FAR 15.804-7(b)(7) and 30.602-2(c)(2)).  Therefore, when issuing a demand letter, the best practice is to identify separately the overpayment principal amount, the interest amount calculated through a specified date, and any penalty amount.  The demand letter should also include a statement that interest will continue to accrue until repayment is made.  A copy of this demand letter should be sent to the payment office.  The payment office will refund interest and penalty amounts to the U.S. Treasury, while principal amounts will be credited to the original appropriation or to Miscellaneous Receipts.
2.  The amount of the contract price reduction and the contract debt will not be the same.  For example, if defective pricing is found after partial deliveries have been paid for by the Government, the contracting officer must calculate the debt--i.e., the amount of overpayment, interest on the overpayment through a specified date, and any penalty amount(sic)  The contract price will be reduced by the total amount of defective pricing determined by the contracting officer.
3.  Interest and penalty assessments for defective pricing and CAS noncompliances are required by statute.  These amounts cannot be negotiated away in the "bottom line" settlements, and contracting officers are not authorized to waive these charges or offset them against amounts owed the contractor.  Contracting officers may not accept credits or adjustments on contracts not affected by defective pricing or CAS noncompliances instead of obtaining price reductions on the affected contracts.  Such action could result in illegal augmentation of appropriations.
II.  COMPROMISE, WAIVER, OR SUSPENSION OF DEBTS, INTEREST, OR PENALTIES
A.  AUTHORITY:
Contracting officers do not have the authority to compromise, waive, or suspend collection of a debt.  Any decision to suspend or defer collection action, accept an installment payment arrangement, or compromise the amount of the debt must be
AFAC 92-45      February 3, 1995        C-2.3
made by the Contract Financing Office or, in some situations, by the General Accounting Office.  Contractor requests for any type of deferment or compromise of a debt should be handled expeditiously in accordance with the procedures at FAR 32.613, 32.616, and DFARS 232.616.  The contracting officer shall forward deferment requests to the Contract Financing Office of the Department or agency for a decision on granting the deferment in accordance with DFARS 232.610(b)(3).  Contract Financing Offices are set forth at DFARS 232.108.
B.  PAYMENT OF DEBTS:
1.  The contractor shall be required to liquidate debts either by cash payment in a lump sum on demand, or by credit against unpaid bills due the contractor, unless an agreement has been entered into to defer collection (see FAR 32.606(d)).  A credit memorandum (also known as a credit invoice) is a request by the contractor that the Government collect the debt by offset against unpaid bills due the contractor.  Such requests should be forwarded to the payment office.  Upon receipt of a credit memorandum, the payment office will offset the debt against current invoices due and payable.  If the debt is not immediately and fully collected by that offset, the contractor is still in debt for the remainder, and interest still accrues.  The payment office should notify the contractor of the continued existence of the debt and the accruing interest on the unpaid balance.
2.  If the contracting officer receives the contractor's check, it should immediately be sent to the payment office, with a request for confirmation of receipt.
AFAC 92-45      February 3, 1995        C-3
TECHNOLOGY                                     JAN 23 1995
EXECUTIVE DIRECTOR, CONTRACT MANAGEMENT, DLA-A
SUBJECT:  Accounting for Impairment of Long-Lived Assets
The Financial Accounting Standards Board (FASB) plans to issue a Statement of Financial Accounting Standards (SFAS) entitled "Accounting for the Impairment of Long-Lived Assets" on February 15, 1995.  The new rule will apply to all financial statements issued for fiscal years beginning after June 15, 1995.  It will address accounting for impairment of long-lived assets, identifiable intangibles, and goodwill related to those assets and will establish guidance to recognize and measure impairment losses.
The SFAS will require the carrying amount of long-lived assets (such as land, buildings, and equipment) to be reduced to fair value when events or circumstances (e.g., environmental damage, idle facilities arising from a declining business base) indicate that their carrying amounts may not be fully recoverable.
Measurement of an impairment loss for long-lived assets and identifiable intangibles that an entity expects to hold and use will be based on the fair value of the asset.  In contrast, assets that are to be disposed of, with certain exceptions, will be reported at the lower of cost or fair value less cost to sell.  Once written down, the previous carrying amount of an asset may not be restored if the impairment is subsequently removed.
The pending rule will not apply to Government contracting.  The Department of Defense will continue to follow the provisions of the Cost Accounting Standards (CAS) and Federal Acquisition Regulations (FAR) regarding asset valuation, depreciation and amortization.
C-3.1   February 3, 1995        AFAC 92-45
CAS 9904.409, "Depreciation of Tangible Capital Assets," provides guidance for assigning costs of tangible capital assets to the proper cost accounting periods; allocating such costs to cost objectives; and recognizing and measuring gains and losses.  The language at CAS 9904.409-40(a)(4) and (b)(4), 9904-409-50(j), and related Promulgation Comment 10, "Gain or Loss," makes it clear that a gain or loss is recognized only upon disposition of an asset; no other circumstances trigger such recognition.
FAR 31.205-16, "Gains and losses on disposition of depreciable property and other capital assets," reflects the CAS requirement that an asset be disposed of in order to recognize a gain or loss.  The FAR rule applies to both CAS and non-CAS covered contracts.
Consequently, for Government contracting purposes, an impairment loss is recognized only upon disposal of the impaired asset and, like other losses, it is measured as the difference between the new amount realized and the impaired asset's undepreciated balance (see CAS 9904.409-50(j)(1) and FAR 31.205-16(b)).  Until an impaired asset is disposed of, its pre-write-down carrying value shall continue to be recoverable under its established depreciation schedule as though no impairment had occurred.
We are preparing a minor change to FAR 31.205-16 to clarify current policy regarding the treatment of impaired asset losses.  In the interim, it may be advisable for contracting officers to negotiate advance agreements with contractors contemplating impaired asset write-downs within the next calendar year.  Please ensure this guidance memorandum is disseminated to all field offices.