Federal Acquisition Regulations; Payment of Subcontractors, 93481-93488 [2016-30221]
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Federal Register / Vol. 81, No. 244 / Tuesday, December 20, 2016 / Rules and Regulations
(2) * * *
(viii) 52.244–6, Subcontracts for
Commercial Items (JAN 2017).
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■ 7. Add section 52.224–3 to read as
follows:
52.224–3
Privacy Training.
As prescribed in 24.302(a), insert the
following clause:
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Privacy Training (JAN 2017)
(a) Definition. As used in this clause,
personally identifiable information means
information that can be used to distinguish
or trace an individual’s identity, either alone
or when combined with other information
that is linked or linkable to a specific
individual. (See Office of Management and
Budget (OMB) Circular A–130, Managing
Federal Information as a Strategic Resource).
(b) The Contractor shall ensure that initial
privacy training, and annual privacy training
thereafter, is completed by contractor
employees who—
(1) Have access to a system of records;
(2) Create, collect, use, process, store,
maintain, disseminate, disclose, dispose, or
otherwise handle personally identifiable
information on behalf of an agency; or
(3) Design, develop, maintain, or operate a
system of records (see also FAR subpart 24.1
and 39.105).
(c)(1) Privacy training shall address the key
elements necessary for ensuring the
safeguarding of personally identifiable
information or a system of records. The
training shall be role-based, provide
foundational as well as more advanced levels
of training, and have measures in place to
test the knowledge level of users. At a
minimum, the privacy training shall cover—
(i) The provisions of the Privacy Act of
1974 (5 U.S.C. 552a), including penalties for
violations of the Act;
(ii) The appropriate handling and
safeguarding of personally identifiable
information;
(iii) The authorized and official use of a
system of records or any other personally
identifiable information;
(iv) The restriction on the use of
unauthorized equipment to create, collect,
use, process, store, maintain, disseminate,
disclose, dispose or otherwise access
personally identifiable information;
(v) The prohibition against the
unauthorized use of a system of records or
unauthorized disclosure, access, handling, or
use of personally identifiable information;
and
(vi) The procedures to be followed in the
event of a suspected or confirmed breach of
a system of records or the unauthorized
disclosure, access, handling, or use of
personally identifiable information (see OMB
guidance for Preparing for and Responding to
a Breach of Personally Identifiable
Information).
(2) Completion of an agency-developed or
agency-conducted training course shall be
deemed to satisfy these elements.
(d) The Contractor shall maintain and,
upon request, provide documentation of
completion of privacy training to the
Contracting Officer.
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(e) The Contractor shall not allow any
employee access to a system of records, or
permit any employee to create, collect, use,
process, store, maintain, disseminate,
disclose, dispose or otherwise handle
personally identifiable information, or to
design, develop, maintain, or operate a
system of records unless the employee has
completed privacy training, as required by
this clause.
(f) The substance of this clause, including
this paragraph (f), shall be included in all
subcontracts under this contract, when
subcontractor employees will—
(1) Have access to a system of records;
(2) Create, collect, use, process, store,
maintain, disseminate, disclose, dispose, or
otherwise handle personally identifiable
information; or
(3) Design, develop, maintain, or operate a
system of records.
(End of clause)
Alternate I (JAN 2017). As prescribed
in 24.302(b), if the agency specifies that
only its agency-provided training is
acceptable, substitute the following
paragraph (c) for paragraph (c) of the
basic clause:
(c) The contracting agency will provide
initial privacy training, and annual privacy
training thereafter, to Contractor employees
for the duration of this contract.
8. Amend section 52.244–6 by—
a. Revising the date of the clause;
■ b. Redesignating paragraphs (c)(1)(xv)
through (xvii) as paragraphs (c)(1)(xvi)
through (xviii), respectively; and
■ c. Adding a new paragraph (c)(1)(xv).
The revisions and additions read as
follows:
■
■
52.244–6
Items.
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Subcontracts for Commercial
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(c)(1) * * *
(xv)(A) 52.224–3, Privacy Training
(JAN 2017) (5 U.S.C. 552a) if flow down
is required in accordance with 52.224–
3(f).
(B) Alternate I (JAN 2017) of 52.224–
3, if flow down is required in
accordance with 52.224–3(f) and the
agency specifies that only its agencyprovided training is acceptable).
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[FR Doc. 2016–30213 Filed 12–19–16; 8:45 am]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Parts 1, 19, 42, and 52
[FAC 2005–94; FAR Case 2014–004; Item
II; Docket No. 2014–0004; Sequence No. 1]
RIN 9000–AM98
Federal Acquisition Regulations;
Payment of Subcontractors
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
AGENCY:
DoD, GSA, and NASA are
issuing a final rule amending the
Federal Acquisition Regulation (FAR) to
implement a section of the Small
Business Jobs Act of 2010. This statute
requires contractors to notify the
contracting officer, in writing, if the
contractor pays a reduced price to a
small business subcontractor or if the
contractor’s payment to a small business
subcontractor is more than 90 days past
due.
DATES: Effective: January 19, 2017.
FOR FURTHER INFORMATION CONTACT: Mr.
Curtis E. Glover, Sr., Procurement
Analyst, at 202–501–1448 for
clarification of content. For information
pertaining to status or publication
schedules, contact the Regulatory
Secretariat Division at 202–501–4755.
Please cite FAC 2005–94, FAR Case
2014–004.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
Subcontracts for Commercial Items
(JAN 2017)
BILLING CODE 6820–EP–P
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DoD, GSA, and NASA are issuing a
final rule to implement section 1334 of
the Small Business Jobs Act of 2010
(Pub. L. 111–240, 15 U.S.C. 637(d)(12))
and the Small Business Administration
(SBA) final rule published in the
Federal Register on July 16, 2013 at 78
FR 42391, which require prime
contractors to self-report late or reduced
payments to their small business
subcontractors. The rule also requires
contracting officers to record the
identity of contractors with a history of
late or reduced payments to small
business subcontractors in the Federal
Awardee Performance and Integrity
System (FAPIIS). DoD, GSA, and NASA
published a proposed rule in the
Federal Register on January 20, 2016 at
81 FR 3087. Seven respondents
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reference in the proposed rule to FAR
part 19 (‘‘see 19.701’’) does not run
contrary to FAR drafting conventions;
however, the language is changed to ‘‘as
defined in 19.701’’ versus ‘‘see 19.701.’’
submitted comments on the proposed
rule.
II. Discussion and Analysis
The Civilian Agency Acquisition
Council and the Defense Acquisition
Regulations Council (the Councils)
reviewed the public comments in the
development of the final rule. A
discussion of the comments and
changes made to the rule as a result of
those comments are provided as
follows:
A. Summary of Significant Changes
From the Proposed Rule
1. A reporting window of 14 days is
added to FAR clause 52.242–5,
Payments to Small Business
Contractors, for prime contractors to
report to the contracting officer an
untimely or reduced payment, as
defined in the rule, made to their small
business subcontractors.
2. The following examples of payment
and nonpayment situations not
considered to be unjustified are added
at FAR 42.1502(g)(2)(ii):
• There is a contract dispute on
performance.
• Partial payment is made for
amounts not in dispute.
• A payment is reduced due to past
overpayments.
• There is an administrative mistake.
• Late performance by the
subcontractor leads to later payment by
the prime contractor.
3. A reference to FAR clause 52.242–
5 was added to paragraph (b) of the
clause at FAR 52.212–5, Contract Terms
and Conditions Required to Implement
Statutes or Executive Orders—
Commercial Items.
B. Analysis of Public Comments
1. Definitions. Multiple respondents
commented on the definitions included
in the proposed rule.
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a. Location of Definitions
Comment: One respondent requested
the location of the definitions for
‘‘reduced payment’’ and ‘‘untimely
payment’’ be moved to either FAR
subpart 2.1 or included within a new
definitions section in FAR subpart
42.15. The respondent also stated that
the parenthetical ‘‘see 19.701’’ was
contrary to FAR drafting conventions.
Response: The two definitions
included in the rule are not used
substantially throughout the FAR and
have only an indirect connection to FAR
part 42. Accordingly, the definitions are
not added to either FAR part 2 or FAR
part 42; they are instead retained in FAR
part 19 and section 52.242–5 (as
presented in the proposed rule). The
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b. Revise Definitions
Comment: One respondent
recommended that the definitions for
‘‘reduced payment’’ and ‘‘untimely
payment’’ be revised to include
information regarding the statutorilymandated standards set forth in FAR
52.232–27(c) relating to payment of
construction subcontractors and
suppliers.
Response: The statutorily-mandated
standards set forth in FAR 52.232–27(c)
stand on their own, are not integral to
the explanation or meaning of the terms
‘‘reduced payment’’ and ‘‘untimely
payment,’’ and need not be repeated in
their respective definitions.
Comment: A number of respondents
recommended that the definitions of
‘‘reduced payment’’ and ‘‘untimely
payment’’ be revised to reflect those
instances where the subcontractor has
not completed their obligations under
the contract. One respondent stated that
the SBA rule made this abundantly
clear, that the prime contractor should
be required to report only those events
that arise when the small business
subcontractor is otherwise entitled to
full and prompt payment (as assessed by
the prime contractor), but the prime
contractor is unable or unwilling to
make such payments. Another
respondent stated that under both of
these definitions, the determination of
whether a prime contractor payment is
either reduced or untimely ultimately
hinges upon ‘‘the terms and conditions
of a subcontract.’’ The terms and
conditions concerning how much and
when a subcontractor is paid under a
subcontract can vary greatly between
such contracts. Still, another respondent
believed that the proposed rule should
contain additional clarification that a
payment should not be considered past
due if the payment is delayed by the late
performance of the subcontractor.
According to the respondent,
contractors often accept late
performance of subcontracts and then
accordingly pay later according to the
payment terms of the subcontract, but
do not necessarily modify the
subcontract to reflect the later
performance date. Another respondent
believed that the proposed rule, as
written, provides unclear guidance to
contracting officers because the
definition of ‘‘unjustified reduced or
untimely payments’’ is vague, and asked
the FAR Council to provide a more
complete definition of what constitutes
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an unjustified payment. For example,
the rule should clarify the impact of
systems errors, third-party errors, or
administrative errors. Still another
respondent recommended that the
Councils define ‘‘unjustifiable’’ late or
reduced payments as a material breach
of the terms and conditions of the
subcontract and provide examples of
what constitutes a material breach
under Federal case law.
Response: The definitions of ‘‘reduced
payment’’ and ‘‘untimely payment’’ are
meant to convey a reasonable
explanation and meaning of those terms.
No additional language is necessary in
the definition; however, the final rule at
FAR 42.1502(g)(2)(ii) includes examples
of payment and nonpayment situations
that are not considered to be unjustified.
Due to privity of contract it is generally
not the contracting officer’s
responsibility to determine if a material
breach of a subcontract has occurred.
2. Existing statutory and regulatory
requirements.
Comment: One respondent stated that
existing statutory and regulatory
requirements governing prime
contractor and subcontractor payments
already satisfy the intent of this
regulation.
Response: In accordance with section
1334 of the Small Business Jobs Act of
2010, the rule offers additional
protections for the small business
community in regard to payments from
prime contractors and is required by
statute. Accordingly, there is no
reasonable basis for withdrawing the
rule.
3. Reporting requirements.
Multiple respondents commented on
the reporting requirements of the
proposed rule.
Comment: One respondent asked if
there was guidance on the time period
for the prime contractor to report a late
or reduced payment to the contracting
officer.
Response: The final rule requires the
prime contractor to report within 14
days any occurrences of untimely or
reduced payments to their small
business subcontractors.
Comment: Several respondents stated
that a different methodology should be
used to determine the number of
occurrences of late or reduced payments
that are reportable in the FAPIIS system.
For example, one prime contractor
makes 10,000 payments a year, but
another makes 10. The history of
unjustified payments should not be set
at ‘‘three’’, but should be scalable,
proportional to the number of payments
made.
Response: The final rule is consistent
with SBA’s final rule published on July
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16, 2013, which defines a history of
unjustified untimely or reduced
payments as three incidents within a 12month period. This final rule clarifies at
FAR 42.1502(g)(2)(ii) that the incidents
are under a single contract.
4. Subcontracting plan dollar
threshold.
Comment: One respondent
commented the small business
subcontracting plan threshold cited in
the analysis for application of the rule
was inconsistent (e.g., $650,000 versus
$700,000).
Response: Concur.
5. Applicability (subcontractor tiers).
Comment: One respondent asked if
the proposed rule applied to
subcontractor payments at all tiers.
Response: The rule applies to prime
contractor payments made to first-tier
small business subcontractors.
6. Contracting officer’s
responsibilities.
Several respondents commented on
the additional contracting officer
responsibilities and offered alternate
procedures.
Comment: Two respondents requested
that the agency counsel and not the
contracting officer determine whether a
late or reduced payment conforms to the
terms and conditions of the contract.
Response: It is the contracting
officer’s responsibility to ensure
compliance with the terms of the
contract; however, per FAR 1.602–2(c),
contracting officers can request and
consider the advice of specialists in
audit, law, engineering, information
security, transportation, and other
fields, as appropriate, when making a
determination regarding a late or
reduced payment.
7. Additional guidance to contracting
officers.
Comment: Two respondents stated the
rule should provide more guidance to
contracting officers in regards to issues
that may arise when dealing with the
reduced or late payments situation in
contracts.
Response: This type of additional
guidance would largely be nonregulatory, falling under agency
procedures and training, which are
outside the scope of this rule. As stated
previously, per FAR 1.602–2(c),
contracting officers can request and
consider the advice of specialists in
audit, law, engineering, information
security, transportation, and other
fields, as appropriate, when making a
determination regarding a late or
reduced payment.
Comment: One respondent
commented that adding additional
responsibilities to the contracting officer
while the Government is focused on
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ensuring the timely submittal of past
performance evaluations will only lead
to lesser quality evaluations.
Response: There is no basis for
concluding that the requirements of this
rule will impact the timely submittal of
past performance evaluations.
8. Government-caused delays.
Comment: One respondent requested
language to note situations in which the
Government causes delays in
subcontractor payments by changing the
scope of the contract, by making late
payments to the prime contractor, etc.
Response: The FAR already contains
adequate policy on Government-caused
delays and changes to contract terms
and conditions. In addition, as stated
previously, the final rule includes the
specific examples of payment and
nonpayment situations that are not
considered to be unjustified.
9. Penalties.
Comment: One respondent asked
what penalties prime contractors will
face for failing to self-report instances of
non-compliance.
Response: Government penalties are
beyond the scope of this rule. However,
the requirements of this rule (in
addition to other Government rights and
remedies) permit the contracting officer
to issue an adverse past performance
assessment for noncompliance with
FAR 52.219–9(a)(15), based upon
individual circumstances.
10. Incentivizing prime contractor
compliance.
Comment: One respondent
commented that prime contractors
should be incentivized to make reduced
payments to small business
subcontractors, rather than withhold
payments when a dispute arises
between the prime contractor and small
business subcontractor. Unlike a late
payment, the proposed rule does not
expressly grant a 90-day window in
which to resolve a reduced payment
that may arise for a legitimate reason
(i.e., substandard performance or
nonconforming parts).
According to the respondent, because
the rule does not address when a prime
contractor must report a reduced
payment to the contracting officer, one
might interpret the rule to require an
immediate report by the prime
contractor to the contracting officer
upon making a reduced payment.
However, requiring the prime
contractor to report a reduced payment
immediately creates a disincentive for
prime contractors to make a reduced
rather than late payment, as the
obligation to report a late payment does
not arise for a minimum of 90 days past
the original due date.
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Response: Reduced payments as a
result of a dispute on performance
between a prime contractor and a small
business contractor would not fall
within the definition of ‘‘reduced
payment.’’ However, the rule does
contain a reporting window of 14 days
for prime contractors to report to the
contracting officer untimely or reduced
payments, as defined in the rule, made
to their small business subcontractors.
This 14-day reporting timeline was
added to the rule as a result of public
comments. Moreover, the rule does not
prohibit prime contractors from making
reduced payments to their small
business subcontractors.
11. Commercial items and
commercially available off-the-shelf
items.
Comment: Several respondents
commented that the FAR Council
should reconsider the application of this
rule to commercial and COTS item
providers. One respondent commented
that given the Government’s stated
preference for ‘‘commercial plans’’ in
FAR 52.219–9(g) for commercial item
contractors (including commercially
available off-the-shelf (COTS)
contractors), it is likely that most
commercial item and COTS contractors
have commercial subcontracting plans.
These commercial plans apply to the
contractor’s entire commercial
organization, which in many cases,
includes only a minimal amount of sales
to the Federal Government. These
commercial plans apply to virtually
every subcontractor or supplier from
which a contractor purchases supplies
or services, whether or not those
supplies or services are used in the
performance of government contracts.
Another respondent commented that
over the last decade, the procurement
community has seen the erosion of
commercial item contracting (in
accordance with 41 U.S.C. 1906) and the
benefits attendant thereto, as well as
layering onto the commercial item
contracting process Government unique
requirements that have increased costs
and raised barriers to entry into the
Federal marketplace. Another
respondent stated that applying the rule
to commercial and COTS item providers
would not be in the best interests of the
Government, and would run contrary to
ongoing attempts by Government policy
makers to streamline the acquisition
process for the acquisition of
commercial and COTS items to reduce
the number of unique government rules
applicable to large and small businesses
providing commercial and COTS
supplies and services, and to introduce
more commercial innovation and
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technology into the federal business
market.
Response: The FAR Council has
determined that the rule should, as a
matter of policy, apply to contracts for
the acquisition of commercial items and
COTS items. See section III of this
preamble.
Comment: One respondent
commented that FAR clause 52.242–5
was not added to the list of clauses in
FAR 52.212–5 regarding commercial
items.
Response: The final rule adds FAR
clause 52.242–5 to the list of clauses in
FAR 52.212–5 regarding application to
commercial items.
12. Public burden.
Comment: Two respondents stated
that the Councils had underestimated
the public burden in regards to the
proposed rule. One respondent
commented that the FAR Council has
greatly underestimated the
implementation burden on commercial
item and COTS item contractors,
especially considering the broad
definition of ‘‘subcontractor’’ that
applies to the proposed rule. The other
respondent believed that the estimate of
reporting time of only two hours per
respondent is grossly underestimated.
This negligible amount of time assumes
that all contractors can easily identify
from their payment systems which
subcontractors are small businesses. The
respondent believed that this is often
not the case, and that the small business
size status of a subcontractor may be
unknown to the contractor’s other
accounting systems. The other
respondent commented that since the
Small Business Jobs Act of 2010 does
not specifically require that the
subcontractor payment clause apply to
commercial contracts, the respondent
recommended that the FAR Council
seek additional information about the
burden on contractors before a
determination is made to apply the
payment of subcontractor requirements
to commercial item acquisitions. The
respondent did not find that the
availability of limited information
indicated that the burden may not be
significant, as described in the proposed
rule. Rather, initial feedback from
contractors suggested that the burdens
associated with reporting under the rule
will have a significant impact.
Response: The respondents do not
offer data with which to support
changing the current estimated public
burden hours. However, since this is a
new rule without an empirical frame of
reference, the public reporting burden is
reviewed every three years and can be
adjusted as necessary.
13. Convene industry working group.
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Comment: One respondent
commented that the FAR Council
should convene an industry working
group in order to gain a better
understanding of some of the more
nuanced aspects of the subcontractor
payment requirement.
Response: The Councils do not concur
that such a working group is necessary
at this time.
C. Other Changes
The following changes were made,
not as a result of public comments:
1. FAR 1.106 was amended to add the
OMB Control Number associated with
FAR clause 52.242–5.
2. Minor editorial changes were made
for grammatical reasons or to conform to
FAR drafting conventions.
III. Applicability to Contracts for
Commercial Items and Commercially
Available Off-the-Shelf Items
The Federal Acquisition Regulatory
(FAR) Council has made the following
determinations with respect to the rule’s
application of Section 1334 of the Small
Business Jobs Act of 2010, to contracts
for the acquisition of commercial items
and contracts for the acquisition of
commercially available off-the-shelf
(COTS) items.
A. Applicability to Contracts for the
Acquisition of Commercial Items
Pursuant to 41 U.S.C. 1906,
acquisitions of commercial items (other
than acquisitions of COTS items, which
are addressed in 41 U.S.C. 1907) are
exempt from a provision of law unless
the law (i) contains criminal or civil
penalties; (ii) specifically refers to 41
U.S.C. 1906 and states that the law
applies to acquisitions of commercial
items; or (iii) the FAR Council makes a
written determination and finding that
it would not be in the best interest of the
Federal Government to exempt contracts
for the procurement of commercial
items from the provision of law. If none
of these conditions are met, the FAR is
required to include the statutory
requirement(s) on a list of provisions of
law that are inapplicable to acquisitions
of commercial items.
The purpose of this rule is to
implement section 1334 of the Small
Business Jobs Act of 2010. Section 1334
requires prime contractors to self-report
late or reduced payments to their small
business subcontractors. The rule also
requires contracting officers to record
the identity of contractors with a history
of late or reduced payments to small
business subcontractors in the Federal
Awardee Performance and Integrity
System (FAPIIS).
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The statutory requirements are
reflected in the Small Business
Administration’s (SBA’s) final rule
published at 78 FR 42391 on July 16,
2013, which did not exempt
acquisitions of commercial items.
The law is silent on the applicability
of these requirements to acquisitions of
commercial items and does not
independently provide for criminal or
civil penalties; nor does it include terms
making express reference to 41 U.S.C.
1906 and its application to acquisitions
of commercial items. Therefore, it does
not apply to acquisitions of commercial
items unless the FAR Council makes a
written determination as provided in 41
U.S.C. 1906.
The law furthers the administration’s
goal of supporting small business and
advances the interests of small business
subcontractors by discouraging reduced
or untimely payments to small business
subcontractors. Exclusion of
acquisitions for commercial items from
these requirements will limit the full
implementation of these subcontractingrelated objectives. Further, the primary
FAR clauses implementing Federal
procurement policies governing
subcontracting with small business,
FAR 52.219–8, Utilization of Small
Business Concerns, and 52.219–9, Small
Business Subcontracting Plan, are
currently prescribed for use in
solicitations for commercial items.
Exclusion of acquisitions for
commercial items from these
requirements would create confusion
among contractors and the Federal
contracting workforce. Moreover, the
rule may also increase the timeliness of
payments to small business
subcontractors.
For these reasons, it is in the best
interest of the Federal Government to
apply the requirements of the rule to the
acquisition of commercial items.
B. Applicability of Contracts for the
Acquisition of COTS Items
Pursuant to 41 U.S.C. 1907,
acquisitions of COTS items will be
exempt from a provision of law unless
the law (i) contains criminal or civil
penalties; (ii) specifically refers to 41
U.S.C. 1907 and states that the law
applies to acquisitions of COTS items;
(iii) concerns authorities or
responsibilities under the Small
Business Act (15 U.S.C. 644) or bid
protest procedures developed under the
authority of 31 U.S.C. 3551 et seq., 10
U.S.C. 2305(e) and (f), or 41 U.S.C. 3706
and 3707; or (iv) the Administrator for
Federal Procurement Policy makes a
written determination and finding that
would not be in the best interest of the
Federal Government to exempt contracts
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for the procurement of COTS items from
the provision of law. If none of these
conditions are met, the FAR is required
to include the statutory requirement(s)
on a list of provisions of law that are
inapplicable to acquisitions of COTS
items.
The purpose of this rule is to
implement section 1334 of the Small
Business Jobs Act of 2010. Section 1334
requires prime contractors to self-report
late or reduced payments to their small
business subcontractors. The rule also
requires contracting officers to record
the identity of contractors with a history
of late or reduced payments to small
business subcontractors in FAPIIS.
These statutory requirements are
reflected in the SBA final rule published
at 78 FR 42391 on July 16, 2013, which
did not exempt acquisitions of COTS
items.
The law is silent on the applicability
of these requirements to acquisitions of
COTS items and does not independently
provide for criminal or civil penalties;
nor does it include terms making
express reference to 41 U.S.C. 1907 and
its application to acquisitions of COTS
items. Therefore, it does not apply to
acquisitions of COTS items unless the
Administrator for Federal Procurement
Policy makes a written determination as
provided in 41 U.S.C. 1907.
The law furthers the Administration’s
goal of supporting small business and
advances the interests of small business
subcontractors by discouraging reduced
or untimely payments to small business
subcontractors. Exclusion of a large
segment of Federal contracting, such as
acquisitions for COTS items, will limit
the full implementation of these
subcontracting-related objectives.
Further, the primary FAR clauses
implementing Federal procurement
policies governing subcontracting with
small business, FAR 52.219–8,
Utilization of Small Business Concerns,
and 52.219–9, Small Business
Subcontracting Plan, are currently
prescribed for use in solicitations for
COTS items. Exclusion of acquisitions
for COTS items from these requirements
would create confusion among
contractors and the Federal contracting
workforce. Moreover, the rule may also
increase the timeliness of payments to
small business subcontractors.
For these reasons, it is in the best
interest of the Federal Government to
apply the subcontracting requirements
to the acquisition of COTS items.
IV. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and
13563 direct agencies to assess all costs
and benefits of available regulatory
alternatives and, if regulation is
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necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). E.O. 13563 emphasizes the
importance of quantifying both costs
and benefits, of reducing costs, of
harmonizing rules, and of promoting
flexibility. This is a significant
regulatory action and, therefore, was
subject to review under section 6(b) of
E.O. 12866, Regulatory Planning and
Review, dated September 30, 1993. This
rule is not a major rule under 5 U.S.C.
804.
V. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared
a final regulatory flexibility analysis
(FRFA) consistent with the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. The
FRFA is summarized as follows:
Section 1334 of the Small Business Jobs
Act of 2010 (Pub. L. 111–240) and the Small
Business Administration’s final rule at 78 FR
42391, Small Business Subcontracting,
published July 16, 2013, require that the
prime contractor self-report when the prime
contractor makes reduced or untimely
payments to small business subcontractors.
Section 1334 also requires the contracting
officer to record the identity of contractors
with a history of unjustified reduced or
untimely payments in the Federal Awardee
Performance and Integrity System (FAPIIS).
This final rule implements the selfreporting requirements of section 1334 by
requiring contracting officers to include FAR
clause 52.242–5, Payments to Small Business
Subcontractors, in all solicitations and
contracts containing the clause at 52.219–9,
Small Business Subcontracting Plan. The
new FAR clause requires prime contractors to
notify the contracting officer of reduced or
untimely payments to small business
subcontractors.
The rule also amends FAR 42.1503(h) to
require contracting officers to report to
FAPIIS a contractor that has a history of three
or more reduced or untimely payments to
small business subcontractors within a 12month period under a single contract that are
unjustified. FAR 42.1503, Table 42–2 is also
amended to include unjustified reduced or
untimely payments to small business
subcontractors as part of the definition of
ratings for the ‘‘small business
subcontracting’’ past performance evaluation
factors.
There were no public comments received
on the initial regulatory flexibility analysis.
The final rule applies to payments made to
small businesses that are first-tier
subcontractors to prime government
contractors. There will be no burden on small
businesses, as small businesses do not have
subcontracting plans. This regulation will
benefit small business subcontractors by
encouraging large business prime contractors
to pay small business subcontractors in a
timely manner and the agreed upon
contractual price.
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93485
This rule imposes new recordkeeping and
reporting requirements and contains
information collection requirements. Small
businesses are not required to report under
this information collection because it only
applies to prime contractors whose contracts
contain the clause 52.219–9, Small Business
Subcontracting Plan, which is not applicable
to small businesses.
The rule does not duplicate, overlap, or
conflict with any other Federal rules.
Interested parties may obtain a copy
of the FRFA from the Regulatory
Secretariat Division. The Regulatory
Secretariat Division has submitted a
copy of the FRFA to the Chief Counsel
for Advocacy of the Small Business
Administration.
VI. Paperwork Reduction Act
The Paperwork Reduction Act (44
U.S.C. Chapter 35) applies. The rule
contains information collection
requirements. OMB has cleared this
information collection requirement
under OMB Control Number 9000–0196,
titled: ‘‘Payments to Small Business
Subcontractors.’’
List of Subjects in 48 CFR Parts 1, 19,
42, and 52.
Government procurement.
Dated: December 9, 2016.
William F. Clark,
Director, Office of Governmentwide
Acquisition Policy, Office of Acquisition
Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA are
amending 48 CFR parts 1, 19, 42, and
52 as set forth below:
■ 1. The authority citation for 48 CFR
parts 1, 19, 42, and 52 continues to read
as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 51 U.S.C. 20113.
PART 1—FEDERAL ACQUISITION
REGULATIONS SYSTEM
1.106
[Amended]
2. Amend section 1.106 by adding to
the table, in numerical sequence, FAR
segment ‘‘52.242–5’’ and its
corresponding OMB Control No. ‘‘9000–
0196’’.
■
PART 19—SMALL BUSINESS
PROGRAMS
3. Amend section 19.701 by adding, in
alphabetical order, the definitions of
‘‘Reduced payment’’ and ‘‘Untimely
payment’’ to read as follows:
■
19.701
Definitions.
*
*
*
*
*
Reduced Payment means a payment
that is for less than the amount agreed
upon in a subcontract in accordance
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with its terms and conditions, for
supplies and services for which the
Government has paid the prime
contractor.
*
*
*
*
*
Untimely Payment means a payment
to a subcontractor that is more than 90
days past due under the terms and
conditions of a subcontract for supplies
and services for which the Government
has paid the prime contractor.
■ 4. Amend section 19.704 by—
■ a. Removing from paragraph (a)(13)
‘‘completion; and’’ and adding
‘‘completion;’’ in its place;
■ b. Removing from paragraph (a)(14)
‘‘subcontractor.’’ and adding
‘‘subcontractor; and’’ in its place; and
■ c. Adding paragraph (a)(15).
The addition reads as follows:
19.704
Subcontracting plan requirements.
(a) * * *
(15) Assurances that the offeror will
pay its small business subcontractors on
time and in accordance with the terms
and conditions of the subcontract, and
notify the contracting officer if the
offeror pays a reduced or an untimely
payment to a small business
subcontractor (see 52.242–5).
*
*
*
*
*
19.705–4
[Amended]
5. Amend section 19.705–4 by
removing from paragraphs (b) and (c)
the number ‘‘14’’ and adding ‘‘15’’ in
both places.
■
PART 42—CONTRACT
ADMINISTRATION AND AUDIT
SERVICES
6. Amend section 42.1502 by revising
paragraph (g) to read as follows:
■
42.1502
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*
*
Policy.
*
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*
*
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(g) Past performance evaluations shall
include an assessment of the
contractor’s—
(1) Performance against, and efforts to
achieve, the goals identified in the small
business subcontracting plan when the
contract includes the clause at 52.219–
9, Small Business Subcontracting Plan;
and
(2) Reduced or untimely payments (as
defined in 19.701), made to small
business subcontractors, determined by
the contracting officer to be unjustified.
The contracting officer shall—
(i) Consider and evaluate a
contractor’s written explanation for a
reduced or an untimely payment when
determining whether the reduced or
untimely payment is justified; and
(ii) Determine that a history of
unjustified reduced or untimely
payments has occurred when the
contractor has reported three or more
occasions of unjustified reduced or
untimely payments under a single
contract within a 12-month period (see
42.1503(h)(1)(vi) and the evaluation
ratings in Table 42–2). The following
payment or nonpayment situations are
not considered to be unjustified:
(A) There is a contract dispute on
performance.
(B) A partial payment is made for
amounts not in dispute.
(C) A payment is reduced due to past
overpayments.
(D) There is an administrative
mistake.
(E) Late performance by the
subcontractor leads to later payment by
the prime contractor.
*
*
*
*
*
■ 7. Amend section 42.1503 by—
■ a. Revising paragraphs (b)(2)(v) and
(b)(2)(vi);
■ b. Revising paragraph (h)(1)
introductory text;
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c. Revising paragraphs (h)(1)(iv) and
(h)(1)(v);
■ d. Adding paragraph (h)(1)(vi); and
■ e. Revising Table 42–2.
The revisions and addition read as
follows:
■
42.1503
Procedures.
*
*
*
*
*
(b)(1) * * *
(2) * * *
(v) Small business subcontracting,
including reduced or untimely
payments to small business
subcontractors when 19.702(a) requires
a subcontracting plan (as applicable, see
Table 42–2).
(vi) Other (as applicable) (e.g.,
trafficking violations, tax delinquency,
failure to report in accordance with
contract terms and conditions, defective
cost or pricing data, terminations,
suspension and debarments).
*
*
*
*
*
(h) * * *
(1) Agencies shall ensure information
is accurately reported in the FAPIIS
module of CPARS within 3 calendar
days after a contracting officer—
*
*
*
*
*
(iv) Makes a subsequent withdrawal
or a conversion of a termination for
default to a termination for
convenience;
(v) Receives a final determination
after an administrative proceeding, in
accordance with 22.1704(d)(1), that
substantiates an allegation of a violation
of the trafficking in persons prohibitions
in 22.1703(a) and 52.222–50(b); or
(vi) Determines that a contractor has
a history of three or more unjustified
reduced or untimely payments to small
business subcontractors under a single
contract within a 12-month period (see
42.1502(g)(2)).
*
*
*
*
*
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93487
TABLE 42–2—EVALUATION RATINGS DEFINITIONS
[For the small business subcontracting evaluation factor, when 52.219–9 is used]
Rating
Definition
Note
(a) Exceptional .....................
Exceeded all statutory goals or goals as negotiated.
Had exceptional success with initiatives to assist,
promote, and utilize small business (SB), small disadvantaged business (SDB), women-owned small
business (WOSB), HUBZone small business, veteran-owned small business (VOSB) and service disabled veteran owned small business (SDVOSB).
Complied with FAR 52.219–8, Utilization of Small
Business Concerns. Exceeded any other small business participation requirements incorporated in the
contract/order, including the use of small businesses
in mission critical aspects of the program. Went
above and beyond the required elements of the subcontracting plan and other small business requirements of the contract/order. Completed and submitted Individual Subcontract Reports and/or Summary Subcontract Reports in an accurate and timely
manner. Did not have a history of three or more unjustified reduced or untimely payments to small business subcontractors within a 12-month period.
Met all of the statutory goals or goals as negotiated.
Had significant success with initiatives to assist, promote and utilize SB, SDB, WOSB, HUBZone, VOSB,
and SDVOSB. Complied with FAR 52.219–8, Utilization of Small Business Concerns. Met or exceeded
any other small business participation requirements
incorporated in the contract/order, including the use
of small businesses in mission critical aspects of the
program. Endeavored to go above and beyond the
required elements of the subcontracting plan. Completed and submitted Individual Subcontract Reports
and/or Summary Subcontract Reports in an accurate
and timely manner. Did not have a history of three or
more unjustified reduced or untimely payments to
small business subcontractors within a 12-month period.
Demonstrated a good faith effort to meet all of the negotiated subcontracting goals in the various socioeconomic categories for the current period. Complied
with FAR 52.219–8, Utilization of Small Business
Concerns. Met any other small business participation
requirements included in the contract/order. Fulfilled
the requirements of the subcontracting plan included
in the contract/order. Completed and submitted Individual Subcontract Reports and/or Summary Subcontract Reports in an accurate and timely manner.
Did not have a history of three or more unjustified reduced or untimely payments to small business subcontractors within a 12-month period.
Deficient in meeting key subcontracting plan elements.
Deficient in complying with FAR 52.219–8, Utilization
of Small Business Concerns, and any other small
business participation requirements in the contract/
order. Did not submit Individual Subcontract Reports
and/or Summary Subcontract Reports in an accurate
or timely manner. Failed to satisfy one or more requirements of a corrective action plan currently in
place; however, does show an interest in bringing
performance to a satisfactory level and has demonstrated a commitment to apply the necessary resources to do so. Required a corrective action plan.
Did not have a history of three or more unjustified reduced or untimely payments to small business subcontractors within a 12-month period.
To justify an Exceptional rating, identify multiple significant events and state how they were a benefit to
small business utilization. A singular benefit, however, could be of such magnitude that it constitutes
an Exceptional rating. Small businesses should be
given meaningful and innovative work directly related
to the contract, and opportunities should not be limited to indirect work such as cleaning offices, supplies, landscaping, etc. Also, there should have been
no significant weaknesses identified
(b) Very Good ......................
(c) Satisfactory .....................
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(d) Marginal ..........................
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To justify a Very Good rating, identify a significant
event and state how it was a benefit to small business utilization. Small businesses should be given
meaningful and innovative opportunities to participate
as subcontractors for work directly related to the contract, and opportunities should not be limited to indirect work such as cleaning offices, supplies, landscaping, etc. There should be no significant weaknesses identified
To justify a Satisfactory rating, there should have been
only minor problems, or major problems the contractor has addressed or taken corrective action.
There should have been no significant weaknesses
identified. A fundamental principle of assigning ratings is that contractors will not be assessed a rating
lower than Satisfactory solely for not performing beyond the requirements of the contract/order
To justify a Marginal rating, identify a significant event
that the contractor had trouble overcoming and how it
impacted small business utilization. A Marginal rating
should be supported by referencing the actions taken
by the Government that notified the contractor of the
contractual deficiency.
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TABLE 42–2—EVALUATION RATINGS DEFINITIONS—Continued
[For the small business subcontracting evaluation factor, when 52.219–9 is used]
Rating
Definition
Note
(e) Unsatisfactory .................
Noncompliant with FAR 52.219–8 and 52.219–9, and
any other small business participation requirements
in the contract/order. Did not submit Individual Subcontract Reports and/or Summary Subcontract Reports in an accurate or timely manner. Showed little
interest in bringing performance to a satisfactory level
or is generally uncooperative. Required a corrective
action plan. Had a history of three or more unjustified
reduced or untimely payments to small business subcontractors within a 12-month period.
To justify an Unsatisfactory rating, identify multiple significant events that the contractor had trouble overcoming and state how it impacted small business utilization. A singular problem, however, could be of
such serious magnitude that it alone constitutes an
Unsatisfactory rating. An Unsatisfactory rating should
be supported by referencing the actions taken by the
Government to notify the contractor of the deficiencies. When an Unsatisfactory rating is justified,
the contracting officer must consider whether the
contractor made a good faith effort to comply with the
requirements of the subcontracting plan required by
FAR 52.219–9 and follow the procedures outlined in
FAR 52.219–16, Liquidated Damages-Subcontracting
Plan.
8. Add section 42.1504 to read as
follows:
■
42.1504
c. Adding paragraph (d)(15);
d. In Alternate III—
1. Revising the date of the Alternate;
and
■ 2. Removing from the introductory
paragraph of Alternate III ‘‘clause;’’ and
adding ‘‘clause:’’ in its place; and
■ e. In Alternate IV—
■ 1. Revising the date of the Alternate;
and
■ 2. Adding paragraph (d)(15).
The revisions and additions read as
follows:
(15) Assurances that the offeror will pay its
small business subcontractors on time and in
accordance with the terms and conditions of
the underlying subcontract, and notify the
contracting officer when the prime contractor
makes either a reduced or an untimely
payment to a small business subcontractor
(see 52.242–5).
52.219–9
Plan.
As prescribed in 42.1504, insert the
following clause:
■
■
■
Contract clause.
Insert the clause at 52.242–5,
Payments to Small Business
Subcontractors, in all solicitations and
contracts containing the clause at
52.219–9, Small Business
Subcontracting Plan.
PART 52—SOLICITATION AND
PROVISIONS AND CONTRACT
CLAUSES
9. Amend section 52.212–5 by—
a. Revising the date of the clause;
b. Revising the introductory text of
paragraph (b)(17)(i);
■ c. Redesignating paragraph (b)(60) as
(b)(61); and
■ d. Adding a new paragraph (b)(60).
The revisions and addition read as
follows:
■
■
■
*
Small Business Subcontracting
*
*
*
*
Small Business Subcontracting Plan
(JAN 2017)
(b) * * *
*
*
*
*
*
52.212–5 Contract Terms and Conditions
Required to Implement Statutes or
Executive Orders—Commercial Items.
Reduced payment means a payment that is
for less than the amount agreed upon in a
subcontract in accordance with its terms and
conditions, for supplies and services for
which the Government has paid the prime
contractor.
*
*
*
*
*
*
Contract Terms and Conditions
Required To Implement Statutes or
Executive Orders—Commercial Items
(JAN 2017)
(b) * * *
l(17)(i) 52.219–9, Small Business
Subcontracting Plan (JAN 2017) (15 U.S.C.
637(d)(4)).
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*
*
*
*
*
l(60) 52.242–5, Payments to Small
Business Subcontractors (JAN 2017)(15
U.S.C. 637(d)(12)).
*
*
*
*
*
10. Amend section 52.219–9 by—
a. Revising the date of the clause;
b. Adding in paragraph (b), in
alphabetical order, the definitions of
‘‘Reduced payment’’ and ‘‘Untimely
payment’’;
■
■
■
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*
*
*
*
Untimely payment means a payment to a
subcontractor that is more than 90 days past
due under the terms and conditions of a
subcontract for supplies and services for
which the Government has paid the prime
contractor.
(d) * * *
(15) Assurances that the offeror will pay its
small business subcontractors on time and in
accordance with the terms and conditions of
the underlying subcontract, and notify the
contracting officer when the prime contractor
makes either a reduced or an untimely
payment to a small business subcontractor
(see 52.242–5).
*
*
*
*
*
Alternate III (JAN 2017). * * *
*
*
*
*
*
Alternate IV (JAN 2017). * * *
(d) * * *
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11. Add section 52.242–5 to read as
follows:
■
52.242–5 Payments to Small Business
Subcontractors.
Payments to Small Business
Subcontractors (JAN 2017)
(a) Definitions. As used in this clause—
Reduced payment means a payment that is
for less than the amount agreed upon in a
subcontract in accordance with its terms and
conditions, for supplies and services for
which the Government has paid the prime
contractor.
Untimely payment means a payment that is
more than 90 days past due under the terms
and conditions of a subcontract, for supplies
and services for which the Government has
paid the prime contractor.
(b) Notice. The Contractor shall notify the
Contracting Officer, in writing, not later than
14 days after—
(1) A small business subcontractor was
entitled to payment under the terms and
conditions of the subcontract; and
(2) The Contractor—
(i) Made a reduced or untimely payment to
the small business subcontractor; or
(ii) Failed to make a payment, which is
now untimely.
(c) Content of notice. The Contractor shall
include the reason(s) for making the reduced
or untimely payment in any notice required
under paragraph (b) of this clause.
(End of clause)
[FR Doc. 2016–30221 Filed 12–19–16; 8:45 am]
BILLING CODE 6820–EP–P
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]]>Agencies
[Federal Register Volume 81, Number 244 (Tuesday, December 20, 2016)]
[Rules and Regulations]
[Pages 93481-93488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30221]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 19, 42, and 52
[FAC 2005-94; FAR Case 2014-004; Item II; Docket No. 2014-0004;
Sequence No. 1]
RIN 9000-AM98
Federal Acquisition Regulations; Payment of Subcontractors
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the
Federal Acquisition Regulation (FAR) to implement a section of the
Small Business Jobs Act of 2010. This statute requires contractors to
notify the contracting officer, in writing, if the contractor pays a
reduced price to a small business subcontractor or if the contractor's
payment to a small business subcontractor is more than 90 days past
due.
DATES: Effective: January 19, 2017.
FOR FURTHER INFORMATION CONTACT: Mr. Curtis E. Glover, Sr., Procurement
Analyst, at 202-501-1448 for clarification of content. For information
pertaining to status or publication schedules, contact the Regulatory
Secretariat Division at 202-501-4755. Please cite FAC 2005-94, FAR Case
2014-004.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA are issuing a final rule to implement section
1334 of the Small Business Jobs Act of 2010 (Pub. L. 111-240, 15 U.S.C.
637(d)(12)) and the Small Business Administration (SBA) final rule
published in the Federal Register on July 16, 2013 at 78 FR 42391,
which require prime contractors to self-report late or reduced payments
to their small business subcontractors. The rule also requires
contracting officers to record the identity of contractors with a
history of late or reduced payments to small business subcontractors in
the Federal Awardee Performance and Integrity System (FAPIIS). DoD,
GSA, and NASA published a proposed rule in the Federal Register on
January 20, 2016 at 81 FR 3087. Seven respondents
[[Page 93482]]
submitted comments on the proposed rule.
II. Discussion and Analysis
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council (the Councils) reviewed the public comments in the
development of the final rule. A discussion of the comments and changes
made to the rule as a result of those comments are provided as follows:
A. Summary of Significant Changes From the Proposed Rule
1. A reporting window of 14 days is added to FAR clause 52.242-5,
Payments to Small Business Contractors, for prime contractors to report
to the contracting officer an untimely or reduced payment, as defined
in the rule, made to their small business subcontractors.
2. The following examples of payment and nonpayment situations not
considered to be unjustified are added at FAR 42.1502(g)(2)(ii):
There is a contract dispute on performance.
Partial payment is made for amounts not in dispute.
A payment is reduced due to past overpayments.
There is an administrative mistake.
Late performance by the subcontractor leads to later
payment by the prime contractor.
3. A reference to FAR clause 52.242-5 was added to paragraph (b) of
the clause at FAR 52.212-5, Contract Terms and Conditions Required to
Implement Statutes or Executive Orders--Commercial Items.
B. Analysis of Public Comments
1. Definitions. Multiple respondents commented on the definitions
included in the proposed rule.
a. Location of Definitions
Comment: One respondent requested the location of the definitions
for ``reduced payment'' and ``untimely payment'' be moved to either FAR
subpart 2.1 or included within a new definitions section in FAR subpart
42.15. The respondent also stated that the parenthetical ``see 19.701''
was contrary to FAR drafting conventions.
Response: The two definitions included in the rule are not used
substantially throughout the FAR and have only an indirect connection
to FAR part 42. Accordingly, the definitions are not added to either
FAR part 2 or FAR part 42; they are instead retained in FAR part 19 and
section 52.242-5 (as presented in the proposed rule). The reference in
the proposed rule to FAR part 19 (``see 19.701'') does not run contrary
to FAR drafting conventions; however, the language is changed to ``as
defined in 19.701'' versus ``see 19.701.''
b. Revise Definitions
Comment: One respondent recommended that the definitions for
``reduced payment'' and ``untimely payment'' be revised to include
information regarding the statutorily-mandated standards set forth in
FAR 52.232-27(c) relating to payment of construction subcontractors and
suppliers.
Response: The statutorily-mandated standards set forth in FAR
52.232-27(c) stand on their own, are not integral to the explanation or
meaning of the terms ``reduced payment'' and ``untimely payment,'' and
need not be repeated in their respective definitions.
Comment: A number of respondents recommended that the definitions
of ``reduced payment'' and ``untimely payment'' be revised to reflect
those instances where the subcontractor has not completed their
obligations under the contract. One respondent stated that the SBA rule
made this abundantly clear, that the prime contractor should be
required to report only those events that arise when the small business
subcontractor is otherwise entitled to full and prompt payment (as
assessed by the prime contractor), but the prime contractor is unable
or unwilling to make such payments. Another respondent stated that
under both of these definitions, the determination of whether a prime
contractor payment is either reduced or untimely ultimately hinges upon
``the terms and conditions of a subcontract.'' The terms and conditions
concerning how much and when a subcontractor is paid under a
subcontract can vary greatly between such contracts. Still, another
respondent believed that the proposed rule should contain additional
clarification that a payment should not be considered past due if the
payment is delayed by the late performance of the subcontractor.
According to the respondent, contractors often accept late performance
of subcontracts and then accordingly pay later according to the payment
terms of the subcontract, but do not necessarily modify the subcontract
to reflect the later performance date. Another respondent believed that
the proposed rule, as written, provides unclear guidance to contracting
officers because the definition of ``unjustified reduced or untimely
payments'' is vague, and asked the FAR Council to provide a more
complete definition of what constitutes an unjustified payment. For
example, the rule should clarify the impact of systems errors, third-
party errors, or administrative errors. Still another respondent
recommended that the Councils define ``unjustifiable'' late or reduced
payments as a material breach of the terms and conditions of the
subcontract and provide examples of what constitutes a material breach
under Federal case law.
Response: The definitions of ``reduced payment'' and ``untimely
payment'' are meant to convey a reasonable explanation and meaning of
those terms. No additional language is necessary in the definition;
however, the final rule at FAR 42.1502(g)(2)(ii) includes examples of
payment and nonpayment situations that are not considered to be
unjustified. Due to privity of contract it is generally not the
contracting officer's responsibility to determine if a material breach
of a subcontract has occurred.
2. Existing statutory and regulatory requirements.
Comment: One respondent stated that existing statutory and
regulatory requirements governing prime contractor and subcontractor
payments already satisfy the intent of this regulation.
Response: In accordance with section 1334 of the Small Business
Jobs Act of 2010, the rule offers additional protections for the small
business community in regard to payments from prime contractors and is
required by statute. Accordingly, there is no reasonable basis for
withdrawing the rule.
3. Reporting requirements.
Multiple respondents commented on the reporting requirements of the
proposed rule.
Comment: One respondent asked if there was guidance on the time
period for the prime contractor to report a late or reduced payment to
the contracting officer.
Response: The final rule requires the prime contractor to report
within 14 days any occurrences of untimely or reduced payments to their
small business subcontractors.
Comment: Several respondents stated that a different methodology
should be used to determine the number of occurrences of late or
reduced payments that are reportable in the FAPIIS system. For example,
one prime contractor makes 10,000 payments a year, but another makes
10. The history of unjustified payments should not be set at ``three'',
but should be scalable, proportional to the number of payments made.
Response: The final rule is consistent with SBA's final rule
published on July
[[Page 93483]]
16, 2013, which defines a history of unjustified untimely or reduced
payments as three incidents within a 12-month period. This final rule
clarifies at FAR 42.1502(g)(2)(ii) that the incidents are under a
single contract.
4. Subcontracting plan dollar threshold.
Comment: One respondent commented the small business subcontracting
plan threshold cited in the analysis for application of the rule was
inconsistent (e.g., $650,000 versus $700,000).
Response: Concur.
5. Applicability (subcontractor tiers).
Comment: One respondent asked if the proposed rule applied to
subcontractor payments at all tiers.
Response: The rule applies to prime contractor payments made to
first-tier small business subcontractors.
6. Contracting officer's responsibilities.
Several respondents commented on the additional contracting officer
responsibilities and offered alternate procedures.
Comment: Two respondents requested that the agency counsel and not
the contracting officer determine whether a late or reduced payment
conforms to the terms and conditions of the contract.
Response: It is the contracting officer's responsibility to ensure
compliance with the terms of the contract; however, per FAR 1.602-2(c),
contracting officers can request and consider the advice of specialists
in audit, law, engineering, information security, transportation, and
other fields, as appropriate, when making a determination regarding a
late or reduced payment.
7. Additional guidance to contracting officers.
Comment: Two respondents stated the rule should provide more
guidance to contracting officers in regards to issues that may arise
when dealing with the reduced or late payments situation in contracts.
Response: This type of additional guidance would largely be non-
regulatory, falling under agency procedures and training, which are
outside the scope of this rule. As stated previously, per FAR 1.602-
2(c), contracting officers can request and consider the advice of
specialists in audit, law, engineering, information security,
transportation, and other fields, as appropriate, when making a
determination regarding a late or reduced payment.
Comment: One respondent commented that adding additional
responsibilities to the contracting officer while the Government is
focused on ensuring the timely submittal of past performance
evaluations will only lead to lesser quality evaluations.
Response: There is no basis for concluding that the requirements of
this rule will impact the timely submittal of past performance
evaluations.
8. Government-caused delays.
Comment: One respondent requested language to note situations in
which the Government causes delays in subcontractor payments by
changing the scope of the contract, by making late payments to the
prime contractor, etc.
Response: The FAR already contains adequate policy on Government-
caused delays and changes to contract terms and conditions. In
addition, as stated previously, the final rule includes the specific
examples of payment and nonpayment situations that are not considered
to be unjustified.
9. Penalties.
Comment: One respondent asked what penalties prime contractors will
face for failing to self-report instances of non-compliance.
Response: Government penalties are beyond the scope of this rule.
However, the requirements of this rule (in addition to other Government
rights and remedies) permit the contracting officer to issue an adverse
past performance assessment for noncompliance with FAR 52.219-9(a)(15),
based upon individual circumstances.
10. Incentivizing prime contractor compliance.
Comment: One respondent commented that prime contractors should be
incentivized to make reduced payments to small business subcontractors,
rather than withhold payments when a dispute arises between the prime
contractor and small business subcontractor. Unlike a late payment, the
proposed rule does not expressly grant a 90-day window in which to
resolve a reduced payment that may arise for a legitimate reason (i.e.,
substandard performance or nonconforming parts).
According to the respondent, because the rule does not address when
a prime contractor must report a reduced payment to the contracting
officer, one might interpret the rule to require an immediate report by
the prime contractor to the contracting officer upon making a reduced
payment.
However, requiring the prime contractor to report a reduced payment
immediately creates a disincentive for prime contractors to make a
reduced rather than late payment, as the obligation to report a late
payment does not arise for a minimum of 90 days past the original due
date.
Response: Reduced payments as a result of a dispute on performance
between a prime contractor and a small business contractor would not
fall within the definition of ``reduced payment.'' However, the rule
does contain a reporting window of 14 days for prime contractors to
report to the contracting officer untimely or reduced payments, as
defined in the rule, made to their small business subcontractors. This
14-day reporting timeline was added to the rule as a result of public
comments. Moreover, the rule does not prohibit prime contractors from
making reduced payments to their small business subcontractors.
11. Commercial items and commercially available off-the-shelf
items.
Comment: Several respondents commented that the FAR Council should
reconsider the application of this rule to commercial and COTS item
providers. One respondent commented that given the Government's stated
preference for ``commercial plans'' in FAR 52.219-9(g) for commercial
item contractors (including commercially available off-the-shelf (COTS)
contractors), it is likely that most commercial item and COTS
contractors have commercial subcontracting plans. These commercial
plans apply to the contractor's entire commercial organization, which
in many cases, includes only a minimal amount of sales to the Federal
Government. These commercial plans apply to virtually every
subcontractor or supplier from which a contractor purchases supplies or
services, whether or not those supplies or services are used in the
performance of government contracts. Another respondent commented that
over the last decade, the procurement community has seen the erosion of
commercial item contracting (in accordance with 41 U.S.C. 1906) and the
benefits attendant thereto, as well as layering onto the commercial
item contracting process Government unique requirements that have
increased costs and raised barriers to entry into the Federal
marketplace. Another respondent stated that applying the rule to
commercial and COTS item providers would not be in the best interests
of the Government, and would run contrary to ongoing attempts by
Government policy makers to streamline the acquisition process for the
acquisition of commercial and COTS items to reduce the number of unique
government rules applicable to large and small businesses providing
commercial and COTS supplies and services, and to introduce more
commercial innovation and
[[Page 93484]]
technology into the federal business market.
Response: The FAR Council has determined that the rule should, as a
matter of policy, apply to contracts for the acquisition of commercial
items and COTS items. See section III of this preamble.
Comment: One respondent commented that FAR clause 52.242-5 was not
added to the list of clauses in FAR 52.212-5 regarding commercial
items.
Response: The final rule adds FAR clause 52.242-5 to the list of
clauses in FAR 52.212-5 regarding application to commercial items.
12. Public burden.
Comment: Two respondents stated that the Councils had
underestimated the public burden in regards to the proposed rule. One
respondent commented that the FAR Council has greatly underestimated
the implementation burden on commercial item and COTS item contractors,
especially considering the broad definition of ``subcontractor'' that
applies to the proposed rule. The other respondent believed that the
estimate of reporting time of only two hours per respondent is grossly
underestimated. This negligible amount of time assumes that all
contractors can easily identify from their payment systems which
subcontractors are small businesses. The respondent believed that this
is often not the case, and that the small business size status of a
subcontractor may be unknown to the contractor's other accounting
systems. The other respondent commented that since the Small Business
Jobs Act of 2010 does not specifically require that the subcontractor
payment clause apply to commercial contracts, the respondent
recommended that the FAR Council seek additional information about the
burden on contractors before a determination is made to apply the
payment of subcontractor requirements to commercial item acquisitions.
The respondent did not find that the availability of limited
information indicated that the burden may not be significant, as
described in the proposed rule. Rather, initial feedback from
contractors suggested that the burdens associated with reporting under
the rule will have a significant impact.
Response: The respondents do not offer data with which to support
changing the current estimated public burden hours. However, since this
is a new rule without an empirical frame of reference, the public
reporting burden is reviewed every three years and can be adjusted as
necessary.
13. Convene industry working group.
Comment: One respondent commented that the FAR Council should
convene an industry working group in order to gain a better
understanding of some of the more nuanced aspects of the subcontractor
payment requirement.
Response: The Councils do not concur that such a working group is
necessary at this time.
C. Other Changes
The following changes were made, not as a result of public
comments:
1. FAR 1.106 was amended to add the OMB Control Number associated
with FAR clause 52.242-5.
2. Minor editorial changes were made for grammatical reasons or to
conform to FAR drafting conventions.
III. Applicability to Contracts for Commercial Items and Commercially
Available Off-the-Shelf Items
The Federal Acquisition Regulatory (FAR) Council has made the
following determinations with respect to the rule's application of
Section 1334 of the Small Business Jobs Act of 2010, to contracts for
the acquisition of commercial items and contracts for the acquisition
of commercially available off-the-shelf (COTS) items.
A. Applicability to Contracts for the Acquisition of Commercial Items
Pursuant to 41 U.S.C. 1906, acquisitions of commercial items (other
than acquisitions of COTS items, which are addressed in 41 U.S.C. 1907)
are exempt from a provision of law unless the law (i) contains criminal
or civil penalties; (ii) specifically refers to 41 U.S.C. 1906 and
states that the law applies to acquisitions of commercial items; or
(iii) the FAR Council makes a written determination and finding that it
would not be in the best interest of the Federal Government to exempt
contracts for the procurement of commercial items from the provision of
law. If none of these conditions are met, the FAR is required to
include the statutory requirement(s) on a list of provisions of law
that are inapplicable to acquisitions of commercial items.
The purpose of this rule is to implement section 1334 of the Small
Business Jobs Act of 2010. Section 1334 requires prime contractors to
self-report late or reduced payments to their small business
subcontractors. The rule also requires contracting officers to record
the identity of contractors with a history of late or reduced payments
to small business subcontractors in the Federal Awardee Performance and
Integrity System (FAPIIS).
The statutory requirements are reflected in the Small Business
Administration's (SBA's) final rule published at 78 FR 42391 on July
16, 2013, which did not exempt acquisitions of commercial items.
The law is silent on the applicability of these requirements to
acquisitions of commercial items and does not independently provide for
criminal or civil penalties; nor does it include terms making express
reference to 41 U.S.C. 1906 and its application to acquisitions of
commercial items. Therefore, it does not apply to acquisitions of
commercial items unless the FAR Council makes a written determination
as provided in 41 U.S.C. 1906.
The law furthers the administration's goal of supporting small
business and advances the interests of small business subcontractors by
discouraging reduced or untimely payments to small business
subcontractors. Exclusion of acquisitions for commercial items from
these requirements will limit the full implementation of these
subcontracting-related objectives. Further, the primary FAR clauses
implementing Federal procurement policies governing subcontracting with
small business, FAR 52.219-8, Utilization of Small Business Concerns,
and 52.219-9, Small Business Subcontracting Plan, are currently
prescribed for use in solicitations for commercial items. Exclusion of
acquisitions for commercial items from these requirements would create
confusion among contractors and the Federal contracting workforce.
Moreover, the rule may also increase the timeliness of payments to
small business subcontractors.
For these reasons, it is in the best interest of the Federal
Government to apply the requirements of the rule to the acquisition of
commercial items.
B. Applicability of Contracts for the Acquisition of COTS Items
Pursuant to 41 U.S.C. 1907, acquisitions of COTS items will be
exempt from a provision of law unless the law (i) contains criminal or
civil penalties; (ii) specifically refers to 41 U.S.C. 1907 and states
that the law applies to acquisitions of COTS items; (iii) concerns
authorities or responsibilities under the Small Business Act (15 U.S.C.
644) or bid protest procedures developed under the authority of 31
U.S.C. 3551 et seq., 10 U.S.C. 2305(e) and (f), or 41 U.S.C. 3706 and
3707; or (iv) the Administrator for Federal Procurement Policy makes a
written determination and finding that would not be in the best
interest of the Federal Government to exempt contracts
[[Page 93485]]
for the procurement of COTS items from the provision of law. If none of
these conditions are met, the FAR is required to include the statutory
requirement(s) on a list of provisions of law that are inapplicable to
acquisitions of COTS items.
The purpose of this rule is to implement section 1334 of the Small
Business Jobs Act of 2010. Section 1334 requires prime contractors to
self-report late or reduced payments to their small business
subcontractors. The rule also requires contracting officers to record
the identity of contractors with a history of late or reduced payments
to small business subcontractors in FAPIIS.
These statutory requirements are reflected in the SBA final rule
published at 78 FR 42391 on July 16, 2013, which did not exempt
acquisitions of COTS items.
The law is silent on the applicability of these requirements to
acquisitions of COTS items and does not independently provide for
criminal or civil penalties; nor does it include terms making express
reference to 41 U.S.C. 1907 and its application to acquisitions of COTS
items. Therefore, it does not apply to acquisitions of COTS items
unless the Administrator for Federal Procurement Policy makes a written
determination as provided in 41 U.S.C. 1907.
The law furthers the Administration's goal of supporting small
business and advances the interests of small business subcontractors by
discouraging reduced or untimely payments to small business
subcontractors. Exclusion of a large segment of Federal contracting,
such as acquisitions for COTS items, will limit the full implementation
of these subcontracting-related objectives. Further, the primary FAR
clauses implementing Federal procurement policies governing
subcontracting with small business, FAR 52.219-8, Utilization of Small
Business Concerns, and 52.219-9, Small Business Subcontracting Plan,
are currently prescribed for use in solicitations for COTS items.
Exclusion of acquisitions for COTS items from these requirements would
create confusion among contractors and the Federal contracting
workforce. Moreover, the rule may also increase the timeliness of
payments to small business subcontractors.
For these reasons, it is in the best interest of the Federal
Government to apply the subcontracting requirements to the acquisition
of COTS items.
IV. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is a significant regulatory action and, therefore, was subject to
review under section 6(b) of E.O. 12866, Regulatory Planning and
Review, dated September 30, 1993. This rule is not a major rule under 5
U.S.C. 804.
V. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared a final regulatory flexibility
analysis (FRFA) consistent with the Regulatory Flexibility Act, 5
U.S.C. 601, et seq. The FRFA is summarized as follows:
Section 1334 of the Small Business Jobs Act of 2010 (Pub. L.
111-240) and the Small Business Administration's final rule at 78 FR
42391, Small Business Subcontracting, published July 16, 2013,
require that the prime contractor self-report when the prime
contractor makes reduced or untimely payments to small business
subcontractors. Section 1334 also requires the contracting officer
to record the identity of contractors with a history of unjustified
reduced or untimely payments in the Federal Awardee Performance and
Integrity System (FAPIIS).
This final rule implements the self-reporting requirements of
section 1334 by requiring contracting officers to include FAR clause
52.242-5, Payments to Small Business Subcontractors, in all
solicitations and contracts containing the clause at 52.219-9, Small
Business Subcontracting Plan. The new FAR clause requires prime
contractors to notify the contracting officer of reduced or untimely
payments to small business subcontractors.
The rule also amends FAR 42.1503(h) to require contracting
officers to report to FAPIIS a contractor that has a history of
three or more reduced or untimely payments to small business
subcontractors within a 12-month period under a single contract that
are unjustified. FAR 42.1503, Table 42-2 is also amended to include
unjustified reduced or untimely payments to small business
subcontractors as part of the definition of ratings for the ``small
business subcontracting'' past performance evaluation factors.
There were no public comments received on the initial regulatory
flexibility analysis.
The final rule applies to payments made to small businesses that
are first-tier subcontractors to prime government contractors. There
will be no burden on small businesses, as small businesses do not
have subcontracting plans. This regulation will benefit small
business subcontractors by encouraging large business prime
contractors to pay small business subcontractors in a timely manner
and the agreed upon contractual price.
This rule imposes new recordkeeping and reporting requirements
and contains information collection requirements. Small businesses
are not required to report under this information collection because
it only applies to prime contractors whose contracts contain the
clause 52.219-9, Small Business Subcontracting Plan, which is not
applicable to small businesses.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
Interested parties may obtain a copy of the FRFA from the
Regulatory Secretariat Division. The Regulatory Secretariat Division
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of
the Small Business Administration.
VI. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies. The
rule contains information collection requirements. OMB has cleared this
information collection requirement under OMB Control Number 9000-0196,
titled: ``Payments to Small Business Subcontractors.''
List of Subjects in 48 CFR Parts 1, 19, 42, and 52.
Government procurement.
Dated: December 9, 2016.
William F. Clark,
Director, Office of Governmentwide Acquisition Policy, Office of
Acquisition Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA are amending 48 CFR parts 1, 19, 42,
and 52 as set forth below:
0
1. The authority citation for 48 CFR parts 1, 19, 42, and 52 continues
to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM
1.106 [Amended]
0
2. Amend section 1.106 by adding to the table, in numerical sequence,
FAR segment ``52.242-5'' and its corresponding OMB Control No. ``9000-
0196''.
PART 19--SMALL BUSINESS PROGRAMS
0
3. Amend section 19.701 by adding, in alphabetical order, the
definitions of ``Reduced payment'' and ``Untimely payment'' to read as
follows:
19.701 Definitions.
* * * * *
Reduced Payment means a payment that is for less than the amount
agreed upon in a subcontract in accordance
[[Page 93486]]
with its terms and conditions, for supplies and services for which the
Government has paid the prime contractor.
* * * * *
Untimely Payment means a payment to a subcontractor that is more
than 90 days past due under the terms and conditions of a subcontract
for supplies and services for which the Government has paid the prime
contractor.
0
4. Amend section 19.704 by--
0
a. Removing from paragraph (a)(13) ``completion; and'' and adding
``completion;'' in its place;
0
b. Removing from paragraph (a)(14) ``subcontractor.'' and adding
``subcontractor; and'' in its place; and
0
c. Adding paragraph (a)(15).
The addition reads as follows:
19.704 Subcontracting plan requirements.
(a) * * *
(15) Assurances that the offeror will pay its small business
subcontractors on time and in accordance with the terms and conditions
of the subcontract, and notify the contracting officer if the offeror
pays a reduced or an untimely payment to a small business subcontractor
(see 52.242-5).
* * * * *
19.705-4 [Amended]
0
5. Amend section 19.705-4 by removing from paragraphs (b) and (c) the
number ``14'' and adding ``15'' in both places.
PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES
0
6. Amend section 42.1502 by revising paragraph (g) to read as follows:
42.1502 Policy.
* * * * *
(g) Past performance evaluations shall include an assessment of the
contractor's--
(1) Performance against, and efforts to achieve, the goals
identified in the small business subcontracting plan when the contract
includes the clause at 52.219-9, Small Business Subcontracting Plan;
and
(2) Reduced or untimely payments (as defined in 19.701), made to
small business subcontractors, determined by the contracting officer to
be unjustified. The contracting officer shall--
(i) Consider and evaluate a contractor's written explanation for a
reduced or an untimely payment when determining whether the reduced or
untimely payment is justified; and
(ii) Determine that a history of unjustified reduced or untimely
payments has occurred when the contractor has reported three or more
occasions of unjustified reduced or untimely payments under a single
contract within a 12-month period (see 42.1503(h)(1)(vi) and the
evaluation ratings in Table 42-2). The following payment or nonpayment
situations are not considered to be unjustified:
(A) There is a contract dispute on performance.
(B) A partial payment is made for amounts not in dispute.
(C) A payment is reduced due to past overpayments.
(D) There is an administrative mistake.
(E) Late performance by the subcontractor leads to later payment by
the prime contractor.
* * * * *
0
7. Amend section 42.1503 by--
0
a. Revising paragraphs (b)(2)(v) and (b)(2)(vi);
0
b. Revising paragraph (h)(1) introductory text;
0
c. Revising paragraphs (h)(1)(iv) and (h)(1)(v);
0
d. Adding paragraph (h)(1)(vi); and
0
e. Revising Table 42-2.
The revisions and addition read as follows:
42.1503 Procedures.
* * * * *
(b)(1) * * *
(2) * * *
(v) Small business subcontracting, including reduced or untimely
payments to small business subcontractors when 19.702(a) requires a
subcontracting plan (as applicable, see Table 42-2).
(vi) Other (as applicable) (e.g., trafficking violations, tax
delinquency, failure to report in accordance with contract terms and
conditions, defective cost or pricing data, terminations, suspension
and debarments).
* * * * *
(h) * * *
(1) Agencies shall ensure information is accurately reported in the
FAPIIS module of CPARS within 3 calendar days after a contracting
officer--
* * * * *
(iv) Makes a subsequent withdrawal or a conversion of a termination
for default to a termination for convenience;
(v) Receives a final determination after an administrative
proceeding, in accordance with 22.1704(d)(1), that substantiates an
allegation of a violation of the trafficking in persons prohibitions in
22.1703(a) and 52.222-50(b); or
(vi) Determines that a contractor has a history of three or more
unjustified reduced or untimely payments to small business
subcontractors under a single contract within a 12-month period (see
42.1502(g)(2)).
* * * * *
[[Page 93487]]
Table 42-2--Evaluation Ratings Definitions
[For the small business subcontracting evaluation factor, when 52.219-9
is used]
------------------------------------------------------------------------
Rating Definition Note
------------------------------------------------------------------------
(a) Exceptional............. Exceeded all To justify an
statutory goals or Exceptional rating,
goals as identify multiple
negotiated. Had significant events
exceptional success and state how they
with initiatives to were a benefit to
assist, promote, small business
and utilize small utilization. A
business (SB), singular benefit,
small disadvantaged however, could be
business (SDB), of such magnitude
women-owned small that it constitutes
business (WOSB), an Exceptional
HUBZone small rating. Small
business, veteran- businesses should
owned small be given meaningful
business (VOSB) and and innovative work
service disabled directly related to
veteran owned small the contract, and
business (SDVOSB). opportunities
Complied with FAR should not be
52.219-8, limited to indirect
Utilization of work such as
Small Business cleaning offices,
Concerns. Exceeded supplies,
any other small landscaping, etc.
business Also, there should
participation have been no
requirements significant
incorporated in the weaknesses
contract/order, identified
including the use
of small businesses
in mission critical
aspects of the
program. Went above
and beyond the
required elements
of the
subcontracting plan
and other small
business
requirements of the
contract/order.
Completed and
submitted
Individual
Subcontract Reports
and/or Summary
Subcontract Reports
in an accurate and
timely manner. Did
not have a history
of three or more
unjustified reduced
or untimely
payments to small
business
subcontractors
within a 12-month
period.
(b) Very Good............... Met all of the To justify a Very
statutory goals or Good rating,
goals as identify a
negotiated. Had significant event
significant success and state how it
with initiatives to was a benefit to
assist, promote and small business
utilize SB, SDB, utilization. Small
WOSB, HUBZone, businesses should
VOSB, and SDVOSB. be given meaningful
Complied with FAR and innovative
52.219-8, opportunities to
Utilization of participate as
Small Business subcontractors for
Concerns. Met or work directly
exceeded any other related to the
small business contract, and
participation opportunities
requirements should not be
incorporated in the limited to indirect
contract/order, work such as
including the use cleaning offices,
of small businesses supplies,
in mission critical landscaping, etc.
aspects of the There should be no
program. Endeavored significant
to go above and weaknesses
beyond the required identified
elements of the
subcontracting
plan. Completed and
submitted
Individual
Subcontract Reports
and/or Summary
Subcontract Reports
in an accurate and
timely manner. Did
not have a history
of three or more
unjustified reduced
or untimely
payments to small
business
subcontractors
within a 12-month
period.
(c) Satisfactory............ Demonstrated a good To justify a
faith effort to Satisfactory
meet all of the rating, there
negotiated should have been
subcontracting only minor
goals in the problems, or major
various socio- problems the
economic categories contractor has
for the current addressed or taken
period. Complied corrective action.
with FAR 52.219-8, There should have
Utilization of been no significant
Small Business weaknesses
Concerns. Met any identified. A
other small fundamental
business principle of
participation assigning ratings
requirements is that contractors
included in the will not be
contract/order. assessed a rating
Fulfilled the lower than
requirements of the Satisfactory solely
subcontracting plan for not performing
included in the beyond the
contract/order. requirements of the
Completed and contract/order
submitted
Individual
Subcontract Reports
and/or Summary
Subcontract Reports
in an accurate and
timely manner. Did
not have a history
of three or more
unjustified reduced
or untimely
payments to small
business
subcontractors
within a 12-month
period.
(d) Marginal................ Deficient in meeting To justify a
key subcontracting Marginal rating,
plan elements. identify a
Deficient in significant event
complying with FAR that the contractor
52.219-8, had trouble
Utilization of overcoming and how
Small Business it impacted small
Concerns, and any business
other small utilization. A
business Marginal rating
participation should be supported
requirements in the by referencing the
contract/order. Did actions taken by
not submit the Government that
Individual notified the
Subcontract Reports contractor of the
and/or Summary contractual
Subcontract Reports deficiency.
in an accurate or
timely manner.
Failed to satisfy
one or more
requirements of a
corrective action
plan currently in
place; however,
does show an
interest in
bringing
performance to a
satisfactory level
and has
demonstrated a
commitment to apply
the necessary
resources to do so.
Required a
corrective action
plan. Did not have
a history of three
or more unjustified
reduced or untimely
payments to small
business
subcontractors
within a 12-month
period.
[[Page 93488]]
(e) Unsatisfactory.......... Noncompliant with To justify an
FAR 52.219-8 and Unsatisfactory
52.219-9, and any rating, identify
other small multiple
business significant events
participation that the contractor
requirements in the had trouble
contract/order. Did overcoming and
not submit state how it
Individual impacted small
Subcontract Reports business
and/or Summary utilization. A
Subcontract Reports singular problem,
in an accurate or however, could be
timely manner. of such serious
Showed little magnitude that it
interest in alone constitutes
bringing an Unsatisfactory
performance to a rating. An
satisfactory level Unsatisfactory
or is generally rating should be
uncooperative. supported by
Required a referencing the
corrective action actions taken by
plan. Had a history the Government to
of three or more notify the
unjustified reduced contractor of the
or untimely deficiencies. When
payments to small an Unsatisfactory
business rating is
subcontractors justified, the
within a 12-month contracting officer
period. must consider
whether the
contractor made a
good faith effort
to comply with the
requirements of the
subcontracting plan
required by FAR
52.219-9 and follow
the procedures
outlined in FAR
52.219-16,
Liquidated Damages-
Subcontracting
Plan.
------------------------------------------------------------------------
0
8. Add section 42.1504 to read as follows:
42.1504 Contract clause.
Insert the clause at 52.242-5, Payments to Small Business
Subcontractors, in all solicitations and contracts containing the
clause at 52.219-9, Small Business Subcontracting Plan.
PART 52--SOLICITATION AND PROVISIONS AND CONTRACT CLAUSES
0
9. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Revising the introductory text of paragraph (b)(17)(i);
0
c. Redesignating paragraph (b)(60) as (b)(61); and
0
d. Adding a new paragraph (b)(60).
The revisions and addition read as follows:
52.212-5 Contract Terms and Conditions Required to Implement Statutes
or Executive Orders--Commercial Items.
* * * * *
Contract Terms and Conditions Required To Implement Statutes or
Executive Orders--Commercial Items (JAN 2017)
(b) * * *
_(17)(i) 52.219-9, Small Business Subcontracting Plan (JAN 2017)
(15 U.S.C. 637(d)(4)).
* * * * *
_(60) 52.242-5, Payments to Small Business Subcontractors (JAN
2017)(15 U.S.C. 637(d)(12)).
* * * * *
0
10. Amend section 52.219-9 by--
0
a. Revising the date of the clause;
0
b. Adding in paragraph (b), in alphabetical order, the definitions of
``Reduced payment'' and ``Untimely payment'';
0
c. Adding paragraph (d)(15);
0
d. In Alternate III--
0
1. Revising the date of the Alternate; and
0
2. Removing from the introductory paragraph of Alternate III
``clause;'' and adding ``clause:'' in its place; and
0
e. In Alternate IV--
0
1. Revising the date of the Alternate; and
0
2. Adding paragraph (d)(15).
The revisions and additions read as follows:
52.219-9 Small Business Subcontracting Plan.
* * * * *
Small Business Subcontracting Plan (JAN 2017)
(b) * * *
* * * * *
Reduced payment means a payment that is for less than the amount
agreed upon in a subcontract in accordance with its terms and
conditions, for supplies and services for which the Government has
paid the prime contractor.
* * * * *
Untimely payment means a payment to a subcontractor that is more
than 90 days past due under the terms and conditions of a
subcontract for supplies and services for which the Government has
paid the prime contractor.
(d) * * *
(15) Assurances that the offeror will pay its small business
subcontractors on time and in accordance with the terms and
conditions of the underlying subcontract, and notify the contracting
officer when the prime contractor makes either a reduced or an
untimely payment to a small business subcontractor (see 52.242-5).
* * * * *
Alternate III (JAN 2017). * * *
* * * * *
Alternate IV (JAN 2017). * * *
(d) * * *
(15) Assurances that the offeror will pay its small business
subcontractors on time and in accordance with the terms and
conditions of the underlying subcontract, and notify the contracting
officer when the prime contractor makes either a reduced or an
untimely payment to a small business subcontractor (see 52.242-5).
0
11. Add section 52.242-5 to read as follows:
52.242-5 Payments to Small Business Subcontractors.
As prescribed in 42.1504, insert the following clause:
Payments to Small Business Subcontractors (JAN 2017)
(a) Definitions. As used in this clause--
Reduced payment means a payment that is for less than the amount
agreed upon in a subcontract in accordance with its terms and
conditions, for supplies and services for which the Government has
paid the prime contractor.
Untimely payment means a payment that is more than 90 days past
due under the terms and conditions of a subcontract, for supplies
and services for which the Government has paid the prime contractor.
(b) Notice. The Contractor shall notify the Contracting Officer,
in writing, not later than 14 days after--
(1) A small business subcontractor was entitled to payment under
the terms and conditions of the subcontract; and
(2) The Contractor--
(i) Made a reduced or untimely payment to the small business
subcontractor; or
(ii) Failed to make a payment, which is now untimely.
(c) Content of notice. The Contractor shall include the
reason(s) for making the reduced or untimely payment in any notice
required under paragraph (b) of this clause.
(End of clause)
[FR Doc. 2016-30221 Filed 12-19-16; 8:45 am]
BILLING CODE 6820-EP-P
