Federal Acquisition Regulation; Payments Under Time-and-Materials and Labor-Hour Contracts, 56314-56317 [05-18964]

Agencies

• General Services Administration
• National Aeronautics and Space Administration
• DEPARTMENT OF DEFENSE

[Federal Register Volume 70, Number 185 (Monday, September 26, 2005)]
[Proposed Rules]
[Pages 56314-56317]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-18964]



[[Page 56313]]

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Part III





Department of Defense

General Services Administration

National Aeronautics and Space Administration





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48 CFR Parts 2, 10, et al.



Federal Acquisition Regulations; Proposed Rules

Federal Register / Vol. 70, No. 185 / Monday, September 26, 2005 / 
Proposed Rules

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 16, 32, and 52

[FAR Case 2004-015]
RIN 9000-AK32


Federal Acquisition Regulation; Payments Under Time-and-Materials 
and Labor-Hour Contracts

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule with request for comments.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
FAR regarding payments under Time-and-Materials (T&M) and Labor-Hour 
(LH) Contracts.

DATES: Interested parties should submit written comments to the FAR 
Secretariat on or before November 25, 2005, to be considered in the 
formulation of a final rule.

ADDRESSES: Submit comments identified by FAR case 2004-015 by any of 
the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web Site: https://www.acqnet.gov/far/ProposedRules/
proposed.htm. Click on the FAR case number to submit comments.
     E-mail: farcase.2004-015@gsa.gov. Include FAR case 2004-
015 in the subject line of the message.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (VIR), 1800 F Street, NW., Room 4035, ATTN: Laurieann 
Duarte, Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR case 2004-
015 in all correspondence related to this case. All comments received 
will be posted without change to https://www.acqnet.gov/far/
ProposedRules/proposed.htm, including any personal and/or business 
confidential information provided.
    Public Meeting: A public meeting will be held on Tuesday, October 
18, 2005, from 9:00 a.m. to 4:00 p.m. Eastern Time, in the GS Building 
Auditorium, 1800 F Street NW, Washington, DC 20405, to facilitate an 
open dialogue between the Government and parties interested in the 
implementation of section 8002(d), FAR Case 2003-027, Additional 
Contract Types. Because they are so closely related, the public meeting 
will also cover this FAR proposed rule 2004-015, Payment Under Time-
and-Materials and Labor-Hour Contracts. Interested parties are 
encouraged to attend and engage in discussions regarding these proposed 
rules.
    To facilitate discussions at the public meeting, interested parties 
are encouraged to provide written comments on issues they would like 
addressed at the public meeting no later than Tuesday, October 11, 
2005. Interested parties may register and submit their input 
electronically at https://www.acq.osd.mil/dpap/dars/index.htm. Attendees 
are encouraged, but not required, to register for the public meeting, 
to ensure adequate accommodations.
    Directions to the meeting can be found at the Web site. 
Participants are encouraged to check with the Web site prior to the 
public meeting to ensure the location has not been changed as a result 
of a large number of registrants. The public meeting is physically 
accessible to people with disabilities. Requests for sign language 
interpretation or other auxiliary aids should be directed to Mr. Jeremy 
Olson at 202-501-3221 at least 5 days prior to the meeting.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755 
for information pertaining to status or publication schedules. For 
clarification of content, contact Mr. Jeremy Olson, at (202) 208-3221. 
Please cite FAR case 2004-015.

SUPPLEMENTARY INFORMATION:

A. Background

    The amendments made under this case are intended to be applicable 
only to non-commercial item contracts. Policies applicable to 
commercial item T&M or LH contracts are being addressed separately 
under FAR case 2003-027.
    The proposed amendments to FAR 16.307, 16.601, 32.111, and the FAR 
clause at 52.232-7 are intended to amend the underlying policies and 
increase the clarity of the affected FAR language. The proposed rule 
addresses the areas related to payments made under T&M and LH contracts 
for non-commercial items, as described below.

1. FAR 16.307--Contract clauses.

    The Councils are proposing to amend FAR 16.307(a)(1) to specify 
that the Allowable Cost and Payment clause is included in T&M 
contracts. The clause is only applicable to the portion of the contract 
that provides for reimbursement of materials at actual cost. This 
change is being made to ensure that appropriate rights and 
responsibilities are provided in T&M contracts with respect to 
reimbursement for material cost.

2. FAR 16.601--Time-and-materials contracts.

    The Councils are proposing to revise the language at FAR 16.601(a) 
to provide a description of ``materials'' as used in ``time-and-
materials contract.'' FAR 16.601(a) currently describes a T&M contract 
as a contract that provides for acquiring supplies or services on the 
basis of--
     Direct labor hours at specified fixed hourly rates that 
include wages, overhead, general and administrative expenses, and 
profit; and
     Materials at cost, including, if appropriate, material 
handling costs as part of material costs.
    The current description does not address subcontract costs, even 
though such costs are often a significant part of the work performed 
and are provided for under the payments clause at FAR 52.232-7. Also, 
the description does not address other direct costs and applicable 
indirect costs other than material handling (e.g., general and 
administrative expenses) that may be appropriate for the acquisition. 
Thus, the Councils are proposing to revise ``materials at cost'' to 
include ``direct materials, subcontracts for supplies and services, 
other direct costs, and applicable indirect costs''.

3. General structure of the FAR clause at 52.232-7--Payments under 
Time-and-Materials and Labor-Hour Contracts.

    The Councils are proposing to amend the current paragraph (b) of 
the FAR clause at 52.232-7 to specify that the term ``materials,'' as 
used in the clause, includes direct materials, subcontracts for 
supplies and services, other direct costs, and applicable indirect 
costs (this is consistent with the proposed changes to FAR 16.601). 
Materials also include supplies and services transferred between 
divisions, subdivisions, subsidiaries, or affiliates of the contractor 
under a common control. The current language has caused significant 
confusion because it does not adequately describe what is included in 
``materials.''

[[Page 56315]]

4. Contractor furnished material--Alternate I.

    The Councils are proposing to move and amend the current Alternate 
I to paragraph (b)(3) of the clause. When a contractor furnishes its 
own materials that meet the definition of a commercial item at FAR 
2.101, the price to be paid for such materials shall be the 
contractor's established catalog or the market price. The ability of 
the contractor to bill at such prices should not be dependent on a 
contracting officer decision as to whether an alternate clause should 
be included in the contract.

5. Profit or fee on materials.

    The Councils are proposing to revise paragraph (b)(8) of the FAR 
clause at 52.232-7 to specifically state that the Government does not 
pay profit or fee to the prime contractor on materials (except for 
commercial items discussed in Item 4 above or as otherwise provided for 
in FAR 31.205-26). The Councils believe this is consistent with the 
historical intent of the clause and the concept of a T&M contract. The 
recovery of profit or fee is accomplished as part of the labor hour 
portion of the T&M/LH contract.

6. Billing subcontracts and interdivisional transfers for incidental 
supplies or services.

    For subcontracts, the Councils are proposing to clarify that 
subcontracts for incidental services are to be reimbursed at the actual 
subcontract price, plus allowable indirect costs, per the requirements 
of the FAR clause at 52.216-7, Allowable Cost and Payment. For 
interdivisional transfers, the Councils are proposing to revise the 
language to limit reimbursement to the actual rates or commercial 
prices of the division performing the work.

7. Billing subcontracts and interdivisional transfers for services that 
comply with the labor hour requirements.

    For services performed by employees of subcontractors, the Councils 
are proposing to amend the policies to provide the contracting parties 
two possible approaches that would be used depending on the contracting 
officer's determination of circumstances applicable to an individual 
procurement. The first approach includes coverage in the FAR clause at 
52.232-7 applicable to subcontractors providing services compliant with 
the labor hour requirements of a T&M or LH contract. Under this 
approach, payment of subcontract costs would be at the contract fixed 
labor rate under the contract requirements applicable to the labor hour 
portion of the contract only if a subcontractor is listed in the 
payment clause.
    The contracting officer can select the second available approach by 
inserting ``None'' in the clause, which would provide that any other 
labor provided by a subcontractor would be paid at actual cost (plus 
applicable indirect costs).
    The Councils believe this two option approach is appropriate for 
the following reasons:
     The Government should have the authority to limit 
subcontractors that are authorized to perform labor hours to be paid at 
the LH rate under a T&M or LH contract.
    o The authority should be independent of the approval/notification 
process in the ``Subcontracts'' clause.
    o The limitation should appear as part of the T&M Payment clause 
and it should include (or refer to) the list of subcontractors approved 
to provide labor hours paid at the LH rate under the contract.
    o If the prime contractor wishes to add a new subcontractor, the 
contracting officer would have to agree (and make any necessary 
adjustment to the LH rates as a result).
    o Subcontracted labor hours paid at the LH rate should not be 
subject to further material handling fees or any other type of 
reimbursement of the sort authorized for material.
    o Subcontracted labor hours paid at the LH rate must be accounted 
for and substantiated under the same standards as labor hours provided 
by the prime contractor.
     Subcontractors providing services that are ancillary to 
and not part of the LH portion of the contract should be paid actual 
costs, using the same procedures as are used for material (e.g., crane 
operators subcontracted as part of installation services, and drivers 
subcontracted to provide transportation to LH workers).

8. Application of Prompt Payment Act.

    The Councils are proposing to add the language at paragraph (i) of 
the FAR clause at 52.232-7 to include application of the Prompt Payment 
Act for interim payments under T&M and LH contracts for services. The 
Prompt Payment Act has applied to fixed-price contracts for services 
for many years. Congress also recently amended the Prompt Payment Act 
to include cost reimbursement contracts for services. The Councils 
believe that since the Prompt Payment Act is applicable to both fixed-
price and cost reimbursement contracts for services, it should also be 
applicable to T&M and LH contracts for services.

B. Regulatory Planning and Review

    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

C. Regulatory Flexibility Act

    The changes may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because Time and Material or 
Labor Hour contracts are commonly awarded to small businesses.
    An Initial Regulatory Flexibility Analysis (IRFA) has been 
prepared. The analysis is summarized as follows:

Initial Regulatory Flexibility Analysis

    1. Description of the reasons why action by the agency is being 
considered. This proposed rule would revise the Federal Acquisition 
Regulation to amend underlying policies and increase the clarity of 
payments made under T&M and LH contracts for non-commercial items.
    2. Succinct statement of the objectives of, and legal basis for, 
the proposed rule. The objectives of the amendment are to ensure 
fair and reasonable prices under T&M contracts and to eliminate the 
ambiguity in T&M contracts that has been responsible for confusion 
over payment amounts for subcontractor provided labor.
    3. Description of, and, where feasible, estimate of the number 
of small entities to which the proposed rule will apply. The changes 
may have a significant economic impact on a substantial number of 
small entities within the meaning of the Regulatory Flexibility Act, 
5 U.S.C. 601, et seq., because T&M contracting is a common method of 
acquiring services from small entities. However, it is not feasible 
to estimate the number of small entities impacted.
    4. Description of projected reporting, record keeping, and other 
compliance requirements of the proposed rule, including an estimate 
of the classes of small entities which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report or record. The current FAR policies 
require contractors to maintain records to support invoices 
presented to the Government for payment. Such records include 
original timecards, the contractor's timekeeping procedures, 
distribution of labor, invoices for material, and so forth. These 
are standard records maintained by any company, large or small, and 
the fact that the contract would require that these records be made 
available to the Government should not place any additional record 
keeping burden on the entity.
    5. Identification, to the extent practicable, of all relevant 
Federal rules which may duplicate, overlap, or conflict with the 
proposed rule. There are no Federal rules

[[Page 56316]]

that duplicate, overlap or conflict with the proposed rule.
    6. Description of any significant alternatives to the proposed 
rule which accomplish the stated objectives of applicable statutes 
and which minimize any significant economic impact of the proposed 
rule on small entities. Significant alternatives to the proposed 
rule include:
     Not permitting any subcontractor to be paid at the 
labor hour rate and reimbursing all subcontractors at actual cost.
     Incorporating a list of each Other Direct Cost (ODC) 
into each T&M contract that would be authorized for reimbursement 
under that contract and prohibiting reimbursement of any other ODC.
     Not requiring a list of each Other Direct Cost (ODC) 
authorized for reimbursement and permitting any ODC to be 
reimbursed.
    The FAR Secretariat has submitted a copy of the IRFA to the Chief 
Counsel for Advocacy of the Small Business Administration. A copy of 
the IRFA may be obtained from the FAR Secretariat. The Councils will 
consider comments from small entities concerning the affected FAR parts 
in accordance with 5 U.S.C. 610. Comments must be submitted separately 
and should cite 5 U.S.C 601, et seq. (FAR case 2004-015), in 
correspondence.

D. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose information collection requirements 
that require the approval of the Office of Management and Budget under 
44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 16, 32, and 52

    Government procurement.

    Dated: September 19, 2005.
Gerald Zaffos,
Acting Director, Contract Policy Division.
    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 16, 32, 
and 52 as set forth below:
    1. The authority citation for 48 CFR parts 16, 32, and 52 is 
revised to read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 16--TYPES OF CONTRACTS

    2. Amend section 16.307 by revising paragraph (a)(1) to read as 
follows:


16.307  Contract clauses.

    (a)(1) The contracting officer shall insert the clause at 52.216-7, 
Allowable Cost and Payment, in solicitations and contracts when a cost-
reimbursement contract (other than a facilities contract) or a time-
and-materials contract (other than a contract for a commercial item) is 
contemplated. If the contract is with an educational institution, 
modify the clause by deleting from paragraph (a) the words ``Subpart 
31.2'' and substituting for them ``Subpart 31.3.'' If the contract is 
with a State or local government, modify the clause by deleting from 
paragraph (a) the words ``Subpart 31.2'' and substituting for them 
``Subpart 31.6.'' If the contract is with a nonprofit organization, 
other than an educational institution, a State or local government, or 
a nonprofit organization exempted under OMB Circular No. A-122, modify 
the clause by deleting from paragraph (a) the words ``Subpart 31.2'' 
and substituting for them ``Subpart 31.7.'' If the contract is a time-
and-materials contract, the clause at 52.216-7 applies only to the 
portion of the contract that provides for reimbursement of materials 
(as defined in the clause at 52.232-7) at actual cost.
* * * * *
    3. Amend section 16.601 by--
    a. Redesignating paragraphs (a), (b), and (c) as (b), (c), and (d), 
respectively;
    b. Adding a new paragraph (a); and
    c. Revising newly redesignated paragraph (b)(2).
    The added and revised text reads as follows:


16.601  Time-and-materials contracts.

    (a) Definitions for the purposes of Time-and-Materials Contracts.
    Direct materials means those materials that enter directly into the 
end product, or that are used or consumed directly in connection with 
the furnishing of the end product or service.
    Materials means--
    (1) Direct materials, including supplies and services transferred 
between divisions, subsidiaries, or affiliates of the contractor under 
a common control;
    (2) Subcontracts for supplies and services;
    (3) Any other direct costs (e.g., travel, computer usage charges, 
etc.); and
    (4) Applicable indirect costs.
    (b) * * *
    (2) Actual cost for materials (except as provided for in 31.205-
26(e) and (f)).
* * * * *
    4. Revise section 16.602 to read as follows:


16.602  Labor-hour contracts.

    Description. A labor-hour contract is a variation of the time-and-
materials contract, differing only in that materials are not supplied 
by the contractor. See 16.601(c) and 16.601(d) for application and 
limitations, respectively, for time and materials contracts that also 
apply to labor hour contracts.

PART 32--CONTRACT FINANCING

    5. Amend section 32.111 in paragraph (a)(7) by--
    a. Removing paragraph (i);
    b. Redesignating paragraphs (ii) and (iii) as (i) and (ii), 
respectively; and
    c. Revising newly designated paragraph (i).
    The revised text reads as follows:


32.111  Contract clauses for non-commercial purchases.

    (a) * * *
    (7) * * *
    (i) If a labor-hour contract is contemplated, the contracting 
officer shall use the clause with its Alternate I.
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Amend section 52.232-7 by--
    a. Revising the date of the clause;
    b. Revising the introductory paragraph of the clause;
    c. Revising paragraphs (a), (b), (d), and (e) of the clause;
    d. Revising the heading of paragraph (h);
    e. Adding paragraph (i); and
    f. Removing Alternate I, and redesignating Alternate II as 
Alternate I and revising it to read as follows:


52.232-7  Payments under Time-and-Materials and Labor-Hour Contracts.

    As prescribed in 32.111(a)(7), insert the following clause:

PAYMENTS UNDER TIME-AND-MATERIALS AND LABOR-HOUR CONTRACTS (DATE)

    The Government will pay the Contractor as follows upon the 
submission of vouchers approved by the Contracting Officer or the 
Contracting Officer's authorized representative:
    (a) Hourly rate. (1) The amounts shall be computed by 
multiplying the appropriate hourly rates prescribed in the Schedule 
by the number of direct labor hours performed. The rates shall 
include wages, indirect costs, general and administrative expense, 
and profit. Fractional parts of an hour shall be payable on a 
prorated basis.
    (2) Vouchers may be submitted once each month (or at more 
frequent intervals, if approved by the Contracting Officer), to the 
Contracting Officer or authorized representative. The Contractor 
shall substantiate vouchers (including any subcontractor hours 
reimbursed at the hourly rate in the schedule) by evidence of actual 
payment and by individual daily job timecards, records that verify 
the employees meet the qualifications for the labor categories 
specified in the contract or other substantiation approved by the 
Contracting Officer.
    (3) Promptly after receipt of each substantiated voucher, the 
Government shall, except as otherwise provided in this contract,

[[Page 56317]]

and subject to the terms of paragraph (e) of this clause, pay the 
voucher as approved by the Contracting Officer. Unless otherwise 
prescribed in the Schedule, the Contracting Officer may unilaterally 
issue a contract modification requiring the Contractor to withhold 
amounts from its billings until a reserve is set aside in an amount 
that the Contracting Officer considers necessary to protect the 
Government's interests. The Contracting Officer may require a 
withhold of 5 percent of the amounts due under paragraph (a), but 
the total amount withheld for the contract shall not exceed $50,000. 
The amounts withheld shall be retained until the Contractor executes 
and delivers the release required by paragraph (f) of this clause.
    (4) Unless the Schedule prescribes otherwise, the hourly rates 
in the Schedule shall not be varied by virtue of the Contractor 
having performed work on an overtime basis. If no overtime rates are 
provided in the Schedule and overtime work is approved in advance by 
the Contracting Officer, overtime rates shall be negotiated. Failure 
to agree upon these overtime rates shall be treated as a dispute 
under the Disputes clause of this contract. If the Schedule provides 
rates for overtime, the premium portion of those rates will be 
reimbursable only to the extent the overtime is approved by the 
Contracting Officer.
    (b) Materials. For the purposes of this clause--
    (1) Direct materials means those materials that enter directly 
into the end product, or that are used or consumed directly in 
connection with the furnishing of the end product or service.
    (2) Materials means--
    (i) Direct materials, including supplies and services 
transferred between divisions, subsidiaries, or affiliates of the 
contractor under a common control;
    (ii) Subcontracts for supplies and services;
    (iii) Any other direct costs (e.g., travel, computer usage 
charges, etc.); and
    (iv) Applicable indirect costs.
    (3) If the Contractor furnishes its own materials that meet the 
definition of a commercial item at 2.101 of the FAR, the price to be 
paid for such materials shall be the Contractor's established 
catalog or the market price, adjusted to reflect the--
    (i) Quantities being acquired; and
    (ii) Actual cost of any modifications necessary because of 
contract requirements.
    (4) Subcontracts. (i) Unless the subcontractor is listed in 
paragraph (b)(4)(ii) of this clause, subcontract costs will be 
reimbursed at actual costs as specified in paragraph (b)(5).
    (ii) Provided the subcontract agreement requires the Contractor 
to substantiate the subcontract hours and employee qualification, 
the Contractor shall be reimbursed at the hourly rates prescribed in 
the schedule for the following subcontractors:
    [Insert subcontractor name(s)or, if no subcontracts are to be 
reimbursed at the hourly rates prescribed in the schedule, insert 
``None.'']
    [If this is an indefinite delivery contract, the Contracting 
Officer may insert ``Each order must list separately the 
subcontractor(s) for that order or, if no subcontracts under that 
order are to be reimbursed at the hourly rates prescribed in the 
schedule, insert `None'.'']
    (5) Except as provided for in paragraphs (b)(3) and (4) of this 
clause, the Government will reimburse the Contractor for allowable 
cost of materials provided the Contractor--
    (i) Has made payments for materials in accordance with the terms 
and conditions of the agreement; or
    (ii) Makes these payments within 30 days of the submission of 
the Contractor's payment request to the Government and such payment 
is in accordance with the terms and conditions of the agreement or 
invoice.
    (6) Payment for materials is subject to the Allowable Cost and 
Payment clause of this contract. The Contracting Officer will 
determine allowable costs of materials in accordance with Subpart 
31.2 of the Federal Acquisition Regulation (FAR) in effect on the 
date of this contract.
    (7) The Contractor may include allocable indirect costs and 
other direct costs to the extent they are--
    (i) Comprised only of costs that are clearly excluded from the 
hourly rate;
    (ii) Allocated in accordance with the Contractor's written or 
established accounting practices; and
    (iii) Indirect costs are not applied to subcontracts listed in 
paragraph (b)(4) for reimbursement at the labor hour rate.
    (8) To the extent able, the Contractor shall--
    (i) Obtain direct materials and subcontracts at the most 
advantageous prices available with due regard to securing prompt 
delivery of satisfactory materials; and
    (ii) Take all cash and trade discounts, rebates, allowances, 
credits, salvage, commissions, and other benefits. When unable to 
take advantage of the benefits, the Contractor shall promptly notify 
the Contracting Officer and give the reasons. The Contractor shall 
give credit to the Government for cash and trade discounts, rebates, 
scrap, commissions, and other amounts that have accrued to the 
benefit of the Contractor, or would have accrued except for the 
fault or neglect of the Contractor. The Contractor shall not deduct 
from gross costs the benefits lost without fault or neglect on the 
part of the Contractor, or lost through fault of the Government.
    (9) Except as provided for in 31.205-26(e) and (f) of the FAR, 
the Government will not pay profit or fee to the prime contractor on 
materials.
    (10) If the Contractor enters into any subcontract that requires 
consent under the clause at 52.244-2, Subcontracts, without 
obtaining such consent, the Government is not required to reimburse 
the Contractor for any costs incurred under the subcontract prior to 
the date the Contractor obtains the required consent. Any 
reimbursement of subcontract costs incurred prior to the date the 
consent was obtained shall be at the sole discretion of the 
Government.
* * * * *
    (d) Ceiling price. The Government will not be obligated to pay 
the Contractor any amount in excess of the ceiling price in the 
Schedule, and the Contractor shall not be obligated to continue 
performance if to do so would exceed the ceiling price set forth in 
the Schedule, unless and until the Contracting Officer notifies the 
Contractor in writing that the ceiling price has been increased and 
specifies in the notice a revised ceiling that shall constitute the 
ceiling price for performance under this contract. When and to the 
extent that the ceiling price set forth in the Schedule has been 
increased, any hours expended and material costs incurred by the 
Contractor in excess of the ceiling price before the increase shall 
be allowable to the same extent as if the hours expended and 
material costs had been incurred after the increase in the ceiling 
price.
    (e) Audit. At any time before final payment under this contract, 
the Contracting Officer may request audit of the vouchers and 
supporting documentation. Each payment previously made shall be 
subject to reduction to the extent of amounts, on preceding 
vouchers, that are found by the Contracting Officer not to have been 
properly payable and shall also be subject to reduction for 
overpayments or to increase for underpayments. Upon receipt and 
approval of the voucher designated by the Contractor as the 
``completion voucher'' and supporting documentation, and upon 
compliance by the Contractor with all terms of this contract 
(including, without limitation, terms relating to patents and the 
terms of (f) and (g) of this section), the Government shall promptly 
pay any balance due the Contractor. The completion voucher, and 
supporting documentation, shall be submitted by the Contractor as 
promptly as practicable following completion of the work under this 
contract, but in no event later than 1 year (or such longer period 
as the Contracting Officer may approve in writing) from the date of 
completion.
* * * * *
    (h) Interim payments on contracts for other than services. * * *
* * * * *
    (i) Interim payments on contracts for services. For interim 
payments made prior to the final payment under this contract, the 
Government will make payment in accordance with the Prompt Payment 
Act (31 U.S.C. 3903) and prompt payment regulations at 5 CFR part 
1315.
    (End of clause)
    Alternate I (Date). If a labor-hour contract is contemplated, 
the Contracting Officer shall add the following paragraph (i) to the 
basic clause:
    (i) The terms of this clause that govern reimbursement for 
materials furnished are considered to have been deleted.
[FR Doc. 05-18964 Filed 9-23-05; 8:45 am]
BILLING CODE 6820-EP-S