Federal Acquisition Regulation; FAR Case 2005-032, Contractor's Request for Progress Payments, 28430-28434 [E9-13977]

Agencies

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

[Federal Register Volume 74, Number 113 (Monday, June 15, 2009)]
[Rules and Regulations]
[Pages 28430-28434]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-13977]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 32, 43, 52, and 53

[FAC 2005-33; FAR Case 2005-032; Item II; Docket 2008-0002; Sequence 1]
RIN 9000-AI47


Federal Acquisition Regulation; FAR Case 2005-032, Contractor's 
Request for Progress Payments

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

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to incorporate 
improvements related to requests for progress payments and the Standard 
Form (SF) 1443, Contractor's Request for Progress Payments, used to 
request those progress payments. Changes made to the Standard Form as 
published in the proposed rule include correction of misspellings, and 
an editorial change made at Item 4 to better describe the order number.

DATES: Effective Date: July 15, 2009.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Ms. Meredith Murphy, Procurement Analyst, at (202) 208-6925. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat, 1800 F Street, NW, Room 4041, Washington, DC 
20405, (202) 501-4755. Please cite FAC 2005-33, FAR case 2005-032.

SUPPLEMENTARY INFORMATION:

A. Background

    The Councils published a proposed rule in the Federal Register at 
73 FR 19035 on April 8, 2008, to (1) address revisions necessary to 
implement the paid-cost rule and (2) simplify the SF 1443 and related 
regulations and instructions to improve clarity.
    No comments were received by the close of the public comment period 
on June 9, 2008. Subsequently, one comment was received from one 
commenter. The commenter specifically took no issue with the proposed 
FAR changes, but objected to the costs that would be incurred by its 
member companies to make programming changes that ensue from altering 
the SF 1443. The commenter reasoned that ``(s)ince DOD's goal is to 
significantly expand the use of performance based payments, it would 
appear to be more cost effective not to incur significant expenditures 
on changes to a form (i.e., SF 1443) that is part of a system (progress 
payments) that is no longer the preferred system for providing 
financing payments.''
    The Councils were puzzled at the commenter's cost estimate of 
$87,000 to update software to use the new SF 1443 because the changes 
incorporated into the SF 1443 by this case were, generally, 
necessitated by prior changes to the paid-cost rule and other changes 
to FAR Part 32. These changes had been in effect for some time, so 
contractors using SF 1443 to request progress payments have already 
made changes to their software to conform their progress payment 
requests to the updated FAR text.
    The commenter, an association representing large defense aerospace 
corporations, was requested to provide the cost analysis upon which it 
based its estimate of the cost to reprogram software in order to enable 
electronic generation and submittal of the SF 1443 to request a 
progress payment. The commenter subsequently provided data supporting 
its estimate of approximately $87,000 per contractor. This estimate and 
the supporting data were forwarded to the Small Business Administration 
(SBA) Office of Advocacy for review specifically to determine the 
impact of modifying the SF 1443 on small businesses. Two independent 
reviews were conducted, one by the SBA's regulatory economist and one 
by an outside small business expert selected by the SBA. Neither of 
these reviews discovered a substantial economic impact on a significant 
number of small entities.
    Further, the Councils did not find the commenter's rationale 
regarding performance-based payments convincing. While it is the goal 
of Federal Government agencies, not just DoD, to use performance-based 
payments wherever possible, there remain many circumstances in which 
progress payments are an important financing mechanism. Therefore, the 
Councils approved this case as a final rule.
    During a final review by the Councils' Acquisition Finance Team, it 
was discovered that the last item in the ``INSTRUCTIONS'' section of 
the form on page 2 was labeled in error as pertaining to ``Item 26.'' 
However, the instruction actually refers to paragraph (f) of the 
``CERTIFICATION'' section. That correction has been made to the form. 
In addition, a sentence was added to the SF 1443 instructions for Items 
14a-14e to clarify that the ``financing payments'' to be included do 
not include interim payments under a cost reimbursement contract.
    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.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because the changes are 
designed to simplify the form and improve clarity. (See also, the 
Background section above for a thorough discussion of lack of impact on 
small entities.)

C. Paperwork Reduction Act

    The Paperwork Reduction Act does apply; however, these changes to 
the FAR do not impose additional information collection requirements to 
the paperwork burden previously approved under OMB Control Number 9000-
0010.

List of Subjects in 48 CFR Parts 32, 43, 52, and 53

    Government procurement.

    Dated: June 9, 2009.
Al Matera,
Director, Office of Acquisition Policy.

0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 32, 43, 52, and 53 as 
set forth below:
0
1. The authority citation for 48 CFR parts 32, 43, 52, and 53 continues 
to read as follows:

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

[[Page 28431]]

PART 32--CONTRACT FINANCING

0
2. Amend section 32.001 by adding, in alphabetical order, the 
definition ``Liquidate'' to read as follows:


32.001  Definitions.

* * * * *
    Liquidate means to decrease a payment for an accepted supply item 
or service under a contract for the purpose of recouping financing 
payments previously paid to the contractor.
* * * * *

0
3. Amend section 32.501-3 by revising paragraph (a)(1) and the first 
sentence of paragraph (a)(3) to read as follows:


32.501-3  Contract price.

    (a) * * *
    (1) Under firm-fixed price contracts, the contract price is the 
current amount fixed by the contract plus the not-to-exceed amount for 
any unpriced modifications.
* * * * *
    (3) Under a fixed-price incentive contract, the contract price is 
the target price plus the not-to-exceed amount of unpriced 
modifications. * * *
* * * * *


32.503-1  [Removed and Reserved]

0
4. Remove and reserve section 32.503-1.

0
5. Amend section 32.503-6 by revising paragraphs (a)(3), (f), and 
(g)(1)(i) to read as follows:


32.503-6  Suspension or reduction of payments.

    (a) * * *
    (3) In all cases, the contracting officer shall--
    (i) Act fairly and reasonably;
    (ii) Base decisions on substantial evidence; and
    (iii) Document the contract file. Findings made under paragraph (c) 
of the Progress Payments clause shall be in writing.
* * * * *
    (f) Fair value of undelivered work. Progress payments must be 
commensurate with the fair value of work accomplished in accordance 
with contract requirements. The contracting officer must adjust 
progress payments when necessary to ensure that the fair value of 
undelivered work equals or exceeds the amount of unliquidated progress 
payments. On loss contracts, the application of a loss ratio as 
provided at paragraph (g) of this subsection constitutes this 
adjustment.
    (g) * * *
    (1) * * *
    (i) Revise the current contract price used in progress payment 
computations (the current ceiling price under fixed-price incentive 
contracts) to include the not-to-exceed amount for any pending change 
orders and unpriced orders.
* * * * *

PART 43--CONTRACT MODIFICATIONS


43.102  [Amended]

0
6. Amend section 43.102 by removing from paragraph (b) the word 
``maximum'' and adding the word ``ceiling'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
7. Amend section 52.232-16 by revising the date of the clause; adding 
paragraph (a)(9); and revising paragraphs (c)(5) and (g) to read as 
follows:


52.232-16  Progress Payments.

* * * * *
    Progress Payments (JUL 2009)
* * * * *
    (a) * * *
    (9) The costs applicable to items delivered, invoiced, and 
accepted shall not include costs in excess of the contract price of 
the items.
* * * * *
    (c) * * *
    (5) The fair value of the undelivered work is less than the 
amount of unliquidated progress payments for that work.
* * * * *
    (g) Reports, forms, and access to records. (1) The Contractor 
shall promptly furnish reports, certificates, financial statements, 
and other pertinent information (including estimates to complete) 
reasonably requested by the Contracting Officer for the 
administration of this clause. Also, the Contractor shall give the 
Government reasonable opportunity to examine and verify the 
Contractor's books, records, and accounts.
    (2) The Contractor shall furnish estimates to complete that have 
been developed or updated within six months of the date of the 
progress payment request. The estimates to complete shall represent 
the Contractor's best estimate of total costs to complete all 
remaining contract work required under the contract. The estimates 
shall include sufficient detail to permit Government verification.
    (3) Each Contractor request for progress payment shall:
    (i) Be submitted on Standard Form 1443, Contractor's Request for 
Progress Payment, or the electronic equivalent as required by agency 
regulations, in accordance with the form instructions and the 
contract terms; and
    (ii) Include any additional supporting documentation requested 
by the Contracting Officer.
* * * * *

PART 53--FORMS


53.232  [Amended]

0
8. Amend section 53.232 by removing ``(10/82)'' and adding ``(JUL 
2009)'' in its place; and by removing ``, as specified in 32.503.1''.

0
9. Amend section 53.301-1443 by revising the form to read as follows:


53.301-1443  Contractor's Request for Progress Payment.

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[FR Doc. E9-13977 Filed 6-12-09; 8:45 am]
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