Federal Acquisition Regulation; FAR Case 2008-015, Payments Under Fixed-Price Architect-Engineer Contracts, 13422-13425 [2010-5991]
Download as PDF
<![CDATA[
13422
Federal Register / Vol. 75, No. 53 / Friday, March 19, 2010 / Rules and Regulations
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
SUMMARY: The Civilian Agency
Acquisition Council and the Defense
Acquisition Regulations Council (the
Councils) have adopted as final, without
change, an interim rule amending the
Federal Acquisition Regulation (FAR) to
implement the Dominican Republic—
Central America—United States Free
Trade Agreement with respect to Costa
Rica, the United States-Oman Free
Trade Agreement, and the United
States-Peru Trade Promotion
Agreement.
Effective Date: March 19, 2010.
FOR FURTHER INFORMATION CONTACT: For
clarification of content, contact Ms. Lori
Sakalos, Procurement Analyst, at (202)
208–0498. For information pertaining to
status or publication schedules, contact
the Regulatory Secretariat at (202) 501–
4755. Please cite FAC 2005–39, FAR
case 2008–036.
SUPPLEMENTARY INFORMATION:
DATES:
erowe on DSK5CLS3C1PROD with RULES_2
A. Background
The Councils published an interim
rule in the Federal Register at 74 FR
28426 on June 15, 2009. No public
comments were received in response to
the interim rule.
The interim rule added Costa Rica,
Oman, and Peru to the definition of
‘‘Free Trade Agreement country’’. The
rule also deleted Costa Rica from the
definition of ‘‘Caribbean Basin country’’
because, in accordance with section
201(a)(3) of Pub. L. 109–53, when the
Dominican Republic—Central
America—United States Free Trade
Agreement (CAFTA—DR) agreement
enters into force with respect to a
country, that country is no longer
designated as a beneficiary country for
purposes of the Caribbean Basin
Economic Recovery Act.
The excluded services for the Oman
and Peru Free Trade Agreements (FTAs)
are the same as for the Bahrain FTA,
CAFTA-DR, Chile FTA, and North
American Free Trade Agreement. Costa
Rica has the same thresholds as the
other CAFTA-DR countries.
This is a significant regulatory action
and, therefore, was 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.
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 acquisitions that are set aside
for small businesses are exempt from
trade agreements. In addition, the
Department of Defense only applies the
trade agreements to the non-defense
items listed at the Defense Federal
Acquisition Regulation Supplement
225.401–70. No comments were
received relating to impact on small
business concerns.
C. Paperwork Reduction Act
The Paperwork Reduction Act does
apply, and this rule is added to the
certification and information collection
requirements in the provisions at FAR
52.212–3, 52.225–4, 52.225–6, and
52.225–11 currently approved under
Office of Management and Budget
clearance 9000–0136 (Commercial Item
Acquisition; FAR sections affected are
part 12 and provisions 52.212–1 and
52.212–3), 9000–0130 (Buy America
Act, Trade Agreements Act Certificate;
FAR section affected is provision
52.225–4), 9000–0025 (Buy American
Act, Trade Agreements Act Certificate;
FAR section affected is provision
52.225–6), and 9000–0141 (Buy America
Act—Construction; FAR sections
affected are subpart 25.2 and provisions
52.225–9 and 52.225–11) respectively.
The impacts of this change on
information collection requirements are
negligible. No comments were received
on the burden or number of entities
affected by this rulemaking.
List of Subjects in 48 CFR Parts 25 and
52
Government procurement.
Dated: March 15, 2010.
Al Matera,
Director, Acquisition Policy Division.
Interim Rule Adopted as Final
Without Change
■ Accordingly, the interim rule
amending 48 CFR parts 25 and 52,
which was published in the Federal
Register at 74 FR 28426 on June 15,
2009, is adopted as a final rule without
change.
Jkt 220001
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Part 52
[FAC 2005–39; FAR Case 2008–015; Item
VI; Docket 2009–0015, Sequence 1]
RIN 9000–AL26
Federal Acquisition Regulation; FAR
Case 2008–015, Payments Under
Fixed-Price Architect-Engineer
Contracts
AGENCIES: Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
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 revise the
withholding of payment requirements
under FAR 52.232–10. This FAR change
was initiated by the Small Business
Administration (SBA) Advocacy Office
and is a part of the SBA, Office of
Advocacy’s Regulatory Review and
Reform Initiative, or r3 initiative. The r3
program was established to help small
businesses address the cumulative
Federal regulatory burden.
DATES: Effective Date: April 19, 2010.
FOR FURTHER INFORMATION CONTACT: For
clarification of content, contact Ms.
Suzanne Neurauter, Procurement
Analyst, at 202–219–0310. For
information pertaining to status or
publication schedules, contact the
Regulatory Secretariat at (202) 501–
4755. Please cite FAC 2005–39, FAR
case 2008–015.
SUPPLEMENTARY INFORMATION:
A. Background
[FR Doc. 2010–5990 Filed 3–18–10; 8:45 am]
The FAR at 52.232–10, Payments
Under Fixed-Price Architect-Engineer
Contracts, currently requires contracting
officers to withhold 10 percent of the
amounts due on each voucher; however,
payment can be made in full during any
month in which the contracting officer
determines the performance to be
satisfactory. The Government retains the
withheld amount until the contracting
officer determines that the work has
been satisfactorily completed. The
contracting officer may release excess
withheld amounts to the contractor
when the contracting officer determines
BILLING CODE 6820–EP–S
The Department of Defense, General
Services Administration, and National
Aeronautics and Space Administration
certify that this final rule will not have
14:19 Mar 18, 2010
GENERAL SERVICES
ADMINISTRATION
■
B. Regulatory Flexibility Act
VerDate Nov<24>2008
DEPARTMENT OF DEFENSE
PO 00000
Frm 00012
Fmt 4701
Sfmt 4700
E:\FR\FM\19MRR2.SGM
19MRR2
erowe on DSK5CLS3C1PROD with RULES_2
Federal Register / Vol. 75, No. 53 / Friday, March 19, 2010 / Rules and Regulations
that the work is substantially complete
or when the contracting officer
determines that the amount retained is
in excess of the amount adequate for the
protection of the Government’s
interests.
This final rule revises FAR 52.232–10
to permit contracting officers to use
their judgment regarding the amount of
payment withheld to apply under fixedprice architect-engineer (A-E) contracts
(based on an assessment of the
contractor’s performance under the
contract) so that the withheld amount
will be applied at the level necessary to
protect the Government’s interests. This
is in contrast to the current requirement
that contracting officers withhold 10
percent on all payments. Thus, this final
rule revises paragraph (b) of the contract
clause at FAR 52.232–10 to state that
contracting officers shall withhold up to
10 percent of the payment due only if
the contracting officer determines that
such a withholding is necessary to
protect the Government’s interest and
ensure satisfactory completion of the
contract. The amount of withholding
shall be determined based upon the
contractor’s performance record. This
final rule also makes several related
editorial changes including one that
clarifies that the contractor will be paid
any unpaid balance due to include
withheld amounts at the successful
completion of the A-E services work.
Discussion and Analysis
A proposed rule was published in the
Federal Register at 74 FR 20666 on May
5, 2009. The FAR Secretariat received
eight (8) responses to the proposed rule
from seven (7) respondents. These
responses included a total of 34
comments on 13 issues. Each issue is
discussed in the following sections.
1. Support for the proposed revision.
Four respondents wrote in support of
the proposed rule. One respondent
commended the Councils for following
through on the change, which was
initially undertaken as part of the SBA’s
r3 initiative, a tool for small business
stakeholders to suggest needed reforms.
2. Clearly distinguish A-E contracts
from construction contracts.
Two respondents recommended that
the FAR clearly distinguish between AE contracts and construction contracts,
pointing out that A-E services are not
construction services.
Response: The Councils thought this
would be unnecessary, given that FAR
part 36 addresses the two types of
contracts separately, even assigning a
separate subpart, subpart 36.6, for A-E
contracts. Both A-E and construction are
thoroughly, and separately, defined at
FAR 2.101, in terms that do not overlap.
No change to the FAR is needed.
VerDate Nov<24>2008
14:19 Mar 18, 2010
Jkt 220001
3. Require contracting officers to
release excess retainage once work is
substantially complete.
Response: This change, requested by
three respondents, has been made in
paragraph (c) of the clause. The clause
at FAR 52.232–10, Payments under
Fixed-Price Architect-Engineer
Contracts, requires (not merely
‘‘authorizes’’) payment by the
Government of ‘‘the unpaid balance of
any money due for work under the
statement, including all withheld
amounts’’ upon satisfactory completion
and final acceptance of ‘‘all the work
done by the Contractor under the
‘Statement of Architect-Engineer
Services.’’’ The ‘‘Statement of ArchitectEngineer Services’’ is the statement of
work for the instant A-E contract; it does
not include any follow-on construction
contract. The rule also deletes the
second sentence of FAR 52.232–10(c),
which allowed the Government to retain
some monies due until ‘‘satisfactory
completion and final acceptance of the
construction work’’.
The matter of the Government’s
acceptance of the work is addressed at
item 10 below.
4. Adopt retainage requirements
similar to those for fixed-price
contracts with the rest of the
construction industry.
One respondent recommended that
the Councils ‘‘adopt FAR requirements
identical to those for fixed-price
contracts made with the rest of the
construction industry.’’
Response: The Councils note that
other respondents rejected treating A-E
services as a type of construction
service. Further, the Councils believe
that retainage for A-E contracts is now
predicated on contracting officers
determining if retainage is necessary to
protect the Government’s interests and
ensure satisfactory completion of the
contract. Any such retainage is to be
released in full, not partially, upon
satisfactory completion of the A-E
statement of work.
5. Consider past performance in
retainage decisions.
Three respondents asked that past
performance (on previous contracts) be
taken into consideration when
negotiating whether retainage will be
applied to a fixed-price A-E contract.
Response: The Councils partially
concur. Past performance is taken into
account in selecting the successful
offeror and making the contract award.
In effect, contracting officers are
considering performance to date on the
instant contract when deciding whether
to retain and in assessing whether
current performance is satisfactory.
PO 00000
Frm 00013
Fmt 4701
Sfmt 4700
13423
6. Proposed rule removes a
mandatory requirement designed to
protect the Government’s financial
interests.
One respondent, a Government
agency, disagreed with the proposed
rule, stating that it removes a mandatory
requirement designed to (a) protect the
financial interest of the Government in
a fixed-price contract, (b) apply a
uniform withholding of payments to all
contractors; and (c) provide an incentive
for contractors to complete the contract
obligation in a timely manner.
Response: Retainage was a mandatory
10 percent unless performance was
satisfactory during that month. The rule
continues to require retainage when
determined necessary to protect the
Government’s interests and ensure
satisfactory completion of the contract.
7. Proposed rule fails to provide
statutory authority.
One respondent stated that the
proposed rule fails to provide the
statutory authority for this clause or for
retainage on Federal A-E contracts.
Response: Title 40 of the United
States Code, chapter 11, Selection of
Architects and Engineers, is the
statutory authority for FAR coverage on
A-E contracts. The authority for
retainage on A-E contracts is not
statutory but is included in the FAR to
ensure the Government’s interests are
protected until final delivery and
acceptance of these types of services is
made.
8. Proposed rule inappropriately uses
the term ‘‘design work’’.
Two respondents believe that the
proposed rule loosely and
inappropriately uses the term ‘‘design
work’’, while the retainage requirement
is applied to all types of A-E contracts,
not just those for design services. A
third respondent states that all A-E
services should be covered by the
revised retainage rule.
Response: The Councils agree, noting
that the definition of A-E services at
FAR 2.101 includes other services such
as surveying and mapping,
consultations, and plans and
specifications (see item 9 below). The
final rule has deleted the term ‘‘design’’
in the two places it is used in FAR
52.232–10(c) of the proposed rule.
9. Specifically include ‘‘surveying,
mapping, and geospatial’’.
One respondent requested that the
term ‘‘surveying, mapping, and
geospatial’’ be specifically included in
the rule and in FAR 52.232–10.
Response: Any revisions to the
definition of A-E services are outside
the scope of this case. The Councils note
that A-E services are defined at FAR
2.101.
E:\FR\FM\19MRR2.SGM
19MRR2
erowe on DSK5CLS3C1PROD with RULES_2
13424
Federal Register / Vol. 75, No. 53 / Friday, March 19, 2010 / Rules and Regulations
10. Add requirements to ensure
prompt and timely review and
acceptance of deliverables from A-E
contractors.
Four respondents commented upon
the need for prompt and timely review
and acceptance by the Government of
deliverables under A-E contracts.
Response: The Councils take no
position on this question because it is
outside the scope of this case, which
was limited to the question of retainage
on A-E contracts. Other FAR clauses
such as FAR 52.232–26, Prompt
Payment for Fixed-Price ArchitectEngineer Contracts, deal with these
requirements.
11. Eliminate retainage altogether,
except for cause, and require
contracting officer to bear burden of
proving that any withholding of fee is
necessary.
Three respondents expressed
opposition to the concept of mandatory
retainage. One respondent opposed the
use of any fee withholding requirement,
and another respondent asked the
Councils to clarify that retainage is now
discretionary, not mandatory.
Response: The Councils agree that
retainage remains an option, one that
depends on the contractor’s
performance on the instant contract. If
the contractor’s performance is
satisfactory, there need not be any
retainage at all for the period. The
revised paragraph (b) of FAR 52.232–10
states that contracting officers ‘‘shall
require a withholding from amounts due
under paragraph (a) of this clause of up
to 10 percent only if the Contracting
Officer determines that such a
withholding is necessary to protect the
Government’s interest and ensure
satisfactory completion of the contract.’’
(Emphasis added). This means that, if
performance is satisfactory for the
period, then retainage could be zero.
Also, some amount less than 10 percent
could be retained.
The third respondent compared A-E
retainage to the payments for fixed-price
construction contracts and claimed that
the burden of proof remains on the
contracting officer to justify withholding
a portion of a construction contractor’s
fee, while this is not the case for A-E
contracts.
Response: The Councils disagree with
respondent, because the revised FAR
52.232–10(b), quoted above, makes it
clear that contracting officers must make
a decision each performance period,
based on the contractor’s performance,
whether to retain any amount and, if so,
how much—up to 10 percent of the
vouchered amount—to retain.
12. Fee withholding should be
different for task orders under
VerDate Nov<24>2008
14:19 Mar 18, 2010
Jkt 220001
indefinite-delivery/indefinite-quantity
(IDIQ) contracts.
Four respondents commented that
IDIQ contracts should be treated
differently. One respondent noted that
some small A-E firms believe that the
current regulation may not be consistent
with IDIQ contracting practices. This
comment is supported by four other
comments received on this same point.
One respondent claimed that retainage
for individual task orders under an IDIQ
contract is, at times, currently held until
the entire IDIQ contract is complete.
Response: Retainage should be related
to the contractor’s performance on the
individual task or delivery order and, in
order to be compliant with the
requirements of FAR 52.232–10, the
contractor must be paid any unpaid
balance upon satisfactory completion of
the work under that contract, whether it
is a task or delivery order or a standalone contract. However, this is a matter
of educating contracting officers rather
than changing policy; the policy is
correct, but its execution needs
improving.
13. Impact on small businesses.
One respondent disagreed with the
proposed rule’s finding that the
proposed change would not have a
significant impact on small firms.
Response: While the Councils agree
that there were some cases during
contract administration where the
retainage in the mandatory amount of 10
percent was not justified, the changes
made in this rule do not rise to the level
of a significant impact on a substantial
number of small entities.
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
rule does not impose any additional
requirements on small businesses. There
are approximately 230,000 architectengineer firms, many of which are small
businesses. This rule actually eases the
impact on such firms, but not to the
point of having a significant economic
impact on a substantial number of small
entities.
PO 00000
Frm 00014
Fmt 4701
Sfmt 4700
C. Paperwork Reduction Act
The Paperwork Reduction Act does
not apply because the 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. chapter 35,
et seq.
List of Subjects in 48 CFR Part 52
Government procurement.
Dated: March 15, 2010.
Al Matera,
Director, Acquisition Policy Division.
Therefore, DoD, GSA, and NASA
amend 48 CFR part 52 as set forth
below:
■
PART 52—SOLICITATION PROVISIONS
AND CONTRACT CLAUSES
1. The authority citation for 48 CFR
part 52 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).
2. Amend section 52.232–10 by
revising the date of the clause and
paragraphs (a), (b), and (c) to read as
follows:
■
52.232–10 Payments under Fixed-Price
Architect-Engineer Contracts.
*
*
*
*
*
PAYMENTS UNDER FIXED-PRICE
ARCHITECT-ENGINEER CONTRACTS
APR 2010.
(a) Estimates shall be made monthly of the
amount and value of the work and services
performed by the Contractor under this
contract which meet the standards of quality
established under this contract. The
estimates, along with any supporting data
required by the Contracting Officer, shall be
prepared by the Contractor and submitted
along with its voucher.
(b) After receipt of each substantiated
voucher, the Government shall pay the
voucher as approved by the Contracting
Officer or authorized representative. The
Contracting Officer shall require a
withholding from amounts due under
paragraph (a) of this clause of up to 10
percent only if the Contracting Officer
determines that such a withholding is
necessary to protect the Government’s
interest and ensure satisfactory completion of
the contract. The amount withheld shall be
determined based upon the Contractor’s
performance record under this contract.
Whenever the Contracting Officer determines
that the work is substantially complete and
that the amount retained is in excess of the
amount adequate for the protection of the
Government, the Contracting Officer shall
release the excess amount to the Contractor.
(c) Upon satisfactory completion by the
Contractor and final acceptance by the
Contracting Officer of all the work done by
the Contractor under the ‘‘Statement of
Architect-Engineer Services’’, the Contractor
will be paid the unpaid balance of any
E:\FR\FM\19MRR2.SGM
19MRR2
Federal Register / Vol. 75, No. 53 / Friday, March 19, 2010 / Rules and Regulations
money due for work under the statement,
including all withheld amounts.
*
*
*
*
List of Subjects in 48 CFR Part 14
Government procurement.
*
Dated: March 15, 2010.
Al Matera,
Director, Acquisition Policy Division.
[FR Doc. 2010–5991 Filed 3–18–10; 8:45 am]
BILLING CODE 6820–EP–S
Therefore, DoD, GSA, and NASA
amend 48 CFR part 14 as set forth
below:
■
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
PART 14—SEALED BIDDING
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
■
48 CFR Part 14
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 42 U.S.C. 2473(c).
[FAC 2005–39; Item VII; Docket FAR 2010–
0078; Sequence 1]
14.202–4
1. The authority citation for 48 CFR
part 14 continues to read as follows:
Federal Acquisition Regulation;
Technical Amendment
AGENCIES: Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
This document makes an
amendment to the Federal Acquisition
Regulation in order to make an editorial
change.
DATES: Effective Date: March 19, 2010.
FOR FURTHER INFORMATION CONTACT: The
Regulatory Secretariat, 1800 F Street,
NW., Room 4041, Washington, DC,
20405, (202) 501–4755, for information
pertaining to status or publication
schedules. Please cite FAC 2005–39,
Technical Amendment.
SUPPLEMENTARY INFORMATION: This
document makes an amendment to the
Federal Acquisition Regulation in order
to make an editorial change.
SUMMARY:
[Amended]
2. Amend section 14.202–4 by
removing from paragraph (a)(3)
‘‘subdivision (e)(1)(ii) below’’ and
adding ‘‘paragraph (d)(1)(ii) of this
section’’ in its place.
■
[FR Doc. 2010–5992 Filed 3–18–10; 8:45 am]
BILLING CODE 6820–EP–S
13425
and National Aeronautics and Space
Administration (NASA).
ACTION:
Small Entity Compliance Guide.
SUMMARY: This document is issued
under the joint authority of the
Secretary of Defense, the Administrator
of General Services and the
Administrator of the National
Aeronautics and Space Administration.
This Small Entity Compliance Guide has
been prepared in accordance with
section 212 of the Small Business
Regulatory Enforcement Fairness Act of
1996. It consists of a summary of rules
appearing in Federal Acquisition
Circular (FAC) 2005–39 which amend
the Federal Acquisition Regulation
(FAR). Interested parties may obtain
further information regarding these
rules by referring to FAC 2005–39
which precedes this document. These
documents are also available via the
Internet at https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Hada Flowers, FAR Secretariat, (202)
208–7282. For clarification of content,
contact the analyst whose name appears
in the table below.
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Chapter 1
[Docket FAR 2010–0077, Sequence 1]
Federal Acquisition Regulation;
Federal Acquisition Circular 2005–39;
Small Entity Compliance Guide
AGENCIES: Department of Defense (DoD),
General Services Administration (GSA),
LIST OF RULES IN FAC 2005–39
Item
Subject
I ............
II ...........
Extend Use of Simplified Acquisition Procedures for Certain Commercial Items ...........................
Clarification of Submission of Cost or Pricing Data on Non-Commercial Modifications of Commercial Items.
Use of Standard Form 26 - Award/Contract ....................................................................................
Enhanced Competition for Task- and Delivery-Order Contracts-Section 843 of the Fiscal Year
2008 National Defense Authorization Act.
Trade Agreements—Costa Rica, Oman, and Peru .........................................................................
Payments Under Fixed-Price Architect-Engineer Contracts ...........................................................
Technical Amendment .....................................................................................................................
III ..........
IV ..........
V ...........
VI ..........
VII .........
erowe on DSK5CLS3C1PROD with RULES_2
SUPPLEMENTARY INFORMATION:
Summaries for each FAR rule follow.
For the actual revisions and/or
amendments made by these FAR cases,
refer to the specific item number and
subject set forth in the documents
following these item summaries.
FAC 2005–39 amends the FAR as
specified below:
VerDate Nov<24>2008
14:19 Mar 18, 2010
Jkt 220001
FAR case
Item I—Extend Use of Simplified
Acquisition Procedures for Certain
Commercial Items (FAR Case 2009–035)
This final rule amends the FAR to
implement section 816 of the National
Defense Authorization Act (NDAA) for
Fiscal Year (FY) 2010. The rule extends
for two more years the commercial
items test program in FAR subpart 13.5.
PO 00000
Frm 00015
Fmt 4701
Sfmt 4700
Analyst
2009–035
2008–012
Jackson.
Chambers.
2008–040
2008–006
Jackson.
Clark.
2008–036
2008–015
Sakalos.
Neurauter.
The program was to expire January 1,
2010.
Item II—Clarification of Submission of
Cost or Pricing Data on NonCommercial Modifications of
Commercial Items (FAR Case 2008–012)
This final rule adopts, with minor
changes, the interim rule published in
the Federal Register at 74 FR 11826 on
E:\FR\FM\19MRR2.SGM
19MRR2
]]>Agencies
[Federal Register Volume 75, Number 53 (Friday, March 19, 2010)]
[Rules and Regulations]
[Pages 13422-13425]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-5991]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 52
[FAC 2005-39; FAR Case 2008-015; Item VI; Docket 2009-0015, Sequence 1]
RIN 9000-AL26
Federal Acquisition Regulation; FAR Case 2008-015, Payments Under
Fixed-Price Architect-Engineer Contracts
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
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 revise the
withholding of payment requirements under FAR 52.232-10. This FAR
change was initiated by the Small Business Administration (SBA)
Advocacy Office and is a part of the SBA, Office of Advocacy's
Regulatory Review and Reform Initiative, or r3 initiative. The r3
program was established to help small businesses address the cumulative
Federal regulatory burden.
DATES: Effective Date: April 19, 2010.
FOR FURTHER INFORMATION CONTACT: For clarification of content, contact
Ms. Suzanne Neurauter, Procurement Analyst, at 202-219-0310. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-39, FAR
case 2008-015.
SUPPLEMENTARY INFORMATION:
A. Background
The FAR at 52.232-10, Payments Under Fixed-Price Architect-Engineer
Contracts, currently requires contracting officers to withhold 10
percent of the amounts due on each voucher; however, payment can be
made in full during any month in which the contracting officer
determines the performance to be satisfactory. The Government retains
the withheld amount until the contracting officer determines that the
work has been satisfactorily completed. The contracting officer may
release excess withheld amounts to the contractor when the contracting
officer determines
[[Page 13423]]
that the work is substantially complete or when the contracting officer
determines that the amount retained is in excess of the amount adequate
for the protection of the Government's interests.
This final rule revises FAR 52.232-10 to permit contracting
officers to use their judgment regarding the amount of payment withheld
to apply under fixed-price architect-engineer (A-E) contracts (based on
an assessment of the contractor's performance under the contract) so
that the withheld amount will be applied at the level necessary to
protect the Government's interests. This is in contrast to the current
requirement that contracting officers withhold 10 percent on all
payments. Thus, this final rule revises paragraph (b) of the contract
clause at FAR 52.232-10 to state that contracting officers shall
withhold up to 10 percent of the payment due only if the contracting
officer determines that such a withholding is necessary to protect the
Government's interest and ensure satisfactory completion of the
contract. The amount of withholding shall be determined based upon the
contractor's performance record. This final rule also makes several
related editorial changes including one that clarifies that the
contractor will be paid any unpaid balance due to include withheld
amounts at the successful completion of the A-E services work.
Discussion and Analysis
A proposed rule was published in the Federal Register at 74 FR
20666 on May 5, 2009. The FAR Secretariat received eight (8) responses
to the proposed rule from seven (7) respondents. These responses
included a total of 34 comments on 13 issues. Each issue is discussed
in the following sections.
1. Support for the proposed revision.
Four respondents wrote in support of the proposed rule. One
respondent commended the Councils for following through on the change,
which was initially undertaken as part of the SBA's r3 initiative, a
tool for small business stakeholders to suggest needed reforms.
2. Clearly distinguish A-E contracts from construction contracts.
Two respondents recommended that the FAR clearly distinguish
between A-E contracts and construction contracts, pointing out that A-E
services are not construction services.
Response: The Councils thought this would be unnecessary, given
that FAR part 36 addresses the two types of contracts separately, even
assigning a separate subpart, subpart 36.6, for A-E contracts. Both A-E
and construction are thoroughly, and separately, defined at FAR 2.101,
in terms that do not overlap. No change to the FAR is needed.
3. Require contracting officers to release excess retainage once
work is substantially complete.
Response: This change, requested by three respondents, has been
made in paragraph (c) of the clause. The clause at FAR 52.232-10,
Payments under Fixed-Price Architect-Engineer Contracts, requires (not
merely ``authorizes'') payment by the Government of ``the unpaid
balance of any money due for work under the statement, including all
withheld amounts'' upon satisfactory completion and final acceptance of
``all the work done by the Contractor under the `Statement of
Architect-Engineer Services.''' The ``Statement of Architect-Engineer
Services'' is the statement of work for the instant A-E contract; it
does not include any follow-on construction contract. The rule also
deletes the second sentence of FAR 52.232-10(c), which allowed the
Government to retain some monies due until ``satisfactory completion
and final acceptance of the construction work''.
The matter of the Government's acceptance of the work is addressed
at item 10 below.
4. Adopt retainage requirements similar to those for fixed-price
contracts with the rest of the construction industry.
One respondent recommended that the Councils ``adopt FAR
requirements identical to those for fixed-price contracts made with the
rest of the construction industry.''
Response: The Councils note that other respondents rejected
treating A-E services as a type of construction service. Further, the
Councils believe that retainage for A-E contracts is now predicated on
contracting officers determining if retainage is necessary to protect
the Government's interests and ensure satisfactory completion of the
contract. Any such retainage is to be released in full, not partially,
upon satisfactory completion of the A-E statement of work.
5. Consider past performance in retainage decisions.
Three respondents asked that past performance (on previous
contracts) be taken into consideration when negotiating whether
retainage will be applied to a fixed-price A-E contract.
Response: The Councils partially concur. Past performance is taken
into account in selecting the successful offeror and making the
contract award. In effect, contracting officers are considering
performance to date on the instant contract when deciding whether to
retain and in assessing whether current performance is satisfactory.
6. Proposed rule removes a mandatory requirement designed to
protect the Government's financial interests.
One respondent, a Government agency, disagreed with the proposed
rule, stating that it removes a mandatory requirement designed to (a)
protect the financial interest of the Government in a fixed-price
contract, (b) apply a uniform withholding of payments to all
contractors; and (c) provide an incentive for contractors to complete
the contract obligation in a timely manner.
Response: Retainage was a mandatory 10 percent unless performance
was satisfactory during that month. The rule continues to require
retainage when determined necessary to protect the Government's
interests and ensure satisfactory completion of the contract.
7. Proposed rule fails to provide statutory authority.
One respondent stated that the proposed rule fails to provide the
statutory authority for this clause or for retainage on Federal A-E
contracts.
Response: Title 40 of the United States Code, chapter 11, Selection
of Architects and Engineers, is the statutory authority for FAR
coverage on A-E contracts. The authority for retainage on A-E contracts
is not statutory but is included in the FAR to ensure the Government's
interests are protected until final delivery and acceptance of these
types of services is made.
8. Proposed rule inappropriately uses the term ``design work''.
Two respondents believe that the proposed rule loosely and
inappropriately uses the term ``design work'', while the retainage
requirement is applied to all types of A-E contracts, not just those
for design services. A third respondent states that all A-E services
should be covered by the revised retainage rule.
Response: The Councils agree, noting that the definition of A-E
services at FAR 2.101 includes other services such as surveying and
mapping, consultations, and plans and specifications (see item 9
below). The final rule has deleted the term ``design'' in the two
places it is used in FAR 52.232-10(c) of the proposed rule.
9. Specifically include ``surveying, mapping, and geospatial''.
One respondent requested that the term ``surveying, mapping, and
geospatial'' be specifically included in the rule and in FAR 52.232-10.
Response: Any revisions to the definition of A-E services are
outside the scope of this case. The Councils note that A-E services are
defined at FAR 2.101.
[[Page 13424]]
10. Add requirements to ensure prompt and timely review and
acceptance of deliverables from A-E contractors.
Four respondents commented upon the need for prompt and timely
review and acceptance by the Government of deliverables under A-E
contracts.
Response: The Councils take no position on this question because it
is outside the scope of this case, which was limited to the question of
retainage on A-E contracts. Other FAR clauses such as FAR 52.232-26,
Prompt Payment for Fixed-Price Architect-Engineer Contracts, deal with
these requirements.
11. Eliminate retainage altogether, except for cause, and require
contracting officer to bear burden of proving that any withholding of
fee is necessary.
Three respondents expressed opposition to the concept of mandatory
retainage. One respondent opposed the use of any fee withholding
requirement, and another respondent asked the Councils to clarify that
retainage is now discretionary, not mandatory.
Response: The Councils agree that retainage remains an option, one
that depends on the contractor's performance on the instant contract.
If the contractor's performance is satisfactory, there need not be any
retainage at all for the period. The revised paragraph (b) of FAR
52.232-10 states that contracting officers ``shall require a
withholding from amounts due under paragraph (a) of this clause of up
to 10 percent only if the Contracting Officer determines that such a
withholding is necessary to protect the Government's interest and
ensure satisfactory completion of the contract.'' (Emphasis added).
This means that, if performance is satisfactory for the period, then
retainage could be zero. Also, some amount less than 10 percent could
be retained.
The third respondent compared A-E retainage to the payments for
fixed-price construction contracts and claimed that the burden of proof
remains on the contracting officer to justify withholding a portion of
a construction contractor's fee, while this is not the case for A-E
contracts.
Response: The Councils disagree with respondent, because the
revised FAR 52.232-10(b), quoted above, makes it clear that contracting
officers must make a decision each performance period, based on the
contractor's performance, whether to retain any amount and, if so, how
much--up to 10 percent of the vouchered amount--to retain.
12. Fee withholding should be different for task orders under
indefinite-delivery/indefinite-quantity (IDIQ) contracts.
Four respondents commented that IDIQ contracts should be treated
differently. One respondent noted that some small A-E firms believe
that the current regulation may not be consistent with IDIQ contracting
practices. This comment is supported by four other comments received on
this same point. One respondent claimed that retainage for individual
task orders under an IDIQ contract is, at times, currently held until
the entire IDIQ contract is complete.
Response: Retainage should be related to the contractor's
performance on the individual task or delivery order and, in order to
be compliant with the requirements of FAR 52.232-10, the contractor
must be paid any unpaid balance upon satisfactory completion of the
work under that contract, whether it is a task or delivery order or a
stand-alone contract. However, this is a matter of educating
contracting officers rather than changing policy; the policy is
correct, but its execution needs improving.
13. Impact on small businesses.
One respondent disagreed with the proposed rule's finding that the
proposed change would not have a significant impact on small firms.
Response: While the Councils agree that there were some cases
during contract administration where the retainage in the mandatory
amount of 10 percent was not justified, the changes made in this rule
do not rise to the level of a significant impact on a substantial
number of small entities.
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 rule does not
impose any additional requirements on small businesses. There are
approximately 230,000 architect-engineer firms, many of which are small
businesses. This rule actually eases the impact on such firms, but not
to the point of having a significant economic impact on a substantial
number of small entities.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the 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.
chapter 35, et seq.
List of Subjects in 48 CFR Part 52
Government procurement.
Dated: March 15, 2010.
Al Matera,
Director, Acquisition Policy Division.
0
Therefore, DoD, GSA, and NASA amend 48 CFR part 52 as set forth below:
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
1. The authority citation for 48 CFR part 52 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).
0
2. Amend section 52.232-10 by revising the date of the clause and
paragraphs (a), (b), and (c) to read as follows:
52.232-10 Payments under Fixed-Price Architect-Engineer Contracts.
* * * * *
PAYMENTS UNDER FIXED-PRICE ARCHITECT-ENGINEER CONTRACTS APR 2010.
(a) Estimates shall be made monthly of the amount and value of
the work and services performed by the Contractor under this
contract which meet the standards of quality established under this
contract. The estimates, along with any supporting data required by
the Contracting Officer, shall be prepared by the Contractor and
submitted along with its voucher.
(b) After receipt of each substantiated voucher, the Government
shall pay the voucher as approved by the Contracting Officer or
authorized representative. The Contracting Officer shall require a
withholding from amounts due under paragraph (a) of this clause of
up to 10 percent only if the Contracting Officer determines that
such a withholding is necessary to protect the Government's interest
and ensure satisfactory completion of the contract. The amount
withheld shall be determined based upon the Contractor's performance
record under this contract. Whenever the Contracting Officer
determines that the work is substantially complete and that the
amount retained is in excess of the amount adequate for the
protection of the Government, the Contracting Officer shall release
the excess amount to the Contractor.
(c) Upon satisfactory completion by the Contractor and final
acceptance by the Contracting Officer of all the work done by the
Contractor under the ``Statement of Architect-Engineer Services'',
the Contractor will be paid the unpaid balance of any
[[Page 13425]]
money due for work under the statement, including all withheld
amounts.
* * * * *
[FR Doc. 2010-5991 Filed 3-18-10; 8:45 am]
BILLING CODE 6820-EP-S
