Federal Acquisition Regulation; Limitation on Pass-Through Charges, 77741-77745 [2010-30566]
Download as PDF
<![CDATA[
Federal Register / Vol. 75, No. 238 / Monday, December 13, 2010 / Rules and Regulations
item, with a contractor that has been
debarred, suspended, or proposed for
debarment unless there is a compelling
reason to do so. If a contractor intends
to subcontract, other than a subcontract
for a commercially available off-theshelf item, with a party that is debarred,
suspended, or proposed for debarment
as evidenced by the parties’ inclusion in
the EPLS (see 9.404), a corporate officer
or designee of the contractor is required
by operation of the clause at 52.209–6,
Protecting the Government’s Interests
when Subcontracting with Contractors
Debarred, Suspended, or Proposed for
Debarment, to notify the contracting
officer, in writing, before entering into
such subcontract. For contracts for the
acquisition of commercial items, the
notification requirement applies only
for first-tier subcontracts. For all other
contracts, the notification requirement
applies to subcontracts at any tier. The
notice must provide the following:
*
*
*
*
*
PART 52—SOLICITATION PROVISIONS
AND CONTRACT CLAUSES
3. Amend section 52.209–6 by—
a. Revising the date of the clause;
b. Redesignating paragraphs (a)
through (c) as paragraphs (b) through
(d), respectively; and adding a new
paragraph (a);
■ c. Revising the newly designated
paragraphs (b), (c), and (d) introductory
text; and
■ d. Adding paragraph (e).
The revised and added text reads as
follows:
■
■
■
52.209–6 Protecting the Government’s
Interest When Subcontracting With
Contractors Debarred, Suspended, or
Proposed for Debarment.
*
*
*
*
*
interests. Other than a subcontract for a
commercially available off-the-shelf item, the
Contractor shall not enter into any
subcontract, in excess of $30,000 with a
Contractor that is debarred, suspended, or
proposed for debarment by any executive
agency unless there is a compelling reason to
do so.
(c) The Contractor shall require each
proposed subcontractor whose subcontract
will exceed $30,000, other than a
subcontractor providing a commercially
available off-the-shelf item, to disclose to the
Contractor, in writing, whether as of the time
of award of the subcontract, the
subcontractor, or its principals, is or is not
debarred, suspended, or proposed for
debarment by the Federal Government.
(d) A corporate officer or a designee of the
Contractor shall notify the Contracting
Officer, in writing, before entering into a
subcontract with a party (other than a
subcontractor providing a commercially
available off-the-shelf item) that is debarred,
suspended, or proposed for debarment (see
FAR 9.404 for information on the Excluded
Parties List System). The notice must include
the following:
52.213–4 Terms and Conditions—
Simplified Acquisitions (Other Than
Commercial Items).
*
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
*
*
*
*
(e) Subcontracts. Unless this is a contract
for the acquisition of commercial items, the
Contractor shall include the requirements of
this clause, including this paragraph (e)
(appropriately modified for the identification
of the parties), in each subcontract that—
(1) Exceeds $30,000 in value; and
(2) Is not a subcontract for commercially
available off-the-shelf items.
4. Amend section 52.212–5 by—
a. Revising the date of the clause; and
■ b. Redesignating paragraphs (b)(6)
through (b)(44) as paragraphs (b)(7)
through (b)(45), respectively; and
adding a new paragraph (b)(6).
The revised and added text reads as
follows:
■
■
mstockstill on DSKH9S0YB1PROD with RULES3
52.212–5 Contract Terms and Conditions
Required To Implement Statutes or
Executive Orders—Commercial Items.
(a) Definition. Commercially available offthe-shelf (COTS) item, as used in this
clause—
(1) Means any item of supply (including
construction material) that is—
(i) A commercial item (as defined in
paragraph (1) of the definition in FAR 2.101);
(ii) Sold in substantial quantities in the
commercial marketplace; and
(iii) Offered to the Government, under a
contract or subcontract at any tier, without
modification, in the same form in which it
is sold in the commercial marketplace; and
(2) Does not include bulk cargo, as defined
in section 3 of the Shipping Act of 1984 (46
U.S.C. App. 1702), such as agricultural
products and petroleum products.
(b) The Government suspends or debars
Contractors to protect the Government’s
Contract Terms and Conditions
Required To Implement Statutes or
Executive Orders—Commercial Items
(DEC 2010)
16:09 Dec 10, 2010
Jkt 223001
*
*
*
*
*
(b) * * *
(6) 52.209–6, Protecting the Government’s
Interest When Subcontracting with
Contractors Debarred, Suspended, or
Proposed for Debarment (DEC 2010) (31
U.S.C. 6101 note). (Applies to contracts over
$30,000). (Not applicable to subcontracts for
the acquisition of commercially available offthe-shelf items).
*
*
*
*
*
5. Amend section 52.213–4 by
revising the date of the clause and
paragraph (b)(2)(i) to read as follows:
■
PO 00000
Frm 00021
*
*
*
*
*
Terms and Conditions—Simplified
Acquisitions (Other Than Commercial
Items) (DEC 2010)
(b) * * *
(2) * * *
(i) 52.209–6, Protecting the Government’s
Interest When Subcontracting with
Contractors Debarred, Suspended, or
Proposed for Debarment (DEC 2010) (Applies
to contracts over $30,000). (Not applicable to
subcontracts for the acquisition of
commercially available off-the-shelf items).
*
*
*
*
*
[FR Doc. 2010–30565 Filed 12–10–10; 8:45 am]
BILLING CODE 6820–EP–P
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
48 CFR Parts 15, 31, and 52
[FAC 2005–47; FAR Case 2008–031; Item
VI; Docket 2009–0034, Sequence 2]
RIN 9000–AL27
Federal Acquisition Regulation;
Limitation on Pass-Through Charges
(End of clause)
Protecting the Government’s Interest
When Subcontracting With Contractors
Debarred, Suspended, or Proposed for
Debarment (DEC 2010)
VerDate Mar<15>2010
77741
Fmt 4701
Sfmt 4700
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
AGENCIES:
The Civilian Agency
Acquisition Council and the Defense
Acquisition Regulations Council
(Councils) have adopted as final, with
changes, the interim rule amending the
Federal Acquisition Regulation (FAR) to
implement section 866 of the Duncan
Hunter National Defense Authorization
Act (NDAA) for Fiscal Year (FY) 2009,
which applies to executive agencies
other than DoD. DoD is subject to
section 852 of the John Warner NDAA
for FY 2007, which is also implemented
in this final rule. Section 866 requires
the Councils to amend the FAR, and
section 852 requires the Secretary of
Defense to prescribe regulations to
minimize excessive pass-through
charges by contractors from
subcontractors, or from tiers of
subcontractors, that add no or negligible
value, and to ensure that neither a
contractor nor a subcontractor receives
indirect costs or profit/fee (i.e., passthrough charges) on work performed by
SUMMARY:
E:\FR\FM\13DER3.SGM
13DER3
77742
Federal Register / Vol. 75, No. 238 / Monday, December 13, 2010 / Rules and Regulations
mstockstill on DSKH9S0YB1PROD with RULES3
a lower-tier subcontractor to which the
higher-tier contractor or subcontractor
adds no or negligible value.
DATES: Effective Date: January 12, 2011.
FOR FURTHER INFORMATION CONTACT: For
clarification of content, contact Mr.
Edward Chambers, Procurement
Analyst, at (202) 501–3221. For
information pertaining to status or
publication schedules, contact the
Regulatory Secretariat at (202) 501–
4755. Please cite FAC 2005–47, FAR
Case 2008–031.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published an
interim rule in the Federal Register at
74 FR 52853, October 14, 2009, to
implement section 866 of the Duncan
Hunter NDAA for FY 2009 (Pub. L. 110–
417) as well as section 852 of the John
Warner NDAA for FY 2007 (Pub. L.
109–364). These acts required the
Councils to amend the FAR to minimize
excessive pass-through charges by
contractors from subcontractors, or from
tiers of subcontractors, that add no or
negligible value, and to ensure that
neither a contractor nor a higher-tier
subcontractor receives indirect costs or
profit/fee (i.e., pass-through charges) on
work performed by a lower-tier
subcontractor to which the contractor or
higher-tier subcontractor adds no or
negligible value.
To enable agencies to ensure that
pass-through charges are not excessive,
the interim rule included a solicitation
provision and a contract clause
requiring offerors and contractors to
identify the percentage of work that will
be subcontracted, and when subcontract
costs will exceed 70 percent of the total
cost of work to be performed, to provide
information on indirect costs and profit/
fee and value added with regard to the
subcontract work. Seventy percent was
selected as the threshold for this
information reporting requirement,
because it represents a substantial
amount of subcontracting.
To ensure that the Government can
make a determination as to whether or
not pass-through charges are excessive,
the interim rule incorporated a reporting
threshold that affords the contracting
officer the ability to understand what
functions the contractor will perform
(e.g., consistent with the contractor’s
disclosed practice) and thus will
provide added value, whether it be
before award, or if the contractor
subsequently decides to subcontract
substantially all of the effort. The rule
provides a recovery mechanism for the
excessive pass-through charges for those
situations in which a contractor
VerDate Mar<15>2010
16:09 Dec 10, 2010
Jkt 223001
subcontracts all, or substantially all, of
the performance of the contract, and
does not perform the subcontract
management functions, or other valueadded functions, that were charged to
the Government through indirect costs
and related profit/fee.
The final rule adopts the interim rule
with a minor change involving the
addition of two types of fixed-price
incentive contracts to the list of
contracts at FAR 15.408(n)(2)(i)(B)(2) for
DoD that are not subject to the
limitation on pass-through charges
clauses. These additions are fixed-price
incentive contracts awarded on the basis
of adequate price competition and fixedprice incentive contracts for the
acquisition of a commercial item.
Section 852 of the John Warner NDAA
for FY 2007 (Pub. L. 109–364) is clear
that DoD contracts awarded on the basis
of adequate price competition, and DoD
contracts for the acquisition of a
commercial item are not subject to the
limitation on pass-through charges.
B. Discussion and Analysis
The FAR Secretariat received five
responses to the interim rule. These
responses included a total of 31
comments on 23 issues. Each issue is
discussed in the following sections.
Issue 1: Three respondents expressed
their support for the interim rule with
one respondent stating that they were in
favor of companies being responsible,
responsive, and capable of providing
adequate management systems to track
the level of subcontracting taking place
under specific contracts.
Response: The Councils acknowledge
their support for the interim rule.
Issue 2: One respondent
recommended that guidance should be
provided to assist contracting officers
with implementing the rule. The
respondent cited several examples of
what should be in that guidance.
Response: The Councils disagree with
the inclusion of such implementation
guidance in the FAR. Agencies will
provide supplemental guidance and
training to implement this rule, as
appropriate.
Issue 3: One respondent
recommended that the clause language
incorporate GAO recommendations
relative to ‘‘requiring contracting
officials to take risk into account when
determining the degree of assessment
needed.’’
Response: The Councils do not
concur. The respondent’s
recommendation goes to procedures for
assessing contractor value added. Such
procedures are beyond the scope of this
case, and reasonably should be
implemented through agency guidance.
PO 00000
Frm 00022
Fmt 4701
Sfmt 4700
Issue 4: One respondent
recommended that the final rule be
written such as to ‘‘serve as a tool to
ensure consistency to the extent
practicable between contractor’s
proposals and actual performance rather
than to serve as a basis to disallow cost
after incurrence.’’
Response: The Councils do not concur
with the respondent’s recommendation.
Unless otherwise required under the
contract, contractors have the right to
revise and manage workload under the
contract as they see fit. The clauses
provide sufficient protection to the
Government for such cases where the
contractor revises the workload from
what had been negotiated to a situation
where excessive pass-through charges
exist.
Issue 5: One respondent
recommended that the final rule be
written such as to ‘‘carefully consider
the potential effects on those small
businesses performing as prime
contractors on contract set-asides given
that small business prime contractors
could experience significant financial
impacts as a result of disallowed passthrough costs under this rule.’’
Response: The Councils do not concur
with the respondent’s recommendation.
Section 866 of the FY 2009 NDAA does
not set forth an exclusion for small
businesses under this rule.
Issue 6: One respondent
recommended that the final rule should
reconcile DoD policies to avoid
confusion. Specifically, they assert that
the Wynne memorandum dated July 12,
2004, and the policies enacted in the
Weapons Systems Acquisition Reform
Act of 2009 are contrary to this rule,
which ‘‘exerts pressure on contracting
officials to keep work in-house to
address the reporting requirement.’’
Response: The Councils do not concur
with the respondent’s recommendation.
The Councils do not agree that there are
conflicts between this rule and DoD
policy. Competition and teaming
arrangements are not hindered by this
regulation, and subcontracting efforts
are not limited to 70 percent of the total
effort. The 70 percent threshold triggers
an information reporting requirement.
This rule is emphasizing that value is to
be added by the contractor to the
subcontracted effort.
Issue 7: One respondent
recommended that ‘‘a distinction be
made with regard to G&A applied to
contracts versus applied profit. This
will serve to protect the contractor’s
recovery of allowable G&A if incurred in
accordance with CAS and the
contractor’s disclosed practices, while
focusing the Government’s attention to
the negotiated item of profit.’’
E:\FR\FM\13DER3.SGM
13DER3
mstockstill on DSKH9S0YB1PROD with RULES3
Federal Register / Vol. 75, No. 238 / Monday, December 13, 2010 / Rules and Regulations
Response: The Councils do not concur
with the respondent’s recommendation.
The Councils disagree that a distinction
should be made with regard to G&A
applied to contracts versus applied
profit because the statutes prohibit
application of overhead to excessive
pass-through charges, as well as profit.
Issue 8: One respondent
recommended that the rule should use
the threshold in FAR 15.403–4 to ensure
a consistent minimum threshold among
all executive agencies in lieu of multiple
thresholds currently in the rule. The
respondent believed that if the Councils
utilize the threshold in FAR 15.404–4,
the rule ‘‘will exclude a significant
number of subcontracts from this
burdensome requirement but still cover
the vast majority of the total value of
subcontracts.’’
Response: The Councils do not concur
with the respondent’s recommendation.
By statute, civilian agencies are required
to establish the threshold at the
simplified acquisition threshold, while
DoD established its threshold at the
threshold for obtaining cost or pricing
data in FAR 15.403–4.
Issue 9: One respondent
recommended that the provision and
clause be amended to include
definitions of ‘‘total cost of the work’’
and ‘‘total cost of work’’. As such, the
respondent recommended that ‘‘FAR
52.215–22 be amended to provide that,
for purposes of determining whether the
70 percent subcontracting threshold is
reached, the ‘total cost of the work’ to
be performed by the prime contractor or
a higher-tier subcontractor shall include
the prime contractor’s or higher-tier
subcontractor’s direct and indirect costs
of the work, excluding applicable profit
or fee, to be performed under the
contract or higher-tier subcontractor, as
the case may be, and the ‘total cost of
the work’ to be performed by each
subcontractor to the prime contractor or
to a higher-tier subcontractor shall
include its direct and indirect costs,
including applicable profit or fee, of the
work to be performed under its
subcontract.’’ Also, the respondent
recommended that ‘‘FAR 52.215–23 be
amended to provide that, for purposes
of determining whether a prime
contractor, or higher-tier subcontractor,
changes the amount of subcontractor
effort after award such that it exceeds 70
percent of the total cost of work to be
performed under the contractor or
higher-tier subcontractor, the ‘total cost
of the work’ to be performed by the
prime contractor or higher-tier
subcontractor under the contract or
higher-tier subcontractor shall include
the contractor’s or higher-tier
subcontractor’s direct and indirect costs
VerDate Mar<15>2010
16:09 Dec 10, 2010
Jkt 223001
of the work, excluding applicable profit
or fee, to be performed under the
contract or higher-tier subcontractor, as
the case may be, and the ‘total cost of
the work’ to be performed by each
subcontractor to the prime contractor or
to a higher-tier subcontractor shall
include its direct and indirect costs,
including applicable profit or fee, of the
work to be performed under its
subcontract.’’
Response: The Councils do not concur
with the respondent’s recommendation.
The Councils believe that the
respondent’s recommended definitions
are not necessary, as they are
universally understood within the
acquisition community.
Issue 10: Two respondents believed
that the determination of value-added
work be performed before contract
award and not during contract
performance. One respondent
recommended that ‘‘the rule be placed
in FAR Part 15 (for example, in 15.404–
1, Proposal Analysis) rather than in a
clause to affirm and emphasize the basic
contract formation policy that contracts
should not be entered into where the
contracting officer determines after a
thorough proposal analysis that an
offeror adds no or negligible value to the
proposed acquisition.’’ The respondent
believed that the pass-through rule, as
currently written, ‘‘would unfairly
continue to subject contractors to
continuing post-award reviews by the
government of pass-through charges and
potential disallowances throughout the
life of the contract which is unjustified,
inappropriate, onerous, and not
required by sections 866 or 852 of the
NDAAs.’’ Similarly, another respondent
recommended that FAR 52.215–23 be
changed to add language from Alternate
I to the standard clause, thus, mandating
that contracting officers determine prior
to award that the contractor will add
value. The respondent also
recommended that FAR 52.215–23(c) be
changed ‘‘to require the contracting
officer to make a determination as to
whether the contractor will, in fact,
provide ‘added value’, thereby putting
the contractor on notice as to whether
it can apply indirect costs and profit to
work performed by subcontractors.’’
This determination should be required
to be made in a reasonable time not to
exceed 30 days and if no determination
made by 30 days, consider work to be
value-added.
Response: The Councils do not concur
with the respondent’s
recommendations. The statute’s
requirements are not limited only to
pre-award restrictions, but instead set
forth the requirements to ensure that
neither a contractor nor a subcontractor
PO 00000
Frm 00023
Fmt 4701
Sfmt 4700
77743
receives indirect costs or profit on work
performed by a lower-tier subcontractor
to which the higher-tier contractor or
subcontractor adds no or negligible
value at any time.
Issue 11: One respondent
recommended that the final rule include
an exemption for cost accounting
standard (CAS)-covered contracts since
allocability and allowability of passthrough charges are already covered in
CAS and cost principles.
Response: The Councils do not concur
with the respondent’s recommendation.
The statutes do not set forth an
exclusion for CAS-covered contracts.
Furthermore, CAS does not ensure that
the Government does not pay excessive
pass-through charges as required by the
statutes.
Issue 12: One respondent
recommended that the final rule include
an exemption for contracts issued
subject to the Truth In Negotiations Act
(TINA) requirements since already
existing cost or pricing data
requirements would provide necessary
data relative to pass-through charges.
Response: The Councils do not concur
with the respondent’s recommendation.
The statutes do not set forth an
exclusion for contracts subject to TINA.
Furthermore, TINA does not ensure that
the Government does not pay excessive
pass-through charges as required by the
statutes.
Issue 13: Two respondents
recommended that the final rule include
an exemption for all commercial item
acquisitions since, as currently written,
commercial items/services procured by
DoD through time-and-materials or
labor-hour contracts could be subject to
the pass-through clause. One of these
respondents believed that applying
these requirements to commercial
contracts would be unnecessary;
contrary to TINA; inconsistent with the
Federal Acquisition Streamlining Act,
as well as the Services Acquisition
Reform Act; and exceed Congressional
authority.
Response: The Councils do not concur
with these respondents’
recommendations. The statutes do not
set forth an exemption for commercial
item/service time-and-materials or
labor-hour contracts. Furthermore, the
Councils do not believe it would be
within the spirit of the statute to
implement such exemptions.
Issue 14: Two respondents
recommended that FAR 52.215–23(e) be
removed as redundant or re-worded to
specifically address what additional
records or data the contracting officer
requires access to that is not currently
addressed by FAR 52.215–2.
E:\FR\FM\13DER3.SGM
13DER3
mstockstill on DSKH9S0YB1PROD with RULES3
77744
Federal Register / Vol. 75, No. 238 / Monday, December 13, 2010 / Rules and Regulations
Response: The Councils do not concur
with the respondent’s recommendation.
The audit and records FAR clause at
52.215–2 does not provide access to all
of the necessary records to show
excessive pass-through charges. The
final rule maintains the access to
records FAR provision at 52.215–23(e)
because it is needed to fully implement
the statutes and ensure that the
Government is not paying excessive
pass-through charges.
Issue 15: One respondent
recommended that the 70 percent
threshold be raised to 90 percent which
reflects the level initially contemplated
by Congress in the Senate version of the
bill (section 844 of S2766). The
respondent believed there was no basis
for the 70 percent threshold.
Response: The Councils disagree with
this recommendation. As permitted by
section 852 of the ‘‘John Warner NDAA
for FY 2007’’, the Councils have
identified 70 percent as the threshold
whereby a greater risk is assumed by the
Government in paying excessive passthrough charges. The Councils consider
this 70 percent threshold reasonable,
because it affords the parties an
opportunity to address subcontracting
management requirements above this
level in more detail and to ensure the
contracting officer is able to determine
the disclosed subcontract management
functions are of benefit to the
Government. The statute requires that
the Government not pay excessive passthrough charges on any contract,
subcontract, or order.
Issue 16: One respondent
recommended that the flowdown
provisions of the solicitation provision
and clause be limited to first-tier
subcontractors. The respondent believed
that there was little benefit in micromanaging pass-through charges deep
into the supply chain.
Response: The Councils do not concur
with the respondent’s recommendation.
It is very apparent from the language of
the statutes that Congressional intent is
to flow down this requirement beyond
the first tier-subcontract level.
Issue 17: One respondent
recommends that the final rule include
a set of narrowly defined definitions for
all key terms, such as, but not limited
to ‘‘no or negligible value’’, ‘‘substantial
value’’, and ‘‘added value’’.
Response: In general, the Councils do
not concur with the respondent’s
recommendation. The Councils believe
that the respondent’s recommended
definitions are not necessary, as they are
universally understood within the
acquisition community. However, the
rule does provide definitions of five of
the more commonly understood terms,
VerDate Mar<15>2010
16:09 Dec 10, 2010
Jkt 223001
including ‘‘no or negligible value’’ and
‘‘added value’’.
Issue 18: One respondent
recommended that the definition of
‘‘added value’’ in FAR 52.215–23(a),
where ‘‘e.g.’’ is included in parentheses,
be changed to ‘‘including, but not
limited to’’.
Response: The Councils do not concur
with the respondent’s recommendation.
The term ‘‘e.g.’’ means for example,
which does not imply that these
functions are all inclusive.
Issue 19: One respondent
recommended that the pass-through
provision and clause be limited to only
sole source contracts (firm-fixed-price,
time and materials, or otherwise) below
the TINA threshold.
Response: The Councils do not concur
with the respondent’s recommendation.
The statutes do not limit
implementation of the requirements on
such a limited basis.
Issue 20: One respondent
recommended that the intent of FAR
52.215–23(d) be clarified since, as
written, it is an open invitation to
contracting officers to revisit contract
terms and price agreements after the
fact, which is unfair and unproductive,
and further be clarified as to how this
section will be implemented in light of
other contract compliance requirements
and/or other operative contract clauses.
Response: The Councils do not concur
with the respondent’s recommendation.
This is not an invitation to revisit
contract terms or price agreements. This
is a compliance function performed
under, and in conjunction with,
standard contract administration.
Issue 21: One respondent
recommended that the final rule
specifically address small business
goals. The respondent did not want to
have the rule inadvertently discourage
substantial subcontracting to small firms
that do provide value added solutions.
In general, the respondent
recommended clarifying intent and
wording of the final rule to prevent
contracting officers from leaving out
legitimate small firms or discouraging
prime contractors from subcontracting.
Specifically, the respondent
recommended that the following
language be added to the rule, ‘‘not
intended to penalize companies with
substantial small business goals that
may on individual task orders exceed 70
percent’’.
Response: The Councils disagree with
including the respondent’s
recommended language. It is not the
Government’s intention to establish a
disincentive for a company from
achieving their small business
subcontractor goals. This rule merely
PO 00000
Frm 00024
Fmt 4701
Sfmt 4700
requires that the Government not pay
excessive pass-through charges to
contractors who add no or negligible
value. The contracting officer has the
discretion to make the determination
whether the contractor has added value.
Issue 22: One respondent
recommended that the definition of
value-added at FAR 52.215–23(a) be
‘‘expanded to include all activities with
respect to subcontractor sourcing,
selection, negotiation, and
administration that facilitate
performance of services and delivery of
goods to the Government and reduce
Government’s risk.’’
Response: The Councils disagree. The
recommended language is too broad and
does not adhere to the intent of the
statute. The interim rule language
provided examples for the contracting
officer to consider, but ultimately this is
a contracting officer determination.
Issue 23: One respondent
recommended that the Defense Federal
Acquisition Regulation Supplement
(DFARS) language in the second interim
rule that was published in the Federal
Register at 73 FR 27464, May 13, 2008,
be eliminated since it is no longer
required based upon this rule.
Response: Although this comment is
outside the scope of this case, the
language has been removed from the
DFARS (DFARS Case 2006–D057, 75 FR
48278, effective August 10, 2010).
C. 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.
D. 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 we do
not expect a significant number of
entities to propose excessive passthrough charges under contracts or
subcontracts, and the information
required from offerors and contractors
regarding pass-through charges is
minimal.
E. Paperwork Reduction Act
The Paperwork Reduction Act does
apply; however, these changes to the
FAR do not impose additional
information collection requirements to
E:\FR\FM\13DER3.SGM
13DER3
Federal Register / Vol. 75, No. 238 / Monday, December 13, 2010 / Rules and Regulations
the paperwork burden previously
approved under OMB Control Number
9000–0173.
List of Subjects in 48 CFR Parts 15, 31,
and 52
Government procurement.
Dated: November 24, 2010.
Millisa Gary,
Acting Director, Acquisition Policy Division.
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
This document makes
amendments to the Federal Acquisition
Regulation (FAR) in order to make
editorial changes.
DATES: Effective Date: December 13,
2010.
SUMMARY:
PART 15—CONTRACTING BY
NEGOTIATION
The
FAR Secretariat, 1275 First St., NE.,
Washington, DC 20417, (202) 501–4755,
for information pertaining to status or
publication schedules. Please cite FAC
2005–47, Technical Amendments.
SUPPLEMENTARY INFORMATION: This
document makes amendments to the
Federal Acquisition Regulation (FAR) in
48 CFR parts 3, 5, 7, and 10 for purposes
of updating.
1. The authority citation for 48 CFR
part 15 continues to read as follows:
List of Subjects in 48 CFR Parts 3, 5, 7,
and 10
FOR FURTHER INFORMATION CONTACT:
Interim Rule Adopted as Final With
Changes
Accordingly, the interim rule
amending 48 CFR parts 15, 31, and 52,
which was published in the Federal
Register at 74 FR 52853, October 14,
2009, is adopted as final with the
following changes:
■
■
15.408 Solicitation provisions and
contract clauses.
*
*
*
*
*
(n) * * *
(2)(i) * * *
(B) * * *
(2) * * *
(v) A fixed-price incentive contract
awarded on the basis of adequate price
competition; or
(vi) A fixed-price incentive contract
for the acquisition of a commercial item.
[FR Doc. 2010–30567 Filed 12–10–10; 8:45 am]
BILLING CODE 6820–EP–P
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Chapter 1
Therefore, DoD, GSA, and NASA
amend 48 CFR parts 3, 5, 7, and 10 as
set forth below:
■ 1. The authority citation for 48 CFR
parts 3, 5, 7, and 10 continues to read
as follows:
AGENCIES:
SUMMARY:
PART 3—IMPROPER BUSINESS
PRACTICES AND PERSONAL
CONFLICTS OF INTEREST
3.104–1
[Amended]
DEPARTMENT OF DEFENSE
■
5.601
GENERAL SERVICES
ADMINISTRATION
[Amended]
3. Amend section 5.601 by removing
from paragraphs (a), (b)(1), and (b)(2)
‘‘https://www.contractdirectory.gov’’ and
adding ‘‘https://
www.contractdirectory.gov/
contractdirectory/’’ in its place.
■
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Parts 3, 5, 7, and 10
mstockstill on DSKH9S0YB1PROD with RULES3
5. Amend section 10.002 by removing
from paragraph (b)(2)(iv) ‘‘https://
www.contractdirectory.gov’’ and adding
‘‘https://www.contractdirectory.gov/
contractdirectory/’’ in its place.
■
■
PART 5—PUBLICIZING CONTRACT
ACTIONS
[FAC 2005–47; Item VII; Docket 2010–0110,
Sequence 1]
PART 7—ACQUISITION PLANNING
7.105
Federal Acquisition Regulation;
Technical Amendments
[Amended]
4. Amend section 7.105 by removing
from paragraph (b)(1), in the second
sentence, ‘‘https://
www.contractdirectory.gov’’ and adding
■
Department of Defense (DoD),
General Services Administration (GSA),
Jkt 223001
[Amended]
Federal Acquisition Regulation;
Federal Acquisition Circular 2005–47;
Small Entity Compliance Guide
BILLING CODE 6820–EP–P
[FR Doc. 2010–30566 Filed 12–10–10; 8:45 am]
16:09 Dec 10, 2010
10.002
Dated: November 24, 2010.
Millisa Gary,
Acting Director, Acquisition Policy Division.
2. Amend section 3.104–1 by
removing from the definition ‘‘Federal
agency procurement,’’ in the second
sentence, the word ‘‘innovative’’ and
adding the word ‘‘innovation’’ in its
place.
VerDate Mar<15>2010
PART 10—MARKET RESEARCH
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 42 U.S.C. 2473(c).
2. Amend section 15.408 by—
a. Removing from paragraph
(n)(2)(i)(B)(2)(iii) the word ‘‘or’’;
■ b. Removing the period from the end
of paragraph (n)(2)(i)(B)(2)(iv) and
adding a semicolon in its place; and
■ c. Adding paragraphs (n)(2)(i)(B)(2)(v)
and (n)(2)(i)(B)(2)(vi) to read as follows:
■
■
AGENCIES:
‘‘https://www.contractdirectory.gov/
contractdirectory/’’ in its place.
[Docket FAR 2010–0077, Sequence 9]
Government procurement.
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 42 U.S.C. 2473(c).
77745
PO 00000
Frm 00025
Fmt 4701
Sfmt 4700
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Small Entity Compliance Guide.
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) 2005–47, which amend
the FAR. An asterisk (*) next to a rule
indicates that a regulatory flexibility
analysis has been performed. Interested
parties may obtain further information
regarding these rules by referring to FAC
2005–47, which precedes this
document. These documents are also
available via the Internet at https://
www.regulations.gov.
For effective dates see separate
documents, which follow.
FOR FURTHER INFORMATION CONTACT: The
analyst whose name appears in the table
below. Please cite FAC 2005–47 and the
specific FAR case number. For
information pertaining to status or
publication schedules, contact the
Regulatory Secretariat at (202) 501–
4755.
DATES:
E:\FR\FM\13DER3.SGM
13DER3
]]>Agencies
[Federal Register Volume 75, Number 238 (Monday, December 13, 2010)]
[Rules and Regulations]
[Pages 77741-77745]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-30566]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 15, 31, and 52
[FAC 2005-47; FAR Case 2008-031; Item VI; Docket 2009-0034, Sequence 2]
RIN 9000-AL27
Federal Acquisition Regulation; Limitation on Pass-Through
Charges
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 adopted as final, with
changes, the interim rule amending the Federal Acquisition Regulation
(FAR) to implement section 866 of the Duncan Hunter National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2009, which applies to
executive agencies other than DoD. DoD is subject to section 852 of the
John Warner NDAA for FY 2007, which is also implemented in this final
rule. Section 866 requires the Councils to amend the FAR, and section
852 requires the Secretary of Defense to prescribe regulations to
minimize excessive pass-through charges by contractors from
subcontractors, or from tiers of subcontractors, that add no or
negligible value, and to ensure that neither a contractor nor a
subcontractor receives indirect costs or profit/fee (i.e., pass-through
charges) on work performed by
[[Page 77742]]
a lower-tier subcontractor to which the higher-tier contractor or
subcontractor adds no or negligible value.
DATES: Effective Date: January 12, 2011.
FOR FURTHER INFORMATION CONTACT: For clarification of content, contact
Mr. Edward Chambers, Procurement Analyst, at (202) 501-3221. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-47, FAR
Case 2008-031.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published an interim rule in the Federal
Register at 74 FR 52853, October 14, 2009, to implement section 866 of
the Duncan Hunter NDAA for FY 2009 (Pub. L. 110-417) as well as section
852 of the John Warner NDAA for FY 2007 (Pub. L. 109-364). These acts
required the Councils to amend the FAR to minimize excessive pass-
through charges by contractors from subcontractors, or from tiers of
subcontractors, that add no or negligible value, and to ensure that
neither a contractor nor a higher-tier subcontractor receives indirect
costs or profit/fee (i.e., pass-through charges) on work performed by a
lower-tier subcontractor to which the contractor or higher-tier
subcontractor adds no or negligible value.
To enable agencies to ensure that pass-through charges are not
excessive, the interim rule included a solicitation provision and a
contract clause requiring offerors and contractors to identify the
percentage of work that will be subcontracted, and when subcontract
costs will exceed 70 percent of the total cost of work to be performed,
to provide information on indirect costs and profit/fee and value added
with regard to the subcontract work. Seventy percent was selected as
the threshold for this information reporting requirement, because it
represents a substantial amount of subcontracting.
To ensure that the Government can make a determination as to
whether or not pass-through charges are excessive, the interim rule
incorporated a reporting threshold that affords the contracting officer
the ability to understand what functions the contractor will perform
(e.g., consistent with the contractor's disclosed practice) and thus
will provide added value, whether it be before award, or if the
contractor subsequently decides to subcontract substantially all of the
effort. The rule provides a recovery mechanism for the excessive pass-
through charges for those situations in which a contractor subcontracts
all, or substantially all, of the performance of the contract, and does
not perform the subcontract management functions, or other value-added
functions, that were charged to the Government through indirect costs
and related profit/fee.
The final rule adopts the interim rule with a minor change
involving the addition of two types of fixed-price incentive contracts
to the list of contracts at FAR 15.408(n)(2)(i)(B)(2) for DoD that are
not subject to the limitation on pass-through charges clauses. These
additions are fixed-price incentive contracts awarded on the basis of
adequate price competition and fixed-price incentive contracts for the
acquisition of a commercial item. Section 852 of the John Warner NDAA
for FY 2007 (Pub. L. 109-364) is clear that DoD contracts awarded on
the basis of adequate price competition, and DoD contracts for the
acquisition of a commercial item are not subject to the limitation on
pass-through charges.
B. Discussion and Analysis
The FAR Secretariat received five responses to the interim rule.
These responses included a total of 31 comments on 23 issues. Each
issue is discussed in the following sections.
Issue 1: Three respondents expressed their support for the interim
rule with one respondent stating that they were in favor of companies
being responsible, responsive, and capable of providing adequate
management systems to track the level of subcontracting taking place
under specific contracts.
Response: The Councils acknowledge their support for the interim
rule.
Issue 2: One respondent recommended that guidance should be
provided to assist contracting officers with implementing the rule. The
respondent cited several examples of what should be in that guidance.
Response: The Councils disagree with the inclusion of such
implementation guidance in the FAR. Agencies will provide supplemental
guidance and training to implement this rule, as appropriate.
Issue 3: One respondent recommended that the clause language
incorporate GAO recommendations relative to ``requiring contracting
officials to take risk into account when determining the degree of
assessment needed.''
Response: The Councils do not concur. The respondent's
recommendation goes to procedures for assessing contractor value added.
Such procedures are beyond the scope of this case, and reasonably
should be implemented through agency guidance.
Issue 4: One respondent recommended that the final rule be written
such as to ``serve as a tool to ensure consistency to the extent
practicable between contractor's proposals and actual performance
rather than to serve as a basis to disallow cost after incurrence.''
Response: The Councils do not concur with the respondent's
recommendation. Unless otherwise required under the contract,
contractors have the right to revise and manage workload under the
contract as they see fit. The clauses provide sufficient protection to
the Government for such cases where the contractor revises the workload
from what had been negotiated to a situation where excessive pass-
through charges exist.
Issue 5: One respondent recommended that the final rule be written
such as to ``carefully consider the potential effects on those small
businesses performing as prime contractors on contract set-asides given
that small business prime contractors could experience significant
financial impacts as a result of disallowed pass-through costs under
this rule.''
Response: The Councils do not concur with the respondent's
recommendation. Section 866 of the FY 2009 NDAA does not set forth an
exclusion for small businesses under this rule.
Issue 6: One respondent recommended that the final rule should
reconcile DoD policies to avoid confusion. Specifically, they assert
that the Wynne memorandum dated July 12, 2004, and the policies enacted
in the Weapons Systems Acquisition Reform Act of 2009 are contrary to
this rule, which ``exerts pressure on contracting officials to keep
work in-house to address the reporting requirement.''
Response: The Councils do not concur with the respondent's
recommendation. The Councils do not agree that there are conflicts
between this rule and DoD policy. Competition and teaming arrangements
are not hindered by this regulation, and subcontracting efforts are not
limited to 70 percent of the total effort. The 70 percent threshold
triggers an information reporting requirement. This rule is emphasizing
that value is to be added by the contractor to the subcontracted
effort.
Issue 7: One respondent recommended that ``a distinction be made
with regard to G&A applied to contracts versus applied profit. This
will serve to protect the contractor's recovery of allowable G&A if
incurred in accordance with CAS and the contractor's disclosed
practices, while focusing the Government's attention to the negotiated
item of profit.''
[[Page 77743]]
Response: The Councils do not concur with the respondent's
recommendation. The Councils disagree that a distinction should be made
with regard to G&A applied to contracts versus applied profit because
the statutes prohibit application of overhead to excessive pass-through
charges, as well as profit.
Issue 8: One respondent recommended that the rule should use the
threshold in FAR 15.403-4 to ensure a consistent minimum threshold
among all executive agencies in lieu of multiple thresholds currently
in the rule. The respondent believed that if the Councils utilize the
threshold in FAR 15.404-4, the rule ``will exclude a significant number
of subcontracts from this burdensome requirement but still cover the
vast majority of the total value of subcontracts.''
Response: The Councils do not concur with the respondent's
recommendation. By statute, civilian agencies are required to establish
the threshold at the simplified acquisition threshold, while DoD
established its threshold at the threshold for obtaining cost or
pricing data in FAR 15.403-4.
Issue 9: One respondent recommended that the provision and clause
be amended to include definitions of ``total cost of the work'' and
``total cost of work''. As such, the respondent recommended that ``FAR
52.215-22 be amended to provide that, for purposes of determining
whether the 70 percent subcontracting threshold is reached, the `total
cost of the work' to be performed by the prime contractor or a higher-
tier subcontractor shall include the prime contractor's or higher-tier
subcontractor's direct and indirect costs of the work, excluding
applicable profit or fee, to be performed under the contract or higher-
tier subcontractor, as the case may be, and the `total cost of the
work' to be performed by each subcontractor to the prime contractor or
to a higher-tier subcontractor shall include its direct and indirect
costs, including applicable profit or fee, of the work to be performed
under its subcontract.'' Also, the respondent recommended that ``FAR
52.215-23 be amended to provide that, for purposes of determining
whether a prime contractor, or higher-tier subcontractor, changes the
amount of subcontractor effort after award such that it exceeds 70
percent of the total cost of work to be performed under the contractor
or higher-tier subcontractor, the `total cost of the work' to be
performed by the prime contractor or higher-tier subcontractor under
the contract or higher-tier subcontractor shall include the
contractor's or higher-tier subcontractor's direct and indirect costs
of the work, excluding applicable profit or fee, to be performed under
the contract or higher-tier subcontractor, as the case may be, and the
`total cost of the work' to be performed by each subcontractor to the
prime contractor or to a higher-tier subcontractor shall include its
direct and indirect costs, including applicable profit or fee, of the
work to be performed under its subcontract.''
Response: The Councils do not concur with the respondent's
recommendation. The Councils believe that the respondent's recommended
definitions are not necessary, as they are universally understood
within the acquisition community.
Issue 10: Two respondents believed that the determination of value-
added work be performed before contract award and not during contract
performance. One respondent recommended that ``the rule be placed in
FAR Part 15 (for example, in 15.404-1, Proposal Analysis) rather than
in a clause to affirm and emphasize the basic contract formation policy
that contracts should not be entered into where the contracting officer
determines after a thorough proposal analysis that an offeror adds no
or negligible value to the proposed acquisition.'' The respondent
believed that the pass-through rule, as currently written, ``would
unfairly continue to subject contractors to continuing post-award
reviews by the government of pass-through charges and potential
disallowances throughout the life of the contract which is unjustified,
inappropriate, onerous, and not required by sections 866 or 852 of the
NDAAs.'' Similarly, another respondent recommended that FAR 52.215-23
be changed to add language from Alternate I to the standard clause,
thus, mandating that contracting officers determine prior to award that
the contractor will add value. The respondent also recommended that FAR
52.215-23(c) be changed ``to require the contracting officer to make a
determination as to whether the contractor will, in fact, provide
`added value', thereby putting the contractor on notice as to whether
it can apply indirect costs and profit to work performed by
subcontractors.'' This determination should be required to be made in a
reasonable time not to exceed 30 days and if no determination made by
30 days, consider work to be value-added.
Response: The Councils do not concur with the respondent's
recommendations. The statute's requirements are not limited only to
pre-award restrictions, but instead set forth the requirements to
ensure that neither a contractor nor a subcontractor receives indirect
costs or profit on work performed by a lower-tier subcontractor to
which the higher-tier contractor or subcontractor adds no or negligible
value at any time.
Issue 11: One respondent recommended that the final rule include an
exemption for cost accounting standard (CAS)-covered contracts since
allocability and allowability of pass-through charges are already
covered in CAS and cost principles.
Response: The Councils do not concur with the respondent's
recommendation. The statutes do not set forth an exclusion for CAS-
covered contracts. Furthermore, CAS does not ensure that the Government
does not pay excessive pass-through charges as required by the
statutes.
Issue 12: One respondent recommended that the final rule include an
exemption for contracts issued subject to the Truth In Negotiations Act
(TINA) requirements since already existing cost or pricing data
requirements would provide necessary data relative to pass-through
charges.
Response: The Councils do not concur with the respondent's
recommendation. The statutes do not set forth an exclusion for
contracts subject to TINA. Furthermore, TINA does not ensure that the
Government does not pay excessive pass-through charges as required by
the statutes.
Issue 13: Two respondents recommended that the final rule include
an exemption for all commercial item acquisitions since, as currently
written, commercial items/services procured by DoD through time-and-
materials or labor-hour contracts could be subject to the pass-through
clause. One of these respondents believed that applying these
requirements to commercial contracts would be unnecessary; contrary to
TINA; inconsistent with the Federal Acquisition Streamlining Act, as
well as the Services Acquisition Reform Act; and exceed Congressional
authority.
Response: The Councils do not concur with these respondents'
recommendations. The statutes do not set forth an exemption for
commercial item/service time-and-materials or labor-hour contracts.
Furthermore, the Councils do not believe it would be within the spirit
of the statute to implement such exemptions.
Issue 14: Two respondents recommended that FAR 52.215-23(e) be
removed as redundant or re-worded to specifically address what
additional records or data the contracting officer requires access to
that is not currently addressed by FAR 52.215-2.
[[Page 77744]]
Response: The Councils do not concur with the respondent's
recommendation. The audit and records FAR clause at 52.215-2 does not
provide access to all of the necessary records to show excessive pass-
through charges. The final rule maintains the access to records FAR
provision at 52.215-23(e) because it is needed to fully implement the
statutes and ensure that the Government is not paying excessive pass-
through charges.
Issue 15: One respondent recommended that the 70 percent threshold
be raised to 90 percent which reflects the level initially contemplated
by Congress in the Senate version of the bill (section 844 of S2766).
The respondent believed there was no basis for the 70 percent
threshold.
Response: The Councils disagree with this recommendation. As
permitted by section 852 of the ``John Warner NDAA for FY 2007'', the
Councils have identified 70 percent as the threshold whereby a greater
risk is assumed by the Government in paying excessive pass-through
charges. The Councils consider this 70 percent threshold reasonable,
because it affords the parties an opportunity to address subcontracting
management requirements above this level in more detail and to ensure
the contracting officer is able to determine the disclosed subcontract
management functions are of benefit to the Government. The statute
requires that the Government not pay excessive pass-through charges on
any contract, subcontract, or order.
Issue 16: One respondent recommended that the flowdown provisions
of the solicitation provision and clause be limited to first-tier
subcontractors. The respondent believed that there was little benefit
in micro-managing pass-through charges deep into the supply chain.
Response: The Councils do not concur with the respondent's
recommendation. It is very apparent from the language of the statutes
that Congressional intent is to flow down this requirement beyond the
first tier-subcontract level.
Issue 17: One respondent recommends that the final rule include a
set of narrowly defined definitions for all key terms, such as, but not
limited to ``no or negligible value'', ``substantial value'', and
``added value''.
Response: In general, the Councils do not concur with the
respondent's recommendation. The Councils believe that the respondent's
recommended definitions are not necessary, as they are universally
understood within the acquisition community. However, the rule does
provide definitions of five of the more commonly understood terms,
including ``no or negligible value'' and ``added value''.
Issue 18: One respondent recommended that the definition of ``added
value'' in FAR 52.215-23(a), where ``e.g.'' is included in parentheses,
be changed to ``including, but not limited to''.
Response: The Councils do not concur with the respondent's
recommendation. The term ``e.g.'' means for example, which does not
imply that these functions are all inclusive.
Issue 19: One respondent recommended that the pass-through
provision and clause be limited to only sole source contracts (firm-
fixed-price, time and materials, or otherwise) below the TINA
threshold.
Response: The Councils do not concur with the respondent's
recommendation. The statutes do not limit implementation of the
requirements on such a limited basis.
Issue 20: One respondent recommended that the intent of FAR 52.215-
23(d) be clarified since, as written, it is an open invitation to
contracting officers to revisit contract terms and price agreements
after the fact, which is unfair and unproductive, and further be
clarified as to how this section will be implemented in light of other
contract compliance requirements and/or other operative contract
clauses.
Response: The Councils do not concur with the respondent's
recommendation. This is not an invitation to revisit contract terms or
price agreements. This is a compliance function performed under, and in
conjunction with, standard contract administration.
Issue 21: One respondent recommended that the final rule
specifically address small business goals. The respondent did not want
to have the rule inadvertently discourage substantial subcontracting to
small firms that do provide value added solutions. In general, the
respondent recommended clarifying intent and wording of the final rule
to prevent contracting officers from leaving out legitimate small firms
or discouraging prime contractors from subcontracting. Specifically,
the respondent recommended that the following language be added to the
rule, ``not intended to penalize companies with substantial small
business goals that may on individual task orders exceed 70 percent''.
Response: The Councils disagree with including the respondent's
recommended language. It is not the Government's intention to establish
a disincentive for a company from achieving their small business
subcontractor goals. This rule merely requires that the Government not
pay excessive pass-through charges to contractors who add no or
negligible value. The contracting officer has the discretion to make
the determination whether the contractor has added value.
Issue 22: One respondent recommended that the definition of value-
added at FAR 52.215-23(a) be ``expanded to include all activities with
respect to subcontractor sourcing, selection, negotiation, and
administration that facilitate performance of services and delivery of
goods to the Government and reduce Government's risk.''
Response: The Councils disagree. The recommended language is too
broad and does not adhere to the intent of the statute. The interim
rule language provided examples for the contracting officer to
consider, but ultimately this is a contracting officer determination.
Issue 23: One respondent recommended that the Defense Federal
Acquisition Regulation Supplement (DFARS) language in the second
interim rule that was published in the Federal Register at 73 FR 27464,
May 13, 2008, be eliminated since it is no longer required based upon
this rule.
Response: Although this comment is outside the scope of this case,
the language has been removed from the DFARS (DFARS Case 2006-D057, 75
FR 48278, effective August 10, 2010).
C. 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.
D. 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 we do not expect a
significant number of entities to propose excessive pass-through
charges under contracts or subcontracts, and the information required
from offerors and contractors regarding pass-through charges is
minimal.
E. Paperwork Reduction Act
The Paperwork Reduction Act does apply; however, these changes to
the FAR do not impose additional information collection requirements to
[[Page 77745]]
the paperwork burden previously approved under OMB Control Number 9000-
0173.
List of Subjects in 48 CFR Parts 15, 31, and 52
Government procurement.
Dated: November 24, 2010.
Millisa Gary,
Acting Director, Acquisition Policy Division.
Interim Rule Adopted as Final With Changes
0
Accordingly, the interim rule amending 48 CFR parts 15, 31, and 52,
which was published in the Federal Register at 74 FR 52853, October 14,
2009, is adopted as final with the following changes:
PART 15--CONTRACTING BY NEGOTIATION
0
1. The authority citation for 48 CFR part 15 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 15.408 by--
0
a. Removing from paragraph (n)(2)(i)(B)(2)(iii) the word ``or'';
0
b. Removing the period from the end of paragraph (n)(2)(i)(B)(2)(iv)
and adding a semicolon in its place; and
0
c. Adding paragraphs (n)(2)(i)(B)(2)(v) and (n)(2)(i)(B)(2)(vi) to read
as follows:
15.408 Solicitation provisions and contract clauses.
* * * * *
(n) * * *
(2)(i) * * *
(B) * * *
(2) * * *
(v) A fixed-price incentive contract awarded on the basis of
adequate price competition; or
(vi) A fixed-price incentive contract for the acquisition of a
commercial item.
[FR Doc. 2010-30566 Filed 12-10-10; 8:45 am]
BILLING CODE 6820-EP-P
