Federal Acquisition Regulation; Limitation on Pass-Through Charges, 77741-77745 [2010-30566]

Download as PDF 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) ‘‘http://www.contractdirectory.gov’’ and adding ‘‘http:// 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) ‘‘http:// www.contractdirectory.gov’’ and adding ‘‘http://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, ‘‘http:// 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: ‘‘http://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 http:// 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]


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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.

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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]
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