Federal Acquisition Regulation; Proper Use and Management of Cost-Reimbursement Contracts, 14543-14547 [2011-5552]
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Federal Register / Vol. 76, No. 51 / Wednesday, March 16, 2011 / Rules and Regulations
established new requirements for
agencies subject to Title 10, United
States Code. As a matter of policy, this
provision of law was applied to
contracts awarded by all executive
agencies. The rule requires that market
research must be conducted before an
agency places a task or delivery order in
excess of the simplified acquisition
threshold under an indefinite-delivery
indefinite-quantity contract. In addition,
a prime contractor with a contract in
excess of $5 million for the procurement
of items other than commercial items is
required to conduct market research
before making purchases that exceed the
simplified acquisition threshold. Among
other changes, the final rule also deletes
the language added to FAR 52.244–6
(Alternate I) and relocates it to a new
FAR clause 52.210–1, Market Research.
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Item V—Socioeconomic Program Parity
(FAR Case 2011–004) (Interim)
This interim rule amends the FAR to
implement section 1347 of the ‘‘Small
Business Jobs Act of 2010’’ (Pub. L. 111–
240) and the Small Business
Administration regulations governing
specific contracting and business
assistance programs. Section 1347
changed the word ‘‘shall’’ to ‘‘may’’ at
section 31(b)(2)(B) of the Small Business
Act (15 U.S.C. 657a(b)(2)(B), thereby
permitting a contracting officer to use
discretion when determining whether
an acquisition will be restricted to a
small business participating in the 8(a)
Business Development Program, the
Historically Underutilized Business
Zone Program, or the Service-Disabled
Veteran-Owned Small Business
Program.
Item VI—Use of Commercial Services
Item Authority (FAR Case 2008–034)
This final rule adopts, without
change, an interim rule that
implemented section 868 of the Duncan
Hunter National Defense Authorization
Act for Fiscal Year 2009 (Pub. L. 110–
417). Section 868 provides that the FAR
shall be amended with respect to the
procurement of commercial services
that are not offered and sold
competitively in substantial quantities
in the commercial marketplace, but are
of a type offered and sold competitively
in substantial quantities in the
commercial marketplace. Such services
may be considered commercial items
only if the contracting officer has
determined in writing that the offeror
has submitted sufficient information to
evaluate, through price analysis, the
reasonableness of the price for these
services.
The rule details the information the
contracting officer may consider in
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order to make this determination. The
rule further details, when this
determination cannot be made, the
information which may be requested to
determine price reasonableness.
Item VII—Trade Agreements
Thresholds (FAR Case 2009–040)
This final rule adopts, without
change, an interim rule that amended
the FAR to adjust the thresholds for
application of the World Trade
Organization Government Procurement
Agreement and the Free Trade
Agreements as determined by the
United States Trade Representative,
according to a pre-determined formula
under the agreements.
Item VIII—Disclosure and Consistency
of Cost Accounting Practices for
Contracts Awarded to Foreign Concerns
(FAR Case 2009–025)
This final rule adopts, without
change, the interim rule that amended
the FAR to revise FAR 30.201–4(c),
30.201–4(d)(1), 52.230–4, and 52.230–6
to maintain consistency between FAR
and Cost Accounting Standards (CAS)
regarding the administration of the Cost
Accounting Standard Board’s (CASB)
rules, regulations and standards. This
revision was necessitated by the CASB
publishing a final rule in the Federal
Register on March 26, 2008 (73 FR
15939) which implemented the revised
clause, Disclosure and Consistency of
Cost Accounting Practices—Foreign
Concerns, in CAS-covered contracts and
subcontracts awarded to foreign
concerns.
Item IX—Compensation for Personal
Services (FAR Case 2009–026)
This final rule adopts, without
change, the interim rule that amended
the FAR to align the existing FAR
31.205–6(q)(2)(i) through (vi) with the
changes made in Cost Accounting
Standards (CAS) Board standards 412
‘‘Cost Accounting Standard for
composition and measurement of
pension cost,’’ and 415 ‘‘Accounting for
the cost of deferred compensation.’’
Formerly, the applicable CAS standard
for measuring, assigning, and allocating
the costs of Employee Stock Ownership
Plans (ESOPs) depended on whether the
ESOP met the definition of a pension
plan at FAR 31.001. Costs for ESOPs
meeting the definition of a pension plan
at FAR 31.001 were covered by CAS
412, while the costs for ESOPs not
meeting the definition of a pension plan
at FAR 31.001 were covered by CAS
415. Now, regardless of whether an
ESOP meets the definitions of a pension
plan at FAR 31.001, all costs of ESOPs
are covered by CAS 415.
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Item X—Technical Amendments
Editorial changes are made at FAR
19.201, 52.212–3, and 52.212–5.
Dated: March 4, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide
Acquisition Policy.
Federal Acquisition Circular (FAC) 2005–
50 is issued under the authority of the
Secretary of Defense, the Administrator of
General Services, and the Administrator for
the National Aeronautics and Space
Administration.
Unless otherwise specified, all Federal
Acquisition Regulation (FAR) and other
directive material contained in FAC 2005–50
is effective March 16, 2011, except for Item
IV which is effective April 15, 2011, and Item
II which is effective May 16, 2011.
Dated: March 4, 2011.
Amy G. Williams,
Acting Deputy Director, Defense Procurement
and Acquisition Policy (Defense Acquisition
Regulations System).
Dated: March 4, 2011.
Joseph A. Neurauter,
Deputy Associate Administrator and Senior
Procurement Executive, Office of Acquisition
Policy, U.S. General Services Administration.
Dated: February 28, 2011.
Sheryl J. Goddard,
Acting Assistant Administrator for
Procurement National Aeronautics and Space
Administration.
[FR Doc. 2011–5551 Filed 3–15–11; 8:45 am]
BILLING CODE 6820–EP–P
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Parts 1, 2, 7, 16, 32, 42, and 50
[FAC 2005–50; FAR Case 2008–030; Item
I; Docket 2011–0082, Sequence 1]
RIN 9000–AL78
Federal Acquisition Regulation; Proper
Use and Management of CostReimbursement Contracts
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Interim rule with request for
comments.
AGENCIES:
DoD, GSA, and NASA are
issuing an interim rule amending the
Federal Acquisition Regulation (FAR) to
implement section 864 of the Duncan
Hunter National Defense Authorization
Act for Fiscal Year 2009. This law aligns
SUMMARY:
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Federal Register / Vol. 76, No. 51 / Wednesday, March 16, 2011 / Rules and Regulations
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with the Presidential Memorandum on
Government Contracting, issued on
March 4, 2009, which directed agencies
to save $40 billion in contracting
annually by Fiscal Year (FY) 2011 and
to reduce the use of high-risk contracts.
This rule provides regulatory guidance
on the proper use and management of
other than firm-fixed-price contracts
(e.g., cost-reimbursement, time-andmaterial, and labor-hour).
DATES: Effective Date: March 16, 2011.
Comment Date: Interested parties
should submit written comments to the
Regulatory Secretariat on or before May
16, 2011 to be considered in the
formulation of a final rule.
ADDRESSES: Submit comments
identified by FAC 2005–50, FAR Case
2008–030, by any of the following
methods:
• Regulations.gov: https://
www.regulations.gov. Submit comments
via the Federal eRulemaking portal by
inputting ‘‘FAR Case 2008–030’’ under
the heading ‘‘Enter Keyword or ID’’ and
selecting ‘‘Search.’’ Select the link
‘‘Submit a Comment’’ that corresponds
with ‘‘FAR Case 2008–030.’’ Follow the
instructions provided at the ‘‘Submit a
Comment’’ screen. Please include your
name, company name (if any), and ‘‘FAR
Case 2008–030’’ on your attached
document.
• Fax: (202) 501–4067.
• Mail: General Services
Administration, Regulatory Secretariat
(MVCB), ATTN: Hada Flowers, 1275
First Street, NE., 7th Floor, Washington,
DC 20417.
Instructions: Please submit comments
only and cite FAC 2005–50, FAR Case
2008–030, in all correspondence related
to this case. All comments received will
be posted without change to https://
www.regulations.gov, including any
personal and/or business confidential
information provided.
FOR FURTHER INFORMATION CONTACT: For
clarification of content, contact Lori
Sakalos, Procurement Analyst, at (202)
208–0498. For information pertaining to
status or publication schedules, contact
the Regulatory Secretariat at (202) 501–
4755. Please cite FAC 2005–50, FAR
Case 2008–030.
SUPPLEMENTARY INFORMATION:
I. Background
This case implements section 864 of
the Duncan Hunter National Defense
Authorization Act for Fiscal Year 2009
(Pub. L. 110–417), enacted October 14,
2008. This law aligns with the
President’s goal of reducing high-risk
contracting as denoted in the March 4,
2009, Presidential Memorandum on
Government Contracting.
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Section 864 requires the FAR to be
revised to address the use and
management of cost-reimbursement
contracts and identifies the following
three areas that the Defense Acquisition
Regulation Council and the Civilian
Agency Acquisition Council (Councils)
should consider in amending the FAR—
(a) Circumstances when costreimbursement contracts are
appropriate;
(b) Acquisition plan findings to
support the selection of a costreimbursement contract; and
(c) Acquisition resources necessary to
award and manage a costreimbursement contract.
1. Guidance on Cost-reimbursement
contracts. As required, the Councils
included additional coverage at FAR
subpart 16.1, Selecting Contract Types,
and at subpart 16.3, CostReimbursement Contracts, to provide
further guidance as to when, and under
what circumstances, costreimbursement contracts are
appropriate. Therefore, this rule makes
the following changes:
• FAR 16.103, Negotiating contract
type, is amended to revise paragraph (d)
to reflect additional documentation
when other than a firm-fixed-price
contract type is selected.
• FAR 16.104, Factors in selecting
contract types, is amended to add a new
paragraph (e) to provide guidance to the
contracting officer to consider
combining contract types if the entire
contract cannot be firm fixed-price.
• FAR 16.301–2, Application, is
amended to provide guidance to the
contracting officer as to the
circumstances in which to use costreimbursement contracts as well as
outlining the rationale for
documentation for selecting this
contract type.
• FAR 16.301–3, Limitations, is
amended to (1) provide additional
guidance to the contracting officer as to
when a cost-reimbursement contract
may be used, (2) ensure that all factors
have been considered per FAR 16.104,
and (3) ensure that adequate
Government resources are available to
award and manage this type of contract.
• FAR 7.104(e) also requires the
designation of a properly trained
contracting officer’s representative
(COR) (or contracting officer’s technical
representative (COTR)) prior to award of
the contract or order.
2. Identification of acquisition plan
findings. FAR 7.103, Agency-head
responsibilities, is amended and
renumbered to add new paragraphs
7.103(d), 7.103(f), and 7.103(j) to ensure
that acquisition planners document the
file to support the selection of the
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contract type in accordance with FAR
subpart 16.1; ensure that the statement
of work is closely aligned with the
performance outcomes and cost
estimates; and obtain an approval and
signature from the appropriate
acquisition official at least one level
above the contracting officer. FAR
7.105(b)(5)(iv) was added to discuss the
strategy to transition from costreimbursement contracts to firm-fixedprice contracts. Although FAR
7.105(b)(5), Acquisition considerations,
requires the acquisition plans to include
a discussion of contract type selection
and rationale, the Councils believe that
a greater emphasis on the use of costreimbursement contracts should be
added and included a new paragraph at
FAR 7.105(b)(3), Contract type selection.
Additionally, FAR 16.301–3(a) has been
amended and renumbered.
3. Acquisition workforce resources.
The Councils recognize that assigning
adequate and proper resources to
support the solicitation, award, and
administration of other than firm-fixedprice contracts (cost-reimbursement,
time-and-material, and labor-hour)
contract is challenging. There is also
great concern that a lack of involvement
in contract oversight by program offices
is primarily present in other than firmfixed-price contracts. Therefore, from
the outset, contracting officers should be
assured, to the greatest extent
practicable, that the right resources in
number, kind, and availability be
assigned to support other than firmfixed-price contracts. The Councils
consider that greater accountability for
the management and oversight of all
contracts, especially other than firmfixed-price contracts, can be gained and
improved by requiring that properly
trained CORs or COTRs (see FAR
2.101(b)(2), Definitions) be appointed
before award. Therefore, FAR 7.104,
General Procedures, and FAR 16.301–
3(a)(4)(i) are amended to reflect that
prior to award of a contract, especially
on other than firm-fixed price contracts,
at least one COR or COTR qualified in
accordance with FAR 1.602–2 is
designated. FAR 1.602–2,
Responsibilities, is amended to add a
new paragraph (d) outlining the
requirement for the contracting officer
to designate and authorize, in writing, a
COR on contracts and orders, as
appropriate. Additionally, a new section
was added at FAR 1.604, Contracting
officer’s representative, outlining the
COR’s duties.
4. Contract administration functions.
A new paragraph was added at FAR
42.302(a)(12) to require that the
contracting officer determine the
continuing adequacy of the contractor’s
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accounting system during the entire
period of contract performance. Also,
paragraph (a)(12) was added to the list
of functions at FAR 42.302(a) that
cannot be retained and that must be
delegated by the contracting officer
when delegating contract administration
functions to a contract administration
office in accordance with FAR
42.202(a).
II. Executive Order 12866
This is a significant regulatory action
and, therefore, was subject to review
under Section 6(b) of Executive Order
12866, Regulatory Planning and Review,
dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
III. Regulatory Flexibility Act
DoD, GSA, and NASA do not expect
this interim rule to 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
section 864 affects only internal
Government operations and requires the
Government to establish internal
guidance on the proper use and
management of all contracts especially
other than firm-fixed-price contracts
(e.g., cost-reimbursement, time-andmaterial, and labor-hour) and does not
impose any additional requirements on
small businesses.
Therefore, an Initial Regulatory
Flexibility Analysis has not been
performed. DoD, GSA, and NASA invite
comments from small business entities
and other interested parties on the
expected impact of this rule on small
entities.
DoD, GSA, and NASA will also
consider comments from small entities
concerning the existing regulations in
subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested
parties must submit such comments
separately and should cite 5 U.S.C. 610
(FAC 2005–50, FAR Case 2008–030) in
correspondence.
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IV. Paperwork Reduction Act
The changes to the FAR do not
impose information collection
requirements that require the approval
of the Office of Management and Budget
under the Paperwork Reduction Act (44
U.S.C. chapter 35).
V. Determination To Issue an Interim
Rule
A determination has been made under
the authority of the Secretary of Defense
(DoD), the Administrator of General
Services (GSA), and the Administrator
of the National Aeronautics and Space
Administration (NASA) that urgent and
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compelling reasons exist to promulgate
this interim rule without prior
opportunity for public comment. This
action is necessary because section 864
of the Duncan Hunter National Defense
Authorization Act for Fiscal Year 2009,
enacted October 14, 2008, directs that it
must be implemented within 270 days
from enactment. This rule is also urgent
because this law requires the Inspector
General to conduct a compliance review
for each executive agency, one year after
the regulations have been promulgated,
on the use of cost-reimbursement
contracts and include the results of their
findings in the IG’s next semiannual
report. However, pursuant to 41 U.S.C.
1707 and FAR 1.501–3(b), DoD, GSA,
and NASA will consider public
comments received in response to this
interim rule in the formation of the final
rule.
List of Subjects in 48 CFR Parts 1, 2, 7,
16, 32, 42, and 50
Government procurement.
Dated: March 4, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide
Acquisition Policy Division.
Therefore, DoD, GSA, and NASA
amend 48 CFR parts 1, 2, 7, 16, 32, 42,
and 50 as set forth below:
■ 1. The authority citation for 48 CFR
parts 1, 2, 7, 16, 32, 42, and 50
continues to read as follows:
14545
(3) Must be qualified by training and
experience commensurate with the
responsibilities to be delegated in
accordance with department/agency
guidelines;
(4) May not be delegated
responsibility to perform functions that
have been delegated under 42.202 to a
contract administration office, but may
be assigned some duties at 42.302 by the
contracting officer;
(5) Has no authority to make any
commitments or changes that affect
price, quality, quantity, delivery, or
other terms and conditions of the
contract; and
(6) Must be designated in writing,
with copies furnished to the contractor
and the contract administration office—
(i) Specifying the extent of the COR’s
authority to act on behalf of the
contracting officer;
(ii) Identifying the limitations on the
COR’s authority;
(iii) Specifying the period covered by
the designation;
(iv) Stating the authority is not
redelegable; and
(v) Stating that the COR may be
personally liable for unauthorized acts.
■ 3. Amend section 1.603 by revising
the section heading to read as follows:
1.603 Selection, appointment, and
termination of appointment for contracting
officers.
*
*
*
*
*
4. Add section 1.604 to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 42 U.S.C. 2473(c).
■
PART 1—FEDERAL ACQUISITION
REGULATIONS SYSTEM
1.604 Contracting Officer’s Representative
(COR).
2. Amend section 1.602–2 by adding
paragraph (d) to read as follows:
■
1.602–2
Responsibilities.
*
*
*
*
*
(d) Designate and authorize, in
writing, a contracting officer’s
representative (COR) on all contracts
and orders other than those that are
firm-fixed price, and for firm-fixed-price
contracts and orders as appropriate.
However, the contracting officer is not
precluded from retaining and executing
the COR duties as appropriate. See
7.104(e). A COR—
(1) Must be a Government employee,
unless otherwise authorized in agency
regulations;
(2) Shall be certified and maintain
certification in accordance with the
Office of Management and Budget
memorandum entitled ‘‘The Federal
Acquisition Certification for Contracting
Officer Technical Representatives’’
dated November 26, 2007, or for DoD,
DoD Regulations, as applicable;
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A contracting officer’s representative
(COR) assists in the technical
monitoring or administration of a
contract (see 1.602–2(d)). The COR shall
maintain a file for each assigned
contract. The file must include, at a
minimum—
(a) A copy of the contracting officer’s
letter of designation and other
documents describing the COR’s duties
and responsibilities;
(b) A copy of the contract
administration functions delegated to a
contract administration office which
may not be delegated to the COR (see
1.602–2(d)(4)); and
(c) Documentation of COR actions
taken in accordance with the delegation
of authority.
PART 2—DEFINITIONS OF WORDS
AND TERMS
5. Amend section 2.101 in paragraph
(b)(2) by adding, in alphabetical order,
the definition ‘‘Contracting officer’s
representative (COR)’’ to read as follows:
■
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Definitions.
*
*
*
*
*
(b) * * *
(2) * * *
Contracting officer’s representative
(COR) means an individual, including a
contracting officer’s technical
representative (COTR), designated and
authorized in writing by the contracting
officer to perform specific technical or
administrative functions.
*
*
*
*
*
PART 7—ACQUISITION PLANNING
6. Amend section 7.102 by adding
paragraph (a)(3) to read as follows:
■
7.102
Policy.
(a) * * *
(3) Selection of appropriate contract
type in accordance with part 16.
*
*
*
*
*
■ 7. Amend section 7.103 by—
■ a. Redesignating paragraphs (e)
through (w) as paragraphs (g) through
(y);
■ b. Redesignating paragraph (d) as
paragraph (e);
■ c. Adding a new paragraph (d);
■ d. Revising newly redesignated
paragraph (e);
■ e. Adding a new paragraph (f); and
■ f. Revising newly redesignated
paragraph (j).
The added and revised text reads as
follows:
7.103
Agency-head responsibilities.
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*
*
*
*
*
(d) Ensuring that acquisition planners
document the file to support the
selection of the contract type in
accordance with subpart 16.1.
(e) Establishing criteria and
thresholds at which increasingly greater
detail and formality in the planning
process is required as the acquisition
becomes more complex and costly,
including for cost-reimbursement and
other high-risk contracts (e.g., other than
firm-fixed-price contracts) requiring a
written acquisition plan. A written plan
shall be prepared for cost
reimbursement and other high-risk
contracts other than firm-fixed-price
contracts, although written plans may
be required for firm-fixed-price
contracts as appropriate.
(f) Ensuring that the statement of work
is closely aligned with performance
outcomes and cost estimates.
*
*
*
*
*
(j) Reviewing and approving
acquisition plans and revisions to these
plans to ensure compliance with FAR
requirements including 7.104 and part
16. For other than firm-fixed-price
contracts, ensuring that the plan is
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approved and signed at least one level
above the contracting officer.
*
*
*
*
*
■ 8. Amend section 7.104 by adding
paragraph (e) to read as follows:
7.104
General procedures.
*
*
*
*
*
(e) The planner shall ensure that a
COR is nominated by the requirements
official, and designated and authorized
by the contracting officer, as early as
practicable in the acquisition process.
The contracting officer shall designate
and authorize a COR as early as
practicable after the nomination. See
1.602–2(d).
■ 9. Amend section 7.105 by—
■ a. Removing from the first sentence of
the introductory text the words ‘‘see
paragraph (b)(19)’’ and adding the words
‘‘see paragraph (b)(21)’’ in their place;
■ b. Redesignating paragraphs (b)(3)
through (b)(21) as paragraphs (b)(4)
through (b)(22), respectively;
■ c. Adding a new paragraph (b)(3);
■ d. Removing from newly redesignated
paragraph (b)(5)(i) the words ‘‘contract
type selection (see part 16);’’;
■ e. Removing from newly redesignated
paragraph (b)(5)(ii)(A) the words ‘‘see
7.103(t)’’ and adding the words ‘‘see
7.103(v)’’ in its place; and
■ f. Adding paragraph (b)(5)(iv).
The added text reads as follows:
7.105 Contents of written acquisition
plans.
*
*
*
*
*
(b) * * *
(3) Contract type selection. Discuss
the rationale for the selection of contract
type. For other than firm-fixed-price
contracts, see 16.103(d) for additional
documentation guidance. Acquisition
personnel shall document the
acquisition plan with findings that
detail the particular facts and
circumstances, (e.g., complexity of the
requirements, uncertain duration of the
work, contractor’s technical capability
and financial responsibility, or
adequacy of the contractor’s accounting
system), and associated reasoning
essential to support the contract type
selection. The contracting officer shall
ensure that requirements and technical
personnel provide the necessary
documentation to support the contract
type selection.
*
*
*
*
*
(5) * * *
(iv) For each contract (and order)
contemplated, discuss the strategy to
transition to firm-fixed-price contracts
to the maximum extent practicable.
During the requirements development
stage, consider structuring the contract
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requirements, e.g., contract line items
(CLINS), in a manner that will permit
some, if not all, of the requirements to
be awarded on a firm-fixed-price basis,
either in the current contract, future
option years, or follow-on contracts.
This will facilitate an easier transition to
a firm-fixed-price contact because a cost
history will be developed for a recurring
definitive requirement.
*
*
*
*
*
PART 16—TYPES OF CONTRACTS
10. Amend section 16.103 by revising
paragraphs (d)(1) and (2) to read as
follows:
■
16.103
Negotiating contract type.
*
*
*
*
*
(d) * * *
(1) Each contract file shall include
documentation to show why the
particular contract type was selected.
This shall be documented in the
acquisition plan, or if a written
acquisition plan is not required, in the
contract file.
(i) Explain why the contract type
selected must be used to meet the
agency need.
(ii) Discuss the Government’s
additional risks and the burden to
manage the contract type selected (e.g.,
when a cost-reimbursement contract is
selected, the Government incurs
additional cost risks, and the
Government has the additional burden
of managing the contractor’s costs). For
such instances, acquisition personnel
shall discuss—
(A) How the Government identified
the additional risks (e.g., pre-award
survey, or past performance
information);
(B) The nature of the additional risks
(e.g., inadequate contractor’s accounting
system, weaknesses in contractor’s
internal control, non-compliance with
Cost Accounting Standards, or lack of or
inadequate earned value management
system); and
(C) How the Government will manage
and mitigate the risks.
(iii) Discuss the Government
resources necessary to properly plan for,
award, and administer the contract type
selected (e.g., resources needed and the
additional risks to the Government if
adequate resources are not provided).
(iv) For other than a firm-fixed price
contract, at a minimum the
documentation should include—
(A) An analysis of why the use of
other than a firm-fixed-price contract
(e.g., cost reimbursement, time and
materials, labor hour) is appropriate;
(B) Rationale that detail the particular
facts and circumstances (e.g.,
E:\FR\FM\16MRR2.SGM
16MRR2
Federal Register / Vol. 76, No. 51 / Wednesday, March 16, 2011 / Rules and Regulations
complexity of the requirements,
uncertain duration of the work,
contractor’s technical capability and
financial responsibility, or adequacy of
the contractor’s accounting system), and
associated reasoning essential to
support the contract type selection;
(C) An assessment regarding the
adequacy of Government resources that
are necessary to properly plan for,
award, and administer other than firmfixed-price contracts; and
(D) A discussion of the actions
planned to minimize the use of other
than firm-fixed-price contracts on future
acquisitions for the same requirement
and to transition to firm-fixed-price
contracts to the maximum extent
practicable.
(v) A discussion of why a level-ofeffort, price redetermination, or fee
provision was included.
(2) Exceptions to the requirements at
(d)(1) of this section are—
(i) Fixed-price acquisitions made
under simplified acquisition
procedures;
(ii) Contracts on a firm-fixed-price
basis other than those for major systems
or research and development; and
(iii) Awards on the set-aside portion
of sealed bid partial set-asides for small
business.
*
*
*
*
*
■ 11. Amend section 16.104 by—
■ a. Redesignating paragraphs (e)
through (k) as paragraphs (f) through (l),
respectively;
■ b. Adding a new paragraph (e);
■ c. Removing from newly redesignated
paragraph (f) the words ‘‘incentives to
ensure’’ and adding the words
‘‘incentives tailored to performance
outcomes to ensure’’ in their place;
■ d. Removing from newly redesignated
paragraph (g) the words ‘‘price
adjustment terms’’ and adding the words
‘‘price adjustment or price
redetermination clauses’’ in their place;
and
■ e. Revising newly redesignated
paragraph (i).
The added and revised text reads as
follows:
16.104
Factors in selecting contract types.
jlentini on DSKJ8SOYB1PROD with RULES2
*
*
*
*
*
(e) Combining contract types. If the
entire contract cannot be firm-fixedprice, the contracting officer shall
consider whether or not a portion of the
contract can be established on a firmfixed-price basis.
*
*
*
*
*
(i) Adequacy of the contractor’s
accounting system. Before agreeing on a
contract type other than firm-fixedprice, the contracting officer shall
VerDate Mar<15>2010
18:19 Mar 15, 2011
Jkt 223001
ensure that the contractor’s accounting
system will permit timely development
of all necessary cost data in the form
required by the proposed contract type.
This factor may be critical—
(1) When the contract type requires
price revision while performance is in
progress; or
(2) When a cost-reimbursement
contract is being considered and all
current or past experience with the
contractor has been on a fixed-price
basis. See 42.302(a)(12).
*
*
*
*
*
■ 12. Revise section 16.301–2 to read as
follows:
16.301–2
Application.
(a) The contracting officer shall use
cost-reimbursement contracts only
when—
(1) Circumstances do not allow the
agency to define its requirements
sufficiently to allow for a fixed-price
type contract (see 7.105); or
(2) Uncertainties involved in contract
performance do not permit costs to be
estimated with sufficient accuracy to
use any type of fixed-price contract.
(b) The contracting officer shall
document the rationale for selecting the
contract type in the written acquisition
plan and ensure that the plan is
approved and signed at least one level
above the contracting officer (see
7.103(j) and 7.105). If a written
acquisition plan is not required, the
contracting officer shall document the
rationale in the contract file. See also
16.103(d).
■ 13. Amend section 16.301–3 by
revising paragraph (a) to read as follows:
16.301–3
Limitations.
(a) A cost-reimbursement contract
may be used only when—
(1) The factors in 16.104 have been
considered;
(2) A written acquisition plan has
been approved and signed at least one
level above the contracting officer;
(3) The contractor’s accounting
system is adequate for determining costs
applicable to the contract; and
(4) Adequate Government resources
are available to award and manage a
contract other than firm-fixed-priced
(see 7.104(e)) including—
(i) Designation of at least one
contracting officer’s representative
(COR) qualified in accordance with
1.602–2 has been made prior to award
of the contract or order; and
(ii) Appropriate Government
surveillance during performance to
provide reasonable assurance that
efficient methods and effective cost
controls are used.
*
*
*
*
*
PO 00000
Frm 00007
Fmt 4701
Sfmt 9990
14547
PART 32—CONTRACT FINANCING
32.1007
[Amended]
14. Amend section 32.1007 by
removing from paragraph (a) ‘‘(see
42.302(a)(12))’’ and adding ‘‘(see
42.302(a)(13))’’ in its place.
■
PART 42—CONTRACT
ADMINISTRATION AND AUDIT
SERVICES
15. Amend section 42.302 by—
a. Removing from the introductory
text of paragraph (a) the words
‘‘paragraphs (a)(5), (a)(9), and (a)(11)’’
and adding the words ‘‘paragraphs (a)(5),
(a)(9), (a)(11), and (a)(12)’’ in their place;
■ b. Redesignating paragraphs (a)(12)
through (a)(26) as paragraphs (a)(13)
through (a)(27); and
■ c. Adding a new paragraph (a)(12) to
read as follows:
■
■
42.302
Contract administration functions.
(a) * * *
(12) Determine the adequacy of the
contractor’s accounting system. The
contractor’s accounting system should
be adequate during the entire period of
contract performance. The adequacy of
the contractor’s accounting system and
its associated internal control system, as
well as contractor compliance with the
Cost Accounting Standards (CAS), affect
the quality and validity of the contractor
data upon which the Government must
rely for its management oversight of the
contractor and contract performance.
*
*
*
*
*
PART 50—EXTRAORDINARY
CONTRACTURAL ACTIONS AND THE
SAFETY ACT
50.205–1
[Amended]
16. Amend section 50.205–1 by
removing from the first sentence in
paragraph (b) the words ‘‘(see FAR
7.105(b)(19)(v))’’ and adding the words
‘‘(see 7.105(b)(20)(v))’’ in their place.
■
[FR Doc. 2011–5552 Filed 3–15–11; 8:45 am]
BILLING CODE 6820–EP–P
E:\FR\FM\16MRR2.SGM
16MRR2
Agencies
[Federal Register Volume 76, Number 51 (Wednesday, March 16, 2011)]
[Rules and Regulations]
[Pages 14543-14547]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5552]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 2, 7, 16, 32, 42, and 50
[FAC 2005-50; FAR Case 2008-030; Item I; Docket 2011-0082, Sequence 1]
RIN 9000-AL78
Federal Acquisition Regulation; Proper Use and Management of
Cost-Reimbursement Contracts
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: DoD, GSA, and NASA are issuing an interim rule amending the
Federal Acquisition Regulation (FAR) to implement section 864 of the
Duncan Hunter National Defense Authorization Act for Fiscal Year 2009.
This law aligns
[[Page 14544]]
with the Presidential Memorandum on Government Contracting, issued on
March 4, 2009, which directed agencies to save $40 billion in
contracting annually by Fiscal Year (FY) 2011 and to reduce the use of
high-risk contracts. This rule provides regulatory guidance on the
proper use and management of other than firm-fixed-price contracts
(e.g., cost-reimbursement, time-and-material, and labor-hour).
DATES: Effective Date: March 16, 2011.
Comment Date: Interested parties should submit written comments to
the Regulatory Secretariat on or before May 16, 2011 to be considered
in the formulation of a final rule.
ADDRESSES: Submit comments identified by FAC 2005-50, FAR Case 2008-
030, by any of the following methods:
Regulations.gov: https://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by inputting ``FAR Case
2008-030'' under the heading ``Enter Keyword or ID'' and selecting
``Search.'' Select the link ``Submit a Comment'' that corresponds with
``FAR Case 2008-030.'' Follow the instructions provided at the ``Submit
a Comment'' screen. Please include your name, company name (if any),
and ``FAR Case 2008-030'' on your attached document.
Fax: (202) 501-4067.
Mail: General Services Administration, Regulatory
Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE., 7th
Floor, Washington, DC 20417.
Instructions: Please submit comments only and cite FAC 2005-50, FAR
Case 2008-030, in all correspondence related to this case. All comments
received will be posted without change to https://www.regulations.gov,
including any personal and/or business confidential information
provided.
FOR FURTHER INFORMATION CONTACT: For clarification of content, contact
Lori Sakalos, Procurement Analyst, at (202) 208-0498. For information
pertaining to status or publication schedules, contact the Regulatory
Secretariat at (202) 501-4755. Please cite FAC 2005-50, FAR Case 2008-
030.
SUPPLEMENTARY INFORMATION:
I. Background
This case implements section 864 of the Duncan Hunter National
Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110-417),
enacted October 14, 2008. This law aligns with the President's goal of
reducing high-risk contracting as denoted in the March 4, 2009,
Presidential Memorandum on Government Contracting.
Section 864 requires the FAR to be revised to address the use and
management of cost-reimbursement contracts and identifies the following
three areas that the Defense Acquisition Regulation Council and the
Civilian Agency Acquisition Council (Councils) should consider in
amending the FAR--
(a) Circumstances when cost-reimbursement contracts are
appropriate;
(b) Acquisition plan findings to support the selection of a cost-
reimbursement contract; and
(c) Acquisition resources necessary to award and manage a cost-
reimbursement contract.
1. Guidance on Cost-reimbursement contracts. As required, the
Councils included additional coverage at FAR subpart 16.1, Selecting
Contract Types, and at subpart 16.3, Cost-Reimbursement Contracts, to
provide further guidance as to when, and under what circumstances,
cost-reimbursement contracts are appropriate. Therefore, this rule
makes the following changes:
FAR 16.103, Negotiating contract type, is amended to
revise paragraph (d) to reflect additional documentation when other
than a firm-fixed-price contract type is selected.
FAR 16.104, Factors in selecting contract types, is
amended to add a new paragraph (e) to provide guidance to the
contracting officer to consider combining contract types if the entire
contract cannot be firm fixed-price.
FAR 16.301-2, Application, is amended to provide guidance
to the contracting officer as to the circumstances in which to use
cost-reimbursement contracts as well as outlining the rationale for
documentation for selecting this contract type.
FAR 16.301-3, Limitations, is amended to (1) provide
additional guidance to the contracting officer as to when a cost-
reimbursement contract may be used, (2) ensure that all factors have
been considered per FAR 16.104, and (3) ensure that adequate Government
resources are available to award and manage this type of contract.
FAR 7.104(e) also requires the designation of a properly
trained contracting officer's representative (COR) (or contracting
officer's technical representative (COTR)) prior to award of the
contract or order.
2. Identification of acquisition plan findings. FAR 7.103, Agency-
head responsibilities, is amended and renumbered to add new paragraphs
7.103(d), 7.103(f), and 7.103(j) to ensure that acquisition planners
document the file to support the selection of the contract type in
accordance with FAR subpart 16.1; ensure that the statement of work is
closely aligned with the performance outcomes and cost estimates; and
obtain an approval and signature from the appropriate acquisition
official at least one level above the contracting officer. FAR
7.105(b)(5)(iv) was added to discuss the strategy to transition from
cost-reimbursement contracts to firm-fixed-price contracts. Although
FAR 7.105(b)(5), Acquisition considerations, requires the acquisition
plans to include a discussion of contract type selection and rationale,
the Councils believe that a greater emphasis on the use of cost-
reimbursement contracts should be added and included a new paragraph at
FAR 7.105(b)(3), Contract type selection. Additionally, FAR 16.301-3(a)
has been amended and renumbered.
3. Acquisition workforce resources. The Councils recognize that
assigning adequate and proper resources to support the solicitation,
award, and administration of other than firm-fixed-price contracts
(cost-reimbursement, time-and-material, and labor-hour) contract is
challenging. There is also great concern that a lack of involvement in
contract oversight by program offices is primarily present in other
than firm-fixed-price contracts. Therefore, from the outset,
contracting officers should be assured, to the greatest extent
practicable, that the right resources in number, kind, and availability
be assigned to support other than firm-fixed-price contracts. The
Councils consider that greater accountability for the management and
oversight of all contracts, especially other than firm-fixed-price
contracts, can be gained and improved by requiring that properly
trained CORs or COTRs (see FAR 2.101(b)(2), Definitions) be appointed
before award. Therefore, FAR 7.104, General Procedures, and FAR 16.301-
3(a)(4)(i) are amended to reflect that prior to award of a contract,
especially on other than firm-fixed price contracts, at least one COR
or COTR qualified in accordance with FAR 1.602-2 is designated. FAR
1.602-2, Responsibilities, is amended to add a new paragraph (d)
outlining the requirement for the contracting officer to designate and
authorize, in writing, a COR on contracts and orders, as appropriate.
Additionally, a new section was added at FAR 1.604, Contracting
officer's representative, outlining the COR's duties.
4. Contract administration functions. A new paragraph was added at
FAR 42.302(a)(12) to require that the contracting officer determine the
continuing adequacy of the contractor's
[[Page 14545]]
accounting system during the entire period of contract performance.
Also, paragraph (a)(12) was added to the list of functions at FAR
42.302(a) that cannot be retained and that must be delegated by the
contracting officer when delegating contract administration functions
to a contract administration office in accordance with FAR 42.202(a).
II. Executive Order 12866
This is a significant regulatory action and, therefore, was subject
to review under Section 6(b) of Executive Order 12866, Regulatory
Planning and Review, dated September 30, 1993. This rule is not a major
rule under 5 U.S.C. 804.
III. Regulatory Flexibility Act
DoD, GSA, and NASA do not expect this interim rule to 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 section 864 affects only internal Government operations
and requires the Government to establish internal guidance on the
proper use and management of all contracts especially other than firm-
fixed-price contracts (e.g., cost-reimbursement, time-and-material, and
labor-hour) and does not impose any additional requirements on small
businesses.
Therefore, an Initial Regulatory Flexibility Analysis has not been
performed. DoD, GSA, and NASA invite comments from small business
entities and other interested parties on the expected impact of this
rule on small entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 610 (FAC 2005-50, FAR Case
2008-030) in correspondence.
IV. Paperwork Reduction Act
The changes to the FAR do not impose information collection
requirements that require the approval of the Office of Management and
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).
V. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense (DoD), the Administrator of General Services (GSA), and the
Administrator of the National Aeronautics and Space Administration
(NASA) that urgent and compelling reasons exist to promulgate this
interim rule without prior opportunity for public comment. This action
is necessary because section 864 of the Duncan Hunter National Defense
Authorization Act for Fiscal Year 2009, enacted October 14, 2008,
directs that it must be implemented within 270 days from enactment.
This rule is also urgent because this law requires the Inspector
General to conduct a compliance review for each executive agency, one
year after the regulations have been promulgated, on the use of cost-
reimbursement contracts and include the results of their findings in
the IG's next semiannual report. However, pursuant to 41 U.S.C. 1707
and FAR 1.501-3(b), DoD, GSA, and NASA will consider public comments
received in response to this interim rule in the formation of the final
rule.
List of Subjects in 48 CFR Parts 1, 2, 7, 16, 32, 42, and 50
Government procurement.
Dated: March 4, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 1, 2, 7, 16, 32,
42, and 50 as set forth below:
0
1. The authority citation for 48 CFR parts 1, 2, 7, 16, 32, 42, and 50
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).
PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM
0
2. Amend section 1.602-2 by adding paragraph (d) to read as follows:
1.602-2 Responsibilities.
* * * * *
(d) Designate and authorize, in writing, a contracting officer's
representative (COR) on all contracts and orders other than those that
are firm-fixed price, and for firm-fixed-price contracts and orders as
appropriate. However, the contracting officer is not precluded from
retaining and executing the COR duties as appropriate. See 7.104(e). A
COR--
(1) Must be a Government employee, unless otherwise authorized in
agency regulations;
(2) Shall be certified and maintain certification in accordance
with the Office of Management and Budget memorandum entitled ``The
Federal Acquisition Certification for Contracting Officer Technical
Representatives'' dated November 26, 2007, or for DoD, DoD Regulations,
as applicable;
(3) Must be qualified by training and experience commensurate with
the responsibilities to be delegated in accordance with department/
agency guidelines;
(4) May not be delegated responsibility to perform functions that
have been delegated under 42.202 to a contract administration office,
but may be assigned some duties at 42.302 by the contracting officer;
(5) Has no authority to make any commitments or changes that affect
price, quality, quantity, delivery, or other terms and conditions of
the contract; and
(6) Must be designated in writing, with copies furnished to the
contractor and the contract administration office--
(i) Specifying the extent of the COR's authority to act on behalf
of the contracting officer;
(ii) Identifying the limitations on the COR's authority;
(iii) Specifying the period covered by the designation;
(iv) Stating the authority is not redelegable; and
(v) Stating that the COR may be personally liable for unauthorized
acts.
0
3. Amend section 1.603 by revising the section heading to read as
follows:
1.603 Selection, appointment, and termination of appointment for
contracting officers.
* * * * *
0
4. Add section 1.604 to read as follows:
1.604 Contracting Officer's Representative (COR).
A contracting officer's representative (COR) assists in the
technical monitoring or administration of a contract (see 1.602-2(d)).
The COR shall maintain a file for each assigned contract. The file must
include, at a minimum--
(a) A copy of the contracting officer's letter of designation and
other documents describing the COR's duties and responsibilities;
(b) A copy of the contract administration functions delegated to a
contract administration office which may not be delegated to the COR
(see 1.602-2(d)(4)); and
(c) Documentation of COR actions taken in accordance with the
delegation of authority.
PART 2--DEFINITIONS OF WORDS AND TERMS
0
5. Amend section 2.101 in paragraph (b)(2) by adding, in alphabetical
order, the definition ``Contracting officer's representative (COR)'' to
read as follows:
[[Page 14546]]
2.101 Definitions.
* * * * *
(b) * * *
(2) * * *
Contracting officer's representative (COR) means an individual,
including a contracting officer's technical representative (COTR),
designated and authorized in writing by the contracting officer to
perform specific technical or administrative functions.
* * * * *
PART 7--ACQUISITION PLANNING
0
6. Amend section 7.102 by adding paragraph (a)(3) to read as follows:
7.102 Policy.
(a) * * *
(3) Selection of appropriate contract type in accordance with part
16.
* * * * *
0
7. Amend section 7.103 by--
0
a. Redesignating paragraphs (e) through (w) as paragraphs (g) through
(y);
0
b. Redesignating paragraph (d) as paragraph (e);
0
c. Adding a new paragraph (d);
0
d. Revising newly redesignated paragraph (e);
0
e. Adding a new paragraph (f); and
0
f. Revising newly redesignated paragraph (j).
The added and revised text reads as follows:
7.103 Agency-head responsibilities.
* * * * *
(d) Ensuring that acquisition planners document the file to support
the selection of the contract type in accordance with subpart 16.1.
(e) Establishing criteria and thresholds at which increasingly
greater detail and formality in the planning process is required as the
acquisition becomes more complex and costly, including for cost-
reimbursement and other high-risk contracts (e.g., other than firm-
fixed-price contracts) requiring a written acquisition plan. A written
plan shall be prepared for cost reimbursement and other high-risk
contracts other than firm-fixed-price contracts, although written plans
may be required for firm-fixed-price contracts as appropriate.
(f) Ensuring that the statement of work is closely aligned with
performance outcomes and cost estimates.
* * * * *
(j) Reviewing and approving acquisition plans and revisions to
these plans to ensure compliance with FAR requirements including 7.104
and part 16. For other than firm-fixed-price contracts, ensuring that
the plan is approved and signed at least one level above the
contracting officer.
* * * * *
0
8. Amend section 7.104 by adding paragraph (e) to read as follows:
7.104 General procedures.
* * * * *
(e) The planner shall ensure that a COR is nominated by the
requirements official, and designated and authorized by the contracting
officer, as early as practicable in the acquisition process. The
contracting officer shall designate and authorize a COR as early as
practicable after the nomination. See 1.602-2(d).
0
9. Amend section 7.105 by--
0
a. Removing from the first sentence of the introductory text the words
``see paragraph (b)(19)'' and adding the words ``see paragraph
(b)(21)'' in their place;
0
b. Redesignating paragraphs (b)(3) through (b)(21) as paragraphs (b)(4)
through (b)(22), respectively;
0
c. Adding a new paragraph (b)(3);
0
d. Removing from newly redesignated paragraph (b)(5)(i) the words
``contract type selection (see part 16);'';
0
e. Removing from newly redesignated paragraph (b)(5)(ii)(A) the words
``see 7.103(t)'' and adding the words ``see 7.103(v)'' in its place;
and
0
f. Adding paragraph (b)(5)(iv).
The added text reads as follows:
7.105 Contents of written acquisition plans.
* * * * *
(b) * * *
(3) Contract type selection. Discuss the rationale for the
selection of contract type. For other than firm-fixed-price contracts,
see 16.103(d) for additional documentation guidance. Acquisition
personnel shall document the acquisition plan with findings that detail
the particular facts and circumstances, (e.g., complexity of the
requirements, uncertain duration of the work, contractor's technical
capability and financial responsibility, or adequacy of the
contractor's accounting system), and associated reasoning essential to
support the contract type selection. The contracting officer shall
ensure that requirements and technical personnel provide the necessary
documentation to support the contract type selection.
* * * * *
(5) * * *
(iv) For each contract (and order) contemplated, discuss the
strategy to transition to firm-fixed-price contracts to the maximum
extent practicable. During the requirements development stage, consider
structuring the contract requirements, e.g., contract line items
(CLINS), in a manner that will permit some, if not all, of the
requirements to be awarded on a firm-fixed-price basis, either in the
current contract, future option years, or follow-on contracts. This
will facilitate an easier transition to a firm-fixed-price contact
because a cost history will be developed for a recurring definitive
requirement.
* * * * *
PART 16--TYPES OF CONTRACTS
0
10. Amend section 16.103 by revising paragraphs (d)(1) and (2) to read
as follows:
16.103 Negotiating contract type.
* * * * *
(d) * * *
(1) Each contract file shall include documentation to show why the
particular contract type was selected. This shall be documented in the
acquisition plan, or if a written acquisition plan is not required, in
the contract file.
(i) Explain why the contract type selected must be used to meet the
agency need.
(ii) Discuss the Government's additional risks and the burden to
manage the contract type selected (e.g., when a cost-reimbursement
contract is selected, the Government incurs additional cost risks, and
the Government has the additional burden of managing the contractor's
costs). For such instances, acquisition personnel shall discuss--
(A) How the Government identified the additional risks (e.g., pre-
award survey, or past performance information);
(B) The nature of the additional risks (e.g., inadequate
contractor's accounting system, weaknesses in contractor's internal
control, non-compliance with Cost Accounting Standards, or lack of or
inadequate earned value management system); and
(C) How the Government will manage and mitigate the risks.
(iii) Discuss the Government resources necessary to properly plan
for, award, and administer the contract type selected (e.g., resources
needed and the additional risks to the Government if adequate resources
are not provided).
(iv) For other than a firm-fixed price contract, at a minimum the
documentation should include--
(A) An analysis of why the use of other than a firm-fixed-price
contract (e.g., cost reimbursement, time and materials, labor hour) is
appropriate;
(B) Rationale that detail the particular facts and circumstances
(e.g.,
[[Page 14547]]
complexity of the requirements, uncertain duration of the work,
contractor's technical capability and financial responsibility, or
adequacy of the contractor's accounting system), and associated
reasoning essential to support the contract type selection;
(C) An assessment regarding the adequacy of Government resources
that are necessary to properly plan for, award, and administer other
than firm-fixed-price contracts; and
(D) A discussion of the actions planned to minimize the use of
other than firm-fixed-price contracts on future acquisitions for the
same requirement and to transition to firm-fixed-price contracts to the
maximum extent practicable.
(v) A discussion of why a level-of-effort, price redetermination,
or fee provision was included.
(2) Exceptions to the requirements at (d)(1) of this section are--
(i) Fixed-price acquisitions made under simplified acquisition
procedures;
(ii) Contracts on a firm-fixed-price basis other than those for
major systems or research and development; and
(iii) Awards on the set-aside portion of sealed bid partial set-
asides for small business.
* * * * *
0
11. Amend section 16.104 by--
0
a. Redesignating paragraphs (e) through (k) as paragraphs (f) through
(l), respectively;
0
b. Adding a new paragraph (e);
0
c. Removing from newly redesignated paragraph (f) the words
``incentives to ensure'' and adding the words ``incentives tailored to
performance outcomes to ensure'' in their place;
0
d. Removing from newly redesignated paragraph (g) the words ``price
adjustment terms'' and adding the words ``price adjustment or price
redetermination clauses'' in their place; and
0
e. Revising newly redesignated paragraph (i).
The added and revised text reads as follows:
16.104 Factors in selecting contract types.
* * * * *
(e) Combining contract types. If the entire contract cannot be
firm-fixed-price, the contracting officer shall consider whether or not
a portion of the contract can be established on a firm-fixed-price
basis.
* * * * *
(i) Adequacy of the contractor's accounting system. Before agreeing
on a contract type other than firm-fixed-price, the contracting officer
shall ensure that the contractor's accounting system will permit timely
development of all necessary cost data in the form required by the
proposed contract type. This factor may be critical--
(1) When the contract type requires price revision while
performance is in progress; or
(2) When a cost-reimbursement contract is being considered and all
current or past experience with the contractor has been on a fixed-
price basis. See 42.302(a)(12).
* * * * *
0
12. Revise section 16.301-2 to read as follows:
16.301-2 Application.
(a) The contracting officer shall use cost-reimbursement contracts
only when--
(1) Circumstances do not allow the agency to define its
requirements sufficiently to allow for a fixed-price type contract (see
7.105); or
(2) Uncertainties involved in contract performance do not permit
costs to be estimated with sufficient accuracy to use any type of
fixed-price contract.
(b) The contracting officer shall document the rationale for
selecting the contract type in the written acquisition plan and ensure
that the plan is approved and signed at least one level above the
contracting officer (see 7.103(j) and 7.105). If a written acquisition
plan is not required, the contracting officer shall document the
rationale in the contract file. See also 16.103(d).
0
13. Amend section 16.301-3 by revising paragraph (a) to read as
follows:
16.301-3 Limitations.
(a) A cost-reimbursement contract may be used only when--
(1) The factors in 16.104 have been considered;
(2) A written acquisition plan has been approved and signed at
least one level above the contracting officer;
(3) The contractor's accounting system is adequate for determining
costs applicable to the contract; and
(4) Adequate Government resources are available to award and manage
a contract other than firm-fixed-priced (see 7.104(e)) including--
(i) Designation of at least one contracting officer's
representative (COR) qualified in accordance with 1.602-2 has been made
prior to award of the contract or order; and
(ii) Appropriate Government surveillance during performance to
provide reasonable assurance that efficient methods and effective cost
controls are used.
* * * * *
PART 32--CONTRACT FINANCING
32.1007 [Amended]
0
14. Amend section 32.1007 by removing from paragraph (a) ``(see
42.302(a)(12))'' and adding ``(see 42.302(a)(13))'' in its place.
PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES
0
15. Amend section 42.302 by--
0
a. Removing from the introductory text of paragraph (a) the words
``paragraphs (a)(5), (a)(9), and (a)(11)'' and adding the words
``paragraphs (a)(5), (a)(9), (a)(11), and (a)(12)'' in their place;
0
b. Redesignating paragraphs (a)(12) through (a)(26) as paragraphs
(a)(13) through (a)(27); and
0
c. Adding a new paragraph (a)(12) to read as follows:
42.302 Contract administration functions.
(a) * * *
(12) Determine the adequacy of the contractor's accounting system.
The contractor's accounting system should be adequate during the entire
period of contract performance. The adequacy of the contractor's
accounting system and its associated internal control system, as well
as contractor compliance with the Cost Accounting Standards (CAS),
affect the quality and validity of the contractor data upon which the
Government must rely for its management oversight of the contractor and
contract performance.
* * * * *
PART 50--EXTRAORDINARY CONTRACTURAL ACTIONS AND THE SAFETY ACT
50.205-1 [Amended]
0
16. Amend section 50.205-1 by removing from the first sentence in
paragraph (b) the words ``(see FAR 7.105(b)(19)(v))'' and adding the
words ``(see 7.105(b)(20)(v))'' in their place.
[FR Doc. 2011-5552 Filed 3-15-11; 8:45 am]
BILLING CODE 6820-EP-P