Federal Acquisition Regulation; Payments Under Time-and-Materials and Labor-Hour Contracts, 44059-44062 [2012-17727]

Download as PDF srobinson on DSK4SPTVN1PROD with RULES3 Federal Register / Vol. 77, No. 144 / Thursday, July 26, 2012 / Rules and Regulations (2) First-tier subcontract information. Unless otherwise directed by the contracting officer, or as provided in paragraph (g) of this clause, by the end of the month following the month of award of a first-tier subcontract with a value of $25,000 or more, the Contractor shall report the following information at http://www.fsrs.gov for that first-tier subcontract. (The Contractor shall follow the instructions at http://www.fsrs.gov to report the data.) (i) Unique identifier (DUNS Number) for the subcontractor receiving the award and for the subcontractor’s parent company, if the subcontractor has a parent company. (ii) Name of the subcontractor. (iii) Amount of the subcontract award. (iv) Date of the subcontract award. (v) A description of the products or services (including construction) being provided under the subcontract, including the overall purpose and expected outcomes or results of the subcontract. (vi) Subcontract number (the subcontract number assigned by the Contractor). (vii) Subcontractor’s physical address including street address, city, state, and country. Also include the nine-digit zip code and congressional district. (viii) Subcontractor’s primary performance location including street address, city, state, and country. Also include the nine-digit zip code and congressional district. (ix) The prime contract number, and order number if applicable. (x) Awarding agency name and code. (xi) Funding agency name and code. (xii) Government contracting office code. (xiii) Treasury account symbol (TAS) as reported in FPDS. (xiv) The applicable North American Industry Classification System code (NAICS). (3) Executive compensation of the first-tier subcontractor. Unless otherwise directed by the Contracting Officer, by the end of the month following the month of award of a first-tier subcontract with a value of $25,000 or more, and annually thereafter (calculated from the prime contract award date), the Contractor shall report the names and total compensation of each of the five most highly compensated executives for that first-tier subcontractor for the first-tier subcontractor’s preceding completed fiscal year at http:// www.fsrs.gov, if— (i) In the subcontractor’s preceding fiscal year, the subcontractor received— (A) 80 percent or more of its annual gross revenues from Federal contracts (and subcontracts), loans, grants (and subgrants), cooperative agreements, and other forms of Federal financial assistance; and (B) $25,000,000 or more in annual gross revenues from Federal contracts (and subcontracts), loans, grants (and subgrants), cooperative agreements, and other forms of Federal financial assistance; and (ii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986. (To determine if the public has access to the compensation information, see the U.S. Security and VerDate Mar<15>2010 18:38 Jul 25, 2012 Jkt 226001 44059 Exchange Commission total compensation filings at http://www.sec.gov/answers/ execomp.htm.) (e) The Contractor shall not split or break down first-tier subcontract awards to a value less than $25,000 to avoid the reporting requirements in paragraph (d). (f) The Contractor is required to report information on a first-tier subcontract covered by paragraph (d) when the subcontract is awarded. Continued reporting on the same subcontract is not required unless one of the reported data elements changes during the performance of the subcontract. The Contractor is not required to make further reports after the first-tier subcontract expires. (g)(1) If the Contractor in the previous tax year had gross income, from all sources, under $300,000, the Contractor is exempt from the requirement to report subcontractor awards. (2) If a subcontractor in the previous tax year had gross income from all sources under $300,000, the Contractor does not need to report awards for that subcontractor. (h) The FSRS database at http:// www.fsrs.gov will be prepopulated with some information from CCR and FPDS databases. If FPDS information is incorrect, the contractor should notify the contracting officer. If the CCR database information is incorrect, the contractor is responsible for correcting this information. (End of clause) Terms and Conditions—Simplified Acquisitions (Other Than Commercial Items) (Aug 2012) 9. Amend section 52.212–5 by revising the date of the clause, and paragraph (b)(4) to read as follows: AGENCY: ■ 52.212–5 Contract Terms and Conditions Required To Implement Statutes or Executive Orders—Commercial Items. * * * * * Contract Terms and Conditions Required To Implement Statutes or Executive Orders— Commercial Items. (Aug 2012) * * * * * (b) * * * (4) 52.204–10, Reporting Executive Compensation and First-Tier Subcontract Awards (Aug 2012) (Pub. L. 109–282) (31 U.S.C. 6101 note). * * * * * 10. Amend section 52.213–4 by— a. Revise the date of the clause; b. Remove paragraph (a)(2)(i); c. Redesignate paragraphs (a)(2)(ii) through paragraphs (a)(2)(viii) as paragraphs (a)(2)(i) through paragraphs (a)(2)(vii), respectively; ■ d. Redesignate paragraphs (b)(1)(i) through paragraphs (b)(1)(xii) as paragraphs (b)(1)(ii) through paragraphs (b)(1)(xiii), respectively; and ■ e. Add a new paragraph (b)(1)(i). The revised and added text reads as follows: ■ ■ ■ ■ 52.213–4 Terms and Conditions— Simplified Acquisitions (Other Than Commercial Items). * PO 00000 * Frm 00015 * * Fmt 4701 * Sfmt 4700 * * * * * (b) * * * (1) * * * (i) 52.204–10, Reporting Executive Compensation and First-Tier Subcontract Awards (Aug 2012) (Pub. L. 109–282) (31 U.S.C. 6101 note) (Applies to contracts valued at $25,000 or more). * * * * * [FR Doc. 2012–17724 Filed 7–25–12; 8:45 am] BILLING CODE 6820–EP–P DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 48 CFR Parts 16, 32, and 52 [FAC 2005–60; FAR Case 2011–003; Item II; Docket 2011–0003, Sequence 1] RIN 9000–AM01 Federal Acquisition Regulation; Payments Under Time-and-Materials and Labor-Hour Contracts Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Final rule. DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to make necessary revisions to accommodate the authorization to use time-and-materials and labor-hour contract payment requirements. DATES: Effective Date: August 27, 2012. FOR FURTHER INFORMATION CONTACT: Mr. Edward N. Chambers, Procurement Analyst, at 202–501–3221 for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202–501–4755. Please cite FAC 2005–60, FAR Case 2011–003. SUPPLEMENTARY INFORMATION: SUMMARY: I. Background DoD, GSA, and NASA published a proposed rule in the Federal Register at 76 FR 44884 on July 27, 2011, to make the necessary regulatory revisions to enable the use of the appropriate payment provisions for time-andmaterials and labor-hour contracts. These revisions supplement the following previously issued revisions to the FAR addressing time-and-materials contracts: E:\FR\FM\26JYR3.SGM 26JYR3 44060 Federal Register / Vol. 77, No. 144 / Thursday, July 26, 2012 / Rules and Regulations (1) FAR Case 2003–027, Additional Commercial Contract Types (71 FR 74667 dated December 12, 2006), implemented section 1432 of the National Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108–136). Title XIV of the Act, referred to as the Services Acquisition Reform Act of 2003 (SARA), amended section 8002(d) of the Federal Acquisition Streamlining Act of 1994 (FASA) (Pub. L. 103–355, 41 U.S.C. 3307) to expressly authorize the use of time-and-materials and laborhour contracts for commercial services under specified conditions. (2) FAR Case 2004–015, Payments Under Time-and-Materials and LaborHour Contracts (71 FR 74656 dated December 12, 2006), revised and clarified policies related to the award and administration of noncommercial time-and-materials and labor-hour contracts and the policies regarding payments made under those contracts. II. Discussion and Analysis of the Public Comments The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the comments in the development of the final rule. A discussion of the comments and the changes made to the rule as a result of those comments are provided as follows: srobinson on DSK4SPTVN1PROD with RULES3 A. Summary of Significant Changes The proposed rule sought to harmonize the provisions for invoicing and submission of the final invoice between FAR clauses 52.216–7, Allowable Cost and Payment, and 52.232–7, Payments under Time-and Materials and Labor-Hour Contracts, when a time-and-materials contract is being used. Currently, under a time-andmaterials contract, FAR clause 52.232– 7 provides for monthly invoicing and submission of the completion voucher no later than one year from the date of work completion. These provisions are in conflict with the corresponding provisions of FAR clause 52.216–7, which is invoked under a time-andmaterials contract. FAR clause 52.216– 7 provides for invoicing on a bi-weekly basis for large businesses, and more frequent invoicing for small businesses, and the submission of the completion voucher no later than 120 days after completion of work. Consequently, the final rule amends the basic FAR clause 52.232–7 to reflect the provisions for invoicing and submission of the completion voucher at FAR clause 52.216–7. This final rule deletes Alternate I along with its VerDate Mar<15>2010 18:38 Jul 25, 2012 Jkt 226001 prescription for use at FAR 32.111(a)(7)(i). Alternate I of FAR 52.232–7 provided for the addition of paragraph (j) in laborhour contracts which deleted the terms of the basic clause governing the reimbursement of furnished materials. Alternate I, paragraph (j), is superfluous and is deleted since the terms of the basic clause governing the reimbursement of furnished materials are in effect self-deleting. B. Analysis of Public Comments Three respondents submitted comments in response to the proposed rule. A discussion of these comments and the changes made to the rule as a result of these comments are provided as follows: 1. Time-and-Materials Contracts and Ceiling Prices Comment: A respondent recommended changing the way timeand-materials contracts are managed to align more closely with how the Canadian procurement regulations manage time-and-materials contracts. Specifically, U.S. Government regulations should include language requiring a ceiling price on time-andmaterials contracts within which the contractor must complete the prescribed work. Response: This comment is outside the scope of this case, which was limited to simply clarifying the existing prescriptions and clauses relating to appropriate payment provisions for use in time-and-materials and labor-hour contracts. FAR 16.601 delineates that time and materials contracts must include a ceiling price that the contractor exceeds at its own risk. 2. Inclusion of FAR 52.246–6(f) Provision Comment: A respondent stated that the proposed rule should include consideration of the provision found at FAR 52.246–6(f), Inspection—Time-andMaterial and Labor-Hour, paragraph (f) (requirement to replace or correct services or materials that failed to meet contract requirements). Response: This comment is outside the scope of this case, which was limited to simply clarifying the existing prescriptions and clauses relating to appropriate payment provisions for use in time-and-materials and labor-hour contracts. Inclusion of FAR provision 52.246–6(f) language into the payment provisions at FAR 52.212–4, 52.216–7, or 52.232–7 is unnecessary. PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 3. Consistency Between Revised Clauses Comment: A respondent cited several instances where language was inconsistent between the clauses under the proposed rule. Specifically, the proposed rule aligned the frequency of invoicing and the period for submission of the completion voucher provisions for time-and-materials contracts at FAR 52.232–7 with that currently set forth in the ‘‘Allowable Cost and Payment’’ clause at FAR 52.216–7. However, for labor-hour contracts, under Alternate I to 52.232–7, the proposed rule left the invoicing and period for submission of the completion voucher provisions, which were different from the requirements set forth in FAR 52.216–7 and 52.232–7, unchanged. The respondent questioned this inconsistency regarding these provisions. Response: The invoicing and submission of the completion voucher provisions in time-and-materials contracts and labor-hour contracts should align. Consequently, the final rule does not include the proposed rule language regarding invoicing and the period for submission of completion vouchers for labor-hour contracts in Alternate I to FAR clause 52.232–7. III. Executive Orders 12866 and 13563 Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804. IV. 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 it merely clarifies the existing prescriptions and clauses relating to services contracts. No comments from E:\FR\FM\26JYR3.SGM 26JYR3 Federal Register / Vol. 77, No. 144 / Thursday, July 26, 2012 / Rules and Regulations small entities were submitted in response to the Regulatory Flexibility Act request under the proposed rule. V. Paperwork Reduction Act The final rule does not contain any 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). List of Subjects in 48 CFR Parts 16, 32, and 52 Government procurement. Dated: July 16, 2012. Laura Auletta, Director, Office of Governmentwide Acquisition Policy, Office of Governmentwide Policy. Therefore, DoD, GSA, and NASA amend 48 CFR parts 16, 32, and 52 as follows: ■ 1. The authority citation for 48 CFR parts 16, 32, and 52 is revised to read as follows: Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113. PART 16—TYPES OF CONTRACTS 2. Amend section 16.307 by revising paragraph (a)(1); and adding paragraphs (a)(3) through (5) to read as follows: ■ srobinson on DSK4SPTVN1PROD with RULES3 § 16.307 Contract clauses. (a)(1) The contracting officer shall insert the clause at 52.216–7, Allowable Cost and Payment, in solicitations and contracts when a cost-reimbursement contract or a time-and-materials contract (other than a contract for a commercial item) is contemplated. If the contract is a time-and-materials contract, the clause at 52.216–7 applies in conjunction with the clause at 52.232–7, but only to the portion of the contract that provides for reimbursement of materials (as defined in the clause at 52.232–7) at actual cost. Further, the clause at 52.216–7 does not apply to labor-hour contracts. * * * * * (3) If the contract is with an educational institution, the contracting officer shall use the clause at 52.216–7 with its Alternate II. (4) If the contract is with a State or local government, the contracting officer shall use the clause at 52.216–7 with its Alternate III. (5) If the contract is with a nonprofit organization other than an educational institution, a State or local government, or a nonprofit organization exempted under OMB Circular No. A–122, the contracting officer shall use the clause at 52.216–7 with its Alternate IV. * * * * * VerDate Mar<15>2010 18:38 Jul 25, 2012 Jkt 226001 PART 32—CONTRACT FINANCING 3. Amend section 32.111 by revising paragraph (a)(7) to read as follows: ■ § 32.111 Contract clauses for noncommercial purchases. (a) * * * (7) The clause at 52.232–7, Payments under Time-and-Materials and LaborHour Contracts, in solicitations and contracts when a time-and-materials or labor-hour contract is contemplated. If the contracting officer determines that it is necessary to withhold payment to protect the Government’s interests, paragraph (a)(7) of the clause permits the contracting officer to unilaterally issue a modification requiring the contractor to withhold 5 percent of amounts due, up to a maximum of $50,000 under the contract. The contracting officer shall ensure that the modification specifies the percentage and total amount of the withheld payment. Normally, there should be no need to withhold payment for a contractor with a record of timely submittal of the release discharging the Government from all liabilities, obligations, and claims, as required by paragraph (g) of the clause. * * * * * PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 4. Amend Alternate I of section 52.212–4 by— ■ a. Revising the date of Alternate I and the introductory text; ■ b. Revising paragraphs of (i)(1) introductory text and (i)(1)(ii)(A); and ■ c. Adding paragraph (m). The revised and added text reads as follows: ■ 52.212–4 Contract Terms and Conditions—Commercial Items. * * * * * Alternate I (AUG 2012). When a time-andmaterials or labor-hour contract is contemplated, substitute the following paragraphs (a), (e), (i), (l), and (m) for those in the basic clause. * * * * * (i) Payments. (1) Work performed. The Government will pay the Contractor as follows upon the submission of commercial invoices approved by the Contracting Officer: * * * * * (ii) * * * (A) If the Contractor furnishes materials that meet the definition of a commercial item at 2.101, the price to be paid for such materials shall not exceed the Contractor’s established catalog or market price, adjusted to reflect the— * * * * * (m) Termination for cause. The Government may terminate this contract, or PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 44061 any part hereof, for cause in the event of any default by the Contractor, or if the Contractor fails to comply with any contract terms and conditions, or fails to provide the Government, upon written request, with adequate assurances of future performance. Subject to the terms of this contract, the Contractor shall be paid an amount computed under paragraph (i) Payments of this clause, but the ‘‘hourly rate’’ for labor hours expended in furnishing work not delivered to or accepted by the Government shall be reduced to exclude that portion of the rate attributable to profit. Unless otherwise specified in paragraph (a)(4) of this clause, the portion of the ‘‘hourly rate’’ attributable to profit shall be 10 percent. In the event of termination for cause, the Contractor shall be liable to the Government for any and all rights and remedies provided by law. If it is determined that the Government improperly terminated this contract for default, such termination shall be deemed a termination for convenience. 5. Amend section 52.216–7 by adding Alternates II through Alternates IV to read as follows: ■ § 52.216–7 Allowable Cost and Payment. * * * * * Alternate II (AUG 2012). As prescribed in 16.307(a)(3), substitute the following paragraph (a)(1) for paragraph (a)(1) of the basic clause: (a)(1) The Government will make payments to the Contractor when requested as work progresses, but not more often than once every two weeks, in amounts determined to be allowable by the Contracting Officer in accordance with FAR subpart 31.3 in effect on the date of this contract and the terms of this contract. The Contractor may submit to an authorized representative of the Contracting Officer, in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this contract. Alternate III (AUG 2012). As prescribed in 16.307(a)(4), substitute the following paragraph (a)(1) for paragraph (a)(1) of the basic clause: (a)(1) The Government will make payments to the Contractor when requested as work progresses, but not more often than once every two weeks, in amounts determined to be allowable by the Contracting Officer in accordance with FAR subpart 31.6 in effect on the date of this contract and the terms of this contract. The Contractor may submit to an authorized representative of the Contracting Officer, in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this contract. Alternate IV (AUG 2012). As prescribed in 16.307(a)(5), substitute the following paragraph (a)(1) for paragraph (a)(1) of the basic clause: (a)(1) The Government will make payments to the Contractor when requested as work progresses, but not more often than once every two weeks, in amounts determined to be allowable by the Contracting Officer in E:\FR\FM\26JYR3.SGM 26JYR3 44062 Federal Register / Vol. 77, No. 144 / Thursday, July 26, 2012 / Rules and Regulations accordance with FAR subpart 31.7 in effect on the date of this contract and the terms of this contract. The Contractor may submit to an authorized representative of the Contracting Officer, in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this contract. 6. Amend section 52.232–7 by— a. Revising the date of the clause; b. Revising the introductory text of paragraph (a)(5); ■ c. Removing from the last sentence of paragraph (f) ‘‘1 year’’ and adding ‘‘120 days’’ in its place; and ■ d. Removing ‘‘Alternate I’’. The revised text reads as follows: ■ ■ ■ § 52.232–7 Payments under Time-andMaterials and Labor-Hour Contracts. * * * * * Payments Under Time-and-Materials and Labor-Hour Contracts (AUG 2012) * * * * * (a) * * * (5) Vouchers may be submitted not more than once every two weeks, to the Contracting Officer or authorized representative. A small business concern may receive more frequent payments than every two weeks. The Contractor shall substantiate vouchers (including any subcontractor hours reimbursed at the hourly rate in the schedule) by evidence of actual payment and by— * * * * * [FR Doc. 2012–17727 Filed 7–25–12; 8:45 am] BILLING CODE 6820–EP–P DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 48 CFR Part 16 [FAC 2005–60; FAR Case 2012–007; Item III; Docket 2012–0007, Sequence 1] RIN 9000–AM26 Federal Acquisition Regulation; Extension of Sunset Date for Protests of Task and Delivery Orders Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Interim rule. srobinson on DSK4SPTVN1PROD with RULES3 AGENCIES: DoD, GSA, and NASA are issuing an interim rule amending the Federal Acquisition Regulation (FAR) to implement sections of the Ike Skelton National Defense Authorization Act for SUMMARY: VerDate Mar<15>2010 18:38 Jul 25, 2012 Jkt 226001 Fiscal Year 2011, and the National Defense Authorization Act for Fiscal Year 2012. These statutes extend the sunset date for protests against the award of task or delivery orders from May 27, 2011, to September 30, 2016. DATES: Effective date: July 26, 2012. Comment date: Interested parties should submit written comments to the Regulatory Secretariat on or before September 24, 2012 to be considered in the formation of a final rule. ADDRESSES: Submit comments identified by FAC 2005–60, FAR Case 2012–007, by any of the following methods: • Regulations.gov: http:// www.regulations.gov. Submit comments via the Federal eRulemaking portal by searching for ‘‘FAR Case 2012–007’’. Select the link ‘‘Submit a Comment’’ that corresponds with ‘‘FAR Case 2012– 007.’’ Follow the instructions provided at the ‘‘Submit a Comment’’ screen. Please include your name, company name (if any), and ‘‘FAR Case 2012– 007’’ 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 2005–60, FAR Case 2012–007, in all correspondence related to this case. All comments received will be posted without change to http:// www.regulations.gov, including any personal and/or business confidential information provided. FOR FURTHER INFORMATION CONTACT: Ms. Deborah Lague, Procurement Analyst, at 202–694–8149 for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at 202–501– 4755. Please cite FAC 2005–60, FAR Case 2012–012. SUPPLEMENTARY INFORMATION: I. Background DoD, GSA, and NASA published an interim rule in the Federal Register at 76 FR 39238 on July 5, 2011, entitled ‘‘Extension of Sunset Date for Protests of Task and Delivery Orders’’ (FAC 2005– 53, FAR Case 2011–015). The rule implemented section 825 of the Ike Skelton National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2011 (Pub. L. 111–383, enacted January 7, 2011). The rule extended the sunset date for protests of task and delivery orders valued in excess of $10 million for Title 10 agencies, namely DoD, NASA, and the Coast Guard. The rule did not extend the sunset date for Title 41 PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 agencies as there was no comparable change to Title 41 at that time. Subsequent to the publication of the interim rule under FAR Case 2011–015, section 813 of the NDAA for FY 2012 (Pub. L. 112–81, enacted December 31, 2011) made comparable changes to Title 41 to extend the sunset date for protests against the award of task and delivery orders from May 27, 2011, to September 30, 2016. In order to accomplish the statutory changes for both Title 10 and Title 41, FAR Case 2011–015 is not being issued as a final rule and is instead being renumbered and incorporated into this second interim rule, FAR Case 2012–007. II. Discussion and Analysis A. Summary of Significant Changes FAR 16.505(a)(10)(ii) is amended to extend, for Title 41 agencies, the authority to protest the placement of task and delivery orders valued in excess of $10 million from May 27, 2011, to September 30, 2016. B. Analysis of Public Comment One public comment was received for FAR Case 2011–015. The public comment and response are provided as follows: Comment on FAR Case 2011–015: The respondent indicated that the sunset date for protest of orders should extend to Title 41 agencies, not just Title 10 agencies. Response: The rule has been changed to incorporate and implement the laterenacted section 813 of the NDAA for FY 2012 to extend the sunset date for the protest of task and delivery orders from May 27, 2011, to September 30, 2016, for Title 41 agencies. III. Executive Orders 12866 and 13563 Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804. E:\FR\FM\26JYR3.SGM 26JYR3

Agencies

[Federal Register Volume 77, Number 144 (Thursday, July 26, 2012)]
[Rules and Regulations]
[Pages 44059-44062]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17727]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 16, 32, and 52

[FAC 2005-60; FAR Case 2011-003; Item II; Docket 2011-0003, Sequence 1]
RIN 9000-AM01


Federal Acquisition Regulation; Payments Under Time-and-Materials 
and Labor-Hour Contracts

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

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the 
Federal Acquisition Regulation (FAR) to make necessary revisions to 
accommodate the authorization to use time-and-materials and labor-hour 
contract payment requirements.

DATES: Effective Date: August 27, 2012.

FOR FURTHER INFORMATION CONTACT: Mr. Edward N. Chambers, Procurement 
Analyst, at 202-501-3221 for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAC 2005-60, FAR Case 2011-
003.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 76 FR 44884 on July 27, 2011, to make the necessary 
regulatory revisions to enable the use of the appropriate payment 
provisions for time-and-materials and labor-hour contracts. These 
revisions supplement the following previously issued revisions to the 
FAR addressing time-and-materials contracts:

[[Page 44060]]

    (1) FAR Case 2003-027, Additional Commercial Contract Types (71 FR 
74667 dated December 12, 2006), implemented section 1432 of the 
National Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108-
136). Title XIV of the Act, referred to as the Services Acquisition 
Reform Act of 2003 (SARA), amended section 8002(d) of the Federal 
Acquisition Streamlining Act of 1994 (FASA) (Pub. L. 103-355, 41 U.S.C. 
3307) to expressly authorize the use of time-and-materials and labor-
hour contracts for commercial services under specified conditions.
    (2) FAR Case 2004-015, Payments Under Time-and-Materials and Labor-
Hour Contracts (71 FR 74656 dated December 12, 2006), revised and 
clarified policies related to the award and administration of 
noncommercial time-and-materials and labor-hour contracts and the 
policies regarding payments made under those contracts.

II. Discussion and Analysis of the Public Comments

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the comments in the 
development of the final rule. A discussion of the comments and the 
changes made to the rule as a result of those comments are provided as 
follows:

A. Summary of Significant Changes

    The proposed rule sought to harmonize the provisions for invoicing 
and submission of the final invoice between FAR clauses 52.216-7, 
Allowable Cost and Payment, and 52.232-7, Payments under Time-and 
Materials and Labor-Hour Contracts, when a time-and-materials contract 
is being used. Currently, under a time-and-materials contract, FAR 
clause 52.232-7 provides for monthly invoicing and submission of the 
completion voucher no later than one year from the date of work 
completion. These provisions are in conflict with the corresponding 
provisions of FAR clause 52.216-7, which is invoked under a time-and-
materials contract. FAR clause 52.216-7 provides for invoicing on a bi-
weekly basis for large businesses, and more frequent invoicing for 
small businesses, and the submission of the completion voucher no later 
than 120 days after completion of work.
    Consequently, the final rule amends the basic FAR clause 52.232-7 
to reflect the provisions for invoicing and submission of the 
completion voucher at FAR clause 52.216-7. This final rule deletes 
Alternate I along with its prescription for use at FAR 32.111(a)(7)(i).
    Alternate I of FAR 52.232-7 provided for the addition of paragraph 
(j) in labor-hour contracts which deleted the terms of the basic clause 
governing the reimbursement of furnished materials. Alternate I, 
paragraph (j), is superfluous and is deleted since the terms of the 
basic clause governing the reimbursement of furnished materials are in 
effect self-deleting.

B. Analysis of Public Comments

    Three respondents submitted comments in response to the proposed 
rule. A discussion of these comments and the changes made to the rule 
as a result of these comments are provided as follows:
1. Time-and-Materials Contracts and Ceiling Prices
    Comment: A respondent recommended changing the way time-and-
materials contracts are managed to align more closely with how the 
Canadian procurement regulations manage time-and-materials contracts. 
Specifically, U.S. Government regulations should include language 
requiring a ceiling price on time-and-materials contracts within which 
the contractor must complete the prescribed work.
    Response: This comment is outside the scope of this case, which was 
limited to simply clarifying the existing prescriptions and clauses 
relating to appropriate payment provisions for use in time-and-
materials and labor-hour contracts. FAR 16.601 delineates that time and 
materials contracts must include a ceiling price that the contractor 
exceeds at its own risk.
2. Inclusion of FAR 52.246-6(f) Provision
    Comment: A respondent stated that the proposed rule should include 
consideration of the provision found at FAR 52.246-6(f), Inspection--
Time-and-Material and Labor-Hour, paragraph (f) (requirement to replace 
or correct services or materials that failed to meet contract 
requirements).
    Response: This comment is outside the scope of this case, which was 
limited to simply clarifying the existing prescriptions and clauses 
relating to appropriate payment provisions for use in time-and-
materials and labor-hour contracts. Inclusion of FAR provision 52.246-
6(f) language into the payment provisions at FAR 52.212-4, 52.216-7, or 
52.232-7 is unnecessary.
3. Consistency Between Revised Clauses
    Comment: A respondent cited several instances where language was 
inconsistent between the clauses under the proposed rule. Specifically, 
the proposed rule aligned the frequency of invoicing and the period for 
submission of the completion voucher provisions for time-and-materials 
contracts at FAR 52.232-7 with that currently set forth in the 
``Allowable Cost and Payment'' clause at FAR 52.216-7. However, for 
labor-hour contracts, under Alternate I to 52.232-7, the proposed rule 
left the invoicing and period for submission of the completion voucher 
provisions, which were different from the requirements set forth in FAR 
52.216-7 and 52.232-7, unchanged. The respondent questioned this 
inconsistency regarding these provisions.
    Response: The invoicing and submission of the completion voucher 
provisions in time-and-materials contracts and labor-hour contracts 
should align. Consequently, the final rule does not include the 
proposed rule language regarding invoicing and the period for 
submission of completion vouchers for labor-hour contracts in Alternate 
I to FAR clause 52.232-7.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

IV. 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 it merely clarifies the 
existing prescriptions and clauses relating to services contracts. No 
comments from

[[Page 44061]]

small entities were submitted in response to the Regulatory Flexibility 
Act request under the proposed rule.

V. Paperwork Reduction Act

    The final rule does not contain any 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).

List of Subjects in 48 CFR Parts 16, 32, and 52

    Government procurement.

    Dated: July 16, 2012.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of 
Governmentwide Policy.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 16, 32, and 52 as 
follows:

0
1. The authority citation for 48 CFR parts 16, 32, and 52 is revised to 
read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

PART 16--TYPES OF CONTRACTS

0
2. Amend section 16.307 by revising paragraph (a)(1); and adding 
paragraphs (a)(3) through (5) to read as follows:


Sec.  16.307   Contract clauses.

    (a)(1) The contracting officer shall insert the clause at 52.216-7, 
Allowable Cost and Payment, in solicitations and contracts when a cost-
reimbursement contract or a time-and-materials contract (other than a 
contract for a commercial item) is contemplated. If the contract is a 
time-and-materials contract, the clause at 52.216-7 applies in 
conjunction with the clause at 52.232-7, but only to the portion of the 
contract that provides for reimbursement of materials (as defined in 
the clause at 52.232-7) at actual cost. Further, the clause at 52.216-7 
does not apply to labor-hour contracts.
* * * * *
    (3) If the contract is with an educational institution, the 
contracting officer shall use the clause at 52.216-7 with its Alternate 
II.
    (4) If the contract is with a State or local government, the 
contracting officer shall use the clause at 52.216-7 with its Alternate 
III.
    (5) If the contract is with a nonprofit organization other than an 
educational institution, a State or local government, or a nonprofit 
organization exempted under OMB Circular No. A-122, the contracting 
officer shall use the clause at 52.216-7 with its Alternate IV.
* * * * *

PART 32--CONTRACT FINANCING

0
3. Amend section 32.111 by revising paragraph (a)(7) to read as 
follows:


Sec.  32.111  Contract clauses for non-commercial purchases.

    (a) * * *
    (7) The clause at 52.232-7, Payments under Time-and-Materials and 
Labor-Hour Contracts, in solicitations and contracts when a time-and-
materials or labor-hour contract is contemplated. If the contracting 
officer determines that it is necessary to withhold payment to protect 
the Government's interests, paragraph (a)(7) of the clause permits the 
contracting officer to unilaterally issue a modification requiring the 
contractor to withhold 5 percent of amounts due, up to a maximum of 
$50,000 under the contract. The contracting officer shall ensure that 
the modification specifies the percentage and total amount of the 
withheld payment. Normally, there should be no need to withhold payment 
for a contractor with a record of timely submittal of the release 
discharging the Government from all liabilities, obligations, and 
claims, as required by paragraph (g) of the clause.
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Amend Alternate I of section 52.212-4 by--
0
a. Revising the date of Alternate I and the introductory text;
0
b. Revising paragraphs of (i)(1) introductory text and (i)(1)(ii)(A); 
and
0
c. Adding paragraph (m).
    The revised and added text reads as follows:


 52.212-4  Contract Terms and Conditions--Commercial Items.

* * * * *
    Alternate I (AUG 2012). When a time-and-materials or labor-hour 
contract is contemplated, substitute the following paragraphs (a), 
(e), (i), (l), and (m) for those in the basic clause.
* * * * *
    (i) Payments. (1) Work performed. The Government will pay the 
Contractor as follows upon the submission of commercial invoices 
approved by the Contracting Officer:
* * * * *
    (ii) * * *
    (A) If the Contractor furnishes materials that meet the 
definition of a commercial item at 2.101, the price to be paid for 
such materials shall not exceed the Contractor's established catalog 
or market price, adjusted to reflect the--
* * * * *
    (m) Termination for cause. The Government may terminate this 
contract, or any part hereof, for cause in the event of any default 
by the Contractor, or if the Contractor fails to comply with any 
contract terms and conditions, or fails to provide the Government, 
upon written request, with adequate assurances of future 
performance. Subject to the terms of this contract, the Contractor 
shall be paid an amount computed under paragraph (i) Payments of 
this clause, but the ``hourly rate'' for labor hours expended in 
furnishing work not delivered to or accepted by the Government shall 
be reduced to exclude that portion of the rate attributable to 
profit. Unless otherwise specified in paragraph (a)(4) of this 
clause, the portion of the ``hourly rate'' attributable to profit 
shall be 10 percent. In the event of termination for cause, the 
Contractor shall be liable to the Government for any and all rights 
and remedies provided by law. If it is determined that the 
Government improperly terminated this contract for default, such 
termination shall be deemed a termination for convenience.


0
5. Amend section 52.216-7 by adding Alternates II through Alternates IV 
to read as follows:


Sec.  52.216-7   Allowable Cost and Payment.

* * * * *
    Alternate II (AUG 2012). As prescribed in 16.307(a)(3), 
substitute the following paragraph (a)(1) for paragraph (a)(1) of 
the basic clause:
    (a)(1) The Government will make payments to the Contractor when 
requested as work progresses, but not more often than once every two 
weeks, in amounts determined to be allowable by the Contracting 
Officer in accordance with FAR subpart 31.3 in effect on the date of 
this contract and the terms of this contract. The Contractor may 
submit to an authorized representative of the Contracting Officer, 
in such form and reasonable detail as the representative may 
require, an invoice or voucher supported by a statement of the 
claimed allowable cost for performing this contract.
    Alternate III (AUG 2012). As prescribed in 16.307(a)(4), 
substitute the following paragraph (a)(1) for paragraph (a)(1) of 
the basic clause:
    (a)(1) The Government will make payments to the Contractor when 
requested as work progresses, but not more often than once every two 
weeks, in amounts determined to be allowable by the Contracting 
Officer in accordance with FAR subpart 31.6 in effect on the date of 
this contract and the terms of this contract. The Contractor may 
submit to an authorized representative of the Contracting Officer, 
in such form and reasonable detail as the representative may 
require, an invoice or voucher supported by a statement of the 
claimed allowable cost for performing this contract.
    Alternate IV (AUG 2012). As prescribed in 16.307(a)(5), 
substitute the following paragraph (a)(1) for paragraph (a)(1) of 
the basic clause:
    (a)(1) The Government will make payments to the Contractor when 
requested as work progresses, but not more often than once every two 
weeks, in amounts determined to be allowable by the Contracting 
Officer in

[[Page 44062]]

accordance with FAR subpart 31.7 in effect on the date of this 
contract and the terms of this contract. The Contractor may submit 
to an authorized representative of the Contracting Officer, in such 
form and reasonable detail as the representative may require, an 
invoice or voucher supported by a statement of the claimed allowable 
cost for performing this contract.


0
6. Amend section 52.232-7 by--
0
a. Revising the date of the clause;
0
b. Revising the introductory text of paragraph (a)(5);
0
c. Removing from the last sentence of paragraph (f) ``1 year'' and 
adding ``120 days'' in its place; and
0
d. Removing ``Alternate I''.
    The revised text reads as follows:


Sec.  52.232-7  Payments under Time-and-Materials and Labor-Hour 
Contracts.

* * * * *

Payments Under Time-and-Materials and Labor-Hour Contracts (AUG 2012)

* * * * *
    (a) * * *
    (5) Vouchers may be submitted not more than once every two 
weeks, to the Contracting Officer or authorized representative. A 
small business concern may receive more frequent payments than every 
two weeks. The Contractor shall substantiate vouchers (including any 
subcontractor hours reimbursed at the hourly rate in the schedule) 
by evidence of actual payment and by--
* * * * *
[FR Doc. 2012-17727 Filed 7-25-12; 8:45 am]
BILLING CODE 6820-EP-P