[Federal Register Volume 60, Number 158 (Wednesday, August 16, 1995)]
[Rules and Regulations]
[Pages 42659-42662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19861]
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DEPARTMENT OF DEFENSE
48 CFR Parts 31, 37, 42 and 52
[FAC 90-31; FAR Case 94-754; Item IV]
RIN 9000-AG21
Federal Acquisition Regulation; Implementation of Various Cost
Principle Provisions
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Federal Acquisition Regulatory Council is amending the
Federal Acquisition Regulation (FAR) to implement Section 2101 of the
Federal Acquisition Streamlining Act of 1994. Section 2101 adds the
costs of lobbying the legislative body of a political subdivision of a
state to the list of unallowable costs; adds the cost of
``conventions'' to the list of costs to be clarified in the cost
principles; and expands the coverage to the Coast Guard and NASA. The
provisions are made generally applicable to all other executive
agencies. This regulatory action was subject to Office of Management
and Budget review under Executive Order 12866, dated September 30,
1993.
EFFECTIVE DATE: October 1, 1995.
FOR FURTHER INFORMATION CONTACT:
Mr. Clarence Belton, Cost Principles Team Leader, at (703)602-2357, in
reference to this FAR case. For general information, contact the FAR
Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-
4755.
[[Page 42660]]
Please cite FAC 90-31, FAR case 94-754.
SUPPLEMENTARY INFORMATION:
A. Background
The Federal Acquisition Streamlining Act of 1994 (the Act), Pub. L.
103-355, provides the authority to streamline the acquisition process
and minimize burdensome requirements unique to the Federal Government.
Major changes that can be expected in the acquisition process as a
result of the Act's implementation include changes in the areas of
Commercial Item Acquisition, the Truth in Negotiations Act, and
introduction of the Federal Acquisition Computer Network.
This notice announces revisions developed under FAR case 94-754,
based on Section 2101 of the Act that adds the costs of lobbying the
legislative body of a political subdivision of a state to the list of
unallowable costs; adds the cost of ``conventions'' to the costs to be
clarified in the cost principles; and expands the coverage to the Coast
Guard and the National Aeronautics and Space Administration. Section
2151 amends 41 U.S.C. 256 to include all the provisions of 10 U.S.C.
2324, as amended by Section 2101. Therefore, the provisions are made
generally applicable to all other executive agencies. The new FAR
language, with only minor variations, was transferred from the current
coverage in the Defense Federal Acquisition Regulation Supplement.
B. Regulatory Flexibility Act
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded
to small businesses are awarded competitively on a firm-fixed-price
basis and, therefore, are not subject to the FAR cost principles.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose recordkeeping or information collection
requirements, or collections of information from offerors, contractors,
or members of the public which require the approval of the Office of
Management and Budget under 44 U.S.C. 3501, et seq.
D. Public Comments
Eight public comments were received in response to the proposed
rule published in the Federal Register on December 13, 1994 (59 FR
64268). These comments were considered in the formulation of this final
rule.
List of Subjects in 48 CFR Parts 31, 37, 42 and 52
Government procurement.
Dated: August 7, 1995.
Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.
Therefore, 48 CFR Parts 31, 37, 42 and 52 are amended as set forth
below:
1. The authority citation for 48 CFR Parts 31, 37, 42 and 52
continues to read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
31.205-1 [Amended]
2. Section 31.205-1(f)(3) is amended by adding ``conventions,''
after ``meetings,''.
3. Section 31.205-6 is amended in paragraph (g)(2) by adding a
sentence at the end of the introductory text and adding paragraph
(g)(3) to read as follows:
31.205-6 Compensation for personal services.
* * * * *
(g) * * *
(2) * * * In addition, paragraph (g)(3) of this subsection applies
if the severance cost is for foreign nationals employed outside the
United States.
* * * * *
(3) Notwithstanding the reference to geographical area in 31.205-
6(b)(1), under 10 U.S.C. 2324(e)(1)(M) and 41 U.S.C. 256(e)(1)(M), the
costs of severance payments to foreign nationals employed under a
service contract performed outside the United States are unallowable to
the extent that such payments exceed amounts typically paid to
employees providing similar services in the same industry in the United
States. Further, under 10 U.S.C. 2324(e)(1)(N) and 41 U.S.C.
256(e)(1)(N), all such costs of severance payments which are otherwise
allowable are unallowable if the termination of employment of the
foreign national is the result of the closing of, or the curtailment of
activities at, a United States facility in that country at the request
of the government of that country; this does not apply if the closing
of a facility or curtailment of activities is made pursuant to a
status-of-forces or other country-to-country agreement entered into
with the government of that country before November 29, 1989. 10 U.S.C.
2324(e)(3) and 41 U.S.C. 256(e)(2) permit the head of the agency, or
designee, to waive these cost allowability limitations under certain
circumstances (see 37.113 and the solicitation provision at 52.237-8).
* * * * *
31.205-22 [Amended]
4. Section 31.205-22 is amended in paragraphs (a) (3) and (4) by
revising the phrase ``Federal or state'' to read ``Federal, state, or
local'' each time it appears.
31.205-43 [Amended]
5. Section 31.205-43 is amended in the introductory text of
paragraph (c) and (c)(3)(ii) by inserting ``convention,'' after
``meeting,'' and in paragraph (c)(1) by inserting ``conventions,''
after ``meetings,''.
6. Section 31.603(b) is revised to read as follows:
31.603 Requirements.
* * * * *
(b) Agencies are not expected to place additional restrictions on
individual items of cost. However, under 10 U.S.C. 2324(e) and 41
U.S.C. 256(e), the following costs are unallowable:
(1) Costs of entertainment, including amusement, diversion, and
social activities, and any costs directly associated with such costs
(such as tickets to shows or sports events, meals, lodging, rentals,
transportation, and gratuities).
(2) Costs incurred to influence (directly or indirectly)
legislative action on any matter pending before Congress, a State
legislature, or a legislative body of a political subdivision of a
State.
(3) Costs incurred in defense of any civil or criminal fraud
proceeding or similar proceeding (including filing of any false
certification) brought by the United States where the contractor is
found liable or has pleaded nolo contendere to a charge of fraud or
similar proceeding (including filing of a false certification).
(4) Payments of fines and penalties resulting from violations of,
or failure to comply with, Federal, state, local, or foreign laws and
regulations, except when incurred as a result of compliance with
specific terms and conditions of the contract or specific written
instructions from the contracting officer authorizing in advance such
payments in accordance with applicable regulations in the FAR or an
executive agency supplement to the FAR.
[[Page 42661]]
(5) Costs of any membership in any social, dining, or country club
or organization.
(6) Costs of alcoholic beverages.
(7) Contributions or donations, regardless of the recipient.
(8) Costs of advertising designed to promote the contractor or its
products.
(9) Costs of promotional items and memorabilia, including models,
gifts, and souvenirs.
(10) Costs for travel by commercial aircraft which exceed the
amount of the standard commercial fare.
(11) Costs incurred in making any payment (commonly known as a
``golden parachute payment'') which is--
(i) In an amount in excess of the normal severance pay paid by the
contractor to an employee upon termination of employment; and
(ii) Is paid to the employee contingent upon, and following, a
change in management control over, or ownership of, the contractor or a
substantial portion of the contractor's assets.
(12) Costs of commercial insurance that protects against the costs
of the contractor for correction of the contractor's own defects in
materials or workmanship.
(13) Costs of severance pay paid by the contractor to foreign
nationals employed by the contractor under a service contract performed
outside the United States, to the extent that the amount of the
severance pay paid in any case exceeds the amount paid in the industry
involved under the customary or prevailing practice for firms in that
industry providing similar services in the United States, as determined
by regulations in the FAR or in an executive agency supplement to the
FAR.
(14) Costs of severance pay paid by the contractor to a foreign
national employed by the contractor under a service contract performed
in a foreign country if the termination of the employment of the
foreign national is the result of the closing of, or curtailment of
activities at, a United States facility in that country at the request
of the government of that country.
(15) Costs incurred by a contractor in connection with any
criminal, civil, or administrative proceedings commenced by the United
States or a State, to the extent provided in 10 U.S.C. 2324(k) or 41
U.S.C. 256(k).
7. Section 31.703(b) is revised to read as follows:
31.703 Requirements.
* * * * *
(b) Agencies are not expected to place additional restrictions on
individual items of cost. However, under 10 U.S.C. 2324(e) and 41
U.S.C. 256(e), the costs cited in 31.603(b) are unallowable.
PART 37--SERVICE CONTRACTING
8. Sections 37.113, 37.113-1 and 37.113-2 are added to read as
follows:
Sec.
37.113 Severance payments to foreign nationals.
37.113-1 Waiver of cost allowability limitations.
37.113-2 Solicitation provision and contract clause.
37.113 Severance payments to foreign nationals.
37.113-1 Waiver of cost allowability limitations.
(a) The head of any agency, or designee, may waive the 31.205-
6(g)(3) cost allowability limitations on severance payments to foreign
nationals for contracts that--
(i) Provide significant support services for (i) members of the
armed forces stationed or deployed outside the United States, or (ii)
employees of an executive agency posted outside the United States; and
(2) Will be performed in whole or in part outside the United
States.
(b) Waivers can be granted only before contract award.
(c) Waivers cannot be granted for--
(1) Military banking contracts, which are covered by 10 U.S.C.
2324(e)(2); or
(2) Severance payments made by a contractor to a foreign national
employed by the contractor under a DOD service contract in the Republic
of the Philippines, if the discontinuation of the foreign national is
the result of the termination of basing rights of the United States
military in the Republic of the Philippines (section 1351(b) of Public
Law 102-484, 10 U.S.C. 1592, note).
37.113-2 Solicitation provision and contract clause.
(a) Use the provision at 52.237-8, Restriction on Severance
Payments to Foreign Nationals, in all solicitations that meet the
criteria in 37.113-1(a), except for those excluded by 37.113-1(c).
(b) When the head of an agency, or designee, has granted a waiver
pursuant to 37.113-1, use the clause at 52.237-9, Waiver of Limitation
on Severance Payments to Foreign Nationals.
PART 42--CONTRACT ADMINISTRATION
9. Section 42.703(c)(2) is revised to read as follows:
42.703 Policy
* * * * *
(c) * * *
(2) To ensure compliance with 10 U.S.C. 2324(a) and 41 U.S.C.
256(a), use established final indirect cost rates in negotiating the
final price of fixed-price incentive and fixed-price redeterminable
contracts and in other situations requiring that indirect costs be
settled before contract prices are established.
10. Section 42.705-1 is amended by revising paragraph (b)(4) and
adding (b)(5)(v) to read as follows:
42.705-1 Contracting officer determination procedure.
* * * * *
(b) * * *
(4) The Government negotiating team shall develop a negotiation
position. Pursuant to 10 U.S.C. 2324(f) and 41 U.S.C. 256(f), the
contracting, officer shall--
(i) Not resolve any questioned costs until obtaining--
(A) Adequate documentation on the costs; and
(B) The contract auditor's opinion on the allowability of the
costs.
(ii) Whenever possible, invite the contract auditor to serve as an
advisor at any negotiation or meeting with the contractor on the
determination of the contractor's final indirect cost rates.
(5) * * *
(v) Notify the contractor of the individual costs which were
considered unallowable and the respective amounts of the disallowance.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
11. Sections 52.237-8 and 52.237-9 are added to read as follows:
52.237-8 Restriction on Severance Payments to Foreign Nationals.
As prescribed in 37.113-2(a), use the following provision:
Restriction on Severance Payments to Foreign Nationals (Oct 1995)
(a) The Federal Acquisition Regulation (FAR), at 31.205-6(g)(3),
limits the cost allowability of severance payments to foreign
nationals employed under a service contract performed outside the
United States unless the head of the agency, or designee, grants a
waiver pursuant to FAR 37.113-1 before contract award.
(b) In making the determination concerning the granting of a
waiver, the head of the agency, or designee, will determine that--
(1) The application of the severance pay limitations to the
contract would adversely affect the continuation of a program,
project, or activity that provides significant support services for
(i) members of the armed forces stationed or deployed outside the
United
[[Page 42662]]
States, or (ii) employees of an executive agency posted outside the
United States;
(2) The Contractor has taken (or has established plans to take)
appropriate actions within its control to minimize the amount and
number of incidents of the payment of severance pay to employees
under the contract who are foreign nationals; and
(3) The payment of severance pay is necessary in order to comply
with a law that is generally applicable to a significant number of
businesses in the country in which the foreign national receiving
the payment performed services under the contract, or is necessary
to comply with a collective bargaining agreement.
(End of provision)
52.237-9 Waiver of Limitation on Severance Payments to Foreign
Nationals.
As prescribed in 37.113-2(b), use the following clause:
Waiver of Limitation on Severance Payments to Foreign Nationals (Oct
1995)
(a) Pursuant to 10 U.S.C. 2324(e)(3)(A) or 41 U.S.C.
256(e)(2)(A), as applicable, the cost allowability limitations in
FAR 31.205-6(g)(3) are waived.
(b) This clause may be incorporated into subcontracts issued
under this contract, if approved by the Contracting Officer.
(End of clause)
[FR Doc. 95-19861 Filed 8-15-95; 8:45 am]
BILLING CODE 6820-EP-M
