95-26489. Federal Acquisition Regulation; Contingent Fees

[Federal Register Volume 60, Number 207 (Thursday, October 26, 1995)]
[Proposed Rules]
[Page 54920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26489]




[[Page 54919]]

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Part III

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________



48 CFR Part 31



Federal Acquisition Regulation, Contingent Fees; Proposed Rule

Federal Register / Vol. 60, No. 207 / Thursday, October 26, 1995 / 
Proposed Rules

[[Page 54920]]


DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 31

[FAR Case 93-19]
RIN 9000-AG64


Federal Acquisition Regulation; Contingent Fees

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

ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council are proposing changes to the Federal 
Acquisition Regulation (FAR) to limit the allowability of contingent 
fees. This regulatory action was not subject to Office of Management 
and Budget review under Executive Order 12866, dated September 30, 
1993.

DATES: Comments should be submitted on or before December 26, 1995 to 
be considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (VRS), 18th & F 
Streets, NW, Room 4037, Washington, DC 20405.
    Please cite FAR case 93-19 in all correspondence related to this 
case.

FOR FURTHER INFORMATION CONTACT:
Mr. Jeremy Olson at [phone] in reference to this FAR case. For 
general information, contact the FAR Secretariat, Room 4037, GS 
Building, Washington, DC 20405 [phone]. Please cite FAR case 93-
19.

SUPPLEMENTARY INFORMATION:

A. Background

    The Councils are proposing to revise the FAR guidance concerning 
contingent fees because the Office of Federal Procurement Policy SWAT 
Team on Civilian Agency Contracting in its report of December 3, 1992, 
entitled ``Improving Federal Contracts'', expressed concern that 
contingent fee arrangements based on percentage of sales, revenue, cost 
incurred or reimbursed, are similar to a cost-plus-percentage-of-cost 
type of contracting. There is a blank check effect in that the agent's 
fee is unknown at the time of contract award and will grow through the 
life of the contract. Cost-plus-percentage-of-cost contracts are 
prohibited by statute (10 U.S.C. 2306(a) and 41 U.S.C. 254(b)). The 
SWAT Team report had recommended several changes to the FAR which were 
viewed to have Governmentwide benefit and which would make the FAR less 
general with respect to the allowability of certain costs.
    The proposed FAR rule would revise the cost principle at FAR 
31.205-38, Selling costs, to clarify that the costs of contingent fees 
are allowable only when stated as a sum certain or not-to-exceed amount 
agreed upon between the company and its agent (i.e., employee or 
commercial/selling agency) in advance of the services being rendered.

B. Regulatory Flexibility Act

    This proposed rule is not expected 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 most 
contracts awarded to small entities are awarded on a competitive, 
fixed-price basis and the cost principles do not apply. This rule 
clarifies a condition of cost allowability for contractors who wish to 
be reimbursed under Government contracts subject to FAR Subpart 31.2. 
An Initial Regulatory Flexibility Analysis has, therefore, not been 
performed. Comments from small entities concerning the affected FAR 
subpart will be considered in accordance with 5 U.S.C. 610 of the Act. 
Such comments must be submitted separately and should cite 5 U.S.C. 601 
et seq. (FAR case 93-19), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
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.

List of Subjects in 48 CFR Part 31

    Government procurement.

    Dated: October 19, 1995.
Edward C. Loeb,
Acting Director, Office of Federal Acquisition Policy.

    Therefore, it is proposed that 48 CFR Part 31 be amended as set 
forth below:

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

    1. The authority citation for 48 CFR Part 31 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).

    2. Section 31.205-38 is amended by revising paragraph (f) to read 
as follows:


31.205-38  Selling costs.

* * * * *
    (f) Notwithstanding any other provision of this subsection, 
sellers' or agents' compensation, fees, commissions, percentages, 
retainer or brokerage fees, whether or not contingent upon the award of 
contracts, are allowable only when--
    (1) Paid to bona fide employees or established commercial or 
selling agencies maintained by the contractor for the purpose of 
securing business (see 3.408-2); and
    (2) Such costs are stated as a sum certain or a not-to-exceed 
amount determined in advance of services rendered.

[FR Doc. 95-26489 Filed 10-25-95; 8:45 am]
BILLING CODE 6820-EP-M