98-28961. Federal Acquisition Regulation; Costs Related to Legal/Other Proceedings  

  • [Federal Register Volume 63, Number 210 (Friday, October 30, 1998)]
    [Rules and Regulations]
    [Pages 58599-58600]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 98-28961]
    
    
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    DEPARTMENT OF DEFENSE
    
    GENERAL SERVICES ADMINISTRATION
    
    NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
    
    48 CFR Part 31
    
    [FAC 97-09; FAR Case 95-020; Item VII]
    RIN 9000-AH05
    
    
    Federal Acquisition Regulation; Costs Related to Legal/Other 
    Proceedings
    
    AGENCIES: Department of Defense (DoD), General Services Administration 
    (GSA),
    
    [[Page 58600]]
    
    and National Aeronautics and Space Administration (NASA).
    
    ACTION: Final rule.
    
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    SUMMARY: The Civilian Agency Acquisition Council and the Defense 
    Acquisition Regulations Council have agreed on a final rule amending 
    the Federal Acquisition Regulation (FAR) to clarify the allowability of 
    costs incurred for qui tam suits in which the Government does not 
    intervene. This regulatory action was not subject to Office of 
    Management and Budget review under Executive Order 12866, dated 
    September 30, 1993. This is not a major rule under 5 U.S.C. 804.
    
    EFFECTIVE DATE: December 29, 1998.
    
    FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
    Building, Washington, DC 20405, (202) 501-4755, for information 
    pertaining to status or publication schedules. For clarification of 
    content, contact Ms. Linda Nelson, Procurement Analyst, at (202) 501-
    1900. Please cite FAC 97-09, FAR case 95-020.
    
    SUPPLEMENTARY INFORMATION:
    
    A. Background
    
        A proposed rule was published in the Federal Register on June 20, 
    1996 (61 FR 31790). Seven sources submitted public comments. All 
    comments were considered in developing the final rule.
        This final rule clarifies the cost principle at FAR 31.205-47 as it 
    relates to qui tam suits not joined in by the Government. The final 
    rule also clarifies, at FAR 31.205-47(e)(3), that the maximum 
    reimbursement contractors may receive for legal costs in connection 
    with agreements reached under FAR 31.205-47(c) is 80 percent of 
    otherwise allowable and allocable incurred costs.
        Industry has commented that this coverage should be effective 
    prospectively. After consideration of these comments, it is concluded 
    that this coverage is properly characterized as a clarification. 
    Nevertheless, it is recognized that certain Government contracting 
    personnel and contractors may have had common misinterpretations of the 
    regulatory coverage. Indeed, those inconsistencies are the catalyst 
    behind this clarification. On August 24, 1995, the Defense Contract 
    Audit Agency issued audit guidance that clarified audit treatment for 
    qui tam legal fees. For qui tam legal fees incurred before August 24, 
    1995, if the Government contracting personnel and the contractor shared 
    a common misinterpretation of the regulatory coverage, the contracting 
    officer, in consultation with his or her legal advisors, should 
    determine the appropriate treatment of those costs on a case-by-case 
    basis.
    
    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 entities use simplified acquisition procedures or are awarded 
    on a competitive fixed-price basis, and do not require application of 
    the cost principle contained in this rule.
    
    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.
    
    List of Subjects in 48 CFR Part 31
    
        Government procurement.
    
        Dated: October 22, 1998.
    Edward C. Loeb,
    Director, Federal Acquisition Policy Division.
        Therefore, 48 CFR Part 31 is 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 31.205-47 is amended by revising the introductory text 
    of paragraph (b); by redesignating (c) as (c)(1) and adding (c)(2); and 
    by revising paragraph (e)(3) to read as follows:
    
    
    31.205-47  Costs related to legal and other proceedings.
    
    * * * * *
        (b) Costs incurred in connection with any proceeding brought by a 
    Federal, State, local, or foreign government for violation of, or a 
    failure to comply with, law or regulation by the contractor (including 
    its agents or employees), or costs incurred in connection with any 
    proceeding brought by a third party in the name of the United States 
    under the False Claims Act, 31 U.S.C. 3730, are unallowable if the 
    result is--
    * * * * *
        (c) * * *
        (2) In the event of a settlement of any proceeding brought by a 
    third party under the False Claims Act in which the United States did 
    not intervene, reasonable costs incurred by the contractor in 
    connection with such a proceeding, that are not otherwise unallowable 
    by regulation or by separate agreement with the United States, may be 
    allowed if the contracting officer, in consultation with his or her 
    legal advisor, determines that there was very little likelihood that 
    the third party would have been successful on the merits.
    * * * * *
        (e) * * *
        (3) The percentage of costs allowed does not exceed the percentage 
    determined to be appropriate considering the complexity of procurement 
    litigation, generally accepted principles governing the award of legal 
    fees in civil actions involving the United States as a party, and such 
    other factors as may be appropriate. Such percentage shall not exceed 
    80 percent. Agreements reached under paragraph (c) of this subsection 
    shall be subject to this limitation. If, however, an agreement 
    described in paragraph (c)(1) of this subsection explicitly states the 
    amount of otherwise allowable incurred legal fees and limits the 
    allowable recovery to 80 percent or less of the stated legal fees, no 
    additional limitation need be applied. The amount of reimbursement 
    allowed for legal costs in connection with any proceeding described in 
    paragraph (c)(2) of this subsection shall be determined by the 
    cognizant contracting officer, but shall not exceed 80 percent of 
    otherwise allowable legal costs incurred.
    * * * * *
    [FR Doc. 98-28961 Filed 10-29-98; 8:45 am]
    BILLING CODE 6820-EP-U
    
    
    

Document Information

Effective Date:
12/29/1998
Published:
10/30/1998
Department:
National Aeronautics and Space Administration
Entry Type:
Rule
Action:
Final rule.
Document Number:
98-28961
Dates:
December 29, 1998.
Pages:
58599-58600 (2 pages)
Docket Numbers:
FAC 97-09, FAR Case 95-020, Item VII
RINs:
9000-AH05
PDF File:
98-28961.pdf
CFR: (1)
48 CFR 31