[Federal Register Volume 61, Number 246 (Friday, December 20, 1996)]
[Rules and Regulations]
[Pages 67418-67419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32005]
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DEPARTMENT OF DEFENSE
48 CFR Parts 16 and 52
[FAC 90-43; FAR Case 93-024; Item V]
RIN 9000-AG74
Federal Acquisition Regulation; Allowable Cost and Payment Clause
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 Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council have agreed on a final rule to amend
the Federal Acquisition Regulation (FAR) to clarify that reimbursement
of subcontract costs under cost-type contracts generally will not be
made to a large business contractor until the contractor has made
payment to the subcontractor. This regulatory action was not subject to
Office of Management and Budget review under Executive Order 12866,
dated September 30, 1993, and is not a major rule under 5 U.S.C. 804.
EFFECTIVE DATE: February 18, 1997.
FOR FURTHER INFORMATION CONTACT: Mr. Jeremy Olson at (202) 501-3221 in
reference to this FAR case. For general information, contact the FAR
Secretariat, Room 4035, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAC 90-43, FAR case 93-024.
SUPPLEMENTARY INFORMATION:
A. Background
The Office of Federal Procurement Policy SWAT Team on Civilian
Agency Contracting, in its report of December 3, 1992, entitled
``Improving Contracting Practices and Management Controls on Cost-Type
Federal Contracts'', recommended several FAR revisions which were
viewed to have Government-wide benefit. One area identified for
clarification was the payment provisions in FAR clauses 52.216-7,
Allowable Cost and Payment, and 52.232-7, Payments under Time-and-
Materials and Labor-Hour
[[Page 67419]]
Contracts. The SWAT team concluded that these clauses did not clearly
convey the Government's intent that payments to subcontractors by large
business prime contractors were not billable to the Government until
the contractor had actually paid the subcontractors.
This final rule amends FAR 52.216-7, Allowable Cost and Payment,
and FAR 52.232-7, Payments under Time-and-Materials and Labor-Hour
Contracts, to clarify that payments to subcontractors by large business
prime contractors are not billable until the contractors have actually
paid the subcontractors. The rule exempts, however, contractors who are
awarded construction contracts that include the clauses at FAR 52.216-
7, Allowable Cost and Payment, and FAR 52.232-27, Prompt Payment for
Construction Contracts. Alternate I of FAR 52.216-7 provides for
reimbursement of construction prime contractors for subcontract costs
prior to the subcontractors actually being paid, as long as the prime
contractor has included a provision in its subcontracts that requires
that the subcontractor be paid within seven days of the prime
contractor's receipt of payment from the Government.
A proposed rule was published in the Federal Register on December
21, 1995 (60 FR 66472). Five sources submitted public comments. All
comments were considered in developing the final rule.
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 the rule only applies
to large business prime contractors under time-and-materials, labor-
hour, and cost-reimbursement type contracts.
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 Parts 16 and 52
Government procurement.
Dated: December 11, 1996.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
Therefore, 48 CFR Parts 16 and 52 are amended as set forth below:
1. The authority citation for 48 CFR Parts 16 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 16--TYPES OF CONTRACTS
2. Section 16.307(a) is amended by redesignating the text as
paragraph (a)(1) and adding paragraph (a)(2) to read as follows:
Sec. 16.307 Contract clauses.
(a)(1) * * *
(2) If the contract is a construction contract and contains the
clause at 52.232-27, Prompt Payment for Construction Contracts, the
contracting officer shall use the clause at 52.216-7 with its Alternate
I.
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
3. Section 52.216-7 is amended by revising the clause date and
paragraph (b)(1)(iii), and by adding Alternate I to read as follows:
52.216-7 Allowable Cost and Payment.
* * * * *
ALLOWABLE COST AND PAYMENT (FEB 1997)
* * * * *
(b) * * *
(1) * * *
(iii) The amount of progress and other payments that have been
paid by cash, check, or other form of payment to the Contractor's
subcontractors under similar cost standards.
* * * * *
(End of clause)
Alternate I (FEB 1997). As prescribed in 16.307(a)(2),
substitute the following paragraph (b)(1)(iii) for paragraph
(b)(1)(iii) of the basic clause:
(iii) The amount of progress and other payments to the
Contractor's subcontractors that either have been paid, or that the
Contractor is required to pay pursuant to the clause of this
contract entitled ``Prompt Payment for Construction Contracts.''
Payments shall be made by cash, check, or other form of payment to
the Contractor's subcontractors under similar cost standards.
4. Section 52.232-7 is amended by revising the clause date and the
second sentence of paragraph (b)(2) to read as follows:
Sec. 52.232-7 Payments under Time-and-Materials and Labor-Hour
Contracts.
* * * * *
PAYMENTS UNDER TIME-AND-MATERIALS AND LABOR-HOUR CONTRACTS (FEB 1997)
* * * * *
(b) * * *
(2) * * * Reimbursable costs in connection with subcontracts
shall be limited to the amounts paid to the subcontractor for items
and services purchased directly for the contract only when cash,
checks, or other form of payment has been made for such purchased
items or services; however, this requirement shall not apply to a
Contractor that is a small business concern.* * *
* * * * *
[FR Doc. 96-32005 Filed 12-19-96; 8:45 am]
BILLING CODE 6820-EP-P
