[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30648]
[Federal Register: December 28, 1994]
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DEPARTMENT OF DEFENSE
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 90-23; FAR Case 91-45; Item XXI]
RIN 9000-AE81
Federal Acquisition Regulation; Advance Agreements, Composition
of Total Cost, and Accounting for Unallowable Costs
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 (CAAC) and the Defense
Acquisition Regulations Council (DARC) have agreed on revisions of the
Federal Acquisition Regulation (FAR) concerning advance agreements,
cost principles, composition of total cost, and accounting for
unallowable costs. This final rule represents the first in a series
resulting from the Councils' ongoing review of industry recommendations
concerning the FAR's contract cost principles and procedures. This
regulatory action was not subject to Office of Management and Budget
review under Executive Order 12866, dated September 30, 1993.
EFFECTIVE DATE: February 27, 1995.
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 4037, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAC 90-23, FAR case 91-45.
SUPPLEMENTARY INFORMATION:
A. Background
A proposed rule was published in the Federal Register at 56 FR
43739, September 4, 1991. The proposed rule, which amends FAR 31.109,
Advance agreements; 31.201-1, Composition of total cost; and 31.201-6,
Accounting for unallowable costs, is being adopted as a final rule
without change.
This rule is the first in a series resulting from the Councils'
ongoing review of industry recommendations, submitted as part of the
Defense Management Review, concerning FAR Part 31, Contract Cost
Principles and Procedures. After considering public comments, the
Councils have agreed to finalize and publish FAR changes as the
deliberations on each increment are completed.
Language is added at FAR 31.109(a) to address the use of advance
agreements to clarify allowability issues under the specific cost
principles, in order to minimize subsequent disputes. The phrase in FAR
31.109(a), ``particularly for firms or their divisions that may not be
under effective competitive constraints,'' is deleted because the
determination of the reasonableness, allocability, or allowability of a
cost under the specific cost principles is not significantly impacted
by the business environment in which the industry operates. Changes in
FAR 31.201-1 include deleting the word ``allowable'' in its first
sentence; redesignating the existing paragraph as ``(a)''; and
inserting a new paragraph ``(b)'' which makes it clear that while the
total cost of a contract includes all allocable costs, the total
allowable costs on a Government contract are limited to those allocable
costs which are allowable pursuant to Part 31 and agency supplements.
FAR 31.201-6(c) is revised to clarify that there is no intended
difference in the accounting and presentation of unallowable costs
between contracts which are covered by the Cost Accounting Standards
and those which are not.
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 under 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.
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: December 7, 1994.
Albert A. Vicchiolla,
Director, Office of Federal Acquisition Policy.
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 31.109 is amended by revising paragraph (a) to read as
follows:
31.109 Advance agreements.
(a) The extent of allowability of the costs covered in this part
applies broadly to many accounting systems in varying contract
situations. Thus, the reasonableness, the allocability and the
allowability under the specific cost principles at subparts 31.2, 31.3,
31.6, and 31.7 of certain costs may be difficult to determine. To avoid
possible subsequent disallowance or dispute based on unreasonableness,
unallocability or unallowability under the specific cost principles at
subparts 31.2, 31.3, 31.6, and 31.7, contracting officers and
contractors should seek advance agreement on the treatment of special
or unusual costs. However, an advance agreement is not an absolute
requirement and the absence of an advance agreement on any cost will
not, in itself, affect the reasonableness, allocability or the
allowability under the specific cost principles at subparts 31.2, 31.3,
31.6, and 31.7 of that cost.
3. Section 31.201-1 is amended by revising the first sentence of
the existing paragraph and designating the paragraph as paragraph (a);
and adding paragraph (b) to read as follows:
31.201-1 Composition of total cost.
(a) The total cost of a contract is the sum of the direct and
indirect costs allocable to the contract, incurred or to be incurred,
less any allocable credits, plus any allocable cost of money pursuant
to 31.205-10. * * *
(b) While the total cost of a contract includes all costs properly
allocable to the contract, the allowable costs to the Government are
limited to those allocable costs which are allowable pursuant to part
31 and applicable agency supplements.
4. Section 31.201-6 is amended by revising paragraph (c) to read as
follows:
31.201-6 Accounting for unallowable costs.
* * * * *
(c) The practices for accounting for and presentation of
unallowable costs will be those as described in 48 CFR 9904.405-50,
Accounting for Unallowable Costs.
* * * * *
[FR Doc. 94-30648 Filed 12-27-94; 8:45 am]
BILLING CODE 6820-34-P
