[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: 94-30658]
[Federal Register: December 28, 1994]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 15 and 52
[FAC 90-23; FAR Case 91-20; Item XI]
RIN 9000-AE72
Federal Acquisition Regulation; Notification of Ownership Changes
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 a final rule
amending the Federal Acquisition Regulation (FAR) to add the clause,
Notification of Ownership Changes, to require contractors to notify the
Government of changes in contractor ownership and of their effects, and
to emphasize existing recordkeeping requirements. This regulatory
action was not subject to Office of Management and Budget (OMB) 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 91-20.
SUPPLEMENTARY INFORMATION:
A. Background
A proposed rule was published in the Federal Register at 56 FR
23762, May 23, 1991, because the CAAC and the DARC determined that the
FAR did not contain sufficient safeguards to assure that, consistent
with FAR 31.205-52, Asset valuations resulting from business
combinations, Government contracts do not absorb increased costs
resulting from changes in contractor ownership. This rule reflects a
resolution agreement between the Director of Defense Procurement and
the DOD Inspector General under Audit Report 89-095 dated July 26,
1989, on the cost impact to contracts as a result of business
combinations.
The rule is intended to facilitate enforcement of the cost
principle at FAR 31.205-52 on allowability of costs resulting from
business combinations by enabling audit determinations that cost
increases related to contractor ownership changes are not charged to
Government contracts. A contract clause is added at 52.215-40,
Notification of Ownership Changes, which requires contractors to
provide timely notice to the Government and to retain and maintain
asset inventory records through successive changes in contractor
ownership. A clause prescription is added at 15.804-8(g) to require use
of the clause in all solicitations and contracts for which certified
cost or pricing data are expected to be required or for which any
preaward or postaward cost determination will be subject to FAR Subpart
31.2.
While several editorial changes were made in the final rule, the
major difference between the final rule and the proposed rule is that
the final rule requires notification in instances of cost decreases as
well as cost increases.
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 an analysis of data available for fiscal years
1989 through 1991 reveals that, in the Department of Defense, the
number of contract actions awarded to small businesses which required
the submission of certified cost or pricing data averaged less than 1
percent of the total number of small business actions during the 3-year
period. In other words, during the 3-year period, the majority of
actions awarded to small businesses were awarded on a competitive,
fixed-price basis, for which the submission of cost or pricing data is
not required and the cost principles do not apply.
For affected contractors, whenever a change in contractor ownership
occurs or is pending, the rule only requires contractors to retain and
maintain asset inventory records already required to be maintained by
generally accepted accounting principles (GAAP) and rules promulgated
by the Cost Accounting Standards Board. As virtually all contractors'
accounting systems are automated, any incremental effort and cost will
likely be nominal. Similarly, the additional requirement for
contractors to notify the Government, in writing, of a pending or
completed ownership change imposes no significant administrative burden
or complexity. No comments on any aspect of the subject were received
from small entities.
C. Paperwork Reduction Act
The Paperwork Reduction Act (Public Law 96-511) is deemed to apply
because the final rule contains information collection requirements.
Accordingly, a request for extension of an approval of the information
collection requirements concerning Notification of Ownership Changes,
OMB Control Number 9000-0115, was submitted to OMB under 44 U.S.C.
3501, et seq., and approved through September 30, 1997. Public comments
concerning this request were invited through a Federal Register notice
published at 59 FR 36169, July 15, 1994.
List of Subjects in 48 CFR Parts 15 and 52
Government procurement.
Dated: December 7, 1994.
Albert A. Vicchiolla,
Director, Office of Federal Acquisition Policy.
Therefore, 48 CFR parts 15 and 52 are amended as set forth below:
1. The authority citation for 48 CFR parts 15 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 15--CONTRACTING BY NEGOTIATION
2. Section 15.804-8 is amended by adding paragraph (g) to read as
follows:
15.804-8 Contract clauses.
* * * * *
(g) Notification of ownership changes. The contracting officer
shall insert the clause at 52.215-40, Notification of Ownership
Changes, in solicitations and contracts for which it is contemplated
that certified cost or pricing data will be required or for which any
preaward or postaward cost determination will be subject to subpart
31.2.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
3. Section 52.215-40 is added to read as follows:
52.215-40 Notification of ownership changes.
As prescribed in 15.804-8(g), insert the following clause:
Notification of Ownership Changes (Feb. 1995)
(a) The Contractor shall make the following notifications in
writing:
(1) When the Contractor becomes aware that a change in its
ownership has occurred, or is certain to occur, which could result
in changes in the valuation of its capitalized assets in the
accounting records, the Contractor shall notify the Administrative
Contracting Officer (ACO) within 30 days.
(2) The Contractor shall also notify the ACO within 30 days
whenever changes to asset valuations or any other cost changes have
occurred or are certain to occur as a result of a change in
ownership.
(b) The Contractor shall: (1) maintain current, accurate, and
complete inventory records of assets and their costs; (2) provide
the ACO or designated representative ready access to the records
upon request; (3) ensure that all individual and grouped assets,
their capitalized values, accumulated depreciation or amortization,
and remaining useful lives are identified accurately before and
after each of the Contractor's ownership changes; and (4) retain and
continue to maintain depreciation and amortization schedules based
on the asset records maintained before each Contractor ownership
change.
(c) The Contractor shall include the substance of this clause in
all subcontracts under this contract which meet the applicability
requirement of FAR 15.804-8(g).
(End of clause)
[FR Doc. 94-30658 Filed 12-27-94; 8:45 am]
BILLING CODE 6820-34-P
