[Federal Register Volume 60, Number 186 (Tuesday, September 26, 1995)]
[Rules and Regulations]
[Pages 49728-49729]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23863]
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DEPARTMENT OF DEFENSE
48 CFR Part 32
[FAC 90-33; FAR Case 94-765; Item IV]
RIN 9000-AG54
Federal Acquisition Regulation; Fraud Remedies
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: This final rule is issued pursuant to the Federal Acquisition
Streamlining Act of 1994, Public Law 103-355 (the Act) to implement
requirements for fraud remedies. This regulatory action was subject to
Office of Management and Budget review under Executive Order 12866,
dated September 30, 1993.
EFFECTIVE DATE: October 1, 1995.
FOR FURTHER INFORMATION CONTACT: Mr. John Galbraith, Finance/Payment
Team Leader, at (703) 697-6710 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 90-33,
FAR case 94-765.
SUPPLEMENTARY INFORMATION:
A. Background
The Federal Acquisition Streamlining Act of 1994 (Pub. L. 103-355)
(the Act) provides authorities that streamline the acquisition process
and minimize burdensome government-unique requirements. -
This notice announces amendments developed under FAR case 94-765.
10 U.S.C. 2307 has contained a statutory requirement titled ``Action in
Case of Fraud'' applicable to only the Department of Defense. Section
2051(e) of the Act added this statutory requirement to the Federal
Property and Administrative Services Act (41 U.S.C. 255) applicable to
civilian agencies. -
The statutes at 10 U.S.C. 2307 and 41 U.S.C. 255 provide that if
the Government official concerned with coordinating the Government's
remedies for a particular case of fraud finds that an advance, partial,
or progress payment is based on fraud, that official must recommend the
head of the agency reduce or suspend further payments to that
contractor. The statutes further provide due process requirements,
standards for the amount of suspension or reduction, and other policy
and procedural requirements. It should be noted that the authority of
the head of the agency to act and the rights of the accused are
statutory and are not based on contractual agreement. However, in any
situation in which the contractor bases a request for payment in fraud,
the Government has contractual and legal rights which the contracting
officer may exercise to stop or recover payments. The authority
provided by these statutes is in addition to those contractual and
legal rights and remedies.
B. Regulatory Flexibility Act -
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
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 this rule will impact
only upon the small percentage of small businesses whose request for an
advance, partial, or progress payment is based upon fraud.
C. Paperwork Reduction Act -
The Paperwork Reduction Act does not apply because the rule falls
within the exception provided under 5 CFR 1320.3(c), i.e., matters
pertaining to the conduct of a Federal criminal investigation or
prosecution, or during the disposition of a particular criminal matter.
D. Public Comments -
The proposed rule was published in the Federal Register on May 12,
1995, at 60 FR 25794. Six comments were received. The most important
point noted was the inapplicability of the coverage to the National
Aeronautics and Space Administration and the United States Coast Guard.
These agencies are normally subject to Title 10 of the United States
Code; however, this statutory language specifically applied these
statutory provisions to just the Department of Defense. The changes
made to the Federal Property and Administrative Services Act (41 U.S.C.
225) apply to all agencies subject to that Act. This coverage has been
appropriately modified. -
One commentor proposed the addition of the following language to
the coverage: ``If payments are suspended and it ultimately is
determined that no fraud existed, the contractor shall be entitled to
any damages that resulted from such suspension of payment.'' This
recommendation was not accepted. Under these statutes, the Government
is acting in its role as sovereign, not under its contractual
authority. The statutes do not provide the accused with a remedy for
incorrect or unproved accusations. Any remedy would be determined by
the Constitution and other law and statutes.
List of Subjects in 48 CFR Part 32 -
Government procurement.
Dated: September 20, 1995.
Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.
-Therefore, 48 CFR Part 32 is amended as set forth below:
PART 32--CONTRACT FINANCING -
1. The authority citation for 48 CFR Part 32 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. Sections 32.006 through 32.006-5 are added to read as follows:
Sec.
32.006 Reduction or suspension of contract payments upon finding of
fraud.
32.006-1 General.
32.006-2 Definitions.
32.006-3 Responsibilities.
32.006-4 Procedures.
32.006-5 Reporting.
32.006 Reduction or suspension of contract payments upon finding of
fraud.
32.006-1 General.
(a) Under Title 10 of the United States Code, the statutory
authority implemented by this section is available only to the
Department of Defense; this statutory authority is not available to the
National Aeronautics and Space Administration or the United States
Coast Guard. Under the Federal Property and Administrative Services Act
(41 U.S.C. 255), this statutory
[[Page 49729]]
authority is available to all agencies subject to that Act.
(b) 10 U.S.C. 2307(h)(2) and 41 U.S.C. 255, as amended by the
Federal Acquisition Streamlining Act of 1994, Public Law 103-355,
provide for a reduction or suspension of further payments to a
contractor when the agency head determines there is substantial
evidence that the contractor's request for advance, partial, or
progress payments is based on fraud. This authority does not apply to
commercial interim payments under subpart 32.2, or performance-based
payments under subpart 32.10.
(c) The agency head may not delegate his or her responsibilities
under these statutes below Level IV of the Executive Schedule.
(d) Authority to reduce or suspend payments under these statutes is
in addition to other Government rights, remedies, and procedures.
(e) In accordance with these statutes, agency head determinations
and decisions under this section may be made for an individual contract
or any group of contracts affected by the fraud.
32.006-2 Definitions.
As used in this section--
Remedy coordination official means the person or entity in the
agency who coordinates within that agency the administration of
criminal, civil, administrative, and contractual remedies resulting
from investigations of fraud or corruption related to procurement
activities. (See 10 U.S.C. 2307(h)(10) and 41 U.S.C. 255(g)(9).)
Substantial evidence means information sufficient to support the
reasonable belief that a particular act or omission has occurred.
32.006-3 Responsibilities.
(a) Agencies shall establish appropriate procedures to implement
the policies and procedures of this section.
(b) Government personnel shall report suspected fraud related to
advance, partial, or progress payments in accordance with agency
regulations.
32.006-4 Procedures.
(a) In any case in which an agency's remedy coordination official
finds substantial evidence that a contractor's request for advance,
partial, or progress payments under a contract awarded by that agency
is based on fraud, the remedy coordination official shall recommend
that the agency head reduce or suspend further payments to the
contractor. The remedy coordination official shall submit to the agency
head a written report setting forth the remedy coordination official's
findings that support each recommendation.
(b) Upon receiving a recommendation from the remedy coordination
official under paragraph (a) of this subsection, the agency head shall
determine whether substantial evidence exists that the request for
payment under a contract is based on fraud.
(c) If the agency head determines that substantial evidence exists,
the agency head may reduce or suspend further payments to the
contractor under the affected contract(s). Such reduction or suspension
shall be reasonably commensurate with the anticipated loss to the
Government resulting from the fraud.
(d) In determining whether to reduce or suspend further payment(s),
as a minimum, the agency head shall consider--
(1) A recommendation from investigating officers that disclosure of
the allegations of fraud to the contractor may compromise an ongoing
investigation;
(2) The anticipated loss to the Government as a result of the
fraud;
(3) The contractor's overall financial condition and ability to
continue performance if payments are reduced or suspended;
(4) The contractor's essentiality to the national defense, or to
the execution of the agency's official business; and
(5) Assessment of all documentation concerning the alleged fraud,
including documentation submitted by the contractor in its response to
the notice required by paragraph (e) of this subsection.
(e) Before making a decision to reduce or suspend further payments,
the agency head shall, in accordance with agency procedures--
(1) Notify the contractor in writing of the action proposed by the
remedy coordination official and the reasons therefor (such notice must
be sufficiently specific to permit the contractor to collect and
present evidence addressing the aforesaid reasons); and
(2) Provide the contractor an opportunity to submit information
within a reasonable time, in response to the action proposed by the
remedy coordination official.
(f) When more than one agency has contracts affected by the fraud,
the agencies shall consider designating one agency as the lead agency
for making the determination and decision.
(g) The agency shall retain in its files the written justification
for each--
(1) Decision of the agency head whether to reduce or suspend
further payments; and
(2) Recommendation received by an agency head in connection with
such decision.
(h) Not later than 180 calendar days after the date of the
reduction or suspension action, the remedy coordination official
shall--
(1) Review the agency head's determination on which the reduction
or suspension decision is based; and
(2) Transmit a recommendation to the agency head as to whether the
reduction or suspension should continue.
32.006-5 Reporting.
(a) In accordance with 41 U.S.C. 255, the head of an agency, other
than the Department of Defense, shall prepare a report for each fiscal
year in which a recommendation has been received pursuant to 32.006-
4(a). Reports within the Department of Defense shall be prepared in
accordance with 10 U.S.C. 2307.
(b) In accordance with 41 U.S.C. 255 and 10 U.S.C. 2307, each
report shall contain--
(1) Each recommendation made by the remedy coordination official;
(2) The actions taken on the recommendation(s), with reasons for
such actions; and
(3) An assessment of the effects of each action on the Government.
[FR Doc. 95-23863 Filed 9-25-95; 8:45 am]
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