01-11008. Federal Acquisition Regulation; Preference for Performance-Based Contracting

AGENCIES:

Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION:

Interim rule with request for comments.

SUMMARY:

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed on an interim rule amending the Federal Acquisition Regulation (FAR) to implement Section 821 of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001. The FAR rule explicitly establishes a preference for performance-based contracting when acquiring services.

DATES:

Effective Date: May 2, 2001.

Comment Date: Interested parties should submit comments to the FAR Secretariat at the address shown below on or before July 2, 2001 to be considered in the formulation of a final rule.

ADDRESSES:

Submit written comments to: General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.

Submit electronic comments via the Internet to: [e-mail].

Please submit comments only and cite FAC 97-25, FAR case 2000-307 in all correspondence related to this case.

FOR FURTHER INFORMATION CONTACT:

The FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, [phone], for information pertaining to status or publication schedules. For clarification of content, contact Ms. Julia Wise, Procurement Analyst, at [phone]. Please cite FAC 97-25, FAR case 2000-307.

SUPPLEMENTARY INFORMATION:

A. Background

Section 821(a) of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398) establishes, Governmentwide, the following order of precedence when acquiring services—

1. A firm-fixed-price performance-based contract or task order.

2. A performance-based contract or task order that is not firm-fixed-price.

3. A contract or task order that is not performance-based.

Section 821(e)(1) provides a definition for “performance-based” that applies to Section 821(a): “The term “performance-based,” with respect to a contract, a task order, or contracting means that the contract, task order, or contracting, respectively, includes the use of performance work statements that set forth contract requirements in clear, specific, and objective terms with measurable outcomes.”

This interim FAR rule—

1. Moves the existing definition “performance-based contracting” at FAR 37.101 to FAR 2.101, Definitions, and revises it to include the substance of the Section 821(e) definition; and

2. Revises FAR 37.102, Policy, to explicitly state that performance-based contracting is the preferred method for acquiring services and to enumerate the order of precedence established by statute.

This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

The interim rule is not expected to 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 does not impose a new policy requirement on small entities. The FAR currently promotes the use of performance-based service contracting and the use of firm-fixed-price type of contracts and task orders when it is appropriate to do so. For example, in the current FAR—

1. Paragraph (a) of 37.102, policy, states “Agencies shall use performance-based contracting methods * * * to the maximum extent practicable, for the acquisition of services. * * *”

2. Subpart 37.6, Performance-Based Contracting, exclusively addresses performance-based contracting; and

3. Subpart 16.1, Selecting Contract Types, addresses a preference, under certain conditions, for a firm-fixed-price type of contract that best utilizes the basic profit motive of business enterprise.

Therefore, an Initial Regulatory Flexibility Analysis has not been performed. The Councils will consider comments from small entities concerning the affected FAR Parts 2 and 37 in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 601, et seq. (FAC 97-25, FAR case 2000-307), in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the changes to the FAR do not impose information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

D. Determination To Issue an Interim Rule

A determination has been made under the authority of the Secretary of Defense (DoD), the Administrator of General Services (GSA), and the Administrator of the National Aeronautics and Space Administration (NASA) that urgent and compelling reasons exist to promulgate this interim rule without prior opportunity for public comment. The Councils have been tasked with publishing an interim rule to implement Section 821 of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398), which is effective 180 days after the date of enactment (October 30, 2000) of Public Law 106-398. However, pursuant to Public Law 98-577 and FAR 1.501, the Councils will consider public comments received in response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 2 and 37

• Government procurement

Dated: April 27, 2001.

Al Matera,

Director, Acquisition Policy Division.

Therefore, DoD, GSA, and NASA amend 48 CFR parts 2 and 37 as set forth below:

1. The authority citation for 48 CFR parts 2 and 37 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 2—DEFINITIONS OF WORDS AND TERMS

2. Amend section 2.101 by adding, in alphabetical order, the definition “Performance-based contracting” to read as follows:

2.101

Definitions.

* * * * *

(b) * * *

Performance-based contracting means structuring all aspects of an acquisition around the purpose of the work to be performed with the contract requirements set forth in clear, specific, and objective terms with measurable outcomes as opposed to either the manner by which the work is to be performed or broad and imprecise statements of work.

* * * * *

PART 37—SERVICE CONTRACTING

37.101

[Amended]

3. Amend section 37.101 by removing the definition “Performance-based contracting.”

4. Amend section 37.102 by revising paragraph (a) to read as follows:

37.102

Policy.

(a) Performance-based contracting (see Subpart 37.6) is the preferred method for acquiring services (Public Law 106-398, section 821). When acquiring services, including those acquired under supply contracts, agencies must—

(1) Use performance-based contracting methods to the maximum extent practicable, except for—

(i) Architect-engineer services acquired in accordance with 40 U.S.C. 541-544 (see part 36);

(ii) Construction (see part 36);

(iii) Utility services (see part 41); or

(iv) Services that are incidental to supply purchases; and

(2) Use the following order of precedence (Public Law 106-398, section 821(a));

(i) A firm-fixed price performance-based contract or task order.

(ii) A performance-based contract or task order that is not firm-fixed price.

(iii) A contract or task order that is not performance-based.

* * * * *