[Federal Register: June 8, 2005 (Volume 70, Number 109)]
[Rules and Regulations]               
[Page 33653-33655]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[[Page 33653]]


Part V

Department of Defense

General Services Administration

National Aeronautics and Space Administration


48 CFR Chapter 1, Part 2, et al.

Federal Acquisition Circular 2005-04; Federal Acquisition Regulations; 
Interim and Final Rules

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48 CFR Chapter 1

Federal Acquisition Circular 2005-04; Introduction

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

ACTION: Summary presentation of interim and final rules.


SUMMARY: This document summarizes the Federal Acquisition Regulation 
(FAR) rules agreed to by the Civilian Agency Acquisition Council and 
the Defense Acquisition Regulations Council in this Federal Acquisition 
Circular (FAC) 2005-04. A companion document, the Small Entity 
Compliance Guide (SECG), follows this FAC. The FAC, including the SECG, 
is available via the Internet at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.acqnet.gov/far.

DATES: For effective dates and comment dates, see separate documents 
which follow.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, at (202) 501-
4755, for information pertaining to status or publication schedules. 
For clarification of content, contact the analyst whose name appears in 
the table below in relation to each FAR case or subject area. Please 
cite FAC 2005-04 and specific FAR case number(s). Interested parties 
may also visit our Web site at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.acqnet.gov/far.

      Item                          Subject                             FAR case                 Analyst
I..............  Notification of Employee Rights Concerning     2004-010                 Marshall.
                  Payment of Union Dues or Fees.
II.............  Telecommuting for Federal Contractors........  2003-025                 Zaffos.
III............  Incentives for Use of Performance-Based        2004-004                 Wise.
                  Contracting for Services.
IV.............  Submission of Cost or Pricing Data on          2004-035                 Olson.
                  Noncommercial Modifications of Commercial
                  Items (Interim).
V..............  Applicability of SDB and HUBZone Price         2003-015                 Marshall.
                  Evaluation Factor.
VI.............  Labor Standards for Contracts Involving        2002-004                 Nelson.
VII............  Deferred Compensation and Postretirement       2001-031                 Olson.
                  Benefits Other Than Pensions.
VIII...........  Gains and Losses.............................  2004-005                 Olson.

SUPPLEMENTARY INFORMATION: Summaries for each FAR rule follow. For the 
actual revisions and/or amendments to these FAR cases, refer to the 
specific item number and subject set forth in the documents following 
these item summaries.
    FAC 2005-04 amends the FAR as specified below:

Item I--Notification of Employee Rights Concerning Payment of Union 
Dues or Fees (FAR Case 2004-010)

    This final rule adopts, without change, the interim rule published 
in the Federal Register at 69 FR 76352, December 20, 2004, and issued 
as Item IV of FAC 2001-26. It amends FAR parts 2, 22, and 52 to 
implement Executive Order (E.O.) 13201, Notification of Employee Rights 
Concerning Payment of Union Dues or Fees, and Department of Labor 
regulations at 29 CFR 470. The rule requires Government contractors and 
subcontractors to post notices informing their employees that under 
Federal law they cannot be required to join a union or maintain 
membership in a union to retain their jobs. The required notice also 
advises employees who are not union members that they can object to the 
use of their union dues for certain purposes. This rule applies to 
Federal contractors and subcontractors with contracts or subcontracts 
that exceed the simplified acquisition threshold, unless covered by an 
exemption granted by the Secretary of Labor.

Item II--Telecommuting for Federal Contractors (FAR Case 2003-025)

    This rule finalizes without changes the interim rule published in 
the Federal Register at 69 FR 59701, October 5, 2004, and issued as 
Item III of FAC 2001-025. This final rule implements Section 1428 of 
the Services Acquisition Reform Act of 2003 (Title XIV of Public Law 
108-136), which prohibits agencies from including a requirement in a 
solicitation that precludes an offeror from permitting its employees to 
telecommute or, when telecommuting is not precluded, from unfavorably 
evaluating an offeror's proposal that includes telecommuting unless it 
would adversely affect agency requirements, such as security. 
Contracting officers awarding service contracts should familiarize 
themselves with this rule.

Item III--Incentives for Use of Performance-Based Contracting for 
Services (FAR Case 2004-004)

    This final rule amends the Federal Acquisition Regulation (FAR) to 
provide Governmentwide authority to treat performance-based contracts 
or task orders for services as commercial items, if certain conditions 
are met. Agencies must report on the use of this authority. This change 
implements sections 1431 and 1433 of the National Defense Authorization 
Act for Fiscal Year 2004 (Pub. L. 108-136) and is intended to promote 
the use of performance-based contracting.

Item IV--Submission of Cost or Pricing Data on Noncommercial 
Modifications of Commercial Items (FAR Case 2004-035)

    This interim rule implements an amendment to 10 U.S.C. 2306a. The 
change requires that the exception from the requirement to obtain 
certified cost or pricing data for a commercial item does not apply to 
noncommercial modifications of a commercial item that are expected to 
cost, in the aggregate, more than $500,000 or 5 percent of the total 
price of the contract, whichever is greater. Section 818 applies to 
offers submitted, and to modifications of contracts or subcontracts 
made, on or after June 1, 2005. This new policy applies only to 
acquisitions funded by DoD, NASA, or the Coast Guard, since the statute 
amends 10 U.S.C. 2306a, which only applies to DoD, NASA, and the Coast 
Guard. The new language does not apply to acquisitions funded by other 
than DoD, NASA, or the Coast Guard because Section 818 did not amend 41 
U.S.C. 254b, which prohibits obtaining cost or pricing data for 
commercial items. However, the new policy applies to contracts awarded 
or task or delivery orders placed on behalf of DoD, NASA, or the Coast 
Guard by an official of the United States outside of those agencies, 
because the statutory requirement of Section 818 applies to the funds 
provided by DoD, NASA, or the Coast Guard.

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Item V--Applicability of SDB and HUBZone Price Evaluation Factor (FAR 
Case 2003-015)

    This final rule removes some of the exceptions to the Small 
Disadvantaged Business and HUBZone preference programs. The contracting 
officer will now apply a price evaluation adjustment to offers of 
eligible products in acquisitions subject to the Trade Agreements Act. 
This rule will have a beneficial impact on all domestic concerns, 
especially small entities that are small disadvantaged business 
concerns or HUBZone small business concerns.

Item VI--Labor Standards for Contracts Involving Construction (FAR Case 

    This final rule implements in the FAR the DoL rule revising the 
terms ``construction, prosecution, completion or repair'' (29 CFR 
5.2(j)) and ``site of the work'' (29 CFR 5.2(l)). In addition, the 
Councils have clarified several definitions relating to labor standards 
for contracts involving construction and made requirements for flow 
down of labor clauses more precise.
    The most significant impact of this rule is that contractors must 
pay Davis-Bacon Act wages at a secondary site of the work, if a 
significant portion of the work is to be constructed at that site and 
the site meets the other criteria specified in the rule. When 
transporting portions of the building or work between the secondary 
site of the work and the primary site of the work, the wages for the 
primary site of the work are applicable. The contracting officer must 
coordinate with the Department of Labor when there is any uncertainty 
as to whether a work site is a secondary site of the work.

Item VII--Deferred Compensation and Postretirement Benefits Other Than 
Pensions (FAR Case 2001-031)

    This final rule amends the FAR by revising paragraph (k), Deferred 
compensation other than pensions, and paragraph (o), Postretirement 
benefits other than pensions, of FAR 31.205-6, Compensation for 
personal services, cost principle. Changes to paragraph (k) include: 
deletion of language that duplicates definitions provided in FAR 
31.001, elimination of obsolete coverage, and use of terminology 
consistent with Cost Accounting Standards. Changes to paragraph (o) 
include: moving and revising language in (o)(3) through (o)(5) to 
(o)(2)(iii) because these requirements only apply to accrual costing 
other than terminal funding. In addition, new coverage is added to the 
related contract clause at FAR 52.215-18, Reversion or Adjustment of 
Plans for Postretirement Benefits (PRB) Other Than Pensions, specifying 
the method of recovery of refunds and credits. The rule revises the 
cost principle and contract clause by improving clarity and structure, 
and removing unnecessary and duplicative language.
    The case was initiated as a result of comments and recommendations 
received from industry and Government representatives during a series 
of public meetings. This rule is of particular interest to contractors 
and contracting officers who use cost analysis to price contracts and 
modifications, and who determine or negotiate reasonable costs in 
accordance with a clause of a contract, e.g., price revision of fixed-
price incentive contracts, terminated contracts, or indirect cost 

Item VIII--Gains and Losses (FAR Case 2004-005)

    This final rule amends FAR 31.205-16 to address the timing of the 
gain or loss recognition of sale and leaseback arrangements of 
contractor depreciable property or other capital assets. The final rule 
defines the disposition date for a sale leaseback arrangement as the 
date the contractor begins to incur an obligation for lease or rental 
costs. Contracting officers, auditors, and contractors with 
responsibilities related to allowable cost determinations involving 
sale and leaseback arrangements of contractor depreciable property or 
other capital assets will be impacted by new policies governing that 

    Dated: May 27, 2005.
Julia B. Wise,
Director, Contract Policy Division.

Federal Acquisition Circular

    Federal Acquisition Circular (FAC) 2005-04 is issued under the 
authority of the Secretary of Defense, the Administrator of General 
Services, and the Administrator for the National Aeronautics and Space 
    Unless otherwise specified, all Federal Acquisition Regulation 
(FAR) and other directive material contained in FAC 2005-04 is 
effective July 8, 2005, except for Items I, II, III, and IV, which are 
effective June 8, 2005.

    Dated: May 26, 2005.
Vincent J. Feck,
Lt Col, Acting Director, Defense Procurement and Acquisition Policy.

    Dated: May 27, 2005.
David A. Drabkin,
Senior Procurement Executive, Office of the Chief Acquisition Officer, 
General Services Administration.

    Dated: May 26, 2005.
Scott Thompson,
Acting Assistant Administrator for Procurement, National Aeronautics 
and Space Administration.
[FR Doc. 05-11179 Filed 6-7-05; 8:45 am]