[Federal Register: January 3, 2006 (Volume 71, Number 1)]
[Rules and Regulations]               
[Page 225-226]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]





48 CFR Parts 44 and 52

[FAC 2005-07 FAR Case 2003-024, Item IX]
RIN 9000-AK39

Federal Acquisition Regulation; Elimination of Certain 
Subcontract Notification Requirements

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

ACTION: Final rule.


SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to modify the 
language regarding advance notification requirements. This change is 
required to implement Section 842 of the National Defense Authorization 
Act for Fiscal Year 2004, Public Law 108-136, which resulted in 
revisions to 10 U.S.C. 2306(e).

DATES: Effective Date: January 3, 2006.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Ms. Rhonda Cundiff, Procurement Analyst, at (202) 501-0044. Please cite 
FAC 2005-07, FAR case 2003-024. For information pertaining to status or 
publication schedules, contact the FAR Secretariat at (202) 501-4755.


A. Background

    DoD, GSA, and NASA published an interim rule in the Federal 
Register at 70 FR 11761, March 9, 2005, with a request for comments by 
May 9, 2005. The interim rule revised FAR 44.201-2, Advance 
notification requirements, and amended Alternate I of FAR clause 
52.244-2, Subcontracts. The change is required in order to implement 
Section 842 of the National Defense Authorization Act for Fiscal Year 

[[Page 226]]

Public Law 108-136. Section 842 removes the requirement for contractors 
under cost-reimbursement contracts with the Department of Defense 
(DoD), Coast Guard, and National Aeronautics and Space Administration 
(NASA) to notify the agency before the award of any cost-plus-fixed-fee 
subcontract or any fixed-price subcontract that exceeds the greater of 
the simplified acquisition threshold or 5 percent of the total 
estimated cost of the contract if the contractor maintains a purchasing 
system approved by the contracting officer for the contract.
    The final rule differs from the interim rule in that it deletes 
Alternate I in its entirety. The Councils adopted the suggestion in a 
public comment that deletion of Alternate I would be a less confusing 
means of implementing the statute than amending Alternate I. 
Renumbering has occurred in FAR 44.204 and 52.244-2 as a result of the 
deletion of Alternate I.
    In addition, the interim rule made a technical amendment to 
Alternate II of the FAR clause at 52.244-2, Subcontracts. The interim 
rule deleted the reference to paragraph (c) from paragraph (f)(2) of 
Alternate II (now renumbered Alternate I in the final rule) because 
paragraph (c) applies to fixed-price type contracts, whereas Alternate 
II (now renumbered Alternate I in the final rule) applies to cost-
reimbursement contracts.
    Two comments were received from one respondent.
    Comment: The respondent noted that the purpose of the FAR change 
is, in the case of DoD, the Coast Guard, and NASA, to eliminate the 
requirement for the contractor to notify the agency before award of 
certain subcontracts when the contractor has an approved purchasing 
system. The respondent stated that the language in the interim rule is 
confusing and suggested eliminating Alternate I of 52.244-2 instead.
    Response: Concur. The final rule deletes Alternate I.
    Comment: The respondent suggested rewriting Alternate II of the FAR 
clause at 52.244-2 and FAR 44.201-2 to have the language match what is 
in 52.244-2(d)(1).
    Response: Nonconcur. Paragraph (d)(1) of the FAR clause at 52.244-2 
specifies the contract types--cost-reimbursement, time-and-materials, 
and labor-hour--subject to subcontract consent requirements. Alternate 
II specifies the contract types--cost-plus-fixed-fee and fixed-price--
subject to advance notification requirements even when subcontract 
consent is not required. These two procedures are separate statutory 
requirements and apply to different contract types.
    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 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 within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because it will have a small 
positive effect. Small businesses do not usually hold prime contracts 
which are cost-reimbursement contracts, so this section would not apply 
to them, and any change would not apply.

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.

List of Subjects in 48 CFR Parts 44 and 52

    Government procurement.

    Dated: December 22, 2005.
Gerald Zaffos,
Director, Contract Policy Division.

Therefore, DoD, GSA, and NASA amend 48 CFR parts 44 and 52 as set forth 
1. The authority citation for 48 CFR parts 44 and 52 continues to read 
as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).


2. Amend section 44.204 by revising paragraph (a)(2) to read as 

44.204  Contract clauses.

    (a)(1) * * *
    (2) If a cost-reimbursement contract is contemplated, for civilian 
agencies other than the Coast Guard and the National Aeronautics and 
Space Administration, the contracting officer shall use the clause with 
its Alternate I.
* * * * *


3. Amend section 52.244-2 by--
a. Removing Alternate I; and
b. Redesignating Alternate II as Alternate I; and revising the 
introductory paragraph to read as follows:

52.244-2  Subcontracts.

* * * * *
    Alternate I (JAN 2006). As prescribed in 44.204(a)(2), 
substitute the following paragraph (f)(2) for paragraph (f)(2) of 
the basic clause:
* * * * *
[FR Doc. 05-24554 Filed 12-30-05; 8:45 am]