[Federal Register: October 1, 2003 (Volume 68, Number 190)]
[Rules and Regulations]
[Page 56682-56684]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01oc03-22]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 12, 32, and 52
[FAC 2001-16; FAR Case 2001-005; Item V]
RIN 9000-AJ20
Federal Acquisition Regulation; Notification of Overpayment,
Contract Financing Payments
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 and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) to require the
contractor to notify the contracting officer if the Government overpays
when making an invoice payment or a contract financing payment under
either a commercial item or noncommercial item contract.
DATES: Effective Date: October 31, 2003.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC, 20405, (202) 501-4755, for information
pertaining to status or publication schedules. For clarification of
content, contact Ms. Jeritta Parnell, Procurement Analyst, at (202)
501-4082. Please cite FAC 2001-16, FAR case 2001-005.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 67 FR 55676, August 29, 2002, with request for comments.
Two respondents submitted public comments. A discussion of the comments
is provided below. Differences between the proposed and the final rule
are discussed in paragraph 4 below.
1. Comment: There is concern that credit invoices, due to a
revision of indirect billing rates, contractual actions impacting
negotiated price, adjustments to progress payments as a result of
change in the contract's estimated cost at completion, and authorized
borrow-payback transfers will all be potentially misconstrued as
overpayments because they may result in a need for the contractor to
pay a sum back to the Government as a result of the normal and expected
operation of contractual terms and conditions. Therefore, the following
definition should be added at the beginning of each of the proposed
paragraphs imposing a notification requirement:
An overpayment is a payment of an amount greater than the value
the contractor is entitled to receive at the time of the payment.
Councils' response: Do not concur. The intent of the rule is to
require contractors to notify the Government when they become aware
that an incorrect payment has been made. The Councils do not believe
there is a demonstrated need for such a definition. First, the term
``overpayment'' is used in Government contracting in a variety of
contexts, and we are concerned that establishing a definition in the
payment clauses could have unintended consequences. Second, when a
contract is modified to reflect the incorporation of new billing rates,
or some other contract administration action, the contract modification
should identify whether a credit is due the Government. The Councils do
not anticipate that a contracting officer would issue a notification of
overpayment in these instances. If, in the future, it becomes apparent
that, in practice, contracting officers are taking an overly broad and
needlessly burdensome interpretation of what constitutes an overpayment
for the purposes of this notification requirement, then the Councils
will revisit this issue.
2. Comment: A dollar threshold of $25,000, or some other reasonable
threshold, should be established for the notification of overpayment
requirement. The requirement for providing a notification for any
overpayment, no matter how small or insignificant in amount, is not
cost-effective. In addition, instead of immediate notification, DoD
should give contractors thirty days to notify the contracting officer,
after the overpayment has been verified to source documents. Finally,
the contract should require that the disposition instructions provided
by the contracting officer be broadened, i.e., that the payment office
be required to provide both the contractor and contracting officer with
appropriation-level detail of how all overpayment refunds are posted
back to the contract.
Councils' response: The Councils do not agree with the premise that
a threshold is needed. Many, if not most, contractors now provide
notice to the Government when they believe an overpayment, or any other
payment
[[Page 56683]]
error, has occurred, and there is no threshold involved. Notification
helps to reinforce the public's trust that taxpayer dollars are being
properly expended and is important, even for smaller dollar
transactions, because there may be a mistake in the payment process
that will cause future payment errors. Notification will enable the
Government to identify and correct any systemic problems that may have
arisen. The Councils also do not believe the rule needs to specify a
notification timeframe. If it is not clear to the contractor that an
overpayment has actually occurred, the contractor could double-check
its records expeditiously prior to notification. On the other hand, if
the contractor provides notification and later determines that it was
in error, the contractor can retract the notification as easily and as
swiftly as it was made. The Councils believed that further disposition
instructions should be addressed on a case-by-case basis.
3. Comment: The analyses required by the Regulatory Flexibility Act
and Paperwork Burden Act should be revised since they do not adequately
address the burden that the proposed rule places on contractors,
especially small businesses.
Councils' response: The Councils believe that it is a normal
business practice for contractors to have billing systems in place that
identify what is owed them, and to submit payment requests to the
Government accordingly. Consequently, the inclusion of notification of
overpayment language in payment and financing clauses is the
formalization of a practice that normally is already followed by most
contractors, i.e., to inform the entity that pays you when you believe
a mistake has been made. Therefore, the proposed case, and the
notification requirement (already instituted in FAR case 1999-023
published in the Federal Register at 66 FR 65353, December 18, 2001,
for most invoicing payments), would only reflect a new burden for
contractors that routinely ignore payment mistakes. The Councils
believe the increase in the paperwork burden, as stated in the proposed
rule, adequately reflects this impact.
In addition, it is not expected that this change will impact a
substantial number of small entities since the overpayments cited by
GAO in its July 1999 report GAO/NSIAD-99-131, Greater Attention Needed
to Identify and Recover Overpayments, were all related to large
businesses.
4. Comment: Government inaction when overpayments occur is a major
problem in addition to the overpayment itself. Therefore, it is
recommended that the words ``promptly'' and ``timely'' be added to the
rule, as indicated below, to emphasize the need for quick response on
the part of a contracting officer to the contractor's notification of
overpayment.
``If the contractor notifies the contracting officer of a
duplicate contract financing or invoice payment or that the
Government has otherwise overpaid on a contract financing or invoice
payment, the contracting officer must promptly provide instructions
to the contractor, in coordination with the cognizant payment
office, regarding timely disposition of the overpayment.''
Councils' response: Concur. The proposed rule has been changed at
FAR 12.215 and FAR 32.008.
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., since the overpayments cited by
GAO in its report GAO/NSIAD-99-131 were all related to large businesses
(see reconciliation of comment 3).
C. Paperwork Reduction Act
The Paperwork Reduction Act (Pub. L. 104-13) applies because the
final rule contains information collection requirements. This final
rule requires the contractor to notify the contracting officer if the
contractor becomes aware that the Government has overpaid on a
financing payment under a contract for noncommercial items, and on
financing and invoice payments under a contract for commercial items.
Although this estimated burden requires approval under the Act, it is
so small (less than 1 percent increase) that it does not substantially
impact the estimated total burden under Office of Management and Budget
Control Number 9000-0102 (in lieu of OMB Control Number 9000-0070,
which was inadvertently listed in the proposed rule). (See
reconciliation of comment 3.)
List of Subjects in 48 CFR Parts 12, 32, and 52
Government procurement.
Dated: September 24, 2003.
Laura G. Auletta,
Director, Acquisition Policy Division.
0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 12, 32, and 52 as set
forth below:
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1. The authority citation for 48 CFR parts 12, 32, and 52 is revised to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 12--ACQUISITION OF COMMERCIAL ITEMS
0
2. Add section 12.215 to read as follows:
12.215 Notification of overpayment.
If the contractor notifies the contracting officer of a duplicate
contract financing or invoice payment or that the Government has
otherwise overpaid on a contract financing or invoice payment, the
contracting officer must promptly provide instructions to the
contractor, in coordination with the cognizant payment office,
regarding timely disposition of the overpayment.
PART 32--CONTRACT FINANCING
0
3. Add section 32.008 to read as follows:
32.008 Notification of overpayment.
If the contractor notifies the contracting officer of a duplicate
contract financing or invoice payment or that the Government has
otherwise overpaid on a contract financing or invoice payment, the
contracting officer must promptly provide instructions to the
contractor, in coordination with the cognizant payment office,
regarding timely disposition of the overpayment.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
4. Amend section 52.212-4 by revising the date of the clause and
paragraph (i) to read as follows (the undesignated paragraph following
paragraph (i) is removed):
52.212-4 Contract Terms and Conditions--Commercial Items.
* * * * *
Contract Terms and Conditions--Commercial Items (Oct. 2003)
* * * * *
(i) Payment.--(1) Items accepted. Payment shall be made for
items accepted by the Government that have been delivered to the
delivery destinations set forth in this contract.
(2) Prompt payment. The Government will make payment in
accordance with the Prompt Payment Act (31 U.S.C. 3903) and
[[Page 56684]]
prompt payment regulations at 5 CFR part 1315.
(3) Electronic Funds Transfer (EFT). If the Government makes
payment by EFT, see 52.212-5(b) for the appropriate EFT clause.
(4) Discount. In connection with any discount offered for early
payment, time shall be computed from the date of the invoice. For
the purpose of computing the discount earned, payment shall be
considered to have been made on the date which appears on the
payment check or the specified payment date if an electronic funds
transfer payment is made.
(5) Overpayments. If the Contractor becomes aware of a duplicate
contract financing or invoice payment or that the Government has
otherwise overpaid on a contract financing or invoice payment, the
Contractor shall immediately notify the Contracting Officer and
request instructions for disposition of the overpayment.
* * * * *
0
5. Amend section 52.213-4 by revising the date of the clause and
paragraph (a)(2)(iv) to read as follows:
52.213-4 Terms and Conditions--Simplified Acquisitions (Other Than
Commercial Items).
* * * * *
Terms and Conditions--Simplified Acquisitions (Other Than Commercial
Items) (Oct. 2003).
(a) * * *
(2) * * *
(iv) 52.232-25, Prompt Payment (Oct. 2003).
* * * * *
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6. Amend section 52.232-25 by revising the date of the clause and
paragraph (d) to read as follows:
52.232-25 Prompt Payment.
* * * * *
Prompt Payment (Oct. 2003).
* * * * *
(d) Overpayments. If the Contractor becomes aware of a duplicate
contract financing or invoice payment or that the Government has
otherwise overpaid on a contract financing or invoice payment, the
Contractor shall immediately notify the Contracting Officer and
request instructions for disposition of the overpayment.
(End of clause)
* * * * *
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7. Amend section 52.232-26 by revising the date of the clause and
paragraph (c) to read as follows:
52.232-26 Prompt Payment for Fixed-Price Architect-Engineer Contracts.
* * * * *
Prompt Payment for Fixed-Price Architect-Engineer Contracts (Oct.
2003).
* * * * *
(c) Overpayments. If the Contractor becomes aware of a duplicate
contract financing or invoice payment or that the Government has
otherwise overpaid on a contract financing or invoice payment, the
Contractor shall immediately notify the Contracting Officer and
request instructions for disposition of the overpayment.
(End of clause)
0
8. Amend section 52.232-27 by revising the date of the clause and
paragraph (1) to read as follows:
52.232-27 Prompt Payment for Construction Contracts.
* * * * *
Prompt Payment for Construction Contracts (Oct. 2003).
* * * * *
(1) Overpayments. If the Contractor becomes aware of a duplicate
contract financing or invoice payment or that the Government has
otherwise overpaid on a contract financing or invoice payment, the
Contractor shall immediately notify the Contracting Officer and
request instructions for disposition of the overpayment.
[FR Doc. 03-24586 Filed 9-30-03; 8:45 am]