[Federal Register: June 8, 2005 (Volume 70, Number 109)]
[Rules and Regulations]
[Page 33657-33659]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jn05-31]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 2, 4, 12, 37, and 52
[FAC 2005-04; FAR Case 2004-004; Item III]
RIN 9000-AJ97
Federal Acquisition Regulation; Incentives for Use of
Performance-Based Contracting for Services
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 to convert the
interim rule published in the Federal Register at 69 FR 34226, June 18,
2004, to a final rule with changes to amend the Federal Acquisition
Regulation (FAR) to implement Sections 1431 and 1433 of the National
Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108-136).
Section 1431 enacts Governmentwide authority to treat performance-based
contracts or task orders for services as commercial items if certain
conditions are met, and requires agencies to report on performance-
based contracts or task orders awarded using this authority. Section
1433 amends the definition of commercial item to add specific
performance-based terminology and to conform to the language added by
Section 1431.
DATE: Effective Date: June 8, 2005.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755
for information pertaining to status or publication schedules. For
clarification of content, contact Ms. Julia Wise, Director, Contract
Policy Division, at (202) 208-1168. Please cite FAC 2005-04, FAR case
2004-004.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule amends the Federal Acquisition Regulation. DoD,
GSA, and NASA published an interim rule in the Federal Register at 69
FR 34226, June 18, 2004, implementing Section 1431 and Section 1433 of
the National Defense Authorization Act for Fiscal Year 2004 (Pub. L.
108-136). Public comments were received from three entities. The
Councils reviewed and resolved the comments. The disposition of
comments, as stated below, requires one change to the rule, as
requested in comment 7.
1. Comment: Requested clarification as to whether the term
``performance assessment'' should be used in place of ``quality
assurance'' in FAR 37.601(a)(2). This comment was based on a statement
in the ``Guidebook for Performance-Based Services Acquisition (PBSA) in
the Department of Defense,'' December 2000, that, ``[h]ereafter,
`performance assessment' will be used in place of the term `quality
assurance' unless otherwise noted.''
Council's response: This statement applied only to usage in the
Guide and was not meant as a change in Governmentwide policy. In fact,
a more recent memo, dated August 19, 2003, from the Undersecretary of
Defense for Acquisition, Technology and Logistics, continues to use the
term ``quality assurance,'' as does the ``Seven Steps Guide to
Procurement Based Services Acquisition Guide.'' This comment is more
appropriate for FAR Case 2003-18, which covers a broader revision of
Performance-Based Services Acquisition, and will be considered along
with other comments received in response to that case. FAR Case 2003-18
was published in the Federal Register at 69 FR 43712, July 21, 2004;
public comments were due September 20, 2004.
2. Comment: Suggested that the Councils move the reference to
quality assurance surveillance plans from FAR 37.601(a)(2) and make it
a new subparagraph (5) to emphasize the importance of quality assurance
surveillance plans.
Council's response: The Councils did not adopt this suggestion
because the purpose of this case is to allow agencies to use FAR Part
12 for noncommercial services if the services otherwise meet the
existing definition of performance-based contracting. This comment is
more appropriate for FAR Case 2003-18 and will be considered along with
other comments received in response to that case.
3. Comment: Recommended revising FAR 12.102(g)(1) by adding the
additional qualifying factor of ``Includes a performance work
statement.''
Council's response: The Councils did not adopt this suggestion
because the purpose of the case is to allow agencies to use FAR Part 12
for noncommercial services if the services otherwise meet the existing
definition of performance-based contracting, which addresses use of a
work statement that is performance-based. FAR
[[Page 33658]]
12.102(g)(1)(vi) further addresses this comment.
4. Comment: Recommended changing FAR 12.102(g)(1)(ii) to: ``has an
estimated value at time of solicitation of not more that $25 million''
because they thought it would be very cumbersome to change back to FAR
Part 15 if the contract value ends up exceeding $25 million.
Council's response: The Councils did not adopt this suggestion
because it will change the intent of this SARA provision. If
acquisition planning is properly performed, prudent independent
Government estimates are constructed and market research is conducted,
the contracting officer will know upfront if this SARA authority is
appropriate for this acquisition.
5. Comment: Recommended changing the language in FAR
12.102(g)(1)(iv) to ``includes appropriate quality assurance
provisions'' instead of ``includes a quality assurance surveillance
plan'' since the Government should not require the creation of a
quality assurance plan different from the one the contractor uses when
providing commercial services as required by FAR 12.208.
Council's response: FAR 12.208 does require the Government to rely
on contractors' existing quality assurance systems as a substitute for
Government inspection and testing unless customary market practices for
the commercial item being acquired include in-process inspection. Since
the rule authorizes the use of FAR Part 12 procedures for certain non-
commercial services, customary market practices for the non-commercial
services may not exist. However, the Councils do not believe it is
necessary to ``include'' the quality assurance surveillance plan in the
contract or task order and revised the rule to require each contract or
task order to ``use'' a quality assurance surveillance plan.
6. Comment: Recommended changing the language in FAR 12.102(g)(vii)
to: ``under terms and conditions similar to those being offered to the
Federal Government.''
Council's response: The Councils recognize the difference in the
language, but believe this change is consistent with and clarifies the
statutory language.
7. Comment: Stated that the language in FAR 12.102(g)(2) was more
prescriptive than the language in FAR 12.302 for tailoring provisions
and clauses for commercial items and recommended that the language be
revised to avoid unnecessary tailoring of the inspection and acceptance
provisions in FAR 52.212-4(a).
Council's response: The Councils recognize the need to avoid
unnecessary tailoring when acquiring commercial items, and consequently
changed the language in FAR 12.102(g)(2) by inserting the word ``may''
instead of the word ``should.'' However, this case authorizes the use
of FAR Part 12 procedures when purchasing certain non-commercial
services. The current basis for tailoring a FAR Part 12 contract at FAR
12.302 authorizes tailoring based, in part, on customary commercial
practices. It is likely that customary commercial practices may not
exist for non-commercial services, even when the services are acquired
using a performance-based requirement. This is particularly important
in the area of inspection and acceptance covered by FAR 12.102(g)(2)
and the clause at FAR 52.212-4. The Councils believe that relying
exclusively on FAR 12.302 as the basis for tailoring provisions for
non-commercial services may not adequately ensure the Government's
interests are protected in this area. Therefore, the Councils
determined that the FAR should provide the ability to consider
additional remedies if needed to protect the Government against
nonconforming services since the items being procured are not
commercial items as defined by FAR 2.101. Since the new language at FAR
12.102(g)(2) only allows the contracting officer to tailor the
inspections and acceptance provisions when necessary to protect the
Government, the Councils do not believe this flexibility will lead to
unnecessary tailoring.
8. Comment: Recommended several revisions to FAR 37.601(a) to
provide for additional flexibility when using performance-based
contracts for services.
Council's response: The Councils did not adopt these suggestions
because this rule does not change existing FAR requirements at FAR
37.601(a) that pertain to performance-based contracts for services. The
only revision to FAR 37.601 in this rule is to add a cross reference to
FAR 12.102(g). These comments are more appropriate for FAR case 2003-
18, which covers a broader revision of Performance-Based Services
Acquisition, and will be considered along with other comments received
in response to that case.
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 changes may 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 we have changed
procedures for award and administration of contracts or task orders
enabling the Government to treat certain commercial services as
commercial items when the contract or task order--
Is entered into on or before November 24, 2013;
Has a value of $25 million or less;
Meets the definition of performance-based contracting at
FAR 2.101;
Includes a quality assurance surveillance plan;
Includes performance incentives where appropriate;
Specifies a firm-fixed price for specific tasks to be
performed or outcomes to be achieved; and
Is awarded to an entity that provides similar services to
the general public under terms and conditions similar to those in the
contract or task order.
Therefore, a Final Regulatory Flexibility Analysis (FRFA) was
prepared in accordance with Title 5, of the United States Code 604. The
rule revised the FAR in order to comply with recently enacted Public
Law 108-136, Section 1431 and 1433 of the National Defense
Authorization Act for Fiscal Year 2004. Section 1431 provides for
Governmentwide authority to treat certain performance-based contracts
or task orders for services as commercial items if the certain
conditions are met. Section 1433 also amends the definition of
commercial services to conform to the language added by Section 1431 by
inserting performance-based terms for clarification.
The implementation of Sections 1431 and 1433 will change the FAR as
follows:
Revises the commercial items definition in FAR 2.101 and
52.202-1;
Adds a new record requirement for reporting commercial
performance-based contracts and task orders to FAR 4.601;
Incorporates the conditions for using FAR Part 12 for any
performance-based contract or task order for services in FAR 12.102;
Adds performance-based terms as required by section 1433;
and
Adds a cross reference to FAR 12.102(g) in FAR 37.601.
An Initial Regulatory Flexibility Analysis (IRFA) was published
with the interim rule, and no comments
[[Page 33659]]
concerning the IRFA were received. A Final Regulatory Flexibility
Analysis (FRFA) was prepared. The rule is expected to have a positive
impact on small business concerns. However, it is not expected to have
a significant impact on a substantial number of small entities because
it provides Governmentwide procurement authority that enables the
contracting officer (CO) to treat a noncommercial service as commercial
if specific conditions, most of which pertain to performance-based
contracting, are met. The Government is encouraged to use performance-
based contracting techniques on all service contracts and allowing this
authority--
Opens up opportunities to small businesses that otherwise
would not have been available if they could not meet the commercial
items definition in FAR 2.101 and 52.202-1;
Provides contracting flexibility when using performance-
based contracting techniques;
Helps the Government move closer to achieving the
performance-based contracting performance-goals for Fiscal Years 2004
and 2005; and
Allows the CO to use FAR Part 12, and procure these types
of services similar to the commercial marketplace.
Specifically, a query of the Central Contractor Registration (CCR)
system indicates there are 198,732 small businesses registered, and
many of these contractors were awarded performance-based contracts or
task orders for noncommercial services and the Government was required
to use FAR Part 13, Simplified Acquisition Procedures, FAR Part 14,
Sealed Bidding, or FAR Part 15, Contracting by Negotiations, for these
acquisitions because they were not commercial items. This authority
allows the CO to use FAR Part 12, which is the Government's preference
since this will allow us to procure these types of services similar to
the commercial marketplace, and using FAR Part 12 will provide more
contracting flexibility and opportunities to the small business
community.
The rule will impose no new reporting or recording keeping
requirements on large or small entities. It only requires the
Government to report on contracts or task orders awarded under this
authority. Specifically, implementation of Section 1431 requires
agencies to collect and maintain reliable data sufficient to identify
the contracts or task orders treated as contracts for commercial items
using the authority of this section. The Federal Procurement Data
System-Next Generation (FPDS-NG) will be revised to enable agencies to
report on the use of such authority both Governmentwide and for each
department and agency. By November 2006, the Office of Management and
Budget will start reporting to the Committees on Governmental Affairs
and Armed Services of the Senate, and the Committees on Government
Reform and Armed Services of the House of Representatives on the
implementation of this section. The authority of Section 1431 expires
on November 24, 2013, ten years after enactment.
The FAR Secretariat has submitted a copy of the FRFA to the Chief
Counsel for Advocacy of the Small Business Administration. Interested
parties may obtain a copy from the FAR Secretariat. The Councils will
consider comments from small entities concerning the affected FAR Parts
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 2005-
004, FAR Case 2004-004), 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.
List of Subjects in 48 CFR Parts 2, 4, 12, 37, and 52
Government procurement.
Dated: May 27, 2005.
Julia B. Wise,
Director, Contract Policy Division.
Interim Rule Adopted as Final With Changes
0
Accordingly, DOD, GSA, and NASA adopt the interim rule amending 48 CFR
parts 2, 4, 12, 37, and 52, which was published in the Federal Register
at 69 FR 34226, June 18, 2004, as a final rule with the following
changes:
0
1. The authority citation for 48 CFR parts 2, 4, 12, 37, 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
12.102 [Amended]
0
2. Amend section 12.102 in paragraph (g)(1)(iv) by removing
``Includes'' and adding ``Uses'' in its place; and in paragraph (g)(2)
by removing ``should'' and adding ``may'' in its place.
[FR Doc. 05-11189 Filed 6-7-05; 8:45 am]