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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: May 2, 2000

FROM: Barry McVay, CPCM

SUBJECT: Federal Acquisition Regulation (FAR); Advance Payments for Non-Commercial Items

SOURCE: Federal Register, May 2, 2000, Vol. 65, No. 85, page 25613

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

ACTION: Proposed Rule

SYNOPSIS: It is proposed that FAR Subpart 32.4, Advance Payments for Non-Commercial Items, be amended to permit federally insured credit unions to participate in the maintenance of special accounts for advance payments.

DATES: Submit comments no later than July 3, 2000.

ADDRESSES: Submit comments General Services Administration, FAR Secretariat (MVRS), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405, or by e-mail to farcase.1999-016@gsa.gov. Cite FAR case 1999-016 in all correspondence related to this proposed rule.

FOR FURTHER INFORMATION CONTACT: Mr. Jeremy Olson, 202-501-0692.

SUPPLEMENTAL INFORMATION: Paragraph (a) of FAR 32.409-3, Security, Supervision, and Covenants, requires that contractors deposit advance payments in special accounts separate from their general or other funds (unless exempted by paragraphs (e) or (f) of FAR 32.409-3). FAR 32.411, Agreement for Special Bank Account, and other FAR sections exclude credit unions from participating in the maintenance of these special accounts by requiring that contractors establish these special accounts only at banks that are members of the Federal Reserve System (FRS) or insured by the Federal Deposit Insurance Corporation (FDIC). However, many credit unions are federally insured through the National Credit Union Administration (NCUA), so they provide the government with comparable security for funds advanced to contractors as do banks that are members of the FRS or insured by FDIC.

This proposed rule amends several FAR Subpart 32.4 sections (FAR 32.407, Interest; FAR 32.408, Application for Advance Payments; FAR 32.409-3; FAR 32.410, Findings, Determination, and Authorization; and FAR 32.411, Agreement for Special Bank Account) and FAR 52.232-12, Advance Payments, to change the word "bank" to "financial institution", change the phase "at a member bank of the Federal Reserve System or any "insured" bank within the meaning of the Act creating the Federal Deposit Insurance Corporation" to "at a member bank of the Federal Reserve System, any "insured" bank within the meaning of the Act creating the Federal Deposit Insurance Corporation ...or a credit union insured by the National Credit Union Administration", and make similar changes to give contractors the option of depositing advance payments in special accounts maintained by credit unions insured by NCUA.

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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