Barry McVay's FEDERAL CONTRACTS DISPATCH
DATE: May 16, 2000
FROM: Barry McVay, CPCM
SUBJECT: National Aeronautics and Space Administration Federal Acquisition Regulation (FAR) Supplement (NFS); Contract Financing
SOURCE: Federal Register, May 16, 2000, Vol. 65, No. 95, page 31101
AGENCIES: National Aeronautics and Space Administration (NASA)
ACTION: Final Rule
SYNOPSIS: NASA is amending the NFS so that it: conforms to the changes made to the Federal Acquisition Regulation (FAR) by Federal Acquisition Circular (FAC) 97-16 regarding progress and performance-based payments; provides additional guidance on the use of progress and performance-based payments; and conforms to the FAC 97-15 deletion of FAR Subpart 23.1, Pollution Control and Clear Air and Water. Also, this final rule makes editorial corrections and miscellaneous changes to correct referenced FAR and NFS citations and NASA office designations.
EDITOR'S NOTE: For more on FAC 97-16, see the March 27, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 97-16, Small Business Competitiveness Demonstration Program and Progress Payments and Related Financing Policies."
EFFECTIVE DATE: May 16, 2000.
FOR FURTHER INFORMATION CONTACT: Joseph Le Cren, NASA Headquarters, Code HK, Washington, DC 20546, 202 358-0444, e-mail: email@example.com.
SUPPLEMENTAL INFORMATION: FAC 97-16 amended FAR Part 32, Contract Financing, to simplify and streamline the administration of progress payments, and to permit the use of performance-based payments in contracts for research and development and contracts awarded through competitive negotiation procedures. The following are the primary changes being made to NFS Part 1832 as a result of FAC 97-16:
- Progress Payments: FAC 97-16 deleted from paragraph (c) of FAR 32.503-5, Administration of Progress Payments, the language authorizing the contractor to request that orders under indefinite delivery contracts be administered on an overall contract basis, or for the contracting officer to treat a group of orders as a single unit. The revised FAR 32.503-5(c) states, "Under indefinite-delivery contracts, the contracting officer should administer progress payments made under each individual order as if the order constituted a separate contract, unless agency procedures provide otherwise." Since the revised paragraph (c) includes the words "unless agency procedures provide otherwise," and NASA want to provide its contracting officers with more flexibility in the administration of progress payments, NASA is adding the deleted language as NFS 1832.503-5, Administration of Progress Payments (NASA supplements paragraph (c)).
- Performance-Based Payments: FAR 32.1001, Policy, states that "performance-based payments are the preferred government financing method when the contracting officer finds them practical, and the contractor agrees to their use." Though the FAR does not offer any guidance for determining what is "practical," the preamble to the FAC 97-16 rule indicates that the use of performance-based payments in competitive negotiations "may lengthen the competitive process and complicate proposal evaluation" and "impact on small business competitiveness", and that contracting officers may consider these factors when assessing the practicality of using performance-based payments. Since NASA has been streamlining its acquisition process and encouraging small business participation in its competitions, NASA is adding NFS 1832.1001, Policy, to require "approval from the Director of the Headquarters Office of Procurement Contract Management Division (Code HK) to use performance-based payments in competitive negotiated solicitations under $50M."
Along those same lines, paragraph (e) of FAR 32.1004, Procedures, says that solicitations requesting offerors to propose performance-based payments should include a price adjustment reflecting the cost to the government of providing the performance-based payments "if the contracting officer anticipates that the cost of providing performance-based payments would have a significant impact on determining the best value offer." But this statement is modified by the phrase "unless agencies prescribe other evaluation procedures". NASA has determined that the use of the price adjustment will have a "significant impact" on the solicitation process, so NFS 1832.1004, Procedures, is revised to advise contracting officers that they should "consider the use of alternative evaluation methods, e.g., qualitative evaluation under Mission Suitability or another appropriate factor" in competitive negotiated acquisitions under $50 million.
In addition, since FAR 32.1004(b) states that "performance-based payment amounts are commensurate with the value of the performance event or performance criterion, and are not expected to result in an unreasonably low or negative level of contractor investment in the contract", NFS 1832.1004(b)(2) is deleted since it included similar language.
FAC 97-16 also deleted FAR 32.1006, Agency Approvals, so the implementing guidance at NFS 1832.1006 is no longer needed and is deleted.
Finally, NFS 1815.201, Exchanges with Industry Before Receipt of Proposals, is revised to add a requirement that draft requests for proposals (DRFPs) for competitive negotiated acquisitions expected to use performance-based payments "request potential offerors to suggest terms, including performance events or payment criteria. Contracting officers shall use that information to establish a common set of performance-based payments parameters in the formal RFP when practicable."
There is one other significant change made by this final rule: NFS Subpart 1923.1, Pollution Control and Clear Air and Water, is deleted because FAC 97-15 deleted FAR Subpart 23.1.
FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.
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