DATE: November 22, 2002

SUBJECT: Federal Acquisition Circular (FAC) 2001-10, Miscellaneous Amendments

SOURCE: Federal Register, November 22, 2002, Vol. 67, No. 226, page 70515

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

ACTION: Final Rules

SYNOPSIS: The Federal Acquisition Regulatory Council is issuing FAC 2001-10 to amend the Federal Acquisition Regulation (FAR) in the following areas: (1) general records schedule; (2) Executive Order 13202, Government Neutrality Towards Contractors' Labor Relations On Federal Construction; (3) Caribbean Basin country end products; (4) financing policies; and (5) technical amendments.

EFFECTIVE DATES: Items (2), (3), and (5) are effective November 22, 2002; items (1) and (4) are effective December 23, 2002.


      Items (1) and (2), Linda Nelson at 202-501-1900.

      Item (3), Cecelia Davis at 202-219-0202.

      Item (4), Jeremy Olson at 202-501-3221.

For more information on the technical amendments or for general information, contact the FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, 202-501-4755.

SUPPLEMENTAL INFORMATION: (1) General Records Schedule: This final rule amends the FAR to reflect the language of FAR 4.705-2 exactly as it was written prior to the revision made by FAC 97-18, Item (4) (see the June 6, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 97-18, Miscellaneous Amendments"). FAC 97-18 changed the name of FAR 4.705-2 from "Pay Administration Records" to "Construction Contracts Pay Administration Records", and revised paragraph (a) to change the retention period for payroll sheets, registers, etc., from four years after generation of the records to "3 years after completion of contract, unless contract performance is the subject of enforcement action." However, it was been brought to the attention of the FAR Council that the FAC 97-18 change inadvertently resulted in longer record retention periods for contractors and subcontractors. Therefore, this final rule changes records retention period back to four years after generation of the records, and changes the title of FAR 4.705-2 back to "Pay Administration Records" to clarify that the records retention period applies to all contracts, not just construction contracts.

The introductory material to the final rule states, "for the period from June 6, 2000, through the effective date of this final rule [December 23, 2002], compliance with either the record retention requirements contained in this rule or the prior requirements published in FAC 97-18 is acceptable."

(2) Executive Order 13202, Preservation of Open Competition and Government Neutrality Towards Government Contractors' Labor Relations on Federal and Federally Funded Construction Projects: On May 16, 2001, FAC 97-26 was published, and it included as Item (2) an interim rule implementing Executive Order 13202, which prohibits the government and federally-funded construction projects from including requirements for or against affiliation with a labor organization as a condition for award of any contract or subcontract for construction or construction management services. In other words, the executive order prohibits the use of so-called "project labor agreements" on these construction projects. FAC 97-26 implemented the executive order by adding paragraph (d) to FAR 36.202, Specifications (see the May 16, 2001, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 97-26, Miscellaneous Amendments").

On March 7, 2002, enforcement of the interim rule was suspended pending resolution of litigation in the United States Court of Appeals for the District of Columbia Circuit (Building and Construction Trades Department, AFL-CIO v. Allbaugh). This "stay" was published in FAC 2001-05 (see the March 7, 2002, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 2001-05, Suspension of Implementation of Executive Order 13202 Prohibiting 'Project Labor Agreements'"). However, on July 12, 2002, the United States Court of Appeals decided in the government's favor, so this final rule terminates the stay and adopts the May 16, 2001, interim rule as final without change.

(3) Caribbean Basin Country End Products: This rule finalizes, with changes, the interim rule in FAC 2001-04 which removed Panama from the definition of "Caribbean Basin country" in FAR 25.003, Definitions, and FAR 52.225-5, Trade Agreements, to implement the December 14, 2001, determination by the United States Trade Representative (USTR) that Panama is not making substantial progress toward implementing and following the customs procedures required by the Caribbean Basin Trade Partnership Act, so its products no longer qualify for duty-free treatment. While no comments were received on the interim rule, the USTR published on July 12, 2002, a notice to reinstate Honduras as a "Caribbean Basin country" eligible for duty-free treatment. Therefore, FAR 25.003 and FAR 52.225-5 are further revised to add Honduras (for a similar action taken by DOD regarding its acquisitions under the Trade Agreements Act, see the October 25, 2002, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); Caribbean Basin Country -- Honduras").

(4) Financing Policies: This finalizes, with changes, the September 18, 2000, proposal to amend the FAR to permit the use of the performance-based payments type of financing on fixed-price contracts prior to definitization, and to establish a standard time period of 30 days that contractors have to pay their vendors after the contractors have billed the government for incurred vendor costs (see the September 18, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Financing Policies"). The proposal was that the FAR be amended as follows:

Four respondents submitted public comments to the proposed rule. As a result, the proposed rule is finalized with "ordinarily within 30 days of the submission of the contractor's progress payment request to the government" substituted for "not later than 30 days after the submission of the contractor's payment request to the government" in FAR 32.504(b)(2), FAR 52.216-7(b)(1) and (d)(2), FAR 52.232-7(b)(3) and (b)(4), and FAR 52.232-16(a)(2).

(5) Technical Amendments: This final rule makes two changes to the FAR:

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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