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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: November 14, 2003

SUBJECT: Defense Federal Acquisition Regulation Supplement (DFARS); Provisional Award Fee Payments

SOURCE: Federal Register, November 14, 2003, Vol. 68, No. 220, page 64561

AGENCIES: Department of Defense (DOD)

ACTION: Final Rule

SYNOPSIS: DOD is amending DFARS 216.405-2, Cost-Plus-Award-Fee Contracts, to permit provisional award fee payments under cost-plus-award-fee (CPAF) contracts to successfully performing contractors prior to a final evaluation for the period.

EDITOR'S NOTE: For more on the proposed rule being finalized, see the November 22, 2002, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); Provisional Award Fee Payments."

DATES: The rule is effective January 13, 2004, and will apply to solicitations issued on or after that date. Contracting officers may, at their discretion, apply these changes to solicitations issued before January 13, 2004, provided award of the resulting contract(s) occurs on or after January 13, 2004. Contracting officers may, at their discretion, apply the changes to any existing contract with appropriate consideration. (EDITOR'S NOTE: The DFARS hyperlinks below are not active until January 13, 2004. Until January 13, 2004, view the DFARS changes at http://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/2003/03-28442.htm).

FOR FURTHER INFORMATION CONTACT: Ted Godlewski, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; 703-602-2022; fax: 703-602-0350.

SUPPLEMENTAL INFORMATION: Cost-reimbursement contracts containing award fees typically provide for an award fee payment no more frequently than every six months. This can place an undue financial burden on an otherwise successfully performing contractor. Therefore, on November 22, 2002, DOD published a proposed rule that would revise DFARS 216.405-2 to add paragraph (b)(3) to provide for the payment of provisional award fees in a CPAF contract within an evaluation period, prior to an interim or final evaluation for that period. Seven respondents submitted comments on the proposed rule, and DOD is adopting it as final with two clarifying changes (the differences between the proposed and final rules are noted).

The new DFARS 216.405-2(b)(3) defines a provisional award fee payment as "a payment made within an evaluation period prior to a final evaluation for that period." (EDITOR'S NOTE: The proposed rule had defined a provisional award fee payment as "a payment made within an evaluation period prior to an interim or final evaluation for that period." A respondent thought that the term "interim evaluation" could be misinterpreted to mean that, when provisional payments are used, contracting officers must provide for payments prior to any interim evaluation period. DOD states in the introduction to the final rule that the rule is intended to provide flexibility to contracting officers in determining when to permit provisional payments, rather than requiring such payments prior to interim evaluation periods. Therefore, the words "interim or" are removed.)

Paragraph (b)(3) permits the contracting officer to include provisional award fee payments in a CPAF contract on a case-by-case basis if the payments:

EDITOR'S NOTE: A training module on the use of provisional award fee payments is available on the Defense Acquisition University (DAU) website at http://www.dau.mil under "Continuous Learning."

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

Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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