FedGovContracts.com

Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: May 22, 2003

SUBJECT: Federal Acquisition Circular (FAC) 2001-14, Miscellaneous Amendments

SOURCE: Federal Register, May 22, 2003, Vol. 68, No. 99, page 28077

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 2001-14 to amend the Federal Acquisition Regulation (FAR) in the following areas: (1) geographic use of the term "United States"; (2) miscellaneous cost principles; (3) prompt payment under cost- reimbursement contracts for services; (4) electronic signatures; (5) increased Federal Prison Industries, Inc. waiver threshold; (6) past performance evaluation of Federal Prison Industries, Inc. contracts; (7) contract terms and conditions required to implement statutes or executive orders -- commercial items; and (8) technical amendments.

EFFECTIVE DATES: All items are effective June 23, 2003, except for items (3) and (5), which are effective May 22, 2003.

Comments on the interim rule that is item (5) must be submitted on or before June 23, 2003.

ADDRESSES: Comments on item (5) must be submitted to General Services Administration, FAR Secretariat (MVA), 1800 F Street, NW, Room 4035, Attn: Laurie Duarte, Washington, DC 20405; or by e-mail to farcase.2003-001@gsa.gov. Cite "FAC 2001-14, FAR case 2003-001" in correspondence related to the interim rule.

FOR FURTHER INFORMATION CONTACT: The following analysts:

      Item (1), Cecelia Davis, 202-219-0202.

      Items (2) and (3), Edward Loeb, 202-501-1224.

      Items (4) and (6), Laura Smith, 202-501-7279.

      Item (5), Linda Nelson, 202-501-1900.

      Item (7), Victoria Moss, 202-501-4764.

For general information, contact the FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, 202-501-4755.

SUPPLEMENTAL INFORMATION: (1) Geographic Use of the Term "United States": This final rule amends the FAR to clarify the use of the term "United States" when used in a geographic sense. FAR 2.101, Definitions, defines "United States" as the 50 states and the District of Columbia. Where a wider area of applicability is intended, the term is redefined in the appropriate FAR part or subpart, or supplemented by listing the additional areas of applicability each time the term is used. For example, there are different definitions for "United States" in FAR Subpart 22.8, Equal Employment Opportunity; FAR Subpart 22.10, Service Contract Act of 1965; FAR Part 25, Foreign Acquisition; and FAR Subpart 47.4, Air Transportation by U.S.-Flag Carriers. These definitions are referenced in the FAR 2.101 definition of "United States."

On July 27, 2001, the FAR Council published a proposed rule to clarify the use of "United States" by substituting more consistent terminology. In addition, because the "Trust Territory of the Pacific Islands" no longer existed, and the term "possessions" was no longer as encompassing as it once was, these were proposed for deletion. No comments were received, so the proposed rule is converted to a final rule with only minor editorial changes (for more on the proposed rule, see the July 27, 2001, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Geographic Use of the Term "United States").

This final rule leaves the current FAR 2.101 definition of "United States" unchanged, but adds the following definitions to FAR 2.101 for use when appropriate:

In addition, the definition of "possessions" is removed from FAR 2.101, and the definition of "state and local taxes" is revised to read as follows: "taxes levied by the States, the District of Columbia, outlying areas of the United States, or their political subdivisions."


(2) Miscellaneous Cost Principles: This final rule amends FAR 31.205, Selected Costs, to delete the cost principle at FAR 31.205-45, Transportation costs, and to revise FAR 31.205-10, Cost of Money, FAR 31.205-28, Other Business Expenses; and FAR 31.205-48, Research and Development Costs, to clarify and simplify their cost principles.

On March 20, 2002, the FAR Council published a proposed rule to revise the FAR as follows:

Two comments were submitted regarding the proposed rule, and the proposed rule is finalized with two editorial changes:

EDITOR'S NOTE: For more on the proposed rule, see the March 20, 2002, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Miscellaneous Cost Principles."


(3) Prompt Payment Under Cost-Reimbursement Contracts for Services: This adopts as final the October 21, 2001, interim rule that requires an agency to pay an interest penalty whenever it makes an interim payment under a cost reimbursement contract for services more than 30 days after the agency receives a proper invoice from the contractor (see the October 21, 2001, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 2001-01, Miscellaneous Amendments", specifically item (3)).

The interim rule implemented the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398), Section 1010, Interest Penalties for Late Payment of Interim Payments Due Under Government Service Contracts, which requires agencies to pay an interest penalty whenever they make an interim payment under a cost-reimbursement contract for services more than 30 days after the agency receives a proper invoice for payment from the contractor. This was done by adding a paragraph (e) to FAR 32.905, Invoice Payments, that establishes the due date for making interim payments on cost-reimbursement contracts for services as 30 days after the date of receipt of a proper invoice.

No comments were received on the interim rule, so it is adopted as final without change. However, the interim rule stated that "the policy and clause apply to all covered contracts awarded on or after December 15, 2000...Agencies may apply the FAR changes made by this rule to contracts awarded prior to December 15, 2000, at their discretion...'' Subsequently, Section 1007 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107) removed that discretion by stating that this policy applies to cost-reimbursement contracts for services awarded before, on, or after December 15, 2000. Therefore, the applicability date of this final rule is revised to read as follows: "This final rule applies to cost-reimbursement contracts for services, irrespective of award date, if interim payments requests under such contracts are due on or after December 15, 2000. In no event may agencies pay late payment penalty interest for any delay in payment that occurred prior to December 15, 2000." (EDITOR'S NOTE: For more on the acquisition-related provisions of Public Law 107-107, see the January 2, 2002, FEDERAL CONTRACTS DISPATCH "Enactment of the National Defense Authorization Act for Fiscal Year 2002.")


(4) Electronic Signatures: Government Paperwork Elimination Act (Title XVII of Division C of Public Law 105-277), and Electronic Signatures in Global and National Commerce Act (E-SIGN) (Public Law 106-229) eliminate legal barriers to using electronic technology in business transactions, such as the formation and signing of contracts (for more on E-Sign, see the July 3, 2000, FEDERAL CONTRACTS DISPATCH "Electronic Signatures in Global and National Commerce Act 'Signed' Into Law").

To further government participation in electronic commerce when conducting government procurements, the FAR Council published on November 1, 2000, a proposed rule to revise the definitions in FAR 2.101 of "electronic commerce," "in writing" or "written", and "signature" or "signed" to permit electronic techniques, symbols, or signs. In addition, the following paragraph (d) was proposed for addition to FAR 4.502, Policy: "As required by the Government Paperwork Elimination Act (GPEA) (Title XVII of Division C of Public Law 105-277), by October 21, 2003, agencies must allow individuals or entities the option to submit information or transact with the agency electronically when practicable. The GPEA requirement includes execution of contracts and associated records using electronic signatures of the offeror or contractor and the agency" (for more on the proposed rule, see the November 1, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Electronic Signatures").

Twenty-five respondents submitted comments on the proposed rule. As a result of these comments, the FAR Council decided to make no changes to any of the definitions, and to reduce FAR 4.502(d) to the following sentence: "Agencies may accept electronic signatures and records in connection with government contracts."


(5) Increased Federal Prison Industries, Inc. Waiver Threshold: This interim rule revises FAR 8.606, Exceptions, to increase the Federal Prison Industries, Inc.'s (FPI) clearance exception threshold from $25 to $2,500, and to eliminate the requirement that delivery be within 10 days.

FPI is a mandatory acquisition program, and a clearance from FPI is required by FAR 8.605, Clearances, before supplies on FPI's schedule are acquired from other sources. However, FAR 8.606 provides five exceptions to the clearance requirement, including the exception in paragraph (e): "[when] orders are for listed items totaling $25 or less that require delivery within 10 days."

The FPI board of directors recently adopted a resolution increasing the blanket waiver threshold from $25 to $2,500, and eliminated the 10 day requirement. To implement the FPI resolution, this interim rule revises paragraph (e) to state "Orders are for listed items totaling $2,500 or less." Agencies may continue to consider and purchase products from FPI that are at or below $2,500, and agencies are still required to purchase products on FPI's schedule from FPI above the $2,500 threshold unless a clearance is obtained as required by FAR 8.605.


(6) Past Performance Evaluation of Federal Prison Industries, Inc. Contracts: This final rule removes the prohibition on evaluating FPI contract performance from FAR 42.1502, Policy ("agencies shall not evaluate performance for contracts awarded under Subpart 8.6 [Acquisitions from Federal Prison Industries, Inc.]"), thus permitting federal customers to rate FPI performance, compare FPI to private sector providers, and give FPI important feedback on previously awarded contracts.

A proposed rule was published August 29, 2002. Ten respondents submitted public comments (see the August 29, 2002, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Past Performance Evaluation of Federal Prison Industries Contracts"). Based on those comments, it was decided to finalize the proposed rule with minor changes to the proposed FAR 8.607, Evaluating FPI Performance, and paragraph (b) of FAR 42.1503, Procedures, to more clearly articulate for contracting officers that the clearance requirement in FAR 8.605 still applies, and that a negative performance evaluation can be used to support clearance requests.


(7) Contract Terms and Conditions Required to Implement Statute or Executive Orders -- Commercial Items: This final rule amends FAR 52.212-5, Contract Terms and Conditions Required to Implement Statute or Executive Orders -- Commercial Items, to update the clauses required to implement statute or executive orders that apply to commercial items.

FAR Part 12, Acquisition of Commercial Items, implements Title VIII of the Federal Acquisition Streamlining Act of 1994 (FASA) (Public Law 103-355). The regulations became effective on October 1, 1995, and several areas need updating and clarification. FAR 52.212-5, which lists the contract clauses that are required to implement statutes and executive orders that apply to commercial items procured under FAR Part 12 procedures, was one of those areas in need of updating.

A proposed rule was published March 20, 2002, to revise FAR 52.212-5 to add clauses implementing statutes enacted after FASA that contain civil or criminal penalties or that specifically cite their applicability to commercial items which are not already listed would be added to the list (for example, FAR 52.232-29, Terms for Financing of Purchases of Commercial Items, and FAR 52.222-19, Child Labor -- Cooperation with Authorities and Remedies (Executive Order 13126)); to add pre-FASA clauses and alternates that were inadvertently left off (such as FAR 52.219-7, Notice of Partial Small Business Set-Aside); and to add the date of each clause to identify what revision of the listed clause applies when this clause is incorporated into a contract (see the March 20, 2002, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Contract Terms and Conditions Required To Implement Statute or Executive Orders -- Commercial Items").

Two respondents submitted comments on the proposed rule, and both suggested revisions to FAR 52.212-5(e), to clarify the requirements for flowing-down clauses to subcontractors. Proposed FAR 52.212-5 had listed the six clauses required to be included in subcontracts. As a result of the comments, the proposed rule is finalized with the addition of language to paragraph (e) clarifying that the Contractor is not required to flow down any FAR clause, other than the six in the clause, in subcontracts for commercial items.


(8) Technical Amendments: The following technical amendments are made:


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.

Return to the Dispatches Library.

Return to the Main Page.