[Federal Register Volume 59, Number 33 (Thursday, February 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3514]


[[Page Unknown]]

[Federal Register: February 17, 1994]


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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1846 and 1852

RIN 2700-AB41

 

Increasing Contractor Liability on Research and Development 
Contracts

AGENCY: Office of Procurement, Procurement Policy Division, National 
Aeronautics and Space Administration.

ACTION: Proposed rule.

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SUMMARY: In accordance with Public Law 102-588, NASA has carried out an 
assessment of the allocation of risk, as currently prescribed by the 
Federal Acquisition Regulation, between NASA and its contractors for 
research and development contracts. This assessment included publishing 
a concept paper in the Federal Register (58 FR 16715, March 30, 1993) 
in order to solicit public and Federal comment on options for 
allocating risk for correction of defects in materials and workmanship 
or other failures to conform to contract requirements. As a result of 
public comment and consistent with the requirement of Public Law 102-
588 to initiate rule making, NASA is proposing certain changes to the 
clause, Inspection of Research and Development--Cost Reimbursement, and 
the associated prescription.
    Essentially these changes, modified as a result of public comment 
on the concept paper, are made to the current FAR coverage:
    (1) Allocate additional financial risks to the contractor;
    (2) Assign the Government the burden of proof when disallowing the 
costs of correction or replacement;
    (3) Define ``routine'' operations clearly; and
    (4) Prescribe the use of an advance agreement to identify routine 
operations, to the maximum extent practical.

DATES: Comments are due on or before April 18, 1994.

ADDRESSES: Submit comments to: Headquarters, NASA, Washington, DC 
20546, ATTN: CODE HP/MR. T. Deback.

FOR FURTHER INFORMATION CONTACT: Mr. T. Deback, Procurement Policy 
Division, (202) 358-0431.

SUPPLEMENTARY INFORMATION: 

Background

    The proposed clause, which would be used as a substitute for the 
clause at FAR 52.246-8, Inspection of Research and Development--Cost 
Reimbursement, for certain procurements, adds two situations under 
which the Contractor will bear additional financial responsibility to 
remedy failures to comply with the requirements of this contract: (1) 
The contractor did not apply best efforts toward the accomplishment of 
the research and development objectives of the contract, and (2) the 
contractor did not follow generally accepted industrial or engineering 
practices in performing routine operations. The contractor's liability 
will be limited to 50 percent of the cost to remedy the failure or 10 
percent of the contract value at the time the failure occurred, 
whichever is less. The proposed clause differs from the standard FAR 
clause in paragraphs (a) and (h). Current cost principles preclude the 
allowability of costs for insurance to cover these potential costs.
    If after evaluating public comments, NASA decides to adopt the 
revised clause proposed herein, NASA will also propose and appropriate 
FAR revision to cover the matter, as required by FAR 1.404.

Impact

    NASA certifies that this regulation will not have a significant 
economic effect on a substantial number of small entities under the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The regulation 
imposes no new burdens on the public within the ambit of the Paperwork 
Reduction Act, as implemented at 5 CFR part 1320.

List of Subjects in 48 CFR Parts 1846 and 1852

    Government procurement.
Deidre A. Lee,
Associate Administrator for Procurement.

    1. The authority citation for 48 CFR parts 1846 and 1852 continues 
to read as follows:

    Authority: 42 U.S.C. 2473(c)(1).

PART 1846--QUALITY ASSURANCE

    2. Subpart 1846.3 is added to read as follows:

Subpart 1846.3--Contract Clauses


1846.308-70  Cost reimbursement research and development contracts.

    (a) With the prior approval of the Procurement Officer, the 
contracting officer shall insert the clause at 1852.246-XX, Inspection 
of High Risk Research and Development--Cost Reimbursement, in lieu of 
the clause at (FAR) 48 CFR 52.246-8, in solicitations and contracts for 
research and development when (1) the primary objective of the contract 
is the delivery of end items other than designs, drawings, or reports, 
(2) a cost-reimbursement contract is contemplated, and (3) the 
estimated value of the contract is $50 million or more.
    (b) In connection with this clause, an advance agreement should be 
included in the contract which, to the maximum extent practicable, 
identifies those particular tasks and activities which are categorized 
as routine operations, as that term is defined in the clause at 
1852.246-XX, and those tasks and activities which embody the contract's 
research and development objectives. Routine operations include 
activities such as moving or packaging pieces of equipment, 
manufacturing standard parts, or conducting standardized tests. 
Research and development activities encompass tasks, methods, or 
technical approaches for which success in meeting the contract 
objectives cannot be reasonably assured.

PART 1852--SOLICITATION PROVISIONS AND CLAUSES

    3. Section 1852.246-XX is added to read as follows:


1852.246-XX  Inspection of High Risk Research and Development--Cost 
Reimbursement.

    As prescribed in 1846.308-70, insert the following clause:

Inspection of High Risk Research and Development--Cost Reimbursement 
(xxx 1994)

    (a) Definitions. Contractor's managerial personnel, as used in 
this clause, means the Contractor's directors, officers, managers, 
superintendents, or equivalent representatives who have supervision 
or direction of--
    (1) All or substantially all of the Contractor's business;
    (2) All or substantially all of the Contractor's operation at 
any one plant or separate location at which the contract is being 
performed; or
    (3) A separate and complete major industrial operation connected 
with performing this contract.
    Routine operation means a task or activity which is performed in 
accordance with customary or regular procedures and for which 
successful performance is reasonably assured. Routine operations may 
involve the performance of a service function or the fabrication of 
an item.
    Work, as used in this clause, includes data when the contract 
does not include the Warranty of Data clause.
    (b) The Contractor shall provide and maintain an inspection 
system acceptable to the Government covering the work under this 
contract. Complete records of all inspection work performed by the 
Contractor shall be maintained and made available to the Government 
during contract performance and for as long afterwards as the 
contract requires.
    (c) The Government has the right to inspect and test all work 
called for by the contract, to the extent practicable at all places 
and times, including the period of performance, and in any event 
before acceptance. The Government may also inspect the plant or 
plants of the Contractor or its subcontractors engaged in the 
contract performance. The Government shall perform inspections and 
tests in a manner that will not unduly delay the work.
    (d) If the Government performs any inspection or test on the 
premises of the Contractor or a subcontractor, the Contractor shall 
furnish and shall require subcontractors to furnish all reasonable 
facilities and assistance for the safe and convenient performance of 
these duties.
    (e) Unless otherwise provided in the contract, the Government 
shall accept work as promptly as practicable after delivery, and 
work shall be deemed accepted 90 days after delivery, unless 
accepted earlier.
    (f) At any time during contract performance, but no later than 6 
months (or such other time as may be specified in the contract) 
after acceptance of all of the end items (other than designs, 
drawings, or reports) to be delivered under the contract, the 
Government may require the Contractor to replace or correct work not 
meeting contract requirements. Time devoted to the replacement or 
correction of such work shall not be included in the computation of 
the above time period. Except as otherwise provided in paragraph (h) 
of this clause, the cost of replacement or correction shall be 
determined as specified in the Allowable Cost and Payment clause, 
but not additional fee shall be paid. The Contractor shall not 
tender for acceptance work required to be replaced or corrected 
without disclosing the former requirement for replacement or 
correction, and, when required, shall disclose the corrective action 
taken.
    (g)(1) If the Contractor fail to proceed with reasonable 
promptness to perform replacement or correction, the Government 
may--
    (i) By contract or otherwise, perform the replacement or 
correction, charge to the Contractor any increased cost, or make an 
equitable reduction in any fixed fee paid or payable under the 
contract;
    (ii) Require delivery of any undelivered articles and shall have 
the right to make an equitable reduction in any fixed fee paid or 
payable under the contract; or
    (iii) Terminate the contract for default.
    (2) Failure to agree on the amount of increased cost to be 
charged the Contractor or to the reduction in fixed fee shall be a 
dispute.
    (h)(1) Notwithstanding paragraphs (f) and (g) of this clause, 
the Government may at any time require the Contractor to remedy by 
correction or replacement, without cost to the Government, any 
failure to comply with the requirements of this contract, if the 
failure is due to:
    (i) Fraud, lack of good faith, or willful misconduct on the part 
of the Contractor's managerial personnel;
    (ii) The conduct of one or more of the Contractor's employees 
selected or retained by the Contractor after any of the Contractor's 
managerial personnel has reasonable grounds to believe that the 
employee is habitually careless or unqualified;
    (iii) The Contractor not applying best efforts toward the 
accomplishment of the research and development objectives of the 
contract (those for which success cannot be reasonably predicted at 
the time of contract award); or
    (iv) The Contractor not following generally accepted industrial 
or engineering practices in performing routine operations as part of 
contract performance.
    (2) The contractor's liability for failures due to causes listed 
in subparagraphs (h)(1) (iii) and (iv) is limited to the lesser of: 
(i) 50 percent of the cost to remedy the failure, or (ii) 10 percent 
of the contract value at the time the failure occurred.
    (i) This clause shall apply in the same manner to a corrected or 
replacement end item or components as to work originally delivered.
    (j) The Contractor has no obligation or liability under the 
contract to correct or replace articles not meeting contract 
requirements at time of delivery, except as provided in this clause 
or as may otherwise be specified in the contract.
    (k) Unless otherwise provided in the contract, the Contractor's 
obligations to correct or replace Government-furnished property 
shall be governed by the clause pertaining to Government property.

[FR Doc. 94-3514 Filed 2-16-94; 8:45 am]
BILLING CODE 7510-01-M