[Federal Register Volume 59, Number 242 (Monday, December 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31020]


[[Page Unknown]]

[Federal Register: December 19, 1994]


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Part VI

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________



48 CFR Parts 42 and 52




Federal Acquisition Regulation; Contractor Overhead Certification; 
Proposed Rule
DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 42 and 52

[FAR Case 94-752]

 
Federal Acquisition Regulation; Contractor Overhead Certification

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule is issued pursuant to the Federal 
Acquisition Streamlining Act of 1994 (the Act) to implement the 
requirements for contractor certification of indirect costs. Section 
2151 of the Act amended Section 306 of the Federal Property and 
Administrative Services Act of 1949 (41 U.S.C. 256). This provision 
extended to the civilian agencies the same certification of indirect 
costs which is currently applicable to Department of Defense (DoD) 
contracts, pursuant to 10 U.S.C. 2324(h). This regulatory action was 
not subject to Office of Management and Budget review under Executive 
Order 12866, dated September 30, 1993.

DATES: Comments should be submitted on or before February 17, 1995 to 
be considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (VRS), 18th & F 
Streets, NW, Room 4037, Washington, DC 20405.
    Please cite FAR case 94-752 in all correspondence related to this 
case.

FOR FURTHER INFORMATION CONTACT: Mr. Clarence Belton, Cost Principles 
Team Leader, at (703) 602-2357 in reference to this FAR case. For 
general information, contact the FAR Secretariat, Room 4037, GS 
Building, Washington, DC 20405 (202) 501-4755. Please cite FAR case 94-
752.

SUPPLEMENTARY INFORMATION:

A. Background

    The Act, Pub. L. 103-355, provides authorities that streamline the 
acquisition process and minimize burdensome government-unique 
requirements. Major changes that can be expected in the acquisition 
process as a result of the Act's implementation include changes in the 
areas of Commercial Item Acquisition, Simplified Acquisition 
Procedures, the Truth in Negotiations Act, and introduction of the 
Federal Acquisition Computer Network (FACNET).
    This notice announces FAR revisions developed under FAR case 94-
752, which was based on provision in the Act that extended to the 
civilian agencies the same certification of indirect costs which is 
currently applicable to DoD contracts, pursuant to 10 U.S.C. 2324(h).
    The FAR Council is interested in an exchange of ideas and opinions 
with respect to the regulatory implementation of the Act. For that 
reason, the FAR Council is conducting a series of public meetings. 
However, the FAR Council has not scheduled a public meeting on this 
rule (FAR case 94-752) because of the clarity and non-controversial 
nature of the rule. If the public believes such a meeting is needed 
with respect to this rule, a letter requesting a public meeting and 
outlining the nature of the requested meeting shall be submitted to and 
received by the FAR Secretariat (see ADDRESSES caption, above) on or 
before January 18, 1995. The FAR Council will consider such requests in 
determining whether a public meeting on this rule should be scheduled.

B. Regulatory Flexibility Act

    This proposed rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the 
percentage of actions awarded to small business that will be affected 
by this rule is estimated to be less than 1% of the total of such 
actions. Most actions awarded to small business are firm-fixed price 
actions awarded on a competitive basis. The cost principles and 
requirements to submit indirect cost rate proposals generally apply 
only when certified cost or pricing data are required. The vast 
preponderance of actions awarded to small business do not require 
submittal of either cost or pricing data nor an indirect cost rate 
proposal. An Initial Regulatory Flexibility Analysis has, therefore, 
not been performed. Comments from small entities concerning the 
affected FAR subparts will be considered in accordance with 5 U.S.C. 
610 of the Act. Such comments must be submitted separately and should 
cite 5 U.S.C. 601, et seq. (FAR case 94-752), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose additional recordkeeping or 
information collection requirements, or collections of information from 
offerors, contractors, or members of the public which require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

List of Subjects in 48 CFR Parts 42 and 52

    Government procurement.

    Dated: December 13, 1994.
Capt. Barry L. Cohen, SC, USN,
Project Manager for the Implementation of the Federal Acquisition 
Streamlining Act of 1994.

    Therefore, it is proposed that 48 CFR Parts 42 and 52 be amended as 
set forth below:
    1. The authority citation for 48 CFR Parts 42 and 52 continues to 
read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 42--CONTRACT ADMINISTRATION


42.703-1  General.

    3. Section 42.703-1 is added as a heading to read as set forth 
above.
    4. Section 42-703-2 is added to read as follows:


42.703-2  Certificate of indirect costs.

    (a) General. In accordance with 10 U.S.C. 2324(h) and 41 U.S.C. 
256(h), a proposal shall not be accepted and no agreement shall be made 
to establish billing rates or final indirect cost rates unless the 
costs have been certified by the contractor using the certificate of 
indirect costs at 52.242-XX, Certification of Indirect Costs, or a 
similar clause from an executive agency's supplement to the FAR.
    (b) Waiver of certification. (1) The agency head, or designee, may 
waive the certification requirement when--
    (i) It is determined to be in the interest of the United States; 
and
    (ii) The reasons for the determination are put in writing and made 
available to the public.
    (2) A waiver may be appropriate for a contract with--
    (i) A foreign government or international organization, such as a 
subsidiary body of the North Atlantic Treaty Organization;
    (ii) A state or local government subject to OMB Circular A-87;
    (iii) An educational institution subject to OMB Circular A-21; and
    (iv) A nonprofit organization subject to OMB Circular A-122.
    (c) Failure to certify. (1) If the contractor has not certified its 
proposal for billing rates or indirect cost rates and a waiver is not 
appropriate, the contracting officer shall unilaterally establish the 
rates if they are necessary for continuation of the contract.
    (2) Rates established unilaterally should be--
    (i) Based on audited historical data or other available data as 
long as unallowable costs are excluded; and
    (ii) Set low enough to ensure that potentially unallowable costs 
will not be reimbursed.-
    (d) False certification. The contracting officer should consult 
with legal counsel to determine appropriate action when a contractor 
certificate of indirect costs is thought to be false.
    (e) Penalties for unallowable costs. 10 U.S.C. 2324(a) through (d) 
and 41 U.S.C. 256(a) through (d) prescribe penalties for submission of 
unallowable costs in final indirect cost rate proposals (see Subpart 
42.709 for penalties and contracting officer responsibilities).
    (f) Contract clause. The clause at 52.242-XX (or a similar clause 
from an executive agency's supplement) shall be incorporated into all 
solicitations and contracts which provide for---
    (1) Interim reimbursement of indirect costs;-
    (2) Establishment of final indirect cost rates; or-
    (3) Contract financing that includes interim payment of indirect 
costs, e.g., progress payments based on cost (48 CFR part 32, subpart 
32.5) or progress payments based on percentage or stage of completion.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES-

    7. Section 52.242-XX is added to read as follows:


52.242-XX  Certification of Indirect Costs.-

    As prescribed in 42.703-2(f), insert the following clause:

Certification of Indirect Costs (Date)-

    (a) The Contractor shall---
    (1) Certify any proposal to establish or modify billing rates or 
to establish final indirect cost rates;-
    (2) Use the format in paragraph (c) of this clause to certify; 
and-
    (3) Have the certificate signed by an individual of the 
Contractor's organization at a level no lower than a vice president 
or chief financial officer of the business segment of the Contractor 
that submits the proposal.-
    (b) Failure by the Contractor to submit a signed certificate, as 
described in this clause, shall result in payment of indirect costs 
at rates unilaterally established by the Government.-
    (c) The certificate of indirect costs shall read as follows:

Certificate of Indirect Costs (Date)

    This is to certify that to the best of my knowledge and belief:
    1. I have reviewed this indirect cost proposal;
    2. All costs included in this proposal ----(identify proposal 
and date)---- to establish billing or final indirect cost rates for 
----(identify period covered by rate)---- are allowable in 
accordance with the requirements of contracts to which they apply 
and with the cost principles of the Federal Acquisition Regulation 
(FAR) and its supplements applicable to those contracts;
    3. This proposal does not include any costs which are 
unallowable under applicable cost principles of the FAR or its 
supplements, including, but not limited to: advertising and public 
relations costs, contributions and donations, entertainment costs, 
fines and penalties, lobbying costs, defense of fraud proceedings, 
and goodwill; and
    4. All costs included in this proposal are properly allocable to 
Government contracts on the basis of a beneficial or causal 
relationship between the expenses incurred and the contracts to 
which they are allocated in accordance with applicable acquisition 
regulations.
    I declare under penalty of perjury that the foregoing is true 
and correct.

Firm:------------------------------------------------------------------

Signature:-------------------------------------------------------------

Name of Certifying Official:-------------------------------------------

Title:-----------------------------------------------------------------

Date of Execution:-----------------------------------------------------

(End of clause)

[FR Doc. 94-31020 Filed 12-16-94; 8:45 am]
BILLING CODE 6820-34-P