[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30658]


[Federal Register: December 28, 1994]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 15 and 52

[FAC 90-23; FAR Case 91-20; Item XI]
RIN 9000-AE72


Federal Acquisition Regulation; Notification of Ownership Changes

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

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council (CAAC) and the Defense 
Acquisition Regulations Council (DARC) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to add the clause, 
Notification of Ownership Changes, to require contractors to notify the 
Government of changes in contractor ownership and of their effects, and 
to emphasize existing recordkeeping requirements. This regulatory 
action was not subject to Office of Management and Budget (OMB) review 
under Executive Order 12866, dated September 30, 1993.

EFFECTIVE DATE: February 27, 1995.

FOR FURTHER INFORMATION CONTACT: Mr. Jeremy Olson at (202) 501-3221 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 FAC 90-23, FAR case 91-20.

SUPPLEMENTARY INFORMATION:

A. Background

    A proposed rule was published in the Federal Register at 56 FR 
23762, May 23, 1991, because the CAAC and the DARC determined that the 
FAR did not contain sufficient safeguards to assure that, consistent 
with FAR 31.205-52, Asset valuations resulting from business 
combinations, Government contracts do not absorb increased costs 
resulting from changes in contractor ownership. This rule reflects a 
resolution agreement between the Director of Defense Procurement and 
the DOD Inspector General under Audit Report 89-095 dated July 26, 
1989, on the cost impact to contracts as a result of business 
combinations.
    The rule is intended to facilitate enforcement of the cost 
principle at FAR 31.205-52 on allowability of costs resulting from 
business combinations by enabling audit determinations that cost 
increases related to contractor ownership changes are not charged to 
Government contracts. A contract clause is added at 52.215-40, 
Notification of Ownership Changes, which requires contractors to 
provide timely notice to the Government and to retain and maintain 
asset inventory records through successive changes in contractor 
ownership. A clause prescription is added at 15.804-8(g) to require use 
of the clause in all solicitations and contracts for which certified 
cost or pricing data are expected to be required or for which any 
preaward or postaward cost determination will be subject to FAR Subpart 
31.2.
    While several editorial changes were made in the final rule, the 
major difference between the final rule and the proposed rule is that 
the final rule requires notification in instances of cost decreases as 
well as cost increases.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities under the Regulatory Flexibility Act, 5 U.S.C. 
601, et seq., because an analysis of data available for fiscal years 
1989 through 1991 reveals that, in the Department of Defense, the 
number of contract actions awarded to small businesses which required 
the submission of certified cost or pricing data averaged less than 1 
percent of the total number of small business actions during the 3-year 
period. In other words, during the 3-year period, the majority of 
actions awarded to small businesses were awarded on a competitive, 
fixed-price basis, for which the submission of cost or pricing data is 
not required and the cost principles do not apply.
    For affected contractors, whenever a change in contractor ownership 
occurs or is pending, the rule only requires contractors to retain and 
maintain asset inventory records already required to be maintained by 
generally accepted accounting principles (GAAP) and rules promulgated 
by the Cost Accounting Standards Board. As virtually all contractors' 
accounting systems are automated, any incremental effort and cost will 
likely be nominal. Similarly, the additional requirement for 
contractors to notify the Government, in writing, of a pending or 
completed ownership change imposes no significant administrative burden 
or complexity. No comments on any aspect of the subject were received 
from small entities.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (Public Law 96-511) is deemed to apply 
because the final rule contains information collection requirements. 
Accordingly, a request for extension of an approval of the information 
collection requirements concerning Notification of Ownership Changes, 
OMB Control Number 9000-0115, was submitted to OMB under 44 U.S.C. 
3501, et seq., and approved through September 30, 1997. Public comments 
concerning this request were invited through a Federal Register notice 
published at 59 FR 36169, July 15, 1994.

List of Subjects in 48 CFR Parts 15 and 52

    Government procurement.

    Dated: December 7, 1994.
Albert A. Vicchiolla,
Director, Office of Federal Acquisition Policy.

    Therefore, 48 CFR parts 15 and 52 are amended as set forth below:
    1. The authority citation for 48 CFR parts 15 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 15--CONTRACTING BY NEGOTIATION

    2. Section 15.804-8 is amended by adding paragraph (g) to read as 
follows:


15.804-8  Contract clauses.

* * * * *
    (g) Notification of ownership changes. The contracting officer 
shall insert the clause at 52.215-40, Notification of Ownership 
Changes, in solicitations and contracts for which it is contemplated 
that certified cost or pricing data will be required or for which any 
preaward or postaward cost determination will be subject to subpart 
31.2.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    3. Section 52.215-40 is added to read as follows:


52.215-40  Notification of ownership changes.

    As prescribed in 15.804-8(g), insert the following clause:

Notification of Ownership Changes (Feb. 1995)

    (a) The Contractor shall make the following notifications in 
writing:
    (1) When the Contractor becomes aware that a change in its 
ownership has occurred, or is certain to occur, which could result 
in changes in the valuation of its capitalized assets in the 
accounting records, the Contractor shall notify the Administrative 
Contracting Officer (ACO) within 30 days.
    (2) The Contractor shall also notify the ACO within 30 days 
whenever changes to asset valuations or any other cost changes have 
occurred or are certain to occur as a result of a change in 
ownership.
    (b) The Contractor shall: (1) maintain current, accurate, and 
complete inventory records of assets and their costs; (2) provide 
the ACO or designated representative ready access to the records 
upon request; (3) ensure that all individual and grouped assets, 
their capitalized values, accumulated depreciation or amortization, 
and remaining useful lives are identified accurately before and 
after each of the Contractor's ownership changes; and (4) retain and 
continue to maintain depreciation and amortization schedules based 
on the asset records maintained before each Contractor ownership 
change.
    (c) The Contractor shall include the substance of this clause in 
all subcontracts under this contract which meet the applicability 
requirement of FAR 15.804-8(g).

(End of clause)

[FR Doc. 94-30658 Filed 12-27-94; 8:45 am]
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