[Federal Register Volume 60, Number 22 (Thursday, February 2, 1995)]
[Proposed Rules]
[Pages 6602-6604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2540]




[[Page 6601]]

_______________________________________________________________________

Part III

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________



48 CFR Parts 28, 32, and 52



Federal Acquisition Regulation; Subcontractor Payments; Proposed Rule

  Federal Register / Vol. 60, No. 22 / Thursday, February 2, 1995 / 
Proposed Rules  

[[Page 6602]]


DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 28, 32, and 52

[FAR Case 94-762]
RIN 9000-AG35


Federal Acquisition Regulation; Subcontractor Payments

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule is issued pursuant to the Federal 
Acquisition Streamlining Act of 1994, Public Law 103-355 (the Act). The 
Federal Acquisition Regulatory Council is considering amending the 
Federal Acquisition Regulation (FAR) to implement Sections 2091 and 
8105 of the Act which address subcontractor payments, requests for 
information, and bonds. This regulatory action was subject to Office of 
Management and Budget review under Executive Order 12866, dated 
September 30, 1993.

DATES: Comments should be submitted on or before April 3, 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 94-762 in all correspondence related to this 
case.

FOR FURTHER INFORMATION CONTACT:  Mr. John S. Galbraith, Finance/
Payment Team Leader, at (703) 697-6710, 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 
94-762.

SUPPLEMENTARY INFORMATION:

A. Background

    The Federal Acquisition Streamlining Act of 1994, Public Law 103-
355 (the Act), 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). In order to promptly achieve the benefits of the 
provisions of the Act, the Government is issuing implementing 
regulations on an expedited basis. We believe prompt publication of 
proposed rules provides the public the opportunity to participate more 
fully in the process of developing regulations.
    This notice announces FAR revisions developed under FAR case 94-
762. The following sections of the Federal Acquisition Streamlining Act 
are implemented by this proposed rule:
    Section 2091 of the Act changed section 806 subsection (c) of the 
Fiscal Years 1992 and 1993 Defense Authorization Act by striking the 
existing subsection (c) and inserting a new subsection (c). The 
stricken words had permitted the FAR Council to substitute FAR coverage 
for coverage otherwise required from the Secretary of Defense. The 
substituted words require the FAR Council to place in the FAR, for 
Government-wide applicability, the coverage required of the Secretary 
of Defense.
    Additionally, Section 8105 of the Act changed section 806 of the 
Fiscal Years 1992 and 1993 Defense Authorization Act by striking the 
existing subsection (b) and inserting a new subsection (b). The 
stricken words dealt with deadlines for the implementation in 
regulations of the statutory requirements, and that coverage is not 
longer pertinent. The substituted language creates an exemption from 
the requirements of the statute for the acquisition of commercial 
items. Therefore, the clause prescription at FAR 28.106-4(b) has been 
revised to reflect this exemption.
    The proposed rule is, except for minor adjustments, the same 
language which was previously in the Defense Federal Acquisition 
Regulation Supplement, at DFARS 228.106-4-70, 228.106-6, 232.970, and 
252.228-7006.
    It should be noted that Section 4104(b) of the Act concerning 
subcontractor payments under smaller construction contracts is being 
addressed in a separate case. This case, 94-762, addresses only the 
changes required by Sections 2091 and 8105. It should also be noted 
that the duplication of responsibilities for furnishing copies of bonds 
in 28.106-6(d)(3) and the clause in 52.228-00 is intentional. The 
statute assigns this responsibility to both the Government and 
contractor. Finally, the language in 32.112-1(c) concerning 
``administrative and other remedial action'' deliberately does not go 
into detail as to what these are. The specifics of these areas and 
especially the regulations and procedures are peculiar to each agency. 
The wording is derived from the underlying statute.
    In addition to the changes proposed here, there are changes being 
proposed to FAR Part 32 by other cases. FAR Subpart 32.1 (which will 
include the proposed 32.112) will apply only to purchases of non-
commercial items. This will give effect to the exclusion provided for 
in Section 8105 of the Act. Coverage concerning financing and payment 
for purchases of commercial items will be provided in its own Subpart 
32.2. It should also be noted that purchases of construction are not 
commercial purchases under the FAR.
    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 94-762) 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) on or before 
March 6, 1995.
    The FAR Council will consider such requests in determining whether 
a public meeting on this rule should be scheduled.

B. Regulatory Flexibility Act

    The proposed rule may 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., although it is not 
possible to estimate the number of Federal contractors or 
subcontractors that will be affected. A previous DOD analysis estimated 
that, based on data available for Fiscal Year 1991, less than 20 
percent of all, or a total of 1,100 small business construction 
contractors under DOD construction contracts would have been impacted. 
The requirement to provide a copy of the payment bond to prospective 
subcontractors and suppliers applies to all businesses that enter into 
a construction prime contract which is subject to the Miller Act (40 
U.S.C. 270a-270d). An Initial Regulatory Flexibility Analysis (IFRA) 
has been prepared and submitted to the Chief Counsel for Advocacy of 
the Small Business Administration. The IRFA states that it is 
impossible to accurately 

[[Page 6603]]
estimate the number of small businesses that prospectively will hold 
Federal construction contracts subject to the Miller Act and 
subsequently, the number of prospective subcontractors or suppliers 
that will request a copy of the payment bond. However, a previous DOD 
analysis estimated that the previous DOD-only equivalent rule would 
have impacted less than 20 percent of all small businesses that would 
have held DOD construction contracts subject to the Miller Act.
    A copy of the IRFA may be obtained from the FAR Secretariat at the 
address given under the ADDRESSES caption. Comments are invited. 
Comments from small entities concerning the affected FAR parts will 
also be considered in accordance with section 610 of the Act. Such 
comments must be submitted separately and should cite FAR Case 94-762 
in all correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 96-511) is deemed to apply 
because the proposed rule contains information collection requirements. 
Accordingly, a request for approval of a new information collection 
requirement concerning Subcontractor Payments is being submitted to the 
Office of Management and Budget under 44 U.S.C. 3501, et seq. Public 
comments concerning this request will be invited through a subsequent 
Federal Register notice.
List of Subjects in 48 CFR Parts 28, 32, and 52

    Government procurement.

    Dated: January 27, 1995.
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 28, 32, and 52 be 
amended as set forth below:-
    1. The authority citation for 48 CFR Parts 28, 32, 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 28--BONDS AND INSURANCE-

    2. Section 28.106-4 is amended by designating the existing text as 
paragraph (a) and adding (b) to read as follows:


28.106-4  Contract clause.

* * * * *-
    (b) In accordance with Section 806(a)(2) of Pub. L. 102-190, as 
amended by Sections 2091 and 8105 of the Federal Acquisition 
Streamlining Act of 1994, Pub. L. 103-355, the contracting officer 
shall insert the clause at 52.228-00, Prospective Subcontractor 
Requests for Bonds, in solicitations and contracts with respect to 
which a payment bond will be furnished pursuant to the Miller Act (see 
28.102-1), except for contracts for the acquisition of commercial items 
as defined in 48 CFR part 12.
    3. Section 28.106-6 is amended by adding paragraph (d) to read as 
follows:


28.106-6  Furnishing information.

* * * * *-
    (d) Section 806(a)(2) of Pub. L. 102-190, as amended by Sections 
2091 and 8105 of the Federal Acquisition Streamlining Act of 1994, Pub. 
L. 103-355, requires that the Federal Government provide subcontractors 
information on payment bonds under contracts for other than commercial 
items as defined in 48 CFR part 12. Upon the written or oral request of 
a subcontractor/supplier, or prospective subcontractor/supplier, under 
a contract with respect to which a payment bond has been furnished 
pursuant to the Miller Act, the contracting officer shall promptly 
provide to the requester, either orally or in writing, as appropriate, 
any of the following:-
    (1) Name and address of the surety or sureties on the payment 
bond.-
    (2) Penal amount of the payment bond.-
    (3) Copy of the payment bond. The contracting officer may impose 
reasonable fees to cover the cost of copying and providing a copy of 
the payment bond.

PART 32--CONTRACT FINANCING-

    4. Sections 32.112, 32.112-1 and 32.112-2 are added to read as 
follows:


32.112  Payment of subcontractors under contracts for non-commercial 
items.


32.112-1  Subcontractor assertions of nonpayment.-

    (a) In accordance with Pub. L. 102-190, title VIII, section 
806(a)(4) as amended by Sections 2091 and 8105 of the Federal 
Acquisition Streamlining Act of 1994, Pub. L. 103-355, upon the 
assertion by a subcontractor or supplier of a Federal contractor that 
the subcontractor or supplier has not been paid in accordance with the 
payment terms of the subcontract, purchase order, or other agreement 
with the prime contractor, the contracting officer may determine---
    (1) For a construction contract, whether the contractor has made---
    (i) Progress payments to the subcontractor or supplier in 
compliance with chapter 39 of title 31, United States Code (Prompt 
Payment Act); -
    (ii) Final payment to the subcontractor of supplier in compliance 
with the terms of the subcontract, purchase order, or other agreement 
with the prime contractor;-
    (2) For a contract other than construction, whether the contractor 
has made progress payments, final payments, or other payments to the 
subcontractor or supplier in compliance with the terms of the 
subcontract, purchase order, or other agreement with the prime 
contractor;-
    (3) For any contract, whether the contractor's certification of 
payment of a subcontractor or supplier accompanying its payment request 
to the Government is accurate.-
    (b) If, in making the determination in subparagraphs (a)(1) and (3) 
of this section, the contracting officer finds the prime contractor is 
not in compliance, the contracting officer may---
    (1) Encourage the contractor to make timely payment to the 
subcontractor or supplier; or
    (2) If authorized by the applicable payment clauses, reduce or 
suspend progress payments to the contractor.-
    (c) If the contracting officer determines that a certification 
referred to in paragraph (a)(4) of this section is inaccurate in any 
material respect, the contracting officer shall initiate administrative 
or other remedial action.


32.112-2  Subcontractor requests for information.-

    (a) In accordance with Pub. L. 102-190, title VIII, section 
806(a)(1) as amended by Sections 2091 and 8105 of the Federal 
Acquisition Streamlining Act of 1994, Pub. L. 103-355, upon the request 
of a subcontractor or supplier under a Federal contract for a non-
commercial purchase, the contracting officer shall promptly advise the 
subcontractor or supplier as to---
    (1) Whether the prime contractor has submitted requests for 
progress payments or other payments under the contract to the Federal 
Government; and-
    (2) Whether final payment under the contract has been made by the 
Federal Government to the prime contractor.-
    (b) This subsection does not apply to matters that are---
    (1) Specifically authorized under criteria established by an 
Executive order to be kept classified in the interest of national 
defense or foreign policy; and-
    (2) Property classified pursuant to such Executive order (see 5 
U.S.C. 552(b)(1)).

[[Page 6604]]


PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES-

    6. Section 52.228-00 is added to read as follows:


52.228-00  Prospective Subcontractor Requests for Bonds.-

    As prescribed in 28.106-4, use the following clause:

PROSPECTIVE SUBCONTRACTOR REQUESTS FOR BONDS (DATE)--

    In accordance with section 806(a)(3) of Pub. L. 102-190, as 
amended by Sections 2091 and 8105 of the Federal Acquisition 
Streamlining Act of 1994, Pub. L. 103-355, upon the request of a 
prospective subcontractor or supplier offering to furnish labor or 
material for the performance of this contract for which a payment 
bond has been furnished to the Government pursuant to the Miller 
Act, the Contractor shall promptly provide a copy of such payment 
bond to the requester.

(End of clause)

[FR Doc. 95-2540 Filed 2-1-95; 8:45 am]
BILLING CODE 6820-34-P