[Federal Register Volume 60, Number 51 (Thursday, March 16, 1995)]
[Proposed Rules]
[Pages 14340-14346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6438]




[[Page 14339]]

_______________________________________________________________________

Part III

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________



48 CFR Part 1 et al.



Federal Acquisition Regulation; Special Contracting Methods; Task and 
Delivery Order Contracts; Proposed Rules

  Federal Register / Vol. 60, No. 51 / Thursday, March 16, 1995 / 
Proposed Rules   
[[Page 14340]] 

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 7, 17, 37, 49, and 52

[FAR Case 94-710]


Federal Acquisition Regulation; Special Contracting Methods

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 (the Act), Sections 1022 and 1072 
on multiyear contracting; Section 1074 on the Economy Act; Sections 
1503, 1504, 1552, and 1553 on the delegation of procurement functions 
and determinations and decisions; and Section 6002 on contracting 
functions performed by Federal personnel. This regulatory action is 
subject to Office of Management and Budget review under Executive Order 
12866, dated September 30, 1993.

DATES: Comments should be submitted on or before May 15, 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, Telephone: (202) 501-
4755.
    Please cite FAR case 94-710 in all correspondence related to this 
case.

FOR FURTHER INFORMATION CONTACT:
Mr. Ed McAndrew, Special Contracting Team Leader, at (202) 501-1474 in 
reference to this FAR case. For general information, contact the FAR 
Secretariat, Room 4037, GSA Building, Washington, DC 20405, (202) 501-
4755. Please cite FAR case 94-710.

SUPPLEMENTARY INFORMATION:

A. Background

    The Federal Acquisition Streamlining Act of 1994 (Pub. L. 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).

FAR Case 94-710

    This notice announces FAR revisions developed under FAR case 94-710 
which was based on provisions in the Act which provided for multiple 
awards under certain circumstances; permitted civilian agencies to 
enter into multiyear contracts under certain circumstances; and for 
agencies to use the Economy Act authority to acquire supplies and 
services from another agency. Other provisions of the statute were 
minor in nature and were not as important as the aforementioned 
provisions.
    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 94-710) because of the clarifying 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 April 17, 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 changes 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., because promulgation 
of this policy is expected to improve access to the procurement process 
for small and disadvantaged businesses, and to broaden the scope of 
competitive acquisitions for which small businesses may be eligible. 
There is a potential negative impact resulting from consolidation of 
contract requirements under a multiyear contract; however, it is 
expected that this negative impact could be mitigated by an increase in 
the opportunities for small businesses to receive subcontracts. The 
rule will place no limit on small businesses' ability to participate. 
An Initial Regulatory Flexibility Analysis (IRFA) has been prepared and 
will be provided to the Chief Counsel for Advocacy for the Small 
Business Administration. Comments from small entities concerning the 
affected FAR subpart will be considered in accordance with 5 U.S.C. 
610. Such comments must be submitted separately and should cite 5 
U.S.C. 601, et seq. (FAR Case 94-710), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose 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 1, 7, 17, 37, 49 and 52

    Government procurement.

    Dated: March 9, 1995.
Barry Cohen,
Project Manager for the Implementation of the Federal Acquisition 
Streamlining Act of 1994.

    Therefore, it is proposed that 48 CFR Parts 1, 7, 17, 37, 49 and 52 
be amended as set forth below:

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

    1. The authority citation for 48 CFR Parts 1, 7, 17, 37, 49 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).

    2. Section 1.601 is revised to read as follows:


1.601  General.

    (a) Unless specifically prohibited by another provision of law, 
authority and responsibility to contract for authorized supplies and 
services are vested in the agency head. The agency head may establish 
contracting activities and delegate broad authority to manage the 
agency's contracting functions in accordance with agency procedures to 
heads of such contracting activities. Contracts may be entered into and 
signed on behalf of the government only by contracting officers. In 
some agencies, a relatively small number of high level officials are 
designated contracting officers solely by virtue of their positions. 
Contracting officers below the level of a head of a contracting 
activity shall be selected and appointed under 1.603.
    (b) The heads of two or more agencies may by agreement--
    (1) Delegate acquisition functions and assign acquisition 
responsibilities from one agency to another of those agencies or to an 
officer or civilian employee of those agencies; or [[Page 14341]] 
    (2) Create joint or combined officers to exercise acquisition 
functions and responsibilities.

PART 7--ACQUISITION PLANNING

    3. Section 7.103 is amended by adding paragraph (m) to read as 
follows:


7.103  Agency-head responsibilities.

* * * * *
    (m) Making a determination, prior to issuance of a solicitation for 
advisory and assistance services involving the analysis and evaluation 
of proposals submitted in response to a solicitation, that a sufficient 
number of covered personnel with the training and capability to perform 
an evaluation and analysis of proposals submitted in response to a 
solicitation are not readily available within the agency or from 
another Federal agency in accordance with the guidelines at 48 CFR 
(FAR) 37.204. Covered personnel who may be paid for evaluation or 
analysis are:
    (1) An employee means an officer or an individual who is appointed 
in the civil service by one of the following acting in an official 
capacity; (i) the President; (ii) a Member of Congress; (iii) a member 
of the uniformed services; (iv) an individual who is an employee; (v) 
the head of a government controlled corporation; or (vi) an adjutant 
general appointed by the Secretary concerned under the national guard 
(32 U.S.C. 709(c)).
    (2) A member of the Armed Forces of the United States.
    (3) A person assigned to a Federal agency who has been transferred 
to another position in the competitive service in another agency.

PART 17--SPECIAL CONTRACTING METHODS

    4. Subpart 17.1 is revised to read as follows:

Subpart 17.1--Multiyear Contracting

Sec.
17.101  Authority.
17.102  Applicability.
17.103  Definitions.
17.104  General.
17.105  Policy.
17.105-1  Uses.
17.105-2  Objectives.
17.106  Procedures.
17.106-1  General.
17.106-2  Solicitations.
17.106-3  Special procedures applicable to DoD, NASA and the Coast 
Guard.
17.107  Options.
17.108  Congressional notification.
17.109  Contract clauses.


17.101  Authority.

    This subpart implements Section 304B of the Federal Property and 
Administrative Services Act of 1949 (41 U.S.C. 254c) and 10 U.S.C. 
2306b and provides policy and procedures for the use of multiyear 
contracting.


17.102  Applicability.

    For DoD, NASA, and the Coast Guard, the authorities cited in 17.101 
do not apply to contracts for the purchase of supplies to which 40 
U.S.C. 759 applies (information resource management supply contracts).


17.103  Definitions.

    Annual funding means appropriations of which Congress limits 
obligational availability to a single fiscal year.
    Cancellation means the cancellation (within a contractually 
specified time) of the total requirements of all remaining program 
years. Cancellation results when the contracting officer (a) notifies 
the contractor of nonavailability of funds for contract performance for 
any subsequent program year, or (b) fails to notify the contractor that 
funds are available for performance of the succeeding program year 
requirement.
    Cancellation ceiling means the maximum amount that the contractor 
can receive in the event that cancellation occurs.
    Cancellation charge means the amount of unrecovered costs which 
would have been recouped through amortization over the full term of the 
contract, including the term cancelled.
    Multiple year contract, as used in this subpart, means a contract 
having a term of more than one year regardless of the type of funding 
that applies.
    Multiyear contract means a contract for the purchase of supplies or 
services for more than one, but not more than five, program years. A 
multiyear contract may provide that performance under the contract 
during the second and subsequent years of the contract is contingent 
upon the appropriation of funds, and (if it does so provide) may 
provide for a cancellation payment to be made to the contractor if 
appropriations are not made.
    Multiyear funding means appropriated funds covering more than 1 
fiscal year.
    No-year funding means funding available for new obligations without 
regard to fiscal year and until the appropriation is either exhausted 
or otherwise cancelled.
    Nonrecurring costs means those production costs which are generally 
incurred on a one-time basis and include such costs as plant or 
equipment relocation, plant rearrangement, special tooling and special 
test equipment, preproduction engineering, initial spoilage and rework, 
and specialized work force training.
    Recurring costs, as used in this subpart, means production costs 
that vary with the quantity being produced such as labor and materials.
    Termination for convenience means the procedure which may apply to 
any Government contract, including multiyear contracts. As contrasted 
with cancellation, termination can be effected at any time during the 
life of the contract (cancellation is effected between fiscal years) 
and can be for the total quantity or a partial quantity (whereas 
cancellation must be for all subsequent fiscal years' quantities).


17.104  General.

    (a) Multiyear contracting is a type of multiple year contract that 
employs special contracting methods to acquire known requirements in 
quantities and total cost not over planned requirements for up to 5 
years unless otherwise authorized by statute, even though the total 
funds ultimately to be obligated may not be available at the time of 
contract award. This method may be used in sealed bidding or 
contracting by negotiation.
    (b) Multiyear contracting is a flexible contracting method 
applicable to a wide range of acquisitions. The extent to which 
cancellation provisions are used in multiyear contracts will depend on 
the unique circumstances of each contracting action. Accordingly, for 
multiyear contracts, the agency head may authorize modification of the 
requirements of this subpart and the clauses at 48 CFR (FAR) 52.217-2, 
Cancellation Under Multiyear Contracts.


17.105  Policy.


17.105-1  Uses.

    (a) The contracting officer may enter into a multiyear contract 
if--
    (1) Funds are available and obligated for the contract, for the 
full period of the contract or for the first fiscal year in which the 
contract is in effect, and for the estimated costs associated with any 
necessary cancellation of the contract; and
    (2) The head of the contracting agency determines that--
    (i) The need for the supplies or services is reasonably firm and 
continuing over the period of the contract; and
    (ii) A multiyear contract will serve the best interests of the 
United States by encouraging full and open competition or promoting 
economy in administration, performance, and operation of the agency's 
programs, and
    (3) If for DoD, NASA or the Coast Guard-- [[Page 14342]] 
    (i) The use of such a contract will result in substantial savings 
of the total estimated costs of carrying out the program through annual 
contracts;
    (ii) With regard to paragraph (a)(2)(i) of this section, the 
minimum need to be purchased is expected to remain substantially 
unchanged during the contemplated contract period in terms of 
production rate, procurement rate, and total quantities;
    (iii) There is a stable design for the supplies to be acquired and 
the technical risks associated with such supplies are not excessive; 
and
    (iv) That the estimates of both the cost of the contract and the 
estimated cost avoidance through the use of a multiyear contract are 
realistic.
    (b) Multiyear contracting may be used when no-year, annual, 
multiple year or multiyear funding is available.
    (c) The multiyear contracting method may be used for the 
acquisition of supplies or services.
    (d) If funds are not appropriated to support the succeeding years' 
requirements, the agency must cancel the contract.


17.105-2  Objectives.

    Use of multiyear contracting is encouraged to take advantage of one 
or more of the following:
    (a) Lower costs.
    (b) Enhancement of standardization.
    (c) Reduction of administrative burden in the placement and 
administration of contracts.
    (d) Substantial continuity of production or performance, thus 
avoiding annual startup costs, preproduction testing costs, make ready 
expenses, and phaseout costs.
    (e) Stabilization of contractor work forces.
    (f) Avoidance of the need for establishing and ``proving out'' 
quality control techniques and procedures for a new contractor each 
year.
    (g) Broadening the competitive base with opportunity for 
participation by firms not otherwise willing or able to compete for 
lesser quantities, particularly in cases involving high startup costs.
    (h) Provide incentives to contractors to improve productivity 
through investment in capital facilities, equipment, and advanced 
technology.


17.106  Procedures.


17.106-1  General.

    (a) Method of contracting. The nature of the requirement should 
govern the selection of the method of contracting, since the multiyear 
procedure is compatible with sealed bidding, including two-step sealed 
bidding, and contract negotiation.
    (b) Type of contract. Given the longer performance period 
associated with multiyear acquisition, consideration in pricing fixed-
priced contracts should be given to the use of economic price 
adjustment terms, profit objectives comparable with contractor risk, 
financing arrangements and cash flow requirements.
    (c) Cancellation procedures. (1) All program years except the first 
are subject to cancellation. For each program year subject to 
cancellation, the contracting officer shall establish a cancellation 
ceiling. Ceilings must exclude amounts for items included in prior 
program years. The contracting officer shall reduce the cancellation 
ceiling for each program year in direct proportion to the remaining 
requirements subject to cancellation. For example, consider that the 
total nonrecurring costs (see 48 CFR (FAR) 15.804-6) are estimated at 
ten percent of the total multiyear price, and the percentages for each 
of the program-year requirements for 5-years are (i) 30 in the first 
year, (ii) 30 in the second, (iii) 20 in the third, (iv) 10 in the 
fourth, and (v) 10 in the fifth. The cancellation percentages, after 
deducting three percent for the first program year, would be 7, 4, 2, 
and 1 percent of the total price applicable to the second, third, 
fourth, and fifth program years, respectively.
    (2) In determining cancellation ceilings, the contracting officer 
must estimate reasonable preproduction or startup, labor learning, and 
other nonrecurring costs to be incurred by an ``average'' prime 
contractor or subcontractor, which would be applicable to, and which 
normally would be amortized over, the items or services to be furnished 
under the multiyear requirements. Nonrecurring costs include such 
costs, where applicable, as plant or equipment relocation or 
rearrangement, special tooling and special test equipment, 
preproduction engineering, initial rework, initial spoilage, pilot 
runs, allocable portions of the costs of facilities to be acquired or 
established for the conduct of the work, costs incurred for the 
assembly training and transportation of a specialized work force to and 
from the job site, and unrealized labor learning. Do not include any 
costs of labor or materials, or other expenses (except as indicated in 
this paragraph), which might be incurred for performance of subsequent 
program year requirements. The total estimate of the above costs must 
then be compared with the best estimate of the contract cost to arrive 
at a reasonable percentage or dollar figure. To perform this 
calculation, the contracting officer shall obtain in-house engineering 
cost estimates identifying detailed recurring and nonrecurring costs, 
the effect of labor learning.
    (3) The contracting officer shall establish cancellation dates for 
each program year's requirements regarding production lead time and the 
date by which funding for these requirements can reasonably be 
established. The contracting officer shall include these dates in the 
schedule, as appropriate.
    (d) Cancellation ceilings. Cancellation ceilings and dates may be 
revised after issuing the solicitation if necessary. In sealed bidding, 
the contracting officer shall change the ceiling by amending the 
solicitation before bid opening. In two-step sealed bidding, 
discussions conducted during the first step may indicate the need for 
revised ceilings and dates which may be incorporated in step two. In a 
negotiated acquisition, negotiations with offerors may provide 
information requiring a change in cancellation ceilings and dates 
before final negotiation and contract award.
    (e) Funding/payment of cancellation charges. If cancellation 
occurs, the contractor is entitled to payment (see the clause at 48 CFR 
(FAR) 52.217-2, Cancellation Under Multiyear Contracts).
    (f) Presolicitation or pre-bid conferences. To ensure that all 
interested sources of supply are thoroughly aware of how multiyear 
contracting is accomplished, use of presolicitation or pre-bid 
conferences may be advisable.
    (g) Payment limit. The contracting officer shall limit the 
Government's payment obligation to an amount available for contract 
performance. The contracting officer shall insert the amount for the 
first program year in the contract upon award and modify it for 
successive program years upon availability of funds.
    (h) Termination payment. If the contract is terminated for the 
convenience of the Government in whole, including items subject to 
cancellation, the Government's obligation shall not exceed the amount 
specified in the schedule as available for contract performance, plus 
the cancellation ceiling.


17.106-2  Solicitations.

    Solicitations for multiyear contracts shall reflect all the factors 
to be considered for evaluation, specifically including the following--
    (a) The requirements, by item of supply or service, for the-- 
[[Page 14343]] 
    (1) First program year; and
    (2) Multiyear contract including the requirements for each program 
year.
    (b) Criteria for comparing the lowest evaluated submission on the 
first program year's requirement to the lowest evaluated submission on 
the multiyear requirements.
    (c) A provision that, if the Government determines before award 
that only the first program year requirements are needed, the 
Government may evaluate offers and make award solely on the basis of 
price, or estimated cost and fee, offered on that year's requirements.
    (d) A provision specifying a separate cancellation ceiling (on a 
percentage or dollar basis) and dates applicable to each program year 
subject to a cancellation (see 17.106-1 (c) and (d)).
    (e) A statement that award will not be made on less than the first 
program year requirements.
    (f) Unless Government administrative costs incident to annual 
contracting and administration can be reasonably established, they 
shall not be used as a factor for evaluation. If so utilized, their 
monetary value shall be set forth in the solicitation.
    (g) The cancellation ceiling shall not be an evaluation factor.


17.106-3  Special procedures applicable to DoD, NASA and the Coast 
Guard.

    (a) Participation by subcontractors, suppliers and vendors. In 
order to broaden the defense industrial base, to the maximum extent 
practicable--
    (1) Multiyear contracting shall be used in such a manner as to 
seek, retain, and promote the use under such contracts of companies 
that are subcontractors, vendors and suppliers; and
    (2) Upon accrual of any payment or other benefit under such a 
multiyear contract to any subcontractor, vendor, or supplier company 
participating in such contract, such payment or benefit shall be 
delivered to such company in the most expeditious manner practicable.
    (b) Protection of existing authority. To the extent practicable, 
multiyear contracting shall not be carried out in a manner to preclude 
or curtail the existing ability of the department or agency to--
    (1) Provide for competition in the production of supplies to be 
delivered under such a contract; or
    (2) Provide for termination of a prime contract the performance of 
which is deficient with respect to cost, quality or schedule.
    (c) Cancellation or termination for insufficient funding. In the 
event funds are not made available for the continuation of a multiyear 
contract awarded using the procedures in this section, the contract 
shall be cancelled or terminated and payment made from--
    (1) Appropriations originally made available for the performance of 
the contract concerned;
    (2) Appropriations currently available for procurement of the type 
of supplies concerned and not otherwise obligated; or
    (3) Funds appropriated for these payments.


17.107  Options.

    Benefits may accrue by including options in a multiyear contract. 
In that event, contracting officers must follow the requirements of 
subpart 17.2. Options should not include--
    (a) Charges for plant and equipment already amortized, nor
    (b) Other nonrecurring charges which were included in the basic 
contract.


17.108  Congressional notification.

    (a) Except for DoD, NASA and the Coast Guard, a multiyear contract 
which includes a cancellation ceiling in excess of $10 million may not 
be awarded until the head of the agency gives written notification of 
the proposed contract and of the proposed cancellation ceiling for that 
contract to the Congress. The contract may not be awarded until the 
thirty-first day after the date of notification.
    (b) For DoD, NASA, and the Coast Guard, a multiyear contract which 
includes a cancellation ceiling in excess of $100 million may not be 
awarded until the head of the agency gives written notification of the 
proposed contract and of the proposed cancellation ceiling for that 
contract to the Committees on Armed Services and on Appropriations of 
the Senate and House of Representatives. The contract may not be 
awarded until the thirty-first day after the date of notification.


17.109  Contract clauses.

    (a) The contracting officer shall insert the clause at 48 CFR (FAR) 
52.217-2, Cancellation Under Multiyear Contracts, in solicitations and 
contracts when a multiyear contract is contemplated.
    (b) Economic price adjustment clauses. Economic price adjustment 
clauses are adaptable to multiyear contracting needs. When the period 
of production is likely to warrant a labor and material costs 
contingency in the contract price, the contracting officer should 
normally use an economic price adjustment clause (see 48 CFR (FAR) 
16.203). When contracting for services, the contracting officer--
    (1) Shall add the clause at 48 CFR (FAR) 52.222-43, Fair Labor 
Standards Act and Service Contract Act--Price Adjustment (Multiyear and 
Option Contracts), when the contract includes the clause at 48 CFR 
(FAR) 52.222-41, Service Contract Act of 1965;
    (2) May modify the clause at 48 CFR (FAR) 52.222-43 in overseas 
contracts when laws, regulations, or international agreements require 
contractors to pay higher wage rates; or
    (3) May use an economic price adjustment clause authorized by 48 
CFR (FAR) 16.203 when potential fluctuations require coverage, and are 
not included in cost contingencies provided for by the clause at 48 CFR 
(FAR) 52.222-43.
    5. Subpart 17.5 is revised to read as follows:

Subpart 17.5--Interagency Acquisitions Under the Economy Act

Sec.
17.500  Scope of subpart.
17.501  Definition.
17.502  General.
17.503  Determination requirements.
17.504  Ordering procedures.
17.505  Payment.


17.500  Scope of subpart.

    (a) This subpart prescribes policies and procedures applicable to 
interagency acquisitions under the Economy Act (31 U.S.C. 1535). The 
Economy Act also provides authority for placement of orders between 
major organizational units within an agency. Procedures for such intra-
agency transactions should be addressed in agency regulations.
    (b) The Economy Act applies when more specific statutory authority 
does not exist. Examples of interagency acquisitions to which the 
Economy Act does not apply include acquisitions from required sources 
of supplies prescribed in 48 CFR Part 8, which have separate statutory 
authority.


17.501  Definition.

    Interagency acquisition means a procedure by which an agency 
needing supplies or services (the requesting agency) obtains them from 
another agency (the servicing agency).


17.502  General.

    (a) The Economy Act may not be used by an agency to circumvent 
conditions and limitations imposed on the use of Government funds 
appropriated for the acquisition.
    (b) Acquisitions under the Economy Act are not exempt from the 
requirements of 48 CFR (FAR) part 7, subpart 7.3, Contractor Versus 
Government Performance. [[Page 14344]] 
    (c) The Economy Act may not be used to make acquisitions 
conflicting with any other agency's authority or responsibility (for 
example, that of the Administrator of General Services under the 
Federal Property and Administrative Services Act).


17.503  Determination requirements.

    (a) An agency may place orders with another agency for supplies or 
services that the servicing agency may be in a position or equipped to 
supply, render, or obtain by contract if it is determined by the head 
of the requesting agency that--
    (1) It is in the Government's best interest to do so, and
    (2) That the ordered supplies or services cannot be provided by 
contract as conveniently or cheaply by the requesting agency from a 
commercial enterprise.
    (b) If the Economy Act order requires contracting action by the 
servicing agency, the determination shall include a finding that one or 
more of the following circumstances is applicable--
    (1) The acquisition is appropriately made under an existing 
contract of the servicing agency to meet the requirements of the 
servicing agency for the same or similar goods or services;
    (2) The servicing agency has capabilities or expertise to enter 
into a contract for such goods or services which is not available 
within the requesting agency; or
    (3) The servicing agency is specifically authorized by law or 
regulation to purchase such goods or services on behalf of other 
agencies.
    (c) Determinations shall be approved either by the contracting 
officer of the requesting agency with authority to contract for the 
goods or services to be ordered, or by another official designated by 
agency regulation to do so, except that if the servicing agency is not 
covered by the Federal Acquisition Regulation, approval of the 
determination may not be delegated below the senior procurement 
executive of the requesting agency.


17.504  Ordering procedures.

    (a) Before placing an Economy Act order for supplies or services 
from another Government agency, the requesting agency shall make the 
determination required in 17.503. The servicing agency may require a 
copy of the determination to be furnished with the order.
    (b) The order may be placed on any form or document that is 
acceptable to both agencies. The order should include--
    (1) A description of the supplies or services required;
    (2) Delivery requirements;
    (3) A funds citation;
    (4) A payment provision (see 17.505); and
    (5) Acquisition authority as may be appropriate (see 17.504(d)).
    (c) The requesting and servicing agencies should agree to 
procedures for the resolution of disagreements that may arise under 
interagency acquisitions, including, in appropriate circumstances, the 
use of a third-party forum. If a third party is proposed, consent of 
the third party should be obtained in writing.
    (d) When an interagency acquisition requires the servicing agency 
to award a contract, the following procedures apply:
    (1) If a justification and approval or a determination and findings 
(D&F) (other than the requesting agency's determination required in 
17.502) is required by law or regulation, the servicing agency shall 
execute and issue the justification and approval or D&F. The requesting 
agency shall furnish the servicing agency any information needed to 
make the justification and approval and the D&F.
    (2) The requesting agency shall also be responsible for furnishing 
other assistance that may be necessary, such as providing special 
contract terms or other requirements that must comply with any 
condition or limitation applicable to the funds of the requesting 
agency.
    (3) The servicing agency is responsible for compliance with all 
other legal or regulatory requirements applicable to the contract, 
including (i) having adequate statutory authority for the contractual 
action, and (ii) complying fully with the competition requirements of 
48 CFR part 6 (see 6.002).
    (e) Nonsponsoring Federal agencies may use a Federally Funded 
Research and Development Center (FFRDC) only if the terms of the 
FFRDC's sponsoring agreement permit work from other than a sponsoring 
agency. Work placed with the FFRDC is subject to the acceptance by the 
sponsor and must fall within the purpose, mission, general scope of 
effort, or special competency of the FFRDC. (See 48 CFR (FAR) 35.017; 
see also 48 CFR (FAR) 6.302 for procedures to follow where using less 
than full and open competition). The nonsponsoring agency shall provide 
to the sponsoring agency necessary documentation that the requested 
work would not place the FFRDC in direct competition with domestic 
private industry.


17.505  Payment.

    (a) Under the Economy Act--
    (1) The servicing agency may ask the requesting agency, in writing, 
for advance payment for all or part of the estimated cost of furnishing 
the supplies or services; or
    (2) If approved by the servicing agency, payment for actual costs 
may be made by the requesting agency after the supplies or services 
have been furnished.
    (b) If advance payment is made, adjustment on the basis of actual 
costs shall be made as agreed by the agencies.
    (c) Bills rendered or requests for advance payment shall not be 
subject to audit or certification in advance of payment.
    (d) If the Economy Act order requires contracting action by the 
servicing agency, then in no event shall the servicing agency require, 
or the requiring agency pay, any fee or charge in excess of the actual 
cost (or estimated cost if the actual cost is not known) of entering 
into and administering the contract or other agreement under which the 
order is filled.

PART 37--SERVICE CONTRACTING

    6. Subpart 37.2 is revised to read as follows:

Subpart 37.2--Advisory and Assistance Services

Sec.
37.200  Scope of subpart.
37.201  Definition.
37.202  Exclusions.
37.203  Policy.
37.204  Guidelines for determining availability of personnel.
37.205  Contracting officer responsibilities.


37.200  Scope of subpart.

    This subpart prescribes policies and procedures for acquiring 
advisory and assistance services by contract. The subpart regulates 
these contracts with individuals and organizations for both personal 
and nonpersonal services.


37.201  Definition.

    Advisory and assistance services means the following services when 
provided by nongovernmental sources--
    (a) Management and professional support services;
    (b) Studies, analyses and evaluations; and
    (c) Engineering and technical services.


37.202  Exclusions.

    The following activities and programs are excluded or exempted from 
the definition of advisory or assistance services:
    (a) Routine automated data processing and telecommunications 
services unless such services are an integral part of a contract for 
the procurement of advisory and assistance services. [[Page 14345]] 
    (b) Architectural and engineering services as defined in section 
901 of the Brooks Architect-Engineers Act (40 U.S.C. 541).
    (c) Research on basic mathematics or medical, biological, physical, 
social, psychological, or other phenomena.


37.203  Policy.

    (a) The acquisition of advisory and assistance services is a 
legitimate way to improve Government services and operations. 
Accordingly, advisory and assistance services may be used at all 
organizational levels to help managers achieve maximum effectiveness or 
economy in their operations.
    (b) Subject to 37.205, agencies may contract for advisory and 
assistance services, when essential to the agency's mission, to--
    (1) Obtain outside points of view to avoid too limited judgment on 
critical issues;
    (2) Obtain advice regarding developments in industry, university, 
or foundation research;
    (3) Obtain the opinions, special knowledge, or skills of noted 
experts;
    (4) Enhance the understanding of, and develop alternative solutions 
to, complex issues;
    (5) Support and improve the operation of organizations; or
    (6) Ensure the more efficient or effective operation of managerial 
or hardware systems.
    (c) Advisory and assistance services shall not be--
    (1) Used in performing work of a policy, decisionmaking, or 
managerial nature which is the direct responsibility of agency 
officials;
    (2) Used to bypass or undermine personnel ceilings, pay 
limitations, or competitive employment procedures;
    (3) Contracted for on a preferential basis to former Government 
employees;
    (4) Used under any circumstances specifically to aid in influencing 
or enacting legislation; or
    (5) Used to obtain professional or technical advice which is 
readily available within the agency or another Federal agency.
    (d) Limitation on payment for advisory and assistance services. 
Except for Federally-Funded Research and Development Centers as 
provided by Section 23 of the Office of Federal Procurement Policy 
(OFPP) Act, (41 U.S.C. 419) as amended, contractors may be paid for 
services to conduct evaluations or analyses of any aspect of a proposal 
submitted for an acquisition only if--
    (1) Neither agency personnel, nor personnel from another agency, 
with adequate training and capabilities to perform the required 
proposal evaluation, are readily available, and;
    (2) A written determination is made in accordance with 37.204.


37.204  Guidelines for determining availability of personnel.

    (a) As required by 37.203 for each evaluation or analysis of 
proposals, the head of an agency shall determine if sufficient 
personnel with the requisite training and capabilities are available 
within the agency to perform evaluation or analysis of proposals 
submitted for acquisitions.
    (b) If, for a specific evaluation or analysis, such personnel are 
not available within the agency, the head of the agency shall--
    (1) Determine which Federal agencies may have personnel with the 
required training and capabilities; and
    (2) Consider the administrative cost and time associated with 
conducting the search, the dollar value of the procurement, other 
costs, such as travel costs involved in the use of such personnel, and 
the needs of the Federal agencies to make management decisions on the 
best use of available personnel in performing the agency's mission.
    (c) If the supporting agency agrees to make the required personnel 
available, the agencies shall execute an agreement for the detail of 
the supporting agency's personnel to the requesting agency.
    (d) If the requesting agency, after reasonable attempts to obtain 
personnel with the required training and capabilities, has been unable 
to identify such personnel, the head of the requesting agency may make 
the determination required by 37.203.


37.205  Contracting officer responsibilities.

    The contracting officer shall ensure that the determination 
required in accordance with the guidelines at 37.104 is accomplished 
prior to issuing a solicitation.

PART 49--TERMINATION OF CONTRACTS


49.603-1 through 49.603-4  [Amended]

    7. Sections 49.603-1(b)(7)(i), 49.603-2(b)(8)(i), 49.603-
3(b)(7)(i), and 49.603-4(b)(4)(i)) are amended by removing the phrase 
``, and regulations made implementing 10 U.S.C. 2382, as amended, and 
any other'' and inserting ``any'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


52.217-1  [Reserved]

    8. Section 52.217-1 is removed and reserved.
    9. Section 52.217-2 is amended by revising the section heading, the 
introductory text, the clause heading, paragraphs (a), (d), (f)(1) and 
(4), (g)(1) and (3), (h), and (i), and by removing Alternate I to read 
as follows:


52.217-2  Cancellation Under Multiyear Contracts.

    As prescribed in 17.109, insert the following clause.

CANCELLATION UNDER MULTIYEAR CONTRACTS (XXX 1995)

    (a) Cancellation, as used in this clause, means that the 
Government is cancelling its requirements for all supplies or 
services in program years subsequent to that in which notice of 
cancellation is provided. Cancellation shall occur by the date or 
within the time period specified in the Schedule, unless a later 
date is agreed to, if the Contracting Officer (1) notifies the 
Contractor that funds are not available for contract performance for 
any subsequent program year, or (2) fails to notify the Contractor 
that funds are available for performance of the succeeding program 
year requirement.
* * * * *
    (d) The cancellation charge will cover only (1) costs (i) 
incurred by the prime Contractor and/or subcontractor, (ii) 
reasonably necessary for performance of the contract, and (iii) that 
would have been equitably amortized over the entire multiyear 
contract period but, because of the cancellation, are not so 
amortized, and (2) a reasonable profit or fee on the costs.
* * * * *
    (f) * * *
    (i) Reasonable nonrecurring costs (see FAR subpart 15.8) which 
are applicable to and normally would have been amortized in all 
supplies or services which are multiyear requirements;
* * * * *
    (4) Costs not amortized solely because the cancellation had 
precluded anticipated benefits of Contractor or subcontractor 
learning.
    (g) * * *
    (1) Labor, material, or other expenses incurred by the 
Contractor or subcontractors for performance of the cancelled work;
* * * * *
    (3) Anticipated profit or unearned fee on the cancelled work; or
* * * * *
    (h) This contract may include an ``Option'' clause with the 
period for exercising the option limited to the date in the contract 
for notification that funds are available for the next succeeding 
program year. If so, the Contractor agrees not to include in option 
quantities any costs of a startup or nonrecurring nature, that have 
been fully set forth in the contract. The Contractor further agrees 
that the option quantities will reflect only those recurring costs, 
and a reasonable profit or fee necessary to furnish the additional 
option quantities.
    (i) Quantities added to the original contract through the 
``Option'' clause of this contract shall be included in the quantity 
cancelled [[Page 14346]] for the purpose of computing allowable 
cancellation charges.

(End of clause)

[FR Doc. 95-6438 Filed 3-15-95; 8:45 am]
BILLING CODE 6820-34-P