[Federal Register Volume 60, Number 107 (Monday, June 5, 1995)]
[Rules and Regulations]
[Pages 29504-29505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13631]



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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1831 and 1852

RIN 2700-AB82


Revision to NASA FAR Supplement Coverage on Precontract Costs

AGENCY: Office of Procurement, Acquisition Liaison Division, National 
Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: This rule amends the regulations pertaining to precontract 
costs to specify the content of letters to contractors which authorize 
the incurrence of precontract costs, make clear the circumstances when 
precontract costs would be appropriate, and clarify that precontract 
costs are not allowable unless the clause ``Precontract Costs'' is 
included in the contract. In addition, the rule revises the 
prescription for the clause to allow its use in other than cost-
reimbursement contracts. Also, the rule changes the title of that 
clauses from ``Date of Incurrence of Costs'' to ``Precontract Costs'' 
to more accurately reflect its purpose.

EFFECTIVE DATE: July 5, 1995.

FOR FURTHER INFORMATION CONTACT:
Mr. Joseph Le Cren, (202) 358-0444.

SUPPLEMENTARY INFORMATION: 

Background

    NASA proposed to amend its regulation on precontract costs, 59 FR 
33254, 6/28/94. The rule is intended to provide standardization in the 
contents of the Agency's precontract cost letters to contractors, make 
clear the circumstances when precontract costs would be appropriate, 
clarify that the precontract cost clause is required in the contract in 
order for such costs to be allowable, and changes the title of the 
precontract cost clause to more accurately reflect its purpose.
    The only public comments submitted were from an industry 
association. The association considers the FAR coverage to be adequate 
and ``strongly opposes the proposed revision as an unwarranted and 
unnecessary restriction of the FAR provisions governing percontract 
costs.'' NASA's coverage differs from the FAR cost principle by making 
precontract costs unallowable unless the NASA precontract costs clause 
is included in the contract.
    The public comments were reviewed and considered. The proposed rule 
was determined to be compliant with the FAR as it utilizes advance 
agreements whose terms are incorporated in the affected contracts. In 
addition, the rule prevents the types of litigation identified by the 
commenter. Furthermore, NASA believes the need to incur precontract 
costs should be disclosed and only incurred when authorized.
    Although no change was made to the proposed rule based on the 
public comments, the rule has been revised as a result of our review 
due to the public comments. The final rule eliminates the need for the 
Precontract Costs clause in firm-fixed-price contracts and fixed-price 
contracts with an economic price adjustment. The background for the 
proposed rule stated that the clause was appropriate for the firm-fixed 
price contracts as the FAR Part 31 cost principles would apply in the 
case of a termination. While that is true, FAR 49.113, Cost principles, 
also states that the Part 31 cost principles are subject to the general 
principles of 49.201. That section states that the primary objective of 
a termination settlement is to compensate the contractor fairly for the 
work done and the parties may agree on a total amount to be paid the 
contractor without agreeing on or segregating the particular elements 
of costs or profit comprising that amount. Therefore, the cost 
principles are viewed as a guide and not required for reaching an 
agreement by cost element, eliminating [[Page 29505]] the need of a 
precontract cost clause for such contracts.

Impact

    NASA certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities under 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). This rule does not 
impose any reporting or record keeping requirements subject to the 
Paperwork Reduction Act.

List of Subjects in 48 CFR Parts 1831 and 1852

    Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.

    Accordingly, 48 CFR Parts 1831 and 1852 are amended as follows.
    1. The authority citation for 48 CFR Parts 1831 and 1852 continues 
to read as follows:

    Authority: 41 U.S.C. 2473(c)(1).

PART 1831--CONTRACT COST PRINCIPLES AND PROCEDURES

    2. Section 1831.205-32 is revised to read as follows:
1831.205-32  Precontract costs.

    (a) The authorization of precontract costs is not encouraged and 
shall be granted only when there will be a sole source award or a 
single offeror has been selected for negotiations as the result of a 
competitive procurement, the criteria at FAR 31.205-32 are met, and a 
written request and justification has been submitted to and approved by 
the procurement officer. The authorization of precontract cost shall 
not apply to firm-fixed-price contracts and fixed-price contracts with 
economic price adjustment. The justification shall:
    (1) Substantiate the necessity for the contractor to proceed prior 
to contract award,
    (2) Specify the start date of such contractor effort,
    (3) Identify the total estimated time of the advanced effort, and
    (4) Specify the cost limitation.
    (b) Authorization to the contractor to incur precontract costs 
shall be in writing and shall:
    (1) Specify the start date for incurrence of such costs,
    (2) Specify a limitation on the total amount of precontract costs 
which may be incurred,
    (3) State that the costs are allowable only to the extent they 
would have been if incurred after the contract had been entered into, 
and
    (4) State that the Government is under no obligation to reimburse 
the contractor for any costs unless a contract is awarded.
    (c) Precontract costs shall not be allowable unless the clause at 
1852.231-70, Precontract Costs, is included in the contract.

    3. Section 1831.205-70 is revised to read as follows:


1831.205-70  Contract clause.

    The contracting officer shall insert the clause at 1852.231-70, 
Precontract Costs, in contracts for which specific coverage of 
precontract costs is authorized under 1831.205-32.

    4. Section 1852.231-70 is revised to read as follows:


1852.231-70  Precontract costs.

    As prescribed in 1831.205-70, insert the following clause:

Precontract Costs

(June 1995)

    The contractor shall be entitled to reimbursement for costs 
incurred on or after ________________ in an amount not to exceed 
$________ that, if incurred after this contract had been entered 
into, would have been reimbursable under this contract.

(End of clause)

[FR Doc. 95-13631 Filed 6-2-95; 8:45 am]
BILLING CODE 7510-01-M