[Federal Register Volume 60, Number 158 (Wednesday, August 16, 1995)]
[Rules and Regulations]
[Pages 42649-42652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19858]
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DEPARTMENT OF DEFENSE
48 CFR Parts 1, 4, 14, 15, 25, 50, and 52
[FAC 90-31; FAR Case 94-740; Item I]
RIN 9000-AG24
Federal Acquisition Regulation; Consolidation and Revision of the
Authority To Examine Records
AGENCY: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: This final rule is issued pursuant to the Federal Acquisition
Streamlining Act of 1994, Public Law 103-355 (the Act). The Federal
Acquisition Regulatory Council is amending the Federal Acquisition
Regulation (FAR) to implement Sections 2201(a), 2251(a), 4102(c) and
4103(d) of the Act. This regulatory action was subject to Office of
Management and Budget review under Executive Order 12866, dated
September 30, 1993.
EFFECTIVE DATE: October 1, 1995.
FOR FURTHER INFORMATION CONTACT:
Mr. Daniel J. Tucciarone at (703) 767-2270 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-
31, FAR case 94-740.
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, the Truth in Negotiations Act, and introduction of the
Federal Acquisition Computer Network.
Title 2, Subtitle C of the Act is entitled Audit and Access to
Records. Section 2201(a) of the act merges the audit provision of TINA
(10 U.S.C. 2306a) and the audit coverage in 10 U.S.C. Section 2313 into
a single comprehensive section at 10 U.S.C. 2313. Section 2201(a)
includes subsections that: (1) limit obtaining preaward information
when the results of a recent audit are already available, (2) allow a
contractor to store original records in electronic form, (3) allow the
use of images as original records, and (4) provide a new definition of
records.
Section 2251(a) of the Act consolidates the audit rights for
civilian agencies and conforms those rights with the provisions in 10
U.S.C. Section 2313 to ensure identical audit authorities for both DOD
and civilian agencies.
Sections 2201(a) and 2251(a) both discuss subpoena authorities.
By its terms, the Act at Sections 2201(a) and 2251(a) provides that
all cost-reimbursement, incentive, time-and-materials, labor-hour or
price-redeterminable subcontracts will be subject to audit. FAR 52.215-
2(g), therefore, requires the flowdown of the Audit and Records--
Negotiation clause into all subcontracts of these types and into
subcontracts when cost or pricing data are required, or when cost
performance reports are required. This rule, however, exempts from the
flowdown requirement all subcontracts below the simplified acquisition
threshold. This conforms the audit rights at the subcontract level with
those at the prime contract level.
An Alternate III was added to the clause at FAR 52.215-2 to provide
for waiver of the right to examination of records by the Comptroller
General.
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 within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded
to small businesses are awarded competitively on a firm-fixed-price
basis and, therefore, are not subject to audit requirements.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose additional recordkeeping or information
collection requirements, or additional 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. For civilian agency procurements, recordkeeping is reduced due
to the higher cost or pricing data threshold.
D. Public Comments
A proposed rule was published in the Federal Register at 59 FR
66408, December 23, 1994. During the public comment period, 11 comments
were received. Comments were also received during two agency comment
periods. Changes were made to the proposed rule
[[Page 42650]]
to achieve clearer, more concise wording based on these comments.
List of Subjects in 48 CFR Parts 1, 4, 14, 15, 25, 50, and 52
Government procurement.
Dated: August 7, 1995.
Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.
Therefore, 48 CFR Parts 1, 4, 14, 15, 25, 50, and 52 are amended as
set forth below:
1. The authority citation for 48 CFR Parts 1, 4, 14, 15, 25, 50,
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 1--FEDERAL ACQUISITION REGULATIONS SYSTEM
1.106 [Amended]
2. Section 1.106 is amended under the ``FAR Segment'' and ``OMB
Control Number'' headings by removing ``52.215-1'' and ``9000-0034''.
PART 4--ADMINISTRATIVE MATTERS
3. Section 4.702 is amended by revising paragraph (a) to read as
follows:
4.702 Applicability.
(a) This subpart applies to records generated under contracts that
contain one of the following clauses:
(1) Audit and Records--Sealed Bidding (52.214-26).
(2) Audit and Records--Negotiation (52.215-2).
* * * * *
4. Section 4.703 is amended as follows:
a. In paragraph (a) by removing the phrase ``books, records,
documents,'' and inserting in its place ``records, which includes
books, documents, accounting procedures and practices, and other data,
regardless of type and regardless of whether such items are in written
form, in the form of computer data, or in any other form,'';
b. In paragraph (b) introductory text and the first sentence of
(b)(2) by removing the word ``documents'' and inserting in its place
``records'';
c. Revising paragraph (c); and
d. Removing paragraph (d) and redesignating paragraph ``(e)'' as
paragraph ``(d)''. The revised text reads as follows:
4.703 Policy.
* * * * *
(c) Nothing in this section shall be construed to preclude a
contractor from duplicating or storing original records in electronic
form unless they contain significant information not shown on the
record copy. Original records need not be maintained or produced in an
audit if the contractor or subcontractor provides photographic or
electronic images of the original records and meets the following
requirements:
(1) The contractor or subcontractor has established procedures to
ensure that the imaging process preserves accurate images of the
original records, including signatures and other written or graphic
images, and that the imaging process is reliable and secure so as to
maintain the integrity of the records.
(2) The contractor or subcontractor maintains an effective indexing
system to permit timely and convenient access to the imaged records.
(3) The contractor or subcontractor retains the original records
for a minimum of one year after imaging to permit periodic validation
of the imaging systems.
* * * * *
4.706 through 4.706-3 [Removed]
5. Section 4.706 is removed and reserved, and sections 4.706-1
through 4.706-3 are removed.
PART 14--SEALED BIDDING
6. Section 14.201-7 is amended by revising paragraph (a) to read as
follows:
14.201-7 Contract clauses.
(a) When contracting by sealed bidding, the contracting officer
shall insert the clause at 52.214-26, Audit and Records--Sealed
Bidding, in solicitations and contracts if the contract amount is
expected to exceed the threshold at 15.804-2(a)(1) for submission of
cost or pricing data.
* * * * *
PART 15--CONTRACTING BY NEGOTIATION
7. Section 15.106-1 is removed and 15.106-2 is redesignated as
15.106-1 and revised to read as follows:
15.106-1 Audit and Records--Negotiation clause.
(a) This subsection implements 10 U.S.C. 2313, 41 U.S.C. 254d, and
OMB Circular No. A-133.
(b) The contracting officer shall, if contracting by negotiation,
insert the clause at 52.215-2, Audit and Records--Negotiation, in
solicitations and contracts except those (1) not exceeding the
simplified acquisition threshold in Part 13; or (2) for utility
services at rates not exceeding those established to apply uniformly to
the general public, plus any applicable reasonable connection charge.
(c) In facilities contracts, the contracting officer shall use the
clause with its Alternate I. In cost-reimbursement contracts with
educational institutions and other nonprofit organizations, the
contracting officer shall use the clause with its Alternate II. If the
examination of records by the Comptroller General is waived in
accordance with 25.901, the contracting officer shall use the clause
with its Alternate III.
8. Section 15.805-5 is amended in paragraph (a)(1) introductory
text by inserting after the first sentence the following:
15.805-5 Field pricing support.
(a)(1) * * * The contracting officer should contact the cognizant
audit office to determine the existence of audits addressing proposed
indirect costs. In accordance with 41 U.S.C. 254d and 10 U.S.C. 2313,
the contracting officer shall not request a preaward audit of such
indirect costs unless the information available from any existing audit
completed within the preceding 12 months is considered inadequate for
determining the reasonableness of the proposed indirect costs. * * *
* * * * *
PART 25--FOREIGN ACQUISITION
9. Section 25.000 is amended by revising the last sentence to read
as follows:
25.000 Scope of part.
* * * This part also provides policies and procedures pertaining to
international agreements, customs and duties, the clause at 52.215-2,
Audit and Records--Negotiation, and use of local currency for payment.
10. Section 25.901 is amended by revising the section heading and
paragraphs (b), (c), (d)(2), (d)(3), and (d)(5) to read as follows:
25.901 Omission of audit clause.
* * * * *
(b) Policy. As required by 10 U.S.C. 2313, 41 U.S.C. 254d, and
15.106-1(b), the contracting officer shall consider for use in
negotiated contracts with foreign contractors, whenever possible, the
basic clause at 52.215-2, Audit and Records--Negotiation, which
authorizes examination of records by the Comptroller General. Use of
the clause with Alternate III should be approved only after the
contracting agency, having considered such factors as alternate sources
of supply, additional cost, and time of delivery, has made all
reasonable efforts to include the basic clause.
[[Page 42651]]
(c) Conditions for use of Alternate III. The contracting officer
may use the clause at 52.215-2, Audit and Records--Negotiation, with
its Alternate III in contracts with foreign contractors--
(1) If the agency head, or designee, determines, with the
concurrence of the Comptroller General, that waiver of the right to
examination of records by the Comptroller General will serve the public
interest; or
(2) If the contractor is a foreign government or agency thereof or
is precluded by the laws of the country involved from making its
records, as defined at 4.703(a), available for examination, and the
agency head, or designee, determines, after taking into account the
price and availability of the property or services from United States
sources, that waiver of the right to examination of records by the
Comptroller General best serves the public interest.
(d) * * *
(2) Describe the efforts to include the basic clause;
(3) State the reasons for the contractor's refusal to include the
basic clause;
* * * * *
(5) Determine that it will serve the interest of the United States
to use the clause with its Alternate III.
PART 50--EXTRAORDINARY CONTRACTUAL ACTIONS
50.307 [Amended]
11. Section 50.307 is amended in paragraph (b) by removing
``52.215-1, Examination of Records by Comptroller General'' and
inserting in its place ``52.215-2, Audit and Records--Negotiation''.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
12. Section 52.214-26 is revised to read as follows:
52.214-26 Audit and Records--Sealed Bidding.
As prescribed in 14.201-7(a), inserting the following clause:
Audit and Records--Sealed Bidding (Oct 1995)
(a) As used in this clause, records includes books, documents,
accounting procedures and practices, and other data, regardless of
type and regardless of whether such items are in written form, in
the form of computer data, or in any other form.
(b) Cost or pricing data. If the Contractor has been required to
submit cost or pricing data in connection with the pricing of any
modification to this contract, the Contracting Officer, or an
authorized representative of the Contracting Officer, in order to
evaluate the accuracy, completeness, and currency of the cost or
pricing data, shall have the right to examine and audit all of the
Contractor's records, including computations and projections,
related to--
(1) The proposal for the modification;
(2) The discussions conducted on the proposal(s), including
those related to negotiating;
(3) Pricing of the modification; or
(4) Performance of the modification.
(c) Comptroller General. In the case of pricing any
modification, the Comptroller General of the United States, or an
authorized representative, shall have the same rights as specified
in paragraph (b) of this clause.
(d) Availability. The Contractor shall make available at its
office at all reasonable times the materials described in
reproduction, until 3 years after final payment under this contract,
or for any other period specified in Subpart 4.7 of the Federal
Acquisition Regulation (FAR). FAR Subpart 4.7, Contractor Records
Retention, in effect on the data of this contract, is incorporated
by reference in its entirety and made a part of this contract.
(1) If this contract is completely or partially terminated, the
records relating to the work terminated shall be made available for
3 years after any resulting final termination settlement.
(2) Records pertaining to appeals under the Disputes clause or
to litigation or the settlement of claims arising under or relating
to the performance of this contract shall be made available until
disposition of such appeals, litigation, or claims.
(e) The Contractor shall insert a clause containing all the
provisions of this clause, including this paragraph (e), in all
subcontracts expected to exceed the threshold in FAR 15.804-2(a)(1)
for submission of cost or pricing data.
(End of clause)
52.215-1 [Reserved]
13. Section 52.215-1 is removed and reserved.
14. Section 52.215-2 is revised to read as follows:
52.215-2 Audit and Records--Negotiation.
As prescribed in 15.106-1(b), insert the following clause:
Audit and Records--Negotiation (Oct 1995)
(a) As used in this clause, records includes books, documents,
accounting procedures and practices, and other data, regardless of
type and regardless of whether such items are in written form, in
the form of computer data, or in any other form.
(b) Examination of costs. If this is a cost-reimbursement,
incentive, time-and-materials, labor-hour, or price redeterminable
contract, or any combination of these, the Contractor shall maintain
and the Contracting Officer, or an authorized representative of the
Contracting Officer, shall have the right to examine and audit all
records and other evidence sufficient to reflect properly all costs
claimed to have been incurred or anticipated to be incurred directly
or indirectly in performance of this contract. This right of
examination shall include inspection at all reasonable times of the
Contractor's plants, or parts of them, engaged in performing the
contract.
(c) Cost or pricing data. If the Contractor has been required to
submit cost or pricing data in connection with any pricing action
relating to this contract, the Contracting Officer, or an authorized
representative of the Contracting Officer, in order to evaluate the
accuracy, completeness, and currency of the cost or pricing data,
shall have the right to examine and audit all of the Contractor's
records, including computations and projections, related to--
(1) The proposal for the contract, subcontract, or modification;
(2) The discussions conducted on the proposal(s), including
those related to negotiating;
(3) Pricing of the contract, subcontract, or modification; or
(4) Performance of the contract, subcontract or modification.
(d) Comptroller General--(1) The Comptroller General of the
United States, or an authorized representative, shall have access to
and the right to examine any of the Contractor's directly pertinent
records involving transactions related to this contract or a
subcontract hereunder.
(2) This paragraph may not be construed to require the
Contractor or subcontractor to create or maintain any record that
the Contractor or subcontractor does not maintain in the ordinary
course of business or pursuant to a provision of law.
(e) Reports. If the Contractor is required to furnish cost,
funding, or performance reports, the Contracting Officer or an
authorized representative of the Contracting Officer shall have the
right to examine and audit the supporting records and materials, for
the purpose of evaluating (1) the effectiveness of the Contractor's
policies and procedures to produce data compatible with the
objectives of these reports and (2) the data reported.
(f) Availability. The Contractor shall make available at its
office at all reasonable times the records, materials, and other
evidence described in paragraphs (a), (b), (c), (d), and (e) of this
clause, for examination, audit, or reproduction, until 3 years after
final payment under this contract or for any shorter period
specified in Subpart 4.7, Contractor Records Retention, of the
Federal Acquisition Regulation (FAR), or for any longer period
required by statute or by other clauses of this contract. In
addition--
(1) If this contract is completely or partially terminated, the
records relating to the work terminated shall be made available for
3 years after any resulting final termination settlement; and
(2) Records relating to appeals under the Disputes clause or to
litigation or the settlement of claims arising under or relating to
this contract shall be made available until such appeals,
litigation, or claims are finally resolved.
(g) The Contractor shall insert a clause containing all the
terms of this clause, including this paragraph (a), in all
subcontracts under this contract that exceed the simplified
acquisition threshold in FAR Part 13, and--
[[Page 42652]]
(1) That are cost-reimbursement, incentive, time-and-materials,
labor-hour, or price-redeterminable type or any combination of
these;
(2) For which cost or pricing data are required; or
(3) That require the subcontractor to furnish reports as
discussed in paragraph (e) of this clause.
The clause may be altered only as necessary to identify properly
the contracting parties and the Contracting Officer under the
Government prime contract.
(End of clause)
Alternate I (OCT 1995). As prescribed in 15.106-1(c), in
facilities contracts, add the following sentence at the end of
paragraph (b) of the basic clause:
The obligations and rights specified in this paragraph shall
extend to the use of, and charges for the use of, the facilities
under this contract.
Alternate II (OCT 1995). As prescribed in 15.106-1(c), in cost-
reimbursement contracts with educational and other non-profit
institutions, add the following paragraph (h) to the basic clause:
(h) The provisions of OMB Circular No. A-133, ``Audits of
Institutions of Higher Learning and Other Nonprofit Institutions,''
apply to this contract.
Alternate III (OCT 1995). As prescribed in 15.106-1(c), delete
paragraph (d) of the basic clause and redesignate the remaining
paragraphs accordingly.
[FR Doc. 95-19858 Filed 8-15-95; 8:45 am]
BILLING CODE 6820-EP-M