[Federal Register Volume 60, Number 180 (Monday, September 18, 1995)]
[Rules and Regulations]
[Pages 48272-48274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22782]



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DEPARTMENT OF DEFENSE
48 CFR Parts 28, 32, and 52

[FAC 90-32; FAR Case 94-762; Item VII]
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: 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 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.

EFFECTIVE DATE: October 1, 1995.

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 FAC 90-32, 
FAR case 94-762.

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.
    This notice announces revisions developed under FAR case 94-762. 
The following sections of the Federal Acquisition Streamlining Act are 
implemented by this final 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

[[Page 48273]]

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 no 
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 final rule is, except for minor adjustments, the same language 
which was previously in the Defense Federal Acquisition Regulation 
Supplement, at 228.106-4-70, 228.106-6, 232.970, and 252.228-7006 and 
proposed in the Federal Register on February 2, 1995.
    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 52.228-12 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 actions 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.

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 it merely requires the 
contracting officer or the contractor to furnish bonding information to 
subcontractors upon request, and provides for remedies which only apply 
to contractors who fail to make payment to subcontractors.
C. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 96-511) is deemed to apply 
because the final rule contains information collection requirements. 
Accordingly, a request for approval of a new information collection 
requirement concerning Subcontractor Payments was submitted to the 
Office of Management and Budget and approved through March 31, 1998, 
OMB Control No. 9000-0135. Public comments concerning this request were 
invited through a Federal Register notice at 60 FR 6526, February 2, 
1995.

D. Public Comments

    A proposed rule was published in the Federal Register at 60 FR 
6602, February 2, 1995. During the public comment period, six comments 
were received. For the most part, these comments raised editorial and 
cross-reference points, which have been corrected. One commentor 
expressed concern about the use of the term ``non-commercial'', and 
suggested, as an alternative, the term ``other-than-commercial.'' While 
the suggested term may be logically more accurate, the term ``non-
commercial'' has been used throughout all the new Part 32 coverage, and 
appears to be correctly understood. It was concluded that this change 
in terminology would not significantly improve the coverage, so the 
suggestion was not adopted.

List of Subjects in 48 CFR Parts 28, 32, and 52

    Government procurement.

    Dated: September 7, 1995.
Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal 
Acquisition Streamlining Act of 1994.

     Therefore, 48 CFR Parts 28, 32, and 52 are 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)(3) of Pub. L. 102-190, as 
amended by Sections 2091 and 8105 of Pub. L. 103-355, the contracting 
officer shall insert the clause at 52.228-12, 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 Subpart 2.1.
    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 Pub. L. 103-355, requires that the Federal Government 
provide information to subcontractors on payment bonds under contracts 
for other than commercial items as defined in Subpart 2.1. 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 Section 806(a)(4) of Pub. L. 102-190, as 
amended by Sections 2091 and 8105 of 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); or
    (ii) Final payment to the subcontractor or supplier in compliance 

[[Page 48274]]
    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; or
    (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 paragraphs (a)(1) and (2) 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)(3) 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 Section 806(a)(1) of Pub. L. 102-190, as 
amended by Sections 2091 and 8105 of Pub. L. 103-355, upon the request 
of a subcontractor or supplier under a Federal contract for a non-
commercial item, 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 to the Federal Government under the 
contract; and
    (2) Whether final payment under the contract has been made by the 
Federal Government to the prime contractor.
    (b) In accordance with 5 U.S.C. 552(b)(1), 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) Properly classified pursuant to such Executive order.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Section 52.228-12 is added to read as follows:


52.228-12  Prospective Subcontractor Requests for Bonds.

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

Prospective Subcontractor Requests For Bonds (Oct 1995)

    In accordance with Section 806(a)(3) of Pub. L. 102-190, as 
amended by Sections 2091 and 8105 of 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. 95-22782 Filed 9-15-95; 8:45 am]
BILLING CODE 6820-EP-P