[Federal Register Volume 60, Number 180 (Monday, September 18, 1995)]
[Rules and Regulations]
[Pages 48274-48276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22783]



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DEPARTMENT OF DEFENSE
48 CFR Parts 32, 33, and 52

[FAC 90-32; FAR Case 94-731; Item VIII]
RIN 9000-AG52


Federal Acquisition Regulation; Reimbursement of Protest Costs

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

ACTION: Final rule.

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SUMMARY: The Federal Acquisition Regulatory Council is promulgating 
this final rule to allow the Government to seek reimbursement for 
protest costs it has paid a protester where the protest has been 
sustained based upon the awardee's misrepresentation. In addition to 
any other remedies available, the Government may collect this debt by 
offsetting the amount against any payment due the awardee under any 
Government contract the awardee might have. 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. Craig Hodge, Protests/Disputes 
Team Leader at (703) 274-8940 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 94-731, Reimbursement of Protest Costs.

SUPPLEMENTARY INFORMATION:

A. Background

    The Federal Acquisition Streamlining Act of 1994 (the Act), Pub. L. 
103-355, provides authorities that streamline the acquisition process 
and minimize burdensome Government-unique requirements.
    This case presents FAR amendments developed under FAR Case 94-731, 
Reimbursement of Protest Costs. Sections 1016, 1403, and 1435 of the 
Act provide that agencies may be required to pay protest and offer 
preparation costs to protesters under certain circumstances. Often as 
the result of discovery during a protest, misrepresentations may be 
detected that could not have been reasonably known to the agency's 
evaluators. A protest may be sustained where the award has been induced 
by a material misrepresentation by the awardee. Such situations often 
involve proposed ``key personnel.''
    The agency is without effective remedy in such cases. 
Theoretically, the agency could ask the Department of Justice to file a 
lawsuit against the offeror making the misrepresentations. However, due 
to the heavy workload of the Justice attorneys, this is not a practical 
alternative. This FAR change will not adversely affect any substantive 
right of an offeror. Under the language, the Government remedy is to 
offset such costs on the same or an unrelated contract. If the offeror 
believes that the offset is not justified, it may appeal the action to 
the agency, or under the Contract Disputes Act to either a Board of 
Contract Appeals or the Court of Federal Claims.

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 the vast majority of 
contracts do not involve protests where misrepresentation is detected 
through discovery.

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.

[[Page 48275]]


D. Public Comments

    A proposed rule was published in the Federal Register at 60 FR 
15450, March 23, 1995. During the public comment period, seven comments 
were received. Some commenters were concerned that the proposed rule 
might be in conflict with the Debt Collection Act. However, based on 
Cecile Ind. v. Department of Defense, 995 F.2d 1052 (Fed. Cir. 1993), 
we do not believe that the Debt Collection Act applies. If it does, the 
final rule would comply with the Debt Collection Act. Some commenters 
felt the clause lacked adequate due process. In response, more 
procedural guidance has been supplied. In particular, the rule provides 
for a review by the head of the contracting activity, if requested, 
before there is any final decision. In addition, actions taken under 
the clause in this rule may be reviewed by courts or boards under the 
Contract Disputes Act, like any other contract administration decision.
    Several commenters suggested the clause was not necessary because 
the Government already has adequate remedies for contractor 
misrepresentation. The drafting team agreed that there are additional 
remedies. For example, the rule now provides that the contracting 
officer should consider referring contractor misrepresentations to the 
agency debarring official. However, these remedies do not always prove 
adequate in the context of misrepresentations discovered as the result 
of bid protests.
    One commenter recommended clarification of whether the agency head 
or the contracting officer is responsible for issuing the demand 
letter. The final rule states that this is the responsibility of the 
contracting officer.

List of Subjects in 48 CFR Parts 32, 33, 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 32, 33, and 52 are amended as set forth 
below:
    1. The authority citation for 48 CFR Parts 32, 33, 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 32--CONTRACT FINANCING

    2. Section 32.602 is amended by adding paragraph (h) to read as 
follows:


Sec. 32.602  General.

* * * * *
    (h) Reimbursement of costs, as provided in 33.102(b), 33.104(h)(1), 
and 33.105(g)(1), paid by the Government where a postaward protest is 
sustained as a result of an awardee's misstatement, misrepresentation, 
or miscertification.
    3. Section 32.603 is revised to read as follows:


Sec. 32.603  Applicability.

    Except as otherwise specified, this subpart applies to all debts to 
the Government arising in connection with contracts and subcontracts 
for the acquisition of supplies or services, and debts arising from the 
Government's payment of costs, as provided in 33.102(b), 33.104(h)(1), 
and 33.105(g)(1), where a postaward protest is sustained as a result of 
an awardee's misstatement, misrepresentation, or miscertification.
    4. Section 32.605(b) is amended by inserting the phrase ``including 
reimbursement of protest costs,'' between the words ``contract debts,'' 
and ``the contracting officer''.

PART 33--PROTESTS, DISPUTES, AND APPEALS

    5. Section 33.102 is amended by adding paragraph (b)(3) to read as 
follows:


Sec. 33.102  General.

* * * * *
    (b) * * *
    (3) Require the awardee to reimburse the Government's costs, as 
provided in this paragraph, where a postaward protest is sustained as 
the result of an awardee's intentional or negligent misstatement, 
misrepresentation, or miscertification. In addition to any other remedy 
available, and pursuant to the requirements of Subpart 32.6, the 
Government may collect this debt by offsetting the amount against any 
payment due the awardee under any contract between the awardee and the 
Government.
    (i) When a protest is sustained by GAO or GSBCA under circumstances 
that may allow the Government to seek reimbursement for protest costs, 
the contracting officer will determine whether the protest was 
sustained based on the awardee's negligent or intentional 
misrepresentation. If the protest was sustained on several issues, 
protest costs shall be apportioned according to the costs attributable 
to the awardee's actions.
    (ii) The contracting officer shall review the amount of the debt, 
degree of the awardee's fault, and costs of collection, to determine 
whether a demand for reimbursement ought to be made. If it is in the 
best interests of the Government to seek reimbursement, the contracting 
officer shall notify the contractor in writing of the nature and amount 
of the debt, and the intention to collect by offset if necessary. Prior 
to issuing a final decision, the contracting officer shall afford the 
contractor an opportunity to inspect and copy agency records pertaining 
to the debt to the extent permitted by statute and regulation, and to 
request review of the matter by the head of the contracting activity.
    (iii) When appropriate, the contracting officer shall also refer 
the matter to the agency debarment official for consideration under 
Subpart 9.4.
* * * * *
    6. Section 33.104 is amended by adding paragraph (h)(7) to read as 
follows:


33.104  Protests to GAO.

* * * * *
    (h) * * *
    (7) If the Government pays costs, as provided in paragraph (h)(1) 
of this section, where a postaward protest is sustained as the result 
of an awardee's intentional or negligent misstatement, 
misrepresentation, or miscertification, the Government may require the 
awardee to reimburse the Government the amount of such costs. In 
addition to any other remedy available, and pursuant to the 
requirements of Subpart 32.6, the Government may collect this debt by 
offsetting the amount against any payment due the awardee under any 
contract between the awardee and the Government.
    7. Section 33.105 is amended by adding paragraph (g)(5) to read as 
follows:


33.105  Protests to GSBCA.

* * * * *
    (g) * * *
    (5) If the Government pays costs, as provided in paragraph (g)(1) 
of this section, where a postaward protest is sustained as the result 
of an awardee's intentional or negligent misstatement, 
misrepresentation, or miscertification, the Government may require the 
awardee to reimburse the Government the amount of such costs. In 
addition to any other remedy available, and pursuant to the 
requirements of Subpart 32.6, the Government may collect this debt by 
offsetting the amount against any payment due the awardee under any 
contract between the awardee and the Government.
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    8. Section 52.233-3 is amended by adding paragraph (f) to read as 
follows: 

[[Page 48276]]



52.233-3  Protest after Award.

* * * * *

Protest After Award (Oct 1995)

* * * * *
    (f) If, as the result of the Contractor's intentional or 
negligent misstatement, misrepresentation, or miscertification, a 
protest related to this contract is sustained, and the Government 
pays costs, as provided in FAR 33.102(b)(2), 33.104(h)(1), or 
33.105(g)(1), the Government may require the Contractor to reimburse 
the Government the amount of such costs. In addition to any other 
remedy available, and pursuant to the requirements of Subpart 32.6, 
the Government may collect this debt by offsetting the amount 
against any payment due the Contractor under any contract between 
the Contractor and the Government.

(End of clause)

[FR Doc. 95-22783 Filed 9-15-95; 8:45 am]
BILLING CODE 6820-EP-P