[Federal Register Volume 61, Number 146 (Monday, July 29, 1996)]
[Proposed Rules]
[Pages 39518-39520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18852]
[[Page 39517]]
_______________________________________________________________________
Part II
Department of Defense
General Services Administration
National Aeronautics and Space Administration
_______________________________________________________________________
48 CFR Parts 4, 42, and 52
Federal Acquisition Regulations: Final Overhead Settlement; Proposed
Rule
Federal Register / Vol. 61, No. 146 / Monday, July 29, 1996 /
Proposed Rules
[[Page 39518]]
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 4, 42 and 52
[FAR Case 95-017]
RIN 9000-AG87
Federal Acquisition Regulation; Final Overhead Settlement
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council are proposing to amend the Federal
Acquisition Regulation to improve the process of final settlement of
contractor overhead rates. This regulatory action was not subject to
Office of Management and Budget review under Executive Order 12866,
dated September 30, 1993. This is not a major rule under 5 U.S.C. 804.
DATES: Comments should be submitted on or before September 27, 1996 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.
Please cite FAR case 95-017 in all correspondence related to this
case.
FOR FURTHER INFORMATION CONTACT: Ms. Linda Klein at (202) 501-3775 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 FAR case 95-017.
SUPPLEMENTARY INFORMATION:
A. Background
This proposed rule amends FAR parts 4, 42 and 52 to improve the
process of final settlement of contractor overhead rates. Cost
reimbursement and fixed-price incentive contracts require that
contractors' overhead rates be settled prior to establishment of final
contract prices. At present, the contractor is required to submit a
certified indirect cost rate proposal within 90 days after the end of
its fiscal year, and a final audit is required of the contractor's
proposed rates. However, late proposal submissions and incomplete
supporting cost data are contributing to greatly extended cycle times
on overhead settlements. As a result, the 90-day timeframe currently
provided for submissions could be considered less than adequate time
for contractors to complete their year-end closing and prepare an
adequate proposal. In addition, there is currently no sanction or
penalty for late submissions.
Improvement of this process by extending the submission date from
90 days to 6 months and identifying the minimum supporting cost data
required to be submitted with the proposal can achieve a substantial,
overall reduction in cycle time. This proposed rule implements
recommendations of the Contract Administration Services Reform Process
Action Team by (1) stating that failure to comply with the revised due
date for submission of proposed final indirect cost rates may be
considered as an indication of an inadequate accounting system and
controls; (2) specifying the minimum data which is needed with the
contractor's proposal in order to proceed efficiently with the audit;
and (3) changing ``final indirect cost rate proposal'' to ``final
incurred cost proposal'' to more closely reflect the terminology used
by the Defense Contract Audit Agency.
B. Regulatory Flexibility Act
This proposed rule is not expected to 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,
generally, large businesses provide the types of supplies and services
that are procured using cost-reimbursement and fixed-price incentive
contracts which require final overhead settlement. An Initial
Regulatory Flexibility Analysis has, therefore, not been performed.
Comments from small entities concerning the affected FAR subpart will
be considered in accordance with 5 U.S.C. 610 of the Act. Such comments
must be submitted separately and should cite 5 U.S.C. 601 et seq. (FAR
case 95-017), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed
changes to the FAR do not impose any substantial change in
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. 3051 et seq.
List of Subject in 48 CFR Parts 4, 42 and 52
Government procurement.
Dated: July 18, 1996.
Edward C. Loeb,
Director, Office of Federal Acquisition Policy.
Therefore, it is proposed that 48 CFR Parts 4, 42 and 52 be amended
as set forth below:
1. The authority citation for 48 CFR Parts 4, 42 and 52 continues
to read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. 2301 to 2331; and 42
U.S.C. 2473(c).
PART 4--ADMINISTRATIVE MATTERS
2. Section 4.703 is amended by revising paragraph (b)(3) to read as
follows:
4.703 Policy.
* * * * *
(b) * * *
(3) The contractor does not meet the original due date for
submission of final incurred cost proposals specified in subparagraph
(d)(2)(i) of the clause at 52.216-7, Allowable Cost and Payment, and
subparagraph (c)(2)(i) of the clause at 52.216-13, Allowable Cost and
Payment--Facilities. Under these circumstances, the retention periods
in 4.705 shall be automatically extended one day for each day the
proposal is not submitted after the original due date.
* * * * *
PART 42--CONTRACT ADMINISTRATION
3. Section 42.705-1 is amended by revising paragraph (b)(1) to read
as follows:
42.705-1 Contracting officer determination procedure.
* * * * *
(b) * * *
(1) In accordance with the Allowable Cost and Payment clause at FAR
52.216-7 or FAR 52.216-13, the contractor shall submit to the
contracting officer and, if required by agency procedures, to the
cognizant auditor a final incurred cost proposal together with the
supporting cost data specified in paragraphs (b)(1) (i) through (viii)
of this subsection. Contractors who are delinquent in the submittal of
final incurred cost proposals may be considered to have an inadequate
accounting system and controls.
(i) Schedule of proposed rates for each expense pool.
(ii) Statement of pool and base costs for each proposed indirect
expense rate, listing the proposed amount by account with unallowable
costs specifically
[[Page 39519]]
identified and excluded from the proposed pool.
(iii) Schedule of allowable direct costs for each cost-
reimbursement and fixed-price incentive contract (or reference to
applicable accounting records if data is too voluminous).
(iv) Schedule of allocation base amounts for each cost-
reimbursement and fixed-price incentive contract (if not otherwise
covered by paragraph (b)(1)(iii) of the subsection).
(v) Schedule of hours and costs proposed on time-and-materials and
labor-hour contracts (if applicable).
(vi) Schedule of Government contract participation in the indirect
expense pools.
(vii) Schedule of facilities capital cost of money factors
computation (if applicable).
(viii) Schedule or computation of allocable independent research
and development and bid and proposal costs (if applicable).
Note to paragraph (b)(1): These items represent the minimum data
necessary to begin the required audit, and compliance with this
requirement does not limit the contracting officer's right to require,
on a case-by-case basis, submission of additional data considered
necessary to support the proposal.
* * * * *
4. Section 42.705-2 is amended by revising paragraph (b)(1) to read
as follows:
42.705-2 Auditor determination procedures.
* * * * *
(b) * * * (1) The contractor shall submit to the cognizant
contracting officer and auditor a final incurred cost proposal
reflecting actual cost experience during the covered period, together
with supporting cost data in accordance with 42.705-1(b)(1).
* * * * *
PART 5--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
5. Section 52.216-7 is amended by revising the date of the clause
and paragraph (d)(2) to read as follows:
52.216-7 Allowable Cost and Payment.
* * * * *
ALLOWABLE COST AND PAYMENT (DATE)
* * * * *
(d) * * *
(2) (i) The Contractor shall, within six months after the
expiration of each of its fiscal years, or by a later date approved
by the Contracting Officer in exceptional circumstances, submit to
the cognizant Contracting Officer responsible for negotiating its
final indirect rates and, if required by agency procedures, to the
cognizant audit activity proposed final indirect cost rates for that
period and the following supporting cost data:
(A) Schedule of proposed rates for each expense pool.
(B) Statement of pool and base costs for each proposed indirect
expense rate, listing the proposed amount by account with
unallowable costs specifically identified and excluded from the
proposed pool.
(C) Schedule of allowable direct costs for each cost-
reimbursement and fixed-price incentive contract (or reference to
applicable accounting records if data is too voluminous).
(D) Schedule of allocation base amounts for each cost-
reimbursement and fixed-price incentive contract (if not otherwise
covered by paragraph (d)(2)(i)(C) of this clause).
(E) Schedule of hours and costs proposed on time-and-materials
and labor-hour contracts (if applicable).
(F) Schedule of Government contract participation in the
indirect expense pools.
(G) Schedule of facilities capital cost of money factors
computation (if applicable).
(H) Schedule or computation of allowable independent research
and development and bid and proposal costs (if applicable).
(ii) Paragraphs (d)(2)(i) (A) through (H) of this clause specify
the minimum data necessary to begin the required audit, and
compliance with this requirement does not limit the Contracting
Officer's right to require, on a case-by-case basis, submission of
additional data considered necessary to support the proposal.
(iii) The proposed rates shall be based on the Contractor's
actual cost experience for that period. The appropriate Government
representative and Contractor shall establish the final indirect
cost rates as promptly as practical after receipt of the
Contractor's proposal. Contractors who are delinquent in the
submittal of final incurred cost proposals may be considered to have
an inadequate accounting system and controls.
* * * * *
6. Section 52.216-13 is amended by revising the date of the clause
and paragraph (c)(2) to read as follows:
52.216-13 Allowable Cost and Payment--Facilities.
* * * * *
ALLOWABLE COST AND PAYMENT--FACILITIES (DATE)
* * * * *
(c) * * *
(2) (i) The Contractor shall within six months after the
expiration of each of its fiscal years, or by a later date approved
by the Contracting Officer in exceptional circumstances, submit to
the Contracting Officer and to the cognizant audit activity proposed
final indirect cost rates for that period and the following
supporting cost data:
(A) Schedule of proposed rates for each expense pool.
(B) Statement of pool and base costs for each proposed indirect
expense rate, listing the proposed amount by account with
unallowable costs specifically identified and excluded from the
proposed pool.
(C) Schedule of allowable direct costs for each cost-
reimbursement and fixed-price incentive contract (or reference to
applicable accounting records if data is too voluminous).
(D) Schedule of allocation base amounts for each cost-
reimbursement and fixed-price incentive contract (if not otherwise
covered by paragraph (c)(2)(i)(C) of this clause).
(E) Schedule of hours and costs proposed on time-and-materials
and labor-hour contracts (if applicable).
(F) Schedule of Government contract participation in the
indirect expense pools.
(G) Schedule of facilities capital cost of money factors
computation (if applicable).
(H) Schedule or computation of allocable independent research
and development and bid and proposal costs (if applicable).
(ii) Paragraphs (c)(2)(i)(A) through (H) of this clause specify
the minimum data necessary to begin the required audit, and
compliance with this requirement does not limit the Contracting
Officer's right to require, on a case-by-case basis, submission of
additional data considered necessary to support the proposal.
(iii) The proposed rates shall be based on the Contractor's
actual cost experience for that period. The appropriate Government
representative and Contractor shall establish the final indirect
cost rates as promptly as practical after receipt of the
Contractor's proposal. Contractors who are delinquent in the
submittal of final incurred cost proposals may be considered to have
an inadequate accounting system and controls.
* * * * *
7. Section 52.216-15 is amended by revising the date of the clause
and paragraph (b) to read as follows:
52.216-15 Predetermined Indirect Cost Rates.
* * * * *
PREDETERMINED INDIRECT COST RATES (DATE)
* * * * *
(b) (1) Not later than six months after the expiration of the
Contractor's fiscal year, the Contractor shall submit to the
cognizant Contracting Officer under Subpart 42.7 of the Federal
Acquisition Regulation (FAR) and, if required by agency procedures
to, to the cognizant Government audit activity, proposed
predetermined indirect cost rates and the following supporting cost
data:
(i) Schedule of proposed rates for each expense pool.
(ii) Statement of pool and base costs for each proposed indirect
expense rate, listing the proposed amount by account with
unallowable costs specifically identified and excluded from the
proposed pool.
(iii) Schedule of allowable direct costs for each cost-
reimbursement and fixed-price incentive contract (or reference to
applicable accounting records if data is too voluminous).
(iv) Schedule of allocation base amounts for each cost-
reimbursement and fixed-price incentive contract (if not otherwise
covered by paragraph (b)(1)(iii) of this clause).
[[Page 39520]]
(v) Schedule of hours and costs proposed on time-and-materials
and labor-hour contracts (if applicable).
(vi) Schedule of Government contract participation in the
indirect expense pools.
(vii) Schedule of facilities capital cost of money factors
computation (if applicable).
(viii) Schedule of computation of allocable independent research
and develop and bid and proposal costs (if applicable).
(2) Paragraphs (b)(1) (i) through (viii) of this clause specify
the minimum data necessary to begin the required audit, and
compliance with this requirement does not limit the Contracting
Officer's right to require, on a case-by-case basis, submission of
additional data considered necessary to support the proposal.
(3) The proposed rates shall be based on the Contractor's actual
cost experience during that fiscal year. Negotiations of
predetermined indirect cost rates shall begin as soon as practical
after receipt of the Contractor's proposal. Contractors who are
delinquent in the submittal of final incurred cost proposals may be
considered to have an inadequate accounting system and controls.
* * * * *
[FR Doc. 96-18852 Filed 7-26-96; 8:45 am]
BILLING CODE 6820-EP-M