[Federal Register Volume 61, Number 149 (Thursday, August 1, 1996)]
[Proposed Rules]
[Pages 40284-40287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19486]
[[Page 40283]]
_______________________________________________________________________
Part II
Department of Defense
General Services Administration
National Aeronautics and Space Administration
_______________________________________________________________________
48 CFR Part 7, et al.
Federal Acquisition Regulation; Service Contracting; Proposed Rule and
Proposed Collection; Comment Request Entitled Service Contracting;
Notice
Federal Register / Vol. 61, No. 149 / Thursday, August 1, 1996 /
Proposed Rules
[[Page 40284]]
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 7, 15, 16, 37, 46, and 52
RIN 9000-AH14
[FAR Case 95-311]
Federal Acquisition Regulation; Service Contracting
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 implement Office of Federal Procurement
Policy (OFPP) Policy Letter 91-2, Service Contracting (previously
considered under withdrawn FAR Case 91-85, Services Contracting). The
OFPP policy letter prescribes policies and procedures for use of
performance-based contracting methods. This regulatory action was not
subject to Office of Management and Budget review under Executive Order
12866, dated September 30, 1993. This action is not a major rule under
5 U.S.C. 804.
DATES: Comments should be submitted on or before September 30, 1996 to
be considered in the formulation of a final rule.
ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (MVRS), 18th and F
Streets, NW, Room 4037, Washington, DC 20405.
Please cite FAR case 95-311 in all correspondence related to this
case.
FOR FURTHER INFORMATION CONTACT:
Mr. Peter O'Such at (202) 501-1759 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-
311.
SUPPLEMENTARY INFORMATION:
A. Background
This proposed rule amends FAR Parts 7, 15, 16, 37, 46, and 52 to
establish policy for the Government's acquisition of services through
the use of performance-based contracting methods.
B. Regulatory Flexibility Act
The proposed changes may 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 of the
burden associated with identifying uncompensated overtime hours and
rates included in proposals and subcontractor proposals under the new
provision 52.327-XX, Identification of Uncompensated Overtime. An
Initial Regulatory Flexibility Analysis has been prepared and is
summarized as follows:
The proposed rule amends the Federal Acquisition Regulation (FAR)
Parts 7, 15, 16, 37, 46, and 52 to implement the Office of Federal
Procurement Policy (OFPP) Policy Letter 91-2, Service Contracting, and
makes other revisions to part 37. One of the revisions implements the
statutory requirement of section 834, Public Law 103-510, concerning
uncompensated overtime. Although the statutory requirement applies only
to DOD, both GSA and NASA have agreed the language is appropriate for
Governmentwide use. The Regulatory Flexibility Act applies only to the
language being added to the FAR concerning uncompensated overtime. The
rule will affect all small businesses that submit offers for services
estimated at $100,000 or more. Work hours provided, not the task to be
performed, are addressed by this rule.
The requirements concerning uncompensated overtime in this proposed
rule are currently in the Defense Federal Acquisition Regulation
(DFARS). When this proposed rule is implemented in the FAR as a final
rule, the DFARS language will be removed. There are no alternatives.
The Initial Regulatory Flexibility Analysis (IRFA) will be provided
to the Chief Counsel for Advocacy for the Small Business
Administration. A copy of the IRFA may be obtained from the FAR
Secretariat. Comments are invited. Comments from small entities
concerning the affected FAR subpart will be considered in accordance
with 5 U.S.C. 610. Such comments must be submitted separately and
should cite 5 U.S.C. 601, et seq. (FAR case 95-311), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (Public Law 104-13) is deemed
to apply because the proposed rule contains information collection
requirements. Accordingly, a request for approval of a new information
collection requirement concerning the Service Contracting/Solicitation
provision, ``Identification of Uncompensated Overtime'', is being
submitted to the Office of Management and Budget under 44 U.S.C.
3507(d), et seq. Public comments concerning this request will be
invited through a Federal Register notice appearing in the Notices
section of this issue.
List of Subjects in 48 CFR Parts 7, 15, 16, 37, 46, and 52
Government procurement.
Dated: July 25, 1996.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
Therefore, it is proposed that 48 CFR Parts 7, 15, 16, 37, 46, and
52 be amended as set forth below:
1. The authority citation for 48 CFR Parts 7, 15, 16, 37, 46, 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 7--ACQUISITION PLANNING
2. Section 7.103 is amended by adding paragraph (q) to read as
follows:
7.103 Agency-head responsibilities.
* * * * *
(q) Ensuring that knowledge gained from prior acquisitions is used
to further refine requirements and acquisition strategies. For
services, greater use of performance-based contracting methods should
occur for follow-on acquisitions.
3. Section 7.105 is amended in the introductory text by adding a
sentence at the end of the paragraph; by revising paragraphs (a)(1),
(a)(4), and (b)(6); by redesignating paragraphs (b)(18) through (b)(20)
as (b)(19) through (b)(21) and adding a new (b)(18) to read as follows:
7.105 Contents of written acquisition plans.
* * * Acquisition plans for service contracts shall describe the
strategies for implementing performance-based contracting methods or
provide rationale for not using those methods (see subpart 37.5).
(a) Acquisition background and objectives. (1) Statement of need.
Introduce the plan by a brief statement of need. Summarize the
technical and contractual history of the acquisition. Discuss feasible
acquisition alternatives, the impact of prior acquisitions on those
alternatives, the impact of prior acquisitions on those alternatives,
and any related in-house effort.
* * * * *
(4) Capability or performance. Specify the required capabilities or
performance characteristics of the supplies or the performance
standards of the services
[[Page 40285]]
being acquired and state how they are related to the need.
* * * * *
(b) * * *
(6) Product or service descriptions. Explain the choice of product
or service description types (including performance-based contracting
descriptions) to be used in the acquisition.
* * * * *
(18) Contract administration. Describe how the contract will be
administered. In contracts for services, include how inspection and
acceptance corresponding to the work statement's performance criteria
will be enforced.
* * * * *
PART 15--CONTRACTING BY NEGOTIATION
4. Section 15.611 is amended in paragraph (c) by revising the
second sentence to read as follows:
15.611 Best and final offers.
* * * * *
(c) * * * If discussions are reopened, the contracting officer
shall, in accordance with agency procedures, issue an additional
request for best and final offers to all offerors still within the
competitive range.
* * * * *
PART 16--TYPES OF CONTRACTS
5. Section 16.104 is amended by adding paragraph (k) to read as
follows:
16. 104 Factors in selecting contract types.
* * * * *
(k) Acquisition history. Contractor risk usually decreases as the
requirement is repetitively acquired. Also, product descriptions or
descriptions of services to be performed can be more clearly defined.
6. Section 16.402-2 is amended by revising the heading and
paragraph (a); by redesignating paragraphs (b) through (g) as (c)
through (h) and adding a new paragraph (b); and by revising the newly
designated paragraph (e) to read as follows:
16.402-2 Performance incentives.
(a) Performance incentives may be considered in connection with
specific product characteristics (e.g., a missile range, an aircraft
speed, an engine thrust, or a vehicle maneuverability) or other
specific elements of the contractor's performance. These incentives
should be designed to relate profit or fee to results achieved by the
contractor, compared with specified targets.
(b) Performance incentives may be considered in connection with
service contracts for performance of objectively measurable tasks when
quality of performance is critical and incentives are likely to
motivate the contractor.
* * * * *
(e) Performance tests and/or assessments of work performance are
generally essential in order to determine the degree of attainment of
performance targets. Therefore, the contract must be as specified as
possible in establishing test criteria (such as testing conditions,
instrumentation precision, and data interpretation), and performance
standards (such as the quality levels of services to be provided).
* * * * *
7. Section 16.404-1 is amended by revising the introductory text of
paragraph (b)(1), and the last sentence of paragraph (b)(2) to read as
follows:
16.404-1 Cost-plus-incentive-fee contracts.
* * * * *
(b) Application. (1) A cost-plus-incentive-fee contract is
appropriate for services or development and test programs when (i) * *
*.
* * * * *
(2) * * * This approach may also apply to other acquisitions, if
the use of both cost and technical performance incentives is desirable
and administratively practical.
* * * * *
PART 37--SERVICE CONTRACTING
8. Section 37.000 is revised to read as follows:
37.000 Scope of part.
This part prescribes general policy and procedures for acquiring
services by contract, and includes but does not limit coverage to only
those services to which the Service Contract Act of 1965 applies (see
37.107). This part requires the use of performance-based contracting to
the maximum extent practicable and prescribes policies and procedures
for use of performance-based contracting methods; distinguishes between
contracts for personal services and those for nonpersonal services; and
includes special conditions to be observed in acquiring advisory and
assistance services. Dismantling, demolition, or removal of
improvements is covered in subpart 37.3. This part does not regulate
the obtaining of services by direct appointment, under normal civil
service employment procedures, or by cooperative agreement.
9. Section 37.101 is amended by adding, in alphabetical order, the
definition ``Performance-based contracting'' to read as follows:
37.101 Definitions.
* * * * *
Performance-based contracting means structuring all aspects of an
acquisition around the purpose of the work to be performed as opposed
to the manner by which the work is to be performed or broad and
imprecise statements of work.
* * * * *
10. Section 37.102 is amended by adding paragraph (d) to read as
follows:
37.102 Policy.
* * * * *
(d) The preferred way of acquiring services is through use of
performance-based contracting methods rather than on the basis of
buying hours.
11. Section 37.103 is amended by redesignating paragraphs (d) and
(e) and adding a new paragraph (d) to read as follows:
37.103 Contracting officer responsibility.
* * * * *
(d) Ensure that performance-based contracting methods are used to
the maximum extent practicable when acquiring services.
* * * * *
12. Section 37.106 is amended by adding paragraph (c) to read as
follows:
37.106 Funding and term of service contracts.
* * * * *
(c) Agencies with statutory multiyear authority shall consider the
use of this authority to encourage and promote economical business
operations when acquiring services.
13. Sections 37.115 through 37.115-3 are added to read as follows:
Sec.
37.115 Uncompensated overtime.
37.115-1 Scope.
37.115-2 General policy.
37.115-3 Solicitation provision.
* * * * *
37.115 Uncompensated overtime.
37.115-1 Scope.
This section implements Section 834 of Public Law 101-510 (10
U.S.C. 2331).
37.115-2 General policy.
(a) When professional or technical services are acquired on the
basis of the number of hours to be provided, rather than on the task to
be performed, the solicitation shall require offerors to identify
uncompensated overtime hours and the uncompensated overtime rate for
direct charge Fair Labor Standards Act--exempt personnel included in
their proposals and subcontractor
[[Page 40286]]
proposals. This includes uncompensated overtime hours that are in
indirect cost pools for personnel whose regular hours are normally
charged direct.
(b) Use of uncompensated overtime is not encouraged.
37.115-3 Solicitation provision.
Use the provision at 52.237-XX, Identification of Uncompensated
Overtime, in all solicitations valued at $100,000 or more, for
professional or technical services to be acquired on the basis of the
number of hours to be provided.
14. Subpart 37.5, consisting of sections 37.500 through 37.502-5 is
added to read as follows:
Subpart 37.5--Performance-Based Contracting
Sec.
37.500 Scope of subpart.
37.501 General.
37.502 Elements of performance-based contracting.
37.502-1 Statements or work.
37.502-2 Quality assurance.
37.502-3 Selection procedures.
37.502-4 Contract type.
37.502-5 Follow-on and repetitive requirements.
37.500 Scope of subpart.
This subpart prescribes policies and procedures for use of
performance-based contracting methods. It implements OFPP Policy Letter
91-2, Service Contracting.
37.501 General.
Performance-based contracting methods provide the means to ensure
that required performance quality levels are achieved and that with
respect to fixed price contracts, payment is made only for services
which meet contract standards. Performance-based contracts--
(a) Describe the requirements in terms of results required rather
than the methods of performance of the work;
(b) Use measurable (i.e., terms of quality, timeliness, quantity,
etc.) performance and quality assurance surveillance plans (see
46.103(a), and 46.401(a));
(c) Specify procedures for reduction of award fee or for reductions
to the price of a fixed-price contract when services are not performed
or do not meet contract requirements (see 46.407(f)); and
(d) Include performance incentives where appropriate.
37.502 Elements of performance-based contracting.
37.502-1 Statements of work.
Generally, statements or work shall define requirement in clear,
concise language identifying specific work to be accomplished.
Statements of work must be individually tailored to consider the period
of performance, deliverable items, if any, and the desired degree of
performance flexibility (see 11.105). However, in the case of task
order contracts, the statement of work need only define the scope of
the overall contract (see 16.504(a)(4)(iii)). Each task issued under a
task order contract shall clearly describe all services to be performed
(see 16.505(a)(2)). When preparing statements or work, agencies shall,
to the maximum extent practicable--
(a) Describe the work in terms of ``what'' is to be the required
output rather than either ``how'' the work is to be accomplished or the
number of hours to be provided;
(b) Enable assessment of work performance against measurable
performance standards;
(c) Rely on the use of measurable performance standards and
financial incentives in a competitive environment to encourage
competitors to develop and institute innovative and cost effective
methods of performing the work; and
(d) Avoid combining requirements into a single acquisition that is
too broad for the agency or a prospective contractor to manage
effectively.
37.502-2 Quality assurance.
Agencies shall develop quality assurance surveillance plans when
acquiring services (see subpart 46.2). These plans shall recognize the
responsibility of the contractor (see 46.105) to carry out its quality
control obligations and shall contain measurable inspection and
acceptance criteria corresponding to the performance standards
contained in the statement of work. The quality assurance plans shall
focus on the level of performance required by the statement of work,
rather than the methodology used by the contractor to achieve that
level of performance.
37.502-3 Selection procedures.
Agencies shall use competitive negotiations where appropriate to
ensure selection of services that offer the best value to the
Government, cost and other factors considered.
37.502-4 Contract type.
Contract types most likely to motivate contractors to perform at
optimal levels shall be chosen (see subpart 16.1). To the maximum
extent practicable, performance incentives, either positive or negative
or both, shall be incorporated into the contract to encourage
contractors to increase efficiency and maximize performance (see
subpart 16.4). These incentives shall correspond to the specific
performance standards in the quality assurance surveillance plan and
shall be capable of being objectively measured.
37.502-5 Follow-on and repetitive requirements.
When acquiring services which previously have been provided by
contract, agencies shall rely on the experience gained from the prior
contract to incorporate performance-based contracting methods to the
maximum extent practicable.
PART 46--QUALITY ASSURANCE
15. Section 46.103 is amended by revising paragraph (a) to read as
follows:
46.103 Contracting office responsibilities.
* * * * *
(a) Receiving from the activity responsible for technical
requirements any specifications for inspection, testing, and other
contract quality requirements essential to ensure the integrity of the
supplies or services (the activity responsible for technical
requirements is responsible for prescribing contract quality
requirements, such as inspection and testing requirements or, for
service contracts, a quality assurance surveillance plan);
* * * * *
16. Section 46.401 is amended by revising paragraph (a) to read as
follows:
46.401 General.
(a) Government contract quality assurance shall be performed at
such times (including any stage of manufacture or performance of
services) and places (including subcontractors' plants) as may be
necessary to determine that the supplies or services conform to
contract requirements. Quality assurance surveillance plans should be
prepared in conjunction with the preparation of the statement of work.
The plans should specify--
(1) All work requiring surveillance, and
(2) The method of surveillance.
* * * * *
17. Section 46.407 is amended by revising the introductory
paragraph (c)(1), and adding a new second and third sentence to (f) to
read as follows:
[[Page 40287]]
46.407 Noncomforming supplies or services.
* * * * *
(c)(1) In situations not covered by paragraph (b) of this section,
the contracting officer shall ordinarily reject supplies or services
when the nonconformance is critical or major. However, there may be
circumstances (e.g., reasons of economy or urgency) when acceptance of
such supplies or services is determined by the contracting officer to
be in the Government's interest. The contracting officer shall make
this determination, based upon--
* * * * *
(f) * * * For services, the contracting officer can consider
identifying the value of the individual work requirements or tasks
(subdivisions) which may be subject to price or fee reduction. This
value may be used to determine an equitable adjustment for
nonconforming services. * * *
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
18. Section 52.237-XX is added to read as follows:
52.237-XX Identification of uncompensated overtime.
As prescribed in 37.115-3, insert the following provision:
Identification of Uncompensated Overtime (Date)
(a) Definitions. As used in this provision--
Uncompensated overtime means the hours worked in excess of an
average of 40 hours per week by direct charge employees who are
exempt from the Fair Labor Standards Act, without additional
compensation. Compensated personal absences such as holidays,
vacations, and sick leave shall be included in the normal work week
for purposes of computing uncompensated overtime hours.
Uncompensated overtime rate is the rate which results from
multiplying the hourly rate for a 40 hour work week by 40, and then
dividing by the proposed hours per week. For example, 45 hours
proposed on a 40 hour work week basis at $20 per hour would be
converted to an uncompensated overtime rate of $17.78 per hour
($20.00 x 40 divided by 45 = $17.78).
(b) For any hours proposed against which an uncompensated
overtime rate is applied, the offeror shall identity in its proposal
the hours in excess of an average of 40 hours per week, by labor
category at the same level of detail as compensated hours, and the
uncompensated overtime rate per hour, whether at the prime or
subcontract level. This includes uncompensated overtime hours that
are in indirect cost pools for personnel whose regular hours are
normally charged direct.
(c) The offeror's accounting practices used to estimate
uncompensated overtime must be consistent with its cost accounting
practices used to accumulate and report uncompensated overtime
hours.
(d) Proposals which include unrealistically low labor rates, or
which do not otherwise demonstrate cost realism, will be considered
in a risk assessment and evaluated for award in accordance with that
assessment.
(e) The offeror shall include a copy of its policy addressing
uncompensated overtime with its proposals.
(End of provision)
[FR Doc. 96-19486 Filed 7-31-96; 8:45 am]
BILLING CODE 6820-EP-M