[Federal Register Volume 62, Number 51 (Monday, March 17, 1997)]
[Rules and Regulations]
[Pages 12695-12696]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6313]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 16 and 52
[FAC 90-46; FAR Case 93-603; Item IV]
RIN 9000-AH07
Federal Acquisition Regulation; Performance Incentives for Fixed-
Price Contracts
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 Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council have agreed on a final rule amending
the Federal Acquisition Regulation (FAR) to permit the use of award-fee
provisions as performance incentives in fixed-price contracts. 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: Effective May 16, 1997.
FOR FURTHER INFORMATION CONTACT: Mr. Ralph DeStefano at (202) 501-1758
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 90-46, FAR case 93-603.
SUPPLEMENTARY INFORMATION:
A. Background
The FAR currently provides for the use of performance incentives
when used with cost incentives. This FAR revision allows the use of
performance incentives alone. This revision will allow agencies to
recognize and reward contractors who exceed minimum standards in terms
of quality, timeliness, technical ingenuity, and effective management.
A proposed rule was published in the Federal Register at 61 FR
31798, June 20, 1996. One comment was received from one respondent. The
comment was considered in developing the final rule.
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 rule merely
authorizes the use of performance incentives for contractors under
fixed-price contracts. The rule authorizes the Government to reward a
contractor for exceeding minimum performance standards.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the 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.
List of Subjects in 48 CFR Parts 16 and 52
Government procurement.
Dated: March 7, 1997.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
Therefore, 48 CFR Parts 16 and 52 are amended as set forth below:
1. The authority citation for 48 CFR Parts 16 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 16--TYPES OF CONTRACTS
16.204 [Amended]
2. Section 16.204 is amended in the last sentence by removing the
citation ``16.405'' and inserting ``16.406''.
16.304 [Amended]
3. Section 16.304 is amended by removing ``16.404-1'' and inserting
``16.405-1''.
16.305 [Amended]
4. Section 16.305 is amended by removing ``16.404-2'' and inserting
``16.405-2'' each time it appears.
5. Section 16.401 is amended in paragraph (c) by revising the first
sentence; and adding paragraph (d) to read as follows:
16.401 General.
* * * * *
(c) The two basic categories of incentive contracts are fixed-price
incentive contracts (see 16.403 and
[[Page 12696]]
16.404) and cost-reimbursement incentive contracts (see 16.405). * * *
(d) Award-fee contracts are a type of incentive contract.
16.402-1 [Amended]
6. Section 16.402-1 is amended in paragraph (b) by removing
``16.404-2'' and inserting ``16.405-2''.
16.404 and 16.405 [Redesignated as 16.405 and 16.406]
7. Sections 16.404 and 16.405 are redesignated as 16.405 and
16.406, respectively.
8. A new section 16.404 is added to read as follows:
16.404 Fixed-price contracts with award fees.
(a) Award-fee provisions may be used in fixed-price contracts when
the Government wishes to motivate a contractor and other incentives
cannot be used because contractor performance cannot be measured
objectively. Such contracts shall--
(1) Establish a fixed price (including normal profit) for the
effort. This price will be paid for satisfactory contract performance.
Award fee earned (if any) will be paid in addition to that fixed price;
and
(2) Provide for periodic evaluation of the contractor's performance
against an award-fee plan.
(b) A solicitation contemplating award of a fixed-price contract
with award fee shall not be issued unless the following conditions
exist:
(1) The administrative costs of conducting award-fee evaluations
are not expected to exceed the expected benefits;
(2) Procedures have been established for conducting the award-fee
evaluation;
(3) The award-fee board has been established; and
(4) An individual above the level of the contracting officer
approved the fixed-price-award-fee incentive.
16.404-1 and 16.404-2 [Redesignated as 16.405-1 and 16.405-2].
9. Sections 16.404-1 and 16.404-2 are redesignated as 16.405-1 and
16.405-2, respectively.
10.-11. The newly designated section 16.406 is amended by revising
the introductory text of paragraph (e) to read as follows:
16.406 Contract clauses.
* * * * *
(e) The contracting officer shall insert an appropriate award-fee
clause in solicitations and contracts when an award-fee contract is
contemplated, provided that the clause--
* * * * *
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
12. Section 52.216-16 is amended by revising the introductory
paragraph, and Alternate I introductory text to read as follows:
52.216-16 Incentive Price Revision--Firm Target.
As prescribed in 16.406(a), insert the following clause:
* * * * *
Alternate I (APR 1984). As prescribed in 16.406(a), add the
following paragraph (o) to the basic clause:
* * * * *
13. Section 52.216-17 is amended by revising the introductory
paragraph, and Alternate I introductory text to read as follows:
52.216-17 Incentive Price Revision Successive Targets.
As prescribed in 16.406(b), insert the following clause:
* * * * *
Alternate I (APR 1984). As prescribed in 16.406(b), add the
following paragraph (q) to the basic clause:
* * * * *
[FR Doc. 97-6313 Filed 3-14-97; 8:45 am]
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