[Federal Register Volume 63, Number 51 (Tuesday, March 17, 1998)]
[Rules and Regulations]
[Pages 12997-12998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6674]


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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1806, 1807, 1816, 1819, and 1837


Revisions to the NASA FAR Supplement on Performance-Based 
Contracting and Other Miscellaneous Revisions

AGENCY: National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: This is a final rule amending the NASA FAR Supplement (NFS) to 
clarify that Performance-Based Contracting (PBC) is the preferred 
contracting technique for the acquisition of all supplies and services 
at NASA; provide guidance on the appropriate contract type for PBC 
requirements; provide common sense guidance as to when positive and 
negative incentives should not be used; and clarify the use of award 
fee incentives in conjunction with other contract types. Other 
miscellaneous revisions are made to conform with recent FAR numbering 
changes.

EFFECTIVE DATE: March 17, 1998.

FOR FURTHER INFORMATION CONTACT: Kenneth A. Sateriale, NASA, Office of 
Procurement, Contract Management Division (Code HK), 202) 358-0491.

SUPPLEMENTARY INFORMATION:

Background

    Federal Acquisition Circular 97-1 revised FAR 7.105 and added FAR 
37.6 to address Performance-Based Service Contracting. These changes 
obviate the need for similar coverage in the NFS, although coverage is 
added to clarify that NASA policy on use of PBC is not limited to 
service contracts. In addition, the following changes are made:
    1. New guidance is added regarding the use of incentives in 
performance-based contracts. Included in this guidance is the addition 
of new sections discussing the use of a CPAF contract type for PBC 
requirements and the use of performance incentives. Previous 
restrictions on the use of CPAF for PBC requirements are deleted.
    2. The requirement in 1806.302-470(b) for competition advocate 
approval of a memorandum justifying not preparing a justification for 
other than full and open competition pursuant to FAR 6.302-4, 
International Agreement, is deleted to reflect a statutory change made 
by section 841(b) of the Defense Authorization Act for Fiscal Year 
1998.
    3. Miscellaneous editorial changes are made to align the NFS with 
FAR section titles and numbers.

Impact

    NASA certifies that this regulation will not have a significant 
economic impact on a substantial number of small business entities 
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). This final 
rule does not impose any reporting or recordkeeping requirements 
subject to the Paperwork Reduction Act.

List of Subjects in 48 CFR Parts 1806, 1807, 1816, 1819, and 1837

    Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.
    Accordingly, 48 CFR Parts 1806, 1807, 1816, 1819, and 1837 are 
amended as follows:
    1. The authority citation for 48 CFR Parts 1806, 1807, 1816, 1819, 
and 1837 continues to read as follows:

    Authority: 42 U.S.C. 2473(c)(1).

PART 1806--COMPETITION REQUIREMENTS


1806.302-470  [Amended]

    2. In section 1806.302-470, paragraph (b) is removed, and paragraph 
(c) is redesignated as paragraph (b).

PART 1807--ACQUISITION PLANNING


1807.105  [Amended]

    3. In the introductory text to section 1807.105, the following 
sentence is added to the end of the paragraph to read as follows:


1807.105  Contents of written acquisition plans.

    * * * The requirements in FAR 7.105 regarding performance-based 
contracting methods shall not be limited to acquisition plans for 
service contracts.

PART 1816--TYPES OF CONTRACTS

Subpart 1816.1--[Added]

    4. Subpart 1816.1 is added to read as follows:

Subpart 1816.1--Selecting Contract Types


1816.104  Factors in selecting contract types.


1816.104-70  Contract type for performance-based contracting (PBC).

    (a) PBC is defined in FAR 37.101 and discussed in FAR 37.6. 
Although FAR part 37 primarily addresses services contracts, PBC is not 
limited to these contracts. PBC is the preferred way of contracting for 
all supplies and services at NASA. Generally, when contract performance 
risk under a PBC specification can be fairly shifted to the contractor 
to allow for the operation of objective incentives, a contract type 
with objectively measurable incentives (e.g., FFP, FPIF, or CPIF) is 
appropriate. However, when contractor performance (e.g., cost control, 
schedule, or quality/technical) is best evaluated subjectively using 
quantitative measures, a CPAF contract may be used.
    (b) A level-of-effort contract is not PBC.


1816.402, 1816.402-2, 1816.402-70  [Amended]

    5. Sections 1816.402 and 1816.402-2 and the first sentence in 
paragraph (a) to section 1816.402-70 are revised to read as follows:


1816.402  Application of predetermined, formula-type incentives. (NASA 
paragraphs 1, 2 and 3).

    When considering the use of a quality, performance, or schedule 
incentive, the following guidance applies.
    (1) A positive incentive is generally not appropriate unless--
    (i) Performance above the target (or minimum, if there are no 
negative incentives) level is of significant value to the Government;
    (ii) The value of the higher level of performance is worth the 
additional cost/fee;
    (iii) The attainment of the higher level of performance is clearly 
within the control of the contractor; and
    (iv) An upper limit is identified, beyond which no further 
incentive is earned.
    (2) A negative incentive is generally not appropriate unless--
    (i) A target level of performance can be established, which the 
contractor can reasonably be expected to reach with a diligent effort, 
but a lower level of performance is also minimally acceptable;
    (ii) The value of the negative incentive is commensurate with the 
lower level of performance and any additional administrative costs; and
    (iii) Factors likely to prevent attainment of the target level of

[[Page 12998]]

performance are clearly within the control of the contractor.
    (3) When a negative incentive is used, the contract must indicate a 
level below which performance is not acceptable.


1816.402-2  Performance incentives.


1816.402-270  NASA technical performance incentives.

    (a) A performance incentive shall be included in all contracts 
based on performance-oriented documents (see FAR 11.101(a)) where the 
primary deliverable(s) is (are) hardware and where total value 
(including options) is greater than $25 million unless it is determined 
that the nature of the acquisition (for example, commercial off-the-
shelf computers) would not effectively lend itself to a performance 
incentive. * * *


1816.405-270  [Amended]

    6. Section 1816.405-270 is revised to read as follows:


1816.405-270  CPAF contracts.

    (a) Use of an award fee incentive shall be approved in writing by 
the procurement officer. The procurement officer's approval shall 
include a discussion of the other types of contracts considered and 
shall indicate why an award fee incentive is the appropriate choice. 
Award fee incentives should not be used on contracts with a total 
estimated cost and fee less than $2 million per year. The procurement 
officer may authorize use of award fee for lower-valued acquisitions, 
but should do so only in exceptional situations, such as contract 
requirements having direct health or safety impacts, where the 
judgmental assessment of the quality of contractor performance is 
critical.
    (b) Except as provided in paragraph (c) of this section, an award 
fee incentive may be used in conjunction with other contract types for 
aspects of performance that cannot be objectively assessed. In such 
cases, the cost incentive is based on objective formulas inherent in 
the other contract types (e.g., FPI, CPIF), and the award fee provision 
should not separately incentivize cost performance.
    (c) Award fee incentives shall not be used with a cost-plus-fixed-
fee (CPFF) contract.


1816.405-274  [Amended]

    7. In section 1816.405-274, paragraph (e) is revised to read as 
follows:


1816.405-274  Award fee evaluation factors.

* * * * *
    (e) When an AF arrangement is used in conjunction with another 
contract type, the award fee's cost control factor will only apply to a 
subjective assessment of the contractor's efforts to control costs and 
not the actual cost outcome incentivized under the basic contract type 
(e.g. CPIF, FPIF).
* * * * *

PART 1819--SMALL BUSINESS PROGRAMS

Subpart 1819.6--[Amended]

    8. Section heading ``Subpart 1819.6--Certificates of Competency'' 
is revised to read ``Subpart 1819.6--Certificates of Competency and 
Determinations of Responsibility''.

PART 1837--SERVICE CONTRACTING


1837.102, 1837.102-70  [Removed]

    9. Sections 1837.102 and 1837.102-70 are removed.

[FR Doc. 98-6674 Filed 3-16-98; 8:45 am]
BILLING CODE 7510-01-P