[Federal Register Volume 63, Number 119 (Monday, June 22, 1998)]
[Rules and Regulations]
[Pages 34059-34062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16112]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 4, 22, 35, 36, 44, and 52
[FAC 97-05; FAR Case 95-011; Item I]
RIN 9000-AH57
Federal Acquisition Regulation; Subcontract Consent
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 reduce requirements for
consent to subcontract. The rule eliminates the consent requirements
for contractors that have an approved purchasing system, except when
specific subcontracts requiring consent are identified by the
contracting officer; eliminates consent requirements for fixed-price
incentive contracts and fixed-price redeterminable contracts; and
increases, to the simplified acquisition threshold, the dollar level at
which consent requirements are included in time-and-materials, labor-
hour, and letter contracts. This regulatory action was not subject to
Office of Management and Budget review under Executive Order 12866,
dated September 30, 1993, and is not a major rule under 5 U.S.C. 804.
EFFECTIVE DATE: August 21, 1998.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC 20405, (202) 501-4755, for information
pertaining to status or publication schedules. For clarification of
content, contact Ms. Linda Klein, Procurement Analyst, at (202) 501-
3775. Please cite FAC 97-05, FAR case 95-011.
SUPPLEMENTARY INFORMATION:
A. Background
A proposed rule was published in the Federal Register on April 21,
1997 (62 FR 19465). Comments were received from nine respondents. All
comments were considered in the development of this 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 consent to
subcontract requirement has a very small administrative cost that is
passed along to the Government as part of the contract price, and this
rule reduces the requirement for consent to subcontract.
C. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. 3501, et seq.) is deemed to
apply because the final rule contains information collection
requirements. Accordingly, a request for approval of the information
collection requirements was submitted to the Office of Management and
Budget (OMB) and approved through June 30, 2000, under OMB Control
Number 9000-0149. Public comments concerning this request were invited
through Federal Register notice 62 FR 19465, April 21, 1997, and no
comments were received.
List of Subjects in 48 CFR Parts 4, 22, 35, 36, 44, and 52
Government procurement.
Dated: June 11, 1998.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
Therefore, 48 CFR Parts 4, 22, 35, 36, 44, and 52 are amended as
set forth below:
1. The authority citation for 48 CFR Parts 4, 22, 35, 6, 44, 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).
[[Page 34060]]
PART 4--ADMINISTRATIVE MATTERS
4.705-3 [Amended]
2. Section 4.705-3 is amended in paragraph (f) by revising the
parenthetical to read ``(see 52.244-2)''.
PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS
22.810 [Amended]
3. Section 22.810 is amended in paragraph (g) by removing the
phrase ``paragraph (a), (b), or (c) of 44.204'' and adding in its place
``44.204(a)''.
PART 35--RESEARCH AND DEVELOPMENT CONTRACTING
4. Section 35.009 is amended by revising the last sentence to read
as follows:
35.009 Subcontracting research and development effort.
* * * The clause at 52.244-2, Subcontracts, prescribed for certain
types of contracts at 44.204(a), requires the contracting officer's
prior approval for the placement of certain subcontracts.
PART 36--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS
5. Section 36.606 is amended by revising paragraph (e) to read as
follows:
36.606 Negotiations.
* * * * *
(e) Because selection of firms is based upon qualifications, the
extent of any subcontracting is an important negotiation topic. The
clause prescribed at 44.204(b), Subcontractors and Outside Associates
and Consultants (Architect-Engineer Services) (see 52.244-4), limits a
firm's subcontracting to firms agreed upon during negotiations.
* * * * *
PART 44--SUBCONTRACTING POLICIES AND PROCEDURES
6. Section 44.000 is revised to read as follows:
44.000 Scope of part.
(a) This part prescribes policies and procedures for consent to
subcontracts or advance notification of subcontracts, and for review,
evaluation, and approval of contractors' purchasing systems.
(b) The consent and advance notification requirements of subpart
44.2 are not applicable to prime contracts for commercial items
acquired pursuant to part 12.
44.102 [Removed]
7. Section 44.102 is removed.
44.201 Consent and advance notification requirements.
8. The heading of section 44.201 is revised to read as set forth
above.
9. Sections 44.201-1 and 44.201-2 are revised to read as follows:
44.201-1 Consent requirements.
(a) If the contractor has an approved purchasing system, consent is
required for subcontracts specifically identified by the contracting
officer in the subcontracts clause of the contract. The contracting
officer may require consent to subcontract if the contracting officer
has determined that an individual consent action is required to protect
the Government adequately because of the subcontract type, complexity,
or value, or because the subcontract needs special surveillance. These
can be subcontracts for critical systems, subsystems, components, or
services. Subcontracts may be identified by subcontract number or by
class of items (e.g., subcontracts for engines on a prime contract for
airframes).
(b) If the contractor does not have an approved purchasing system,
consent to subcontract is required for cost-reimbursement, time-and-
materials, labor-hour, or letter contracts, and also for unpriced
actions (including unpriced modifications and unpriced delivery orders)
under fixed-price contracts that exceed the simplified acquisition
threshold, for--
(1) Cost-reimbursement, time-and-materials, or labor-hour
subcontracts; and
(2) Fixed-price subcontracts that exceed--
(i) For the Department of Defense, the Coast Guard, and the
National Aeronautics and Space Administration, the greater of the
simplified acquisition threshold or 5 percent of the total estimated
cost of the contract; or
(ii) For civilian agencies other than the Coast Guard and the
National Aeronautics and Space Administration, either the simplified
acquisition threshold or 5 percent of the total estimated cost of the
contract.
(c) Consent may be required for subcontracts under prime contracts
for architect-engineer services.
(d) The contracting officer's written authorization for the
contractor to purchase from Government sources (see part 51)
constitutes consent.
44.201-2 Advance notification requirements.
Under cost-reimbursement contracts, even if the contractor has an
approved purchasing system and consent to subcontract is not required
under 44.201-1, the contractor is required by statute (10 U.S.C.
2306(e) or 41 U.S.C. 254(b)) to notify the agency before the award of--
(a) Any cost-plus-fixed-fee subcontract; or
(b) Any fixed-price subcontract that exceeds--
(1) For the Department of Defense, the Coast Guard, and the
National Aeronautics and Space Administration, the greater of the
simplified acquisition threshold or 5 percent of the total estimated
cost of the contract; or
(2) For civilian agencies other than the Coast Guard and the
National Aeronautics and Space Administration, either the simplified
acquisition threshold or 5 percent of the total estimated cost of the
contract.
44.201-3 and 44.201-4 [Removed]
10. Sections 44.201-3 and 44.201-4 are removed.
11. Section 44.202-1 is amended by revising paragraphs (b) and (c)
to read as follows:
44.202-1 Responsibilities.
* * * * *
(b) The contracting officer responsible for consent shall review
the contractor's notification and supporting data to ensure that the
proposed subcontract is appropriate for the risks involved and
consistent with current policy and sound business judgment.
(c) Designation of specific subcontractors during contract
negotiations does not in itself satisfy the requirements for advance
notification or consent pursuant to the clause at 52.244-2. However,
if, in the opinion of the contracting officer, the advance notification
or consent requirements were satisfied for certain subcontracts
evaluated during negotiations, the contracting officer shall identify
those subcontracts in paragraph (k) of the clause at 52.244-2.
44.202-2 [Amended]
12. Section 44.202-2 is amended in the introductory text of
paragraph (a) by adding ``, at a minimum,'' after the word ``shall''.
13. Section 44.204 is revised to read as follows:
44.204 Contract clauses.
(a)(1) The contracting officer shall insert the clause at 52.244-2,
Subcontracts, in solicitations and contracts when contemplating--
(i) A cost-reimbursement contract;
(ii) A letter contract that exceeds the simplified acquisition
threshold;
[[Page 34061]]
(iii) A fixed-price contract that exceeds the simplified
acquisition threshold under which unpriced contract actions (including
unpriced modifications or unpriced delivery orders) are anticipated;
(iv) A time-and-materials contract that exceeds the simplified
acquisition threshold; or
(v) A labor-hour contract that exceeds the simplified acquisition
threshold.
(2) If a cost-reimbursement contract is contemplated--
(i) For the Department of Defense, the Coast Guard, and the
National Aeronautics and Space Administration, the contracting officer
shall use the clause with its Alternate I; or
(ii) For civilian agencies other than the Coast Guard and the
National Aeronautics and Space Administration, the contracting officer
shall use the clause with its Alternate II.
(3) Use of this clause is not required in--
(i) Fixed-price architect-engineer contracts; or
(ii) Contracts for mortuary services, refuse services, or shipment
and storage of personal property, when an agency-prescribed clause on
approval of subcontractors' facilities is required.
(b) The contracting officer may insert the clause at 52.244-4,
Subcontractors and Outside Associates and Consultants (Architect-
Engineer Services), in fixed-price architect-engineer contracts.
(c) The contracting officer shall, when contracting by negotiation,
insert the clause at 52.244-5, Competition in Subcontracting, in
solicitations and contracts when the contract amount is expected to
exceed the simplified acquisition threshold, unless--
(1) A firm-fixed-price contract, awarded on the basis of adequate
price competition or whose prices are set by law or regulation, is
contemplated; or
(2) A time-and-materials, labor-hour, or architect-engineer
contract is contemplated.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
52.244-1 [Removed and Reserved]
14. Section 52.244-1 is removed and reserved.
15. Section 52.244-2 is revised to read as follows:
52.244-2 Subcontracts.
As prescribed in 44.204(a)(1), insert the following clause:
SUBCONTRACTS (AUG 1998)
(a) Definitions. As used in this clause--
Approved purchasing system means a Contractor's purchasing
system that has been reviewed and approved in accordance with Part
44 of the Federal Acquisition Regulation (FAR).
Consent to subcontract means the Contracting Officer's written
consent for the Contractor to enter into a particular subcontract.
Subcontract means any contract, as defined in FAR Subpart 2.1,
entered into by a subcontractor to furnish supplies or services for
performance of the prime contract or a subcontract. It includes, but
is not limited to, purchase orders, and changes and modifications to
purchase orders.
(b) This clause does not apply to subcontracts for special test
equipment when the contract contains the clause at FAR 52.245-18,
Special Test Equipment.
(c) When this clause is included in a fixed-price type contract,
consent to subcontract is required only on unpriced contract actions
(including unpriced modifications or unpriced delivery orders), and
only if required in accordance with paragraph (d) or (e) of this
clause.
(d) If the Contractor does not have an approved purchasing
system, consent to subcontract is required for any subcontract
that--
(1) Is of the cost-reimbursement, time-and-materials, or labor-
hour type; or
(2) Is fixed-price and exceeds--
(i) For a contract awarded by the Department of Defense, the
Coast Guard, or the National Aeronautics and Space Administration,
the greater of the simplified acquisition threshold or 5 percent of
the total estimated cost of the contract; or
(ii) For a contract awarded by a civilian agency other than the
Coast Guard and the National Aeronautics and Space Administration,
either the simplified acquisition threshold or 5 percent of the
total estimated cost of the contract.
(e) If the Contractor has an approved purchasing system, the
Contractor nevertheless shall obtain the Contracting Officer's
written consent before placing the following subcontracts:
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(f)(1) The Contractor shall notify the Contracting Officer
reasonably in advance of placing any subcontract or modification
thereof for which consent is required under paragraph (c), (d), or
(e) of this clause, including the following information:
(i) A description of the supplies or services to be
subcontracted.
(ii) Identification of the type of subcontract to be used.
(iii) Identification of the proposed subcontractor.
(iv) The proposed subcontract price.
(v) The subcontractor's current, complete, and accurate cost or
pricing data and Certificate of Current Cost or Pricing Data, if
required by other contract provisions.
(vi) The subcontractor's Disclosure Statement or Certificate
relating to Cost Accounting Standards when such data are required by
other provisions of this contract.
(vii) A negotiation memorandum reflecting--
(A) The principal elements of the subcontract price
negotiations;
(B) The most significant considerations controlling
establishment of initial or revised prices;
(C) The reason cost or pricing data were or were not required;
(D) The extent, if any, to which the Contractor did not rely on
the subcontractor's cost or pricing data in determining the price
objective and in negotiating the final price;
(E) The extent to which it was recognized in the negotiation
that the subcontractor's cost or pricing data were not accurate,
complete, or current; the action taken by the Contractor and the
subcontractor; and the effect of any such defective data on the
total price negotiated;
(F) The reasons for any significant difference between the
Contractor's price objective and the price negotiated; and
(G) A complete explanation of the incentive fee or profit plan
when incentives are used. The explanation shall identify each
critical performance element, management decisions used to quantify
each incentive element, reasons for the incentives, and a summary of
all trade-off possibilities considered.
(2) The Contractor is not required to notify the Contracting
Officer in advance of entering into any subcontract for which
consent is not required under paragraph (c), (d), or (e) of this
clause.
(g) Unless the consent or approval specifically provides
otherwise, neither consent by the Contracting Officer to any
subcontract nor approval of the Contractor's purchasing system shall
constitute a determination--
(1) Of the acceptability of any subcontract terms or conditions;
(2) Of the allowability of any cost under this contract; or
(3) To relieve the Contractor of any responsibility for
performing this contract.
(h) No subcontract or modification thereof placed under this
contract shall provide for payment on a cost-plus-a-percentage-of-
cost basis, and any fee payable under cost-reimbursement type
subcontracts shall not exceed the fee limitations in FAR 15.404-
4(c)(4)(i).
(i) The Contractor shall give the Contracting Officer immediate
written notice of any action or suit filed and prompt notice of any
claim made against the Contractor by any subcontractor or vendor
that, in the opinion of the Contractor, may result in litigation
related in any way to this contract, with respect to which the
Contractor may be entitled to reimbursement from the Government.
(j) The Government reserves the right to review the Contractor's
purchasing system as set forth in FAR Subpart 44.3.
(k) Paragraphs (d) and (f) of this clause do not apply to the
following subcontracts, which were evaluated during negotiations:
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(End of clause)
Alternate I (Aug 1998). As prescribed in 44.204(a)(2)(i),
substitute the following paragraph (f)(2) for paragraph (f)(2) of
the basic clause:
[[Page 34062]]
(f)(2) If the Contractor has an approved purchasing system and
consent is not required under paragraph (c), (d), or (e) of this
clause, the Contractor nevertheless shall notify the Contracting
Officer reasonably in advance of entering into any (i) cost-plus-
fixed-fee subcontract, or (ii) fixed-price subcontract that exceeds
the greater of the simplified acquisition threshold or 5 percent of
the total estimated cost of this contract. The notification shall
include the information required by paragraphs (f)(1)(i) through
(f)(1)(iv) of this clause.
Alternate II (Aug 1998). As prescribed in 44.204(a)(2)(ii),
substitute the following paragraph (f)(2) for paragraph (f)(2) of
the basic clause:
(f)(2) If the Contractor has an approved purchasing system and
consent is not required under paragraph (c), (d), or (e) of this
clause, the Contractor nevertheless shall notify the Contracting
Officer reasonably in advance of entering into any (i) cost-plus-
fixed-fee subcontract, or (ii) fixed-price subcontract that exceeds
either the simplified acquisition threshold or 5 percent of the
total estimated cost of this contract. The notification shall
include the information required by paragraphs (f)(1)(i) through
(f)(1)(iv) of this clause.
52.244-3 [Removed and reserved]
16. Section 52.244-3 is removed and reserved.
17. Section 52.244-4 is amended by revising the section heading,
introductory paragraph, and clause heading and date to read as follows:
52.244-4 Subcontractors and outside associates and consultants
(Architect-engineer services).
As prescribed in 44.204(b), insert the following clause:
SUBCONTRACTORS AND OUTSIDE ASSOCIATES AND CONSULTANTS (ARCHITECT-
ENGINEER SERVICES) (AUG 1998)
* * * * *
(End of clause)
52.244-5 [Amended]
18. Section 52.244-5 is amended in the introductory paragraph by
revising ``44.204(e)'' to read ``44.204(c)''.
[FR Doc. 98-16112 Filed 6-19-98; 8:45 am]
BILLING CODE 6820-EP-P