[Federal Register Volume 64, Number 185 (Friday, September 24, 1999)]
[Rules and Regulations]
[Pages 51835-51837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24415]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 12, 13, and 15

[FAC 97-14; FAR Case 98-300; Item VI]
RIN 9000-AI45


Federal Acquisition Regulation; Determination of Price 
Reasonableness and Commerciality

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Interim rule with request for comments.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on an interim 
rule amending the Federal Acquisition Regulation (FAR) to implement 
Sections 803 and 808 of the Strom Thurmond National Defense 
Authorization Act for Fiscal Year 1999 (Pub. L. 105-261).

EFFECTIVE DATE: September 24, 1999.
    Comment Date: Interested parties should submit comments to the FAR 
Secretariat at the address shown below on or before November 23, 1999 
to be considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVR), 1800 F Street, 
NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.
    Address e-mail comments submitted via the Internet to:

[email protected]

    Please submit comments only and cite FAC 97-14, FAR case 98-300 in 
all correspondence related to this case.

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 Mr. Jeremy Olson at (202) 501-0692. Please cite FAC 
97-14, FAR case 98-300.

SUPPLEMENTARY INFORMATION:

A. Background

    The Councils initiated this case to implement Sections 803 and 808 
of the Strom Thurmond National Defense Authorization Act for Fiscal 
Year 1999 (Pub. L. 105-261) as follows:
    (a) Section 803 of Public Law 105-261. (1) Paragraphs (a)(2)(A) 
through (a)(2)(C) of Section 803 of Public Law 105-261 require that the 
FAR provide specific guidance concerning--
    (i) The appropriate application and precedence of various price 
analysis tools;
    (ii) The circumstances under which contracting officers should 
require offerors of exempt commercial items to provide information 
other than cost or pricing data; and
    (iii) The role and responsibility of support organizations in 
determining price reasonableness.
    (2) Paragraph (a)(2)(D) of Section 803 is not implemented under 
this case.
    (b) Section 808 of Public Law 105-261. Section 808 of Public Law 
105-261 requires amending the FAR to--
    (1) Clarify procedures associated with obtaining information other 
than cost or pricing data;
    (2) Establish that offerors who fail to comply with requirements to 
provide the information shall be ineligible for award; and
    (3) Establish exceptions, as appropriate.
    This is not a significant regulatory action and, therefore, was not 
subject to Office of Management and Budget

[[Page 51836]]

review under Section 6(b) of Executive Order 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    This interim rule may have a significant cost or administrative 
impact on contractors or offerors within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because offerors may be 
ineligible for award if they fail to provide the required information 
other than cost or pricing data. We have prepared an Initial Regulatory 
Flexibility Analysis (IRFA) that is summarized as follows:

    The rule will apply to all offerors, large or small, that 
respond to solicitations for commercial items which require 
submission of information other than cost or pricing data. We expect 
few, if any, offerors to fail to comply with the requirements to 
provide information other than cost or pricing data.

The FAR Secretariat has submitted a copy of the IRFA to the Chief 
Counsel for Advocacy of the Small Business Administration. Interested 
parties may obtain a copy from the FAR Secretariat. The Councils will 
consider comments from small entities concerning the affected FAR 
subpart in accordance with 5 U.S.C. 610. Interested parties must submit 
such comments separately and should cite 5 U.S.C 601, et seq. (FAC 97-
14, FAR case 98-300), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose information collection requirements that require 
the approval of the Office of Management and Budget under 44 U.S.C. 
3501, et seq.

D. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DoD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary because this rule implements Section 808 of the Strom 
Thurmond National Defense Authorization Act for Fiscal Year 1999 (Pub. 
L. 105-261), which required implementation in the FAR by April 15, 
1999. However, pursuant to Public Law 98-577 and FAR 1.501, the 
Councils will consider public comments received in response to this 
interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 12, 13, and 15

    Government procurement.

    Dated: September 14, 1999.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA amend 48 CFR Parts 12, 13, and 15 as 
set forth below:
    1. The authority citation for 48 CFR Parts 12, 13, and 15 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 12--ACQUISITION OF COMMERCIAL ITEMS

    2. Revise section 12.209 read as follows:


12.209  Determination of price reasonableness.

    When contracting for commercial items, the contracting officer must 
establish price reasonableness in accordance with 13.106-3, 14.408-2, 
or Subpart 15.4, as applicable.

PART 13--SIMPLIFIED ACQUISITION PROCEDURES

    3. Amend section 13.106-3 in the introductory text of paragraph (a) 
by removing ``shall'' and adding ``must'' in its place, and by revising 
paragraph (a)(2) to read as follows:


13.106-3  Award and documentation.

    (a) * * *
    (2) If only one response is received, include a statement of price 
reasonableness in the contract file. The contracting officer may base 
the statement on--
    (i) Market research;
    (ii) Comparison of the proposed price with prices found reasonable 
on previous purchases;
    (iii) Current price lists, catalogs, or advertisements. However, 
inclusion of a price in a price list, catalog, or advertisement does 
not, in and of itself, establish fairness and reasonableness of the 
price;
    (iv) A comparison with similar items in a related industry;
    (v) The contracting officer's personal knowledge of the item being 
purchased;
    (vi) Comparison to an independent Government estimate; or
    (vii) Any other reasonable basis.
* * * * *

PART 15--CONTRACTING BY NEGOTIATION

    4. Amend section 15.403-1 to add a sentence to the end of paragraph 
(c)(3) to read as follows:


15.403-1  Prohibition on obtaining cost or pricing data (10 U.S.C. 
2306a and 41 U.S.C. 254b).

* * * * *
    (c) * * *
    (3) * * * If the contracting officer determines that an item 
claimed to be commercial is, in fact, not commercial and that no other 
exception or waiver applies, the contracting officer must require 
submission of cost or pricing data.
* * * * *
    5. Amend section 15.403-3 to revise paragraphs (a) and (c) to read 
as follows:


15.403-3  Requiring information other than cost or pricing data.

    (a) General. (1) The contracting officer is responsible for 
obtaining information that is adequate for evaluating the 
reasonableness of the price or determining cost realism, but the 
contracting officer should not obtain more information than is 
necessary (see 15.402(a)). If the contracting officer cannot obtain 
adequate information from sources other than the offeror, the 
contracting officer must require submission of information other than 
cost or pricing data from the offeror that is adequate to determine a 
fair and reasonable price (10 U.S.C. 2306a(d)(1) and 41 U.S.C. 
254b(d)(1)). Unless an exception under 15.403-1(b) (1) or (2) applies, 
the contracting officer must require that the information submitted by 
the offeror include, at a minimum, appropriate information on the 
prices at which the same item or similar items have previously been 
sold, adequate for determining the reasonableness of the price. To 
determine the information an offeror should be required to submit, the 
contracting officer should consider the guidance in Section 3.3, 
Chapter 3, Volume I, of the Contract Pricing Reference Guide cited at 
15.404-1(a)(7).
    (2) The contractor's format for submitting the information should 
be used (see 15.403-5(b)(2)).
    (3) The contracting officer must ensure that information used to 
support price negotiations is sufficiently current to permit 
negotiation of a fair and reasonable price. Requests for updated 
offeror information should be limited to information that affects the 
adequacy of the proposal for negotiations, such as changes in price 
lists.
    (4) As specified in Section 808 of Public Law 105-261, an offeror 
who

[[Page 51837]]

does not comply with a requirement to submit information for a contract 
or subcontract in accordance with paragraph (a)(1) of this subsection 
is ineligible for award unless the HCA determines that it is in the 
best interest of the Government to make the award to that offeror, 
based on consideration of the following:
    (i) The effort made to obtain the data.
    (ii) The need for the item or service.
    (iii) Increased cost or significant harm to the Government if award 
is not made.
* * * * *
    (c) Commercial items. (1) At a minimum, the contracting officer 
must use price analysis to determine whether the price is fair and 
reasonable whenever the contracting officer acquires a commercial item 
(see 15.404-1(b)). The fact that a price is included in a catalog does 
not, in and of itself, make it fair and reasonable. If the contracting 
officer cannot determine whether an offered price is fair and 
reasonable, even after obtaining additional information from sources 
other than the offeror, then the contracting officer must require the 
offeror to submit information other than cost or pricing data to 
support further analysis (see 15.403-3(a)(1)).
    (2) Limitations relating to commercial items (10 U.S.C. 2306a(d)(2) 
and 41 U.S.C. 254b(d)). (i) The contracting officer must limit requests 
for sales data relating to commercial items to data for the same or 
similar items during a relevant time period.
    (ii) The contracting officer must, to the maximum extent 
practicable, limit the scope of the request for information relating to 
commercial items to include only information that is in the form 
regularly maintained by the offeror as part of its commercial 
operations.
    (iii) The Government must not disclose outside the Government 
information obtained relating to commercial items that is exempt from 
disclosure under 24.202(a) or the Freedom of Information Act (5 U.S.C. 
552(b)).
    6. Amend section 15.404-1 to revise paragraph (b)(2) introductory 
text, (b)(2)(i) and (b)(2)(ii); and to add (b)(2)(vii), (b)(3) and 
(b)(4) to read as follows:


15.404-1  Proposal analysis techniques.

* * * * *
    (b) * * *
    (2) The Government may use various price analysis techniques and 
procedures to ensure a fair and reasonable price. Examples of such 
techniques include, but are not limited to, the following:
    (i) Comparison of proposed prices received in response to the 
solicitation. Normally, adequate price competition establishes price 
reasonableness (see 15.403-1(c)(1)).
    (ii) Comparison of previously proposed prices and previous 
Government and commercial contract prices with current proposed prices 
for the same or similar items, if both the validity of the comparison 
and the reasonableness of the previous price(s) can be established.
* * * * *
    (vii) Analysis of pricing information provided by the offeror.
    (3) The first two techniques at 15.404-1(b)(2) are the preferred 
techniques. However, if the contracting officer determines that 
information on competitive proposed prices or previous contract prices 
is not available or is insufficient to determine that the price is fair 
and reasonable, the contracting officer may use any of the remaining 
techniques as appropriate to the circumstances applicable to the 
acquisition.
    (4) Value analysis can give insight into the relative worth of a 
product and the Government may use it in conjunction with the price 
analysis techniques listed in paragraph (b)(2) of this section.
* * * * *
    7. Amend section 15.404-2 to revise paragraphs (a)(1) and (a)(2) to 
read as follows:


15.404-2  Information to support proposal analysis.

    (a) Field pricing assistance. (1) The contracting officer should 
request field pricing assistance when the information available at the 
buying activity is inadequate to determine a fair and reasonable price. 
The contracting officer must tailor requests to reflect the minimum 
essential supplementary information needed to conduct a technical or 
cost or pricing analysis.
    (2) The contracting officer must tailor the type of information and 
level of detail requested in accordance with the specialized resources 
available at the buying activity and the magnitude and complexity of 
the required analysis. Field pricing assistance is generally available 
to provide--
    (i) Technical, audit, and special reports associated with the cost 
elements of a proposal, including subcontracts;
    (ii) Information on related pricing practices and history;
    (iii) Information to help contracting officers determine 
commerciality and price reasonableness, including--
    (A) Verifying sales history to source documents;
    (B) Identifying special terms and conditions;
    (C) Identifying customarily granted or offered discounts for the 
item;
    (D) Verifying the item to an existing catalog or price list;
    (E) Verifying historical data for an item previously not determined 
commercial that the offeror is now trying to qualify as a commercial 
item; and
    (F) Identifying general market conditions affecting determinations 
of commerciality and price reasonableness.
    (iv) Information relative to the business, technical, production, 
or other capabilities and practices of an offeror.
* * * * *
[FR Doc. 99-24415 Filed 9-23-99; 8:45 am]
BILLING CODE 6820-EP-P