[Federal Register Volume 64, Number 185 (Friday, September 24, 1999)]
[Rules and Regulations]
[Pages 51845-51846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24422]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 46

[FAC 97-14; FAR Case 98-002; Item XIII]
RIN 9000-AI17


Federal Acquisition Regulation; Conditionally Accepted Items

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 (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to require that, when 
conditionally accepting nonconforming items, amounts withheld from 
payments should be at least sufficient to cover the cost and related 
profit to correct deficiencies and complete unfinished work; and that 
the contracting officer must document the basis for the amounts 
withheld in the contract file.

EFFECTIVE DATE: November 23, 1999.

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 97-14, FAR case 98-002.

SUPPLEMENTARY INFORMATION:

A. Background

    The Councils published a proposed rule in the Federal Register on 
October 28, 1998, (63 FR 57878). This final rule implements the 
recommendation of General Accounting Office Report GAO/NSIAD-98-20 
Defense Acquisition, Guidance Is Needed On Payments For Conditionally 
Accepted Items, dated December 12, 1997. The rule amends FAR 46.101 to 
add a definition of ``conditional acceptance,'' and amends

[[Page 51846]]

FAR 46.407 to provide procedures for the conditional acceptance of 
supplies and services.
    The Councils received public comments from two respondents and 
considered them in finalizing the rule.
    This rule was not subject to Office of Management and Budget 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

    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 use of conditional 
acceptance is not widespread. No additional requirements are imposed on 
small businesses.

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.

List of Subjects in 48 CFR Part 46

    Government procurement.

    Dated: September 14, 1999.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
    Therefore, DoD, GSA, and NASA amend 48 CFR Part 46 as set forth 
below:

PART 46--QUALITY ASSURANCE

    1. The authority citation for 48 CFR Part 46 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).

    2. Amend section 46.101 by adding, in alphabetical order, the 
definition ``Conditional acceptance'' to read as follows:


46.101  Definitions.

* * * * *
    Conditional acceptance, as used in this part, means acceptance of 
supplies or services that do not conform to contract quality 
requirements, or are otherwise incomplete, that the contractor is 
required to correct or otherwise complete by a specified date.
* * * * *
    3. Amend section 46.407 as follows:
    a. Remove from paragraph (a) ``Contracting officers'' and insert 
``The contracting officer'', in its place;
    b. Remove from the first sentence of paragraph (b) ``Contractors 
ordinarily shall be given'' and from the second sentence ``shall'' and 
insert ``The contracting officer ordinarily must give the contractor'', 
and ``must'', respectively;
    c. Revise paragraph (c)(1);
    d. Remove from the first and second sentences of paragraph (c)(2) 
``shall'' and insert ``must,'' in their places;
    e. Remove from paragraph (e) ``Contracting officers shall'' and 
insert ``The contracting officer must'';
    f. Revise paragraph (f); and
    g. Remove from the first and last sentences of the introductory 
text of paragraph (g) ``shall'' and insert ``must,'' in their places;
    Revised text read as follows:


46.407  Nonconforming supplies or services.

* * * * *
    (c)(1) In situations not covered by paragraph (b) of this section, 
the contracting officer ordinarily must reject supplies or services 
when the nonconformance is critical or major or the supplies or 
services are otherwise incomplete. However, there may be circumstances 
(e.g., reasons of economy or urgency) when the contracting officer 
determines acceptance or conditional acceptance of supplies or services 
is in the best interest of the Government. The contracting officer must 
make this determination based upon--
    (i) Advice of the technical activity that the item is safe to use 
and will perform its intended purpose;
    (ii) Information regarding the nature and extent of the 
nonconformance or otherwise incomplete supplies or services;
    (iii) A request from the contractor for acceptance of the 
nonconforming or otherwise incomplete supplies or services (if 
feasible);
    (iv) A recommendation for acceptance, conditional acceptance, or 
rejection, with supporting rationale; and
    (v) The contract adjustment considered appropriate, including any 
adjustment offered by the contractor.
* * * * *
    (f) When supplies or services are accepted with critical or major 
nonconformances as authorized in paragraph (c) of this section, the 
contracting officer must modify the contract to provide for an 
equitable price reduction or other consideration. In the case of 
conditional acceptance, amounts withheld from payments generally should 
be at least sufficient to cover the estimated cost and related profit 
to correct deficiencies and complete unfinished work. The contracting 
officer must document in the contract file the basis for the amounts 
withheld. For services, the contracting officer can consider 
identifying the value of the individual work requirements or tasks 
(subdivisions) that may be subject to price or fee reduction. This 
value may be used to determine an equitable adjustment for 
nonconforming services. However, when supplies or services involving 
minor nonconformances are accepted, the contract need not be modified 
unless it appears that the savings to the contractor in fabricating the 
nonconforming supplies or performing the nonconforming services will 
exceed the cost to the Government of processing the modification.
* * * * *
[FR Doc. 99-24422 Filed 9-23-99; 8:45 am]
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