[Federal Register Volume 66, Number 85 (Wednesday, May 2, 2001)]
[Rules and Regulations]
[Pages 22082-22084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11008]


-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2 and 37

[FAC 97-25; FAR Case 2000-307; Item I]
RIN 9000-AJ12


Federal Acquisition Regulation; Preference for Performance-Based 
Contracting

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

ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

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 
Section 821 of the Floyd D. Spence National Defense Authorization Act 
for Fiscal Year 2001. The FAR rule explicitly establishes a preference 
for performance-based contracting when acquiring services.

DATES: Effective Date: May 2, 2001.
    Comment Date: Interested parties should submit comments to the FAR 
Secretariat at the address shown below on or before July 2, 2001 to be 
considered in the formulation of a final rule.

ADDRESSES: Submit written comments to: General Services Administration, 
FAR Secretariat (MVP), 1800 F Street,

[[Page 22083]]

NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.
    Submit electronic comments via the Internet to: [email protected].
    Please submit comments only and cite FAC 97-25, FAR case 2000-307 
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 Ms. Julia Wise, Procurement Analyst, at (202) 208-
1168. Please cite FAC 97-25, FAR case 2000-307.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 821(a) of the Floyd D. Spence National Defense 
Authorization Act for Fiscal Year 2001 (Public Law 106-398) 
establishes, Governmentwide, the following order of precedence when 
acquiring services--
    1. A firm-fixed-price performance-based contract or task order.
    2. A performance-based contract or task order that is not firm-
fixed-price.
    3. A contract or task order that is not performance-based.
    Section 821(e)(1) provides a definition for ``performance-based'' 
that applies to Section 821(a): ``The term ``performance-based,'' with 
respect to a contract, a task order, or contracting means that the 
contract, task order, or contracting, respectively, includes the use of 
performance work statements that set forth contract requirements in 
clear, specific, and objective terms with measurable outcomes.''
    This interim FAR rule--
    1. Moves the existing definition ``performance-based contracting'' 
at FAR 37.101 to FAR 2.101, Definitions, and revises it to include the 
substance of the Section 821(e) definition; and
    2. Revises FAR 37.102, Policy, to explicitly state that 
performance-based contracting is the preferred method for acquiring 
services and to enumerate the order of precedence established by 
statute.
    This is not a significant regulatory action and, therefore, was not 
subject to 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 interim rule is not expected to 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 
does not impose a new policy requirement on small entities. The FAR 
currently promotes the use of performance-based service contracting and 
the use of firm-fixed-price type of contracts and task orders when it 
is appropriate to do so. For example, in the current FAR--
    1. Paragraph (a) of 37.102, policy, states ``Agencies shall use 
performance-based contracting methods * * * to the maximum extent 
practicable, for the acquisition of services. * * *''
    2. Subpart 37.6, Performance-Based Contracting, exclusively 
addresses performance-based contracting; and
    3. Subpart 16.1, Selecting Contract Types, addresses a preference, 
under certain conditions, for a firm-fixed-price type of contract that 
best utilizes the basic profit motive of business enterprise.
    Therefore, an Initial Regulatory Flexibility Analysis has not been 
performed. The Councils will consider comments from small entities 
concerning the affected FAR Parts 2 and 37 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 97-25, FAR case 2000-307), 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. The Councils 
have been tasked with publishing an interim rule to implement Section 
821 of the Floyd D. Spence National Defense Authorization Act for 
Fiscal Year 2001 (Public Law 106-398), which is effective 180 days 
after the date of enactment (October 30, 2000) of Public Law 106-398. 
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 2 and 37

    Government procurement.

    Dated: April 27, 2001.
Al Matera,
Director, Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 2 and 37 as set 
forth below:
    1. The authority citation for 48 CFR parts 2 and 37 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 2--DEFINITIONS OF WORDS AND TERMS

    2. Amend section 2.101 by adding, in alphabetical order, the 
definition ``Performance-based contracting'' to read as follows:


2.101  Definitions.

* * * * *
    (b) * * *
    Performance-based contracting means structuring all aspects of an 
acquisition around the purpose of the work to be performed with the 
contract requirements set forth in clear, specific, and objective terms 
with measurable outcomes as opposed to either the manner by which the 
work is to be performed or broad and imprecise statements of work.
* * * * *

PART 37--SERVICE CONTRACTING


37.101  [Amended]

    3. Amend section 37.101 by removing the definition ``Performance-
based contracting.''

    4. Amend section 37.102 by revising paragraph (a) to read as 
follows:


37.102  Policy.

    (a) Performance-based contracting (see Subpart 37.6) is the 
preferred method for acquiring services (Public Law 106-398, section 
821). When acquiring services, including those acquired under supply 
contracts, agencies must--
    (1) Use performance-based contracting methods to the maximum extent 
practicable, except for--
    (i) Architect-engineer services acquired in accordance with 40 
U.S.C. 541-544 (see part 36);
    (ii) Construction (see part 36);
    (iii) Utility services (see part 41); or
    (iv) Services that are incidental to supply purchases; and
    (2) Use the following order of precedence (Public Law 106-398, 
section 821(a));
    (i) A firm-fixed price performance-based contract or task order.

[[Page 22084]]

    (ii) A performance-based contract or task order that is not firm-
fixed price.
    (iii) A contract or task order that is not performance-based.
* * * * *
[FR Doc. 01-11008 Filed 5-1-01; 8:45 am]
BILLING CODE 6820-EP-U