[Federal Register Volume 66, Number 204 (Monday, October 22, 2001)]
[Rules and Regulations]
[Pages 53485-53487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26298]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 32 and 52

[FAC 2001-01; FAR Case 2000-308; Item III]
RIN 9000-AJ17


Federal Acquisition Regulation; Prompt Payment Under Cost-
Reimbursement Contracts for Services

AGENCIES: Department of Defense (DoD), General ServicesAdministration 
(GSA), and National Aeronautics and SpaceAdministration (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 require 
agencies to pay an interest penalty whenever they make an interim 
payment under a cost-reimbursement contract for services more than 30 
days after the agency receives a proper invoice from the contractor.

DATES: Effective Date: October 22, 2001.
    Applicability Date: This amendment is applicable to solicitations 
issued and contracts awarded on or after October 22, 2001. Any cost 
reimbursement solicitations issued or contracts awarded for services on 
or after December 15, 2000, but prior to October 22, 2001 must be 
amended/modified to incorporate the new Alternate I to 52.232-25. In no 
event may agencies pay late payment penalty interest for any delay in 
payment that occurred prior to December 15, 2000.
    Comment Date: Interested parties should submit comments to the FAR 
Secretariat at the address shown below on or before December 21, 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, 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 2001-01, FAR case 2000-
308, 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) 501-3221. Please cite FAC 
2001--01, FAR case 2000-308.

SUPPLEMENTARY INFORMATION:

A. Background

    This FAR amendment implements changes in the Office of Management 
and Budget's (OMB) Prompt Payment Act regulations at 5 CFR part 1315 
that implemented Section 1010 of the National Defense Authorization Act 
for Fiscal Year 2001. Those changes were published by OMB as an interim 
final rule and became effective on December 15, 2000 (65 FR 78403). 
Section 1010 requires agencies to pay an interest penalty, in 
accordance with regulations issued, whenever an interim payment under a 
cost-reimbursement contract for services is paid more than 30 days 
after the agency receives a proper invoice from a contractor. The Act 
does not permit payment of late payment interest penalty for any period 
prior to December 15, 2000.
    This FAR amendment eliminates the prior policy and contract clause 
prohibitions on payment of late payment penalty interest for late 
interim finance payments under cost reimbursement contracts for 
services. It adds new policy and a contract clause, Alternate I to 
52.232-25, to provide for those penalty payments. The policy and clause 
apply to all covered contracts awarded on or after December 15, 2000. 
OMB's regulation states that agencies, at their discretion, may apply 
the revisions made by Section 1010 to interim payment requests received 
under cost-reimbursement contracts for services awarded prior to 
December 15, 2000. Accordingly, agencies may apply the FAR changes made 
by this rule to contracts awarded prior to December 15, 2000, at their 
discretion provided no late payment interest penalty is paid for any 
period prior to December 15, 2000.
    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 
number of small entities receiving awards of cost-reimbursement 
contracts for services is very low compared to the number of fixed-
price-type contracts awarded. Therefore, an Initial Regulatory 
Flexibility Analysis has not been performed. The Councils will consider 
comments from small entities concerning the affected FAR Parts 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 2001-01, 
FAR case 2000-308), 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.

[[Page 53486]]

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 the amendments to the controlling regulation 
issued by OMB (5 CFR part 1315, 65 FR 78403) became effective on 
December 15, 2000. (Section 1010 of the National Defense Authorization 
Act for Fiscal Year 2001, which required OMB to issue the regulation, 
was effective December 15, 2000.) This amendment to the FAR is 
necessary to enable agencies to comply with OMB's interim final rule in 
the most effective and consistent manner possible.
    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. In addition, this interim rule will be 
revised, as necessary, to reflect any changes OMB may make to its 
regulations in promulgating a final rule.

List of Subjects in 48 CFR Parts 2, 32 and 52

    Government procurement.

    Dated: October 12, 2001.
Al Matera,
Director, Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 32 and 52 as 
set forth below:
    1. The authority citation for 48 CFR parts 2, 32 and 52 continues 
to read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and42 U.S.C. 
2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS


2.101  [Amended]

    2. In section 2.101, amend the definition ``Proper invoice'' by 
removing ``32.905(e)'' and adding ``32.905(f)'' in its place.

PART 32--CONTRACT FINANCING

    3. Amend section 32.902 in the definition ``Contract financing 
payment'' by revising the second sentence; revising the definition 
``Invoice payment''; and in the definition ``Receiving report'' by 
removing ``32.905(f)'' and adding ``32.905(g)'' in its place. The 
revised text reads as follows:


32.902  Definitions.

    * * * Contract financing payments include advance payments, 
progress payments based on cost under the clause at 52.232-16, Progress 
Payments, progress payments based on a percentage or stage of 
completion (see 32.102(e)(1)) other than those made under the clause at 
52.232-5, Payments Under Fixed-Price Construction Contracts, or the 
clause at 52.232-10, Payments Under Fixed-Price Architect-Engineer 
Contracts, and interim payments on cost-type contracts other than 
contracts for services. * * *
* * * * *
    Invoice payment means a Government disbursement of monies to a 
contractor under a contract or other authorization for supplies or 
services accepted by the Government.
    (1) This includes payments for partial deliveries that have been 
accepted by the Government and final cost or fee payments where amounts 
owed have been settled between the Government and the contractor.
    (2) For purposes of this subpart, invoice payments also include all 
payments made under the clause at 52.232-5, Payments Under Fixed-Price 
Construction Contracts, the clause at 52.232-10, Payments Under Fixed-
Price Architect-Engineer Contracts, or the clause at 52.232-25, Prompt 
Payment, when Alternate I is used for interim payments on cost-
reimbursement contracts for services.
    (3) Invoice payments do not include contract financing payments.
* * * * *

    4. Amend section 32.905 by--
    a. Removing from the introductory text of paragraph (a)``paragraphs 
(b), (c), and (d)'' and adding ``paragraphs (b) through (e)'' in its 
place;
    b. Redesignating paragraphs (e) through (j) as (f) through (k), 
respectively, and adding a new paragraph (e);
    c. Revising the introductory text of newly designated paragraph 
(f); and
    d. Revising the first sentence of the introductory text of newly 
designated paragraph (g) to read as follows:


32.905  Invoice payments.

* * * * *
    (e) Cost-reimbursement contracts for services. For purposes of 
computing late payment interest penalties that may apply, the due date 
for making interim payments on cost-reimbursement contracts for 
services is 30 days after the date of receipt of a proper invoice.
    (f) Content of invoices. A proper invoice must include the items 
listed in paragraphs (f)(1) through (f)(8) of this section, except for 
interim payments on cost-reimbursement contracts for services. An 
interim payment request under a cost-reimbursement contract for 
services constitutes a proper invoice for purposes of this subpart if 
it includes all the information required by the contract. If the 
invoice does not comply with these requirements, it will be returned 
within 7 days after the date the designated billing office received the 
invoice (3 days on contracts for meat, meat food products, or fish; 5 
days on contracts for perishable agricultural commodities, dairy 
products, edible fats or oils, and food products prepared from edible 
fats or oils), with a statement of the reasons why it is not a proper 
invoice. If such notice is not timely, then an adjusted due date for 
the purpose of determining an interest penalty, if any, will be 
established in accordance with 32.907-1(b):
* * * * *
    (g) Authorization to pay. All invoice payments, with the exception 
of interim payments on cost-reimbursement contracts for services, must 
be supported by a receiving report or any other Government 
documentation authorizing payment. * * *
* * * * *

    5. Amend section 32.907-1 by adding paragraph (a)(5); and in 
paragraphs (b)(1) and (b)(2) by removing ``32.905(e)'' and adding 
``32.905(f)'' in its place. The added text reads as follows:


32.907-1  Late invoice payment.

    (a) * * *
    (5) In the case of interim payments on cost-reimbursement contracts 
for services, when payment is made more than 30 days after the 
designated billing office receives a proper invoice.
* * * * *

    6. Amend section 32.908 by adding paragraph (c)(4) to read as 
follows:


32.908  Contract clauses.

* * * * *
    (c) * * *
    (4) If the contract is a cost-reimbursement contract for services, 
use the clause with its Alternate I.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    7. Amend section 52.232-25 by adding Alternate I to read as 
follows:


52.232-25  Prompt Payment.

* * * * *


[[Page 53487]]


    Alternate I (Oct 2001). As prescribed in 32.908(c)(4), add the 
following paragraph (d) to the basic clause:
    (d) Invoices for interim payments. For interim payments under 
this cost-reimbursement contract for services--
    (1) Paragraphs (a)(2), (a)(3), (a)(4)(ii), (a)(4)(iii), and 
(a)(5)(i) do not apply;
    (2) For purposes of computing late payment interest penalties 
that may apply, the due date for payment is the 30th day after the 
designated billing office receives a proper invoice; and
    (3) The Contractor shall submit invoices for interim payments in 
accordance with paragraph (a) of FAR 52.216-7, Allowable Cost and 
Payment. If the invoice does not comply with contract requirements, 
it will be returned within 7 days after the date the designated 
billing office received the invoice.
[FR Doc. 01-26298 Filed 10-19-01; 8:45 am]
BILLING CODE 6820-EP-P