[Federal Register Volume 67, Number 226 (Friday, November 22, 2002)]
[Proposed Rules]
[Pages 70388-70389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29466]



48 CFR Part 216

[DFARS Case 2001-D013]

Defense Federal Acquisition Regulation Supplement; Provisional 
Award Fee Payments

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.


SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to address the use of provisional award 
fee payments under cost-plus-award-fee contracts. The rule provides for 
successfully performing contractors to receive a portion of award fees 
within an evaluation period, prior to an interim or final evaluation 
for that period.

DATES: DoD will consider all comments received by January 21, 2003.

ADDRESSES: Respondents may submit comments directly on the World Wide 
Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an 
alternative, respondents may e-mail comments to: [email protected]. 
Please cite DFARS Case 2001-D013 in the subject line of e-mailed 
    Respondents that cannot submit comments using either of the above 
methods may submit comments to: Defense Acquisition Regulations 
Council, Attn: Ms. Sandra Haberlin, OUSD(AT&L)DPAP(DAR), IMD 3C132, 
3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-
0350. Please cite DFARS Case 2001-D013.
    At the end of the comment period, interested parties may view 
public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra Haberlin, (703) 602-0289.


A. Background

    Cost-reimbursement contracts containing award fees typically 
provide for an award fee payment no more frequently than every 6 
months. This practice may place an undue financial burden on an 
otherwise successfully performing contractor. Therefore, the proposed 
rule provides for the payment of provisional award fees within an 
evaluation period, prior to an interim or final evaluation for that 
period. The provisional payments are based on (1) successful 
evaluations for prior evaluation periods, and (2) the fee determining 
official's expectation that payment of provisional fee amounts will not 
reduce the overall effectiveness of the award fee incentive.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD does not expect this rule 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 
applies only to cost-plus-award-fee contracts. Most contracts awarded 
to small entities use simplified acquisition procedures or are awarded 
on a competitive, fixed-price basis. Therefore, DoD has not performed 

[[Page 70389]]

initial regulatory flexibility analysis. DoD invites comments from 
small businesses and other interested parties. DoD also will consider 
comments from small entities concerning the affected DFARS subpart in 
accordance with 5 U.S.C. 610. Such comments should be submitted 
separately and should cite DFARS Case 2001-D013.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the rule does 
not impose any 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 216

    Government procurement.

Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.

    Therefore, DoD proposes to amend 48 CFR Part 216 as follows:
    1. The authority citation for 48 CFR Part 216 continues to read as 

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.


2. Section 216.405-2  is amended by adding paragraph (b)(3) to read as 

216.405-2 Cost-plus-award-fee contracts.
* * * * *
    (b) * * *
    (3) The CPAF contract may include provisional award fee payments. A 
provisional award fee payment is a payment made within an evaluation 
period prior to an interim or final evaluation for that period. The 
contracting officer may include provisional award fee payments in a 
CPAF contract on a case-by-case basis, provided those payments'
    (A) Are made no more frequently than monthly;
    (B) Are limited to no more than--
    (1) For the initial award fee evaluation period, 50 percent of the 
award fee available for that period; and
    (2) For subsequent award fee evaluation periods, 80 percent of the 
evaluation score for the prior evaluation period times the award fee 
available for the current period, e.g., if the contractor received 90 
percent of the award fee available for the prior evaluation period, 
provisional payments for the current period shall not exceed 72 percent 
(90 percent x 80 percent) of the award fee available for the current 
    (C) Are superceded by an interim or final award fee evaluation for 
the applicable evaluation period. If provisional payments have exceeded 
the payment determined by the evaluation score for the applicable 
period, the contractor shall either credit the next payment voucher for 
the amount of the overpayment or refund the difference to the 
Government, as directed by the contracting officer; and
    (D) May be discontinued, or reduced in such amounts deemed 
appropriate by the contracting officer, when the contracting officer 
determines that the contractor will not achieve a level of performance 
commensurate with the provisional payment. The contracting officer 
shall notify the contractor in writing of any discontinuance or 
reduction in provisional award fee payments.
* * * * *
[FR Doc. 02-29466 Filed 11-21-02; 8:45 am]