[Federal Register Volume 68, Number 52 (Tuesday, March 18, 2003)]
[Rules and Regulations]
[Pages 13201-13202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6372]



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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 12 and 16

[FAC 2001-13; FAR Case 2000-013; Item I]
RIN 9000-AJ03


Federal Acquisition Regulation; Contract Types for Commercial 
Item Acquisitions

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 clarify the use of 
award fees and performance or delivery incentives in firm-fixed-price 
contracts and fixed-price with economic price adjustment contracts. 
These changes are intended to clarify how award fees and performance or 
delivery incentives may be used in commercial item acquisitions where 
statute prohibits use of cost-type contracts and requires use of firm-
fixed-price contracts and fixed-price contracts with economic price 
adjustment to the maximum extent practicable.

DATES: Effective Date: April 17, 2003.

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. Victoria Moss, Procurement Analyst, at (202) 501-
4764. Please cite FAC 2001-13, FAR case 2000-013.

SUPPLEMENTARY INFORMATION: 

A. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 65 FR 83292, December 29, 2000, that proposed to amend FAR 
12.207 and Subpart 16.2 to clarify the contract-type requirements for 
commercial item acquisitions derived from Section 8002(d) of the 
Federal Acquisition Streamlining Act (FASA) (Pub. L. 103-355). FASA 
states that agencies must use firm-fixed-price (FFP) contracts and 
fixed-price contracts with economic price adjustments (FP/EPA) to the 
maximum extent practicable for commercial item acquisitions. FASA also 
prohibits the use of cost-type contracts.
    The proposed rule would have amended Part 12 to address pricing 
mechanisms for acquiring commercial services available on a time-and-
materials or labor-hour basis within FAR Part 12 contract-type 
restrictions. Additionally, the proposed rule contained revisions to 
FAR 16.202-1 and 16.203-1 to indicate that award fee and performance or 
delivery incentives based solely on factors other than cost may be used 
in conjunction with FFP and FP/EPA contracts without changing the FFP 
or FP/EPA nature of the contract.
    The 60-day comment period for the proposed rule ended February 27, 
2001. Ten sources submitted comments on the proposed rule. All comments 
received were considered in the formulation of this final rule. The 
comments indicated significant confusion concerning the proposed 
revisions to Part 12 regarding the intended application of the proposed 
time-and-materials and labor-hour pricing mechanism coverage. 
Consequently, the FAR Council decided that only the changes associated 
with using non-cost based award fee and delivery or schedule incentives 
in conjunction with FFP and FP/EPA contracts should be finalized.
    Although this rule does not address the use of time-and-materials 
and labor-hour contracts for commercial item acquisitions, the 
Administrator, Office of Federal Procurement Policy, intends to work 
with the other FAR Council members to develop appropriate revisions to 
current FAR coverage to address their use, including safeguards that 
are needed to effectively protect taxpayer interests when these 
contractual arrangements are used under Part 12.
    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 Regulatory Flexibility Act does not apply to this rule. This 
final rule does not constitute a significant FAR revision within the 
meaning of FAR 1.501 and Public Law 98-577, and publication for public 
comments is not required. However, the Councils will consider comments 
from small entities concerning the affected FAR Parts 12 and 16 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 2001-13, 
FAR case 2000-013), 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.

List of Subjects in 48 CFR Parts 12 and 16

    Government procurement.

    Dated: March 12, 2003.
Laura G. Smith,
Director, Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 12 and 16 as set 
forth below:
    1. The authority citation for 48 CFR parts 12 and 16 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. In section 12.207, add the following sentence to the end of the 
paragraph to read as follows:


12.207  Contract type.

    * * * These contract types may be used in conjunction with an award 
fee and performance or delivery incentives when the award fee or 
incentive is based solely on factors other than cost (see 16.202-1 and 
16.203-1).

PART 16--TYPES OF CONTRACTS

    3. In section 16.202-1, add the following sentences to the end of 
the paragraph to read as follows:


16.202-1  Description.

    * * * The contracting officer may use a firm-fixed-price contract 
in conjunction with an award-fee incentive (see 16.404) and performance 
or delivery incentives (see 16.402-2 and 16.402-3) when the award fee 
or incentive is based solely on factors other than cost. The contract 
type remains firm-fixed-price when used with these incentives.

    4. In section 16.203-1, redesignate the introductory text as 
paragraph (a), and paragraphs (a) through (c) as (1) through (3), 
respectively; and add paragraph (b) to read as follows:


16.203-1  Description.

* * * * *
    (b) The contracting officer may use a fixed-price contract with 
economic

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price adjustment in conjunction with an award-fee incentive (see 
16.404) and performance or delivery incentives (see 16.402-2 and 
16.402-3) when the award fee or incentive is based solely on factors 
other than cost. The contract type remains fixed-price with economic 
price adjustment when used with these incentives.

[FR Doc. 03-6372 Filed 3-17-03; 8:45 am]
BILLING CODE 6820-EP-P