[Federal Register Volume 70, Number 47 (Friday, March 11, 2005)]
[Proposed Rules]
[Pages 12167-12168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-4766]


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GENERAL SERVICES ADMINISTRATION

48 CFR Parts 546 and 552

[GSAR ANPR 2005-N01]


General Services Administration Acquisition Regulation; Waiver of 
Consequential Damages and ``Post Award'' Audit Provisions.

AGENCY: Office of the Chief Acquisition Officer, General Services 
Administration (GSA).

ACTION: Advance notice of proposed rulemaking and notice of public 
meeting.

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SUMMARY: The General Services Administration (GSA) is requesting 
comments from both Government and industry on whether the General 
Services Administration Acquisition Regulation (GSAR) should be revised 
to include a waiver of consequential damages for contracts awarded for 
commercial item under the FAR. GSA is also requesting comments on 
whether ``post award'' audit provisions should be included in its 
Multiple Award Schedules (MAS) contracts and Governmentwide acquisition 
contracts (GWACs).

DATES: Comment Date: Comments are due on or before March 25, 2005.

ADDRESSES: Submit comments identified by GSAR ANPR 2005-N01 by any of 
the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web Site: http://www.acqnet.gov/GSAM/gsamproposed.html. Click on the GSAR ANPR number to submit comments.
     E-mail: [email protected]. Include GSAR ANPR 2005-
N01 in the subject line of the message.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann 
Duarte, Washington, DC 20405.
    Instructions: Please submit comments only and cite GSAR ANPR 2005-
N01 in all correspondence related to this case. All comments received 
will be posted without change to http://www.acqnet.gov/far/ProposedRules/proposed.htm, including any personal information 
provided.
    Public Meeting: The meeting will be held on April 14, 2005, from 9 
a.m. to 4:00 p.m. EST.
    To facilitate discussions at the public meeting, interested parties 
are encouraged to provide, no later than March 25, 2005 written 
comments on issues they would like addressed at the meeting. There will 
be no record kept of this meeting, any comments to be made a part of 
the administrative record must be in writing and must be submitted to 
GSA at the address below within two weeks following the public meeting.
    The meeting will be held at the General Services Administration, 
National Capital Region, 301 7th and D Street, SW, Washington, DC 
20407, Auditorium. Participants are encouraged to check the Web site 
prior to the public meeting to ensure the location has not changed. 
Interested parties may register and submit electronic comments at 
http://www.acqnet.gov/GSAM/gsamproposed.html.
    Special Accommodations: The public meeting is physically accessible 
to people with disabilities. Request for sign language interpretation 
or other auxiliary aids should be directed to Ernest Woodson, at 202-
501-3775, at least 5 working days prior to the meeting date.

FOR FURTHER INFORMATION CONTACT: Mr. Ernest Woodson, Procurement 
Analyst, Contract Policy Division, 202-501-3775.

SUPPLEMENTARY INFORMATION: Background
    Currently, FAR Part 12, Acquisition of Commercial Items, prescribes 
polices and procedures unique to the acquisition of commercial items 
under FAR Part 12. FAR Part 12 implements the Government's preference 
for the acquisition of commercial items as contained in Title VIII of 
the Federal Acquisition Streamlining Act of 1994 by establishing 
policies more closely resembling those of the commercial marketplace. 
The clause, FAR 52.212-4, Contract Terms and Conditions--Commercial 
Items, that includes terms and conditions applicable to each 
acquisition procured under FAR Part 12 is, to the maximum extent 
practicable, consistent with customary commercial practices. The clause 
includes a provision, FAR 52.212-4(p), Limitation of liability, that 
provides; ``Except as otherwise provided by an express warranty, the 
Contractor will not be liable to the Government for consequential 
damages resulting from any defect or deficiencies in accepted items.'' 
Also, FAR 12.302(b) allows the contracting officer to tailor the clause 
at FAR 52.212-4 to adapt to market conditions for each commercial 
acquisition. In addition to the limitation of liability clause and the 
provision at FAR 12.302, Federal contracts typically include a broad 
range of standard contract clauses such as warranties and liquidated 
damages that provide exclusive remedies for nonperformance that limit 
the Government to the specific remedies set forth in the clause.
    Likewise, the Contract Disputes Act of 1978 provides for the 
resolution of any failure on the part of the Government and the 
contractor to reach agreement on any request for equitable adjustment, 
claim, appeal, or action arising under or relating to a Government 
contract to be a dispute to be resolved in accordance with FAR 52.233-
1, Disputes.
    Notwithstanding specific adjustments and other remedies provided in 
Government contracts for contractor deficiencies or nonperformance, 
concerns have been raised that--

[[Page 12168]]

     FAR clause 52.212-4(p) and the ``tailoring'' provision at 
FAR 12.302, do not reach the level of commercial standards and that 
unlimited consequential or other incidental or special damages are not 
necessary and are, in fact, counterproductive to efficient procurement, 
raising costs and establishing barriers to commercial companies 
considering whether to do business with the Federal Government;
     Although FAR 12.302 permits contracting officers to tailor 
the limitation of liability clause at FAR 52.212-4(p), some companies 
assert that contracting officers are unwilling to do so, leaving 
contractors with a take-it or leave-it option and contracts that 
deviate from the commercial marketplace, making contractors in general 
less willing to sign on to such contracts;
     The commercial practice, unlike FAR 52.212-4(p), that 
waives liability for consequential damages resulting from any defect or 
deficiencies in accepted items, provides for a complete wavier of 
consequential damages;
     Contractors would make risk decisions and negotiate 
Government contracts without having to add an uncertainty premium as to 
liability protection, if FAR Part 12 were appropriately amended to 
reflect commercial practices; and
     Contractors also request that we make the waiver of 
consequential damages for commercial products and services available 
under other provisions of the FAR.
    Similarly, the General Accounting Office and periodically GSA's IG 
raise concerns regarding GSA's right to access and examine contractor 
records after contract award. GSA's primary vehicle for conducting 
post-award audits is GSAR 552.215-70, Examination of Records by GSA, 
that gives the Administrator of GSA, or any duly authorized 
representative, typically the GSA Inspector General's Office of Audits, 
access to and the right to examine contractor records relating to over 
billings, billing errors, compliance with the Industrial Funding Fee 
(IFF) clause of the contract, and compliance with the Price Reduction 
Clause under MAS contracts.
    In addition to the GSA Examination of Records clause, GSA may use a 
number of other authorities to conduct a post-award review of a 
contractor's records. These other authorities include FAR 52.212-5 
which authorizes the Comptroller General of the United States to access 
and examine a contractor's directly pertinent records involving 
transactions related to the contract; GSAR 515.209-70(b) that permits a 
contracting officer to modify the GSA Examination of Records Clause to 
define the specific area of audit (e.g., the use or disposition of 
Government-furnished property, compliance with price reduction clause, 
etc.), and the right of the GSA Inspector General to issue subpoenas 
for contractor records under the Inspector General Act of 1978.
    Contractors' major concerns with GSA's post-award audit authority 
include complaints that they are too broad and not consistent with 
commercial contract practices.
    In consideration of the above concerns, we have questions as to how 
the taxpayer may benefit from any revisions to the GSAR to address 
contractor concerns regarding limitation of liability or post-award 
audits. We are also interested in learning what, if any, impact the 
Services Acquisition Reform Act of 2002 and 2003 has on the issue of 
revising the GSAR to address limitations of liability.
    In this advance notice of proposed rulemaking and notice of public 
meeting, GSA is seeking input from both Government and industry on 
whether the GSAR should be revised to waive consequential damages in 
the purchase of commercial items under FAR Parts 12, 13, 14, and 15 and 
whether GSA should modify its policy and practices with regard to the 
addition of post award audit clauses into contracts it awards.

    Dated: March 4, 2005.
Rodney P. Lantier,
Acting Senior Procurement Executive, Office of the Chief Acquisition 
Officer, General Services Administration.
[FR Doc. 05-4766 Filed 3-10-05; 8:45 am]
BILLING CODE 6820-61-S