[Federal Register Volume 73, Number 122 (Tuesday, June 24, 2008)]
[Proposed Rules]
[Pages 35615-35617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-14253]


48 CFR Parts 543 and 552

[GSAR Case 2008-G513; Docket 2008-0007; Sequence 10]
RIN 3090-AI55

General Services Acquisition Regulation; GSAR Case 2008-
G513;Rewrite of Part 543, Contract Modifications

AGENCY:  Office of the Chief Acquisition Officer, General Services 

ACTION:  Proposed rule.


SUMMARY:  The General Services Administration (GSA) is proposing to 
amend the General Services Acquisition Regulation (GSAR) to revise GSAM 
language pertaining to requirements for contract modifications.

DATES:  Interested parties should submit written comments to the 
Regulatory Secretariat on or before August 25, 2008 to be considered in 
the formulation of a final rule.

ADDRESSES:  Submit comments identified by GSAR Case 2008-G513 by any of 
the following methods:
     Regulations.gov: http://www.regulations.gov.Submit 
comments via the Federal eRulemaking portal by inputting ``GSAR Case 
2008-G513'' under the heading ``Comment or Submission.'' Select the 
link ``Send a Comment or Submission'' that corresponds with GSAR Case 
2008-G513. Follow the instructions provided to complete the ``Public 
Comment and Submission Form.'' Please include your name, company name 
(if any), and ``GSAR Case 2008-G513'' on your attached document.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat Division (VPR), 1800 F Street, NW, Room 4041, ATTN: 
Laurieann Duarte, Washington, DC 20405.
    Instructions: Please submit comments only and cite GSAR Case 2008-
G513 in all correspondence related to this case. All comments received 
will be posted without change to http://www.regulations.gov, including 
any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT:  For clarification regarding content, 
please contact Ms. Jeritta Parnell at (202) 501-4082. For information 
pertaining to the status or publication schedules, please contact the 
Regulatory Secretariat Division (VPR), Room 4041, GS Building, 
Washington, DC 20405, (202) 501-4755. Please cite GSAR Case 2008-G513.


A. Background

    The GSA is amending the General Services Administration Acquisition 
Regulation (GSAR) to revise the prescriptions for clauses included in 
543.205, Contract clauses. The associated clauses located in 552.243 
are amended to delete the clause at 552.243-70, Pricing of Adjustments, 
to revise the clause at 552.243-71, Equitable Adjustments, and to 
relocate the clause at 552.243-72, Modifications (Multiple Award 
Schedule) to GSAR 552.238.
    This proposed rule is a result of the General Services 
Administration Acquisition Manual (GSAM) rewrite initiative. The 
initiative was undertaken by GSA to revise the GSAM so as to maintain 
consistency with the Federal Acquisition Regulation (FAR) and implement 
streamlined and innovative acquisition procedures that contractors, 
offerors, and GSA contracting personnel can use when entering into and 
administering contractual relationships. The GSAM incorporates the GSAR 
as well as internal agency acquisition policy.
    The GSA will rewrite each part of the GSAR and GSAM, and as each 
GSAR part is rewritten, GSA will publish it in the Federal Register.
    This proposed rule revises GSAR 543.205, Contract clauses, and 
associated clauses in GSAR 552.243. The information in GSAR 543.205, 
Contract clauses, is revised to remove 543.205(a)(1) and 543.205(b) and 
re-numbered accordingly. The information in 543.205(a)(1) is deleted. 
This clause prescription is no longer necessary. The information in 
543.205(b) is relocated to Part 538. The prescription for the clause at 
552.243-71, Equitable Adjustment, is revised to include the clause 
title for FAR 52.243-4, Changes. The clause at 552.243-70, Pricing of 
Adjustments, is deleted. Information formerly contained in this clause 
is now contained in the revised clause at 552.243-71, Equitable 
Adjustments. The clause at 552.243-71, Equitable Adjustments, is 
revised to clarify costs, overhead, profit, and proposal preparation 
costs. The clause at 552.243-72, Modifications, (Multiple Award 
Schedule) is relocated to GSAR Part 538.

Discussion of Comments

    There were three public comments received in response to the 
``Advanced Notice of Proposed Rulemaking.'' One commenter requested 
that the ``Overhead, Profit, and Commission''

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section needed to be ``reworded to be clearer about the breakdown and 
distinctions between Subcontractor and Prime Commission, and Overhead 
and Profit, and the maximum allowable amounts for each.'' The Agency 
agreed and the clause at 552.243-71, Equitable Adjustments, was revised 
to reflect this suggested change. The second commenter recommended that 
the ``Changes'' clause should be applicable to orders. The GSAM was 
never intended to be a stand-alone document: it merely supplements the 
FAR. The term ``order'' is defined in FAR 2.101, and therefore, should 
not be repeated in the GSAM. The third commenter recommended that GSA 
reconsider the timing of solicitation refreshes and associated 
modifications to existing contract terms and conditions. This issue 
will be addressed in the rewrite of GSAR Part 538.
    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 GSA does not expect this proposed 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 revisions are not considered substantive. The revisions 
only update, clarify, and reorganize existing coverage. An Initial 
Regulatory Flexibility Analysis has, therefore, not been performed. We 
invite comments from small businesses and other interested parties. The 
GSA will consider comments from small entities concerning the affected 
GSAR Part 543 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. 
(GSAR case 2008-G513), in all correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the GSAM 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 543 and 552

    Government procurement.

    Dated: June 13, 2008
Al Matera,
Director, Office of Acquisition Policy.
    Therefore, GSA proposes to amend 48 CFR parts 543 and 552 as set 
forth below:
    1. The authority citation for 48 CFR parts 543 and 552 continues to 
read as follows:

    Authority:  40 U.S.C. 121(c).


    2. Revise section 543.205 to read as follows:

543.205  Contract clauses.

    The contracting officer shall insert 552.243-71, Equitable 
Adjustments, in solicitations and contracts containing FAR 52.243-4, 


552.243-70  [Removed]

    3. Remove section 552.243-70.
    4. Revise section 552.243-71 to read as follows:

552.243-71  Equitable Adjustments.

    As prescribed in 543.205, insert the following clause:
    (a) This clause governs the determination of equitable 
adjustments to which the Contractor may be entitled under the 
``Changes'' clause prescribed by FAR 52.243-4, the ``Differing Site 
Conditions'' clause prescribed by FAR 52.236-2, and any other 
provision of this contract allowing entitlement to an equitable 
adjustment. This clause does not govern determination of the 
Contractor's relief allowable under the ``Suspension of Work'' 
clause prescribed by FAR 52.242-14.
    (b) At the written request of the Contracting Officer, the 
Contractor shall submit a proposal, in accordance with the 
requirements set forth herein, for an equitable adjustment to the 
contract for changes or other conditions that may entitle a 
Contractor to an equitable adjustment. If the Contractor deems an 
oral or written order to be a change to the contract, it shall 
promptly submit to the Contracting Officer a proposal for equitable 
adjustment attributable to such deemed change. The change shall also 
conform to the requirements set forth herein.
    (c) The proposal shall be submitted within the time specified in 
the ``Changes'' clause, or such other time as may reasonably be 
required by the Contracting Officer. In the case of a proposal 
submitted based on the ``Differing Site Conditions'' clause, the 
notice requirement of that clause shall be met.
    (d) Proposals for equitable adjustments, including no costs 
requests for adjustment of the contract's required completion date, 
shall include a detailed breakdown of the following elements, as 
    (1) Direct Costs.
    (2) Markups.
    (3) Change to the time for completion specified in the contract.
    (e) Direct Costs. The Contractor shall separately identify each 
item of deleted and added work associated with the change or other 
condition giving rise to entitlement to an equitable adjustment, 
including increases or decreases to unchanged work. For each item of 
work so identified, the Contractor shall propose for itself and, if 
applicable, its first two tiers of subcontractors, the following 
direct costs:
    (1) Material cost broken down by trade, supplier, material 
description, quantity of material units, and unit cost (including 
all manufacturing burden associated with material fabrication and 
cost of delivery to site, unless separately itemized).
    (2) Labor cost broken down by trade, employer, occupation, 
quantity of labor hours, and burdened hourly labor rate, together 
with itemization of applied labor burdens (exclusive of employer's 
overhead, profit, and any labor cost burdens carried in employer's 
overhead rate).
    (3) Cost of equipment required to perform the work, identified 
with material to be placed or operation to be performed.
    (4) Cost of preparation and/or revision to shop drawings and 
other submittals with detail set forth in paragraphs (e)(1) and 
(e)(2) of this clause.
    (5) Delivery costs, if not included in material unit costs.
    (6) Time-related costs not separately identified as direct 
costs, and not included in the Contractor's or subcontractors' 
overhead rates, as specified in paragraph (g).
    (7) Other direct costs.
    (f) Marked-up costs of subcontractors below the second tier may 
be treated as other direct costs of a second tier subcontractor, 
unless the Contracting Officer requires a detailed breakdown under 
paragraph (i) of this clause.
    (g) Extensions of time and time-related costs. The Contractor 
shall propose a daily rate for each firm's time-related costs during 
the affected period, and, for each firm, the increase or decrease in 
the number of work days of performance attributable to the change or 
other condition giving rise to entitlement to an equitable 
adjustment, with supporting analysis. Entitlement to time and time-
related costs shall be determined as follows:
    (1) Increases or decreases to a firm's time-related costs shall 
be allowed only if such increase or decrease necessarily and 
exclusively results from the change or other condition giving rise 
to entitlement to an equitable adjustment.
    (2) The Contractor shall not be entitled to an extension of time 
or recovery of its own time-related costs except to the extent that 
such change or other condition necessarily and exclusively causes 
its duration of performance to extend beyond the completion date 
specified in the contract.
    (3) Costs may be characterized as time-related costs only if 
they are incurred solely to support performance of this contract and 
the increase or decrease in such costs is solely dependent upon the 
duration of a firm's performance of work.

[[Page 35617]]

    (4) Costs may not be characterized as time-related costs if they 
are included in the calculation of a firm's overhead rate.
    (5) Equitable adjustment of time and time-related costs shall 
not be allowed unless the analysis supporting the proposal complies 
with provisions specified elsewhere in this contract regarding the 
Contractor's project schedule.
    (h) Markups. For each firm whose direct costs are separately 
identified in the proposal, the Contractor shall propose an overhead 
rate, profit rate, and where applicable, a bond rate and insurance 
rate. Markups shall be determined and applied as follows:
    (1) Overhead rates shall be negotiated, and may be subject to 
audit and adjustment.
    (2) Profit rates shall be negotiated, but shall not exceed ten 
percent, unless entitlement to a higher rate of profit may be 
    (3) The Contractor and its subcontractors shall not be allowed 
overhead or profit on the overhead or profit received by a 
subcontractor, except to the extent that the subcontractor's costs 
are properly included in other direct costs as specified in 
paragraph (f) of this clause.
    (4) Overhead rates shall be applied to the direct costs of work 
performed by a firm, and shall not be allowed on the direct costs of 
work performed by a subcontractor to that firm at any tier except as 
set forth in paragraphs (h)(6) and (h)(7) of this clause.
    (5) Profit rates shall be applied to the sum of a firm's direct 
costs and the overhead allowed on the direct costs of work performed 
by that firm.
    (6) Overhead and profit shall be allowed on the direct costs of 
work performed by a subcontractor within two tiers of a firm at 
rates equal to only fifty percent of the overhead and profit rates 
negotiated pursuant to paragraphs (h)(1) and (h)(2) of this clause 
for that firm, but not in excess of ten percent when combined.
    (7) Overhead and profit shall not be allowed on the direct costs 
of a subcontractor more than two tiers below the firm claiming 
overhead and profit for subcontractor direct costs.
    (8) If changes to a Contractor's or subcontractor's bond or 
insurance premiums are computed as a percentage of the gross change 
in contract value, markups for bond and insurance shall be applied 
after all overhead and profit is applied. Bond and insurance rates 
shall not be applied if the associated costs are included in the 
calculation of a firm's overhead rate.
    (9) No markup shall be applied to a firm's costs other than 
those specified herein.
    (i) At the request of the Contracting Officer, the Contractor 
shall provide such other information as may be reasonably necessary 
to allow evaluation of the proposal. If the proposal includes 
significant costs incurred by a subcontractor below the second tier, 
the Contracting Officer may require the same detail for those costs 
as required for the first two tiers of subcontractors, and markups 
shall be applied to these subcontractor costs in accordance with 
paragraph (h) of this clause.
    (j) Proposal preparation costs. If performed by the firm 
claiming them, proposal preparations costs shall be included in the 
labor hours proposed as direct costs. If performed by an outside 
consultant or law firm, proposal preparation costs shall be treated 
as other direct costs to the firm incurring them. Requests for 
proposal preparation costs shall include the following:
    (1) A copy of the contract or other documentation identifying 
the consultant or firm, the scope of the services performed, the 
manner in which the consultant or firm was to be compensated, and if 
compensation was paid on an hourly basis, the fully burdened and 
marked-up hourly rates for the services provided.
    (2) If compensation were paid on an hourly basis, documentation 
of the quantity of hours worked, including descriptions of the 
activities for which the hours were billed, and applicable rates.
    (3) Written proof of payment of the costs requested. The 
sufficiency of the proof shall be determined by the Contracting 
    (k) Proposal preparation costs shall be allowed only if--
    (1) The nature and complexity of the change or other condition 
giving rise to entitlement to an equitable adjustment warrants 
estimating, scheduling, or other effort not reasonably foreseeable 
at the time of contract award;
    (2) Proposed costs are not included in a firm's time-related 
costs or overhead rate; and
    (3) Proposed costs were incurred prior to a Contracting 
Officer's unilateral determination of an equitable adjustment under 
the conditions set forth in paragraph (o) of this clause, or were 
incurred prior to the time the request for equitable adjustment 
otherwise became a matter in dispute.
    (l) Proposed direct costs, markups, and proposal preparation 
costs shall be allowable in the determination of an equitable 
adjustment only if they are reasonable and otherwise consistent with 
the contract cost principles and procedures set forth in Part 31 of 
the Federal Acquisition Regulation (48 CFR part 31) in effect on the 
date of this contract. Characterization of costs as direct costs, 
time-related costs, or overhead costs must be consistent with the 
requesting firm's accounting practices on other work under this 
contract and other contracts.
    (m) If the Contracting Officer determines that it is in the 
Government's interest that the Contractor proceed with a change 
before negotiation of an equitable adjustment is completed, the 
Contracting Officer may order the Contractor to proceed on the basis 
of a unilateral modification to the contract increasing or 
decreasing the contract price by an amount to be determined later. 
Such increase or decrease shall not exceed the increase or decrease 
proposed by the Contractor.
    (n) If the parties cannot agree to an equitable adjustment, the 
Contracting Officer may determine the equitable adjustment 
    (o) The Contractor shall not be entitled to any proposal 
preparation costs incurred subsequent to the date of a unilateral 
determination or denial of the request if the Contracting Officer 
issues a unilateral determination or denial under any of the 
following circumstances:
    (1) The Contractor fails to submit a proposal within the time 
required by this contract or such time as may reasonably be required 
by the Contracting Officer.
    (2) The Contractor fails to submit additional information 
requested by the Contracting Officer within the time reasonably 
    (3) Agreement to an equitable adjustment cannot be reached 
within 60 days of submission of the Contractor's proposal or receipt 
of additional requested information, despite the Contracting 
Officer's diligent efforts to negotiate the equitable adjustment.
    (End of clause)

552.243-72  [Removed]

    5. Remove section 552.243-72.
[FR Doc. E8-14253 Filed 6-23-08; 8:45 am]