[Federal Register Volume 74, Number 6 (Friday, January 9, 2009)]
[Rules and Regulations]
[Pages 864-866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-215]



48 CFR Parts 543 and 552

[GSAR Amendment 2005-04; GSAR Case 2008-G513 (Change 25); Docket 2009-
0012; Sequence 2]
RIN 3090-AI83

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

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

ACTION: Final rule.


SUMMARY: The General Services Administration (GSA) is amending the GSA 
Acquisition Regulation (GSAR) to revise the language that provides 
requirements for contract modifications.

DATES: Effective Date: January 9, 2009.

FOR FURTHER INFORMATION CONTACT: Ms. Jeritta Parnell at (202) 501-4082, 
for clarification of content. For information pertaining to the status 
or publication schedules, contact the Regulatory Secretariat (VPR), 
Room 4041, GS Building, Washington, DC 20405, (202) 501-4755. Please 
cite Amendment 2005-04, GSAR case 2008-G513 (Change 25).


A. Background

    The GSA is amending the GSAR to revise 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 be 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.
    The GSA published a proposed rule with request for comments in the 
Federal Register at 73 FR 35614 on June 24, 2008. There were four 
public comments from two respondents. One respondent recommended adding 
the phrase ``impacted by the change'' to paragraph (e) of the clause at 
552.243-71 to limit the equitable adjustment to only the work impacted 
by the change. The GSA agrees and the language was revised to include 
this recommendation. The second respondent made three suggestions 
regarding internal GSA procedures. These suggestions are outside the 
scope of the GSAR case as published. Additional editorial corrections 
were made in paragraphs (b), (d), and (j)(2)of the clause at 552.243-
    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 General Services Administration certifies that this final rule 
will not 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 updates, clarifies, and 
reorganizes existing language.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the GSAR do not impose recordkeeping or information collection 
requirements, or otherwise collect information from offerors, 
contractors, or members of the public that require 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: December 8, 2008.
David A. Drabkin,
Senior Procurement Executive, Office of the Chief Acquisition Officer, 
General Services Administration.

Therefore, GSA amends 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:
Equitable Adjustments
(JAN 2009)
    (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 proposal 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 cost requests 
for adjustment of the contract's required

[[Page 865]]

completion date, shall include a detailed breakdown of the following 
elements, as applicable:
    (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 impacted by the 
change. 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 
    (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) of this clause; and
    (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.
    (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 subcontractor[s] 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 below 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).
    (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 was 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

[[Page 866]]

entitlement to an equitable adjustment warrants estimating, scheduling, 
or other effort not reasonably foreseeable at the time of contract 
    (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), or were incurred prior to the 
time the request for equitable adjustment otherwise became a matter in 
    (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 
    (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 
    (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 
    (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 required.
    (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. E9-215 Filed 1-8-09; 8:45 am]