[Federal Register Volume 74, Number 205 (Monday, October 26, 2009)]
[Rules and Regulations]
[Pages 54915-54919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-25606]



48 CFR Parts 532 and 552

[GSAR Amendment 2009-13; GSAR Case 2006-G515 (Change 41) Docket 2008-
0007; Sequence 8]
RIN 3090-AI75

General Services Administration Acquisition Regulation; GSAR Case 
2006-G515; Rewrite of GSAR Part 532, Contract Financing

AGENCIES: General Services Administration (GSA), Office of Acquisition 

ACTION: Final rule.


SUMMARY: The General Services Administration (GSA) is amending the 
General Services Administration Acquisition Regulation (GSAR) to update 
Part 532, Contract Financing, of the regulation. This project is part 
of the GSAM rewrite Project, in which all parts of the regulation are 
being reviewed and updated to include new statutes, legislation, and 

DATES: Effective Date: November 25, 2009.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Edward Chambers, Procurement Analyst, at (202) 501-3221. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat (VPR), Room 4041, 1800 F Street, NW., 
Washington, DC 20405, (202) 501-4755. Please cite Amendment 2009-13, 
GSAR case 2006-G515 (Change 41).


A. Background

    The GSA is amending the GSA Acquisition Regulation (GSAR) to update 
the text addressing contract financing. This rule is a result of the 
GSA Acquisition Manual (GSAM) rewrite initiative undertaken by GSA to 
revise the GSAM to maintain consistency with the Federal Acquisition 
Regulation (FAR) and implement streamlined and innovative acquisition 
procedures that contractors, offerors, and GSA contracting personnel 
can utilize 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, will publish it in the Federal Register.
    This rule covers the rewrite of GSAR Part 532, Contract Financing. 
A proposed rule was published in the Federal Register at 73 FR 58515 on 
October 7, 2008. Three comment letters, with 23 comments, were received 
in response to the proposed rule.
    Many of the comments apply solely to construction and architect-
engineer contracts. Two of these comments were referred to the GSAM 
Part 536 team for consideration in the rewrite of that part. These 
dealt with the Public Building Service's unique requirement for 
progress payment meetings and the need to have contractor involvement 
in such meetings. These comments will be addressed in the final rule 
for GSAM Part 536, Construction and Architect-Engineer Contracts. The 
responses to the balance of the construction-related comments were 
coordinated with the GSAM Part 536 team.
    Comment: The commenter believes that GSA Form 1142, Release of 
Claims, is an unauthorized form. Commenter notes that there is no 
Office of Management and Budget (OMB) control number and no indication 
that a Regulatory Flexibility Act analysis was ever performed. 
Commenter also notes that the form fails to advise contractors that, by 
signing the form, they forfeit certain rights.
    Response: Currently, use of this form is prescribed at GSAR 
532.904(a). The commenter is correct that there is no OMB control 
number on the GSA Form 1142, and GSAM Part 532 drafters cannot find any 
record of a Regulatory Flexibility Act analysis ever having been 
performed for this pre-GSAM Rewrite requirement. Further, the form has 
not been revised since December 1974. The material on the ``form'' is 
minimal, and neither the FAR nor the GSAM require specific wording for 
the contractor's release of claims. Therefore, the GSA Form 1142 will 
be cancelled, and GSAR 532.904(a) of the proposed rule is deleted.
    Comment: Given that the requirement for a release of claims stems 
from FAR 52.232-26 and 52.232-27, commenter believes it would be more 
appropriate for the FAR Council to develop a standard form to be used 
by all agencies in accordance with FAR 1.304(c), because it is not just 
pertinent to GSA.
    Response: This comment pertains to whether the GSA Form 1142 should 
be retained or a Standard Form should be designed as a FAR Part 32 
change. Given that neither FAR clause designates specific wording for 
the contractor's release of claims, it does not appear to be an 
appropriate candidate for a standard form.
    Comment: Commenter believes that the FAR Council should consider 
allowing contractors to submit the release jointly along with the 
electronic submission of a final invoice request.
    Response: This is outside the scope of the GSAM Rewrite.
    Comment: Commenter believes that, under GSAR 532.904, contracting 
officers' repeated attempts to obtain release of claims from 
contractors could be considered coercion penalizing contractors by 
withholding funds. Commenter thinks that GSAM should justify the 
reasonableness of withholding final payments.
    Response: Because the GSA Form 1142 has been cancelled, the balance 
of GSAR 532.904(a) should also be deleted. Further, obtaining a release 
of claims is a FAR requirement, not a GSA requirement.
    Comment: Commenter believes that the GSAM should provide guidance 
for contracting officers to initiate an action for architect-engineer 
(A-E) design services in advance of approved appropriations. Many find 
nothing in the FAR that precludes contracting officers from selecting 
an A-E using Brooks Act procedures through the solicitation and 
negotiation phase up to

[[Page 54916]]

award when the appropriations request is included in the President's 
    Response: There is currently appropriate guidance on contracting in 
advance of funds in FAR Subpart 32.7 and GSAM Subpart 532.7. There is 
no reason to treat A-E design services differently.
    Comment: Commenter states that contractors experience numerous 
problems attempting to submit invoices electronically to GSA for 
payment. Frequently, commenter claims, GSA has failed to enter 
obligations into Pegasys which, in turn, prohibits contractors from 
being able to submit a pay request and establish a receipt date for 
purposes of computing interest, which appears to be in direct violation 
of FAR 32.907(f).
    Response: This comment is outside the scope of the GSAM Rewrite. 
The commenter appears to have issues with Pegasys, which is a financial 
system, not a contracting system.
    Comment: Commenter recommends that GSA include in its invoicing 
system a citation to FAR 32.909(b) that suggests that contractors 
contact GSA small business specialist or representative from the Office 
of Small and Disadvantaged Business Utilization to obtain additional 
assistance related to payment issues, late payment interest penalties, 
and information on the Prompt Payment Act.
    Response: FAR 1.304(b) states that ``(a)gency acquisition 
regulations shall not * * * (u)nnecessarily repeat, paraphrase, or 
otherwise restate material contained in the FAR or higher-level agency 
acquisition regulations.'' Therefore, the commenter's recommendation is 
not accepted.
    Comment: Commenter suggests that, to eliminate confusion and ensure 
consistency, all GSA contractors should be permitted to submit invoices 
electronically, including those for construction contracts awarded on 
an SF 1442. Invoices for construction contracts awarded on a GSA Form 
300 as a task order against an indefinite delivery/indefinite quantity 
contract are permitted to be submitted electronically. All construction 
payments are 14-day pay.
    Response: The GSA Form 300 was cancelled in connection with the 
rewrite of GSAR Part 513. Therefore, using the cancelled form as a 
reason to revise the invoicing rules for contracts awarded using 
another form is moot. Further, authority to submit invoices 
electronically is provided by Office of the Chief Financial Officer, 
not the GSAM.
    Comment: Commenter states that, per FAR 32.103, retainage should 
not be used as a substitute for good contract management, and the 
contracting officer should not withhold funds without cause.
    Response: We agree with the commenter but do not propose to revise 
the GSAM as a result.
    Comment: Commenter addresses GSA Form 2419 using the same rationale 
as commenter used for the GSA Form 1142. Just like the Release of 
Claims form, commenter says, it would seem more appropriate for the FAR 
Council to develop a standard form to be used by all agencies in 
accordance with FAR 1.304(c) in lieu of GSA's Certification of Progress 
Payment, Form 2419, since the requirement is set forth for all 
construction contracts under FAR 32.904.
    Response: While we agree with the commenter that it would make 
sense for the FAR to prescribe a standard form in lieu of the GSA Form 
2419, Certification of Progress Payments Under Fixed-Price Construction 
Contracts, the FAR does not currently do so. The GSA form will be 
retained unless or until a standard form is prescribed in the FAR.
    The commenter likens the GSA Form 2419 to the GSA Form 1142, but 
the two forms are different in two very important ways. First, the 
clause at FAR 52.232-5, Payments Under Fixed-Price Construction 
Contracts, provides exact language that must be used in the 
certification. Second, the GSA Form 2419 does have an OMB clearance and 
has been through the Paperwork Reduction Act and Regulatory Flexibility 
Act review process.
    Comment: The proposed rule, at GSAR 532.905(a), required 
contractors to submit invoices or vouchers concurrently to the Office 
of the Chief Financial Officer and the contracting officer for 
approval. The GSA's Office of General Counsel questioned the 
requirement for contractors to submit more than one copy to the 
Government, given that the contracting officer is considered to be the 
``one-face'' to the public. The Office of General Counsel recommended 
that any internal distribution of contractors' invoices or vouchers 
should be an internal procedural matter.
    Response: Agree. The GSAR at 532.905(a) has been revised.
    Comment: Commenter recommends that any rejection of invoices should 
``cite the specific section of FAR 32.905(b)(1) that is in non-
compliance'' and also advise contractors of their rights under the 
disputes clause.
    Response: FAR 32.905(b)(3) currently requires the designated 
billing office, if the invoice does not comply with the requirements of 
FAR 32.905(b)(1), to return it ``with the reasons why it is not a 
proper invoice.'' Given that FAR 1.304(b) prohibits agency acquisition 
regulations from unnecessarily repeating the FAR, there will not be a 
change made to the GSAM as a result of this comment.
    Comment: Commenter states that GSA has collected electronic funds 
transfer information from contractors using a form that has not been 
approved by OMB for this information collection. Further, there is no 
indication that GSA is ensuring the financial information collected is 
protected as privileged and confidential in accordance with FAR 
    Response: The form described is not prescribed by GSAM. This 
comment is outside the scope of the GSAM Rewrite. Commenter should 
direct her concerns to the GSA Office of the Chief Financial Officer.
    Comment: Commenter recommends that the reference to FAR 52.232-
25(a)(6)(i), at GSAR 532.905(a)(1), should be corrected to 52.232-
    Response: Agree.
    Comment: Commenter refers to GSAR 532.905(a)(3), stating that FAR 
52.232-26(a)(4)(i)(B) does not give the option of entering an 
alternative to the 7-day constructive approval for prompt payment. 
Further, the instructions for the FAR clause state ``insert the 
clause'', not ``insert a clause substantially the same as.''
    Response: Agree. The authority at 532.905(a)(3) to select longer 
periods of time is deleted.
    Comment: Commenter refers to 532.905(b)(1), stating that FAR 
52.232-27(a)(1)(i)(A) does not give the option of entering an 
alternative to the 14-day period for payment. Further, the instructions 
for the FAR clause state ``insert the clause,'' not ``insert a clause 
substantially the same as.''
    Response: Agree. The authority at 532.905(b)(1) to select longer 
periods is deleted.
    Comment: GSAR 532.905(b)(2) and FAR 52.232-27(a)(4)(i) does not 
give the option of entering an alternative to the 7-day period for 
constructive approval for prompt payment. Further, the instructions 
state ``insert the clause'', not ``insert a clause substantially the 
same as.''
    Response: Agree. The authority at GSAR 532.905(b)(2) to select 
longer periods is deleted.
    Comment: With regard to the clause at GSAR 552.232-1, commenter 
notes that, while this deviation is included in GSAR Part 552, there is 
no corresponding mention of it in the clause section of Part GSAR 532. 

[[Page 54917]]

clause prescription should be added to Part 532.
    Response: Agree. A new GSAR 532.905(a) will be added as follows: 
``GSA has a FAR deviation that allows this agency to use the clause at 
552.232-1, Payments, in lieu of the clause at FAR 52.232-1, Payments.''
    Comment: For the preface to the clause at GSAR 552.232-73, the 
clause prescription should be revised from GSAR 532.705-1 to 532.705-
    Response: Not applicable. The clause at GSAR 552.232-73 has been 
deleted on the recommendation of GSA's Office of General Counsel.
    Comment: With regard to the new clause GSAR 552.232-7007, 
Limitation of Government's Obligation, commenter strongly believes that 
authorizing incremental funding of fixed-price, time-and-materials, and 
labor-hour contracts is ill advised. Commenter believes that limiting 
the Government's obligation to pay (i.e., conditioning the payment 
requirement on the availability of funds) is antithetical to the notion 
of fixed-price contracts. It would also transfer from the Government to 
the contractor the burden of tracking the costs of contract 
    Response: Agree. We could not find any agency FAR supplement that 
authorizes use of incremental funding on time-and-materials or labor-
hour contracts. We note that DoD carefully circumscribes the use of 
incremental funding on fixed-price contracts. Effectively, the same 
limits already had been provided for GSA under Acquisition Letter V-07-
04, dated June 12, 2007. The proposed clause at GSAR 552.232-7007, 
Limitation of Government's Obligation, and its prescription at 532.705-
1(c), have been deleted from the final rule.
    Comment: If GSAR 552.232-7007 is retained, commercial-item 
contracts should be exempted from its use.
    Response: We agree that commercial-item contractors do not have the 
accounting systems needed to track the Government's funds expenditures 
and should not be required to take on this risk. Although DoD 
authorizes the use of incremental funding on fixed-price contracts, as 
the commenter points out, DoD does not award many contracts under FAR 
Part 12 and therefore does not have any need to address this 
circumstance. The proposed clause at GSAR 552.232-7007 has been deleted 
from the final rule.
    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 this rule does not add any new contract 
clauses and, in fact, simplifies agency contract financing rules by 
eliminating 12 contract clauses from the current GSAR Part 532. For 
these reasons, it is expected that the number of entities impacted by 
this rule will be minimal. Therefore, a Regulatory Flexibility Analysis 
was not performed.

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. Chapter 35, et seq.

List of Subjects in 48 CFR Parts 532 and 552

    Government procurement.

    Dated: October 20, 2009.
David A. Drabkin,
Senior Procurement Executive, Office of Acquisition Policy, General 
Services Administration.

Therefore, GSA amends 48 CFR parts 532 and 552 as set forth below:
1. The authority citation for 48 CFR parts 532 and 552 continues to 
read as follows:

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


2. Revise section 532.111 to read as follows:

532.111  Contract clauses for non-commercial purchases.

    For contracts that include the clause at FAR 52.232-5, Payments 
Under Fixed-Price Construction Contracts, the contracting officer shall 
provide the contractor with GSA Form 2419, Certification of Progress 
Payments Under Fixed-Price Construction Contracts, to be used to make 
the certification required by FAR 52.232-5(c).

Subpart 532.2 [Removed]

3. Remove Subpart 532.2.

Subpart 532.7 [Removed]

4. Remove Subpart 532.7.

532.902  [Removed]

5. Remove section 532.902.
6. Add section 532.904 to read as follows:

532.904  Determining payment due dates.

    Payment due dates for construction contracts are addressed at FAR 
32.904(d). The following procedures apply to construction and building 
service contracts:
    (a) The amount of final payment must include, as appropriate, 
deductions to cover any of the following:
    (1) Liquidated damages for late completion.
    (2) Liquidated damages for labor violations.
    (3) Amounts withheld for improper payment of labor wages.
    (4) The amount of unilateral change orders covering defects and 
    (5) The agreed-upon dollar amount in a Deficiency Report, which is 
included in all applicable Operation and Maintenance (O&M) service 
    (b) When the contract is for the performance of building services, 
the contracting officer shall include the clause at 552.232-72, Final 
Payment Under Building Services Contracts.

7. Revise section 532.905 to read as follows:

532.905   Payment documentation and process.

    For contracts of the type shown in 532.7201(a)(1) through (4):
    (a) Contractors are to submit invoices or vouchers to the 
contracting officer for approval. Invoices must be annotated with the 
date of receipt, as required by FAR 32.905. That date will be used to 
determine interest penalties for late payments. The contracting officer 
or designee must review the processing of invoices or vouchers before 
payment to determine if the items and amounts claimed are consistent 
with the contract terms and represent prudent business transactions. 
The contracting officer must ensure that these payments are 
commensurate with physical and technical progress under the contract. 
If the contractor has not deducted questionable amounts from the 
invoice or amounts required to be withheld, the contracting officer 
must make the required deduction, except as provided in 532.7203. 
Subject to 532.7201, the contracting officer must note approval of any 
payment on (or attached to) the invoice or voucher submitted by the 
contractor and forward the invoice or voucher to the appropriate 

[[Page 54918]]

finance office for retention after certification and scheduling for 
payment by a disbursing office.
    (b) See GSAM 532.7203 for the handling of audit findings.

532.905-70  [Removed]

8. Remove section 532.905-70.

532.905-71  [Removed]

9. Remove section 532.905-71.

10. Revise section 532.908 to read as follows:

532.908  Contract clauses.

    (a) GSA has a FAR deviation that allows this agency to use the 
clause at 552.232-1, Payments, in lieu of the clause at FAR 52.232-1, 
    (b) General. Before exercising the authority to modify the date for 
constructive acceptance or constructive approval of progress payments 
in paragraph (a)(5)(i) of the clause at FAR 52.232-25, Prompt Payment, 
the contracting officer must prepare a written justification explaining 
why a longer period is necessary. An official one level above the 
contracting officer must approve the justification. The time needed 
should be determined on a case-by-case basis, but the specified 
constructive acceptance period shall not exceed 30 days.
    (c) Stock, Special Order, and Schedules Programs. (1) GSA has 
obtained a FAR Deviation to authorize payment within 10 days of receipt 
of a proper invoice. The authority applies only to:
    (i) Orders placed by GSA under the referenced programs;
    (ii) That include FAR 52.232-33, Mandatory Information for 
Electronic Funds Transfer Payment; and
    (iii) For which the order is placed, and the contractor submits 
invoices, using EDI in accordance with the Trading Partner Agreement.
    (2) If the contract is for commercial items and will include FAR 
52.212-4, use the clause with its Alternate II. If the contract is not 
for commercial items, use the clause at 552.232-25, Prompt Payment, 
instead of FAR 52.232-25.

11. Revise the heading in Subpart 532.70 to read as follows:

Subpart 532.70--Authorizing Payment by Government Charge Card

532.7001  [Removed]

12. Remove section 532.7001.

13. Revise section 532.7003 to read as follows:

532.7003  Contract clause.

    For indefinite-delivery, indefinite-quantity (IDIQ) contracts other 
than Schedules, insert the clause at 552.232-77, Payment By Government 
Charge Card, if the contract will provide for payment by Government 
charge card as an alternative method of payment for orders. For 
Schedule contracts that provide for payment using the Government charge 
card, use the clause(s) prescribed at Part 538.

Subpart 532.71 [Removed]

14. Remove subpart 532.71.


15. Add section 552.212-4 to read as follows:

552.212-4  Contract Terms and Conditions--Commercial Items.

    Alternate II (FAR Deviation) NOV 2009. When a commercial item 
contract is contemplated and the contract will include the clause at 
FAR 52.212-4, insert this Alternate II instead of subparagraph 
(g)(2) of the FAR clause.
    (g)(2) The due date for making invoice payments by the 
designated payment office is the later of the following two events:
    (i) The 10th day after the designated billing office receives a 
proper invoice from the Contractor. If the designated billing office 
fails to annotate the invoice with the date of receipt at the time 
of receipt, the invoice payment due date shall be the 10th day after 
the date of the Contractor's invoice; provided the Contractor 
submitted a proper invoice and no disagreement exists over quantity, 
quality, or Contractor compliance with contract requirements.
    (ii) The 10th day after Government acceptance of supplies 
delivered or services performed by the Contractor.

16. Amend section 552.232-1 by revising the date of the clause and 
paragraph (c) to read as follows:

552.232-1  Payments.

* * * * *

Payments (NOV 2009) (Deviation FAR 52.232-1)

* * * * *
    (c) When processing payment, GSA's Finance Office will 
automatically generate the 12 digit invoice number using the PDN 
assigned to the contract, followed by an abbreviated month and year 
of service (e.g., 84261554JUN7, for June 2007). The PDN appears on 
the contract award document.

552.232-8  [Removed]

17. Remove section 552.232-8.

552.232-25  [Amended]

18. Amend section 552.232-25 by--
a. Removing from the introductory paragraph ``532.908(a)(2)'' and 
adding ``532.908(c)(2)'' in its place;
b. Removing from the clause heading ``(Jul 1998)'' and adding (NOV 
2009) in its place; and
c. Removing from paragraph (a)(1)(i) ``Federal Supply Service (FSS)'' 
and adding ``Federal Acquisition Service (FAS)'' in its place.

552.232-70  [Removed]

19. Remove section 552.232-70.

552.232-71  [Removed]

20. Remove section 552.232-71.

21. Amend section 552.232-72 by revising the section heading, the 
introductory paragraph, and the clause heading to read as follows:

552.232-72  Final Payment Under Building Services Contracts.

    As prescribed in 532.904(c), insert the following clause:

Final Payment Under Building Services Contracts (NOV 2009)

* * * * *

552.232-73  [Removed]

22. Remove section 552.232-73.

552.232-74  [Removed]

23. Remove section 552.232-74.

552.232-75  [Removed]

24. Remove section 552.232-75.

552.232-76  [Removed]

25. Remove section 552.232-76.

26. Amend section 552.232-77 by revising the section heading, adding an 
introductory paragraph, and revising the clause heading, and paragraphs 
(a) and (c); and removing Alternate I.
    The revised text reads as follows:

552.232-77  Payment By Government Charge Card.

Payment By Government Charge Card (NOV 2009)

    As prescribed in 532.7003, insert the following clause:

    (a) Definitions. ``Governmentwide commercial purchase card'' 
means a uniquely numbered charge card issued by a contractor under 
the GSA SmartPay[reg] program contract for Fleet, Travel, and 
Purchase Card Services to named individual Government employees or 
entities to pay for official Government purchases.
* * * * *
    (c) The Contractor shall not process a transaction for payment 
using the charge card until the purchased supplies have been shipped 
or services performed. Unless the cardholder requests correction or 
replacement of a defective or faulty item

[[Page 54919]]

under other contract requirements, the Contractor must immediately 
credit a cardholder's account for items returned as defective or 
* * * * *

552.232-78  [Removed]

27. Remove section 552.232-78.

552.232-79  [Removed]

28. Remove section 552.232-79.

552.232-81  [Removed]

29. Remove section 552.232-81.

552.232-82  [Removed]

30. Remove section 552.232-82.

552.232-83  [Removed]

31. Remove section 552.232-83.

[FR Doc. E9-25606 Filed 10-23-09; 8:45 am]