[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]
[Rules and Regulations]
[Pages 80369-80376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31148]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 4, 8, 17, 37, and 52

[FAC 2005-72; FAR Case 2010-010; Item I; Docket 2010-0010, Sequence 1]
RIN 9000-AM06


Federal Acquisition Regulation; Service Contracts Reporting 
Requirements

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the 
Federal Acquisition Regulation (FAR) to implement a section of the 
Consolidated Appropriations Act, 2010. This final rule amends the FAR 
to require service contractors for executive agencies, except where DoD 
has fully funded the contract or order, to submit information annually 
in support of agency-level inventories for service contracts.

DATES: Effective: January 30, 2014.
    Applicability: The changes in this rule apply to solicitations 
issued and contracts awarded on or after January 30, 2014. Contracting 
officers will modify existing indefinite-delivery contracts, on a 
bilateral basis in accordance with FAR 1.108(d)(3), within six months 
of the effective date of the final rule, if the remaining period of 
performance extends beyond October 1, 2013, and $2.5 million or more 
remains to be obligated.

FOR FURTHER INFORMATION CONTACT: Mr. Edward Loeb, Procurement Analyst, 
at 202-501-0650, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAC 2005-72, FAR Case 2010-
010.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 743(a) of Division C of the Consolidated Appropriations 
Act, 2010 (Pub. L. 111-117) requires executive agencies covered by the 
Federal Activities Inventory Reform (FAIR) Act (Pub. L. 105-270), 
except DoD, to submit to the Office of Management and Budget (OMB) 
annually an inventory of activities performed by service contractors. 
To allow review by the agency and any necessary correction by the 
contractor, Office of Federal Procurement Policy (OFPP) agreed to 
change the deadline for agencies to submit a service contract inventory 
to OMB from December 30 to January 15, even though section 743 of P.L. 
111-117 establishes December. DoD is exempt from this reporting 
requirement because 10 U.S.C. 2462 and 10 U.S.C. 2330a(c) already 
require DoD to develop an annual service contract inventory.
    Specifically, FAR 4.1703 establishes service contractor reporting 
requirements based on type of contract and dollar amount as stated 
below:

     Contract types (e.g., cost-reimbursement, time-and-
materials, and labor-hour contracts), which already require contractors 
to track labor hours closely in order to invoice the Government, will 
have lower dollar thresholds than fixed-price contracts. Contractors 
will now be required to report on all cost-reimbursement, time-and-
materials, and labor-hour contracts and orders above the simplified 
acquisition threshold (SAT).
     Contractors will be required to report on new fixed-price 
definite-delivery contracts at or above the following--
    [cir] $2.5 million in Fiscal Year 2014;
    [cir] 1 million in Fiscal Year 2015; and
    [cir] $500,000 from Fiscal Year 2016 onwards.
     For indefinite-delivery contracts including, but not 
limited to, indefinite-delivery indefinite-quantity (IDIQ) contracts, 
Federal Supply Schedule (FSS) contracts, Governmentwide Acquisition 
contracts (GWACs), and multi-agency contracts, reporting requirements 
will be determined based on the expected dollar amount and type of the 
orders issued under the contracts.
     First-tier subcontracts for services will be reported 
using the phase-in thresholds.
     Existing indefinite-delivery contracts will be bilaterally 
modified within six months of the effective date of the final rule if 
sufficient time and value remain on the base contract, which is defined 
as--

    (i) A performance period that extends beyond October 1, 2013; and
    (ii) $2.5 million or more remaining to be obligated to the 
indefinite-delivery contract.
    The threshold for existing indefinite-delivery contracts is 
consistent with the threshold for new fixed-price contracts. Agencies 
placing orders on these existing contracts after the effective date of 
this final rule will be required to report this information if the 
order meets the thresholds established in FAR 4.1703 (e.g., above the 
SAT for cost-reimbursement, time-and-materials, and labor-hour 
contracts, and fixed-price contracts at or above $2.5 million in Fiscal 
Year 2014 and phased-in thresholds thereafter).
    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 76 FR 22070 on April 20, 2011, to implement section 743(a). 
The section of the preamble discussing coverage for existing contracts 
was included in the correction published in the Federal Register at 76 
FR 24443 on May 2, 2011.
    On June 20, 2011, the period for public comment ended. Twelve 
respondents submitted comments on the proposed rule.

II. Determinations

    The Federal Acquisition Regulatory (FAR) Council has made the 
following

[[Page 80370]]

determination with respect to the rule's applicability to contracts for 
the acquisition of commercial items.

Applicability to Contracts for the Acquisition of Commercial Items

    Pursuant to 41 U.S.C. Sec.  1906, the FAR is required to include 
a list of provisions of law that are inapplicable to acquisitions of 
commercial items (other than acquisitions of commercially available 
off-the-shelf items, which are addressed in 41 U.S.C. Sec.  1907). 
Recently enacted laws that set forth policies, procedures, 
requirements, or restrictions for the acquisition of property or 
services by the Federal Government shall be included on the list, 
unless the law--
    1. Provides for criminal or civil penalties;
    2. Specifically refers to 41 U.S.C. Sec.  1906 and states that 
the law applies to acquisitions of commercial items; or
    3. Is applicable because the FAR Council makes a written 
determination that it would not be in the best interest of the 
Federal Government to exempt acquisitions of commercial items from 
this law.

    Given the requirements of section 743(a) of Division C of the 
Consolidated Appropriations Act, 2010, for service contract reporting, 
the FAR Council has determined the rule should apply to contracts for 
the acquisition of commercial items, as defined at FAR 2.101, in order 
to fulfill the intended result of the statutory requirement for 
increased visibility of contracted services to determine whether the 
agency has the right balance of contractor and in-house resources 
needed to accomplish its mission.

III. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the public comments in the 
development of the final rule.
    The following changes from the proposed rule were made in the final 
rule:
     The subpart has been renumbered from FAR 4.16 to 4.17.
     The definition of ``first-tier subcontract'' has been 
modified slightly to conform to the definition at FAR 52.204-10, 
Reporting Executive Compensation and First-Tier Subcontract Awards. In 
addition, the definition of ``service contract'' has been deleted 
because the cross reference to the definition of service contract at 
FAR 37.101, did not include construction services, to which this rule 
is applicable.
     FAR 4.1702 is modified to add ``as specified in 4.1705.'' 
This is done to clarify that the clauses at FAR 52.204-14 and 52.204-15 
are not applicable to actions entirely funded by DoD.
     The thresholds in FAR 4.1703(a)(2)(ii) are updated to 
begin in Fiscal Year 2014. This change results from internal review and 
the anticipated publication date for the final rule. The only existing 
contracts that are covered by this rule are existing indefinite-
delivery contracts if sufficient time and value remain on the base 
contract. The stipulation ``for services'' was added at FAR 
4.1703(a)(1) and 4.1703(a)(3) to clarify that first-tier subcontract 
for services reporting is only required for subcontractors that are 
primarily providing services.
     FAR 4.1703(a)(3) was changed from the proposed rule to 
clarify that first-tier subcontract reporting thresholds are the same 
as the prime contract reporting thresholds in 4.1703(a)(2)(i) and 
4.1703(a)(2)(ii).
     FAR 4.1703(b). The responsibility of the agency for 
reviewing the contractor reported data was changed as a result of 
internal review to provide for the respective agency to review the 
contractor's report for reasonableness and consistency and to advise 
the contractor of possible errors. The contractor is to revise the 
report, unless the contractor believes the report was accurate, and so 
advises the agency. These changes have been incorporated into the 
clauses that are included within this rule.
     FAR 4.1705 is modified to add ``for actions entirely 
funded by DoD or''. This is done to clarify that the clauses at FAR 
52.204-14 and 52.204-15 are not applicable to DoD funded actions.
     A definition of ``first-tier subcontract'' has been added 
to FAR 52.204-14 and 52.204-15.
     FAR 52.204-14(c) is renumbered as (d) and revised to 
remove ``[to] the online Service Contract Reporting Portal and will be 
publicly available at www.acquisition.gov''; information will be found 
and reporting will be made at www.sam.gov (See section 3.10 of the SAM 
User Guide at https://www.sam.gov/sam/SAM_Guide/SAM_User_Guide.htm. 
The reported information will be publicly available as required by 
section 743.
     FAR 52.204-14(d)(1)(i) is renumbered, and revised to 
change ``Subcontractor DUNS number, or if DUNS number is unavailable, 
subcontractor name'' to ``subcontract number (including subcontractor 
name and DUNS number)'' because contracts at this threshold already 
require a DUNS number.
     The stipulation ``providing services'' was added at FAR 
52.204-14(f)(1) and 52.204-15(f)(1) to clarify that first-tier 
subcontract reporting is only required for subcontractors that are 
primarily providing services.
     FAR 52.204-14, Alternate I is changed to ``52.204-15, 
Service Contract Reporting Requirements for Indefinite Delivery 
Contracts''. References in FAR subpart 4.17 were conformed. Paragraph 
(c) from FAR 52.204-14, now renumbered as (d), is added to the new 
clause at 52.204-15. FAR 52.204-14(d)(1)(i) is renumbered as (f)(1)(i), 
and the words ``Subcontractor DUNS number, or if DUNS number is 
unavailable, subcontract name'' are changed to ``subcontract number 
(including subcontractor name and DUNS number)'' because contracts at 
this threshold already require a DUNS number.
     FAR 52.212-5 is added for applicability to commercial 
items for contractor reporting requirements.
    A discussion of the comments and the changes made to the rule as a 
result of those comments are provided as follows:

A. Application to Fixed-Price Performance-Based Services

    Comments: Three respondents commented that this requirement could 
cause contractors to change their internal accounting processes for 
firm-fixed-price contracts. Another respondent gave the example that in 
test scenarios, labor hours may not be easily assigned, since analysts 
work on batches of samples at a time, which may include samples for 
both Government and non-Governmental contracts. This respondent 
recommended clarifying whether the threshold applies to fixed unit 
prices on IDIQ services. Similarly, another respondent commented that 
the reporting does not take into account how software and maintenance 
fixed-price contract costs and labor can significantly fluctuate each 
year or how this type of labor can be comingled between government and 
non-government work on a contract. Lastly, another respondent stated 
that limiting the definition of ``service contracts'' to the FAR part 
37 definition would exclude reporting and evaluation of billions of 
dollars of services that are included in supply, maintenance and 
repair, and construction contracts.
    Response: Section 743(a) requires agencies to compile service 
contract inventories for all service contracts, regardless of contract 
type. Therefore, this rule requires contractors to submit the 
information for fixed price contracts as well as for other contract 
types. To alleviate the reporting burden, the case establishes higher 
reporting thresholds for fixed-price contracts, where the information 
may not be as readily available. The same thresholds apply at the 
contract and task order level. The

[[Page 80371]]

rule does not mandate how contractors track labor hours, but simply 
requires the reporting of aggregated number of hours for each year of 
contract performance. The statute specifies that reporting is required 
for service contracts.
    Comment: One respondent stated that ``requiring the disclosure of 
direct labor hours expended on the services performed is extremely 
concerning, particularly in a Firm Fixed Price scenario. Pricing data 
is exceptionally sensitive information . . . and is routinely protected 
under Exemption 4 under FOIA''.
    Response: The statute requires the agency to report the number of 
contractor employees expressed as full-time equivalents for direct 
labor, compensated under the contract. To relieve burden on the 
contractor, the clause requires direct labor hours to be reported 
rather than the full-time equivalent. The statute also requires the 
reporting and that the agency's service contract inventory be publicly 
available. The number of hours is the total for the entire fiscal year 
and is not broken down by type of employee.

B. Type of Information Collected

    Comments: One respondent commented that this rule would not provide 
agency officials with enough information to determine whether services 
are excessively costly and should be insourced, so more information 
should be required from the contractor. Five other respondents stated 
that the rule places additional burden on contractors, especially 
considering information is already reported in contractor proposals or 
invoices. One of these respondents recommended deleting FAR 52.204-
14(b)(2) from the clause because the information is already collected.
    Response: This rule requires the collection of information that 
will supplement existing data available to the Government in order to 
fulfill the requirements mandated in section 743(a) of Division C of 
the Consolidated Appropriations Act, 2010 (Pub. L. 111-117). The 
statute requires reporting of incurred direct labor hours, not proposal 
information. While reporting of direct labor hours currently may be 
required for some payment processes, the information collected pursuant 
to this requirement is not required at the same level of detail for all 
contract types or submitted in the same format for all agencies. In 
other words, this rule requires contractors to report information that 
is not readily available to the Government.

C. Small Business Impact

    Comments: Two respondents stated that the rule would impose 
additional reporting burden on small businesses, thereby increasing 
overhead rates and eventually passing the cost of implementation on to 
the Government.
    Response: The rule attempts to minimize burden on small businesses 
by implementing contract value thresholds and phasing in the reporting 
requirement.

D. Increased Cost for Contractors and the Government

    Comment: Two respondents questioned whether the value of this 
information will be worth the additional contract costs associated with 
collecting the information. Another respondent stated that even though 
DoD is exempt from section 743, it is required to compile service 
contract inventories, and DoD should be covered by this rule to avoid 
burdening contractors with separate reporting processes, definitions, 
and locations when they provide identical information for civilian and 
DoD contracts.
    Response: This rule implements the requirements of section 743(a) 
of Division C of the Consolidated Appropriations Act, 2010, (Pub. L. 
111-117), which specifically excludes DoD.

E. Subcontractor Data

    Comments: Three respondents commented on subcontractor data. One 
respondent questioned why the data needs to be broken down to the 
subcontractor level, since the Government appears to be interested in 
the total dollars being expended for all non-Government performed work, 
not whether it is prime contractors or subcontractors. Another 
respondent stated that the exclusion of lower-tier subcontracts is an 
improper interpretation of the statute, which requires the reporting of 
all subcontractor employees, not just first-tier subcontractor 
employees. A third respondent recommended changing the word 
``subcontract'' to ``subcontractor'' in FAR 52.204-14, Alternate I 
paragraph (d)(1)(i) since the work is being performed by subcontractors 
under the subcontract.
    Response: Section 743(a) requires the reporting of both contractor 
and subcontractor labor hours, and the rule limits the reporting to 
first-tier subcontracts for services to alleviate the burden on 
contractors. The recommendation to change the text of the clauses to 
state `subcontractor name' instead of `subcontract name' has been 
incorporated into the final rule.

F. Reporting Direct Labor Hours Versus Full-Time Equivalent (FTE)

    Comments: Two respondents questioned why direct labor hours are 
being collected instead of FTE. One of these respondents also stated 
that the rule should include a requirement for contractors to report 
the work location for each FTE. In addition, this respondent stated 
that the total dollar amount invoiced for services performed during the 
previous fiscal year may not always represent the number of direct 
labor hours expended on services performed during the previous fiscal 
years, so the Councils should consider changing the requirement to 
direct labor hours invoiced, instead of number of direct labor hours 
expended.
    Response: The rule requires contractors to submit an aggregated 
number of hours for each year of contract performance. The Government 
will calculate FTEs based on the number of labor hours submitted, so 
contractors should not submit FTE information. The service contract 
inventories are utilizing the place of performance data currently 
available in the Federal Procurement Data System (FPDS), so this rule 
is not requiring contractors to submit that information. The rule will 
continue to capture direct labor hours expended, as required by section 
743(a).

G. Reporting Time-Frame

    Comments: Two respondents stated that reporting within 30-days 
after the end of the fiscal year is too tight a reporting timeframe.
    Response: Section 743(a) requires agencies submit inventories to 
OMB by December 30 annually. In order for agencies to be able to 
compile inventories and provide for a review and possible correction, 
contractors need to submit this information by the end of October. The 
Councils have determined that this reporting timeframe is adequate, but 
have modified the rule to allow up to November 30th of each year for 
review by the agency and any necessary corrections by the contractor.

H. Reporting Thresholds

    Comments: Two respondents commented on reporting thresholds. One 
respondent recommends implementing the same thresholds for all contract 
types by the end of FY 2014 and aligning the thresholds with OFPP 
guidance on Service Contract Inventories. Another respondent commented 
that unsupported reporting thresholds were included in the proposed 
rule, which do not exist in

[[Page 80372]]

section 743 and will exclude billions of dollars in service contracts 
annually.
    Response: The rule minimizes the burden on contractors, especially 
for contract types that do not typically require this type of detailed 
reporting of labor hours, by implementing contract value thresholds and 
the phase-in of the reporting requirement. The thresholds for 
determining if a contract or order should include this clause have been 
revised to reflect the thresholds beginning as of FY 2014, since that 
is now when the reporting will begin.

I. Generic Data Universal Numbering System (DUNS)

    Comment: One respondent cited to the proposed rule, which stated 
that contracts reported using the generic DUNS number allowed at FAR 
4.605(c) will interfere with the contractor's ability to comply with 
this reporting requirement, because the data will not pre-populate from 
FPDS. The respondent recommended adding an Alternate II to FAR 52.204-
14 for contractors using the generic DUNS number that identifies the 
additional data these contractors will have to provide manually.
    Response: Contractors awarded a contract with a generic DUNS number 
will not be able to report information. Contracting officers should 
only use generic DUNS numbers under the very specific conditions in FAR 
4.605(c).

J. OFPP Guidance

    Comments: Two respondents raised issues that related to OFPP 
guidance. One respondent recommended consolidating the reporting 
requirements of section 743(a) and section 736 with OFPP guidance 
documents to simplify the reporting process for contractors and 
agencies. Another respondent stated that the rule does not establish 
whether functions performed by contractors will be determined based on 
Office of Personnel Management (OPM) job series codes, the GSA Product 
and Service Codes (PSC) Manual, or FAIR inventory function codes. The 
rule should adopt a services classification system that reflects the 
broad spectrum of occupational services recognized in the real world 
and that tailors that system to be compatible with the OPM 
classification system so that compensation standards can be compared 
across comparable service clusters.
    Response: OFPP guidance supplements this rule, which implements 
section 743(a). This rule requires contractors to submit information 
that will supplement existing contract information, so it does not 
create a new classification system for services.

K. Failure To Report

    Comment: One respondent recommended adding the following language 
to FAR 52.204-14(d)(2): ``The Contractor shall advise the subcontractor 
that the information reported, or the failure to report, will be made 
available to the public.'' The respondent also recommended adding the 
following to FAR 52.204-14(b)(4) (Alternate I): ``Data reported by 
subcontractors under paragraph (d) of this clause, and any failure of 
subcontractors to submit reports as required''.
    Response: In the event that a contractor fails to comply with this 
reporting requirement, the contracting officer is required to document 
the failure in the contractor's performance evaluation (see FAR 4.1704 
``Contracting officer responsibilities''). This is the most appropriate 
enforcement tool for dealing with noncompliance.

L. Interagency Acquisitions

    Comment: One respondent stated that the proposed FAR language is 
unclear as to whether the applicability is based on which agency is 
issuing the contract versus which agency is funding the action, 
especially if a contract is supporting multiple agencies.
    Response: Applicability is based on the funding agency. FAR 4.1705 
is modified to add ``for actions entirely funded by DoD or''. This is 
done to clarify that the clauses are not applicable to DoD-funded 
actions.

M. Definition of ``Classified Contracts''

    Comment: One respondent questioned whether the use of the term 
``classified contract'' in proposed FAR 4.1705 references the 
definition of the same from FAR part 2.
    Response: Yes. FAR 1.108, ``FAR Conventions'' states that the 
definitions of words and terms used in part 2 apply throughout the FAR, 
unless specifically defined in another part, subpart, section, 
provision, or clause.

N. Effect on Competition

    Comment: One respondent stated that the rule will create a 
significant barrier for commercial companies to participate in the 
Government market.
    Response: While this rule might be one factor of a commercial 
contractor choosing not to participate in the Government market, the 
Councils have determined the rule's overall impact to be minimal, and 
do not consider that it will have a significant effect on such 
participation.

O. Public Burden

    Comment: One respondent questioned the methodology used to 
calculate the hours needed to prepare responses and considered the 
reporting requirement estimates in the Paperwork Reduction Act 
submission to be grossly underestimated.
    Response: Two hours is the estimated time to report per contract, 
one hour to calculate the data and one hour to enter the data at 
www.sam.gov. The burden estimate is based on the average burden 
experienced under all contract types, including cost-reimbursement, 
time-and-materials, and labor-hour contracts, which already require 
contractors to track labor hours closely in order to invoice the 
Government, and will therefore require less additional effort to meet 
this reporting requirement. This new paperwork burden is approved under 
OMB control number 9000-0179.

P. Existing Contracts

    Comment: One respondent stated that the proposed rule contains no 
requirement to modify existing contracts or task orders to require 
reporting, meaning that more than 10 years could pass before these 
provisions are applicable to many contracts or task orders. The statute 
clearly states that the reporting requirements become effective at the 
exercise of an option year.
    Response: The May 2, 2011, correction to the Federal Register at 76 
FR 24443 states applicability to existing contracts in the preamble.
    ``Existing indefinite-delivery contracts will be bilaterally 
modified within six months of the effective date of the final rule if 
sufficient time and value remain on the base contract, which is defined 
as--
    1. A performance period that extends beyond October 1, 2012; and
    2. $5 million or more remaining to be obligated to the indefinite-
delivery contract.''
    This is repeated in the final rule, in the DATES section, updated 
to show the year as 2013 and the dollar threshold as $2.5 million.

IV. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the

[[Page 80373]]

importance of quantifying both costs and benefits, of reducing costs, 
of harmonizing rules, and of promoting flexibility. This is a 
significant regulatory action and, therefore, was 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.

V. Regulatory Flexibility Act

    DoD, GSA, and NASA have prepared a Final Regulatory Flexibility 
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 
U.S.C. 601, et seq. The FRFA is summarized as follows:

    This rule amends the FAR to implement section 743(a) of Division 
C of the Consolidated Appropriations Act, 2010 (Pub. L. 111-117). 
Section 743(a) requires agencies covered by the Federal Activities 
Inventory Reform (FAIR) Act, except for the Department of Defense 
(DoD), to submit annual agency inventories of their service 
contracts. DoD is exempt because DoD was already required to do 
annual service contract reporting under 10 U.S.C. 2462 and 10 U.S.C. 
2330a(c). Section 743(a) calls for agencies to develop annually an 
inventory that reports, for each service contract, the following:
    (1) A description of the services purchased by the executive 
agency and the role the services played in achieving objectives, 
regardless of whether such a purchase was made through a contract or 
task order.
    (2) The organizational component of the executive agency 
administering the contract, and the organizational component of the 
agency whose requirements are being met through contractor 
performance of the service.
    (3) The total dollar amount obligated for services under the 
contract and the funding source for the contract.
    (4) The total dollar amount invoiced for services under the 
contract.
    (5) The contract type and date of award.
    (6) The name of the contractor and place of performance.
    (7) The number and work location of contractor and subcontractor 
employees, expressed as full-time equivalents for direct labor, 
compensated under the contract.
    (8) Whether the contract is a personal services contract.
    (9) Whether the contract was awarded on a noncompetitive basis, 
regardless of date of award.
    DoD, GSA, and NASA attempted to minimize the information-
collection requirement for contractors by requiring agencies to 
obtain as much of the data as possible from existing sources, such 
as the FPDS. However, certain minimum data must be collected from 
service contractors in order for agencies to meet the annual 
statutory service contract inventory requirement.
    Therefore, contractors will be required to report annually the 
following information on each service contract or order in 
accordance with the thresholds established, excluding actions 
entirely funded by DoD:
    (1) Contract number and, as applicable, task order number.
    (2) The total dollar amount invoiced for services performed 
during the previous Government fiscal year under the contract or 
order.
    (3) The number of contractor direct labor hours expended on the 
services performed during the previous Government fiscal year.
    (4) The number of first-tier subcontractor direct labor hours 
expended on the services performed during the previous Government 
fiscal year.
    In order to invoice the Government, contractors track labor 
hours worked for cost-reimbursement, time-and-materials and labor-
hour contracts. Therefore, a lower reporting threshold was 
established for these types of contracts. Contractors are not 
required to track or report labor hour information for fixed price 
contracts, so higher thresholds and a phased-in implementation 
schedule were developed to minimize the burden for contractors.
    In addition, the final rule will require service contractor 
reporting to include first-tier subcontracts for services only. The 
same reporting thresholds will apply to both first-tier subcontracts 
and prime contracts. First-tier subcontract reporting of direct 
labor hours and amount invoiced will be done electronically by the 
prime contractor. Further lessening the reporting requirement, 
service contractors will not be asked to convert the number of 
direct labor hours into full-time equivalents.
    Two comments were received stating that there would be an impact 
on small business, in addition to large businesses, but the two 
respondents did not include specific supporting data.
    Each contractor will be required to report once annually on the 
services provided during the previous Government fiscal year. The 
information will be input to a Government-managed data system. There 
is no hard-copy reporting required, nor is there an agency 
certification or approval requirement.
    When providing a proper invoice to the Government for cost-
reimbursement, time-and-materials, and labor-hour contracts, the 
information on the number of direct labor hours worked is already 
compiled by contractors, so the information collected should be 
minimal for these types of contracts. Currently, the information on 
the number of employee hours worked must already be compiled by 
prime and subcontractors in order to (a) pay employees and (b) 
properly invoice for services provided.
    There are no additional professional skills necessary in this 
area on the part of small businesses. If the small business has the 
personnel needed to account for and invoice the Government in 
compliance with preexisting financial data regulations and 
procedures, then compliance with the new reporting requirement 
should be transparent. In fact, the Contractors are already 
collecting the data. Therefore, since the data would already have 
been collected for paying employees and monthly invoicing, a 
reasonable average is that two additional hours of labor per 
contract per year is required. One hour has been allotted to adding 
the total labor hours for twelve monthly invoices and one hour to 
input the data.
    Since both large and small entities already prepare monthly 
billing and collect and pay hourly wages as a standard business 
practice, it is not considered to be any greater burden for small 
entities. In fact, the cost is estimated to be primarily an 
additional two hour labor burden for an employee such as a payroll 
clerk at a cost of approximately $60/contract/year.
    To minimize the burden on small businesses, the following 
alternatives were considered and included in the FAR rule:
     Minimizing the inventory data elements collected by 
using existing systems, such as FPDS.
     Minimizing the reporting to once a year.
     Enabling electronic reporting by the contractor.
     Requiring contractors to provide only the number of 
direct labor hours and developing the system to automatically 
generate the number of full-time equivalents.
     Limiting the reporting requirement to first-tier 
subcontractors for services in lieu of all subcontractors.
     Establishing a phased-in approach based on contract 
type and estimated total dollar amount, from 2014 to 2016.

    Interested parties may obtain a copy of the FRFA from the 
Regulatory Secretariat. The Regulatory Secretariat has submitted a copy 
of the FRFA to the Chief Counsel for Advocacy of the Small Business 
Administration.

VI. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The 
rule contains information collection requirements. The Office of 
Management and Budget (OMB) has cleared this information collection 
requirement under OMB Control Number 9000-0179, titled: Service 
Contractor Reporting Requirements.

List of Subjects in 48 CFR Parts 1, 4, 8, 17, 37, and 52

    Government procurement.

    Dated: December 19, 2013.
William Clark,
Acting Director, Office of Government-wide Acquisition Policy, Office 
of Acquisition Policy, Office of Government-wide Policy.
    Therefore, DoD, GSA, and NASA amend 48 CFR parts 1, 4, 8, 17, 37, 
and 52 as set forth below:

0
1. The authority citation for 48 CFR parts 1, 4, 8, and 17 continues to 
read as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

[[Page 80374]]

PART 1--FEDERAL ACQUISITION REGULATION SYSTEM


1.106  [Amended]

0
2. Amend section 1.106 in the table following the introductory text, by 
adding in numerical sequence, FAR segments ``4.17'', ``52.204-14'', and 
``52.204-15'' and their corresponding OMB Control Number ``9000-0179''.

PART 4--ADMINISTRATIVE MATTERS

0
3. Add subpart 4.17 to read as follows:
Subpart 4.17--Service Contracts Inventory
Sec.
4.1700 Scope of subpart.
4.1701 Definitions.
4.1702 Applicability.
4.1703 Reporting requirements.
4.1704 Contracting officer responsibilities.
4.1705 Contract clauses.

Subpart 4.17--Service Contracts Inventory


4.1700  Scope of subpart.

    This subpart implements section 743(a) of Division C of the 
Consolidated Appropriations Act, 2010 (Pub. L. 111-117), which requires 
agencies to report annually to the Office of Management and Budget 
(OMB) on activities performed by service contractors. Section 743(a) 
applies to executive agencies, other than the Department of Defense 
(DoD), covered by the Federal Activities Inventory Reform Act (Pub. L. 
105-270) (FAIR Act). The information reported in the inventory will be 
publicly accessible.


4.1701  Definitions.

    As used in this subpart--
    FAIR Act agencies means the agencies required under the FAIR Act to 
submit inventories annually of the activities performed by Government 
personnel.
    First-tier subcontract means a subcontract awarded directly by the 
contractor for the purpose of acquiring supplies or services (including 
construction) for performance of a prime contract. It does not include 
the contractor's supplier agreements with vendors, such as long-term 
arrangements for materials or supplies that benefit multiple contracts 
and/or the costs of which are normally applied to a contractor's 
general and administrative expenses or indirect costs.


4.1702  Applicability.

    (a) This subpart applies to--
    (1) All FAIR Act agencies, except DoD as specified in 4.1705;
    (2) Solicitations, contracts, and orders for services (including 
construction) that meet or exceed the thresholds at 4.1703; and
    (3) Contractors and first-tier subcontractors.
    (b) Procedures for compiling and submitting agency service contract 
inventories are governed by section 743(a)(3) of Division C of Pub. L. 
111-117 and Office of Federal Procurement Policy (OFPP) guidance. The 
guidance is available at the following Web site: http://www.whitehouse.gov/omb/procurement-service-contract-inventories.
    (c) This subpart addresses requirements for obtaining information 
from, and reporting by, agency service contractors.


4.1703  Reporting requirements.

    (a) Thresholds. (1) Except as exempted by OFPP guidance, service 
contractor reporting shall be required for contracts and first-tier 
subcontracts for services based on type of contract and estimated total 
value. For indefinite-delivery contracts, reporting shall be determined 
based on the type and estimated total value of the orders issued under 
the contract. Indefinite-delivery contracts include, but are not 
limited to, contracts such as indefinite-delivery indefinite-quantity 
(IDIQ) contracts, Federal Supply Schedule contracts (FSSs), 
Governmentwide acquisition contracts (GWACs), and multi-agency 
contracts.
    (2) Reporting is required according to the following thresholds:
    (i) All cost-reimbursement, time-and-materials, and labor-hour 
service contracts and orders with an estimated total value above the 
simplified acquisition threshold.
    (ii) All fixed-price service contracts awarded and orders issued 
according to the following thresholds:
    (A) Awarded or issued in Fiscal Year 2014, with an estimated total 
value of $2.5 million or greater.
    (B) Awarded or issued in Fiscal Year 2015, with an estimated total 
value of $1 million or greater.
    (C) Awarded or issued in Fiscal Year 2016, and subsequent years, 
with an estimated total value of $500,000 or greater.
    (3) Reporting is required for all first-tier subcontracts for 
services as prescribed in paragraphs (a)(2)(i) and (ii) of this 
section.
    (b) Agency reporting responsibilities. (1) Agencies shall ensure 
that contractors comply with the reporting requirements of 52.204-14, 
Service Contract Reporting Requirements and 52.204-15, Service Contract 
Reporting Requirements for Indefinite-Delivery Contracts. Agencies 
shall review contractor reported information for reasonableness and 
consistency with available contract information. The agency is not 
required to address data for which the agency would not normally have 
supporting information. In the event the agency believes that revisions 
to the contractor reported information are warranted, the agency shall 
notify the contractor no later than November 15. By November 30, the 
contractor shall revise the report, or document its rationale for the 
agency. Authorized agency officials may review the reports at 
www.sam.gov.
    (2) Agencies are required to compile annually an inventory of 
service contracts performed for, or on behalf of, the agency during the 
prior fiscal year in order to determine the extent of the agency's 
reliance on service contractors. Agencies shall submit a service 
contract inventory to OMB by January 15 annually. Then, each agency 
must post the inventory on its Web site and publish a Federal Register 
Notice of Availability by February 15 annually.
    (3) Most of the required information is already collected in the 
Federal Procurement Data System (FPDS). Information not collected in 
FPDS will be provided by the contractor, as specified in 52.204-14, 
Service Contract Reporting Requirements and 52.204-15, Service Contract 
Reporting Requirements for Indefinite-Delivery Contracts.


4.1704  Contracting officer responsibilities.

    (a) For other than indefinite-delivery contracts, the contracting 
officer shall ensure that 52.204-14, Service Reporting Requirement, is 
included in solicitations, contracts, and orders as prescribed at 
4.1705. For indefinite-delivery contracts, the contracting officer who 
awarded the contract shall ensure that 52.204-15, Service Contract 
Reporting Requirements for Indefinite-Delivery Contracts, is included 
in solicitations and contracts as prescribed at 4.1705. The contracting 
officer at the order level shall verify the clause's inclusion in the 
contract.
    (b) If the contractor fails to submit a report in a timely manner, 
the contracting officer shall exercise appropriate contractual 
remedies. In addition, the contracting officer shall make the 
contractor's failure to comply with the reporting requirements a part 
of the contractor's performance information under subpart 42.15.


4.1705  Contract clauses.

    (a) The contracting officer shall insert the clause at 52.204-14, 
Service Contract Reporting Requirements, in solicitations and contracts 
for services

[[Page 80375]]

(including construction) that meet or exceed the thresholds at 4.1703, 
except for indefinite-delivery contracts. This clause is not required 
for actions entirely funded by DoD, contracts awarded with a generic 
DUNS number, or in classified solicitations, contracts, or orders.
    (b) The contracting officer shall insert the clause at 52.204-15, 
Service Contract Reporting Requirements for Indefinite-Delivery 
Contracts, in solicitations and indefinite-delivery contracts for 
services (including construction) where one or more orders issued 
thereunder are expected to each meet or exceed the thresholds at 
4.1703. This clause is not required for actions entirely funded by DoD, 
contracts awarded with a generic DUNS number, or in classified 
solicitations, contracts, or orders.

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

0
4. Amend section 8.404 by adding paragraph (i) to read as follows:


8.404  Use of Federal Supply Schedules.

* * * * *
    (i) Ensure that service contractor reporting requirements are met 
in accordance with subpart 4.17, Service Contracts Inventory.

PART 17--SPECIAL CONTRACTING METHODS

0
5. Revise section 17.504 to read as follows:


17.504  Reporting requirements.

    (a) The senior procurement executive for each executive agency 
shall submit to the Director of OMB an annual report on interagency 
acquisitions, as directed by OMB.
    (b) The contracting officer for the servicing agency shall ensure 
that service contractor reporting requirements are met in accordance 
with subpart 4.17, Service Contracts Inventory.

PART 37--SERVICE CONTRACTING

0
6. The authority citation for 48 CFR part 37 is revised to read as 
follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.


0
7. Amend section 37.103 by adding paragraph (e) to read as follows:


37.103  Contracting officer responsibility.

* * * * *
    (e) Ensure that service contractor reporting requirements are met 
in accordance with subpart 4.17, Service Contracts Inventory.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
8. The authority citation for 48 CFR part 52 continues to read as 
follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.


0
9. Add sections 52.204-14 and 52.204-15 to read as follows:


52.204-14  Service Contract Reporting Requirements.

    As prescribed in 4.1705(a), insert the following clause:

Service Contract Reporting Requirements (Jan 2014)

    (a) Definition.
    First-tier subcontract means a subcontract awarded directly by 
the Contractor for the purpose of acquiring supplies or services 
(including construction) for performance of a prime contract. It 
does not include the Contractor's supplier agreements with vendors, 
such as long-term arrangements for materials or supplies that 
benefit multiple contracts and/or the costs of which are normally 
applied to a Contractor's general and administrative expenses or 
indirect costs.
    (b) The Contractor shall report, in accordance with paragraphs 
(c) and (d) of this clause, annually by October 31, for services 
performed under this contract during the preceding Government fiscal 
year (October 1-September 30).
    (c) The Contractor shall report the following information:
    (1) Contract number and, as applicable, order number.
    (2) The total dollar amount invoiced for services performed 
during the previous Government fiscal year under the contract.
    (3) The number of Contractor direct labor hours expended on the 
services performed during the previous Government fiscal year.
    (4) Data reported by subcontractors under paragraph (f) of this 
clause.
    (d) The information required in paragraph (c) of this clause 
shall be submitted via the internet at www.sam.gov. (See SAM User 
Guide). If the Contractor fails to submit the report in a timely 
manner, the contracting officer will exercise appropriate 
contractual remedies. In addition, the Contracting Officer will make 
the Contractor's failure to comply with the reporting requirements a 
part of the Contractor's performance information under FAR subpart 
42.15.
    (e) Agencies will review Contractor reported information for 
reasonableness and consistency with available contract information. 
In the event the agency believes that revisions to the Contractor 
reported information are warranted, the agency will notify the 
Contractor no later than November 15. By November 30, the Contractor 
shall revise the report, or document its rationale for the agency.
    (f)(1) The Contractor shall require each first-tier 
subcontractor providing services under this contract, with 
subcontract(s) each valued at or above the thresholds set forth in 
4.1703(a)(2), to provide the following detailed information to the 
Contractor in sufficient time to submit the report:
    (i) Subcontract number (including subcontractor name and DUNS 
number); and
    (ii) The number of first-tier subcontractor direct-labor hours 
expended on the services performed during the previous Government 
fiscal year.
    (2) The Contractor shall advise the subcontractor that the 
information will be made available to the public as required by 
section 743 of Division C of the Consolidated Appropriations Act, 
2010.

    (End of clause)


52.204-15  Service Contract Reporting Requirements for Indefinite-
Delivery Contracts.

    As prescribed in 4.1705(b), insert the following clause:

Service Contract Reporting Requirements for Indefinite-Delivery 
Contracts (January 30, 2014)

    (a) Definition.
    First-tier subcontract means a subcontract awarded directly by 
the Contractor for the purpose of acquiring supplies or services 
(including construction) for performance of a prime contract. It 
does not include the Contractor's supplier agreements with vendors, 
such as long-term arrangements for materials or supplies that 
benefit multiple contracts and/or the costs of which are normally 
applied to a Contractor's general and administrative expenses or 
indirect costs.
    (b) The Contractor shall report, in accordance with paragraphs 
(c) and (d) of this clause, annually by October 31, for services 
performed during the preceding Government fiscal year (October 1-
September 30) under this contract for orders that exceed the 
thresholds established in 4.1703(a)(2).
    (c) The Contractor shall report the following information:
    (1) Contract number and order number.
    (2) The total dollar amount invoiced for services performed 
during the previous Government fiscal year under the order.
    (3) The number of Contractor direct labor hours expended on the 
services performed during the previous Government fiscal year.
    (4) Data reported by subcontractors under paragraph (f) of this 
clause.
    (d) The information required in paragraph (c) of this clause 
shall be submitted via the internet at www.sam.gov. (See SAM User 
Guide). If the Contractor fails to submit the report in a timely 
manner, the Contracting Officer will exercise appropriate 
contractual remedies. In addition, the Contracting Officer will make 
the Contractor's failure to comply with the reporting requirements a 
part of the Contractor's performance information under FAR subpart 
42.15.
    (e) Agencies will review Contractor reported information for 
reasonableness and consistency with available contract information. 
In the event the agency believes that revisions to the Contractor 
reported information are warranted, the agency will notify the 
Contractor no later than November 15. By November 30, the Contractor 
shall

[[Page 80376]]

revise the report, or document its rationale for the agency.
    (f)(1) The Contractor shall require each first-tier 
subcontractor providing services under this contract, with 
subcontract(s) each valued at or above the thresholds set forth in 
4.1703(a)(2), to provide the following detailed information to the 
Contractor in sufficient time to submit the report:
    (i) Subcontract number (including subcontractor name and DUNS 
number), and
    (ii) The number of first-tier subcontractor direct-labor hours 
expended on the services performed during the previous Government 
fiscal year.
    (2) The Contractor shall advise the subcontractor that the 
information will be made available to the public as required by 
section 743 of Division C of the Consolidated Appropriations Act, 
2010.

    (End of clause)

0
10. Amend section 52.212-5 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (b)(6) through (b)(51) as paragraphs (b)(8) 
through (b)(53), respectively; and
0
c. Adding new paragraphs (b)(6) and (b)(7).
    The revised and added text reads as follows:


52.212-5  Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 
Executive Orders--Commercial Items (JAN 2014)

* * * * *
    (b) * * *
    ---- (6) 52.204-14, Service Contract Reporting Requirements (JAN 
2014) (Pub. L. 111-117, section 743 of Div. C).
    ---- (7) 52.204-15, Service Contract Reporting Requirements for 
Indefinite-Delivery Contracts (JAN 2014) (Pub. L. 111-117, section 
743 of Div. C).
* * * * *
[FR Doc. 2013-31148 Filed 12-30-13; 8:45 am]
BILLING CODE 6820-EP-P