[Federal Register Volume 81, Number 178 (Wednesday, September 14, 2016)]
[Proposed Rules]
[Pages 63158-63159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22070]





48 CFR Part 49

[FAR Case 2015-039; Docket No. 2015-0039, Sequence No. 1]
RIN 9000-AN26

Federal Acquisition Regulation: Audit of Settlement Proposals

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

ACTION: Proposed rule.


SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to raise the dollar threshold requirement 
for the audit of prime contract settlement proposals and subcontract 
settlements from $100,000 to $750,000.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat Division at one of the addresses shown below on 
or before November 14, 2016 to be considered in the formation of the 
final rule.

ADDRESSES: Submit comments in response to FAR case 2015-039 by any of 
the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by searching for ``FAR Case 
2015-039''. Select the link ``Comment Now'' that corresponds with ``FAR 
Case 2015-039.'' Follow the instructions provided on the screen. Please 
include your name, company name (if any), and ``FAR Case 2015-039'' on 
your attached document.
     Mail: General Services Administration, Regulatory 
Secretariat Division (MVCB), ATTN: Ms. Flowers, 1800 F Street NW., 2nd 
Floor, Washington, DC 20405.

Instructions: Please submit comments only and cite FAR Case 2015-039, 
in all

[[Page 63159]]

correspondence related to this case. All comments received will be 
posted without change to http://www.regulations.gov, including any 
personal and/or business confidential information provided. To confirm 
receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Kathlyn Hopkins, Procurement 
Analyst, at 202-969-7226 for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat Division at 202-501-4755. Please cite FAR Case 2015-039.


I. Background

    DOD, GSA, and NASA are proposing to amend FAR 49.107 to increase 
the dollar threshold for the audit of prime contract settlement 
proposals and subcontract settlements, submitted in the event of 
contract termination. The threshold is increased from $100,000 to align 
with the threshold in FAR 15.403-4(a)(1) for obtaining certified cost 
or pricing data, which is currently $750,000. Other than the dollar 
amount, there will be no link between the requirements for certified 
cost or pricing data and the audit threshold for termination settlement 
    The proposed amendment will help alleviate contract close-out 
backlogs and enable contracting officers to more quickly deobligate 
excess funds from terminated contracts.
    Under FAR 49.001, a ``settlement proposal'' is a proposal for 
effecting settlement of a contract terminated in whole or in part, 
submitted by a contractor or subcontractor in the form, and supported 
by the data, required by FAR part 49. Termination clauses and other 
contract clauses authorize contracting officers to terminate contracts 
for convenience or for default, and to enter into settlement 

II. 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 importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

III. Regulatory Flexibility Act

    DoD, GSA, and NASA do not expect this rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act 5 U.S.C. 601, et seq. because 
the rule raises the threshold for audit requirements, thus reducing 
burdens on all types of businesses. However, an Initial Regulatory 
Flexibility Analysis (IRFA) has been performed and it is summarized as 

    Of all contracts awarded to small businesses in a typical year, 
the number terminated and subject to FAR part 49 procedures is less 
than one-fifth of one percent. Moreover, since the rule raises the 
audit threshold, even fewer small businesses will be subject to 
audits of their termination settlement proposals.

    The Regulatory Secretariat Division has submitted a copy of the 
IRFA to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the IRFA may be obtained from the Regulatory 
Secretariat Division. DoD, GSA, and NASA invite comments from small 
business concerns and other interested parties on the expected impact 
of this proposed rule on small entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by the 
proposed rule consistent with 5 U.S.C. 610. Interested parties must 
submit such comments separately and should cite 5 U.S.C. 610 (FAR Case 
2015-039), in correspondence.

IV. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Part 49

    Government procurement.

    Dated: September 9, 2016.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA are proposing to amend 48 CFR part 49 
as set forth below:


1. The authority citation for 48 CFR part 49 continues to read as 

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

2. Amend section 16.505 by revising paragraphs (a) and (b) to read as 

49.107  Audit of prime contract settlement proposals and subcontract 

    (a) The TCO shall refer each prime contractor settlement proposal 
valued at or above the threshold for obtaining certified cost or 
pricing data set forth in FAR 15.403-4(a)(1) to the appropriate audit 
agency for review and recommendations. The TCO may submit settlement 
proposals of less than the threshold for obtaining certified cost or 
pricing data to the audit agency. Referrals shall indicate any specific 
information or data that the TCO considers relevant and shall include 
facts and circumstances that will assist the audit agency in performing 
its function. The audit agency shall develop requested information and 
may make any further accounting reviews it considers appropriate. After 
its review, the audit agency shall submit written comments and 
recommendations to the TCO. When a formal examination of settlement 
proposals valued under the threshold for obtaining certified cost or 
pricing data is not warranted, the TCO will perform or have performed a 
desk review and include a written summary of the review in the 
termination case file.
    (b) The TCO shall refer subcontract settlements received for 
approval or ratification to the appropriate audit agency for review and 
recommendations when:
    (1) The amount exceeds the threshold for obtaining certified cost 
or pricing data; or
    (2) The TCO determines that a complete or partial accounting review 
is advisable. The audit agency shall submit written comments and 
recommendations to the TCO. The review by the audit agency does not 
relieve the prime contractor or higher tier subcontractor of the 
responsibility for performing an accounting review.
* * * * *
[FR Doc. 2016-22070 Filed 9-13-16; 8:45 am]