[Federal Register Volume 81, Number 242 (Friday, December 16, 2016)]
[Rules and Regulations]
[Pages 91045-91048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30157]


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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1845 and 1852

RIN 2700-AE33


NASA Federal Acquisition Regulation Supplement: Contractor 
Financial Reporting of Property (2016-N024)

AGENCY: National Aeronautics and Space Administration.

ACTION: Final rule.

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SUMMARY: NASA is issuing a final rule amending the NASA Federal 
Acquisition Regulation Supplement (NFS) to add a monthly reporting 
requirement for contractors having custody of $10 million or more in 
NASA-owned Property, Plant and Equipment (PP&E).

DATES:  Effective: January 17, 2017.

[[Page 91046]]


FOR FURTHER INFORMATION CONTACT: Andrew O'Rourke, telephone 202-358-
4560.

SUPPLEMENTARY INFORMATION: 

I. Background

    NASA published a proposed rule in the Federal Register at 81 FR 
48726 on July 26, 2016, to amend the NFS to add a monthly reporting 
requirement at 1852.245-73 for contracts in which the contractor has 
custody of NASA-owned PP&E valued at $10 million or more to ensure 
contractor-held PP&E are more accurately represented in NASA financial 
statements. Two respondents provided comments in response to the 
proposed rule.

II. Discussion and Analysis

    NASA reviewed the public comments in the development of the final 
rule. A discussion of the comments and any changes made to the rule as 
a result of these comments is provided, as follows:
    A. Changes. No changes are being made to the final rule as a result 
of the public comments received with the exception of minor editorial 
changes.
    B. Analysis of Public Comments.
    1. Recommend use of different approach to asset management.
    Comment: One respondent agreed with the overall objective of the 
rule, but disagreed with NASA's proposed approach and changes in the 
rule. The respondent commented that the NFS clause is fundamentally 
flawed, is non-GAAP accounting, and it does not in of itself create 
adequate infrastructure to provide reliable accounting data and 
financial reporting. The respondent commented that the clause 
inappropriately combines and transforms property management 
accountability data under a contract based upon FAR 45 Government 
Property, into Financial Accounting Standards Board (FASB) accounting 
data. The respondent commented that NASA-owned and contractor-furnished 
internal use property, acquired under a contract that is accountable to 
a contract is generally not subject to NASA's capitalization threshold 
of $500,000; however, what is acquired and furnished includes property 
transactions for research and development, period cost, program cost . 
. ., probably very little individual capital items, per FASAB No. 6--
Accounting for property, plant, and equipment. The respondent commented 
that using property accountability data subject to FAR 45, for 
financial accounting data is wrong, as it does not provide faithful 
representation of NASA's PP&E as well as external reporting of property 
accountability in all other Government agencies is not on a monthly 
basis. The respondent commented that reporting this information will 
not result in improved decision making. The respondent also stated that 
reporting unreliable financial data on a yearly basis or monthly basis 
is a waste of NASA resources, the cost to increase the reporting cycle 
from annual to monthly is not inconsequential, and NASA should expect 
their contractors to ask for a contract modification with due 
consideration. The respondent recommended that NASA not proceed with 
the proposed rule, rather NASA should migrate to the new ISO 55000 
Asset Management standard.
    Response: NASA does not concur with the respondent's stance on the 
proposed rule. The objective of the rule is to clarify and emphasize 
the supplemental instructions in paragraph (a) of NFS clause 1852.245-
73 that all contractors having custody of NASA Property, Plant, and 
Equipment (PP&E) with a value of $10 million or more are required to 
report this information on a monthly basis to NASA. The property 
reporting requirement is to help assess the efficiency and 
effectiveness of asset management consistent with the Statement of 
Federal Financial Accounting Standard (SFFAS) No. 6, Accounting for 
Property, Plant, and Equipment, and NASA Procedural Requirement (NPR) 
9250.1, Property, Plant, and Equipment and Operating Materials and 
Supplies, which implements SFFAS No. 6. The respondent failed to 
provide data to support their comments concerning the NFS clause or the 
recommendation to migrate to a new standard. Thus, no changes were made 
in response to this comment.
    2. Difference between monthly and annual reporting.
    Comment: One respondent submitted the following questions on the 
proposed rule:
     If a contractor has $10M worth of property, is reporting 
is required?
     If the value drops below $10M, does the contractor stop 
reporting on a monthly basis?
     Is the $10M per contract or the sum of NASA property 
accountable to the contractor?
     Is the NASA Form 1018 required for the monthly reporting 
or is another format/system used?
     If NASA is going to require monthly financial reporting, 
are they referring to how the contractor reports monthly financials on 
the CHATS report or how the contractor reports on the NASA Form 1018?
     Will NASA require the contractor to submit a NASA Form 
1018 monthly or a CHATS monthly?
     Currently in the month of September an annual and a 
monthly financial report is due. Will NASA eliminate one of these if 
they are going to require 1018s on a monthly basis?
    Response: If at any time during performance of the contract, NASA-
owned property in the custody of the contractor has a value of $10 
million or more for the contract, the contractor shall submit a report 
no later than the 21st of each month. At any time during performance of 
the contract if the value of property for the contract drops below 
$10M, the contractor does not have to submit the monthly report. A 
contractor having NASA-owned property in their custody of $10 million 
or more will be required to report both the monthly and yearly 
reporting in accordance with the requirements of paragraph (c)(1) and 
paragraph (c)(2) of the clause utilizing the NASA Form 1018, the NASA 
Form 1018 Electronic Submission System (NESS), NASA Form 533 Contractor 
Financial Management Report, and any supplemental instructions issued 
by the contracting officer. Accordingly, no changes were made in 
response to this respondent's questions.

III. 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.

IV. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
and is summarized as follows:
    The objective of this rule is to add a monthly reporting 
requirement for contractors having custody of NASA-owned PP&E valued at 
$10 million or greater to ensure that contractor-held PP&E are more 
accurately represented in NASA financial statements consistent with the 
Statement of Federal Financial

[[Page 91047]]

Accounting Standard (SFFAS) No. 6, Accounting for Property, Plant, and 
Equipment and NASA Procedural Requirement (NPR) 9250.1, Property, 
Plant, and Equipment and Operating Materials and Supplies.
    Two respondents provided comments in response to the proposed rule, 
but none of the comments were submitted in response to the Initial 
Regulatory Flexibility Act request in the proposed rule. Thus, no 
changes were made to the final rule.
    NASA does not expect this final 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 
affected NASA contractors with custody of NASA-owned Property, Plant, 
and Equipment (PP&E) valued at $10 million or greater are primarily 
large businesses.
    The requirements under this rule apply to any contract award 
(including contracts for supplies, services, construction, and major 
systems) that requires contractors to use Government property. 
According to NASA Property Records in Fiscal Year (FY) 2015 there were 
643 contracts that required reporting NASA contractors with custody of 
Government property to report that property. Of the 643 contracts, 
approximately 20% or 129 contracts were with small business 
contractors. Of the 643 contracts, 32 contracts had NASA-owned and 
contractor-held PP&E with a value of $10 million or more and required 
monthly reporting. Of those 32 contracts, only three were awarded to 
small business contractors.
    Each NASA contractor is required to submit annually the NASA Form 
1018, NASA Property in the Custody of Contractors. This rule will add a 
new reporting requirement requiring contractors to submit a report if 
at any time during performance of the contract NASA-owned property in 
the custody of the contractor has a value of $10 million or more. 
However, the impact of this reporting requirement is minimal on small 
entities based on FY 2015 NASA property records that show only three 
small business contractors with custody of NASA PP&E valued at $10 
million or more. There are no additional professional skills necessary 
in this area on the part of small businesses.
    There are no significant alternatives that could further minimize 
the already minimal impact on businesses, small or large. New PP&E 
reporting requirements are the same for both large and small businesses 
once the NASA-owned PP&E threshold of $10 million is reached.

V. Paperwork Reduction Act

    The rule contains information collection requirements that require 
the approval of the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act (44 U.S.C chapter 35); however, these changes 
to the NFS do not impose additional information collection requirements 
to the paperwork burden previously approved under OMB Control Number 
2700-0017, titled NASA Property in the Custody of Contractors and OMB 
Control No. 9000-0075, titled Government Furnished Property 
Requirements.

List of Subjects in 48 CFR Parts 1845 and 1852

    Government procurement.

Manuel Quinones,
NASA FAR Supplement Manager.

    Accordingly, 48 CFR parts 1845 and 1852 are amended as follows:

PART 1845--GOVERNMENT PROPERTY

0
1. The authority citation for part 1845 continues to read as follows:

    Authority: 51 U.S.C. 20113(a) and 48 CFR chapter 1.


0
2. Amend section 1845.107-70 by revising paragraph (d) to read as 
follows:


1845.107-70  NASA solicitation provisions and contract clauses.

* * * * *
    (d) The contracting officer shall insert the clause at 1852.245-73, 
Financial Reporting of NASA Property in the Custody of Contractors, in 
cost reimbursement solicitations and contracts and in all contracts in 
which the contractor has custody of NASA-owned property with a value of 
$10 million or more, unless all property to be provided is subject to 
the clause at 1852.245-71, Installation-Accountable Government 
Property. Insert the clause 1852.245-73 in other types of solicitations 
and contracts when it is known at award that property will be provided 
to the contractor or that the contractor will acquire property title to 
which will vest in the Government prior to delivery.
* * * * *

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. The authority citation for part 1852 continues to read as follows:

    Authority: 51 U.S.C. 20113(a) and 48 CFR chapter 1.


0
4. Amend section 1852.245-73 by--
0
a. Revising the date of the clause; and
0
b. Revising paragraphs (b)(2) and (c).
    The revised text reads as follows:


1852.245-73  Financial reporting of NASA property in the custody of 
contractors.

* * * * *
Financial Reporting of NASA Property in the Custody of Contractors (Jan 
2017)
* * * * *
    (b) * * *
    (2) The Contractor shall mail the original signed NF 1018 directly 
to the cognizant NASA Center Industrial Property Officer and a copy to 
the cognizant NASA Center Deputy Chief Financial Officer, Finance, 
unless the Contractor uses the NF 1018 Electronic Submission System 
(NESS) for report preparation and submission.
* * * * *
    (c)(1) The annual reporting period shall be from October 1 of each 
year through September 30 of the following year. The report shall be 
submitted in time to be received by October 31st. The information 
contained in these reports is entered into the NASA accounting system 
to reflect current asset values for agency financial statement 
purposes. Therefore, it is essential that required reports be received 
no later than October 31st.
    (2) Some activity may be estimated for the month in which the 
report is submitted, if necessary, to ensure the NF 1018 is received 
when due. However, contractors' procedures must document the process 
for developing these estimates based on planned activity such as 
planned purchases or NASA Form 533 (NF 533) Contractor Financial 
Management Report cost estimates. It should be supported and documented 
by historical experience or other corroborating evidence, and be 
retained in accordance with FAR Subpart 4.7, Contractor Records 
Retention. Contractors shall validate the reasonableness of the 
estimates and associated methodology by comparing them to the actual 
activity once that data is available, and adjust them accordingly. In 
addition, differences between the estimated cost and actual cost must 
be adjusted during the next reporting period. Contractors shall have 
formal policies and procedures, which address the validation of NF 1018 
data, including data from subcontractors, and the identification and 
timely reporting of errors. The objective of this validation is to 
ensure that information reported is accurate and in compliance with the 
NASA FAR Supplement. If errors are discovered on NF 1018 after 
submission, the contractor shall contact

[[Page 91048]]

the cognizant NASA Center Industrial Property Officer (IPO) within 30 
days after discovery of the error to discuss corrective action.
    (3) In addition to an annual report, if at any time during 
performance of the contract, NASA-owned property in the custody of the 
contractor has a value of $10 million or more, the contractor shall 
also submit a report no later than the 21st of each month in accordance 
with the requirements of paragraph (c)(2) of this clause.
    (4) The Contracting Officer may, in NASA's interest, withhold 
payment until a reserve not exceeding $25,000 or 5 percent of the 
amount of the contract, whichever is less, has been set aside, if the 
Contractor fails to submit annual NF 1018 reports in accordance with 
NFS subpart 1845.71, any monthly report in accordance with (c)(3) of 
this clause, and any supplemental instructions for the current 
reporting period issued by NASA. Such reserve shall be withheld until 
the Contracting Officer has determined that NASA has received the 
required reports. The withholding of any amount or the subsequent 
payment thereof shall not be construed as a waiver of any Government 
right.
* * * * *

[FR Doc. 2016-30157 Filed 12-15-16; 8:45 am]
 BILLING CODE 7510-13-P