[Federal Register Volume 84, Number 121 (Monday, June 24, 2019)]
[Rules and Regulations]
[Pages 29391-29394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12759]


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DEPARTMENT OF VETERANS AFFAIRS

48 CFR Parts 817 and 852

RIN 2900-AQ19


VA Acquisition Regulation: Special Contracting Methods

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: The Department of Veterans Affairs (VA) is amending and 
updating its VA Acquisition Regulation (VAAR) in phased increments to 
revise or remove any policy superseded by changes in the Federal 
Acquisition Regulation (FAR), to remove procedural guidance internal to 
VA into the VA Acquisition Manual (VAAM), and to incorporate any new 
agency specific regulations or policies. These changes seek to align 
the VAAR with the FAR and remove outdated and duplicative requirements 
and reduce burden on contractors. The VAAM incorporates portions of the 
removed VAAR as well as other internal agency acquisition policy. VA 
will rewrite certain parts of the VAAR and VAAM, and as VAAR parts are 
rewritten, VA will publish them in the Federal Register. In particular, 
this rulemaking revises VAAR coverage concerning Special Contracting 
Methods as well as an affected part covering Solicitation Provisions 
and Contract Clauses.

DATES: This rule is effective on July 24, 2019.

FOR FURTHER INFORMATION CONTACT: Mr. Rafael N. Taylor, Senior 
Procurement Analyst, Procurement Policy and Warrant Management 
Services, 003A2A, 425 I Street NW, Washington, DC 20001, (202) 382-
2787. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On December 27, 2018, VA published a 
proposed rule in the Federal Register (83 FR 66662) which announced 
VA's intent to amend regulations for VAAR Case RIN 2900-AQ19--VA 
Acquisition Regulation: Special Contracting Methods. VA provided a 60-
day comment period for the public to respond to the proposed rule and 
submit comments. The comment period for the proposed rule ended on 
February 25, 2019 and VA received one comment. VA makes no changes to 
this final rule as a result of the one comment received. However, this 
rule adopts as a final rule, the proposed rule that published in the 
Federal Register on December 27, 2018, along with two technical non-
substantive changes to the proposed rule and minor formatting and/or 
grammatical edits. The two technical non-substantive changes to the 
proposed rule are described below.
    In particular, this final rule revises part 817, Special 
Contracting Methods. This final rule removes subpart 817.1, Multi-year 
Contracting, in its entirety since it deals with internal procedures 
about the uses of multi-year contracting and internal approvals to be 
obtained. This final rule also removes subpart 817.2 in its entirety by 
removing 817.202, Use of options, and 817.204, Contracts. 817.202 
consisted of internal procedures to develop solicitations and cost 
comparisons under Office of Management and Budget Circular A-76. Since 
there is currently a moratorium on public-private competitions this 
will not be moved to the VAAM. 817.204, Contracts, contained internal 
procedures and approvals to be obtained for contracts with option 
periods greater than five years, and this coverage was moved to the 
VAAM.
    This rule removes subpart 817.4, Leader Company Contracting, and 
817.402, Limitations, since they included internal procedures and 
approval requirements for leader company contracts. The coverage was 
moved to the VAAM.
    This final rule revises the title of subpart 817.5 to read 
``Interagency Acquisitions,'' and adds 817.501, General, which requires 
that any governmental entity that acquires goods and services on behalf 
of the Department of Veterans Affairs shall comply, to the maximum 
extent feasible, with the provisions of 38 U.S.C. 8127 and 8128, and 
the Veterans First Contracting Program as implemented at subpart 
819.70.
    This regulatory action removes 817.502, General, which is replaced 
with updated policy in 817.501. The coverage was moved to comport with 
the numbering in the FAR.
    This rule adds subpart 817.70, Undefinitized Contract Actions, to 
provide policy and procedures for the use of undefinitized contract 
actions (UCAs) as UCAs are a high-risk method of procurement. This 
final rule adds 817.7000, Scope, which describes the material being 
introduced in this subpart, and 817.7001, Definitions, to provide 
definitions of four terms used in the subpart: contract action, 
definitization, definitization proposal, and undefinitized contract 
action.
    This final rule also adds 817.7002, Exceptions, which exempts 
simplified acquisitions and congressionally mandated long-lead 
procurement contracts from this policy but requires the contracting 
officer to apply the policy and procedures to the maximum extent 
practicable.
    817.7003, Policy, was added to clearly convey that undefinitized 
contract actions should be limited to situations where it is not 
possible to negotiate a definitive contract action in time to meet the 
government's requirements, and where the interests of the government 
demand that the contractor be given a commitment so that contract 
performance can begin immediately.
    This final rule adds 817.7004, Limitations, with no text, and the 
following sections: 817.7004-1, Authorization, which provides guidance 
as to when the contracting officer must obtain approval to use an 
undefinitized contract action; and 817.7004-2, Price ceiling, which 
requires all undefinitized

[[Page 29392]]

contract actions to include not-to-exceed price ceilings.
    This regulatory action also adds 817.7004-3, Definitization 
schedule, which sets parameters for establishing definitization 
schedules and requires submission of a definitization proposal in 
accordance with the definitization schedule as a material element of 
the contract, where non-compliance may result in suspension or 
reduction of progress payments under FAR 32.503-6 or other appropriate 
action.
    This rule adds 817.7004-4, Final price negotiation--profit, which 
provides guidance on negotiating profit that reflects the contractor's 
reduced cost risk prior to definitization.
    This final rule also adds 817.7005, Contract clause, which 
prescribes new clause 852.217-70, Contract Action Definitization, for 
all UCAs, solicitations associated with UCAs, basic ordering 
agreements, indefinite-delivery contracts, or any other type of 
contract providing for the use of UCAs.
    In subpart 852.2, Text of Provisions and Clauses, we propose to add 
clause 852.217-70, Contract Action Definitization, to provide specific 
procedures required to definitize UCAs.

Technical Non-Substantive Changes to the Proposed Rule

    This rule makes two non-substantive changes to the proposed rule to 
provide clarity, eliminate confusion, and to ensure compliance with 
statute and VA's authority.
    1. Under section 817.501, General, VA is making a revision to the 
language to provide clarity regarding the applicability of the Veterans 
First Contracting Program to interagency acquisitions. VA has 
simplified the section to use plain language to make clear that when an 
entity acquires goods and services on behalf of VA, a notice will be 
included in the agreement stating the entity will comply, to the 
maximum extent feasible, with the provisions of 38 U.S.C. 8127 and 
8128, and the Veterans First Contracting Program as implemented at 
subpart 819.70. This language was already included in the proposed rule 
but the rephrase provides clarity and does not otherwise significantly 
change the meaning and intent of the section.
    2. Under section 817.7004-4, Limitations on obligations, which was 
proposed as added language in the proposed rule, VA is removing the 
section in its entirety. The proposed language potentially created a 
conflict with 817.7004-3(a)(2) and is unnecessary. Accordingly, with 
the removal of 817.7004-4, Limitations on obligations, the remaining 
proposed section at 817.7004-5, Final price negotiation--profit, is 
renumbered 817.7004-4.
    VA provided a 60-day comment period for the public to respond to 
the proposed rule. As stated previously, VA received one comment. The 
single comment consisted of one word: ``Good.'' VA appreciates the 
comment which doesn't warrant any substantive changes to be made to the 
final rule.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal Governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This final rule will have no such effect on 
State, local, and tribal Governments or on the private sector.

Paperwork Reduction Act

    This final rule contains no provisions constituting a collection of 
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521).

Regulatory Flexibility Act

    This final rule does not have a significant economic impact on a 
substantial number of small entities as they are defined in the 
Regulatory Flexibility Act, 5 U.S.C. 601-612. The overall impact of the 
rule is of benefit to small businesses owned by Veterans or service-
disabled Veterans as the VAAR is being updated to remove extraneous 
procedural information that applies only to VA's internal operating 
processes or procedures. VA estimates no cost impact to individual 
businesses will result from these rule updates. On this basis, the 
final rule does not have a significant economic impact on a substantial 
number of small entities as they are defined in the Regulatory 
Flexibility Act, 5 U.S.C. 601-612. Therefore, under 5 U.S.C. 605(b), 
this regulatory action is exempt from the initial and final regulatory 
flexibility analysis requirements of sections 603 and 604.

Executive Orders 12866, 13563 and 13771

    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. 
E.O. 12866, Regulatory Planning and Review defines ``significant 
regulatory action'' to mean any regulatory action that is likely to 
result in a rule that may: (1) Have an annual effect on the economy of 
$100 million or more or adversely affect in a material way the economy, 
a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
Governments or communities; (2) Create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) Materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order.
    VA has examined the economic, interagency, budgetary, legal, and 
policy implications of this regulatory action, and it has been 
determined not be a significant regulatory action under E.O. 12866 
because it does not raise novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in this Executive Order.
    VA's impact analysis can be found as a supporting document at 
http://www.regulations.gov, usually within 48 hours after the 
rulemaking document is published. Additionally, a copy of the 
rulemaking and its impact analysis are available on VA's website at 
http://www.va.gov/orpm by following the link for VA Regulations 
Published from FY 2004 Through Fiscal Year to Date. This rule is not an 
E.O. 13771 regulatory action because this rule is not significant under 
E.O. 13771.

List of Subjects

48 CFR Part 817

    Government procurement.

48 CFR Part 852

    Government procurement, Reporting and recordkeeping requirements.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Robert L. 
Wilkie, Secretary, Department

[[Page 29393]]

of Veterans Affairs, approved this document on April 17, 2019, for 
publication.

    Dated: June 12, 2019.
Consuela Benjamin,
Regulations Development Coordinator, Office of Regulation Policy & 
Management, Office of the Secretary, Department of Veterans Affairs.

    For the reasons set out in the preamble, VA revises 48 CFR parts 
817 and 852 as follows:

PART 817--SPECIAL CONTRACTING METHODS

0
1. The authority citation for part 817 is revised to read as follows:

    Authority: 38 U.S.C. 8127-8128; 41 U.S.C. 1303; 41 U.S.C. 1702; 
and 48 CFR 1.301-1.304.

Subpart 817.1--[Removed and Reserved]

0
2. Subpart 817.1, consisting of sections 817.105 and 817.105-1, is 
removed and reserved.

Subpart 817.2--[Removed and Reserved]

0
3. Subpart 817.2, consisting of sections 817.202 and 817.204, is 
removed and reserved.

Subpart 817.4--[Removed and Reserved]

0
4. Subpart 817.4, consisting of section 817.402, is removed and 
reserved.

0
5. Subpart 817.5 is revised to read as follows:

Subpart 817.5--Interagency Acquisitions


817.501  General.

    (d) Agreements pursuant to FAR subpart 17.5, including 
construction, shall include a requirement, that, when acquiring goods 
and services on behalf of the Department of Veterans Affairs, the 
entity will comply, to the maximum extent feasible, with the provisions 
of 38 U.S.C. 8127 and 8128, and the Veterans First Contracting Program 
as implemented at subpart 819.70.

0
6. Subpart 817.70 is added to read as follows:

Subpart 817.70--Undefinitized Contract Actions

Sec.
817.7000 Scope.
817.7001 Definitions.
817.7002 Exceptions.
817.7003 Policy.
817.7004 Limitations.
817.7004-1 Authorization.
817.7004-2 Price ceiling.
817.7004-3 Definitization schedule.
817.7004-4 Final price negotiation--profit.
817.7005 Contract clause.


817.7000   Scope.

    This subpart prescribes policies and procedures for use of 
undefinitized contract actions.


817.7001   Definitions.

    As used in this subpart--
    (a) Contract action includes:
    (1) Contracts and contract modifications for supplies or services.
    (2) Task orders and delivery orders.
    (3) It does not include change orders, administrative changes, 
funding modifications, or any other contract modifications that are 
within the scope and under the terms of the contract, e.g., engineering 
change proposals and value engineering change proposals.
    (b) Definitization means the agreement on, or determination of, 
contract terms, specifications, and price, which converts the 
undefinitized contract action to a definitive contract.
    (c) Definitization proposal means a proposal containing sufficient 
data for the VA to do complete and meaningful analyses and audits of 
the--
    (1) Data in the proposal; and
    (2) Any other data that the contracting officer has determined VA 
needs to review in connection with the contract.
    (d) Undefinitized contract action means any contract action for 
which the contract terms, specifications, or price are not agreed upon 
before performance is begun under the action. Examples are letter 
contracts and orders under basic ordering agreements for which the 
final price has not been agreed upon before performance has begun.


817.7002  Exceptions.

    (a) The following undefinitized contract actions (UCAs) are not 
subject to this subpart:
    (1) Purchases at or below the simplified acquisition threshold.
    (2) Congressionally mandated long-lead procurement contracts.
    (b) However, the contracting officer shall apply the policy and 
procedures to the contract actions in paragraph (a) to the maximum 
extent practicable.


817.7003   Policy.

    Undefinitized contract actions shall--
    (a) Be used only when--
    (1) The negotiation of a definitive contract action is not possible 
in sufficient time to meet the Government's requirements; and
    (2) The Government's interest demands that the contractor be given 
a binding commitment so that contract performance can begin 
immediately.
    (b) Be as complete and definite as practicable.


817.7004   Limitations.


817.7004-1   Authorization.

    The contracting officer shall obtain approval one level above the 
contracting officer before--
    (a) Entering into a UCA. The request for approval must fully 
explain the need to begin performance before definitization, including 
the adverse impact on the VA resulting from delays in beginning 
performance.
    (b) Including requirements for non-urgent items and equipment in a 
UCA. The request should show that inclusion of the non-urgent items is 
consistent with good business practices and in the best interest of the 
Government.
    (c) Modifying the scope of a UCA when performance has already 
begun. The request should show that the modification is consistent with 
good business practices and in the best interests of the Government.


817.7004-2   Price ceiling.

    UCAs shall include a not-to-exceed price.


817.7004-3   Definitization schedule.

    (a) UCAs shall contain definitization schedules that provide for 
definitization by the earlier of--
    (1) The date that is 180 days after issuance of the action (this 
date may be extended but may not exceed the date that is 180 days after 
the contractor submits a definitization proposal); or
    (2) The date on which the amount of funds paid to the contractor 
under the contract action is equal to more than 50 percent of the not-
to-exceed price.
    (b) Submission of a definitization proposal in accordance with the 
definitization schedule is a material element of the contract. If the 
contractor does not submit a timely definitization proposal, the 
contracting officer may suspend or reduce progress payments under FAR 
32.503-6, or take other appropriate action.


817.7004-4   Final price negotiation--profit.

    Before the final price of a UCA is negotiated, contracting officers 
shall ensure the profit agreed to and documented in the contract 
negotiation memorandum reflects consideration of any risks incurred in 
performance of the work under the UCA.


817.7005   Contract clause.

    (a) Use the clause at 852.217-70, Contract Action Definitization, 
in--
    (1) All UCAs;
    (2) Solicitations associated with UCAs;

[[Page 29394]]

    (3) Orders against basic ordering agreements;
    (4) Indefinite delivery task orders; and
    (5) Any other type of contract providing for the use of UCAs.
    (b) Insert the applicable information in paragraphs (a), (b), and 
(d) of the clause.
    (c) If, at the time of entering into the UCA, the contracting 
officer knows that the definitive contract action will meet the 
criteria of FAR 15.403-1, 15.403-2, or 15.403-3 for not requiring 
submission of certified cost or pricing data, the words ``and certified 
cost or pricing data'' may be deleted from paragraph (a) of the clause.

PART 852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
7. The authority citation for part 852 continues to read as follows:

    Authority:  38 U.S.C. 8127-8128, and 8151-8153; 40 U.S.C. 
121(c); 41 U.S.C. 1121(c)(3); 41 U.S.C. 1303; 41 U.S.C. 1702; and 48 
CFR 1.301-1.304.


0
8. Section 852.217-70 is added to read as follows:


852.217-70   Contract Action Definitization.

    As prescribed in 817.7005(a), insert the following clause:

Contract Action Definitization (Jul 2019)

    (a) A [Insert specific type of contract action] is contemplated. 
The Contractor agrees to begin promptly negotiating with the 
Contracting Officer the terms of a definitive contract action that 
will include all clauses required by the Federal Acquisition 
Regulation (FAR) on the date of execution of the undefinitized 
contract action, all clauses required by law on the date of 
execution of the definitive contract action, and any other mutually 
agreeable clauses, terms, and conditions. The Contractor agrees to 
submit a ___ [Insert type of proposal, e.g., fixed-price, or cost-
and-fee] proposal with cost or pricing data, as appropriate, 
supporting it.
    (b) The schedule for definitizing this contract action is as 
follows [Insert target date for definitization of the contract 
action and dates for submission of proposal, beginning of 
negotiations, and, if appropriate, submission of the make-or-buy 
plans, subcontracting plans, and cost or pricing data].

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    (c) If agreement on a definitive contract action to supersede 
this undefinitized contract action is not reached by the target date 
in paragraph (b) of this clause, or within any extension of it 
granted by the Contracting Officer, the Contracting Officer may, 
with the approval of a Contracting Officer one level above, 
determine a reasonable price or fee in accordance with FAR subpart 
15.4 and FAR part 31, subject to Contractor appeal as provided in 
the Disputes clause. In any event, the Contractor shall proceed with 
completion of the contract, subject only to FAR 52.216-24, 
Limitation of Government Liability.
    (1) After the Contracting Officer's determination of price or 
fee, the contract shall be governed by--
    (i) All clauses required by the FAR on the date of execution of 
this undefinitized contract action for either fixed-price or cost-
reimbursement contracts, as determined by the Contracting Officer 
under this paragraph (c);
    (ii) All clauses required by law as of the date of the 
Contracting Officer's determination; and
    (iii) Any other clauses, terms, and conditions mutually agreed 
upon.
    (2) To the extent consistent with paragraph (c)(1) of this 
clause, all clauses, terms, and conditions included in this 
undefinitized contract action shall continue in effect, except those 
that by their nature apply only to an undefinitized contract action.
    (d) The definitive contract action resulting from this 
undefinitized contract action will include a negotiated ____ [Insert 
``cost/price ceiling'' or ``firm-fixed-price''] in no event to 
exceed ____ [Insert the not-to-exceed amount].

(End of clause)

[FR Doc. 2019-12759 Filed 6-21-19; 8:45 am]
 BILLING CODE 8320-01-P