[Federal Register: August 16, 1995 (Volume 60, Number 158)]
			[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
________________________________________________________
Part II
Department of Defense
General Services Administration
National Aeronautics and Space Administration
________________________________________________________
48 CFR Part 1, et al.
Federal Acquisition Regulations; Final Rules
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Chapter 1

[Federal Acquisition Circular 90-31]

Federal Acquisition Regulation; Introduction of Miscellaneous
Amendments
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Summary presentation of final rules.
-----------------------------------------------------------------------
SUMMARY: This document serves to introduce the final rules which follow
and which comprise Federal Acquisition Circular (FAC) 90-31. The
Federal Acquisition Regulatory Council has agreed to issue FAC 90-31 to
amend the Federal Acquisition Regulation (FAR).
DATES: For effective dates, see individual documents following this
one.

FOR FURTHER INFORMATION CONTACT:The team leader whose name appears in
relation to each FAR case or subject area. For general information,
contact the FAR Secretariat, Room 4037, GS Building, Washington, DC,
20405 (202) 501-4755. Please cite FAC 90-31 and FAR case number(s).

SUPPLEMENTARY INFORMATION: Federal Acquisition Circular 90-31 amends
the Federal Acquisition Regulation (FAR) as specified below:
------------------------------------------------------------------------
  Item            Subject             FAR case          Team leader
------------------------------------------------------------------------

I         Consolidation and        94-740         Tucciarone (703) 767-
           Revision of the                         2270
           Authority to Examine
           Records.

II        Contract Award           94-701         Rider (703) 614-1634
           Implementation.

III       Penalties on             94-751         Belton (703) 602-2357
           Unallowable Indirect
           Costs.
IV        Implementation of        94-754         Belton (703) 602-2357
           Various Cost Principle
           Provisions.

V         Entertainment, Gift,     94-750         Belton (703) 602-2357
           and Recreation Costs
           for Contractor
           Employees.

VI        Contractor Overhead      94-752         Belton (703) 602-2357
           Certification.

VII       Technical Amendments.
------------------------------------------------------------------------

Case Summaries
    For the actual revisions and/or amendments to these FAR cases,
refer to the specific item number and subject set forth in the
documents following these item summaries.

Item I--Consolidation and Revision of the Authority to Examine Records
(FAR Case 94-740)
    This final rule implements Sections 2201(a), 2251(a), 4102(c), and
4103(d) of the Federal Acquisition Streamlining Act of 1994 (Pub. L.
103-355). The rule (1) permits contractors to store records in
electronic form; (2) restricts contracting officers from requesting a
preaward audit of indirect costs if the results of a recent audit are
available; (3) deletes the clause at 52.215-1, Examination of Records
by Comptroller General; (4) and revises the clauses at 52.214-26, Audit
and Records--Sealed Bidding, and 52.215-2, Audit and Records--
Negotiation, to provide for examination of records by the Comptroller
General.

Item II--Contract Award Implementation (FAR Case 94-701)
    This final rule implements Sections 1002, 1003, 1005, 1011, 1012,
1013, 1014, 1052, 1053, 1055, 1061, 1062, 1063, 1064, 1555, 7203, and
10004 of Pub. L. 103-355. The rule (1) requires agencies to report
additional information on procurements exceeding $25,000; (2) expands
the criteria for establishing or maintaining alternative sources of
supplies or services; (3) permits use of other than full and open
competition to acquire expert services for litigation; (4) places
limitations on the use of other than full and open competition when
authorized or required by statute; (5) clarifies approval requirements
for written justifications for other than full and open competition;
(6) revises procedures for specifying evaluation factors and subfactors
in solicitations, for conducting written or oral discussions, and for
providing postaward notices and debriefings to offerors; (7) requires a
written determination before providing for evaluation of options in
sealed bid procurements; (8) permits nonprofit agencies for the blind
or severely disabled to use Government supply sources in performing
contracts under the Javits-Wagner-O'Day Act; and (9) allows award
without discussion to other than the lowest overall cost offeror.

Item III--Penalties on Unallowable Indirect Costs (FAR Case 94-751)
    This final rule implements Sections 2101 and 2151 of Pub. L. 103-
355. The rule contains procedures for the assessment of penalties on
unallowable indirect costs under contracts exceeding $500,000. These
procedures are essentially the same as those contained in the Defense
FAR Supplement.

Item IV--Implementation of Various Cost Principle Provisions (FAR Case
94-754)
    This final rule implements Section 2101 of Pub. L. 103-355. The
rule adds the costs of lobbying the legislative body of a political
subdivision of a state to the list of unallowable costs; adds the cost
of ``conventions'' to the costs to be clarified in the cost principles;
and expands the coverage to the Coast Guard and the National
Aeronautics and Space Administration. Section 2151 amends 41 U.S.C. 256
to include all the provisions of 10 U.S.C. 2324, as amended by Section
2101. Therefore, the provisions are made generally applicable to all
other executive agencies. The new FAR language, with only minor
variations, was transferred from the current coverage in the Defense
Federal Acquisition Regulation Supplement.

Item V--Entertainment, Gift, and Recreation Costs for Contractor
Employees (FAR Case 94-750)
    This rule finalizes the interim rule published in FAC 90-25. The
rule implements Section 2192 of Pub. L. 103-355 to revise the cost
principles governing entertainment, gift, and recreation costs for
contractor employees. The final rule differs from the interim rule in
that it (1) clarifies that gifts do not include certain employee
performance and achievement awards; (2) clarifies the restrictions
pertaining to entertainment and recreation costs; and (3) eliminates
the requirement that certain costs are allowable only if the net amount
per employee is reasonable. This final rule replaces the interim rule
in its entirety for any contracts containing the interim rule. Thus,
the provisions of the interim rule will not apply to costs incurred
under any contract under any circumstances.

Item VI--Contractor Overhead Certification (FAR Case 94-752)
    This final rule implements Section 2151 of Pub. L. 103-355. The
rule contains procedures for obtaining contractor certification of a
proposal to establish or modify billing rates or to establish final
indirect cost rates. These procedures are essentially the same as those
contained in the Defense FAR Supplement.

    Dated: August 7, 1995.
Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.
Federal Acquisition Circular

[Number 90-31]
    Federal Acquisition Circular (FAC) 90-31 is issued under the
authority of the Secretary of Defense, the Administrator of General
Services, and the Administrator for the National Aeronautics and Space
Administration.
    Unless otherwise specified, all Federal Acquisition Regulation
(FAR) and other directive material contained in FAC 90-31 is effective
October 1, 1995, except for Item VII which is effective August 16,
1995. FAC Items I through VI are applicable for solicitations issued on
or after October 1, 1995. Contracting officers may, at their
discretion, include the provisions and clauses in FAC Items I through
VI in solicitations issued before October 1, 1995, for contracts
expected to be awarded on or after October 1, 1995.

    Dated: August 3, 1995.
Eleanor R. Spector,
Director, Defense Procurement.

    Dated: August 3, 1995.
Ida M. Ustad,
Associate Administrator for Acquisition Policy, General Services
Administration.

    Dated: August 7, 1995.
Deidre A. Lee,
Associate Administrator for Procurement, National Aeronautics & Space
Administration.



[Federal Register: August 16, 1995 (Volume 60, Number 158)]
[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
48 CFR Parts 1, 4, 14, 15, 25, 50, and 52

[FAC 90-31; FAR Case 94-740; Item I]

RIN 9000-AG24
Federal Acquisition Regulation; Consolidation and Revision of the
Authority To Examine Records

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

ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule is issued pursuant to the Federal Acquisition
Streamlining Act of 1994, Public Law 103-355 (the Act). The Federal
Acquisition Regulatory Council is amending the Federal Acquisition
Regulation (FAR) to implement Sections 2201(a), 2251(a), 4102(c) and
4103(d) of the Act. This regulatory action was subject to Office of
Management and Budget review under Executive Order 12866, dated
September 30, 1993.

EFFECTIVE DATE: October 1, 1995.

FOR FURTHER INFORMATION CONTACT:
Mr. Daniel J. Tucciarone at (703) 767-2270 in reference to this FAR
case. For general information, contact the FAR Secretariat, Room 4037,
GS Building, Washington, DC 20405 (202) 501-4755. Please cite FAC 90-
31, FAR case 94-740.

SUPPLEMENTARY INFORMATION:
A. Background
    The Federal Acquisition Streamlining Act of 1994, Pub. L. 103-355
(the Act), provides authorities that streamline the acquisition process
and minimize burdensome government-unique requirements. Major changes
that can be expected in the acquisition process as a result of the
Act's implementation include changes in the areas of Commercial Item
Acquisition, the Truth in Negotiations Act, and introduction of the
Federal Acquisition Computer Network.

    Title 2, Subtitle C of the Act is entitled Audit and Access to
Records. Section 2201(a) of the act merges the audit provision of TINA
(10 U.S.C. 2306a) and the audit coverage in 10 U.S.C. Section 2313 into
a single comprehensive section at 10 U.S.C. 2313. Section 2201(a)
includes subsections that: (1) limit obtaining preaward information
when the results of a recent audit are already available, (2) allow a
contractor to store original records in electronic form, (3) allow the
use of images as original records, and (4) provide a new definition of
records.

    Section 2251(a) of the Act consolidates the audit rights for
civilian agencies and conforms those rights with the provisions in 10
U.S.C. Section 2313 to ensure identical audit authorities for both DOD
and civilian agencies.

    Sections 2201(a) and 2251(a) both discuss subpoena authorities.

    By its terms, the Act at Sections 2201(a) and 2251(a) provides that
all cost-reimbursement, incentive, time-and-materials, labor-hour or
price-redeterminable subcontracts will be subject to audit. FAR 52.215-
2(g), therefore, requires the flowdown of the Audit and Records--
Negotiation clause into all subcontracts of these types and into
subcontracts when cost or pricing data are required, or when cost
performance reports are required. This rule, however, exempts from the
flowdown requirement all subcontracts below the simplified acquisition
threshold. This conforms the audit rights at the subcontract level with
those at the prime contract level.

    An Alternate III was added to the clause at FAR 52.215-2 to provide
for waiver of the right to examination of records by the Comptroller
General.


B. Regulatory Flexibility Act
    The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq.,  because most contracts awarded
to small businesses are awarded competitively on a firm-fixed-price
basis and, therefore, are not subject to audit requirements.


C. Paperwork Reduction Act
    The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose additional recordkeeping or information
collection requirements, or additional collections of information from
offerors, contractors, or members of the public which require the
approval of the Office of Management and Budget under 44 U.S.C. 3501,
et seq. For civilian agency procurements, recordkeeping is reduced due
to the higher cost or pricing data threshold.


D. Public Comments
    A proposed rule was published in the Federal Register at 59 FR
66408, December 23, 1994. During the public comment period, 11 comments
were received. Comments were also received during two agency comment
periods. Changes were made to the proposed rule
to achieve clearer, more concise wording based on these comments.

List of Subjects in 48 CFR Parts 1, 4, 14, 15, 25, 50, and 52
    Government procurement.
    Dated: August 7, 1995.
Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.

    Therefore, 48 CFR Parts 1, 4, 14, 15, 25, 50, and 52 are amended as
set forth below:
    1. The authority citation for 48 CFR Parts 1, 4, 14, 15, 25, 50,
and 52 continues to read as follows:
    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).


PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

1.106  [Amended]
    2. Section 1.106 is amended under the ``FAR Segment'' and ``OMB
Control Number'' headings by removing ``52.215-1'' and ``9000-0034''.


PART 4--ADMINISTRATIVE MATTERS

    3. Section 4.702 is amended by revising paragraph (a) to read as
follows:
4.702  Applicability.
    (a) This subpart applies to records generated under contracts that
contain one of the following clauses:
	    (1) Audit and Records--Sealed Bidding (52.214-26).
	    (2) Audit and Records--Negotiation (52.215-2).
* * * * *
  
  4. Section 4.703 is amended as follows:
    a. In paragraph (a) by removing the phrase ``books, records,
documents,'' and inserting in its place ``records, which includes
books, documents, accounting procedures and practices, and other data,
regardless of type and regardless of whether such items are in written
form, in the form of computer data, or in any other form,'';
    b. In paragraph (b) introductory text and the first sentence of
(b)(2) by removing the word ``documents'' and inserting in its place
``records'';
    c. Revising paragraph (c); and
    d. Removing paragraph (d) and redesignating paragraph ``(e)'' as
paragraph ``(d)''. The revised text reads as follows:
4.703  Policy.
* * * * *
    (c) Nothing in this section shall be construed to preclude a
contractor from duplicating or storing original records in electronic
form unless they contain significant information not shown on the
record copy. Original records need not be maintained or produced in an
audit if the contractor or subcontractor provides photographic or
electronic images of the original records and meets the following
requirements:
	    (1) The contractor or subcontractor has established procedures to
ensure that the imaging process preserves accurate images of the
original records, including signatures and other written or graphic
images, and that the imaging process is reliable and secure so as to
maintain the integrity of the records.
	    (2) The contractor or subcontractor maintains an effective indexing
system to permit timely and convenient access to the imaged records.
	    (3) The contractor or subcontractor retains the original records
for a minimum of one year after imaging to permit periodic validation
of the imaging systems.
* * * * *

4.706 through 4.706-3  [Removed]
    5. Section 4.706 is removed and reserved, and sections 4.706-1
through 4.706-3 are removed.


PART 14--SEALED BIDDING

    6. Section 14.201-7 is amended by revising paragraph (a) to read as
follows:
14.201-7  Contract clauses.
    (a) When contracting by sealed bidding, the contracting officer
shall insert the clause at 52.214-26, Audit and Records--Sealed
Bidding, in solicitations and contracts if the contract amount is
expected to exceed the threshold at 15.804-2(a)(1) for submission of
cost or pricing data.
* * * * *


PART 15--CONTRACTING BY NEGOTIATION

    7. Section 15.106-1 is removed and 15.106-2 is redesignated as
15.106-1 and revised to read as follows:
15.106-1  Audit and Records--Negotiation clause.
    (a) This subsection implements 10 U.S.C. 2313, 41 U.S.C. 254d, and
OMB Circular No. A-133.
    (b) The contracting officer shall, if contracting by negotiation,
insert the clause at 52.215-2, Audit and Records--Negotiation, in
solicitations and contracts except those (1) not exceeding the
simplified acquisition threshold in Part 13; or (2) for utility
services at rates not exceeding those established to apply uniformly to
the general public, plus any applicable reasonable connection charge.
    (c) In facilities contracts, the contracting officer shall use the
clause with its Alternate I. In cost-reimbursement contracts with
educational institutions and other nonprofit organizations, the
contracting officer shall use the clause with its Alternate II. If the
examination of records by the Comptroller General is waived in
accordance with 25.901, the contracting officer shall use the clause
with its Alternate III.

    8. Section 15.805-5 is amended in paragraph (a)(1) introductory
text by inserting after the first sentence the following:
15.805-5  Field pricing support.
    (a)(1) * * * The contracting officer should contact the cognizant
audit office to determine the existence of audits addressing proposed
indirect costs. In accordance with 41 U.S.C. 254d and 10 U.S.C. 2313,
the contracting officer shall not request a preaward audit of such
indirect costs unless the information available from any existing audit
completed within the preceding 12 months is considered inadequate for
determining the reasonableness of the proposed indirect costs. * * *
* * * * *


PART 25--FOREIGN ACQUISITION

    9. Section 25.000 is amended by revising the last sentence to read
as follows:
25.000  Scope of part.
    * * * This part also provides policies and procedures pertaining to
international agreements, customs and duties, the clause at 52.215-2,
Audit and Records--Negotiation, and use of local currency for payment.

    10. Section 25.901 is amended by revising the section heading and
paragraphs (b), (c), (d)(2), (d)(3), and (d)(5) to read as follows:
25.901  Omission of audit clause.
* * * * *
    (b) Policy. As required by 10 U.S.C. 2313, 41 U.S.C. 254d, and
15.106-1(b), the contracting officer shall consider for use in
negotiated contracts with foreign contractors, whenever possible, the
basic clause at 52.215-2, Audit and Records--Negotiation, which
authorizes examination of records by the Comptroller General. Use of
the clause with Alternate III should be approved only after the
contracting agency, having considered such factors as alternate sources
of supply, additional cost, and time of delivery, has made all
reasonable efforts to include the basic clause.
    (c) Conditions for use of Alternate III. The contracting officer
may use the clause at 52.215-2, Audit and Records--Negotiation, with
its Alternate III in contracts with foreign contractors--
	    (1) If the agency head, or designee, determines, with the
concurrence of the Comptroller General, that waiver of the right to
examination of records by the Comptroller General will serve the public
interest; or
	    (2) If the contractor is a foreign government or agency thereof or
is precluded by the laws of the country involved from making its
records, as defined at 4.703(a), available for examination, and the
agency head, or designee, determines, after taking into account the
price and availability of the property or services from United States
sources, that waiver of the right to examination of records by the
Comptroller General best serves the public interest.
    (d) * * *
	    (2) Describe the efforts to include the basic clause;
	    (3) State the reasons for the contractor's refusal to include the
basic clause;
* * * * *	
	    (5) Determine that it will serve the interest of the United States
to use the clause with its Alternate III.


PART 50--EXTRAORDINARY CONTRACTUAL ACTIONS

50.307  [Amended]
    11. Section 50.307 is amended in paragraph (b) by removing
``52.215-1, Examination of Records by Comptroller General'' and
inserting in its place ``52.215-2, Audit and Records--Negotiation''.


PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    12. Section 52.214-26 is revised to read as follows:
52.214-26  Audit and Records--Sealed Bidding.
    As prescribed in 14.201-7(a), inserting the following clause:
Audit and Records--Sealed Bidding (Oct 1995)
    (a) As used in this clause, records includes books, documents,
accounting procedures and practices, and other data, regardless of
type and regardless of whether such items are in written form, in
the form of computer data, or in any other form.
    (b) Cost or pricing data. If the Contractor has been required to
submit cost or pricing data in connection with the pricing of any
modification to this contract, the Contracting Officer, or an
authorized representative of the Contracting Officer, in order to
evaluate the accuracy, completeness, and currency of the cost or
pricing data, shall have the right to examine and audit all of the
Contractor's records, including computations and projections,
related to--
	    (1) The proposal for the modification;
	    (2) The discussions conducted on the proposal(s), including
those related to negotiating;
	    (3) Pricing of the modification; or
	    (4) Performance of the modification.
    (c) Comptroller General. In the case of pricing any
modification, the Comptroller General of the United States, or an
authorized representative, shall have the same rights as specified
in paragraph (b) of this clause.
    (d) Availability. The Contractor shall make available at its
office at all reasonable times the materials described in
reproduction, until 3 years after final payment under this contract,
or for any other period specified in Subpart 4.7 of the Federal
Acquisition Regulation (FAR). FAR Subpart 4.7, Contractor Records
Retention, in effect on the data of this contract, is incorporated
by reference in its entirety and made a part of this contract.
	    (1) If this contract is completely or partially terminated, the
records relating to the work terminated shall be made available for
3 years after any resulting final termination settlement.	
	    (2) Records pertaining to appeals under the Disputes clause or
to litigation or the settlement of claims arising under or relating
to the performance of this contract shall be made available until
disposition of such appeals, litigation, or claims.
    (e) The Contractor shall insert a clause containing all the
provisions of this clause, including this paragraph (e), in all
subcontracts expected to exceed the threshold in FAR 15.804-2(a)(1)
for submission of cost or pricing data.
						(End of clause)

52.215-1  [Reserved]
    13. Section 52.215-1 is removed and reserved.

    14. Section 52.215-2 is revised to read as follows:
52.215-2  Audit and Records--Negotiation.
    As prescribed in 15.106-1(b), insert the following clause:
Audit and Records--Negotiation (Oct 1995)
    (a) As used in this clause, records includes books, documents,
accounting procedures and practices, and other data, regardless of
type and regardless of whether such items are in written form, in
the form of computer data, or in any other form.
    (b) Examination of costs. If this is a cost-reimbursement,
incentive, time-and-materials, labor-hour, or price redeterminable
contract, or any combination of these, the Contractor shall maintain
and the Contracting Officer, or an authorized representative of the
Contracting Officer, shall have the right to examine and audit all
records and other evidence sufficient to reflect properly all costs
claimed to have been incurred or anticipated to be incurred directly
or indirectly in performance of this contract. This right of
examination shall include inspection at all reasonable times of the
Contractor's plants, or parts of them, engaged in performing the
contract.
    (c) Cost or pricing data. If the Contractor has been required to
submit cost or pricing data in connection with any pricing action
relating to this contract, the Contracting Officer, or an authorized
representative of the Contracting Officer, in order to evaluate the
accuracy, completeness, and currency of the cost or pricing data,
shall have the right to examine and audit all of the Contractor's
records, including computations and projections, related to--
	    (1) The proposal for the contract, subcontract, or modification;
	    (2) The discussions conducted on the proposal(s), including
those related to negotiating;
	    (3) Pricing of the contract, subcontract, or modification; or
	    (4) Performance of the contract, subcontract or modification.
    (d) Comptroller General--
	    (1) The Comptroller General of the
United States, or an authorized representative, shall have access to
and the right to examine any of the Contractor's directly pertinent
records involving transactions related to this contract or a
subcontract hereunder.
	    (2) This paragraph may not be construed to require the
Contractor or subcontractor to create or maintain any record that
the Contractor or subcontractor does not maintain in the ordinary
course of business or pursuant to a provision of law.
    (e) Reports. If the Contractor is required to furnish cost,
funding, or performance reports, the Contracting Officer or an
authorized representative of the Contracting Officer shall have the
right to examine and audit the supporting records and materials, for
the purpose of evaluating (1) the effectiveness of the Contractor's
policies and procedures to produce data compatible with the
objectives of these reports and (2) the data reported.
    (f) Availability. The Contractor shall make available at its
office at all reasonable times the records, materials, and other
evidence described in paragraphs (a), (b), (c), (d), and (e) of this
clause, for examination, audit, or reproduction, until 3 years after
final payment under this contract or for any shorter period
specified in Subpart 4.7, Contractor Records Retention, of the
Federal Acquisition Regulation (FAR), or for any longer period
required by statute or by other clauses of this contract. In
addition--
	    (1) If this contract is completely or partially terminated, the
records relating to the work terminated shall be made available for
3 years after any resulting final termination settlement; and
	    (2) Records relating to appeals under the Disputes clause or to
litigation or the settlement of claims arising under or relating to
this contract shall be made available until such appeals,
litigation, or claims are finally resolved.
    (g) The Contractor shall insert a clause containing all the
terms of this clause, including this paragraph (a), in all
subcontracts under this contract that exceed the simplified
acquisition threshold in FAR Part 13, and--
	    (1) That are cost-reimbursement, incentive, time-and-materials,
labor-hour, or price-redeterminable type or any combination of
these;
	    (2) For which cost or pricing data are required; or
	    (3) That require the subcontractor to furnish reports as
discussed in paragraph (e) of this clause.
    The clause may be altered only as necessary to identify properly
the contracting parties and the Contracting Officer under the
Government prime contract.
					(End of clause)

    Alternate I (OCT 1995). As prescribed in 15.106-1(c), in
facilities contracts, add the following sentence at the end of
paragraph (b) of the basic clause:
    The obligations and rights specified in this paragraph shall
extend to the use of, and charges for the use of, the facilities
under this contract.

    Alternate II (OCT 1995). As prescribed in 15.106-1(c), in cost-
reimbursement contracts with educational and other non-profit
institutions, add the following paragraph (h) to the basic clause:
    (h) The provisions of OMB Circular No. A-133, ``Audits of
Institutions of Higher Learning and Other Nonprofit Institutions,''
apply to this contract.

    Alternate III (OCT 1995). As prescribed in 15.106-1(c), delete
paragraph (d) of the basic clause and redesignate the remaining
paragraphs accordingly.


[Federal Register: August 16, 1995 (Volume 60, Number 158)]
[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
48 CFR Parts 2, 4, 5, 6, 14, 15, 17, 19, 25, 36, 51 and 52

[FAC 90-31; FAR Case 94-701; Item II]

RIN 9000-AG39
Federal Acquisition Regulation; Contract Award Implementation
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.
----------------------------------------------------------------------
SUMMARY: This final rule is issued pursuant to the Federal Acquisition
Streamlining Act of 1994 to (1) identify new Federal Procurement Data
System reporting requirements, (2) expand the reasons for establishing
or maintaining alternative sources of supplies or services, (3) allow
acquisition of expert services to support litigation by other than full
and open competition and provide an exception to synopsis requirements,
(4) clarify procedures for award to a source identified in a statute,
(5) clarify approval authority for use of other than full and open
competition, (6) revise procedures for use of source selection
evaluation factors in solicitations, for conducting written or oral
discussions, and for providing postaward notices and debriefing to
offerors, (7) require a determination that an option is likely to be
exercised before providing for evaluation of sealed bid options, (8)
allow nonprofit agencies for the blind or severely disabled to use
Government supply sources in performing certain Javits-Wagner-O'Day
contracts, and (9) make procedures for award without discussion the
same for Department of Defense and civilian agencies. This regulatory
action was subject to Office of Management and Budget review under
Executive Order 12866, dated September 30, 1993.

EFFECTIVE DATE: October 1, 1995.
FOR FURTHER INFORMATION CONTACT:
Ms. Melissa Rider, Contract Award Team Leader, at (703) 614-1634 in
reference to this FAR case. For general information, contact the FAR
Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAC 90-31, FAR case 94-701.

SUPPLEMENTARY INFORMATION:
A. Background
    The Federal Acquisition Streamlining Act of 1994, Pub. L. 103-355
(the Act), provides authorities that streamline the acquisition process
and minimize burdensome Government-unique requirements. Major changes
that can be expected in the acquisition process as a result of the
Act's implementation include changes in the areas of Commercial Item
Acquisition, the Truth in Negotiations Act, and introduction of the
Federal Acquisition Computer Network.

    This notice announces FAR revisions developed under FAR Case 94-
701, Contract Award Implementation, which implements the following
sections of the Act:
--Sections 1002 and 1052 amend 10 U.S.C. 2304(b) and 41 U.S.C. 253(b)
to--(1) Ensure the continuous availability of a reliable source of
supply; (2) satisfy projected needs based on a history of high demand;
and (3) satisfy a critical need for medical, safety, or emergency
supplies, as reasons for establishing or maintaining alternative
sources. (Implementation at FAR 6.202.)
--Sections 1003 and 1053 amend 10 U.S.C. 2304(f)(1)(B)(i) and 41 U.S.C.
253(f)(1)(B)(i) to clarify the approval authority for use of other than
full and open competition. (Implementation at FAR 6.304.)
--Sections 1005 and 1055 amend 10 U.S.C. 2304(c)(3) and 41 U.S.C.
253(c) to add the acquisition of expert services for use in any
litigation or dispute involving the Federal Government as an exception
to use of full and open competition. (Implementation at FAR 6.302-3.)
Section 1055 also amended 41 U.S.C. 416(c) and 15 U.S.C. 637(c) to
provide an exception to the publication of notices in the Commerce
Business Daily for acquisition of expert services. (Implementation at
FAR 5.201, 5.202, 5.301, and 6.302-3.)
--Sections 1011 and 1061 amend 10 U.S.C. 2305(a) and 41 U.S.C. 253a and
253b to (1) Make procedures for award of contracts without discussion
comparable in Department of Defense and civilian agencies, (2) require
solicitations for competitive proposals to include all significant
factors and subfactors and whether they are more important, of equal
importance or less important than cost or price, (3) permit agencies to
disclose numerical weights assigned to evaluation factors at their
discretion, and (4) allow award without discussion to other than the
lowest overall cost offeror. (Implementation at FAR 15.406-5, 15.407,
15.605, 15.610, and 52.215-16.)
--Sections 1012 and 1062 amend 10 U.S.C. 2305(a) and 41 U.S.C. 253a to
require a determination that it is likely that an option will be
exercised before providing for evaluation of prices of options in
solicitations for contracts awarded using sealed bid procedures.
(Implementation at FAR 17.202 and 17.208.)
--Sections 1013 and 1063 amend 10 U.S.C. 2305(b) and 41 U.S.C. 253b to
require, within three days of contract award, notification to
unsuccessful offerors that a contract has been awarded and to allow
electronic transmission of the notice. (Implementation at FAR 2.101,
14.408-1, 14.409-1, 15.1002, 15.1003, 25.405, and 36.304.)
--Sections 1014 and 1064 amend 10 U.S.C. 2305(b) and 41 U.S.C. 253b to
(1) Allow offerors to request a debriefing within three days of receipt
of notice of award and require agencies, to the maximum extent
practicable, to conduct the debriefings within five days, and (2)
specify minimum requirements for content of the debriefings.
(Implementation at FAR 15.1001, 15.1004, 36.607, and 52.215-16.)
--Section 1555 amends 40 U.S.C. 481 to allow nonprofit agencies for the
blind or severely disabled providing supplies or services under a
Javitts-Wagner-O'Day Act contract to use Government supply sources in
performing the contract. (Implementation at FAR 51.101 and
51.102.) Other parts of Section 1555 are being implemented separately
by GSA (see proposed rule of April 7, 1995, 60 FR 17764).
--Section 7203 amends 10 U.S.C. 2304 and 41 U.S.C. 253 to state
Congressional policy regarding legislative requirements for award of a
new contract to a specific non-Federal Government entity.
(Implementation at FAR 6.302-5.)
--Section 10004 requires the Federal Procurement Data System to collect
from contracts in excess of $25,000 data on awards to small and
disadvantaged businesses using either set asides or full and open
competition, awards to businesses owned and controlled by women, the
number of offers received in response to a solicitation, task or
delivery order contracts and contracts for the acquisition of
commercial items. (Implementation at FAR 4.601.)

B. Regulatory Flexibility Act
    The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because the regulatory changes
contained in the rule relate primarily to the content of solicitations,
debriefings and notifications to offerors, internal Government
procedures, and procedures which apply only to the acquisition of
expert services for litigation or to decisions to maintain alternative
sources of supply. The rule will increase the amount of pre-award and
post-award information provided to the public, but will not have a
significant economic impact.

C. Paperwork Reduction Act
    The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose recordkeeping or information collection
requirements, or collections of information from offerors, contractors,
or members of the public which require the approval of the Office of
Management and Budget under 44 U.S.C. 3501, et seq.

D. Public Comments
    Eighteen public comments were received in response to the proposed
rule published in the Federal Register on January 9, 1995 (60 FR 2472).
These comments were considered in formulation of this final rule.
List of Subjects in 48 CFR Parts 2, 4, 5, 6, 14, 15, 17, 19, 25,
36, 51 and 52
    Government procurement.
    Dated: August 7, 1995.

Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.

    Therefore, 48 CFR Chapter 1 is amended as set forth below:
    1. The authority citation for 48 CFR Parts 2, 4, 5, 6, 14, 15, 17,
19, 25, 36, 51 and 52 continue to read as follows:
    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

    2. Section 2.101 is amended by adding, in alphabetical order, the
definition Day to read as follows:
2.101  Definitions.
* * * * *
    Day means, unless otherwise specified, a calendar day.
* * * * *


PART 4--ADMINISTRATIVE MATTERS

    3. Section 4.601 is amended by redesignating existing paragraph (d)
as (e); and adding a new paragraph (d) to read as follows:
4.601  Record requirements.
* * * * *
    (d) In addition to the information described in paragraphs (b) and
(c) of this section, for procurements in excess of $25,000, agencies
shall be able to access information on the following from the computer
file:
	    (1) Awards to small disadvantaged businesses using either set-
asides or full and open competition.
	    (2) Awards to business concerns owned and controlled by women.
	    (3) The number of offers received in response to a solicitation.
	    (4) Task or delivery order contracts.
	    (5) Contracts for the acquisition of commercial items.
* * * * *


PART 5--PUBLICIZING CONTRACT--ACTIONS

    4. Section 5.201 is amended by revising paragraph (a) to read as
follows:
5.201  General.
    (a) As required by the Small Business Act (15 U.S.C. 637(e)) and
the Office of Federal Procurement Policy Act (41 U.S.C. 416), agencies
shall furnish for publication in the Commerce Business Daily (CBD)
notices of proposed contract actions as specified in paragraph (b) of
this section.
* * * * *

    5. Section 5.202 is amended at the end of paragraph (a)(13) by
removing the word ``or''; at the end of paragraph (a)(14) by removing
the period and inserting ``; or'' in its place; and by adding paragraph
(a)(15) to read as follows:
5.202  Exceptions.
* * * * *
    (a) * * *
	    (15) The contract action is made under conditions described in
6.302-3 with respect to the services of an expert to support the
Federal Government in any current or anticipated litigation or dispute.
* * * * *

    6. Section 5.301 is amended at the end of paragraph (b)(6) by
removing ``or''; at the end of paragraph (b)(7) by removing the period
and inserting ``; or''; and by adding paragraph (b)(8) to read as
follows:
5.301  General.
* * * * *
    (b) * * *
	    (8) The award is for the services of an expert to support the
Federal Government in any current or anticipated litigation or dispute
pursuant to the exception to full and open competition authorized at
6.302-3.
* * * * *

5.303  [Amended]
    7. Section 5.303 is amended in paragraph (b)(2) by removing the
citation ``15.1001(c)'' and inserting ``15.1002(c)'' in its place.


PART 6--COMPETITION REQUIREMENTS

    8. Section 6.202 is amended by revising paragraph (a)(1); at the
end of paragraph (a)(2) by removing ``or''; at the end of paragraph
(a)(3) by removing the period and inserting a semicolon; and adding
paragraphs (a)(4) through (a)(6) to read as follows:
6.202  Establishing or maintaining alternative sources.
    (a) * * *
	    (1) Increase or maintain competition and likely result in reduced
overall costs for the acquisition, or for any anticipated acquisition;
 * * * * *
	    (4) Ensure the continuous availability of a reliable source of
supplies or services;
	    (5) Satisfy projected needs based on a history of high demand; or
	    (6) Satisfy a critical need for medical, safety, or emergency
supplies.
 * * * * *

    9. Section 6.302-3 is amended by revising the heading and paragraph
(a)(2); and by adding paragraph (b)(3) to read as follows:
6.302-3  Industrial mobilization; engineering, developmental, or
research capability; or expert services.
    (a) * * *
	    (2) Full and open competition need not to be provided for when it
is necessary to award the contract to a particular source or sources in
order:
		    (i) to maintain a facility, producer, manufacturer, or other
supplier available for furnishing supplies or services in case of a
national emergency or to achieve industrial mobilization,
		    (ii) to establish or maintain an essential engineering, research,
or other nonprofit institution or a federally funded research and
development center, or
		    (iii) to acquire the services of an expert for any current or
anticipated litigation or dispute.
    (b) * * *
	    (3) Use of the authority in paragraph (a)(2)(iii) of this section
may be appropriate when it is necessary to acquire the services of
either--
		    (i) An expert to use, in any litigation or dispute (including any
reasonably foreseeable litigation or dispute) involving the Government
in any trial, hearing, or proceeding before any court, administrative
tribunal, or agency, whether or not the expert is expected to testify.
Examples of such services include, but are not limited to:
			    (A) Assisting the Government in the analysis, presentation, or
defense of any claim or request for adjustment to contract terms and
conditions, whether asserted by a contractor or the Government, which
is in litigation or dispute, or is anticipated to result in dispute or
litigation before any court, administrative tribunal, or agency, or
			    (B) Participating in any part of an alternative dispute resolution
process, including but not limited to evaluators, fact finders, or
witnesses, regardless of whether the expert is expected to testify; or
		    (ii) A neutral person, e.g., mediators or arbitrators, to
facilitate the resolution of issues in an alternative dispute
resolution process.
 * * * * *

    10. Section 6.302-5 is amended by revising paragraph (c)(1) and
adding paragraph (c)(3) to read as follows:
6.302-5  Authorized or required by statute.
 * * * * *
    (c) Limitations.
		 (1) This authority shall not be used when a
provision of law requires an agency to award a new contract to a
specified non-Federal Government entity unless the provision of law
specifically--
			 (i) Identifies the entity involved;
			 (ii) Refers to 10 U.S.C. 2304(j) for armed services acquisitions or
section 303(h) of the Federal Property and Administrative Services Act
of 1949 for civilian agency acquisitions; and
		      (iii) States that award to that entity shall be made in
contravention of the merit-based selection procedures in 10 U.S.C.
2304(j) or section 303(h) of the Federal Property and Administrative
Services Act, as appropriate. However, this limitation does not apply--
				    (A) When the work provided for in the contract is a continuation of
the work performed by the specified entity under a preceding contract;
or
				    (B) To any contract requiring the National Academy of Sciences to
investigate, examine, or experiment upon any subject of science or art
of significance to an executive agency and to report on those matters
to the Congress or any agency of the Federal Government.
* * * * *
	      (3) The authority in (a)(2)(ii) of this subsection may be used only
for purchases of brand-name commercial items for resale through
commissaries or other similar facilities. Ordinarily, these purchases
will involve articles desired or preferred by customers of the selling
activities (but see 6.301(d)).

    11. Section 6.304 is amended by revising paragraph (a)(2) to read
as follows:
6.304  Approval of the justification.
    (a) * * *
	    (2) For a proposed contract over $100,000 but not exceeding
$1,000,000, by the competition advocate for the procuring activity
designated pursuant to 6.501 or an official described in paragraph
(a)(3) or (a)(4) of this section. This authority is not delegable.
* * * * *


PART 14--SEALED BIDDING

    12. Section 14.408-1 is amended by revising paragraphs (a)(1) and
(d)(2) to read as follows:
14.408-1  General.
    (a) * * *
	    (1) by written or electronic notice,* * *
* * * * *
    (d) * * *
	    (2) Use of the Award portion of SF 33, SF 26, or SF 1447, does not
preclude the additional use of informal documents, including telegrams
or electronic transmissions, as notices of awards.

    13. Section 14.409-1 is revised to read as follows:
14.409-1  Award of unclassified contracts.
    (a)(1) The contracting officer shall as a minimum (subject to any
restrictions in Subpart 9.4)--
		    (i) Notify each unsuccessful bidder in writing or electronically
within three days after contract award, that its bid was not accepted.
``Day,'' for purposes of the notification process, means calendar day,
except that the period will run until a day which is not a Saturday,
Sunday, or legal holiday;
		    (ii) Extend appreciation for the interest the unsuccessful bidder
has shown in submitting a bid; and
		    (iii) When award is made to other than a low bidder, state the
reason for rejection in the notice to each of the unsuccessful low
bidders.
	    (2) For acquisitions subject to the Trade Agreements Act or the
North American Free Trade Agreement (NAFTA) Implementation Act (see
25.405(e)), agencies shall include in notices given unsuccessful
bidders from designated or NAFTA countries--
		    (i) The dollar amount of the successful bid; and
		    (ii) The name and address of the successful bidder.
    (b) Information included in paragraph (a)(2) of this subsection
shall be provided to any unsuccessful bidder upon request except when
multiple awards have been made and furnishing information on the
successful bids would require so much work as to interfere with normal
operations of the contracting office. In such circumstances, only
information concerning location of the abstract of offers need be
given.
    (c) When a request is received concerning an unclassified
invitation from an inquirer who is neither a bidder nor a
representative of a bidder, the contracting officer should make every
effort to furnish the names of successful bidders and, if requested,
the prices at which awards were made. However, when such requests
require so much work as to interfere with the normal operations of the
contracting office, the inquirer will be advised where a copy of the
abstract of offers may be seen.
    (d) Requests for records shall be governed by agency regulations
implementing Subpart 24.2.

14.503-1  [Amended]
    14. Section 14.503-1 is amended at the end of paragraph (g) by
removing the phrase ``(see 15.1003)'' and inserting ``(see 15.1004)''
in its place.


PART 15--CONTRACTING BY NEGOTIATION

15.406-5  [Amended]
    15. Section 15.406-5 is amended in paragraph (c) by inserting the
word ``significant'' after the word ``all''; and by removing the phrase
``(see 15.605(e) and (f)'' and inserting in its place ``(see 15.605(d)
and (e)''.

    16. Section 15.407 is amended by revising paragraph (d)(4) to read
as follows:
15.407  Solicitation provisions.
* * * * *
    (d) * * *
	    (4) Insert in RFP's the provision at 52.215-16, Contract Award.
		    (i) If the RFP is for construction, the contracting officer shall
use the provision with its Alternate I. If awards are to be made
without discussions, also use Alternate II.
		    (ii) If the contracting officer intends to evaluate offers and make
award without discussions, use the basic provision with its Alternate
II.
* * * * *

15.412  [Amended]
    17. Section 15.412 is amended in the second sentence of paragraph
	  (d) by removing the citation ``15.1001(c)(1)'' and inserting
``15.1002(c)(1)'' in its place.

    18. Section 15.605 is amended by revising the heading, and
paragraphs (a), (b)(1) introductory text, (b)(1)(iii), (b)(2), and (d)
to read as follows:
15.605  Evaluation factors and subfactors.
    (a) The factors and subfactors that will be considered in
evaluating proposals shall be tailored to each acquisition and shall
include only those factors that will have an impact on the source
selection decision.
    (b)(1) The evaluation factors and subfactors that apply to an
acquisition and the relative importance of those factors and subfactors
are within the broad discretion of agency acquisition officials except
that--
* * * * *
		    (iii) Quality shall be addressed in every source selection through
inclusion in one or more of the non-cost evaluation factors or
subfactors, such as past performance, technical excellence, management
capability, personnel qualifications, prior experience, and schedule
compliance.
* * * * *
	    (2) Any other relevant factors or subfactors, such as cost realism,
may also be included.
* * * * *
    (d)(1) The solicitation should be structured to provide for the
selection of the source whose proposal offers the greatest value to the
Government in terms of performance, risk management, cost or price, and
other factors. At a minimum, the solicitation shall clearly state the
significant evaluation factors, such as cost or price, cost or price-
related factors, past performance and other non-cost or non-price-
related factors, and any significant subfactors, that will be
considered in making the source selection, and their relative
importance (see 15.406-5(c)). The solicitation shall inform offerors of
minimum requirements that apply to particular evaluation factors and
significant subfactors. Further, the solicitation shall state whether
all evaluation factors other than cost or price, when combined, are--
		    (i) Significantly more important than cost or price;
		    (ii) Approximately equal to cost or price; or
		    (iii) Significantly less important than cost or price.
	    (2) The solicitation may elaborate on the relative importance of
factors and subfactors at the discretion of the contracting officer.
Agencies may elect to assign numerical weights to evaluation factors
and employ those weights when evaluating proposals. Numerical weights
need not be disclosed in solicitations; however, nothing precludes an
agency from disclosing the weights on a case-by-case basis. The
solicitation may state that award will be made to the offeror that
meets the solicitation's minimum criteria for acceptable award at the
lowest cost or price.
* * * * *

15.609  [Amended]
    19. Section 15.609 is amended in paragraph (c) by removing ``(see
15.1001(b))'' and inserting ``(see 15.1002(b))'' in its place.

    20. Section 15.610 is amended by revising paragraphs (a) and (b) to
read as follows:
15.610  Written or oral discussion.
    (a) The requirement in paragraph (b) of this section for written or
oral discussion need not be applied in acquisitions--
	    (1) In which prices are fixed by law or regulation;
	    (2) Of the set-aside portion of a partial set-aside; or
	    (3) In which the solicitation notified all offerors that the
Government intends to evaluate proposals and make award without
discussion, unless the contracting officer determines that discussions
(other than communications conducted for the purpose of minor
clarification) are considered necessary (see 15.407(d)(4)). Once the
Government states its intent to award without discussion, the rationale
for reversal of this decision shall be documented in the contract file.
    (b) Except as provided in paragraph (a) of this section, the
contracting officer shall conduct written or oral discussions with all
responsible offerors who submit proposals within the competitive range.
The content and extent of the discussions is a matter of the
contracting officer's judgment, based on the particular facts of each
acquisition (but see paragraphs (c) and (d) of this section).
* * * * *

    21. Section 15.612 is amended by revising paragraph (f) to read as
follows:
15.612  Formal source selection.
* * * * *
    (f) Postaward notices and debriefings. See 15.1002(c) and 15.1004.
15.1001 through 15.1005  [Redesignated as 15.1002 through 15.1006]

    22. Sections 15.1001 through 15.1005 are redesignated as 15.1002
through 15.1006, respectively; and a new 15.1001 is added to read as
follows:
15.1001  General.
    This subpart applies to the use of competitive proposals, as
described in 6.102(b), and a combination of competitive procedures, as
described in 6.102(c). To the extent practicable, however, the
procedures and intent of this subpart, with reasonable modification,
should be followed for acquisitions described in 6.102(d): broad agency
announcements, small business innovation research contracts, and
architect-engineer contracts. However, they do not apply to multiple
award schedules, as described in 6.102(d)(3).

    23. Newly designated section 15.1002 is amended by revising
paragraph (a), and the introductory text of paragraph (b)(2); by
removing paragraph (c)(2) and redesignating paragraph (c)(3) as (c)(2);
and by amending the newly designated paragraph (c)(2) by removing
``15.1001(c)(1)(i)'' and inserting ``15.1002(c)(1)(i)''. The revised
text reads as follows:
15.1002  Notifications to unsuccessful offerors.
    (a) General. Within three days after the date of contract award,
the contracting officer shall notify, in writing or electronically,
each offeror whose proposal is determined to be
unacceptable or whose offer is not selected for award. ``Day,'' for
purposes of the notification process, means calendar day, except that
the period will run until a day which is not a Saturday, Sunday, or
legal holiday.
    (b) * * *
	    (2) In a small business set-aside (see Subpart 19.5), upon
completion of negotiations and determinations of responsibility, but
prior to award, the contracting officer shall notify each unsuccessful
offeror in writing or electronically of the name and location of the
apparent successful offeror. The notice shall also state that:
* * * * *

    24. Newly designated section 15.1003 is amended by revising the
first sentence to read as follows:
15.1003  Notification to successful offeror.
    The contracting officer shall award a contract with reasonable
promptness to the successful offeror (selected in accordance with
15.611(d)) by transmitting written or electronic notice of the award to
that offeror (but see 15.608(b)). * * *

    25. Newly designated section 15.1004 is revised to read as follows:
15.1004  Debriefing of offerors.
    (a) When a contract is awarded on the basis of competitive
proposals, an offeror, upon its written request received by the agency
within three days after the date on which that offeror has received
notice of contract award, shall be debriefed and furnished the basis
for the selection decision and contract award. When practicable,
debriefing requests received more than three days after the offeror
receives notice of contract award shall be accommodated. However,
accommodating such untimely debriefing requests does not extend the
time within which suspension of performance can be required, as this
accommodation is not a ``required debriefing'' as described in FAR Part
33. To the maximum extent practicable, the debriefing should occur
within five days after receipt of the written request. ``Day,'' for
purposes of the debriefing process, means calendar day, except that the
period will run until a day which is not a Saturday, Sunday, or legal
holiday.
    (b) Debriefings of successful and unsuccessful offerors may be done
orally, in writing, by electronic means, or any other method acceptable
to the contracting officer.
    (c) The contracting officer should normally chair any debriefing
session held. Individuals actually responsible for the evaluations
shall provide support. If the contracting officer is unavailable,
another agency representative may be designated by the contracting
officer on a case-by-case basis, with the approval of an individual a
level above the contracting officer.
    (d) At a minimum, the debriefing information shall include--
	    (1) The Government's evaluation of the significant weaknesses or
deficiencies in the offeror's proposal, if applicable;
	    (2) The overall evaluated cost or price and technical rating, if
applicable, of the successful offeror and the debriefed offeror;
	    (3) The overall ranking of all offerors when any ranking was
developed by the agency during the source selection;
	    (4) A summary of the rationale for award;
	    (5) For acquisitions of commercial end items, the make and model of
the item to be delivered by the successful offeror; and
	    (6) Reasonable responses to relevant questions about whether source
selection procedures contained in the solicitation, applicable
regulations, and other applicable authorities were followed.
    (e) The debriefing shall not include point-by-point comparisons of
the debriefed offeror's proposal with those of other offerors.
Moreover, debriefing shall not reveal any information exempt from
release under the Freedom of Information Act including--
	    (1) Trade secrets;
	    (2) Privileged or confidential manufacturing processes and
techniques;
	    (3) Commercial and financial information that is privileged or
confidential, including cost breakdowns, profit, indirect cost rates,
and similar information; and
	    (4) The names of individuals providing reference information about
an offeror's past performance.
    (f) The contracting officer shall include an official summary of
the debriefing in the contract file.
    (g) If, within one year of contract award, a protest causes the
agency to issue either a new solicitation or a new request for best and
final offers on the protested contract award, the agency shall make
available to all prospective offerors--
	    (1) Information provided in any debriefings conducted on the
original award about the successful offeror's proposal; and
	    (2) Other nonproprietary information that would have been provided
to the original offerors.


PART 17--SPECIAL CONTRACTING METHODS

    26. Section 17.202 is amended by revising paragraph (a); and at the
end of paragraph (b)(1)(ii) by removing ``; or'' and inserting a period
in its place. The revised text reads as follows:
17.202  Use of options.
    (a) Subject to the limitations of paragraphs (b) and (c) of this
section, for both sealed bidding and contracting by negotiation, the
contracting officer may include options in contracts when it is in the
Government's interest. When using sealed bidding, the contracting
officer shall make a written determination that there is a reasonable
likelihood that the options will be exercised before including the
provision at 52.217-5, Evaluation of Options, in the solicitation. (See
17.207(f) with regard to the exercise of options.)
* * * * *

    27. Section 17.208 is amended by revising paragraphs (b) and (c)(4)
to read as follows:
17.208  Solicitation provisions and contract clauses.
* * * * *
    (b) The contracting officer shall insert a provision substantially
the same as the provision at 52.217-4, Evaluation of Options Exercised
at Time of Contract Award, in solicitations when the solicitation
includes an option clause, the contracting officer has determined that
there is a reasonable likelihood that the option will be exercised, and
the option may be exercised at the time of contract award.
    (c) * * *
	    (4) The contracting officer has determined that there is a
reasonable likelihood that the option will be exercised. For sealed
bids, the determination shall be in writing.
* * * * *


PART 19--SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS

19.302  [Amended]
    28. Section 19.302 is amended in paragraph (d)(1) introductory text
by removing the word ``below'' and inserting ``of this section'' in its
place; and removing ``(see 15.1001(b)(2))'' and inserting ``(see
15.1002(b)(2))'' in its place.

19.501  [Amended]
    29. Section 19.501 is amended in the second sentence of paragraphs
(h)(1) and (h)(2) by removing the citation ``15.1001(b)(2)'' and
inserting ``15.1002(b)(2) in their place.


PART 25--FOREIGN ACQUISITION

    30. Section 25.405 is amended by revising paragraph (e) to read as
follows:
25.405  Procedures.
* * * * *
    (e) Within three days after a contract award for an eligible
product, agencies shall give unsuccessful offerors from designated or
NAFTA countries notice in accordance with 14.409-1 and 15.1002.
``Day,'' for purposes of the notification process, means calendar day,
except that the period will run until a day which is not a Saturday,
Sunday, or legal holiday.


PART 36--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

    31. Section 36.304 is amended by revising the introductory text to
read as follows:
36.304  Notice of award.
    When a notice of award is issued, it shall be done in writing or
electronically, shall contain information required by 14.408, and
shall--
* * * * *

    32. Section 36.607 is amended by designating the existing text as
paragraph (a) and adding paragraph (b) to read as follows:
36.607  Release of information on firm selection.
* * * * *
    (b) Debriefings of successful and unsuccessful firms will be held
after final selection has taken place and will be conducted, to the
extent practicable, in accordance with 15.1004 (b) through (g). Note
that 15.1004 (d)(2) through (d)(5) does not apply to architect-engineer
contracts.


PART 51--USE OF GOVERNMENT SOURCES BY CONTRACTORS

    33. Section 51.101 is amended at the end of paragraph (a)(1) by
removing ``or'' and at the end of paragraph (a)(2) by removing the
period and inserting ``; or'' and by adding paragraph (a)(3) to read as
follows:
51.101  Policy.
    (a) * * *
	    (3) A contract under the Javits-Wagner-O'Day Act (41 U.S.C. 46, et
seq.) if:
		    (i) the nonprofit agency requesting use of the supplies and
services is providing a commodity or service to the Federal Government,
and
		    (ii) the supplies or services received are directly used in making
or providing a commodity or service, approved by the Committee for
Purchase From People Who Are Blind or Severely Disabled, to the Federal
Government (See Subpart 8.7).
* * * * *

    34. Section 51.102 is amended by revising the second sentence of
paragraph (a) introductory text to read as follows:
51.102  Authorization to use Government supply sources.
    (a) * * * Except for findings under 51.101(a)(3), the determination
shall be based on, but not limited to, considerations of the following
factors:
* * * * *


PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    35. Section 52.215-16 is amended by revising the date in the
provision heading and by revising paragraph (c); by adding paragraph
(h); by removing Alternate II and redesignating Alternate III as
Alternate II; and revising Alternates I and II to read as follows:
52.215-16  Contract Award.
* * * * *
Contract Award (Oct 1995)
* * * * *
   (c) The Government intends to evaluate proposals and award a
contract after conducting written or oral discussions with all
responsible offerors whose proposals have been determined to be
within the competitive range. However, each initial offer should
contain the offeror's best terms from a cost or price and technical
standpoint.
* * * * *
    (h) The Government may disclose the following information in
post-award debriefings to other offerors: (1) the overall evaluated
cost or price and technical rating of the successful offeror; (2)
the overall ranking of all offerors, when any ranking was developed
by the agency during source selection; (3) a summary of the
rationale for award; and (4) for acquisitions of commercial end
items, the make and model of the item to be delivered by the
successful offeror.
					(End of provision)

    Alternate I (OCT 1995). As prescribed in 15.407(d)(4)(i),
substitute the following paragraph (d) for paragraph (d) of the
basic provision:
    (d) The Government may accept any item or combination of items,
unless doing so is precluded by a restrictive limitation in the
solicitation or offer.

    Alternate II (OCT 1995). As prescribed in 15.407(d)(4)(ii),
substitute the following paragraph (c) for paragraph (c) of the
basic provision:
    (c) The Government intends to evaluate proposals and award a
contract without discussions with offerors (except communications
conducted for the purpose of minor clarification). Therefore, each
initial offer should contain the offeror's best terms from a cost or
price and technical standpoint. However, the Government reserves the
right to conduct discussions if later determined by the Contracting
Officer to be necessary.


[Federal Register: August 16, 1995 (Volume 60, Number 158)]
[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
48 CFR Parts 31, 42, and 52

[FAC 90-31; FAR Case 94-751; Item III]

RIN 9000-AG20
Federal Acquisition Regulation; Penalties on Unallowable Indirect
Costs
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule is issued pursuant to the Federal Acquisition
Streamlining Act of 1994 to amend the Federal Acquisition Regulation
(FAR) to implement the requirements for penalties for unallowable
costs. This regulatory action was subject to Office of Management and
Budget review under Executive Order 12866, dated September 30, 1993.

EFFECTIVE DATE: October 1, 1995.
FOR FURTHER INFORMATION CONTACT:
Mr. Clarence Belton, Cost Principles Team Leader, at (703) 602-2357 in
reference to this FAR case. For general information, contact the FAR
Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAC 90-31, FAR case 94-751.

SUPPLEMENTARY INFORMATION:
A. Background
    The Federal Acquisition Streamlining Act of 1994, Pub. L. 103-355
(the Act), provides authorities that streamline the acquisition process
and minimize burdensome Government-unique requirements. Major changes
that can be expected in the acquisition process as a result of the
Act's implementation include changes in the areas of Commercial Item
Acquisition, the Truth in Negotiations Act, and introduction of the
Federal Acquisition Computer Network (FACNET).
    Sections 2101 and 2151 of the Federal Acquisition Streamlining Act
of 1994 change the contract value threshold for assessment of penalties
on unallowable costs from $100,000 to $500,000 and expand the coverage
from the Department of Defense to all executive agencies. This final
rule makes the required changes. With the exception of the threshold
value, the penalty  provisions in the new law are the same as those implemented in the
current Defense Federal Acquisition Regulation Supplement.

B. Regulatory Flexibility Act
    The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities under the Regulatory Flexibility Act, 5 U.S.C.
601, et seq., because most contracts awarded to small businesses are
awarded competitively on a firm-fixed-price basis and, therefore, are
not subject to the FAR cost principles.

C. Paperwork Reduction Act
    The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose recordkeeping or information collection
requirements, or collections of information from offerors, contractors,
or members of the public which require the approval of the Office of
Management and Budget under 44 U.S.C. 3501, et seq.

D. Public Comments
    Twelve public comments were received in response to the proposed
rule published in the Federal Register on December 19, 1994 (59 FR
65460). The comments were considered in the formulation of this final
rule.
List of Subjects in 48 CFR Parts 31, 42, and 52
    Government procurement.
    Dated: August 7, 1995.

Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.

    Therefore, 48 CFR Parts 31, 42, and 52 are amended as set forth
below:
    1. The authority citation for 48 CFR Parts 31, 42, and 52 continues
to read as follows:
    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).


PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

    2. Section 31.110 is added to read as follows:
31.110  Indirect cost rate certification and penalties on unallowable
costs.
    (a) Certain contracts require certification of the indirect cost
rates proposed for progress, billing, or final payment purposes. See
42.703-2 for administrative procedures regarding the certification
provisions and the related contract clause prescription.
    (b) If unallowable costs are included in final indirect cost
settlement proposals, penalties may be assessed. See 42.709 for
administrative procedures regarding the penalty assessment provisions
and the related contract clause prescription.


PART 42--CONTRACT ADMINISTRATION

    3. Sections 42.709 thru 42.709-6 are added to read as follows:
Sec.
42.709  Scope.
42.709-1  General.
42.709-2  Responsibilities.
42.709-3  Assessing the penalty.
42.709-4  Computing interest.
42.709-5  Waiver of the penalty.
42.709-6  Contract clause.
42.709  Scope.
    (a) This section implements 10 U.S.C. 2324 (a) through (d) and 41
U.S.C. 256 (a) through (d). It covers the assessment of penalties
against contractors which include unallowable indirect costs in--
	    (1) Final indirect cost rate proposals; or
	    (2) The final statement of costs incurred or estimated to be
incurred under a fixed-price incentive contract.
    (b) This section applies to all contracts in excess of $500,000,
except fixed-price contracts without cost incentives or any firm-fixed-
price contracts for the purchase of commercial items.

42.709-1  General.
    (a) The following penalties apply to contracts covered by this
section:
	    (1) If the indirect cost is expressly unallowable under a cost
principle in the FAR, or an executive agency supplement to the FAR,
that defines the allowability of specific selected costs, the penalty
is equal to--
		    (i) The amount of the disallowed costs allocated to contracts that
are subject to this section for which an indirect cost proposal has
been submitted; plus
		    (ii) Interest on the paid portion, if any, of the disallowance.
	    (2) If the indirect cost was determined to be unallowable for that
contractor before proposal submission, the penalty is two times the
amount in paragraph (a)(1)(i) of this section.
    (b) These penalties are in addition to other administrative, civil,
and criminal penalties provided by law.
    (c) It is not necessary for unallowable costs to have been paid to
the contractor in order to assess a penalty.

42.709-2  Responsibilities.

    (a) The cognizant contracting officer is responsible for--
	    (1) Determining whether the penalties in 42.709-1(a) should be
assessed;
	    (2) Determining whether such penalties should be waived pursuant to
42.709-5; and
	    (3) Referring the matter to the appropriate criminal investigative
organization for review and for appropriate coordination of remedies,
if there is evidence that the contractor knowingly submitted
unallowable costs.
    (b) The contract auditor, in the review and/or the determination of
final indirect cost proposals for contracts subject to this section, is
responsible for--
	    (1) Recommending to the contracting officer which costs may be
unallowable and subject to the penalties in 42.709-1(a);
	    (2) Providing rationale and supporting documentation for any
recommendation; and
	    (3) Referring the matter to the appropriate criminal investigative
organization for review and for appropriate coordination of remedies,
if there is evidence that the contractor knowingly submitted
unallowable costs.

42.709-3  Assessing the penalty.
    Unless a waiver is granted pursuant to 42.709-5, the cognizant
contracting officer shall--
    (a) Assess the penalty in 42.709-1(a)(1), when the submitted cost
is expressly unallowable under a cost principle in the FAR or an
executive agency supplement that defines the allowability of specific
selected costs; or
    (b) Assess the penalty in 42.709-1(a)(2), when the submitted cost
was determined to be unallowable for that contractor prior to
submission of the proposal. Prior determinations of unallowability may
be evidenced by--
	    (1) A DCAA Form 1, Notice of Contract Costs Suspended and/or
Disapproved (see 48 CFR 242.705-2), or any similar notice which the
contractor elected not to appeal and was not withdrawn by the cognizant
Government agency;
	    (2) A contracting officer final decision which was not appealed;
	    (3) A prior executive agency Board of Contract Appeals or court
decision involving the contractor, which upheld the cost disallowance;
or
	    (4) A determination or agreement of unallowability under 31.201-6.
    (c) Issue a final decision (see 33.211) which includes a demand for
payment of any penalty assessed under paragraph (a) or (b) of this
section. The letter shall state that the determination is a final
decision under the Disputes clause of the contract. (Demanding payment
of the penalty is separate from demanding repayment of any paid portion
of the disallowed cost.)

42.709-4  Computing interest.
    For 42.709-1(a)(1)(ii), compute interest on any paid portion of the
disallowed cost as follows:
    (a) Consider the overpayment to have occurred, and interest to have
begun accumulating, from the midpoint of the contractor's fiscal year.
Use an alternate equitable method if the cost was not paid evenly over
the fiscal year.
    (b) Use the interest rate specified by the Secretary of the
Treasury pursuant to Pub. L. 92-41 (85 Stat. 97).
    (c) Compute interest from the date of overpayment to the date of
the demand letter for payment of the penalty.
    (d) Determine the paid portion of the disallowed costs in
consultation with the contract auditor.

42.709-5  Waiver of the penalty.
    The cognizant contracting officer shall waive the penalties at
42.709-1(a) when--
    (a) The contractor withdraws the proposal before the Government
formally initiates an audit of the proposal and the contractor submits
a revised proposal (an audit will be deemed to be formally initiated
when the Government provides the contractor with written notice, or
holds an entrance conference, indicating that audit work on a specific
final indirect cost proposal has begun);
    (b) The amount of the unallowable costs under the proposal which
are subject to the penalty is $10,000 or less (i.e., if the amount of
expressly or previously determined unallowable costs which would be
allocated to the contracts specified in 42.709(b) is $10,000 or less);
or
    (c) The contractor demonstrates, to the cognizant contracting
officer's satisfaction, that--
	    (1) It has established policies and personnel training and an
internal control and review system that provide assurance that
unallowable costs subject to penalties are precluded from being
included in the contractor's final indirect cost rate proposals (e.g.,
the types of controls required for satisfactory participation in the
Department of Defense sponsored self-governance programs, specific
accounting controls over indirect costs, compliance tests which
demonstrate that the controls are effective, and Government audits
which have not disclosed recurring instances of expressly unallowable
costs); and
	    (2) The unallowable costs subject to the penalty were inadvertently
incorporated into the proposal; i.e., their inclusion resulted from an
unintentional error, notwithstanding the exercise of due care.

42.709-6  Contract clause.
    Use the clause at 52.242-3, Penalties for Unallowable Costs, in all
solicitations and contracts over $500,000 except fixed-price contracts
without cost incentives or any firm-fixed-price contract for the
purchase of commercial items. Generally, covered contracts are those
which contain one of the clauses at 52.216-7, 52.216-13, 52.216-16, or
52.216-17, or a similar clause from an executive agency's supplement to
the FAR.


PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    5. Section 52.242-3 is added to read as follows:
52.242-3  Penalties for Unallowable Costs.
    As prescribed in 42.709-6, use the following clause:
Penalties for Unallowable Costs (Oct 1995)
    (a) Definition. Proposal, as used in this clause, means either--
	    (1) A final indirect cost rate proposal submitted by the
Contractor after the expiration of its fiscal year which--
		    (i) Relates to any payment made on the basis of billing rates;
or
		    (ii) Will be used in negotiating the final contract price; or
	    (2) The final statement of costs incurred and estimated to be
incurred under the Incentive Price Revision clause (if applicable),
which is used to establish the final contract price.
    (b) Contractors which include unallowable indirect costs in a
proposal may be subject to penalties. The penalties are prescribed
in 10 U.S.C. 2324 or 41 U.S.C. 256, as applicable, which is
implemented in Section 42.709 of the Federal Acquisition Regulation
(FAR).
    (c) The Contractor shall not include in any proposal any cost
which is unallowable, as defined in Part 31 of the FAR, or an
executive agency supplement to Part 31 of the FAR.
    (d) If the Contracting Officer determines that a cost submitted
by the Contractor in its proposal is expressly unallowable under a
cost principle in the FAR, or an executive agency supplement to the
FAR, that defines the allowability of specific selected costs, the
Contractor shall be assessed a penalty equal to--
	    (1) The amount of the disallowed cost allocated to this
contract; plus
	    (2) Simple interest, to be computed--
		    (i) On the amount the Contractor was paid (whether as a progress
or billing payment) in excess of the amount to which the Contractor
was entitled; and
		    (ii) Using the applicable rate effective for each six-month
interval prescribed by the Secretary of the Treasury pursuant to
Pub. L. 92-41 (85 Stat. 97).
    
(e) If the Contracting Officer determines that a cost submitted
by the Contractor in its proposal includes a cost previously
determined to be unallowable for that Contractor, then the
Contractor will be assessed a penalty in an amount equal to two
times the amount of the disallowed cost allocated to this contract.
    (f) Determinations under paragraphs (d) and (e) of this clause
are final decisions within the meaning of the Contract Disputes Act
of 1978 (41 U.S.C. 601, et seq.).
    (g) Pursuant to the criteria in FAR 42.709-5, the Contracting
Officer may waive the penalties in paragraph (d) or (e) of this
clause.
    (h) Payment by the Contractor of any penalty assessed under this
clause does not constitute repayment to the Government of any
unallowable cost which has been paid by the Government to the
Contractor.
						(End of clause)


[Federal Register: August 16, 1995 (Volume 60, Number 158)]
[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
48 CFR Parts 31, 37, 42 and 52

[FAC 90-31; FAR Case 94-754; Item IV]

RIN 9000-AG21
Federal Acquisition Regulation; Implementation of Various Cost
Principle Provisions
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Acquisition Regulatory Council is amending the
Federal Acquisition Regulation (FAR) to implement Section 2101 of the
Federal Acquisition Streamlining Act of 1994. Section 2101 adds the
costs of lobbying the legislative body of a political subdivision of a
state to the list of unallowable costs; adds the cost of
``conventions'' to the list of costs to be clarified in the cost
principles; and expands the coverage to the Coast Guard and NASA. The
provisions are made generally applicable to all other executive
agencies. This regulatory action was subject to Office of Management
and Budget review under Executive Order 12866, dated September 30,
1993.

EFFECTIVE DATE: October 1, 1995.
FOR FURTHER INFORMATION CONTACT:
Mr. Clarence Belton, Cost Principles Team Leader, at (703)602-2357, in
reference to this FAR case. For general information, contact the FAR
Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-
4755.

Please cite FAC 90-31, FAR case 94-754.

SUPPLEMENTARY INFORMATION:
A. Background
    The Federal Acquisition Streamlining Act of 1994 (the Act), Pub. L.
103-355, provides the authority to streamline the acquisition process
and minimize burdensome requirements unique to the Federal Government.
Major changes that can be expected in the acquisition process as a
result of the Act's implementation include changes in the areas of
Commercial Item Acquisition, the Truth in Negotiations Act, and
introduction of the Federal Acquisition Computer Network.
    This notice announces revisions developed under FAR case 94-754,
based on Section 2101 of the Act that adds the costs of lobbying the
legislative body of a political subdivision of a state to the list of
unallowable costs; adds the cost of ``conventions'' to the costs to be
clarified in the cost principles; and expands the coverage to the Coast
Guard and the National Aeronautics and Space Administration. Section
2151 amends 41 U.S.C. 256 to include all the provisions of 10 U.S.C.
2324, as amended by Section 2101. Therefore, the provisions are made
generally applicable to all other executive agencies. The new FAR
language, with only minor variations, was transferred from the current
coverage in the Defense Federal Acquisition Regulation Supplement.

B. Regulatory Flexibility Act
    The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded
to small businesses are awarded competitively on a firm-fixed-price
basis and, therefore, are not subject to the FAR cost principles.

C. Paperwork Reduction Act
    The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose recordkeeping or information collection
requirements, or collections of information from offerors, contractors,
or members of the public which require the approval of the Office of
Management and Budget under 44 U.S.C. 3501, et seq.

D. Public Comments
    Eight public comments were received in response to the proposed
rule published in the Federal Register on December 13, 1994 (59 FR
64268). These comments were considered in the formulation of this final
rule.

List of Subjects in 48 CFR Parts 31, 37, 42 and 52
    Government procurement.
    Dated: August 7, 1995.

Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.

    Therefore, 48 CFR Parts 31, 37, 42 and 52 are amended as set forth
below:
    1. The authority citation for 48 CFR Parts 31, 37, 42 and 52
continues to read as follows:
    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).


PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

31.205-1  [Amended]
    2. Section 31.205-1(f)(3) is amended by adding ``conventions,''
after ``meetings,''.

    3. Section 31.205-6 is amended in paragraph (g)(2) by adding a
sentence at the end of the introductory text and adding paragraph
(g)(3) to read as follows:
31.205-6  Compensation for personal services.
* * * * *
    (g) * * *
	    (2) * * * In addition, paragraph (g)(3) of this subsection applies
if the severance cost is for foreign nationals employed outside the
United States.
* * * * *
	    (3) Notwithstanding the reference to geographical area in 31.205-
6(b)(1), under 10 U.S.C. 2324(e)(1)(M) and 41 U.S.C. 256(e)(1)(M), the
costs of severance payments to foreign nationals employed under a
service contract performed outside the United States are unallowable to
the extent that such payments exceed amounts typically paid to
employees providing similar services in the same industry in the United
States. Further, under 10 U.S.C. 2324(e)(1)(N) and 41 U.S.C.
256(e)(1)(N), all such costs of severance payments which are otherwise
allowable are unallowable if the termination of employment of the
foreign national is the result of the closing of, or the curtailment of
activities at, a United States facility in that country at the request
of the government of that country; this does not apply if the closing
of a facility or curtailment of activities is made pursuant to a
status-of-forces or other country-to-country agreement entered into
with the government of that country before November 29, 1989. 10 U.S.C.
2324(e)(3) and 41 U.S.C. 256(e)(2) permit the head of the agency, or
designee, to waive these cost allowability limitations under certain
circumstances (see 37.113 and the solicitation provision at 52.237-8).
* * * * *

31.205-22  [Amended]
    4. Section 31.205-22 is amended in paragraphs (a) (3) and (4) by
revising the phrase ``Federal or state'' to read ``Federal, state, or
local'' each time it appears.

31.205-43  [Amended]
    5. Section 31.205-43 is amended in the introductory text of
paragraph (c) and (c)(3)(ii) by inserting ``convention,'' after
``meeting,'' and in paragraph (c)(1) by inserting ``conventions,''
after ``meetings,''.

    6. Section 31.603(b) is revised to read as follows:
31.603  Requirements.
* * * * *
    (b) Agencies are not expected to place additional restrictions on
individual items of cost. However, under 10 U.S.C. 2324(e) and 41
U.S.C. 256(e), the following costs are unallowable:
	    (1) Costs of entertainment, including amusement, diversion, and
social activities, and any costs directly associated with such costs
(such as tickets to shows or sports events, meals, lodging, rentals,
transportation, and gratuities).
	    (2) Costs incurred to influence (directly or indirectly)
legislative action on any matter pending before Congress, a State
legislature, or a legislative body of a political subdivision of a
State.
	    (3) Costs incurred in defense of any civil or criminal fraud
proceeding or similar proceeding (including filing of any false
certification) brought by the United States where the contractor is
found liable or has pleaded nolo contendere to a charge of fraud or
similar proceeding (including filing of a false certification).
	    (4) Payments of fines and penalties resulting from violations of,
or failure to comply with, Federal, state, local, or foreign laws and
regulations, except when incurred as a result of compliance with
specific terms and conditions of the contract or specific written
instructions from the contracting officer authorizing in advance such
payments in accordance with applicable regulations in the FAR or an
executive agency supplement to the FAR.
	    (5) Costs of any membership in any social, dining, or country club
or organization.
	    (6) Costs of alcoholic beverages.
	    (7) Contributions or donations, regardless of the recipient.
	    (8) Costs of advertising designed to promote the contractor or its
products.
	    (9) Costs of promotional items and memorabilia, including models,
gifts, and souvenirs.
	    (10) Costs for travel by commercial aircraft which exceed the
amount of the standard commercial fare.
	    (11) Costs incurred in making any payment (commonly known as a
``golden parachute payment'') which is--
		    (i) In an amount in excess of the normal severance pay paid by the
contractor to an employee upon termination of employment; and
		    (ii) Is paid to the employee contingent upon, and following, a
change in management control over, or ownership of, the contractor or a
substantial portion of the contractor's assets.
	    (12) Costs of commercial insurance that protects against the costs
of the contractor for correction of the contractor's own defects in
materials or workmanship.
	    (13) Costs of severance pay paid by the contractor to foreign
nationals employed by the contractor under a service contract performed
outside the United States, to the extent that the amount of the
severance pay paid in any case exceeds the amount paid in the industry
involved under the customary or prevailing practice for firms in that
industry providing similar services in the United States, as determined
by regulations in the FAR or in an executive agency supplement to the
FAR.
	    (14) Costs of severance pay paid by the contractor to a foreign
national employed by the contractor under a service contract performed
in a foreign country if the termination of the employment of the
foreign national is the result of the closing of, or curtailment of
activities at, a United States facility in that country at the request
of the government of that country.
	    (15) Costs incurred by a contractor in connection with any
criminal, civil, or administrative proceedings commenced by the United
States or a State, to the extent provided in 10 U.S.C. 2324(k) or 41
U.S.C. 256(k).

    7. Section 31.703(b) is revised to read as follows:
31.703  Requirements.
* * * * *
    (b) Agencies are not expected to place additional restrictions on
individual items of cost. However, under 10 U.S.C. 2324(e) and 41
U.S.C. 256(e), the costs cited in 31.603(b) are unallowable.


PART 37--SERVICE CONTRACTING

    8. Sections 37.113, 37.113-1 and 37.113-2 are added to read as
follows:
Sec.
37.113  Severance payments to foreign nationals.
37.113-1  Waiver of cost allowability limitations.
37.113-2  Solicitation provision and contract clause.
37.113  Severance payments to foreign nationals.
37.113-1  Waiver of cost allowability limitations.
    (a) The head of any agency, or designee, may waive the 31.205-
6(g)(3) cost allowability limitations on severance payments to foreign
nationals for contracts that--
		    (i) Provide significant support services for (i) members of the
armed forces stationed or deployed outside the United States, or 
		    (ii) employees of an executive agency posted outside the United States; and
	    (2) Will be performed in whole or in part outside the United
States.
    (b) Waivers can be granted only before contract award.
    (c) Waivers cannot be granted for--
	    (1) Military banking contracts, which are covered by 10 U.S.C.
2324(e)(2); or
	    (2) Severance payments made by a contractor to a foreign national
employed by the contractor under a DOD service contract in the Republic
of the Philippines, if the discontinuation of the foreign national is
the result of the termination of basing rights of the United States
military in the Republic of the Philippines (section 1351(b) of Public
Law 102-484, 10 U.S.C. 1592, note).

37.113-2  Solicitation provision and contract clause.
    (a) Use the provision at 52.237-8, Restriction on Severance
payments to Foreign Nationals, in all solicitations that meet the
criteria in 37.113-1(a), except for those excluded by 37.113-1(c).
    (b) When the head of an agency, or designee, has granted a waiver
pursuant to 37.113-1, use the clause at 52.237-9, Waiver of Limitation
on Severance Payments to Foreign Nationals.


PART 42--CONTRACT ADMINISTRATION

    9. Section 42.703(c)(2) is revised to read as follows:
42.703  Policy
* * * * *
    (c) * * *
	    (2) To ensure compliance with 10 U.S.C. 2324(a) and 41 U.S.C.
256(a), use established final indirect cost rates in negotiating the
final price of fixed-price incentive and fixed-price redeterminable
contracts and in other situations requiring that indirect costs be
settled before contract prices are established.

    10. Section 42.705-1 is amended by revising paragraph (b)(4) and
adding (b)(5)(v) to read as follows:
42.705-1  Contracting officer determination procedure.
* * * * *
    (b) * * *
	    (4) The Government negotiating team shall develop a negotiation
position. Pursuant to 10 U.S.C. 2324(f) and 41 U.S.C. 256(f), the
contracting, officer shall--
		    (i) Not resolve any questioned costs until obtaining--
			    (A) Adequate documentation on the costs; and
			    (B) The contract auditor's opinion on the allowability of the
costs.
		    (ii) Whenever possible, invite the contract auditor to serve as an
advisor at any negotiation or meeting with the contractor on the
determination of the contractor's final indirect cost rates.
	    (5) * * *
		    (v) Notify the contractor of the individual costs which were
considered unallowable and the respective amounts of the disallowance.


PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    11. Sections 52.237-8 and 52.237-9 are added to read as follows:
52.237-8  Restriction on Severance Payments to Foreign Nationals.
    As prescribed in 37.113-2(a), use the following provision:
Restriction on Severance Payments to Foreign Nationals (Oct 1995)
    (a) The Federal Acquisition Regulation (FAR), at 31.205-6(g)(3),
limits the cost allowability of severance payments to foreign
nationals employed under a service contract performed outside the
United States unless the head of the agency, or designee, grants a
waiver pursuant to FAR 37.113-1 before contract award.
    (b) In making the determination concerning the granting of a
waiver, the head of the agency, or designee, will determine that--
	    (1) The application of the severance pay limitations to the
contract would adversely affect the continuation of a program,
project, or activity that provides significant support services for
			(i) members of the armed forces stationed or deployed outside the
United States, or
		     (ii) employees of an executive agency posted outside the
United States;
	    (2) The Contractor has taken (or has established plans to take)
appropriate actions within its control to minimize the amount and
number of incidents of the payment of severance pay to employees
under the contract who are foreign nationals; and
	    (3) The payment of severance pay is necessary in order to comply
with a law that is generally applicable to a significant number of
businesses in the country in which the foreign national receiving
the payment performed services under the contract, or is necessary
to comply with a collective bargaining agreement.
						(End of provision)

52.237-9  Waiver of Limitation on Severance Payments to Foreign
Nationals.
    As prescribed in 37.113-2(b), use the following clause:
Waiver of Limitation on Severance Payments to Foreign Nationals (Oct
1995)
    (a) Pursuant to 10 U.S.C. 2324(e)(3)(A) or 41 U.S.C.
256(e)(2)(A), as applicable, the cost allowability limitations in
FAR 31.205-6(g)(3) are waived.
    (b) This clause may be incorporated into subcontracts issued
under this contract, if approved by the Contracting Officer.
						(End of clause)


[Federal Register: August 16, 1995 (Volume 60, Number 158)]
[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
48 CFR Part 31

[FAC 90-31, FAR Case 94-750; Item V]

RIN 9000-AG33
Federal Acquisition Regulation; Entertainment, Gift, and
Recreation Costs for Contractor Employees
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule amends the Federal Acquisition Regulation to
revise the cost principles governing entertainment, gift and recreation
costs for contractor employees. This regulatory action was subject to
Office of Management and Budget review under Executive Order 12866,
dated September 30, 1993.

EFFECTIVE DATE: October 1, 1995.
FOR FURTHER INFORMATION CONTACT:
Mr. Clarence M. Belton, Team Leader, Cost Principles Team, at (703)
602-2357, in reference to this FAR case. For general information,
contact the FAR Secretariat, Room 4037, GS Building, Washington, DC
20405 (202) 501-4755. Please cite FAC 90-31, FAR case 94-750.

SUPPLEMENTARY INFORMATION:
A. Background
    The Federal Acquisition Streamlining Act of 1994, Public Law 103-
355 (the Act), provides authorities that streamline the acquisition
process and minimize burdensome government-unique requirements. Major
changes that can be expected in the acquisition process as a result of
the Act's implementation include changes in the areas of Commercial
Item Acquisition, the Truth in Negotiations Act, and introduction of
the Federal Acquisition Computer Network. This notice announces Federal
Acquisition Regulation (FAR) revisions developed under FAR case 94-750
to implement Section 2192 of the Act.
    The final rule revisions to the cost principles at FAR 31.205-13
and 31.205-14 are made as a result of Section 2192 of the Federal
Acquisition Streamlining Act of 1994. An interim rule was promulgated
to meet the 120-day and 90-day deadlines in Section 2192 for changes to
FAR 31.205-13 and 31.205-14, respectively. The interim rule was
published in the Federal Register on January 13, 1995, 60 FR 3314. This
final rule replaces the interim rule in its entirety for any contracts
containing the interim rule. Thus, the provisions of the interim rule
will not apply to costs incurred under any contract under any
circumstances.
    To comply with the requirements of paragraph (a)(1) of Section
2192, the final rule provides that the costs of gifts are expressly
unallowable (31.205-13(b)). To clarify that the rule does not disallow
costs which meet the definition of and are properly accounted for as
compensation or recognition awards, the final rule provides a reference
to 31.205-6, which allows compensation awards recognizing performance
but also allows for recognition awards pursuant to an established
contractor plan or policy. Additionally, it makes the costs of
recreation expressly unallowable with the exception of costs of company
sponsored employee sports teams and employee organizations designed to
improve company loyalty, team work, or physical fitness. The final rule
retains the allowability of ``wellness/fitness centers'' found in the
interim rule. The final rule eliminates the requirement that costs are
only allowable to the extent that the net amount per employee must be
reasonable for all categories of costs under this cost principle.
    To comply with the requirements of paragraph (a)(2) of Section
2192, the final rule revises the cost principle at 31.205-14 to
incorporate the statutory wording relating to the unallowability of
entertainment costs and to delete the ``but see'' provision.

B. Regulatory Flexibility Act
    The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded
to small businesses are awarded competitively on a firm-fixed-price
basis and, therefore, are not subject to the FAR cost principles.

C. Paperwork Reduction Act
    The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose recordkeeping or information collection
requirements, or collection of information from offerors, contractors,
or members of the public which require the approval of OMB under 44
U.S.C. 3501, et seq.

D. Public Comments
    Twenty-three public comments were received in response to the
interim rule published in the Federal Register on January 13, 1995 (60
FR 3314). These comments were considered in the formulation of this
final rule.
List of Subjects in 48 CFR Part 31
    Government procurement.
    Dated: August 7, 1995
Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.
    Therefore, 48 CFR Part 31 is amended as set forth below:


PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

    1. The authority citation for 48 CFR Part 31 continues to read as
follows:
    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).

    2. Section 31.205-13 is revised to read as follows:
31.205-13  Employee morale, health, welfare, food service, and
dormitory costs and credits.
    (a) Aggregate costs incurred on activities designed to improve
working conditions, employer-employee relations, employee morale, and
employee performance (less income generated by these activities) are
allowable, except as limited by paragraphs (b), (c), and (d) of this
subsection. Some examples of allowable activities are house publications, health clinics, wellness/fitness
centers, employee counseling services, and food and dormitory services,
which include operating or furnishing facilities for cafeterias, dining
rooms, canteens, lunch wagons, vending machines, living accommodations,
or similar types of services for the contractor's employees at or near
the contractor's facilities.
    (b) Costs of gifts are unallowable. (Gifts do not include awards
for performance made pursuant to 31.205-6(f) or awards made in
recognition of employee achievements pursuant to an established
contractor plan or policy.)
    (c) Costs of recreation are unallowable, except for the costs of
employees' participation in company sponsored sports teams or employee
organizations designed to improve company loyalty, team work, or
physical fitness.
    (d) Losses from operating food and dormitory services may be
included as costs only if the contractor's objective is to operate such
services on a break-even basis. Losses sustained because food services
or lodging accommodations are furnished without charge or at prices or
rates which obviously would not be conducive to the accomplishment of
the above objective are not allowable. A loss may be allowed, however,
to the extent that the contractor can demonstrate that unusual
circumstances exist (e.g., where the contractor must provide food or
dormitory services at remote locations where adequate commercial
facilities are not reasonably available; or where charged but
unproductive labor costs would be excessive but for the services
provided or where cessation or reduction of food or dormitory
operations will not otherwise yield net cost savings) such that even
with efficient management, operating the services on a break-even basis
would require charging inordinately high prices, or prices or rates
higher than those charged by commercial establishments offering the
same services in the same geographical areas. Costs of food and
dormitory services shall include an allocable share of indirect
expenses pertaining to these activities.
    (e) When the contractor has an arrangement authorizing an employee
association to provide or operate a service, such as vending machines
in the contractor's plant, and retain the profits, such profits shall
be treated in the same manner as if the contractor were providing the
service (but see paragraph (f) of this subsection).
    (f) Contributions by the contractor to an employee organization,
including funds from vending machine receipts or similar sources, may
be included as costs incurred under paragraph (a) of this subsection
only to the extent that the contractor demonstrates that an equivalent
amount of the costs incurred by the employee organization would be
allowable if directly incurred by the contractor.

    3. Section 31.205-14 is revised to read as follows:
31.205-14  Entertainment costs.
     Costs of amusement, diversions, social activities, and any directly
associated costs such as tickets to shows or sports events, meals,
lodging, rentals, transportation, and gratuities are unallowable. Costs
made specifically unallowable under this cost principle are not
allowable under any other cost principle. Costs of membership in
social, dining, or country clubs or other organizations having the same
purposes are also unallowable, regardless of whether the cost is
reported as taxable income to the employees.


[Federal Register: August 16, 1995 (Volume 60, Number 158)]
[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
48 CFR Parts 42 and 52

[FAC 90-31; FAR Case 94-752; Item VI]

RIN 9000-AG29
Federal Acquisition Regulation; Contractor Overhead Certification
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule is issued pursuant to the Federal Acquisition
Streamlining Act of 1994 (the Act) to implement the requirements for
contractor certification of indirect costs (see proposed rule published
at 59 FR 65464, December 19, 1994). Section 2151 of the Act amended
Section 306 of the Federal Property and Administrative Services Act of
1949 (41 U.S.C. 256). This provision extended to the civilian agencies
the same certificate of indirect costs which is currently applicable to
Department of Defense (DOD) contracts, pursuant to 10 U.S.C. 2324(h).
This regulatory action was subject to Office of Management and Budget
review under Executive Order 12866, dated September 30, 1993.

EFFECTIVE DATE: October 1, 1995.
FOR FURTHER INFORMATION CONTACT: Mr. Clarence Belton, Cost Principles
Team Leader, at (703) 602-2357, in reference to this FAR case. For
general information, contact the FAR Secretariat, Room 4037, GS
Building, Washington, DC 20405 (202) 501-4755. Please cite FAC 90-31,
FAR case 94-752.

SUPPLEMENTARY INFORMATION:
A. Background
    The Federal Acquisition Streamlining Act of 1994, Pub. L. 103-355
(the Act), provides authorities that streamline the acquisition process
and minimize burdensome Government-unique requirements. Major changes
that can be expected in the acquisition process as a result of the
Act's implementation include changes in the areas of Commercial Item
Acquisition, the Truth in Negotiations Act, and introduction of the
Federal Acquisition Computer Network (FACNET).
    Section 2151 of the Act amends Section 306 of the Federal Property
and Administrative Services of 1949 (41 U.S.C. 256). It extends
requirements for contractor certification of indirect costs to the
civilian agencies. Pursuant to 10 U.S.C. 2324(h), the Department of
Defense already determines or negotiates contractor indirect cost rates
on the basis of a certified proposal.

B. Regulatory Flexibility Act
    The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded
to small businesses are awarded competitively on a firm-fixed-price
basis and, therefore, do not require submission of indirect cost rate
proposals.

C. Paperwork Reduction Act
    The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose additional recordkeeping or information
collection requirements, or collections of information from offerors,
contractors, or members of the public which require the approval of the
Office of Management and Budget under 44 U.S.C. 3501, et. seq.

D. Public Comments
    Seven public comments were received in response to the proposed
rule published in the Federal Register on December 19, 1994 (59 FR
65464). These comments were considered in the formulation of this final
rule.
List of Subjects in 48 CFR Parts 42 and 52
    Government procurement.
    Dated: August 7, 1995.
Edward C. Loeb,
Deputy Project Manager for the Implementation of the Federal
Acquisition Streamlining Act of 1994.

    Therefore, 48 CFR Parts 42 and 52 are amended as set forth below:
    1. The authority citation for 48 CFR Parts 42 and 52 continues to
read as follows:
    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).


PART 42--CONTRACT ADMINISTRATION

42.703  General.
    2. Section 42.703 is redesignated as 42.703-1 and a new section
42.703 is added as a heading to read as set forth above.

    3. Section 42.703-2 is added to read as follows:
42.703-2  Certificate of indirect costs.
    (a) General. In accordance with 10 U.S.C. 2324(h) and 41 U.S.C.
256(h), a proposal shall not be accepted and no agreement shall be made
to establish billing rates or final indirect cost rates unless the
costs have been certified by the contractor.
    (b) Waiver of certification.
		 (1) The agency head, or designee, may
waive the certification requirement when--
		    (i) It is determined to be in the interest of the United States;
and
		    (ii) The reasons for the determination are put in writing and made
available to the public.
	      (2) A waiver may be appropriate for a contract with--
		    (i) A foreign government or international organization, such as a
subsidiary body of the North Atlantic Treaty Organization;
		    (ii) A state or local government subject to OMB Circular A-87;
		    (iii) An educational institution subject to OMB Circular A-21; and
		    (iv) A nonprofit organization subject to OMB Circular A-122.
    (c) Failure to certify. 
		 (1) If the contractor has not certified its
proposal for billing rates or indirect costs rates and a waiver is not
appropriate, the contracting officer shall unilaterally establish the
rates if they are necessary for continuation of the contract.
    	 (2) Rates established unilaterally should be--
		    (i) Based on audited historical data or other available data as
long as unallowable costs are excluded; and
		    (ii) Set low enough to ensure that potentially unallowable costs
will not be reimbursed.
    (d) False certification. The contracting officer should consult
with legal counsel to determine appropriate action when a contractor
certificate of indirect costs is thought to be false.
    (e) Penalties for unallowable costs. 10 U.S.C. 2324(a) through (d)
and 41 U.S.C. 256 (a) through (d) prescribe penalties for submission of
unallowable costs in final indirect cost rate proposals (see 42.709 for
penalties and contracting officer responsibilities).
    (f) Contract clause. 
 		 (1) Except as provided in paragraph (f)(2) of
this subsection, the clause at 52.242-4, Certification of Indirect
Costs, shall be incorporated into all solicitations and contracts which
provide for--
		    (i) Interim reimbursement of indirect costs;
		    (ii) Establishment of final indirect costs rates; or
		    (iii) Contract financing that includes interim payment of indirect
costs, e.g., progress payments based on cost (Subpart 32.5) or progress
payments based on percentage or stage of completion.
	      (2) The Department of Energy may provide an alternate clause in its
agency supplement for its Management and Operating contracts.


PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    4. Section 52.242-4 is added to read as follows:
52.242-4  Certification of Indirect Costs.
    As prescribed in 42.703-2(f), insert the following clause:
Certification of Indirect Costs (Oct 1995)
    (a) The Contractor shall--
	    (1) Certify any proposal to establish or modify billing rates or
to establish final indirect cost rates;
	    (2) Use the format in paragraph (c) of this clause to certify;
and
	    (3) Have the certificate signed by an individual of the
Contractor's organization at a level no lower than a vice president
or chief financial officer of the business segment of the Contractor
that submits the proposal.
    (b) Failure by the Contractor to submit a signed certificate, as
described in this clause, shall result in payment of indirect costs
at rates unilaterally established by the Government.
    (c) The certificate of indirect costs shall read as follows:
Certificate of Indirect Costs
    This is to certify that to the best of my knowledge and belief:
	    1. I have reviewed this indirect cost proposal;
 	    2. All costs included in this proposal (identify proposal and
date) to establish billing or final indirect costs rates for
(identify period covered by rate) are allowable in accordance with
the requirements of contracts to which they apply and with the cost
principles of the Federal Acquisition Regulation (FAR) and its
supplements applicable to those contracts;
	    3. This proposal does not include any costs which are
unallowable under applicable cost principles of the FAR or its
supplements, including, but not limited to: advertising and public
relations costs, contributions and donations, entertainment costs,
fines and penalties, lobbying costs, defense of fraud proceedings,
and goodwill; and
	    4. All costs included in this proposal are properly allocable to
Government contracts on the basis of a beneficial or causal
relationship between the expenses incurred and the contracts to
which they are allocated in accordance with applicable acquisition
regulations.
    I declare under penalty of perjury that the foregoing is true
and correct.
Firm:------------------------------------------------------------------
Signature:-------------------------------------------------------------
Name of Certifying Official:-------------------------------------------
Title:-----------------------------------------------------------------
Date of Execution:-----------------------------------------------------

						(End of clause)
 
(End of FAC 90-31)