Federal Acquisition Regulation; Contract Financing

SUMMARY: This notice is issued to familiarize the public with the

status of the rulemaking effort on FAR Case 94-764, Contract Financing,

which implements the Federal Acquisition Streamlining Act of 1994

(FASA), to extend the period for public comment, and to provide notice

of a public meeting. The Contract Financing drafting team has made some

refinements to the proposed rule that was published in the March 15,

1995, Federal Register. The revised coverage has been mailed to the

public commenters on FAR Case 94-764 and copies may be obtained by

other interested parties.

DATES: Comment Date: Comments should be submitted to the FAR

Secretariat at the address shown below on or before July 31, 1995.

Meeting Date: The meeting will be held at 1:00 p.m. on July 17,

1995.

ADDRESSES: A copy of the revised coverage may be obtained by calling

the FAR Secretariat at 202-501-4755. Interested parties should submit

written comments to: General Services Administration, FAR Secretariat

(VRS), 18th and F Streets NW., Room 4037, Washington, DC 20405.

The public meeting will be held at: Office of Personnel Management,

1900 E Street NW., Room 1350, Washington, DC.

Please cite FAR case 94-764 in all correspondence related to this

case.

FOR FURTHER INFORMATION CONTACT: Mr. John Galbraith, Contract

Financing/Payment Team leader, at (703) 697-6710 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

FAR case 94-764.

SUPPLEMENTARY INFORMATION:

A. Background

On March 15, 1995, a proposed rule was published in the Federal

Register (60 FR 14156). The proposed rule afforded the public a 60-day

comment period. During that time, 21 organizations submitted more than

263 comments. A public meeting was also held on this rule on April 28,

1995. Based upon comments received, the financing drafting team has

refined the coverage. The FAR Council wants to afford the public and

Federal agencies the opportunity to comment on the refinements to the

proposed rule. Accordingly, a copy of the revised coverage has been

mailed to previous public commenters on FAR case 94-764. Other

interested parties may obtain a copy by contacting the FAR Secretariat.

B. Case Summary

FAR Case 94-764 implements Sections 2001 and 2051 of the Federal

Acquisition Streamlining Act of 1994 (Pub. L. 103-355), which

substantially changed the statutory authorities for Government

financing of contracts. Subsections 2001(f) and 2051(e) provide

specific authority for Government financing of purchases of commercial

items, and subsections 2001(b) and 2051(b) substantially revised the

authority for Government financing of purchases of non-commercial

items.

Subsections 2001(f) and 2051(e) provide specific authority for

Government financing of purchases of commercial items. These sections

amended 10 U.S.C. 2307 and 41 U.S.C. 255 by adding a new paragraph,

Conditions for Payments for Commercial Items, to each. These paragraphs

authorize the Government to provide contract financing with certain

limitations:

The financing must be in the best interest of the

Government;

The financing cannot exceed 15 percent until some

performance of work under the contract;

The terms and conditions must be appropriate or customary

in the commercial marketplace.

The above statutory provisions also remove from financing of

commercial purchases certain restrictions applicable to financing of

non-commercial purchases by other provisions of 10 U.S.C. 2307 and 41

U.S.C. 255. Subsections 2001(b) and 2051(b) amend the authority for

Government financing of non-commercial purchases by authorizing

financing on the basis of certain classes of measures of performance.

To implement these changes, the DOD, NASA, and GSA propose to amend

the FAR by revising Subparts 32.0, 32.1, 32.4, and 32.5; by adding new

Subparts 32.2 and 32.10; and by adding new clauses to 52.232. The

statutory changes create a fundamental distinction between financing of

purchases of commercial and non-commercial items. As a result, the

subparts of Part 32, Contract Financing, fall into three logical

categories:

Subparts applicable to both commercial and non-commercial

financing;

Subparts applicable to only commercial financing; and

Subparts applicable to only non-commercial financing.

C. Summary of Changes

The following are highlights of changes that have been made to the

proposed rule as a result of the written comments received during the

comment period and other issues that were raised at the public hearing

held on April 28, 1995:

Simplify rule--The team significantly rewrote, clarified

and shortened the coverage on financing of commercial item contracts.

Complexity of process--The team eliminated or made

optional many of the complex requirements that had applied to both

contracting officers and to contractors.

Access to records--The team eliminated the government's

access to records for contract financing of commercial items.

Certification--The team eliminated the certification

requirement that had applied to requests for payments under the

commercial financing clause.

Reduction of commercial financing--The team revised the

clause to eliminate its authority for the Government to take back

previously provided finance payments under certain conditions.

Market research--The team made market research optional

for commercial financing.

Contractor financial condition as adequate security--The

team restructured the policy on security for commercial item financing

to promote reliance on a healthy contractor's financial condition in

place of hard assets as security.

Financing rate--The team increased the maximum permissible

financing rate for performance based financing from 75% to 90%.

Payment of financing under dispute--The team added new

coverage permitting performance-based financing payments to be paid

under certain

[[Page 35455]]

circumstances, even though prior events had been delayed.

Payment of financing under government caused delay--The

team added specific authority to renegotiate performance-based

financing to mitigate the effects of government caused delay.

D. Presentations at the Public Meeting

To allow the public to present its views on the refinements to this

proposed rule, a public meeting will be held at the Office of Personnel

Management on July 17, 1995. Persons or organizations wishing to make

presentations will be allowed 10 minutes to present their views,

provided they notify the FAR Secretariat at (202) 501-4745 and provide

an advance copy of their remarks not later than July 14, 1995.

Dated: July 3, 1995.

Jeremy Olson,

Acting Deputy Project Manager for the Implementation of the Federal

Acquisition Streamlining Act.

[FR Doc. 95-16718 Filed 7-6-95; 8:45 am]

BILLING CODE 6820-EP-M