Federal Acquisition Regulation; Payment by Electronic Fund Transfer

Federal RegisterOct 3, 1995

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 32 and 52

[FAR Case 91-118]

RIN 9000-AG49

Federal Acquisition Regulation; Payment by Electronic Fund

Transfer

AGENCIES: Department of Defense (DOD), General Services Administration

(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council are considering changes to the Federal

Acquisition Regulation (FAR) to address the use of electronic fund

transfers for Federal contract payments. This regulatory action was

subject to Office of Management and Budget review under Executive Order

12866 dated September 30, 1993.

DATES: Comment Due Date: To be considered in the formulation of a final

rule, comments should be submitted to the address given below on or

before December 4, 1995.

ADDRESSES: Comments should be submitted to: General Services

Administration, FAR Secretariat (VRS), 18th & F Streets NW, Room 4037,

Washington, DC 20405.

FOR FURTHER INFORMATION CONTACT:

Mr. Jeremy F. Olson at (202) 501-3221 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 91-

118.

SUPPLEMENTARY INFORMATION:

A. Background

The Councils are committed to advancing the use of electronic fund

transfers (EFT) as the standard method of payment under Federal

contracts and believe that the use of EFT will ultimately reduce the

administrative burden currently associated with contract invoice or

financing payments made by check. The Councils also believe that many

of the banks used by Federal contractors are not currently capable of

properly handling the complex data transmissions used for many

Government contract payments. Similarly, many Government offices

involved in certifying invoices and disbursing contract payments are

not currently capable of using EFT as the standard method of payment.

In drafting the proposed rule, the Councils tried to avoid committing

the Government to the routine use of EFT capabilities it does not yet

possess. This does not lessen the Councils' commitment to the use of

EFT as a contract payment method but recognizes that, as new computer

systems and attendant EFT procedures develop in both the public and

private sectors, the use of EFT as a normal payment practice will also

expand.

The proposed rule amends FAR Subpart 32.9 to provide guidance

concerning the use of electronic fund transfers (EFT) as a method of

contract payment. The rule also adds solicitation provisions and

contract clauses at FAR section 52.232 to implement the guidance. The

rule establishes a requirement for contractors to provide certain

information which would enable the Government to make payments under

the contract by electronic fund transfer rather than by check. The

information necessary to make the EFT transaction is specified in two

new clauses at section 52.232-00, Mandatory Information for Electronic

Fund Transfer Payment, and section 52.232-01, Optional Information for

Electronic Fund Transfer Payment. Under section 52.232-00, the

contractor is required to provide the information, prior to the

submission of the first request for payment, as a condition of payment

under the contract. The clause at section 52.232-01 is used if EFT may

become a viable method of payment during the period of contract

performance and if the contractor consents and provides the necessary

data to enable payment by EFT.

B. Regulatory Flexibility Act

The proposed FAR changes may 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 changes

are intended to advance the use of EFT as a method of contract payment

and reduce the current administrative burden associated with payments

made by check. Under the proposed regulations, any business which

enters into a contract with the Government would be required to submit

certain information which would enable the Government to make contract

payments by EFT rather than by check. This requirement may have a

significant impact on a substantial number of small businesses because

it is expected that the majority of small businesses will receive

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payments by EFT under their contracts when EFT becomes the standard

method of contract payment. Based on fiscal years 1991 and 1992 data

for contracts over $25,000, if fully implemented, EFT as a method of

payment would affect nearly 22,000 small businesses who received over

86,000 new contract awards. An Initial Regulatory Flexibility Analysis

(IRFA) has been performed. A copy of the IRFA has been submitted to the

Chief Counsel for Advocacy for the Small Business Administration. A

copy of the IRFA may be obtained from the FAR Secretariat. Comments are

invited. Comments from small entities concerning the affected FAR

subpart will be considered in accordance with 5 U.S.C. 610. Such

comments must be submitted separately and should cite 5 U.S.C. 601 et

seq. (FAR case 91-118), in all correspondence.

C. Paperwork Burden

Under the provisions of the Paperwork Reduction Act of 1995 (Pub.L.

104-13), the Federal Acquisition Regulation (FAR) Secretariat has

submitted to the Office of Management and Budget (OMB) a request to

review and approve a new information collection requirement under

Section 3507(d) of the Act concerning Payment by Electronic Fund

Transfer.

Dates: Comments may be submitted on or before December 4, 1995.

Addresses: Send comments to Mr. Peter Weiss, FAR Desk Officer, OMB,

Room 10102, NEOB, Washington, DC 20503 and a copy to the FAR

Secretariat at the address listed below for comments on the proposed

rule.

Annual Reporting Burden: Public reporting burden for this

collection of information is estimated to average .5 hours per

response, including the time for reviewing instructions, searching

existing data sources, gathering and maintaining the data needed, and

completing and reviewing the collection of information. Send comments

regarding this burden estimate or any other aspect of this collection

of information, including suggestions for reducing this burden, to

General Services Administration, FAR Secretariat, 18th & F Streets,

NW., Room 4037, Washington, DC 20405, and to the FAR Desk Officer,

Office of Information and Regulatory Affairs, Office of Management and

Budget, Washington, DC 20503.

The annual reporting burden is estimated to be $2,235,000 as a

result of the following estimated number of hours of labor for

compliance: Respondents, 31,000; responses per respondent, 10; total

annual responses, 310,000; preparation hours per response, .5; and

total response burden hours, 155,000.

List of Subjects in 48 CFR Parts 32 and 52

Government procurement.

Dated: September 27, 1995.

C. Allen Olson,

Director, Office of Federal Acquisition Policy.

Therefore, it is proposed that 48 CFR parts 32 and 52 be amended as

set forth below:

PART 32--CONTRACT FINANCING

1. The authority citation for 48 CFR parts 32 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.

2. Section 32.902 is amended by adding the definition of

``Specified payment date'' in alphabetical order to read as follows:

32.902 Definitions.

* * * * *

Specified payment date means, for a payment by electronic fund

transfer (EFT), the date which the Government has placed in the EFT

payment transaction instruction given to the Federal Reserve System, as

the date on which the funds are to be transferred to the contractor's

financial agent (see 32.911-3). However, a specified payment date mut

be a valid date under the rules of the Federal Reserve System. For

example, if the Federal Reserve System requires two days' notice before

a specified payment date to process a transaction, release to the

Federal Reserve Bank of a payment transaction instruction one day

before the specified payment date could not constitute a valid date

under the rules of the Federal Reserve System.

3. Section 32.908 is amended by revising paragraph (d) and adding

paragraph (e) to read as follows:

32.908 Contract clauses.

* * * * *

(d) The contracting officer shall insert the clause at section

52.232-00, Mandatory Information for Electronic Fund Transfer Payment,

in all solicitations and contracts unless instructed not to by the

cognizant payment office.

(e) The contracting officer shall insert the clause at section

52.232-01, Optional Information for Electronic Fund Transfer Payment,

in all solicitations and contracts not containing the clause at section

52.232-00.

32.910 [Reserved]

4. Section 32.910 is reserved.

5. Sections 32.911 through 32.911-4 are added to read as follows:

32.911 Payment by electronic fund transfer (EFT).

32.911-1 Policy.

(a) The decision as to which clause is to be included in a contract

is that of the office responsible for making payment on the contract

per 31 CFR part 206. Normally, the payment office will notify the

contracting office of which clause to use. However, when in doubt, the

contracting officer shall consult with the payment office. (Note: If

the certifying and disbursing functions are separated, the decision as

to which clause to use shall be made by the office performing the

disbursing function.)

(b) Contracting officers shall not commit the Government to use or

not use EFT, but shall refer all contractor requests to the payment

office. When authorized by agency regulations, the payment office has

the authority not to exercise the Government's right to require

submission of EFT information.

conditions for payment by EFT and permits the Government to refuse to

make any payments until the contractor submits the information needed

to make payment by EFT.

(d) The clause at section 52.232-01 states the terms and conditions

for EFT payment if the contractor should request that the Governor use

EFT for payment.

(e) If more than one payment office will be making payments on a

contract, the contracting officer shall include the EFT clause

appropriate for each office and shall identify the applicability by

payment office and contract line item.

32.911-2 EFT information.

To protect against improper disclosure of a contractor's EFT

information, the clauses at section 52.232-00 and section 52.232-01

require the contractor to submit such information directly to the

payment office. However, if the information is inadvertently sent to

the contracting officer, the information shall be protected and

delivered immediately to the designated payment office.

32.911-3 Prompt payment.

The information provided to the Federal Reserve system that

constitutes the Government's order to pay the contractor includes a

specified payment date. The valid specified payment date is the date of

payment for prompt payment purposes, whether or not the Federal Reserve

system actually makes

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the payment by that date, and whether or not the contractor's financial

agent credits the contractor's account on that date.

32.911-4 Assignment of claims.

The use of EFT payment methods is not a substitute for a properly

executed assignment of claims in accordance with Subpart 32.8. EFT

information which shows the ultimate recipient of the transfer to be

other than the contractor, in the absence of a proper assignment of

claims, is considered to be incorrect EFT information within the

meaning of the ``Suspension of Payment'' paragraphs of the EFT clauses

section 52.232-00, Mandatory Information for Electronic Fund Transfer,

and section 52.232-01, Optional Information for Electronic Fund

Transfer.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

542.232-28 [Reserved]

6. Section 52.232-28 is removed and reserved.

7. Sections 52.232-00 and 52.232-01 are added to read as follows:

52.232-00 Mandatory Information for Electronic Fund Transfer Payment.

As prescribed in 32.908(d), insert the following clause:

MANDATORY INFORMATION FOR ELECTRONIC FUND TRANSFER PAYMENT (DATE)

(a) Method of payment. Payments by the Government under this

contract, including invoice and contract financing payments, may be

made by check or electronic fund transfer (EFT) at the option of the

Government. If payment is made by EFT, the Government may at its

option, also forward the associated payment information by

electronic transfer. For this clause, the term EFT includes both the

fund transfer and the information transfer.

(b) Mandatory submission of contractor's EFT information. (1)

The Contractor is required, as a condition to any payment under this

contract, to provide the Government with the information required to

make payment by EFT as described in paragraph (d) of this clause.

(2) If the Contractor provides EFT information applicable to

multiple contracts, the Contractor shall specifically state the

applicability of this EFT information in terms acceptable to the

payment office.

first request for payment (whether for invoice or contract financing

payment) under this contract, the Contractor shall provide the

information required to make contract payment by EFT, as described

in paragraph (d) of this clause, directly to the Government payment

office named in this contract. If more than one payment office is

named for the contract, the Contractor shall provide a separate

notice to each office. In the event that the EFT information

changes, the Contractor shall be responsible for providing the

changed information to the designated payment office(s).

(d) Required EFT information. The Government may make payment by

EFT through either the Automated Clearing House (ACH) or Federal

Reserve System wire transfer at the Government's option. The

Contractor shall provide the following information for both methods

in a form acceptable to the designated payment office. The

Contractor may supply this data for this or multiple contracts (see

paragraph b of this clause).

(1) The contract number to which this notice applies.

(2) The Contractor's name and account number at the Contractor's

financial agent.

(3) The signature, title, and telephone number of the Contractor

Official authorized to provide this information.

(4) For ACH payments only:

(i) Name, address, and 9-digit Routing Transit Number of the

Contractor's financial agent.

(ii) Contractor's account number and the type of account

(checking, saving, or lockbox).

(5) For Federal Reserve System Wire Transfer payments only:

(i) Name, address, telegraphic abbreviation, and the 9-digit

Routing Transit Number for the Contractor's financial agent.

(ii) If the Contractor's financial agent is not directly on-line

to the Federal Reserve System's wire transfer network, and therefore

not the receiver of the wire transfer payment, the Contractor shall

also provide the name, address, and 9-digit Routing Transit Number

of the correspondent financial agent receiving the wire transfer

payment.

(e) Suspension of payment. (1) Notwithstanding the provisions of

any other clause, the Government is not required to make any payment

under this contract until after receipt from the Contractor of the

correct EFT payment information by the designated payment office.

Until receipt of the correct EFT information, any invoice or

contract financing request shall be deemed not to be a valid invoice

or contract financing request as defined in the Prompt Payment

clause of this contract.

(2) If the EFT information changes, after submission of correct

EFT information, the Government shall begin using the changed EFT

information no later than the 30th day after its receipt. However,

the Contractor may request that no further payments be made until

the changed EFT information is implemented by the payment office. If

such suspension would result in a late payment under the Prompt

Payment clause of this contract, the Contractor's request for

suspension shall extend the due date for payment by the number of

days of the suspension.

(f) Contractor EFT arrangements. The Contractor shall designate

a single financial agent capable of receiving and processing the

electronic fund transfer and associated electronic payment

information transfer, using the EFT methods described in paragraph

(d) of this clause. The Contractor shall pay all fees and charges

for receipt and processing of transfers.

(g) Liability for uncompleted or erroneous transfers. (1) If an

uncompleted or erroneous transfer occurs because the Government

failed to use the Contractor-provided EFT information in the correct

manner, the Government remains responsible for (i) making a correct

payment, (ii) paying any prompt payment penalty due, and (iii)

recovering any erroneously directed funds.

(2) If an uncompleted or erroneous transfer occurs because

Contractor-provided EFT information was incorrect at the time of

Government release of the EFT payment transaction instruction to the

Federal Reserve System, and:

(i) If the funds are no longer under the control of the payment

office, the Government is deemed to have made payment and the

Contractor is responsible for recovery of any erroneously directed

funds, or

(ii) If the funds remain under the control of the payment

office, the Government retains the rights to either make payment by

mail or suspend the payment in accordance with paragraph (e) of this

clause.

(h) EFT and prompt payment. (1) A payment shall be deemed to

have been made in a timely manner in accordance with the Prompt

Payment clause of this contract if, in the EFT payment transaction

instruction given to the Federal Reserve System, the date specified

for settlement of the payment is on or before the prompt payment due

date, provided the specified due date is a valid date under the

rules of the Federal Reserve System.

(2) When payment cannot be made by EFT because of incorrect EFT

information provided by the Contractor, no interest penalty is due

after the date of the uncompleted or erroneous payment transaction,

provided that notice of the defective EFT information is issued to

the Contractor within seven days after the Government is notified of

the defective EFT information.

(i) EFT and assignment of claims. If the Contractor assigns the

proceeds of this contract as provided for in the clause at section

52.232-23, Assignment of Claims, the assignee shall provide the EFT

information required by paragraph (d) of this clause for the

assignee. In all respects, the requirements of this clause shall

apply to the assignee as if it were the Contractor. EFT information

which shows the ultimate recipient of the transfer to be other than

the Contractor, in the absence of a proper assignment of claims

acceptable to the Government, is incorrect EFT information within

the meaning of paragraph (e) of this clause.

(j) Payment office discretion. If the Contractor does not wish

to receive payment by EFT methods for one or more payments, a

request may be submitted to the designated payment office to refrain

from requiring EFT information or using the EFT payment method. The

decision to grant the request is solely that of the Government.

(End of clause)

52.232-01 Optional information for electronic fund transfer payment.

As prescribed in 32.908(e), insert the following clause:

[[Page 51769]]

OPTIONAL INFORMATION FOR ELECTRONIC FUND TRANSFER PAYMENT (DATE)

(a) Method of payment. After the Contractor provides the

information described in paragraph (d) of this clause, in accordance

with paragraph (b), payments by the Government under this contract,

including invoice and contract financing payments, may by made by

check or electronic fund transfer (EFT) at the option of the

Government. If payment is made by EFT, the Government may, at its

option, also forward the associated payment information by

electronic transfer. For this clause, the term EFT includes both the

fund transfer and the information transfer.

(b) Contractor consent. (1) If the Contractor is willing to be

paid by EFT, the Contractor shall provide the EFT information

described in paragraph (d) of this clause. If the Contractor does

not provide the EFT information, this clause is inoperative. The

Contractor agrees that, after providing EFT information in

accordance with this clause, the Contractor cannot withdraw the

Government's right to make payment by EFT for this contract.

(2) If the Contractor provides EFT information applicable to

multiple contracts, the Contractor shall specifically state the

applicability of this EFT information in terms acceptable to the

payment office.

first request for payment (whether for invoice or contract financing

payment) under this contract, for which the Contractor desires EFT

payment, the Contractor shall provide the information required to

make contract payment by EFT, as described in paragraph (d) of this

clause, directly to the Government payment office named in this

contract. If more than one payment office is named for the contract,

the Contractor shall provide a separate notice to each office. In

the event that the EFT information changes, the Contractor shall be

responsible for providing the changed information to the designated

payment office(s).

(d) Required EFT information. The Government may make payment by

EFT through either the Automated Clearing House (ACH) or Federal

Reserve System wire transfer at the Government's option. The

Contractor shall provide the following information for both methods

in a form acceptable to the designated payment office. The

Contractor may supply this data for this or multiple contracts (see

paragraph (b) of this clause).

(1) The contract number to which this notice applies.

(2) The Contractor's name and account number at the Contractor's

financial agent.

(3) The signature, title, and telephone number of the Contractor

official authorized to provide this information.

(4) For ACH payment only:

(i) Name, address, and 9-digit Routing Transit Number of the

Contractor's financial agent.

(ii) Contractor's account number and the type of account

(checking, saving, or lockbox).

(5) For Federal Reserve System Wire Transfer payments only:

(i) Name, address, telegraphic abbreviation, and the 9-digit

Routing Transit Number for the Contractor's financial agent,

(ii) If the Contractor's financial agent is not directly on-line

to the Federal Reserve System's wire transfer network, and therefore

not the receiver of the wire transfer payment, the Contractor shall

also provide the name, address, and 9-digit Routing Transit Number

of the correspondent financial agent receiving the wire transfer

payment.

(e) Suspension of payment: (1) Notwithstanding the provisions of

any other clause, if after receipt of the Contractor's EFT

information in accordance with paragraph (b) of this clause, the EFT

information is found to be incorrect, and until after receipt from

the Contractor of the correct EFT information by the designated

payment office: (i) the Government is not required to make any

further payment under this contract; and (ii) any invoice or