Federal Acquisition Regulation; Special Contracting Methods

SUMMARY: This proposed rule is issued pursuant to the Federal

Acquisition Streamlining Act of 1994 (the Act), Sections 1022 and 1072

on multiyear contracting; Section 1074 on the Economy Act; Sections

1503, 1504, 1552, and 1553 on the delegation of procurement functions

and determinations and decisions; and Section 6002 on contracting

functions performed by Federal personnel. This regulatory action is

subject to Office of Management and Budget review under Executive Order

12866, dated September 30, 1993.

DATES: Comments should be submitted on or before May 15, 1995 to be

considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to:

General Services Administration, FAR Secretariat (VRS), 18th & F

Streets, NW., Room 4037, Washington, DC 20405, Telephone: (202) 501-

4755.

Please cite FAR case 94-710 in all correspondence related to this

case.

FOR FURTHER INFORMATION CONTACT:

Mr. Ed McAndrew, Special Contracting Team Leader, at (202) 501-1474 in

reference to this FAR case. For general information, contact the FAR

Secretariat, Room 4037, GSA Building, Washington, DC 20405, (202) 501-

4755. Please cite FAR case 94-710.

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, Simplified Acquisition Procedures, the Truth in

Negotiations Act, and introduction of the Federal Acquisition Computer

Network (FACNET).

FAR Case 94-710

This notice announces FAR revisions developed under FAR case 94-710

which was based on provisions in the Act which provided for multiple

awards under certain circumstances; permitted civilian agencies to

enter into multiyear contracts under certain circumstances; and for

agencies to use the Economy Act authority to acquire supplies and

services from another agency. Other provisions of the statute were

minor in nature and were not as important as the aforementioned

provisions.

The FAR Council is interested in an exchange of ideas and opinions

with respect to the regulatory implementation of the Act. For that

reason, the FAR Council is conducting a series of public meetings.

However, the FAR Council has not scheduled a public meeting on this

rule (FAR case 94-710) because of the clarifying and non-controversial

nature of the rule. If the public believes such a meeting is needed

with respect to this rule, a letter requesting a public meeting and

outlining the nature of the requested meeting shall be submitted to and

received by the FAR Secretariat (see ADDRESSES caption, above) on or

before April 17, 1995. The FAR Council will consider such requests in

determining whether a public meeting on this rule should be scheduled.

B. Regulatory Flexibility Act

The proposed 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 promulgation

of this policy is expected to improve access to the procurement process

for small and disadvantaged businesses, and to broaden the scope of

competitive acquisitions for which small businesses may be eligible.

There is a potential negative impact resulting from consolidation of

contract requirements under a multiyear contract; however, it is

expected that this negative impact could be mitigated by an increase in

the opportunities for small businesses to receive subcontracts. The

rule will place no limit on small businesses' ability to participate.

An Initial Regulatory Flexibility Analysis (IRFA) has been prepared and

will be provided to the Chief Counsel for Advocacy for the Small

Business Administration. 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 94-710), in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the proposed

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.

List of Subjects in 48 CFR Parts 1, 7, 17, 37, 49 and 52

Government procurement.

Dated: March 9, 1995.

Barry Cohen,

Project Manager for the Implementation of the Federal Acquisition

Streamlining Act of 1994.

Therefore, it is proposed that 48 CFR Parts 1, 7, 17, 37, 49 and 52

be amended as set forth below:

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

1. The authority citation for 48 CFR Parts 1, 7, 17, 37, 49 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).

2. Section 1.601 is revised to read as follows:

1.601 General.

(a) Unless specifically prohibited by another provision of law,

authority and responsibility to contract for authorized supplies and

services are vested in the agency head. The agency head may establish

contracting activities and delegate broad authority to manage the

agency's contracting functions in accordance with agency procedures to

heads of such contracting activities. Contracts may be entered into and

signed on behalf of the government only by contracting officers. In

some agencies, a relatively small number of high level officials are

designated contracting officers solely by virtue of their positions.

Contracting officers below the level of a head of a contracting

activity shall be selected and appointed under 1.603.

(b) The heads of two or more agencies may by agreement--

(1) Delegate acquisition functions and assign acquisition

responsibilities from one agency to another of those agencies or to an

officer or civilian employee of those agencies; or [[Page 14341]]

(2) Create joint or combined officers to exercise acquisition

functions and responsibilities.

PART 7--ACQUISITION PLANNING

3. Section 7.103 is amended by adding paragraph (m) to read as

follows:

7.103 Agency-head responsibilities.

* * * * *

(m) Making a determination, prior to issuance of a solicitation for

advisory and assistance services involving the analysis and evaluation

of proposals submitted in response to a solicitation, that a sufficient

number of covered personnel with the training and capability to perform

an evaluation and analysis of proposals submitted in response to a

solicitation are not readily available within the agency or from

another Federal agency in accordance with the guidelines at 48 CFR

(FAR) 37.204. Covered personnel who may be paid for evaluation or

analysis are:

(1) An employee means an officer or an individual who is appointed

in the civil service by one of the following acting in an official

capacity; (i) the President; (ii) a Member of Congress; (iii) a member

of the uniformed services; (iv) an individual who is an employee; (v)

the head of a government controlled corporation; or (vi) an adjutant

general appointed by the Secretary concerned under the national guard

(32 U.S.C. 709(c)).

(2) A member of the Armed Forces of the United States.

(3) A person assigned to a Federal agency who has been transferred

to another position in the competitive service in another agency.

PART 17--SPECIAL CONTRACTING METHODS

4. Subpart 17.1 is revised to read as follows:

Subpart 17.1--Multiyear Contracting

Sec.

17.101 Authority.

17.102 Applicability.

17.103 Definitions.

17.104 General.

17.105 Policy.

17.105-1 Uses.

17.105-2 Objectives.

17.106 Procedures.

17.106-1 General.

17.106-2 Solicitations.

17.106-3 Special procedures applicable to DoD, NASA and the Coast

Guard.

17.107 Options.

17.108 Congressional notification.

17.109 Contract clauses.

17.101 Authority.

This subpart implements Section 304B of the Federal Property and

Administrative Services Act of 1949 (41 U.S.C. 254c) and 10 U.S.C.

2306b and provides policy and procedures for the use of multiyear

contracting.

17.102 Applicability.

For DoD, NASA, and the Coast Guard, the authorities cited in 17.101

do not apply to contracts for the purchase of supplies to which 40

U.S.C. 759 applies (information resource management supply contracts).

17.103 Definitions.

Annual funding means appropriations of which Congress limits

obligational availability to a single fiscal year.

Cancellation means the cancellation (within a contractually

specified time) of the total requirements of all remaining program

years. Cancellation results when the contracting officer (a) notifies

the contractor of nonavailability of funds for contract performance for

any subsequent program year, or (b) fails to notify the contractor that

funds are available for performance of the succeeding program year

requirement.

Cancellation ceiling means the maximum amount that the contractor

can receive in the event that cancellation occurs.

Cancellation charge means the amount of unrecovered costs which

would have been recouped through amortization over the full term of the

contract, including the term cancelled.

Multiple year contract, as used in this subpart, means a contract

having a term of more than one year regardless of the type of funding

that applies.

Multiyear contract means a contract for the purchase of supplies or

services for more than one, but not more than five, program years. A

multiyear contract may provide that performance under the contract

during the second and subsequent years of the contract is contingent

upon the appropriation of funds, and (if it does so provide) may

provide for a cancellation payment to be made to the contractor if

appropriations are not made.

Multiyear funding means appropriated funds covering more than 1

fiscal year.

No-year funding means funding available for new obligations without

regard to fiscal year and until the appropriation is either exhausted

or otherwise cancelled.

Nonrecurring costs means those production costs which are generally

incurred on a one-time basis and include such costs as plant or

equipment relocation, plant rearrangement, special tooling and special

test equipment, preproduction engineering, initial spoilage and rework,

and specialized work force training.

Recurring costs, as used in this subpart, means production costs

that vary with the quantity being produced such as labor and materials.

Termination for convenience means the procedure which may apply to

any Government contract, including multiyear contracts. As contrasted

with cancellation, termination can be effected at any time during the

life of the contract (cancellation is effected between fiscal years)

and can be for the total quantity or a partial quantity (whereas

cancellation must be for all subsequent fiscal years' quantities).

17.104 General.

(a) Multiyear contracting is a type of multiple year contract that

employs special contracting methods to acquire known requirements in

quantities and total cost not over planned requirements for up to 5

years unless otherwise authorized by statute, even though the total

funds ultimately to be obligated may not be available at the time of

contract award. This method may be used in sealed bidding or

contracting by negotiation.

(b) Multiyear contracting is a flexible contracting method

applicable to a wide range of acquisitions. The extent to which

cancellation provisions are used in multiyear contracts will depend on

the unique circumstances of each contracting action. Accordingly, for

multiyear contracts, the agency head may authorize modification of the

requirements of this subpart and the clauses at 48 CFR (FAR) 52.217-2,

Cancellation Under Multiyear Contracts.

17.105 Policy.

17.105-1 Uses.

(a) The contracting officer may enter into a multiyear contract

if--

(1) Funds are available and obligated for the contract, for the

full period of the contract or for the first fiscal year in which the

contract is in effect, and for the estimated costs associated with any

necessary cancellation of the contract; and

(2) The head of the contracting agency determines that--

(i) The need for the supplies or services is reasonably firm and

continuing over the period of the contract; and

(ii) A multiyear contract will serve the best interests of the

United States by encouraging full and open competition or promoting

economy in administration, performance, and operation of the agency's

programs, and

(3) If for DoD, NASA or the Coast Guard-- [[Page 14342]]

(i) The use of such a contract will result in substantial savings

of the total estimated costs of carrying out the program through annual

contracts;

(ii) With regard to paragraph (a)(2)(i) of this section, the

minimum need to be purchased is expected to remain substantially

unchanged during the contemplated contract period in terms of

production rate, procurement rate, and total quantities;

(iii) There is a stable design for the supplies to be acquired and

the technical risks associated with such supplies are not excessive;

and

(iv) That the estimates of both the cost of the contract and the

estimated cost avoidance through the use of a multiyear contract are

realistic.

(b) Multiyear contracting may be used when no-year, annual,

multiple year or multiyear funding is available.

(c) The multiyear contracting method may be used for the

acquisition of supplies or services.

(d) If funds are not appropriated to support the succeeding years'

requirements, the agency must cancel the contract.

17.105-2 Objectives.

Use of multiyear contracting is encouraged to take advantage of one

or more of the following:

(a) Lower costs.

(b) Enhancement of standardization.

(c) Reduction of administrative burden in the placement and

administration of contracts.

(d) Substantial continuity of production or performance, thus

avoiding annual startup costs, preproduction testing costs, make ready

expenses, and phaseout costs.

(e) Stabilization of contractor work forces.

(f) Avoidance of the need for establishing and ``proving out''

quality control techniques and procedures for a new contractor each

year.

(g) Broadening the competitive base with opportunity for

participation by firms not otherwise willing or able to compete for

lesser quantities, particularly in cases involving high startup costs.

(h) Provide incentives to contractors to improve productivity

through investment in capital facilities, equipment, and advanced

technology.

17.106 Procedures.

17.106-1 General.

(a) Method of contracting. The nature of the requirement should

govern the selection of the method of contracting, since the multiyear

procedure is compatible with sealed bidding, including two-step sealed

bidding, and contract negotiation.

(b) Type of contract. Given the longer performance period

associated with multiyear acquisition, consideration in pricing fixed-

priced contracts should be given to the use of economic price

adjustment terms, profit objectives comparable with contractor risk,

financing arrangements and cash flow requirements.

(c) Cancellation procedures. (1) All program years except the first

are subject to cancellation. For each program year subject to

cancellation, the contracting officer shall establish a cancellation

ceiling. Ceilings must exclude amounts for items included in prior

program years. The contracting officer shall reduce the cancellation

ceiling for each program year in direct proportion to the remaining

requirements subject to cancellation. For example, consider that the

total nonrecurring costs (see 48 CFR (FAR) 15.804-6) are estimated at

ten percent of the total multiyear price, and the percentages for each

of the program-year requirements for 5-years are (i) 30 in the first

year, (ii) 30 in the second, (iii) 20 in the third, (iv) 10 in the

fourth, and (v) 10 in the fifth. The cancellation percentages, after

deducting three percent for the first program year, would be 7, 4, 2,

and 1 percent of the total price applicable to the second, third,

fourth, and fifth program years, respectively.

(2) In determining cancellation ceilings, the contracting officer

must estimate reasonable preproduction or startup, labor learning, and

other nonrecurring costs to be incurred by an ``average'' prime

contractor or subcontractor, which would be applicable to, and which

normally would be amortized over, the items or services to be furnished

under the multiyear requirements. Nonrecurring costs include such

costs, where applicable, as plant or equipment relocation or

rearrangement, special tooling and special test equipment,

preproduction engineering, initial rework, initial spoilage, pilot

runs, allocable portions of the costs of facilities to be acquired or

established for the conduct of the work, costs incurred for the

assembly training and transportation of a specialized work force to and

from the job site, and unrealized labor learning. Do not include any

costs of labor or materials, or other expenses (except as indicated in

this paragraph), which might be incurred for performance of subsequent

program year requirements. The total estimate of the above costs must

then be compared with the best estimate of the contract cost to arrive

at a reasonable percentage or dollar figure. To perform this

calculation, the contracting officer shall obtain in-house engineering

cost estimates identifying detailed recurring and nonrecurring costs,

the effect of labor learning.

(3) The contracting officer shall establish cancellation dates for

each program year's requirements regarding production lead time and the

date by which funding for these requirements can reasonably be

established. The contracting officer shall include these dates in the

schedule, as appropriate.

(d) Cancellation ceilings. Cancellation ceilings and dates may be

revised after issuing the solicitation if necessary. In sealed bidding,

the contracting officer shall change the ceiling by amending the

solicitation before bid opening. In two-step sealed bidding,

discussions conducted during the first step may indicate the need for

revised ceilings and dates which may be incorporated in step two. In a

negotiated acquisition, negotiations with offerors may provide

information requiring a change in cancellation ceilings and dates

before final negotiation and contract award.

(e) Funding/payment of cancellation charges. If cancellation

occurs, the contractor is entitled to payment (see the clause at 48 CFR

(FAR) 52.217-2, Cancellation Under Multiyear Contracts).

(f) Presolicitation or pre-bid conferences. To ensure that all

interested sources of supply are thoroughly aware of how multiyear

contracting is accomplished, use of presolicitation or pre-bid

conferences may be advisable.

(g) Payment limit. The contracting officer shall limit the

Government's payment obligation to an amount available for contract

performance. The contracting officer shall insert the amount for the

first program year in the contract upon award and modify it for

successive program years upon availability of funds.

(h) Termination payment. If the contract is terminated for the

convenience of the Government in whole, including items subject to

cancellation, the Government's obligation shall not exceed the amount

specified in the schedule as available for contract performance, plus

the cancellation ceiling.

17.106-2 Solicitations.

Solicitations for multiyear contracts shall reflect all the factors

to be considered for evaluation, specifically including the following--

(a) The requirements, by item of supply or service, for the--

[[Page 14343]]

(1) First program year; and

(2) Multiyear contract including the requirements for each program

year.

(b) Criteria for comparing the lowest evaluated submission on the

first program year's requirement to the lowest evaluated submission on

the multiyear requirements.

(c) A provision that, if the Government determines before award

that only the first program year requirements are needed, the

Government may evaluate offers and make award solely on the basis of

price, or estimated cost and fee, offered on that year's requirements.

(d) A provision specifying a separate cancellation ceiling (on a

percentage or dollar basis) and dates applicable to each program year

subject to a cancellation (see 17.106-1 (c) and (d)).

(e) A statement that award will not be made on less than the first

program year requirements.

(f) Unless Government administrative costs incident to annual

contracting and administration can be reasonably established, they

shall not be used as a factor for evaluation. If so utilized, their

monetary value shall be set forth in the solicitation.

(g) The cancellation ceiling shall not be an evaluation factor.

17.106-3 Special procedures applicable to DoD, NASA and the Coast

Guard.

(a) Participation by subcontractors, suppliers and vendors. In

order to broaden the defense industrial base, to the maximum extent

practicable--

(1) Multiyear contracting shall be used in such a manner as to

seek, retain, and promote the use under such contracts of companies

that are subcontractors, vendors and suppliers; and

(2) Upon accrual of any payment or other benefit under such a

multiyear contract to any subcontractor, vendor, or supplier company

participating in such contract, such payment or benefit shall be

delivered to such company in the most expeditious manner practicable.

(b) Protection of existing authority. To the extent practicable,

multiyear contracting shall not be carried out in a manner to preclude

or curtail the existing ability of the department or agency to--

(1) Provide for competition in the production of supplies to be

delivered under such a contract; or

(2) Provide for termination of a prime contract the performance of

which is deficient with respect to cost, quality or schedule.

(c) Cancellation or termination for insufficient funding. In the

event funds are not made available for the continuation of a multiyear

contract awarded using the procedures in this section, the contract

shall be cancelled or terminated and payment made from--

(1) Appropriations originally made available for the performance of

the contract concerned;

(2) Appropriations currently available for procurement of the type

of supplies concerned and not otherwise obligated; or

(3) Funds appropriated for these payments.

17.107 Options.

Benefits may accrue by including options in a multiyear contract.

In that event, contracting officers must follow the requirements of

subpart 17.2. Options should not include--

(a) Charges for plant and equipment already amortized, nor

(b) Other nonrecurring charges which were included in the basic

contract.

17.108 Congressional notification.

(a) Except for DoD, NASA and the Coast Guard, a multiyear contract

which includes a cancellation ceiling in excess of $10 million may not

be awarded until the head of the agency gives written notification of

the proposed contract and of the proposed cancellation ceiling for that

contract to the Congress. The contract may not be awarded until the

thirty-first day after the date of notification.

(b) For DoD, NASA, and the Coast Guard, a multiyear contract which

includes a cancellation ceiling in excess of $100 million may not be

awarded until the head of the agency gives written notification of the

proposed contract and of the proposed cancellation ceiling for that

contract to the Committees on Armed Services and on Appropriations of

the Senate and House of Representatives. The contract may not be

awarded until the thirty-first day after the date of notification.

17.109 Contract clauses.

(a) The contracting officer shall insert the clause at 48 CFR (FAR)

52.217-2, Cancellation Under Multiyear Contracts, in solicitations and

contracts when a multiyear contract is contemplated.

(b) Economic price adjustment clauses. Economic price adjustment

clauses are adaptable to multiyear contracting needs. When the period

of production is likely to warrant a labor and material costs

contingency in the contract price, the contracting officer should

normally use an economic price adjustment clause (see 48 CFR (FAR)

16.203). When contracting for services, the contracting officer--

(1) Shall add the clause at 48 CFR (FAR) 52.222-43, Fair Labor

Standards Act and Service Contract Act--Price Adjustment (Multiyear and

Option Contracts), when the contract includes the clause at 48 CFR

(FAR) 52.222-41, Service Contract Act of 1965;

(2) May modify the clause at 48 CFR (FAR) 52.222-43 in overseas

contracts when laws, regulations, or international agreements require

contractors to pay higher wage rates; or

(3) May use an economic price adjustment clause authorized by 48

CFR (FAR) 16.203 when potential fluctuations require coverage, and are

not included in cost contingencies provided for by the clause at 48 CFR

(FAR) 52.222-43.

5. Subpart 17.5 is revised to read as follows:

Subpart 17.5--Interagency Acquisitions Under the Economy Act

Sec.

17.500 Scope of subpart.

17.501 Definition.

17.502 General.

17.503 Determination requirements.

17.504 Ordering procedures.

17.505 Payment.

17.500 Scope of subpart.

(a) This subpart prescribes policies and procedures applicable to

interagency acquisitions under the Economy Act (31 U.S.C. 1535). The

Economy Act also provides authority for placement of orders between

major organizational units within an agency. Procedures for such intra-

agency transactions should be addressed in agency regulations.

(b) The Economy Act applies when more specific statutory authority

does not exist. Examples of interagency acquisitions to which the

Economy Act does not apply include acquisitions from required sources

of supplies prescribed in 48 CFR Part 8, which have separate statutory

authority.

17.501 Definition.

Interagency acquisition means a procedure by which an agency

needing supplies or services (the requesting agency) obtains them from

another agency (the servicing agency).

17.502 General.

(a) The Economy Act may not be used by an agency to circumvent

conditions and limitations imposed on the use of Government funds

appropriated for the acquisition.

(b) Acquisitions under the Economy Act are not exempt from the

requirements of 48 CFR (FAR) part 7, subpart 7.3, Contractor Versus

Government Performance. [[Page 14344]]

(c) The Economy Act may not be used to make acquisitions

conflicting with any other agency's authority or responsibility (for

example, that of the Administrator of General Services under the

Federal Property and Administrative Services Act).

17.503 Determination requirements.

(a) An agency may place orders with another agency for supplies or

services that the servicing agency may be in a position or equipped to

supply, render, or obtain by contract if it is determined by the head

of the requesting agency that--

(1) It is in the Government's best interest to do so, and

(2) That the ordered supplies or services cannot be provided by

contract as conveniently or cheaply by the requesting agency from a

commercial enterprise.

(b) If the Economy Act order requires contracting action by the

servicing agency, the determination shall include a finding that one or

more of the following circumstances is applicable--

(1) The acquisition is appropriately made under an existing

contract of the servicing agency to meet the requirements of the

servicing agency for the same or similar goods or services;

(2) The servicing agency has capabilities or expertise to enter

into a contract for such goods or services which is not available

within the requesting agency; or

(3) The servicing agency is specifically authorized by law or

regulation to purchase such goods or services on behalf of other

agencies.

(c) Determinations shall be approved either by the contracting

officer of the requesting agency with authority to contract for the

goods or services to be ordered, or by another official designated by

agency regulation to do so, except that if the servicing agency is not

covered by the Federal Acquisition Regulation, approval of the

determination may not be delegated below the senior procurement

executive of the requesting agency.

17.504 Ordering procedures.

(a) Before placing an Economy Act order for supplies or services

from another Government agency, the requesting agency shall make the

determination required in 17.503. The servicing agency may require a

copy of the determination to be furnished with the order.

(b) The order may be placed on any form or document that is

acceptable to both agencies. The order should include--

(1) A description of the supplies or services required;

(2) Delivery requirements;

(3) A funds citation;

(4) A payment provision (see 17.505); and

(5) Acquisition authority as may be appropriate (see 17.504(d)).

(c) The requesting and servicing agencies should agree to

procedures for the resolution of disagreements that may arise under

interagency acquisitions, including, in appropriate circumstances, the

use of a third-party forum. If a third party is proposed, consent of

the third party should be obtained in writing.

(d) When an interagency acquisition requires the servicing agency

to award a contract, the following procedures apply:

(1) If a justification and approval or a determination and findings

(D&F) (other than the requesting agency's determination required in

17.502) is required by law or regulation, the servicing agency shall

execute and issue the justification and approval or D&F. The requesting

agency shall furnish the servicing agency any information needed to

make the justification and approval and the D&F.

(2) The requesting agency shall also be responsible for furnishing

other assistance that may be necessary, such as providing special

contract terms or other requirements that must comply with any

condition or limitation applicable to the funds of the requesting

agency.

(3) The servicing agency is responsible for compliance with all

other legal or regulatory requirements applicable to the contract,

including (i) having adequate statutory authority for the contractual

action, and (ii) complying fully with the competition requirements of

48 CFR part 6 (see 6.002).

(e) Nonsponsoring Federal agencies may use a Federally Funded

Research and Development Center (FFRDC) only if the terms of the

FFRDC's sponsoring agreement permit work from other than a sponsoring

agency. Work placed with the FFRDC is subject to the acceptance by the

sponsor and must fall within the purpose, mission, general scope of

effort, or special competency of the FFRDC. (See 48 CFR (FAR) 35.017;

see also 48 CFR (FAR) 6.302 for procedures to follow where using less

than full and open competition). The nonsponsoring agency shall provide

to the sponsoring agency necessary documentation that the requested

work would not place the FFRDC in direct competition with domestic

private industry.

17.505 Payment.

(a) Under the Economy Act--

(1) The servicing agency may ask the requesting agency, in writing,

for advance payment for all or part of the estimated cost of furnishing

the supplies or services; or

(2) If approved by the servicing agency, payment for actual costs

may be made by the requesting agency after the supplies or services

have been furnished.

(b) If advance payment is made, adjustment on the basis of actual

costs shall be made as agreed by the agencies.

(c) Bills rendered or requests for advance payment shall not be

subject to audit or certification in advance of payment.

(d) If the Economy Act order requires contracting action by the

servicing agency, then in no event shall the servicing agency require,

or the requiring agency pay, any fee or charge in excess of the actual

cost (or estimated cost if the actual cost is not known) of entering

into and administering the contract or other agreement under which the

order is filled.

PART 37--SERVICE CONTRACTING

6. Subpart 37.2 is revised to read as follows:

Subpart 37.2--Advisory and Assistance Services

Sec.

37.200 Scope of subpart.

37.201 Definition.

37.202 Exclusions.

37.203 Policy.

37.204 Guidelines for determining availability of personnel.

37.205 Contracting officer responsibilities.

37.200 Scope of subpart.

This subpart prescribes policies and procedures for acquiring

advisory and assistance services by contract. The subpart regulates

these contracts with individuals and organizations for both personal

and nonpersonal services.

37.201 Definition.

Advisory and assistance services means the following services when

provided by nongovernmental sources--

(a) Management and professional support services;

(b) Studies, analyses and evaluations; and

(c) Engineering and technical services.

37.202 Exclusions.

The following activities and programs are excluded or exempted from

the definition of advisory or assistance services:

(a) Routine automated data processing and telecommunications

services unless such services are an integral part of a contract for

the procurement of advisory and assistance services. [[Page 14345]]

(b) Architectural and engineering services as defined in section

901 of the Brooks Architect-Engineers Act (40 U.S.C. 541).

(c) Research on basic mathematics or medical, biological, physical,

social, psychological, or other phenomena.

37.203 Policy.

(a) The acquisition of advisory and assistance services is a

legitimate way to improve Government services and operations.

Accordingly, advisory and assistance services may be used at all

organizational levels to help managers achieve maximum effectiveness or

economy in their operations.

(b) Subject to 37.205, agencies may contract for advisory and

assistance services, when essential to the agency's mission, to--

(1) Obtain outside points of view to avoid too limited judgment on

critical issues;

(2) Obtain advice regarding developments in industry, university,

or foundation research;

(3) Obtain the opinions, special knowledge, or skills of noted

experts;

(4) Enhance the understanding of, and develop alternative solutions

to, complex issues;

(5) Support and improve the operation of organizations; or

(6) Ensure the more efficient or effective operation of managerial

or hardware systems.

(c) Advisory and assistance services shall not be--

(1) Used in performing work of a policy, decisionmaking, or

managerial nature which is the direct responsibility of agency

officials;

(2) Used to bypass or undermine personnel ceilings, pay

limitations, or competitive employment procedures;

(3) Contracted for on a preferential basis to former Government

employees;

(4) Used under any circumstances specifically to aid in influencing

or enacting legislation; or

(5) Used to obtain professional or technical advice which is

readily available within the agency or another Federal agency.

(d) Limitation on payment for advisory and assistance services.

Except for Federally-Funded Research and Development Centers as

provided by Section 23 of the Office of Federal Procurement Policy

(OFPP) Act, (41 U.S.C. 419) as amended, contractors may be paid for

services to conduct evaluations or analyses of any aspect of a proposal

submitted for an acquisition only if--

(1) Neither agency personnel, nor personnel from another agency,

with adequate training and capabilities to perform the required

proposal evaluation, are readily available, and;

(2) A written determination is made in accordance with 37.204.

37.204 Guidelines for determining availability of personnel.

(a) As required by 37.203 for each evaluation or analysis of

proposals, the head of an agency shall determine if sufficient

personnel with the requisite training and capabilities are available

within the agency to perform evaluation or analysis of proposals

submitted for acquisitions.

(b) If, for a specific evaluation or analysis, such personnel are

not available within the agency, the head of the agency shall--

(1) Determine which Federal agencies may have personnel with the

required training and capabilities; and

(2) Consider the administrative cost and time associated with

conducting the search, the dollar value of the procurement, other

costs, such as travel costs involved in the use of such personnel, and

the needs of the Federal agencies to make management decisions on the

best use of available personnel in performing the agency's mission.

(c) If the supporting agency agrees to make the required personnel

available, the agencies shall execute an agreement for the detail of

the supporting agency's personnel to the requesting agency.

(d) If the requesting agency, after reasonable attempts to obtain

personnel with the required training and capabilities, has been unable

to identify such personnel, the head of the requesting agency may make

the determination required by 37.203.

37.205 Contracting officer responsibilities.

The contracting officer shall ensure that the determination

required in accordance with the guidelines at 37.104 is accomplished

prior to issuing a solicitation.

PART 49--TERMINATION OF CONTRACTS

49.603-1 through 49.603-4 [Amended]

7. Sections 49.603-1(b)(7)(i), 49.603-2(b)(8)(i), 49.603-

3(b)(7)(i), and 49.603-4(b)(4)(i)) are amended by removing the phrase

``, and regulations made implementing 10 U.S.C. 2382, as amended, and

any other'' and inserting ``any'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

52.217-1 [Reserved]

8. Section 52.217-1 is removed and reserved.

9. Section 52.217-2 is amended by revising the section heading, the

introductory text, the clause heading, paragraphs (a), (d), (f)(1) and

(4), (g)(1) and (3), (h), and (i), and by removing Alternate I to read

as follows:

52.217-2 Cancellation Under Multiyear Contracts.

As prescribed in 17.109, insert the following clause.

CANCELLATION UNDER MULTIYEAR CONTRACTS (XXX 1995)

(a) Cancellation, as used in this clause, means that the

Government is cancelling its requirements for all supplies or

services in program years subsequent to that in which notice of

cancellation is provided. Cancellation shall occur by the date or

within the time period specified in the Schedule, unless a later

date is agreed to, if the Contracting Officer (1) notifies the

Contractor that funds are not available for contract performance for

any subsequent program year, or (2) fails to notify the Contractor

that funds are available for performance of the succeeding program

year requirement.

* * * * *

(d) The cancellation charge will cover only (1) costs (i)

incurred by the prime Contractor and/or subcontractor, (ii)

reasonably necessary for performance of the contract, and (iii) that

would have been equitably amortized over the entire multiyear

contract period but, because of the cancellation, are not so

amortized, and (2) a reasonable profit or fee on the costs.

* * * * *

(f) * * *

(i) Reasonable nonrecurring costs (see FAR subpart 15.8) which

are applicable to and normally would have been amortized in all

supplies or services which are multiyear requirements;

* * * * *

(4) Costs not amortized solely because the cancellation had

precluded anticipated benefits of Contractor or subcontractor

learning.

(g) * * *

(1) Labor, material, or other expenses incurred by the

Contractor or subcontractors for performance of the cancelled work;

* * * * *

(3) Anticipated profit or unearned fee on the cancelled work; or

* * * * *

(h) This contract may include an ``Option'' clause with the

period for exercising the option limited to the date in the contract

for notification that funds are available for the next succeeding

program year. If so, the Contractor agrees not to include in option

quantities any costs of a startup or nonrecurring nature, that have

been fully set forth in the contract. The Contractor further agrees

that the option quantities will reflect only those recurring costs,

and a reasonable profit or fee necessary to furnish the additional

option quantities.

(i) Quantities added to the original contract through the

``Option'' clause of this contract shall be included in the quantity

cancelled [[Page 14346]] for the purpose of computing allowable

cancellation charges.

(End of clause)

[FR Doc. 95-6438 Filed 3-15-95; 8:45 am]

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