Federal Acquisition Regulation; Exception to Requirement for Certified Cost or Pricing Data

[[Page 41214]]

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 4, 12, 15, 16, 25, 31, 46, and 52

[FAR Case 96-306]

RIN 9000-AH16

Federal Acquisition Regulation; Exception to Requirement for

Certified Cost or Pricing Data

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

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council are proposing to amend the Federal

Acquisition Regulation (FAR) to implement Section 4201 of the Federal

Acquisition Reform Act of 1996. This regulatory action was not subject

to Office of Management and Budget review under Executive Order 12866,

dated September 30, 1993. This is not a major rule under 5 U.S.C. 804.

DATES: Comments should be submitted on or before October 7, 1996, to be

considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to:

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

Streets, NW., Room 4037, Washington, DC 20405.

Please cite FAR case 96-306 in all correspondence related to this

case.

FOR FURTHER INFORMATION CONTACT: Mr. Jeremy 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 96-306.

SUPPLEMENTARY INFORMATION:

A. Background

The proposed rule implements changes to the Truth in Negotiations

Act (TINA) contained in Section 4201 of the Federal Acquisition Reform

Act of 1996 (Public Law 104-106).

The proposed rule:

Simplifies obtaining a TINA exception for commercial items

by eliminating the distinction between catalog or market-priced

commercial items and all other commercial items;

Eliminates the subordination of the commercial item

exception to the traditional exceptions of adequate price competition,

catalog or market-priced commercial items, or prices set by law or

regulation, which previously was required by the Federal Acquisition

Streamlining Act of 1994 (Public Law 103-355) (FASA);

Eliminates the criteria established by FASA for the

commercial item exception (i.e., an exception could not be granted

unless price reasonableness could be determined based on specific

information requirements) and deletes the authority to obtain cost or

pricing data for commercial item acquisitions when the criteria is not

met; and

Eliminates the clause for postaward audit of information

submitted to support the pricing of commercial item contracts.

B. Regulatory Flexibility Act

This proposed rule is not expected to 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 it is

estimated that most contracts awarded to small entities are awarded on

a competitive, fixed-price basis and do not require the submission of

``cost or pricing data.'' An Initial Regulatory Flexibility Analysis

has, therefore, not been performed. Comments from small entities

concerning the affected FAR subpart will be considered in accordance

with 5 U.S.C. 610 of the Act. Such comments must be submitted

separately and should cite 5 U.S.C. 601 et seq. (FAR case 96-306), 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 4, 12, 15, 16, 25, 31, 46 and 52:

Government procurement.

Dated: July 31, 1996.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, it is proposed that 48 CFR Parts 4, 12, 15, 16, 25, 31,

46 and 52 be amended as set forth below:

1. The authority citation for 48 CFR Parts 4, 12, 15, 16, 25, 31,

46 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 4--ADMINISTRATIVE MATTERS

4.702 [Amended]

2. Section 4.702 is amended by removing paragraph (a)(3).

PART 12--ACQUISITION OF COMMERCIAL ITEMS

12.209 [Amended]

3. Section 12.209(e) is amended in the first sentence by removing

``15.804-1(b)(6)'' and inserting ``15.804-1(b)(5)'' in its place.

PART 15--CONTRACTING BY NEGOTIATION

4. Section 15.106 is revised to read as follows:

15.106 Contract clause.

(a) This section 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;

(2) For commercial items exempted under 15.804-1; or

(3) 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.

15.106-1 [Amended]

5. Section 15.106-1 is removed.

15.106-2 [Amended]

6. Section 15.106-2 is removed.

15.802 [Amended]

7. Section 15.802 is amended in the third sentence of paragraph (a)

introductory text by removing ``(b)'', and in (a)(1) by removing

``(a)(3)'' and inserting ``(b)'' in its place.

8. Section 15.804-1 is amended by revising paragraph (a); removing

(b)(2); redesignating (b)(3) through (b)(6) as (b)(2) through (b)(5),

respectively, and

[[Page 41215]]

revising newly designated (b)(3) and (b)(5); and by removing paragraphs

(c) and (d). The revised text reads as follows:

15.804-1 Prohibition on obtaining cost or pricing data.

(a) Exceptions to cost or pricing data requirements. The

contracting officer shall not, pursuant to 10 U.S.C. 2306a and 41

U.S.C. 254b, require submission of cost or pricing data (but may

require information other than cost or pricing data to support a

determination of price reasonableness or cost realism)--

(1) If the contracting officer determines that prices agreed upon

are based on--

(i) Adequate price competition (see exception standards at

paragraph (b)(1) of this subsection; or

(ii) Prices set by law or regulation (see exception standards at

paragraph (b)(2) of this subsection).

(2) For acquisition of a commercial item (see exception standards

at paragraph (b)(3) of this subsection).

(3) For exceptional cases where a waiver has been granted (see

exception standards at paragraph (b)(4) of this subsection).

(4) For modifications to contracts or subcontracts for commercial

items, if the basic contract or subcontract was awarded without the

submission of cost or pricing data because the action was granted an

exception from cost or pricing data requirements under paragraph (a)(1)

or (a)(2) of this subsection and the modification does not change the

contract or subcontract to a contract or subcontract for the

acquisition of other than a commercial item (see exception standards at

paragraph (b)(5) of this subsection).

(b) * * *

(3) Commercial items. If an acquisition is for an item that meets

the commercial item definition in 2.101, it is excepted from the

requirement to obtain cost or pricing data.

* * * * *

(5) Modifications. This exception applies when the original

contract or subcontract was exempt from cost or pricing data based on

adequate price competition, price set by law or regulation, or was a

contract or subcontract for the acquisition of a commercial item

(15.804-1 (a)(1) or (a)(2)). For modifications of contracts or

subcontracts for commercial items, the exception at 15.804-1(a)(4)

applies if the modification does not change the item from a commercial

item to a noncommercial item. However, if the modification to a

contract or a subcontract changes the nature of the work under the

contract or subcontract either by a change to the commercial item or by

the addition of other noncommercial work, the contracting officer is

not prohibited from obtaining cost or pricing data for the changed or

added work.

15.804-2 [Amended]

9. Section 15.804-2 is amended in the second sentence of paragraph

(a)(1) introductory text, by removing ``15.804-1(b)(5)'' and inserting

``15.804-1(b)(4)''; and in (a)(1)(ii) by removing ``15.804-1(b)(5)''

and inserting ``15.804-1(b)(4)'' in its place; and by revising

paragraph (a)(2) as follows:

15.804-2 Requiring cost or pricing data.

(a) * * *

(2) Unless prohibited because an exception at 15.804-1(a)(1) or

(a)(2) applies, the head of the contracting activity, without power of

delegation, may authorize the contracting officer to obtain cost or

pricing data for pricing actions below the pertinent threshold in

paragraph (a)(1) of this subsection provided the action exceeds the

simplified acquisition threshold. The head of the contracting activity

shall justify the requirement for cost or pricing data. The

documentation shall include a written finding that cost or pricing data

are necessary to determine whether the price is fair and reasonable and

the facts supporting that finding.

* * * * *

10. Section 15.804-5 is revised to read as follows:

15.804-5 Requiring information other than cost or pricing data.-

(a) General. (1) If cost or pricing data are not required because

an exception applies, or an action is at or below the cost or pricing

data threshold, the contracting officer shall perform a price analysis

to determine the reasonableness of the price and any need for further

negotiation.--

(2) The contracting officer shall require submission of information

other than cost or pricing data only to the extent necessary to

determine reasonableness of the price or cost realism. Unless an

exception under 15.804-1(a)(1) applies, the contracting officer shall

obtain at a minimum, in accordance with the policy at 15.802(a)(2),

appropriate information on the prices at which the same item or similar

items have previously been sold that is adequate for evaluating the

reasonableness of the price.

(3) The contractor's format for submitting such information shall

generally be used (see 15.804-5(c)(2)).

(4) The contracting officer shall ensure that information used to

support price negotiations is sufficiently current to permit

negotiation of a fair and reasonable price. Requests for updated

offeror information should be limited to information that affects the

adequacy of the proposal for negotiations, such as changes in price

lists. Such data shall not be certified in accordance with 15.804-4.

(b) Adequate price competition. When an acquisition is based on

adequate price competition, generally no additional information is

necessary to determine the reasonableness of price. However, if it is

determined that additional information is necessary to determine the

reasonableness of the price, the contracting officer shall, to the

maximum extent practicable, obtain the additional information from

sources other than the offeror. In addition, the contracting officer

may request information to determine the cost realism of competing

offers or to evaluate competing approaches.

(c) Limitations relating to commercial items. (1) Requests for

sales data relating to commercial items shall be limited to data for

the same or similar items during a relevant time period.

(2) The contracting officer shall, to the maximum extent

practicable, limit the scope of the request for information relating to

commercial items to include only information that is in the form

regularly maintained by the offeror in commercial operations.

(3) Any information obtained relating to commercial items that is

exempt from disclosure under the Freedom of Information Act (5 U.S.C.

552(b)) shall not be disclosed by the Government.

11. Section 15.804-6 is amended in paragraph (a)(5) by removing the

words ``or postaward'' and in Table 15-2 by revising the fourth

paragraph of Item 1 entitled ``Established Catalog or Market Prices or

Prices Set by Law or Regulation or Commercial Items Not Covered By

Another Exception'' to read as follows:

15.804-6 Instructions for submission of cost or pricing data or

information other than cost or pricing data.

* * * * *

TABLE 15-2 INSTRUCTIONS FOR SUBMISSION OF A CONTRACT PRICING PROPOSAL

WHEN COST OR PRICING DATA ARE REQUIRED

* * * * *

Prices Set by Law or Regulation or Commercial Item Exception--When

an exception from the requirement to submit cost or pricing data is

requested, whether the item was produced by

[[Page 41216]]

others or by the offeror, provide justification for the exception.

* * * * *

12. Section 15.812-1 is amended by revising paragraph (b) and the

fourth sentence of (c) to read as follows:

15.812-1 General.

* * * * *

(b) However, the policy in paragraph (a) of this subsection does

not apply to any contract or subcontract for acquisition of a

commercial item.

(c) * * * The information shall not be requested for commercial

items. * * *

13. Section 15.812-2 is amended by revising paragraphs (a)(3) and

(5); and adding (a)(6) to read as follows:

15.812-2 Contract clause.

(a) * * *

(3) Utility services under part 41;

* * * * *

(5) Acquisitions of commercial items; and

(6) Contracts for petroleum products.

* * * * *

PART 16--TYPES OF CONTRACTS

14. Section 16.203-4 is amended by revising paragraphs (a)(1)(ii)

and (b)(1)(ii) to read as follows:

16.203-4 Contract clauses.

(a)(1) * * *

(ii) The requirement is for standard supplies that have an

established catalog or market price.

* * * * *

(b)(1) * * *

(ii) The requirement is for semistandard supplies for which the

prices can be reasonably related to the prices of nearly equivalent

standard supplies that have an established catalog or market price.

* * * * *

PART 25--FOREIGN ACQUISITION

25.901 [Amended]

15. Section 25.901(b) is amended in the first sentence by removing

``15.106-1(b)'' and inserting ``15.106(b)'' in its place.

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

16. Section 31.205-26 is amended by revising paragraph (f) to read

as follows:

31.205-26 Material costs.

* * * * *

(f) When a commercial item under paragraph (e) of this subsection

is transferred at a price based on a catalog or market price, the price

should be adjusted to reflect the quantities being acquired and may be

adjusted to reflect the actual cost of any modifications necessary

because of contract requirements.

PART 46-QUALITY ASSURANCE

46.804 [Amended]-

17. Section 46.804 is amended by removing ``(see 15.804-1(b)(2))''.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

52.215-2 [Amended]

18. Section 52.215-2 is amended in the introductory text by

removing ``15.106-1(b)'' and inserting ``15.106(b)'' and in Alternates

I, II and III remove ``15.106-1(c)'' and add ``15.106(c)'' in its

place.

19. Section 52.215-26 is revised to read as follows:

52.215-26 Integrity of Unit Prices.

As prescribed in 15.812-2, insert the following clause:

Integrity of Unit Prices (Date)

(a) Any proposal submitted for the negotiation of prices for

items of supplies shall distribute costs within contracts on a basis

that ensures that unit prices are in proportion to the items' base

cost (e.g., manufacturing or acquisition costs). Any method of

distributing costs to line items that distorts unit prices shall not

be used. For example, distributing costs equally among line items is

not acceptable except when there is little or no variation in base

cost. Nothing in this paragraph requires submission of cost or

pricing data not otherwise required by law or regulation.

(b) The Offeror/Contractor shall also identify those supplies

which it will not manufacture or to which it will not contribute

significant value when requested by the Contracting Officer.

(c) The Contractor shall insert the substance of this clause,

less paragraph (b), in all subcontracts other than those for the

acquisition of commercial items.

(End of clause)

Alternate I (DATE). As prescribed in 15.812-2(b), substitute the

following paragraph (b) for paragraph (b) of the basic clause:

(b) The Offeror/Contractor shall also identify those supplies

which it will not manufacture or to which it will not contribute

significant value.

20. Section 52.215-41 is amended by revising the clause, the clause

date, and Alternates II and III to read as follows:

52.215-41 Requirements for Cost or Pricing Data or Information Other

Than Cost or Pricing Data.

* * * * *

Requirements for Cost or Pricing Data or Information Other Than Cost or

Pricing Data (Date)

(a) Exceptions from cost or pricing data. (1) In lieu of

submitting cost or pricing data, offerors may submit a written

request for exception by submitting the information described in the

following subparagraphs. The Contracting Officer may require

additional supporting information, but only to the extent necessary

to determine whether an exception should be granted, and whether the

price is fair and reasonable.

(i) Identification of the law or regulation establishing the

price offered. If the price is controlled under law by periodic

rulings, reviews, or similar actions of a governmental body, attach

a copy of the controlling document, unless it was previously

submitted to the contracting office.--

(ii) For a commercial item exception, the offeror shall submit,

at a minimum, information on prices at which the same item or

similar items have previously been sold that is adequate for

evaluating the reasonableness of the price for this acquisition.

Such information may include--

(A) For catalog items, a copy of or identification of the

catalog and its date, or the appropriate pages for the offered

items, or a statement that the catalog is on file in the buying

office to which the proposal is being submitted. Provide a copy or

describe current discount policies and price lists (published or

unpublished), e.g., wholesale, original equipment manufacturer, or

reseller. Also explain the basis of each offered price and its

relationship to the established catalog price, including how the

proposed price relates to the price or recent sales in quantities

similar to the proposed quantities.

(B) For market-priced items, the source and date or period of

the market quotation or other basis for market price, the base

amount, and applicable discounts. In addition, describe the nature

of the market.---

(C) For items included on an active Federal Supply Service or

Information Technology Service Multiple Award Schedule contract,

proof that an exception has been granted for the schedule item.

(2) The offeror grants the Contracting Officer or an authorized

representative the right to examine, at any time before award,

books, records, documents, or other directly pertinent records to

verify any request for an exception under this provision, and the

reasonableness of price.

Access does not extend to cost or profit information or other

data relevant solely to the offeror's determination of the prices to

be offered in the catalog or marketplace.

(b) Requirements for cost or pricing data. If the offeror is not

granted an exception from the requirement to submit cost or pricing

data, the following applies:

(1) The offeror shall submit cost or pricing data on Standard

Form (SF) 1411, Contract Pricing Proposal Cover Sheet (Cost or

Pricing Data Required), with supporting attachments prepared in

accordance with Table 15-2 of FAR 15.804-6(b)(2).

(2) As soon as practicable after agreement on price, but before

contract award (except for unpriced actions such as letter

contracts), the offeror shall submit a Certificate of

[[Page 41217]]

Current Cost or Pricing Data, as prescribed in FAR 15.804-4.

(End of provision)

* * * * *

Alternate II (DATE). As prescribed in 15.804-8(h), add the

following paragraph (c) to the basic provision:-

(c) When the proposal is submitted, also submit one copy each,

including the SF 1411 and supporting attachments, to (1) the

Administrative Contracting Officer, and (2) the Contract Auditor.

Alternate III (DATE). As prescribed in 15.804-8(h), add the

following paragraph (c) to the basic provision (if Alternate II is

also used, redesignate as paragraph (d)):

(c) Submit the cost portion of the proposal via the following

electronic media: (Insert media format, e.g., electronic spreadsheet

format, electronic mail, etc.).

* * * * *

21. Section 52.215-42 is amended by revising the clause, the clause

date, and the last sentence in paragraph (b) of Alternate IV to read as

follows:

52.215-42 Requirements for Cost or Pricing Data or Information Other

Than Cost or Pricing Data--Modifications.

* * * * *

Requirements for Cost or Pricing Data or Information Other Than Cost or

Pricing Data--Modifications (Date)

(a) Exceptions from cost or pricing data. (1) In lieu of

submitting cost or pricing data for modifications under this

contract, for price adjustments expected to exceed the threshold set

forth at FAR 15.804(a)(1) on the date of the agreement on price or

the date of the award, whichever is later, the Contractor may submit

a written request for exception by submitting the information

described in the following subparagraphs. The Contracting Officer

may require additional supporting information, but only to the

extent necessary to determine whether an exception should be

granted, and whether the price is fair and reasonable:--

(i) Identification of the law or regulation establishing the

price offered. If the price is controlled under law by periodic

rulings, reviews, or similar actions of a governmental body, attach

a copy of the controlling document, unless it was previously

submitted to the contracting office.--

(ii) Information on modifications of contracts or subcontracts

for commercial items.---

(A) If (1) the original contract or subcontract was granted an

exception from cost or pricing data requirements because the price

agreed upon was based on adequate price competition, or prices set

by law or regulation, or was a contract or subcontract for the

acquisition of a commercial item, and (2) the modification (to the

contract or subcontract) is not exempted based on one of these

exceptions, then the Contractor may provide information to establish

that the modification would not change the contract or subcontract

from a contract or subcontract for the acquisition of a commercial

item to a contract or subcontract for the acquisition of an item

other than a commercial item.---

(B) For a commercial item exception, the Contractor shall

provide, at a minimum, information on prices at which the same item

or similar items have previously been sold that is adequate for

evaluating the reasonableness of the price of the modification. Such

information may include:----

(1) For catalog items, a copy of or identification of the

catalog and its date, or the appropriate pages for the offered

items, or a statement that the catalog is on file in the buying

office to which the proposal is being submitted. Provide a copy or

describe current discount policies and price lists (published or

unpublished), e.g., wholesale, original equipment manufacturer, or

reseller. Also explain the basis of each offered price and its

relationship to the established catalog price, including how the

proposed price relates to the price of recent sales in quantities

similar to the proposed quantities.----

(2) For market-priced items, the source and date or period of

the market quotation or other basis for market price, the base

amount, and applicable discounts. In addition, describe the nature

of the market.----

(3) For items included on an active Federal Supply Service or

Information Technology Service Multiple Award Schedule contract,

proof that an exception has been granted for the schedule item.-

(2) The Contractor grants the Contracting Officer or an

authorized representative the right to examine, at any time before

award, books, records, documents, or other directly pertinent

records to verify any request for an exception under this clause,

and the reasonableness of price. Access does not extend to cost or

profit information or other data relevant solely to the Contractor's

determination of the prices to be offered in the catalog or

marketplace.-

(b) Requirements for cost or pricing data. If the Contractor is

not granted an exception from the requirement to submit cost or

pricing data, the following applies:--

(1) The Contractor shall submit cost or pricing data on Standard

Form (SF) 1411, Contract Pricing Proposal Cover Sheet (Cost or

Pricing Data Required), with supporting attachments prepared in

accordance with Table 15-2 of FAR 15.804-6(b)(2).--

(2) As soon as practical after agreement on price, but before

award (except for unpriced actions), the Contractor shall submit a

Certificate of Current Cost or Pricing Data, as prescribed by FAR

15.804-4.

(End of clause)

* * * * *

Alternate IV (Date) * * *

* * * * *

(b) * * * Standard Form 1448, Proposal Cover Sheet (Cost or

Pricing Data Not Required), may be used for information other than

cost or pricing data.)

52.215.43 [Removed]-

22. Section 52.215-43 is removed.-

23. Section 52.216-2 is amended by revising the introductory

paragraph, the clause date, and the third sentence in paragraph (a) to

read as follows:

52.216-2 Economic Price Adjustment--Standard Supplies.-

As prescribed in 16.203-4(a), insert the following clause. The

clause may be modified by increasing the 10 percent limit on aggregate

increases specified in subparagraph (c)(1), upon approval by the chief

of the contracting office.

Economic Price Adjustment--Standard Supplies (Date)-

(a) * * * The term ``established price'' means a price that (1)

is an established catalog or market price for a commercial item sold

in substantial quantities to the general public, and (2) is the net

price after applying any standard trade discounts offered by the

Contractor. -

24. Section 52.216-3 is amended by revising the introductory

paragraph, the clause date and the second sentence of paragraph (a) to

read as follows:

52.216-3 Economic Price Adjustment--Semistandard Supplies.-

As prescribed in 16.203-4(b), insert the following clause. The

clause may be modified by increasing the 10 percent limit on aggregate

increases specified in subparagraph (c)(1), upon approval by the chief

of the contracting office.-

Economic Price Adjustment--Semistandard Supplies (Date)-

(a) * * * The term ``established price'' means a price that (1)

is an established catalog or market price for a commercial item sold

in substantial quantities to the general public, and (2) is the net

price after applying any standard trade discounts offered by the

Contractor. * * *

* * * * *

[FR Doc. 96-20013 Filed 8-6-96; 8:45 am]

BILLING CODE 6820-EP-P