[Federal Register Volume 68, Number 31 (Friday, February 14, 2003)]
[Proposed Rules]
[Pages 7490-7491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3575]
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DEPARTMENT OF DEFENSE
48 CFR Part 228
[DFARS Case 2002-D030]
Defense Federal Acquisition Regulation Supplement; Payment Bonds
on Cost-Reimbursement Contracts
AGENCY: Department of Defense (DoD).
ACTION: Proposed rule with request for comments.
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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition
Regulation Supplement (DFARS) to permit the use of alternative payment
protections for fixed-price construction subcontracts between $25,000
and $100,000 issued under cost-reimbursement contracts. This change is
consistent with the corresponding Federal Acquisition Regulation (FAR)
policy applicable to fixed-price construction contracts.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before April 15, 2003, to be considered
in the formation of the final rule.
ADDRESSES: Respondents may submit comments directly on the World Wide
Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an
alternative, respondents may e-mail comments to: [email protected].
Please cite DFARS Case 2002-D030 in the subject line of e-mailed
comments.
Respondents that cannot submit comments using either of the above
methods may submit comments to: Defense Acquisition Regulations
Council, Attn: Mr. Euclides Barrera, OUSD(AT&L)DPAP(DAR), IMD 3C132,
3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-
0350. Please cite DFARS Case 2002-D030.
At the end of the comment period, interested parties may view
public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.
FOR FURTHER INFORMATION CONTACT: Mr. Euclides Barrera, (703) 602-0296.
SUPPLEMENTARY INFORMATION:
A. Background
This proposed rule updates DFARS policy on performance and payment
bonds for construction contracts. In accordance with the Miller Act (40
U.S.C. 270a-270f), FAR 28.102-1(a) requires performance and payment
bonds for construction contracts exceeding $100,000. In accordance with
section 4104(b)(2) of the Federal Acquisition Streamlining Act of 1994
(Pub. L. 103-355), FAR 28.102-1(b) permits alternative payment
protections for construction contracts between $25,000 and $100,000.
DFARS 228.102-1(a) presently waives the requirement for performance and
payment bonds for cost-reimbursement contracts, but requires the prime
contractor to obtain bonds for its fixed-price subcontracts exceeding
$25,000. This proposed DFARS rule authorizes the use of alternative
payment protections for subcontracts between $25,000 and $100,000, for
consistency with the corresponding FAR policy applicable to prime
contracts.
In addition, this proposed rule updates text implementing 10 U.S.C.
2701(h) and (i), pertaining to bonds under Defense Environmental
Restoration Program contracts. 10 U.S.C. 2701(h) and (i) were to expire
on December 31, 1999; however, section 314 of the National Defense
Authorization Act for Fiscal Year 2002 (Pub. L. 107-107) removed this
expiration date. Therefore, the corresponding DFARS text has been
amended to remove the expiration date. Additionally, the text has been
relocated to a new section 228.102-70, as its present location and
numbering has led to confusion regarding its relationship with the
subsequent text.
This rule was not subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
B. Regulatory Flexibility Act
DoD does not expect this rule 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 the rule
still requires payment protections for fixed-price construction
subcontracts exceeding $25,000, while providing flexibility for
subcontractors to chose the type of protection to be provided for
subcontracts between $25,000 and $100,000. Therefore, DoD has not
performed an initial regulatory flexibility analysis. DoD invites
comments from small businesses and other interested parties. DoD also
will consider comments from small entities concerning the affected
DFARS subpart in accordance with 5 U.S.C. 610. Such comments should be
submitted separately and should cite DFARS Case 2002-D030.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the rule does
not impose any information collection requirements that require the
approval of the Office of Management and Budget under 44 U.S.C. 3501,
et seq.
List of Subjects in 48 CFR Part 228
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, DoD proposes to amend 48 CFR Part 228 as follows:
1. The authority citation for 48 CFR Part 228 continues to read as
follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 228--BONDS AND INSURANCE
2. Section 228.102-1 is revised to read as follows:
228.102-1 General.
The requirement for performance and payment bonds is waived for
cost-reimbursement contracts. However, for cost type contracts with
fixed-price construction subcontracts over $25,000, require the prime
contractor to obtain from each of its construction subcontractors
performance and payment protections in favor of the prime contractor as
follows:
(1) For fixed-price construction subcontracts over $25,000, but not
exceeding $100,000, payment protection sufficient to pay labor and
material costs, using any of the alternatives listed at FAR 28.102-
1(b)(1).
(2) For fixed-price construction subcontracts over $100,000--
(i) A payment bond sufficient to pay labor and material costs; and
(ii) A performance bond in an equal amount if available at no
additional cost.
3. Section 228.102-70 is added to read as follows:
228.102-70 Defense Environmental Restoration Program construction
contracts.
For Defense Environmental Restoration Program construction
contracts entered into pursuant to 10 U.S.C. 2701--
(a) Any rights of action under the performance bond shall only
accrue to, and be for the exclusive use of, the obligee named in the
bond;
(b) In the event of default, the surety's liability on the
performance bond is limited to the cost of completion of the contract
work, less the balance of unexpended funds. Under no circumstances
shall the liability exceed the penal sum of the bond;
(c) The surety shall not be liable for indemnification or
compensation of the obligee for loss or liability arising from personal
injury or property damage,
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even if the injury or damage was caused by a breach of the bonded
contract; and
(d) Once it has taken action to meet its obligations under the
bond, the surety is entitled to any indemnification and identical
standard of liability to which the contractor was entitled under the
contract or applicable laws and regulations.
[FR Doc. 03-3575 Filed 2-13-03; 8:45 am]
BILLING CODE 5001-08-P