[Federal Register Volume 68, Number 40 (Friday, February 28, 2003)]
[Proposed Rules]
[Pages 9627-9628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4700]
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DEPARTMENT OF DEFENSE
48 CFR Parts 232 and 252
[DFARS Case 2002-D017]
Defense Federal Acquisition Regulation Supplement; Payment
Withholding
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 remove the requirement that a
contracting officer withhold 5 percent of the payments due under a
time-and-materials or labor-hour contract unless otherwise prescribed
in the contract Schedule. The proposed rule would permit, but not
require, the administrative contracting officer (ACO) to withhold
payment amounts if the ACO determines the withholding to be necessary
to protect the Government's interests.
DATES: DoD will consider all comments received by April 29, 2003.
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-D017 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: Ms. Sandra Haberlin, OUSD(AT&L)DPAP(DAR), IMD 3C132,
3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-
0350. Please cite DFARS Case 2002-D017.
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: Ms. Sandra Haberlin, (703) 602-0289.
SUPPLEMENTARY INFORMATION:
A. Background
Federal Acquisition Regulation (FAR) 52.232-7, Payments under Time-
and-Materials and Labor-Hour Contracts, requires the contracting
officer to withhold 5 percent of the amounts due, up to a maximum of
$50,000, unless otherwise specified in the contract Schedule. The
Government retains the withheld amount until the contractor executes
and delivers, at the time of final payment, a release discharging the
Government from all liabilities, obligations, and claims arising under
the contract.
This rule proposes to add DFARS 232.111(b) and DFARS 252.232-7XXX,
Alternate A, to specify that, normally, there should be no need to
withhold payments when dealing with contractors that typically comply
with contractual requirements in a timely manner. This is in contrast
to the current requirement in time-and-materials and labor-hour
contracts that contracting officers must withhold payments unless other
direction is provided in the contract.
DoD is considering revising its policy because the current
withholding provisions are administratively burdensome and may, in some
situations, result in the withholding of amounts that exceed reasonable
amounts needed to protect the Government's interests. In addition, the
contractor is already incentivized to execute and deliver the release
discharging the Government from all liabilities, obligations, and
claims under the contract, since this release is a condition for final
payment.
This rule was not subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
[[Page 9628]]
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
applies only to time-and-materials and labor-hour contracts. Most
contracts awarded to small entities use simplified acquisition
procedures or are awarded on a competitive, fixed-price basis.
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 subparts in accordance with 5 U.S.C. 610.
Such comments should be submitted separately and should cite DFARS Case
2002-D017.
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 Parts 232 and 252
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, DoD proposes to amend 48 CFR Parts 232 and 252 as
follows:
1. The authority citation for 48 CFR Parts 232 and 252 continues to
read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 232--CONTRACT FINANCING
2. Section 232.111 is added to read as follows:
232.111 Contract clauses for non-commercial purchases.
(b) Use the clause at FAR 52.232-7, Payments under Time-and-
Materials and Labor-Hour Contracts, with 252.232-7XXX, Alternate A, in
solicitations and contracts when a time-and-materials or labor-hour
contract is contemplated.
(i) Alternate A permits the administrative contracting officer
(ACO) to withhold 5 percent of the amount due until a reserve is set
aside in an amount the ACO considers to be necessary, but not to exceed
$50,000, to protect the Government's interests.
(ii) Normally, there should be no need to withhold payment for a
contractor with a record of timely submittal of the release discharging
the Government from all liabilities, obligations, and claims.
(iii) If the ACO determines that it is necessary to withhold
payment to protect the Government's interests, the ACO shall issue
written direction to the contractor to withhold 5 percent of amounts
due until a sufficient reserve is set aside.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
3. Section 252.232-7XXX is added to read as follows:
252.232-7XXX Alternate A.
Alternate A (XXX 2003)
As prescribed in 232.111(b), substitute the following paragraph
(a)(2) for paragraph (a)(2) of the clause at FAR 52.232-7:
(a)(2) The Administrative Contracting Officer (ACO) may
unilaterally issue written direction to the Contractor to withhold
amounts from its billings until a reserve is set aside in an amount
that the ACO considers necessary to protect the Government's
interests. The ACO may withhold 5 percent of the amounts due under
this paragraph (a), but the total amount withheld shall not exceed
$50,000. The amounts withheld shall be retained until the Contractor
executes and delivers the release required by paragraph (f) of this
clause.
[FR Doc. 03-4700 Filed 2-27-03; 8:45 am]
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