[Federal Register: September 24, 1999 (Volume 64, Number 185)] [Rules and Regulations] [Page 51845-51846] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr24se99-28] ----------------------------------------------------------------------- DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 48 CFR Part 46 [FAC 97-14; FAR Case 98-002; Item XIII] RIN 9000-AI17 Federal Acquisition Regulation; Conditionally Accepted Items AGENCIES: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed on a final rule amending the Federal Acquisition Regulation (FAR) to require that, when conditionally accepting nonconforming items, amounts withheld from payments should be at least sufficient to cover the cost and related profit to correct deficiencies and complete unfinished work; and that the contracting officer must document the basis for the amounts withheld in the contract file. EFFECTIVE DATE: November 23, 1999. FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS Building, Washington, DC, 20405, (202) 501-4755, for information pertaining to status or publication schedules. For clarification of content, contact Ms. Linda Klein, Procurement Analyst, at (202) 501- 3775. Please cite FAC 97-14, FAR case 98-002. SUPPLEMENTARY INFORMATION: A. Background The Councils published a proposed rule in the Federal Register on October 28, 1998, (63 FR 57878). This final rule implements the recommendation of General Accounting Office Report GAO/NSIAD-98-20 Defense Acquisition, Guidance Is Needed On Payments For Conditionally Accepted Items, dated December 12, 1997. The rule amends FAR 46.101 to add a definition of ``conditional acceptance,'' and amends [[Page 51846]] FAR 46.407 to provide procedures for the conditional acceptance of supplies and services. The Councils received public comments from two respondents and considered them in finalizing the rule. This rule was not subject to Office of Management and Budget review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804. B. Regulatory Flexibility Act The Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration certify that this final rule will not 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 use of conditional acceptance is not widespread. No additional requirements are imposed on small businesses. C. Paperwork Reduction Act The Paperwork Reduction Act does not apply because the changes to the FAR do not impose 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 46 Government procurement. Dated: September 14, 1999. Edward C. Loeb, Director, Federal Acquisition Policy Division. Therefore, DoD, GSA, and NASA amend 48 CFR Part 46 as set forth below: PART 46--QUALITY ASSURANCE 1. The authority citation for 48 CFR Part 46 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. Amend section 46.101 by adding, in alphabetical order, the definition ``Conditional acceptance'' to read as follows: 46.101 Definitions. * * * * * Conditional acceptance, as used in this part, means acceptance of supplies or services that do not conform to contract quality requirements, or are otherwise incomplete, that the contractor is required to correct or otherwise complete by a specified date. * * * * * 3. Amend section 46.407 as follows: a. Remove from paragraph (a) ``Contracting officers'' and insert ``The contracting officer'', in its place; b. Remove from the first sentence of paragraph (b) ``Contractors ordinarily shall be given'' and from the second sentence ``shall'' and insert ``The contracting officer ordinarily must give the contractor'', and ``must'', respectively; c. Revise paragraph (c)(1); d. Remove from the first and second sentences of paragraph (c)(2) ``shall'' and insert ``must,'' in their places; e. Remove from paragraph (e) ``Contracting officers shall'' and insert ``The contracting officer must''; f. Revise paragraph (f); and g. Remove from the first and last sentences of the introductory text of paragraph (g) ``shall'' and insert ``must,'' in their places; Revised text read as follows: 46.407 Nonconforming supplies or services. * * * * * (c)(1) In situations not covered by paragraph (b) of this section, the contracting officer ordinarily must reject supplies or services when the nonconformance is critical or major or the supplies or services are otherwise incomplete. However, there may be circumstances (e.g., reasons of economy or urgency) when the contracting officer determines acceptance or conditional acceptance of supplies or services is in the best interest of the Government. The contracting officer must make this determination based upon-- (i) Advice of the technical activity that the item is safe to use and will perform its intended purpose; (ii) Information regarding the nature and extent of the nonconformance or otherwise incomplete supplies or services; (iii) A request from the contractor for acceptance of the nonconforming or otherwise incomplete supplies or services (if feasible); (iv) A recommendation for acceptance, conditional acceptance, or rejection, with supporting rationale; and (v) The contract adjustment considered appropriate, including any adjustment offered by the contractor. * * * * * (f) When supplies or services are accepted with critical or major nonconformances as authorized in paragraph (c) of this section, the contracting officer must modify the contract to provide for an equitable price reduction or other consideration. In the case of conditional acceptance, amounts withheld from payments generally should be at least sufficient to cover the estimated cost and related profit to correct deficiencies and complete unfinished work. The contracting officer must document in the contract file the basis for the amounts withheld. For services, the contracting officer can consider identifying the value of the individual work requirements or tasks (subdivisions) that may be subject to price or fee reduction. This value may be used to determine an equitable adjustment for nonconforming services. However, when supplies or services involving minor nonconformances are accepted, the contract need not be modified unless it appears that the savings to the contractor in fabricating the nonconforming supplies or performing the nonconforming services will exceed the cost to the Government of processing the modification. * * * * * [FR Doc. 99-24422 Filed 9-23-99; 8:45 am] BILLING CODE 6820-EP-P