[Federal Register: December 30, 2002 (Volume 67, Number 250)]
[Rules and Regulations]
[Page 79515-79516]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30de02-1]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
[[Page 79515]]
OFFICE OF MANAGEMENT AND BUDGET
5 CFR Part 1315
Prompt Payment
AGENCY: Office of Management and Budget, Executive Office of the
President.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Office of Management and Budget (OMB) is issuing a final
revision to its rules on the Prompt Payment Act (PPA) to implement
section 1010 of the National Defense Authorization Act for Fiscal Year
2001, as amended by section 1007 of the National Defense Authorization
Act for Fiscal Year 2002. Section 1010 requires agencies to pay an
interest penalty whenever they make an interim payment under a cost-
reimbursement contract for services more than 30 days after the agency
receives a proper invoice for payment from the contractor. Section 1007
states that the requirements of section 1010 apply to interim payments
that are due on or after December 15, 2000 under any cost-reimbursement
service contract regardless of when the contract was awarded.
DATES: Effective Date: This final rule is effective December 30, 2002.
Applicable Dates: This final rule shall apply to all interim payment
requests that are due on or after December 15, 2000 and received under
cost-reimbursement service contracts awarded before, on, or after
December 15, 2000. However, no interest penalty shall accrue under this
rule for any delay in payment that occurred prior to December 15, 2000.
FOR FURTHER INFORMATION CONTACT: Martha Thomas-Mitchell, Financial
Program Specialist, Financial Management Service, Department of the
Treasury, on (202) 874-6757; Mathew Blum, Office of Federal Procurement
Policy, OMB, on 202-395-4953; or Dana James, Office of Federal
Financial Management, OMB, on 202-395-7480.
SUPPLEMENTARY INFORMATION:
I. Background
Contractors who are awarded cost-reimbursement contracts are
generally authorized to seek reimbursement, including reimbursement
during the course of the contract (``interim payments''), for the
allowable costs they incur in the performance of the contract. In the
National Defense Authorization Act for Fiscal Year 2001, Public Law
106-398, 114 Stat. 1654, Congress imposed a new statutory requirement
on agencies to pay an interest penalty on interim payments that are
made late under cost-reimbursement service contracts. This requirement
is set forth in section 1010 of the Act--``Interest Penalties for Late
Payment of Interim Payments Due Under Government Service Contracts.''
Under section 1010(a), ``an agency acquiring services from a
business concern under a cost reimbursement contract requiring interim
payments who does not pay the concern a required interim payment by the
date that is 30 days after the date of the receipt of a proper invoice
shall pay an interest penalty to the concern on the amount of the
payment due.'' Interest is to be computed as provided in the Prompt
Payment Act (PPA, 31 U.S.C. 3901, 3902(a)). Section 1010(b) directs OMB
to ``prescribe regulations to carry out this section,'' which shall be
prescribed as part of OMB's regulations implementing the PPA. (OMB's
PPA regulations may be found at 5 CFR Part 1315.) Section 1010(c)
states that ``[t]he provisions of chapter 39 of title 31, United States
Code [i.e., the PPA], shall apply to this section in the same manner as
if this section were enacted as part of such chapter.'' Finally,
section 1010(d) provides that ``Subsection (a) shall take effect on
December 15, 2000. No interest shall accrue by reason of that
subsection for any period before that date.''
On December 15, 2000, OMB published an interim final rule to
implement section 1010 (65 FR 78403). The rule requires agencies to pay
an interest penalty whenever they make an interim payment under a cost-
reimbursement contract for services more than 30 days after the agency
receives a proper invoice for payment from the contractor. The rule
mandated application of the requirements of section 1010 to contracts
awarded on or after December 15, 2000. The rule authorized agencies, at
their discretion, to apply these requirements to interim payment
requests received under cost-reimbursement service contracts awarded
prior to December 15, 2000.
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council issued an interim rule amending the Federal
Acquisition Regulation (FAR) to implement the changes in OMB's PPA
regulations. See 66 FR 53485 (October 22, 2001). The FAR amendments add
new policy and a contract clause to provide for penalty payments under
covered contracts.
Three public comments were received in response to OMB's interim
final rule. The comments focused on the rule's applicability. Each of
the commenters stated that the rule failed to fully implement section
1010 because it did not require application of its requirements to
interim payment requests received under cost-reimbursement service
contracts awarded prior to December 15, 2000. The commenters asserted
that Congress intended for all cost-reimbursement contracts for
services requiring interim payment to be covered by the requirements of
section 1010.
Subsequent to receipt of these public comments, Congress took
action to clarify the application of section 1010, effectively removing
the discretion that OMB afforded in its interim rule regarding
application of section 1010 to contracts awarded prior to December 15,
2000. In particular, section 1007 of the National Defense Authorization
Act for Fiscal Year 2002, Public Law 107-107, 115 Stat. 1012, enacted
on December 28, 2001, states that the requirements of section 1010
apply with respect to ``interim payment that are due on or after
[December 15, 2000] under contracts entered into before, on, or after
that date.'' Accordingly, this final rule amends section 1315.20 of
OMB's PPA's regulations, which address the application of section 1010,
to incorporate the clarification made by section 1007. With the
exception of the amendments made to section 1315.20, this final rule
adopts the interim final rule without change.
Agencies are authorized to issue modifications to contracts, as
necessary,
[[Page 79516]]
to conform them to the revisions made by this final rule. However, as
required by Section 1010(d), no interest penalty shall accrue under
this rule for any delay in payment that occurred prior to December 15,
2000.
Neither section 1010 nor this final rule is intended to modify
current agency practices or policies regarding dates for payment for
interim payments on cost-reimbursement service contracts, other than to
require--in accordance with section 1010(a)--that PPA interest
penalties be paid on interim payments that are made more than 30 days
after the agency receives a proper invoice. In particular, section 1010
leaves unaffected existing agency policies that call for these interim
payments to be made well in advance of 30 days. For example, it is the
policy of the Department of Defense to generally pay contractors 14
days or less after being billed for reimbursements on cost-
reimbursement contracts. See subpart 232.906 of the Department of
Defense Supplement to the Federal Acquisition Regulation (DFARS), 48
CFR Chapter 2.
II. Regulatory Flexibility Act, Unfunded Mandates Reform Act,
Congressional Review Act, and Executive Orders 12866 and 12875
This final rule will not have a significant economic effect on a
substantial number of small entities; the regulations implement section
1010 of the National Defense Authorization Act for Fiscal Year 2001, as
amended by section 1007 of the National Defense Authorization Act for
Fiscal Year 2002. Section 1010 requires Federal agencies to pay an
interest penalty whenever they make interim payments on cost-
reimbursement service contracts more than 30 days after they receive a
proper invoice. For purposes of the Unfunded Mandates Reform Act of
1995 (Public Law 104-4), as well as Executive Orders 12866 and 12875,
the final rule will not significantly or uniquely affect small
governments, and will not result in increased expenditures by State,
local, and tribal governments, or by the private sector, of $100
million or more. Finally, the final rule is not a ``major rule'' under
5 U.S.C. Chapter 8; the rule will not have any of the effects set forth
in 5 U.S.C. 804(2).
III. Paperwork Reduction Act
The Paperwork Reduction Act does not apply to this final rule
because the rule's changes do not impose new recordkeeping requirements
or collections of information from offerors, contractors, or members of
the public that require approval under 44 U.S.C. 3501, et seq. The
information a contractor must submit in order to receive an interim
payment under a cost-reimbursement service contract is addressed at
section 1315.9(b)(2) of the revised PPA regulations. Section
1315.9(b)(2) states that an interim payment request must correctly
include all the information required by the contract or by agency
procedures.
List of Subjects in 5 CFR Part 1315
Administrative practice and procedure, Government contracts,
Penalties, Reporting and recordkeeping requirements.
Mitchell E. Daniels, Jr.,
Director.
Authority and Issuance
For reasons set out in the preamble, the interim rule amending 5
CFR Part 1315 published at 65 FR 78403, December 15, 2000, is adopted
as final with the following change:
PART 1315--PROMPT PAYMENT
1. The authority citation for part 1315 is revised to read as
follows:
Authority: 31 U.S.C. chapter 39; Section 1010 of Public Law 106-
398, 114 Stat. 1654; Section 1007 of Public Law 107-107, 115 Stat.
1012.
2. Section 1315.20 is revised to read as follows:
Sec. 1315.20 Application of Section 1010 of the National Defense
Authorization Act for Fiscal Year 2001.
Section 1010 of the National Defense Authorization Act for Fiscal
Year 2001 (Public Law 106-398, 114 Stat. 1654), as amended by section
1007 of the National Defense Authorization Act for Fiscal Year 2002
(Public Law 107-107, 115 Stat. 1012), requires an agency to pay an
interest penalty whenever the agency makes an interim payment under a
cost-reimbursement contract for services more than 30 days after the
date the agency receives a proper invoice for payment from the
contractor. This part implements Section 1010, as amended, and is
applicable in the following manner:
(a) This part shall apply to all interim payment requests that are
due on or after December 15, 2000 under cost-reimbursement service
contracts awarded before, on, or after December 15, 2000.
(b) No interest penalty shall accrue under this part for any delay
in payment that occurred prior to December 15, 2000.
(c) Agencies are authorized to issue modifications to contracts, as
necessary, to conform them to the provisions in this part implementing
Section 1010, as amended.
[FR Doc. 02-32821 Filed 12-27-02; 8:45 am]
BILLING CODE 3110-01-P