[Federal Register Volume 66, Number 7 (Wednesday, January 10, 2001)]
[Rules and Regulations]
[Pages 2137-2139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 32 and 52
[FAC 97-22; FAR Case 1999-016; Item III]
RIN 9000-AI74
Federal Acquisition Regulation; Advance Payments for Non-
Commercial Items
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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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 permit federally
insured credit unions to participate in the maintenance of special
accounts for advance payments.
DATE: Effective Date: March 12, 2001.
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 Mr. Jeremy Olson, at (202) 501-4755. Please cite FAC
97-22, FAR case 1999-016.
SUPPLEMENTARY INFORMATION:
A. Background
Prior to publication of this final FAR rule, FAR Subpart 32.4,
Advance Payments for Non-Commercial Items, required, unless exempted by
FAR 32.409-3(e) or (f), that contractors deposit advance payments in
special accounts separate from their general or other funds. FAR 32.411
and other FAR text excluded credit unions from participating in the
maintenance of these special accounts by requiring that contractors
establish these special accounts only at banks that are members of the
Federal Reserve System (FRS) or insured by the Federal Deposit
Insurance Corporation (FDIC). However, many credit unions are federally
insured through the National Credit Union Administration (NCUA).
Therefore, these credit unions also are able to provide the Government
a measure of security for Federal funds advanced to contractors.
This final rule amends FAR Subpart 32.4 and FAR 52.232-12 to change
certain terminology (e.g., change the word ``bank'' to ``financial
institution'') to provide contractors an additional option of
depositing advance payments in special accounts maintained by credit
unions that are federally insured by NCUA. This revision will foster
competition among financial institutions that are in the business of
providing special accounts for advance payment funds, without
increasing the risk to the Government.
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 65 FR 25614, May 2, 2000. Two respondents submitted public
comments on the proposed rule. The Councils considered all comments
before agreeing to convert the proposed rule to a final rule without
change.
This is not a significant regulatory action, and therefore, was not
subject to 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 rule only applies
to the very limited number of contractors that receive advance payments
and deposit these payments in special accounts.
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 Parts 32 and 52
Government procurement.
Dated: December 22, 2000.
Al Matera,
Acting Director, Federal Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 32 and 52 as set
forth below:
1. The authority citation for 48 CFR parts 32 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).
[[Page 2138]]
PART 32--CONTRACT FINANCING
2. Revise paragraph (a)(1) of section 32.407 to read as follows:
32.407 Interest.
(a) * * *
(1) The published prime rate of the financial institution
(depository) in which the special account (see 32.409-3) is
established; or
* * * * *
32.408 [Amended]
3. Amend paragraph (b)(4) of section 32.408 by removing ``bank''
both times it appears and adding ``financial institution'' in its
place.
4. Amend section 32.409-3 as follows:
a. In paragraph (a) remove ``bank'' and add ``special'' in its
place;
b. In paragraphs (b)(2), (c)(2), and (e) remove ``bank''.
c. Revise paragraph (f)(1); and
d. In paragraph (g) remove ``bank'' both times it appears.
The revised text reads as follows:
32.409-3 Security, supervision, and covenants.
* * * * *
(f) * * *
(1) The use under a cost-reimbursement contract of Federal funds
deposited in the contractor's account at a financial institution
(without the contractor acquiring title to the funds); and
* * * * *
5. In section 32.410, revise the second sentence in paragraph
(a)(4) of the ``Findings, Determination, and Authorization for Advance
Payments Findings'' to read as follows:
32.410 Findings, determination, and authorization.
* * * * *
(a) * * *
(4) * * * The clause requires that all payments will be
deposited in a special account at the Contractor's financial
institution and that the Government will have a paramount lien on
(i) the credit balance in the special account, (ii) any supplies
contracted for, and (iii) any material or other property acquired
for performance of the contract. * * *
* * * * *
6. Revise 32.411 to read as follows:
32.411 Agreement for special account at a financial institution.
The contracting officer must use substantially the following form
of agreement for a special account for advance payments:
Agreement for Special Account
This agreement is entered into this ____ day of ____, 20____,
between the United States of America (the Government), represented
by the Contracting Officer executing this agreement, ________
[Insert the name of the Contractor], a ________ [Insert the name of
the State of incorporation] corporation (the Contractor), and
________, a financial institution operating under the laws of
________, located at ________ (the financial institution).
Recitals
(a) Under date of ________, 20________, the Government and the
Contractor entered into Contract No. ____, or a related supplemental
agreement, providing for advance payments to the Contractor. A copy
of the advance payment terms was furnished to the financial
institution.
(b) The contract or supplemental agreement requires that amounts
advanced to the Contractor be deposited separate from the
Contractor's general or other funds, in a Special Account at a
member bank of the Federal Reserve System, any ``insured'' bank
within the meaning of the Act creating the Federal Deposit Insurance
Corporation (12 U.S.C. 1811), or a credit union insured by the
National Credit Union Administration. The parties agree to deposit
the amounts with the financial institution, which meets the
requirement.
(c) This Special Account is designated ``________ [Insert the
Contractor's name], ________ [Insert the name of the Government
agency] Special Account.''
Covenants
In consideration of the foregoing, and for other good and
valuable considerations, the parties agree to the following
conditions:
(a) The Government shall have a lien on the credit balance in
the account to secure the repayment of all advance payments made to
the Contractor. The lien is paramount to any lien or claim of the
financial institution regarding the account.
(b) The financial institution is bound by the terms of the
contract relating to the deposit and withdrawal of funds in the
Special Account, but is not responsible for the application of funds
withdrawn from the account. The financial institution shall act on
written directions from the Contracting Officer, the administering
office, or a duly authorized representative of either. The financial
institution is not liable to any party to this agreement for any
action that complies with the written directions. Any written
directions received by the financial institution through the
Contracting Officer on ________ [Insert the name of the agency]
stationery and purporting to be signed by, or by the direction of
________ or duly authorized representative, shall be, as far as the
rights, duties, and liabilities of the financial institution are
concerned, considered as being properly issued and filed with the
financial institution by the ________ [Insert the name of the
agency].
(c) The Government, or its authorized representatives, shall
have access to the books and records maintained by the financial
institution regarding the Special Account at all reasonable times
and for all reasonable purposes, including (but not limited to), the
inspection or copying of the books and records and any and all
pertinent memoranda, checks, correspondence, or documents. The
financial institution shall preserve the books and records for a
period of 6 years after the closing of this Special Account.
(d) In the event of the service of any writ of attachment, levy
of execution, or commencement of garnishment proceedings regarding
the Special Account, the financial institution will promptly notify
________ [Insert the name of the administering office].
(e) While this Special Account exists, the financial institution
shall inform the Government each month of the financial
institution's published prime interest rate and changes to the rate
during the month. The financial institution shall give this
information to the Contracting Officer on the last business day of
the month. [This covenant will not be included in the Special
Account Agreements covering interest-free advance payments.]
Each of the parties to this agreement has executed the agreement
on ________, 20____.
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[Signatures and Official Titles]
32.412 [Amended]
7. Amend paragraph (f) of section 32.412 by removing ``bank''.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
8. Amend section 52.232-12 as follows:
a. Revise the date of the clause;
b. Revise paragraph (b);
c. Remove ``bank'' from paragraphs (c) and (d);
d. Revise paragraph (f)(3);
e. Revise paragraph (g);
f. Remove ``bank'' from paragraphs (h), (k)(1) introductory text,
(k)(1)(iv), (k)(2)(i), and (m)(1) each time it appears;
g. Revise paragraph (p)(11);
h. Amend Alternate II by revising the date to read ``(Mar 2001) '';
and removing ``bank'' from paragraph (c); and
i. Amend Alternate V by revising the date to read ``(Mar 2001)'';
removing from the introductory paragraph ``bank''; and revising the
heading of the clause and paragraph (m)(11) of Alternate V to read as
follows:
52.232-12 Advance Payments.
* * * * *
Advance Payments (Mar 2001)
* * * * *
(b) Special account. Until (1) the Contractor has liquidated all
advance payments made under the contract and related interest
charges and (2) the administering office has approved in writing the
release of any funds due and payable to the Contractor, all advance
payments and other payments under this contract shall be made by
check payable to the Contractor marked for deposit only in the
Contractor's
[[Page 2139]]
special account with the ________ [insert the name of the financial
institution]. None of the funds in the special account shall be
mingled with other funds of the Contractor. Withdrawals from the
special account may be made only by check of the Contractor
countersigned by the Contracting Officer or a Government
countersigning agent designated in writing by the Contracting
Officer.
* * * * *
(f) * * *
(3) If interest is required under the contract, the Contracting
Officer shall determine a daily interest rate based on the higher of
(i) the published prime rate of the financial institution
(depository) in which the special account is established or (ii) the
rate established by the Secretary of the Treasury under Pub. L. 92-
41 (50 U.S.C. App. 1215(b)(2)). The Contracting Officer shall revise
the daily interest rate during the contract period in keeping with
any changes in the cited interest rates.
* * * * *
(g) Financial institution agreement. Before an advance payment
is made under this contract, the Contractor shall transmit to the
administering office, in the form prescribed by the administering
office, an agreement in triplicate from the financial institution in
which the special account is established, clearly setting forth the
special character of the account and the responsibilities of the
financial institution under the account. The Contractor shall select
a financial institution that is a member bank of the Federal Reserve
System, an ``insured'' bank within the meaning of the Federal
Deposit Insurance Corporation Act (12 U.S.C. 1811), or a credit
union insured by the National Credit Union Administration.
* * * * *
(p) * * *
(11) Deposit any of its funds except in a bank or trust company
insured by the Federal Deposit Insurance Corporation or a credit
union insured by the National Credit Union Administration;
* * * * *
Advance Payments Without Special Account (Mar 2001)
* * * * *
(m) * * *
(11) Deposit any of its funds except in a bank or trust company
insured by the Federal Deposit Insurance Corporation or a credit
union insured by the National Credit Union Administration;
* * * * *
[FR Doc. 01-13 Filed 1-9-01; 8:45 am]
BILLING CODE 6820-EP-P