[Federal Register Volume 60, Number 130 (Friday, July 7, 1995)]
[Proposed Rules]
[Pages 35454-35455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16718]

[[Page 35453]]


Part II

Department of Housing and Urban Development


48 CFR Parts 32 and 52

Federal Acquisition Regulation (FAR); Contract Financing, Proposed Rule

Federal Register  /  Vol. 60, No. 130  /  Friday, July 7, 1995  /  
Proposed Rules

[[Page 35454]]




48 CFR Parts 32 and 52

[FAR Case 94-764]
RIN 9000-AG36

Federal Acquisition Regulation; Contract Financing

AGENCIES: Department of Defense (DOD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Extension of comment period and notice of public meeting.


SUMMARY: This notice is issued to familiarize the public with the 
status of the rulemaking effort on FAR Case 94-764, Contract Financing, 
which implements the Federal Acquisition Streamlining Act of 1994 
(FASA), to extend the period for public comment, and to provide notice 
of a public meeting. The Contract Financing drafting team has made some 
refinements to the proposed rule that was published in the March 15, 
1995, Federal Register. The revised coverage has been mailed to the 
public commenters on FAR Case 94-764 and copies may be obtained by 
other interested parties.

DATES: Comment Date: Comments should be submitted to the FAR 
Secretariat at the address shown below on or before July 31, 1995.
    Meeting Date: The meeting will be held at 1:00 p.m. on July 17, 

ADDRESSES: A copy of the revised coverage may be obtained by calling 
the FAR Secretariat at 202-501-4755. Interested parties should submit 
written comments to: General Services Administration, FAR Secretariat 
(VRS), 18th and F Streets NW., Room 4037, Washington, DC 20405.
    The public meeting will be held at: Office of Personnel Management, 
1900 E Street NW., Room 1350, Washington, DC.
    Please cite FAR case 94-764 in all correspondence related to this 

Financing/Payment Team leader, at (703) 697-6710 in reference to this 
FAR Case. For general information, contact the FAR Secretariat, Room 
4037, GS Building, Washington, DC 20405, (202) 501-4755. Please cite 
FAR case 94-764.


A. Background

    On March 15, 1995, a proposed rule was published in the Federal 
Register  (60 FR 14156). The proposed rule afforded the public a 60-day 
comment period. During that time, 21 organizations submitted more than 
263 comments. A public meeting was also held on this rule on April 28, 
1995. Based upon comments received, the financing drafting team has 
refined the coverage. The FAR Council wants to afford the public and 
Federal agencies the opportunity to comment on the refinements to the 
proposed rule. Accordingly, a copy of the revised coverage has been 
mailed to previous public commenters on FAR case 94-764. Other 
interested parties may obtain a copy by contacting the FAR Secretariat.

B. Case Summary

    FAR Case 94-764 implements Sections 2001 and 2051 of the Federal 
Acquisition Streamlining Act of 1994 (Pub. L. 103-355), which 
substantially changed the statutory authorities for Government 
financing of contracts. Subsections 2001(f) and 2051(e) provide 
specific authority for Government financing of purchases of commercial 
items, and subsections 2001(b) and 2051(b) substantially revised the 
authority for Government financing of purchases of non-commercial 
    Subsections 2001(f) and 2051(e) provide specific authority for 
Government financing of purchases of commercial items. These sections 
amended 10 U.S.C. 2307 and 41 U.S.C. 255 by adding a new paragraph, 
Conditions for Payments for Commercial Items, to each. These paragraphs 
authorize the Government to provide contract financing with certain 
     The financing must be in the best interest of the 
     The financing cannot exceed 15 percent until some 
performance of work under the contract;
     The terms and conditions must be appropriate or customary 
in the commercial marketplace.
    The above statutory provisions also remove from financing of 
commercial purchases certain restrictions applicable to financing of 
non-commercial purchases by other provisions of 10 U.S.C. 2307 and 41 
U.S.C. 255. Subsections 2001(b) and 2051(b) amend the authority for 
Government financing of non-commercial purchases by authorizing 
financing on the basis of certain classes of measures of performance.
    To implement these changes, the DOD, NASA, and GSA propose to amend 
the FAR by revising Subparts 32.0, 32.1, 32.4, and 32.5; by adding new 
Subparts 32.2 and 32.10; and by adding new clauses to 52.232. The 
statutory changes create a fundamental distinction between financing of 
purchases of commercial and non-commercial items. As a result, the 
subparts of Part 32, Contract Financing, fall into three logical 
     Subparts applicable to both commercial and non-commercial 
     Subparts applicable to only commercial financing; and
     Subparts applicable to only non-commercial financing.

C. Summary of Changes

    The following are highlights of changes that have been made to the 
proposed rule as a result of the written comments received during the 
comment period and other issues that were raised at the public hearing 
held on April 28, 1995:
     Simplify rule--The team significantly rewrote, clarified 
and shortened the coverage on financing of commercial item contracts.
     Complexity of process--The team eliminated or made 
optional many of the complex requirements that had applied to both 
contracting officers and to contractors.
     Access to records--The team eliminated the government's 
access to records for contract financing of commercial items.
     Certification--The team eliminated the certification 
requirement that had applied to requests for payments under the 
commercial financing clause.
     Reduction of commercial financing--The team revised the 
clause to eliminate its authority for the Government to take back 
previously provided finance payments under certain conditions.
     Market research--The team made market research optional 
for commercial financing.
     Contractor financial condition as adequate security--The 
team restructured the policy on security for commercial item financing 
to promote reliance on a healthy contractor's financial condition in 
place of hard assets as security.
     Financing rate--The team increased the maximum permissible 
financing rate for performance based financing from 75% to 90%.
     Payment of financing under dispute--The team added new 
coverage permitting performance-based financing payments to be paid 
under certain 

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circumstances, even though prior events had been delayed.
     Payment of financing under government caused delay--The 
team added specific authority to renegotiate performance-based 
financing to mitigate the effects of government caused delay.

D. Presentations at the Public Meeting

    To allow the public to present its views on the refinements to this 
proposed rule, a public meeting will be held at the Office of Personnel 
Management on July 17, 1995. Persons or organizations wishing to make 
presentations will be allowed 10 minutes to present their views, 
provided they notify the FAR Secretariat at (202) 501-4745 and provide 
an advance copy of their remarks not later than July 14, 1995.

    Dated: July 3, 1995.
Jeremy Olson,
Acting Deputy Project Manager for the Implementation of the Federal 
Acquisition Streamlining Act.
[FR Doc. 95-16718 Filed 7-6-95; 8:45 am]