B-226175, FEB 24, 1987, OFFICE OF GENERAL COUNSEL

B-226175: Feb 24, 1987

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THIS IS FAR CASE NO. 86-65. EACH OF THE CITED CLAUSES PROVIDES THAT AFTER SPECIFIED PAYMENT LEVELS HAVE BEEN REACHED. AN AMOUNT WE UNDERSTAND WAS ESTABLISHED IN 1945. WE HAVE NO OBJECTIONS TO THE PROPOSED CHANGES.

B-226175, FEB 24, 1987, OFFICE OF GENERAL COUNSEL

PROCUREMENT - PAYMENT/DISCHARGE - FEDERAL PROCUREMENT REGULATIONS/LAWS - REVISION - PAYMENT WITHHOLDING DIGEST: GENERAL ACCOUNTING OFFICE HAS NO OBJECTION TO A PROPOSAL TO AMEND THE FIVE CONTRACT CLAUSES SET FORTH AT FEDERAL ACQUISITION REGULATION SECS. 15.216-8 THROUGH 15.216-12 BY REMOVING THE $100,000 LIMITATION ON THE AMOUNT THAT MAY BE WITHHELD FROM MONIES OTHERWISE DUE A CONTRACTOR AS A RESERVE TO PROTECT THE GOVERNMENT'S INTEREST.

MS. MARGARET A. WILLIS:

THIS RESPONDS TO YOUR LETTER OF JANUARY 21, 1987, REQUESTING OUR COMMENTS ON A PROPOSAL TO AMEND THE FIVE CONTRACT CLAUSES SET FORTH AT FEDERAL ACQUISITION REGULATION (FAR) SECS. 15.216-8 THROUGH 15.216-12. THIS IS FAR CASE NO. 86-65.

EACH OF THE CITED CLAUSES PROVIDES THAT AFTER SPECIFIED PAYMENT LEVELS HAVE BEEN REACHED, A CONTRACTING OFFICER MAY WITHHOLD FUNDS OTHERWISE DUE THE CONTRACTOR TO ESTABLISH A RESERVE IN AN AMOUNT THE CONTRACTING OFFICER CONSIDERS NECESSARY TO PROTECT THE GOVERNMENT'S INTEREST. THE CLAUSES LIMIT THE RESERVE TO $100,000, AN AMOUNT WE UNDERSTAND WAS ESTABLISHED IN 1945. THE PROPOSED CHANGES TO THE CLAUSES WOULD REMOVE THE $100,000 CEILING ON THE RESERVE, BUT WOULD LEAVE IN PLACE A CEILING OF EITHER 15 PERCENT OF THE CONTRACTOR'S FEE OR 1 PERCENT OF THE GOVERNMENT'S SHARE OF THE ESTIMATED CONTRACT COSTS, DEPENDING ON THE TYPE OF CONTRACT INVOLVED.

WE HAVE NO OBJECTIONS TO THE PROPOSED CHANGES.

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