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B-204499 L/M, NOV 9, 1981, OFFICE OF GENERAL COUNSEL

B-204499 L/M Nov 09, 1981
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DIGEST: GAO NOTES THAT PARAGRAPH 16.301-4(B) OF PROPOSED FEDERAL ACQUISITION REGULATION (FAR) PROVIDES THAT COST PLUS-INCENTIVE-FEE AND COST-PLUS AWARD -FEE CONTRACTS ARE SUBJECT TO THE MAXIMUM FEE LIMITATIONS CONTAINED IN 10 U.S.C. GAO CANNOT DETERMINE WHETHER THESE WAIVER PROVISIONS ARE APPROPRIATE BECAUSE NO EXPLANATION IS GIVEN REGARDING NEED FOR SUCH AUTHORITY. GAO BELIEVES GUIDELINES FOR DETERMINING WHEN A WAIVER IS APPROPRIATE SHOULD BE ESTABLISHED AND LIMITS PLACED ON EXTENT TO WHICH AUTHORITY MAY BE DELEGATED. WE NOTE THAT PARAGRAPH 16.301-4(B) PROVIDES THAT COST-PLUS-INCENTIVE FEE AND COST-PLUS-AWARD-FEE CONTRACTS ARE SUBJECT TO THE FEE LIMITATIONS SET FORTH IN 10 U.S.C. SEC. 254(B) FEES UNDER COST- PLUS-FIXED-FEE CONTRACTS ARE LIMITED TO A MAXIMUM OF UP TO 15 PERCENT OF ESTIMATED COSTS DEPENDING ON THE WORK REQUIRED.

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B-204499 L/M, NOV 9, 1981, OFFICE OF GENERAL COUNSEL

DIGEST: GAO NOTES THAT PARAGRAPH 16.301-4(B) OF PROPOSED FEDERAL ACQUISITION REGULATION (FAR) PROVIDES THAT COST PLUS-INCENTIVE-FEE AND COST-PLUS AWARD -FEE CONTRACTS ARE SUBJECT TO THE MAXIMUM FEE LIMITATIONS CONTAINED IN 10 U.S.C. SEC. 2306(D) (1976) AND 41 U.S.C. SEC. 254(B) (1976). GAO FURTHER NOTES THAT PARAGRAPH 16.301-4(B) PERMITS FEE LIMITATIONS TO BE WAIVED UNLIKE CURRENT DAR SEC. 3-405.4(C) AND FPR SEC. 1-3.405-4(C). GAO CANNOT DETERMINE WHETHER THESE WAIVER PROVISIONS ARE APPROPRIATE BECAUSE NO EXPLANATION IS GIVEN REGARDING NEED FOR SUCH AUTHORITY. IN ANY EVENT, GAO BELIEVES GUIDELINES FOR DETERMINING WHEN A WAIVER IS APPROPRIATE SHOULD BE ESTABLISHED AND LIMITS PLACED ON EXTENT TO WHICH AUTHORITY MAY BE DELEGATED.

MR. WILLIAM J. MARAIST, ASSISTANT ADMINISTRATOR FOR REGULATIONS:

BY LETTER DATED AUGUST 20, 1981, YOU REQUESTED OUR COMMENTS ON A DRAFT SEGMENT OF THE FEDERAL ACQUISITION REGULATION COVERING PART 16 - TYPES OF CONTRACTS.

WE NOTE THAT PARAGRAPH 16.301-4(B) PROVIDES THAT COST-PLUS-INCENTIVE FEE AND COST-PLUS-AWARD-FEE CONTRACTS ARE SUBJECT TO THE FEE LIMITATIONS SET FORTH IN 10 U.S.C. SEC. 2306(D) (1976) AND 41 U.S.C. SEC. 254(B) (1976). WE ALSO NOTE THAT THE PARAGRAPH PROVIDES THAT THE MAXIMUM FEE LIMITATIONS FOR COST-PLUS-INCENTIVE-FEE AND COST-PLUS-AWARD FEE CONTRACTS MAY BE WAIVED BY AGENCY HEADS OR THEIR DESIGNEES.

UNDER 10 U.S.C. SEC. 2306(D) AND 41 U.S.C. SEC. 254(B) FEES UNDER COST- PLUS-FIXED-FEE CONTRACTS ARE LIMITED TO A MAXIMUM OF UP TO 15 PERCENT OF ESTIMATED COSTS DEPENDING ON THE WORK REQUIRED. CURRENTLY, BOTH THE DEFENSE ACQUISITION REGULATION (DAR) AND THE FEDERAL PROCUREMENT REGULATIONS (FPR) PROVIDE THAT COST-PLUS-INCENTIVE-FEE AND COST-PLUS-AWARD -FEE CONTRACTS ARE SUBJECT TO THESE MAXIMUM FEE LIMITATIONS. THE REGULATIONS DO NOT, HOWEVER, PERMIT THE MAXIMUM FEE LIMITATIONS TO BE WAIVED BY AGENCY HEADS OR THEIR DESIGNEES. NO EXPLANATION IS GIVEN WHY THE FAR PERMITS AGENCY HEADS OR THEIR DESIGNEES TO WAIVE THE MAXIMUM FEE LIMITATIONS. WITHOUT AN EXPLANATION REGARDING THE NEED FOR PERMITTING THE WAIVER, WE CANNOT DETERMINE WHETHER THIS IS AN APPROPRIATE ADDITION TO THE FAR.

IN ANY EVENT, THE DRAFT SEGMENT DOES NOT ESTABLISH GUIDELINES FOR DETERMINING WHEN A WAIVER OF THE MAXIMUM FEE LIMITATION IS APPROPRIATE. WE BELIEVE THE REGULATION SHOULD AT LEAST PROVIDE GUIDANCE AS TO WHEN A WAIVER WOULD BE APPROPRIATE. FURTHERMORE, IT IS UNCLEAR TO WHAT EXTENT THE WAIVER AUTHORITY MAY BE DELEGATED. IF THIS SECTION IS TO BE RETAINED, AUTHORITY TO WAIVE THE MAXIMUM FEE LIMITATIONS SHOULD BE SITUATED AT A HIGH LEVEL WITHIN THE PROCURING AGENCIES AND SHOULD NOT BE DELEGATED TO THE CONTRACTING OFFICER LEVEL.

WE HAVE NO FURTHER COMMENTS TO OFFER.

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