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New Amendment to Federal Acquisition Regulation (FAR)

FARA new amendment to the Federal Acquisition Regulation (FAR) will greatly impact the way service providers track both theirs and subcontractor hours. The ruling comes from the Federal Activities Inventory Reform (FAIR) act that mandates agencies annually submit an inventory of activities performed by service contractors to the Office of Management and Budget (OMB). The new rule requires that prime contracts submit their hours worked.

This new amendment requires contractors with fixed-priced definite-delivery contracts to track and report hours worked on their service contracts. Prime contractors will not only be responsible for their own internal hours, but for reporting the hours worked by their first-tier subcontractors as well. First –tier subcontracts are those awarded directly by the prime contractor for the purpose of acquiring supplies or services (including construction) for performance of a prime contract. This does not include the supplier agreements with vendors, such as long-term arrangements for materials or supplies that benefit multiple contracts and/or the costs of which are normally applied to a Contractor’s general and administrative expenses or indirect costs.

The new rule will be implemented in the following phases with regards to fixed-priced definite-delivery contract values:

  • $2.5 million in Fiscal Year 2014.
  • $1 million in Fiscal Year 2015.
  • $500,000 from Fiscal Year 2016 onwards.

While cost-reimbursement, time-and-materials, and labor-hour contracts already track and report hours, the determining dollar threshold has been lowered to the simplified acquisition threshold (SAT), which is currently $150,000

In regards to IDIQs, FSS contracts, GWACs, and multi-agency contracts, the reporting requirements will be determined based on the expected dollar amount and type of orders issued under the contracts. For any existing indefinite-delivery will be modified bilaterally within six months of January 30, 2014 so long as the contract performance period extend past October 1, 2013; and there is $2.5 million or more obligated.

This rule change applies to both solicitations and contracts issued on or after January 30, 2014. The DoD is exempt from this requirement as the DFAR already stipulates this reporting requirement. Reports will be due annually by October 31, for services performed during the preceding Government fiscal year (October 1-September 30).

The new amendment can be found under FAR clauses 52-204-14 and 52-204-15.

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