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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: October 4, 2004

SUBJECT: Federal Employees' Group Life Insurance (FEGLI) Federal Acquisition Regulation (LIFAR) Update

SOURCE: Federal Register, October 4, 2004, Vol. 69, No. 191, page 59166

AGENCIES: Office of Personnel Management (OPM)

ACTION: Proposed Rule

SYNOPSIS: OPM is proposing to update FEGLI's LIFAR to incorporate changes in administrative policy and practices and make clarifying language changes.

EDITOR'S NOTE: The LIFAR is Chapter 21 of Title 48 of the Code of Federal Regulations. It is available on the Internet at http://www.access.gpo.gov/nara/cfr/waisidx_03/48cfrv6_03.html#2101.

DATES: Comments on the proposed rule must be received by December 3, 2004.

ADDRESSES: Send comments to Abby L. Block, Deputy Associate Director for Employee and Family Support Policy, Strategic Human Resources Policy Division, Office of Personnel Management, 1900 E Street NW, Washington, DC 20415; or deliver to OPM, Room 3425, 1900 E Street NW; or fax to 202-606-0633.

FOR FURTHER INFORMATION CONTACT: Karen Leibach, 202-606-0004.

SUPPLEMENTAL INFORMATION: On August 27, 1993, OPM issued the LIFAR, which identifies basic and significant acquisition policies that are unique to the FEGLI Program. It has not been updated since its issuance, and it does not reflect changes that has been incorporated in the Federal Acquisition Regulation (FAR) beginning with the passage of the Federal Acquisition Streamlining Act of 1994, nor does it reflect changes in the FEGLI program's policies that have taken place since then. This proposed rule would revise the LIFAR to reflect the changes to the FAR and the FEGLI program, and to make other clarifying changes.

The following are some of the more significant changes being proposed to the LIFAR:

• LIFAR 2101.370, Effective Date of LIFAR Amendments, would be revised to add paragraph (e), which would provide that "OPM will not initiate any changes to the LIFAR during a continuity of services period..."
  
  
• LIFAR 2102.101, Definitions, would clarify that the "grace period" is "31 days from and including the payment due date of the first business day of the month." The grace period is referenced in LIFAR 2149.002, Applicability, and LIFAR 2152.249-70, Renewal and Termination. Also in LIFAR 2152.249.70, paragraph (b) is revised to provide that the contractor "agrees to reinstate the contract if termination: (1) arose out of the government's inadvertent failure to fund the letter of credit (LOC) account for the amount of the premium payment prior to the expiration of the grace period as defined in LIFAR 2102.101, and/or (2) was due to circumstances beyond the government's control, provided that the LOC account is funded in the amount of the premium payment due to the contractor within 5 days after the expiration of the grace period." Nevertheless, "the contractor and OPM may agree to continue the contract."
  
  
• LIFAR 2103.570, Misleading, Deceptive, or Unfair Advertising, would be revised to provide that both OPM and the contractor may issue FEGLI literature to employees. Also, the language clarifies that "the [FEGLI program] booklet, along with valid election documents, serves as certification of the employee's coverage under the FEGLI Program."
  
  
• LIFAR 2110.7002, Contractor Investment of FEGLI Program Funds, would be revised to provide that "the Contractor will not be responsible for any actions taken at the direction of OPM." The "actions" refer to OPM-directed investment strategies intended to maximize investment income. This change would protect the contractor if it is requested to take an action that could have an adverse affect on its responsibility to manage and invest program funds in a prudent manner.
  A corresponding change would be made to paragraph (a) of LIFAR 2152.210-70, Investment Income.
  
  
• LIFAR 2131.109, Advance Agreements, would be revised to increase the threshold for allowance of precontract and nonrecurring costs of the contractor from $25,000 to $100,000. A similar change would be made to LIFAR 2131.205-32, Precontract Costs.
  
  
• LIFAR 2131.203, Indirect Costs, would be amended to delete the reference to a "dividend or retention formula," leaving the following sentence: "The provisions of FAR 31.203 [Indirect Costs] apply to the allocation of indirect costs."
  
  
• LIFAR 2132.170, Recurring Premium Payments to Contractors, would establish a LOC account for the contractor, which would be "credited to the contractor's LOC account in 12 equal monthly installments due on the first business day of each month and available for drawdown. OPM will credit the contractor's LOC account for the December payment no later than the last business day of each calendar year. Following the close of the contract year, a reconciliation of premiums, benefits, and other costs will be performed as a limited cost redetermination." In addition, interest distribution payments will be made available for contractor drawdown from the LOC account...Withdrawals from the LOC account for benefit costs of $5,000 or more will be made on a claims-paid basis. Withdrawals from the LOC account for benefit costs of less than $5,000 and other FEGLI Program disbursements will be made on a checks-presented basis."
  
  
• LIFAR 2137.102, Policy, would be amended to add an incentive amount which the contractor can earn for exceptional performance during a continuity of services period. The incentive amount would not exceed the pro rata risk or service charge for the same period. A corresponding change would be made to LIFAR 2152.237-70, Continuity of Services, in paragraph (d). Also, a new weighted guidelines profit factor, "transitional services," would be added as paragraph (a)(7) of LIFAR 2115.404-71, Profit Analysis Factors, to reflect this change. This profit factor would apply only during a continuity of services period.
  
  
• LIFAR 2144.102, Policy, would be amended to increase the threshold for advance approval of subcontracts or modifications from $100,000 to $550,000. Corresponding changes would be made to paragraph (a) of LIFAR 2152.244-70, Subcontracts, and paragraph (d) of LIFAR 2152.210-70, Notice of Significant Events.
  
  
• Paragraph (b) of LIFAR 2146.201, General, is revised to change the requirement to annually evaluate a contractor's system of internal controls under a quality assurance program to one in which "OPM will make an initial evaluation of the contractor's system of internal controls under the quality assurance program...After the initial review, subsequent periodic reviews may be limited to changes in the contractor's internal control guidelines."
  
  
• LIFAR 2152.231-70, Accounting and Allowable Cost, would be amended to add a new subparagraph (b)(2)(ii)(B), Administrative Expense Ceiling. The administrative expense ceiling would be calculated annually, and would be based on the contractor's prior year's administrative expense ceiling adjusted by the percent change in the Consumer Price Index for All Urban Consumers for the preceding 12 months. The subparagraph would require both OPM and the contractor to reexamine the base, including the prior year's actual expenses, at the request of either OPM or the contractor.
  
  Also, a significant number of additions and clarifying changes would be made to LIFAR 2152.231-70:
  
  
  • Paragraph (b)(1) would define "cost" as "chargeable to the contract for a contract term if it is: (i) an actual, allowable, allocable, and reasonable cost; [and] (ii) incurred with proper justification and accounting support..." In addition, the definitions of "administrative expenses" and "investment income" would reference the "cost" definition.
    
    
  • The definition of "benefits" would be revised to include excess mortality charges, post-mortem conversion charges, conversion policies, and delayed settlement interest as part of payments made and costs incurred.
    
    
  • The term "overpayments" would be modified to "overpayments recovered" since overpayment monies are an offset against benefits paid or incurred.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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