DATE: May 25, 2004

SUBJECT: Federal Acquisition Regulation (FAR); Payment Withholding

SOURCE: Federal Register, May 25, 2004, Vol. 69, No. 101, page 29837

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

ACTION: Proposed Rule

SYNOPSIS: It is proposed that FAR 32.111, Contract Clauses for Non-Commercial Purchases, and FAR 52.232-7, Payments Under Time-and-Materials and Labor-Hour Contracts, be amended to remove the requirement that a contracting officer withhold 5% of the payments due under a time-and materials or labor-hour contract. The contracting officer would be permitted, but not required, to withhold payment amounts if the contracting officer determines the withholding to be necessary to protect the gvernment's interests.

EDITOR'S NOTE: For more on a similar change made to the Defense FAR Supplement (DFARS), see the December 15, 2003, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); Payment Withholding."

DATES: Comments should be submitted on or before July 26, 2004.

ADDRESSES: Submit written comments on proposed rule to General Services Administration, FAR Secretariat (MVA), 1800 F Street, NW, Room 4035, Attn: Laurie Duarte, Washington, DC 20405. Submit e-mail comments to: farcase.2004-003@gsa.gov. Cite "FAR case 2004-003" when referring to this proposed rule.


SUPPLEMENTAL INFORMATION: FAR 52.232-7, Payments under Time-and-Materials and Labor-Hour Contracts, requires the contracting officer to withhold 5% of the amounts due, up to a maximum of $50,000, unless otherwise specified in the contract. The government retains the withheld amount until the contractor executes and delivers, at the time of final payment, a release discharging the government from all liabilities, obligations, and claims arising under the contract.

This policy is considered administratively burdensome and may result in the withholding of amounts that exceed reasonable amounts needed to protect the government's interests. In addition, the contractor is already incentivized to execute and deliver the release discharging the government from all liabilities, obligations, and claims under the contract, since this release is a condition of final payment.

This proposed rule would make the following changes:

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

Copyright 2004 by Panoptic Enterprises. All Rights Reserved.

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