VA Issues Proposed Rule to Revise and Streamline VA Acquisition Regulation

Targeted News Service

WASHINGTON, March 14 -- The Department of Veterans Affairs published the following proposed rule in the Federal Register to amend and update its Acquisition Regulation (Document Citation: 82 FR 13418; CFR: 48 CFR 816, 48 CFR 828, 48 CFR 852; RIN: 2900-AP82; Document Number: 2017-04877):

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The Department of Veterans Affairs (VA) is proposing to amend and update its VA Acquisition Regulation (VAAR). Under this initiative, all parts of the regulation are being reviewed in phased increments to revise or remove any policy that has been superseded by changes in Federal Acquisition Regulation (FAR), to remove any procedural guidance that is internal to the VA, and to incorporate any new regulations or policies.

Acquisition regulations become outdated over time and require updating to incorporate additional policies, solicitation provisions, or contract clauses that implement and supplement the FAR to satisfy VA mission needs, and to incorporate changes in dollar and approval thresholds, definitions, and VA position titles and offices. This Proposed Rule will correct inconsistencies, remove redundant and duplicate material already covered by the FAR, delete outdated material or information, and appropriately renumber VAAR text, clauses and provisions where required to comport with FAR format, numbering and arrangement.

This Proposed Rule will streamline the VAAR to implement and supplement the FAR only when required, and remove internal agency guidance as noted above in keeping with the FAR principles concerning agency acquisition regulations.

DATES:

Comments must be received on or before May 12, 2017 to be considered in the formulation of the final rule.

ADDRESSES:

Written comments may be submitted through www.Regulations.gov; by mail or hand-delivery to Director, Regulation Policy and Management (00REG), Department of Veterans Affairs, 810 Vermont Avenue NW., Room 1068, Washington, DC 20420; or by fax to (202) 273-9026. Comments should indicate that they are submitted in response to "RIN 2900-AP82--Revise and Streamline VA Acquisition Regulation to Adhere to Federal Acquisition Regulation Principles (VAAR Case 2014-V002--parts 816, 828)." Copies of comments received will be available for public inspection in the Office of Regulation Policy and Management, Room 1068, between the hours of 8:00 a.m. and 4:30 p.m., Monday through Friday (except holidays). Please call (202) 461-4902 for an appointment. This is not a toll-free number. In addition, during the comment period, comments may be viewed online through the Federal Docket Management System (FDMS) at www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Mr. Ricky Clark, Senior Procurement Analyst, Procurement Policy and Warrant Management Services, 003A2A, 425 I Street NW., Washington, DC 20001, (202) 632-5276. This is not a toll-free telephone number.

SUPPLEMENTARY INFORMATION:

Background

This action is being taken under the authority of the Office of Federal Procurement Policy Act which provides the authority for an agency head to authorize the issuance of agency acquisition regulations that implement or supplement the FAR. This authority ensures that Government procurements are handled fairly and consistently, that the Government receives overall best value, and that the Government and contractors both operate under a known set of rules.

The Proposed Rule updates the VAAR to current FAR titles, requirements, and definitions; it updates VA titles and offices; it corrects inconsistencies, removes redundancies and duplicate material already covered by the FAR; it deletes outdated material or information and appropriately renumbers VAAR text, clauses, and provisions where required to comport with FAR format, numbering and arrangement. All amendments, revisions, and removals have been peer reviewed and concurred with by an Integrated Product Team of agency stakeholders.

The VAAR uses the regulatory structure and arrangement of the FAR and headings and subject areas are broken up consistent with the FAR content. The VAAR is divided into subchapters, parts (each of which covers a separate aspect of acquisition), subparts, sections, and subsections.

The Office of Federal Procurement Policy Act provides the authority for the Federal Acquisition Regulation and for the issuance of agency acquisition regulations consistent with the FAR.

When Federal agencies acquire supplies and services using appropriated funds, the purchase is governed by the FAR, set forth at Title 48 Code of Federal Regulations (CFR), chapter 1, parts 1 through 53, and the agency regulations that implement and supplement the FAR. The VAAR is set forth at Title 48 CFR, chapter 8, parts 801 to 873. These authorities are designed to ensure that Government procurements are handled fairly and consistently, that the Government receives overall best value, and that the Government and contractors both operate under a known set of rules.

VA is proposing to revise the VAAR to add new policy or regulatory requirements and to remove any guidance that is applicable only to VA's internal operating processes or procedures. Codified acquisition regulations may be amended and revised only through formal rulemaking under the Office of Federal Procurement Policy Act. This proposed rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act. This proposed rule will generally be small business neutral. VA has examined the economic, interagency, budgetary, legal, and policy implications of this regulatory action, and it has been determined this rule is not a significant regulatory action.

Discussion and Analysis

VA proposes to make the following changes to the VAAR in this phase of its revision and streamlining initiative. For procedural guidance cited below that is proposed to be deleted from the VAAR, each section cited for removal is being considered for inclusion in VA's internal agency operating procedures in accordance with FAR 1.301(a)(2). Similarly, delegations of authorities that are removed from the VAAR will be included in the VA Acquisition Manual (VAAM) as internal agency guidance.

VAAR Part 816--Types of Contracts

In subpart 816.1, Selecting Contract Types, we propose to delete 816.102, Policies, since it contains procedural guidance and a delegation of authority that is internal to VA and will be in the VA Acquisition Manual (VAAM).

We propose to add a new subpart: 816.2, Fixed-Price Contracts. This subpart 816.2 includes one subsection, 816.203-4, Contract clauses, which prescribes the various Economic Price Adjustment (EPA) clauses.

In subpart 816.5, Indefinite-Delivery Contracts, we propose to delete 816.504, Indefinite-quantity contracts, due to the issuance of a Class Deviation from VAAR 816.504, which prohibited the use of estimated quantity clauses.

In subpart 816.5, Infinite-Delivery Contracts, we propose to amend section 816.505, Ordering, to include the title and office of the Task and Delivery Order Ombudsman.

We propose to add a new subpart 816.7, Agreements, that includes one section, 816.770, Consignment agreements, which defines and describes the consignment agreement acquisition method used for satisfying the need for immediate and on-going requirements.

We propose to delete subpart 816.70, Unauthorized Agreements, since the only section included, 816.7001, Letters of availability, covers a procurement method that is no longer in use in VA. VAAR Part 828--Bonds and Insurance

In subpart 828.1, Bonds and Other Financial Protections, we propose to delete section 814.101, Bid guarantees, and subsection 828.101-2, Solicitation provision or contract clause, because the FAR guidance is sufficient in this area. We also propose to delete subsection 828.101-70, Safekeeping and return of bid guarantee, because the information included is considered to be procedural guidance and it will be moved to the VAAM.

In section 828.106, Administration, we propose to delete subsection 828.106-6, Furnishing information, since it includes an internal delegation of authority.

In section 828.106, Administration, we propose to amend subsection 828.106-70, Bond premium adjustment, to clarify the clause prescription."

In subpart 828.2, Sureties and Other Security for Bonds, we propose to delete the entire subpart since it contains only internal procedural guidance and it will be moved to the VAAM.

In subpart 828.3, Insurance, we propose to amend section 828.306, Insurance under fixed-price contracts, to clarify the clause prescription.

In subpart 828.71, Indemnification of Contractors, Medical Research or Development Contracts, we propose to delete section 828.7101, Approval for indemnification, as it contains only internal procedural information.

In subpart 828.71, Indemnification of Contractors for Medical Research or Development Contracts, we propose to revise the numbering from 828.71 to 828.70 to conform to the FAR drafting guide. Accordingly, under this subpart, we propose to revise the numbering for section 828.7100, Scope of part, to 828.7000; to change the numbering for section 828.7102, Extent of indemnification, to 828.7001; and to revise the numbering of section 828.7103, Financial protection, to 828.7002.

In the proposed subpart 828.70, Indemnification of Contractors for Medical Research or Development Contracts, we propose to add a new subsection, 828.7003, Indemnification clause, which prescribes the use of clause 852.228-73, Indemnification of Contractor--Hazardous Research Projects, when certain conditions apply. VAAR Part 852--Solicitation Provisions and Contract Clauses

In subpart 852.2, we propose to remove clause 852.216-70, Estimated Quantities, as it includes language that codifies contracting practices that are not recommended as they increase the risk level for VA procurements. In this subpart we propose to add clause 852.216-71, Economic price adjustment of contract price(s) based on a price index.

We propose to add the following clauses which are based on VA-specific clauses that were previously uncodified: 852.216-72, Proportional economic price adjustment of contract price(s) based on a price index;" clause 852.216-73, Economic price adjustment--state nursing home care for veterans (ALT #1); add clause 852.216-74, Economic price adjustment--Medicaid labor rates (ALT #2), and clause 852.216-75, Economic price adjustment clause--fuel surcharge.

In subpart 252.2, we propose to amend 852.228-71, Indemnification and insurance, to correct minor typographical and grammatical errors. We propose to add clause 852.228-73, Indemnification of contractor-hazardous research projects, which requires contractors to have appropriate insurance coverage when performing work of a hazardous nature which protects the Government's interest.

Effect of Rulemaking

Title 48, Federal Acquisition Regulations System, Chapter 8, Department of Veterans Affairs, of the Code of Federal Regulations, as revised by this proposed rulemaking, represents VA's implementation of its legal authority and publication of the Department of Veterans Affairs Acquisition Regulation (VAAR) for the cited applicable parts. Other than future amendments to this rule or governing statutes for the cited applicable parts, or as otherwise authorized by approved deviations or waivers in accordance with Federal Acquisition Regulation (FAR) subpart 1.4, Deviations from the FAR, and as implemented by VAAR subpart 801.4, Deviations from the FAR or VAAR, no contrary guidance or procedures are authorized. All existing or subsequent VA guidance must be read to conform with the rulemaking if possible or, if not possible, such guidance is superseded by this rulemaking as pertains to the cited applicable VAAR parts.

Executive Orders 12866 and 13563

Executive Orders (E.O.) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits of reducing costs, of harmonizing rules, and of promoting flexibility. E.O. 12866, Regulatory Planning and Review defines "significant regulatory action" to mean any regulatory action that is likely to result in a rule that may: "(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive order."

VA has examined the economic, interagency, budgetary, legal, and policy implications of this regulatory action, and it has been determined this rule is not a significant regulatory action under E.O. 12866.

VA's impact analysis can be found as a supporting document at http://www.regulations.gov, usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available on VA's Web site at http://www.va.gov/aEurosorpm by following the link for VA Regulations Published from FY 2004 Through Fiscal Year to Date.

Paperwork Reduction Act

Although this action contains provisions constituting collections of information at 48 CFR 828.306 and 852.228-71, under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521), no new or proposed revised collections of information are associated with this proposed rule. The information collection requirements for sections48 CFR 828.306 and 852.228-71 are currently approved by the Office of Management and Budget (OMB) and have been assigned OMB control number 2900-0590.

Regulatory Flexibility Act

This proposed rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This proposed rule will generally be small business neutral. The overall impact of the proposed rule will be of benefit to small businesses owned by Veterans or service-disabled Veterans as the VAAR is being updated to remove extraneous procedural information that applies only to VA's internal operating procedures. VA estimates no cost impact to individual business resulting from these rule updates. On this basis, the adoption of this proposed rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. Therefore, under 5 U.S.C. 605(b), this proposed rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

Unfunded Mandates

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal Governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. This proposed rule will have no such effect on State, local, and tribal Governments or on the private sector. List of Subjects 38 CFR Part 816

* Government procurement

38 CFR Part 828

* Government procurement

* Insurance

* Surety bonds

38 CFR Part 852

* Government procurement Reporting and record keeping requirements

Signing Authority

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Gina S. Farrisee, Deputy Chief of Staff, Department of Veterans Affairs, approved this document on January 12, 2017, for publication.

Janet Coleman,

Chief, Office of Regulation Policy & Management, Office of the Secretary, Department of Veterans Affairs.

For the reasons set out in the preamble, VA proposes to amend 48 CFR, chapter 8, parts 816, 828, and 852 as follows:

PART 816--TYPES OF CONTRACTS

1. The authority citation for part 816 continues to read as follows:

Authority: 40 U.S.C. 121(c) and 48 CFR 1.301-1.304. Subpart 816.1[Removed and Reserved]

2. Subpart 816.1 is removed and reserved.

3. Subpart 816.2 is added to read as follows:

Subpart 816.2--Fixed-Price Contracts 816.203

Fixed-price contracts with economic price adjustment. 816.203-4

Contract clauses.

(e) The contracting officer shall, when contracting by negotiation, use the following clauses.

(1) The contracting officer shall insert the clause at 852.216-71, Economic Price Adjustment of Contract Price(s) based on a Price Index, in solicitations and firm-fixed-price contracts, subject to FAR 16.203-4(d)(1) and when changes to a price index will be used to calculate corresponding changes to the total contract price or unit prices of the contract.

(i) Exceptions:

(A) Do not use this clause when changes to the price index will apply to only a component part of the contract price.

(B) Do not publish or include the footnotes in the solicitation, they are only included herein to provide guidance to contracting officers.

(2) The contracting officer shall insert the clause at 852.216-72, Proportional Economic Price Adjustment of Contract Price(s) based on a Price Index, in solicitations and firm-fixed-price contracts, and subject to FAR 16.203-4(d)(1) when changes to an industry price index shall be used to calculate changes to only a portion of the contract price or the unit prices of the contract.

(i) Exceptions:

(A) The clause should not be used when a change in the index price will be applied directly and totally to the contract price or the unit prices, i.e., when the Consumer Price Index (CPI) is used to calculate changes and a 5% increase in the CPI would result in a 5% increase in the total contract price of the unit prices.

(B) Do not publish or include the footnotes in the solicitation, as they are only provided herein for the guidance to the contracting officer.

(3) The contracting officer shall Insert the clause at 852.216-73, Economic Price Adjustment--State Nursing Home Care for Veterans (ALT #1) in solicitations and firm-fixed-price contracts subject to FAR 16.203-4(d)(1) and the following circumstance: When changes to the Medicaid rate as authorized by the State Medicaid Agency (SMA) shall be used to calculate corresponding changes in the total contract price or the per diem prices of the agreement.

(4) The contracting officer shall insert the clause at 852.216-74, Economic Price Adjustment--Medicaid Labor Rates (ALT #2) in solicitations and firm fixed price contracts when the conditions specified in FAR 16.203-4(c)(1) exist. The clause is modifiable by increasing the 10-percent maximum limit on aggregate increases specified in subparagraph (c)(4), upon the approval by the Head of the Contracting Activity (HCA) or designee.

(5) The contracting officer shall insert the clause at 852.216-75, Economic Price Adjustment--Fuel Surcharge, in solicitations and firm fixed price contracts when contracting by negotiation is subject to changes in the cost of fuel increases. The clause is subject to the conditions at FAR 16.203-4(d)(1).

(f) The contracting officer shall follow procedures as prescribed in FAR 16.203-4(c) and 38 CFR 51.41(b)(1)(c) for EPA fixed price contracts based on Medicaid rates. These procedures shall be used when contracting by negotiation between the VA and the State Veteran Home for both making payments under contracts or under a VA provider agreement for nursing home care for veterans. Subpart 816.5--Indefinite-Delivery Contracts

Subpart 816.504[Removed]

4. Subpart 816.504 is removed.

5. Section 803.505 is revised to read as follows: 816.505

Ordering.

(b)(8) Task-order and delivery-order ombudsman. The task-order contract and delivery-order ombudsman for VA is the Associate Deputy Assistant Secretary (ADAS) for Procurement Policy, Systems and Oversight. The VA Ombudsman shall review and resolve complaints from contractors concerning all task and delivery order actions. If any corrective action is needed after reviewing complaints from contractors, the VA Ombudsman shall provide a written determination of such action to the contracting officer. Contracting officers shall be notified of any complaints submitted to the VA Ombudsman.

6. Subpart 816.7 is added to read as follows:

Subpart 816.7--Agreements 816.770

Consignment agreements.

A consignment agreement is not a contract. It is defined as a delivery method for a specified period of time in which the contractor provides an item/s for Government use and the contractor receives reimbursement only if and when the item is used by the Government. Consignment agreements are allowable and shall be considered in those instances when the requirement for an item will be immediate and on-going and when it is impossible to predetermine the type or model of a particular item until the need is established, and it is determined to be in the best interest of the VA.

Subpart 816.70[Removed and Reserved]

7. Subpart 816.70 is removed and reserved.

PART 828--BONDS AND INSURANCE

8. The authority citation for part 828 continues to read as follows:

Authority: 38 U.S.C. 501, 8127, 8128 and 8151-8153; 40 U.S.C. 121(c); and 48 CFR 1.301-1.304.

828.101 [Removed]

9. Section 828.101 is removed. 828.101-2 [Removed]

10. Section 828.101-2 is removed. 828.101-70 [Removed]

11. Section 828.101-70 is removed. 828.106-6 [Removed]

12. Section 828.106-6 is removed. 828.106-70 [Amended]

13. Section 828.106-70 is revised to read as follows: 828.106-70

Bond premium adjustment.

The contracting officer shall insert the clause at 852.228-70, Bond Premium Adjustment, in solicitations and contracts when performance and payment bonds, or payment protection is required. 828.2 [Removed]

14. Subpart 828.2 is removed. Subpart 828.3--Insurance 828.306 [Amended]

15. Section 816.306 is amended by revising paragraph (a) to read as follows: 828.306

Insurance under fixed-price contracts.

(a) The contracting officer shall insert the provision at 852.228-71, Indemnification and insurance, in solicitations when utilizing term contracts, or contracts of a continuing nature, for ambulance, automobile and aircraft service.

* * * * *

Subpart 828.71 [Redesignated and Amended]

16. Subpart 828.71 is redesignated as subpart 828.70 and the subpart heading of newly redesignated subpart 828.70 is revised to read as follows: Subpart 828.70--Indemnification of Contractors, for Medical Research or Development Contracts 828.7100

[Redesignated and Amended]

17. Section 828.7100 is redesignated as section 828.7000 and revised to read as follows: 828.7000 Scope of subpart.

(a) As used in this subpart, the term "contractor" includes subcontractors of any tier under a contract containing an indemnification provision under 38 U.S.C. 7317.

(b) This subpart sets forth the policies and procedures concerning indemnification of contractors performing contracts involving medical research or research and development that involve risks of an unusually hazardous nature, as authorized by 38 U.S.C. 7317.

(c) The authority to indemnify the contractor under this subpart does not create any rights to third parties that do not exist by law. 828.7101 [Removed]

18. Section 828.7101 is removed. 828.7102 [Redesignated and amended]

19. Section 828.7102 is redesignated as section 828.7001 and paragraph (a)(3) is revised to read as follows: 828.7001

Extent of indemnification.

* * * * *

(a) * * *

(3) The losses or liability are not covered by the financial protection required under 828.7002.

* * * * *

828.7103 [Redesignated]

20. Section 828.7103 is redesignated as section 828.7002.

21. Section 828.7003 is added to read as follows: 828.7003

Indemnification Clause.

The contracting officer shall include the clause, 852.228-73, Indemnification of contractor--Hazardous Research Projects, in contracts and solicitations that indemnify a contractor for liability (including reasonable expenses of litigation or settlement) to third person for death, bodily injury, or loss of or damage to property from a risk that the contract defines in the performance work statement, the statement of work, or the statement of objectives as unusually hazardous.

PART 852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

22. The authority citation for 48 CFR part 852 continues to read as follows:

Authority: 38 U.S.C. 501, 8127, 8128, and 8151-8153; 40 U.S.C. 121(c); and 48 CFR 1.301-1.304. Subpart 852.2--Text of Provisions and Clauses 852.216-70 [Removed and reserved]

23. Section 852.216-70 is removed and reserved.

24. Section 852.216-71 is added to read as follows: 852.216-71

Economic price adjustment of contract price(s) based on a price index.

As prescribed in 816.203-4(e)(1), insert the following clause: Economic Price Adjustment of Contract Price(s) Based on a Price Index (Date)

(a) To the extent that contract cost increases are provided for by this economic price adjustment clause, the contractor warrants that the prices in this contract for the base period and any option periods do not include any amount to protect against such contingent cost increases.

(b) The Base and Adjusting Indexes, for the purpose of price adjustment under this clause, shall be___,[1] as contained in___,[2] as published by ___.[3] All adjustments authorized under this clause shall be made by using the Base Index and Adjusting Indexes, which are published___.[4]

(1) The Base Index, for the purposes of price adjustment under this clause, shall be the most recent Index published prior to the date for receipt of offers, or the due date for receipt of best and final offers if discussions were held whichever is later. The Base Index shall remain constant for the entire term of the contract, including all option periods.

(2) The Adjusting Index shall be the most recent Index published prior to the date of contract adjustment, as specified in paragraph (d) of this clause.

(c) The percentage difference between the Base Index and the Adjusting Index, rounded to the nearest .01 percent (e.g., 4.57%), will be used in calculating all adjustments to the following line items:___[5] The prices for these line items will be multiplied by the percentage increase or decrease and the resulting amount will be added to or deducted from the original line item price for that contract period (e.g., Base Year) to arrive at the new contract price for those line items from the effective date of the adjustment to the beginning of the next contract adjustment period, rounded to the same number of decimal points as the prices originally bid. Calculations for option year contract terms will be based on the prices in the schedule for those option years.

(d) The dates of contract adjustment shall be___[6] and the starting dates of each option year, if not already included in these dates. The contracting officer shall retain a copy of the Base Index in the contract file and, on each date of adjustment specified in this paragraph (d), shall obtain a copy of the Adjusting Index. The contracting officer shall calculate the adjustment due and shall, within 5 business days, issue a modification to the contract adjusting the unit or contract prices, as specified in paragraph (c). The adjusted unit or contract prices shall be effective for all orders placed or services provided after the date of contract adjustment as specified in this paragraph (d) until the beginning of the next contract adjustment period. If the contracting officer fails to act, the contractor shall request in writing a contract adjustment and any subsequent adjustment shall be retroactive to the applicable date of contract adjustment specified in this paragraph (d). The contractor's entitlement to price increases for a prior contract period (base year or option year) is waived unless the contractor's written request for an adjustment under this clause is received by the contracting officer no later than 30 days following the end of the base year for changes applicable to the base year, or 30 days following the end of each option year for changes applicable to that option year. The Government's right to contract decreases for prior contract periods (base year or option year) is waived unless the contracting officer processes a contract modification no later than 30 days following the end of the base year for changes applicable to the base year, or 30 days following the end of each option year for changes applicable to that option year.

(e) An example of an adjustment calculation is provided herein for informational purposes only.

(1) The original contract price or line item prices for that contract term (e.g., base year) shall be used for all calculations during that particular contract term and new calculations shall be made for each and every contract adjustment period specified in paragraph (d) during that contract term.

(2) For purposes of this example, the contract prices for the line items as specified in paragraph (c) will be adjusted by the percentage calculated as follows: Adjusting Index for the current period 196.6 Minus the Base Index -188.0 Equals the Index Point Change 8.6 Index Point Change Divided by the Base Index 8.6/188.0 = .0457* Result Multiplied by 100 Equals the Percentage Change (The Index Point Change Percentage) 4.57%

*This figure shall be rounded to the fourth decimal place. When the fifth decimal is 1 to 4, the figure shall be rounded down, 5 to 9, rounded up.

(3) For a line item with an original bid price of $25.00 and a 4.57 percent Index Point Change increase as of the first contract adjustment period, as shown above, the calculations for a new contract price for the first contract adjustment period would be as follows: $25.00 dz .0457 = $1.14, $25 + $1.14 = $26.14**. The new contract price for this line item from the beginning of that first contract adjustment period until the start of the next contract adjustment period would be $26.14 and the contracting officer would issue a contract modification reflecting this price change.

**The unit price adjustment shall be rounded up or down, as in paragraph

(e)(1) above, to match the number of decimal places in the original bid.

(4) If the Adjusting Index went down for the second adjustment period, reflecting only a 3 percent Index Point Change increase over the Base Index, the new price for this sample line item would be reduced for the second contract adjustment period from $26.14 to $25.75 as follows: $25 dz .03 = $0.75, $25 + $0.75 = $25.75. Note that the calculations for the second contract adjustment period are based on the original contract price for that contract term of $25.00. The contract price for this line item is modified to reflect this new price for the second contract adjustment period.

(5) At the start of the first option year and each subsequent option year period (as well as for each contract adjustment period specified in paragraph

(d) during that option year, if different), the contracting officer shall recalculate the contract or unit prices for that first option year based on any changes between the Adjusting Index and the Base Index, from the original contract award date to the start of the first option period, and based on the contractor's new option year prices. Assume the contractor's bid price for the first option year for the above sample line item was $25.50 and the calculations shown in paragraph (e)(1) above at the start of the first option period reflected a 6 percent Index Point Change. The new contract price for this sample line item at the start of the first option period would be calculated as follows: $25.50 dz .06 = $1.53, $25.50 + $1.53 = $27.03. The contracting officer would process a contract modification reflecting a revised contract price of $27.03 for the first contract adjustment period in the first option year.

(f) Price adjustments pursuant to this clause, shall be documented by a contract modification issued by the contracting officer, show the Base Index (see paragraph (b)(1)), the Adjusting Index, the adjusted contract prices (see paragraph (c)), the mathematical calculations used to arrive at the adjusted contract prices, and the effective date of the adjustment (see paragraph (d)).

(g) At the start of each option year, the contracting officer shall, within 5 days of the start of the option year period, process a contract modification adjusting the option year prices by the then current Index Point Change percentage, if any, reflecting the new adjusted prices for that first contract adjustment period in that option year.

(h) In the event that___[7] discontinues, or alters substantially, its method of calculating the Index cited herein, the parties shall mutually agree upon an appropriate substitute for determining the price adjustment described herein. If the contracting officer determines that the Index consistently and substantially fails to reflect market conditions, the contracting officer may modify the contract to specify the use of an appropriate substitute index, effective on the date the Index specified herein begins to consistently and substantially fail to reflect market conditions.

(i) Any dispute arising under this clause shall be resolved subject to the "Disputes" clause of the contract.

(End of clause) * * * * *

25. Section 852.216-72 is added to read as follows: 852.216-72 Proportional Economic Price Adjustment of Contract Price(s) Based on a Price Index.

As prescribed in 816.203-4(e)(2), insert the following clause: Proportional Economic Price Adjustment of Contract Price(s) Based on a Price Index (Date)

(a) To the extent that contract cost increases are provided for by this economic price adjustment clause, the contractor warrants that the prices in this contract for any option periods do not include any amount to protect against such contingent cost increases.

(b) The cost index, for the purpose of price adjustment under this clause, shall be___[1] as contained in___[2] as published by___[3] All adjustments authorized under this clause shall be made by using the Base Index and Adjusting Indexes, which are published.[4]

For the full-text of this document, click this link or copy it into your browser: https://www.federalregister.gov/documents/2017/03/13/2017-04877/revise-and-streamline-va-acquisition-regulation-to-adhere-to-federal-acquisition-regulation

[FR Doc. 2017-04877 Filed 3-10-17; 8:45 am]

BILLING CODE 8320-01-P

Myron Struck, editor, Targeted News Service, Springfield, Va., 703/304-1897; [email protected]; http://www.targetednews.com

09I-Abraham-1296748