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Federal Register / Vol. 86, No. 192 / Thursday, October 7, 2021 / Rules and Regulations conditions that are customarily offered to the public by vendors of supplies or services that meet the Federal Acquisition Regulation FAR definition of commercial item and are intended to create a binding legal obligation on the end user. CSAs are common in information technology acquisitions, including acquisitions of commercial computer software and commercial technical data, and they may apply to any supply or service.
Commercial supplies and services are offered to the public under standard agreements that may take a variety of forms, including but not limited to license agreements, terms of service, and terms of sale or purchase. These standard CSAs contain terms and conditions that are appropriate when the purchaser is a private party, but not when the purchaser is the Federal Government.
The existence of federallyincompatible terms in standard CSAs is recognized in FAR 27.4053b, which is limited to the acquisition of commercial computer software. This subsection advises contracting officers to exercise caution when accepting a contractors terms and conditions. The use of CSAs is not limited to information technology acquisitions, as they have become common in a broad variety of contexts, from travel to telecommunications, financial services, and building maintenance systems;
including purchases below the simplified acquisition threshold.
Discrepancies between CSAs and Federal law, or the Governments needs, create recurrent points of inconsistency.
Below are examples of incompatible clauses that are commonly found in CSAs:
Jurisdiction or venue clauses may require that disputes be resolved in a particular state or a venue that otherwise conflicts with U.S. Federal law. Such clauses conflict with the sovereign immunity of the U.S.
Government. Therefore, these clauses cannot apply to litigation where the U.S.
Government is a defendant because those disputes must be heard either in the U.S. District Courts 28 U.S.C. 1346, the U.S. Court of Federal Claims 28
U.S.C. 1491, or a venue otherwise authorized by Federal law.
Automatic renewal clauses may automatically renew or extend contracts unless affirmative action is taken by the Government. Such clauses that require the obligation of funds prior to appropriation violate the restrictions of the Anti-Deficiency Act 31 U.S.C.
1341a1B.
Termination clauses may allow the contractor to unilaterally terminate a
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contract if the Government is alleged to have breached the contract. Government contracts are subject to the Contract Disputes Act of 1978 41 U.S.C. 601
613. The Contract Disputes Act requires a certain process for resolving disputes, including terminations, and that the Contractor shall proceed diligently with performance of this contract, pending final resolution under the terms of the FAR Disputes clause at 52.2331.
Additionally, the current order of precedence contained in the Commercial Items clause at FAR
52.2124 is not clear on prevailing terms, and potentially allows CSAs to supersede the terms of Federal contracts, especially in those areas where Federal law is implicated indirectly. As a result, industry and Government representatives must spend time and resources negotiating and tailoring CSAs to comply with Federal law and to ensure both parties reach an agreement on the contract terms.
b Value of Addressing Incompatible Commercial Supplier Agreements EPA has identified common illegal, improper or inappropriate CSA terms that constitute the majority of the negotiated CSA terms. The outcome of the negotiations regarding these identified terms is generally predetermined by rule of law, but EPA
and contractors must spend time and resources to negotiate these terms. By explicitly addressing common unenforceable terms within the Commercial Items clause at FAR
52.2124 and clarifying prevailing terms in the order of precedence, it eliminates the need for negotiation of these common conflicting terms.
This approach will decrease the time needed for legal review prior to contract award and will reduce costs to both the Government and contractors. EPA
believes that such an approach will benefit contractors, including small business concerns, by: 1 Decreasing proposal costs associated with negotiating the identified unenforceable CSA terms; 2 facilitating faster procurement and contract lead times, therefore decreasing the time it takes for contractors to make a return on their investment; 3 reducing administrative costs for companies that maintain alternate federally compliant CSAs; and 4 for small business concerns, it levels the playing field with larger competitors since negotiations will only be required if the CSA contains objectionable clauses outside of those already identified in proposed clause.
Additionally, this approach ensures consistent application and
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understanding of these unenforceable terms.
c EPA Class Deviation EPA is issuing class deviations for two Federal Acquisition Regulation FAR clauses to address the order of precedence and CSA terms that are incompatible with Federal law. The class deviations not only protect EPA
and contractors by uniformly addressing common unacceptable terms and reducing risk, but also by further streamlining the acquisition process and reducing administrative cost for commercial-item supplies and services.
The class deviations also clarify the precedence of terms to ensure parties have a mutual understanding of the contract terms.
d Updates to 1516.505b and 1552.21673
The EPA is updating clause 1552.216
73, Fixed Rates for ServicesIndefinite Delivery/Indefinite Quantity Contract, to add Alternate I which had previously been a deviation to the Basic form. The deviation was issued in April 2018 and provides for contractors to be paid escalated rates for optional periods of performance. The deviation is amended into an alternate version because there is an ongoing need for the deviation.
The corresponding prescription in 1516.505b is being updated accordingly.
e New Subpart 1552.3
EPA is creating a new subpart 1552.3, FAR and EPAAR Class Deviations, that will contain FAR and EPAAR class deviations initiated by the EPA. As discussed in IIc the EPA is creating two new FAR class deviations in this final rule that will be added to the new subpart: Class deviations for 52.2124, Contract Terms and Conditions Commercial Items FAR DEVIATION;
and 52.23239, Unenforceability of Unauthorized Obligations FAR
DEVIATION.
II. Final Rule The final rule amends the EPAAR to implement standard terms and conditions for the most common conflicting CSA terms and to minimize the need for the negotiation of these terms of CSAs on an individual basis.
The final rule will add requirements to contracts making certain conflicting or inconsistent terms in a CSA
unenforceable so long as an express exception is not authorized elsewhere by Federal statute. EPA is also amending the EPAAR to modify the order of precedence contained in the Contract Terms and Conditions
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