Part 542—Contract Administration and Audit Services

542.001  Definitions.

“Contract administration” means Government actions taken after contract award to obtain compliance with such contract requirements as timely delivery of supplies or services, acceptance, payment, and closing of the contract. These actions include technical, financial, audit, legal, administrative, and managerial services in support of the contracting officer. It may include additional tasks requested or needed by the contracting activity including support in the pre-award phase of contracting.

“Procuring Contracting Officer” (PCO) means the contracting officer who awards the contract.

Subpart 542.1—Contract Audit Services

542.102  Assignment of contract audit services.

(a) Request all audit services through the Assistant Inspector General-Auditing or the Regional Inspector General-Auditing, as appropriate.

(b) Follow the procedures in GSA Order, Audit resolution and follow-up system (ADM P 2030.2B) for handling contract audit reports.

Subpart 542.2—Contract Administration Services

542.202  Assignment of contract administration.

(a) Assignment of contract administration is the process whereby identified functions, duties, or responsibilities related to the administration of contracts are assigned to a contract administration office (CAO) or an administrative contracting officer (ACO) within a contracting office.

(b) Each contracting director must establish procedures that ensure that qualified personnel perform contract administration activities in an effective manner. Usually, the PCO or the ACO in the contracting office performs these activities (but see paragraphs (c)(g) of this section).

(c) If it is more efficient, management may establish a separate CAO. Consider each of the following:

(1) The nature and complexity of the contract.

(2) The need to perform contract administration at or near the contractor’s facility or the place of performance.

(3) The availability of resources.

(d) You may designate one or more representatives to perform specified functions such as quality assurance, production, price analysis, finance and various engineering and technical specialties. The contracting officer’s representatives (CORs) may not enter into or modify a contract or otherwise perform functions reserved for a contracting officer (except see 543.202 for construction contracts).

(e) If you delegate contract administration to an ACO or designate a contracting officer’s technical representative (COTR) or contracting officer’s representative (COR), then provide the contractor with the name of the ACO and any representative and identify the functions each is authorized to perform.

(f) Provide or make available to the ACO a complete copy of the contract file. Provide each COR and COTR with the contract file information they need to perform their duties.

(g) You may delegate to an ACO functions other than those listed in FAR 42.302 and 542.302(b) after obtaining approval from the Senior Procurement Executive. Submit requests through the HCA. If approved, follow FAR 42.202(c).

Subpart 542.3—Contract Administration Office Functions

542.302  Contract administration functions.

The ACO or CAO performs these additional functions only if and to the extent specifically authorized by the PCO. Paragraphs (d) through (h) apply only to ACOs in FSS.

(a) Negotiate and issue priced or unpriced orders under indefinite delivery type contracts and basic ordering agreements.

(b) Terminate individual purchase, delivery, or task orders after coordinating with the PCO.

(c) Assess liquidated damages.

(d) Issue change orders to modify the method of shipment, packing requirements, the place of delivery, or specifications after coordinating with the PCO.

(e) Accept or reject requests for acceptance of nonconforming supplies involving other than a minor nonconformance after coordinating with the PCO.

(f) Negotiate price adjustments and execute supplemental agreements resulting from acceptances in (e) of this section.

(g) Issue cure or show cause notices under FAR 49.402-3(b).

(h) Terminate the contract for default after coordinating with the PCO.

Subpart 542.9—Bankruptcy

542.901  General.

If a contractor becomes insolvent or files under any of the laws relating to bankruptcy, insolvency, and dissolution of businesses (11 U.S.C. 101 et. seq.), you must protect the Government’s rights concerning both terminated and ongoing contracts. If you receive notification of contractor financial difficulties, bankruptcy or business dissolution, verify the accuracy of the information and follow the procedures in 542.902. Information may come from various sources including, but not limited to, the Industrial Operations Analyst (IOA), COR or COTR, Office of Finance or Inspector General, an industry association or a financial institution, another Federal agency or contractor, Dun and Bradstreet, or a newspaper item.

542.902  Procedures.

(a) Notice of financial difficulty. Upon notice and verification that a contractor is experiencing financial difficulty, take all the following actions:

(1) Determine whether the contractor is performing in a timely manner and making satisfactory progress. Obtain recommendations from the IOA or COR.

(2) Consider terminating the contract for default if performance has been untimely or otherwise unsatisfactory and the reason was within the contractor’s control.

(3) Request that the IOA or COR monitor the contract more closely (for example, visit the contractor’s plant or the work site more frequently) if contract termination is not considered necessary.

(4) Notify the Regional Small Business Administration (SBA) office and the SBTA if a small business contractor is involved.

(5) Notify the bonding company if circumstances dictate.

(b) Notice of bankruptcy. Upon notice that a contractor has filed for bankruptcy, take all the following actions:

(1) Notify the contracting director, assigned counsel, the Office of Finance and other interested parties. Notify the Inspector General if you either:

(i) Suspect that the contractor may have fraudulently transferred assets before filing for bankruptcy.

(ii) Are aware of an ongoing audit or investigation of the contractor.

(2) Consider terminating the contract for default if performance has been untimely or otherwise unsatisfactory and the reason was within the contractor’s control. Terminate only after obtaining concurrence of legal counsel.

(3) Determine the status of and provide for the protection and disposition of any Government-owned property. If special safeguards are needed, obtain the names, addresses, and phone numbers of the local Government officials concerned in the bankruptcy proceedings (e.g., sheriff, marshal, or the assigned Receiver or Trustee).

(4) Transmit promptly all relevant communications to legal counsel (for example, notice of bankruptcy, notice of meeting of creditors, plan of arrangement, status of such plan, claims bar date and address of the Bankruptcy Court where proceedings were filed).

(5) Prepare, in consultation with assigned counsel, the preliminary, contingent and, after reprocurement (if any), final proof of claim.

(6) Consult legal counsel regarding possible setoffs of Government claims from retained and unpaid contractor earnings.

(c) Notice of intent to dissolve a business or cease operations. Upon notice and verification that a contractor intends to dissolve a business or cease operations, take all the following actions:

(1) Obtain the current status of contract(s) from the IOA or COR and notify other directly interested parties. Do not request special visits unless all other efforts to obtain the necessary information have failed.

(2) Notify assigned legal counsel if a claim is either pending or outstanding and obtain information that would aid in finalizing the amount of the claim.

Subpart 542.11—Production Surveillance and Reporting

542.1107  Contract clause.

FSS Stock or Special Order Program

Insert 552.242-70, Status Report of Orders and Shipments, in solicitations and indefinite quantity and requirements contracts for stock or special order program items. You also may use the clause in indefinite delivery definite quantity contracts for stock or special order program items when close monitoring is necessary because numerous shipments are involved.

Subpart 542.12—Novation and Change-of-Name Agreements

542.1203  Processing agreements.

For any contract awarded under a small business set-aside, if the proposed successor is a large business:

(a) Notify and solicit comments from the SBTA (see FAR 42.1203(b) and (c)).

(b) If you believe that the transaction is intended to circumvent the requirements and objectives of the small business program, do not recognize the proposed successor.

(c) If a MAS contract is involved and other MAS small business contracts exist for the same special item number(s), do not recognize the proposed successor.

(d) If a MAS contract is involved and the contract has both set-aside and non-set-aside special item numbers, cancel the set-aside items, and process the novation request for the non-set-aside items.

Subpart 542.15—Contractor Performance Information

542.1503  Procedures.

(a) The contracting director reviews and considers any disagreement between GSA and the contractor regarding GSA’s evaluation of the contractor. Based on the review, the contracting directors issues the ultimate conclusion on the performance evaluation.

(b) Promptly provide a copy of the contracting director’s ultimate conclusion to the contractor.

(c) When responding to another department or agency request for past performance information, include a copy of any related contractor comments and contracting director’s ultimate conclusion.

542.1503-70  Responsibilities.

(a) Senior Procurement Executive. The Senior Procurement Executive evaluates each Service’s system for collecting and applying contract performance information to ensure compliance with the FAR and GSAM.

(b) Heads of Services. Consistent with FAR 42.1500 and this subpart, the Head of each Service must take all the following actions:

(1) Establish mechanisms for systematically collecting and maintaining positive and negative information on contractor performance.

(2) Identify pertinent performance data elements for collection.

(3) Ensure that contractor performance information is readily available to contracting officials and other individuals with procurement-related responsibilities.

(4) Clearly identify the officials responsible for collecting, disseminating, and applying this information in the acquisition process.

(c) Contracting officers. Follow the procedures in FAR 42.15, this subpart, and those established by the Head of the Service. Systematically collect and appropriately use contractor performance information.

542.1503-71  Information to collect.

The system for collecting contractor performance data should include, as appropriate:

(a) Timeliness of delivery or performance, for example:

(1) Adherence to contract delivery schedules.

(2) Resolution of delays.

(3) Number of “show cause” letters and “cure notices” issued.

(4) Number of delinquent deliveries.

(5) Number of contract extensions resulting from contractor-caused delays.

(6) Timely submission or performance or required tests.

(b) Conformance of product or service to contract requirements, for example:

(1) Quality of workmanship.

(2) Reliability.

(3) Adequacy of correction of defects.

(4) Number of safety defects.

(5) Number of product rejections.

(6) Results of laboratory tests.

(7) Number and extent of warranty problems.

(c) Customer comments, for example:

(1) Number and quality of positive comments.

(2) Number and nature of complaints.

(3) Adequacy of resolving customer complaints.

(d) Terminations for default.

(e) On-the-job safety performance record, including the number of lost or restricted workdays due to occupational injuries in comparison to the national average.

(f) Adequacy of contractor’s quality assurance system.

(g) Compliance with other key contract provisions, for example:

(1) Subcontracting program.

(2) Labor standards.

(3) Safety standards.

(4) Reporting requirements.

(h) Exhibiting customer-oriented behavior.

(i) Other performance elements identified by the Service.

Subpart 542.70—Audit of Contractor’s Records

542.7001  General.

The Office of Audits audits contractor’s records if required by law, regulation, or sound business judgment. These audits include periodic or special request audits necessary to determine a contractor’s financial condition, adequacy of its accounting system, integrity and reliability. Coordinate with technical specialists, finance and audit personnel to achieve the maximum benefits from these audits.

542.7002  Purpose of audit.

You may obtain from audits advice or recommendations on the:

(a) Propriety of amounts paid, or to be paid, by GSA to a contractor when such amounts are based on a cost or time determination or on variable features related to the results of the contractor’s operations.

(b) Adequacy of a contractor’s measures to safeguard Government property in its custody or under its control.

(c) Contractor’s compliance with contractual obligations concerning progress payments, advance payments, guaranteed loans, cash return provisions, and price adjustments.

(d) Reasonableness of a contractor’s termination settlement proposals.

542.7003  Additional internal controls.

(a) Do not rely solely on contractual audit rights. Establish internal controls or procedures for any flexible or variable features of these contracts:

(1) Cost-reimbursement.

(2) Time-and-materials or labor-hour.

(3) Requirements or indefinite-quantity.

For example, for a time-and-materials or labor-hour contract performed at a Government facility or elsewhere, provide for the review of time records. Provide for this review even if the contractor is subject to supervision by Government personnel.

(b) Establish these internal controls or procedures prior to the commencement of contract performance. Use any reasonable and reliable method or procedure that will enable the Government to determine the correctness of the charges for such matters as the time spent on the job and materials or supplies received. If needed, obtain assistance from the Assistant Inspector General for Auditing or the Field Audit Office.

542.7004  Releasing or withholding of audit reports.

The Freedom of Information Act requires the disclosure of Government records subject to certain exceptions. Consult with both the Assistant Inspector General for Auditing and the Office of General Counsel before releasing or withholding a contract audit report.