[Federal Register Volume 69, Number 191 (Monday, October 4, 2004)]
[Proposed Rules]
[Pages 59166-59177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21922]


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OFFICE OF PERSONNEL MANAGEMENT

48 CFR Parts 2101, 2102, 2103, 2104, 2105, 2109, 2110, 2115, 2116, 
2131, 2132, 2137, 2144, 2146, 2149, and 2152

RIN 3206-AI65


Federal Employees' Group Life Insurance; Federal Acquisition 
Regulation

AGENCY: Office of Personnel Management.

ACTION: Proposed regulations.

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SUMMARY: The Office of Personnel Management (OPM) is issuing proposed 
regulations to amend the Federal Employees' Group Life Insurance 
(FEGLI) Acquisition Regulation. The proposed regulations incorporate 
changes in administrative policy and practices and make clarifying 
language changes.

DATES: OPM must receive comments on or before December 3, 2004.

ADDRESSES: Send written 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.

SUPPLEMENTARY INFORMATION: On August 27, 1993, OPM issued the Life 
Insurance Federal Acquisition Regulation (LIFAR), 48 CFR chapter 21, 
which identifies basic and significant acquisition policies that are 
unique to the FEGLI Program. The proposed regulations explain changes 
in the FEGLI Program's policies, update Federal Acquisition Regulation 
(FAR) changes, and make clarifying changes to the language.
    Some of the more significant changes in the regulations are:
    LIFAR 2101.102(b), Authority, is modified to reflect the prior 
consolidation of 5 CFR parts 870 through 874 into one part, part 870. 
An identical change is also made in 2109.7001(a).
    The revised regulation provides that both OPM and the Contractor, 
with the approval of OPM, may issue FEGLI literature to employees 
(2103.570(a)). The language clarifies that the FEGLI Program Booklet, 
along with valid election documents, serves as certification of 
coverage under the FEGLI Program. The Booklet alone does not suffice as 
certification of coverage.
    Under revised 2110.7002, Contractor investment of FEGLI Program 
funds, the Contractor is not responsible for any actions regarding 
investment strategy to maximize investment income when and if such 
actions were directed by OPM. This modification protects the Contractor 
in the event it is requested to take an action that could have an 
adverse impact on its responsibility to manage and invest Program funds 
in a prudent manner. The same modification occurs in 2152.210-70(a).
    Section 2131.109, Advance agreements, increases the threshold from 
$25,000 to $100,000 for precontract and nonrecurring costs of the 
Contractor. We consider this change reasonable in relation to the total 
cost of the FEGLI contract. We are making a similar change at 2131.205-
32.
    A new subparagraph, Administrative Expense Ceiling, is added to 
2152.231-70 (Accounting and allowable cost). Calculated annually, the 
administrative expense ceiling is based on the Contractor's prior 
year's administrative expense ceiling and adjusted by the percent 
change in the Consumer Price Index for All Urban Consumers for the 
preceding 12 months. Both OPM and the Contractor will reexamine the 
base, including the prior year's actual expenses, if either party so 
requests.
    During a continuation of services period, revised policy allows for 
a one-time negotiated increase in the administrative expense ceiling to 
handle phase-in/phase-out costs. All costs, including costs that exceed 
the revised ceiling, must be actual, allowable, allocable, and 
reasonable under FAR cost principles. Since indirect costs are charged 
against an annual administrative expense ceiling, the policy on 
indirect costs is modified (2131.203) to delete reference to a 
``dividend or retention formula.'' Under the ceiling, a separate annual 
limit for indirect costs is negotiated between OPM and the Contractor.
    An OPM policy change adds an incentive fee the Contractor can earn 
for exceptional performance during a continuity of services period 
(2137.102 and 2152.237-70). The incentive fee cannot exceed the pro 
rata risk or service charge for the same period. A new factor, 
Transitional services, is added to the weighted guidelines at 2115.404-
71 (Profit analysis factors) to reflect this change and is only 
applicable during a continuity of services period.
    Also, during a continuity of services period, OPM will not initiate 
any changes to the LIFAR (2101.370). This does not, however, exempt the 
Contractor from complying with statutory changes that may take effect 
during such a period.
    The proposed regulation establishes a letter of credit (LOC) 
account for the Contractor (2132.170), which will be credited on the 
first business day of each month with one-twelfth of the estimated 
annual premium payment. The December payment will be credited to the 
LOC account no later than the last business day of each calendar year. 
Interest earnings on the LOC account will be made available for 
drawdown by the Contractor. 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

[[Page 59167]]

account for benefit costs of less than $5,000 and other FEGLI Program 
disbursements will be made on a checks-presented basis.
    The proposed regulation clarifies the start date of the 31-day 
grace period that follows the date premiums are due. Since OPM cannot 
credit the LOC account if the first of the month falls on a non-
business day, the revised regulations: (1) Define ``grace period'' at 
2102.101 as 31 days from and including the payment due date of the 
first business day of the month; and (2) provide that the annual 
estimated premium, which will be credited to the Contractor's LOC 
account in 12 equal monthly installments, is due and available for 
drawdown on the first business day of the month. The grace period is 
also referenced in 2149.002, Applicability, and 2152.249-70, Renewal 
and termination.
    Also under 2152.249-70, Renewal and termination, the Contractor 
agrees to reinstate the contract if termination occurs as the result of 
the Government's failure to make premium payments before the grace 
period ends due to circumstances beyond the Government's control. In 
such situations, the Contractor will allow an additional 5 days after 
the expiration of the grace period for OPM to make payment to the 
Contractor. Notwithstanding the above, the Contractor and OPM can agree 
to continue the contract.
    The proposed regulation states that the Contractor is not 
responsible for continued performance as a result of OPM's failure to 
make timely premium payments. Were such a circumstance to occur, it 
would be unfair to expect the Contractor to continue to make benefits 
payments on a regular basis and subsequently seek recovery from OPM 
(2137.102 and 2152.237-70). This Contractor protection is included in 
revised policy and contract clause provisions on Termination 
(2149.002(b)) and Renewal and termination (2152.249-70(b)).
    We believe it is unnecessary to evaluate annually a Contractor's 
system of internal controls under a quality assurance program. 
Accordingly, the language at 2146.201 provides for periodic reviews. 
While subsequent reviews may be limited to changes in the Contractor's 
internal control system, the Contractor has an ongoing obligation to 
fully implement its internal control system at all times.
    Our current policy on subcontracting requires advance approval of 
subcontracts or modifications that exceed $100,000. The proposed 
regulation increases the threshold to $550,000 (2144.102 and 2152.244-
70(a)). We are also making this change in the Notice of significant 
events clause (2152.210-71(d)).
    We are making a number of important additions and clarifying 
language changes to 2152.231-70, Accounting and allowable costs. We are 
defining cost as a chargeable cost against the contract which must meet 
separate cost principle tests for being actual, allowable, allocable, 
and reasonable. Conforming changes are being made to the definitions of 
``Administrative expenses'' and ``Investment income'' so that they 
reference the definition of cost. We are changing the definition of 
``Benefits'' under this section 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'' is being modified to ``Overpayments recovered,'' 
since overpayment monies are an offset against benefits paid or 
incurred.
    An expanded Definitions section at subpart 2102.1 includes terms 
used throughout the LIFAR. Editorial changes to the LIFAR correct 
typographical errors in the Code of Federal Regulations, provide for 
consistency throughout, and make the text more readable. Reference 
changes and updates are made to the FEGLI Clause Matrix at 2152.3 and 
other sections of the LIFAR, where applicable, to conform to changes in 
the FAR (chapter 1 of title 48, Code of Federal Regulations) since the 
original issuance of the LIFAR.

Executive Order 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
affect only the Federal life insurance Contractor.

List of Subjects in 48 CFR Parts 2101, 2102, 2103, 2104, 2105, 
2109, 2110, 2115, 2116, 2131, 2132, 2137, 2144, 2146, 2149, and 
2152

    Advertising, Government employees, Government procurement, Life 
insurance.

U.S. Office of Personnel Management.
Kay Coles James,
Director.

    Accordingly, OPM proposes to amend 48 CFR chapter 21, as follows:

CHAPTER 21--OFFICE OF PERSONNEL MANAGEMENT, FEDERAL EMPLOYEES' GROUP 
LIFE INSURANCE FEDERAL ACQUISITION REGULATION

    1. The authority citation for 48 CFR parts 2101, 2102, 2103, 2104, 
2105, 2109, 2110, 2115, 2116, 2131, 2132, 2137, 2144, 2146, 2149, and 
2152 continues to read as follows:

    Authority: 5 U.S.C. 8716; 40 U.S.C. 486(c); 48 CFR 1.301.

PART 2101--FEDERAL ACQUISITION REGULATIONS SYSTEM

Subpart 2101.1--Purpose, Authority, Issuance

    2. In section 2101.102 revise paragraph (b) to read as follows:


2101.102  Authority.

* * * * *
    (b) The LIFAR does not replace or incorporate regulations found at 
5 CFR part 870, which provide the substantive policy guidance for 
administration of the FEGLI Program under 5 U.S.C. chapter 87. The 
following is the order of precedence in interpreting a contract 
provision under the FEGLI Program:
    (1) 5 U.S.C. chapter 87.
    (2) 5 CFR part 870.
    (3) 48 CFR chapters 1 and 21.
    (4) The FEGLI Program contract.

Subpart 2101.3--Agency Acquisition Regulations

    3. In section 2101.301 revise paragraph (b) to read as follows:


2101.301  Policy.

* * * * *
    (b) OPM may issue internal procedures, instructions, directives, 
and guides to clarify or implement the LIFAR within OPM. Clarifying or 
implementing procedures, instructions, directives, and guides issued 
pursuant to this section of the LIFAR must:
    (1) Be consistent with the policies and procedures contained in 
this chapter as implemented and supplemented from time to time; and
    (2) Follow the format, arrangement, and numbering system of this 
chapter to the extent practicable.
    4. In section 2101.370 add paragraph (e) to read as follows:


2101.370  Effective date of LIFAR amendments.

* * * * *
    (e) OPM will not initiate any changes to the LIFAR during a 
continuity of services period, as discussed in 2152.237-70 of this 
chapter.

[[Page 59168]]

PART 2102--DEFINITIONS OF WORDS AND TERMS

Subpart 2102.1--Definitions

    5. Revise section 2102.101 to read as follows:


2102.101  Definitions.

    In this chapter, unless otherwise indicated, the following terms 
have the meaning set forth in this subpart.
    Contract means a policy or policies of group life and accidental 
death and dismemberment insurance to provide the benefits specified by 
5 U.S.C. chapter 87.
    Contract price means premium.
    Contract year means October 1 through September 30. Also referred 
to as contract term.
    Contractor means an insurance company contracted to provide the 
benefits specified by 5 U.S.C. chapter 87.
    Director means the Director of the Office of Personnel Management.
    Employees' Life Insurance Fund means the trust fund established 
under 5 U.S.C. 8714.
    Enrollee means the insured, or, where applicable, the assignee.
    FEGLI Program means the Federal Employees' Group Life Insurance 
Program.
    Fixed price with limited cost redetermination plus fixed fee 
contract means a contract which provides for:
    (1) A fixed price during the contract year with a cost element that 
is adjusted at the end of the contract term based on costs incurred 
under the contract; and
    (2) A profit or fee that is fixed at the beginning of the contract 
term. The amount of adjustment for costs is limited to the amount in 
the Employees' Life Insurance Fund. The fee will be in the form of 
either a risk charge or a service charge.
    Grace period means 31 days from and including the payment due date 
of the first business day of the month.
    Insurance company, as provided in 5 U.S.C. 8709, means a company 
licensed to transact life and accidental death and dismemberment 
insurance under the laws of all the States and the District of 
Columbia. It must have in effect, on the most recent December 31 for 
which information is available to the Office of Personnel Management, 
an amount of employee group life insurance equal to at least 1 percent 
of the total amount of employee group life insurance in the United 
States in all life insurance companies.
    OPM means the United States Office of Personnel Management.
    Premium means an amount intended to cover the estimated annual 
benefits and administrative costs plus a fixed service or risk charge, 
made available to the Contractor in 12 equal installments. At the end 
of the contract year, a reconciliation of premiums, benefits, and other 
costs is performed as a limited cost redetermination.
    Reinsurer means a company that reinsures portions of the total 
amount of insurance under the contract as specified in 5 U.S.C. 8710 
and is not an agent or representative of the Contractor.
    Subcontract means a contract entered into by any subcontractor that 
furnishes supplies or services for performance of a prime contract 
under the FEGLI Program. Except for the purpose of FAR subpart 22.8--
Equal Employment Opportunity, the term ``subcontract'' does not include 
a contract with a reinsurer under the FEGLI Program.
    Subcontractor means any supplier, distributor, vendor, or firm that 
furnishes supplies or services to or for a prime Contractor under the 
FEGLI Program contract. Except for the purpose of FAR subpart 22.8--
Equal Employment Opportunity, the term ``subcontractor'' does not 
include reinsurers under the FEGLI Program.

PART 2103--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST

Subpart 2103.5--Other Improper Business Practices

    6. In section 2103.570 revise paragraphs (a) and (b) to read as 
follows:


2103.570  Misleading, deceptive, or unfair advertising.

    (a) OPM, or the Contractor with the approval of OPM, makes 
available to Federal employees a booklet describing the provisions of 
the FEGLI Program, which includes information about eligibility, 
enrollment, and general procedures. The booklet, along with valid 
election documents, serves as certification of the employee's coverage 
under the FEGLI Program. Any marketing/advertising directed 
specifically at Federal employees and life insurance contacts with 
Federal employees for the purpose of selling FEGLI Program coverage 
must be approved by OPM in advance.
    (b) The Contractor is prohibited from making incomplete and/or 
incorrect comparisons or using disparaging or minimizing techniques to 
compare its other products or services to those of the FEGLI Program. 
The Contractor agrees that any advertising material authorized and 
released by the Contractor which mentions the FEGLI Program will be 
truthful and not misleading and will present an accurate statement of 
FEGLI Program benefits. The Contractor will use reasonable efforts to 
assure that agents selling its other products are aware of and abide by 
this prohibition.
* * * * *

PART 2104--ADMINISTRATIVE MATTERS

    7. Add subpart 2104.9 consisting of section 2104.9001 to read as 
follows:

Subpart 2104.9--Taxpayer Identification Number

Sec.
2104.9001 Contract clause.


2104.9001  Contract clause.

    The clause at 2152.204-70 must be inserted in all FEGLI Program 
contracts.

PART 2105--PUBLICIZING CONTRACT ACTIONS

Subpart 2105.70--Applicability

    8. Revise section 2105.7001 to read as follows:


2105.7001  Applicability.

    FAR part 5 has no practical application to the FEGLI Program 
because the requirements for eligible contractors (i.e., qualified life 
insurance companies) are stated in 5 U.S.C. 8709.

PART 2106--COMPETITION REQUIREMENTS

Subpart 2106.70--Applicability

    9. Revise section 2106.7001 to read as follows:


2106.7001  Applicability.

    FAR part 6 has no practical application to the FEGLI Program 
because 5 U.S.C. chapter 87 exempts the FEGLI Program from competitive 
bidding.

PART 2109--CONTRACTOR QUALIFICATIONS

Subpart 2109.70--Minimum Standards for FEGLI Program Contractors

    10. In section 2109.7001 revise paragraphs (a), (f), and (g) to 
read as follows:


2109.7001  Minimum standards for FEGLI Program Contractors.

    (a) The Contractor must meet the requirements of chapter 87 of 
title 5, United States Code; part 870 of title 5, Code of Federal 
Regulations; chapter 1 of title 48, Code of Federal Regulations; and 
the standards in this subpart. The Contractor must continue to meet 
these and the following statutory and

[[Page 59169]]

regulatory requirements while under contract with OPM. Failure to meet 
these requirements and standards is cause for OPM's termination of the 
contract in accordance with part 2149 of this chapter.
* * * * *
    (f) The Contractor agrees to enter into annual premium rate 
redeterminations with OPM.
    (g) The Contractor must furnish such reasonable reports as OPM 
determines are necessary to administer the FEGLI Program. The cost of 
preparation of such reports will be considered an allowable expense 
within the administrative expense ceiling defined in 2152.231-70 of 
this chapter.
* * * * *

PART 2110--SPECIFICATIONS, STANDARDS, AND OTHER PURCHASE 
DESCRIPTIONS

Subpart 2110.70--Contract Specifications

    11. Revise section 2110.7002 to read as follows:


2110.7002  Contractor investment of FEGLI Program funds.

    (a) The Contractor is required to invest and reinvest all FEGLI 
Program funds on hand, including any attributable to the special 
contingency reserve (as used in 5 U.S.C. 8712), until needed to 
discharge promptly the obligations incurred under the contract. Within 
the constraints of safety and liquidity of investments, the Contractor 
must seek to maximize investment income. However, the Contractor will 
not be responsible for any actions taken at the direction of OPM.
    (b) The Contractor is required to credit income earned from its 
investment of FEGLI Program funds to the FEGLI Program. Thus, the 
Contractor must be able to allocate investment income to the FEGLI 
Program in an appropriate manner. If the Contractor fails to invest 
funds on hand, properly allocate investment income, or credit any 
income due to the contract, for whatever reason, it must return or 
credit any investment income lost to OPM or the FEGLI Program, 
retroactive to the date that such funds should have been originally 
invested, allocated, or credited in accordance with the clause at 
2152.210-70.

PART 2114--SEALED BIDDING

Subpart 2114.70--Applicability

    12. Revise section 2114.7001 to read as follows:


2114.7001  Applicability.

    FAR part 14 has no practical application to the FEGLI Program 
because 5 U.S.C. chapter 87 exempts the FEGLI Program from competitive 
bidding.

PART 2115--CONTRACTING BY NEGOTIATION


2115.106-270  [Redesignated as 2115.071]

    13. Redesignate section 2115.106-270 as section 2115.071 and revise 
the title to read as ``Specific retention periods: Contract clause.''


2115.170  [Redesignated as 2115.070]

    14. Redesignate section 2115.170 as section 2115.070.
    15. Revise the title of subpart 2115.1, remove section 2115.106, 
and add a new section 2115.170 to read as follows:

Subpart 2115.1--Source Selection Processes and Techniques


2115.170  Applicability.

    FAR subpart 15.1 has no practical application to the FEGLI Program 
because prospective contractors (insurance companies) are considered 
for inclusion in the FEGLI Program in accordance with criteria provided 
in 5 U.S.C. chapter 87, LIFAR 2109.7001, and LIFAR 2115.370.
    16. Redesignate subpart 2115.4 as subpart 2115.2 and revise the 
title, redesignate section 2115.401 as section 2115.270, and revise 
paragraphs (a) and (c) to read as follows:

Subpart 2115.2--Solicitation and Receipt of Proposals and 
Information


2115.270  Applicability.

    (a) FAR subpart 15.2 has no practical application to the FEGLI 
Program because 5 U.S.C. chapter 87 exempts the FEGLI Program from 
competitive bidding.
* * * * *
    (c) Eligible contractors (i.e., qualified life insurance companies) 
are identified in accordance with 5 U.S.C. 8709. Prospective 
contractors voluntarily come forth in accordance with procedures 
provided in 2115.370.
* * * * *
    17. Redesignate subpart 2115.6 as subpart 2115.3, and redesignate 
section 2115.602 as section 2115.370, and revise the introductory 
paragraph to read as follows:

Subpart 2115.3--Source Selection


2115.370  Applicability.

    FAR subpart 15.3 has no practical application to the FEGLI Program 
because prospective contractors (insurance companies) are considered 
for inclusion in the FEGLI Program in accordance with criteria provided 
in 5 U.S.C. chapter 87, LIFAR 2109.7001, and the following:
* * * * *
    18. Redesignate subpart 2115.8 as subpart 2115.4 and revise the 
title, and redesignate section 2115.802 as section 2115.402 and revise 
it to read as follows:

Subpart 2115.4--Contract Pricing


2115.402  Policy.

    Pricing of FEGLI Program premium rates is governed by 5 U.S.C. 
8707, 8708, 8711, 8714a, 8714b, and 8714c. FAR subpart 15.4 will be 
implemented by applying cost analysis policies and procedures. To the 
extent that reasonable or good faith actuarial estimates are used for 
pricing, such estimates will be deemed acceptable and, if inaccurate, 
will not constitute defective pricing.
    19. Redesignate section 2115.902 as section 2115.404-70, revise the 
title, and revise paragraph (b)(2) to read as follows:


2115.404-70  Profit.

* * * * *
    (b) * * *
    (2) Once agreement to relinquish the risk charge is made, the 
agreement may not be cancelled unless OPM and the Contractor mutually 
agree to reinstitute payment of a risk charge; or unless the Fund 
balance falls below the level defined in 2115.404-70(a) and 30 days' 
notice of cancellation is provided; or unless the Contractor or OPM 
provides notice of cancellation for any reason 1 year prior to the date 
cancellation is sought.
* * * * *
    20. Redesignate section 2115.905 as section 2115.404-71 and revise 
it to read as follows:


2115.404-71  Profit analysis factors.

    (a) The OPM Contracting Officer will apply a weighted guidelines 
method when developing the prenegotiation objective (service charge) 
for the FEGLI Program contract. In accordance with the factors defined 
in FAR 15.404-4(d), OPM will apply the appropriate weights derived from 
the ranges specified in paragraph (b) of this section and will 
determine the prenegotiation objective based on the total dollar amount 
of the Contractor's Basic and Option C (family optional insurance) 
claims paid in the previous contract year.
    (1) Contractor performance. OPM will consider such elements as the 
accurate and timely processing of benefit claims,

[[Page 59170]]

the volume and validity of complaints received by OPM, effectiveness of 
internal controls systems in place, the timeliness and adequacy of 
reports on operations, and responsiveness to OPM offices, enrollees, 
beneficiaries, and Congress as measures of economical and efficient 
contract performance. This factor will be judged apart from the 
Contractor's basic responsibility for contract compliance and will be a 
measure of the extent and nature of the Contractor's contribution to 
the FEGLI Program through the application of managerial expertise and 
effort. Evidence of effective contract performance will receive a plus 
weight, and poor performance or failure to comply with contract terms 
and conditions a zero weight. Innovations of benefit to the FEGLI 
Program will generally receive a plus weight; documented inattention or 
indifference to effective operations, a zero weight.
    (2) Contract cost risk. OPM will evaluate the Contractor's risk 
annually in relation to the amount in the Employees' Life Insurance 
Fund and will evaluate this factor accordingly.
    (3) Federal socioeconomic programs. OPM will consider documented 
evidence of successful Contractor-initiated efforts to support such 
Federal socioeconomic programs as drug and substance abuse deterrents 
and other concerns of the type enumerated in FAR 15.404-4(d)(1)(iii) as 
a factor in negotiating profit. This factor will be related to the 
quality of the Contractor's policies and procedures and the extent of 
exceptional effort or achievement demonstrated. Evidence of effective 
support of Federal socioeconomic programs will result in a plus weight; 
indifference to Federal socioeconomic programs will result in a zero 
weight; and only deliberate failure to provide opportunities to persons 
and organizations that would benefit from these programs will result in 
a negative weight.
    (4) Capital investments. This factor is generally not applicable to 
FEGLI Program contracts because facilities capital cost of money may be 
an allowable administrative expense. Generally, this factor will be 
given a weight of zero. However, special purpose facilities or 
investment costs of direct benefit to the FEGLI Program that are not 
recoverable as allowable or allocable administrative expenses may be 
taken into account in assigning a plus weight.
    (5) Cost control. This factor is based on the Contractor's 
previously demonstrated ability to perform effectively and 
economically. In addition, consideration will be given to measures 
taken by the Contractor that result in productivity improvements and 
other cost containment accomplishments that will be of future benefit 
to the FEGLI Program. Examples are containment of costs associated with 
processing claims; success at preventing waste, loss, unauthorized use, 
or misappropriation of FEGLI Program assets; and success at limiting 
and recovering erroneous benefit payments.
    (6) Independent development. Consideration will be given to 
independent Contractor-initiated efforts, such as the development of a 
unique and enhanced customer support system, that are of demonstrated 
value to the FEGLI Program and for which developmental costs have not 
been recovered directly or indirectly through allowable or allocable 
administrative expenses. This factor will be used to provide additional 
profit opportunities based upon an assessment of the Contractor's 
investment and risk in developing techniques, methods, practices, etc., 
having viability to the Program at large. Improvements and innovations 
recognized and rewarded under any other profit factor cannot be 
considered.
    (7) Transitional services. This factor is based on the Contractor's 
performance of transitional activities during a continuity of services 
period as described in the clause at 2152.237-70 of this chapter. These 
are any activities apart from the normal servicing of the contract 
during an active contract term. Other than for a transitional period, 
the weight applied to this factor for any active contract term is zero.
    (b) The weight ranges for each factor to be used in the weighted 
guidelines approach are set forth in the following table:

------------------------------------------------------------------------
            Profit factor                        Weight ranges
------------------------------------------------------------------------
1. Contractor performance............  0 to +.0005
2. Contract cost risk................  +.000001 to +.00001
3. Federal socioeconomic programs....  -.00003 to +.00003
4. Capital investment................  0 to +.00001
5. Cost control......................  -.0002 to +.0002
6. Independent development...........  0 to +.00003
7. Transitional services.............  0 to +.0007
------------------------------------------------------------------------

Subpart 2115.9--[Removed]

    20a. Remove subpart 2115.9.

PART 2116--TYPES OF CONTRACTS

Subpart 2116.2--Fixed Price Contracts

    21. Revise section 2116.270 to read as follows:


2116.270  FEGLI Program contracts.

    FEGLI Program contracts are fixed price with limited cost 
redetermination plus fixed fee. The premium paid to the Contractor is 
mutually agreed upon by OPM and the Contractor and is based on an 
estimate of benefits and administrative costs, plus the fixed service 
or risk charge, and is determined annually. Claims costs, including 
benefits and administrative expenses, in excess of premiums are paid up 
to the amount in the Employees' Life Insurance Fund. Payment for costs 
exceeding the amount in the Fund are the responsibility of the 
Contractor and reinsurers. The fee is fixed at the inception of each 
contract year. The fee does not vary with the actual costs but may be 
adjusted as a result of changes in the work to be performed under the 
contract. The fee is in the form of either a risk charge or a service 
charge.
    (a) Risk charge. The risk charge will be determined as prescribed 
in 5 U.S.C. 8711(d) and 2115.404-70 of this chapter. It will consist of 
a negotiated amount which will reflect the risk assumed by the 
Contractor and the reinsurers and may be adjusted as a result of 
increased or decreased risk under the contract. When the applicable fee 
is a risk charge, no service charge will be paid for the same period of 
time.
    (b) Service charge. The amount of the service charge will be 
determined using a weighted guidelines structured approach in 
accordance with 2115.404-71 of this chapter and negotiated with the 
Contractor at the beginning of the contract term. When the applicable 
fee is a service charge, no risk charge will be paid for the same 
period of time.

PART 2131--CONTRACT COST PRINCIPLES AND PROCEDURES

Subpart 2131.1--Applicability

    22. Revise section 2131.109 to read as follows:


2131.109  Advance agreements.

    FAR 31.109 is applicable to FEGLI Program contracts, except that 
precontract costs and nonrecurring costs that exceed $100,000 will not 
be allowed in the absence of an advance agreement between OPM and any 
potential FEGLI Contractor.

Subpart 2131.2--Contracts with Commercial Organizations

    23. Revise section 2131.203 to read as follows:


2131.203  Indirect costs.

    The provisions of FAR 31.203 apply to the allocation of indirect 
costs.

[[Page 59171]]

    24. Revise section 2131.205-32 to read as follows:


2131.205-32  Precontract costs.

    Precontract costs will be allowable in accordance with FAR part 31, 
but precontract costs that exceed $100,000 will not be allowable except 
to the extent allowable under an advance agreement negotiated in 
accordance with 2131.109 of this chapter.
    25. Revise section 2131.205-38 to read as follows:


2131.205-38  Selling costs.

    Selling costs are not allowable costs to FEGLI contracts except to 
the extent that they are attributable to conducting contract 
negotiations with the Government and for liaison activities involving 
ongoing contract administration, including the conduct of informational 
and enrollment activities as directed or approved by the Contracting 
Officer.

PART 2132--CONTRACT FINANCING

Subpart 2132.1--General

    26. Revise section 2132.170 to read as follows:


2132.170  Recurring premium payments to Contractors.

    (a) OPM will make payments on a letter of credit (LOC) basis. OPM 
and the Contractor will concur on an estimate of benefits and 
administrative costs plus the fixed service or risk charge for the 
forthcoming contract year, as specified in the contract. The annual 
premium to the Contractor, based on this estimate, will 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. The Contractor will use the 
LOC account in accordance with guidelines issued by OPM.
    (b) 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. Under a checks-
presented basis, drawdown on the LOC is delayed until the checks issued 
for FEGLI Program disbursements are presented to the Contractor's bank 
for payment.
    (c) Nothing in this section will affect the ability of the 
Contractor to hold the special contingency reserve established and 
maintained in accordance with the terms of 5 U.S.C. 8712.

Subpart 2132.7--Contract Funding

    27. Revise section 2132.771 to read as follows:


2132.771  Non-commingling of FEGLI Program funds.

    (a) FEGLI Program funds must be maintained in such a manner as to 
be separately identifiable from other assets of the Contractor. Cash 
and investment balances reported on the FEGLI Program Annual Financial 
Report must be supported by the Contractor's books and records.
    (b) This requirement may be modified by the Contracting Officer in 
accordance with the clause at 2152.232-71 of this chapter when adequate 
accounting and other controls are in effect. If the requirement is 
modified, such modification will remain in effect until rescinded by 
OPM.

PART 2137--SERVICE CONTRACTING

Subpart 2137.1--Service Contracts--General

    28. Revise section 2137.102 to read as follows:


2137.102  Policy.

    (a) The services under this contract are of vital interest to the 
Government and must be continued without interruption in the event the 
contract is terminated, unless the termination occurs as a result of 
OPM's failure to pay premiums on a timely basis.
    (b) The Contractor will be reimbursed for all reasonable phase-in 
and phase-out costs (i.e., costs incurred within the agreed-upon period 
after contract termination that result from phase-in and phase-out 
operations). The Contractor also will receive a risk or service charge 
for the full period after contract termination during which services 
are continued, not to exceed a pro rata portion of the risk or service 
charge for the final contract year. In addition, OPM will pay the 
Contractor an incentive amount, not to exceed the pro rata risk or 
service charge for the continuity of services period (LIFAR 2152.237-
70), based on exceptional performance during the transition period to a 
new Contractor. The Contracting Officer will use the weighted 
guidelines method described in 2115.404-71 of this chapter in 
determining the incentive amount. The amount of the risk or service 
charge will be based upon the accurate and timely processing of benefit 
claims, the volume and validity of customer service complaints, the 
timeliness and adequacy of reports on operations, and responsiveness to 
OPM offices, insured individuals, beneficiaries, and Congress.

PART 2144--SUBCONTRACTING POLICIES AND PROCEDURES

Subpart 2144.1--General

    29. Revise section 2144.102 to read as follows:


2144.102  Policy.

    For all FEGLI Program contracts, the Contracting Officer's advance 
approval will be required on subcontracts or modifications to 
subcontracts when the cost of that portion of the subcontract that is 
charged the FEGLI Program contract exceeds $550,000 and is at least 25 
percent of the total cost of the subcontract.

PART 2146--QUALITY ASSURANCE

Subpart 2146.2--Contract Quality Requirements

    30. In section 2146.201 revise paragraph (b) to read as follows:


2146.201  General.

* * * * *
    (b) OPM will make an initial evaluation of the Contractor's system 
of internal controls under the quality assurance program required by 
2146.270 of this chapter and will acknowledge in writing whether or not 
the system is consistent with the requirements set forth in this 
subpart. After the initial review, subsequent periodic reviews may be 
limited to changes in the Contractor's internal control guidelines. 
However, a limited review does not diminish the Contractor's obligation 
to apply the full internal control system.
    31. In section 2146.270 revise paragraph (b) to read as follows:


2146.270  FEGLI Program quality assurance requirements.

* * * * *
    (b) The Contractor must prepare overpayment recovery guidelines to 
include a system of internal controls.
* * * * *

PART 2149--TERMINATION OF CONTRACTS

    32. Revise section 2149.002 to read as follows:

[[Page 59172]]

2149.002  Applicability.

    (a) Termination. (1) Termination of FEGLI Program contracts is 
controlled by 5 U.S.C. 8709(c) and this chapter. The procedures for 
termination of FEGLI Program contracts are contained in FAR part 49. 
For the purpose of this part, ``terminate'' means to ``discontinue'' as 
used in 5 U.S.C. 8709(c).
    (2) A life insurance contract entered into by OPM may be terminated 
by OPM at any time for default by the Contractor in accordance with the 
provisions of FAR parts 49 and 52.249-8. A life insurance contract 
entered into by OPM may be terminated by the Contractor at the end of 
the grace period, after default for nonpayment by OPM. Notwithstanding 
the preceding sentence, the Contractor will allow OPM an additional 5 
days after the end of the grace period to make payment if the failure 
to make payment was inadvertent and/or due to circumstances beyond the 
Government's control.
    (3) A life insurance contract entered into by OPM may be terminated 
for convenience of the Government 60 days after the Contractor's 
receipt of OPM's written notice to terminate.
    (4) The Contractor may terminate its contract with OPM at the end 
of any contract year when notice of intent to terminate is given to OPM 
in writing at least 60 days prior to the end of the contract year 
(i.e., no later than July 31).
    (b) Continuation of services. The services under this contract are 
of vital interest to the Government and must be continued without 
interruption in the event the contract is terminated for the 
Contractor's default or OPM's convenience. Consequently, the contract 
termination procedures contained in this paragraph must be used in 
conjunction with 2137.102 of this chapter, 2137.110 of this chapter, 
and the provisions of the ``Continuity of Services'' clause at 
2152.237-70 of this chapter. The Contractor is not required to continue 
performance subsequent to OPM's default for failure to pay premiums in 
accordance with the provisions of the clause at 2152.249-70(b).
    (c) Settlement. The procedures for settlement of contracts after 
they are terminated are those contained in FAR part 49.

PART 2152--PRECONTRACT PROVISIONS AND CONTRACT CLAUSES

    33. In section 2152.070 revise the listing under Section and Clause 
Title to read as follows:


2152.070  Applicable clauses.

* * * * *

Section and Clause Title

52.202-1 Definitions
52.203-3 Gratuities
52.203-5 Covenant against Contingent Fees
52.203-6 Restrictions on Subcontractor Sales to the Government
52.203-7 Anti-Kickback Procedures
52.203-12 Limitation on Payments To Influence Certain Federal 
Transactions
52.209-6 Protecting the Government's Interest When Subcontracting 
With Contractors Debarred, Suspended, or Proposed for Debarment
52.215-2 Audit and Records--Negotiation
52.215-10 Price Reduction for Defective Cost or Pricing Data
52.215-12 Subcontractor Cost or Pricing Data
52.215-15 Pension Adjustments and Asset Reversions
52.215-16 Facilities Capital Cost of Money
52.215-17 Waiver of Facilities Capital Cost of Money
52.215-18 Reversion or Adjustment of Plans for Postretirement 
Benefits (PRB) Other Than Pensions
52.219-8 Utilization of Small Business Concerns
52.222-1 Notice to the Government of Labor Disputes
52.222-3 Convict Labor
52.222-4 Contract Work Hours and Safety Standards Act--Overtime 
Compensation
52.222-21 Prohibition of Segregated Facilities
52.222-22 Previous Contracts and Compliance Reports
52.222-25 Affirmative Action Compliance
52.222-26 Equal Opportunity
52.222-29 Notification of Visa Denial
52.222-35 Equal Opportunity for Special Disabled Veterans, Veterans 
of the Vietnam Era, and Other Eligible Veterans
52.222-36 Affirmative Action for Workers with Disabilities
52.222-37 Employment Reports on Special Disabled Veterans, Veterans 
of the Vietnam Era, and Other Eligible Veterans
52.223-6 Drug-Free Workplace
52.227-1 Authorization and Consent
52.227-2 Notice and Assistance regarding Patent and Copyright 
Infringement
52.228-7 Insurance--Liability to Third Persons
52.232-9 Limitation on Withholding of Payments
52.232-17 Interest
52.232-23 Assignment of Claims
52.232-33 Payment by Electronic Funds Transfer--Central Contractor 
Registration
52.233-1 Disputes (Alternate I)
52.242-1 Notice of Intent To Disallow Costs
52.242-3 Penalties for Unallowable Costs
52.242-13 Bankruptcy
52.244-5 Competition in Subcontracting
52.245-2 Government Property (Fixed-Price Contracts)
52.246-4 Inspection of Services--Fixed Price
52.246-25 Limitation of Liability--Services
52.247-63 Preference for U.S.-Flag Air Carriers
52.249-2 Termination for Convenience of the Government (Fixed Price)
52.249-8 Default (Fixed Price Supply and Service)
52.249-14 Excusable Delays
52.251-1 Government Supply Sources
52.252-4 Alterations in Contract
52.252-6 Authorized Deviations in Clauses

    34. Revise section 2152.203-70 to read as follows:


2152.203-70  Misleading, deceptive, or unfair advertising.

    As prescribed in 2103.571, insert the following clause:

Misleading, Deceptive, or Unfair Advertising (Oct 2005)

    The Contractor agrees that any advertising material authorized 
and released by the Contractor which mentions the FEGLI Program must 
be truthful and not misleading and must present an accurate 
statement of FEGLI Program benefits. The Contractor is prohibited 
from making incomplete and/or incorrect comparisons or using 
disparaging or minimizing techniques to compare its other products 
or services to those of the FEGLI Program. The Contractor agrees to 
use reasonable efforts to assure that agents selling its other 
products are aware of and abide by this provision. The Contractor 
agrees to incorporate this clause in all subcontracts as defined at 
LIFAR 2102.101.

(End of Clause)

    35. Add a new section 2152.204-70 to read as follows:


2152.204-70  Taxpayer Identification Number.

    As prescribed in 2104.9001, insert the following clause:

Taxpayer Identification Number (Oct 2005)

    (a) Definitions.
    Common parent, as used in this provision, means that corporate 
entity that owns or controls an affiliated group of corporations 
that files its Federal income tax returns on a consolidated basis, 
and of which the Contractor is a member.
    Taxpayer Identification Number (TIN), as used in this provision, 
means the number required by the Internal Revenue Service (IRS) to 
be used by the Contractor in reporting income tax and other returns. 
The TIN is the Contractor's Social Security Number.
    (b) The Contractor must submit the information required in 
paragraphs (d) through (f) of this clause to comply with debt 
collection requirements of 31 U.S.C. 7701(c) and 3325(d), reporting 
requirements of 26 U.S.C. 6041, 6041A, and 6050M, and implementing 
regulations issued by the IRS. The Contractor is subject to the 
payment reporting requirements described in FAR 4.904. The 
Contractor's failure or refusal to furnish the information will 
result in payment being withheld until the TIN is provided.
    (c) The Government may use the TIN to collect and report on any 
delinquent amounts arising out of the Contractor's relationship

[[Page 59173]]

with the Government (31 U.S.C. 7701(c)(3)). The TIN provided 
hereunder may be matched with IRS records to verify its accuracy.
    (d) Taxpayer Identification Number (TIN).
TIN:-------------------------------------------------------------------
    (e) Type of organization.

[ballot] Corporate entity (tax-exempt);
[ballot] Other --------------------
    (f) Common parent.

[ballot] Contractor is not owned or controlled by a common parent as 
defined in paragraph (a) of this clause.
[ballot] Name and TIN of common parent:
 Name------------------------------------------------------------------
 TIN-------------------------------------------------------------------

(End of Clause)

    36. In section 2152.210-70 revise the clause title date, and revise 
paragraphs (a), (c), and (d)(2) to read as follows:


2152.210-70  Investment income.

Investment Income (Oct 2005)

    (a) The Contractor must invest and reinvest all FEGLI Program 
funds on hand until needed to discharge promptly the obligations 
incurred under the contract. Within the constraints of safety and 
liquidity of investments, the Contractor must seek to maximize 
investment income. However, the Contractor will not be responsible 
for any actions taken at the direction of OPM.
* * * * *
    (c) When the Contracting Officer concludes that the Contractor 
failed to comply with paragraph (a) or (b) of this clause, the 
Contractor must pay to OPM the investment income that would have 
been earned, at the rate(s) specified in paragraph (d) of this 
clause, had it not been for the Contractor's noncompliance. Failed 
to comply with paragraph (a) or (b) of this clause means:
    (1) Making any charges against the contract which are not 
actual, allowable, allocable, or reasonable; or
    (2) Failing to credit any income due the contract and/or failing 
to place funds on hand, including premium payments and payments from 
OPM not needed to discharge promptly the obligations incurred under 
the contract, tax refunds, credits, deposits, investment income 
earned, uncashed checks, or other amounts owed OPM in income-
producing investments and accounts.
    (d) * * *
    (2) Investment income lost by the Contractor as a result of 
failure to credit income due under the contract or failure to place 
funds on hand in income-producing investments and accounts must be 
paid from the date the funds should have been invested or 
appropriate income was not credited and will end on the earlier of:
    (i) The date the amounts are returned to OPM;
    (ii) The date specified by the Contracting Officer; or
    (iii) The date of the Contracting Officer's final decision.
* * * * *
    37. In section 2152.210-71 revise the clause title date, and revise 
paragraphs (a)(3), (a)(5), (a)(6), (a)(11), (b), and (d) to read as 
follows:


2152.210-71  Notice of significant events.

    As prescribed in 2110.7004(b), insert the following clause:

Notice of Significant Events (Oct 2005)

    (a) * * *
    (3) Loss of 20 percent or more of FEGLI Program reinsurers in a 
contract year;
* * * * *
    (5) The withdrawal of, or notice of intent to withdraw, by any 
State or the District of Columbia, its license to do life insurance 
business or any other change of life insurance status under State 
law;
    (6) The Contractor's material default on a loan or other 
financial obligation;
* * * * *
    (11) Any written exceptions, reservations, or qualifications 
expressed by the independent accounting firm contracted with by the 
Contractor to provide an audit opinion on the annual financial 
report required by OPM for the FEGLI Program. (Accounting firm 
employees must be members of the American Institute of Certified 
Public Accountants and must audit the report in accordance with 
Generally Accepted Government Auditing Standards or other 
requirements issued by OPM.)
    (b) Upon learning of a significant event, OPM may institute 
action, in proportion to the seriousness of the event, to protect 
the interest of insureds, including, but not limited to--
    (1) Directing the Contractor to take corrective action; or
    (2) Making a downward adjustment to the weight in the 
``Contractor Performance'' factor of the service charge.
* * * * *
    (d) The Contractor agrees to insert this clause in any 
subcontract or subcontract modification when the amount of the 
subcontract or modification that is charged to the FEGLI Program 
contract exceeds $550,000 and is at least 25 percent of the total 
cost of the subcontract.

(End of Clause)

    38. Revise section 2152.215-70 to read as follows:


2152.215-70  Contractor records retention.

    As prescribed in 2115.071, insert the following clause:

Contractor Records Retention (Oct 2005)

    Notwithstanding the provisions of FAR 52.215-2(f), ``Audit and 
Records--Negotiation,'' the Contractor must retain and make 
available all records applicable to a contract term that support the 
annual financial report for a period of 5 years after the end of the 
contract term to which the records relate. Claim records must be 
maintained for 10 years after the end of the contract term to which 
the claim records relate. If the Contractor chooses to maintain 
paper documents in electronic format, the electronic version must be 
an exact replica of the paper document.

(End of Clause)

    39. Revise section 2152.216-70 to read as follows:


2152.216-70  Fixed price with limited cost redetermination--risk 
charge.

    As prescribed in 2116.270-1(a), insert the following clause when a 
risk charge is negotiated:

Fixed Price With Limited Cost Redetermination Plus Fixed Fee Contract--
Risk Charge (Oct 2005)

    (a) This is a fixed price with limited cost redetermination plus 
fixed fee contract, with the fixed fee in the form of a risk charge. 
OPM will pay the Contractor the risk charge as specified in a letter 
from the Contracting Officer.
    (b) At the Contractor's request, OPM will furnish, during the 
third quarter of the current contract year, an accounting of the 
funds in the Employees' Life Insurance Fund as of the end of the 
second quarter of the contract year.

(End of Clause)

    40. Revise section 2152.216-71 to read as follows:


2152.216-71  Fixed price with limited cost redetermination--service 
charge.

    As prescribed in 2116.270-1(b), insert the following clause when a 
service charge is negotiated:

Fixed Price With Limited Cost Redetermination Plus Fixed Fee Contract--
Service Charge (Oct 2005)

    (a) This is a fixed price with limited cost redetermination plus 
fixed fee contract, with the fixed fee in the form of a service 
charge. OPM will pay the Contractor the service charge as specified 
in a letter from the Contracting Officer.
    (b) At the Contractor's request, OPM will furnish, during the 
third quarter of the current contract year, an accounting of the 
funds in the Employees' Life Insurance Fund as of the end of the 
second quarter of the contract year.
(End of Clause)

    41. In section 2152.224-70 revise the clause title date, and revise 
paragraph (a) to read as follows:


2152.224-70  Confidentiality of records.

* * * * *

Confidentiality of Records (Oct 2005)

    (a) The Contractor will use the personal data on employees and 
annuitants that is provided by agencies and OPM, including social 
security numbers, for only those routine uses stipulated for the 
data and published in the Federal Register as part of OPM's notice 
of systems of records.
* * * * *
    42. Revise section 2152.231-70 to read as follows:


2152.231-70  Accounting and allowable cost.

    As prescribed in 2131.270, insert the following clause:

Accounting and Allowable Cost (Oct 2005)

    (a) Annual Financial Report. (1) The Contractor must prepare 
annually a financial

[[Page 59174]]

report summarizing the financial operations of the FEGLI Program for 
the previous contract year. This report will be due to OPM in 
accordance with a date established by OPM's requirements.
    (2) The Contractor must have the most recent financial report 
for the FEGLI Program audited by an independent public accounting 
firm, whose employees are members of the American Institute of 
Certified Public Accountants. The audit must be performed in 
accordance with Generally Accepted Government Auditing Standards or 
other requirements issued by OPM. The report by the independent 
accounting firm on its audit must be submitted to OPM along with the 
annual financial report.
    (3) Based on the results of either the independent audit or a 
Government audit, the FEGLI contract may be:
    (i) Adjusted by amounts found not to constitute chargeable 
costs; or
    (ii) Adjusted for prior overpayments or underpayments.
    (b) Definition of costs. (1) A cost is chargeable to the 
contract for a ontract term if it is:
    (i) An actual, allowable, allocable, and reasonable cost;
    (ii) Incurred with proper justification and accounting support;
    (iii) Determined in accordance with subpart 31.2 of the Federal 
Acquisition Regulation (FAR) and subpart 2131.2 of the Federal 
Employees' Group Life Insurance Acquisition Regulation (LIFAR) 
applicable on October 1 of each year; and
    (iv) Determined in accordance with the terms of this contract.
    (2) In the absence of specific contract terms to the contrary, 
contract costs will be classified in accordance with the following 
criteria:
    (i) Benefits. Claims costs consist of payments made and costs 
incurred (including delayed settlement interest) by the Contractor 
for life insurance, accidental death and dismemberment insurance, 
excess mortality charges, post-mortem conversion charges, and 
conversion policies on behalf of insured persons, less any 
overpayments recovered (subject to the terms of LIFAR 2131.205-3), 
refunds, or other credits received.
    (ii)(A) Administrative expenses. Administrative expenses consist 
of chargeable costs as defined in paragraph (b)(1) of this clause 
incurred in the adjudication of claims or incurred in the 
Contractor's overall operation of the business. Unless otherwise 
provided in the contract, FAR, or LIFAR, administrative expenses 
include, but are not limited to, taxes, service charges to 
reinsurers, the cost of investigation and settlement of policy 
claims, the cost of maintaining records regarding payment of claims, 
and legal expenses incurred in the litigation of benefit payments. 
Administrative expenses exclude the expenses related to investment 
income in paragraph (b)(2)(iii) of this clause.
    (B) Administrative Expense Ceiling. Each year an administrative 
expense ceiling for the following contract year is calculated based 
on the prior contract year's administrative expense ceiling, 
adjusted by the percentage change in the average monthly consumer 
Price Index for All Urban Consumers for the preceding 12 months. 
Administrative expenses are reimbursed up to the administrative 
expense ceiling or actual costs, whichever is less. Both parties 
will reexamine the base, including the prior year's actual expenses, 
at the request of either OPM or the Contractor. Within the 
administrative expense ceiling is a separately negotiated limit for 
indirect costs that may be charged against the ceiling for the 
contract year. The Contractor agrees to provide annually to the 
Contracting Officer a detailed report of direct and indirect 
administrative costs which form the basis for determining the limit 
on indirect costs for the following contract year. During a 
continuity of services period, OPM and the Contractor will negotiate 
a one-time increase in the administrative expense ceiling to cover 
phase-in/phase-out costs. Costs that exceed the revised ceiling must 
be submitted by the Contractor, in writing and in advance of their 
incurrence, to the Contracting Officer for approval.
    (iii) Investment income. Investment income represents the amount 
earned by the Contractor after deducting chargeable investment 
expenses. Investment expenses are those chargeable contract costs, 
as defined in paragraph (b)(1) of this clause, which are 
attributable to the investment of FEGLI funds.
    (c) Certification of Annual Financial Report. (1) The Contractor 
must certify the annual financial report in the form set forth in 
paragraph (c)(2) of this clause. The certificate must be signed by 
the chief executive officer for the Contractor's FEGLI Program 
operations and the chief financial officer for the Contractor's 
FEGLI Program operations and must be returned with the annual 
financial report.
    (2) The certification required must be in the following form:

Certification of Annual Financial Report

    This is to certify that I have reviewed this financial report 
and, to the best of my knowledge and belief, attest that:
    1. The report was prepared in conformity with the guidelines 
issued by the Office of Personnel Management and fairly presents the 
financial results of this contract year in conformity with those 
guidelines;
    2. The costs included in the report are actual, allowable, 
allocable, and reasonable in accordance with the terms of the 
contract and with the cost principles of the Federal Employees' 
Group Life Insurance Program Acquisition Regulation (LIFAR) and the 
Federal Acquisition Regulation (FAR);
    3. Income, overpayments, refunds, and other credits made or owed 
in accordance with the terms of the contract and applicable cost 
principles have been included in the report.

(End of clause)

    43. Revise section 2152.232-70 to read as follows:


2152.232-70  Payments.

    As prescribed in 2132.171, insert the following clause:

Payments (Oct 2005)

    (a) OPM will make available to the Contractor, in full 
settlement of its obligations under this contract, subject to 
adjustment based on actual claims and administrative cost, a fixed 
premium once per month on the first business day of the month. The 
premium is determined by an estimate of costs for the contract year 
as provided in Section ------ and is redetermined annually by mutual 
agreement of OPM and the Contractor. In addition, an annual 
reconciliation of premiums, benefits, and other costs is performed, 
and additional payment by OPM or reimbursement by the Contractor is 
paid as necessary.
    (b) If OPM fails to fund the Letter of Credit (LOC) account for 
the full amount of premium due by the due date, a grace period of 31 
days will be granted to OPM for providing any premium due, unless 
OPM has previously given written notice to the Contractor that the 
contract is to be discontinued. The contract will continue in force 
during the grace period.
    (c) If OPM fails to fund the LOC account for any premiums within 
the grace period, the contract may be terminated at the end of the 
31\st\ day of the grace period in accordance with LIFAR 
2149.002(a)(2). If during the grace period OPM presents written 
notice to the Contractor that the contract is to be terminated 
before the expiration of the grace period, the contract will be 
terminated the later of the date of receipt of such written notice 
by the Contractor or the date specified by OPM for termination. In 
either event, OPM will be liable to the Contractor for all premiums 
then due and unpaid.
    (d) In accordance with LIFAR 2143.205 and LIFAR 2252.243-70, 
Changes, if a change is made to the contract that increases or 
decreases the cost of performance of the work under this contract, 
the Contracting Officer will make an equitable adjustment to the 
payments under this contract.
    (e) In the event this contract is terminated in accordance with 
LIFAR part 2149, the special contingency reserve held by the 
Contractor will be available to pay the necessary and proper charges 
against this contract after other Program assets held by the 
Contractor are exhausted.

(End of Clause)

    44. Revise section 2152.232-71 to read as follows:


2152.232-71  Non-commingling of FEGLI Program funds.

    As prescribed in 2132.772, insert the following clause:

Non-Commingling of Funds (Oct 2005)

    (a) The Contractor must maintain FEGLI Program funds in such a 
manner as to be separately identifiable from other assets of the 
Contractor.
    (b) The Contractor may request a modification of paragraph (a) 
of this clause from the Contracting Officer. The modification must 
be requested, and approved by the Contracting Officer, in advance of 
any change, and the Contractor must demonstrate that accounting 
techniques have been established that clearly measure

[[Page 59175]]

FEGLI Program cash and investment income (i.e., subsidiary ledgers). 
Reconciliations between amounts reported and actual amounts shown in 
accounting records must be provided as supporting schedules to the 
annual financial report.

(End of Clause)

    45. In section 2152.237-70 revise the clause title date, and revise 
paragraphs (a), (c), and (d) to read as follows:


2152.237-70  Continuity of services.

* * * * *

Continuity of Services (Oct 2005)

    (a) The Contractor recognizes that the services under this 
contract are vital to the Government and must be continued without 
interruption. The Contractor further recognizes that upon contract 
expiration or termination, including termination by the Contractor 
for OPM's failure to make timely premium payments, a successor, 
either the Government or another Contractor, may continue them. The 
Contractor agrees to furnish phase-in training and exercise its best 
efforts and cooperation to effect an orderly and efficient 
transition to a successor.
* * * * *
    (c) The Contractor must allow as many experienced personnel as 
practicable to remain on the job during the transition period to 
help the successor maintain the continuity and consistency of the 
services required by this contract. The Contractor also must, except 
if prohibited by applicable law, disclose necessary personnel 
records and allow the successor to conduct onsite interviews with 
these employees. If selected employees are agreeable to the change, 
the Contractor must release them at a mutually agreeable date and 
negotiate transfer of their earned fringe benefits to the successor.
    (d) The Contractor will be reimbursed for all reasonable phase-
in, phase-out costs (i.e., costs incurred within the agreed period 
after contract termination that result from phase-in and phase-out 
operations) in accordance with the provisions of the administrative 
expense ceiling in the clause at 2152.231-70(b)(2)(ii)(B) and a risk 
charge or a service charge (profit) not to exceed a pro rata portion 
of the risk or service charge under this contract. The amount of 
profit will be based upon the accurate and timely processing of 
benefit claims, the volume and validity of complaints received by 
OPM, the timeliness and adequacy of reports on operations, and 
responsiveness to OPM offices, enrollees, beneficiaries, and 
Congress. In setting the final profit figure, obstacles overcome by 
the Contractor during the phase-in and phase-out period will be 
taken into consideration. OPM will pay an incentive amount to the 
Contractor not to exceed the pro rata risk or service charge for the 
continuity of services period, if the Contractor has performed 
exceptionally during the transition period to a new Contractor. The 
Contracting Officer uses the weighted guidelines method described in 
LIFAR 2115.404-71 in determining the incentive amount.

(End of Clause)

    46. In section 2152.243-70 revise the clause title date, and revise 
paragraphs (a)(1), (a)(2), and (c) to read as follows:


2152.243-70  Changes.

* * * * *

Changes (Oct 2005)

    (a) * * *
    (1) Description of services to be performed;
    (2) Time of performance (i.e., hours of the day, days of the 
week, etc.);
* * * * *
    (c) The Contractor must assert its right to an adjustment under 
this clause within 30 days from the date of receipt of the written 
order. However, if the Contracting Officer decides that the facts 
justify it, the Contracting Officer may receive and act upon a 
proposal submitted before final payment of the contract.
* * * * *
    47. In section 2152.244-70 revise the clause title date, and revise 
paragraphs (a) and (f) to read as follows:


2152.244-70  Subcontracts.

* * * * *

Subcontracts (October 2005)

    (a) The Contractor must notify the Contracting Officer 
reasonably in advance of entering into any subcontract or 
subcontract modification, or as otherwise specified by this 
contract, when the cost of that portion of the subcontract that is 
charged the FEGLI Program contract exceeds $550,000 and is at least 
25 percent of the total cost of the subcontract.
* * * * *
    (f) No subcontract placed under this contract will provide for 
payment on a cost-plus-a-percentage-of-cost basis. Any fee payable 
under cost reimbursement type subcontracts will not exceed the fee 
limitations in FAR 15.404-4(c)(4)(i). Any profit or fee payable 
under a subcontract will be in accordance with the provisions of 
Section ------.
* * * * *
    48. In section 2152.246-70 revise the clause title date, and revise 
paragraph (b) to read as follows:


2152.246-70  Quality assurance requirements.

* * * * *

Quality Assurance Requirements (Oct 2005)

* * * * *
    (b) The Contractor must keep complete records of its quality 
assurance procedures and the results of their implementation and 
make them available to an authorized Government entity during 
contract performance and for 5 years after the end of the contract 
term to which the records relate.
* * * * *
    49. In section 2152.249-70 revise the clause title date, and revise 
paragraphs (b) and (d) to read as follows:


2152.249-70  Renewal and termination.

* * * * *

Renewal and Termination (Oct 2005)

* * * * *
    (b) This contract may be terminated by OPM at any time in 
accordance with FAR part 49 and FAR 52.249-8 for default by the 
Contractor. This contract terminates at the end of the grace period 
if the Government does not fund the LOC account for any of the 
premium due to the Contractor (see LIFAR 2149.002(a)(2)). However, 
the Contractor and OPM may agree to continue the contract. In 
addition, the Contractor agrees to reinstate the contract if 
termination: (1) Arose out of the Government's inadvertent failure 
to fund the 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. In the event of such reinstatement, OPM will 
equitably adjust the payments due under the contract to compensate 
the Contractor for any increased costs of performance that result 
from the Government's failure to fund the LOC account prior to the 
expiration of the grace period and/or such reinstatement.
* * * * *
    (d) Upon termination of the contract for Contractor's default or 
OPM's convenience, the Contractor agrees to assist OPM with an 
orderly and efficient transition to a successor in accordance with 
LIFAR 2137.102, LIFAR 2137.110, and the provisions of the 
``Continuity of Services'' clause at 2152.237-70. The Contractor is 
not required to continue performance subsequent to OPM's failure to 
fund the LOC account for premiums due under paragraph (b) of this 
clause.
* * * * *

Subpart 2152.3--Provision and Clause Matrix

    50. In section 2152.370 revise the FEGLI Program Clause Matrix to 
read as follows:


2152.370  Use of the matrix.

* * * * *

[[Page 59176]]



                                           FEGLI Program Clause Matrix
----------------------------------------------------------------------------------------------------------------
              Clause No.                    Text reference                   Title                Use  status
----------------------------------------------------------------------------------------------------------------
FAR 52.202-1.........................  FAR 2.201...............  Definitions.................  M
FAR 52.203-3.........................  FAR 3.202...............  Gratuities..................  M
FAR 52.203-5.........................  FAR 3.404...............  Covenant against Contingent   M
                                                                  Fees.
FAR 52.203-6.........................  FAR 3.503-2.............  Restrictions on               M
                                                                  Subcontractor Sales to the
                                                                  Government.
FAR 52.203-7.........................  FAR 3.502-3.............  Anti-Kickback Procedures....  M
FAR 52.203-12........................  FAR 3.808...............  Limitation on Payments to     M
                                                                  Influence Certain Federal
                                                                  Transactions.
2152.203-70..........................  2103.571................  Misleading, deceptive, or     M
                                                                  unfair advertising.
2152.204-70..........................  2104.9001...............  Taxpayer Identification       M
                                                                  Number.
FAR 52.209-6.........................  FAR 9.409(b)............  Protecting the Government's   M
                                                                  Interest when
                                                                  Subcontracting with
                                                                  Contractors Debarred,
                                                                  Suspended, or Proposed for
                                                                  Debarment.
2152.209-71..........................  2109.409(b).............  Certification regarding       M
                                                                  debarment, suspension,
                                                                  proposed debarment and
                                                                  other responsibility
                                                                  matters.
2152.210-70..........................  2110.7004(a)............  Investment income...........  M
2152.210-71..........................  2110.7004(b)............  Notice of significant events  M
FAR 52.215-2.........................  FAR 15.209(b)...........  Audit and Records--           M
                                                                  Negotiation.
FAR 52.215-10........................  FAR 15.408(b)...........  Price Reduction for           M
                                                                  Defective Cost or Pricing
                                                                  Data.
FAR 52.215-12........................  FAR 15.408(d)...........  Subcontractor Cost or         M
                                                                  Pricing Data.
FAR 52.215-15........................  FAR 15.408(g)...........  Pension Adjustments and       M
                                                                  Asset Reversions.
FAR 52.215-16........................  FAR 15.408(h)...........  Facilities Capital Cost of    M
                                                                  Money.
FAR 52.215-17........................  FAR 15.408(i)...........  Waiver of Facilities Capital  A
                                                                  Cost of Money.
FAR 52.215-18........................  FAR 15.408(j)...........  Reversion or Adjustment of    A
                                                                  Plans for Postretirement
                                                                  Benefits (PRB) other than
                                                                  Pensions.
2152.215-70..........................  2115.071................  Contractor records retention  M
2152.216-70..........................  2116.270-1(a)...........  Fixed price with limited      A
                                                                  cost redetermination--risk
                                                                  charge.
2152.216-71..........................  2116.270-1(b)...........  Fixed price with limited      A
                                                                  cost redetermination--
                                                                  service charge.
FAR 52.219-8.........................  FAR 19.708(a)...........  Utilization of Small          M
                                                                  Business Concerns.
FAR 52.222-1.........................  FAR 22.103-5(a).........  Notice to the Government of   M
                                                                  Labor Disputes.
 
FAR 52.222-3.........................  FAR 22.202..............  Convict Labor...............  M
FAR 52.222-4.........................  FAR 22.305..............  Contract Work Hours and       M
                                                                  Safety Standards Act--
                                                                  Overtime Compensation.
FAR 52.222-21........................  FAR 22.810(a)(1)........  Prohibition of Segregated     M
                                                                  Facilities.
FAR 52.222-22........................  FAR 22.810(a)(2)........  Previous Contracts and        M
                                                                  Compliance Reports.
FAR 52.222-25........................  FAR 22.810(d)...........  Affirmative Action            M
                                                                  Compliance.
FAR 52.222-26........................  FAR 22.810(e)...........  Equal Opportunity...........  M
FAR 52.222-29........................  FAR 22.810(g)...........  Notification of Visa Denial.  A
FAR 52.222-35........................  FAR 22.1310(a)(1).......  Equal Opportunity for         M
                                                                  Special Disabled Veterans,
                                                                  Veterans of the Vietnam
                                                                  Era, and Other Eligible
                                                                  Veterans.
FAR 52.222-36........................  FAR 22.1408(a)..........  Affirmative Action for        M
                                                                  Workers with Disabilities.
FAR 52.222-37........................  FAR 22.1310(b)..........  Employment Reports on         M
                                                                  Special Disabled Veterans,
                                                                  Veterans of the Vietnam
                                                                  Era, and Other Eligible
                                                                  Veterans.
FAR 52.223-6.........................  FAR 23.505..............  Drug-Free Workplace.........  M
2152.224-70..........................  2124.104-70.............  Confidentiality of records..  M
FAR 52.227-1.........................  FAR 27.201-2(a).........  Authorization and Consent...  M
FAR 52.227-2.........................  FAR 27.202-2............  Notice and Assistance         A
                                                                  regarding Patent and
                                                                  Copyright Infringement.
FAR 52.228-7.........................  FAR 28.311-1............  Insurance--Liability to       M
                                                                  Third Persons.
2152.231-70..........................  2131.270................  Accounting and allowable      M
                                                                  cost.
FAR 52.232-9.........................  FAR 32.111(c)(2)........  Limitation on Withholding of  M
                                                                  Payments.
FAR 52.232-17........................  FAR 32.617(a) and (b)...  Interest....................  M
FAR 52.232-23........................  FAR 32.806(a)(1)........  Assignment of Claims........  A
FAR 52.232-33........................  FAR 32.1110(a)(1).......  Payment by Electronic Funds   M
                                                                  Transfer--Central
                                                                  Contractor Registration.
2152.232-70..........................  2132.171................  Payments....................  M
2152.232-71..........................  2132.772................  Non-commingling of FEGLI      M
                                                                  Program funds.
2152.232-72..........................  2132.806................  Approval for assignment of    M
                                                                  claims.
FAR 52.233-1.........................  FAR 33.215..............  Disputes (Alternate I)......  M
2152.237-70..........................  2137.110................  Continuity of services......  M
FAR 52.242-1.........................  FAR 42.802..............  Notice of Intent to Disallow  M
                                                                  Costs.
FAR 52.242-3.........................  FAR 42.709-6............  Penalties for Unallowable     M
                                                                  Costs.
FAR 52.242-13........................  FAR 42.903..............  Bankruptcy..................  M
2152.243-70..........................  2143.205................  Changes.....................  M
FAR 52.244-5.........................  FAR 44.204(c)...........  Competition in                M
                                                                  Subcontracting.
2152.244-70..........................  2144.204................  Subcontracts................  M
FAR 52.245-2.........................  FAR 45.106(b)(1)........  Government Property (Fixed-   M
                                                                  Price Contracts).
FAR 52.246-4.........................  FAR 46.304..............  Inspection of Services--      M
                                                                  Fixed Price.
FAR 52.246-25........................  FAR 46.805..............  Limitation of Liability--     M
                                                                  Services.
2152.246-70..........................  2146.270-1..............  Quality assurance             M
                                                                  requirements.
FAR 52.247-63........................  FAR 47.405..............  Preference for U.S.-Flag Air  M
                                                                  Carriers.

[[Page 59177]]

 
FAR 52.249-2.........................  FAR 49.502(b)(1)(i).....  Termination for Convenience   M
                                                                  of the Government (Fixed-
                                                                  Price).
FAR 52.249-8.........................  FAR 49.504(a)(1)........  Default (Fixed Price Supply   M
                                                                  and Service).
FAR 52.249-14........................  FAR 49.505(d)...........  Excusable Delays............  M
2152.249-70..........................  2149.505-70.............  Renewal and termination.....  M
FAR 52.251-1.........................  FAR 51.107..............  Government Supply Sources...  A
FAR 52.252-4.........................  FAR 52.107(d)...........  Alterations in Contract.....  M
FAR 52.252-6.........................  FAR 52.107(f)...........  Authorized Deviations in      M
                                                                  Clauses.
----------------------------------------------------------------------------------------------------------------

[FR Doc. 04-21922 Filed 10-1-04; 8:45 am]
BILLING CODE 6325-39-P