Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Rules and Regulations 60667

the same profit consideration as if they

were direct labor. The other elements of

indirect cost pools should be evaluated

to determine whether they are routine

expenses such as utilities, depreciation,

and maintenance, and therefore given

less profit consideration.

(B) The contractor’s accounting

system need not break down its

overhead expenses within the

classification of professional/technical

overhead, general overhead and general

and administrative expenses.

(iv) Subcontractors. (A) Subcontract

costs should be analyzed from the

standpoint of the talents and skills of

the subcontractors. The analysis should

consider if the contractor normally

should be expected to have people with

comparable expertise employed as fulltime staff, or if the contract requires

skills not normally available in an

employer-employee relationship. Where

the contractor is using subcontractors to

perform labor which would normally be

expected to be done in-house, the rating

factor should generally be at or near 1

percent. Where exceptional expertise is

retained, or the contractor is

participating in the mentor-prote ́ge ́

program, the assigned weight should be

nearer to the high end of the range.

(B) In accordance with (EPAAR) 48

CFR 1515.902(d), whenever the

subcontractor profit/fee is known to the

contracting officer, that profit/fee shall

not be considered as part of the basis for

determining the contractor profit/fee.

(v) Other direct costs. Items of costs,

such as travel and subsistence, should

generally be assigned a rating of 1 to 3

percent. The analysis of these costs

should be similar to the analysis of

direct material.

(3) Contractor’s assumption of

contract cost risk. (i) The risk of contract

costs should be shifted to the fullest

extent practicable to contractors, and

the Government should assign a rating

that reflects the degree of risk

assumption. Evaluation of this risk

requires a determination of

(A) The degree of cost responsibility

the contractor assumes,

(B) The reliability of the cost

estimates in relation to the task

assumed, and

(C) The chance of the contractor’s

success or failure. This factor is

specifically limited to the risk of

contract costs. Thus, such risks of losing

potential profits in other fields are not

within the scope of this factor.

(ii) The first determination of the

degree of cost responsibility assumed by

the contractor is related to the sharing

of total risk of contract cost by the

Government and the contractor,

depending on selection of contract type.

The extremes are a cost-plus-fixed-fee

contract requiring only that the

contractor use its best efforts to perform

a task, and a firm-fixed-price contract

for a complex item. A cost-plus-fixedfee contract would reflect a minimum

assumption of cost responsibility by the

contractor, whereas a firm-fixed-price

contract would reflect a complete

assumption of cost responsibility by the

contractor. Therefore, in the first step of

determining the value given for the

contractor’s assumption of contract cost

risk, a low rating would be assigned to

a proposed cost-plus-fixed-fee best

efforts contract, and a higher rating

would be assigned to a firm-fixed-price

contract.

(iii) The second determination is that

of the reliability of the cost estimates.

Sound price negotiation requires welldefined contract objectives and reliable

cost estimates. An excessive cost

estimate reduces the possibility that the

cost of performance will exceed the

contract price, thereby reducing the

contractor’s assumption of contract cost

risk.

(iv) The third determination is that of

the difficulty of the contractor’s task.

The contractor’s task may be difficult or

easy, regardless of the type of contract.

(v) Contractors are likely to assume

greater cost risks only if the contracting

officer objectively analyzes the risk

incident to the proposed contract, and is

willing to compensate contractors for it.

Generally, a cost-plus-fixed-fee contract

would not justify a reward for risk in

excess of 1 percent, nor would a firmfixed-price contract normally justify a

reward of less than 4 percent. Where

proper contract type selection has been

made, the reward for risk by contract

type would usually fall into the

following percentage ranges:

Type of contract

Percentage

ranges

Cost-plus-fixed-fee ........................ 0 to 1.

Prospective price determination ... 4 to 5.

Firm-fixed-price ............................. 4 to 6.

(A) These ranges may not be

appropriate for all acquisitions. The

contracting officer might determine that

a basis exists for high confidence in the

reasonableness of the estimate, and that

little opportunity exists for cost

reduction without extraordinary efforts.

The contractor’s willingness to accept

ceilings on their burden rates should be

considered as a risk factor for cost-plusfixed-fee contracts.

(B) In making a contract cost risk

evaluation in an acquisition that

involves definitization of a letter

contract, consideration should be given

to the effect on total contract cost risk

as a result of partial performance under

a letter contract. Under some

circumstances, the total amount of cost

risk may have been effectively reduced

by the existence of a letter contract.

Under other circumstances, it may be

apparent that the contractor’s cost risk

remained substantially as great as

though a letter contract had not been

used. Where a contractor has begun

work under an anticipatory cost letter,

the risk assumed is greater than normal.

To be equitable, the determination of a

profit weight for application to the total

of all recognized costs, both those

incurred and those yet to be expended,

must be made with consideration to all

relevant circumstances, not just to the

portion of costs incurred or percentage

of work completed prior to

definitization.

1552.217–73 [Amended]

3. Section 1552.217–73 is amended by

revising the clause heading as follows:

1552.217–73 Option for Increased

Quantity—Cost Type Contract (JUN

1997)

1552.217–74 [Amended]

4. Section 1552.217–74 is amended by

revising the clause heading as follows:

1552.217–74 Option for Increased

Quantity—Cost Plus Award Fee

Contract (JUN 1997)

Dated: October 27, 1997

John C. Gherardini,

Acting Director, Office of Acquisition

Management.

[FR Doc. 97–29593 Filed 11–10–97; 8:45 am]

BILLING CODE 6560–50–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

50 CFR Part 679

[Docket No. 970520118–7251–02; I.D.

050197A]

RIN 0648–AJ00

Fisheries of the Exclusive Economic

Zone Off Alaska; Individual Fishing

Quota Program; Standard Allowances

for Ice and Slime

AGENCY: National Marine Fisheries

Service (NMFS), National Oceanic and

Atmospheric Administration (NOAA),

Commerce.

ACTION: Final rule.

SUMMARY: NMFS issues a final rule that

establishes standard allowances for ice
60668 Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Rules and Regulations

and slime found on unwashed Pacific

halibut and sablefish landed in the

Individual Fishing Quota (IFQ) fisheries

for these species and incorporates them

into the conversion factors for halibut

and product recovery rates for sablefish

used by NMFS to debit IFQ accounts.

This action is necessary to correct

inaccuracies in the current accounting

process for landed IFQ product and is

intended to support the goals and

objectives of the IFQ program.

DATES: Effective December 12, 1997.

ADDRESSES: Copies of the

Environmental Assessment/Regulatory

Impact Review (EA/RIR) for this action

may be obtained from: National Marine

Fisheries Service, Alaska Region,

Fisheries Management Division, 709

West 9th Street, Room 453, Juneau, AK

99801, or P.O. Box 21668, Juneau, AK

99802, Attention: Lori J. Gravel.

FOR FURTHER INFORMATION CONTACT: John

Lepore, 907–586–7228.

SUPPLEMENTARY INFORMATION: The U.S.

groundfish fisheries of the Gulf of

Alaska and the Bering Sea and Aleutian

Islands in the exclusive economic zone

are managed by NMFS pursuant to the

fishery management plans (FMPs) for

groundfish in the respective

management areas. The FMPs were

prepared by the North Pacific Fishery

Management Council (Council)

pursuant to the Magnuson-Stevens

Fishery Conservation and Management

Act (Magnuson-Stevens Act), 16 U.S.C.

1801 et seq., and are implemented by

regulations for the U.S. fisheries at 50

CFR part 679. The Northern Pacific

Halibut Act of 1982 (Halibut Act), 16

U.S.C. 773 et seq., authorizes the

Council to develop, and NMFS to

implement, regulations applicable in

waters under the Convention between

the United States and Canada for the

Preservation of the Halibut Fishery of

the North Pacific Ocean and Bering Sea

to allocate halibut fishing privileges

among U.S. fishermen.

Under these authorities, the Council

developed the IFQ program, a limited

access management system for the fixed

gear Pacific halibut and sablefish

fisheries. The IFQ program was

approved by NMFS, and fishing under

that program began in March 1995. The

Magnuson-Stevens Act and the Halibut

Act authorize the Council and NMFS to

make regulatory changes to the IFQ

program that are consistent with the

FMPs and that are necessary to conserve

and manage the fixed gear Pacific

halibut and sablefish fisheries.

Rationale and Management Action for

Establishing Standard Allowances for

Ice and Slime

Accurately accounting for the harvest

of IFQ halibut and IFQ sablefish (IFQ

species) is an important component of

the IFQ program. Participants in the IFQ

program are given specified allocations

of IFQ species. Inaccurate accounting of

the harvest of these allocations could

cause either the underharvesting or

overharvesting of IFQ species.

A major source of inaccurate

accounting currently occurs because the

current regulations do not provide for

the adjustment of landed weights of

unwashed IFQ species by either NMFS

or program participants (fishermen and

purchasers). An adjustment is needed to

allow participants landing fish or fish

products with ice and slime to harvest

their full IFQ species share. Participants

have been making, without regulatory

authorization, adjustments of up to 9

percent to account for ice and slime. To

the extent that the amount of adjustment

is too high, these participants harvest

more than their IFQ species share,

potentially leading to a total

overharvest. Also anecdotal reports from

industry indicate that some purchasers

of IFQ species have used their practice

of making high ice and slime allowance

adjustments to the weights they report

to NMFS as an inducement to fishermen

to deliver their catch to them rather than

to a competitor who makes no

adjustment or at least attempts to make

a fair adjustment. The larger the

percentage allowance for ice and slime

used, the smaller the amount of landed

IFQ species is reported to NMFS and the

smaller the deduction from an IFQ

participant’s account with the ultimate

consequence being overharvest. This

method of inducing a participant’s

business is unfair to other purchasers of

IFQ species.

In recognition that persons who land

unwashed IFQ fish and products and

who, in compliance with the

regulations, report actual scale weights

do not get to harvest their full IFQ

shares while those who land washed

fish and products do, and those who

make unauthorized deductions harvest

more than their share, NMFS proposed

establishing a standard allowance of 2

percent for ice and slime on unwashed

IFQ species (62 FR 32734, June 17,

1997). A 2-percent allowance for

unwashed Pacific halibut is based on

long-standing industry convention and

has been accepted by the International

Pacific Halibut Commission (IPHC), the

international body entrusted with the

primary responsibility for managing

Pacific halibut. A 2-percent allowance

for unwashed sablefish was proposed by

the industry. NMFS specifically

requested comments on this proposed

standard. Only one comment was

received. That comment is addressed in

the comment section below.

NMFS, by this rule, adopts a 2-

percent allowance for ice and slime on

unwashed halibut and sablefish. NMFS

is implementing this allowance by

incorporating it into the conversion

factors and product recovery rates it

uses to adjust reported weights to

‘‘standardized’’ weight measurements

when debiting a participant’s IFQ

account. When applying conversion

factors and product recovery rates,

NMFS relies on product codes. The

following new product codes are

established and codified to

accommodate the new conversion

factors and product recovery rates for

the ice and slime standard allowance:

Product code 51—Whole fish/food fish

with ice and slime (sablefish only);

product code 54—Gutted only with ice

and slime (Pacific halibut and

sablefish); product code 55—Headed

and gutted with ice and slime (Pacific

halibut only); product code 57—Headed

and gutted, Western cut, with ice and

slime (sablefish only); and Headed and

gutted, Eastern cut, with ice and slime

(sablefish only). IFQ program

participants are to use these new

product codes only for unwashed IFQ

species. Existing product codes 01, 04,

05, 07, and 08 are available for washed

IFQ species (i.e., IFQ species without

ice and slime).

These changes do not affect the

requirement that IFQ program

participants accurately report the scale

weight actually measured without any

adjustments at the time of landing.

NMFS will adjust these weights to

compensate for ice and slime by using

the appropriate conversion factor or

product recovery rate based on the

product code(s) reported. By NMFS

adopting a standard allowance and by

NMFS doing the adjustments instead of

industry participants, the practice of

some industry participants using large

allowances to ‘‘induce’’ business will be

eliminated and the playing field will be

leveled for all. Recording any amount

on the IFQ landing report that is

different from the scale weight actually

measured at time of landing is a

violation of the regulations and is

subject to penalty.

Other Changes Made by This Action

The following changes are made to

the regulatory text found at 50 CFR part

679 to clarify ambiguities concerning

IFQ program requirements and

deducted amounts.
Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Rules and Regulations 60669

First, the information required by

§ 679.5(l)(1)(iv) to be reported by IFQ

landing reports is clarified by changing

the words ‘‘fish product weight of

sablefish and halibut landed’’ to ‘‘the

scale weight of the product at the time

of landing.’’

Second, the requirement to ‘‘sign any

required fish ticket’’ in § 679.42(c)(3) is

separated from the requirement to sign

the IFQ landing report. Separating these

requirements is intended to clarify that

the IFQ landing report is the exclusive

source of data NMFS will use to debit

an IFQ account and to make all other

IFQ calculations (e.g., adjustments

under § 679.40(c)).

Third, the regulatory text in

§ 679.42(c)(3) (i) and (ii) explaining

exactly what amount must be reported

to NMFS for debit against an IFQ

account is removed. These requirements

will now appear at § 679.5(l)(1)(iv).

Other provisions that were found in

§ 679.42(c)(3) (i) and (ii) are moved to

§ 679.42(c)(2), and new language is

added to § 679.42(c)(2) specifying that

the IFQ landing report will be the

exclusive source of data NMFS will use

for debiting an IFQ account.

Response to Comments

NMFS received one letter of comment

was received on the proposed rule

during the comment period. The

following paragraphs summarize and

respond to that comment.

Comment 1: The commenter fully

supports establishing a standard

allowance for ice and slime on

unwashed IFQ species; however, the

commenter indicates that 4 percent,

rather than 2 percent, is a more accurate

percentage based on derived recovery

rates on IFQ species purchased and

prepared for marketing. Further, the

commenter states that the derived

recovery rates are also affected by the

allowance for heads, which is fixed at

10 percent for Pacific halibut. For

example, when the weights of the heads

of IFQ species are a greater percentage

of body weight than the current

allowance for heads, which frequently

occurs with smaller fish, recovering

buying and processing costs, even with

a 4 percent allowance for ice and slime,

is difficult. The head weight/body

weight ratio is also affected by where

the head is severed from the body.

Historically, the standard head cut used

to be on the back side of the eye socket;

currently the head cut must be through

the middle of the eye socket, or even

lower, to achieve an economically

viable head weight/body weight ratio.

Response: Historical information and

the best available data support the

determination that 2 percent is an

appropriate standard allowance for ice

and slime. Calculating an allowance for

ice and slime by comparing recovery

rates of purchased product to processed

product is not statistically accurate

because it does not account for other

variables, such as the loss of body

weight through loss of moisture content,

different head cuts, etc. The only

statistically accurate method of deriving

a percentage for an allowance for ice

and slime is to measure the product

before and after washing. To ensure the

accuracy of the percentage, the time

period between the two weighings

should be minimal and the product

should not be affected by any other

procedures, such as heading the product

or chilling the product. Changing the ice

and slime standard allowance to

account for varying head weights is

inappropriate. Furthermore, NMFS

contacted the IPHC and confirmed that

the standard head cut percentage

allowance is based on a head cut

through the second eye ball. Therefore,

cutting the head behind the eye socket

would change the head weight/body

weight ratio. This change would reduce

the processed product weight, thereby

requiring an increase in some allowance

to account for the loss. This could be the

reason why the commenter prefers 4

percent, rather than 2 percent ice and

slime allowance to achieve an

economically viable derived rate.

However, the two allowances should

not be dependent on one another and,

for the reasons stated above, a 2-percent

standard allowance for ice and slime is

appropriate.

Changes Made to the Final Rule

Two changes were made to the final

rule as compared with the proposed

rule. First, the fifth clause of the first

sentence of § 679.5(l)(1)(iv) was

removed because it was the same as the

previous clause. Second, the words

‘‘actually measured’’ and ‘‘actually

measured and reported’’ were removed

from § 679.5(l)(1)(iv) and

§ 679.42(c)(2)(i) and (ii), respectively.

These phrases did not add any

additional clarification to the regulatory

text.

Classification

NMFS prepared an EA/RIR for this

rule, and the Assistant Administrator for

Fisheries concluded that there will be

no significant impact on the quality of

the human environment as a result of

this rule. This action will not

significantly alter the impacts analyzed

in the Final Environmental Impact

Statement (FEIS) for the IFQ program. A

copy of the FEIS for the IFQ program or

the EA/RIR for this action is available

from NMFS (see ADDRESSES).

This final rule has been determined to

be not significant for purposes of E.O.

12866.

The Assistant General Counsel for

Legislation and Regulation of the

Department of Commerce certified to

the Chief Counsel for Advocacy of the

Small Business Administration that this

rule would not have a significant

economic impact on a substantial

number of small entities. No comments

were received regarding this

certification. As a result, a regulatory

flexibility analysis was not prepared.

List of Subjects in 50 CFR Part 679

Fisheries, Recordkeeping and

reporting requirements.

Dated: November 4, 1997.

David L. Evans,

Deputy Assistant Administrator for Fisheries,

National Marine Fisheries Service.

For the reasons set out in the

preamble, 50 CFR part 679 is amended

as follows:

PART 679—FISHERIES OF THE

EXCLUSIVE ECONOMIC ZONE OFF

ALASKA

1. The authority citation for 50 CFR

part 679 continues to read as follows:

Authority: 16 U.S.C. 773 et seq., 1801 et

seq., and 3631 et seq.

2. In § 679.5, paragraph (l)(1)(iv) is

revised to read as follows:

§ 679.5 Recordkeeping and reporting.

* * * * *

(l) * * *

(1) * * *

(iv) Information required. Information

contained in a complete IFQ landing

report shall include: Date, time, and

location of the IFQ landing; name and

permit number of the IFQ card holder

and registered buyer; product type

landed; and the scale weight of the

product at the time of landing.

* * * * *

3. In § 679.42, paragraph (c) is revised

to read as follows:

§ 679.42 Limitations on use of QS and IFQ.

* * * * *

(c) Requirements and deductions. (1)

Any individual who harvests halibut or

sablefish with fixed gear must:

(i) Have a valid IFQ card.

(ii) Be aboard the vessel at all times

during the fishing operation.

(iii) Sign any required fish ticket.

(iv) Sign the IFQ landing report

required by § 679.5(l)(1)(iv).

(2) The scale weight of the halibut or

sablefish product actually measured at
60670 Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Rules and Regulations

the time of landing, required by

§ 679.5(l)(1)(iv) to be included in the

IFQ landing report, shall be the only

source of information used by NMFS to

debit an IFQ account. An IFQ account

will be debited as follows:

(i) For sablefish product, dividing the

scale weight at the time of landing by

the product recovery rate found in Table

3 of this part that corresponds to the

product code reported in the IFQ

landing report; or

(ii) For halibut product, multiplying

the scale weight at the time of landing

by the conversion factor listed in

paragraph (c)(2)(iii) of this section that

corresponds to the product code

reported in the IFQ landing report.

(iii) Halibut conversion factors.

Product code Product description Conversion factor

04 ........................................................................................... Gutted, head on .................................................................... 0.90

05 ........................................................................................... Gutted, head off .................................................................... 1.00

54 ........................................................................................... Gutted, head on, with ice and slime ..................................... 0.88

55 ........................................................................................... Gutted, head off, with ice and slime ..................................... 0.90

* * * * *

4. In 50 CFR part 679, Table 1 is amended by adding the following fish product codes/descriptions in numerical

order to read as follows:

TABLE 1 TO PART 679—PRODUCT CODES

Fish product code Description

* * * * * * *

5 ................................................................................................................. Headed and gutted. Pacific halibut only.

* * * * * * *

51 ............................................................................................................... Whole fish/food fish with ice and slime. Sablefish only.

54 ............................................................................................................... Gutted only with ice and slime. Belly slit and viscera removed. Pacific

halibut and sablefish only.

55 ............................................................................................................... Headed and gutted with ice and slime. Pacific halibut only.

57 ............................................................................................................... Headed and gutted, Western cut, with ice and slime. Sablefish only.

58 ............................................................................................................... Headed and gutted, Eastern cut, with ice and slime. Sablefish only.

* * * * * * *

5. In 50 CFR part 679, Table 3 is amended by adding new product code columns with the following descriptions

and product code numbers between Column 37 (Butterfly Backbone Removed) and Column 96 (Decomposed Fish) and

adding the following product recovery rate values for the listed FMP species ‘‘SABLEFISH’’ in new columns 51, 54,

57, and 58:

TABLE 3 TO PART 679.—PRODUCT RECOVERY RATES FOR GROUNDFISH SPECIES PRODUCT CODE

FMP species Species

code

Whole fish/

food fish

with ice and

slime

Gutted with

ice and

slime

H&G western cut with

ice and

slime

H&G eastern cut with

ice and

slime

................... 51 54 57 58

* * * * * * *

Sablefish .................................................................................................... 710 1.02 0.91 0.70 0.65

* * * * * * *

[FR Doc. 97–29707 Filed 11–10–97; 8:45 am]

BILLING CODE 3510–22–P