Federal Register / Vol. 78, No. 86 / Friday, May 3, 2013 / Rules and Regulations 25795 

accordance with the approved scope of 

work and that the grant is expended for 

Eligible Grant Purposes. 

(d) Recipients shall diligently monitor 

performance to ensure that time 

schedules are being met, projected work 

within designated time periods is being 

accomplished, and other performance 

objectives are being achieved. 

(e) The applicant must have the 

necessary processes and systems in 

place to comply with the reporting 

requirements for first-tier sub-awards 

and executive compensation under the 

Federal Funding Accountability and 

Transparency Act of 2006 in the event 

the applicant receives funding unless 

such applicant is exempt from such 

reporting requirements pursuant to 2 

CFR 170.110(b). The reporting 

requirements under the Transparency 

Act pursuant to 2 CFR part 170 are as 

follows: 

(1) First Tier Sub-Awards of $25,000 

or more in non-Recovery Act funds 

(unless they are exempt under 2 CFR 

part 170) must be reported by the 

Recipient to http://www.fsrs.gov no later 

than the end of the month following the 

month the obligation was made. 

(2) The Total Compensation of the 

Recipient’s Executives (5 most highly 

compensated executives) must be 

reported by the Recipient (if the 

Recipient meets the criteria under 2 CFR 

part 170) to http://www.sam.gov by the 

end of the month following the month 

in which the award was made. 

(3) The Total Compensation of the 

Subrecipient’s Executives (5 most 

highly compensated executives) must be 

reported by the Subrecipient (if the 

Subrecipient meets the criteria under 2 

CFR part 170) to the Recipient by the 

end of the month following the month 

in which the subaward was made. 

§ 1739.20 Audit requirements. 

A grant recipient shall provide the 

Agency with an audit for each year in 

which a portion of the financial 

assistance is expended, in accordance 

with the following: 

(a) If the recipient is a for-profit 

entity, an existing Telecommunications 

or Electric Borrower with the Agency, or 

any other entity not covered by the 

following paragraph, the recipient shall 

provide an independent audit report in 

accordance with 7 CFR part 1773, 

‘‘Policy on Audits of the Agency’s 

Borrowers.’’ Please note that the first 

audit submitted to the Agency and all 

subsequent audits must be comparative 

audits as described in 7 CFR part 1773. 

(b) If the recipient is a Tribal, State or 

local government, or non-profit 

organization, the recipient shall provide 

an audit in accordance with OMB 

Circular A–133, ‘‘Audits of States, Local 

Governments, and Non-Profit 

Organizations.’’ 

§ 1739.21 OMB control number. 

The information collection 

requirements in this part are approved 

by the Office of Management and 

Budget (OMB) and assigned OMB 

control number 0572–0127. 

Subpart B [Reserved] 

Dated: April 8, 2013. 

John Charles Padalino, 

Acting Administrator, Rural Utilities Service. 

[FR Doc. 2013–10502 Filed 5–2–13; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF ENERGY 

10 CFR Part 719 

48 CFR Parts 931, 952, and 970 

RIN 1990–AA37 

Contractor Legal Management 

Requirements; Acquisition 

Regulations 

AGENCY: Office of General Counsel, 

Department of Energy. 

ACTION: Final rule. 

SUMMARY: The Department of Energy 

revises existing regulations covering 

contractor legal management 

requirements. Conforming amendments 

are also made to the Department of 

Energy Acquisition Regulation (DEAR). 

The regulations provide rules for 

handling of legal matters and associated 

costs by certain contractors whose 

contracts exceed $100,000,000 as well 

as legal counsel retained directly by the 

Department for matters in which costs 

exceed $100,000. 

DATES: Effective date: July 2, 2013. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Eric Mulch, Attorney-Adviser, U.S. 

Department of Energy, Office of General 

Counsel, 1000 Independence Avenue 

SW., Washington, DC 20585–0121. 

Telephone: (202) 287–5746. Email: 

eric.mulch@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. Public Comments 

III. Summary of Final Rule 

IV. Procedural Requirements 

A. Review Under Executive Orders 12866 

and 13563 

B. Review Under Executive Order 12988 

C. Review Under the Regulatory Flexibility 

Act 

D. Review Under the Paperwork Reduction 

Act 

E. Review Under the National 

Environmental Policy Act 

F. Review Under Executive Order 13132 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 13211 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Congressional Notification 

I. Background 

The Department’s contracts that 

include cost reimbursable elements 

generally allow reimbursement of legal 

costs, including the costs of litigation, if 

the costs are reasonable and incurred in 

accordance with the applicable cost 

principles and contract clauses. 

Consequently, the Department has an 

ongoing obligation to monitor and 

control the legal costs that it reimburses. 

The Department has a long history of 

overseeing aspects of its contractors’ 

management of legal matters and 

associated costs. This practice was 

formalized in 1994 when the 

Department published an interim 

Acquisition Letter as an interim policy 

in the Federal Register on August 31, 

1994 (59 FR 44981). The interim 

Acquisition Letter was finalized as a 

Policy Statement on April 3, 1996 (61 

FR 14763). This Policy Statement was 

followed by a formal rulemaking that 

added part 719, Contractor Legal 

Management Requirements, to Title 10 

of the Code of Federal Regulations with 

an effective date of April 23, 2001 (66 

FR 4616, 66 FR 19717). 

After a decade operating in 

accordance with the 2001 rulemaking, 

the Department determined that it 

should review, update and revise the 

rule. Therefore, it did so and issued the 

results in a Notice of Proposed 

Rulemaking (NOPR) on December 28, 

2011 (76 FR 81408). The NOPR 

requested public comments no later 

than February 27, 2012. The public 

comment period was reopened on 

March 2, 2012 and extended until 

March 16, 2012 (77 FR 12754). 

Today’s final rule revises the current 

contractor legal management 

requirements found in part 719, in Title 

10 of the Code of Federal Regulations. 

The revisions reflect lessons learned by 

the Department during the years since 

implementing part 719. The part 

establishes regulations to monitor and 

control legal costs and to provide 

guidance to aid contractors and the 

Department in making determinations 

regarding the reasonableness of outside 

counsel costs, including the costs 

associated with litigation. Today’s 

amendments to part 719 and the 

associated portions of the Department of 


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25796 Federal Register / Vol. 78, No. 86 / Friday, May 3, 2013 / Rules and Regulations 

Energy Acquisition Regulation (DEAR) 

are designed to clarify and streamline 

existing requirements, improve 

efficiency of contractor legal 

management, and facilitate oversight 

over the expenditure of taxpayer dollars. 

Contracting Officers must include the 

changes of this Final Rule in 

solicitations issued on or after the 

effective date of this rule. Contracting 

Officers may, at their discretion, include 

the changes of this Final Rule in 

solicitations issued before the effective 

date of this rule, provided award of the 

resulting contract(s) occurs on or after 

the effective date. 

Contracting Officers must apply the 

changes of this Final Rule to affected 

contracts, prospectively, by including 

them in those contracts by bilateral 

modifications. The changes are to 

become effective on the date the 

modifications are executed. Contracting 

Officers are to attempt to execute 

modifications within 60 days of the 

publication in the Federal Register of 

this Final Rule. Affected contracts are 

all management and operating contracts 

and other contracts that currently 

contain DEAR 931.205–33 or otherwise 

reference the Department’s litigation 

management procedures and cost 

guidelines. DEAR 931.205–33 requires 

litigation and other legal expenses be 

incurred per 10 CFR Part 719, 

Contractor Legal Management 

Requirements, as a condition of 

allowability. 

Contracting Officers must also 

incorporate the changes of this Final 

Rule into affected contracts before: 

extending them, exercising options 

under them, or adding additional term 

to them per award term provisions. 

II. Public Comments 

The Department of Energy received 

public comments from fifteen 

respondents concerning the NOPR. 

Commenters were divided in their 

reaction to the proposed rule. Many of 

the commenters expressed concerns 

about the enlarged scope of the 

regulations, while one commenter 

praised the Department’s efforts to 

increase oversight of legal costs. The 

Department carefully considered each 

comment and made numerous changes 

to today’s final rule based upon 

concerns raised by the responses to the 

NOPR. 

A short summary of the comments 

received and the Department of Energy’s 

responses are set forth below. 

Comments from multiple responses 

were combined where the comments 

addressed similar issues and presented 

similar concerns. The comments are 

listed under the proposed part 719 

subheading to which they pertain in 

order to ease readability. 

§ 719.2 What are the definitions of 

terms used in this part? 

Comment 1: One commenter 

suggested that the monetary threshold 

for establishing a legal matter as a 

significant matter should be raised from 

$100,000 to $250,000. 

Response 1: The Department believes 

the current threshold has been workable 

and efficient. We are aware of no 

evidence to the contrary, much less any 

showing that the existing threshold has 

significantly burdened contractors or 

their counsel. Moreover, the 

Department’s experience has shown that 

the existing level has protected the 

public fisc by enabling the Department 

to identify and eliminate duplicative 

and other unnecessary outside counsel 

expenses that we would not have been 

in a position to detect under the 

suggested higher threshold. 

Comment 2: One commenter 

suggested that the definition of 

Department Counsel be revised to 

clarify the distinction between DOE and 

NNSA field offices. 

Response 2: The Department believes 

that the proposed definition, identical 

in pertinent part to the definition 

included in the previous version of the 

rule, is sufficiently clear. 

Comment 3: One commenter 

suggested revising the definition of 

litigation to make it clear that, for 

purposes of the rule, the term applies 

only if the proceeding relates to a 

contract between the contractor and the 

Department. The commenter also 

suggested that the definition recognize 

that contractors may become parties in 

litigation in relation to a Department 

contract in territorial, District of 

Columbia, tribal or foreign courts or 

administrative bodies. 

Response 3: The Department amends 

the definition in section 719.2 to 

implement the commenter’s 

suggestions. 

Comment 4: One commenter 

suggested that proceedings before state 

or federal administrative bodies or 

arbitrators be removed from the 

definition of litigation. The commenter 

stated that the definition was too broad 

and that there would be added expense 

due to the ‘‘onerous requirements that 

apply to litigation.’’ 

Response 4: The Department declines 

to remove matters before states or 

federal administrative bodies or 

arbitrators from the definition of 

litigation. The Department has limited 

the requirements for matters in litigation 

by not requiring submission of an 

engagement letter or Staffing and 

Resource Plan unless the matter in 

litigation is expected to exceed specified 

monetary thresholds. An engagement 

letter must be submitted for a matter in 

litigation only if retained legal counsel 

is expected to provide $25,000 or more 

in services. A Staffing and Resource 

Plan must be submitted only if it is 

anticipated that retained legal counsel 

costs will exceed $100,000. 

Comment 5: Multiple commenters 

expressed concern regarding the 

proposed rule’s definition of legal 

matter. They stated that inclusion of an 

‘‘aggregate of legal issues associated 

with a particular subject area’’ within 

the definition would result in overly 

broad application of certain 

requirements tied to significant matters. 

Response 5: The Department agrees 

with these comments and removes the 

previous definition of legal matter from 

today’s rule. Where used, the term legal 

matter should be understood to carry its 

common meaning. 

Comment 6: Several commenters 

suggested that the Department should 

include only an objective methodology 

for defining significant matters. 

Response 6: Although the Department 

believes that Departmental authority to 

determine when a matter is to be 

considered significant is necessary, 

today’s final rule includes a requirement 

that the Department notify the 

contractor in writing of all matters 

considered significant unless they cross 

the monetary threshold contained in 

section 719.2. 

Comment 7: Several commenters 

expressed concern regarding the 

proposed rule’s definition of a 

significant matter that triggers the 

Staffing and Resource Plan requirements 

under section 719.15 when the matter is 

deemed significant by Department 

Counsel. These commenters criticized 

the subjective nature of this 

determination. One commenter noted 

that contractors may find it necessary to 

burden Department Counsel with 

requests for determinations on matters 

that are not clearly significant in order 

to manage the threat of unallowable 

costs. 

Response 7: The Department believes 

that the ability to define a matter as 

significant is essential to Departmental 

monitoring and managing contractor 

legal costs, but understands the need to 

have a clear identification of what 

constitutes a significant matter. Today’s 

rule revises the definition of significant 

matter to state that a matter is 

significant when it is a legal matter that 

involves significant issues as 

determined by Department Counsel and 

identified to a contractor in writing, and 

where the amount of any legal costs, 


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over the life of the matter, is expected 

to exceed $100,000. Therefore, the final 

rule deletes section 719.16(d) of the 

proposed rule which requires that a 

contractor consult with Department 

Counsel when it is unclear whether a 

matter is significant. 

§ 719.3 What contracts are covered by 

the part? 

Comment 8: One commenter 

suggested that the Department include 

language further explaining the 

threshold requirements for applicability 

of the part. 

Response 8: Based on experience 

administering the previous version of 

the part, the Department believes that 

further elaboration of the thresholds in 

section 719.3 is unnecessary. 

Comment 9: One commenter stated 

that the interplay among sections 719.3, 

.4, and .5 is confusing and suggested 

that 719.4 and .5 be deleted. 

Response 9: The Department declines 

to follow this suggestion. The 

Department believes that section 

719.4(b) (which permits the Department 

to make the part applicable to a 

particular contract by inserting a 

specific contract clause requiring 

compliance) is necessary to ensure that 

the Department has the ability to make 

this part applicable to a contract that 

would otherwise be exempt. The 

Department believes that section 719.5 

aids the public in understanding the 

applicability of the part. 

§ 719.4 Are law firms that are retained 

by contract by the Department covered 

by this part? 

Comment 10: One commenter 

suggested that section 719.4 be revised 

to specifically state which party is to 

determine whether costs are expected to 

exceed $100,000. 

Response 10: The Department agrees 

with the commenter and today’s rule 

states that the Department will 

determine whether costs are expected to 

exceed $100,000 and that the 

Department will provide notice of this 

determination to retained legal counsel. 

§ 719.6 Are there any types of legal 

matters not included in the coverage of 

this part? 

Comment 11: One commenter 

suggested that subcontractor bankruptcy 

matters be added to the list of legal 

matters to which the part does not apply 

in section 719.6. 

Response 11: The Department 

declines to follow this suggestion 

because subcontractor bankruptcy 

actions are not so commonplace as to 

fall within the same category as routine 

intellectual property law support 

services and routine workers and 

unemployment compensation matters. 

Comment 12: One commenter 

requested clarification as to whether 

routine workers compensation matters 

excluded from the purview of part 719 

would be excluded if such matters are 

handled through a retrospective 

insurance policy. 

Response 12: See the Department’s 

responses to comments related to 

section 719.45 regarding retrospective 

insurance carriers. 

Comment 13: Several commenters 

requested that the Department reverse 

its proposal to include labor arbitrations 

within the purview of part 719. Some 

commenters stated that treating labor 

arbitrations like other litigation for 

purposes of part 719 coverage will 

inappropriately insert the Department in 

the bargaining relationship between the 

contractor and the union. 

Response 13: Labor arbitrations that 

are handled by in-house counsel for the 

contractor will not be subject to the 

majority of the requirements of part 719. 

In addition, labor arbitrations that are 

expected to result in less than $25,000 

in retained legal counsel costs do not 

require the contractor to execute an 

engagement letter. 

As a matter of course, part 719 

requirements will not apply to routine, 

low cost labor arbitrations; high cost 

arbitrations will be subject to the same 

litigation oversight requirements as 

other types of contractor litigation. In 

addition, departmental oversight over 

expenditure of these legal costs in no 

way places the Department in the 

bargaining relationship between a 

contractor and a union. In labor 

arbitrations, as with other litigation, the 

contractor represents itself in the matter 

and the Department reimburses the 

contractor for reasonable, allowable, and 

allocable costs associated with the 

arbitration. 

§ 719.7 Is there a procedure for 

exceptions or deviations from this part? 

Comment 14: One commenter stated 

that the proposed rule fails to 

acknowledge legal management 

innovations adopted by the contractor 

community since part 719 was first 

published in 2001. The commenter 

proposed that part 719 be amended to 

include a provision allowing 

Department Management and Operating 

contractors to be exempted from the 

majority of part 719’s approval 

requirements if the contractor 

demonstrates a management approach 

consistent with the best practices and 

contractor assurance principles 

identified in individual contracts and 

DOE Order 226.1B. 

Response 14: The Department 

acknowledges advancements in the 

larger DOE contractor community’s legal 

cost management practices. Section 

719.7 provides Departmental flexibility 

to approve contractor request for 

exceptions or deviations from part 719. 

No changes to the part are necessary. 

Comment 15: One commenter 

suggested that there should be a deemed 

approval of requests for exceptions or 

deviations filed per section 719.7, if the 

Department does not respond to the 

contractor’s request within 30 days from 

receipt of the request. The commenter 

also suggested that when such requests 

are denied, the General Counsel and 

Senior Procurement Executive should 

be required to provide a written 

rationale for denial. 

Response 15: The Department does 

not believe that deemed approval of 

requests for exceptions or deviations 

from the regulations is appropriate. 

However, the Department agrees that a 

written response to such requests is 

appropriate and amends today’s rule to 

provide for such a response by the 

General Counsel or his or her delegee. 

The response requirement is not 

intended to require a justification for the 

Department’s exercise of its discretion. 

§ 719.8 Does the provision of protected 

documents from the contractor to the 

Department constitute a waiver of 

privilege? 

Comment 16: Several commenters 

noted that the statement regarding 

application of privilege to documents 

exchanged between the Department and 

the contractors will apply only when 

the law of the relevant jurisdiction 

recognizes such a privilege. 

Response 16: Section 719.8 includes 

the following limitation: ‘‘[t]o the extent 

documents associated with compliance 

with this part . . . are protected from 

disclosure to third parties because the 

items constitute attorney work product 

and/or involve attorney client 

communications. . . .’’ This language 

recognizes that the common interest 

applies only when the underlying 

documents are protected by a privilege 

and when the relevant jurisdiction 

recognizes the common interest under 

the facts presented by DOE contractors. 

Comment 17: One commenter noted 

that section 719.8 asserts that privilege 

is not waived by the sharing of 

documents with the Department is 

undermined when contractors are not 

able to rely on DOE approvals and 

authorizations to determine cost 

allowability. 

Response 17: The proposed revisions 

to part 719 do not change the 

allowability analysis performed by 


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Contracting Officers. Whether the 

Department’s and contractor’s interests 

are sufficiently aligned to support a 

finding of common interest for purposes 

of protecting items from disclosure is an 

analysis that will be performed by a 

court of competent jurisdiction as issues 

arise. 

Comment 18: One commenter noted 

the statement in section 719.8 that the 

common interest is ‘‘rooted’’ in the 

reimbursement of allowable costs 

excludes other sources of the common 

interest, such as mission completion. 

Response 18: To the extent that 

proposed section 719.8 implies that 

there is only one basis for the common 

interest between contractors and the 

Department, this misconception is 

clarified in the final rule. Today’s final 

rule states that the common interest 

between the parties is primarily rooted 

in the Department’s reimbursement of 

contractors for allowable costs incurred 

when litigation is threatened or initiated 

against contractors, but that other 

factors may also support a 

determination that the Department and 

the contractor share a common interest. 

Comment 19: One commenter 

suggested that section 719.8 should 

address how the privilege would apply 

and who is authorized to waive the 

privilege. 

Response 19: The parties authorized 

to waive the privilege and the operation 

of the privilege will be evaluated on a 

case-by-case basis. In some cases, a third 

party suing the contractor may assert 

that the privilege protecting certain 

documents from disclosure is waived 

because the documents were provided 

to an alleged outside party, the 

Department. Whether the privilege 

would operate in that circumstance 

depends on a host of details 

surrounding the disclosure and the 

underlying documents. Therefore, in the 

view of the Department, no additional 

details need to be added to the 

regulation. 

Comment 20: One commenter noted 

that the interests of the Department and 

a contractor may diverge at some point. 

For example, interests may diverge 

where an action could lead to 

government action against the 

contractor. The commenter suggested 

adding language to section 719.8 that 

would permit the contractor to withhold 

privileged information when it is 

reasonable to anticipate eventual 

divergence of interests. 

Response 20: Contractors are not 

permitted by this part to withhold 

documents required to be submitted 

pursuant to this part because the 

contractor anticipates that the interest of 

the Department and the contractor in a 

litigation matter may diverge. Section 

719.40 makes clear that adherence to 

part 719, including provision of 

documents such as Staffing and 

Resource Plans and settlement 

memoranda as appropriate, is a 

prerequisite to allowability. Failure to 

provide information required by part 

719 may result in the denial of 

reimbursement of associated costs. 

Comment 21: One commenter 

suggested that the Department require 

written common interest agreements 

before requesting privileged information 

from contractors. 

Response 21: The Department 

declines to adopt this suggestion. 

Written common interest agreements 

may be helpful in some cases to 

emphasize that the parties’ exchange of 

documents on a specific matter occurred 

in furtherance of their common interest, 

particularly if the matter is in litigation 

or if litigation is imminent. However, it 

is the view of the Department that it is 

not necessary to require the parties to 

enter into a common interest agreement 

every time that the parties exchange 

potentially sensitive documents or 

communications. Such a requirement 

would potentially disrupt site 

operations by slowing the delivery of 

mission deliverables from the contractor 

to the government. Moreover, requiring 

the use of common interest agreements 

in all circumstances involving the 

sharing of potentially privileged 

information might undercut the ability 

of DOE and its contractors to protect the 

privilege when the parties did not enter 

into an agreement. 

§ 719.10 Who must submit a Legal 

Management Plan? 

Comment 22: One commenter 

questioned the continued wisdom of 

requiring contractor submission of a 

Legal Management Plan stating that it 

has been the commenter’s experience 

that the plan is not often referenced by 

the Department. The commenter notes 

that frequent interaction between 

Department counsel and in-house 

counsel for the contractor obviates the 

need for a written Legal Management 

Plan. 

Response 22: The Legal Management 

Plan documents critical information 

allowing the Department to guide 

practices and manage costs. The 

Department notes further that Legal 

Management Plans are commonplace 

among businesses. The Legal 

Management Plan assists Department 

Counsel in understanding the 

contractor’s internal procedures, 

litigation protocols and processes to 

manage costs. Legal Management Plans 

are submitted following the award of a 

contract and revised only upon request 

of the Contracting Officer. The 

Department believes that the benefit of 

requiring submission of the plans 

outweighs any burden associated with 

compliance with this requirement. 

§ 719.11 When must a Legal 

Management Plan be submitted or 

revised? 

Comment 23: Several commenters 

suggested that the Department should be 

required to have a reason or justification 

for requesting a revised Legal 

Management Plan and should provide 

such reason or justification to the 

contractor with such a request. 

Response 23: The Department agrees 

in part and today’s final rule states that 

a request for a revised plan shall include 

an explanation for the request. However, 

the explanation requirement is not 

intended to require a justification for the 

Department’s exercise of its discretion. 

Comment 24: One commenter 

suggested that language be inserted at 

the end of section 719.11(b) allowing 

the Department to grant an extension of 

the deadline for submitting a revised 

Legal Management Plan. The 

commenter also suggested that the 

section state that all reasonable requests 

for extensions will not be denied. 

Response 24: The Department agrees 

that that Department Counsel should 

have the authority to extend the 

deadline for submitting a revised Legal 

Management Plan and today’s rule 

reflects this change. The Department 

declines to include the suggested 

statement concerning the acceptance of 

reasonable requests. The Department 

believes that Department Counsel must 

maintain the discretion to accept or 

reject a request for deadline extension to 

ensure proper management of contractor 

legal costs. 

Comment 25: One commenter 

suggested that section 719.11(b), 

requiring contractors to submit a revised 

Legal Management Plan upon request of 

the contracting officer, should be 

deleted because it is unnecessary and 

burdensome. 

Response 25: The Department 

declines to accept the suggestion. The 

ability to request a revised plan is 

necessary to ensure proper management 

of contractor legal costs. 

§ 719.12 What information must be 

included in the Legal Management 

Plan? 

Comment 26: Several commenters 

stated that the requirement in section 

719.12(a) that the Legal Management 

Plan include a description of in-house 

counsel resources does not provide any 

benefit to the government and should be 


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eliminated. Some of these commenters 

questioned whether Department 

Counsel would be making 

determinations on whether in-house 

counsel would be qualified to handle a 

particular matter, thereby assuming the 

role of managing in-house counsel. 

Multiple commenters stated that the fact 

that a contractor has in-house counsel 

with experience in a specific area 

should not be determinative of whether 

engaging outside counsel is appropriate. 

Multiple commenters stated that as a 

contractor’s in-house staff change, their 

levels of expertise will change and the 

Legal Management Plan will be quickly 

out of date. 

Response 26: The Department 

believes that requiring a contractor to 

provide a description of in-house 

counsel resources is essential to 

developing an understanding of the 

contractor’s internal legal resources. 

Although not determinative on its own, 

having information concerning the areas 

of expertise among a contractor’s inhouse resources is essential when 

evaluating the reasonableness of outside 

counsel use. Neither the submission of 

such information nor the existence of 

contractor in-house expertise precludes 

reimbursement of contractor outside 

counsel costs in appropriate situations. 

The Department believes that the 

information required to be included in 

a Legal Management Plan required by 

section 719.12(a) is necessary to ensure 

proper management of contractor legal 

costs. However, the Department 

appreciates the commenters’ concerns 

regarding the required listing of ‘‘levels 

of experience of each legal staff 

member.’’ Today’s rule eliminates this 

requirement from the section. 

Comment 27: One commenter 

recommended deletion of subsection 

(d), which requires an outline of the 

factors that the contractor will use in 

selecting outside counsel. 

Response 27: The Department 

believes that the information requested 

under subsection (d) causes minimal 

burden and benefits the Department by 

providing the rationale for the selection 

of outside counsel. No change is made 

to today’s final rule. 

Comment 28: Several commenters 

suggested that section 719.12(k)’s 

requirement that the Legal Management 

Plan include a description of procedures 

for providing the earliest possible 

notification to the Department of the 

likely initiation of any legal matter 

concerning certain topics which are of 

general importance to the Department, 

should be revised or eliminated. Several 

commenters noted that the language in 

section 719.21(k) creates unnecessary 

ambiguity. Specifically, one commenter 

stated that the term ‘‘likely initiation’’ 

did not specify the triggering initiator. 

The commenter noted that if a third 

party was ‘‘likely initiating’’ litigation it 

is unlikely that the contractor would be 

aware of it and if the contractor was 

‘‘likely initiating’’ litigation it would be 

required to get Department approval 

under 719.30. Another commenter 

complained that the information 

requested was overly burdensome. One 

commenter suggested that this 

paragraph should include an expanded 

definition of ‘‘classified information’’ to 

ensure proper handling of such 

information. 

Response 28: The Department agrees 

that removal of section 719.12(k) is 

appropriate. Other requirements ensure 

that the Department is timely notified of 

impending legal matters and therefore 

this subsection has been removed from 

the final rule. Also, requirements 

regarding the handing of classified 

information are fully addressed in 

statutory and regulatory provisions 

governing such information. 

Comment 29: Several commenters 

suggested that section 719.12(l) be 

eliminated because other regulations 

and contract provisions prohibit a 

contractor from submitting unallowable 

costs for reimbursement, and therefore it 

adds no value. 

Response 29: The Department agrees 

that section 719.12(l) is duplicative of 

other prohibitions regarding submission 

of unallowable costs for reimbursement. 

Today’s rule removes this section. 

§ 719.13 Who at the Department 

receives and reviews the Legal 

Management Plan? 

Comment 30: One commenter stated 

that section 719.13 should make plain 

that the Legal Management Plan is to be 

routed through the Contracting Officer. 

Response 30: The Department has 

carefully considered the assignment of 

Departmental responsibilities under part 

719 and believes that Departmental 

Counsel receipt of the Legal 

Management Plan is appropriate. 

Departmental Counsel will 

appropriately coordinate their efforts 

with the cognizant Contracting Officer. 

§ 719.14 Will the Department notify 

the contractor concerning the adequacy 

or inadequacy of the submitted Legal 

Management Plan? 

Comment 31: Multiple commenters 

objected to the proposed deletion of the 

subsection allowing contractors to file a 

letter or other communication with the 

General Counsel disputing a 

Departmental Legal Management Plan 

determination of inadequacy or 

noncompliance, noting that this process 

may avoid contract disputes. 

Response 31: The Department amends 

the final rule to permit contractors to 

file a letter with the General Counsel 

disputing a deficiency determination. 

§ 719.15 What are the requirements for 

a Staffing and Resource Plan? 

Comment 32: One commenter noted 

that section 719.15(e) makes reference to 

the budget developed in paragraph (c) of 

the section, but that the particularized 

budget requirement for the matter in 

litigation is set forth in paragraph (d). 

Response 32: The Department 

recognizes this error and today’s final 

rule corrects the section. 

Comment 33: Several commenters 

addressed the requirement that 

contractors submit Staffing and 

Resource Plans for significant matters. 

They noted that these plans must 

describe, among other things, the major 

phases likely to be involved in the 

handling of the matter. The commenters 

stated that requiring the plan for all 

significant matters is impractical 

because the definition of Significant 

Matter includes any legal matter where 

the amount of legal costs over the 

lifetime of the matter is expected to 

exceed $100,000. Because legal matter is 

defined to include an aggregate of legal 

issues associated with a particular 

subject area, the commenters are 

concerned that Staffing and Resource 

Plans will be required for series of 

discrete, unrelated issues which do not 

lend themselves to the preparation of 

such a plan. 

Response 33: The Department agrees 

that the application of the requirement 

to provide a Staffing and Resource Plan 

is most appropriate for matters in 

litigation. Therefore section 719.15(a) is 

changed so that it applies only to 

significant matters in litigation. 

Comment 34: Several commenters 

suggested that section 719.5(e) be 

changed to require contractor counsel to 

notify the Department of potential costs 

in excess of the Staffing and Resource 

Plan estimates instead of prohibiting the 

incurrence of such costs and requiring 

DOE approval. Several commenters 

suggested that the requirement for preapproval of over-budget costs should be 

deleted because it is impractical in the 

context of litigation, and litigation may 

be compromised if the contractor is 

required to go back to the Department 

for approval before incurring additional 

expenses. Some commenters expressed 

concern that advance approval for overbudget costs will lead to highly inflated 

budget estimates. 

Response 34: The Department agrees 

with some of the commenters that this 


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requirement should be changed from 

one of advance approval to advance 

notice. Under today’s final rule the 

contractor must notify Department 

Counsel before incurring retained legal 

costs in excess of the budget developed 

pursuant to paragraph (d). 

§ 719.16 When must the Staffing and 

Resource Plan be submitted? 

Comment 35: One commenter 

suggested that language be inserted in 

section 719.16(a) allowing the 

Department to grant an extension to the 

deadline for submitting a Staffing and 

Resource Plan. The commenter also 

suggested that the section include a 

requirement that no reasonable requests 

for extensions will be denied. 

Response 35: The Department agrees 

that Department Counsel should have 

the authority to extend the deadline for 

submitting a revised Staffing and 

Resource Plan and today’s rule reflects 

this fact. The Department declines to 

include the suggested statement 

concerning the acceptance of reasonable 

requests. The Department believes that 

Department Counsel must maintain the 

discretion to accept or reject a request 

for deadline extension to ensure proper 

management of contractor legal costs. 

Comment 36: Multiple commenters 

suggested that the right to dispute 

Department Counsel’s stated objections 

to a Staffing and Resource Plan to the 

General Counsel, which was deleted in 

the proposed rule, be retained. The 

commenters noted that this process may 

avoid contract disputes. 

Response 36: The Department amends 

the final rule to permit contractors to 

file a letter with the General Counsel 

disputing a stated objection. 

Comment 37: One commenter stated 

that requiring a plan be submitted 

within 30 days after DOE determines 

that a matter is to be considered a 

Significant Matter is unrealistic, noting 

that a contractor may not even have 

hired outside counsel within the 30 day 

period. The commenter further objected 

to the period allotted for DOE review of 

the plan, noting that waiting 30 days for 

DOE approval is not realistic during 

ongoing litigation. 

Response 37: The Department notes 

that a Staffing and Resource Plan is 

required to be filed within 30 days after 

the filing of an answer or a dispositive 

motion in lieu of an answer or within 

30 days after a determination that 

associated costs are expected to exceed 

$100,000. These triggers should allow 

adequate time to prepare the required 

plan. The Department further believes 

that any concerns regarding the 

timeframe for contractor submission of 

the plan are adequately addressed by 

the addition of the option for 

Department Counsel to extend the 

deadline. Regarding the 30 day deadline 

for Department Counsel to state 

objections to the plan, the Department 

notes that there is no approval 

requirement and the regulation does not 

prohibit the contractor from taking any 

action during the 30 day period during 

which Department Counsel may state 

objections to the plan. 

§ 719.17 Are there any budgetary 

requirements? 

Comment 38: One commenter 

expressed concern about the interplay 

between the definition of significant 

matters and the words ‘‘existing or 

anticipated significant matters’’ in the 

proposed rule. The commenter noticed 

that the use of the word anticipated was 

confusing and could create problems 

during implementation. 

Response 38: The Department agrees 

that the language ‘‘existing or 

anticipated’’ is not helpful, and today’s 

final rule removes the words ‘‘existing’’ 

and ‘‘anticipated.’’ 

Comment 39: One commenter 

objected to the provision in section 

719.17(c) requiring the submission of a 

report comparing its budgeted and 

actual legal costs at the conclusion of 

the budget period. The commenter 

stated that the Department has access to 

the information that would be reflected 

in the report. 

Response 39: The Department 

believes that the required report will 

benefit its efforts to monitor and manage 

contractor legal costs. The contractor is 

in the best position to create the 

required report given that not all 

information regarding costs incurred 

during a particular budget period may 

have been provided to the Department 

within 30 days of the end of the budget 

period. Today’s final rule retains this 

requirement. 

§ 719.20 When must an engagement 

letter be submitted to Department 

Counsel? 

Comment 40: Multiple commenters 

expressed concern with the requirement 

that contractors submit to Department 

Counsel the terms of proposed 

engagement letters between the 

contractor and proposed retained legal 

counsel when the proposed legal 

services are expected to meet or exceed 

$25,000. The commenters noted that the 

previous version of the regulation 

required submission of executed, rather 

than proposed, engagement letters and 

characterized the proposed change as 

requiring that contractors obtain 

Department preapproval before 

executing an engagement letter. Several 

commenters stated that preapproval of 

engagement letters would unnecessarily 

burden contractors and delay the hiring 

of outside counsel. The commenters 

noted that Department preapproval of 

engagement letters is unnecessary 

because section 719.21 prescribes in 

great detail the information to be 

included in the engagement letter. 

Response 40: The Department has 

considered the comments and agrees 

that it need not review proposed 

engagement letters. Section 719.21 

provides clear guidance on 

requirements for these letters and 

preapproval may unnecessarily delay 

engagement of outside counsel. Today’s 

final rule is amended to require the 

submission of executed, rather than 

proposed, engagement letters when 

retained counsel is expected to provide 

$25,000 or more in legal services for a 

particular matter. 

Comment 41: One commenter urged 

the Department to raise the $25,000 

threshold in section 719.20 that triggers 

the contractor obligation to obtain an 

engagement letter from retained legal 

counsel. The commenter noted that 

$25,000 is the amount included in this 

regulation in 2001, and that this figure 

is unreasonably low given the increase 

in litigation costs over the last years. 

Another commenter stated that it is 

unclear when initiation of the 

engagement letter process will be 

expected if contractor counsel engages 

outside counsel for ad hoc advisory 

services. 

Response 41: It is the view of the 

Department that obtaining an 

engagement letter from retained legal 

counsel that sets forth basic agreements 

regarding billing, invoice and record 

retention is a good practice and it is not 

an onerous requirement; rather, it is 

standard practice for companies hiring 

outside counsel and often required by 

State legal ethics rules. Also, section 

719.20 states that contractors must 

submit the engagement letter ‘‘when the 

proposed retained counsel is expected 

to provide $25,000 or more in legal 

services for a particular matter.’’ It is the 

view of the Department that contractor 

counsel should form a good faith 

judgment whether a given matter will 

involve $25,000 or more of legal 

expenses. 

§ 719.21 What are the required 

elements of an engagement letter? 

Comment 42: Several commenters 

noted that section 719.21(b)(6) should 

be clarified to specifically state that the 

initial assessment of the legal matter, 

along with a commitment to provide 

updates as necessary, must be provided 


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by retained legal counsel rather than 

contractor counsel. 

Response 42: The items set forth in 

section 719.21(b) describe the 

obligations of retained legal counsel. 

However, to ensure clarity, the text of 

section 719.21(b)(6) is changed to 

specify that the initial assessment and 

updates are the responsibility of 

retained legal counsel. 

Comment 43: One commenter 

objected to the fact that the engagement 

letter requirements at section 

719.21(b)(4) require the contractor to 

obtain agreement from retained legal 

counsel to maintain all records for six 

years and three months after the final 

payment or after final case disposition, 

whichever is later. The commenter 

noted that the current regulations 

require the engagement letter to state 

retained legal counsel will maintain all 

records for three years and further noted 

that additional storage costs will be 

incurred because of the extended record 

maintenance period. 

Response 43: The requirement that 

retained legal counsel’s records for a 

particular case must be maintained for 

six years, three months, aligns with the 

Contract Disputes Act statute of 

limitations. There is no change to the 

proposed record retention period in 

today’s final rule. 

Comment 44: One commenter noted 

that the required engagement letter 

elements are overly prescriptive and 

should be eliminated. 

Response 44: The Department 

disagrees; obtaining an engagement 

letter from retained legal counsel that 

sets forth basic agreements regarding 

billing, invoices, and record retention 

reflects best practices for any company 

obtaining legal services. 

Comment 45: One commenter 

recommended that an addition be made 

to the engagement letter requirements in 

section 719.21, requiring retained legal 

counsel to affirm that (s)he has read 

section 719.8 regarding waiver of 

privilege, and that provision of records 

to the Government is in no way 

intended to constitute a waiver of any 

applicable privilege. 

Response 45: Section 719.21(b)(2) 

contains a requirement that the 

engagement letter from retained legal 

counsel must include a statement 

acknowledging that provision of records 

to the Government is not a waiver of 

applicable legal privilege, protection or 

immunity with respect to disclosure of 

these records to third parties. No 

additional acknowledgement 

requirement is necessary. 

Comment 46: Several commenters 

suggested changes to section 

719.21(b)(11), which sets forth the 

requirement that all engagement letters 

contain a statement that retained legal 

counsel will provide a certification 

concerning costs submitted for 

reimbursement. Several commenters 

suggested that the portion of the 

certification described in section 

719.21(b)(11) affirming that ‘‘the costs 

and charges set forth herein are 

necessary’’ should read instead ‘‘the 

costs and charges set forth herein are 

reasonable, appropriate and in 

conformance with 10 CFR 719 and the 

client engagement letter covering this 

invoice.’’ In addition, the commenters 

suggested that section 719.21(b)(11) be 

changed from ‘‘[i]nvoices must be 

submitted in conformance with the 

model bill format . . .’’ to ‘‘[i]nvoices 

must be submitted in conformance with 

the substance of the model bill format. 

. . .’’ 

Response 46: The Department agrees 

with the commenters in part. The 

certification language in section 

719.21(b)(11) in today’s final rule reads 

‘‘the costs and charges set forth herein 

are appropriate and related to the 

representation of the client’’ to reinforce 

that retained legal counsel will certify 

that all billed items were necessary to 

represent its client, the contractor. With 

respect to the suggestion that the 

certification specifically state that 

retained legal counsel affirms that 

charges set forth are in conformance 

with 10 CFR part 719, it is the 

contractor, not retained legal counsel, 

that must adhere to 10 CFR part 719. 

Section 719.21(a) reminds the DOE 

contracting community that the 

obligation to adhere to 10 CFR part 719 

is placed on the contractors: ‘‘[t]he 

engagement letter must require retained 

legal counsel to assist the contractor in 

complying with this part and any 

supplemental guidance distributed 

under this part.’’ With respect to the 

comment that the invoices should be 

submitted in conformance with the 

substance of the model bill, the 

language of section 719.21(b)(11) in 

today’s final rule clarifies that retained 

legal counsel must submit all 

information included in the model bill 

format of Appendix A to 10 CFR part 

719, but that the invoice need not mirror 

the model bill. The modified language 

reads: ‘‘[i]nvoices must contain all 

elements (e.g., date of service, 

description of service, name of attorney) 

set forth in the model bill format in 

Appendix A to this part.’’ 

§ 719.30 In what circumstances may 

the contractor initiate litigation, 

including appeals from adverse 

decisions? 

Comment 47: Several commenters 

objected to the proposed requirement in 

that contractors obtain prior 

authorization from Department Counsel 

if the contractor wishes to file a 

counterclaim in a matter in litigation. 

The commenters asserted that 

counterclaims are fundamentally 

different from initiating litigation 

insofar as counterclaims do not start a 

lawsuit; rather, they are asserted or 

waived when a contractor is sued. 

Several commenters objected to this 

new requirement on its face and urged 

that if it is not removed entirely the 

regulation should, at the very least, 

require Department Counsel to respond 

to the contractor’s request within a 

finite period of time. The commenters 

expressed concern that a lack of a timely 

response by Department Counsel may 

result in a waiver of the contractor’s 

right to file counterclaims. 

Response 47: The Department 

recognizes that contractors may need to 

file counterclaims in a short time frame. 

Today’s final rule removes the 

requirement that contractors obtain 

Department Counsel approval before 

filing counterclaims. 

Comment 48: Several commenters 

noted that section 719.30 states that 

contractors must obtain prior written 

authorization from Department Counsel 

to initiate litigation and counterclaims 

but that 719.30(b) confuses matters by 

implying the contracting officer would 

communicate the Department’s decision 

on whether the contractor may initiate 

or appeal adverse decisions. 

Response 48: The Department agrees 

that proposed section 719.30(b) creates 

an internal inconsistency. Today’s final 

rule deletes proposed section 719.30(b) 

because it confuses the identity of the 

individual responsible for 

communicating approval of initiation of 

litigation to the contractor. 

Comment 49: One commenter 

suggested that section 719.30(a)(10) be 

modified to state that the Department 

must benefit from approved litigation 

and that benefits to the contractor 

should not be factored in when 

considering requests to approve 

litigation. 

Response 49: The Department 

declines to modify today’s final rule to 

incorporate the commenter’s suggestion. 

The language of the proposed rule 

provides the Department with the 

information needed to use its discretion 

in determining whether to approve 

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§ 719.31 When must the contractor 

initiate litigation against third parties? 

Comment 50: One commenter noted 

that a contractor’s counsel may be acting 

in violation of ethical responsibilities to 

the client if the attorney follows 

Departmental direction to engage in 

litigation that is not meritorious. 

Response 50: We reject any suggestion 

that the Department would direct a 

contractor to initiate unmeritorious 

litigation to fulfill its contractual 

obligations. Resolution of hypothetical 

future disagreements concerning 

contractors’ obligations in such 

circumstances is beyond the purview of 

these regulations. Any contractor 

concerns should be directed to 

Department Counsel. 

Comment 51: Several commenters 

noted that the provision in section 

719.31 requiring contractors to initiate 

litigation against third parties upon the 

request of the contracting officer should 

be deleted because it does not 

specifically confirm that reasonable 

costs arising from such litigation will be 

allowable. 

Response 52: The Department 

believes that section 719.31 merely 

reserves to the government the right to 

direct the contractor to engage in 

litigation that it deems to be in the best 

interest of the Department. The 

allowability of litigation costs, including 

costs associated with litigation that the 

Department directs the contractor to 

undertake, will be evaluated by the 

contracting officer for reasonableness in 

light of the circumstances in the same 

manner as other costs incurred under 

the contract. Therefore, no blanket 

statement regarding the allowability of 

these costs is appropriate. No change to 

section 719.31 is necessary. 

Comment 52: One commenter noted 

that the Department should add a 

discussion to the rule describing the 

effect of initiating litigation on the 

contractor and the Department, and 

stating why initiation of litigation 

would prove beneficial to the 

Department. 

Response 52: The Department 

declines to implement the commenter’s 

suggestion. The circumstances under 

which contractor initiation of litigation 

may be beneficial to the government 

will vary, but would normally be rooted 

in the government’s interest in prudent 

expenditure of public funds (e.g., 

requiring a cost reimbursement 

contractor to file a lawsuit against a 

subcontractor when a positive outcome 

in the lawsuit would result in cost 

recapture for the government). Section 

719.31 preserves all options so that the 

government may assert its right, among 

others, to cost recovery vis-a-vis the 

contractors that it reimburses. 

§ 719.32 What must the contractor do 

when it receives notice that it is a party 

to litigation? 

Comment 53: Several commenters 

noted that the Department should 

articulate why contractor litigation is 

subject to extra scrutiny in this 

regulation, suggesting instead that 

litigation should be treated like other 

contractor purchases that involve less 

government oversight. 

Response 53: Contractor litigation 

costs can significantly affect the 

Department’s financial resources. In 

addition, litigation against contractors 

often directly affects the reputation of 

the Department and, directly or 

indirectly, its legal position. In light of 

these facts, the Department believes it is 

appropriate to subject contractor 

litigation to scrutiny that is not applied 

to contractor purchases of other goods 

and services. 

Comment 54: One commenter 

suggested that ‘‘DOE/NNSA-approved’’ 

should be stricken and instead 

‘‘Department Counsel-approved’’ should 

be inserted in section 719.32(c)(1). 

Response 54: The Department agrees 

to modify today’s final rule to state that 

Department representatives will 

collaborate with contractor in-house 

counsel or Department Counsel 

approved outside counsel. This change 

is consistent with 719.32(b), which 

contemplates that the contractor shall 

proceed with litigation as directed from 

time to time by Department Counsel. 

Comment 55: Several commenters 

suggested changing ‘‘claim’’ in section 

719.32(c), (c)(1), and (c)(2) to ‘‘legal 

proceeding’’ because the remainder of 

719.32 regulates a ‘‘legal proceeding.’’ 

Response 55: The Department agrees 

that the term ‘‘legal proceeding’’ used at 

the start of section 719.32 in (a) should 

be used throughout this subpart to 

ensure consistency. 

§ 719.33 In what circumstances must 

the contractor seek permission from the 

Department to enter a settlement 

agreement? 

Comment 56: A number of 

commenters asserted that the $25,000 

settlement agreement approval 

threshold is too low. Several 

commenters suggested that the 

settlement approval authority threshold 

be increased to at least $100,000. 

Several commenters also noted the lack 

of a finite deadline for the Department 

to respond to the contractor’s request to 

settle a lawsuit. In addition, several 

commenters noted that 719.33’s 

statement that Departmental approval to 

settle a case does not mean that the 

settlement amount or associated legal 

costs will be determined to be allowable 

is a departure from longstanding DOE 

practice. 

Response 56: The Department 

believes that the $25,000 settlement 

agreement approval threshold is 

appropriate and no change is necessary. 

As noted previously, lawsuits against 

DOE/NNSA contractors have the 

potential to significantly affect DOE/ 

NNSA budgetary resources and often 

bring additional non-monetary 

sensitivities. The Department believes it 

is appropriate to review and authorize 

settlement of cases for $25,000 or more. 

In addition, the vast majority of existing 

Legal Management Plans require 

Department Counsel approval of 

settlements for any monetary value and, 

therefore, section 719.33 does not 

represent a radical departure from 

existing practice. With respect to the 

request for a deadline for Department 

Counsel to reply to a request for 

authority to enter into a settlement 

agreement, the Department declines to 

include such a deadline. The 

Department understands the need for 

expeditious review of settlement 

requests and Department Counsel will 

endeavor to approve settlement requests 

as soon as is practicable upon receipt. 

With respect to the assertions that in the 

past, approval to settle was granted 

simultaneously with a determination on 

allowability, the Department 

acknowledges that in some instances, in 

the past, Contracting Officers made 

explicit allowability determinations at 

the same time that Department Counsel 

notified the contractor that it could 

settle a matter. Under today’s final rule, 

contracting officers may still, in their 

discretion, make simultaneous 

settlement approval and cost 

allowability determinations. However, it 

should be noted that existing part 719 

Appendix 5.2(B) makes clear that in 

some cases the final determination of 

allowability of legal costs cannot be 

made until a matter is fully resolved. In 

addition, 48 CFR (FAR) 31.201–3, 

clearly states that no presumption of 

reasonableness is attached to the 

incurrence of costs by a contractor. 

Therefore, the proposed statement in 

section 719.33 that the Departmental 

cost allowability determination is 

distinct from a determination regarding 

settlement approval reiterates a concept 

that has been reflected since part 719’s 

initial publication and is a wellestablished cost reimbursement 

contracting principle. In addition, at the 

time the contractor seeks settlement 

authority from Department Counsel, the 


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contractor is in a position of superior 

knowledge regarding the underlying 

facts that may factor into a 

determination of the reasonableness of 

the costs, which may be revealed 

subsequent to the grant of settlement 

authority by Department Counsel to the 

contractor. 

§ 719.34 What documentation must 

the contractor provide to Department 

Counsel when it seeks permission to 

enter a settlement agreement? 

Comment 57: Two commenters noted 

that plaintiffs’ counsel with whom they 

are engaging in settlement discussions 

might not be willing to share the type 

of information required to be provided 

to the Department under section 

719.34(g), such as the proposed amount 

to be provided to each plaintiff. The 

commenters noted that inability to 

furnish information to the DOE for this 

reason should not be considered a 

violation of the regulation. 

Response 57: The Department 

recognizes that when a contractor is 

sued, plaintiff’s counsel may not share 

with the contractor the monetary 

amount to be provided to each plaintiff. 

However, the Department believes no 

change is necessary because the first 

sentence of section 719.34 states that the 

contractor must provide a list of items 

in its settlement authority request ‘‘that 

includes the following information, as 

applicable.’’ The Department believes 

that use of the term ‘‘as applicable’’ 

accounts for the circumstance when a 

plaintiff’s counsel simply will not reveal 

to the contractor how much each 

plaintiff will receive pursuant to the 

contemplated settlement agreement. 

Therefore, no change is required. 

Comment 58: Two commenters noted 

that section 719.34’s requirement that 

the contractor submit several documents 

to Department Counsel to inform the 

decision as to whether settlement 

authority should be granted puts the 

attorney client/work product privilege 

at risk. 

Response 58: The Department 

declines to make any change to section 

719.34 based on this comment. As 

stated in section 719.8, it is the view of 

the Department that otherwise 

privileged documents provided to the 

Department pursuant to part 719 are 

protected from disclosure to third 

parties because the Department and the 

contractors share a common interest in 

the litigation. 

Comment 59: One commenter noted 

that the requirement in section 719.34(f) 

for contractors to provide information 

about all of the terms of the settlement 

agreement, including non-monetary 

terms, is intrusive and, further, the 

contractors have the contractual 

authority to manage their workforces, 

including handling nonmonetary 

settlement terms. The commenter also 

stated that the general requirement in 

section 719.34 to provide a settlement 

memorandum is unnecessary. 

Response 59: The Department 

believes that contractor provision of all 

of the terms associated with a settlement 

proposal assists the Department in fully 

understanding and evaluating the 

contractor’s settlement request. This 

subpart does not limit the contractor’s 

ability to manage its workforce. No 

change is necessary. 

§ 719.35 When must the contractor 

provide a copy of the executed 

settlement agreement? 

Comment 60: Several commenters 

noted that the requirement in section 

719.35 to provide an executed copy of 

the settlement agreement should be 

eliminated because the agreement may 

be subject to disclosure pursuant to 

FOIA. The commenters also noted that 

the requirement to submit the 

settlement agreement within seven days 

of execution was unnecessary. 

Response 60: The Department 

discloses all documents subject to the 

Freedom of Information Act to promote 

the goals of transparency and 

accountability in government. The 

release of settlement agreements in the 

possession of the Department, both draft 

and executed, will be governed by 

FOIA. The benefit of Department 

Counsel review of all relevant 

provisions of a settlement agreement 

(e.g., to assist in a determination of the 

reasonableness of the underlying costs) 

outweighs the burden associated with 

potential disclosure of settlement 

agreements pursuant to FOIA. It is the 

view of the Department that it is not 

unduly burdensome for contractors to 

transmit a settlement agreement within 

seven days of execution. Therefore, no 

change to the time period is necessary. 

§ 719.40 What effect do the regulations 

of this part have on cost allowability? 

Comment 61: Several commenters 

objected to the language in section 

719.40, which states that compliance 

with part 719 is a prerequisite for the 

allowability of legal costs. Some 

commenters asked whether the 

Department intends to establish a new 

standard for determining the 

allowability of legal costs. 

Response 61: The purpose of the 

language in section 719.40 is to clarify 

language regarding cost allowability 

issues previously appearing at section 

5.0 of the Appendix to the part, which 

was deleted in the proposed rule. 

Compliance with part 719 has always 

been one of several considerations in 

determining the allowability of legal 

costs and is not sufficient by itself to 

determine that costs are allowable. 

Another consideration is compliance 

with the other contract terms and 

conditions, including the standards for 

allowability articulated in FAR part 31 

and DEAR part 931. Nevertheless, in 

order to ensure clarity, the following 

language is added to the last sentence of 

the section: ‘‘In accordance with 48 CFR 

(FAR) part 31 and (DEAR) part 931 and 

all other applicable contract terms and 

conditions.’’ 

Comment 62: One commenter 

recommended adding a ‘‘mechanism for 

the contractor to challenge 

determinations that could increase 

potentially unreimbursed liabilities 

under the Disputes Clause.’’ 

Response 62: The Department 

believes that the Contract Disputes Act 

referenced in the Disputes Clause of 

DOE contracts provides the legal 

mechanism for contractors to challenge 

Department decisions regarding cost 

allowability. 

§ 719.41 How does the Department 

determine whether fees are reasonable? 

Comment 63: One commenter 

recommends amending paragraph (b) to 

read: ‘‘(b) Whether lower rates from 

other firms providing comparable 

services at comparable competency and 

experience levels were available.’’ 

Another commenter recommended 

deleting this section because it could be 

misconstrued and understood to mean 

that the contractor must always use the 

least expensive option. 

Response 63: The Department 

believes that in routine and 

unspecialized cases it is often 

unnecessary to engage law firms that 

charge higher than ordinary fees even 

where such law firms may be 

considered to have more or better 

experience in similar matters. The 

Department expects contractors to 

engage law firms that provide 

competent legal services at a good value. 

Therefore, a modified version of the 

suggested language is added to today’s 

final rule to make it clear that the 

government expects contractors to 

engage outside counsel who are 

appropriately competent and 

experienced and who offer competitive 

rates. 

§ 719.44 What categories of costs 

require advance approval? 

Comment 64: Several commenters 

requested that the Department clarify 

section 719.44 by stating that it only 


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applies to costs incurred by retained 

legal counsel. 

Response 64: The Department agrees 

that this section applies to certain costs 

incurred by retained counsel and not 

costs associated with in-house counsel. 

The Department has revised this section 

accordingly. 

Comment 65: One commenter 

suggested that contractors’ 

determinations regarding the 

reasonableness of outside counsel fee 

increases during the course of ongoing 

litigation action should be sufficient and 

recommended that requiring 

Department approval of such increases 

is unnecessary. 

Response 65: Because litigation often 

lasts for long periods of time, the 

Department believes that it is important 

for it to approve fee increases in order 

to maintain effective cost control. The 

Department does not believe that 

obtaining Department approval for a fee 

increase in the middle of an action is 

likely to be an impediment to the 

progress of the action because sufficient 

notice of a fee increase should be given 

by outside counsel before it becomes 

effective, thereby providing ample time 

for the contractor to obtain DOE 

approval. 

Comment 66: One commenter 

recommended that section 719.44(a)(1) 

be deleted, or in the alternative, the use 

of e-discovery vendors, commercially 

available software, and web-based 

review and production databases should 

be excluded from its purview. The 

commenter stated that the use of 

software analytics is standard industry 

practice and therefore the provision has 

outlived its usefulness. The commenter 

also objected to the language stating that 

the Department be given ‘‘dominion 

over any computers or any general 

application software.’’ The commenter 

expressed a concern that e-discovery 

vendors would object to the term and 

that it may violate the terms of software 

licenses. 

Response 66: The Department 

declines to accept the commenter’s 

proposals for section 719.44(a)(1). The 

regulation covers only computers, 

software, and databases purchased or 

created for specific matters. With 

respect to the commenter’s objection to 

the Department’s request for 

‘‘dominion’’ over computers or software, 

this section does not involve access to 

all of the information on contractor 

counsel’s computers, only the 

information related to the particular 

matters covered by the rule. 

Comment 67: One commenter 

suggests deleting the requirement for 

DOE approval for two or more attorneys 

to attend depositions, the use of law 

clerks, and the retention of expert 

witnesses. These approvals were 

described as unduly burdensome and 

not cost-effective because contractors 

can effectively manage such costs. 

Response 67: The Department 

believes that it is appropriate to require 

approval for these types of costs in order 

to maintain effective cost control. No 

change is required. 

Comment 68: One commenter 

suggests an increase of the $5,000 

threshold in subpart (a)(2) to $25,000 to 

reflect increases in costs of materials 

and non-attorney services over the last 

decade. 

Response 68: The Department has 

removed the requirement for 

preapproval of charges for materials or 

non-attorney services exceeding $5,000. 

Comment 69: One commenter 

suggested that any time the Department 

approves a fee increase for retained 

counsel, the approved increase should 

be deemed reasonable and allowable 

unless unallowable under some other 

applicable contract term or cost 

principle. 

Response 69: Approval by the 

Department of a fee increase is one 

factor in determining the reasonableness 

of legal costs that include such a fee. 

However, when determining whether 

legal costs are allowable, factors other 

than the fee amount that must be 

considered and determined to be 

reasonable. The Department declines to 

modify today’s final rule based upon the 

commenter’s suggestion. 

§ 719.45 Are there any special 

procedures or requirements regarding 

subcontractor and retrospective 

insurance carrier legal costs? 

Comment 70: Some commenters 

objected to the already-existing 

monitoring requirements applicable to 

legal costs incurred by subcontractors 

whose contracts provide for the 

reimbursement of legal costs. 

Response 70: Through these 

regulations, the Department seeks to 

achieve an appropriate balance of 

Department oversight, contractor 

oversight, and the flexibility to allow 

subcontractors to handle legal matters 

with an appropriate degree of 

discretion. The general requirement for 

contractors to monitor legal costs 

incurred by their cost-reimbursement 

subcontractors is not new, and the 

Department considers it necessary to 

retain this requirement in order to 

ensure that all costs reimbursed to the 

contractor are reasonable and allowable, 

including pass-through costs incurred 

by lower-tier contractors and service 

providers. 

Comment 71: Many commenters 

objected to the proposed requirements 

applicable to legal matters handled by 

retrospective insurance carriers. In the 

notice of proposed rulemaking, the 

Department proposed requirements 

applicable to all subcontractors as well 

as additional requirements applicable 

only to retrospective insurance carriers. 

The proposed rule would have required 

contractors to obtain from retrospective 

insurance carriers a Staffing and 

Resource Plan for all legal matters that 

are expected to reach or exceed 

$100,000 in cost, and engagement letters 

when insurance carriers retain the 

services of outside counsel for $25,000 

or more. Contractors would also have 

needed to obtain approval from 

Department Counsel before authorizing 

retrospective insurance carriers to make 

settlements in amounts of $25,000 or 

more. 

Many commenters expressed concern 

that these requirements would conflict 

with the existing cost and litigation 

controls and protocols used by 

retrospective insurance carriers and 

would lead to increases in premiums or 

possibly result in insurance carriers 

being unwilling to provide DOE 

contractors with retrospective insurance 

policies. The commenters noted that 

DOE has had a long-standing policy of 

encouraging the use of retrospective 

insurance carriers as a way to gain costeffective claims-handling expertise and 

that including these requirements 

would potentially undermine the 

Department’s objectives with respect to 

the use of retrospective insurance 

carriers. Some commenters also 

recommended that if DOE wishes to 

promulgate these additional 

requirements, DOE should directly 

negotiate with the insurance industry. 

Additionally, a number of commenters 

suggested that part 719’s new 

retrospective insurance requirements 

conflict with the Department’s policies 

on retrospective insurance articulated in 

DOE Order 350.1. Finally, one 

commenter objected to the section’s 

characterization of retrospective 

insurance carriers as ‘‘subcontractors.’’ 

The commenter questioned the 

implications of this characterization. 

Most comments urged the elimination 

of these new provisions, but some 

suggested in the alternative that DOE 

limit the application of the new 

requirements by excluding workers 

compensation and general liability 

policies from part 719. The comments 

also requested clarification on whether 

or not routine workers compensation 

matters handled by retrospective 

insurance carriers were meant to be 

excluded from the new requirements. 


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Response 71: The Department has 

fully considered the comments and has 

determined that many of the 

observations have merit. The 

Department recognizes the claimshandling expertise of retrospective 

insurance carriers and agrees that the 

proposed requirements could result in 

unnecessary redundancies in the 

insurance carriers’ existing litigation 

management procedures and potentially 

result in higher premiums. However, the 

Department does not agree that the 

section should be eliminated in its 

entirety or that the Department should 

directly contract for retrospective 

insurance services. The Department 

believes that it is necessary for both the 

contractor and the Department to 

monitor the progress of certain legal 

matters handled by subcontractors 

whose contracts provide for the 

reimbursement of legal costs. Therefore, 

in light of the Department’s objectives 

and the comments received, the 

Department has decided to modify the 

proposed rule as follows: 

(1) The regulation includes a 

requirement that contractors employ a 

monitoring system for all significant 

matters handled by subcontractors other 

than retrospective insurance carriers 

whose legal costs will be reimbursed by 

the Department to ensure that both the 

contractor and the Department are 

regularly apprised of developments in 

the progress of significant matters. 

(2) The regulation does not include a 

requirement that retrospective insurance 

carriers provide Staffing and Resource 

Plans or engagement letters. 

(3) A requirement to provide the 

Department with cost information 

associated with legal matters handled by 

retrospective insurance carriers and 

other subcontractors upon request was 

added to facilitate determining cost 

allowability as necessary. 

(4) Proposed section 719.46(g) 

discussing audits was deleted because it 

is redundant to the statement in section 

719.46 regarding the Government right 

to audit costs. 

(5) The requirement for contractors to 

provide the Department with cost and 

status updates for significant matters 

handled by subcontractors was retained 

in order to ensure that the Department 

is fully informed of the progress of 

significant matters and costs associated 

with such matters. However, this 

requirement no longer applies to 

significant matters handled by 

retrospective insurance carriers, except 

upon the written request by the 

Department. 

(6) The regulation requires 

subcontractors, including retrospective 

insurance carriers, to obtain permission 

to enter into settlement agreements that 

exceed certain thresholds. The 

Department has determined that the 

appropriate settlement threshold for 

retrospective insurance carriers is 

$100,000, and the appropriate threshold 

for other subcontractors is $25,000. 

The settlement threshold of $100,000 

for retrospective insurance carriers is 

appropriate because it is recognized that 

insurance carriers bring certain claimshandling expertise. Additionally, 

settlements or payments by 

retrospective insurance carriers that are 

$100,000 or more represent a very small 

portion of the total claims handled by 

retrospective insurance carriers under 

DOE contracts. Therefore, it is 

anticipated that the $100,000 settlement 

approval requirement threshold will be 

triggered only occasionally. 

The settlement approval threshold of 

$25,000 for subcontractors is 

appropriate because it is consistent with 

the requirement applicable to DOE 

prime contractors and because other 

subcontractors do not have the same 

expertise in handling claims or other 

legal matters that retrospective 

insurance carriers have. 

Finally, the Department notes that 

coverage exclusions set forth in section 

719.6 are applicable to the requirements 

of section 719.45. 

§ 719.50 What authority does 

Department counsel have? 

Comment 72: Two commenters noted 

that Department Counsel should be 

authorized Contracting Officer’s 

Representatives (COR). 

Response 72: The Department notes 

that the rule, as drafted, contemplates 

Department Counsel serving as 

authorized CORs for contracts subject to 

the part. 

§ 719.51 What information must be 

forwarded to the General Counsel’s 

office concerning contractor 

submissions to Department Counsel 

under this part? 

Comment 73: One commenter stated 

that the requirement in section 719.51 

that Department Counsel forward 

certain information to the General 

Counsel’s office is overly burdensome. 

Response 73: The Department 

disagrees. Moreover, the requirement 

relates to internal Department 

procedures, not contractor obligations. 

§ 719.52 What types of field actions 

must be coordinated with the General 

Counsel? 

Comment 74: One commenter 

recommended deletion of section 719.52 

to the extent that it requires General 

Counsel approval for any exception or 

deviation from the part. 

Response 74: The Department 

declines to follow this suggestion and 

today’s rule requires General Counsel 

approval of deviations or exceptions to 

the part to ensure a coordinated 

approach to contractor legal 

management across the DOE complex. 

Appendix A to Part 719—Guidance for 

Legal Resource Management 

Comment 75: One commenter 

recommended deletion of the language 

concerning alternative dispute 

resolution. The commenter suggested 

prescriptive guidance on ADR has no 

value because each matter is casespecific. 

Response 75: The new language 

merely encourages the contractor to 

consult with the Department’s Office of 

Conflict Prevention and Resolution to 

evaluate whether a matter may be 

effectively and efficiently resolved by 

alternative dispute resolution. No 

change is necessary to the Appendix 

language. 

Comment 76: One commenter 

objected to the limitation on copying 

charges to ten cents per page, because it 

has not been changed in the last 15 

years. 

Response 76: Today’s rule eliminates 

the ten cents per page example from 

Note 2 to the Appendix and inserts 

‘‘number of pages times cost per page’’ 

in its place. 

Title 48—Federal Acquisition 

Regulations System 

Part 970—DOE Management and 

Operating Contracts 

Comment 77: One commenter 

inquired about the intended effect of 

deleting former subparagraph (i) of 48 

CFR 970.5228–1. This paragraph stated 

that a contractor has the burden of proof 

to establish that costs are allowable and 

reasonable if, after an initial review of 

the facts, the Contracting Officer 

challenges a specific cost or informs the 

contractor that there is reason to believe 

that the cost results from willful 

misconduct, lack of good faith, or failure 

to exercise prudent business judgment 

by contractor managerial personnel. 

Response 77: The Department 

determined that this subparagraph is 

duplicative and unnecessary as FAR 

31.201–3, Determining reasonableness, 

provides that the contractor holds the 

burden of proof if a cost is challenged 

by the contracting officer or COR. 

Comment 78: One commenter asked 

what the Department intended when 

revising the direction in 48 CFR 

952.231–71 and 970.5228–1 previously 


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at paragraph (j)(1) and in the proposed 

rule at (g)(1) regarding contractor 

handling of litigation costs. Specifically, 

the commenter asked what the 

Department means by requiring such 

costs to be ‘‘excluded’’ and whether the 

revised language expressed the 

presumption that litigation costs are 

unallowable. 

Response 78: The Department 

appreciates the commenter’s concern 

and understands that the revised 

language, when read in conjunction 

with FAR 31.201–6, Accounting for 

unallowable costs, may be read as 

indicating a presumption of 

unallowability. No such presumption is 

intended and the Department revises 

today’s final rule to delete the term 

‘‘excluded’’ from 48 CFR 952.231–71 

and 970.5228–1 paragraph (j)(1). 

Paragraphs (g)(1) of the two clauses now 

mirror the language included at 48 CFR 

31.205–47. The paragraphs state in 

pertinent part: ‘‘All litigation costs, 

including counsel fees, judgments and 

settlements shall be segregated and 

accounted for by the contractor 

separately.’’ 

General Comments 

Comment 79: One commenter 

expressed concerns regarding the 

varying requirements that the contractor 

seek approvals and provide submissions 

to Department Counsel, the Contracting 

Officer, or both. The commenter 

suggests that the Department require 

Contracting Officers to designate 

Department Counsel as the single point 

of contact for part 719 requirements. 

Response 79: The Department 

acknowledges the varying requirements 

identified by the commenter and today’s 

final rule consistently identifies 

Department Counsel as the primary 

point of contractor contact for purposes 

of part 719. 

Comment 80: One commenter 

suggested that Management and 

Operating contractors should not be 

subject to part 719 and instead should 

have a separate regulation for litigation 

expenses. The commenter noted the 

differences between Management and 

Operating contractors and other cost 

reimbursement contractors as significant 

and deserving of separate regulations. 

Response 80: The Department does 

not believe that separate regulations for 

Management and Operations contractors 

and other cost reimbursement 

contractors are necessary or prudent. 

Part 719 provides an appropriate level 

of oversight for all contractors who are 

subject to its provisions. 

Comment 81: One commenter 

suggested that the Department rescind 

part 719 and convert the substance of 

the part to a Department-issued manual. 

The commenter recommends that such 

a manual contain best management 

practices for legal management and that 

DOE issue the manual as a guide to be 

applied with skill and judgment of 

Department Counsel and contractor 

counsel through a graded approach 

depending on the experience level of 

contractor counsel. The commenter 

suggests that the proposed manual coexist with a required Legal Management 

Plan developed and administered 

jointly by the contractor and the 

Department, compliance with which 

would be specifically required by a new 

contract clause. The commenter 

suggests that the Department should 

rely on 48 CFR 31.205–33 in 

determining cost allowability and 

consider allocating a portion of the 

contractor’s fee to the ‘‘management 

effectiveness’’ section of the contractor’s 

annual Performance Evaluation 

Management Plan, with fee deductions 

occurring for those contractors who do 

not manage their Legal Management 

Plan and/or litigation as provided in the 

Performance Evaluation Management 

Plan. 

Response 81: The Department 

disagrees with the commenter’s 

proposal that the regulation be 

rescinded and its substance converted to 

a manual of best practices. The 

Department believes that a uniform rule 

provides for consistency in oversight 

and control of contractor legal 

management and associated costs across 

the DOE complex. Of the possible 

approaches to contractor legal 

management, the Department believes 

that today’s rule as amended in 

response to public comments strikes an 

appropriate balance and provides the 

best approach. 

Comment 82: One commenter 

suggested that the regulations be 

applied only to contractor legal matters 

for which costs are expected to exceed 

$100,000. The commenter 

recommended that this will align 

treatment of contractor and Department 

retained counsel. Another commenter 

suggested that the Federal Acquisition 

Regulation Simplified Acquisition 

Threshold be used as a threshold under 

which legal matters could be handled 

with autonomy by the contractor. 

Response 82: These recommendations 

would effectively raise all thresholds for 

requirements under the part to a 

minimum of $100,000. As explained 

herein, the Department believes that 

lower thresholds for various 

requirements are necessary to facilitate 

control of legal costs. Additionally, the 

distinction between applicability of the 

part to contractor and Departmentretained counsel is justified because the 

Department has direct control of its 

costs in these matters as the represented 

client. 

Comment 83: One commenter 

suggested that the proposed rule would 

increase costs and improperly increases 

oversight and administrative burdens. 

This commenter recommended that 

DOE withdraw the proposed rule, restart 

the rulemaking process, and proceed 

with increased contractor engagement. 

Response 83: The Department has 

engaged contractors regarding the 

subject of today’s rule during the years 

spent administering the regulations that 

previously appeared at 10 CFR part 719. 

The Department has carefully 

considered the comments received in 

response to the Notice of Proposed 

Rulemaking and believes that today’s 

rule appropriately balances the benefits 

and burdens related to contractor legal 

management requirements. 

Comment 84: Multiple commenters 

expressed that the proposed rule is 

contrary to the Department’s general 

governance reform efforts and that the 

part increases the level of control over 

contractor legal management. One 

commenter stated that the proposed rule 

fails to acknowledge legal management 

innovations adopted by the contractor 

community since the part was first 

published in 2001 and is not properly 

innovative in its approach to the legal 

management landscape. Multiple 

commenters stated that the revisions to 

the part would increase burdens placed 

on the contractors and correspondingly 

increase costs. Multiple commenters 

stated that DOE and NNSA field counsel 

should have been more involved in the 

rulemaking process. Commenters also 

stated that the proposed rule goes 

beyond the recommendation of the 2009 

Office of Inspector General Report 

regarding contractor litigation costs that 

was offered by the Department as one 

impetus for today’s revision. 

Response 84: The Department 

believes that today’s rule provides for 

the correct amount of contractor and 

department-retained counsel oversight. 

The regulation reduces or eliminates 

several requirements contained in the 

previous version and adds only limited 

requirements necessary to ensure proper 

stewardship of taxpayer dollars. Certain 

requirements included in the regulation 

for the first time with today’s rule (e.g., 

Department approval of contractor 

settlements in section 719.33) are 

simply codifications of contractual 

requirements. Additionally, the 

Department has carefully considered the 

comments received in response to the 

proposed rule and has deleted a number 

of proposed requirements. For example, 


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the requirements in Subpart E regarding 

retrospective insurance carriers have 

been significantly reduced. Today’s 

final rule is the result of significant 

efforts to balance the needs of the 

Department with those of its 

contractors. Although the 2009 

Inspector General Report was one 

impetus for today’s final rule, it was not 

the only reason for the revision. The 

Department believes that the thorough 

review conducted by the Department 

and today’s revisions to the rule will 

result in better management of retained 

legal counsel and contractor legal costs. 

Comment 85: One commenter 

suggested broadly that the language 

regarding costs previously included in 

part 719 be restored. The commenter 

suggested that the primary purpose of 

the proposed revisions was to change 

the Department’s approach to 

allowability of legal costs, but the 

Department failed to state this purpose. 

Response 85: The Department 

disagrees with the commenter’s 

characterization of the revisions to part 

719. As discussed in the NOPR (76 FR 

8148), the primary purposes of the 

revisions are to amend the requirements 

related to management of contractor 

legal costs to clarify and streamline 

existing requirements, improve 

efficiency of contractor legal 

management, and facilitate oversight of 

the expenditure of taxpayer dollars. 

Comment 86: One commenter 

suggested revising the statement of 

authority underlying the part to include 

additional statutory citations. 

Response 86: The Department 

declines to revise the statement of 

authority for the part. The current 

statement is accurate and sufficient. 

III. Summary of Final Rule 

Subpart A, sections 719.1–719.8, 

includes general provisions, defines 

important terms, and addresses 

applicability of the part. Section 719.2 

defines terms used throughout the part. 

Today’s final rule no longer includes a 

definition of legal matter because 

respondents noted that it caused 

confusion about the applicability of the 

part. The definitions of litigation, 

retrospective insurance, significant 

matters, and Staffing and Resource Plan 

were also modified in the final rule 

based on commenter concerns. The 

definition of significant matter now 

includes language requiring the 

Department to notify a contractor in 

writing if the Department determines a 

matter is significant. 

Section 719.3 continues to cover all 

outside legal costs incurred under the 

Department’s Management and 

Operating (M&O) contracts, nonmanagement and operating cost 

reimbursement contracts exceeding 

$100,000,000, and non-Management and 

Operating contracts exceeding 

$100,000,000 that include cost 

reimbursable elements exceeding 

$10,000,000. Today’s final rule retains 

the proposed expansion of applicability 

of the part; however, it now also 

references section 719.5 to make it clear 

that the part does not apply to contracts 

under which the Department does not 

reimburse legal costs even if they 

otherwise meet the criteria described in 

section 719.3. Sections 719.3 and 719.4 

continue to apply this part to legal 

counsel retained directly by the 

Department where the legal costs over 

the life of the matter are expected to 

exceed $100,000. 

Sections 719.5 and 719.6 describe 

types of contracts and legal matters not 

covered by this part and no significant 

changes were made to the NOPR in 

today’s final rule. Procedures for 

exceptions or deviations from the part 

are set out in section 719.7. Today’s 

final rule provides that, where a 

deviation or exception is requested, the 

General Counsel will provide a written 

response. Section 719.8 states that the 

sharing of certain information between 

contractors and the Department does not 

waive any applicable privilege, and 

today’s final rule adds more potential 

bases for the privilege. 

Subpart B, sections 719.10–719.17, 

describes the requirements for 

submission of a Legal Management Plan, 

Staffing and Resource Plan, and annual 

legal budget. Sections 719.10–719.14 

concern the requirement for a Legal 

Management Plan. Today’s final rule 

clarifies that requests for revised Legal 

Management Plans shall include an 

explanation and that the deadline for 

revised Legal Management Plans may be 

extended. Today’s final rule removes 

two requirements from the Legal 

Management Plan under proposed 

section 719.12. The contractor no longer 

needs to provide a description of 

procedures for providing notification of 

the likely initiation of a legal matter to 

the Department or a description of 

procedures the contractor uses to ensure 

unallowable costs are not submitted for 

reimbursement. Section 719.14, 

concerning the adequacy of Legal 

Management Plans, is modified in 

today’s final rule to allow the contractor 

the option of filing a letter disputing the 

determination of a deficiency. 

Sections 719.15–719.17 explain the 

requirements associated with the 

Staffing and Resource Plan and budgets. 

Changes were made to 719.15 to limit 

the Staffing and Resource Plan 

requirement to litigation matters and to 

eliminate the need for contractors to 

obtain prior approval before incurring 

legal costs in excess of the budget. The 

contractor must still notify the 

Department before exceeding budget 

costs. 

Subpart C, sections 719.20–719.21, 

describes the requirements for 

engagement letters. Contractors must 

submit executed engagement letters to 

Department Counsel when legal services 

are expected to exceed $25,000, as 

described in section 719.20. Section 

719.21 describes the required elements 

of an engagement letter. 

Subpart D, sections 719.30–719.35, 

describes the requirements related to 

contractor initiation of offensive or 

defensive litigation, including appeals, 

and for contractor settlement of legal 

matters. Current part 719 addresses 

initiation and defense of litigation in the 

Appendix to the part. Today’s final rule 

deletes these portions of the Appendix 

and modifies and moves requirements 

regarding initiation and notification of 

litigation to subpart D. The regulations 

also modify and move requirements 

related to initiation and notification of 

litigation from the DEAR Insurance— 

Litigation and Claims clauses, 48 CFR 

952.231–71 and 48 CFR 970.5228–1, to 

part 719, subpart D, in order to clarify 

the requirements and streamline the 

regulations. In today’s final rule, the 

Department, of its own accord, decides 

to no longer assume the authority to 

prevent the contractor from initiating or 

defending litigation, including appeals, 

but the Department requires notice 

before litigation is initiated and 

maintains the right to authorize 

offensive litigation for which the 

contractor seeks reimbursement. 

Section 719.33 requires a contractor to 

obtain permission from Department 

Counsel to enter a settlement agreement 

requiring contractor payment of $25,000 

or more. Previously this requirement 

was included in contractor Legal 

Management Plans. Section 719.34 lists 

documentation that must be submitted 

with a contractor’s request to settle a 

matter, and 719.35 provides contractors 

with a deadline for submitting executed 

settlement agreements to the 

Department. 

Subpart E, sections 719.40–719.47, 

describes the policies and limitations 

for reimbursement of legal costs 

associated with retained legal counsel. 

Section 719.40 makes it clear that 

compliance with part 719 is a 

prerequisite for allowability of legal 

costs. Sections 719.42–719.44 describe 

categories of costs that are unallowable, 

require special treatment or need 

advance approval. 


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Section 719.45 describes special 

requirements related to subcontractors, 

including retrospective insurance 

carriers. These requirements are 

significantly modified from the Notice 

of Proposed Rulemaking. Retrospective 

insurance carriers must get prior 

approval from contractors if settlement 

payment is likely to reach $100,000 or 

more and subcontractors must get prior 

approval if settlement payment is likely 

to reach $25,000 or more. The contractor 

must obtain Department approval before 

authorizing payments to claimants 

exceeding the settlement thresholds. 

Subpart F, sections 719.50–719.52, 

discusses the roles and responsibilities 

of Department Counsel. Section 719.50 

describes the limitations on Department 

Counsel authority. Sections 719.51 and 

719.52 set forth parameters for 

Department Counsel coordination with 

Department of Energy and National 

Nuclear Security Administration Offices 

of General Counsel. 

The Appendix to part 719 discusses 

expectations related to alternative 

dispute resolution. The Appendix also 

makes clear that there is no 

presumption of reasonableness attached 

to incurrence of costs by a contractor 

and notes that the reasons underlying 

incurrence of a legal cost may affect its 

allowability. The Attachment to part 

719 includes a model bill format for 

contractor use. 

The Department is also making 

corresponding changes to the DEAR. 

The clause prescription at 48 CFR 

931.205–19 is revised to prescribe 

insertion of the clause at 48 CFR 

952.231–71 in (1) non-Management and 

Operating cost reimbursement contracts 

exceeding $100,000,000, and (2) nonManagement and Operating contracts 

exceeding $100,000,000 that include 

cost reimbursable elements exceeding 

$10,000,000. The clause prescription at 

48 CFR 970.2803–2 is revised to 

prescribe insertion of the clause at 48 

CFR 970.5228–1 in all Management and 

Operating contracts. Both prescriptions 

are revised to clarify that the prescribed 

clauses are to be inserted instead of the 

clause at 48 CFR 52.228–7. The 

Insurance—litigation and claims clauses 

at 48 CFR 952.231–71 and 48 CFR 

970.5228–1 are revised to reflect the 

above described consolidation of 

requirements related to initiation and 

notification of litigation in subpart D of 

part 719. Other changes to the clauses 

are included to simplify and clarify 

their requirements. Paragraph (a) of both 

DEAR clauses requires compliance with 

10 CFR part 719 ‘‘if applicable,’’ 

recognizing that the clause sometimes 

may be included in contracts which do 

not provide for the reimbursement of 

legal costs subject to 10 CFR part 719. 

The cost principle at 48 CFR 931.205– 

33 is revised to reflect the amended 

applicability of the DEAR Insurance— 

litigation and claims clauses and to 

clarify the requirement for contractor 

compliance with part 719 when the part 

is applicable to a particular contract. 

IV. Procedural Requirements 

A. Review Under Executive Orders 

12866 and 13563 

This regulatory action has been 

determined not to be a significant 

regulatory action under Executive Order 

12866, Regulatory Planning and Review, 

58 FR 51735, October 4, 1993. 

Accordingly, this rule is not subject to 

review under the Executive Order by the 

Office of Information and Regulatory 

Affairs (OIRA) within the Office of 

Management and Budget. DOE has also 

reviewed this rule pursuant to Executive 

Order 13563, issued on January 18, 2011 

(76 FR 3281 (Jan. 21, 2011)). Executive 

Order 13563 is supplemental to, and 

explicitly reaffirms, the principles, 

structures, and definitions governing 

regulatory review established in 

Executive Order 12866. To the extent 

permitted by law, agencies are required 

by Executive Order 13563 to: (1) 

Propose or adopt a regulation only upon 

a reasoned determination that its 

benefits justify its costs (recognizing 

that some benefits and costs are difficult 

to quantify); (2) tailor regulations to 

impose the least burden on society, 

consistent with obtaining regulatory 

objectives, taking into account, among 

other things, and to the extent 

practicable, the costs of cumulative 

regulations; (3) select, in choosing 

among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify 

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. 

DOE emphasizes as well that 

Executive Order 13563 requires agencies 

to use the best available techniques to 

quantify anticipated present and future 

benefits and costs as accurately as 

possible. In its guidance, the Office of 

Information and Regulatory Affairs has 

emphasized that such techniques may 

include identifying changing future 

compliance costs that might result from 

technological innovation or anticipated 

behavioral changes. DOE believes that 

today’s final rule is consistent with 

these principles, including the 

requirement that, to the extent 

permitted by law, agencies adopt a 

regulation only upon a reasoned 

determination that its benefits justify its 

costs and, in choosing among alternative 

regulatory approaches, those approaches 

maximize net benefits. 

B. Review Under Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, Section 3(a) of 

Executive Order 12988, Civil Justice 

Reform, 61 FR 4729, February 7, 1996, 

imposes on executive agencies the 

general duty to adhere to the following 

requirements: (1) Eliminate drafting 

errors and ambiguity; (2) write 

regulations to minimize litigation; (3) 

provide a clear legal standard for 

affected conduct rather than a general 

standard; and (4) promote simplification 

and burden reduction. With regard to 

the review required by Section 3(a), 

Section 3(b) of Executive Order 12988 

specifically requires that executive 

agencies make every reasonable effort to 

ensure that the regulation: (1) Clearly 

specifies the preemptive effect, if any; 

(2) clearly specifies any effect on 

existing Federal law or regulation; (3) 

provides a clear legal standard for 

affected conduct while promoting 

simplification and burden reduction; (4) 

specifies the retroactive effect, if any; (5) 

adequately defines key terms; and (6) 

addresses other important issues 

affecting clarity and general 

draftsmanship under any guidelines 

issued by the Attorney General. Section 

3(c) of Executive Order 12988 requires 

executive agencies to review regulations 

in light of applicable standards in 

section 3(a) and section 3(b) to 

determine whether they are met or that 

it is unreasonable to meet one or more 

of them. DOE has completed the 

required review and determined that, to 

the extent permitted by law, these 

regulations meet the relevant standards 

of Executive Order 12988. 

C. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. 601 et seq., requires preparation 

of an initial regulatory flexibility 

analysis for any rule that must be 

proposed for public comment and is 

likely to have a significant economic 

impact on a substantial number of small 

entities unless the agency certifies that 


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the rule will not have a significant 

economic impact on a substantial 

number of small entities. DOE certified 

at the time of the proposed rule that this 

rulemaking would not have a significant 

economic impact on a substantial 

number of small entities. No comments 

were received regarding that 

certification. As a result, DOE adopts as 

final that certification and, therefore, no 

regulatory flexibility analysis has been 

prepared. 

D. Review Under the Paperwork 

Reduction Act 

The final rule requires each covered 

contractor to submit a Legal 

Management Plan that describes the 

contractor’s practices for managing legal 

matters for which it procures the 

services of retained legal counsel. Under 

certain circumstances Staffing and 

Resource Plans, annual legal budgets, 

and engagement letters are required to 

be submitted to the Department. 

Documentation related to initiation of 

litigation and settlement of legal matters 

also may be required. This collection of 

information is required for the 

Department to determine whether to 

approve reimbursement of contractors’ 

litigation and other legal expenses. 

Under the Paperwork Reduction Act, 

44 U.S.C. 3501 et seq., an agency may 

not conduct or sponsor, and a person is 

not required to respond to, a collection 

of information unless the collection has 

been reviewed and assigned a control 

number by Office of Management and 

Budget (OMB). OMB approved the 

information collection associated with 

this final rule under OMB Control 

Number 1910–5115. 

E. Review Under the National 

Environmental Policy Act 

DOE has concluded that promulgation 

of this final rule falls into a class of 

actions that would not individually, or 

cumulatively, have significant impact 

on the human environment, as 

determined by DOE’s regulations, 10 

CFR part 1021, Subpart D, 

implementing the National 

Environmental Policy Act (NEPA) of 

1969, 42 U.S.C. 4321 et seq. 

Specifically, this rule is categorically 

excluded from NEPA review because 

today’s rule is strictly procedural 

(categorical exclusion A6). Therefore, 

this rule does not require an 

environmental impact statement or 

environmental assessment pursuant to 

NEPA. 

F. Review Under Executive Order 13132 

Executive Order 13132, 64 FR 43255, 

August 4, 1999, imposes certain 

requirements on agencies formulating 

and implementing policies or 

regulations that preempt state law or 

that have federalism implications. 

Agencies are required to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the states 

and carefully assess the necessity for 

such actions. DOE has examined today’s 

rule and has determined that it would 

not preempt state law and would not 

have a substantial direct effect on the 

states, on the relationship between the 

national government and the states, or 

on the distribution of power and 

responsibilities among the various 

levels of government. No further action 

is required by Executive Order 13132. 

G. Review Under the Unfunded 

Mandates Reform Act of 1995 

The Unfunded Mandates Reform Act 

of 1995, Public Law 104–4, requires a 

federal agency to perform a detailed 

assessment of costs and benefits of any 

rule imposing a federal mandate with 

costs to state, local or tribal 

governments, or to the private sector, of 

$100 million or more in any single year. 

This rule does not impose a federal 

mandate on state, local or tribal 

governments or on the private sector. 

H. Review Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999, Public Law 105–277, requires 

federal agencies to issue a Family 

Policymaking Assessment for any rule 

or policy that may affect family wellbeing. This rule would have no impact 

on family well-being. 

I. Review Under Executive Order 13211 

Executive Order 13211, Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use, 66 FR 28355, May 

22, 2001, requires federal agencies to 

prepare and submit to the Office of 

Information and Regulatory Affairs 

(OIRA), Office of Management and 

Budget (OMB), a Statement of Energy 

Effects for any significant energy action. 

A ‘‘significant energy action’’ is defined 

as any action by an agency that 

promulgates or is expected to lead to 

promulgation of a final rule, and that: 

(1) Is a significant regulatory action 

under Executive Order 12866, or any 

successor order; and (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy, or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any significant energy action, the agency 

must give a detailed statement of any 

adverse effects on energy supply, 

distribution, or use should the proposal 

be implemented, and of reasonable 

alternatives to the action and their 

expected benefits on energy supply, 

distribution, and use. 

This rule is not a significant energy 

action. Accordingly, DOE has not 

prepared a Statement of Energy Effects. 

J. Review Under the Treasury and 

General Government Appropriations 

Act, 2001 

The Treasury and General 

Government Appropriations Act, 2001, 

44 U.S.C. 3516, note, provides for 

agencies to review most disseminations 

of information to the public under 

implementing guidelines established by 

each agency pursuant to general 

guidelines issued by OMB. OMB’s 

guidelines were published at 67 FR 

8452, February 22, 2002, and DOE’s 

guidelines were published at 67 FR 

62446, October 7, 2002. DOE has 

reviewed today’s final rule under the 

OMB and DOE guidelines and has 

concluded that it is consistent with 

applicable policies in those guidelines. 

K. Congressional Notification 

As required by 5 U.S.C. 801, the 

Department will submit to Congress a 

report regarding the issuance of today’s 

final rule prior to the effective date set 

forth at the outset of this rule. The 

report will state that it has been 

determined that the rule is not a ‘‘major 

rule’’ as defined by 5 U.S.C. 804(2). 

List of Subjects 

10 CFR Part 719 

Government contracts, Legal services, 

Reporting and recordkeeping 

requirements. 

48 CFR Parts 931, 952, and 970 

Government contracts, Government 

procurement. 

Issued in Washington, DC, on April 25, 

2013. 

Daniel B. Poneman, 

Acting Secretary of Energy. 

For the reasons set out in the 

preamble, the Department of Energy 

(DOE) amends Chapter III of Title 10 

and Chapter IX of Title 48 of the Code 

of Federal Regulations as set forth 

below: 

TITLE 10—ENERGY 

Chapter III—Department of Energy 

■ 1. Part 719 is revised to read as 

follows: 


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PART 719—CONTRACTOR LEGAL 

MANAGEMENT REQUIREMENTS 

Sec. 

Subpart A—General Provisions 

719.1 What is the purpose of this part? 

719.2 What are the definitions of terms 

used in this part? 

719.3 What contracts are covered by this 

part? 

719.4 Are law firms that are retained by 

contract by the Department covered by 

this part? 

719.5 What contracts are not covered by 

this part? 

719.6 Are there any types of legal matters 

not included in the coverage of this part? 

719.7 Is there a procedure for exceptions or 

deviations from this part? 

719.8 Does the provision of protected 

documents from the contractor to the 

Department constitute a waiver of 

privilege? 

Subpart B—Legal Management Plan, 

Staffing and Resource Plan and Annual 

Legal Budget 

719.10 Who must submit a Legal 

Management Plan? 

719.11 When must a Legal Management 

Plan be submitted or revised? 

719.12 What information must be included 

in the Legal Management Plan? 

719.13 Who at the Department receives and 

reviews the Legal Management Plan? 

719.14 Will the Department notify the 

contractor concerning the adequacy or 

inadequacy of the submitted Legal 

Management Plan? 

719.15 What are the requirements for a 

Staffing and Resource Plan? 

719.16 When must the Staffing and 

Resource Plan be submitted? 

719.17 Are there any budgetary 

requirements? 

Subpart C—Engagement Letter 

719.20 When must an engagement letter be 

submitted to Department Counsel? 

719.21 What are the required elements of an 

engagement letter? 

Subpart D—Requests from Contractor 

Counsel to Initiate, Defend, and Settle Legal 

Matters 

719.30 In what circumstances may the 

contractor initiate litigation, including 

appeals from adverse decisions? 

719.31 When must the contractor initiate 

litigation against third parties? 

719.32 What must the contractor do when 

it receives notice that it is a party to 

litigation? 

719.33 In what circumstances must the 

contractor seek permission from the 

Department to enter a settlement 

agreement? 

719.34 What documentation must the 

contractor provide to Department 

Counsel when it seeks permission to 

enter a settlement agreement? 

719.35 When must the contractor provide a 

copy of an executed settlement 

agreement? 

Subpart E—Reimbursement of Costs 

Subject to this Part 

719.40 What effect do the regulations of this 

part have on cost allowability? 

719.41 How does the Department determine 

whether fees are reasonable? 

719.42 What categories of costs are 

unallowable? 

719.43 What is the treatment of travel costs? 

719.44 What categories of costs require 

advance approval? 

719.45 Are there any special procedures or 

requirements regarding subcontractor 

and retrospective insurance carrier legal 

costs? 

719.46 Are costs covered by this part 

subject to audit? 

719.47 What happens when more than one 

contractor is a party to a matter? 

Subpart F—Department Counsel 

719.50 What authority does Department 

Counsel have? 

719.51 What information must be 

forwarded to the General Counsel’s 

Office concerning contractor 

submissions to Department Counsel 

under this part? 

719.52 What types of field actions must be 

coordinated with the General Counsel? 

Appendix A to Part 719—Guidance for Legal 

Resource Management 

Authority: 42 U.S.C. 2201, 5814, 5815 and 

7101, et seq.; 50 U.S.C. 2401, et seq. 

Subpart A—General Provisions 

§ 719.1 What is the purpose of this part? 

This part facilitates management of 

retained legal counsel and contractor 

legal costs, including litigation and legal 

matter costs. It requires the contractor to 

develop a Legal Management Plan, to 

document the analysis used to decide 

when to utilize outside counsel, and to 

document what law firm or individual 

attorney will be engaged as outside 

counsel. This part also requires the 

contractor to document the terms of the 

engagement with retained legal counsel. 

Payment of Department-retained law 

firm invoices and reimbursement of 

contractor legal costs under covered 

contracts are subject to compliance with 

this part. 

§ 719.2 What are the definitions of terms 

used in this part? 

For purposes of this part: 

Alternative dispute resolution 

includes, but is not limited to, processes 

such as mediation, neutral evaluation, 

mini-trials and arbitration. 

Contractor means any person or entity 

with whom the Department contracts for 

the acquisition of goods or services. 

Covered contracts means those 

contracts described in § 719.3 of this 

part. 

Days means calendar days. 

Department means the Department of 

Energy (DOE), including the National 

Nuclear Security Administration 

(NNSA). 

Department Counsel means the 

attorney in the DOE or NNSA field 

office, or Headquarters office, 

designated as the contracting officer’s 

representative and point of contact for a 

contractor or for Department retained 

legal counsel, for purposes of this part. 

General Counsel means the DOE 

General Counsel for DOE legal matters 

and the NNSA General Counsel for 

NNSA legal matters. 

Legal costs means, but is not limited 

to, administrative expenses associated 

with the provision of legal services by 

retained legal counsel; the costs of legal 

services provided by retained legal 

counsel; the costs of the services, if the 

services are procured in connection 

with a legal matter, of accountants, 

consultants, experts or others retained 

by the contractor or by retained legal 

counsel; and any similar costs incurred 

by retained legal counsel or in 

connection with the services of retained 

legal counsel. 

Legal Management Plan means a 

document required by subpart B of this 

part describing the contractor’s practices 

for managing legal costs and legal 

matters for which it procures the 

services of retained legal counsel. 

Litigation means a proceeding arising 

under or related to a contract between 

the contractor and the Department to 

which the contractor is a party in a 

State, tribal, territorial, foreign, or 

federal court or before an administrative 

body or an arbitrator. 

Retained legal counsel means a 

licensed attorney working in the private 

sector who is retained by a contractor or 

the Department to provide legal 

services. 

Retrospective insurance means any 

insurance policy under which the 

premium is not fixed but is subject to 

adjustments to reimburse the insurance 

carrier for actual losses incurred or paid 

(e.g. claims, settlements, damages, and 

legal costs). Retrospective insurance 

includes service-type insurance policies 

as described in 48 CFR 928.370. 

Settlement agreement means a written 

agreement between a contractor and one 

or more parties pursuant to which one 

or more parties waives the right to 

pursue a legal claim in exchange for 

something of value. 

Significant matters means legal 

matters involving significant issues as 

determined by Department Counsel and 

identified to a contractor in writing, and 

any legal matters where the amount of 

any legal costs, over the life of the 

matter, is expected to exceed $100,000. 

Staffing and Resource Plan means a 

statement prepared in accordance with 


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subpart B of this part by retained legal 

counsel that describes the method for 

managing a Significant Matter in 

litigation. 

§ 719.3 What contracts are covered by this 

part? 

(a) Unless excluded under § 719.5, 

this part covers the following three 

categories of contracts: 

(1) All management and operating 

contracts; 

(2) Non-management and operating 

cost reimbursement contracts exceeding 

$100,000,000; and 

(3) Non-management and operating 

contracts exceeding $100,000,000 that 

include cost reimbursable elements 

exceeding $10,000,000 (e.g., contracts 

with both fixed-price and costreimbursable line items where the costreimbursable line items exceed 

$10,000,000 or time and materials 

contracts where the materials portions 

exceed $10,000,000). 

(b) This part also covers contracts 

otherwise not covered by paragraph (a) 

of this section but which contain a 

clause requiring compliance with this 

part. 

(c) This part also covers any contract 

the Department awards directly to 

retained legal counsel exceeding 

$100,000. 

§ 719.4 Are law firms that are retained by 

contract by the Department covered by this 

part? 

Legal counsel retained under fixed 

rate or other type of contract or other 

agreement by the Department to provide 

legal services must comply with the 

following if the legal costs over the life 

of the matter for which counsel has been 

retained are expected by the Department 

to exceed $100,000 and retained legal 

counsel are so notified by the 

Department: 

(a) Requirements related to Staffing 

and Resource Plans in subpart B of this 

part; 

(b) Cost guidelines in subpart E of this 

part; and 

(c) Engagement letter requirements in 

subpart C of this part if the retained 

legal counsel subcontracts legal work 

valued at $25,000 or more (e.g., a law 

firm retained by the Department 

subcontracts with another law firm to 

provide $26,000 in discovery-related 

legal work). 

§ 719.5 What contracts are not covered by 

this part? 

This part does not cover any contract 

under which the Department is not 

responsible for directly reimbursing the 

contractor for legal costs, such as fixed 

price contracts. 

§ 719.6 Are there any types of legal 

matters not included in the coverage of this 

part? 

Legal matters not covered by this part 

include: 

(a) Matters handled by counsel 

retained by an insurance carrier, except 

under retrospective insurance in 

accordance with § 719.45; 

(b) Routine intellectual property law 

support services; and 

(c) Routine workers and 

unemployment compensation matters. 

§ 719.7 Is there a procedure for exceptions 

or deviations from this part? 

(a) Requests for exceptions or 

deviations from this part must be made 

in writing to Department Counsel and 

approved by the General Counsel. If an 

alternate procedure is proposed for 

compliance with an individual 

requirement in this part, that procedure 

must be included in the written request 

by the contractor. The General Counsel 

or his/her delegee shall provide a 

written response to such requests; 

however the response shall not require 

a justification of the Department’s 

exercise of its discretion. 

(b) The General Counsel may 

authorize exceptions or deviations 

requested under paragraph (a) of this 

section. The General Counsel may also 

establish exceptions to this part based 

on current field office and contractor 

practices that satisfy the purpose of 

these requirements. 

(c) Exceptions to this part that are also 

a deviation from the Department of 

Energy Acquisition Regulation (DEAR) 

cost principles (see subpart D of this 

part) must be approved in accordance 

with applicable DOE procurement 

policy. See, e.g., DOE Acquisition Guide 

chapter 1.1, requiring approval by the 

Senior Procurement Executive of DOE 

or NNSA as applicable. In any event, the 

written request from a contractor for a 

deviation from a cost principle relating 

to this part must be submitted to the 

contracting officer, with a copy 

provided to Department Counsel. 

§ 719.8 Does the provision of protected 

documents from the contractor to the 

Department constitute a waiver of 

privilege? 

Contractors are required to provide 

detailed information about third-party 

claims and litigation to the Department. 

The Department and its contractors 

typically share common legal and 

strategic interests relating to pending or 

threatened litigation. The common 

interest between the parties is primarily 

rooted in the fact that the Department 

reimburses contractors for allowable 

costs incurred when litigation is 

threatened or initiated against 

contractors. However, other sources of 

the common interest between the 

Department and its contractors may 

include, but are not limited to, an 

interest in completion of the agency’s 

important mission work and an interest 

in safe and efficient operation of the 

Department’s facilities. To the extent 

documents associated with compliance 

with this part (e.g., Staffing and 

Resource Plans, invoices, engagement 

letters, settlement authority requests, 

and draft pleadings) are protected from 

disclosure to third parties because the 

items constitute attorney work product 

and/or involve attorney client 

communications, the contractor’s 

provision of these items to the 

Department does not constitute a waiver 

of privilege. As long as the Department 

and the contractor share a common 

interest in the outcome of legal matters, 

this mutual legal interest permits the 

parties to share privileged material 

without waiving any applicable 

privilege. 

Subpart B—Legal Management Plan, 

Staffing and Resource Plan and 

Annual Legal Budget 

§ 719.10. Who must submit a Legal 

Management Plan? 

Contractors who are parties to 

contracts identified under § 719.3(a) and 

(b) must submit a Legal Management 

Plan. 

§ 719.11 When must a Legal Management 

Plan be submitted or revised? 

(a) Contractors must submit a Legal 

Management Plan to Department 

Counsel within 60 days following award 

of the contract. The deadline for 

submitting the Legal Management Plan 

may be extended by Department 

Counsel. 

(b) Contractors must submit a revised 

Legal Management Plan upon request of 

Department Counsel within 60 days of 

receipt of the Department Counsel’s 

request. The request for a revised Legal 

Management Plan shall include an 

explanation of the request. The deadline 

for submitting the Legal Management 

Plan may be extended by the 

Department Counsel. 

§ 719.12 What information must be 

included in the Legal Management Plan? 

The Legal Management Plan must 

include the following items: 

(a) A description of the contractor’s 

in-house counsel resources at the time 

the Legal Management Plan is 

submitted, including areas of expertise 

and an explanation of the types of 

matters expected to be handled inhouse. 


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(b) A description of the legal matters 

that may necessitate engagement of 

retained legal counsel. 

(c) A description of the factors the 

contractor will consider in determining 

whether to handle a particular matter 

utilizing retained legal counsel. 

(d) An outline of the factors the 

contractor must consider in selecting 

retained legal counsel, including: 

(1) Cost; 

(2) Past performance of previously 

retained counsel; 

(3) Particular expertise in a specific 

area of the law; 

(4) Familiarity with the Department’s 

activity at the particular site and the 

prevalent issues associated with facility 

history and current operations; 

(5) Location of retained legal counsel 

relative to: 

(i) The site involved in the matter, 

(ii) Any forum in which the matter 

will be processed, and 

(iii) The location where a significant 

portion of the work will be performed; 

(6) Experience as an advocate in 

alternative dispute resolution 

procedures such as mediation; 

(7) Actual or potential conflicts of 

interest; and 

(8) The means and rate of 

compensation (e.g., hourly billing, fixed 

fee, blended fees). 

(e) A description of the system that 

the contractor will use to review each 

matter in litigation to determine 

whether and when alternative dispute 

resolution is appropriate. 

(f) A description of the role of inhouse counsel in cost management. 

(g) A description of the contractor’s 

process for review and approval of 

invoices for legal costs. 

(h) A description of the contractor’s 

strategy for interaction with, and 

supervision of, retained legal counsel. 

(i) A description of the procedures the 

contractor will employ in order to seek 

timely approval from Department 

Counsel to settle any legal matters as 

required by § 719.34 of this part; 

(j) A description of the contractor’s 

strategy for keeping Department Counsel 

apprised of all legal matters covered by 

this part (e.g., regularly scheduled 

meetings and written communications). 

§ 719.13 Who at the Department receives 

and reviews the Legal Management Plan? 

Contractors must submit a Legal 

Management Plan to Department 

Counsel. If the contractor has not been 

notified of the assignment of 

Department Counsel, the contractor 

must submit the Legal Management Plan 

to the contracting officer and the DOE 

Deputy General Counsel for Litigation 

and Enforcement or the NNSA Deputy 

General Counsel as appropriate. 

§ 719.14 Will the Department notify the 

contractor concerning the adequacy or 

inadequacy of the submitted Legal 

Management Plan? 

The Contracting Officer or 

Department Counsel will notify the 

contractor of any non-compliance or 

inadequate information relating to 

requirements in § 719.12 within 30 days 

of the contractor’s submission of the 

plan. The contractor must either correct 

matters identified within 30 days of 

notification or file a letter with the 

General Counsel disputing the 

determination of a deficiency. 

§ 719.15 What are the requirements for a 

Staffing and Resource Plan? 

(a) For significant matters in 

litigation, the contractor must require 

retained legal counsel to prepare a 

Staffing and Resource Plan. The 

contractor must then forward the 

Staffing and Resource Plan to 

Department Counsel. 

(b) Retained legal counsel retained 

directly by the Department subject to 

this part must prepare a Staffing and 

Resource Plan and forward it to 

Department Counsel. 

(c) A Staffing and Resource Plan must 

describe the following: 

(1) Major phases likely to be involved 

in the handling of the matter; 

(2) Timing and sequence of such 

phases; 

(3) Projected cost for each phase of the 

representation; and 

(4) Detailed description of resources 

that the retained legal counsel intends 

to devote to the representation. 

(d) A Staffing and Resource Plan must 

include a budget, broken down by 

phases, including at a minimum the 

following phases: 

(1) Matter assessment, development 

and administration; 

(2) Pretrial pleadings and motions; 

(3) Discovery; 

(4) Trial preparation and trial; and 

(5) Appeal. 

(e) The contractor must notify 

Department Counsel before incurring 

retained legal counsel costs in excess of 

costs listed in the budget developed 

pursuant to paragraph (d) of this 

section. 

§ 719.16 When must the Staffing and 

Resource Plan be submitted? 

(a) The contractor or retained legal 

counsel must submit the Staffing and 

Resource Plan to Department Counsel 

within 30 days after the filing of an 

answer or a dispositive motion in lieu 

of an answer, 30 days after a 

determination that the cost is expected 

to exceed $100,000, or 30 days after 

notification from Department Counsel 

that a matter is considered significant, 

whichever is sooner. The deadline for 

submitting the Staffing and Resource 

Plan may be extended by Department 

Counsel. 

(b) Department Counsel may state 

objections to the Staffing and Resource 

Plan within 30 days of receipt of a 

Staffing and Resource Plan. When an 

objection is stated, the contractor or 

retained legal counsel must either revise 

the Staffing and Resource Plan to satisfy 

the objection within 30 days or file a 

letter with the General Counsel 

disputing the objection. 

(c) Contractors must require retained 

legal counsel to update Staffing and 

Resource Plans annually or more 

frequently if there are significant 

changes in the matter. The contractor 

must submit the Staffing and Resource 

Plan updates to Department Counsel. 

Similarly, Department retained legal 

counsel must submit to Department 

Counsel annual Staffing and Resource 

Plan updates or more frequent updates 

if there are significant changes in the 

matter. 

§ 719.17 Are there any budgetary 

requirements? 

(a) Contractors required to submit a 

Legal Management Plan must also 

submit an annual legal budget to 

Department Counsel. 

(b) The annual legal budget must 

include cost projections for significant 

matters at a level of detail reflective of 

the types of billable activities and the 

stage of each such matter. 

(c) For informational purposes for 

both the contractor and Department 

Counsel, the contractor must submit a 

report to Department Counsel 

comparing its budgeted and actual legal 

costs within 30 days of the conclusion 

of the period covered by each annual 

legal budget. The Department 

recognizes, however, that there may be 

departures from the annual budget 

beyond the control of the contractor. 

Subpart C—Engagement Letter 

§ 719.20 When must an engagement letter 

be submitted to Department Counsel? 

Contractors must submit a copy of an 

executed engagement letter between it 

and retained legal counsel to 

Department Counsel when the retained 

counsel is expected to provide $25,000 

or more in legal services for a particular 

matter. A copy of the executed 

engagement letter must be submitted to 

Department Counsel upon execution. 

§ 719.21 What are the required elements of 

an engagement letter? 

(a) The engagement letter must 

require retained legal counsel to assist 


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the contractor in complying with this 

part and any supplemental guidance 

distributed under this part. 

(b) At a minimum, the engagement 

letter must include the following: 

(1) A process for review and 

documented approval of all billing by a 

contractor representative including the 

timing and scope of billing reviews. 

(2) A statement that provision of 

records to the Government is not 

intended to constitute a waiver of any 

applicable legal privilege, protection, or 

immunity with respect to disclosure of 

these records to third parties. An 

exemption for specific records may be 

obtained where contractors can 

demonstrate that a particular situation 

may provide grounds for a waiver. 

(3) A requirement that the contractor, 

the Department, and the Government 

Accountability Office have the right, 

upon request, and at reasonable times 

and locations to inspect, copy, and audit 

all records documenting billable fees 

and costs. 

(4) A statement that all records must 

be retained for a period of six (6) years 

and three (3) months after the final 

payment or after final case disposition, 

whichever is later. 

(5) Identification of all attorneys and 

staff who are assigned to the matter and 

the rate and basis of their compensation 

(i.e., hourly rates, fixed fees, 

contingency arrangement) and a process 

for obtaining approval of temporary 

adjustments in staffing levels or 

identified attorneys. 

(6) An initial assessment of the matter 

by retained legal counsel, along with a 

commitment to provide updates as 

necessary. 

(7) A description of billing 

procedures, including frequency of 

billing and billing statement format. 

(8) A statement setting forth an 

agreement that the retained legal 

counsel will prepare a Staffing and 

Resource Plan in accordance with the 

requirements of § 719.15. 

(9) A statement setting forth an 

agreement to consider alternative 

dispute resolution at the earliest 

possible stage and thereafter as 

appropriate where litigation is involved. 

(10) A statement setting forth an 

agreement that retained legal counsel 

must comply with the cost guidelines in 

subpart E of this part. 

(11) A statement setting forth an 

agreement that retained legal counsel 

will provide a certification concerning 

the costs submitted for reimbursement. 

The certification that must be included 

in bills or invoices submitted by 

retained legal counsel must appear as 

follows: ‘‘Under penalty of law, [the 

representative] acknowledges the 

expectation that the bill will be paid by 

the contractor and that the contractor 

will be reimbursed by the Federal 

Government through the U.S. 

Department of Energy, and, based on 

personal knowledge and a good faith 

belief, certifies that the bill is truthful 

and accurate, and that the services and 

charges set forth herein comply with the 

terms of engagement and the policies set 

forth in the Department of Energy’s 

regulation and guidance on contractor 

legal management requirements, and 

that the costs and charges set forth 

herein are appropriate and related to the 

representation of the client.’’ The 

certification must be signed and dated 

by a representative of the retained legal 

counsel. Invoices must contain all 

elements (e.g., date of service, 

description of service, name of attorney, 

etc.) set forth in the model bill format 

in Appendix A to this part. 

(12) A statement setting forth 

agreement to identify and address 

promptly any professional conflicts of 

interest. 

(c) There may be additional 

requirements for an engagement letter 

based on the needs of the contractor or 

the Departmental element requiring the 

services of the Department retained 

legal counsel. 

Subpart D—Requests From Contractor 

Counsel To Initiate, Defend, and Settle 

Legal Matters 

§ 719.30 In what circumstances may the 

contractor initiate litigation, including 

appeals from adverse decisions? 

(a) The contractor must provide 

written notice to Department Counsel 

prior to initiating litigation or appealing 

from adverse decisions. 

(b) The contractor may not initiate 

litigation for which it seeks 

reimbursement without prior written 

authorization of Department Counsel. 

(c) The following information must be 

provided to Department Counsel by the 

contractor prior to initiating litigation or 

appealing an adverse decision: 

(1) Identification of the proposed 

parties; 

(2) The nature of the proposed action; 

(3) Relief sought; 

(4) Venue; 

(5) Proposed representation and 

reason for selection; 

(6) An analysis of the issues and the 

likelihood of success, and any time 

limitation associated with the requested 

approval; 

(7) The estimated costs associated 

with the proposed action, including 

whether outside counsel has agreed to a 

contingent fee arrangement; 

(8) Whether, for any reason, the 

contractor will assume any part of the 

costs of the action; 

(9) A description of any attempts to 

resolve the issues that would be the 

subject of the litigation, such as through 

mediation or other means of alternative 

dispute resolution; and 

(10) A discussion regarding why 

initiating litigation would prove 

beneficial to the contractor and to the 

Department. 

§ 719.31 When must the contractor initiate 

litigation against third parties? 

The contractor must initiate litigation, 

upon the request of the contracting 

officer, against third parties including 

proceedings before administrative 

agencies, in connection with the 

contract. The contractor shall proceed 

with such litigation in good faith and as 

directed from time to time by 

Department Counsel. 

§ 719.32 What must the contractor do 

when it receives notice that it is a party to 

litigation? 

(a) The contractor shall give the 

contracting officer and Department 

Counsel immediate notice in writing of 

any legal proceeding, including any 

proceeding before an administrative 

agency and any claim which will be 

handled by a retrospective insurance 

carrier if costs (including Legal costs, 

settlements, claims paid, damages, etc.) 

are likely to be $100,000 or more, filed 

against the contractor arising out of the 

performance of the contract and shall 

provide a copy of all relevant filings and 

any other documents that may be 

requested by the contracting officer and/ 

or Department Counsel. The Department 

Counsel will direct the contractor as to: 

(1) Whether the contractor must 

authorize the Government to defend the 

action; 

(2) Whether the Government will take 

charge of the action; or 

(3) Whether the Government must 

receive an assignment of the contractor’s 

rights. 

(b) The contractor shall proceed with 

such litigation in good faith and as 

directed from time to time by the 

Department Counsel. 

(c) If the costs and expenses 

associated with the legal proceeding 

against the contractor are potentially 

allowable under the contract, the 

contractor shall: 

(1) Authorize Department 

representatives to collaborate with 

contractor in-house counsel or 

Department Counsel-approved outside 

counsel in settling or defending the 

legal proceeding; or counsel for any 

associated insurance carrier in settling 


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or defending the claim if retrospective 

insurance applies or the amount of 

liability claimed exceeds the amount of 

insurance coverage; and 

(2) Authorize Department 

representatives to settle the legal 

proceeding or to defend or represent the 

contractor in and/or to take charge of 

any litigation, if required by the 

Department, except where the liability 

is covered by bond or is insured by an 

insurance policy other than 

retrospective insurance. 

§ 719.33 In what circumstances must the 

contractor seek permission from the 

Department to enter a settlement 

agreement? 

The contractor must obtain 

permission from Department Counsel to 

enter a settlement agreement if the 

settlement agreement requires 

contractor payment of $25,000 or more. 

Obtaining this approval does not 

represent a determination that the 

settlement amount and/or the legal costs 

incurred in connection with the 

underlying legal matter will be 

determined to be allowable. 

§ 719.34 What documentation must the 

contractor provide to Department Counsel 

when it seeks permission to enter a 

settlement agreement? 

The contractor must provide a written 

statement to the Department Counsel 

that includes the following information, 

as applicable: 

(a) The amount of any proposed 

monetary settlement payment. 

(b) Titles and docket numbers 

associated with the case(s) for which the 

contractor is seeking approval to settle; 

(c) The procedural history of the 

case(s) or issue(s); 

(d) A narrative description of the legal 

claims or allegations at issue in the 

matter and any background information 

that explains events that precipitated 

the initiation of the matter; 

(e) A description of the history of the 

settlement discussions; 

(f) A description of the terms of the 

proposed settlement agreement or 

requested settlement authority and the 

rationale for the contractor entering into 

the proposed agreement; 

(g) If the proposed total monetary 

settlement amount would be allocated 

among multiple plaintiffs, a list of the 

plaintiffs and the amount of money each 

would receive pursuant to the proposed 

settlement agreement as well as an 

explanation as to why the settlement 

amount is different for any particular 

plaintiff, if appropriate; 

(h) A description as to why settlement 

of the matter is in the best interest of the 

Department; and 

(i) Any additional supporting 

documents requested by Department 

Counsel. 

§ 719.35 When must the contractor 

provide a copy of an executed settlement 

agreement? 

A contractor must provide a copy of 

an executed settlement agreement 

within seven (7) days of execution. 

Subpart E—Reimbursement of Costs 

Subject to This Part 

§ 719.40 What effect do the regulations of 

this part have on cost allowability? 

Contractor and retained legal counsel 

compliance with this part is a 

prerequisite for allowability of legal 

costs. However, compliance with this 

part does not guarantee that legal costs 

will be determined to be allowable. 

Only the contracting officer has the 

authority to determine allowability of 

costs in accordance with 48 CFR (FAR) 

part 31 and (DEAR) part 931 and all 

other applicable contract terms and 

conditions. 

§ 719.41 How does the Department 

determine whether fees are reasonable? 

In determining whether fees or rates 

charged by retained legal counsel are 

reasonable, the Department may 

consider among other things: 

(a) Whether the lowest reasonably 

achievable fees or rates (including any 

currently available or negotiable 

discounts) were obtained from retained 

legal counsel; 

(b) Whether lower rates from other 

firms providing comparable services, at 

appropriate competency and experience 

levels, were available; 

(c) Whether alternative rate structures 

such as flat, contingent, and other 

innovative proposals, were considered; 

and 

(d) The complexity of the legal matter 

and the expertise of the law firm in this 

area. 

§ 719.42 What categories of costs are 

unallowable? 

(a) Specific categories of unallowable 

costs are contained in the cost 

principles at 48 CFR (FAR) part 31 and 

48 CFR (DEAR) part 931 and 48 CFR 

970.31. See also 41 U.S.C. 4304. 

(b) Costs that are customarily or 

already included in billed hourly rates 

are not separately reimbursable. 

(c) Interest charges that a contractor 

incurs on any outstanding (unpaid) bills 

from retained legal counsel are not 

reimbursable. 

§ 719.43 What is the treatment of travel 

costs? 

(a) Travel and related expenses must 

at a minimum comply with the 

restrictions set forth in 48 CFR 31.205– 

46, or 48 CFR (DEAR) 970.3102–05–46, 

as appropriate, to be reimbursable. 

(b) Travel time may be allowed at a 

full hourly rate for the portion of time 

during which retained legal counsel 

performs legal work for which it was 

retained; any remaining travel time shall 

be reimbursed at 50 percent of the full 

hourly rate, except that in no event will 

travel time spent working for other 

clients be allowable. Also, for long 

distance travel that could be completed 

by various methods of transportation, 

e.g., car, train, or plane, costs charged by 

retained legal counsel or any agent of 

retained legal counsel will be 

considered reasonable only if the 

individuals charge no more travel time 

than it would take to utilize the fastest 

mode of transportation that is costeffective. For example, if retained legal 

counsel travels for 10 hours by train 

when a cost-effective flight that would 

take two hours to get to the same 

destination is available, the attorney 

may charge a maximum of two hours for 

the time spent traveling. 

§ 719.44 What categories of costs require 

advance approval? 

(a) To be considered for 

reimbursement, costs incurred by 

retained legal counsel for the following 

require advance written approval from 

Department Counsel or the submission 

of subsequent specific justification to 

Department Counsel when 

circumstances out of the contractor’s 

control make advance approval 

unobtainable: 

(1) Computers or general application 

software, or non-routine computerized 

databases, if they are specifically 

created for a particular matter. For costs 

associated with the creation and use of 

computerized databases, contractors and 

retained legal counsel must ensure that 

the creation and use of computerized 

databases is necessary and costeffective. Use of databases originally 

created by the Department or its 

contractors for other purposes, but that 

can be used to assist a contractor or 

retained legal counsel in connection 

with a particular matter, should be 

considered. Contractors and retained 

legal counsel must ensure that DOE is 

provided the discretion to obtain 

unlimited access to and dominion over 

any computers or general application 

software, or non-routine computerized 

databases specifically created for a 

particular matter; 

(2) Secretarial and support services, 

word processing, or temporary support 

personnel; 


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(3) Attendance by more than one 

attorney at a deposition, court hearing 

or interview; 

(4) Expert witnesses and consultants; 

(5) Trade publications, books, 

treatises, background materials, and 

other similar documents; 

(6) Professional or educational 

seminars and conferences; 

(7) Preparation of bills or time spent 

responding to questions about bills from 

either the Department or the contractor; 

(8) Food and beverages when the 

attorney or consultant is not on travel 

status and away from the home office; 

(9) Pro hac vice admissions; and 

(10) Time charged for law students’ or 

interns’ services. 

(b) Requests for fee increases by 

retained legal counsel, other than those 

under contract directly with the 

Department, must be sent in writing to 

the contractor, who will review the 

request for reasonableness. If the 

contractor determines the request is 

reasonable, the contractor must seek 

approval for the increase from 

Department Counsel before it authorizes 

any increase. Contractors should 

attempt to lock in rates for partners, 

associates and paralegals for at least a 

two year period. 

§ 719.45 Are there any special procedures 

or requirements regarding subcontractor 

and retrospective insurance carrier legal 

costs? 

(a) The contractor shall establish a 

monitoring system for significant 

matters in litigation which are handled 

by subcontractors other than 

retrospective insurance carriers whose 

contracts provide for the reimbursement 

of legal costs. The purpose of this 

monitoring system is to enable the 

contractor to be regularly informed of 

the progress of the Significant Matter, to 

monitor the associated costs and help 

ensure that they are reasonable, and to 

report on the progress of the Significant 

Matter and the associated costs to 

Department Counsel. 

(b) The contractor shall require 

retrospective insurance carriers and 

other subcontractors whose contracts 

provide for the reimbursement of legal 

costs to request prior permission from 

the contractor to enter into a settlement 

agreement with, or make any payments 

to, claimants or third-parties if: 

(1) In the case of a subcontractor other 

than a retrospective insurance carrier, 

the settlement or payment amount is 

likely to reach $25,000 or more; or 

(2) In the case of a retrospective 

insurance carrier, the settlement or 

payment amount is likely to reach 

$100,000 or more. 

(c) The contractor shall require the 

insurance carrier or other subcontractor 

to submit all documentation described 

in § 719.34 and to provide the contractor 

with a copy of the executed settlement 

agreement within seven days of 

execution, which the contractor will 

promptly forward to Department 

Counsel. The contractor shall not 

authorize the subcontractor to enter into 

a settlement agreement or make a 

payment to a claimant or third-party 

that is likely to reach or exceed the 

above-stated threshold amounts without 

first obtaining the approval of the 

Department Counsel. 

(d) Upon request from Department 

Counsel, the Contracting Officer, or 

other authorized representative of the 

Department, the contractor shall provide 

detailed cost information regarding 

particular legal matters handled by 

retrospective insurance carriers or other 

subcontractors whose contracts provide 

for the reimbursement of legal costs. 

(e) The contractor shall provide 

reviewed costs and status updates for all 

significant matters in litigation handled 

by subcontractors whose contracts 

provide for the reimbursement of legal 

costs in accordance with § 719.51. The 

contractor is not required to provide 

cost and status updates for matters 

handled by retrospective insurance 

carriers except upon the written request 

of the cognizant Contracting Officer or 

Department Counsel. 

§ 719.46 Are costs covered by this part 

subject to audit? 

All costs covered by this part are 

subject to audit by the Department, its 

designated representative, or the 

Government Accountability Office. See 

§ 719.21. 

§ 719.47 What happens when more than 

one contractor is a party to a matter? 

(a) If more than one contractor is a 

party in a particular matter and the 

issues involved are similar for all the 

contractors, a single legal counsel 

designated by the General Counsel must 

either represent all of the contractors or 

serve as lead counsel, when the rights 

of the contractors and the Government 

can be effectively represented by a 

single legal counsel, consistent with the 

standards for professional conduct 

applicable in the particular matter. 

Contractors may propose to the General 

Counsel their preference for the 

individual or law firm to perform as the 

lead counsel for a particular matter. 

(b) If a contractor, having been 

afforded an opportunity to present its 

views concerning joint or lead 

representation, does not acquiesce in 

the designation of one retained legal 

counsel to represent a number of 

contractors, or serve as lead counsel, 

then the legal costs of such contractor 

are not reimbursable by the Department, 

unless the contractor demonstrates that 

it was reasonable for the contractor to 

incur such expenses. 

Subpart F—Department Counsel 

§ 719.50 What authority does Department 

Counsel have? 

(a) Department Counsel will receive 

written delegated authority from the 

contracting officer to serve as the 

contracting officer’s representative for 

legal matters. 

(b) Actions by Department Counsel 

may not exceed the responsibilities and 

limitations as delegated by the 

contracting officer. Delegated 

contracting officer representative 

authority shall not be construed to 

include the authority to execute or 

modify the contract or resolve any 

contract dispute arising under the 

contract. Additional discussion of the 

authority and limitation of contracting 

officers can be found at 48 CFR 1.602– 

1, and contracting officer’s 

representatives at 48 CFR (DEAR) 

942.270–1. The clause, Technical 

Direction, 48 CFR (DEAR) 952.242–70, 

also discusses the responsibilities and 

authority of a contracting officer’s 

representative. 

§ 719.51 What information must be 

forwarded to the General Counsel’s Office 

concerning contractor submissions to 

Department Counsel under this part? 

Department Counsel must submit 

through the General Counsel reporting 

system, the reviewed costs and status 

updates for all matters involving 

retained counsel, including but not 

limited to contractor litigation. The 

reports are to be received by the 15th 

day of the month following the end of 

each quarter of the fiscal year. 

§ 719.52 What types of field actions must 

be coordinated with the General Counsel? 

(a) Requests from contractors for 

exceptions or deviations from this part 

must be submitted to the contracting 

officer and Department Counsel, and 

approved by the General Counsel or his/ 

her delegee. 

(b) Requests from contractors for 

approval to initiate or defend litigation, 

or to appeal from adverse decisions, 

where legal issues of first impression, 

sensitive issues, issues of national 

significance to the Department or of 

broad applicability to the Government 

that might adversely impact its 

operations are involved must be 

coordinated by Department Counsel 

with the General Counsel or his/her 

delegee. 


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(c) Department Counsel must inform 

the General Counsel of any Significant 

Matter, as defined in this part, and must 

coordinate any action involving a 

Significant Matter with the General 

Counsel, or his/her delegee, as directed 

by the General Counsel or his/her 

delegee. 

Appendix A to Part 719—Guidance for 

Legal Resource Management 

Management and Administration of Outside 

Legal Services 

1.0 Alternative Dispute Resolution 

2.0 Cost Allowability Issues 

2.1 Underlying Cause for Incurrence of 

Costs 

Attachment—Contractor Litigation and Legal 

Costs, Model Bill Format 

Management and Administration of Outside 

Legal Services 

This guidance is intended to assist 

contractors, contracting officers and retained 

legal counsel in managing the costs of 

outside legal services. 

1.0 Alternative Dispute Resolution 

Contractors are expected to evaluate all 

matters for appropriate alternative dispute 

resolution (ADR) at various stages of an issue 

in dispute, e.g., before a case is filed, during 

pre-discovery, after initial discovery and 

during pretrial. This evaluation should be 

done in coordination with the Department’s 

ADR liaison if one has been established or 

appointed or Department Counsel if an ADR 

liaison has not been appointed. Contractors, 

contractor counsel, and Department Counsel 

are also encouraged to consult with the 

Department’s Director of the Office of 

Conflict Prevention and Resolution. The 

Department anticipates that mediation will 

be the principal and most common method 

of alternative dispute resolution. Agreement 

to arbitrate should generally be consistent 

with the Administrative Dispute Resolution 

Act (incorporated in part at 5 U.S.C. 571, et 

seq.) and Department guidance issued under 

that Act. When a decision to arbitrate is 

made, a statement fixing the maximum award 

amount should be agreed to in advance by 

the participants. 

2.0 Cost Allowability Issues 

A determination of cost reasonableness 

depends on a variety of considerations and 

circumstances. 48 CFR 31.201–3 establishes 

that no presumption of reasonableness is 

attached to the incurrence of costs by a 

contractor. 

2.1 Underlying Cause for Incurrence of 

Costs 

While 10 CFR part 719 provides 

procedures associated with incurring and 

monitoring legal costs, the evaluation of the 

reason for the incurrence of the legal costs, 

e.g., liability, fault or avoidability, is a 

separate issue. The reason for the contractor 

incurring costs may affect the allowability of 

the contractor’s legal costs. In some cases, the 

final determination of allowability of legal 

costs cannot be made until a matter is fully 

resolved. In certain circumstances, contract 

and cost principle language may permit 

conditional reimbursement of costs pending 

the outcome of the legal matter. Whether the 

Department makes conditional 

reimbursements or withholds any payment 

pending the outcome, legal costs ultimately 

reimbursed by the Department must comply 

with the applicable cost principles, the terms 

of the contract, and part 719. 

Attachment—Contractor Litigation and 

Legal Costs, Model Bill Format 

1. Model Bill Format 

I—FOR FEES

Date of service Description of service Name or initials of attorney Approved rate Time charged Amount (rate 

× time) 

(See Note 1 to this table). 

II—FOR DISBURSEMENTS

Date Description of 

disbursement Amount 

(See Note 1 to this table). 

Note 1—Description of Service: All fees 

must be itemized and described in sufficient 

detail and specificity to reflect the purpose 

and nature of the work performed (e.g., 

subject matter researched or discussed; 

names of participants of calls/meetings; type 

of documents reviewed). 

Note 2—Description of Disbursement: 

Description should be in sufficient detail to 

determine that the disbursement expense was 

in accordance with all applicable Department 

policies on reimbursement of contractor legal 

costs and the terms of engagement between 

the contractor and the retained legal counsel. 

The date the expense was incurred or 

disbursed should be listed rather than the 

date the expense was processed. The 

following should be itemized: copy charge 

(i.e., number of pages times the price per 

page); fax charges (date, phone number and 

actual amount); overnight delivery (date and 

amount); electronic research (date and 

amount); extraordinary postage (e.g., bulk or 

certified mail); court reporters; expert 

witness fees; filing fees; outside copying or 

binding charges; temporary help (assuming 

prior approval). 

Note 3—Receipts: Receipts for all expenses 

equal to or above $75 must be attached. 

TITLE 48—FEDERAL ACQUISITION 

REGULATIONS SYSTEM 

Chapter 9—Department of Energy 

PART 931—CONTRACT COST 

PRINCIPLES AND PROCEDURES 

■ 2. The authority citation for part 931 

continues to read as follows: 

Authority: 42 U.S.C. 7101, et seq.; 50 

U.S.C. 2401, et seq. 

■ 3. Section 931.205–19 is revised to 

read as follows: 

931.205–19 Insurance and 

indemnification. 

(f) The contracting officer shall insert 

the clause at 952.231–71, Insurancelitigation and claims, instead of the 

clause at 48 CFR 52.228–7, in 

(1) Non-management and operating 

cost reimbursement contracts exceeding 

$100,000,000, and 

(2) Non-management and operating 

contracts exceeding $100,000,000 that 

include cost reimbursable elements 

exceeding $10,000,000 (e.g. contracts 

with both fixed-price and costreimbursable line items where the costreimbursable line items exceed 

$10,000,000 or time and materials 

contracts where the materials portions 

exceed $10,000,000. 

■ 4. Section 931.205–33 is revised to 

read as follows: 

931.205–33 Professional and consultant 

service costs. 

(g) If the clause at 48 CFR 952.231– 

71 or the clause at 48 CFR 970.5228–1 

is included in the contract, or the 

contract is a non-management and 

operating contract exceeding 

$100,000,000 that includes cost 

reimbursable elements exceeding 

$10,000,000 (for example, contracts 

with both fixed-price and costreimbursable line items where the costreimbursable line items exceed 

$10,000,000 or time and materials 

contracts where the materials portions 

exceed $10,000,000), litigation and 

other legal costs are only allowable if 

both: incurred in accordance with 10 

CFR part 719, Contractor Legal 

Management Requirements; and not 

otherwise made unallowable by law, 

regulation, or the terms of the contract. 

PART 952—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 5. The authority citation for part 952 

continues to read as follows: 

Authority: 42 U.S.C. 7101 et seq. and 50 

U.S.C. 2401 et seq. 


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■ 6. Section 952.231–71 is revised to 

read as follows: 

952.231–71 Insurance-litigation and 

claims. 

As prescribed in 931.205–19(f), insert 

the following clause in applicable nonmanagement and operating contracts: 

Insurance—Litigation and Claims (JUL 

2013) 

(a) The contractor must comply with 10 

CFR part 719, contractor Legal Management 

Requirements, if applicable. 

(b)(1) Except as provided in paragraph 

(b)(2) of this clause, the contractor shall 

procure and maintain such bonds and 

insurance as required by law or approved in 

writing by the Contracting Officer. 

(2) The contractor may, with the approval 

of the Contracting Officer, maintain a selfinsurance program in accordance with FAR 

28.308; provided that, with respect to 

workers’ compensation, the contractor is 

qualified pursuant to statutory authority. 

(3) All bonds and insurance required by 

this clause shall be in a form and amount and 

for those periods as the Contracting Officer 

may require or approve and with sureties and 

insurers approved by the Contracting Officer. 

(c) The contractor agrees to submit for the 

Contracting Officer’s approval, to the extent 

and in the manner required by the 

Contracting Officer, any other bonds and 

insurance that are maintained by the 

contractor in connection with the 

performance of this contract and for which 

the contractor seeks reimbursement. If an 

insurance cost (whether a premium for 

commercial insurance or related to selfinsurance) includes a portion covering costs 

made unallowable elsewhere in the contract, 

and the share of the cost for coverage for the 

unallowable cost is determinable, the portion 

of the cost that is otherwise an allowable cost 

under this contract is reimbursable to the 

extent determined by the Contracting Officer. 

(d) Except as provided in paragraph (f) of 

this clause, or specifically disallowed 

elsewhere in this contract, the contractor 

shall be reimbursed— 

(1) For that portion of the reasonable cost 

of bonds and insurance allocable to this 

contract required in accordance with contract 

terms or approved under this clause, and 

(2) For liabilities (and reasonable expenses 

incidental to such liabilities, including 

litigation costs) to third persons not 

compensated by insurance without regard to 

the limitation of cost or limitation of funds 

clause of this contract. 

(e) The Government’s liability under 

paragraph (d) of this clause is subject to the 

availability of appropriated funds. Nothing in 

this contract shall be construed as implying 

that the Congress will, at a later date, 

appropriate funds sufficient to meet 

deficiencies. 

(f)(1) Notwithstanding any other provision 

of this contract, the contractor shall not be 

reimbursed for liabilities to third parties, 

including contractor employees, and directly 

associated costs which may include but are 

not limited to litigation costs, counsel fees, 

judgment and settlements— 

(i) Which are otherwise unallowable by 

law or the provisions of this contract, 

including the cost reimbursement limitations 

contained in 48 CFR part 31, as 

supplemented by 48 CFR 970.31; 

(ii) For which the contractor has failed to 

insure or to maintain insurance as required 

by law, this contract, or by the written 

direction of the Contracting Officer; or 

(iii) Which were caused by contractor 

managerial personnel’s— 

(A) Willful misconduct; 

(B) Lack of good faith; or 

(C) Failure to exercise prudent business 

judgment, which means failure to act in the 

same manner as a prudent person in the 

conduct of competitive business; or, in the 

case of a non-profit educational institution, 

failure to act in the manner that a prudent 

person would under the circumstances 

prevailing at the time the decision to incur 

the cost is made. 

(2) The term ‘‘contractor’s managerial 

personnel’’ is defined in the Property clause 

in this contract. 

(g)(1) All litigation costs, including counsel 

fees, judgments and settlements shall be 

segregated and accounted for by the 

contractor separately. If the Contracting 

Officer provisionally disallows such costs, 

then the contractor may not use funds 

advanced by DOE under the contract to 

finance the litigation. 

(2) Punitive damages are not allowable 

unless the act or failure to act which gave rise 

to the liability resulted from compliance with 

specific terms and conditions of the contract 

or written instructions from the Contracting 

Officer. 

(3) The portion of the cost of insurance 

obtained by the contractor that is allocable to 

coverage of liabilities referred to in paragraph 

(f) of this clause is not allowable. 

(h) The contractor may at its own expense 

and not as an allowable cost procure for its 

own protection insurance to compensate the 

contractor for any unallowable or nonreimbursable costs incurred in connection 

with contract performance. 

(End of clause) 

PART 970—DOE MANAGEMENT AND 

OPERATING CONTRACTS 

■ 7. The authority citation for part 970 

continues to read as follows: 

Authority: 42 U.S.C. 2201: 2282a: 2282b: 

2282c: 42 U.S.C. 7101 et seq.: 50 U.S.C. 2401, 

et seq. 

■ 8. Section 970.2803–2 is revised to 

read as follows: 

970.2803–2 Contract clause. 

The contracting officer shall insert the 

clause at 970.5228–1, Insurance— 

Litigation and Claims, instead of the 

clause at 48 CFR 52.228–7, in all 

management and operating contracts. 

Paragraphs (f)(3)(C) and (g)(2) of that 

clause apply to a nonprofit contractor 

only to the extent specifically provided 

in the individual contract. 

■ 9. Section 970.5228–1 is revised to 

read as follows: 

970.5228–1 Insurance—litigation and 

claims. 

As prescribed in 970.2803–2, insert 

the following clause: 

Insurance—Litigation and Claims (JUL 

2013) 

(a) The contractor must comply with 10 

CFR part 719, Contractor Legal Management 

Requirements, if applicable. 

(b)(1) Except as provided in paragraph 

(b)(2) of this clause, the contractor shall 

procure and maintain such bonds and 

insurance as required by law or approved in 

writing by the Contracting Officer. 

(2) The contractor may, with the approval 

of the Contracting Officer, maintain a selfinsurance program in accordance with FAR 

28.308; provided that, with respect to 

workers’ compensation, the contractor is 

qualified pursuant to statutory authority. 

(3) All bonds and insurance required by 

this clause shall be in a form and amount and 

for those periods as the Contracting Officer 

may require or approve and with sureties and 

insurers approved by the Contracting Officer. 

(c) The contractor agrees to submit for the 

Contracting Officer’s approval, to the extent 

and in the manner required by the 

Contracting Officer, any other bonds and 

insurance that are maintained by the 

contractor in connection with the 

performance of this contract and for which 

the contractor seeks reimbursement. If an 

insurance cost (whether a premium for 

commercial insurance or related to selfinsurance) includes a portion covering costs 

made unallowable elsewhere in the contract, 

and the share of the cost for coverage for the 

unallowable cost is determinable, the portion 

of the cost that is otherwise an allowable cost 

under this contract is reimbursable to the 

extent determined by the Contracting Officer. 

(d) Except as provided in paragraph (f) of 

this clause, or specifically disallowed 

elsewhere in this contract, the contractor 

shall be reimbursed— 

(1) For that portion of the reasonable cost 

of bonds and insurance allocable to this 

contract required in accordance with contract 

terms or approved under this clause, and 

(2) For liabilities (and reasonable expenses 

incidental to such liabilities, including 

litigation costs) to third persons not 

compensated by insurance without regard to 

the clause of this contract entitled 

‘‘Obligation of Funds.’’ 

(e) The Government’s liability under 

paragraph (d) of this clause is subject to the 

availability of appropriated funds. Nothing in 

this contract shall be construed as implying 

that the Congress will, at a later date, 

appropriate funds sufficient to meet 

deficiencies. 

(f)(1) Notwithstanding any other provision 

of this contract, the contractor shall not be 

reimbursed for liabilities to third parties, 

including contractor employees, and directly 

associated costs which may include but are 

not limited to litigation costs, counsel fees, 

judgments and settlements— 

(i) Which are otherwise unallowable by 

law or the provisions of this contract, 


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25818 Federal Register / Vol. 78, No. 86 / Friday, May 3, 2013 / Rules and Regulations 

1Public Law 111–24, 123 Stat. 1734 (2009). 

including the cost reimbursement limitations 

contained in 48 CFR part 31, as 

supplemented by 48 CFR 970.31; 

(ii) For which the contractor has failed to 

insure or to maintain insurance as required 

by law, this contract, or by the written 

direction of the Contracting Officer; or 

(iii) Which were caused by contractor 

managerial personnel’s— 

(A) Willful misconduct; 

(B) Lack of good faith; or 

(C) Failure to exercise prudent business 

judgment, which means failure to act in the 

same manner as a prudent person in the 

conduct of competitive business; or, in the 

case of a non-profit educational institution, 

failure to act in the manner that a prudent 

person would under the circumstances 

prevailing at the time the decision to incur 

the cost is made. 

(2) The term ‘‘contractor’s managerial 

personnel’’ is defined in the Property clause 

in this contract. 

(g)(1) All litigation costs, including counsel 

fees, judgments and settlements shall be 

segregated and accounted for by the 

contractor separately. If the Contracting 

Officer provisionally disallows such costs, 

then the contractor may not use funds 

advanced by DOE under the contract to 

finance the litigation. 

(2) Punitive damages are not allowable 

unless the act or failure to act which gave rise 

to the liability resulted from compliance with 

specific terms and conditions of the contract 

or written instructions from the Contracting 

Officer. 

(3) The portion of the cost of insurance 

obtained by the contractor that is allocable to 

coverage of liabilities referred to in paragraph 

(f) of this clause is not allowable. 

(h) The contractor may at its own expense 

and not as an allowable cost procure for its 

own protection insurance to compensate the 

contractor for any unallowable or nonreimbursable costs incurred in connection 

with contract performance. 

(End of clause) 

[FR Doc. 2013–10485 Filed 5–2–13; 8:45 am] 

BILLING CODE 6450–01–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1026 

[Docket No. CFPB–2012–0039] 

RIN 3170–AA28 

Truth in Lending (Regulation Z) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Final rule; official 

interpretations. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) issues this 

final rule to amend Regulation Z, which 

implements the Truth in Lending Act 

(TILA), and the official interpretations 

to the regulation. Regulation Z generally 

prohibits a card issuer from opening a 

credit card account for a consumer, or 

increasing the credit limit applicable to 

a credit card account, unless the card 

issuer considers the consumer’s ability 

to make the required payments under 

the terms of such account. Regulation Z 

currently requires that issuers consider 

the consumer’s independent ability to 

pay, regardless of the consumer’s age; in 

contrast, TILA expressly requires 

consideration of an independent ability 

to pay only for applicants who are 

under the age of 21. The final rule 

amends Regulation Z to remove the 

requirement that issuers consider the 

consumer’s independent ability to pay 

for applicants who are 21 or older, and 

permits issuers to consider income and 

assets to which such consumers have a 

reasonable expectation of access. 

DATES: The rule is effective on May 3, 

2013. Compliance with the rule is 

required by November 4, 2013. Card 

issuers may, at their option, comply 

with the final rule prior to this date. 

FOR FURTHER INFORMATION CONTACT: 

Krista P. Ayoub and Andrea Pruitt 

Edmonds, Senior Counsels, Office of 

Regulations, Bureau of Consumer 

Financial Protection, 1700 G Street NW., 

Washington, DC 20552, at (202) 435– 

7000. 

SUPPLEMENTARY INFORMATION: 

I. Summary of the Final Rule 

The Credit Card Accountability 

Responsibility and Disclosure Act 

(Credit Card Act) was enacted in 2009 

as an amendment to the Truth in 

Lending Act (TILA) to address concerns 

that certain practices in the credit card 

industry were not transparent or fair to 

consumers. As amended, TILA section 

150 generally prohibits a card issuer 

from opening a credit card account or 

increasing a line of credit for any 

consumer unless it considers the 

consumer’s ability to make the required 

payments under the terms of the 

account. TILA section 127(c)(8) 

establishes special requirements for 

consumers under 21 and, among other 

things, prohibits a card issuer from 

extending credit to younger consumers 

unless the consumer’s written 

application is cosigned by a person 21 

or older with the means to make the 

required payments, or the card issuer 

has financial information that indicates 

the consumer’s independent ability to 

make the required payments under the 

terms of the account. The statutory 

requirements in TILA sections 150 and 

127(c)(8) are implemented in section 

1026.51(a) and (b) of Regulation Z, 

respectively. Notwithstanding TILA’s 

different ability-to-pay standards for 

consumers based on age, Regulation Z 

currently applies the independent 

ability-to-pay standard to all consumers, 

regardless of age. 

The Bureau of Consumer Financial 

Protection (Bureau) is issuing this final 

rule to amend § 1026.51 and the official 

interpretations to the regulation to 

address concerns that, in light of the 

statutory framework established by 

TILA sections 150 and 127(c)(8), current 

§ 1026.51(a) may be unduly limiting the 

ability of certain individuals 21 or older, 

including spouses or partners who do 

not work outside the home, to obtain 

credit. The final rule takes effect on the 

date of publication in the Federal 

Register and all covered persons must 

come into compliance with the final 

rule no later than six months from the 

effective date, although covered persons 

may come into compliance before that 

date. 

The final rule has four main elements. 

First, the final rule generally removes 

references to an ‘‘independent’’ abilityto-pay standard from § 1026.51(a)(1) and 

associated commentary. As a result, 

card issuers are no longer required to 

consider whether consumers age 21 or 

older have an independent ability to 

pay; instead, card issuers are now 

required by Regulation Z to consider the 

consumer’s ability to pay. Second, in 

determining a consumer’s ability to pay, 

the final rule permits issuers to consider 

income or assets to which an applicant 

or accountholder who is 21 or older— 

and thus subject to § 1026.51(a) rather 

than § 1026.51(b) b has a reasonable 

expectation of access. The final rule 

clarifies by examples in the commentary 

those circumstances in which the 

expectation of access is deemed to be 

reasonable or unreasonable. Third, the 

final rule continues to require in 

§ 1026.51(b)(1)(i) that consumers under 

the age of 21 without a cosigner or 

similar party who is 21 years or older 

have an independent ability to pay, 

consistent with TILA section 127(c)(8). 

Finally, the final rule clarifies that 

application of the independent abilityto-pay standard to consumers under 21, 

consistent with Regulation Z, does not 

violate the Regulation B prohibition 

against age-based discrimination. 

II. Background 

The Credit Card Accountability 

Responsibility and Disclosure Act of 

2009 (Credit Card Act) was signed into 

law on May 22, 2009.1 The Credit Card 

Act primarily amended the Truth in 

Lending Act (TILA) and instituted new 

substantive and disclosure requirements 

to establish fair and transparent 


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