[Federal Register Volume 65, Number 207 (Wednesday, October 25, 2000)]
[Proposed Rules]
[Pages 63809-63817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-26995]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 65, No. 207 / Wednesday, October 25, 2000 / 
Proposed Rules

[[Page 63809]]



DEPARTMENT OF ENERGY

48 CFR Parts 928, 944, 952 and 970

10 CFR Part 719

RIN 1990-AA27


Contractor Legal Management Requirements; Acquisition Regulations

AGENCY: Department of Energy.

ACTION: Notice of proposed rulemaking and opportunity for public 
comment.

-----------------------------------------------------------------------

SUMMARY: The Department of Energy (Department) is proposing to 
establish new regulations covering contractor legal management 
requirements. Conforming amendments are also proposed to the Department 
of Energy Acquisition Regulation (DEAR). The proposed regulation will 
cover legal costs to be reimbursed by the Department to its facility 
management contractors with contracts exceeding $10,000,000. An 
appendix to the regulations provides additional guidance to 
contractors.

DATES: Written comments must be received on or before the close of 
business November 24, 2000.

ADDRESSES: Comments (3 copies) should be addressed to: Laura Fullerton, 
GC-61, U.S. Department of Energy, Office of Procurement and Assistance 
Management, 1000 Independence Avenue, SW, Washington, DC 20585.

FOR FURTHER INFORMATION CONTACT: Laura Fullerton at (202) 586-3420 
(<a href="/cdn-cgi/l/email-protection#763a170304175830031a1a1304021918361e075812191358111900"><span class="__cf_email__" data-cfemail="86cae7f3f4e7a8c0f3eaeae3f4f2e9e8c6eef7a8e2e9e3a8e1e9f0">[email protected]</span></a>) or Anne Broker at (202) 586-5060 
(<a href="/cdn-cgi/l/email-protection#b9f8d7d7dc97fbcbd6d2dccbf9d1c897ddd6dc97ded6cf"><span class="__cf_email__" data-cfemail="793817171c573b0b16121c0b391108571d161c571e160f">[email protected]</span></a>).

SUPPLEMENTARY INFORMATION

I. Background.
II. Discussion of Rule Provisions.
III. Public Comment.
IV. Procedural Requirements.
    A. Review Under Executive Order 12866.
    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 of 1999.

I. Background

    The cost principles and contract clauses in the Department's 
contracts generally make legal costs, including the cost of litigation, 
allowable if reasonable and incurred in accordance with the applicable 
cost principles and contract clauses. Consequently, the Department has 
an ongoing obligation to monitor, supervise, and control the legal 
costs that it reimburses.
    The Department has engaged contractors in a public dialogue aimed 
at controlling the increasing legal costs reimbursed by the Department. 
On August 31, 1994, the Department published an interim Acquisition 
Letter as an interim policy in the Federal Register (59 FR 44981). The 
interim Acquisition Letter established the Department's policy 
regarding the terms of engagement that are a condition of any 
authorization to a current or former management and operating (M&O) 
contractor to engage a law firm for purposes of litigation. The interim 
Acquisition Letter, was finalized as a Policy Statement on April 3, 
1996 (61 FR 14763).
    The Department also developed, and distributed to field counsel, 
Litigation Management Procedures, as a contract reform action item on 
March 23, 1994. The Litigation Management Procedures and the Final 
Policy Statement have been referenced in, and attached to, the 
Department's management and operating contracts executed since then. 
This rulemaking action has its basis in those two documents.
    This proposed rulemaking is intended to create a new Part 719, in 
Chapter 10 of the Code of Federal Regulations, to establish regulations 
to monitor and control legal costs and to provide guidance to aid 
contractors and Department personnel in making determinations regarding 
the reasonableness of all outside legal costs, including the costs of 
litigation. Today's proposed rules and guidance would cover all outside 
legal costs incurred by contractors with contracts exceeding 
$10,000,000 at facilities owned or leased by the Department. The 
policies would also apply to legal counsel retained by the Department 
itself for litigation or other legal services where the legal costs 
over the life of the matter for which counsel has been retained are 
expected to exceed $100,000.
    The Department previously determined that case-by-case review of 
contractor agreements with outside law firms is necessary to ensure 
effective control of contractor litigation costs. The Department now 
realizes that this procedure needs to be extended to a broader category 
of contractor legal costs, whether or not litigation is involved, for 
contracts at facilities owned or leased by the Department.
    To facilitate that case-by-case review, the proposed regulation 
would require submission of a legal management plan by contractors 
where costs for legal services are to be reimbursed by the Department. 
Once approved by the Department, the legal management plan, as well as 
applicable regulations and contract provisions, will form the basis for 
approvals by the Department to reimburse litigation and other legal 
expenses.
    The proposed regulation also identifies those costs that would be 
generally considered allowable and those that would be considered 
unallowable. Costs not identified as specifically allowable or 
unallowable are still subject to the general rules of allowability and 
reasonableness. Additionally, the acquisition of legal services by 
contractors falls within the ambit of 48 CFR (DEAR) Part 944 and 
Subpart 970.71, which cover contractor purchasing.
    In addition to the proposed regulatory material included in this 
notice, an Appendix to Part 719 is attached which provides additional 
``safe harbor'' guidance for legal management practices. The guidance 
provided in the Appendix may be updated from time to time by the 
Department and those updates will be distributed to contractors, 
contracting officers and Department counsel.
    The Department also proposes to add 48 CFR (DEAR) 970.5204-31, 
Insurance-Litigation and Claims, to the contract clauses in 48 CFR 
(DEAR) Part 952 to clarify the requirement that facility management 
contracts exceeding an amount of $10,000,000 must include this clause. 
The application of the proposed legal management regulation

[[Page 63810]]

would be tied to the application and use of the Insurance-Litigation 
and Claims clause, or a specialized clause requiring compliance with 
Part 719, in a facility management contract. The Insurance-Litigation 
and Claims clause already contains a requirement that contractors keep 
the Department informed of new and ongoing litigation, whether or not 
the costs are to be reimbursed.
    Finally, conforming technical amendments to the Department of 
Energy's Acquisition Regulation (DEAR), at 48 CFR Chapter 9, are 
proposed at the end of this notice of proposed rulemaking.

II. Discussion of Rule Provisions

    Subpart A, Sections 719.1-719.7, sets out general provisions 
providing definitions and addressing who is covered by this part. 
Section 719.3 states that the Department's contracts for an amount 
exceeding $10,000,000 for work performed at facilities owned or leased 
by the Department and containing the Insurance-Litigation and Claims 
clause are covered contracts subject to the proposed regulation. 
Section 719.3 also makes it clear that reimbursement of contractor 
legal costs under covered contracts is subject to compliance with the 
proposed regulation. Coverage is also extended to legal counsel, in 
section 719.4, retained by the Department itself where the legal costs 
are expected to exceed $100,000 for a particular matter. Procedures for 
exceptions or deviations are set out in section 719.7. The procedures 
call for a determination by the General Counsel. In the case of a 
Department contract, the determination would be made by the 
Department's General Counsel; in the case of a National Nuclear 
Security Administration (NNSA) contract, it would be made by the NNSA 
General Counsel.
    Subpart B, Sections 719.10-719.17, describes the requirement for 
submission of a legal management plan and what is to be included in the 
plan. Subparagraphs (c)(6) and (d)(1) in section 719.10 require that 
experience as an advocate in alternative dispute resolution procedures, 
primarily mediation, be considered as a factor in selection of retained 
counsel, and a system for identification of matters suitable for 
alternative dispute resolution be described in the legal management 
plan. Contractors will have 60 days following execution of a contract 
with the Department for submission of the legal management plan. 
Section 719.15 sets out a requirement for submission of a staffing and 
resource plan for significant matters, and section 719.16 requires 
submission of the staffing and resource plan no later than 30 days 
after the filing of an answer in a significant matter involving 
litigation. Section 719.17 requires submission of an annual legal 
budget for matters for which reimbursable legal costs will exceed 
$100,000. The annual budget should be broken down by activity or phase 
of a matter. The Department is interested in receiving comments on 
whether there is value added by having budget submission requirements 
in both subparagraph 719.15(c), as part of a staffing and resource 
plan, and in section 719.17.
    Subpart C, Sections 719.20-719.21, describes the requirements for 
engagement letters. Engagement letters must be prepared and submitted 
to retained legal counsel for matters where costs are expected to 
exceed $25,000. Subparagraph 719.21(b)(10) requires the contractor to 
include the right of the government to inspect, copy and audit 
documentation of billable fees and other records where the Department 
is reimbursing the legal costs.
    Subpart D, Sections 719.30-719.39, describes the policies and 
limitations for reimbursement of legal costs associated with retained 
legal counsel. Sections 719.32-719.35 describe categories of costs 
which require special treatment or advance approval. Requirements for 
contractor management of subcontractor legal matters, so that the 
contractor keeps the Department informed about significant legal 
matters, are set out in section 719.37. Section 719.37 also prohibits 
the prime contractor from bundling subcontractor legal costs with non-
legal costs in submissions for reimbursements so that subcontractor 
legal costs are clearly identified to Department counsel.
    Subpart E, Sections 719.40-719.42, sets out requirements for the 
Department's field office counsel. Requests for reimbursement of legal 
costs made by contractors and retained legal counsel are discussed in 
sections 719.40-719.41. Section 719.42 describes the types of 
recommendations made by field counsel which must be coordinated with 
Headquarters.

III. Public Comments

    Interested persons are invited to participate by submitting data, 
views or arguments with respect to the new regulation proposed in this 
notice. Three copies of written comments should be submitted to the 
address indicated in the ADDRESSES section of this notice. All comments 
received will be available for public inspection as part of the 
administrative record on file for this rulemaking in the Department of 
Energy Reading Room, Room 1E-090, Forrestal Building, 1000 Independence 
Avenue, SW, Washington, DC 20585, (202) 586-3142, between the hours 9 
a.m. and 4 p.m., Monday through Friday, except Federal holidays. All 
written comments received by the date indicated in the DATES section of 
this notice of proposed rulemaking and all other relevant information 
in the record will be carefully assessed and fully considered prior to 
the publication of the final rule. Any information or data considered 
to be exempt from public disclosure by law must be so identified and 
submitted in writing, one copy, as well as one complete copy from which 
the information believed to be exempt from disclosure is deleted. The 
Department will determine if the information or data is exempt from 
disclosure.

IV. Procedural Requirements

A. Review Under Executive Order 12866

    Today's 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 action was not subject to review under that Executive 
Order by the Office of Information and Regulatory Affairs of the Office 
of Management and Budget (OMB).

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

[[Page 63811]]

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 it is unreasonable to meet one or more of them. 
The Department has completed the required review and determined that, 
to the extent permitted by law, the 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 
that a Federal agency prepare a regulatory flexibility analysis for any 
rule for which the agency is required to publish a general notice of 
proposed rulemaking. Such an analysis is not required, however, if the 
agency certifies that the rule would not, if promulgated, have a 
significant economic impact on a substantial number of small entities 
(5 U.S.C. 605(b)).
    The Department certifies that today's proposal creating a new part 
10 CFR Part 719 will not have a significant economic impact on a 
substantial number of small entities. This rule will only restate and 
clarify the Department's restrictions on the reimbursement of 
contractor legal costs. The rule will affect only potential claims for 
reimbursement of costs. The rule will not directly regulate small 
entities.

D. Review Under the Paperwork Reduction Act

    The proposed rule would require each covered contractor to submit a 
legal management plan that describes the contractor's practices for 
managing legal costs and matters for which it procures the services of 
retained legal counsel. This collection of information is required for 
the Department to determine whether to approve reimbursement of 
contractors' litigation and other legal expenses.
    The Department is submitting to the Office of Management and Budget 
(OMB), simultaneously with the publication of this proposed rule, this 
proposed collection of information for review and approval 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 OMB. Interested persons may obtain a copy 
of the Paperwork Reduction Act Submission from the contact person named 
in this notice.
    Interested persons are invited to submits comments to OMB addressed 
to: Department of Energy Desk Officer, Office of Information and 
Regulatory Affairs, OMB, 725 17th Street, NW., Washington, DC 20503. 
Persons submitting comments to OMB also are requested to send a copy to 
the contact person at the address given in the ADDRESSES section of 
this notice. OMB is particularly interested in comments on: (1) The 
necessity for the proposed collection of information, including whether 
the information will have practical utility; (2) the accuracy of DOE's 
estimates of the burden; (3) ways to enhance the quality, utility, and 
clarity of the information to be collected; and (4) ways to minimize 
the burden of the collection of information on respondents, including 
the use of automated collection techniques or other forms of 
information technology.
    The proposed requirements for completion of a legal management plan 
under this regulation are essentially the same as the currently 
existing requirements that have applied to management and operating 
contractors for several years, with the difference that this rulemaking 
will extend the requirements to all legal matters and not just 
litigation matters.
    Preparation of the initial Legal Management Plan will usually be a 
one-time action completed at the start of a five year contract. The 
estimated time for preparation of this initial plan is 15-30 hours. 
This estimate is based on discussions with contractors about their 
current burden for preparing litigation management plans. The only 
requirement for updating relates to the submission of an annual budget 
for significant matters. This revision is estimated to be about 10 
hours. Approximately 36 contractors will be subject to the requirement 
to submit a Legal Management Plan. The Department estimates that in any 
one year approximately 20% or 7 Legal Management Plans will be 
submitted to the Department for approval each year. The total annual 
paperwork burden that will result from these requirements is estimated 
to be approximately 465 to 570 hours.

E. Review Under the National Environmental Policy Act

    The Department has concluded that promulgation of this proposed 
rule falls into a class of actions which would not individually or 
cumulatively have significant impact on the human environment, as 
determined by Department of Energy 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 proposed rule is 
categorically excluded from NEPA review because the amendments to the 
DEAR would be strictly procedural (categorical exclusion A6). 
Therefore, this proposed 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 10, 1999) requires 
agencies to develop an accountable process to ensure meaningful and 
timely input by State and local officials in the development of 
regulatory policies that have ``federalism implications.'' As defined 
in the Executive Order, policies that have federalism implications 
include regulations that have substantial direct effects 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. The Department has examined this proposed rule 
and has determined that it 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 (Pub. L. 104-4) generally 
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. This rulemaking affects private sector entities, and the 
impact is less than $100 million. H. Review Under the Treasury and 
General Government Appropriations Act, 1999 Section 654 of the Treasury 
and General Government Appropriations Act, 1999 (Pub.L. 105-277) 
requires Federal agencies to issue a Family Policymaking Assessment for 
any proposed rule or policy that may affect family well-being. Today's 
rule does not impact on the autonomy or integrity of the family 
institution. Accordingly, the Department has concluded that it is not 
necessary to prepare a Family Policymaking Statement.

[[Page 63812]]

List of Subjects

10 CFR Part 719

    Government contracts, Lawyers, Legal matters.

48 CFR Parts 928, 944, 952 and 970.

    Government procurement.

    Issued in Washington, D.C. on October 16, 2000.
T. J. Glauthier,
Deputy Secretary.

    For the reasons set out in the preamble, Chapter III of title 10 
and Chapter 9 of title 48 of the Code of Federal Regulations are 
proposed to be amended as set forth below:
    1. 10 CFR Part 719 is added to read as follows:

PART 719--CONTRACTOR LEGAL MANAGEMENT REQUIREMENTS

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 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?
Subpart B--Legal Management Plan
719.10   What information must be included in the legal management 
plan?
719.11   Who must submit a legal management plan?
719.12   When must the plan be submitted?
719.13   Who at the Department must receive and review the plan?
719.14   Will the Department notify the contractor concerning the 
adequacy or inadequacy of the submitted 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 used?
719.21   What are the required elements of an engagement letter?
Subpart D--Reimbursement of Costs Subject to This Part
719.30   Is there a standard for determining cost reasonableness?
719.31   How does the Department determine whether fees are 
reasonable?
719.32   For what costs is the contractor, or Department retained 
counsel, limited to reimbursement of actual costs only?
719.33   What categories of costs are unallowable?
719.34   What is the treatment for travel costs?
719.35   What categories of costs require advance approval?
719.36   Who at the Department must give advance approval?
719.37   Are there any special procedures or requirements regarding 
subcontractor legal costs?
719.38   Will costs covered by this part be subject to audit?
719.39   What happens when more than one contractor is a party to 
the matter?
Subpart E--Department Counsel Requirements
719.40   What is the role of Department counsel as a contracting 
officer's representative?
719.41   What information must be forwarded to the General Counsel's 
Office concerning contractor submissions to Department counsel under 
this part?
719.42   What types of field actions must be coordinated with 
Headquarters?

Appendix to Part 719--Guidance for Legal Resource Management

    Authority: 42 U.S.C. 2201, 5814, 5815, 7101 et seq.; 50 U.S.C. 
2401, et seq.

Subpart A--General Provisions


Sec. 719.1  What is the purpose of this part?

    This part is intended to facilitate control of Department and 
contractor legal costs, including litigation costs. The contractor is 
required to develop a procedure for retaining legal counsel, and to 
document the analysis used to decide when, where and who will be 
engaged as outside counsel and the terms of the engagement. Payment of 
law firm invoices and reimbursement of contractor legal costs under 
covered contracts is subject to compliance with this part.


Sec. 719.2  What are the definitions of terms used in this part?

    For purposes of this part:
    Alternative dispute resolution includes 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 Secs. 719.3 
and 719.4.
    Department means the Department of Energy, including the National 
Nuclear Security Administration.
    Department counsel means the individual in the field office, or 
Headquarter's office, designated as the contracting officer's 
representative and point of contact for a contractor or Department 
retained legal counsel, for purposes of this part only, for submission 
and approval of the legal management plan, advance approval of certain 
costs, and submission of a staffing and resource plan, as addressed in 
this part.
    Legal costs include, but are 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 of accountants, consultants, or 
others retained by the contractor or by retained legal counsel to 
assist retained legal counsel; and any similar costs incurred by or in 
connection with the services of retained legal counsel.
    Legal management plan means a statement describing the contractor's 
practices for managing legal costs and matters for which it procures 
the services of retained legal counsel.
    Retained legal counsel means members of the bar working in the 
private sector, either individually or in law firms, who are retained 
by a contractor or the Department to provide legal services.
    Significant matters means legal matters, including litigation, 
involving significant issues as determined by Department counsel, and 
any legal matter 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 by retained 
legal counsel describing plans for managing a significant matter.


Sec. 719.3  What contracts are covered by this part?

    This part covers cost reimbursement contracts:
    (a) For an amount exceeding $10,000,000;
    (b) Involving work performed at the facilities owned or leased by 
the Department; and
    (c) Containing the contract clause Insurance-Litigation and Claims, 
48 CFR (DEAR) 952.228-1 or 970.5204-31, or a specialized clause 
requiring compliance with this part.


Sec. 719.4  Are law firms that are retained by the Department covered 
by this part?

    Retained legal counsel under contract with the Department itself to 
provide legal services must also comply with this part where the legal 
costs over the life of the matter for which counsel has been retained 
are expected to exceed $100,000.


Sec. 719.5  What contracts are not covered by this part?

    This part does not cover:
    (a) Fixed price contracts; and

[[Page 63813]]

    (b) Cost reimbursement contracts for an amount less than 
$10,000,000.


Sec. 719.6  Are there any types of legal matters not included in the 
coverage of this part?

    Matters not covered by this part include:
    (a) Matters handled by counsel retained by an insurance carrier, 
except for insurance providers of third party administrator services or 
retrospective policies where the Department has retained the risk of 
liability;
    (b) Routine intellectual property law support services;
    (c) Routine unemployment compensation matters and labor 
arbitrations; and
    (d) Routine matters handled by counsel retained through a GSA 
supply schedule.


Sec. 719.7  Is there a procedure for exceptions or deviations from this 
part?

    (a) Requests for exceptions or deviations from this part by 
contractors 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.
    (b) The General Counsel may authorize exceptions based on a 
recommendation of Department counsel. The General Counsel may also 
establish exceptions to this part based on current field office and 
contractor practices which satisfy the purpose of these requirements.
    (c) Exceptions to this part which are also a deviation from the 
cost principles (see subpart D of this part) must be approved by the 
Procurement Executive. See 48 CFR (FAR) 31.101. Written requests from 
contractors for a deviation to a cost principle must be submitted to 
the contracting officer, with a copy provided to Department counsel.

Subpart B--Legal Management Plan


Sec. 719.10  What information must be included in the legal management 
plan?

    The legal management plan must include the following items:
    (a) A description of the legal matters that may necessitate 
handling by retained legal counsel.
    (b) A discussion of the factors the contractor will consider in 
determining whether to handle a particular matter utilizing retained 
legal counsel.
    (c) An outline of the factors the contractor will consider in 
selecting retained legal counsel, including:
    (1) Competition;
    (2) Past performance and proficiency shown by 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) 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, etc.).
    (d) A description of:
    (1) The system that the contractor will use to review each case to 
determine whether and when alternative dispute resolution is 
appropriate;
    (2) The role of in house counsel in cost management;
    (3) The contractor's process for review and approval of invoices 
from outside law firms or consultants;
    (4) The contractor's strategy for interaction with, and supervision 
of, retained legal counsel;
    (5) How appropriate interaction with the contracting officer and 
Department counsel will be ensured; and,
    (6) The contractor's corporate approach to legal decision making.


Sec. 719.11  Who must submit a legal management plan?

    Contractors identified under Sec. 719.3 must submit a legal 
management plan.


Sec. 719.12  When must the plan be submitted?

    Contractors identified under Sec. 719.3 must submit a legal 
management plan within 60 days following the execution of a contract 
with the Department.


Sec. 719.13  Who at the Department must receive and review the plan?

    The contractors identified under Sec. 719.3 must file a legal 
management plan with Department counsel.


Sec. 719.14  Will the Department notify the contractor concerning the 
adequacy or inadequacy of the submitted plan?

    (a) The Department will notify the contractor within 30 days of the 
contractor's submission of the plan of any deficiencies in its 
submitted plan.
    (b) The contractor must correct identified deficiencies within 30 
days of notice of the deficiency.


Sec. 719.15  What are the requirements for a staffing and resource 
plan?

    (a) For significant matters, the contractor must require retained 
legal counsel providing legal services to prepare a staffing and 
resource plan as provided in this section. The contractor must then 
forward the staffing and resource plan to Department counsel. 
Department retained counsel subject to this part must prepare a 
staffing and resource plan and forward it to Department counsel.
    (b) A staffing and resource plan is a plan describing:
    (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) Numbers and mix of resources, when applicable, that the 
retained legal counsel intends to devote to the representation.
    (c) For significant matters in litigation, in addition to the 
generalized annual budget required by Sec. 719.10, a staffing and 
resource plan must include a budget, broken down by phases, including 
at a minimum:
    (1) Matter assessment, development and administration;
    (2) Pretrial pleadings and motions;
    (3) Discovery;
    (4) Trial preparation and trial; and
    (5) Appeal.


Sec. 719.16  When must the staffing and resource plan be submitted?

    (a) For significant matters in litigation, the contractor or 
Department retained counsel must submit the staffing and resource plan 
no later than 30 days after the filing of an answer or a dispositive 
motion in lieu of an answer.
    (b) For other significant legal services matters, the contractor or 
Department retained counsel must submit the staffing and resource plan 
within 30 days following execution of an engagement letter.
    (c) Contractors and Department retained counsel must submit updates 
to staffing and resource plans annually or sooner if significant 
changes occur in the matter.


Sec. 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 known 
or existing matters for which reimbursable legal costs will exceed 
$100,000, at a

[[Page 63814]]

level of detail reflective of the types of billable activities and the 
stage of each such matter.
    (c) At the conclusion of the period covered by each annual legal 
budget, the contractor must report on its success on staying within 
budget.

Subpart C--Engagement Letter


Sec. 719.20  When must an engagement letter be used?

    Contractors must prepare and submit an engagement letter to 
retained legal counsel expected to provide $25,000 or more in legal 
services and submit a copy of this correspondence, including 
correspondence from retained legal counsel addressing issues under 
Sec. 719.21(b), to Department counsel.


Sec. 719.21  What are the required elements of an engagement letter?

    (a) The engagement letter must require retained legal counsel to 
assist 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 does 
not constitute a waiver of any applicable legal privilege, protection, 
or immunity with respect to disclosure of these records to third 
parties.
    (3) A requirement that the contractor, the Department, and the 
General Accounting Office, have the right upon request, at reasonable 
times and locations, to inspect, copy, and audit all records 
documenting billable fees and costs and any other records or systems of 
records relevant to the representation by retained legal counsel.
    (4) A statement that all records must be retained for a period of 
three (3) years after the final payment.
    (c) The contractor must obtain the following information from 
retained counsel:
    (1) Identification of all attorneys and staff who will be assigned 
to the matter and the rate and basis of their compensation i.e., hourly 
rates, fixed fees, contingency arrangement).
    (2) An initial assessment of the matter, along with a commitment to 
provide updates as necessary.
    (3) A description of billing procedures, including frequency of 
billing and billing statement format.
    (d) The contractor must obtain retained counsel's agreement to the 
following:
    (1) That in significant matters a staffing and resource plan for 
the conduct of the matter will be submitted by the retained legal 
counsel to the contractor in accordance with the requirements of 
Secs. 719.15 and 719.16.
    (2) That alternative dispute resolution will be considered at as 
early a stage as possible where litigation is involved.
    (3) That retained counsel will comply with the cost guidelines in 
this subpart C.
    (4) That retained counsel will provide a certification concerning 
the costs submitted for reimbursement that is consistent with the 
certification in the Attachment to Appendix A to this part.
    (5) That professional conflicts of interest issues will be 
identified and addressed promptly.
    (e) Additional requirements may be included in an engagement letter 
based on the needs of the contractor or the office requiring the 
Department retained counsel.

Subpart D--Reimbursement of Costs Subject to This Part


Sec. 719.30  Is there a standard for determining cost reasonableness?

    The standard for cost reasonableness determinations is contained in 
the Federal Acquisition Regulation (FAR), at 48 CFR (FAR) 31.201-3.


Sec. 719.31  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:
    (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 were available;
    (c) Whether alternative rate structures such as flat, contingent, 
and other innovative proposals, were utilized;
    (d) The complexity of the legal matter and the expertise of the law 
firm in this area; and
    (e) The factors listed in Sec. 719.10(c).


Sec. 719.32  For what costs is the contractor, or Department retained 
counsel, limited to reimbursement of actual costs only?

    All costs are reimbursable for actual costs only, with no overhead 
or surcharge adjustments.


Sec. 719.33  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 
970.31. See also 41 U.S.C. 256(e).
    (b) The Department will not consider for reimbursement any costs 
incurred for entertainment or alcoholic beverages. See 48 CFR (FAR) 
31.205-14 and 31.205-51 and 41 U.S.C. 256(e).
    (c) Costs that are customarily or already included in billed hourly 
rates are not separately reimbursable.
    (d) Interest charges that a contractor incurs on any outstanding 
(unpaid) bills from retained legal counsel are not reimbursable.


Sec. 719.34  What is the treatment for travel costs?

    Travel and related expenses must at a minimum comply with the 
restrictions set forth in 48 CFR (FAR) 31.205-46, or 48 CFR (DEAR) 
970.3102-46, as appropriate, to be reimbursable.


Sec. 719.35  What categories of costs require advance approval?

    Costs for the following will not be eligible for reimbursement 
without prior written approval from Department counsel:
    (a) Computers or general application software, or computerized 
databases specifically created for a particular matter;
    (b) Charges for materials or non-attorney services expected to 
exceed $5,000;
    (c) Secretarial and support services, word processing, or temporary 
support personnel;
    (d) Attendance by more than one person at a deposition, court 
hearing, interview or meeting;
    (e) Expert witnesses and consultants;
    (f) Trade publications, books, treatises, background materials, and 
other similar documents;
    (g) Professional or educational seminars and conferences;
    (h) Preparation of bills or time spent responding to questions 
about bills from either the Department or the contractor;
    (i) Food and beverages when the attorney or consultant is not on 
travel status and away from the home office; and
    (j) Pro hac vice admissions.


Sec. 719.36  Who at the Department must give advance approval?

    If advance approval is required under this part, the advance 
approval must be obtained from the Department counsel unless the 
Department counsel indicates that approval of a request may only be 
given by the contracting officer.


Sec. 719.37  Are there any special procedures or requirements regarding 
subcontractor legal costs?

    (a) The contractor must have a monitoring system for subcontractor

[[Page 63815]]

legal matters likely to reach $100,000 over the life of the matter. The 
purpose of this system is to enable the contractor to perform the same 
type of analysis and review of subcontractor legal management practices 
that the Department can perform of the contractor's legal management 
practices. The monitoring is intended to enable the contractor to keep 
the Department informed about significant subcontractor legal matters, 
including significant matters in litigation. The burden will be on the 
prime contractor to be responsive to questions raised by the Department 
concerning significant subcontractor legal matters.
    (b) Subcontractor legal costs are not allowable without the prior 
approval of Department counsel.


Sec. 719.38  Will costs covered by this part be subject to audit?

    All costs covered by this part are subject to audit by the 
Department, its designated representative or the General Accounting 
Office. See Sec. 719.21.


Sec. 719.39  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 Department 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.
    (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 persuasively shows that it was reasonable for the contractor 
to incur such expenses.

Subpart E--Department Counsel Requirements


Sec. 719.40  What is the role of Department counsel as a contracting 
officer's representative?

    (a) The individual selected as Department counsel for a contract 
subject to the requirements of this part must be approved by the 
contracting officer and the appropriate Chief Counsel, or General 
Counsel if at Headquarters. The Department counsel must receive written 
delegated authority from the contracting officer to serve as the 
contracting officer's representative for legal matters. The contractor 
will receive a copy of this delegation of authority.
    (b) Actions by Department counsel may not exceed the 
responsibilities and limitations as delegated by the contracting 
officer. Delegated contracting officer representative authority may not 
be construed to include the authority to execute or to agree to any 
modification of the contract nor to attempt to resolve any contract 
dispute concerning a question of fact arising under the contract.


Sec. 719.41  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 approved 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.


Sec. 719.42  What types of field actions must be coordinated with 
Headquarters?

    (a) Requests from contractors for exception from this entire part 
must be coordinated with Headquarters.
    (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 significance to the 
Department nationwide or issues of broad applicability to the 
Government that might adversely impact its operations are involved must 
be coordinated by Department counsel with the Deputy General Counsel 
for Litigation or his/her designee.
    (c) Department field 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 designee, as directed by the General Counsel or his/her designee.

Appendix to Part 719--Guidance for Legal Resource Management

Management and Administration of Outside Legal Services

1.0 Initiation of Litigation
2.0 Defense of Litigation
2.1 Disapproval of Defensive Litigation
3.0 Notice to the Department of Special Interest Matters and 
Litigation
4.0 Alternative Dispute Resolution
5.0 Cost Allowability Issues
5.1 Underlying Cause for Incurrence of Costs
5.2 Fees and Other Charges
6.0 Role of Department Counsel as the Contracting Officer's 
Representative
7.0 Future Amendments to Guidance

Management and Administration of Outside Legal Services

    This guidance is intended to assist contractors and the 
Department's contracting officers and counsel in managing the costs 
of outside legal services. This guidance is also intended to assist 
retained legal counsel who provide services to the Department or to 
the Department's contractors.

1.0  Initiation of Litigation

    (A) The Insurance--Litigation and Claims clause (48 CFR (DEAR) 
952.228-1 and 970.5204-31) in the Department's facility management 
contracts provides that the contractor may not initiate litigation, 
including appeals from adverse decisions, without the prior 
authorization or approval of the Department's contracting officer, 
who must consult with Department counsel. The following are the 
minimum informational requirements for requests for authorization or 
approval under that clause:
    (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 of why initiating litigation would prove 
beneficial to the contractor and to the Government.
    (B) Department counsel should advise the contracting officer 
concerning each request and must provide assistance to the 
contracting officer in communicating the Department's decision to 
the contractor.

2.0  Defense of Litigation

    (A) In accordance with the Insurance-Litigation and Claims 
clause, the contractor must immediately notify Department counsel of 
the initiation of litigation against the contractor. Department 
counsel will advise the contractor as to:
    (1) Whether the defense of the litigation will be either 
approved or disapproved or approval deferred and any conditions to 
which approval is subject;
    (2) Whether the contractor will be required to authorize the 
Government to defend the action;
    (3) Whether the Government will take charge of the action; or
    (4) Whether the Government will receive an assignment of the 
contractor's rights.
    (B) When defensive litigation is approved at a later stage or at 
the conclusion of the matter, reimbursement will be made for only 
those expenses which would have been reimbursable as allowable costs 
if the

[[Page 63816]]

Department had originally approved the defense of the litigation.

2.1  Disapproval of Defensive Litigation

    If the Department disapproves in advance the costs of defense of 
the litigation, the contractor will be notified of the disapproval 
and that contract funds may not be used to fund the defense of the 
litigation. The contractor will also be informed if the Department 
changes its position. Contractor compliance with these policies and 
procedures will not itself obligate the Department to reimburse 
litigation costs or judgment costs when Departmental approval of the 
litigation cost has been denied or deferred.

3.0  Notice to the Department of Special Interest Matters and 
Litigation

    The contractor's procedures under its Legal Management Plan 
should include provisions for earliest possible notification to the 
Department of the likely initiation of any ``significant matters'' 
such as class actions, cases involving radiation or toxic substance 
exposure, cases involving problems concerning the safeguarding of 
classified information, and any other matters involving issues which 
the contractor has reason to believe are of general importance to 
the Department or the government as a whole.

4.0  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, pre-discovery, after 
initial discovery and pre-trial. This evaluation should be done in 
coordination with the Department's ADR liaison if one has been 
established or appointed or the 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 Dispute Resolution. The 
Department anticipates that mediation will be the principal and most 
common method of alternative dispute resolution. In exceptional 
circumstances, arbitration may be appropriate. However, 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.

5.0  Cost Allowability Issues

    A determination of cost reasonableness may depend on a variety 
of considerations and circumstances. In accordance with 48 CFR (FAR) 
31.201-3, no presumption of reasonableness is attached to the 
incurrence of costs by a contractor. 10 CFR part 719 and this 
Appendix provide contractors guidelines for incurring legal costs to 
which adherence should result in a determination of allowability if 
the cost is otherwise allowable under the contract.

5.1  Underlying Cause for Incurrence of Costs

    While 10 CFR part 719 provides procedures for incurring legal 
costs, the determination of the reason for the incurrence of the 
legal costs, e.g., liability, fault or avoidability, is a separate 
determination. This latter determination may involve, for example, a 
possible finding of willful misconduct or lack of good faith by 
contractor management in the case of third party liability, or a 
finding of violation of a statute or regulation by the contractor in 
a governmental proceeding. The reason for the contractor incurring 
costs may be determinative of the allowability of the contractor's 
legal costs. For example, legal costs incurred by a contractor in 
defending actions brought by governmental agency may be covered by 
the Major Fraud Act, 41 U.S.C. 256(k), implemented as a cost 
principle at 48 CFR (FAR) 31.205-47. In such cases, the statute may 
restrict the Department's authority to reimburse legal costs 
incurred by the contractor regardless of the outcome of the action.
    (B) In some cases, the final determination of allowability of 
legal costs cannot be made until a matter is fully resolved. This is 
particularly true in the case of legal defense costs covered by the 
restrictions in the Major Fraud Act and is also a common problem in 
cases covered by various whistleblower statutes and regulations. 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 satisfy the 
standards of cost reasonableness.

5.2  Fees and Other Charges

    (A) Requests by retained legal counsel that are not in a direct 
contract with the Department for fee increases should be sent in 
writing to the contractor, who should review the request for 
reasonableness. If the contractor determines the request is 
reasonable, the contractor should seek approval for the request from 
Department counsel and the contracting officer before it authorizes 
any increase. Contractors should attempt to lock in rates for 
partners, associates and paralegals for at least a two-year period.
    (B) Rate and fee structures for retained legal counsel should 
include all ``overhead'' and ``profit,'' and, therefore, any 
additional overhead or profit charged by retained legal counsel 
should be considered unreasonable. Costs listed in 10 CFR 719.33(c) 
are usually incorporated into the rate or fee structure. Consultants 
or experts hired by retained legal counsel who do not include any 
overhead or similar charges, such as computer time, in their base 
rate, must have those charges approved in advance by Department 
counsel and the contracting officer. Time charged by law students 
should be scrutinized for its efficiency and have prior 
authorization.
    (C) Travel time may be reimbursed at a full rate for the portion 
of time during which retained legal counsel actually performs work 
for which it was retained; any remaining travel time during normal 
working hours shall be reimbursed at 50 percent, except that in no 
event is travel time for time during which work was performed for 
other clients reimbursable. Also, for long distance travel that 
could be completed by various methods of transportation, i.e., car, 
train, or plane, only the charge for the overall fastest travel time 
will be considered reasonable.
    (D) 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 cost-effective. Potential 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 and be 
coordinated with Department counsel.

6.0  Role of Department Counsel as the Contracting Officer's 
Representative

    (A) An attorney from the field office or from Headquarters will 
be appointed a contracting officer's representative by the cognizant 
contracting officer. A contracting officer may designate other 
Government personnel to act as authorized representatives for 
functions not involving a change in the scope, price, terms or 
conditions of the contract. This designation is made in writing and 
contains specific instructions regarding the extent to which the 
representatives may take action for the contracting officer, and 
will prohibit the representative from signing contractual documents. 
The contracting officer is the only person authorized to approve 
changes in any of the requirements under the contract.
    (B) Additional discussion of the authority and limitation of 
contracting officers can be found at 48 CFR (FAR) 1.602-1, and for 
contracting officer's representatives at 48 CFR (DEAR) 942.270-1. A 
recently standardized clause, Technical Direction, 48 CFR (DEAR) 
952.242-70, also discusses the responsibilities and limitations of a 
contracting officer's representative.

7.0  Future Amendments to Guidance

    The Office of the General Counsel may by memorandum provide 
additional guidance to contractors. These memoranda will serve as 
guidance for ``safe harbor'' practices for contractors procuring 
outside legal services.

Attachment--Contractor Litigation and Legal Costs, Model Bill 
Certification and Format

1. Certification

    Bills or invoices should contain a certification signed by a 
representative of the retained legal counsel to the effect that:
    ``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

[[Page 63817]]

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 necessary.''

2. Model Bill Format

                                                  I. For Fees
Date of service     Description of      Name or             Approved rate       Time charged       Amount (rate
                     service            initials of                                                 x  time)
                    (see note 1 below)  attorney
----------------------------------------------------------------------------------------------------------------
                                             II. For Disbursements
Date                Description of      Amount
                    disbursement
                    (see note 2 below)
----------------------------------------------------------------------------------------------------------------


    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 a maximum of 10 cents per page); fax 
charges (date, phone number and actual amount); overnight delivery 
(date and amount); electronic research (date and amount); 
extraordinary postage (i.e., 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.

    2. The authority citation for Parts 928 and 952 continues to read 
as follows:

    Authority: 42 U.S.C. 7101, et seq.; 40 U.S.C. 486(c); 50 U.S.C. 
2401, et seq.; 42 U.S.C. 2201.

PART 928--BONDS AND INSURANCE

    3. Section 928.311-2 is added to read as follows:


Sec. 928.311-2  Agency solicitation provisions and contract clauses. 
(Department coverage--paragraph (b)).

    (b) Cost reimbursement contracts for an amount exceeding 
$10,000,000, involving work performed at facilities owned or leased by 
the Department, must use the clause at 952.228-1.
    4. Part 944 is added to read as follows:

PART 944--SUBCONTRACTING POLICIES AND PROCEDURES

    Authority: 42 U.S.C. 7101 et seq.; 40 U.S.C. 486(c); 50 U.S.C. 
2401 et seq.; 42 U.S.C. 2201.


Sec. 944.102  Policy. (Department coverage--paragraph (c)).

    (c) Contractor purchases of litigation and other legal services are 
subject to the requirements in 10 CFR part 719 and this part 944 of 48 
CFR (DEAR).

PART 952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    5. Section 952.228-1 is added to read as follows:


Sec. 952.228-1  Insurance--Litigation and Claims.

    As prescribed at 928.311-2(b), insert the clause at 970.5204-31. 
The contracting officer shall substitute these paragraphs of the 
clause:
    (e) (2) For liabilities (and reasonable expenses incidental to such 
liabilities, including litigation costs) to third persons not 
compensated by insurance or otherwise without regard to and as an 
exception to the limitation of cost or limitation of funds clause of 
this contract.
    (h) In addition to the cost reimbursement limitations contained in 
FAR 31.201-3 and DEAR 931.205-33, and notwithstanding any other 
provision of this contract, the contractor's liabilities to third 
persons, including employees but excluding costs incidental to workers' 
compensation actions, (and any expenses incidental to such liabilities, 
including litigation costs, counsel fees, judgments and settlements) 
shall not be reimbursed if such liabilities were caused by contractor 
managerial personnel's.

    (j) (4) The term ``contractor's managerial personnel'' is 
defined in the Property clause in this contract.

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

    6. The authority citation for Part 970 continues to read as 
follows:

    Authority: Atomic Energy Act of 1954 (42 U.S.C. 2201); 
Department of Energy Organization Act (42 U.S.C. 7101, et seq.); and 
National Nuclear Security Administration Act (50 U.S.C. 2401, et 
seq.)

    7. Section 970.5204-31 is amended by adding clause paragraph (m) to 
read as follows:


Sec. 970.5204-31  Insurance--litigation and claims.

* * * * *
    (m) Reasonable litigation and other legal expenses are allowable 
when incurred in accordance with 10 CFR part 719, Contractor Legal 
Management Requirements, which includes a requirement to submit a 
Legal Management Plan within 60 days of execution of a contract, and 
if not otherwise made unallowable by law or the provisions of this 
contract.

    10. Section 970.7103 is amended by adding paragraph (e) to read as 
follows:


Sec. 970.7103  Contractor purchasing system.

* * * * *
    (e) Contractor purchases of litigation and other legal services are 
subject to the requirements in10 CFR part 719, 48 CFR (FAR) part 44 and 
this subpart, 48 CFR (DEAR) 970.71.

[FR Doc. 00-26995 Filed 10-24-00; 8:45 am]
BILLING CODE 6450-01-P


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