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.

Proposed Rules Federal Register

63809

Vol. 65, No. 207

Wednesday, October 25, 2000

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

(Laura.Fullerton@hq.doe.gov) or Anne

Broker at (202) 586–5060

(Anne.Broker@hq.doe.gov).

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, InsuranceLitigation 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

63810 Federal Register / Vol. 65, No. 207 / Wednesday, October 25, 2000 / Proposed Rules

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 InsuranceLitigation 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

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

63812 Federal Register / Vol. 65, No. 207 / Wednesday, October 25, 2000 / Proposed Rules

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

§ 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.

§ 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 §§ 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.

§ 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.

§ 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.

§ 719.5 What contracts are not covered by

this part?

This part does not cover:

(a) Fixed price contracts; and

Federal Register / Vol. 65, No. 207 / Wednesday, October 25, 2000 / Proposed Rules 63813

(b) Cost reimbursement contracts for

an amount less than $10,000,000.

§ 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.

§ 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

§ 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.

§ 719.11 Who must submit a legal

management plan?

Contractors identified under § 719.3

must submit a legal management plan.

§ 719.12 When must the plan be

submitted?

Contractors identified under § 719.3

must submit a legal management plan

within 60 days following the execution

of a contract with the Department.

§ 719.13 Who at the Department must

receive and review the plan?

The contractors identified under

§ 719.3 must file a legal management

plan with Department counsel.

§ 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.

§ 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 § 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.

§ 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.

§ 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

63814 Federal Register / Vol. 65, No. 207 / Wednesday, October 25, 2000 / Proposed Rules

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

§ 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

§ 719.21(b), to Department counsel.

§ 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 §§ 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

§ 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.

§ 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 § 719.10(c).

§ 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.

§ 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.

§ 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.

§ 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 nonattorney 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.

§ 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.

§ 719.37 Are there any special procedures

or requirements regarding subcontractor

legal costs?

(a) The contractor must have a

monitoring system for subcontractor

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

§ 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 § 719.21.

§ 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

§ 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.

§ 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.

§ 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 InsuranceLitigation 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

63816 Federal Register / Vol. 65, No. 207 / Wednesday, October 25, 2000 / Proposed Rules

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, prediscovery, after initial discovery and pretrial. 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 twoyear 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

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

(see note 1 below)

Name or

initials of

attorney

Approved rate Time charged Amount

(rate ×

time)

II. FOR DISBURSEMENTS

Date Description of

disbursement

(see note 2 below)

Amount

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:

§ 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.

§ 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:

§ 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:

§ 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:

§ 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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 2000–NM–214–AD]

RIN 2120–AA64

Airworthiness Directives; Airbus Model

A310 Series Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes the

adoption of a new airworthiness

directive (AD) that is applicable to all

Airbus Model A310 series airplanes.

This proposal would require repetitive

detailed visual inspections to detect

cracks propagating from the fastener

holes that attach the left- and right-hand

pick-up angles at frame 40 to the wing

lower skin and fuselage panel, and