[Federal Register Volume 63, Number 21 (Monday, February 2, 1998)]
[Rules and Regulations]
[Pages 5272-5276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2049]


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DEPARTMENT OF ENERGY

48 CFR Parts 932 and 970

RIN 1991-AB29


Acquisition Regulation: Contract Financing; Management and 
Operating Contracts

AGENCY: Department of Energy.

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) amends its Acquisition 
Regulation to incorporate coverage required by the Federal Acquisition 
Streamlining Act of 1994. These amendments will clarify the 
allowability of costs reimbursed under Department of Energy contracts 
and establish the responsibilities of the remedy coordination official 
within the Department.

DATES: This final rule is effective March 4, 1998.

FOR FURTHER INFORMATION CONTACT: Terrence D. Sheppard, Office of Policy 
(HR-51), Office of Procurement and Assistance Policy, Department of 
Energy, 1000 Independence Avenue S.W., Washington, D.C. 20585, (202) 
586-8193 (Phone), (202) 586-0545 (Facsimile), <a href="/cdn-cgi/l/email-protection#43372631313a6d302b263333223127032b326d272c266d242c35"><span class="__cf_email__" data-cfemail="186c7d6a6a61366b707d6868796a7c587069367c777d367f776e">[email protected]</span></a> 
(Internet).

SUPPLEMENTARY INFORMATION:

I. Background
II. Resolution of Comments
III. 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 12612
    G. Review Under Small Business Regulatory Enforcement Fairness 
Act of 1996
    H. Review Under the Unfunded Mandates Reform Act of 1995

I. Background

    On June 4, 1997 the Department of Energy published in the Federal 
Register (62 FR 30558) a notice of proposed rulemaking to amend the 
Department's acquisition regulations based on selected provisions in 
Sections 2051, 2151, and 2192 of the Federal Acquisition Streamlining 
Act of 1994 (the Act). These amendments establish certification of cost 
submissions and assessment of penalties on unallowable costs; a remedy 
coordination official for payment requests suspected to be based on 
substantial evidence of fraud; parameters for resolution of questioned 
costs; guidance for application of cost principles; general 
prohibitions on severance payments to foreign nationals and 
compensation costs associated with a change in management control or 
ownership; clarification of employee morale, recreation, entertainment, 
executive branch lobbying, company furnished automobiles, and insurance 
costs which protect the contractor against defects in material or 
workmanship.
    The public comment period closed August 4, 1997. The Department 
received comments from three entities. Today's final rulemaking adopts 
the amendments in the notice of proposed rulemaking with certain 
changes discussed under the Resolution of Comments section.

II. Resolution of Comments

    Three entities responded with 20 total comments. A comment 
resolution package has been prepared and is part of the file. The 
Department has considered and evaluated all the comments received 
during the comment period. Comments that resulted in changes to the 
proposed rulemaking are summarized below.
    Comment: It was stated that, as written, the proposed language 
under Political Activity Costs addressing unallowable costs associated 
with attempting to influence executive or legislative actions could be 
construed to make unallowable the costs of negotiations.
    Response: Concur. DOE has modified its coverage by deleting a 
portion of the last sentence of the proposed coverage. The final rule 
makes the following changes to the June 4, 1997, proposed rulemaking: 
970.3102-7(b), 970.5204-13(e)(31)(ii), 970.5204-14(e)(29)(ii), and 
970.5204-17(a)(6) were revised by deleting language which addressed 
costs associated with proposals.
    Comment: Proposed changes to the Payments and Advances clause, 
970.5204-16, would complicate other DOE efforts at streamlining.
    Response: Concur. The proposed change has been deleted from the 
final rulemaking.
    Comment: As written, DOE appears to disallow the cost of local 
travel at 970.3102-17.
    Response: It was not our intent to disallow the costs of local 
business travel and we do not believe we have done so. However, the 
coverage could be clearer. Accordingly, DOE has modified its proposed 
coverage to ensure a distinction between company-furnished automobiles 
used for company business, which can be allowable if approved by the 
contracting officer and personal use of company

[[Page 5273]]

furnished automobiles. It does prohibit, as does FAR 31.205-46(f), that 
portion of the costs that relate to personal use. DEAR 970.3102-
17(b)(3) was revised by clarifying the distinction between costs of 
company-furnished automobiles that can be allowable if approved by the 
contracting officer and the cost of company-furnished automobiles.

III. 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: and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
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 draftmenship under any guidelines issued by the Attorney 
General. Section 3(c) of Executive Order 12988 requires Executive 
agencies to review regulations in light of applicable standards in 
section 3(a) and section 3(b) to determine whether they are met or it 
is unreasonable to meet one or more of them. The Department of Energy 
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

    This rule was reviewed under the Regulatory Flexibility Act of 1980 
(Pub. L. 96-354) which requires preparation of a regulatory flexibility 
analysis for any rule which is likely to have significant economic 
impact on a substantial number of small entities. DOE certifies that 
this rule will not have a significant economic impact on a substantial 
number of small entities, and, therefore, no regulatory flexibility 
analysis has been prepared.

D. Review Under the Paperwork Reduction Act

    No new information or recordkeeping requirements are imposed by 
this rulemaking. Accordingly, no OMB clearance is required under the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).

E. Review Under the National Environmental Policy Act

    DOE has concluded that promulgation of this rule falls into a class 
of actions which would not individually or cumulatively have 
significant impact on the human environment, as determined by DOE's 
regulations (10 CFR Part 1021, Subpart D) implementing the National 
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.). 
Specifically, this rule is categorically excluded from NEPA review 
because the proposed amendments to the DEAR do not change the 
environmental effect of the rule being amended (categorical exclusion 
A5). Therefore, this rule does not require an environmental impact 
statement or environmental assessment pursuant to NEPA.

F. Review Under Executive Order 12612

    Executive Order 12612 (52 FR 41685, October 30, 1987) requires that 
regulations, rules, legislation, and any other policy actions be 
reviewed for any substantial direct effects on States, on the 
relationship between the National Government and the States, or in the 
distribution of power and responsibilities among the various levels of 
Government. If there are sufficient substantial direct effects, then 
the Executive Order requires the preparation of a federalism assessment 
to be used in all decisions involved in promulgating and implementing a 
policy action. This rule, when finalized, will revise certain policy 
and procedural requirements. States which contract with DOE will be 
subject to this rule. However, DOE has determined that this rule will 
not have a substantial direct effect on the institutional interests or 
traditional functions of the States.

G. Review Under Small Business Regulatory Enforcement Fairness Act of 
1996

    As required by 5 U.S.C. 801, the Department of Energy will report 
to Congress promulgation of the rule prior to its effective date. The 
report will state that it has been determined that the rule is not a 
``major rule'' as defined by 5 U.S.C. 804(3).

H. 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 only affects private sector entities, and the 
impact is less than $100 million.

List of Subjects in 48 CFR Parts 932 and 970

    Government procurement.

    Issued in Washington, D.C. on January 5, 1998.
Richard H. Hopf,
Deputy Assistant Secretary for
Procurement and Assistance Management.

    For the reasons set out in the preamble, Chapter 9 of Title 48 of 
the Code of Federal Regulations is amended as set forth below.
    1. The authority citation for Part 932 continues to read as 
follows:

    Authority: 42 U.S.C. 7254; 40 U.S.C. 486(c)

PART 932--CONTRACT FINANCING

    2. Section 932.006-4 is added before Subpart 932.1 to read as 
follows:


932.006-4  Procedures.

    (a) The remedy coordination official shall follow the procedures 
identified in FAR 32.006-4.
    (b) [Reserved]
    3. The authority citation for Part 970 continues to read as 
follows:

    Authority: Sec. 161 of the Atomic Energy Act of 1954 (42 U.S.C. 
2201), sec 644 of the Department of Energy Organization Act, Pub. L. 
95-91 (42 U.S.C. 7254).

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

    4. Subpart 970.25 is added to read as follows:

[[Page 5274]]

970.25  Foreign acquisition.


970.2501  Severance payments for foreign nationals.


970.2501  Severance payments for foreign nationals.

    (a) The Head of the Contracting Activity may waive the application 
of the provisions of 48 CFR 970.3102-2(i)(2)(iv) and (v) in accordance 
with 41 U.S.C. 256(e)(2) if:
    (1) The application of the provisions would adversely affect the 
continuation of a program, project, or activity that provides 
significant support services for Department of Energy employees posted 
outside the United States;
    (2) The contractor has taken, or plans to take, appropriate actions 
within its control to minimize the amount and number of incidents of 
payment of severance pay to employees under the contract who are 
foreign nationals; and
    (3) The payment of severance pay under the contract is necessary to 
comply with a law that is generally applicable to a significant number 
of businesses in the country in which the foreign national receiving 
the payment performed services or is necessary to comply with a 
collective bargaining agreement.
    (b) Solicitation provision and contract clause. The solicitation 
provision at 970.5204-84, Waiver of Limitations on Severance Payments 
to Foreign Nationals, shall be included in solicitations and resulting 
contracts involving support services for Department of Energy 
operations outside of the United States expected to exceed $500,000, 
when, prior to the solicitation, the limitations on severance to 
foreign nationals has been waived. Use the Alternate 1 contract clause 
in solicitations and resulting contracts, when the Head of the 
Contracting Activity may waive the limitations on severance to foreign 
nationals after contract award.
    5. Section 970.3101-3 is amended by adding paragraphs (b), (c), and 
(d) to read as follows:


970.3101-3  General basis for reimbursement of costs.

* * * * *
    (b) A contracting officer shall not resolve any questioned costs 
until the contracting officer has obtained:
    (1) Adequate documentation with respect to such costs; and
    (2) The opinion of the Department of Energy's auditor on the 
allowability of such costs.
    (c) The contracting officer shall ensure that the documentation 
supporting the final settlement addresses the amount of the questioned 
costs and the subsequent disposition of such questioned costs.
    (d) The contracting officer shall ensure, to the maximum extent 
practicable, that the Department of Energy's auditor is afforded an 
opportunity to attend any negotiation or meeting with the contractor 
regarding a determination of allowability.
    6. Section 970.3101-7 is added to read as follows:


970.3101-7  Cost submission, certification, penalties, and waivers.

    (a) The contracting officer shall require that management and 
operating contractors provide a submission for settlement of costs 
incurred during the period stipulated on the submission and a 
certification that the costs included in the submission are allowable. 
The contracting officer shall assess a penalty if unallowable costs are 
included in the submission. Unallowable costs are either expressly 
unallowable or determined unallowable.
    (1) An expressly unallowable cost is a particular item or type of 
cost which, under the express provisions of an applicable law, 
regulation, or this contract, is specifically named and stated to be 
unallowable.
    (2) A cost determined unallowable is one which, for that contractor
    (i) Was subject to a contracting officer's final decision and not 
appealed;
    (ii) The Department's Board of Contract Appeals or a court has 
previously ruled as unallowable; or
    (iii) Was mutually agreed to be unallowable.
    (b) If, during the review of the submission, the contracting 
officer determines that the submission contains an expressly 
unallowable cost or a cost determined to be unallowable prior to the 
submission, the contracting officer shall assess a penalty.
    (c) If the contracting officer determines that a cost submitted by 
the contractor in its submission for settlement is
    (1) Expressly unallowable, then the contracting officer shall 
assess a penalty in an amount equal to the disallowed cost allocated to 
this contract plus interest on the paid portion of the disallowed cost. 
Interest shall be computed from the date of overpayment to the date of 
repayment using the interest rate specified by the Secretary of the 
Treasury pursuant to 50 U.S.C. 1215.
    (2) Determined unallowable, then the contracting officer shall 
assess a penalty in an amount equal to two times the amount of the 
disallowed cost allocated to this contract.
    (d) The contracting officer may waive the penalty provisions when
    (1) The contractor withdraws the submission before the formal 
initiation of an audit of the submission and submits a revised 
submission;
    (2) The amount of the unallowable costs allocated to covered 
contracts is $10,000 or less; or
    (3) The contractor demonstrates to the contracting officer's 
satisfaction that:
    (i) It has established appropriate policies, personnel training, 
and an internal control and review system that provides assurances that 
unallowable costs subject to penalties are precluded from the 
contractor's submission for settlement of costs; and
    (ii) The unallowable costs subject to the penalty were 
inadvertently incorporated into the submission.
    (e) The Head of the Contracting Activity may waive the 
certification when--
    (1) It is determined that it would be in the best interest to waive 
such certification; and
    (2) The Head of the contracting Activity states in writing the 
reasons for that determination and makes such determination available 
to the public.
    7. Section 970.3102 is amended by removing the last sentence of the 
existing paragraph, designating the existing paragraph as (a) and 
adding a new paragraph (b) to read as follows.


970.3102  Application of cost principles.

* * * * *
    (b) This section does not cover every element of cost. Failure to 
include any item of cost does not imply that it is either allowable or 
unallowable. The determination of allowability shall be based on the 
principles and standards in this subpart and the treatment of similar 
or related items. When more than one paragraph in this section is 
relevant to a contractor cost, the cost shall be apportioned among the 
applicable subsections, and the determination of allowability of each 
portion shall be based on the guidance contained in the applicable 
subsection. As an example, the cost of meals while in a travel status 
would normally be allowable if reasonable. However, the cost of 
alcoholic beverages associated with a meal would be unallowable. In no 
case shall costs made specifically unallowable under one cost principle 
be made allowable under another cost principle.
    8. Section 970.3102-2 is amended by adding a sentence at the end of 
paragraph (i)(2) introductory text and adding new paragraphs 
(i)(2)(iv), (v), (vi), and (p) to read as follows:

[[Page 5275]]

970.3102-2  Compensation for personal services.

* * * * *
    (i) * * *
    (2) * * * In addition, paragraphs (i)(2)(iv) and (v) of this 
section apply if the severance cost is for foreign nationals employed 
outside the United States.
* * * * *
    (iv) Notwithstanding the provision of paragraph (c) of this 
section, which references geographic area, under 41 U.S.C. 
256(e)(1)(M), the costs of severance payments to foreign nationals 
employed under a service contract performed outside the United States 
are unallowable to the extent that such payments exceed amounts 
typically paid to employees providing similar services in the same 
industry in the United States.
    (v) Further, under 41 U.S.C. 256(e)(1)(N), the costs of severance 
payments referred to in paragraph (i)(2)(iv) of this section are 
unallowable if the termination of employment is the result of the 
closing of, or curtailment of, activities at a United States facility 
in that country at the request of the government of that country.
    (vi) The Head of the Contracting Activity may waive the application 
of the provisions of paragraphs (i)(2)(iv) and (v) of this section 
under the conditions specified in subpart 970.25.
* * * * *
    (p) Special compensation. The following costs are unallowable:
    (1) Special compensation to employees pursuant to agreements which 
permit payments in excess of the contractor's normal severance pay 
practices, if their employment terminates following a change in the 
management control over, or ownership of, the contractor or a 
substantial portion of its assets.
    (2) Special compensation to employees pursuant to agreements which 
permit payments resulting from a change, whether actual or prospective, 
in the management control over, or ownership of, the contractor or a 
portion of its assets which is contingent upon the employee remaining 
with the contractor for a stated period of time.
    9. Section 970.3102-5 is revised to read as follows:


970.3102-5  Employee morale, health, welfare, food service, and 
dormitory costs.

    (a) Employee morale, health, and welfare activities are those 
services or benefits provided by the contractor to its employees to 
improve working conditions, employer-employee relations, employee 
morale, and employee performance. These activities include such items 
as house or employee publications, health or first-aid clinics, 
wellness/fitness centers, employee counseling services, awards for 
performance or awards made in recognition of employee achievements 
pursuant to an established contractor plan or policy, and, for the 
purpose of this section, food service and dormitory costs. However, 
these activities do not include, and should be differentiated from 
compensation for personal services as defined in 970.3102-2. Food and 
dormitory services include operating or furnishing facilities for 
cafeterias, dining rooms, canteens, lunch wagons, vending machines, 
living accommodations, or similar types of services for the 
contractor's employees at or near the contractor's facilities or site 
of the contract work.
    (b) Costs of recreation, registration fees of employees 
participating in competitive fitness promotions, team activities, and 
sporting events are unallowable, except for the costs of employees' 
participation in company sponsored intramural sports teams or employee' 
organizations designed to improve company loyalty, team work, or 
physical fitness.
    (c) Except as limited by paragraph (d) of this section, the 
aggregate of costs incurred on account of all activities mentioned in 
paragraph (a) of this section, less income generated by all such 
activities, is allowable to the extent that the net aggregate cost of 
all such activities, as well as the net cost of each individual 
activity, is reasonable and allocable to the contract work. 
Additionally, advance understandings with respect to the costs 
mentioned in paragraph (a) of this section are to be reached prior to 
the incurrence of these costs as required in 48 CFR 970.3101-6.
    (d) Losses from the operation of food or dormitory services may be 
included as costs incurred under paragraph (c) of this section only if 
the contractor's objective is to operate such services at least on a 
break-even basis. Losses sustained because food services or lodging 
accommodations are furnished without charge or at prices or rates which 
obviously would not be conducive to operation on a break-even basis are 
not allowable, except in those instances where the contractor can 
demonstrate that unusual circumstances exist, such that, even with 
efficient management, operation of the services on a break-even basis 
would require charging inordinately high prices, or prices or rates 
higher than those charged by commercial establishments offering the 
same services in the same geographical areas. Typical examples of such 
unusual circumstances are:
    (1) Where the contractor must provide food or dormitory services at 
remote locations where adequate commercial facilities are not 
reasonably available, or
    (2) Where it is necessary to operate a facility at a lower volume 
than the facility could economically support. Cost of food and 
dormitory services shall include an allocable share of indirect 
expenses pertaining to these activities.
    (e) In those situations where the contractor has an arrangement 
authorizing an employee association to provide or operate a service 
such as vending machines in the contractor's plant, and retain the 
profits derived therefrom, such profits shall be treated in the same 
manner as if the contractor were providing the service, except as 
provided in paragraph (f) of this section.
    (f) Contributions by the contractor to an employee organization, 
including funds set over from vending machines receipts or similar 
sources, may be included as cost incurred under paragraph (c) of this 
section, only to the extent that the contractor demonstrates that an 
equivalent amount of the costs incurred by the employee organization 
would be allowable, if incurred by the contractor directly.
    10. Section 970.3102-7 is revised to read as follows:


970.3102-7  Political activity costs.

    The following costs are unallowable, except for costs associated 
with providing information pursuant to 970.5204-17, unless approved by 
the contracting officer: Contractor costs incurred to influence either 
directly or indirectly--
    (a) Legislative action on any matter pending before Congress, a 
State legislature, or a legislative body of a political subdivision of 
a State; or
    (b) Federal, State, or executive body of a political subdivision of 
a State action on regulatory and contract matters.
    11. Section 970.3102-17 Travel costs, is amended by revising the 
paragraph heading for (b) and by adding paragraph (b)(3) to read as 
follows:


970.3102-17  Travel costs.

* * * * *
    (b) Government-owned, commercial rental, and company-furnished 
vehicles. * * *
    (3) The costs of contractor-owned or -leased vehicles include the 
costs of lease, operation, maintenance, depreciation, insurance, and 
other similar costs. These costs are unallowable except as approved by 
the contracting officer. That portion of the

[[Page 5276]]

cost of company-furnished automobiles that relates to personal use by 
employees, including transportation to and from work is unallowable.
* * * * *
    12. Section 970.3103 is amended by revising paragraph (b) to read 
as follows:


970.3103  Contract clauses.

* * * * *
    (b) The political activity cost prohibition clause at 48 CFR 
970.5204-17 shall be included in all M&O contracts.
* * * * *
    13. Section 970.3272 is added to read as follows:

Subpart 970.32--Contract Financing


970.3272  Reduction or suspension of advance, partial, or progress 
payments.

    (a) The procedures prescribed at FAR 32.006 shall be followed.
    (b) The agency head has delegated their responsibilities under this 
section to the Senior Procurement Executive.
    (c) The remedy coordination official is responsible for receiving, 
assessing, and making recommendations to the Senior Procurement 
Executive.
    (d) The contracting officer shall insert the clause at 48 CFR 
970.5204-85, Reduction or suspension of contract payments, in 
management and operating contracts.
    14. Section 970.5204-13, Allowable costs and fixed-fee (management 
and operating contracts), is amended by revising clause paragraphs 
(d)(8)(iv), (e)(11), (e)(31); and adding new paragraphs (e)(37) and 
(38) to read as follows:


970.5204-13  Allowable costs and fixed-fee (management and operating 
contracts).

* * * * *
    (d) * * *
    (8) * * *
    (iv) Employee relations, welfare, morale, etc.; programs 
including incentive or suggestion awards; employee counseling 
services, health or first-aid clinics; house or employee 
publications; and wellness/fitness centers;
* * * * *
    (e) * * *
    (11) Entertainment, including costs of amusement, diversion, 
social activities; and directly associated costs such as tickets to 
shows or sports events, meals, lodging, rentals, transportation, and 
gratuities; costs of membership in any social, dining or country 
club or organization.
* * * * *
    (31) Contractor costs incurred to influence either directly or 
indirectly--
    (i) Legislative action on any matter pending before Congress, a 
State legislature, or a legislative body of a political subdivision 
of a State; or
    (ii) Federal, State, or executive body of a political 
subdivision of a State action on regulatory and contract matters as 
described in the ``Political Activity Cost Prohibition'' clause of 
this contract.
 * * * * *
    (37) Costs of gifts; however, gifts do not include awards for 
performance or awards made in recognition of employee achievements 
pursuant to an established contractor plan or policy.
    (38) The costs of recreation, registration fees of employees 
participating in competitive fitness promotions, team activities, 
and sporting events except for the costs of employees' participation 
in company sponsored intramural sports teams or employee 
organizations designed to improve company loyalty, team work, or 
physical fitness.

    15. Section 970.5204-14 is amended by revising clause paragraphs 
(d)(8)(iv), (e)(9), (e)(29); and adding new paragraphs (e)(35) and 
(e)(36) to read as follows:


970.5204-14  Allowable costs and fixed-fee (support contracts).

* * * * *
    (d) * * *
    (8) * * *
    (iv) Employee relations, welfare, morale, etc.; programs 
including incentive or suggestion awards; employee counseling 
services, health or first-aid clinics; and house or employee 
publications; and wellness/fitness centers;
* * * * *
    (e) * * *
    (9) Entertainment, including costs of amusement, diversion, 
social activities; and directly associated costs such as tickets to 
shows or sports events, meals, lodging, rentals, transportation, and 
gratuities; costs of membership in any social, dining or country 
club or organization.
* * * * *
    (29) Contractor costs incurred to influence either directly or 
indirectly--
    (i) Legislative action on any matter pending before Congress, a 
State legislature, or a legislative body of a political subdivision 
of a State; or
    (ii) Federal, State, or local executive branch action on 
regulatory and contract matters as described in the ``Political 
Activity Cost Prohibition'' clause of this contract.
* * * * *
    (35) Costs of gifts; however, gifts do not include awards for 
performance or awards made in recognition of employee achievements 
pursuant to an established contractor plan or policy.
    (36) The costs of recreation, registration fees of employees 
participating in competitive fitness promotions, team activities, 
and sporting events except for the costs of employees' participation 
in company sponsored intramural sports teams or employee 
organizations designed to improve company loyalty, team work, or 
physical fitness.

    16. Section 970.5204-17 is amended by revising the section heading 
and clause heading and adding clause paragraph (a)(6) to read as 
follows:


970.5204-17  Political activity cost prohibition.

* * * * *

Political Activity Cost Prohibition (Dec. 1997)

    (a) * * *
    (6) Contractor costs incurred to influence (directly or 
indirectly) Federal, State, or local executive branch action on 
regulatory and contract matters.
* * * * *
    17. Section 970.5204-84 is added to read as follows:


970.5204-84  Waiver of limitations on severance payments to foreign 
nationals.

    As prescribed in subpart 970.25, insert the following solicitation 
provision, or its alternate 1, clause:

    Waiver of Limitations on Severance Payments to Foreign Nationals 
(Dec. 1997).
    Pursuant to Department of Energy Acquisition Regulation (DEAR) 
subpart 970.25, the cost allowability limitations in (DEAR) subpart 
970.3102-2(i)(iv) and (v) are waived for this contract.
    Alternate 1 (Dec. 1997). Substitute the following paragraph for 
the foregoing solicitation provision when the waiver of limitations 
to severance payments for foreign nationals has not been 
predetermined by the Department.
    Pursuant to Department of Energy Acquisition Regulation (DEAR) 
subpart 970.25, the Department will consider waiving the cost 
allowability limitations in (DEAR) 48 CFR 970.3102-2(i)(iv) and (v) 
for this contract.

    18. Section 970.5204-85 is added to read as follows:


970.5204-85  Reduction or suspension of advance, partial, or progress 
payments upon finding of substantial evidence of fraud.

    As prescribed in 48 CFR 970.3272, insert the following clause:

Reduction or Suspension of Advance, Partial, or Progress Payments (Dec. 
1997)

    (a) The contracting officer may reduce or suspend further 
advance, partial, or progress payments to the contractor upon a 
written determination by the Secretary that substantial evidence 
exists that the contractor's request for advance, partial, or 
progress payment is based on fraud.
    (b) The contractor shall be afforded a reasonable opportunity to 
respond in writing.

[End of Clause]

[FR Doc. 98-2049 Filed 1-30-98; 8:45 am]
BILLING CODE 6450-01-P


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