Vol. 79 Tuesday, 

No. 62 April 1, 2014 

Part II 

Department of Energy 

48 CFR Parts 915, 934, 942, et al. 

Acquisition Regulation: Contractor Business Systems—Definition and 

Administration; Proposed Rule 


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DEPARTMENT OF ENERGY 

48 CFR Parts 915, 934, 942, 944, 945 

and 952 

RIN 1991–AC01 

Acquisition Regulation: Contractor 

Business Systems—Definition and 

Administration 

AGENCY: Department of Energy. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Department of Energy 

(DOE) is proposing to amend the 

Department of Energy Acquisition 

Regulation (DEAR) to define contractor 

business system as accounting system, 

estimating system, purchasing system, 

earned value management system 

(EVMS), and property management 

system. DOE is proposing to implement 

compliance enforcement mechanisms in 

the form of a contractor business system 

clause and related clauses that includes 

a provision that would allow 

contracting officers to withhold a 

percentage of payments, under certain 

conditions, when a contractor’s business 

system contains significant deficiencies. 

DATES: Written comments on the 

proposed rulemaking must be received 

on or before close of business June 2, 

2014. 

ADDRESSES: You may submit comments, 

identified by ‘‘DEAR—Contractor 

Business Systems—Definition and 

Administration and RIN 1991–AC01,’’ 

by any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email to: DEARrulemaking@

hq.doe.gov mailto:. Include DEAR: 

Contractor Business Systems— 

Definition and Administration and RIN 

1991–AC01 in the subject line of the 

message. 

• Mail to: U.S. Department of Energy, 

Office of Procurement and Assistance 

Management, MA–611, 1000 

Independence Avenue SW., 

Washington, DC 20585. Comments by 

email are encouraged. 

FOR FURTHER INFORMATION CONTACT: 

Barbara Binney, (202) 287–1340 or 

barbara.binney@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

II. Section-by-Section Analysis 

III. Procedural Requirements: 

A. Review Under Executive Orders 12866 

and 13563 

B. Review Under Executive Order 12988 

C. Review Under the Regulatory Flexibility 

Act 

D. Review Under the Paperwork Reduction 

Act 

E. Review Under the National 

Environmental Policy Act 

F. Review Under Executive Order 13132 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 13211 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Approval by the Office of the Secretary 

of Energy 

I. Background 

The purpose of this rulemaking is to 

define a contractor’s business system as 

their accounting system, estimating 

system, purchasing system, earned 

value management system (EVMS), and 

property management system. DOE 

proposes to implement compliance 

enforcement mechanisms in the form of 

a business system clause and related 

clauses that allow contracting officers to 

withhold a percentage of payments, 

under certain conditions, when a 

contractor’s business system contains 

significant deficiencies. DOE proposes, 

when the prime contract is awarded to 

a large business, to include a contractor 

teaming arrangement, and the total 

contract value exceeds $50 million, 

including options; or when the prime 

contract totaling $10 million or more 

including options (but less than $50 

million) is awarded to a large business, 

to include a contractor teaming 

arrangement, and the contracting officer 

determines it to be in the best interest 

of the Government (e.g., significant 

estimating problems are believed to 

exist or the contractor’s sales are 

predominantly Government) to 

prescribe these clauses for contracts in 

support of Capital Asset Projects (other 

than management and operating 

contracts), as prescribed in DOE Order 

(DOE O) 413.3B, Program and Project 

Management for the Acquisition of 

Capital Assets, or non-capital asset 

projects. Under the proposed rule, DOE 

could withhold a percentage of interim 

payments invoiced under—cost 

reimbursement contracts; incentive type 

contracts; time-and-materials contracts 

and; labor-hour contracts; as well as 

progress payments; and performancebased payments. The proposed changes 

affect DOE, which includes the National 

Nuclear Security Administration 

(NNSA), as well as DOE contractors, 

which include both DOE and NNSA 

contractors. The proposed changes do 

not affect Management & Operating 

(M&O) contracts. M&O contracts include 

M&O specific clauses that need to be 

considered and possibly revised to 

incorporate the clauses for the business 

system. For example, DOE authorizes 

the M&O contractor to finance contract 

performance by use of Special Financial 

Institution Accounts and requires the 

M&O contractor to maintain integrated 

accounting systems, under which the 

contractors budgeting and accounting 

follow DOE’s Accounting Handbook. 

Because of these differences the 

business system clause and related 

clauses for the M&O contracts will be 

different from this rule; it is our intent 

to publish a separate proposed rule for 

M&O contracts at a later time. 

The proposed changes include policy 

revisions under DOE contracts. 

Contractor business systems and 

internal controls are the first line of 

defense against waste, fraud, and abuse. 

Weak control systems increase the risk 

of unallowable and unreasonable costs 

on Government contracts. To improve 

the effectiveness of DOE’s oversight of 

contractor business systems, DOE is 

considering a rule to clarify the 

definition and administration of 

contractor business systems. It applies 

to designated fixed-price contracts 

awarded to a large business on the basis 

of adequate price competition without 

submission of cost or pricing data or 

covered contracts subject to the Cost 

Accounting Standards under 41 U.S.C. 

chapter 15, as implemented in 

regulations found at 48 CFR 9903.201– 

1(a) and not exempted at 9903.201– 

1(b)(1) through (14). DOE proposes to: 

1. Define contractor business system 

as estimating system, purchasing 

system, earned value management 

system (EVMS), accounting system and 

property management system. 

2. Implement compliance 

enforcement mechanisms in the form of 

a business system clause that allows 

contracting officers to withhold a 

percentage of payments, under certain 

conditions, when a contractor’s business 

system contains significant deficiencies. 

Significant deficiency means a 

shortcoming in the system that 

materially affects the ability of officials 

of the Department of Energy to rely 

upon information produced by the 

system that is needed for management 

purposes. Under such circumstances, 

payments could be withheld on— 

Æ Interim payments under— 

• Cost reimbursement contracts; 

• Incentive type contracts; 

• Time-and-materials contracts; or 

• Labor-hour contracts; 

Æ Progress payments to include fixedprice contracts; and 

Æ Performance-based payments to 

include fixed-price contracts. 

If the contracting officer issues the 

final determination with a notice to 

withhold payments for significant 

deficiencies in a contractor business 

system required under the contract, the 

contracting officer will withhold no 

more than five percent of amounts for 


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one or more significant deficiencies in 

any single contractor business system 

and no more than ten percent of 

amounts for significant deficiencies in 

multiple contractor business system by 

directing the contractor, in writing, to 

withhold five percent or ten percent 

from its invoices until the contracting 

officer has determined that the 

contractor has corrected all significant 

deficiencies as directed by the 

contracting officer’s final determination. 

When the contracting officer has 

determined that all significant 

deficiencies are corrected, the 

contracting officer will direct the 

contractor to discontinue the payment 

withholding from invoices and 

authorize the contractor to invoice for 

any monies previously withheld that are 

not also being withheld due to other 

significant deficiencies. This final 

determination is not a final decision 

within the meaning of the Contract 

Disputes Act of 1978 (41 U.S.C. 7101, et 

seq.). 

At the end of contract performance, if 

significant deficiencies remain in the 

disapproved system or systems and 

payment withholdings are in effect, the 

payment withholdings will be released 

during contract closeout. However, the 

release of the payment withholdings 

from one contract will not mean the 

system is approved. If there are other 

contracts where payment withholdings 

are in effect, the payment withholdings 

will continue on those contracts. These 

payment withholding are contract 

financing payments, and therefore are 

not subject to the interest penalty 

provisions of the Prompt Payment Act. 

When the Final Rule becomes 

effective, the clauses will be 

incorporated into solicitations that meet 

the established applicability 

requirements and will apply 

prospectively after being incorporated 

into affected contracts. Affected 

contracts are contracts awarded to large 

businesses, to include teaming 

arrangements, in support of Capital 

Asset Projects (other than management 

and operating contracts), as prescribed 

in DOE Order (DOE O) 413.3B, Program 

and Project Management for the 

Acquisition of Capital Assets, and noncapital asset projects when the total 

contract value exceeds $50 million, 

including options; or when the prime 

contract totaling $10 million or more, 

including options (but less than $50 

million) is awarded to a large business, 

to include a contractor teaming 

arrangement, and the contracting officer 

determines it to be in the best interest 

of the Government (e.g., significant 

estimating problems are believed to 

exist or the contractor’s sales a 

predominantly Government). After the 

effective date of the Final Rule, 

contracting officers will negotiate 

bilaterally with contractors who hold 

affected contracts to incorporate the 

changes of the Final Rule into their 

contracts within 60 days. Contracting 

officers must also incorporate the 

changes of the Final Rule into affected 

contracts before extending them or 

exercising options under them by 

negotiating bilaterally with the 

contractors. 

DOE notes that the Department of 

Defense (DoD) clauses were considered 

in drafting the proposed clauses. The 

system criteria in the clauses are based 

on the DoD clauses. Because the 

applicable DOE contracts are performed 

mostly at the DOE sites, each contractor 

will provide documentation to support 

the system criteria that they are using 

for that DOE contract. In circumstances 

where the contractor is using the same 

business system for a DoD contract and 

a DOE contract, the contractor would 

explain this circumstance and provide 

the results of DoD’s review of their 

business system so that DOE can 

coordinate with DoD concerning use of 

the business system under the DOE 

contract. 

Today’s proposed rule does not alter 

substantive rights or obligations under 

current law. 

DOE requests comments on all aspects 

of this proposed rule. 

II. Section-by-Section Analysis 

1. Part 915 is amended to add new 

Sections 915.407 Special cost or pricing 

areas, 915.407–5 Estimating system, and 

915.407–5–70 Disclosure, maintenance, 

and review requirements. Section 

915.407–5–70 establishes the policy that 

DOE contractors have acceptable 

estimating systems. It adds definitions, 

describes applicability requirements, 

system criteria, and provides procedures 

for addressing significant deficiencies in 

estimating system. 

The applicable contract is subject to 

estimating system disclosure, 

maintenance, and review requirements 

for prime contractors (large business to 

include contractor teaming arrangement, 

as defined at 48 CFR 9.601(1)) when the 

total contract value exceeds $50 million, 

including options; or when the prime 

contract totaling $10 million or more 

including options (but less than $50 

million) is awarded to a large business, 

to include a contractor teaming 

arrangement and the contracting officer 

determines it to be in the best interest 

of the Government (e.g., significant 

estimating problems are believed to 

exist). Also, Subpart 952 is amended to 

add the related clause 952.215–71 Cost 

Estimating System Requirements. A 

contractor’s acceptable estimating 

system accurately describes the policies, 

procedures, and practices that the 

contractor currently uses in preparing 

cost proposal (budgeting planning 

controls, generating estimates of costs 

and other data included in proposals) 

with sufficient detail for the 

Government to reasonably make an 

informed judgment regarding the 

acceptability of the contractor’s 

estimating practices. 

In the event any significant 

deficiencies are found in the estimating 

system, the contracting officer will 

provide to the contractor an initial 

determination of a significant deficiency 

and allow the contractor to respond 

within 30 days if the contractor 

disagrees. If the contracting officer does 

not receive a written response from the 

contractor within 30 days, the 

contractor will be deemed to agree with 

the initial determination. The 

contracting officer will evaluate the 

contractor’s response or the contractor’s 

lack of response and notify the 

contractor of a final determination 

concerning any remaining significant 

deficiencies, adequacy of any proposed 

or completed corrective action, and 

system disapproval if one or more 

significant deficiencies remain. If the 

contractor receives a final 

determination, the contractor shall, 

within 45 days, correct the significant 

deficiencies or submit an acceptable 

corrective action plan showing 

milestones and actions to eliminate the 

significant deficiencies. When the 

contracting officer makes a final 

determination to disapprove the 

contractor’s estimating system, the 

contracting officer will withhold 

payments in accordance with the clause 

952.242–71, Contractor Business 

Systems. 

2. Section 915.408–70 is amended by 

revising the language to add instructions 

on when to use the cost estimating 

clause. 

3. Subchapter E is amended to add a 

new part 934—Major System 

Acquisition and Subpart 934.2—Earned 

Value Management System, and 

Sections 934.201–70 and 934.203. 

Subpart 952 is amended to add the 

related provision and clause, 952.234– 

70 Notice of Earned Value Management 

System, and 952.234–71 Earned Value 

Management System, respectively. The 

Subpart and Sections add DEAR text, a 

provision, and a clause addressing 

earned value management policy for 

DOE contracts. The rule supplements 

the final Federal Acquisition Regulation 

(FAR) rule published at 71 FR 38238 on 

July 5, 2006, and establishes DOE 


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specific earned value management 

requirements, as permitted by the FAR. 

This section establishes policy that DOE 

contractors have an acceptable earned 

value management system (EVMS). It 

adds definitions, applicability 

requirements, system criteria, and 

provides procedures for addressing 

significant deficiencies in estimating 

systems. 

EVMS requirements apply to Capital 

Asset Projects on cost or incentive 

contracts and subcontracts based on 

dollar thresholds. For contracts valued 

at $20,000,000 or more, the contractor 

shall have an EVMS determined to be in 

compliance with the guidelines in the 

American National Standards Institute/ 

Electronic Industries Alliance Standard 

748, EVMS (ANSI/EIA–748). In 

addition, for contracts valued at 

$20,000,000 but not exceeding 

$50,000,000, the contractor shall 

conduct self-certification review and 

periodic surveillance reviews. 

When the contractor has two or more 

contracts in support of capital asset 

projects at DOE and the total contract 

value for a contract is $20,000,000 or 

greater and the combined total contract 

values for these contracts is $50,000,000 

or more, those contracts shall be subject 

to certification and surveillance reviews 

for contract values for $50,000,000 and 

above. For example, the contractor has 

3 contracts in support of a DOE capital 

asset projects. Contract A is for 

$15,000,000. Contract B is for 

$21,000,000. Contract C is for 

$30,000,000. Contracts B and C are each 

by themselves $20,000,000 or greater. 

The combined total contract values for 

these two contracts (B at $21,000,000 

and C at $30,000,000) is $50,000,000 or 

more. Therefore, DOE would conduct 

certification reviews and surveillance 

reviews for these 2 contracts. 

When the contract value is 

$50,000,000 but not exceeding 

$100,000,000, the applicable DOE 

Program Office will conduct 

certification reviews and periodic 

surveillance reviews to ensure 

continued compliance with ANSI/EIA– 

748. 

When the contract value is 

$100,000,000 or more, DOE Office of 

Acquisition and Project Management 

will conduct certification reviews and 

periodic surveillance reviews to ensure 

continued compliance with ANSI/EIA– 

748. 

Also for solicitations and contracts 

valued at $20,000,000 or more, DOE will 

use the provision 952.234–70, Notice of 

Earned Value Management System, 

instead of the provisions at FAR 52.234– 

2, Notice of Earned Value Management 

System—Pre-Award IBR, and FAR 

52.234–3, Notice of Earned Value 

Management System—Post-Award IBR; 

and the clause at 952.234–71, Earned 

Value Management System, instead of 

the clause at FAR 52.234–4, Earned 

Value Management System. For 

proposals in the amount of $50,000,000 

or more, the provision 952.234–70, 

Notice of Earned Value Management 

System, requires the offeror to comply 

with the EVMS guidelines of the ANSI/ 

EIA–748. If offeror proposes to use a 

system that has not been determined to 

be in compliance with ANSI/EIA–748, 

the offeror shall submit a 

comprehensive plan for compliance 

with the guidelines in ANSI/EIA–748. 

For a contract valued at $50 million 

or more, the clause 952.234–71, Earned 

Value Management System, requires the 

contractor to use an EVMS that has been 

determined to be acceptable by DOE. If, 

at the time of award, the contractor’s 

EVMS has not been determined by DOE 

to be in compliance with the EVMS 

guidelines, the contractor shall apply its 

current system to the contract and shall 

take necessary actions to meet the 

milestones in the contractor’s EVMS 

plan. 

In the event any significant 

deficiencies are found in the earned 

value management system, the 

contracting officer will provide to the 

contractor an initial determination of a 

significant deficiency and allow the 

contractor 30 days to respond if the 

contractor disagrees. If there is no 

written response from the contractor 

within 30 days, it will indicate that the 

contractor agrees with the initial 

determination. The contracting officer 

will evaluate the contractor’s response 

or the contractor’s lack of response and 

notify the contractor of a final 

determination concerning any 

remaining significant deficiencies; 

adequacy of any proposed or completed 

corrective action; system 

noncompliance when the EVMS fails to 

comply with ANSI/EIA–748 guidelines; 

and system disapproval if EVMS 

validation is not successfully completed 

or that there is one or more significant 

deficiencies in guidelines. 

The contracting officer’s final 

determination of the contractor’s EVMS 

will indicate that the system is 

acceptable and approved with no 

significant deficiencies remaining, or 

that the system contains one or more 

significant deficiencies in high-risk 

guidelines in ANSI/EIA–748 standards 

(guidelines 1, 3, 6, 7, 8, 9, 10, 12, 16, 

21, 23, 26, 27, 28, 30, or 32). When the 

contracting officer determines that the 

existing earned value management 

system contains one or more significant 

deficiencies in one or more of the 

remaining 16 guidelines in ANSI/EIA– 

748 standards, the contracting officer 

shall use discretion to disapprove the 

system based on input received from 

functional specialists and the auditor. 

The contractor will have 45 days to 

either correct the significant 

deficiencies or submit an acceptable 

corrective action plan showing 

milestones and actions to eliminate the 

significant deficiencies. When the 

contracting officer makes a final 

determination to disapprove the 

contractor’s system, the contracting 

officer will withhold payments in 

accordance with the clause 952.242–71, 

Contractor Business Systems. 

4. Part 942 is amended to add a new 

Subpart 942.70—Contractor Business 

System, Sections 942.7001 through 

942.7005. Subpart 952 is amended to 

add the related clause 952.242–71, 

Contractor Business System. The 

proposed amendments will permit a 

contracting officer to withhold payment 

not to exceed five percent for one or 

more significant deficiencies in any 

single contractor business system and 

not to exceed ten percent for significant 

deficiencies in multiple contractor 

business systems after making a final 

determination to disapprove a 

contractor’s business system for 

designated fixed-price contracts 

awarded to a large business on the basis 

of adequate price competition with or 

without submission of cost or pricing 

data; or for covered contract(s) subject to 

the Cost Accounting Standards under 41 

U.S.C. chapter 15, as implemented in 

regulations found at 48 CFR 9903.201– 

1(a) and are not exempted at (b)(1) 

through (14). 

In solicitations and contracts in 

support of a Capital Asset Project (other 

than a management and operating 

contract), as prescribed in DOE Order 

413.3B, or for a non-capital asset 

project, for prime contractors (large 

business to include contractor teaming 

arrangements), when the total contract 

value exceeds $50 million, including 

options; or when the prime contract 

totaling $10 million or more, including 

options, (but less than $50 million) is 

awarded to a large business, to include 

a contractor teaming arrangement and 

the contracting officer determines it to 

be in the best interest of the Government 

(e.g., significant estimating problems are 

believed to exist) use the clause 

952.242–71, Contractor Business 

System. Also, the solicitation or contract 

will include any of the following 

clauses: 952.215–71, Cost Estimating 

System Requirements; 952.234–71, 

Earned Value Management System; 

952.242–72, Accounting System 

Administration; 952.244–71, Contractor 


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Purchasing System Administration; and 

952.245–70, Contractor Property 

Management System Administration. 

The requirements of this subpart 

942.70 will not apply to acquisitions 

for— 

• Small business set-asides; 

• Energy savings performance 

contracts as required by the Energy 

Policy Act of 1992; 

• Services for— 

Æ ‘‘Advisory and assistance 

services’’ as defined at 48 CFR 2.101, 

unless otherwise designated as 

applicable by the Senior Procurement 

Executive or the Head of the Contracting 

Activity; 

Æ Security Guards; 

Æ Housekeeping; 

Æ Education and training; 

Æ National Environmental Policy 

Act of 1969 Support; or 

Æ Utilities; 

• Office of the Deputy Administrator 

for Naval Reactors; 

• Interagency acquisitions in 

accordance with 48 CFR 17.5; or 

• Orders against another Federal 

agency contract, e.g. Federal Supply 

Services (48 CFR 8.4). 

During contract performance, the 

contracting officer, or designee, shall 

evaluate the contractor’s business 

system performance and compliance in 

accordance with 48 CFR 42.15 and DOE 

procedures. At the end of contract 

performance, if significant deficiencies 

remain in the disapproved system or 

systems and payment withholdings are 

in effect, the payment withholdings will 

be released during contract closeout. 

However, the release of the payment 

withholdings from one contract will not 

mean the system is approved. If there 

are other contracts where payment 

withholdings are in effect, the payment 

withholdings will continue on those 

contracts. These payment withholding 

are contract financing payments; 

therefore, these payments withholdings 

are not subject to the interest penalty 

provisions of the Prompt Payment Act. 

5. Part 942 is amended to add a new 

Subpart 942.71—Contractor Accounting 

System and Related Controls, Sections 

942.7101, 942.7102 and 942.7103. 

Subpart 952 is amended to add the 

related clause 952.242–72, Accounting 

System Administration. The proposed 

amendments will require DOE 

contractors to have acceptable 

accounting systems. It adds definitions, 

describes applicability requirements, 

system criteria, and provides procedures 

for addressing significant deficiencies in 

contractor accounting systems. 

In solicitations and contracts in 

support of a Capital Asset Project, (other 

than a management and operating 

contract), as prescribed in DOE Order 

413.3B, or for a non-capital asset 

project, for prime contractors, (large 

business to include contractor teaming 

arrangements), when the total contract 

value exceeds $50 million, including 

options; or when the prime contract 

totaling $10 million or more, including 

options, (but less than $50 million) is 

awarded to a large business, to include 

a contractor teaming arrangement and 

the contracting officer determines it to 

be in the best interest of the Government 

(e.g., significant estimating problems are 

believed to exist) and the contract will 

be either a cost-reimbursement, 

incentive type, time-and-materials, or 

labor-hour contract; or a contractor with 

progress payments made on the basis of 

cost incurred by the contractor or on a 

percentage or stage of completion, or 

fixed-price contracts awarded on the 

basis of adequate price competition 

without submission of cost or pricing 

data with a large business, to include 

contractor teaming arrangement, use the 

clause 952.242–72, Accounting System 

Administration. The clause requires the 

contractor to establish and maintain an 

acceptable accounting system in 

accordance with the system criteria 

described in the clause. 

In the event any significant 

deficiencies are found in the accounting 

system, the contracting officer will 

provide to the contractor an initial 

determination of a significant deficiency 

and allows the contractor to respond 

within 30 days if the contractor 

disagrees. If there is no written response 

from the contractor within 30 days, it 

will indicate that the contractor agrees 

with the initial determination. The 

contracting officer will evaluate the 

contractor’s response or the contractor’s 

lack of response and notify the 

contractor of a final determination 

concerning any remaining significant 

deficiencies, adequacy of any proposed 

or completed corrective action, and 

system disapproval if one or more 

significant deficiencies remain. If the 

contractor receives a final 

determination, the contractor shall 

within 45 days either correct the 

significant deficiencies or submit an 

acceptable corrective action plan 

showing milestones and actions to 

eliminate the significant deficiencies. 

When the contracting officer makes a 

final determination to disapprove the 

contractor’s accounting system, the 

contracting officer will withhold 

payments in accordance with the clause 

952.242–71, Contractor Business 

System. 

6. Subchapter G is amended to add a 

new Part 944—Subcontracting Policies 

and Procedures, Subpart 944.3— 

Contractors’ Purchasing System Review, 

and Sections 944.301, 944.303, 944.305, 

944.305–70 and 944.305–71. Subpart 

952 is amended to add the related 

clause 952.244–71, Contractor 

Purchasing System Administration. The 

proposed amendment requires that DOE 

contractors have acceptable purchasing 

system. The amendment add 

definitions, describe applicability 

requirements, define system criteria, 

and provide procedures for addressing 

significant deficiencies in contractor 

purchasing systems. 

In solicitations and contracts in 

support of a Capital Asset Project (other 

than a management and operating 

contract), as prescribed in DOE Order 

413.3B, or for a non-capital asset 

project, for prime contractors (large 

business to include contractor teaming 

arrangements), when the total contract 

value exceeds $50 million, including 

options; or when the prime contract 

totaling $10 million or more, including 

options, (but less than $50 million) is 

awarded to a large business, to include 

a contractor teaming arrangement and 

the contracting officer determines it to 

be in the best interest of the Government 

(e.g., significant estimating problems are 

believed to exist) and the contract 

contains the clause at 48 CFR 52.244– 

2 Subcontracts, use the clause 952.244– 

71, Contractor Purchasing System 

Administration. The clause requires the 

contractor to establish and maintain an 

acceptable purchasing system in 

accordance with the system criteria 

described in the clause. 

In the event any significant 

deficiencies are found in the purchasing 

system, the contracting officer will 

provide to the contractor an initial 

determination of a significant deficiency 

and allows the contractor to respond 

within 30 days if the contractor 

disagrees. If there is no written response 

from the contractor within 30 days, it 

will indicate that the contractor agrees 

with the initial determination. The 

contracting officer will evaluate the 

contractor’s response or the contractor’s 

lack of response and notify the 

contractor of a final determination 

concerning any remaining significant 

deficiencies, adequacy of any proposed 

or completed corrective action, and 

system disapproval if one or more 

significant deficiencies remain. If the 

contractor receives a final 

determination, the contractor shall 

within 45 days either correct the 

significant deficiencies or submit an 

acceptable corrective action plan 

showing milestones and actions to 

eliminate the significant deficiencies. 

When the contracting officer makes a 

final determination to disapprove the 


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contractor’s purchasing system, the 

contracting officer will withhold 

payments in accordance with the clause 

952.242–71, Contractor Business 

System. 

7. Part 945 is amended to add new 

Sections 945.105, and 945.107. Subpart 

952 is amended to add the related 

clause 952.245–70, Contractor Property 

Management System Administration. 

The proposed amendments requires that 

DOE contractors have acceptable 

property management systems. The 

amendments add definitions, describe 

applicability requirements, define 

system criteria, and provide procedures 

for addressing significant deficiencies in 

the contractor property management 

systems. 

In solicitations and contracts in 

support of a Capital Asset Project (other 

than a management and operating 

contract), as prescribed in DOE Order 

413.3B, or for a non-capital asset 

project, for prime contractors (large 

business to include contractor teaming 

arrangements), when the total contract 

value exceeds $50 million, including 

options; or when the prime contract 

totaling $10 million or more, including 

options, (but less than $50 million) is 

awarded to a large business, to include 

a contractor teaming arrangement and 

the contracting officer determines it to 

be in the best interest of the Government 

(e.g., significant estimating problems are 

believed to exist and the contract 

contains the clause at 48 CFR 52.245– 

1, Government Property, use the clause 

952.245–70, Contractor Property 

Management System. The clause 

requires the contractor to establish and 

maintain an acceptable property 

management system in accordance with 

the system criteria described in the 

clause. 

In the event any significant 

deficiencies are found in the property 

management system, the contracting 

officer will provide the contractor an 

initial determination of a significant 

deficiency and allow the contractor 30 

days to respond within if the contractor 

disagrees. If there is no written response 

from the contractor within 30 days, it 

will indicate that the contractor agrees 

with the initial determination. The 

contracting officer will evaluate the 

contractor’s response or the contractor’s 

lack of response and notify the 

contractor of a final determination 

concerning any remaining significant 

deficiencies, adequacy of any proposed 

or completed corrective action, and 

system disapproval if one or more 

significant deficiencies remain. If the 

contractor receives a final 

determination, the contractor shall 

within 45 days either correct the 

significant deficiencies or submit an 

acceptable corrective action plan 

showing milestones and actions to 

eliminate the significant deficiencies. 

When the contracting officer makes a 

final determination to disapprove the 

contractor’s property management 

system, the contracting officer will 

withhold payments in accordance with 

the clause 952.242–71, Contractor 

Business System. 

III. Procedural Requirements 

A. Review Under Executive Orders 

12866 and 13563 

Today’s regulatory action has been 

determined to be a ‘‘significant 

regulatory action’’ under Executive 

Order 12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (October 4, 1993). 

Accordingly, this proposed rule was 

reviewed under that Executive Order by 

the Office of Information and Regulatory 

Affairs (OIRA) of the Office of 

Management and Budget (OMB). 

DOE has also reviewed this regulation 

pursuant to Executive Order 13563, 

issued on January 18, 2011 (76 FR 3281 

(Jan. 21, 2011)). Executive Order 13563 

is supplemental to and explicitly 

reaffirms the principles, structures, and 

definitions governing regulatory review 

established in Executive Order 12866. 

To the extent permitted by law, agencies 

are required by Executive Order 13563 

to: (1) Propose or adopt a regulation 

only upon a reasoned determination 

that its benefits justify its costs 

(recognizing that some benefits and 

costs are difficult to quantify); (2) tailor 

regulations to impose the least burden 

on society, consistent with obtaining 

regulatory objectives, taking into 

account, among other things, and to the 

extent practicable, the costs of 

cumulative regulations; (3) select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

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

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. 

DOE emphasizes as well that 

Executive Order 13563 requires agencies 

to use the best available techniques to 

quantify anticipated present and future 

benefits and costs as accurately as 

possible. In its guidance, the Office of 

Information and Regulatory Affairs has 

emphasized that such techniques may 

include identifying changing future 

compliance costs that might result from 

technological innovation or anticipated 

behavioral changes. DOE believes that 

today’s NOPR is consistent with these 

principles, including the requirement 

that, to the extent permitted by law, 

agencies adopt a regulation only upon a 

reasoned determination that its benefits 

justify its costs and, in choosing among 

alternative regulatory approaches, those 

approaches maximize net benefits. 

B. Review Under Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ 61 FR 4729 (February 7, 1996), 

imposes on Executive agencies the 

general duty to adhere to the following 

requirements: (1) Eliminate drafting 

errors and ambiguity; (2) write 

regulations to minimize litigation; 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 draftsmanship under any 

guidelines issued by the United States 

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 if it 

is unreasonable to meet one or more of 

them. DOE has completed the required 

review and determined that, to the 

extent permitted by law, this rule meets 

the relevant standards of Executive 

Order 12988. 

C. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act (5 

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

of an initial regulatory flexibility 

analysis for any rule that by law must 

be proposed for public comment, unless 


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the agency certifies that the rule, if 

promulgated, will not have a significant 

economic impact on a substantial 

number of small entities. As required by 

Executive Order 13272, ‘‘Proper 

Consideration of Small Entities in 

Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies on February 19, 

2003, to ensure that the potential 

impacts of its rules on small entities are 

properly considered during the 

rulemaking process (68 FR 7990). DOE 

has made its procedures and policies 

available on the Office of General 

Counsel’s Web site at http://energy.gov/ 

gc/guidance-opinions-0. 

Today’s proposed rule establishes a 

definition for contractor business 

systems and implements compliance 

mechanisms to improve DOE oversight 

of those contractor business systems. 

The requirements of the rule will apply 

to solicitations and contracts that are 

subject to the Cost Accounting 

Standards (CAS) under 41 U.S.C. 

chapter 15, as implemented in 

regulations found at 48 CFR 9903.201– 

1 (see the FAR Appendix), other than in 

contracts with educational institutions 

or Federally Funded Research and 

Development Centers (FFRDCs) 

operated by educational institutions, 

and include one or more of the defined 

contractor business systems. Contracts 

and subcontracts with small businesses 

are exempt from CAS requirements. 

This rule would not have a significant 

economic impact on small entities 

because it does not apply to small 

businesses. Consequently, this proposed 

rule is exempt from the requirements of 

the Regulatory Flexibility Act. 

D. Review Under the Paperwork 

Reduction Act 

The Paperwork Reduction Act (44 

U.S.C. chapter 35) applies because the 

proposed rule contains information 

collection requirements. DOE invites 

comments on the following aspects of 

the proposed rule: (a) Whether the 

collection of information is necessary 

for the proper performance of the 

functions of DOE, including whether the 

information will have practical utility; 

(b) the accuracy of the estimate of the 

burden of the information collection; (c) 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; and (d) ways to minimize the 

burden of the information collection on 

respondents, including the use of 

automated collection techniques or 

other forms of information technology. 

The following is a summary of the 

information collection requirement: The 

business systems clause in this 

proposed rule contains a requirement 

for contractors to respond to initial and 

final determinations of deficiencies. The 

information that contractors will be 

required to submit to respond to 

deficiencies in one of the five business 

systems defined in this rule has been 

approved by the Office of Management 

and Budget (OMB) is the Accounting 

Systems—OMB Clearance 9000–0011 

concerning preaward surveys. DOE 

estimates that there will be 5 new 

contracts awarded per year, which will 

have these 5 clauses. DOE is also 

proposing a new information collection 

requirement as follows: 

Title: Department of Energy 

Acquisition Regulation (DEAR) Business 

Systems—Definition and 

Administration. 

Type of Request: New request. 

The information that contractors will 

be required to submit to respond to 

deficiencies in contractors’ cost 

estimating system is estimated as 

follows: 

Number of Respondents: 5. 

Responses per Respondent: 2. 

Annual Responses: 10. 

Average Burden per Response: 1.2 

hours. 

Annual Burden Hours: 12 hours. 

The information that contractors will 

be required to submit to respond to 

deficiencies in contractors’ earned value 

management system (EVMS) is 

estimated as follows: 

Number of Respondents: 5. 

Responses per Respondent: 2. 

Annual Responses: 10. 

Burden per Response: 10.4 hours. 

Annual Burden Hours: 104 hours. 

The information that contractors will 

be required to submit to respond to 

deficiencies in contractors’ accounting 

systems is estimated as follows: 

Number of Respondents: 5. 

Responses per Respondent: 2. 

Annual Responses: 10. 

Average Burden per Response: 1.2 

hours. 

Annual Burden Hours: 12 hours. 

The information that contractors will 

be required to submit to respond to 

deficiencies in contractors’ purchasing 

system is estimated as follows: 

Number of Respondents: 5. 

Responses per Respondent: 2. 

Annual Responses: 10. 

Average Burden per Response: 1.2 

hours. 

Annual Burden Hours: 12 hours. 

The information that contractors will 

be required to submit to respond to 

deficiencies in contractors’ property 

management system is estimated as 

follows: 

Number of Respondents: 5. 

Responses per Respondent: 2. 

Annual Responses: 10. 

Average Burden per Response: 1.2 

hours. 

Annual Burden Hours: 12 hours. 

Needs and Uses: DOE needs the 

information required by the business 

system clause in this proposed rule to 

mitigate the risk of unallowable and 

unreasonable costs on Government 

contracts when a contractor has one or 

more deficiencies in a business system. 

Affected Public: The business system 

clause (952.242–71) will be used in 

solicitations and contracts that include 

any of the following clauses: 

(1) 952.215–71, Cost Estimating 

System Requirements; 

(2) 952.234–71, Earned Value 

Management System; 

(3) 952.242–72, Accounting System 

Administration; 

(4) 952.244–71, Contractor Purchasing 

System Administration; and 

(5) 952.245–70, Contractor Property 

Management System Administration. 

Frequency: On occasion. 

Written comments and 

recommendations on the proposed 

information collection should be sent to: 

DOE Desk Officer, Office of Information 

and Regulatory Affairs, Office of 

Management and Budget, New 

Executive Office Building, Room 10102, 

735 17th Street NW., Washington, DC 

20503. 

The Desk Officer may be telephoned 

at 202–395–4718 or contacted by email 

at chad_s_whiteman@omb.eop.gov. 

Please send a copy by mail to the U.S. 

Department of Energy, Office of 

Acquisition and Project Management, 

Attn: MA–611, Ms. Barbara Binney, 

1000 Independence Avenue SW., 

Washington, DC 20585; or email to: 

DEARrulemaking@hq.doe.gov. Include 

DEAR: Contractor Business Systems— 

Proposed Information Collection RIN 

1991–AC01 in the subject line of the 

message. 

Comments can be received from 60 

days after the date of this notice, but 

comments to OMB will be most useful 

if received by OMB within 30 days after 

the date of this notice. 

To request more information on this 

proposed information collection or to 

obtain a copy of the proposal and 

associated collection instruments, 

please write to the U.S. Department of 

Energy, Office of Acquisition and 

Project Management, Attn: MA–611, Ms. 

Barbara Binney, 1000 Independence 

Avenue SW., Washington, DC 20585; or 

email to DEARrulemaking@hq.doe.gov. 

Include DEAR: Contractor Business 

Systems—Proposed Information 

Collection RIN 1991–AC01 in the 

subject line of the message. 


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E. Review Under the National 

Environmental Policy Act 

DOE 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 DOE’s regulations (10 CFR part 1021, 

subpart D) implementing the National 

Environmental Policy Act (NEPA) of 

1969 (42 U.S.C. 4321 et seq.). 

Specifically, this proposed rule is 

categorically excluded from NEPA 

review because the amendments to the 

DEAR are 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 4, 1999), imposes certain 

requirements on agencies formulating 

and implementing policies or 

regulations that preempt State law or 

that have federalism implications. 

Agencies are required to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States and carefully assess the necessity 

for such actions. The Executive Order 

requires agencies to have an 

accountability process to ensure 

meaningful and timely input by state 

and local officials in the development of 

regulatory policies that have federalism 

implications. 

On March 14, 2000, DOE published a 

statement of policy describing the 

intergovernmental consultation process 

it will follow in the development of 

such regulations (65 FR 13735). DOE 

has examined the proposed rule and has 

determined that it does not preempt 

State law and does 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 

written 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. Costs imposed by 

this proposed rule would be reimburse 

under the contract. This proposed rule 

does not impose any unfunded 

mandates. 

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 

rulemaking or policy that may affect 

family well-being. This rulemaking will 

have no impact on the autonomy or 

integrity of the family as an institution. 

Accordingly, DOE has concluded that it 

is not necessary to prepare a Family 

Policymaking Assessment. 

I. Review Under Executive Order 13211 

Executive Order 13211, Actions 

Concerning Regulations that 

Significantly Affect Energy Supply, 

Distribution, or Use, 66 FR 28355 (May 

22, 2001), requires Federal agencies to 

prepare and submit to the Office of 

Information and Regulatory Affairs 

(OIRA), of the Office of Management 

and Budget (OMB), a Statement of 

Energy Effects for any proposed 

significant energy action. A ‘‘significant 

energy action’’ is defined as any action 

by an agency that promulgates or is 

expected to lead to promulgation of a 

final rule, and that: (1) Is a significant 

regulatory action under Executive Order 

12866, or any successor order, (2) is 

likely to have a significant adverse effect 

on the supply, distribution, or use of 

energy, or (3) is designated by the 

Administrator of OIRA as a significant 

energy action. For any proposed 

significant energy action, the agency 

must give a detailed statement of any 

adverse effects on energy supply, 

distribution or use should the proposal 

be implemented, and of reasonable 

alternatives to the action and their 

expected benefits on energy supply, 

distribution and use. Today’s proposed 

rule is not a significant energy action. 

Accordingly, DOE has not prepared a 

Statement of Energy Effects. 

J. Review Under the Treasury and 

General Government Appropriations 

Act, 2001 

The Treasury and General 

Government Appropriations Act, 2001 

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

agencies to review most disseminations 

of information to the public under 

guidelines established by each agency 

pursuant to general guidelines issued by 

OMB. OMB’s guidelines were published 

at 67 FR 8452 (February 22, 2002), and 

DOE’s guidelines were published at 67 

FR 62446 (October 7, 2002). DOE has 

reviewed the proposed rule under the 

OMB and DOE guidelines and has 

concluded that it is consistent with 

applicable policies in those guidelines. 

K. Approval by the Office of the 

Secretary of Energy 

Issuance of this proposed rule has 

been approved by the Office of the 

Secretary of Energy. 

List of Subjects in 48 CFR Parts 915, 

934, 942, 944, 945 and 952 

Government procurement. 

Issued in Washington, DC, on March 24, 

2014. 

Paul Bosco, 

Director, Office of Acquisition and Project 

Management, Department of Energy. 

Joseph Waddell, 

Deputy Associate Administrator, Acquisition 

and Project Management, National Nuclear 

Security Administration. 

For reasons set out in the preamble, 

the DOE is proposing to amend Chapter 

9 of Title 48 of the Code of Federal 

Regulations as set forth below. 

■ 1. The authority citations for parts 

915, 942, 945, and 952 continue to read 

as follows: 

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

U.S.C. 2401 et seq. 

PART 915—CONTRACTING BY 

NEGOTIATION 

Subpart 915.4—Contract Pricing 

■ 2. Add sections 915.407, 915.407–5, 

and 915.407–5–70 to subpart 915.4 to 

read as follows: 

915.407 Special cost or pricing areas. 

915.407–5 Estimating system. 

915.407–5–70 Disclosure, maintenance, 

and review requirements. 

(a) Definitions. (1) Acceptable 

estimating system is defined in the 

clause at 952.215–71, Cost Estimating 

System Requirements. 

(2) Contractor means a business unit 

as defined in 48 CFR 2.101. 

(3) Estimating system is as defined in 

the clause at 952.215–71, Cost 

Estimating System Requirements. 

(4) Significant deficiency is defined in 

the clause at 952.215–71, Cost 

Estimating System Requirements. 

(b) Applicability. (1) DOE policy is 

that contractors have acceptable 

estimating systems that consistently 

produce well-supported proposals that 

are acceptable as a basis for negotiation 

of fair and reasonable prices. 

(2) The estimating system 

requirements apply when a large 

business contractor, to include a 

contractor teaming arrangement, as 

defined at 48 CFR 9.601(1), performs a 


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contract in support of a Capital Asset 

Project, (other than a management and 

operating contract), as prescribed in 

DOE Order (DOE O) 413.3B, or current 

version, or a non-capital asset project. 

See 942.7003 for exceptions. The 

applicable contract is subject to 

estimating system disclosure, 

maintenance, and review 

requirements— 

(i) For a DOE prime contract totaling 

$50 million, including options; or 

(ii) For a DOE prime contract totaling 

$10 million or more including options 

(but less than $50 million) and the 

contracting officer determines it to be in 

the best interest of the Government (e.g., 

significant estimating problems are 

believed to exist). 

(c) Policy. (1) When the solicitation or 

contract includes the clause 952.242–71 

Contractor Business System and related 

clauses, the contracting officer shall— 

(i) Through use of the clause at 

952.215–71, Cost Estimating System 

Requirements, apply the disclosure, 

maintenance, and review requirements 

to large business contractors meeting the 

criteria in paragraph (b)(2)(i) or (ii) of 

this section; 

(ii) Ensure that contract, Part I—The 

Schedule, addresses in the business 

administration section, or similar 

section, that the contractor shall submit 

its cost estimating system for DOE 

review and acceptance with full 

implementation of the system to be in 

place no later than 60 days after contract 

award; 

(iii) Consider whether to apply the 

disclosure, maintenance, and review 

requirements to large business 

contractors under paragraph (b)(2)(ii) of 

this section; and 

(iv) Not apply the disclosure, 

maintenance, and review requirements 

to other than large business contractors. 

(2) The cognizant contracting officer, 

in consultation with the auditor, for 

contractors subject to paragraph (b)(2) of 

this section, shall— 

(i) Determine the acceptability of the 

disclosure and approve or disapprove 

the system; and 

(ii) Pursue correction of any 

deficiencies. 

(3) The auditor conducts estimating 

system reviews. 

(4) An acceptable system shall 

provide for the use of appropriate 

source data, utilize sound estimating 

techniques and good judgment, 

maintain a consistent approach, and 

adhere to established policies and 

procedures. 

(5) In evaluating the acceptability of a 

contractor’s estimating system, the 

contracting officer, in consultation with 

the auditor, shall determine whether the 

contractor’s estimating system complies 

with the system criteria for an 

acceptable estimating system as 

prescribed in the clause at 952.215–71, 

Cost Estimating System Requirements. 

(d) Disposition of findings—(1) 

Reporting of findings. The auditor shall 

document findings and 

recommendations in a report to the 

contracting officer. If the auditor 

identifies any significant deficiencies in 

the contractor’s estimating system, the 

report shall describe the deficiencies in 

sufficient detail to allow the contracting 

officer to understand the deficiencies. 

(2) Initial determination. (i) The 

contracting officer shall review all 

findings and recommendations and, if 

there are no significant deficiencies, 

shall promptly notify the contractor, in 

writing, that the contractor’s estimating 

system is acceptable and approved; 

or 

(ii) If the contracting officer finds that 

there are one or more significant 

deficiencies (as defined in the clause at 

952.215–71, Cost Estimating System 

Requirements) due to the contractor’s 

failure to meet one or more of the 

estimating system criteria in the clause 

at 952.215–71, the contracting officer 

shall— 

(A) Within 30 days of receiving the 

report, provide an initial determination 

of deficiencies in writing, describing 

each significant deficiency in sufficient 

detail to allow the contractor to 

understand the deficiency and provide 

a copy of the report to the contractor; 

(B) Request the contractor respond in 

writing to the initial determination 

within 30 days; and 

(C) Within 30 days of receiving the 

contractor’s response or if the contractor 

does not submit a response, the date the 

response was due, in consultation with 

the auditor or cognizant functional 

specialist, evaluate the contractor’s 

response or the contractor’s lack of 

response and make a final 

determination. 

(3) Final determination. (i) The 

contracting officer shall make a final 

determination and notify the contractor 

in writing that—(A) The contractor’s 

estimating system is acceptable and 

approved, and no significant 

deficiencies remain, or 

(B) Significant deficiencies remain. 

The notice shall identify any remaining 

significant deficiencies, and indicate the 

adequacy of any proposed or completed 

corrective action. 

The contracting officer shall— 

(1) Request that the contractor, within 

45 days of receipt of the final 

determination, either correct the 

deficiencies or submit an acceptable 

corrective action plan showing 

milestones and actions to eliminate the 

deficiencies; 

(2) Disapprove the system in 

accordance with the clause at 952.215– 

71, Cost estimating System 

Requirements; and 

(3) Withhold payments in accordance 

with the clause at 952.242–71, 

Contractor Business System, if the 

clause is included in the contract. 

(ii) Monitoring a contractor’s 

corrective action and the correction of 

significant deficiencies. 

(A) Monitoring contractor’s corrective 

action. The contracting officer or 

designee shall monitor the contractor’s 

progress in correcting deficiencies. If the 

contractor fails to make adequate 

progress, the contracting officer shall 

take whatever action is necessary to 

ensure that the contractor corrects the 

deficiencies. Examples of actions the 

contracting officer can take include 

reducing or suspending progress 

payments (see 48 CFR 32.503–6), 

implementing the withholding in 

accordance with 952.242–71, Contractor 

Business System, if applicable, and 

recommending non-award of potential 

contracts. 

(B) Correction of significant 

deficiencies. (1) When the contractor 

notifies the contracting officer, in 

writing, that the contractor has 

corrected the significant deficiencies, 

the contracting officer shall request that 

the auditor review the correction to 

determine if the deficiencies have been 

resolved. 

(2) The contracting officer shall 

determine if the contractor has corrected 

the deficiencies. 

(3) If the contracting officer 

determines the contractor has corrected 

the deficiencies, the contracting officer’s 

notification shall be sent to the auditor; 

invoice approving official; payment 

office; appropriate action officers 

responsible for reporting past 

performance; and the Department of 

Energy’s or National Nuclear Security 

Administration’s Heads of the 

Contracting Activities and Senior 

Procurement Executives. 

(e) System approval. The contracting 

officer shall promptly approve a 

previously disapproved estimating 

system and notify the contractor when 

the contracting officer determines that 

there are no remaining significant 

deficiencies. 

(f) Contracting officer notifications. 

The cognizant contracting officer shall 

promptly distribute copies of a 

determination to approve a system, 

disapprove a system and withhold 

payments, or approve a previously 

disapproved system and release 


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withheld payments, to the auditor, 

invoice approving official, payment 

office, affected DOE contracting offices, 

and the Department of Energy’s or 

National Nuclear Security 

Administration’s Heads of the 

Contracting Activities and Senior 

Procurement Executives. 

■ 3. Revise section 915.408–70 to read 

as follows: 

915.408–70 Solicitation provisions and 

contract clauses. 

(a) The contracting officer (after 

deleting ‘‘under the clause at 970.5203– 

3, Contractor’s Organization’’ from 

paragraph (a) if not a management and 

operating contract) shall insert the 

clause at 952.215–70, Key Personnel, in 

contracts under which performance is 

largely dependent on the expertise of 

specific key personnel. 

(b) Unless one of the exceptions at 

942.7003 applies, use the clause at 

952.215–71, Cost Estimating System 

Requirements, in all solicitations and 

contracts, in support of a Capital Asset 

Project (other than a management and 

operating contract), as prescribed in 

DOE O 413.3B, or current version, or for 

a non-capital asset project as described 

at 915.407–5–70(b)(2), for a prime 

contract, when the total contract value 

exceeds $50 million, including options, 

or when the total contract exceeds $10 

million or more, including options, (but 

less than $50 million) and the 

contracting officer determines it to be in 

the best interest of the Government (e.g., 

significant estimating problems are 

believed to exist or the contractor’s sales 

are predominantly Government). 

■ 4. Add part 934 to Subchapter F to 

read as follows: 

PART 934—MAJOR SYSTEM 

ACQUISITION 

Subpart 934.2—Earned Value Management 

System 

Sec. 

934.201–70 Policy. 

934.203 Solicitation provisions and 

contract clause. 

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

U.S.C. 2401 et seq. 

Subpart 934.2—Earned Value 

Management System 

934.201–70 Policy. 

(a) The Department of Energy (DOE) 

applies the earned value management 

system (EVMS) requirement as follows: 

(1) For cost or incentive contracts and 

subcontracts valued at $20,000,000 or 

more, the contractor in support of a 

Capital Asset Project, as prescribed in 

DOE Order (DOE O) 413.3B, or current 

version, shall have an EVMS that has 

been determined to be in compliance 

with the guidelines in the American 

National Standards Institute/Electronic 

Industries Alliance Standard 748, EVMS 

(ANSI/EIA–748) (current version at time 

of award) in accordance with the 

thresholds in paragraphs (a)(1)(i) 

through (iii) of this section. 

(i) For cost or incentive contracts and 

subcontracts valued at $20,000,000 but 

not exceeding $50,000,000, the 

contractor shall conduct a selfcertification review by an entity 

independent of the contractor personnel 

assigned to programs and projects 

specified in the contract and provide 

self-certifying documentation of its 

EVMS compliance with ANSI/EIA–748. 

The contractor shall conduct periodic 

surveillance reviews and provide 

documentation of results to show 

continued compliance of contractor’s 

EVMS with ANSI/EIA–748. When the 

contractor has two or more contracts in 

support of capital asset projects at DOE 

and the total contract values are 

$20,000,000 or greater per contract for 

total contract values of $50,000,000 or 

more, those contracts shall be subject to 

certification and surveillance reviews as 

described in paragraphs (a)(1)(ii) or (iii) 

of this section. 

(ii) For contracts valued at 

$50,000,000 but not exceeding 

$100,000,000, the contracting officer 

will receive a copy of the certification 

review which certifies that the 

contractor’s EVMS is compliant with 

ANSI/EIA–748 from the cognizant DOE 

program office. The cognizant DOE 

Program Office shall conduct 

certification reviews and periodic 

surveillance reviews to ensure 

continued compliance of contractor’s 

EVMS with ANSI/EIA–748, the 

contracting officer will receive a copy of 

these reviews from the cognizant DOE 

program office. 

(iii) For contracts valued at 

$100,000,000 or more, the contracting 

officer will receive a copy of the 

certification review which certifies that 

the contractor’s EVMS is compliant with 

ANSI/EIA–748 from DOE’s Office of 

Acquisition and Project Management 

(OAPM). OAPM shall conduct 

certification reviews and periodic 

surveillance reviews to ensure 

continued compliance of contractor’s 

EVMS with ANSI/EIA–748, and the 

contracting officer shall receive a copy 

of these reviews from OAPM. Also, 

OAPM shall conduct certification 

reviews and surveillance reviews and 

certify the contractor’s EVMS 

compliance with ANSI/EIA–748 for 

contracts of lesser value if requested by 

the contracting officer, the contractor or 

the DOE program office; or if the 

contractor or cognizant DOE program 

office does not complete its required 

actions in (a)(1)(i) and (ii) of this section 

within one year of contract award. 

(2) For cost or incentive contracts and 

subcontracts valued at less than 

$20,000,000— 

(i) The application of earned value 

management is optional and is a riskbased decision; 

(ii) A decision to apply earned value 

management shall be documented in the 

contract file; and 

(iii) When the DOE program manager 

decides to implement earned value 

management on contracts and 

subcontracts valued at less than 

$20,000,000, a cost-benefit analysis 

shall be conducted and the documented 

results provided to the contracting 

officer for the contract file. 

(3) For fixed-price contracts and 

subcontracts of any dollar value: 

(i) The application of earned value 

management is not required. 

(ii) In extraordinary cases where cost/ 

schedule visibility is required and 

cannot be obtained using other means, 

the DOE program manager shall request 

a waiver for individual contracts from 

the applicable Acquisition Executive 

(AE), as defined in DOE Order 413.3B, 

or current version. In these cases, the 

program manager will conduct a 

business case analysis that includes 

rationale as to why a cost or fixed-price 

incentive contract was not an 

appropriate contracting vehicle. 

(b) Under the provision at 952.234– 

70, Notice of Earned Value Management 

System, when an offeror proposes a plan 

for compliance with the earned value 

management system guidelines in 

ANSI/EIA–748, the contracting officer 

shall obtain the assistance of the 

cognizant DOE program office or OAPM, 

as applicable, in determining the 

adequacy of an earned value 

management system plan. The 

Government will review and approve 

the offeror’s EVMS plan to achieve 

compliance before contract award. 

Guidance and instructions for 

performing EVMS plan reviews can be 

found at DOE Order 413.3B, Program 

and Project Management for the 

Acquisition of Capital Assets, Appendix 

C, Section 5 and DOE Guide 413.3–10A, 

Earned Value Management System. 

(c) For contracts of $50,000,000 or 

more, DOE is responsible for 

determining the contractor’s earned 

value management system compliance. 

Furthermore, when the contractor has 

two or more contracts in support of 

capital asset projects at the same DOEsite and the total contract values are 

$20,000,000 or greater per contract for 

total contract values of $50,000,000 or 


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more, DOE is responsible for 

determining the contractor’s earned 

value management system compliance. 

(d) The cognizant contracting officer, 

in consultation with the cognizant DOE 

program office or OAPM (both are 

herein referred to as functional 

specialist) or auditor, as applicable, 

shall— 

(1) Determine the acceptability of the 

contractor’s earned value management 

system through certification reviews 

and periodic surveillance reviews 

conducted by the cognizant DOE 

program office or OAPM, as applicable, 

and approve or disapprove the system; 

and 

(2) Pursue correction of any 

deficiencies identified during 

certification reviews or surveillance 

reviews. 

(e) In evaluating the acceptability of a 

contractor’s earned value management 

system, the contracting officer, in 

consultation with the cognizant 

functional specialist or auditor, as 

applicable, shall determine whether the 

contractor’s earned value management 

system complies with the system 

criteria for an acceptable earned value 

management system as prescribed in the 

clause at 952.234–71, Earned Value 

Management System. 

(f) Disposition of findings—(1) 

Reporting of findings. The cognizant 

functional specialist or auditor shall 

document findings and 

recommendations in a report to the 

contracting officer. If the cognizant 

functional specialist or auditor 

identifies any significant deficiencies in 

the contractor’s earned value 

management system, the report shall 

describe the deficiencies in sufficient 

detail to allow the contracting officer to 

understand the deficiencies. 

(2) Initial determination. (i) The 

contracting officer shall review all 

findings and recommendations and, if 

there are no significant deficiencies, 

shall promptly notify the contractor, in 

writing, that the contractor’s earned 

value management system is acceptable 

and approved; or 

(ii) If the contracting officer finds that 

there are one or more significant 

deficiencies (as defined in the clause at 

952.234–71, Earned Value Management 

System) due to the contractor’s failure to 

meet one or more of the earned value 

management system criteria in the 

clause at 952.234–71, the contracting 

officer shall— 

(A) Within 30 days of receiving the 

report, provide an initial determination 

of deficiencies, in writing, describing 

each significant deficiency in sufficient 

detail to allow the contractor to 

understand the deficiencies and provide 

a copy of the report to the contractor; 

(B) Request the contractor to respond, 

in writing, to the initial determination 

within 30 days; and 

(C) Within 30 days of receiving the 

contractor’s response or if the contractor 

does not submit a response, the date the 

response was due, in consultation with 

the auditor or cognizant functional 

specialist, evaluate the contractor’s 

response and make a final 

determination. 

(3) Final determination. (i) The 

contracting officer, in consultation with 

the cognizant functional specialist or 

auditor, shall make a final 

determination and notify the contractor, 

in writing, that— 

(A) The contractor’s earned value 

management system is acceptable and 

approved, and no significant 

deficiencies remain, or 

(B) Significant deficiencies remain. 

The notice shall identify any remaining 

significant deficiencies, and indicate the 

adequacy of any proposed or completed 

corrective action. The contracting officer 

shall— 

(1) Request that the contractor, within 

45 days of receipt of the final 

determination, either correct the 

deficiencies or submit an acceptable 

corrective action plan showing 

milestones and actions to eliminate the 

deficiencies; 

(2) Disapprove the system in 

accordance with the clause at 952.234– 

71, Earned Value Management System, 

when initial validation is not 

successfully completed within the 

timeframe approved by the contracting 

officer or the contracting officer 

determines that the existing earned 

value management system contains one 

or more significant deficiencies in the 

high-risk guidelines in ANSI/EIA 748 

standards (guidelines 1, 3, 6, 7, 8, 9, 10, 

12, 16, 21, 23, 26, 27, 28, 30, or 32). 

When the contracting officer determines 

that the existing earned value 

management system contains one or 

more significant deficiencies in one or 

more of the remaining 16 guidelines in 

ANSI/EIA–748 standards, the 

contracting officer shall use discretion 

to disapprove the system based on input 

received from functional specialists and 

the auditor; and 

(3) Withhold payments in accordance 

with the clause at 952.242–71, 

Contractor Business System, if the 

clause is included in the contract. 

(ii) Monitoring contractor’s corrective 

action and the correction of significant 

deficiencies. 

(A) Monitoring contractor’s corrective 

action. The contracting officer or 

designee shall monitor the contractor’s 

progress in correcting deficiencies. If the 

contractor fails to make adequate 

progress, the contracting officer shall 

take whatever action is necessary to 

ensure that the contractor corrects the 

deficiencies. Example of an action the 

contracting officer can take is to 

increase the withholding in accordance 

with 952.242–71, Contractor Business 

System. 

(B) Correction of significant 

deficiencies. (1) When the contractor 

notifies the contracting officer that the 

contractor has corrected the significant 

deficiencies, the contracting officer shall 

request the cognizant functional 

specialist or auditor to review the 

correction to determine if the 

deficiencies have been resolved. 

(2) The contracting officer shall 

determine if the contractor has corrected 

the deficiencies. 

(3) If the contracting officer 

determines the contractor has corrected 

the deficiencies, the contracting officer’s 

notification shall be sent to the 

cognizant functional specialist, auditor, 

invoice approving official, payment 

office, DOE contracting offices having 

substantial business with the contractor, 

and the Department of Energy’s or 

National Nuclear Security 

Administration’s Heads of the 

Contracting Activities and Senior 

Procurement Executives. 

(g) System approval. The contracting 

officer shall promptly approve a 

previously disapproved earned value 

management system and notify the 

contractor when the contracting officer 

determines that there are no remaining 

significant deficiencies. 

(h) Contracting officer notifications. 

The cognizant contracting officer shall 

promptly distribute copies of a 

determination to approve a system, 

disapprove a system and withhold 

payments, or approve a previously 

disapproved system and release 

withheld payments to the auditor, 

invoice approving official, payment 

office, DOE contracting offices having 

substantial business with the contractor, 

and the Department of Energy’s or 

National Nuclear Security 

Administration’s Heads of the 

Contracting Activities and both Senior 

Procurement Executives. 

(i) Contract reporting. For a cost 

reimbursement contract requiring 

EVMS, the contract shall include 

instructions to the prime contractor to 

electronically upload earned value and 

schedule data into the Project 

Assessment and Reporting System 

(PARS II) (or current DOE project 

performance reporting system) in 

accordance with the ‘‘Contractor Project 

Performance Upload Requirements’’ 


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document maintained by the OAPM. 

Unless OAPM has granted a temporary 

exemption, all requested data shall be 

submitted timely and accurately. Data 

shall be loaded into PARS II no later 

than the last workday of every month. 

This data shall be current as of the close 

of the previous month’s accounting 

period. 

934.203 Solicitation provisions and 

contract clause. 

For cost or incentive contracts in 

support of a Capital Asset Project, as 

prescribed in DOE Order (DOE O) 

413.3B, or current version, valued at 

$20,000,000 or more, and for other 

contracts for which EVMS will be 

applied in accordance with 

934.201(a)(1)— 

(a) Use the provision at 952.234–70, 

Notice of Earned Value Management 

System, instead of the provisions at FAR 

52.234–2, Notice of Earned Value 

Management System—Pre-Award IBR, 

and FAR 52.234–3, Notice of Earned 

Value Management System—PostAward IBR, in the solicitation; and 

(b) Use the clause at 952.234–71, 

Earned Value Management System, 

instead of the clause at FAR 52.234–4, 

Earned Value Management System, in 

the solicitation and contract. 

PART 942—CONTRACT 

ADMINISTRATION AND AUDIT 

SERVICES 

■ 5. Add subpart 942.70 to part 942 to 

read as follows: 

Subpart 942.70—Contractor Business 

System 

Sec. 

942.7001 Scope of subpart. 

942.7002 Definitions. 

942.7003 Exceptions. 

942.7004 Contractor business system 

deficiencies procedures. 

942.7005 Contract clause. 

Subpart 942.70—Contractor Business 

System 

942.7001 Scope of subpart. 

This subpart prescribes procedures to 

implement contractor business system 

requirements in applicable contracts to 

include how to determine and withhold 

payments when the contractor business 

system has deficiencies. 

942.7002 Definitions. 

Definitions. As used in this subpart— 

Acceptable contractor business 

system and contractor business system 

are defined in the clause at 952.242–71, 

Contractor Business System. 

Covered contract means a contract 

(other than a management and operating 

contract) that is subject to the Cost 

Accounting Standards under 41 U.S.C. 

chapter 15, as implemented in 

regulations found at 48 CFR 9903.201– 

1(a) and are not exempted at 9903.201– 

1(b)(1) through (14) (see the 48 CFR 

Appendix). 

Significant deficiency is defined in 

the clause at 952.242–71, Contractor 

Business System. 

942.7003 Exceptions. 

The requirements of this subpart do 

not apply to acquisitions for— 

(a) Small business set-asides; 

(b) Energy savings performance 

contracts as required by the Energy 

Policy Act of 1992; 

(c) Services for— 

(1) ‘‘Advisory and assistance services’’ 

as defined at 48 CFR 2.101, unless 

otherwise designated as applicable by 

the Senior Procurement Executive or the 

Head of the Contracting Activity; 

(2) Security Guards; 

(3) Housekeeping; 

(4) Education and training; 

(5) National Environmental Policy Act 

of 1969 Support; or 

(6) Utilities; 

(d) Office of the Deputy Administrator 

for Naval Reactors; 

(e) Interagency acquisitions in 

accordance with 48 CFR 17.5; or 

(f) Orders against another Federal 

agency contract, e.g. Federal Supply 

Services (48 CFR 8.4). 

942.7004 Contractor business system 

deficiencies procedures. 

(a) Determination to withhold 

payments. If the contracting officer 

makes a final determination to 

disapprove a contractor’s business 

system in accordance with the clause at 

952.242–71, Contractor Business 

System, the contracting officer shall— 

(1) Identify if within DOE there is one 

or more fixed-price contracts awarded 

on the basis of adequate price 

competition without submission of cost 

or pricing data with large businesses or 

covered contracts containing the clause 

at 952.242–71, Contractor Business 

System, from which payments will be 

withheld. When identifying the 

contracts from which to withhold 

payments, the contracting officer shall 

ensure that the total amount of payment 

withholding under the clause at 

952.242–71, does not exceed 10 percent 

of progress payments, performancebased payments, and interim payments 

under cost-reimbursement, labor-hour, 

and time-and-materials, contracts billed 

under each of the identified contracts. 

Similarly, the contracting officer shall 

ensure that the total amount of payment 

withholding under the clause at 

952.242–71, Contractor Business 

System, for each business system does 

not exceed five percent of progress 

payments, performance-based 

payments, and interim payments under 

cost-reimbursement, labor-hour, and 

time-and-materials contracts billed 

under each of the identified covered 

contracts. The contracting officer has 

the sole discretion to identify the 

covered contracts from which to 

withhold payments. 

(2) Promptly notify the contractor, in 

writing, of the contracting officer’s 

determination to implement payment 

withholding in accordance with the 

clause at 952.242–71, Contractor 

Business System. The notice of payment 

withholding shall be included in the 

contracting officer’s written final 

determination for the contractor 

business system and shall inform the 

contractor that— 

(i) Payments shall be withheld from 

the contract or contracts identified in 

the written determination in accordance 

with the clause at 952.242–71, 

Contractor Business System, until the 

contracting officer determines that there 

are no remaining significant 

deficiencies; and 

(ii) The contracting officer reserves 

the right to take other actions within the 

terms and conditions of the contract. 

(3) Provide all contracting officers 

administering the selected contracts 

from which payments will be withheld, 

a copy of the determination. The 

contracting officer shall also provide a 

copy of the determination to the auditor, 

invoice approving official, and payment 

office. 

(b) Monitoring contractor’s corrective 

action. The contracting officer, in 

consultation with the auditor, 

functional specialist, or designee, shall 

monitor the contractor’s progress in 

correcting the deficiencies. The 

contracting officer shall notify the 

contractor of any decision to decrease or 

increase the amount of payment 

withholding in accordance with the 

clause at 952.242–71, Contractor 

Business System. 

(c) Correction of significant 

deficiencies. (1) If the contractor notifies 

the contracting officer that the 

contractor has corrected the significant 

deficiencies, the contracting officer shall 

request the auditor or functional 

specialist to review the correction to 

verify that the deficiencies have been 

corrected. If, after receipt of verification, 

the contracting officer determines that 

the contractor has corrected all 

significant deficiencies as directed by 

the contracting officer’s final 

determination, the contracting officer 

shall discontinue the withholding of 

payments, release any payments 


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Federal Register / Vol. 79, No. 62 / Tuesday, April 1, 2014 / Proposed Rules 18427 

previously withheld, and approve the 

system, unless other significant 

deficiencies remain. 

(2) Prior to the receipt of verification, 

the contracting officer may discontinue 

withholding payments pending receipt 

of verification, and release any 

payments previously withheld, if the 

contractor submits evidence that the 

significant deficiencies have been 

corrected, and the contracting officer, in 

consultation with the auditor or 

functional specialist, determines that 

there is a reasonable expectation that 

the corrective actions have been 

implemented and are expected to 

correct the significant deficiencies. 

(3) Within 90 days of receipt of the 

contractor notification that the 

contractor has corrected the significant 

deficiencies, the contracting officer 

shall— 

(i) Make a determination that— 

(A) The contractor has corrected all 

significant deficiencies as directed by 

the contracting officer’s final 

determination in accordance with 

paragraph (d)(1) of this section; 

(B) There is a reasonable expectation 

that the corrective actions have been 

implemented in accordance with 

paragraph (d)(2) of this section; or 

(C) The contractor has not corrected 

all significant deficiencies as directed 

by the contracting officer’s final 

determination in accordance with 

paragraph (d)(1) of this section, or there 

is not a reasonable expectation that the 

corrective actions have been 

implemented in accordance with 

paragraph (d)(2) of this section; or 

(ii) Direct the contractor, in writing, to 

reduce the percentage withheld on 

invoices by at least 50 percent, until the 

contracting officer makes a 

determination in accordance with 

paragraph (d)(3)(i) of this section. 

(4) If, at any time, the contracting 

officer determines that the contractor 

has failed to correct the significant 

deficiencies identified in the 

contractor’s notification, the contracting 

officer will continue, reinstate, or 

increase withholding and direct the 

contractor, in writing, to continue, 

reinstate, or increase the percentage 

withheld on invoices to the percentage 

initially withheld, until the contracting 

officer determines that the contractor 

has corrected all significant deficiencies 

as directed by the contracting officer’s 

final determination. 

(d) Determinations regarding payment 

withholding. The contracting officer 

shall use the written notification format 

or similar format to document the 

contracting officer determinations to 

initiate payment withholding, reduce 

payment withholding, and discontinue 

payment withholding in accordance 

with the clause at 952.242–71, 

Contractor Business System. The final 

determination regarding payment 

withholding is not a final decision 

within the meaning of the Contract 

Disputes Act of 1978 (41 U.S.C. 7101, et 

seq.). 

(1) Final determination for payment 

withholding. Use the sample format or 

similar format for final determination 

for payment withholding in accordance 

with the clause 952.242–71, Contractor 

Business Systems. Tailor the notice in 

paragraph (4) to use the appropriate 

version to reflect invoice payments or 

advance payments under a special bank 

account (letter of credit). 

[Begin notice] 

Payment Withholding 

(1) The purpose of this final determination 

is to disapprove your [identify the contractor 

business system(s)] and implement payment 

withholding per the terms of the clause at 48 

CFR 952.242–71, Contractor Business 

System. 

(2) It is my final determination that XXX 

System(s) contains the following significant 

deficiencies: 

—[list all significant deficiencies] 

(3) Effective immediately, five percent (or 

a lesser percentage if five percent will exceed 

the withhold limitations in the clause 48 CFR 

952.242–71) of each request for payment 

under the contracts in Attachment A will be 

withheld as described below for significant 

deficiencies in XXX system. Upon receipt of 

an acceptable corrective action plan and my 

determination that this corrective action plan 

is being effectively implemented, I will issue 

a notification with respect to reducing the 

percentage being withheld to two percent 

until I determine that all significant 

deficiencies, as identified in this final 

determination, have been corrected. Failure 

to follow the accepted corrective action plan 

will result in an increase in the percentage 

withheld against each payment under this 

contract to five percent (or a lesser 

percentage if five percent will exceed the 

withhold limitations in clause 48 CFR 

952.242–71). [Repeat this paragraph, as 

necessary, if multiple withholds are being 

applied to multiple systems in accordance 

with 952.242–71(d)]. 

(4) [For invoice payments use the following 

paragraph.] For invoice payments, the 

Contractor shall apply a five percent (or a 

lesser percentage if five percent will exceed 

the withhold limitations in 48 CFR 952.242– 

71) withhold to the amount requested. For 

invoices in Vendor Invoicing Payment 

Electronic Reporting System (VIPERS), the 

Contractor shall invoice for the net amount 

due after application of the withhold and 

show the amount withheld on the current 

billing, as well as the cumulative amount 

withheld to date on this contract in 

accordance with the clause 48 CFR 952.242– 

71, in the Description field of the VIPERS 

invoice or as supporting documentation 

attached to the voucher. When approving the 

invoice for payment in the Vendor Invoice 

Approval System (VIAS), the Contracting 

Officer or Invoice Approving Official will 

verify that the Contractor reduced the invoice 

the five percent (or a lesser percentage if five 

percent will exceed the withhold limitations 

in 48 CFR 952.242–71). In the event the 

Contractor did not submit the invoice with 

the proper withholding, the Contracting 

Officer or Invoice Approving Official will 

reject the invoice and enter the reason for the 

rejection in the VIAS Comments field. When 

the Contractor reviews the Invoice Status 

Report in VIPERS, the reason for the reduced 

payment will be displayed in the Invoice 

Description field. 

[For advance payments under a special 

bank account (letter of credit) use the 

following paragraph.] For advance payments 

under a special bank account (letter of 

credit), the Contractor shall immediately be 

subject to the advance approval requirements 

by the Contracting Officer or Government 

countersigning agent for cash withdrawals 

against the letter of credit. Each Contractor 

request for cash withdrawal for the net 

amount due after the withhold shall contain 

the amount of expenditure, the amount 

withheld on the current request, as well as 

the cumulative amount withheld to date on 

this contract in accordance with the clause 

48 CFR 952.242–71, and the net amount 

requested after application of the withhold. 

When approving the request for cash 

withdrawal, the Contracting Officer or 

Government countersigning agent will verify 

that the Contractor reduced the request by 

five percent (or a lesser percentage if five 

percent will exceed the withhold limitations 

in 48 CFR 952.242–71). In the event the 

Contractor did not submit the cash 

withdrawal request with the proper 

withholding, the Contracting Officer or 

Government countersigning agent will reject 

the request for cash withdrawal for noncompliance with the requirements of this 

clause in his/her response. 

[End of notice] 

(2) Reduction of temporary payment 

withholding. Use the sample format or 

similar format for determination to 

reduce payment withholding in 

accordance with the clause 48 CFR 

952.242–71, Contractor Business 

System. Tailor the notice in paragraph 

(3) to use the appropriate version to 

reflect invoice payments or advance 

payments under a special bank account 

(letter of credit). 

[Begin notice] 

Reduction of Temporary Payment 

Withholding 

(1) The purpose of this determination is to 

reduce the payment withholding percentage 

per the terms of the clause 48 CFR 952.242– 

71, Contractor Business System, as a result of 

receiving an acceptable corrective action plan 

from the contractor, dated YYYY/MM/DD, 

for resolving deficiencies in its XXX 

system(s) as identified in the Contracting 

Officer’s determination, dated YYYY/MM/

DD. This reduction is prospective and 

previous amounts withheld will not be 

reduced or released at this time. 


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18428 Federal Register / Vol. 79, No. 62 / Tuesday, April 1, 2014 / Proposed Rules 

(2) Effective immediately, two percent of 

each request for payment under this contract 

will be withheld as described below. The two 

percent being withheld will remain in effect 

until the Contracting Officer determines that 

the Contractor has corrected all significant 

deficiencies as directed by the Contracting 

Officer’s determination. Failure to follow the 

accepted corrective action plan will result in 

an increase in the percentage withheld 

against each payment under this contract to 

five percent (or a lesser percentage if five 

percent will exceed the withhold limitations 

in 48 CFR 952.242–71). 

(3) [For invoice payments use the following 

paragraph.] For invoice payments, the 

Contractor shall apply a two percent 

withhold to the amount being requested. For 

invoices in Vendor Invoicing Payment 

Electronic Reporting System (VIPERS), the 

Contractor shall invoice for the net amount 

due after withholding and show the amount 

withheld on the current billing, as well as the 

cumulative amount withheld to date on this 

contract in accordance with the clause 48 

CFR 952.242–71, in the Description field of 

the VIPERS invoice or as supporting 

documentation attached to the invoice. When 

approving the invoice for payment in the 

Vendor Invoice Approval System (VIAS), the 

Contracting Officer or Invoice Approving 

Official will verify that the Contractor 

reduced the invoice the two percent. In the 

event the Contractor did not submit the 

invoice with the proper withholding, the 

Contracting Officer or Invoice Approving 

Official will reject the invoice and enter the 

reason for the rejection in the VIAS 

Comments field. When the Contractor 

reviews the Invoice Status Report in VIPERS, 

the reason for the reduced payment will be 

displayed in the Invoice Description field. 

[For advance payments under a special 

bank account (letter of credit) use the 

following paragraph.] For advance payments 

under a special bank account (letter of 

credit), the Contractor shall immediately be 

subject to the advance approval requirements 

by the Contracting Officer or Government 

countersigning agent for cash withdrawals 

against the letter of credit. Each Contractor 

request for cash withdrawal for the net 

amount due after the withhold shall contain 

the amount of expenditure, the amount 

withheld on the current request, as well as 

the cumulative amount withheld to date on 

this contract in accordance with the clause 

48 CFR 952.242–71, and the net amount 

requested after application of the withhold. 

When approving the request for cash 

withdrawal, the Contracting Officer or 

Government countersigning agent will verify 

that the Contractor reduced the request by 

five percent (or a lesser percentage if two 

percent will exceed the withhold limitations 

in 48 CFR 952.242–71). In the event the 

Contractor did not submit the cash 

withdrawal request with the proper 

withholding, the Contracting Officer or 

Government countersigning agent will reject 

the request for cash withdrawal for noncompliance with the requirements of this 

clause in his/her response. 

[End of notice] 

(3) Discontinuation of payment 

withholding pending verification. Use 

the sample format or similar format if 

payment withholding is discontinued 

after auditor or functional specialist 

verification and based on evidence that 

the Contractor has corrected all 

significant deficiencies, in accordance 

with clause 48 CFR 952.242–71, 

Contractor Business System. Tailor the 

notice in paragraph (3) to use the 

appropriate version to reflect invoice 

payments or advance payments under a 

special bank account (letter of credit). 

[Begin notice] 

Discontinuation of Payment Withholding 

Pending Verification 

(1) The purpose of this determination is to 

approve your [identify system(s)] pending 

verification, discontinue the payment 

withhold as identified in the Contracting 

Officer’s determination dated YYYY/MM/

DD, and release previous amounts withheld 

on the contracts in Attachment A, in 

accordance with clause 48 CFR 952.242–71, 

Contractor Business System. 

(2) The discontinuation of the payment 

withhold is made pending receipt of 

verification and based on my review of the 

evidence submitted by the Contractor that all 

the Contractor’s system(s) deficiencies 

identified in the Contracting Officer’s 

determination dated YYYY/MM/DD have 

been corrected. 

(3) [For invoice payments use the following 

paragraph.] For invoice payments in Vendor 

Invoicing Payment Electronic Reporting 

system (VIPERS), the Contractor is 

authorized to submit an invoice in the 

amount of $XXXXXXXX. The billed amount 

should be submitted on the same type of 

invoice as the withhold was originally taken, 

as appropriate. 

[For advance payments under a special 

bank account (letter of credit) use the 

following paragraph.] For advance payments 

under a special bank account (letter of 

credit), the Contractor is authorized to submit 

a request for cash withdrawal for amount of 

$XXXXXXXX. 

[End of notice] 

(4) Discontinuation of Payment 

Withholding. Use the sample format or 

similar format if payment withholding 

is discontinued after auditor or 

functional specialist verification that the 

Contractor has corrected all significant 

deficiencies, in accordance with clause 

48 CFR 952.242–71, Contractor Business 

System. Tailor the notice in paragraph 

(3) to use the appropriate version to 

reflect invoice payments or advance 

payments under a special bank account 

(letter of credit). 

[Begin of notice] 

Discontinuation of Payment Withholding 

(1) The purpose of this determination is to 

approve your [identify system(s)], 

discontinue the payment withhold as 

identified in the Contracting Officer’s 

determination dated YYYY/MM/DD, and 

release previous amounts withheld on the 

contracts in Attachment A, in accordance 

with clause 48 CFR 952.242–71, Contractor 

Business System. 

(2) The discontinuation of the payment 

withhold is made based on verification that 

all the Contractor’s system(s) deficiencies 

identified in the Contracting Officer’s final 

determination dated YYYY/MM/DD have 

been corrected. 

(3) [For invoice payments use the following 

paragraph.] For invoice payments in Vendor 

Invoicing Payment Electronic Reporting 

system (VIPERS), the Contractor is 

authorized to submit an invoice in the 

amount of $XXXXXXXX. The billed amount 

should be submitted on the same type of 

invoice as the withhold was originally taken, 

as appropriate. 

[For advance payments under a special 

bank account (letter of credit) use the 

following paragraph.] For advance payments 

under a special bank account (letter of 

credit), the Contractor is authorized to submit 

a request for cash withdrawal for amount of 

$XXXXXXXX. 

[End of notice] 

(e) Contractor performance 

information. The contracting officer, or 

designee, shall evaluate the contractor’s 

business system performance and 

compliance in all evaluations in 

accordance with 48 CFR 42.15 and DOE 

procedures. 

(f) Contract closeout. At the end of 

contract performance, if significant 

deficiencies remain in the disapproved 

system or systems and payment 

withholdings are in effect, the payment 

withholdings will be released during 

contract closeout. However, the release 

of the payment withholdings from one 

contract will not mean the system is 

approved. If there are other contracts 

where payment withholdings are in 

effect, the payment withholdings will 

continue on those contracts. These 

payment withholding are contract 

financing payments; therefore, these 

payments withholdings are not subject 

to the interest penalty provisions of the 

Prompt Payment Act. 

942.7005 Contract clause. 

Unless one of the exceptions at 

942.7003 applies, use the clause at 

952.242–71, Contractor Business 

System, in solicitations and contracts in 

support of a Capital Asset Project (other 

than a management and operating 

contract), as prescribed in DOE O 

413.3B, or current version, or for a noncapital asset project as described at 

915.407–5–70(b)(2), for a prime 

contract, the total contract value 

exceeds $50 million, including options, 

or when the total contract value exceeds 

$10 million or more, including options, 

(but less than $50 million) and the 

contracting officer determines it to be in 

the best interest of the Government (e.g., 

significant estimating problems are 


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believed to exist or the contractor’s sales 

are predominantly Government) when— 

(a) The resulting contract will be— 

(1) Fixed-price contract awarded to a 

large business to include contractor 

teaming arrangement on the basis of 

adequate price competition without 

submission of cost or pricing data; or 

(2) A covered contract as defined in 

942.7001(a); and 

(b) The solicitation or contract 

includes any of the following clauses: 

(1) 952.215–71, Cost Estimating 

System Requirements. 

(2) 952.234–71, Earned Value 

Management System. 

(3) 952.242–72, Accounting System 

Administration. 

(4) 952.244–71, Contractor Purchasing 

System Administration. 

(5) 952.245–70, Contractor Property 

Management System Administration. 

■ 6. Add subpart 942.71 to part 942 to 

read as follows: 

Subpart 942.71—Contractor Accounting 

System and Related Controls 

Sec. 

942.7101 Definitions. 

942.7102 Policy. 

942.7103 Contract clause. 

Subpart 942.71—Contractor 

Accounting System and Related 

Controls 

942.7101 Definitions. 

As used in this subpart— 

Acceptable accounting system and 

accounting system are defined in the 

clause at 952.242–72, Accounting 

System Administration. 

Significant deficiency is defined in 

the clause at 952.242–72, Accounting 

System Administration. 

942.7102 Policy. 

(a) Contractors receiving costreimbursement, incentive type, timeand-materials, fixed-price, or labor-hour 

contracts, or contracts which provide for 

progress payments based on costs or on 

a percentage or stage of completion, 

shall maintain an accounting system. 

(b) When the solicitation or contract 

includes the clause 952.242–71 

Contractor Business System and related 

clauses, the cognizant contracting 

officer, in consultation with the auditor 

or functional specialist, shall— 

(1) Ensure that contract, Part I—The 

Schedule, addresses in the business 

administration section, or similar 

section, that the contractor shall submit 

its accounting system for DOE review 

and acceptance with full 

implementation of the system to be in 

place no later than 60 days after contract 

award; 

(2) Determine the acceptability of a 

contractor’s accounting system and 

approve or disapprove the system; and 

(3) Pursue correction of any 

deficiencies. 

(c) In evaluating the acceptability of a 

contractor’s accounting system, the 

contracting officer, in consultation with 

the auditor or functional specialist, shall 

determine whether the contractor’s 

accounting system complies with the 

system criteria for an acceptable 

accounting system as prescribed in the 

clause at 952.242–72, Accounting 

System Administration. 

(d) Disposition of findings—(1) 

Reporting of findings. The auditor shall 

document findings and 

recommendations in a report to the 

contracting officer. If the auditor 

identifies any significant accounting 

system deficiencies, the report shall 

describe the deficiencies in sufficient 

detail to allow the contracting officer to 

understand the deficiencies. 

(2) Initial determination. (i) The 

contracting officer shall review findings 

and recommendations and, if there are 

no significant deficiencies, shall 

promptly notify the contractor, in 

writing, that the contractor’s accounting 

system is acceptable and approved; or 

(ii) If the contracting officer finds that 

there are one or more significant 

deficiencies (as defined in the clause at 

952.242–72, Accounting System 

Administration) due to the contractor’s 

failure to meet one or more of the 

accounting system criteria in the clause 

at 952.242–72, the contracting officer 

shall— 

(A) Within 30 days of receiving the 

report, provide an initial determination 

of deficiencies in writing, describing 

each significant deficiency in sufficient 

detail to allow the contractor to 

understand the deficiency and provide 

a copy of the report to the contractor; 

(B) Request the contractor to respond, 

in writing, to the initial determination 

within 30 days; and 

(C) Within 30 days of receiving the 

contractor’s response or if the contractor 

does not submit a response, the date the 

response was due, in consultation with 

the auditor or cognizant functional 

specialist, evaluate the contractor’s 

response or the contractor’s lack of 

response and make a final 

determination. 

(3) Final determination. (i) The 

contracting officer shall make a final 

determination and notify the contractor, 

in writing, that— 

(A) The contractor’s accounting 

system is acceptable and approved, and 

no significant deficiencies remain, or 

(B) Significant deficiencies remain. 

The notice shall identify any remaining 

significant deficiencies, and indicate the 

adequacy of any proposed or completed 

corrective action. The contracting officer 

shall— 

(1) Request that the contractor, within 

45 days of receipt of the final 

determination, either correct the 

deficiencies or submit an acceptable 

corrective action plan showing 

milestones and actions to eliminate the 

deficiencies; 

(2) Make a determination to 

disapprove the system in accordance 

with the clause at 952.242–72, 

Accounting System Administration; and 

(3) Withhold payments in accordance 

with the clause at 952.242–71, 

Contractor Business System, if the 

clause is included in the contract. 

(ii) Monitoring a contractor’s 

corrective action and the correction of 

significant deficiencies. 

(A) Monitoring contractor’s corrective 

action. The contracting officer or 

designee shall monitor the contractor’s 

progress in correcting deficiencies. If the 

contractor fails to make adequate 

progress, the contracting officer shall 

take whatever action is necessary to 

ensure that the contractor corrects the 

deficiencies. Examples of actions the 

contracting officer can take include 

disapproving the system; implementing 

or increasing the withholding in 

accordance with 952.242–71, Contractor 

Business System, if applicable; and 

recommending non-award of potential 

contracts. 

(B) Correction of significant 

deficiencies. (1) When the contractor 

notifies the contracting officer that the 

contractor has corrected the significant 

deficiencies, the contracting officer shall 

request that the auditor review the 

correction to determine if the 

deficiencies have been resolved. (2) The 

contracting officer shall determine if the 

contractor has corrected the 

deficiencies. 

(3) If the contracting officer 

determines the contractor has corrected 

the deficiencies, the contracting officer’s 

notification shall be sent to the auditor, 

invoice approving official, payment 

office, appropriate action officers 

responsible for reporting past 

performance, affected DOE contracting 

offices having substantial business with 

the contractor, and the Department of 

Energy’s or National Nuclear Security 

Administration’s Heads of the 

Contracting Activities and Senior 

Procurement Executives. 

(e) System approval. The contracting 

officer shall promptly approve a 

previously disapproved accounting 

system and notify the contractor when 

the contracting officer determines that 


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18430 Federal Register / Vol. 79, No. 62 / Tuesday, April 1, 2014 / Proposed Rules 

there are no remaining significant 

deficiencies. 

(f) Contracting officer notifications. 

The cognizant contracting officer shall 

promptly distribute copies of a 

determination to approve a system, 

disapprove a system and withhold 

payments, or approve a previously 

disapproved system and release 

withheld payments to the auditor, 

invoice approving official, payment 

office, and affected contracting offices. 

(g) Mitigating the risk of accounting 

system deficiencies on specific 

proposals. (1) The functional specialist 

or field pricing team shall discuss 

identified accounting system 

deficiencies and their impact in all 

reports on contractor proposals until the 

deficiencies are resolved. 

(2) The contracting officer responsible 

for negotiation of a proposal generated 

by an accounting system with an 

identified deficiency shall evaluate 

whether the deficiency impacts the 

negotiations. If it does not, the 

contracting officer should proceed with 

negotiations. If it does, the contracting 

officer should consider other 

alternatives, e.g.— 

(i) Allowing the contractor additional 

time to correct the accounting system 

deficiency and submit a corrected 

proposal; 

(ii) Considering another type of 

contract; 

(iii) Using additional cost analysis 

techniques to determine the 

reasonableness of the cost elements 

affected by the accounting system’s 

deficiency; 

(iv) Reducing the negotiation 

objective for profit or fee; or 

(v) Including a contract (reopener) 

clause that provides for adjustment of 

the contract amount after award. 

(3) The contracting officer is 

responsible for negotiating price 

adjustments required by the clause. Any 

reopener clause necessitated by an 

accounting system deficiency should— 

(i) Clearly identify the amounts and 

items that are in question at the time of 

negotiation; 

(ii) Indicate a specific time or 

subsequent event by which the 

contractor will submit a supplemental 

proposal, including certified cost or 

pricing data, identifying the cost impact 

adjustment necessitated by the deficient 

accounting system; 

(iii) Provide for the contracting officer 

to adjust the contract price unilaterally 

if the contractor fails to submit the 

supplemental proposal; and 

(iv) Provide that failure of the 

Government and the contractor to agree 

to the price adjustment shall be a 

dispute under the Disputes clause. 

942.7103 Contract clause. 

Unless one of the exceptions at 

942.7003 applies, use the clause at 

952.242–72, Accounting System 

Administration, in solicitations and 

contracts when contemplating a contract 

in support of a Capital Asset Project 

(other than a management and operating 

contract), as prescribed in DOE O 

413.3B, or current version, or for a noncapital asset project as described at 

915.407–5–70(b)(2), for a prime 

contract, when the total contract value 

exceeds $50 million, including options, 

or when the prime contract totaling $10 

million or more including options (but 

less than $50 million) and the 

contracting officer determines it to be in 

the best interest of the Government (e.g., 

significant estimating problems are 

believed to exist or the contractor’s sales 

are predominantly Government and— 

(a) A cost-reimbursement, incentive 

type, time-and-materials, or labor-hour 

contract; 

(b) A contract with progress payments 

made on the basis of costs incurred by 

the contractor or on a percentage or 

stage of completion; or 

(c) A fixed-price contract that is not 

a small business set-aside. 

■ 7. Add part 944 to Subchapter G to 

read as follows: 

PART 944—SUBCONTRACTING 

POLICIES AND PROCEDURES 

Subpart 944.3—Contractors’ Purchasing 

System Reviews 

Sec. 

944.301 Objective. 

944.303 Extent of review. 

944.305 Granting, withholding, or 

withdrawing approval. 

944.305–70 Policy. 

944.305–71 Contract clause. 

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

U.S.C. 2401 et seq. 

Subpart 944.3—Contractors’ 

Purchasing System Reviews 

944.301 Objective. 

The contracting officer is responsible 

for initiating reviews of the contractor’s 

purchasing systems, but other 

organizations may request that the 

contracting officer initiate such reviews. 

944.303 Extent of review. 

In addition to the review 

requirements of 48 CFR 44.303, the 

contracting officer shall review the 

adequacy of rationale documenting 

commercial item determinations to 

ensure compliance with the definition 

of ‘‘commercial item’’ in 48 CFR 2.101. 

944.305 Granting, withholding, or 

withdrawing approval. 

944.305–70 Policy. 

The contracting officer shall use the 

days in this subsection instead of the 

days in 48 CFR 44.305–2(c) and 44.305– 

3(b) to permit the contractor’s response. 

(a) When the solicitation or contract 

includes the clause 952.242–71 

Contractor Business Systems and related 

clauses, the cognizant contracting 

officer, in consultation with the 

purchasing system analyst or auditor, 

shall— 

(1) Ensure that contract, Part I—The 

Schedule, addresses in the business 

administration section, or similar 

section, that the contractor shall submit 

its purchasing system for DOE review 

and acceptance with full 

implementation of the system to be in 

place no later than 60 days after contract 

award; 

(2) Determine the acceptability of the 

contractor’s purchasing system and 

approve or disapprove the system; and 

(3) Pursue correction of any 

deficiencies. 

(b) In evaluating the acceptability of 

the contractor’s purchasing system, the 

contracting officer, in consultation with 

the purchasing system analyst or 

auditor, shall determine whether the 

contractor’s purchasing system complies 

with the system criteria for an 

acceptable purchasing system as 

described in the clause at 952.244–71, 

Contractor Purchasing System 

Administration. 

(c) Disposition of findings—(1) 

Reporting of findings. The purchasing 

system analyst or auditor shall 

document findings and 

recommendations in a report to the 

contracting officer. If the auditor or 

purchasing system analyst identifies any 

significant purchasing system 

deficiencies, the report shall describe 

the deficiencies in sufficient detail to 

allow the contracting officer to 

understand the deficiencies. 

(2) Initial determination. (i) The 

contracting officer shall review all 

findings and recommendations and, if 

there are no significant deficiencies, 

shall promptly notify the contractor that 

the contractor’s purchasing system is 

acceptable and approved; or 

(ii) If the contracting officer finds that 

there are one or more significant 

deficiencies (as defined in the clause at 

952.244–71, Contractor Purchasing 

System Administration) due to the 

contractor’s failure to meet one or more 

of the purchasing system criteria in the 

clause at 952.244–71, the contracting 

officer shall— 


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(A) Within 30 days of receiving the 

report, provide an initial determination 

of deficiencies in writing, describing 

each significant deficiency in sufficient 

detail to allow the contractor to 

understand the deficiency and provide 

a copy of the report to the contractor; 

(B) Request the contractor to respond, 

in writing, to the initial determination 

within 30 days; and 

(C) Within 30 days of receiving the 

contractor’s response or if the contractor 

does not submit a response, the date the 

response was due, in consultation with 

the auditor or cognizant functional 

specialist, evaluate the contractor’s 

response or the contractor’s lack of 

response and make a final 

determination. 

(3) Final determination. (i) The 

contracting officer shall make a final 

determination and notify the contractor, 

in writing, that— 

(A) The contractor’s purchasing 

system is acceptable and approved, and 

no significant deficiencies remain, or 

(B) Significant deficiencies remain. 

The notice shall identify any remaining 

significant deficiencies, and indicate the 

adequacy of any proposed or completed 

corrective action. The contracting officer 

shall— 

(1) Request that the contractor, within 

45 days of receipt of the final 

determination, either correct the 

deficiencies or submit an acceptable 

corrective action plan showing 

milestones and actions to eliminate the 

deficiencies; 

(2) Disapprove the system in 

accordance with the clause at 952.244– 

71, Contractor Purchasing System 

Administration; and 

(3) Withhold payments in accordance 

with the clause at 952.242–71, 

Contractor Business System, if the 

clause is included in the contract. 

(ii) Monitoring a contractor’s 

corrective action and the correction of 

significant deficiencies. 

(A) Monitoring contractors’ corrective 

action. The contracting officer and 

either the purchasing system analyst or 

auditor shall monitor the contractor’s 

progress in correcting deficiencies. If the 

contractor fails to make adequate 

progress, the contracting officer shall 

take whatever action is necessary to 

ensure that the contractor corrects the 

deficiencies. Examples of actions the 

contracting officer can take include 

withdraw or withhold approval of the 

system or implementing or increasing 

the withholding in accordance with 

952.242–71, Contractor Business 

System, and recommending non-award 

of potential contracts. 

(B) Correction of significant 

deficiencies. (1) When the contractor 

notifies the contracting officer that the 

contractor has corrected the significant 

deficiencies, the contracting officer shall 

request the purchasing system analyst or 

auditor to review the correction to 

determine if the deficiencies have been 

resolved. 

(2) The contracting officer shall 

determine if the contractor has corrected 

the deficiencies. 

(3) If the contracting officer 

determines the contractor has corrected 

the deficiencies, the contracting officer’s 

notification shall be sent to the 

purchasing system analyst, auditor, 

invoice approving official, payment 

office, appropriate action officers 

responsible for reporting past 

performance, and the Department of 

Energy’s or National Nuclear Security 

Administration’s Heads of the 

Contracting Activities and Senior 

Procurement Executives. 

(d) System approval. The contracting 

officer shall promptly approve a 

previously disapproved purchasing 

system and notify the contractor when 

the contracting officer determines that 

there are no remaining significant 

deficiencies. 

(e) Contracting officer notifications. 

The cognizant contracting officer shall 

promptly distribute copies of a 

determination to approve a system, 

disapprove a system and withhold 

payments, or approve a previously 

disapproved system and release 

withheld payments to the auditor, 

invoice approving official, payment 

office, and affected contracting offices. 

(f) Mitigating the risk of purchasing 

system deficiencies on specific 

proposals. 

(1) The functional specialist shall 

discuss identified purchasing system 

deficiencies and their impact in all 

reports on contractor proposals until the 

deficiencies are resolved. 

(2) The contracting officer responsible 

for negotiation of a proposal generated 

by a purchasing system with an 

identified deficiency shall evaluate 

whether the deficiency impacts the 

negotiations. If it does not, the 

contracting officer should proceed with 

negotiations. If it does, the contracting 

officer should consider other 

alternatives, e.g.— 

(i) Allowing the contractor additional 

time to correct the purchasing system 

deficiency and submit a corrected 

proposal; 

(ii) Considering another type of 

contract, e.g., a fixed-price incentive 

(firm target) contract instead of firmfixed-price; 

(iii) Using additional cost analysis 

techniques to determine the 

reasonableness of the cost elements 

affected by the purchasing system’s 

deficiency; 

(iv) Segregating the questionable areas 

as a cost-reimbursable line item; 

(v) Reducing the negotiation objective 

for profit or fee; or 

(vi) Including a contract (reopener) 

clause that provides for adjustment of 

the contract amount after award. 

(3) The contracting officer is 

responsible for negotiating price 

adjustments required by the clause. Any 

reopener clause necessitated by a 

purchasing system deficiency shall— 

(i) Clearly identify the amounts and 

items that are in question at the time of 

negotiation; 

(ii) Indicate a specific time or 

subsequent event by which the 

contractor will submit a supplemental 

proposal, including certified cost or 

pricing data, identifying the cost impact 

adjustment necessitated by the deficient 

purchasing system; 

(iii) Provide for the contracting officer 

to adjust the contract price unilaterally 

if the contractor fails to submit the 

supplemental proposal; and 

(iv) Provide that failure of the 

Government and the contractor to agree 

to the price adjustment shall be a 

dispute under the Disputes clause. 

944.305–71 Contract clause. 

Unless one of the exceptions at 

942.7003 applies, use the clause at 

952.244–71, Contractor Purchasing 

System Administration, in solicitations 

and contracts, in support of a Capital 

Asset Project (other than a management 

and operating contract), as prescribed in 

DOE O 413.3B, or current version, or for 

a non-capital asset project as described 

at 915.407–5–70(b)(2), for a prime 

contract, when the total contract value 

exceeds $50 million, including options, 

or when the prime contract totaling $10 

million or more including options (but 

less than $50 million) and the 

contracting officer determines it to be in 

the best interest of the Government 

(significant purchasing problems are 

believed to exist or the contractor’s sales 

are predominantly Government and 

containing the clause at 48 CFR 52.244– 

2, Subcontracts. 

PART 945—GOVERNMENT PROPERTY 

■ 8. Add section 945.105 to read as 

follows: 

945.105 Contractor’s property 

management system compliance. 

(a) Definitions— 

(1) Acceptable property management 

system and property management 

system are defined in the clause at 

952.245–70, Contractor Property 

Management System Administration. 


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(2) Significant deficiency is defined in 

the clause at 952.245–70, Contractor 

Property Management System 

Administration. 

(b) Policy. When the solicitation or 

contract includes the clause 952.242–71 

Contractor Business System and related 

clauses, the cognizant contracting 

officer, in consultation with the 

property administrator, shall— 

(1) Ensure that contract, Part I—The 

Schedule, addresses in the business 

administration section, or similar 

section, that the contractor shall submit 

its property management system for 

DOE review and acceptance with full 

implementation of the system to be in 

place no later than 60 days after contract 

award; 

(2) Determine the acceptability of the 

system and approve or disapprove the 

system; and 

(3) Pursue correction of any 

deficiencies. 

(c) In evaluating the acceptability of a 

contractor’s property management 

system, the contracting officer, in 

consultation with the property 

administrator, shall determine whether 

the contractor’s property management 

system complies with the system 

criteria for an acceptable property 

management system as prescribed in the 

clause at 952.245–70, Contractor 

Property Management System 

Administration. 

(d) Disposition of findings—(1) 

Reporting of findings. The property 

administrator shall document findings 

and recommendations in a report to the 

contracting officer. If the property 

administrator identifies any significant 

property system deficiencies, the report 

shall describe the deficiencies in 

sufficient detail to allow the contracting 

officer to understand the deficiencies. 

(2) Initial determination. (i) The 

contracting officer shall review findings 

and recommendations and, if there are 

no significant deficiencies, shall 

promptly notify the contractor, in 

writing, that the contractor’s property 

management system is acceptable and 

approved; or 

(ii) If the contracting officer finds that 

there are one or more significant 

deficiencies (as defined in the clause at 

952.245–70, Contractor Property 

Management System Administration) 

due to the contractor’s failure to meet 

one or more of the property 

management system criteria in the 

clause at 952.245–70, the contracting 

officer shall— 

(A) Within 30 days of receiving the 

report, provide an initial determination 

of deficiencies in writing, describing 

each significant deficiency in sufficient 

detail to allow the contractor to 

understand the deficiency and provide 

a copy of the report to the contractor; 

(B) Request the contractor to respond, 

in writing, to the initial determination 

within 30 days; and 

(C) Within 30 days of receiving the 

contractor’s response or if the contractor 

does not submit a response, the date the 

response was due, the contracting 

officer, in consultation with the auditor 

or cognizant functional specialist, 

should evaluate the contractor’s 

response or the contractor’s lack of 

response and make a final 

determination. 

(3) Final determination. (i) The 

contracting officer shall make a final 

determination and notify the contractor, 

in writing, that— 

(A) The contractor’s property 

management system is acceptable and 

approved, and no significant 

deficiencies remain, or 

(B) Significant deficiencies remain. 

The notice shall identify any remaining 

significant deficiencies, and indicate the 

adequacy of any proposed or completed 

corrective action. 

The contracting officer shall— 

(1) Request that the contractor, within 

45 days of receipt of the final 

determination, either correct the 

deficiencies or submit an acceptable 

corrective action plan showing 

milestones and actions to eliminate the 

deficiencies; 

(2) Disapprove the system in 

accordance with the clause at 952.245– 

70, Contractor Property Management 

System Administration; and 

(3) Withhold payments in accordance 

with the clause at 952.242–71, 

Contractor Business System, if the 

clause is included in the contract. 

(ii)(A) Monitoring contractor’s 

corrective action. The contracting officer 

and property administrator shall 

monitor the contractor’s progress in 

correcting deficiencies. If the contractor 

fails to make adequate progress, the 

contracting officer shall take whatever 

action is necessary to ensure that the 

contractor corrects the deficiencies. 

Examples of actions the contracting 

officer can take include withdraw or 

withhold approval of the system; or 

implementing or increasing the 

withholding in accordance with the 

clause at 952.242.71, Contractor 

Business System, and recommending 

non-award of potential contracts. 

(B) Correction of significant 

deficiencies. (1) When the contractor 

notifies the contracting officer that the 

contractor has corrected the significant 

deficiencies, the contracting officer shall 

request the property administrator to 

review the correction to determine if the 

deficiencies have been resolved. 

(2) The contracting officer shall 

determine if the contractor has corrected 

the deficiencies. 

(3) If the contracting officer 

determines the contractor has corrected 

the deficiencies, the contracting officer’s 

notification shall be sent to the property 

administrator, auditor, invoice 

approving official, payment office, 

appropriate action officers responsible 

for reporting past performance, and the 

Department of Energy’s or National 

Nuclear Security Administration’s 

Heads of the Contracting Activities and 

Senior Procurement Executives. 

(e) System approval. The contracting 

officer shall promptly approve a 

previously disapproved property 

management system and notify the 

contractor when the contracting officer 

determines, in consultation with the 

property administrator, that there are no 

remaining significant deficiencies. 

(f) Contracting officer notifications. 

The cognizant contracting officer shall 

promptly distribute copies of a 

determination to approve a system, 

disapprove a system and withhold 

payments, or approve a previously 

disapproved system and release 

withheld payments to the auditor, 

invoice approving official, payment 

office, and affected contracting offices. 

■ 9. Add section 945.107 to read as 

follows: 

945.107 Contract clauses. 

(a) Unless one of the exceptions at 

942.7003 applies, use the clause at 

952.245–70, Contractor Property 

Management System Administration, in 

solicitations and contracts in support of 

a Capital Asset Project, (other than a 

management and operating contract as 

described at 917.6), as prescribed in 

DOE O 413.3B, or current version, or for 

a non-capital asset project as described 

at 915.407–5–70(b)(2), for a prime 

contract, when the total contract value 

exceeds $50 million, including options, 

or when the prime contract totaling $10 

million or more including options (but 

less than $50 million) and the 

contracting officer determines it to be in 

the best interest of the Government 

(significant property problems are 

believed to exist or the contractor’s sales 

are predominantly Government) and 

containing the clause at 48 CFR 52.245– 

1, Government Property. (b) For 

negotiated fixed-price contract, not 

subject to 48 CFR 942.7002, awarded on 

a basis other than submission of 

certified cost or pricing data for which 

Government property is provided, use 

the clause at 48 CFR 52.245–1, 

Government Property, without its 

Alternate I. 


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Federal Register / Vol. 79, No. 62 / Tuesday, April 1, 2014 / Proposed Rules 18433 

PART 952—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 10. Revise section 952.215–70 

introductory text to read as follows: 

952.215–70 Key Personnel. 

As prescribed in 915.408–70(a), the 

contracting officer shall insert the 

following clause: 

* * * * * 

■ 11. Add section 952.215.71 to read as 

follows: 

952.215–71 Cost estimating system 

requirements. 

As prescribed in 915.408–70(b), use 

the following clause: 

COST ESTIMATING SYSTEM 

REQUIREMENTS (xxx 201x) 

(a) Definitions. 

Acceptable estimating system means an 

estimating system that complies with the 

system criteria in paragraph (d) of this clause, 

and provides for a system that— 

(1) Is maintained, reliable, and consistently 

applied; 

(2) Produces verifiable, supportable, 

documented, and timely cost estimates that 

are an acceptable basis for negotiation of fair 

and reasonable prices; 

(3) Is consistent with and integrated with 

the Contractor’s related management systems; 

and 

(4) Is subject to applicable financial control 

systems. 

Estimating system means the Contractor’s 

policies, procedures, and practices for 

budgeting and planning controls, and 

generating estimates of costs and other data 

included in proposals submitted to 

customers in the expectation of receiving 

contract awards or contract modifications. 

Estimating system includes the 

Contractor’s— 

(1) Organizational structure; 

(2) Established lines of authority, duties, 

and responsibilities; 

(3) Internal controls and managerial 

reviews; 

(4) Flow of work, coordination, and 

communication; and 

(5) Budgeting, planning, estimating 

methods, techniques, accumulation of 

historical costs, and other analyses used to 

generate cost estimates. 

Significant deficiency means a shortcoming 

in the system that materially affects the 

ability of officials of the Department of 

Energy to rely upon information produced by 

the system that is needed for management 

purposes. 

(b) General. The Contractor shall establish, 

maintain, and comply with an acceptable 

estimating system. 

(c) Applicability. Paragraphs (d) and (e) of 

this clause apply if the Contractor is a large 

business to include a contractor teaming 

arrangement, as defined at 48 CFR 9.601(1), 

performing a contract in support of a Capital 

Asset Project (other than a management and 

operating contract as described at 917.6), as 

prescribed in DOE Order (DOE O) 413.3B, or 

current version; or a non-capital asset project 

and either— 

(1) The total prime contract value exceeds 

$50 million, including options; or 

(2) The Contractor was notified, in writing, 

by the Contracting Officer that paragraphs (d) 

and (e) of this clause apply. 

(d) System requirements. (1) The 

Contractor shall disclose its estimating 

system to the Contracting Officer, in writing. 

If the Contractor wishes the Government to 

protect the information as privileged or 

confidential, the Contractor must mark the 

documents with the appropriate legends 

before submission. If the Contractor plans to 

adopt the existing system from the previous 

Contractor, the Contractor is responsible for 

the system and shall comply with the system 

requirements required in this clause. 

(2) An estimating system disclosure is 

acceptable when the Contractor has provided 

the Contracting Officer with documentation 

no later than 60 days after contract award 

that— 

(i) Accurately describes those policies, 

procedures, and practices that the Contractor 

currently uses in preparing cost proposals; 

and 

(ii) Provides sufficient detail for the 

Government to reasonably make an informed 

judgment regarding the acceptability of the 

Contractor’s estimating practices. 

(3) The Contractor shall— 

(i) Comply with its disclosed estimating 

system; and 

(ii) Disclose significant changes to the cost 

estimating system to the Contracting Officer 

on a timely basis. 

(4) The Contractor’s estimating system 

shall provide for the use of appropriate 

source data, utilize sound estimating 

techniques and good judgment, maintain a 

consistent approach, and adhere to 

established policies and procedures. An 

acceptable estimating system shall 

accomplish the following functions: 

(i) Establish clear responsibility for 

preparation, review, and approval of cost 

estimates and budgets. 

(ii) Provide a written description of the 

organization and duties of the personnel 

responsible for preparing, reviewing, and 

approving cost estimates and budgets. 

(iii) Ensure that relevant personnel have 

sufficient training, experience, and guidance 

to perform estimating and budgeting tasks in 

accordance with the Contractor’s established 

procedures. 

(iv) Identify and document the sources of 

data and the estimating methods and 

rationale used in developing cost estimates 

and budgets. 

(v) Provide for adequate supervision 

throughout the estimating and budgeting 

process. 

(vi) Provide for consistent application of 

estimating and budgeting techniques. 

(vii) Provide for detection and timely 

correction of errors. 

(viii) Protect against cost duplication and 

omissions. 

(ix) Provide for the use of historical 

experience, including historical vendor 

pricing information, where appropriate. 

(x) Require use of appropriate analytical 

methods. 

(xi) Integrate information available from 

other management systems. 

(xii) Require management review, 

including verification of compliance with the 

company’s estimating and budgeting policies, 

procedures, and practices. 

(xiii) Provide for internal review of, and 

accountability for, the acceptability of the 

estimating system, including the budgetary 

data supporting indirect cost estimates and 

comparisons of projected results to actual 

results, and an analysis of any differences. 

(xiv) Provide procedures to update cost 

estimates and notify the Contracting Officer 

in a timely manner. 

(xv) Provide procedures that ensure 

subcontract prices are reasonable based on a 

documented review and analysis provided 

with the prime proposal, when practicable. 

(xvi) Provide estimating and budgeting 

practices that consistently generate sound 

proposals that are compliant with the 

provisions of the solicitation and are 

adequate to serve as a basis to reach a fair 

and reasonable price. 

(xvii) Have an adequate system 

description, including policies, procedures, 

and estimating and budgeting practices, that 

comply with the Federal Acquisition 

Regulation (48 CFR chapter 1) and 

Department of Energy Acquisition Regulation 

(48 CFR chapter 9). 

(e) Significant deficiencies. (1) The 

Contracting Officer will provide an initial 

determination to the Contractor, in writing, 

of any significant deficiencies. The initial 

determination will describe the deficiency in 

sufficient detail to allow the Contractor to 

understand the deficiency. 

(2) The Contractor shall respond within 30 

days to a written initial determination from 

the Contracting Officer that identifies 

significant deficiencies in the Contractor’s 

estimating system. If the Contractor disagrees 

with the initial determination, the Contractor 

shall state, in writing, its rationale for 

disagreeing. In the event the Contractor did 

not respond in writing to the initial 

determination within the response time, this 

lack of response shall indicate that the 

Contractor agrees with the initial 

determination. 

(3) The Contracting Officer will evaluate 

the Contractor’s response or the Contractor’s 

lack of response and notify the Contractor, in 

writing, of the Contracting Officer’s final 

determination concerning— 

(i) Remaining significant deficiencies; 

(ii) The adequacy of any proposed or 

completed corrective action; and 

(iii) System disapproval, if the Contracting 

Officer determines that one or more 

significant deficiencies remain. 

(f) If the Contractor receives the 

Contracting Officer’s final determination of 

significant deficiencies, the Contractor shall, 

within 45 days of receipt of the final 

determination, either correct the significant 

deficiencies or submit an acceptable 

corrective action plan showing milestones 

and actions to eliminate the significant 

deficiencies. 

(g) Withholding payments. If the 

Contracting Officer makes a final 

determination to disapprove the Contractor’s 

estimating system, and the contract includes 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS2
18434 Federal Register / Vol. 79, No. 62 / Tuesday, April 1, 2014 / Proposed Rules 

the clause at 952.242–71, Contractor Business 

System, the Contracting Officer will withhold 

payments in accordance with that clause. 

(End of clause) 

■ 12. Add section 952.234.70 to read as 

follows: 

952.234–70 Notice of earned value 

management system. 

As prescribed in 934.203(a), use the 

following provision: 

NOTICE OF EARNED VALUE 

MANAGEMENT SYSTEM (xxx 201x) 

(a) If the offeror submits a proposal for a 

Department of Energy (DOE) Capital Asset 

Project— 

(1) In the amount of $50,000,000 or more; 

or 

(2) Where the offeror has a contract or 

other contracts in support of DOE Capital 

Asset Projects and the total contract values 

are $20,000,000 or greater per contract for a 

total contract values of $50,000,000 or 

more— 

(i) The offeror shall provide documentation 

that an authorized government representative 

has determined that the proposed Earned 

Value Management System (EVMS) complies 

with the EVMS guidelines in the American 

National Standards Institute/Electronic 

Industries Alliance Standard 748, Earned 

Value Management Systems (ANSI/EIA–748) 

(current version at time of solicitation). The 

Government reserves the right to perform 

reviews of the EVMS when deemed 

necessary to verify compliance. 

(ii) If the offeror proposes to use a system 

that has not been determined to be in 

compliance with the requirements of 

paragraph (a)(1) of this provision, the offeror 

shall submit a comprehensive plan for 

compliance with the guidelines in ANSI/

EIA–748. 

(A) The plan shall— 

(1) Describe the EVMS the offeror intends 

to use in performance of the contract, and 

how the proposed EVMS complies with the 

EVMS guidelines in ANSI/EIA–748; 

(2) Distinguish between the offeror’s 

existing management system and 

modifications proposed to meet the EVMS 

guidelines; 

(3) Describe the management system and 

its application in terms of the EVMS 

guidelines; 

(4) Describe the proposed procedure for 

administration of the EVMS guidelines as 

applied to subcontractors; and 

(5) Describe the process the offeror will use 

to determine subcontractor compliance with 

ANSI/EIA–748. 

(B) The offeror shall provide information 

and assistance as required by the Contracting 

Officer to support review of the plan. 

(C) The offeror’s EVMS plan must provide 

milestones that indicate when the offeror 

anticipates that the EVMS will be compliant 

with the guidelines in ANSI/EIA–748. 

(b) If the offeror submits a proposal in an 

amount less than $50,000,000 and does not 

meet the condition described at (a)(2) 

above— 

(1) The offeror shall submit a written 

description of the management procedures it 

will use and maintain in the performance of 

any resultant contract to comply with the 

requirements of the Earned Value 

Management System clause of the contract. 

The description shall include— 

(i) A matrix that correlates each guideline 

in ANSI/EIA–748 (current version at time of 

solicitation) to the corresponding process in 

the offeror’s written management procedures; 

and 

(ii) The process the offeror will use to 

determine subcontractor compliance with 

ANSI/EIA–748. 

(2) If the offeror proposes to use an EVMS 

that has been determined by the CFA to be 

in compliance with the EVMS guidelines in 

ANSI/EIA–748, the offeror may submit a 

copy of the documentation of such 

determination instead of the written 

description required by paragraph (b)(1) of 

this provision. 

(c) The offeror shall identify the 

subcontractors (or the subcontracted effort if 

subcontractors have not been selected) to 

whom the EVMS requirements will apply. 

The offeror and the Government shall agree 

to the contractors or the subcontracted effort 

selected for application of the EVMS 

requirements. The offeror shall be 

responsible for ensuring that the selected 

subcontractors comply with the requirements 

of the Earned Value Management System 

clause of the contract. 

(End of provision) 

■ 13. Add section 952.234.71 to read as 

follows: 

952.234–71 Earned value management 

system. 

As prescribed in 934.203(b), use the 

following clause: 

EARNED VALUE MANAGEMENT SYSTEM 

(XXX 201X) 

(a) Definitions. As used in this clause— 

Acceptable earned value management 

system means an earned value management 

system that generally complies with system 

criteria in paragraph (b) of this clause. 

Earned value management system means 

an earned value management system that 

complies with the earned value management 

system guidelines in the ANSI/EIA–748. 

Over Target Baseline means an overrun to 

the Contract Budget Base (CBB) which is 

formally incorporated into the Performance 

Measurement Baseline (PMB) for 

management purposes. 

Over Target Schedule means the term used 

to describe a condition where a baseline 

schedule is time-phased beyond the contract 

completion date. 

Significant deficiency means a shortcoming 

in the system that materially affects the 

ability of officials of the Department of 

Energy to rely upon information produced by 

the system that is needed for management 

purposes. 

(b) System criteria. In the performance of 

this contract, the Contractor shall use— 

(1) An Earned Value Management System 

(EVMS) that complies with the EVMS 

guidelines in the American National 

Standards Institute/Electronic Industries 

Alliance Standard 748, Earned Value 

Management Systems (ANSI/EIA–748) 

(current version at time of award; and 

(2) Management procedures. (i) 

Management procedures provide for 

generation of timely, reliable, and verifiable 

information for the Department of Energy 

(DOE) Integrated Program Management 

Report (IPMR) data item of this contract. 

(ii) The Contractor shall use Department of 

Energy’s (DOE) modified version of 

Department of Defense’s Data Item 

Description (DID) Integrated Program 

Management Report (IPMR), DI–MGMT– 

81861, (DOE version, current version at time 

of contract award) which contains data for 

measuring cost and schedule performance for 

this DOE contract. The Contractor shall 

submit the data electronically by uploading 

the data into the Project Assessment and 

Reporting System (PARS II) in accordance 

with the ‘‘Contractor Project Performance 

Upload Requirements’’ document maintained 

by the DOE Office of Acquisition and Project 

Management (OAPM). All requested data 

shall be submitted timely and accurately, and 

shall be current as of the close of the 

previous month’s accounting period. 

(c) If the Contractor has one or more DOE 

contracts valued at $20,000,000 or greater per 

contract for a total contract value of 

$50,000,000 or more which support DOE 

Capital Asset Projects, the Contractor shall 

use an EVMS that has been determined to be 

acceptable by DOE. If, at the time of award, 

the Contractor’s EVMS has not been 

determined by DOE to be in compliance with 

the EVMS guidelines as stated in paragraph 

(b)(1) of this clause, the Contractor shall 

apply its current system to the contract and 

shall take necessary actions to meet the 

milestones in the Contractor’s EVMS plan. 

(d) If this contract has a total value of less 

than $50,000,000 and does not meet the 

condition described at (c) above, the 

Government will not make a formal 

determination that the Contractor’s EVMS 

complies with the EVMS guidelines in ANSI/ 

EIA–748 with respect to the contract. The use 

of the Contractor’s EVMS for this contract 

does not imply a Government determination 

of the Contractor’s compliance with the 

EVMS guidelines in ANSI/EIA–748 for 

application to future contracts. 

(e) The Contractor shall submit notification 

of all proposed changes to the EVMS 

procedures and the impact of those changes 

to DOE. If this contractor has one or more 

contracts in support of DOE Capital Asset 

Projects and the total contract values are 

$20,000,000 or greater per contract for total 

contract values of $50,000,000 or more, 

unless a waiver is granted by DOE, any 

EVMS changes proposed by the Contractor 

require approval of DOE prior to 

implementation. DOE will advise the 

Contractor of the acceptability of such 

changes as soon as practicable (generally 

within 30 calendar days) after receipt of the 

Contractor’s notice of proposed changes. If 

DOE waives the advance approval 

requirements, the Contractor shall disclose 

EVMS changes to DOE at least 14 calendar 

days prior to the effective date of 

implementation. 

(f) Integrated baseline reviews. (1) The 

purpose of the integrated baseline reviews 


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Federal Register / Vol. 79, No. 62 / Tuesday, April 1, 2014 / Proposed Rules 18435 

(IBR) is to verify the technical content and 

the realism of the related performance 

budgets, resources, and schedules. It should 

provide a mutual understanding of the 

inherent risks in the offerors’/contractors’ 

performance plans and the underlying 

management control systems, and it should 

formulate a plan to handle these risks. DOE 

and the Contractor will use the IBR process 

described in the National Defense Industrial 

Association Program Management Systems 

Committee Integrated Baseline Review (NDIA 

PMSC IBR) Guide (current version at time of 

award). 

(2) The Government will schedule IBRs as 

early as practicable, and the review process 

will be conducted not later than 180 calendar 

days after— 

(i) Contract award; 

(ii) The exercise of significant contract 

options; and 

(iii) The incorporation of major 

modifications. 

During such reviews, the Government and 

the Contractor will jointly assess the 

Contractor’s baseline to be used for 

performance measurement to ensure 

complete coverage of the statement of work, 

logical scheduling of the work activities, 

adequate resourcing, and identification of 

inherent risks. 

(g) The Contractor shall provide access to 

all pertinent records and data requested by 

the Contracting Officer or duly authorized 

representative as necessary to permit 

Government surveillance to ensure that the 

EVMS complies, and continues to comply, 

with the performance criteria referenced in 

paragraph (b) of this clause. 

(h) When indicated by contract 

performance, the Contractor shall submit a 

request for approval to initiate an over-target 

baseline or over-target schedule to the 

Contracting Officer. The request shall include 

a top-level projection of cost and/or schedule 

growth, a determination of whether or not 

performance variances will be retained, and 

a schedule of implementation for the 

rebaselining. The Government will 

acknowledge receipt of the request in a 

timely manner (generally within 30 calendar 

days). 

(i) Significant deficiencies. (1) The 

Contracting Officer will provide an initial 

determination to the Contractor, in writing, 

on any significant deficiencies. The initial 

determination will describe the deficiency in 

sufficient detail to allow the Contractor to 

understand the deficiency. 

(2) The Contractor shall respond within 30 

days to a written initial determination from 

the Contracting Officer that identifies 

significant deficiencies in the Contractor’s 

EVMS. If the Contractor disagrees with the 

initial determination, the Contractor shall 

state, in writing, its rationale for disagreeing. 

In the event the Contractor did not respond 

in writing to the initial determination within 

the response time, this lack of response shall 

indicate that the Contractor agrees with the 

initial determination. 

(3) The Contracting Officer will evaluate 

the Contractor’s response or the Contractor’s 

lack of response and notify the Contractor, in 

writing, of the Contracting Officer’s final 

determination concerning— 

(i) Remaining significant deficiencies; 

(ii) The adequacy of any proposed or 

completed corrective action; 

(iii) System noncompliance, when the 

Contractor’s existing EVMS fails to comply 

with the earned value management system 

guidelines in the ANSI/EIA–748; and 

(iv) System disapproval, if initial EVMS 

validation is not successfully completed 

within the timeframe approved by the 

Contracting Officer, or if the Contracting 

Officer determines that the Contractor’s 

earned value management system contains 

one or more significant deficiencies in highrisk guidelines in ANSI/EIA–748 standards 

(guidelines 1, 3, 6, 7, 8, 9, 10, 12, 16, 21, 23, 

26, 27, 28, 30, or 32). When the Contracting 

Officer determines that the existing earned 

value management system contains one or 

more significant deficiencies in one or more 

of the remaining 16 guidelines in ANSI/EIA– 

748 standards, the contracting officer will use 

discretion to disapprove the system based on 

input received from the DOE Office of 

Acquisition and Project Management or the 

DOE Program Office, herein referred to as the 

functional specialists. 

(4) If the Contractor receives the 

Contracting Officer’s final determination of 

significant deficiencies, the Contractor shall, 

within 45 days of receipt of the final 

determination, either correct the significant 

deficiencies or submit an acceptable 

corrective action plan showing milestones 

and actions to eliminate the significant 

deficiencies. 

(j) Withholding payments. If the 

Contracting Officer makes a final 

determination to disapprove the Contractor’s 

EVMS, and the contract includes the clause 

at 952.242–71, Contractor Business System, 

the Contracting Officer will withhold 

payments in accordance with that clause. 

(k) With the exception of paragraphs (i) 

and (j) of this clause, for contracts valued at 

$20 million or more requiring EVMS, the 

contractor shall flow down appropriate 

EVMS requirements to its subcontractors in 

order for the contractor to meet all 

requirements of this clause. 

[Contracting Officer to insert names of 

subcontractors (or subcontracted effort if 

subcontractors have not been selected) 

designated for application of the EVMS 

requirements of this clause.] 

(l) Adopting previous Contractor’s 

previously certified earned value 

management (EVM) process. If the Contractor 

plans to adopt the existing system from the 

previous Contractor or DOE-site, the 

Contractor is responsible for the system and 

shall comply with the system requirements 

required in this clause. The existing system 

shall utilize the same DOE approved EVM 

Process Description and the same EVM 

training as the previous system. The 

Contractor shall— 

(1) Identify the corporate entity which 

owns the certified EVM process and provide 

the certification documentation; 

(2) Obtain DOE prior approval or 

Advanced Agreement including DOE 

approval of process changes and joint 

surveillance; 

(3) Be responsible for compliance with the 

system criteria required in paragraph (b) of 

this clause; and 

(4) Be responsible for correcting any 

significant deficiencies previously identified 

to the previous Contractor by the Contracting 

Officer in accordance with paragraph (i) of 

this clause. Within 45 days after receiving a 

copy of the previous contractor’s final 

determination, the Contractor shall follow 

paragraph (i)(4) and either correct any 

significant deficiencies or submit an 

acceptable corrective action plan. The 

Contracting Officer or designee, will provide 

a copy of the previous contractor’s final 

determination. 

(End of clause) 

■ 14. Add section 952.242.71 to read as 

follows: 

952.242–71 Contractor business system. 

As prescribed in 942.7002, use the 

following clause: 

CONTRACTOR BUSINESS SYSTEM (xxx 

201x) 

(a) This clause only applies to fixed-price 

contract awarded to a large business on the 

basis of adequate price competition with or 

without submission of cost or pricing data; or 

covered contract that is subject to the Cost 

Accounting Standards under 41 U.S.C. 

chapter 15, as implemented in regulations 

found at 48 CFR 9903.201–1(a) and is not 

exempted at 9903.201–1(b)(1) through (14) 

(see the 48 CFR Appendix). 

(b) Definitions. As used in this clause— 

Acceptable contractor business system 

means contractor business system that 

comply with the terms and conditions of the 

applicable business system clauses listed in 

the definition of ‘‘contractor business 

system’’ in this clause. 

Contractor business system means— 

(1) Accounting system, if this contract 

includes the clause at 48 CFR 952.242–72, 

Accounting System Administration; 

(2) Earned value management system, if 

this contract includes the clause at 48 CFR 

952.234–70, Earned Value Management 

System; 

(3) Estimating system, if this contract 

includes the clause at 48 CFR 952.215–71, 

Cost Estimating System Requirements; 

(4) Property management system, if this 

contract includes the clause at 48 CFR 

952.245–70, Contractor Property 

Management System Administration; and 

(5) Purchasing system, if this contract 

includes the clause at 48 CFR 952.244–71, 

Contractor Purchasing System 

Administration. 

Significant deficiency, in the case of a 

contractor business system, means a 

shortcoming in the system that materially 

affects the ability of officials of the 

Department of Energy to rely upon 

information produced by the system that is 

needed for management purposes. 

(c) General. The Contractor shall establish 

and maintain acceptable business systems in 

accordance with the terms and conditions of 

this contract. If the Contractor plans to adopt 

any existing business system from the 

previous Contractor, the Contractor is 

responsible for the system and shall comply 

with the system requirements and criteria 

required in that specific business system 

clause. 


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(d) Significant deficiencies. (1) The 

Contractor shall respond, in writing, within 

30 days to an initial determination that there 

are one or more significant deficiencies in 

one or more of the Contractor’s business 

systems. 

(2) The Contracting Officer will evaluate 

the Contractor’s response and notify the 

Contractor, in writing, of the final 

determination as to whether the Contractor’s 

business system contains significant 

deficiencies. If the Contracting Officer 

determines that the Contractor’s business 

system contains significant deficiencies, the 

final determination will include a notice to 

withhold payments. 

(e) Withholding payments. (1) If the 

Contracting Officer issues the final 

determination with a notice to withhold 

payments for significant deficiencies in a 

contractor business system required under 

this contract, the Contracting Officer will 

direct the Contractor, in writing, to withhold 

five percent from its invoices until the 

Contracting Officer has determined that the 

Contractor has corrected all significant 

deficiencies as directed by the Contracting 

Officer’s final determination. The Contractor 

shall, within 45 days of receipt of the notice, 

either— 

(i) Correct the deficiencies; or 

(ii) Submit an acceptable corrective action 

plan showing milestones and actions to 

eliminate the deficiencies. The plan shall 

contain— 

(A) Root cause(s) identification of the 

problem(s); 

(B) The proposed corrective action(s) to 

address the root cause(s); 

(C) A schedule for implementation; and 

(D) The name of the person responsible for 

the implementation. 

(2) If the Contractor submits an acceptable 

corrective action plan within 45 days of 

receipt of a notice of the Contracting Officer’s 

intent to withhold payments, and the 

Contracting Officer, in consultation with the 

auditor or functional specialist, determines 

that the Contractor is effectively 

implementing such plan, the Contracting 

Officer will direct the Contractor, in writing, 

to reduce the percentage withheld on 

invoices to two percent until the Contracting 

Officer determines the Contractor has 

corrected all significant deficiencies as 

directed by the Contracting Officer’s final 

determination. However, if at any time, the 

Contracting Officer determines that the 

Contractor has failed to follow the accepted 

corrective action plan, the Contracting 

Officer will increase withholding and direct 

the Contractor, in writing, to increase the 

percentage withheld on invoices to the 

percentage initially withheld, until the 

Contracting Officer determines that the 

Contractor has corrected all significant 

deficiencies as directed by the Contracting 

Officer’s final determination. 

(3) Payment withhold percentage limits. 

(i) The total percentage of payments 

withheld on amounts due on this contract 

shall not exceed— 

(A) Five percent for one or more significant 

deficiencies in any single contractor business 

system; and 

(B) Ten percent for significant deficiencies 

in multiple contractor business systems. 

(ii) If this contract contains pre-existing 

withholds, and the application of any 

subsequent payment withholds will cause 

withholding under this clause to exceed the 

payment withhold percentage limits in 

paragraph (e)(3)(i) of this clause, the 

Contracting Officer will reduce the payment 

withhold percentage in the final 

determination to an amount that will not 

exceed the payment withhold percentage 

limits. 

(4) For the purpose of this clause, payment 

means invoicing for any of the following 

payments authorized under this contract: 

(i) Interim payments under— 

(A) Cost-reimbursement contracts; 

(B) Incentive type contracts; 

(C) Time-and-materials contracts; or 

(D) Labor-hour contracts. 

(ii) Progress payments to include fixedprice contracts. 

(iii) Performance-based payments to 

include fixed-price contracts. 

(5) Payment withholding shall not apply to 

payments on fixed-price line items where 

performance is complete and the items were 

accepted by the Government. 

(6) The withholding of any amount or 

subsequent payment to the Contractor shall 

not be construed as a waiver of any rights or 

remedies the Government has under this 

contract. 

(7) Notwithstanding the provisions of any 

clause in this contract providing for interim, 

partial, or other payment withholding on any 

basis, the Contracting Officer may withhold 

payment in accordance with the provisions 

of this clause. 

(8) The payment withholding authorized in 

this clause is not subject to the interestpenalty provisions of the Prompt Payment 

Act. 

(f) Correction of deficiencies. (1) The 

Contractor shall notify the Contracting 

Officer, in writing, when the Contractor has 

corrected the business system’s deficiencies. 

(2) Once the Contractor has notified the 

Contracting Officer that all deficiencies have 

been corrected, the Contracting Officer will 

take one of the following actions: 

(i) If the Contracting Officer determines 

that the Contractor has corrected all 

significant deficiencies as directed by the 

Contracting Officer’s final determination, the 

Contracting Officer will direct the Contractor, 

in writing, to discontinue the payment 

withholding from invoices under this 

contract associated with the Contracting 

Officer’s final determination, and authorize 

the Contractor to bill for any monies 

previously withheld that are not also being 

withheld due to other significant 

deficiencies. Any payment withholding 

under this contract due to other significant 

deficiencies, will remain in effect until the 

Contracting Officer determines that those 

significant deficiencies are corrected. 

(ii) If the Contracting Officer determines 

that the Contractor still has significant 

deficiencies, the Contractor shall continue 

withholding amounts from its invoices in 

accordance with paragraph (e) of this clause, 

and not invoice for any monies previously 

withheld. 

(iii) If the Contracting Officer determines, 

based on the evidence submitted by the 

Contractor, that there is a reasonable 

expectation that the corrective actions have 

been implemented and are expected to 

correct the significant deficiencies, the 

Contracting Officer will discontinue 

withholding payments, and release any 

payments previously withheld directly 

related to the significant deficiencies 

identified in the Contractor notification, and 

direct the Contractor, in writing, to 

discontinue the payment withholding from 

invoices associated with the Contracting 

Officer’s final determination, and authorize 

the Contractor to bill for any monies 

previously withheld. 

(iv) If, within 90 days of receipt of the 

Contractor notification that the Contractor 

has corrected the significant deficiencies, the 

Contracting Officer has not made a 

determination in accordance with paragraphs 

(f)(2)(i), (ii), or (iii) of this clause, the 

Contracting Officer will direct the Contractor, 

in writing, to reduce the payment 

withholding from invoices directly related to 

the significant deficiencies identified in the 

Contractor notification by a specified 

percentage that is at least 50 percent, but not 

authorize the Contractor to bill for any 

monies previously withheld until the 

Contracting Officer makes a determination in 

accordance with paragraphs (f)(2)(i), (ii), or 

(iii) of this clause. 

(v) At any time after the Contracting Officer 

directs the Contractor to reduce or 

discontinue the payment withholding from 

invoices under this contract, if the 

Contracting Officer determines that the 

Contractor has failed to correct the significant 

deficiencies identified in the Contractor’s 

notification, the Contracting Officer will 

reinstate or increase withholding and direct 

the Contractor, in writing, to reinstate or 

increase the percentage withheld on invoices 

to the percentage initially withheld, until the 

Contracting Officer determines that the 

Contractor has corrected all significant 

deficiencies as directed by the Contracting 

Officer’s final determination. 

(End of clause) 

■ 15. Add section 952.242.72 to read as 

follows: 

952.242–72 Accounting system 

administration. 

As prescribed in 942.7103, use the 

following clause: 

ACCOUNTING SYSTEM 

ADMINISTRATION (XXX 201X) 

(a) Definitions. As used in this clause— 

(1) Acceptable accounting system means a 

system that complies with the system criteria 

in paragraph (c) of this clause to provide 

reasonable assurance that— 

(i) Applicable laws and regulations are 

complied with; 

(ii) The accounting system and cost data 

are reliable; 

(iii) Risk of misallocations and mischarges 

are minimized; and 

(iv) Contract allocations and charges are 

consistent with billing procedures. 

(2) Accounting system means the 

Contractor’s system or systems for accounting 

methods, procedures, and controls 


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established to gather, record, classify, 

analyze, summarize, interpret, and present 

accurate and timely financial data for 

reporting in compliance with applicable 

laws, regulations, and management 

decisions, and may include subsystems for 

specific areas such as indirect and other 

direct costs, compensation, billing, labor, and 

general information technology. 

(3) Significant deficiency means a 

shortcoming in the system that materially 

affects the ability of officials of the 

Department of Energy to rely upon 

information produced by the system that is 

needed for management purposes. 

(b) General. The Contractor shall establish 

and maintain an acceptable accounting 

system. If the Contractor plans to adopt the 

existing system from the previous Contractor, 

the Contractor is responsible for the system 

and shall comply with the system criteria 

required in this clause. The Contractor shall 

provide in writing to the Contracting Officer 

documentation that its accounting system 

meets the system criteria in paragraph (c) of 

this clause no later than 60 days after 

contract award. Failure to maintain an 

acceptable accounting system, as defined in 

this clause, shall result in the withholding of 

payments if the contract includes the clause 

at 48 CFR 952.242–71, Contractor Business 

System, and also may result in disapproval 

of the system. 

(c) System criteria. The Contractor’s 

accounting system shall provide for— 

(1) A sound internal control environment, 

accounting framework, and organizational 

structure; 

(2) Proper segregation of direct costs from 

indirect costs; 

(3) Identification and accumulation of 

direct costs by contract; 

(4) A logical and consistent method for the 

accumulation and allocation of indirect costs 

to intermediate and final cost objectives; 

(5) Accumulation of costs under general 

ledger control; 

(6) Reconciliation of subsidiary cost 

ledgers and cost objectives to general ledger; 

(7) Approval and documentation of 

adjusting entries; 

(8) Management reviews or internal audits 

of the system to ensure compliance with the 

Contractor’s established policies, procedures, 

and accounting practices; 

(9) A timekeeping system that identifies 

employees’ labor by intermediate or final cost 

objectives; 

(10) A labor distribution system that 

charges direct and indirect labor to the 

appropriate cost objectives; 

(11) Interim (at least monthly) 

determination of costs charged to a contract 

through routine posting of books of account; 

(12) Exclusion from costs charged to 

Government contracts of amounts which are 

not allowable in terms of 48 CFR part 31, 

Contract Cost Principles and Procedures, and 

other contract provisions; 

(13) Identification of costs by contract line 

item and by units (as if each unit or line item 

were a separate contract), if required by the 

contract; 

(14) Segregation of preproduction costs 

from production costs, as applicable; 

(15) Cost accounting information, as 

required— 

(i) By contract clauses concerning 

limitation of cost (48 CFR 52.232–20), 

limitation of funds (48 CFR 52.232–22), or 

allowable cost and payment (48 CFR 52.216– 

7); and 

(ii) To readily calculate indirect cost rates 

from the books of accounts; 

(16) Billings that can be reconciled to the 

cost accounts for both current and 

cumulative amounts claimed and comply 

with contract terms; 

(17) Adequate, reliable data for use in 

pricing follow-on acquisitions; and 

(18) Accounting practices in accordance 

with standards promulgated by the Cost 

Accounting Standards Board, if applicable, 

otherwise, Generally Accepted Accounting 

Principles. 

(d) Significant deficiencies. (1) The 

Contracting Officer will provide an initial 

determination to the Contractor, in writing, 

on any significant deficiencies. The initial 

determination will describe the deficiency in 

sufficient detail to allow the Contractor to 

understand the deficiency. 

(2) The Contractor shall respond within 30 

days to a written initial determination from 

the Contracting Officer that identifies 

significant deficiencies in the Contractor’s 

accounting system. If the Contractor 

disagrees with the initial determination, the 

Contractor shall state, in writing, its rationale 

for disagreeing. In the event the Contractor 

did not respond in writing to the initial 

determination within the response time, this 

lack of response shall indicate that the 

Contractor agrees with the initial 

determination. 

(3) The Contracting Officer will evaluate 

the Contractor’s response or the Contractor’s 

lack of response and notify the Contractor, in 

writing, of the Contracting Officer’s final 

determination concerning— 

(i) Remaining significant deficiencies; 

(ii) The adequacy of any proposed or 

completed corrective action; and 

(iii) System disapproval, if the Contracting 

Officer determines that one or more 

significant deficiencies remain. 

(e) If the Contractor receives the 

Contracting Officer’s final determination of 

significant deficiencies, the Contractor shall, 

within 45 days of receipt of the final 

determination, either correct the significant 

deficiencies or submit an acceptable 

corrective action plan showing milestones 

and actions to eliminate the significant 

deficiencies. 

(f) Withholding payments. If the 

Contracting Officer makes a final 

determination to disapprove the Contractor’s 

accounting system, and the contract includes 

the clause 48 CFR 952.242–71, Contractor 

Business System, the Contracting Officer will 

withhold payments in accordance with that 

clause. 

(End of clause) 

■ 16. Add section 952.244.71 to read as 

follows: 

952.244–71 Contractor purchasing system 

administration. 

As prescribed in 944.305–71, insert 

the following clause: 

CONTRACTOR PURCHASING SYSTEM 

ADMINISTRATION (XXX 201X) 

(a) Definitions. As used in this clause— 

Acceptable purchasing system means a 

purchasing system that complies with the 

system criteria in paragraph (c) of this clause. 

Purchasing system means the Contractor’s 

system or systems for purchasing and 

subcontracting, including make-or-buy 

decisions, the selection of vendors, analysis 

of quoted prices, negotiation of prices with 

vendors, placing and administering of orders, 

and expediting delivery of materials. 

Significant deficiency means a shortcoming 

in the system that materially affects the 

ability of officials of the Department of 

Energy to rely upon information produced by 

the system that is needed for management 

purposes. 

(b) General. The Contractor shall establish 

and maintain an acceptable purchasing 

system. If the Contractor plans to adopt the 

existing system from the previous Contractor, 

the Contractor is responsible for the system 

and shall comply with the system criteria 

required in this clause. The Contractor shall 

provide in writing to the Contracting Officer 

documentation that its purchasing system 

meets the system criteria in paragraph (c) of 

this clause no later than 60 days after 

contract award. Failure to maintain an 

acceptable purchasing system, as defined in 

this clause, may result in disapproval of the 

system by the Contracting Officer and/or 

withholding of payments. 

(c) System criteria. The Contractor’s 

purchasing system shall— 

(1) Have an adequate system description 

including policies, procedures, and 

purchasing practices that comply with the 

Federal Acquisition Regulation (FAR) (48 

CFR Chapter 1) and the Department of Energy 

Acquisition Regulation (48 CFR Chapter 9); 

(2) Ensure that all applicable purchase 

orders and subcontracts contain all 

flowdown clauses, including terms and 

conditions and any other clauses needed to 

carry out the requirements of the prime 

contract; 

(3) Maintain an organization plan that 

establishes clear lines of authority and 

responsibility; 

(4) Ensure all purchase orders are based on 

authorized requisitions and include a 

complete and accurate history of purchase 

transactions to support vendor selected, price 

paid, and document the subcontract/

purchase order files which are subject to 

Government review; 

(5) Establish and maintain adequate 

documentation to provide a complete and 

accurate history of purchase transactions to 

support vendors selected and prices paid; 

(6) Apply a consistent make-or-buy policy 

that is in the best interest of the Government; 

(7) Use competitive sourcing to the 

maximum extent practicable, and ensure 

debarred or suspended contractors are 

properly excluded from contract award; 

(8) Evaluate price, quality, delivery, 

technical capabilities, and financial 

capabilities of competing vendors to ensure 

fair and reasonable prices; 

(9) Require management level justification 

and adequate cost or price analysis, as 

applicable, for any sole or single source 

award; 


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(10) Perform timely and adequate cost or 

price analysis and technical evaluation for 

each subcontractor and supplier proposal or 

quote to ensure fair and reasonable 

subcontract prices; 

(11) Document negotiations in accordance 

with 48 CFR 15.406–3; 

(12) Seek, take, and document 

economically feasible purchase discounts, 

including cash discounts, trade discounts, 

quantity discounts, rebates, freight 

allowances, and company-wide volume 

discounts; 

(13) Ensure proper type of contract 

selection and prohibit issuance of cost-plusa-percentage-of-cost subcontracts; 

(14) Maintain subcontract surveillance to 

ensure timely delivery of an acceptable 

product and procedures to notify the 

Government of potential subcontract 

problems that may impact delivery, quantity, 

or price; 

(15) Document and justify reasons for 

subcontract changes that affect cost or price; 

(16) Notify the Government of the award of 

all subcontracts that contain the 48 CFR 

Chapter 1 and 48 CFR Chapter 9 flowdown 

clauses that allow for Government audit of 

those subcontracts, and ensure the 

performance of audits of those subcontracts; 

(17) Enforce adequate policies on conflict 

of interest, gifts, and gratuities, including the 

requirements of the 41 U.S.C. chapter 87, 

Kickbacks; 

(18) Perform internal audits or 

management reviews, training, and maintain 

policies and procedures for the purchasing 

department to ensure the integrity of the 

purchasing system; 

(19) Establish and maintain policies and 

procedures to ensure purchase orders and 

subcontracts contain mandatory and 

applicable flowdown clauses, as required by 

the 48 CFR chapter 1, including terms and 

conditions required by the prime contract 

and any clauses required to carry out the 

requirements of the prime contract; 

(20) Provide for an organizational and 

administrative structure that ensures 

effective and efficient procurement of 

required quality materials and parts at the 

best value from responsible and reliable 

sources; 

(21) Establish and maintain selection 

processes to ensure the most responsive and 

responsible sources for furnishing required 

quality parts and materials and to promote 

competitive sourcing among dependable 

suppliers so that purchases are reasonably 

priced and from sources that meet contractor 

quality requirements; 

(22) Establish and maintain procedures to 

ensure performance of adequate price or cost 

analysis on purchasing actions; 

(23) Establish and maintain procedures to 

ensure that proper types of subcontracts are 

selected, and that there are controls over 

subcontracting, including oversight and 

surveillance of subcontracted effort; and 

(24) Establish and maintain procedures to 

timely notify the Contracting Officer, in 

writing, if— 

(i) The Contractor changes the amount of 

subcontract effort after award such that it 

exceeds 70 percent of the total cost of the 

work to be performed under the contract, task 

order, or delivery order. The notification 

shall identify the revised cost of the 

subcontract effort and shall include 

verification that the Contractor will provide 

added value; or 

(ii) Any subcontractor changes the amount 

of lower-tier subcontractor effort after award 

such that it exceeds 70 percent of the total 

cost of the work to be performed under its 

subcontract. The notification shall identify 

the revised cost of the subcontract effort and 

shall include verification that the 

subcontractor will provide added value as 

related to the work to be performed by the 

lower-tier subcontractor(s). 

(d) Significant deficiencies. (1) The 

Contracting Officer will provide notification 

of initial determination to the Contractor, in 

writing, of any significant deficiencies. The 

initial determination will describe the 

deficiency in sufficient detail to allow the 

Contractor to understand the deficiency. 

(2) The Contractor shall respond within 30 

days to a written initial determination from 

the Contracting Officer that identifies 

significant deficiencies in the Contractor’s 

purchasing system. If the Contractor 

disagrees with the initial determination, the 

Contractor shall state, in writing, its rationale 

for disagreeing. In the event the Contractor 

did not respond in writing to the initial 

determination within the response time, this 

lack of response shall indicate that the 

Contractor agrees with the initial 

determination. 

(3) The Contracting Officer will evaluate 

the Contractor’s response or the Contractor’s 

lack of response and notify the Contractor, in 

writing, of the Contracting Officer’s final 

determination concerning— 

(i) Remaining significant deficiencies; 

(ii) The adequacy of any proposed or 

completed corrective action; and 

(iii) System disapproval, if the Contracting 

Officer determines that one or more 

significant deficiencies remain. 

(e) If the Contractor receives the 

Contracting Officer’s final determination of 

significant deficiencies, the Contractor shall, 

within 45 days of receipt of the final 

determination, either correct the significant 

deficiencies or submit an acceptable 

corrective action plan showing milestones 

and actions to eliminate the deficiencies. 

(f) Withholding payments. If the 

Contracting Officer makes a final 

determination to disapprove the Contractor’s 

purchasing system, and the contract includes 

the clause at 952.242–71, Contractor Business 

System, the Contracting Officer will withhold 

payments in accordance with that clause. 

(End of clause) 

■ 17. Add section 952.245.70 to read as 

follows: 

952.245–70 Contractor property 

management system administration. 

As prescribed in 945.107(a), insert the 

following clause: 

CONTRACTOR PROPERTY MANAGEMENT 

SYSTEM ADMINISTRATION (xxx 201x) 

(a) Definitions. As used in this clause— 

Acceptable property management system 

means a property system that complies with 

the system criteria in paragraph (c) of this 

clause. 

Property management system means the 

Contractor’s system or systems for managing 

and controlling Government property. 

Significant deficiency means a shortcoming 

in the system that materially affects the 

ability of officials of the Department of 

Energy to rely upon information produced by 

the system that is needed for management 

purposes. 

(b) General. The Contractor shall establish 

and maintain an acceptable property 

management system. If the Contractor plans 

to adopt the existing system from the 

previous Contractor, the Contractor is 

responsible for the system and shall comply 

with the system criteria required in this 

clause. The Contractor shall provide in 

writing to the Contracting Officer 

documentation that its property management 

system meets the system criteria in paragraph 

(c) of this clause no later than 60 days after 

contract award. Failure to maintain an 

acceptable property management system, as 

defined in this clause, may result in 

disapproval of the system by the Contracting 

Officer and/or withholding of payments. 

(c) System criteria. The Contractor’s 

property management system shall be in 

accordance with paragraph (f) of the contract 

clause at 48 CFR 52.245–1. 

(d) Significant deficiencies. (1) The 

Contracting Officer will provide an initial 

determination to the Contractor, in writing, 

of any significant deficiencies. The initial 

determination will describe the deficiency in 

sufficient detail to allow the Contractor to 

understand the deficiency. 

(2) The Contractor shall respond within 30 

days to a written initial determination from 

the Contracting Officer that identifies 

significant deficiencies in the Contractor’s 

property management system. If the 

Contractor disagrees with the initial 

determination, the Contractor shall state, in 

writing, its rationale for disagreeing. In the 

event the Contractor did not respond in 

writing to the initial determination within 

the response time, this lack of response shall 

indicate that the Contractor agrees with the 

initial determination. 

(3) The Contracting Officer will evaluate 

the Contractor’s response or the Contractor’s 

lack of response and notify the Contractor, in 

writing, of the Contracting Officer’s final 

determination concerning— 

(i) Remaining significant deficiencies; 

(ii) The adequacy of any proposed or 

completed corrective action; and 

(iii) System disapproval, if the Contracting 

Officer determines that one or more 

significant deficiencies remain. 

(e) If the Contractor receives the 

Contracting Officer’s final determination of 

significant deficiencies, the Contractor shall, 

within 45 days of receipt of the final 

determination, either correct the significant 

deficiencies or submit an acceptable 

corrective action plan showing milestones 

and actions to eliminate the significant 

deficiencies. 

(f) Withholding payments. If the 

Contracting Officer makes a final 

determination to disapprove the Contractor’s 

property management system, and the 


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Federal Register / Vol. 79, No. 62 / Tuesday, April 1, 2014 / Proposed Rules 18439 

contract includes the clause at 952.242–71, 

Contractor Business System, the Contracting 

Officer will withhold payments in 

accordance with that clause. 

(End of clause) 

[FR Doc. 2014–07086 Filed 3–31–14; 8:45 am] 

BILLING CODE 6450–01–P 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS2