[Federal Register Volume 61, Number 122 (Monday, June 24, 1996)]
[Proposed Rules]
[Pages 32588-32604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15367]




Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / 
Proposed Rules

[[Page 32588]]



DEPARTMENT OF ENERGY

48 CFR Parts 917, 950, 952, and 970

[1991-AB-28]


Acquisition Regulation; Department of Energy Management and 
Operating Contracts

AGENCY: Department of Energy.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Department of Energy (DOE) proposes to amend the 
Department of Energy Acquisition Regulation (DEAR) to implement certain 
key recommendations of its Department-wide contract reform initiative. 
Changes are proposed in the following areas: performance-based 
management contracting; fines, penalties, third-party liability, and 
property liability; requirements for contractor make or buy plans; 
payment of fee; procedures for determining the application of laws, 
regulations, and Department directives to contractors; environment; 
ownership of records; and overtime management.

DATES: Written comments should be forwarded no later than August 23, 
1996. A public hearing will be held on August 1, 1996, beginning at 
9:30 a.m. local time at the address listed below. Requests to speak at 
the hearing should be received by 4:30 p.m. local time on July 18, 
1996. Later requests will be accommodated to the extent practicable.

ADDRESSES: All comments, as well as requests to speak at the public 
hearing, are to be submitted to Connie P. Fournier, Office of Policy 
(HR-51), Department of Energy, 1000 Independence Avenue, SW, 
Washington, D.C. 20585, (202) 586-8245; (202) 586-0545 (facsimile); 
<a href="/cdn-cgi/l/email-protection#bfdcd0d1d1d6da91d9d0cacdd1d6dacdffd7ce91dbd0da91d8d0c9"><span class="__cf_email__" data-cfemail="01626e6f6f68642f676e74736f6864734169702f656e642f666e77">[email protected]</span></a> (Internet).
    The public hearing will be held at the U.S. Department of Energy, 
Main Auditorium, Forrestal Building, 1000 Independence Avenue, SW, 
Washington, DC 20585.
    The administrative record regarding this rulemaking that is on file 
for public inspection, including a copy of the transcript of the public 
hearing and any additional public comments received, is located in the 
Department's Freedom of Information Reading Room, Room 1E-190, 1000 
Independence Avenue, SW, Washington, DC 20585.

FOR FURTHER INFORMATION CONTACT: Connie P. Fournier, Office of Policy 
(HR-51), Department of Energy, 1000 Independence Avenue, SW, 
Washington, D.C. 20585, (202) 586-8245.

SUPPLEMENTARY INFORMATION:

I. Background
II. Section-by-Section Analysis
III. Procedural Requirements
    A. Review Under Executive Order 12866
    B. Review Under Executive Order 12778
    C. Review Under the Regulatory Flexibility Act
    D. Review Under the Paperwork Reduction Act
    E. Review Under Executive Order 12612
    F. Review Under the National Environmental Policy Act
IV. Opportunities for Public Comment

I. Background

    In February 1994, the Department of Energy issued the report of its 
Contract Reform Team, Making Contracting Work Better and Cost Less, 
which recommended a number of changes to improve the Department's 
acquisition system, principally in areas affecting management and 
operating contracts. The Department has since developed and tested 
various policies, practices, and procedures to implement the report's 
recommendations. Today's proposed rule would include those new policies 
and changes to existing policies in the Department's acquisition 
regulation needed to strengthen the management of management and 
operating contracts.
    DOE today also publishes a notice of interim final rulemaking that 
discusses changes to the Department's policies regarding competition 
and extension of its management and operating contracts. A third 
rulemaking that discusses the Department's fee policies for profit 
making and nonprofit management and operating contractors will be 
promulgated as a separate proposal. Together, these three rulemakings 
constitute the Department's regulatory implementation of certain key 
contract reform initiatives in its acquisition regulation.

II. Section-by-Section Analysis

    The proposed rule would amend the following sections of the DEAR, 
as discussed below. For convenience, this section-by-section analysis 
is grouped by the major items covered. Proposed text changes are listed 
at the end of each major item discussed.

Item I--Performance-based Management Contracting

    The Contract Reform Report recommended Performance Based Management 
Contracts, a new form of management and operating contract, which use 
performance-based contracting concepts to better define measurable 
standards of performance under which the Department evaluated and 
appropriately rewarded contractors. That recommendation was based, in 
part, on the policies established by the Office of Federal Procurement 
Policy (OFPP) Policy Letter 91-2, entitled ``Service Contracting.'' 
That Policy Letter, issued in April 1991, establishes performance-based 
contracting as a strategy for acquiring services, with the objectives 
of improving quality and ensuring that the Government only pays for 
services actually received. These objectives are met through 
contracting methodologies that use performance-based, results-oriented 
statements of work in conjunction with measurable performance 
indicators to assess quality, evaluation and selection factors that 
employ quality related factors, performance incentives, and greater use 
of fixed pricing arrangements. Although the OFPP Policy Letter applies 
to service contracts under Part 37 of the Federal Acquisition 
Regulation, the concepts and methodologies of performance-based service 
contracting have application in the Department's contracts for the 
management and operation of its sites and facilities. Accordingly, the 
Department considered the policies established under the OFPP Policy 
Letter in developing policies for its performance-based management and 
operating contracts and adopted its key features and methodologies. The 
Department intends to review its proposed coverage with the upcoming 
proposed coverage in FAR Part 37 implementing the OFPP Policy Letter to 
ensure consistency with Government-wide policies. The key to the 
Department's efforts is the development of specific, objective criteria 
for performance as well as identification of specific measures to 
determine if the contractor met the expectations established in the 
contract. Accordingly, today's proposed rule would define performance-
based management contracts and would require that specific criteria for 
performance and measures of that performance be included in the 
contract.
    The following changes are proposed:
    1. 917.600, Scope of subpart. This section would be revised to 
recognize the applicability of the requirements of the subpart to 
performance-based management contracts.
    2. 917.601, Definitions. This section would be added to define the 
term ``performance-based management contract'' as a form of management 
and operating contract to be used by the Department of Energy for the 
management and operation of its weapons production and laboratory 
facilities, where the contract includes objective performance standards 
and incentives. This term, first identified in

[[Page 32589]]

the Contract Reform Report, would be recognized as the embodiment of 
the Department's commitment and policy to employ performance-based 
contracting methodologies in contracting for the management and 
operation of its sites and facilities.
    3. 970.10, Specifications, standards and other statement of work 
descriptions. Section 970.1001 is proposed to be revised as a new 
section on Performance-based statements of work, criteria, and 
measures, and section 970.1002 is proposed to be retitled, Additional 
considerations.

Item II--Fines, Penalties, Third-party Liability, and Property 
Liability

    The Contract Reform Report indicated that the Department's 
contracting policy must focus on payment for results and not simply 
payment for incurred costs. An early attempt, in January 1990, to be 
more outcome-oriented and encourage the contractor to more efficiently 
manage risk resulted in the ``accountability rule.'' This revision to 
the Department's cost reimbursement policies, published as a final rule 
(56 FR 28099) on June 19, 1991, made profit making management and 
operating contractors liable for certain costs, known as ``avoidable 
costs,'' which resulted from the negligence of the contractor's or 
subcontractor's employees.
    Based on practical experience with this policy, the Department is 
proposing to maintain the concept of transferring certain risk to the 
contractor in order to incentivize good business management but to 
change the approach to minimize the costs associated with the 
administration of the accountability rule. Therefore, this notice of 
proposed rulemaking would revise the current reimbursement rules in the 
DEAR regarding avoidable costs by eliminating the provisions of the 
accountability rule contained in DEAR Part 970 and introducing a new 
policy on cost reimbursement and liability. With regard to property, 
the Department also proposes to have the contractor compensate the 
Government for Government property losses and damage under certain 
circumstances.
A. Comments on Sample Contract Provisions for Profit-Making Contractors 
Related to Liability Provisions
    The Department announced in the Commerce Business Daily on February 
13, 1995, the availability of draft sample contract provisions which 
contained, among other things, contract clauses relating to the 
reimbursement of costs for fines, penalties, third party liabilities, 
and damage to, or loss of, government property. These contract clauses 
have also been subjected to numerous, less formal reviews by 
stakeholders and other interested parties both within and outside of 
the Department in the months preceding and following the announcement 
of the availability of the draft sample contract. The contract clauses 
proposed today governing the Department's treatment of costs for fines, 
penalties, third party liabilities, and damage to, or loss of, 
government property reflect the Department's consideration of comments, 
concerns, and observations raised by stakeholders during these 
developmental efforts.
B. Burden of Proof Shifted for Fines and Penalties, Third-Party 
Liability, and Damage to or Loss of Government Property
    A key change in today's notice of proposed rulemaking would be the 
adoption of a rebuttable presumption of unallowability standard for 
fines and penalties, third-party liability, and damage to or loss of 
government property. This standard, which would affect a number of 
contract clauses governing the Department's management and operating 
contracts, would shift the burden of proof for establishing the 
reasonableness and allowability of these costs from the Government to 
the contractor. An underlying premise in promulgating this change in 
policy is the belief that the contractor has in its possession the 
information necessary to determine how and why these costs are incurred 
and, therefore, is better able to establish the facts and other 
information needed to support a decision of allowability. Accordingly, 
under this proposed rule, the contractor would have to make an 
affirmative showing to the contracting officer that such costs should 
be allowable.
    The Department believes that the proposals set forth in this 
proposed rule concerning the presumption of allowability and burden of 
proof for fines and penalties, third-party liability, and damage to or 
loss of government property are appropriate to the Department's 
management and operating contracts. In addition, the Department 
believes that the changes are supported by current policies, legal 
precedent, and legislative reform efforts in this area. For example, 
under a previous rulemaking published by the Federal Acquisition 
Regulation Council, Federal Acquisition Regulation 31.201-3 was amended 
to change the Government allowability standard and shift the burden of 
proof from the Government to the contractor once the contracting 
officer challenged the allowability of a cost (see 52 FR 19800, May 27, 
1987). Further, Section 2151(f)(2) of the Federal Acquisition 
Streamlining Act of 1994 (Pub. L. 103-355), entitled, Allowable 
Contract Costs, provides that the Federal Acquisition Regulation shall 
require a contracting officer not to resolve any questioned costs until 
adequate documentation has been obtained from the contractor with 
respect to the questioned costs.
C. Prudent Business Judgment
    This proposed rule contains amendments to DEAR 970.3101-3, General 
basis for reimbursement of costs, and the general allowability 
paragraph (paragraph (c)) of DEAR 970.5204-13 and 970.5204-14. Under 
these amendments, the Department would rely on FAR 31.201-3, 
Determining Reasonableness, as the basis for determining cost 
reasonableness. Under FAR 31.201-3, a cost is reasonable if, in its 
nature and amount, it does not exceed that which would be incurred by a 
prudent person in the conduct of competitive business. This standard 
would be used in conjunction with other factors stated in the affected 
provisions and contract clauses to determine cost allowability and 
reimbursement.
    This guidance would also be applied in determining whether the 
contractor has met its burden to demonstrate that its managerial 
personnel did not fail to exercise prudent business judgment under the 
facts and circumstances leading to the incurrence of the cost.
    In applying this new standard, the contracting officer would 
consider the totality of the circumstances and the exercise of skill 
and judgment by the contractor's management in his/her review and 
determination on a particular cost's reasonableness. Included in the 
contracting officer's review of each set of circumstances would be an 
analysis of the contractor's management practices with respect to lower 
level employees, including whether management has failed to act on 
repeated misconduct by lower level employees or has failed to institute 
on a systematic basis sufficient controls or mechanisms to prevent 
deficient behavior or performance.
D. Fines and Penalties.
    The current DEAR policy on fines and penalties, DEAR 970.3102-21, 
contains amendments from the accountability rule and provides different 
treatment for profit making contractors and nonprofit contractors. This 
proposed rule would amend this policy and the allowable cost provisions 
to make fines and

[[Page 32590]]

penalties unallowable unless the contractor demonstrates to the 
contracting officer that they were incurred as a result of compliance 
with specific terms and conditions of the contract or written 
instructions from the contracting officer.
    The proposed rule additionally provides that the contracting 
officer would have authority to reimburse the contractor where the fine 
or penalty was imposed without regard to whether the contractor was at 
fault or exercised due care, and the fine or penalty could not have 
been avoided by the exercise of due care by the contractor or its 
employees. The Department recognizes concerns on the part of 
contractors regarding potential liabilities arising from activities 
occurring on a Department of Energy-owned site before the contractor 
assumed responsibility for that site and, for this reason, the 
Department is proposing a new clause, DEAR 970.5204-XX--Preexisting 
Conditions.
E. Litigation and Losses From Third-Party Liabilities.
    This proposed rule would amend certain contract clauses to provide 
that third-party liabilities would not be allowable unless the 
contractor demonstrates that they did not result from (1) willful 
misconduct or lack of good faith by the contractor's managerial 
personnel, or (2) failure to exercise prudent business judgment by the 
contractor's managerial personnel. Under the proposed rule, the new 
clause, Insurance--Litigation and Claims, would provide guidance on the 
reimbursement of insurance covering third-party claims, litigation 
involving third-party claims, treatment of punitive damages under a 
third-party claim, and the burden of proof carried by the contractor in 
seeking reimbursement of its costs. The proposed revision to the 
Litigation and Claims clause would also revise the Department's 
guidance on non-third-party litigation, such as litigation by other 
governmental entities. The new clause would, in no way, impact or 
affect the Department's obligation to provide nuclear hazards indemnity 
pursuant to the Price-Anderson Act (42 U.S.C. Section 2210(d)).
    On the issue of reimbursement of contractor insurance costs, the 
Department proposes that contracting officers should be given authority 
to pro-rate the cost of premiums incurred by contractors to exclude the 
unallowable portion but still cover the portion of the premium 
allowable under the contract's terms.
    Finally, the Department proposes to revise the allowable cost 
provisions in DEAR 970.5204-13 and 970.5204-14 to clearly provide that 
litigation expenses would only be allowable if incurred in accordance 
with Department-approved contractor litigation management procedures, 
including cost guidelines.
F. Qui Tam Actions.
    A new paragraph (h) would be added to DEAR 970.5204-61, Cost 
Prohibitions Related to Legal and Other Proceedings, to address the 
treatment of costs incurred in proceedings involving a qui tam action 
under the False Claims Act, 31 U.S.C. 3730, alleging fraud against the 
Government, which are not otherwise covered by the existing provisions 
of that clause.
G. Environmentally-Related Third-Party Liabilities Incurred by 
Contractors Performing Response Action Work.
    The Department has reviewed a number of issues, including the types 
of environmental cleanup problems confronted by the Department and its 
contractors, the potential third-party liabilities at the Department's 
sites, and the availability of reasonably priced commercial pollution 
liability insurance for sites potentially contaminated with radioactive 
waste. A determination has been made that the same provision proposed 
in this notice of proposed rulemaking for general third-party 
liabilities should be proposed for environmentally-related third-party 
liabilities incurred by contractors performing response action work.
H. Damage to or Loss of Government Property.
    A similar standard of liability is proposed in DEAR 970.5204-21 for 
damage to or loss of government property as for third-party 
liabilities. The proposed rule provides that costs resulting from 
damage to government property would not be allowable unless the 
contractor demonstrates to the contracting officer that they did not 
result from: (1) willful misconduct or lack of good faith on the part 
of the contractor's managerial personnel; or (2) failure of the 
contractor to comply with any appropriate written direction of the 
contracting officer to safeguard such property; or (3) failure of the 
contractor to establish, maintain or administer an approved property 
management system. Further, the contractor may be responsible for and 
required to compensate the Government for loss, destruction, or damage 
to Government property.
I. Effect of Proposed Rule on Nonprofit Contractors.
    Until now, the Department's accountability provisions have not 
applied to nonprofit contractors. This proposed rule would apply the 
same rules to nonprofit as profit-making contractors. Through this 
approach, the Department is expressing its desire that all its 
contractors, regardless of business status, must bear responsibility 
for employing good business practices and must mitigate risks 
associated with potential liabilities. In proposing this change, some 
minor distinctions, such as for the definition of managerial personnel 
in the Insurance--Litigation and Claims clause, would be recognized for 
nonprofit contractors. This definition is necessarily different since 
nonprofit contractors usually have a different organizational structure 
and different work responsibilities than profit-making contractors. The 
Department particularly seeks comment on this part of the proposal.
J. Effect of Proposed Rule on Accountability Rule.
    This proposed rule would revise the provisions of the 
accountability rule relating to cost reimbursement policies and clauses 
contained in DEAR Part 970.
    The following changes are proposed:
    1. 950.7101, General contract authority indemnity. Paragraph (c)(2) 
would be removed.
    2. 970.28, would be amended to add a new section 970.2830, Contract 
clause, which would prescribe the use of the clause at 970.5204-31, 
Insurance--Litigation and Claims.
    3. 970.3101-3, General basis for reimbursement of costs. 
Subparagraph (a)(1) would be amended to add a reference to FAR 31.201-
3.
    4. 970.3102-21, Fines and penalties. This subsection would be 
revised.
    5. 970.3102-22, Avoidable Costs for Profit Making Contractors. This 
subsection would be removed.
    6. 970.3103, Contract Clauses. Paragraph (d) would be added.
    7. 970.5204-13. Subparagraph (c)(1) would be amended to refer to 
FAR 31.201-3.
    8. 970.5204-13(d)(4). This paragraph would be amended to add 
references to Department of Energy-approved contractor litigation 
management procedures and cost guidelines to be included in an Appendix 
to the contract.
    9. 970.5204-13(d)(9). This paragraph would be amended to add ``and 
as allowable under subparagraph (f) of the clause of this contract 
entitled, Property.''

[[Page 32591]]

    10. 970.5204-13(e)(12). This paragraph concerning fines and 
penalties for profit making and nonprofit contractors would be revised.
    11. 970.5204-13(e)(17). This paragraph would be reorganized and 
revised.
    12. 970.5204-13(e)(36). This paragraph would be revised to remove 
most of the discussion; the statement that the cost of insurance for an 
unallowable cost is an unallowable cost would be retained.
    13. 970.5204-14. Subparagraph (c)(1) would be amended to add a 
reference to FAR 31.201-3.
    14. 970.5204-14(d)(4). This paragraph would be amended to add 
references to Department of Energy-approved contractor litigation 
management procedures and cost guidelines to be included in an Appendix 
to the contract.
    15. 970.5204-14(d)(10). This paragraph would be amended to add 
``and as allowable under subparagraph (f) of the clause of this 
contract entitled Property.''
    16. 970.5204-14(e)(10). This paragraph concerning fines and 
penalties for profit making and nonprofit contractors would be revised.
    17. 970.5204-14(e)(15). This paragraph would be reorganized and 
revised.
    18. 970.5204-14(e)(34). This paragraph would be revised to remove 
most of the discussion; only the statement that the cost of insurance 
for an unallowable cost is an unallowable cost would be retained.
    19. 970.5204-18, Definition of nonprofit and profit making 
management and operating contractors and subcontractors. This 
subsection would be removed and reserved.
    20. 970.5204-21, Property. Paragraphs (e), (f), (g), (i) and (j) 
would be revised; the definition of contractor's managerial personnel 
which previously appeared at the end of paragraph (f) would appear as 
paragraph (j).
    21. 970.5204-31, Litigation and claims. This subsection would be 
removed and a new subsection, Insurance--Litigation and Claims, would 
be added in its place.
    22. 970.5204-32, Required bond and insurance-exclusive of 
Government property. This subsection would be removed and reserved.
    23. 970.5204-55, Ceiling on certain liabilities for profit making 
contractors. This subsection would be removed and reserved.
    24. 970.5204-56, Determining avoidable costs. This subsection would 
be removed and reserved.
    25. 970.5204-61, Cost prohibitions related to legal and other 
proceedings. This subsection would be amended to add a new paragraph 
(h).
    26. 970.5204-XX, Preexisting Conditions. This subsection would be 
added.

Item III--Make-or-buy Decisions

    The Department of Energy expects its management and operating 
contractors to operate the Department's laboratories, weapons 
production plants, and other facilities in a cost-effective and 
efficient manner. In addition to maximizing the productivity of 
existing operations, contractors are expected to critically analyze all 
of the functions performed at a facility to identify the most efficient 
and cost effective manner in which these functions may be performed, 
with an emphasis on subcontracting. Accordingly, the Department 
proposes that contracts for the management and operation of the 
Department's facilities require the contractor to prepare and 
administer a master make-or-buy plan consistent with the Department's 
expectations.
    Because subcontracting decisions by a management and operating 
contractor can result in the displacement of workers in, or a 
restructuring of, the current work force, the Department would expect 
its contractors to assess subcontracting opportunities and implement 
subcontracting decisions in a manner which (1) promotes open 
communications early in and throughout the planning process between and 
among the parties affected by such subcontracting decisions and (2) 
mitigates the social and economic impacts of subcontracting decisions, 
consistent with the Department's commitments and responsibilities under 
Section 3161 of the National Defense Authorization Act for Fiscal Year 
1993 (42 U.S.C. 7274h). The policy proposed today addresses the 
application, submission, review, and acceptance of make-or-buy plans 
under management and operating contracts, including considerations 
relating to subcontracting activities which result in the displacement 
of the existing contractor work force.
    The following changes are proposed:
    1. 970.1507, Make-or-Buy Plans. A new section would be added to 
Subpart 970.15, Contracting by Negotiation, consisting of Subsection 
970.1507-2, Requirements, and Subsection 970.1507-3, Contract Clause. 
Subsection 970.1507-1, Policy, would provide the basic policy of the 
Department that its management and operating contractors operate the 
facility or site on a least-cost basis. Subsection 970.1507-2, 
Requirements, would provide broad guidance on key elements of the make-
or-buy plan submission, approval and evaluation process. Subsection 
970.1507-3, Contract Clauses, would provide the contracting officer 
with guidance on the application of the clauses to be included in 
contracts.
    2. 970.5204-XX, Make-or-Buy Plan. A new subsection would be added 
to provide a contract clause to be used in management and operating 
contracts governing the submission and approval of contractor make-or-
buy plans, and changes to the approved make-or-buy plan.
    3. 970.5204-XX, Displaced Employee Hiring Preference. A new 
subsection would be added to provide a contract clause to be used in 
management and operating contracts describing hiring preferences for 
certain employees affected by the downsizing of a Department of Energy 
defense nuclear facility.

Item IV--Payment of Fee

    With regard to the Government's payment of fixed-fee, base fee, and 
award fee under a management and operating contract, the clause at DEAR 
970.5204-16, Payments and Advances, would be revised to give the 
contracting officer the option to either pay fee through draw downs 
against the special financial institution account or by direct payment. 
Prior written approval of the contracting officer for fee payment to be 
withdrawn against the letter-of-credit is also proposed. This would 
allow the Department the latitude to make fee payments in the most cost 
effective manner; i.e., draw downs, but retain the option to pay fee by 
direct payment if circumstance so warrant. Additionally, language would 
be added allowing the contracting officer to offset against any such 
fee payment the amounts owed to the Government by the contractor, 
including any amounts owed for disallowed costs under the contract.
    The following change is proposed:
    970.5204-16, Payments and advances. This subsection would be 
revised to permit the contracting officer to either pay fee through 
draw downs against special financial institution accounts or by direct 
payment. In addition, contracting officer approval is proposed for fee 
payment to be withdrawn against a letter of credit.

Item V--Laws, Regulations, and DOE Directives

    The Department is proposing a revised DEAR clause entitled, Laws, 
Regulations, and DOE Directives, as part of its contract reform 
efforts. The proposed clause would standardize the

[[Page 32592]]

manner in which applicable requirements are included in its management 
and operating contracts.
    Paragraph (a) would provide that the contractor is obligated to 
comply with applicable Federal, State, and local laws and regulations, 
unless relief has been granted in writing by the appropriate regulatory 
agency. In addition, this paragraph would provide that a List of 
Applicable Laws and Regulations identifying all applicable Federal, 
state, and local laws and regulations may be appended to the contract, 
but the contractor would not be excused from compliance with applicable 
laws and regulations in the event the Department omitted a law or 
regulation from the List. Paragraph (b) would provide for the inclusion 
of a List of Applicable Directives containing a listing of DOE 
directives, or parts thereof, applicable to a particular contract on 
the effective date of the contract, and as discussed below, would 
explain the mechanism to be used by the Department to revise the List. 
This List might include Department orders and other written 
requirements such as Department of Energy Notices.
    Development of both lists would be aided by efforts to tailor 
Department requirements on environment, safety, and health to the 
unique circumstances at particular facilities. The Office of Defense 
Programs and Office of Environmental Management have established the 
Standards/Requirements Program to identify adequate environmental, 
safety, and health protection standards and requirements for selected 
facilities and activities and to assess the status of implementation of 
those standards/requirements. The environment, safety, and health 
requirements for Department sites, facilities, and activities would be 
documented in Standards/Requirements Identification Documents (SRIDs).
    Building on experience with the SRIDs process, the Department 
Standards Committee has developed a generic process, called the 
Necessary and Sufficient Process, to identify an appropriate set of 
standards for a particular facility or activity that would ensure 
adequate protection of workers, the public, and the environment.
    If the Standards/Requirements identification process or the 
Necessary and Sufficient Process has been concluded before a contract 
is executed, the resulting SRID or Necessary and Sufficient set of 
standards should be used as the basis for developing the lists of 
environment, safety, and health requirements.
    Paragraph (b) would provide that when the contracting officer 
decides to revise the List of Applicable Directives in any way, the 
contractor is given the opportunity to assess and advise the 
contracting officer of the potential impact of such revision. Revisions 
to the List of Applicable Directives would be made in accordance with 
the Changes clause of the contract.
    If the SRID or Necessary and Sufficient set of standards is 
developed and approved after execution of the contract, it would be 
incorporated into the contract pursuant to proposed paragraph (c), and 
would substitute for environment, safety, and health requirements 
identified on the pre-existing List of Applicable Directives, as 
appropriate, for the work activities subject to the approved SRID or 
Necessary and Sufficient set of standards.
    As background for those wishing to comment on this proposed clause, 
information on the SRID development process and the Necessary and 
Sufficient process is available in the Department's Freedom of 
Information Act Reading Room, where public information for this notice 
of proposed rulemaking is available.
    Information and background on the SRID development process may be 
found in the Department of Energy Implementation Plan in response to 
the Defense Nuclear Facilities Safety Board Recommendation 90-2 
(Revision 5; November 1994), and in Standards/Requirements 
Identification Document Development and Approval Instruction (September 
1994). The Necessary and Sufficient Closure Process is described in 
Department of Energy Closure Process for Necessary and Sufficient Set 
of Standards (M450.3-1, January 25, 1996).
    The following changes are proposed:
    1. 970.04, Administrative Matters. A new section 970.0470, 
Department of Energy Directives, would be added, describing the 
Department of Energy directives system.
    2. 970.5204-XX, Laws, Regulations, and DOE Directives. A new 
subsection would be added to provide a clause to identify directives 
and related requirements applicable to a specific contract.

Item VI--Environment

    DEAR 970.5204-2 and the clause therein would be retitled to add 
``Environment'' to their titles, reflecting the broadening of the 
clause to add this subject related to safety and health. The revised 
clause would call for compliance with applicable laws and regulations 
and, in conjunction with the clause on Departmental directives 
discussed elsewhere in this proposed rule, identify more specifically 
the Department of Energy directives with which a contractor is to 
comply than does the existing clause at DEAR 970.5204-2. The clause 
would change from 30 days to 60 days the period by which an 
Environment, Safety, and Health (ES&H) Management Plan is to be 
submitted, provide for the Plan to be periodically updated, and make 
changes to the Plan subject to the Government-approved change control 
process applicable to the contract. Successful application of the 
clause would require that: 1) Department of Energy Operations Office 
Managers establish contractor expectations for ES&H performance prior 
to the program execution year; 2) contractors develop an ES&H 
Management Plan that describes the management and program activities 
that would be conducted to meet those expectations and that the 
contractor would commit to undertake; 3) Department of Energy 
Operations Office Manager approve the Plan; and 4) ES&H performance 
measures flow from the Plan, target major risk management issues, and 
tie explicitly to incentives and fees. The ``stop work'' provisions of 
the clause would be revised to enhance their clarity. Guidance for the 
flowdown of environment, safety, and health requirements in 
subcontracts to be performed on-site would be provided. Also, paragraph 
(d) would be added requiring the submission and approval of an 
Authorization Agreement for certain facilities and/or site operations 
as determined by the contracting officer. Authorization Agreements 
might be used to establish, document, and control the safety 
requirements and other parameters for specified operations. Paragraph 
(d) would also require that: 1) contracting officers may at any time 
notify the contractor that specified operations may require an 
Authorization Agreement; 2) specified operations may proceed only 
subject to the requirements of a Department of Energy-approved 
Authorization Agreement; and 3) updates and changes to an Authorization 
Agreement shall be subject to Department of Energy approval. 
Authorization Agreements would be subject to the same ``stop work'' and 
fee and awards payment criteria established for the ES&H Management 
Plan. This paragraph is intended to be responsive to the Defense 
Nuclear Facilities Safety Board (DNFSB) Recommendation 95-2 regarding 
integrated safety management. Additional changes to contract language 
may be required as a result of the Department's implementation plan for 
DNFSB Recommendation 95-2.

[[Page 32593]]

Alternate clause paragraph (b) would provide for the use of an 
alternate version of the clause in contracts that do not incorporate 
clauses referenced in the basic Environment, Safety and Health clause.
    Several clauses dealing with environment, safety, or health would 
be consolidated for the sake of simplification and overall consistency. 
Three clauses proposed, DEAR 970.5204-2, Environment, Safety, and 
Health; DEAR 970.5204-XX, Ownership of Records; and DEAR 970.5204-XX, 
Laws, Regulations, and DOE Directives, would incorporate requirements 
from four existing clauses the Department proposes to remove from its 
regulation: DEAR 970.5204-2, Safety and Health; DEAR 970.5204-26, 
Nuclear Facility Safety; DEAR 970.5204-41, Preservation of Individual 
Occupational Radiation Exposure Records; and DEAR 970.5204-62, 
Environmental Protection. For instance, the provisions in the Safety 
and Health clause would be consolidated in DEAR 970.5204-2, 
Environment, Safety, and Health. The Department proposes to remove the 
Nuclear Facility Safety clause, since most of the provisions of the 
Nuclear Facility Safety clause are, or will be, incorporated in other 
Departmental rulemakings (see 10 CFR Parts 830, 834, and 835). These 
other Departmental rulemakings will also be available for public 
comment as they are developed. Removal of the Nuclear Facility Safety 
clause would be contingent upon the final promulgation of Part 830. The 
Department proposes to remove the clause entitled, Preservation of 
Individual Occupational Radiation Exposure Records, and place the 
substance of the clause in DEAR 970.5204-XX, Ownership of Records. It 
is also noted that the removed clause's requirements would be 
encompassed within 10 CFR Part 835. The Department proposes to remove 
DEAR 970.5204-62, Environmental Protection, because the list of 
applicable laws, regulations, and directives cited therein would be 
included in the contract pursuant to proposed paragraph (a) of DEAR 
970.5204-XX, Laws, Regulations, and DOE Directives. The language, 
``assist the DOE in complying'' contained in paragraph (b) of 970.5204-
62, would be added to DEAR 970.5204-2, Environment, safety, and health.
    The following changes are proposed:
    1. 952.223-71, Safety and health. This subsection would be 
clarified so that it is consistent with 970.5204-2, Safety and Health, 
for non-management and operating contracts.
    2. 970.2303-2, Clauses. Paragraphs (c), (d), and (e), prescribing 
clauses at 970.5204-26, 970.5204-41, and 970.5204-62, respectively, 
would be removed, since these clauses would also be removed.
    3. 970.5204-2, Safety and health. Environmental requirements would 
be added to those for safety and health in this clause.
    4. 970.5204-26, Nuclear facility safety. This clause would be 
removed.
    5. 970.5204-41. Preservation of individual occupational radiation 
exposure records. This clause would be removed.
    6. 970.5204-62, Environmental protection. This clause would be 
removed.

Item VII--Ownership of Records

    The Ownership of Records clause proposed today sets forth the 
government's ownership of, and control over, those records the creation 
or acquisition of which by the contractor was paid for by the 
government. This clause would preserve the government's access and 
copying rights to such records during the contract term and ensure 
continuity at sites by giving the Department the records upon 
termination or completion of the contract. Additionally, consistent 
with the Department's implementing requirements (59 FR 63882, December 
12, 1994) for the Freedom of Information Act (FOIA), the ownership 
provision in paragraph (a) of the clause would grant public access to 
contractor-generated or acquired records, subject only to the two 
specified exceptions in the FOIA rule (privileged and commercially 
valuable information) and to the statutory exemptions in the Freedom of 
Information Act.
    Generally, all records generated or acquired by the contractor in 
connection with work performed under management and operating contracts 
have been considered the property of the Government. Conversely, the 
Department recognizes that under this principle, a contractor may 
request that the Department restrict its rights with respect to 
documents for which the contractor would not seek reimbursement from 
the Department under the contract. Nonetheless, over time, contractors 
have requested that certain, limited categories of records be the 
property of the contractors. The Department proposes that some of these 
categories may be appropriate for contractor ownership, subject to the 
Department's rights of audit, inspection, and copying.
    The proposed clause, therefore, would ensure that the Department's 
right to obtain and determine the disposition of contractor-owned 
documents be maintained. For instance, the Department must have access 
to contractor medical and personnel records when the Department has 
determined that such access is necessary to enable the Department to 
carry out its public health and safety responsibilities under existing 
law. The Department has made such determinations in the area of health-
related research, including epidemiological research performed by the 
Department or other public health agencies, and in connection with the 
Department's evaluation of a contractor's performance of environment, 
safety, and health requirements. In the past, government access to 
records on individuals has been restricted to protect the privacy 
interests of the individuals, based on state law. The clause 
recognizes, however, that federal law preempts state law in this area, 
and that in any event, the government's use of such records would be 
consistent with applicable federal laws, including the Privacy Act.
    The categories of records proposed in this clause as eligible for 
contractor ownership, in paragraph (b), are intended to be restricted 
to only those contained in the clause. Paragraph (c) of the clause 
would delineate the Department's rights to obtain the documents; the 
Department anticipates that certain of these documents would be 
routinely provided to the Department under the contract.
    The following changes are proposed:
    1. 970.0407, Alternate retention schedules. This section would be 
redesignated 970.0407-1.
    2. 970.0407-2, Ownership of records. This subsection would be added 
to explain the circumstances in which contractor ownership of certain 
records may be identified in a management and operating contract.
    3. 970.5204-XX, Ownership of records. A clause would be added to 
identify government-owned records; contractor-owned records; the 
government's rights to inspection, copying, use, and audit of records; 
and records retention requirements under the contract.

Item VIII--Management and Operating Contract Overtime Practices

    The Contract Reform Report identified weaknesses in the 
Department's management of contractor overtime costs. While 
acknowledging that overtime can save money compared to not doing the 
job at all or hiring new permanent workers, it can also be abused. In 
order to better manage these resources and to ensure that management 
and operating contractors

[[Page 32594]]

balance the efficient use of human resources and the need to adequately 
compensate its work force with effective cost control of overtime, the 
Department is proposing an approach for assuring overtime costs are 
reasonable. Individual contractor overtime practices exceeding 
specified criteria would trigger a requirement for the contractor to 
develop an overtime control plan, with the contractor establishing 
specific controls for the use and evaluation of overtime. The 
Department proposes to require the plan, on an annual basis, if one of 
the following criteria are met: (1) the contractor exceeds the 
Department's management and operating contract median overtime usage 
plus 2%; or (2) the contractor's overtime usage as a percentage of 
payroll exceeds the DOE contractor median and the contractor's policy 
permits payment of overtime premiums for exempt employees earning equal 
to or greater than $45,000 per annum; or (3) the contractor's overtime 
usage as a percentage of payroll exceeds the DOE contractor median and 
the contractor permits overtime payments on any basis other than hours 
worked in excess of 40 hours per week. In 1994, the median overtime 
experienced by the Department's management and operating contractors 
was 3.09% of base payroll expenditures; in 1993, it was 3.16%.
    The following changes are proposed:
    1. 970.2275. A new section, Overtime management, would be added.
    2. 970.2275-1. A new subsection would be added to describe the 
criteria under which a management and operating contract may incur 
overtime without further management controls. Management and operating 
contractors that exceed these overtime criteria would be required to 
develop and comply with a plan to report and control overtime.
    3. 970.2275-2. A new subsection would be added to give the 
prescription for use of an overtime management clause.
    4. 970.5204-XX. A new clause on overtime management would be added.

III. Procedural Requirements

A. Review Under Executive Order 12866

    This regulatory action has been determined not to be a 
``significant regulatory action'' under Executive Order 12866, 
``Regulatory Planning and Review,'' (58 FR 51735, October 4, 1993). 
Accordingly, this action was not subject to review, under that 
Executive Order, by the Office of Information and Regulatory Affairs of 
the Office of Management and Budget (OMB).

B. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following 
requirements: (1) eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. With regard to the review 
required by section 3(a), section 3(b) of Executive Order 12988 
specifically requires that Executive agencies make every reasonable 
effort to ensure that the regulation: (1) clearly specifies the 
preemptive effect, if any; (2) clearly specifies any effect on existing 
Federal law or regulation; (3) provides a clear legal standard for 
affected conduct while promoting simplification and burden reduction; 
(4) specifies the retroactive effect, if any; (5) adequately defines 
key terms; and (6) addresses other important issues affecting clarity 
and general draftsmanship under any guidelines issued by the Attorney 
General. Section 3(c) of Executive Order 12988 requires Executive 
agencies to review regulations in light of applicable standards in 
section 3(a) and section 3(b) to determine whether they are met or it 
is unreasonable to meet one or more of them. The Department of Energy 
has completed the required review and determined that, to the extent 
permitted by law, the proposed regulations meet the relevant standards 
of Executive Order 12988.

C. Review Under the Regulatory Flexibility Act

    This proposed rule was reviewed under the Regulatory Flexibility 
Act of 1980, 5 U.S.C. 601, et seq., which requires preparation of a 
regulatory flexibility analysis for any rule that is likely to have a 
significant economic impact on a substantial number of small entities. 
This proposed rule is intended to provide policies for the Department 
of Energy's management and operating contractors, who are all large 
businesses. There are three clauses proposed which identify flowdown 
requirements to subcontractors, some of whom may be small businesses. 
(1) The clause at 970.5204-2, Environment, Safety, and Health, would 
provide for the flowdown of ``appropriate requirements'' to 
subcontractors performing work on-site at a Department-owned or -leased 
facility. (2) The clause at 970.5204-XX, Laws, Regulations, and DOE 
Directives, would provide for subcontract compliance with ``necessary 
provisions'' as determined by the prime contractor. (3) The clause at 
970.5204-XX, Ownership of Records, would specify requirements for 
certain subcontractors meeting specific thresholds. The first two 
clauses do not impose a significant economic impact since nearly all of 
the prime and subcontracts have been cost reimbursement contracts. The 
third clause has considered the needs of small business in establishing 
thresholds above which requirements must be met. The Department 
anticipates that most small businesses will not meet these threshold 
requirements for compliance. Based on this review, the Department 
certifies that this proposed rule will not have a significant economic 
impact on a substantial number of small entities and, therefore, no 
regulatory flexibility analysis has been prepared.

D. Review Under the Paperwork Reduction Act

    No new information collection or recordkeeping requirements are 
imposed by this proposed rule. Accordingly, no Office of Management and 
Budget clearance is required under the Paperwork Reduction Act of 1980 
(44 U.S.C. 3501, et seq.).

E. Review Under Executive Order 12612

    Executive Order 12612, entitled ``Federalism,'' 52 FR 41685 
(October 30, 1987), requires that regulations, rules, legislation, and 
any other policy actions be reviewed for any substantial direct effects 
on States, on the relationship between the Federal Government and the 
States, or in the distribution of power and responsibilities among 
various levels of government. If there are sufficient substantial 
direct effects, then the Executive Order requires preparation of a 
federalism assessment to be used in all decisions involved in 
promulgating and implementing a policy action. The Department has 
determined that this proposed rule will not have a substantial direct 
effect on the institutional interests or traditional functions of 
States.

F. Review Under the National Environmental Policy Act

    Pursuant to the Council on Environmental Quality Regulations (40 
CFR 1500-1508), the Department has established guidelines for its 
compliance with the provisions of the National Environmental Policy Act 
(NEPA) of 1969 (42 U.S.C. 4321, et seq.). Pursuant to Appendix A of 
Subpart D of 10 CFR 1021, National Environmental

[[Page 32595]]

Policy Act Implementing Procedures (Categorical Exclusion A6), the 
Department has determined that this proposed rule is categorically 
excluded from the need to prepare an environmental impact statement or 
environmental assessment.

IV. Opportunities for Public Comment

A. Written Comments

    Interested persons are invited to participate by submitting data, 
views, or arguments with respect to the DEAR amendments set forth in 
this proposed rule. Three copies of written comments should be 
submitted to the address indicated in the ADDRESSES section. Comments 
on the major items identified in this proposed rule should be 
identified on separate pages, with the name of the item at the top of 
each page. In addition, it is requested that you provide a copy of your 
comments on a WordPerfect 6.1 or ASCII diskette. Comments may be sent 
to the Internet address in the ADDRESSES section of this proposed rule 
instead of the written copies and diskette, provided they are 
transmitted in a WordPerfect 6.1 compatible format and include the 
name, title, organization, postal address, and Internet address with 
the text of the comments. All comments received will be available for 
public inspection in the Department of Energy Reading Room, 1E-190, 
Forrestal Building, 1000 Independence Avenue, SW., Washington, D.C. 
20585, between the hours of 9 a.m. and 4 p.m., Monday through Friday, 
except Federal holidays. All written comments received on or before the 
date specified in the beginning of this proposed rule and all other 
relevant information will be considered by the Department before taking 
final action. Comments received after that date will be considered to 
the extent that time allows. Any person submitting information which 
that person believes to be confidential and which may be exempt from 
public disclosure should submit one complete copy, as well as an 
additional copy from which the information claimed to be confidential 
has been deleted. The Department reserves the right to determine the 
confidential status of the information or data and to treat it 
according to its determination. The Department's generally applicable 
procedures for handling information which has been submitted in a 
document and may be exempt from public disclosure are set forth in 10 
CFR 1004.11.

B. Public Hearing

1. Request to Speak Procedures
    A public hearing on the proposed rule will be held at 9:30 a.m. on 
August 1, 1996, in the Main Auditorium of the Forrestal Building, 1000 
Independence Avenue, SW, Washington, DC 20585. Oral presentations on 
both this proposed rule and the proposed rule on fees for management 
and operating contractors published elsewhere in this Federal Register 
will be heard at that time.
    Any person who has an interest in the proposed rule or who is a 
representative of a group or class of persons who has an interest in 
the proposed rule may request an opportunity to make an oral 
presentation. A request to speak at the public hearing should be 
addressed to the address indicated at the beginning of this proposed 
rule. The person making the request should briefly describe his or her 
interest in the proceedings and, if appropriate, state why the person 
is a proper representative of a group. The person should also provide a 
telephone number where he or she may be reached during the day. Two 
copies of the speaker's statement should be brought to the hearing. In 
the event any person wishing to testify cannot meet this requirement, 
alternative arrangement can be made in advance.
2. Conduct of the Hearing
    DOE reserves the right to select persons to be heard at the 
hearing, to schedule their respective presentations, and to establish 
procedures governing the conduct of the hearing. To ensure that all 
persons wishing to make a presentation can be heard, each speaker will 
be limited to 10 minutes to present comments on this proposed rule. 
Speakers who wish to provide further information for the record should 
submit such information in writing.
    A Department of Energy official will preside at the hearing. This 
will not be a judicial or evidentiary hearing. It will be conducted in 
accordance with 5 U.S.C. 553 and section 501 of the Department of 
Energy Organization Act, 42 U.S.C. 7191.
    Questions may be asked only by those conducting the hearing. Any 
further procedural rules needed for the proper conduct of the hearing 
will be announced by the presiding officer. DOE reserves the right to 
change the location, date, and procedures for this hearing. If DOE must 
cancel the public hearing, DOE will make every effort to publish an 
advance notice of such cancellation in the Federal Register. Actual 
notice of cancellation will also be given to all persons scheduled to 
speak. The hearing date may be canceled in the even no member of the 
public requests the opportunity to make an oral presentation.
    A transcript of the hearing will be made by DOE and made available 
as part of the administrative record for this rulemaking. It will be on 
file for inspection at the DOE Freedom of Information Reading Room, 
Forrestal Building, 1000 Independence Avenue, SW, Washington, DC 20585, 
between the hours of 9 a.m. and 4 p.m., Monday through Friday, except 
Federal holidays. Any person may purchase a copy of the transcript from 
the hearing reporter.

List of Subjects in 48 CFR Parts 917, 950, 952, 970

    Government procurement.

    Issued in Washington, D.C., on June 7, 1996.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.

    For the reasons set forth in the preamble, Chapter 9 of Title 48 of 
the Code of Federal Regulations is proposed to be amended as set forth 
below.

PART 917--SPECIAL CONTRACTING METHODS

    1. The authority citation for Part 917 continues to read as 
follows:

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

    2. Section 917.600 is amended by adding the following sentences at 
the end of the paragraph:


917.600  Scope of subpart.

    * * * The requirements of this subpart apply to any Department of 
Energy management and operating contract, including performance-based 
management contracts as defined in 48 CFR (DEAR) 917.601. References in 
this subpart to ``management and operating contracts'' shall be 
understood to include performance-based management contracts.
    3. Subpart 917.6, Management and Operating Contracts, is amended to 
add new section 917.601, Definitions, to read as follows:


917.601  Definitions.

    Performance-based management contract means a management and 
operating contract that employs, to the maximum extent practicable, 
performance-based contracting concepts and methodologies through the 
application of results-oriented statements of work; clear, objective 
performance standards and measurement tools; and incentives to

[[Page 32596]]

encourage superior contractor performance.

PART 950--EXTRAORDINARY CONTRACTUAL ACTIONS

    4. The authority citation for Part 950 continues to read as 
follows:

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


950.7101  [Amended]

    5. Section 950.7101 is amended by removing paragraph (c)(2) and 
redesignating paragraph (c)(1) as (c).

PART 952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. The authority citation for Part 952 is revised to read as 
follows:

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

    7. Section 952.223-71 is amended by revising the section heading 
and adding the following sentence at the end of the paragraph to read 
as follows:


952.223-71  Environment, safety and health.

    * * * Replace clause paragraph (b) with the following:

    (b) The contractor shall comply with applicable Federal, State, 
and local environmental, safety, and health laws and regulations, 
and with DOE directives identified in writing by the contracting 
officer. The contractor shall cooperate with Federal and non-Federal 
agencies having jurisdiction over environmental, safety, and health 
matters under this contract.

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

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

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


970.0407  [Removed]

    9. Section 970.0407, Records retention requirements, is removed.
    10. New subsection 970.0407-1, Alternate retention schedules, is 
added to read as follows:


970.0407-1  Alternate retention schedules.

    Records produced under the Department's contracts involving 
management and operation responsibilities relative to DOE-owned or -
leased facilities are to be retained and disposed of in accordance with 
the requirements of DOE Order 1324.5 rather than those set forth at 
subpart 4.4 of the Federal Acquisition Regulation.
    11. New section 970.0407-2, Ownership of records, is added to read 
as follows:


970.0407-2  Ownership of records.

    Contracting officers may agree to contractor ownership of the 
categories of records designated in the instruction in paragraph (b) of 
48 CFR (DEAR) 970.5204-XX, Ownership of Records, so long as such 
agreements do not limit the Government's right to inspect, copy, and 
audit these records. Right of inspection, copying, and audit must be 
maintained in order to protect the public interest and meet the 
Department's statutory reporting requirements.
    12. New section 970.0470-3, Contract clause, is added to read as 
follows:


970.0470-3  Contract clause.

    The contracting officer shall insert the clause at 48 CFR (DEAR) 
970.5204-XX, Ownership of records, in management and operating 
contracts where the contractor wishes to retain ownership of certain 
records. Contracts containing the clause at 48 CFR (DEAR) 970.5204-XX, 
Ownership of Records, shall also include the clauses at 48 CFR (DEAR) 
970.5203-2, Inspection of records by the Comptroller General, and 48 
CFR (DEAR) 970.5204-9, Accounts, records and inspection.
    13. New section 970.0470, Department of Energy Directives, 
consisting of subsections 970.0470-1 and 970.0470-2, is added to read 
as follows:

970.0470  Department of Energy Directives.
970.0470-1  General.
970.0470-2  Contract clause.


970.0470-1  General.

    (a) The Department of Energy Directives system is the system of 
instructions, including orders, notices, manuals, guides, and 
standards, for Departmental elements. In certain circumstances, 
requirements contained in these directives may apply to a contractor 
through operation of a contract clause. Program and requirements 
personnel are responsible for identifying requirements applicable to a 
contract, developing the list, and providing the list to the 
contracting officer for inclusion in the contract.
    (b) If the contract relates to facilities or activities that have 
been the subject of a completed review using the Standards/Requirements 
Identification process or the Necessary and Sufficient process, the 
environment, safety, and health portion of the list should be developed 
using the approved Standards/Requirements Identification Document or 
Necessary and Sufficient set of standards. If the Standards/
Requirements Identification process or the Necessary and Sufficient 
process is completed with regard to facilities or activities covered by 
the contract after the contract is executed, the approved Standards/
Requirements Identification Document or Necessary and Sufficient set of 
standards should be used in developing the environment, safety, and 
health portion of the list, as appropriate.


970.0470-2  Contract clause.

    The contracting officer shall insert the clause at DEAR 970.5204-
XX, Laws, Regulations, DOE Directives, in management and operating 
contracts.
    14. Section 970.1001 is revised to read as follows:


970.1001  Performance-based statements of work, criteria, and measures.

    (a) It is the policy of the Department of Energy to use, to the 
maximum extent practicable, performance-based contracting in its 
management and operating contracts. The use of performance-based 
statements of work, where feasible, is the preferred method for 
establishing work requirements. Statements of work, work 
authorizations, and other documents describing contractor work activity 
should describe performance requirements and expectations in terms of 
outcome, results, or final work products, as opposed to methods, 
processes, design, or broad statements or categories of work activity.
    (b) Performance criteria, measures, and incentives shall be 
structured to correspond to the performance requirements established in 
the statement of work, work authorization, or other such document.


970.1002  [Amended]

    15. The section heading for section 970.1002 is revised to read, 
``Additional considerations.''
    16. Subpart 970.15 is amended by adding new section 970.1507, Make-
or-Buy Plans, consisting of 970.1507-1, 970.1507-2, and 970.1507-3, to 
read as follows:

970.1507  Make-or-buy Plans
970.1507-1  Policy.
970.1507-2  Requirements.
970.1507-3  Contract clauses.


970.1507-1  Policy.

    (a) Contracting officers shall require management and operating 
contractors to develop and implement make-or-buy plans that establish a 
preference for providing property or services (including construction 
and construction management) on a least-cost basis, subject to program 
specific make-or-buy criteria. The emphasis of this make-or-buy 
structure is to

[[Page 32597]]

eliminate bias for in-house performance where an activity may be 
performed at less cost or otherwise more efficiently through 
subcontracting.
    (b) In developing and implementing its make-or-buy plan, a 
contractor shall be required to assess subcontracting opportunities and 
implement subcontracting decisions in accordance with the following:
    (1) The contractor shall actively support internal productivity 
improvement and cost-reduction programs so that in-house performance 
options can be made more efficient and cost-effective.
    (2) The contractor shall consider subcontracting opportunities with 
the maximum practicable regard for open communications with potentially 
affected employees and their representatives. Similarly, contractors 
will openly discuss their plans, activities, cost-benefit analyses, and 
decisions with the many stakeholders affected by such decisions, 
including representatives of the community and local businesses.
    (3) Consistent with Section 3161 of the National Defense 
Authorization Act for Fiscal Year 1993 (42 U.S.C. 7274h), the 
contractor shall mitigate the social and economic impacts of 
subcontracting decisions, including work force displacement or 
restructuring, to the extent practicable. Mitigation shall include the 
requirement for hiring preferences in a subcontract (see 48 CFR (DEAR) 
970.5204-XX, Displaced Employee Hiring Preference). Potential work 
force displacement may require the Department of Energy to prepare a 
work force restructuring plan. The contractor shall implement the plan, 
which may require the following initiatives for eligible workers 
consistent with the objectives of Section 3161: retraining, early 
retirement or other options to avoid lay-offs; retraining for new 
missions; outplacement assistance, including tuition reimbursement; 
relocation assistance; and 60 days individual layoff notice.


970.1507-2  Requirements.

    (a) Development of program-specific make-or-buy criteria. DOE 
programmatic sponsors of the work conducted at the facility or site 
shall develop program specific make-or-buy criteria. Program specific 
make-or-buy criteria are those factors that reflect specific mission or 
program objectives (including operational efficiency, contractor 
diversity, environment, safety and health, work force displacement and 
restructuring, and collective bargaining agreements) and that, upon 
their application to a specific work effort, would obviate a decision 
based on a purely economic (i.e., least-cost) rationale. These criteria 
are to be used to assess each work effort identified in a facility's or 
site's make-or-buy plan to determine the appropriateness of a 
contractor's make-or-buy decisions. Program specific make-or-buy 
criteria shall be provided to the contractor for use in developing a 
master make-or-buy plan for the facility, site, or specific program, as 
appropriate.
    (b) Make-or-buy plan property and services. Property or services 
estimated to cost less than one (1) percent of the estimated total 
operating cost for a year or $1 million for the same year, whichever is 
less, generally should not be included in the contractor's make-or-buy 
plan. However, adjustments may be made to these thresholds where 
programmatic or cost considerations would indicate that a particular 
supply or service should be included in the master plan.
    (c) Submission of make-or-buy plans. The contracting officer shall 
require the contractor to submit an initial plan and all plan updates 
for DOE approval. For newly awarded contracts, the contracting officer 
shall require the contractor to submit to the contracting officer the 
master make-or-buy plan for approval not later than 180 days after 
contract award. Where existing contracts are to be renewed with the 
incumbent contractor, the contracting officer shall require the 
contractor to submit a master make-or-buy plan during the negotiation 
of the contract extension. The contracting officer shall modify 
existing contracts that have a remaining term of at least two (2) years 
to include a requirement for a contractor make-or-buy plan. Evaluation 
and approval of such a plan should occur as part of the annual work 
plan/budget negotiations. Once approved, make-or-buy plans shall remain 
effective for the term of the contract (up to a period of five years), 
unless circumstances warrant a change. The contracting officer shall 
require the contractor to update the plan whenever changed 
circumstances occur or significant new work not identified or 
contemplated at the time of approval of the initial plan is initiated.
    (d) Evaluation of the contractor's make-or-buy plan. In evaluating 
the contractor's make-or-buy plan, the contracting officer shall 
consider the following factors:
    (1) The program specific make-or-buy criteria with particular 
attention to the effect of a ``buy'' decision on the contractor's 
ability to maintain core competencies needed to operate the site or 
facility;
    (2) The impact of a ``make'' or ``buy'' decision on contract cost, 
schedule, and performance and financial risk;
    (3) The potential impact of a ``make'' or ``buy'' decision on known 
future mission or program activities at the facility or site;
    (4) Past experience at the facility or site regarding ``make-or-
buy'' decisions for the same, or similar, supplies or services;
    (5) Consistent with the contractor's approved subcontracting plan, 
whether small, small disadvantaged, or other minority owned businesses 
will be afforded maximum practicable opportunity to compete for work 
that is subcontracted;
    (6) Local market conditions, including contractor work force 
displacement and the availability of firms that can meet the work 
requirements with regard to quality, quantity, cost, and timeliness;
    (7) Where the construction of new or additional facilities is 
required, that the cost of such facilities is in the Government's best 
interest when compared to subcontracting or privatization alternatives; 
and
    (8) Whether all relevant requirements and costs of performing the 
work by the contractor and through subcontracting are considered and 
any different requirements for the same work are reconciled.
    (e) Approval. The contracting officer shall approve all plans and 
updates. Once approved, make-or-buy plans shall remain effective for 
the term of the contract (up to a period of five years), unless 
circumstances warrant a change.
    (f) Administration. The contractor's performance against the 
approved make-or-buy plan shall be monitored to ensure that
    (1) The contractor is complying with the plan;
    (2) Items identified for deferral decisions are addressed in a 
timely manner; and
    (3) The contractor periodically updates the make-or-buy plan based 
on changed circumstances or significant new work.


970.1507-3  Contract clauses.

    (a) The contracting officer shall insert the clause at 48 CFR 
(DEAR) 970.5204-XX, Make-or-Buy Plan, in management and operating 
contracts.
    (b) The contracting officer shall insert the clause at 48 CFR 
(DEAR) 970.5204-XX, Displaced Employee Hiring Preference, in management 
and operating contracts.
    17. New section 970.2275, consisting of subsections 970.2275-1 and 
970.2275-2, is added to read as follows:

[[Page 32598]]

970.2275  Overtime management.


970.2275-1  General.

    (a) Contracting officers shall require an overtime control plan 
from contractors whose overtime premium funds meet any one of the 
following criteria:
    (1) They exceed the DOE management and operating contract median 
overtime expenditures for the preceding calendar year plus 2%;
    (2) They exceed the DOE management and operating contractor median 
overtime expenditures for the preceding calendar year and the 
contractor's policy permits payment of overtime premiums for exempt 
employees earning equal to or greater than $45,000 per annum; or,
    (3) They exceed the DOE management and operating contractor median 
overtime expenditures for the preceding calendar year and the 
contractor permits overtime payments on any basis other than hours 
worked in excess of 40 hours per week.
    (b) The overtime control plan shall be on an annual basis and 
approved by DOE. It shall include submission of a semi-annual report on 
overtime usage to the contracting officer and implementation of an 
effective management evaluation program to assure that overtime usage 
is in accordance with the approved overtime control plan.


970.2275-2  Contract clause.

    The contracting officer shall insert the clause at 48 CFR (DEAR) 
970.5204-XX, Overtime Management, in management and operating contracts 
and contracts with advance understandings on cost.


970.2302-2  [Amended]

    18. Subsection 970.2303-2 is amended by removing paragraphs (c), 
(d), and (e).
    19. New section 970.2830 is added to read as follows:


970.2830  Contract clause.

    The contracting officer shall insert the clause at 48 CFR (DEAR) 
970.5204-31, Insurance--Litigation and Claims, in management and 
operating contracts. Individual deviations to 48 CFR (DEAR) 970.5204-
31(h)(1)(i) may be used in contracts with nonprofit organizations when 
combined with a reduction in fee and approved by the Procurement 
Executive.
    20. Section 970.3101-3 is amended by revising paragraph (a)(1) to 
read as follows:


970.3101-3  General basis for reimbursement of costs.

    (a) * * *
    (1) Reasonableness in accordance with FAR 31.201-3;
* * * * *
    21. Section 970.3102-21, Fines and penalties, is revised to read as 
follows:


970.3102-21  Fines and penalties.

    It is Department of Energy policy not to reimburse management and 
operating contractors for fines and penalties except as provided in 48 
CFR (DEAR) 970.5204-13(e)(12), Allowable Costs and Fixed Fee 
(Management and Operating Contracts), 48 CFR (DEAR) 970.5204-14(e)(10), 
Allowable Costs and Fixed Fee (Support Contracts), and 48 CFR (DEAR) 
970.5204-XX, Preexisting Conditions.


970.3102-22  [Removed]

    22. Section 970.3102-22 is removed.
    23. Subsection 970.3103, Contract Clauses, is amended to add new 
paragraph (d) to read as follows:


970.3103  Contract clauses.

* * * * *
    (d) The clause at 970.5204-XX, Preexisting Conditions, shall be 
included in management and operating contracts. Alternate I of the 
clause shall be used in management and operating contracts with 
incumbent contractors.
    24. Subsection 970.5204-2, Safety and health (Government-owned or 
leased) is revised to read as follows:


970.5204-2  Environment, safety, and health.

    As prescribed in 48 CFR (DEAR) 970.2303-2(a), insert the following 
clause.

Environment, Safety, and Health (Month and Year TBE)

    (a) The contractor shall perform the work under this contract in 
a manner that ensures adequate protection for workers, the public, 
and the environment and shall develop and manage a comprehensive 
program in support of these objectives, consistent with its 
Environment, Safety, and Health Management Plan and any applicable 
Authorization Agreement. The contractor shall exercise a degree of 
care commensurate with the risk of harm involved, particularly with 
respect to the operation of nuclear facilities, where applicable.
    (b) The contractor shall comply with, and assist the Department 
of Energy in complying with (where identified by the Department), 
(i) all applicable Federal and non-Federal environment, safety, and 
health laws, regulations, and (ii) applicable directives identified 
in the clause of this contract on Departmental directives. The 
contractor shall cooperate with Federal and non-Federal agencies 
having jurisdiction over environmental, safety, and health matters 
under this contract.
    (c) Management plan. The contractor, within 60 days after the 
effective date of this contract or the modification incorporating 
this clause, shall submit to the contracting officer for review and 
approval an Environment, Safety, and Health Management Plan. This 
management plan shall contain the management program to be 
implemented by the contractor to protect the environment, workers, 
and the public. Guidance on preparation of the Management Plan will 
be provided by DOE as it may be periodically revised. The contractor 
shall annually submit an updated management plan to the DOE for 
review and approval reflecting budget decisions and contractor 
performance commitments for implementation in the budget execution 
year. Revisions to the management plan shall be subject to the 
change control process(es) established for the facility(ies) and 
activity(ies) managed by the contractor.
    (d) Authorization agreement(s). This contract establishes the 
agreed-upon safety requirements and other operating safety 
parameters for operations covered by the contract, except with 
respect to operations for which the contracting officer has notified 
the contractor that a separate Authorization Agreement is necessary. 
Authorization Agreements may be used to establish, document, and 
control the safety requirements and other parameters for specified 
operations that ensure adequate protection of the workers, the 
public, and the environment. The contracting officer may at any time 
notify the contractor that specified operations may proceed only 
subject to the requirements of a DOE-approved Authorization 
Agreement. Upon such notification, the contractor shall prepare and 
submit for DOE approval an Authorization Agreement within the time 
frame specified in the notice. Updates and changes to any approved 
Authorization Agreement shall be subject to DOE approval.
    (e) The contractor shall promptly correct any noncompliance with 
applicable environmental or safety and health requirements, the 
Management Plan, and any applicable Authorization Agreements. If the 
contractor fails to take corrective action or if, at any time, the 
contractor's acts or failure to act cause substantial harm or an 
imminent danger to the environment or health and safety of employees 
or the public, the contracting officer may issue an order stopping 
work in whole or in part. Any stop work order issued under this 
clause (including a stop work order issued by the contractor to a 
subcontractor in accordance with paragraph (f) of this clause) shall 
be without prejudice to any other legal or contractual rights of the 
Government. Thereafter, an order authorizing the resumption of the 
work may be issued at the discretion of the contracting officer. The 
contractor shall not be entitled to an extension of time or 
additional fee or damages by reason of, or in connection with, any 
work stoppage ordered in accordance with this clause.
    (f) The contractor shall provide in its purchasing system, 
required under the clause of this contract entitled, Contractor 
Purchasing System, for policies, practices, and procedures for the 
flowdown of appropriate requirements of this clause to

[[Page 32599]]

subcontractors performing work on-site at a DOE-owned or -leased 
facility. Such subcontracts shall provide for the right to stop work 
under the conditions described in paragraph (e) of this clause.

    25. Section 970.5204-13, Allowable costs and fixed-fee (management 
and operating contracts), is amended by revising the prescription, 
clause paragraphs (c), (d)(4), (d)(9), (e)(12), (e)(17), the note 
preceding (e)(36), and (e)(36) to read as follows:


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

    As prescribed in 48 CFR (DEAR) 970.3103(a), insert the following 
clause.

Allowable Costs and Fixed-Fee (Management and Operating Contracts) 
(Month and Year TBE)

* * * * *
    (c) Allowable costs. The allowable cost of performing the work 
under this contract shall be the costs and expenses that are 
actually incurred by the contractor in the performance of the 
contract work in accordance with its terms, that are necessary or 
incident thereto, and are determined to be allowable as set forth in 
this paragraph. The determination of allowability of cost shall be 
based on:
    (1) Reasonableness in accordance with FAR 31.201-3;
    (2) Standards promulgated by the Cost Accounting Standards 
Board, if applicable; otherwise, generally accepted accounting 
principles and practices appropriate to the particular 
circumstances; and
    (3) Recognition of all exclusions and limitations set forth in 
this clause or elsewhere in this contract as to types or amounts of 
items of cost. Allowable costs shall not include the cost of any 
item described as unallowable in paragraph (e) of this clause except 
as indicated therein. Failure to mention an item of cost 
specifically in paragraphs (d) or (e) of this clause shall not imply 
either that it is allowable or that it is unallowable.
    (d) * * *
    (4) Reasonable litigation expenses, including counsel fees, if 
incurred in accordance with the clause of the contract entitled, 
Insurance--Litigation and Claims, and the DOE approved contractor 
litigation management procedures (including cost guidelines) as such 
procedures may be revised from time to time, and if not otherwise 
made unallowable in this contract.
* * * * *
    (9) Repairs, maintenance, inspection, replacement, and disposal 
of Government-owned property and the restoration or clean-up of site 
and facilities to the extent approved by the contracting officer and 
as allowable under paragraph (f) of the clause of this contract 
entitled, Property.
* * * * *
    (e) * * *
    (12) Fines and penalties, except, with respect to civil fines 
and penalties only, if the contractor demonstrates to the 
contracting officer that--
    (i) Such a civil fine or penalty was incurred as a result of 
compliance with specific terms and conditions of the contract or 
written instructions from the contracting officer; or
    (ii) Such a civil fine or penalty was imposed without regard to 
fault and could not have been avoided by the exercise of due care.
* * * * *
    (17) Losses or expenses:
    (i) On, or arising from the sale, exchange, or abandonment of 
capital assets, including investments;
    (ii) On other contracts, including the contractor's contributed 
portion under cost-sharing contracts;
    (iii) In connection with price reductions to and discount 
purchases by employees and others from any source;
    (iv) That are compensated for by insurance or otherwise or which 
would have been compensated by insurance required by law or by 
written direction of the contracting officer but which the 
contractor failed to procure or maintain through its own fault or 
negligence;
    (v) That result from willful misconduct or lack of good faith on 
the part of any of the contractor's managerial personnel (as that 
term is defined in the clause of this contract entitled, Property);
    (vi) That represent liabilities to third persons that are not 
allowable under the clause of this contract entitled, Insurance--
Litigation and Claims; or
    (vii) That represent liabilities to third persons for which the 
contractor has expressly accepted responsibility under other terms 
of this contract.
* * * * *
    Note: In contracts with profit making contractors, add the 
following paragraph 36:

    (36) Notwithstanding any other provision of this contract, the 
costs of bonds and insurance are unallowable to the extent they are 
incurred to protect and indemnify the contractor and/or 
subcontractor against otherwise unallowable costs, unless such 
insurance or bond is required by law, the express terms of this 
contract, or is authorized in writing by the contracting officer. 
The cost of commercial insurance to protect the contractor against 
the costs of correcting its own defects in materials or workmanship 
is an unallowable cost.

    Section 970.5204-14, Allowable costs and fixed-fee (support 
contracts), is amended by revising clause paragraphs (c), (d)(4), 
(d)(10), (e)(10), (e)(15), the note preceding (e)(34), and (e)(34) to 
read as follows:


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

    As prescribed in 48 CFR (DEAR) 970.3103(a), insert the following 
clause.

Allowable Costs and Fixed-Fee (Support Contracts) (Month and Year TBE)

* * * * *
    (c) Allowable costs. The allowable cost of performing the work 
under this contract shall be the costs and expenses that are 
actually incurred by the contractor in the performance of the 
contract work in accordance with its terms, that are necessary or 
incident thereto, and are determined to be allowable as set forth in 
this paragraph. The determination of allowability of cost hereunder 
shall be based on:
    (1) Reasonableness in accordance with FAR 31.201-3;
    (2) Standards promulgated by the Cost Accounting Standards 
Board, if applicable; otherwise, generally accepted accounting 
principles and practices appropriate to the particular 
circumstances; and
    (3) Recognition of all exclusions and limitations set forth in 
this clause or elsewhere in this contract as to types or amounts of 
items of cost. Allowable costs shall not include the cost of any 
item described as unallowable in paragraph (e) of this clause except 
as indicated therein. Failure to mention an item of cost 
specifically in paragraphs (d) or (e) of this clause shall not imply 
either that it is allowable or that it is unallowable.
    (d) * * *
    (4) Reasonable litigation expenses, including counsel fees, if 
incurred in accordance with the clause of the contract entitled, 
Insurance--Litigation and Claims, in accordance with DOE approved 
contractor litigation management procedures (including cost 
guidelines) as such procedures may be revised from time to time, and 
if not otherwise made unallowable in this contract.
* * * * *
    (10) Repairs, maintenance, inspection, replacement, and disposal 
of government-owned property to the extent directed or approved by 
the contracting officer and as allowable under paragraph (f) of the 
clause of this contract entitled, Property.
* * * * *
    (e) * * *
    (10) Fines and penalties, except, with respect to civil fines 
and penalties only, if the contractor demonstrates to the 
contracting officer that--
    (i) Such a civil fine or penalty was incurred as a result of 
compliance with specific terms and conditions of the contract or 
written instructions from the contracting officer; or
    (ii) Such a civil fine or penalty was imposed without regard to 
fault and could not have been avoided by the exercise of due care.
* * * * *
    (15) Losses or expenses:
    (i) On, or arising from the sale, exchange, or abandonment of 
capital assets, including investments;
    (ii) On other contracts, including the contractor's contributed 
portion under cost-sharing contracts;
    (iii) In connection with price reductions to and discount 
purchases by employees and other from any source;
    (iv) That are compensated for by insurance or otherwise or which 
would have been compensated by insurance required by law or by 
written direction of the contracting officer but which the 
contractor failed to procure or maintain through its own fault or 
negligence;
    (v) That result from willful misconduct or lack of good faith on 
the part of any of the contractor's managerial personnel (as that 
term is defined in the clause of this contract entitled, Property);
    (vi) That represent liabilities to third persons that are not 
allowable under the

[[Page 32600]]

clause of this contract entitled, Insurance--Litigation and Claims; 
or
    (vii) That represent liabilities to third persons for which the 
contractor has expressly accepted responsibility under other terms 
of this contract.
* * * * *
    Note: In contracts with profit making contractors, add the 
following paragraph 34:

    (34) Notwithstanding any other provision of this contract, the 
costs of bonds and insurance are unallowable to the extent they are 
incurred to protect and indemnify the contractor and/or 
subcontractor against otherwise unallowable costs, unless such 
insurance or bond is required by law, the express terms of this 
contract, or is authorized in writing by the contracting officer. 
The cost of commercial insurance to protect the contractor against 
the costs of correcting its own defects in materials or workmanship 
is an unallowable cost.

    27. Subsection 970.5204-16 is amended by adding the following to 
the end of clause paragraph (a) and revising alternate clause paragraph 
(a) following Note 2 to read as follows:


970.5204-16  Payments and advances.

    As prescribed in 48 CFR (DEAR) 970.3270, insert the following 
clause.

Payments and Advances (Month and Year TBE)

    (a) * * * Fixed-fee payments shall be made by direct payment or 
withdrawn from funds advanced or available under this contract, as 
determined by the contracting officer. The contracting officer may 
offset against any such fee payment, the amounts owed to the 
Government by the contractor, including any amounts owed for 
disallowed costs under this contract. No fixed-fee payment may be 
withdrawn against the letter-of-credit without prior written 
approval of the contracting officer.
* * * * *
    (a) Payment of Base Fee and Award Fee Pool Amounts Earned. The 
base fee shall become due and payable in equal monthly installments. 
Award fee pool amounts earned shall become due and payable following 
the issuance by the FDO of a Determination of Award Fee Pool Amount 
Earned, in accordance with the clause of this contract entitled, 
Award Fee: base fee and award fee. Base and award fee pool amount 
earned payments shall be made by direct payment or withdrawn from 
funds advanced or available under this contract, as determined by 
the contracting officer. The contracting officer may offset against 
any such fee payment, the amounts owed to the Government by the 
contractor, including any amounts owed for disallowed costs under 
this contract. No base or award fee pool amount earned payment may 
be withdrawn against the letter-of-credit without prior written 
approval of the contracting officer.
* * * * *


970.5204-18  [Removed and Reserved]

    28.Section 970.5204-18 is removed and reserved.
    29.Section 970.5204-21, Property, is amended by revising clause 
paragraphs (e), (f), (g), (i) and (j) to read as follows:


970.5204-21  Property.

    As prescribed in 970.7104-43, insert the following clause.

Property (Month and Year TBE)

* * * * *
    (e) Protection of government property--Management of high-risk 
property and classified materials.
    (1) The contractor shall take all reasonable precautions, and 
such other actions as may be directed by the contracting officer, or 
in the absence of such direction, in accordance with sound business 
practice, to safeguard and protect government property in the 
contractor's possession or custody.
    (2) The contractor shall ensure that adequate safeguards are in 
place, and adhered to, for the handling, control and disposition of 
high risk property and classified materials throughout the life 
cycle of the property and materials consistent with the policies, 
practices and procedures for property management contained in the 
Federal Property Management Regulations (41 CFR part 101) and the 
Department of Energy Property Management Regulations (41 CFR part 
109).
    (3) High-risk property is property, the loss, or the unintended 
or premature transfer, of which could pose risks to the public, the 
environment, or the national security interests of the United 
States. High risk property includes proliferation-sensitive, 
nuclear-related dual-use, export controlled, chemically or 
radioactively contaminated, hazardous, and specially designed and 
prepared property, including property on the militarily critical 
technologies list.
    (f) Risk of loss of Government property. (1) The contractor 
shall be responsible and compensate the Government for the loss or 
destruction of, or damage to, Government property unless the 
contractor demonstrates to the contracting officer that such loss, 
destruction, or damage was not caused by any of the following:
    (i) Willful misconduct or lack of good faith on the part of the 
contractor's managerial personnel;
    (ii) Failure of the contractor to comply with any appropriate 
written direction of the contracting officer to safeguard such 
property under paragraph (e) of this clause; or
    (iii) Failure of the contractor to establish, administer or 
properly maintain an approved property management system in 
accordance with paragraph (i) of this clause.
    (2) As described in paragraph (f)(1) of this clause, the 
contractor's compensation to the Government shall be determined as 
follows:
    (i) For damaged property, the compensation shall be the cost of 
repairing such damaged property, plus any costs incurred for 
temporary replacement of the damaged property. However, the value of 
repair costs shall not exceed the fair market value of the damaged 
property. If a fair market value of the property does not exist, the 
contracting officer shall determine the value of such property, 
consistent with all relevant facts and circumstances.
    (ii) For destroyed or lost property, the compensation shall be 
the fair market value of such property at the time of such loss or 
destruction, plus any costs incurred for temporary replacement and 
costs associated with the disposition of destroyed property. If a 
fair market value of the property does not exist, the contracting 
officer shall determine the value of such property, consistent with 
all relevant facts and circumstances.
    (3) The cost of insurance obtained by the contractor to cover 
the risk of loss referred to in paragraph (f)(1) of this clause is 
not allowable.
    (g) Steps to be taken in event of loss. In the event of any 
damage, destruction, or loss to Government property in the 
possession or custody of the contractor, the contractor:
    (1) Shall immediately inform the contracting officer of the 
occasion and extent thereof,
    (2) Shall take all reasonable steps to protect the property 
remaining, and
    (3) Shall repair or replace the damaged, destroyed, or lost 
property in accordance with the written direction of the contracting 
officer. The contractor shall take no action prejudicial to the 
right of the Government to recover therefore, and shall furnish to 
the Government, on request, all reasonable assistance in obtaining 
recovery.
* * * * *
    (i) Property Management.
    (1) Property Management System. 
    (i) The contractor shall maintain and administer an approved 
property management system of accounting for and control, 
utilization, maintenance, repair, protection, and preservation of 
Government property in its possession under the contract. The 
contractor's property management system shall be approved by the 
contracting officer and maintained and administered in accordance 
with sound business practice, applicable Federal Property Management 
Regulations and Department of Energy Property Management 
Regulations, and such directives or instructions which the 
contracting officer may from time to time prescribe.
    (ii) In order for a property management system to be approved, 
it must provide for:
    (A) Comprehensive coverage of property from the requirement 
identification, through its life cycle, to final disposition;
    (B) Employee personal responsibility and accountability for 
Government-owned property;
    (C) Full integration with the contractor's other administrative 
and financial systems; and
    (D) A reliable method for continuously improving property 
management practices through the identification of best practices 
established by ``best in class'' performers.
    (iii) Approval of the contractor's property management system 
shall be contingent upon the completion of the baseline inventory as 
provided in subparagraph (i)(2) of this clause.
    (2) Property Inventory. (i) Unless otherwise directed by the 
contracting officer, the contractor shall within six months after 
execution of the contract provide a baseline inventory covering all 
items of property furnished by the Government.
    (ii) In the event that the contractor is succeeding another 
contractor(s) in the

[[Page 32601]]

performance of this contract, the contractor shall conduct a joint 
reconciliation of the property inventory with the predecessor 
contractor. The contractor further agrees to participate in a joint 
reconciliation of the property inventory at the completion of this 
contract. This information will be used to provide a baseline for 
the succeeding contract as well as information for closeout of the 
predecessor contract.
    (j) The term ``contractor's managerial personnel'' as used in 
this clause means the contractor's directors, officers and any of 
its managers, superintendents, or other equivalent representatives 
who have supervision or direction of:
    (1) All or substantially all of the contractor's business; or
    (2) All or substantially all of the contractor's operations at 
any one facility or separate location to which this contract is 
being performed; or
    (3) A separate and complete major industrial operation in 
connection with the performance of this contract; or
    (4) A separate and complete major construction, alteration, or 
repair operation in connection with performance of this contract; or
    (5) A separate and discrete major task or operation in 
connection with the performance of this contract.

    Note: Substitute the following paragraph (j) for nonprofit 
contractors:

    (j) The term ``contractor's managerial personnel'' as used in 
this clause means the contractor's directors, officers and any of 
its managers, superintendents, or other equivalent representatives 
who have supervision or direction of:
    (1) All or substantially all of the contractor's business; or
    (2) All or substantially all of the contractor's operations at 
any one facility or separate location at which this contract is 
being performed; or
    (3) The Laboratory officials responsible for the contractor's 
Government property system and/or a Major System Acquisition or 
Major Project as defined in DOE Order 4700.1 (Version in effect on 
effective date of contract).


970.5204-26  [Removed and Reserved]

    30. Subsection 970.5204-26, Nuclear facility safety, is removed and 
reserved.
    31. Subsection 970.5204-31 is revised to read as follows:


970.5204-31  Insurance--litigation and claims.

    As prescribed in 48 CFR (DEAR) 970.2830(a), insert the following 
clause.

Insurance--Litigation and Claims (Month and Year TBE)

    (a) The contractor may, with the prior written authorization of 
the contracting officer, and shall, upon the request of the 
Government, initiate litigation against third parties, including 
proceedings before administrative agencies, in connection with this 
contract. The contractor shall proceed with such litigation in good 
faith and as directed from time to time by the contracting officer.
    (b) The contractor shall give the contracting officer immediate 
notice in writing of any legal proceeding, including any proceeding 
before an administrative agency, filed against the contractor 
arising out of the performance of this contract. Except as otherwise 
directed by the contracting officer, in writing, the contractor 
shall furnish immediately to the contracting officer copies of all 
pertinent papers received by the contractor with respect to such 
action. The contractor, with the prior written authorization of the 
contracting officer, shall proceed with such litigation in good 
faith and as directed from time to time by the contracting officer.
    (c)(1) Except as provided in paragraph (c)(2) of this clause, 
the contractor shall procure and maintain such bonds and insurance 
as required by law or approved in writing by the contracting 
officer.
    (2) The contractor may, with the approval of the contracting 
officer, maintain a self-insurance program; provided that, with 
respect to workers' compensation, the contractor is qualified 
pursuant to statutory authority.
    (3) All bonds and insurance required by this clause shall be in 
a form and amount and for those periods as the contracting officer 
may require or approve and with sureties and insurers approved by 
the contracting officer.
    (d) The contractor agrees to submit for the contracting 
officer's approval, to the extent and in the manner required by the 
contracting officer, any other bonds and insurance that are 
maintained by the contractor in connection with the performance of 
this contract and for which the contractor seeks reimbursement.
    (e) Except as provided in subparagraphs (g) and (h) of this 
clause, or specifically disallowed elsewhere in this contract, the 
contractor shall be reimbursed--
    (1) For that portion of the reasonable cost of bonds and 
insurance allocable to this contract required in accordance with 
contract terms or approved under this clause, and
    (2) For liabilities (and expenses incidental to such 
liabilities, including litigation costs) to third persons not 
compensated by insurance or otherwise without regard to and as an 
exception to the clause of this contract entitled, Obligation of 
Funds (48 CFR (DEAR) 970.5204-15).
    (f) The Government's liability under paragraph (e) of this 
clause is subject to the availability of appropriated funds. Nothing 
in this contract shall be construed as implying that the Congress 
will, at a later date, appropriate funds sufficient to meet 
deficiencies.
    (g) Notwithstanding any other provision of this contract, the 
contractor shall not be reimbursed for liabilities (and expenses 
incidental to such liabilities, including litigation costs, counsel 
fees, judgment and settlements)--
    (1) Which are otherwise unallowable by law or the provisions of 
this contract; or
    (2) For which the contractor has failed to insure or to maintain 
insurance as required by law, this contract, or by the written 
direction of the contracting officer.
    (h) Notwithstanding any other provision of this contract, the 
contractor's liabilities to third persons, including employees, (and 
any expenses incidental to such liabilities, including litigation 
costs) are not allowable unless the contractor demonstrates to the 
contracting officer that such liabilities were not caused by the 
willful misconduct or lack of good faith of the contractor's 
managerial personnel, or failure to exercise prudent business 
judgment by the contractor's managerial personnel.
    (i)(1) Costs which may be unallowable under subparagraph (g)(1) 
or (h) of this clause shall be differentiated and accounted for by 
the contractor so as to be separately identifiable. The contracting 
officer shall generally withhold payment and not authorize the use 
of funds advanced under the contract for payment of such costs. 
However, the contracting officer may, in appropriate circumstances, 
provide for conditional payment upon provision of adequate security, 
or other adequate assurance, and agreement by the contractor to 
repay all unallowable costs, plus interest, if the costs are 
subsequently determined to be unallowable.
    (2) Punitive damages are not allowable unless the contractor 
demonstrates to the contracting officer that the act or failure to 
act which gave rise to the liability resulted from compliance with 
specific terms and conditions of the contract or written 
instructions from the contracting officer.
    (3) The cost of insurance specifically procured by the 
contractor to cover the third-party liabilities referenced in 
paragraph (g)(1) of this clause is not allowable.
    (4) The term ``contractor's managerial personnel'' is defined in 
clause paragraph (j) of 48 CFR (DEAR) 970.5204-21.
    (j) The contractor may at its own expense and not as an 
allowable cost procure for its own protection insurance to 
compensate the contractor for any unallowable or unreimbursable 
costs incurred in connection with contract performance.
    (k) If any suit or action is filed or any claim is made against 
the contractor, the cost and expense of which may be reimbursable to 
the contractor under this contract, and the risk of which is then 
uninsured or is insured for less than the amount claimed, the 
contractor shall--
    (1) Immediately notify the contracting officer and promptly 
furnish copies of all pertinent papers received;
    (2) Authorize Department representatives to collaborate with: 
in-house or DOE-approved outside counsel in settling or defending 
the claim; or counsel for the insurance carrier in settling or 
defending the claim when the amount of the liability claimed exceeds 
the amount of coverage, unless precluded by the terms of the 
insurance contract; and
    (3) Authorize Department representatives to settle the claim or 
to defend or represent the contractor in and/or to take charge of 
any litigation, if required by the Department, when the liability is 
not insured or covered by bond. In any action against more than one 
Department contractor, the Department may require the contractor to 
be represented by common counsel. Counsel for the contractor may, at 
the contractor's own expense, be associated with the Department

[[Page 32602]]

representatives in any such claim or litigation.
    (l) The provisions of 48 CFR (DEAR) 970.71 are not applicable to 
costs incurred under and in accordance with this clause and 
subparagraph (d)(4) of the clause at 48 CFR (DEAR) 970.5204-13 
entitled, Allowable costs and fixed fee.


970.5204-32  [Removed and Reserved]

    32. Subsection 970.5204-32, Required bond and insurance--exclusive 
of government property, is removed and reserved.


970.5204-41  [Removed and Reserved]

    33. Subsection 970.5204-41, Preservation of individual occupational 
radiation exposure records, is removed and reserved.


970.5204-55 and 970.5204-56  [Removed and Reserved]

    34. Subsections 970.5204-55 and 970.5204-56 are removed and 
reserved.
    35. Subsection 970-5204-61 is amended by revising the presciptation 
and adding clause paragraph (h):


970.5204-61  Cost prohibitions related to legal and other proceedings.

    As prescribed in 48 CFR (DEAR) 970.3103(c), insert the following 
clause.

Cost Prohibitions Related to Legal and Other Proceedings (Month and 
Year TBE)

* * * * *
    (h) For proceedings against the contractor in which the 
contractor is alleged to have violated the False Claims Act, 31 
U.S.C. 3730, and to the extent paragraph (b) of this clause is not 
otherwise applicable:
    (1) Any costs of judgments against the contractor, and the 
associated litigation costs, and, except as authorized by the 
contracting officer, costs of settlements made by the contractor, 
and the associated litigation costs, are unallowable; and
    (2) For those cases in which the Department of Justice does not 
intervene, contractor requests for provisional reimbursement of 
proceeding costs should be denied unless the General Counsel concurs 
in a determination that the case is so frivolous or devoid of merit 
that it would be in the interest of the government to provisionally 
allow such costs.


970.5204-62  [Removed and Reserved]

    36. Subsection 970.5204-62, Environmental protection, is removed 
and reserved.
    37. Subpart 970.52, Contract Clauses for Management and Operating 
Contracts, is amended to add 970.5204-XX, Preexisting Conditions; 
970.5204-XX, Make-or-Buy Plan; 970.5204-XX, Displaced Employee Hiring 
Preference; 970.5204-XX, Laws, Regulations, and DOE Directives; 
970.5204-XX, Ownership of Records; and 970.5204-XX, Overtime 
Management, to read as follows:

970.52  Contract Clauses for Management and Operating Contracts.
970.5204-XX  Preexisting conditions.
970.5204-XX  Make-or-buy plan.
970.5204-XX  Displaced employee hiring preference.
970.5204-XX  Laws, regulations, DOE directives.
970.5204-XX  Ownership of records.
970.5204-XX  Overtime management.


970.5204-XX  Preexisting conditions.

    As prescribed in 48 CFR (DEAR) 970.3103(d), insert the following 
clause.

Preexisting Conditions (Month and Year TBE)

    (a) The Department agrees to reimburse the contractor, and the 
contractor shall not be held responsible, for any liability 
(including without limitation, a claim involving strict or absolute 
liability and any civil fine or penalty), expense, or remediation 
cost, but limited to those of a civil nature, which may be incurred 
by, imposed on, or asserted against the contractor arising out of 
any condition, act or failure to act which occurred before the 
contractor assumed responsibility on [Specify date contract began]. 
To the extent the acts or omissions of the contractor cause or add 
to any liability, expense or remediation cost resulting from 
conditions in existence prior to [Specify date contract began], the 
contractor shall be responsible in accordance with the terms and 
conditions of this contract.
    (b) The contractor has the duty to inspect the facilities and 
sites and timely identify to the contracting officer those 
conditions which it believes could give rise to a liability, 
obligation, loss, damage, penalty, fine, claim, action, suit, cost, 
expense, or disbursement or areas of actual or potential 
noncompliance with the terms and conditions of this contract or 
applicable law or regulation, and the contractor has the 
responsibility to take corrective action, as directed by the 
contracting officer as required elsewhere in this contract.
    (c) The obligations of the Government under this provision are 
subject only to the availability of appropriated funds.
    Alternate I. As prescribed in 48 CFR (DEAR) 970.3103(d), 
substitute the following paragraph (a):
    (a) Any liability, obligation, loss, damage, claim (including 
without limitation, a claim involving strict or absolute liability), 
action, suit, civil fine or penalty, cost, expense or disbursement, 
which may be incurred or imposed, or asserted by any party and 
arising out of any condition, act or failure to act which occurred 
before [Insert date of contract including this clause], in 
conjunction with the management and operation of [Insert name of 
facility], shall be deemed incurred under Contract No. [Insert 
number of prior contract].


970.5204-XX  Make-or-buy plan.

    As prescribed in 48 CFR (DEAR) 970.1507-3(a), insert the following 
clause:

Make-Or-Buy Plan (Month and Year TBE)

    (a) Definitions.
    Buy item means a work activity or property or services to be 
produced or performed by an outside source, including a 
subcontractor or an affiliate, subsidiary, or division of the 
contractor.
    Make item means a work activity or property or services to be 
produced or performed by the contractor using its personnel and 
other resources at the Department of Energy facility or site.
    Master make-or-buy plan means a contractor's written program for 
the contract that identifies work efforts or requirements that 
either are ``make items'' or ``buy items.''
    (b) Make-or-buy plan. The contractor shall develop and implement 
a make-or-buy plan that establishes a preference for providing 
property and services on a least cost basis, subject to specific 
Department of Energy make or buy criteria identified in the contract 
or otherwise provided by the contracting officer. In developing and 
implementing its make-or-buy plan, the contractor agrees to assess 
subcontracting opportunities and implement subcontracting decisions 
in accordance with the following:
    (1) The contractor will actively support internal productivity 
improvement and cost-reduction programs so that in-house performance 
options can be made more efficient and cost-effective.
    (2) The contractor shall consider subcontracting opportunities 
with the maximum practicable regard for open communications with 
potentially affected employees and their representatives. Similarly, 
contractors will openly discuss their plans, activities, cost-
benefit analyses, and decisions with the many stakeholders affected 
by such decisions, including representatives of the community and 
local businesses.
    (3) Consistent with Section 3161 of the National Defense 
Authorization Act for Fiscal Year 1993, the contractor shall 
mitigate the social and economic impacts of subcontracting 
decisions, including work force displacement or restructuring, to 
the extent practicable. Mitigation shall include:
    (i) The requirement for hiring preferences and retraining in a 
subcontract,
    (ii) The provision of relocation and/or reemployment assistance, 
and
    (iii) Consideration of early retirement opportunities.
    (c) Submission and approval. The contractor shall submit a make-
or-buy plan for approval in accordance with the schedule and other 
instructions provided by the contracting officer.The following 
documentation shall be prepared and submitted:
    (1) A description of the each work item, and if appropriate, the 
identification of the associated Work Authorization or Work 
Breakdown Structure element;
    (2) The categorization of each work item as ``must make,'' 
``must buy,'' or ``can make or buy,'' with the reasons for such 
categorization in consideration of the program specific make or buy 
criteria (including least cost considerations). For non-core 
capabilities categorized as ``must make,'' a cost/benefit analysis 
must be performed for each item when:

[[Page 32603]]

    (i) The contractor is not the least-cost performer, and
    (ii) A program specific make-or-buy criterion does not otherwise 
justify a ``must make'' categorization;
    (3) A decision to either ``make'' or ``buy'' in consideration of 
the program specific make or buy criteria (including least cost 
considerations) for work effort categorized as ``can make or buy'';
    (4) Identification of potential suppliers and subcontractors, if 
known, and their location and size status;
    (5) A recommendation to defer a make or buy decision where 
categorization of an identifiable work effort(s) is impracticable at 
the time of initial development of the plan;
    (6) A description of the impact of a change in current practice 
of making or buying on the existing work force; and
    (7) Any additional information appropriate to support and 
explain the plan.
    (d) Conduct of operations. Once a master make or buy plan is 
approved, the contractor shall perform in accordance with the plan.
    (e) Changes to the master make-or-buy plan. The master make- or-
buy plan established in accordance with paragraph (b) of this clause 
shall remain in effect for the term of the contract, unless:
    (1) A lesser period is provided either for the total plan or for 
individual items or work effort;
    (2) The circumstances supporting the original make-or-buy 
decisions change subsequent to the initial approval, or
    (3) New work is identified. At least annually, the contractor 
shall review its approved make-or-buy plan to ensure that it 
reflects current conditions. Changes to the approved make-or-buy 
plan shall be submitted in advance of the effective date of the 
proposed change in sufficient time to permit evaluation and review. 
All changes shall be submitted in accordance with instructions 
provided by the contracting officer. Modification of the make-or-buy 
plan to incorporate proposed changes or additions shall be effective 
upon the contractor's receipt of the contracting officer's written 
approval.


970.5204-XX  Displaced employee hiring preference.

    As prescribed in 48 CFR (DEAR) 970.1507-3(b), insert the following 
clause.

Displaced Employee Hiring Preference (Month and Year TBE)

    (a) Definition.
    Eligible employee means a current or former employee of the 
[insert name of facility] whose position of employment has been, or 
will be, affected by the downsizing, contracting out decision, or 
subcontracting decision of a Department of Energy defense nuclear 
facility and who has also met the eligibility criteria contained in 
the Department of Energy's Interim Planning Guidance for Contractor 
Work Force Restructuring.
    (b) The contractor agrees that it will provide a preference in 
hiring to an eligible employee to the extent practicable for work 
performed under this contract when that employee is qualified to 
perform the work.
    (c) The requirements of this clause shall be included in all 
subcontracts awarded in accordance with this contract at any tier 
which exceed $500,000 in value, unless a statute, such as 41 U.S.C. 
Section 403 on commercial items, intends to preclude inclusion of 
such a requirement.


970.5204-XX  Laws, regulations, and DOE directives.

    As prescribed in 48 CFR (DEAR) 970.0470-2, insert the following 
clause.

Laws, Regulations, and DOE Directives (Month and Year TBE)

    (a) In performing work under this contract, the contractor shall 
comply with the requirements of applicable Federal, State, and local 
laws and regulations, unless relief has been granted in writing by 
the appropriate regulatory agency. A List of Applicable Laws and 
Regulations may be appended to this contract for information 
purposes. Omission of any applicable law or regulation from the List 
does not affect the obligation of the contractor to comply with such 
law or regulation pursuant to this paragraph.
    (b) In performing work under this contract, the contractor shall 
comply with the requirements of those Department of Energy 
directives, or parts thereof, identified in the List of Applicable 
Directives appended to this contract. The contracting officer may, 
from time to time and at any time, revise this List by unilateral 
modification to the contract to add, modify, or delete specific 
requirements. Prior to revising this List, the contracting officer 
shall notify the contractor in writing of the Department's intent to 
revise this List and provide the contractor with the opportunity to 
assess the effect of the contractor's compliance with the revised 
list on contract cost and funding, technical performance, and 
schedule; and identify any potential inconsistencies between the 
revised list and the other terms and conditions of the contract, 
including an alternative set of requirements incorporated by 
reference in accordance with paragraph (d) of this clause. Within 30 
days after receipt of the contracting officer's notice, the 
contractor shall advise the contracting officer in writing of the 
potential impact of the contractor's compliance with the revised 
list. Based on the information provided by the contractor and any 
other information available, the contracting officer shall decide 
whether to revise this List, and so advise the contractor not later 
than 30 days prior to the effective date of the revision of the 
list. The contractor and the contracting officer shall identify and, 
if appropriate, agree to any changes to other contract terms and 
conditions, including cost and schedule, associated with the 
revision of the list pursuant to the clause entitled, Changes, of 
this contract.
    (c) Environmental, safety, and health requirements applicable to 
this contract may be determined by an alternate process developed by 
the Department of Energy (i.e., the Standards/Requirements 
Identification process or the Necessary and Sufficient Process). 
When such alternate process is used, the resulting set of 
requirements shall be incorporated into the List of Applicable 
Directives with full force and effect. These requirements shall 
supersede, in whole or in part, the environmental, safety, and 
health requirements previously made applicable to the contract by 
the List of Applicable Directives.
    (d) The contractor shall be responsible for compliance with the 
requirements made applicable to this contract, regardless of the 
performer of the work. Consequently, the contractor shall be 
responsible for flowing down the necessary provisions to 
subcontracts at any tier to which the contractor determines such 
requirements apply.


970.5204-XX  Ownership of records.

    As prescribed in 48 CFR (DEAR) 970.0407-3, insert the following 
clause.

Ownership of Records (Month and Year TBE)

    (a) Government's records. Except as provided in paragraph (b) of 
this clause, all records acquired or generated by the contractor in 
its performance of this contract shall be the property of the 
Government and shall be delivered to the Government or otherwise 
disposed of by the contractor either as the contracting officer may 
from time to time direct during the process of the work or, in any 
event, as the contracting officer shall direct upon completion or 
termination of the contract.
    (b) Contractor's own records. The following records are 
considered the property of the contractor and are not within the 
scope of paragraph (a) of this clause. [The contracting officer 
shall identify here any of the following listed records.
    (1) Employment-related records (such as workers' compensation 
files; employee relations records, records on salary and employee 
benefits; drug testing records, labor negotiation records; and 
personnel and medical/health-related records and similar files).
    (2) Confidential contractor financial information, and 
correspondence between the contractor and other segments of the 
contractor located away from the DOE facility (i.e., the 
contractor's corporate headquarters);
    (3) Non-accounting records relating to any procurement action by 
the contractor; and
    (4) The following categories of records maintained pursuant to 
the technology transfer clause of this contract:
    (i) Executed license agreements, including exhibits or 
appendices containing information on royalties, royalty rates, other 
financial information, or commercialization plans, and all related 
documents, notes and correspondence.
    (ii) The contractor's protected Cooperative Research and 
Development Agreement (CRADA) information and appendices to a CRADA 
that contain licensing terms and conditions, or royalty or royalty 
rate information.
    (iii) Patent, copyright, mask work, and trademark application 
files and related contractor invention disclosures, documents and 
correspondence, where the contractor has elected rights or has 
permission to assert rights and has not relinquished such rights or 
turned such rights over to the Government.]

[[Page 32604]]

    (c) In the event of completion or termination of this contract, 
copies of any of the contractor's own records identified in 
paragraph (b) of this clause shall be delivered to DOE or its 
designees. Title to such records shall vest in DOE upon delivery.
    (d) Inspection, copying, and audit of records. All records 
acquired or generated by the contractor under this contract in the 
possession of the contractor, including those described at paragraph 
(b) of this clause, shall be subject to inspection, copying, and 
audit by the Government or its designee at all reasonable times, and 
the contractor shall afford the Government or its designee 
reasonable facilities for such inspection, copying, and audit; 
provided, however, that upon request by the contracting officer, the 
contractor shall deliver such records to a location specified by the 
contracting officer for inspection, copying, and audit.
    (e) Applicability. The provisions of paragraph (b) and (c) of 
this clause apply to all records without regard to the date or 
origination of such records.
    (f) Records retention standards. Special records retention 
standards, described at DOE Order 1324.5, Records Management Program 
and DOE Records Schedules (version in effect on effective date of 
contract), are applicable for the classes of records described 
therein, whether or not the records are owned by the Government or 
the contractor. In addition, the contractor shall retain individual 
radiation exposure records generated in the performance of work 
under this contract until DOE authorizes disposal.
    (g) Flowdown. The contractor shall include the requirements of 
this clause in all subcontracts that are of a cost-reimbursement 
type if any of the following factors is present:
    (1) The value of the contract is greater than $2 million (unless 
specifically waived by the contracting officer);
    (2) The contracting officer determines that the subcontract is, 
or involves, a critical task related to the contract; or
    (3) The subcontract includes 48 CFR (DEAR) 970.5204-2, 
Environment, safety, and health, or similar clause.


970.5204-XX  Overtime management.

    As prescribed in 48 CFR (DEAR) 970.2275-2, insert the following 
clause:

Overtime Management (Month and Year TBE)

    (a) The contractor shall submit and comply with an annual 
overtime control plan approved by the contracting officer if any of 
the following criteria are met:
    (1) The contractor's overtime expenditures as a percent of 
payroll exceed the DOE contractor median overtime expenditures for 
the preceding calendar year plus 2 percent;
    (2) The contractor's overtime expenditures as a percent of 
payroll exceed the DOE contractor median overtime expenditures for 
the preceding calendar year and the contractor's policy permits 
payment of overtime premium for exempt employees earning greater 
than or equal to $45,000 per annum; or
    (3) The contractor's overtime as a percent of payroll exceed the 
DOE contractor median overtime expenditures for the preceding 
calendar year and the contractor provides for overtime premium pay 
on any other basis than for hours worked in excess of 40 per week.
    (b) The annual overtime control plan shall include, at a 
minimum:
    (1) An overtime premium fund (maximum dollar amount);
    (2) Specific controls for casual overtime for non-exempt 
employees;
    (3) Specific parameters for allowability of exempt overtime;
    (4) An evaluation of alternatives to the use of overtime; and
    (5) Submission of a semi-annual report that includes for exempt 
and non-exempt employees:
    (i) Total cost of overtime;
    (ii) Total cost of straight time;
    (iii) Overtime cost as a percentage of straight-time cost;
    (iv) Total overtime hours;
    (v) Total straight-time hours; and
    (vi) Overtime hours as a percentage of straight-time hours.

[FR Doc. 96-15367 Filed 6-21-96; 8:45 am]
BILLING CODE 6450-01-P

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