32588 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

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.

SUMMARY: The Department of Energy

(DOE) proposes to amend the

Department of Energy Acquisition

Regulation (DEAR) to implement certain

key recommendations of its Departmentwide 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);

connie.fournier@hq.doe.gov (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 performancebased, 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 Governmentwide 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
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules 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
32590 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

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 ThirdParty 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 PriceAnderson 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.’’
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules 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 makeor-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
32592 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

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 preexisting 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 Governmentapproved 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.
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules 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 contractorgenerated 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 healthrelated 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
32594 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

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
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules 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
32596 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

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-orBuy 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 leastcost basis, subject to program specific

make-or-buy criteria. The emphasis of

this make-or-buy structure is to
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules 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-orbuy 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-orbuy 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 makeor-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:
32598 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

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
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules 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 Governmentowned property and the restoration or cleanup 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 costsharing 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 governmentowned 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 costsharing 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
32600 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

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
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules 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 selfinsurance 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 thirdparty 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 DOEapproved 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
32602 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

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 costreduction 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:
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules 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.]
32604 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Proposed Rules

(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