32584 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Rules and Regulations

DEPARTMENT OF ENERGY

48 CFR Parts 917 and 970

[1991–AB–09]

Acquisition Regulation; Department of

Energy Management and Operating

Contracts

AGENCY: Department of Energy.

ACTION: Interim final rule with request

for comment.

SUMMARY: The Department of Energy

(DOE) today publishes an interim

rulemaking to set forth its policy

regarding the competition and extension

of the Department’s management and

operating contracts. Under its policy,

the Department affirms its commitment

to provide for full and open competition

in the award of its management and

operating contracts, except where the

Department determines that competitive

procedures should not be used pursuant

to one of the circumstances authorized

by the Competition in Contracting Act

of 1984 (41 U.S.C. 254), as implemented

in Part 6 of the Federal Acquisition

Regulation. This rulemaking

implements one of the key

recommendations of the Department’s

contract reform initiative to improve its

acquisition system.

DATES: This interim rule is effective

August 23, 1996. Written comments

should be forwarded no later than

August 23, 1996.

ADDRESSES: Comments should be

submitted to Connie P. Fournier, Office

of Policy (HR–51), Department of

Energy, 1000 Independence Avenue,

SW, Washington, D.C. 20585; (202) 586–

0545 (facsimile);

connie.fournier@hq.doe.gov (Internet).

The administrative record regarding

this rulemaking that is on file for public

inspection 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 at (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. Public Comments

I. Background

The Department’s contracts for the

management and operation of its

facilities have historically been subject

to specialized rules pertaining to their

periodic extension. Under these rules,

contained at Department of Energy

Acquisition Regulation (DEAR)

970.0001 and 917.6, existing policy

favored non-competitive extensions of

incumbent contractors. Competition was

permitted only when it appeared likely

that the Government’s position might be

meaningfully improved in terms of cost

or performance and only then when it

was determined that to change a

contractor would not be contrary to the

best interest of the Government. This

resulted in noncompetition as the

preferential norm.

The Department’s Contract Reform

Report, Making Contracting Work Better

and Cost Less (February 1994), in

recommending a number of changes,

called for a reversal of this policy.

Accordingly, the Department published

Acquisition Letter 94–14 in the Federal

Register (59 FR 50733), October 5, 1994,

as an interim policy setting forth

guidelines for the competition or

extension of the Department’s

management and operating contracts.

The interim policy established

competition as the preferential norm.

Exceptions to competition were to be

made on a case-by-case basis, only in

exceptional circumstances, and only

when authorized by the Head of the

Agency. The intent was to balance the

positive effects of a competitive

environment with the recognition that

long-term contractual relationships can

facilitate superior contractor

performance, especially given the highly

complex and multi-faceted work

performed under management and

operating contracts. The Department has

competed, or is competing, a number of

management and operating contracts in

accordance with this interim policy.

After considering the comments

received in response to the interim

policy, as set forth in Acquisition Letter

94–14, and its experience under that

policy, the Department has concluded

that certain aspects of the Acquisition

Letter are appropriate for regulation, as

modified for consistency with

applicable law. Other aspects of the

Acquisition Letter will be incorporated

into nonregulatory internal Department

guidance. Under the rulemaking

published today, the Department affirms

its commitment to full and open

competition as the norm for its

management and operating contracts.

Exceptions to the use of full and open

competition will be made on a case-bycase basis: (1) only in accordance with

the circumstances authorized by the

Competition in Contracting Act of 1984

(CICA) and Part 6 of the Federal

Acquisition Regulation (FAR), and (2)

only when authorized by the Head of

the Agency. Adherence to the existing

statutory requirements of CICA, as

implemented in FAR Part 6, preserves a

preference for competition; conforms

the Department’s decisionmaking

process to noncompetitively award

contracts with Federal-wide standards

found in statute and regulation; and

eliminates unnecessary, agency-specific

regulations. Today’s interim rule

supersedes both the Department’s

regulation that created a noncompetitive

norm and Acquisition Letter 94–14.

A notice of proposed rulemaking

published elsewhere in this issue of the

Federal Register discusses changes

proposed to the Department of Energy

Acquisition Regulation to implement

other contract reform recommendations.

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

A detailed list of changes in the

interim rule follows.

1. 917.602, Policy. This section is

added to prescribe the Department’s

policy to provide for full and open

competition and the use of competitive

procedures in the award of management

and operating contracts, except as

authorized by law and the Head of the

Agency.

2. 917.605, Award, renewal, and

extension. This section is amended to

remove the existing coverage at

917.605(b) that prescribes the

Department’s internal processing and

documentation requirements for extend/

compete decisions. This nonregulatory

subject matter will be reflected in

internal Department guidance. A new

section 917.605(d) is added to provide

for the conditional approval of any

noncompetitive extension (other than an

extension accomplished by the exercise

of an option) subject to the successful

achievement of the Government’s

negotiation objectives. This section also

permits adequate time to compete the

contract in the event that the

negotiations cannot be successfully

concluded.

3. 970.0001, Renewal of management

and operating contracts. This section is
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Rules and Regulations 32585

amended to delete the Department’s

previous policy that competition

generally would be used only when it

appeared likely that the Government’s

position might be meaningfully

improved in terms of cost or

performance, unless it was determined

that to change a contractor would be

contrary to the best interest of the

Government. This section is removed

and reserved for future use.

4. 970.17, Special Contracting

Methods. This subpart is added to

provide for coverage concerning

contract term and options to extend

management and operating contracts.

5. 970.1702–1, Contract term and

option to extend. This section is added

to provide policy guidance on (1) the

total period of performance permitted

under a management and operating

contract and (2) the requirements

governing the exercise of an option to

extend the term of an existing contract.

Paragraph (a) of the section states that

management and operating contracts

may provide for a base period of up to

5 years and may include an option to

extend the period of performance for up

to an additional total of 5 years. The

purpose of permitting the inclusion of

an option to extend the term of the

contract is to facilitate long-term

contractual relationships where the

mission of the Department is best served

by such an extension and to reward

contractors for superior performance

under the contract.

Regarding the exercise of options

under paragraph (b), the contracting

officer may exercise an option to extend

a competitively awarded contract only

after assessing certain factors, including

the contractor’s past performance. The

decision of the contracting officer must

be approved by the Head of the

Contracting Activity and the cognizant

Assistant Secretary(s).

6. 970.1701–2, Solicitation provision

and contract clause. This section is

added to provide instruction to the

contracting officer on the application of

the solicitation provision and contract

clause pertaining to the use of options

in management and operating contracts.

7. 970.5204–73, Notice regarding

option. This section is added to subpart

970.52, Contract clauses for

management and operating contracts, to

provide a solicitation provision for

options to extend the term of the

contract.

8. 970.5204–74, Option to extend the

term of the contract. This section is

added to subpart 970.52, Contract

clauses for management and operating

contracts, to provide a contract clause

for options to extend the term of the

contract.

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. DOE has completed the required

review and determined that, to the

extent permitted by law, the interim

final regulations meet the relevant

standards of Executive Order 12988.

C. Review Under the Regulatory

Flexibility Act

This rule is not subject to review

under the Regulatory Flexibility Act of

1980, 5 U.S.C. 601, et seq., because it is

not subject to a legal requirement to

publish a general notice of proposed

rulemaking.

D. Review Under the Paperwork

Reduction Act

No new information collection or

recordkeeping requirements are

imposed by this 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 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

Policy Act Implementing Procedures

(Categorical Exclusion A6), the

Department has determined that this

rule is categorically excluded from the

need to prepare an environmental

impact statement or environmental

assessment.

IV. Public Comments

A. Written Comments

Although the interim regulations

published in this rule are not

substantive regulations with the kind of

impact that warrants prior notice, the

Department is nevertheless providing an

opportunity for public comment.

Interested persons are invited to

participate by submitting data, views, or

arguments with respect to the DEAR

amendments set forth in this rule. Three

copies of written comments should be

submitted to the address indicated in

the ADDRESSES section of this rule. In

addition, it is requested that you

provide a copy of your comments on a
32586 Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Rules and Regulations

WordPerfect 6.1 or ASCII diskette.

Comments may be sent to the Internet

address in the ADDRESSES section of this

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 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 Determination

The Department has concluded that

this rule does not involve any

significant issues of law or fact.

Therefore, consistent with 5 U.S.C. 553,

the Department has not scheduled a

public hearing. However, a public

hearing will be held on the notice of

proposed rulemaking published

elsewhere in this issue of the Federal

Register on other contract reform

changes proposed to the Department of

Energy Acquisition Regulation. Any

person who has an interest in those

proposed contract reform changes may

request an opportunity to make an oral

presentation in accordance with the

procedures described in that

rulemaking.

List of Subjects in 48 CFR Parts 917 and

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 out in the

preamble, Chapter 9 of Title 48 of the

Code of Federal Regulations is 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. Subpart 917.6, Management and

Operating Contracts, is amended to add

new section 917.602, Policy, to read as

follows:

917.602 Policy.

(a) It is the policy of the Department

of Energy to provide for full and open

competition in the award of

management and operating contracts,

including performance-based

management contracts.

(b) A management and operating

contract may be awarded or extended at

the completion of its term without

providing for full and open competition

only when such award or extension is

justified under one of the statutory

authorities identified in FAR 6.302 and

only when authorized by the Head of

the Agency. Documentation and

processing requirements for

justifications for the use of other that

full and open competition shall be

accomplished in accordance with

internal agency procedures.

3. Section 917.605 is revised to read

as follows:

917.605 Award, renewal, and extension.

Conditional Authorization of Noncompetitive Extension Made Pursuant to

Authority Under CICA. Authorization to

extend by the Head of the Agency shall

be considered conditional upon the

successful negotiation of the contract to

be extended in accordance with the

Department’s negotiation objectives.

The Head of the Contracting Activity

shall advise the Procurement Executive

no later than 6 months after receipt of

the conditional authorization as to

whether the Department’s objectives

will be met and, if not, the contracting

activity’s plans for competing the

requirement.

PART 970—DOE MANAGEMENT AND

OPERATING CONTRACTS

4. 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).

970.0001 [Removed and reserved]

5. Section 970.0001 is removed and

reserved.

6. Subpart 970.17, Special contracting

methods, is added to read as follows:

970.17 Special contracting methods.

970.1702–1 Term of contract and option to

extend.

970.1702–2 Solicitation provision and

contract clause.

970.1702–1 Term of contract and option to

extend.

(a) Contract term. Effective work

performance under a management and

operating contract is facilitated by the

use of a relatively long contract term of

up to ten (10) years. Accordingly,

management and operating contracts

shall provide for a basic contract term

not to exceed five (5) years and may

include an option(s) to extend the term

for additional periods; provided, that no

one option period exceeds five (5) years

in duration and the total term of the

contract, including any options

exercised, does not exceed ten (10)

years. The specific term of the base

period and of any options periods shall

be determined at the time of the

authorization to compete or extend the

contract. The term ‘‘option’’ as used

herein means a unilateral right in the

contract by which the Government can

extend the term of the contract.

Accordingly, except as may be provided

for through the inclusion of an option(s)

in the contract to extend the term, any

extension to continue the contract with

the incumbent contractor beyond its

term shall only occur when such

extension can be justified under one of

the statutory authorities identified in

FAR 6.302 and when authorized by the

Head of the Agency.

(b) Exercise of option. As part of the

review required by FAR 17.605(b), the

contracting officer shall assess whether

competing the contract will produce a

more advantageous offer than exercising

the option. The incumbent contractor’s

past performance under the contract, the

extent to which performance-based

management contract provisions are

present, or can be negotiated into, the

contract, and the impact of a change in

a contractor on the Department’s

discharge of its programs are

considerations that shall be addressed

in the contracting officer’s decision that

the exercise of the option is in the

Government’s best interest. The

contracting officer’s decision shall be

approved by the Procurement Executive

and the cognizant Assistant Secretary(s).
Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Rules and Regulations 32587

970.1702–2 Solicitation provision and

contract clause.

(a) The contracting officer shall insert

a provision substantially the same as the

provision at 48 CFR (DEAR) 970.5204–

73, Notice Regarding Options, in

solicitations when the inclusion of an

option to extend the term of the contract

has been authorized.

(b) The contracting officer shall insert

the clause at 48 CFR (DEAR) 970.5204–

74, Option to extend the term of the

contract, when the inclusion of an

option to extend the term of the contract

has been authorized.

7. Subpart 970.52 is amended by

adding sections 970.5204–73, Notice

regarding options, and 970.5204–74,

Option to extend the term of the

contract, to read as follows:

970.5204–73 Notice regarding options.

As prescribed in 48 CFR (DEAR)

970.1702–2(a), insert the following

provision:

Notice Regarding Options (June 1996)

The contract resulting from this solicitation

is expected to include one or more options

to extend the term of the contract. Exercise

of any option to extend the term of contract

will be at the unilateral right of the

Department of Energy. The contractor’s

performance under the basic contract,

including any previously exercised options,

will be among the significant considerations

in the Department’s decision to exercise any

option.

970.5204–74 Option to extend the term of

the contract.

As prescribed in 48 CFR (DEAR)

970.1702–2(b), insert the following

clause:

Option to Extend the Term of The Contract

(June 1996)

(a) The Department of Energy may

unilaterally extend the term of this

performance-based management contract by

written notice to the contractor within [Insert

the period of time in which the contracting

officer has to exercise the option]; provided,

that the Department of Energy shall give the

contractor a preliminary written notice of its

intent to extend at least twelve (12) months

before the basic term of the contract expires.

The preliminary notice does not commit the

Department of Energy to an extension.

(b) The option(s) to extend the contract is

identified in [Specify section of contract and

clause number and name] of the contract.

The Department of Energy may exercise any,

or all, of the options identified in the

contract. The total duration of this contract,

including the exercise of any option(s) under

this clause, shall not exceed 120 months.

[FR Doc. 96–15366 Filed 6–21–96; 8:45 am]

BILLING CODE 6450–01–P