[Federal Register: June 14, 2000 (Volume 65, Number 115)]
[Proposed Rules]
[Page 37335-37343]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14jn00-36]
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DEPARTMENT OF ENERGY
48 CFR Part 970
RIN 1991-AB46
Acquisition Regulation: Changes to Department of Energy Cost
Principles and Various Clauses
AGENCY: Energy.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of Energy (DOE) proposes to amend its
Acquisition Regulation to delete those cost principles and related
provisions of Department of Energy Acquisition Regulation (DEAR) that
are adequately covered by the Federal Acquisition Regulation (FAR) and
retaining only that coverage which supplements the FAR. There is one
policy change in this rulemaking. Cost of Money, a previously
unallowable cost, is proposed as an allowable cost. This proposed
rulemaking results from a special review performed by DOE and it will
be finalized concurrently with another recently proposed rule published
March 13, 2000. The two rules will result in a complete reissuance of
the DEAR.
DATES: Written comments must be submitted no later than August 14,
2000.
ADDRESSES: Comments (3 copies) should be addressed to: Terrence D.
Sheppard, Office of Procurement and Assistance Management, Office of
Procurement and Assistance Policy (MA-51), Department of Energy, 1000
Independence Avenue S.W., Washington, D.C. 20585.
FOR FURTHER INFORMATION CONTACT: Terrence D. Sheppard (202) 586-8193;
e-mail terry.sheppard@hq.doe.gov; fax (202) 586-0545.
SUPPLEMENTARY INFORMATION:
I. Background
II. Section by Section Analysis
III. Public Comments
IV. Procedural Requirements
A. Review Under Executive Order 12866
B. Review Under Executive Order 12988
C. Review Under the Regulatory Flexibility Act
D. Review Under the Paperwork Reduction Act
E. Review Under the National Environmental Policy Act
F. Review Under Executive Order 12612
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and general Government
Appropriations Act, 1999
I. Background
The Department of Energy (DOE) and its predecessor agencies have
traditionally accomplished their defense and energy research mission
responsibilities through the use of management and operating (M&O)
contracts. Although M&O contracts are authorized by the Federal
Acquisition Regulation (FAR) at Part 17.6, FAR policies generally do
not provide the special terms and conditions for award and contract
administration processes tailored to the M&O contracting environment.
Accordingly, the Department has established specific policies and
procedures at Department of Energy Acquisition Regulation (DEAR) Parts
917 and 970. Included among these policies and procedures is a unique
set of cost principles which govern the allowability of costs under M&O
contracts.
Last year DOE conducted a review of the policies and procedures
governing the award and administration of M&O contracts. One of the
objectives of the review was to determine whether current DEAR cost
principle coverage could be eliminated and reliance placed on similar
coverage contained in the FAR. As a result of a comparative analysis
between the FAR and the DEAR cost principles and related procedures,
the review concluded that the FAR cost principles adequately addressed
DOE interests, and that supplemental coverage was necessary only in a
limited number of cases.
In this notice DOE proposes to amend the DEAR to implement the
results of a comparative analysis of the FAR, Part 31, and DEAR 970.31,
and 970.52. The amendments will delete those cost principles and
related provisions of DEAR 970 that are adequately covered by the FAR
and renumber those cost principles supplemented in the DEAR to conform
to the FAR numbering.
One exception is the ``Travel costs'' cost principle (FAR 31.205-46
and DEAR 970.3102-17). DOE has retained separate coverage, although
identical to the current FAR coverage, because there is a proposed
change to the FAR section on travel costs that will change the
government-wide standard of travel cost allowability to a
``reasonableness'' standard. If the FAR change is made, DOE will need
to retain the current
[[Page 37336]]
travel cost requirements mandated by Congress. Section 309, Pub. L.
106-60, Energy and Water Appropriations Act, 2000, requires DOE to
limit travel cost reimbursement to the ``rates and amounts'' that apply
to federal employees.
Also, DOE has conducted a separate review of the Department's
policies addressing home office/corporate allocations, bid and proposal
costs, and cost of money. This separate review resulted in a
determination that existing policy relative to home office/corporate
allocations remains valid and that the individual locations should
continue to determine appropriate home office/corporate allocations.
The review also determined that bid and proposal costs should remain
unallowable due to the unique nature of the M&O arrangement. For cost
of money, DOE policy will be amended to state that such costs are
allowable, rather than unallowable. This change should have little
impact on DOE as most facilities are government-owned. Accordingly, the
existing language which makes this cost unallowable is deleted. The
result of this deletion is to make this an allowable cost under
indirect and overhead cost allocations.
In summary, DOE chooses to adopt all of the FAR cost principles
except as supplemented in the areas identified:
Treatment of Current Sections
----------------------------------------------------------------------------------------------------------------
Section No. Section Title Retain Delete Amend
Relocate
----------------------------------------------------------------------------------------------------------------
Subpart 970.25--Foreign Acquisition
----------------------------------------------------------------------------------------------------------------
970.2501....................... Severance payments for ............ <check> ............
............
foreign nationals.
----------------------------------------------------------------------------------------------------------------
Subpart 970.31--Contract Cost Principles and Procedures
----------------------------------------------------------------------------------------------------------------
970.3100....................... Scope and applicability ............ <check> ............
............
of subpart.
970.3100-1..................... Definitions............ ............ <check> ............ ............
970.3100-2..................... Responsibilities....... ............ ............ ............ <check>
970.3100-3..................... Deviation.............. ............ ............ ............ <check>
970.3101....................... General policy......... ............ <check> ............ ............
970.3101-1..................... Actual cost basis...... ............ <check> ............ ............
970.3101-2..................... Direct and indirect ............ <check> ............
............
costs.
970.3101-3..................... General basis for ............ <check> ............
............
reimbursement of costs.
970.3101-4..................... Cost determination ............ <check> ............
............
based on audit.
970.3101-5..................... Contractor's system of ............ <check> ............
............
accounting.
970.3101-6..................... Advance understandings ............ <check>
<check> <check>
on \1\ particular cost
items.
970.3101-7..................... Cost submission, ............ ............ ............ <check>
certification,
penalties, and waivers.
970.3102....................... Application of cost ............ <check> ............
............
principles.
970.3102-1..................... General and ............ ............ ............ <check>
administrative
expenses.
970.3102-2..................... Compensation for ............ ............ <check>
<check>
personal services.
970.3102-3..................... Cost of money......... ............ <check> ............ ............
970.3102-4..................... Depreciation........... ............ <check> ............ ............
970.3102-5..................... Employee morale, ............ <check> ............
............
health, welfare, food
service, and dormitory
costs.
970.3102-6..................... Facilities (plant and ............ <check> ............
............
equipment).
970.3102-7..................... Political activity ............ ............ <check>
<check>
costs.
970.3102-8..................... Membership in trade, ............ <check> ............
............
business and
professional
organizations.
970.3102-9..................... Outside technical and ............ <check> ............
............
professional
consultants.
970.3102-10.................... Overtime, shift, and ............ ............ ............ <check>
holiday premiums.
970.3102-11.................... Page charges in ............ ............ ............ <check>
scientific journals.
970.3102-12.................... Plant reconversion ............ <check> ............
............
costs.
970.3102-13.................... Precontract costs...... ............ <check> ............ ............
970.3102-14.................... Preparatory and make- ............ <check> ............
............
ready costs.
970.3102-15.................... Procurement: ............ <check> ............
............
Subcontracts,
contractor-affiliated
sources, and leases.
970.3102-16.................... Relocation costs....... ............ <check> ............ ............
970.3102-17.................... Travel costs........... <check> ............ ............
<check>
970.3102-18.................... Special funds in the ............ <check> ............
............
construction industry.
970.3102-19.................... Public relations and ............ <check> ............
............
advertising.
970.3102-20.................... Cost prohibitions ............ <check> ............
............
related to legal and
other proceedings.
970.3102-21.................... Fines and penalties.... ............ <check> ............
............
970.3103....................... Contract clauses....... ............ <check> ............ ............
970.5204-4..................... New Mexico Gross ............ ............ <check>
............
Receipts.
970.5204-13.................... Allowable costs and ............ <check> ............
............
fixed-fee (Management
and Operating
contracts).
970.5204-14.................... Allowable costs and ............ <check> ............
............
fixed-fee (support
contracts).
970.5204-15.................... Obligation of funds.... <check> ............ ............
............
970.5204-16.................... Payments and advances.. ............ ............ <check>
............
970.5204-17.................... Political activity cost ............ <check> ............
............
prohibition.
970.5204-61.................... Cost prohibitions ............ <check> ............
............
related to legal and
other proceedings.
970.5204-75.................... Preexisting conditions. <check> ............ ............
............
970.5204-84.................... Waiver of limitations ............ <check> ............
............
on severance payments
to foreign nationals.
----------------------------------------------------------------------------------------------------------------
\1\ Footnote: This subject heading has been moved to 970.3101-9, but all of the original text
has been deleted
and replaced with new text.
[[Page 37337]]
Organization of New Sections
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Section title
(FAR headings Summary of
New Section No.* where supplemental coverage/
appropriate) references
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970.3100-1................... Scope of subpart. Coverage relocated
from current
970.3100-2.
970.3101-1................... Objectives....... Coverage relocated
from current
970.3100-3.
970.3101-3................... Home Office The coverage
Expenses. addressing Home
Office expenses is
rewritten in terms
of allocability
rather than
allowability (moved
from 970.3102-1(b)).
970.3101-9................... Advance CO may identify
Agreements. selected cost items
requiring CO
approval.
970.3101-10.................. Indirect cost Coverage relocated
rate from current
certification 970.3101-7.
and penalties on
unallowable
costs.
970.3102-4................... Bonding Costs.... References DEAR
970.5204-31.
970.3102-6................... Compensation..... --Personnel costs
determined in
accordance with
personnel appendix
--Limits on executive
compensation.
970.3102-18.................. Bid and Proposal B&P costs
costs. unallowable.
970.3102-19.................. Insurance and References DEAR
indemnification. 970.5204-31.
970.3102-20.................. Interest and Imputed interest on
Other Financial capital leases
Costs. allowable.
970.3102-22.................. Lobbying and Addresses costs for
Political transportation,
Activity Costs. lodging, and meals
associated with
providing
information, advice
etc.
970.3102-28.................. Other Business Establishment and
Expense. maintenance of
financial
institution
accounts; allowable
(moved from 970.5204-
13(d)(15).
970.3102-46.................. Travel costs..... Section 309 of Pub.
L. 106-60, Energy
and Water
Development
Appropriations Act
2000 requires the
Department to limit
travel cost
reimbursement to the
``rates and
amounts'' that apply
to Federal
employees.
Revise documentation
threshold from $25
to $75.
970.3102-53.................. Preexisting References DEAR
conditions. 970.5204-75.
970.4207-1................... Contracting Identifies procedures
Officer associated with cost
Determination resolution (moved
procedure. from 970.3101-3(b)).
970.4207-2................... Certificate of Addresses procedures
costs.. for cost
certification,
assessment and
waiver of penalties
(moved entire
970.3101-7).
970.5204-4................... New Mexico Gross Change cross
Receipts.. reference.
970.5204-16.................. Payments and Adds paragraph (k) to
Advances. reference FAR 31 and
DEAR 970.31
970.5204-31.................. Insurance- Changes reference in
litigation and Paragraph (h) to FAR
claims. 31.2.
Adds -13/-14 (d)(4)
language at
paragraph (m)
970.5204-xx.................. Penalties for Clause for assessment
unallowable of penalties
costs. (repeats part of
970.4207-2).
------------------------------------------------------------------------
* Proposed section numbers correspond directly with the numbering of FAR
coverage being supplemented.
II. Section-by-Section Analysis
1. Subpart 970.25, Foreign Acquisitions, and the coverage contained
in Section 970.2501, Severance payments for foreign nationals, would be
removed because FAR 31.205-6(g)(3) provides coverage.
2. We propose to revise subpart 970.31 and remove current sections
970.3100 through 970.3103. They would be replaced by the following
sections:
A. Section 970.3100-1, Scope of subpart, prescribes the
responsibilities and roles of the Procurement Executive and the Head of
the Contracting Activity.
B. Section 970.3101-1, Objectives, identifies the procedures for
deviations to the cost principles.
C. Section 970.3101-3, Home Office Expenses, is moved from
970.3102-1, renamed, and rewritten in plain language.
D. Section 970.3101-9, Advance agreements, establishes the
contracting officer's authority to require the contracting officer's
approval on selected items of cost.
E. Section 970.3101-10, Indirect cost rate certification and
penalties on unallowable costs, addresses the requirement for a cost
certification and penalties associated with unallowable costs.
F. Section 970.3102-4, Bonding costs, paragraph (d) references the
clause at 970.5204-31, Insurance-litigation and claims.
G. Section 970.3102-6(a) and (p) establish the requirement for a
personnel appendix and set limits on the allowability of compensation
costs for certain contractor personnel.
H. Section 970.3102-18(c), Independent research and development and
bid and proposal costs, addresses the allowability of bid and proposal
costs.
I. Section 970.3102-19, Insurance and indemnification, references
970.5204--31, Insurance-litigation and claims.
J. Section 970.3102-20, Interest and other financial costs,
addresses the allowability of interest relating to capital leases.
K. Section 970.3102-22(b)(1), Lobbying and political activity
costs, addresses the allowability of costs of transportation, lodging,
and/or meals associated with providing technical information.
L. Section 970.3102-28(i), Other business expense, addresses the
the maintenance of financial institution accounts. (Moved from
970.5204-13(d)(15)).
M. Section 970.3102-46, Travel costs, is retained as Section 309 of
Pub. L. 106-60, Energy and Water Development Appropriations Act, 2000,
requires the Department to limit travel cost reimbursement to the
``rates and amounts'' that apply to Federal employees.
Documentation threshold to support actual costs are revised from
$25 to $75.
N. Section 970.3102-53, Preexisting conditions, references
970.5204-75, Preexisting conditions.
3. Section 970.4207-1, Contracting officer determination procedure,
identifies procedures associated with the resolution of questioned
costs.
4. Section 970.4207-2, Cost certification, identifies
administrative
[[Page 37338]]
procedures associated with the cost certification.
5. Section 970.5204-4, New Mexico gross receipts and compensating
tax, would be revised by changing cross reference from ``Allowable
costs and fixed fee'' which would be removed by this rulemaking and is
replaced by a reference to ``Payments and advances.''
6. Section 970.5204-13, Allowable costs and fixed-fee (Management
and Operating contracts), would be removed and reserved.
7. Section 970.5204-14, Allowable costs and fixed-fee (support
contracts), would be removed and reserved.
8. Section 970.5204-16 would be revised to add language referencing
FAR Part 31 coverage and DEAR supplemental coverage.
9. Section 970.5204-17, Political activity cost prohibition, would
be removed and reserved. This section would be addressed in new section
970.3102-22.
10. Section 970.5204-31, Insurance-litigation and claims, would be
revised by deleting the paragraph (h) cross reference to DEAR 970.3101-
3 and replacing with a reference to FAR Part 31 and DEAR 970.31, and
adding a new paragraph (m) addressing the DOE approved contractor legal
management procedures.
11. Section 970.5204-61, Cost prohibitions related to legal and
other proceedings, would be removed and reserved.
12. Section 970.5204-84, Waiver of limitations on severance
payments to foreign nationals, would be removed and reserved.
13. Section 970.5204-XX, Penalties for unallowable costs, explains
the penalty provisions associated with the submission of unallowable
costs.
III. Public Comments
Interested persons are invited to participate by submitting data,
views, or arguments with respect to the proposed DEAR amendments set
forth in this notice. Three copies of written comments should be
submitted to the address indicated in the ADDRESSES section of this
notice. All comments received will be available for public inspection
in the DOE Reading Room, Room lE-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 by the date indicated in the DATES section of
this notice and all other relevant information in the record will be
carefully assessed and fully considered prior to publication of the
final rule. Any information considered to be confidential must be so
identified and submitted in writing, one copy only. DOE reserves the
right to determine the confidential status of the information and to
treat it according to our determination (See 10 CFR 1004.11).
The Department has concluded that this proposed rule does not
involve a substantial issue of fact or law and that the proposed rule
should not have substantial impact on the nation's economy or a large
number of individuals or businesses. Therefore, pursuant to Public Law
95-91, the DOE Organization Act, and the Administrative Procedure Act
(5 U.S.C. 553), the Department does not plan to hold a public hearing
on this proposed rule.
IV. Procedural Requirements
A. Review Under Executive Order 12866
Today's regulatory action has been determined not to be a
``significant regulatory action'' under Executive Order 12866,
``Regulatory Planning and Review,'' (58 FR 51735, October 4, 1993).
Accordingly, this action was not subject to review under that Executive
Order by the Office of Information and Regulatory Affairs of the Office
of Management and Budget (OMB).
B. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform, `` 61 FR 4729 (February 7, 1996), imposes on
Executive agencies the general duty to adhere to the following
requirements: (1) Eliminate drafting errors and ambiguity; (2) write
regulations to minimize litigation; and (3) provide a clear legal
standard for affected conduct rather than a general standard and
promote simplification and burden reduction. With regard to the review
required by section 3(a), section 3(b) of Executive Order 12988
specifically requires that Executive agencies make every reasonable
effort to ensure that the regulation: (1) Clearly specifies the
preemptive effect, if any; (2) clearly specifies any effect on existing
Federal law or regulation; (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction;
(4) specifies the retroactive effect, if any; (5) adequately defines
key terms; and (6) addresses other important issues affecting clarity
and general draftmenship under any guidelines issued by the Attorney
General. Section 3(c) of Executive Order 12988 requires Executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to determine whether they are met or it
is unreasonable to meet one or more of them. The Department of Energy
has completed the required review and determined that, to the extent
permitted by law, the regulations meet the relevant standards of
Executive Order 12988.
C. Review Under the Regulatory Flexibility Act
This proposed rule was reviewed under the Regulatory Flexibility
Act, 5 U.S.C. 601 et seq., which requires preparation of a regulatory
flexibility analysis for any rule which is likely to have significant
economic impact on a substantial number of small entities. Today's
proposed rule streamlines the cost principles that apply to DOE M&O
contracts. M&O contractors are not small entities. Accordingly, DOE
certifies that this rule will not have a significant economic impact on
a substantial number of small entities, and, therefore, no regulatory
flexibility analysis has been prepared.
D. Review Under the Paperwork Reduction Act
No new information or recordkeeping requirements are imposed by
this rulemaking. Accordingly, no OMB clearance is required under the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
E. Review Under the National Environmental Policy Act
DOE has concluded that promulgation of this rule falls into a class
of actions which would not individually or cumulatively have
significant impact on the human environment, as determined by DOE's
regulations (10 CFR Part 1021, Subpart D) implementing the National
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.).
Specifically, this rule is categorically excluded from NEPA review
because the proposed amendments to the DEAR do not change the
environmental effect of the rule being amended (categorical exclusion
A5). Therefore, this rule does not require an environmental impact
statement or environmental assessment pursuant to NEPA.
F. Review Under Executive Order 12612
Executive Order 12612 (52 FR 41685, October 30, 1987) requires that
regulations, rules, legislation, and any other policy actions be
reviewed for any substantial direct effects on States, on the
relationship between the National Government and the States, or in the
distribution of power and responsibilities among the various
[[Page 37339]]
levels of Government. If there are sufficient substantial direct
effects, then the Executive Order requires the preparation of a
federalism assessment to be used in all decisions involved in
promulgating and implementing a policy action. This proposed rule, when
finalized, will revise certain policy and procedural requirements.
States which contract with DOE will be subject to this rule. However,
DOE has determined that this rule will not have a substantial direct
effect on the institutional interests or traditional functions of the
States.
G. Review Under the Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally
requires a Federal agency to perform a detailed assessment of costs and
benefits of any rule imposing a Federal Mandate with costs to state,
local or tribal governments, or to the private sector, of $100 million
or more. This rulemaking affects private sector entities, and the
impact is less than $100 million.
H. Treasury and General Government Appropriations Act, 1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any proposed rule that may affect family
well-being. Today's proposal would not have any impact on the autonomy
or integrity of the family as in institution. Accordingly, DOE has
concluded that it is not necessary to prepare a Family Policymaking
Assessment.
List of Subjects in 48 CFR Part 970
Government procurement.
Issued in Washington, D.C. on June 6, 2000.
Richard H. Hopf,
Director, Office of Procurement and Assistance Management.
For the reasons set out in the preamble, Chapter 9 of Title 48 of
the Code of Federal Regulations is proposed to be amended as set forth
below.
1. The authority citation for Part 970 continues to read as
follows:
Authority: Atomic Energy Act of 1954 (42 U.S.C. 2201);
Department of Energy Organization Act (42 U.S.C. 7101); National
Nuclear Security Administration Act (50 U.S.C. 2401, et seq.).
PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS
Subpart 970.25 [Removed]
2. Subpart 970.25 consisting of 970.2501 is removed.
3. Subpart 970.31, Contract Cost Principles and Procedures, is
revised to read as follows:
Sec.
970.3100-1 Scope of subpart.
970.3101-1 Objectives.
970.3101-3 Home office expenses
970.3101-9 Advance agreements.
970.3101-10 Cost certification.
970.3102-4 Bonding costs.
970.3102-6 Compensation for personal services.
970.3102-18 Independent research and development and bid and
proposal costs.
970.3102-19 Insurance and indemnification.
970.3102-20 Interest and other financial costs.
970.3102-22 Lobbying and political activity costs.
970.3102-28 Other business expenses.
970.3102-46 Travel costs.
970.3102-53 Preexisting conditions.
Subpart 970.31--Contract cost principles and procedures
970.3100-1 Scope of subpart.
(a) The Procurement Executive is responsible for developing and
revising the policy and procedures for the determination of allowable
costs reimbursable under a management and operating contract, and for
coordination with other Headquarters' offices having joint interests.
(b) The Head of the Contracting Activity is responsible for
following the policy, principles and standards set forth in this
subpart in establishing the compensation and reimbursement provisions
of contracts and subcontracts and for submission of deviations for
Headquarters consideration and approval.
970.3101-1 Objectives.
Deviations from the policy and principles set forth in this subpart
shall not be made unless such action is authorized by the Procurement
Executive, on the basis of a written justification stating clearly the
special circumstances involved.
970.3101-3, Home office expenses.
(a) For on-site work, DOE's fee for management and operating
contract, determined under the policy of and calculated per the
procedures in 970.15404-4, provides adequate compensation for home or
corporate office general and administrative expenses incurred in the
general management of the contractor's business as a whole.
(1) DOE recognizes that some Home Office Expenses are incurred for
the benefit of a management and operating contract. DOE has elected to
recognize that benefit through fee due to the difficulty of determining
the dollar value applicable to any management and operating contract.
The difficulty arises because:
(i) The general construct of a management and operating contract
results in minimal Home Office involvement in the contract work, and
(ii) Conventional Home Office Expense allocation techniques that
use bases such as total operating costs, labor dollars, hours etc., are
not appropriate because they inherently assume significant contractor
investment (in terms of its own resources, such as, labor, material,
overhead, etc.). Contractor investments are minimal under DOE's
operating and management contracts. The contracts are totally financed
by DOE advance payments, and DOE provides government-owned facilities,
property, and other needed resources.
(2) From time to time, the fee for a management and operating
contract may not be adequate compensation for Home Office Expenses
incurred for the benefit of the contract. An indication that such a
case exists is the need for significant home office support to deal
with issues at the site that occur without the fault or negligence of
the contractor, for example, the need for home office legal support to
deal with third party, environmental, safety, or health issues.
(3) In such a case, the contracting officer, after obtaining the
HCA's approval, may consider a contractor request for additional
compensation. The contractor may request:
(i) Fee in addition to its normal fee; or
(ii) Compensation on the basis of actual cost.
(4) Because the contract's fee provides some compensation for Home
Office Expenses, the contractor's request for additional compensation
must always be for an amount less than the Home Office Expenses that
are incurred for the benefit of the management and operating contract.
(b) For off-site work, the DOE allows Home Office Expenses under
architect-engineer, supply and research contracts with commercial
contractors performing the work in their own facilities. Home Office
Expenses may, however, be included for reimbursement under such DOE
off-site architect-engineer, supply and research contracts, only to the
extent that they are determined, after careful examination, to be
allowable, reasonable, and properly allocable to the
[[Page 37340]]
work. Work performed in a contractor's own facilities under a
management and operating or construction contract may likewise be
allowed to bear the properly allocable portion of allowable Home Office
Expenses.
970.3101-9 Advance agreements. (DOE coverage-paragraph (i))
(i) At any time, the contracting officer may institute an advance
approval requirement for any cost item under a contract.
970.3101-10 Cost certification.
(a) Certain contracts require certification of the costs proposed
for final payment purposes. Section 970.4207-2 states the
administrative procedures for the certification provisions and the
related contract clause prescription.
(b) If unallowable costs are included in final cost settlement
proposals, penalties may be assessed. Section 970.4207-2 states the
administrative procedures for penalty assessment provisions and the
related clause prescription.
970.3102-4 Bonding costs. (DOE coverage-paragraph (d))
(d) The allowability of bonding costs shall be determined pursuant
to 970.5204-31, Insurance-litigation and claims.
970.3102-6 Compensation for personal services. (DOE coverage-
paragraphs (a) and (p))
(a)(6) In determining the reasonableness of compensation, the
compensation of each individual contractor employee normally need not
be subjected to review and approval. Generally, the compensation paid
individual employees should be left to the judgment of contractors
subject to the limitations of DOE-approved compensation policies,
programs, classification systems, and schedules, and amounts of money
authorized for wage and salary increases for groups of employees.
However, the contracting officer shall designate a compensation
threshold appropriate for the particular situation. The contract shall
specifically provide that contracting officer approval is required for
compensating an individual contractor employee above the threshold if a
total of 50 percent or more of such compensation is reimbursed under
DOE cost-type contracts. For purposes of designating the threshold,
total compensation includes only the employee's salary and cash bonus
or incentive compensation.
(7)(i) Reimbursable costs for compensation for personal services
are to be set forth in a personnel appendix which is a part of the
contract. This personnel appendix shall be negotiated using the
principles and policies of FAR 31.205-6, Compensation, as supplemented
by this section, 970.3102-6, and other pertinent parts of the DEAR.
Costs that are unallowable under other contract terms shall not be
allowable as compensation for personnel services.
(ii) The personnel appendix sets forth in detail personnel costs
and related expenses allowable under the contract and documents
personnel policies, practices and plans which have been found
acceptable by the contracting officer. The contractor will advise DOE
of any proposed changes in any matters covered by these policies,
practices or plans which relate to personnel costs. The personnel
appendix may be modified from time to time in writing by mutual
agreement of the contractor and DOE without execution of an amendment
to the contract. Such modifications shall be evidenced by execution of
written numbered approval letters from the contracting officer or his
representative. Types of personnel costs and related expenses addressed
in the personnel appendix, or amendments thereto, are as follows:
salaries and wages; bonuses and incentive compensation; overtime, shift
differential, holiday, and other premium pay for time worked; welfare
benefits and retirement programs; paid time off, and salaries and wages
to employees in their capacity as union stewards and committeemen for
time spent in handling grievances, or serving on labor management
(contractor) committees. Provided, however, that the contracting
officer's approval is required in each instance of total compensation
to an individual employee above an annual rate as specified in the
personnel appendix.
(p)(1) Notwithstanding paragraph (a) of this section, costs
incurred for compensation of a senior executive in excess of the
benchmark compensation amount determined applicable for the contractor
fiscal year by the Administrator, Office of Federal Procurement Policy,
are unallowable. Allowable costs of executive compensation shall be
determined pursuant to Federal Acquisition Regulation 31.205-6(p).
970.3102-18 Independent research and development and bid and proposal
costs. (DOE coverage-paragraph (c))
(c) Bid and Proposal costs are unallowable.
970.3102-19 Insurance and indemnification.
The supplemental material on the costs of insurance and
indemnification is found in 970.5204-31, Insurance-litigation and
claims.
970.3102-20 Interest and other financial costs.
Imputed interest costs relating to leases classified and accounted
for as capital leases under generally accepted accounting principles
(GAAP) are allowable when the decision to enter into a capital leasing
arrangement has been specifically authorized and approved by the DOE in
accordance with applicable procedures and such interest costs are
recorded in a DOE account established for such purpose.
970.3102-22 Lobbying and political activity costs. (DOE coverage--
paragraph (b))
(b) Costs of the following activities are excepted from FAR 31.205-
22, Lobbying and political activity costs, coverage, provided that the
resultant costs are reasonable and otherwise fall into the following
exceptions:
(1) Providing Members of Congress, their staff members or staff of
cognizant legislative committees, in response to a request (written or
oral, prior or contemporaneous) from Members of Congress, their staff
members or staff of cognizant legislative committees, or as otherwise
directed by the Contracting Officer, information or expert advice of a
factual, technical, or scientific nature, with respect to topics
directly related to the performance of the contract or proposed
legislation. In providing this information or expert advice, the
contractor shall indicate to the recipient that it is not presenting
the views of DOE. Reasonable costs for transportation, lodging or meals
incurred by contractor employees for the purpose of providing such
information or expert advice shall also be reimbursable, provided the
request for such information or expert advice is a prior written
request signed by a Member of Congress.
(2) Providing State legislatures or subdivisions thereof, their
staff members, or staff of cognizant legislative committees, in
response to a prior written request from a State legislator, or as
otherwise directed by the Contracting Officer, information or expert
advice of a factual, technical, or scientific nature, with respect to
topics directly related to the performance of the contract or proposed
legislation. In providing this information or expert advice, the
contractor shall indicate to the recipient that it is not presenting
the views of DOE. Reasonable costs for
[[Page 37341]]
transportation, lodging, or meals incurred by contractor employees
shall be reimbursable.
970.3102-28 Other business expenses. (DOE coverage--paragraph (i))
(i) Reasonable costs associated with the establishment and
maintenance of financial institution accounts in connection with the
work under this subpart are allowable, including, but not limited to,
service charges, the cost of disbursing cash, necessary guards,
cashiers, and paymasters. If payments to employees are made by check,
facilities and arrangements for cashing checks may be provided without
expense to the employees, subject to the approval of the contracting
officer.
970.3102-46 Travel costs.
(a) Costs for transportation, lodging, meals, and incidental
expenses.
(1) Costs incurred by contractor personnel on official company
business are allowable, subject to the limitations contained in this
subsection. Costs for transportation may be based on mileage rates,
actual costs incurred, or on a combination thereof, provided the method
used results in a reasonable charge. Costs for lodging, meals, and
incidental expenses may be based on per diem, actual expenses, or a
combination thereof, provided the method used results in a reasonable
charge.
(2) Except as provided in paragraph (a)(3) of this subsection,
costs incurred for lodging, meals, and incidental expenses (as defined
in the regulations cited in paragraphs (a)(2)(i) through (iii) of this
subsection) shall be considered to be reasonable and allowable only to
the extent that they do not exceed on a daily basis the maximum per
diem rates in effect at the time of travel as set forth in the--
(i) Federal Travel Regulation, prescribed by the General Services
Administration, for travel in the conterminous 48 United States,
available on a subscription basis from the Superintendent of Documents,
U.S. Government Printing Office, Washington, DC 20402, Stock No. 922-
002-00000-2;
(ii) Joint Travel Regulations, DoD Civilian Personnel, Appendix A,
prescribed by the Department of Defense, for travel in Alaska, Hawaii,
The Commonwealth of Puerto Rico, and territories and possessions of the
United States, available on a subscription basis from the
Superintendent of Documents, U.S. Government Printing Office,
Washington, DC 20402, Stock No. 908-010-00000-1; or
(iii) Standardized Regulations (Government Civilians, Foreign
Areas), section 925, ``Maximum Travel Per Diem Allowances for Foreign
Areas,'' prescribed by the Department of State, for travel in areas not
covered in paragraphs (a)(2)(i) and (ii) of this subsection, available
on a subscription basis from the Superintendent of Documents, U.S.
Government Printing Office, Washington, DC 20402, Stock No. 744-008-
00000-0.
(3) In special or unusual situations, actual costs in excess of the
maximum per diem rates are allowable provided that such amounts do not
exceed the higher amounts authorized for Federal civilian employees as
permitted in the regulations referenced in pargraphs (a)(2)(i), (ii),
or (iii) of this subsection. For such higher amounts to be allowable,
all of the following conditions must be met:
(i) One of the conditions warranting approval of the actual expense
method, as set forth in the regulations referred in paragraphs
(a)(2)(i), (ii), or (iii) of this subsection, must exist.
(ii) A written justification for use of the higher amounts must be
approved by an officer of the contractor's organization or designee to
ensure that the authority is properly administered and controlled to
prevent abuse.
(iii) If it becomes necessary to exercise the authority to use the
higher actual expense method repetitively or on a continuing basis in a
particular area, the contractor must obtain advance approval from the
contracting officer.
(iv) Documentation to support actual costs incurred shall be in
accordance with the contractor's established practices, subject to
paragraph (a)(7) of this subsection, and provided that a receipt is
required for each expenditure of $75.00 or more. The approved
justification required by paragraph (a)(3)(ii) and, if applicable,
paragraph (a)(3)(iii) of this subsection must be retained.
(4) Paragraphs (a)(2) and (a)(3) of this subsection do not
incorporate the regulations cited in paragraphs (a)(2)(i), (ii), and
(iii) of this subsection in their entirety. Only the maximum per diem
rates, the definitions of lodging, meals, and incidental expenses, and
the regulatory coverage dealing with special or unusual situations are
incorporated in those paragraphs.
(5) An advance agreement (see FAR 31.109 and DEAR 970.3101-9) with
respect to compliance with paragraphs (a)(2) and (a)(3) of this
subsection may be useful and desirable.
(6) The maximum per diem rates referenced in paragraph (a)(2) of
this subsection generally would not constitute a reasonable daily
charge--
(i) When no lodging costs are incurred; and/or
(ii) On partial travel days (e.g., day of departure and return).
Appropriate downward adjustments from the maximum per diem rates would
normally be required under these circumstances. While these adjustments
need not be calculated in accordance with the Federal Travel Regulation
or Joint Travel Regulations, they must result in a reasonable charge.
(7) Costs shall be allowable only if the following information is
documented:
(i) Date and place (city, town, or other similar designation) of
the expenses;
(ii) Purpose of the trip; and
(iii) Name of person on trip and that person's title or
relationship to the contractor.
(b) Travel costs incurred in the normal course of overall
administration of the business are allowable and shall be treated as
indirect costs.
(c) Travel costs directly attributable to specific contract
performance are allowable and may be charged to the contract under FAR
31.202.
(d) Airfare costs in excess of the lowest customary standard,
coach, or equivalent airfare offered during normal business hours are
unallowable except when such accommodations require circuitous routing,
require travel during unreasonable hours, excessively prolong travel,
result in increased cost that would offset transportation savings, are
not reasonably adequate for the physical or medical needs of the
traveler, or are not reasonably available to meet mission requirements.
However, in order for airfare costs in excess of the standard airfare
to be allowable, the applicable condition(s) must be documented and
justified.
(e)(1) ``Cost of travel by contractor-owned, -leased, or -chartered
aircraft,'' as used in this paragraph, includes the cost of lease,
charter, operation (including personnel), maintenance, depreciation,
insurance, and other related costs.
(2) The costs of travel by contractor-owned, -leased, or -chartered
aircraft are limited to the standard airfare described in paragraph (d)
of this subsection for the flight destination unless travel by such
aircraft is specifically required by contract specification, term, or
condition, or a higher amount is approved by the contracting officer. A
higher amount may be agreed to when one or more of the circumstances
for justifying higher than standard airfare listed in paragraph (d) of
this subsection are applicable, or when an advance agreement under
paragraph (e)(3) of this
[[Page 37342]]
subsection has been executed. In all cases, travel by contractor-owned,
-leased, or -chartered aircraft must be fully documented and justified.
For each contractor-owned, -leased, or -chartered aircraft used for any
business purpose which is charged or allocated, directly or indirectly,
to a Government contract, the contractor must maintain and make
available manifest/logs for all flights on such company aircraft. As a
minimum, the manifest/log shall indicate--
(i) Date, time, and points of departure;
(ii) Destination, date, and time of arrival;
(iii) Name of each passenger and relationship to the contractor;
(iv) Authorization for trip; and
(v) Purpose of trip.
(3) Where an advance agreement is proposed (see 31.109),
consideration may be given to the following:
(i) Whether scheduled commercial airlines or other suitable, less
costly, travel facilities are available at reasonable times, with
reasonable frequency, and serve the required destinations conveniently;
(ii) Whether increased flexibility in scheduling results in time
savings and more effective use of personnel that would outweigh
additional travel costs.
(f) Costs of contractor-owned or -leased automobiles, as used in
this paragraph, include the costs of lease, operation (including
personnel), maintenance, depreciation, insurance, etc. These costs are
allowable, if reasonable, to the extent that the automobiles are used
for company business. That portion of the cost of company-furnished
automobiles that relates to personal use by employees (including
transportation to and from work) is compensation for personal services
and is unallowable as stated in FAR 31.205-6(m)(2).
970.3102-53 Preexisting conditions.
Clause 970.5204-75, Preexisting conditions, provides guidance on
situations where this category of costs may be allowable.
970.42 Contract Administration.
4. 970.4207-1, Contracting officer determination procedure, is
added to read as follows:
970.4207-1 Contracting officer determination procedure. (DOE coverage-
paragraph (b))
(b)(4) A contracting officer shall not resolve any questioned costs
until the contracting officer has obtained:
(i) Adequate documentation with respect to such costs; and
(ii) The opinion of the Department of Energy's auditor on the
allowability of such costs.
(5) The contracting officer shall ensure that the documentation
supporting the final settlement addresses the amount of the questioned
costs and the subsequent disposition of such questioned costs.
(6) The contracting officer shall ensure, to the maximum extent
practicable, that the Department of Energy's auditor is afforded an
opportunity to attend any negotiation or meeting with the contractor
regarding a determination of allowability.
5. Section 970.4207-2, is added to read as follows:
970.4207-2 Certificate of costs.
(a) The contracting officer shall require that management and
operating contractors provide a submission, pursuant to 970.5204-16(e),
for settlement of costs incurred during the period stipulated on the
submission and a certification that the costs included in the
submission are allowable. The contracting officer shall assess a
penalty pursuant to 970.5204-XX if unallowable costs are included in
the submission. Unallowable costs are either expressly unallowable or
determined unallowable.
(1) An expressly unallowable cost is a particular item or type of
cost which, under the express provisions of an applicable law,
regulation, or this contract, is specifically named and stated to be
unallowable.
(2) A cost determined unallowable is one which, for that
contractor,
(i) Was subject to a contracting officer's final decision and not
appealed;
(ii) The Department's Board of Contract Appeals or a court has
previously ruled as unallowable; or
(iii) Was mutually agreed to be unallowable.
(b) If, during the review of the submission, the contracting
officer determines that the submission contains an expressly
unallowable cost or a cost determined to be unallowable prior to the
submission, the contracting officer shall assess a penalty.
(c) If the contracting officer determines that a cost submitted by
the contractor in its submission for settlement is:
(1) Expressly unallowable, then the contracting officer shall
assess a penalty in an amount equal to the disallowed cost allocated to
the contract plus interest on the paid portion of the disallowed cost.
Interest shall be computed from the date of overpayment to the date of
repayment using the interest rate specified by the Secretary of the
Treasury pursuant to Public Law 92-41 (85 Stat. 97).
(2) Determined unallowable, then the contracting officer shall
assess a penalty in an amount equal to two times the amount of the
disallowed cost allocated to the contract.
(d) The contracting officer may waive the penalty provisions when:
(1) The contractor withdraws the submission before the formal
initiation of an audit of the submission and submits a revised
submission;
(2) The amount of the unallowable costs allocated to covered
contracts is $10,000 or less; or
(3) The contractor demonstrates to the contracting officer's
satisfaction that:
(i) It has established appropriate policies, personnel training,
and an internal control and review system that provides assurances that
unallowable costs subject to penalties are precluded from the
contractor's submission for settlement of costs; and
(ii) The unallowable costs subject to the penalty were
inadvertently incorporated into the submission.
(e) The Head of the Contracting Activity may waive the
certification when--
(1) It determines that it would be in the best interest of the
United States to waive such certification; and
(2) It states in writing the reasons for that determination and
makes such determination available to the public.
970.5204-4 [Amended]
6. Subsection 970.5204-4 is amended by revising the reference to
``Allowable Costs and Fixed Fee'' to read ``Payment and advances.''
970.5204-13 and 970.5204-14 [Removed and Reserved]
7. Section 970.5204-13, Allowable costs and fixed-fee (Management
and Operating contracts), is removed and reserved.
8. Section 970.5204-14, Allowable costs and fixed-fee (support
contracts), is removed and reserved.
9. Section 970.5204-16 is amended by adding a new paragraph (k) to
read as follows:
970.5204-16 Payments and advances.
* * * * *
(k) Determining allowable costs. The contracting officer shall
determine allowable costs in accordance with the Federal Acquisition
Regulation subpart 31.2 and the Department of Energy Acquisition
Regulation subpart 970.31 in effect on the date of this contract and
other provisions of this contract.
[[Page 37343]]
970.5204-17 [Removed and Reserved]
10. Section 970.5204-17, Political activity cost prohibition is
removed and reserved.
11. Section 970.5204-31 is amended by revising the introductory
paragraph of clause paragraph (h) and adding clause paragraph (m) to
read as follows:
970.5204-31 Insurance-litigation and claims.
* * * * *
(h) In addition to the cost reimbursement limitations contained
in FAR part 31, as supplemented by DEAR 970.31, and notwithstanding
any other provision of this contract, the contractor's liabilities
to third persons, including employees but excluding costs incidental
to worker's compensation actions, (and any expenses incidental to
such liabilities, including litigation costs, counsel fees,
judgments and settlements) shall not be reimbursed if such
liabilities were caused by contractor managerial personnel:
* * * * *
(m) Reasonable litigation and other legal expenses are allowable
when incurred in accordance with the DOE approved contractor legal
management procedures (including cost guidelines) as such procedures
may be revised from time to time, and if not otherwise made
unallowable by law or the provisions of this contract.
970.5204-61 [Removed and Reserved]
12. Section 970.5204-61, Cost prohibitions related to legal and
other proceedings is removed and reserved.
970.5204-84 [Removed and Reserved]
13. Section 970.5204-84, Waiver of limitations on severance
payments to foreign nationals, is removed and reserved.
14. Section 970.5204-XX is added to read as follows:
970.5204-XX Penalties for unallowable costs.
As prescribed in 970.4207-3 use the following clause:
Penalties for unallowable costs (APR 2000)
(a) Contractors which include unallowable cost in a submission
for settlement for cost incurred, may be subject to penalties.
(b) If, during the review of a submission for settlement of cost
incurred, the contracting officer determines that the submission
contains an expressly unallowable cost or a cost determined to be
unallowable prior to the submission, the contracting officer shall
assess a penalty.
(c) Unallowable costs are either expressly unallowable or
determined unallowable.
(1) An expressly unallowable cost is a particular item or type
of cost which, under the express provisions of an applicable law,
regulation, or this contract, is specifically named and stated to be
unallowable.
(2) A cost determined unallowable is one which, for that
contractor,
(i) Was subject to a contracting officer's final decision and
not appealed;
(ii) The Department's Board of Contract Appeals or a court has
previously ruled as unallowable; or
(iii) Was mutually agreed to be unallowable.
(d) If the contracting officer determines that a cost submitted
by the contractor in its submission for settlement of cost incurred
is:
(1) Expressly unallowable, then the contracting officer shall
assess a penalty in an amount equal to the disallowed cost allocated
to this contract plus interest on the paid portion of the disallowed
cost. Interest shall be computed from the date of overpayment to the
date of repayment using the interest rate specified by the Secretary
of the Treasury pursuant to Public Law 92-41 (85 Stat. 97); or
(2) Determined unallowable, then the contracting officer shall
assess a penalty in an amount equal to two times the amount of the
disallowed cost allocated to this contract.
(e) The contracting officer may waive the penalty provisions
when:
(1) The contractor withdraws the submission before the formal
initiation of an audit of the submission and submits a revised
submission;
(2) The amount of the unallowable costs allocated to covered
contracts is $10,000 or less; or
(3) The contractor demonstrates to the contracting officer's
satisfaction that:
(i) It has established appropriate policies, personnel training,
and an internal control and review system that provides assurances
that unallowable costs subject to penalties are precluded from the
contractor's submission for settlement of costs; and
(ii) The unallowable costs subject to the penalty were
inadvertently incorporated into the submission.
(End of clause)
[FR Doc. 00-14866 Filed 6-13-00; 8:45 am]
BILLING CODE 6450-01-P