FedGovContracts.com

Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: April 21, 2000

FROM: Barry McVay, CPCM

SUBJECT: Department of Energy Acquisition Regulation (DEAR); Financial Management Clauses for Management and Operating (M&O) Contracts

SOURCE: Federal Register, April 21, 2000, Vol. 65, No. 78, page 21371

AGENCIES: Department of Energy (DOE)

ACTION: Final Rule

SYNOPSIS: DOE is amending DEAR Part 970, DOE Management and Operating (M&O) Contracts, to designate certain DEAR M&O contract clauses and Federal Acquisition Regulation (FAR) clauses as Standard Financial Management Clauses to be included in M&O contracts unless the Chief Financial Officer concurs in a deviation. Also, this final rule revises several existing financial management clauses and adds four financial management related clauses.

EDITOR'S NOTE: The DEAR is available on the Internet at http://www.pr.doe.gov/dear.html.

DOE has proposed to rewrite DEAR Part 970 to streamline its policies, procedures, provisions, and clauses. For more on this effort, see the March 13, 2000, FEDERAL CONTRACTS DISPATCH "Department of Energy (DOE); Rewrite of DEAR Part 970, DOE Management and Operating (M&O) Contracts."

EFFECTIVE DATE: May 22, 2000. The introduction to the rules states, "The contracting officer must apply the changes this rule makes to solicitations issued on or after the effective date of this rule and may apply the changes to existing solicitations. Because this rule's changes are already incorporated in the majority of the Department's management and operating contracts, the contracting officer should incorporate the changes into existing contracts as soon as practicable, but in no case later than one year from the effective date of this rule."

FOR FURTHER INFORMATION CONTACT: Michael L. Righi, Office of Policy (MA-51), Department of Energy, 1000 Independence Avenue, SW, Washington, DC 20585, 202-586-8175, fax: 202-586-0545, e-mail: michael.l.righi@pr.doe.gov.

SUPPLEMENTAL INFORMATION: On November 18, 1998, DOE published a notice of proposed rulemaking (NPRM) that would revise DEAR Part 970 to implement provisions of the Chief Financial Officers Act of 1990 (Public Law 101-576), which requires each agency to improve its systems of accounting, financial management, and internal controls. The proposed rule would apply the requirements of the act to DOE's financial relationship with its M&O contractors. DOE received 11 comments from three commenters, and none of the comments were accepted. Therefore, this rule finalizes the notice of proposed rulemaking without change.

However, President Clinton signed the National Nuclear Security Administration (NNSA) Act (Public Law 106-65) into law after publication of the notice of proposed rulemaking. The NNSA Act reorganized DOE by drawing together various national security-related components of DOE and placing them under an the new DOE Undersecretary for Nuclear Security. Since the NNSA Act provides that existing procurement regulations, including DEAR Part 970, remain in effect, the authority citation for DEAR Part 970 is revised to include the citation for the NNSA.

The following are the main changes being made to the DEAR by this final rule:

• To permit DOE to use financial institutions other than banks for special accounts, the term "bank" is changed to "financial institution" in DEAR 970.3201, General; DEAR 970.3202, Advance Payments; DEAR 970.5204-13, Allowable Costs and Fixed-Fee (Management and Operating Contracts); and DEAR 970.5204-16, Payments and Advances. In addition, to implement the Automatic Standard Application for Payment (ASAP), which has replaced the letter-of-credit, the term "letter of credit" is replaced with "payments cleared financing arrangement" in DEAR 970.3202 and DEAR 970.5204-16. Also, to require accounting for any type of collection accruing to the contractor with the work under the contract, the term "revenue" is replaced with "collections accruing to the contractor in connection with the work under this contract" in DEAR 970.5204-9, Accounts, Records, Inspection; DEAR 970.5204-15, Obligation of Funds; and DEAR 970.5204-16; and DEAR 970.5204-20, Management Controls.
  
  
• DEAR 970.3270, Standard Financial Management Clauses, is revised to require the inclusion of the following clauses in all M&O contracts (those preceded with an asterisk ("*") are added by this final rule):
  • DEAR 970.5204-9, Accounts, Records, and Inspection
  • DEAR 970.5204-15, Obligation of Funds
  • DEAR 970.5204-16, Payments and Advances
  • DEAR 970.5204-20, Management Controls
  • *DEAR 970.5204-92, Liability with Respect to Cost Accounting Standards
  • *DEAR 970.5204-93, Work for Others Funding Authorization
  • FAR 52.230-2, Cost Accounting Standards
  • FAR 52.230-6, Administration of Cost Accounting Standards
  
  In addition, the following two clauses are required in all M&O contracts with integrated accounting systems:
  • *DEAR 970.5204-90, Financial Management System
  • *DEAR 970.5204-91, Integrated Accounting
  
  
• New DEAR 970.5204-90, Financial Management System, requires the contractor to "maintain and administer a financial management system that is suitable to provide proper accounting in accordance with DOE requirements...submit to DOE for written approval an annual plan for new financial management systems and/or subsystems and major enhancements and/or upgrades to the currently existing financial systems and/or subsystems...notify DOE thirty (30) days in advance of any planned implementation of any substantial deviation from this plan and, as requested by the contracting officer...submit any such deviation to DOE for written approval before implementation."
  
  
• New DEAR 970.5204-91, Integrated Accounting, is included when integrated accounting procedures are required. The clause requires the contractor's financial management system to "include an integrated accounting system that is linked to DOE's accounts through the use of reciprocal accounts and that has electronic capability to transmit monthly and year-end self-balancing trial balances to the Department's Primary Accounting System for reporting financial activity under this contract..."
  
  
• New DEAR 970.5204-92, Liability with Respect to Cost Accounting Standards, which states that the contractor is not liable for failure to comply with FAR 52.230-2, Cost Accounting Standards, and FAR 52.230-6, Administration of Cost Accounting Standards, "if its failure to comply with the clauses is caused by the contractor's compliance with published DOE financial management policies and procedures or other requirements established by the Department's Chief Financial Officer or Procurement Executive." It also states that the contractor is not liable for increased costs or interest caused by its subcontractors' failure to comply with the FAR's two cost accounting standards clauses "if the contractor includes in each covered subcontract a clause making the subcontractor liable to the Government for increased costs or interest resulting from the subcontractor's failure to comply with the clauses..."
  
  
• New DEAR 970.5204-93, Work for Others Funding Authorization, provides that, when the contractor performs work for others utilizing its own funding, "any uncollectible receivables...shall be the responsibility of the contractor, and the United States Government shall have no liability to the contractor for the contractor's uncollected receivables."

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

Return to the Dispatches Library.

Return to the Main Page.