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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: June 13, 2000

FROM: Barry McVay, CPCM

SUBJECT: National Aeronautics and Space Administration Federal Acquisition Regulation Supplement (NFS); Risk Management

SOURCE: Federal Register, June 13, 2000, Vol. 65, No. 114, page 37057

AGENCIES: National Aeronautics and Space Administration (NASA)

ACTION: Interim Rule

SYNOPSIS: NASA is amending the NFS to emphasize risk management, including safety, security (including information technology security), health, export control, and damage to the environment, within the context of acquisition planning, selecting sources, choosing contract type, structuring award fee incentives, administering contracts, and conducting contractor surveillance.

EFFECTIVE DATE: This interim rule applies to all solicitations issued on or after July 13, 2000. Comments on the interim rule should be submitted to NASA on or before August 14, 2000.

ADDRESSES: Submit comments to James H. Dolvin, NASA Headquarters Office of Procurement, Contract Management Division (Code HK), Washington, DC 20546. Comments may also be submitted by e-mail to jdolvin1@mail.hq.nasa.gov.

FOR FURTHER INFORMATION CONTACT: James H. Dolvin, 202-358-1279.

SUPPLEMENTAL INFORMATION: In a January 11, 1999, message, NASA Administrator Daniel Goldin called upon NASA to become an agency of informed risk takers. He emphasized that it is critically important for NASA to achieve mission success without compromising safety. Then, on February 26, 1999, Mr. Goldin emphasized the need for NASA contractors, both on-site and others, to be supportive of, and accountable for safety. However, since many of NASA's activities involve advanced research, aeronautics, and space flight, NASA cannot completely avoid risk. So risk must be identified, analyzed, planned, tracked, controlled, communicated, and documented.

NASA decided to revise the NFS to emphasize that "risk management" is a "core acquisition concern." On July 20, 1999, NASA published a proposed NFS revision to emphasize this concern and provide procedures for making sure that all aspects of risk management are considered in the acquisition process. Comments were received from the Council of Defense and Space Industry Associations (CODSIA), the United Space Alliance, and the Jet Propulsion Laboratory. Based on the comments, NASA made extensive changes to the rule, so much so that it is issuing the rule as "interim" and requesting additional comments.

The most important differences between the proposed and interim versions of this rule are in the requirements for written acquisition plans (NFS 1807.105, Contents of Written Acquisition Plans); (2) changes in award fee evaluation factors (NFS 1816.405-274, Award Fee Evaluation Factors), (3) revisions to requirements for the Safety and Health Plan (NFS 1852.223-73, Safety and Health Plan), and (4) the elimination of the requirement for a separate risk management plan in proposals (deletion of proposed NFS 1852.223-75, Risk Management Plan, which would have been required in all negotiated solicitations of $5 million or more).

The following are the significant changes being made to the NFS by this interim rule:

• NFS 1807.104, General Procedures, is added. It requires the acquisition planning team to "obtain input from the center offices responsible for matters of safety and mission assurance, occupational health, environmental protection, information technology, export control, and security." Also, it references NPG 8715.3, NASA Safety Manual; NPG 7120.5, NASA Program and Project Management Processes and Requirements; NPG 2810.1, Security of Information Technology, and NPG 1620.1, Security Procedures and Guidelines, all of which are available at http://nodis.hq.nasa.gov.
  
  
• Paragraph (a)(7) is added to NFS 1807.105, Contents of Written Acquisition Plans. In addition to technical, schedule, and cost risks, it requires that each acquisition plan include such considerations as "safety and security (including personnel, information technology, and facilities/property); the need to involve foreign sources (contractor and/or governmental), and risks of unauthorized technology transfer (see NPG 2190, NASA Export Control Program); and resource risk, including the necessary level and expertise of NASA personnel resources available to manage the project/program." The relative magnitude of each identified risk must be provided (for example, high, medium, or low), together with the specific actions taken to structure the acquisition approach to manage the risk throughout the acquisition process.
  
  
• Added to NFS 1812.301, Solicitation Provisions and Contract Clauses for the Acquisition of Commercial Items, are the following clauses when required: NFS 1852.223-70, Safety and Health (negotiated acquisitions of $1,000,000 or more ($100,000 for construction), with some exceptions); NFS 1852.223-73, Safety and Health Plan (acquisitions that include NFS 1852.223-70); and NFS 1852.223-75, Major Breach of Safety and Security (all acquisitions of $500,000 or more).
  
  
• NFS 1815.203-72, Risk Management, is added, which requires all requests for proposals (RFP) for which a technical proposal is required to require offerors to "identify and discuss risk factors and issues throughout the proposal where they are relevant, and describe their approach to managing these risks."
  
  
• To NFS 1815.304-70, NASA Evaluation Factors, is added paragraph (b)(4), which requires all solicitations that include NFS 1852.223-73, Safety and Health Plan, to include safety and health in the evaluation. Also, for acquisitions valued at $10 million or more, or $25 million or more for commercial items, then the Mission Suitability factor, if used, shall include a subfactor for safety and health." Finally, paragraph (d)(4) is added, which requires the contracting officer to "evaluate the offeror's past performance in occupational health, security, safety, and mission success (e.g., mishap rates and problems in delivered hardware and software that resulted in mishaps or failures) when these areas are germane to the requirement."
  
  
• Paragraph (a)(vi) of NFS 1815.305, Proposal Evaluation, is revised to require that "any programmatic risk to mission success, e.g., technical, schedule, cost, safety, occupational health, security, export control, or environmental" be evaluated. Previously, paragraph (a)(vi) required that "any technical, schedule, and cost risk" be evaluated.
  
  
• NFS 1816.405-274, Award Fee Evaluation Factors, states that contractors are to receive "an overall fee determination of zero for any evaluation period in which there is a major breach of safety or security." It goes on to define "a major breach of safety " as "an accident, incident, or exposure resulting in a fatality or mission failure; or in damage to equipment or property equal to or greater than $1 million; or in any 'willful' or 'repeat' violation cited by the Occupational Health and Safety Administration (OSHA) or by a state agency operating under an OSHA approved plan", and "a major breach of security" as "compromise of classified information; illegal technology transfer; workplace violence resulting in criminal conviction; sabotage; compromise or denial of information technology services; damage or loss greater than $250,000 to the Government; or theft." The proposed rule would have categorized the "major breach of safety" into "Type A mishaps", "Type B mishaps", and "Mission Failure", and each would have different criteria and thresholds for application.
  
  
• NFS 1852.223-70, Safety and Health, is revised to require contractors to report "close calls", which is defined as "a situation or occurrence with no injury, no damage, or only minor damage (less than $1,000) but possesses the potential to cause any category of mishap, or any injury, damage, or negative mission impact" (paragraph (c)). Also, it now requires the contractor to "investigate all work-related incidents, accidents, and close calls, to the extent necessary to determine their causes and furnish the Contracting Officer a report, in such form as the Contracting Officer may require, of the investigative findings and proposed or completed corrective actions" (paragraph (d)).
  
  
• NFS 1852.223-73, Safety and Health Plan, is revised to add the requirement that the plan address the "safety and occupational health for subcontractor employees for any proposed subcontract whose value is expected to exceed $500,000, including commercial services and services provided in support of a commercial item" as well as "the policies, procedures, and techniques that will be used to ensure the safety and occupational health of NASA employees and the public."
  
  
• NFS 1852.223-75, Major Breach of Safety or Security, repeats the definitions included in NFS 1816.405-274 (see above), and provides reporting requirements. (NFS 1852.223-75 was originally proposed as NFS 1852.223-76.)

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

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