DATE: June 14, 2000

FROM: Barry McVay, CPCM

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

SOURCE: Federal Register, June 15, 2000, Vol. 65, No. 115, page 37335

AGENCIES: Department of Energy (DOE)

ACTION: Proposed Rule

SYNOPSIS: DOE is proposing to amend the cost principles in DEAR Part 970, DOE Management and Operating (M&O) Contracts, particularly DEAR Subpart 970.31, Contract Cost Principles and Procedure, to delete the cost principles and related provisions that are adequately covered by the Federal Acquisition Regulation (FAR). All that would be retained are the cost principles that supplement coverage in the FAR.

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

DATE: 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 SW, 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.

SUPPLEMENTAL INFORMATION: DOE accomplishes its defense and energy research mission responsibilities through the use of M&O contracts. Although M&O contracts are authorized by FAR Subpart 17.6, Management and Operating Contracts, the FAR does not provide the special terms and conditions needed for M&O contract award and administration. Therefore, DOE has established specific policies and procedures in DEAR Subpart 917.6 and DEAR Part 970. Included among these policies and procedures is a unique set of cost principles which govern the allowability of costs under M&O contracts.

DOE has reviewed the policies and procedures governing the award and administration of M&O contracts, and one of the objectives was to determine whether the DEAR M&O cost principles could be eliminated, and whether reliance could be placed on similar coverage in the FAR. As a result of a comparative analysis between the FAR and the DEAR cost principles and related procedures, it was concluded that the FAR cost principles adequately addressed DOE interests, and that supplemental coverage was only necessary in a limited number of cases. Consequently, DOE proposes to delete all the cost principles in DEAR Subpart 970.31 except for the few that are necessary to retain, and to renumber the remaining cost principles to correspond to the numbering in the FAR (for example, DEAR 970.3102-2, Compensation for Personal Services, would be renumbered DEAR 970.3102-6 to correspond to FAR 31.205-6, Compensation for Personal Services). In addition, several associated sections, such as DEAR 970.3100-1, Scope of Subpart, and DEAR 970.3101-1, Objectives, would be retained, renumbered, and rewritten in plain language. Also, a few "cost principles" would be added, primarily to provide cross-references to other pertinent portions of the FAR and DEAR.

The following are the cost principles proposed for retention and addition:

In addition, DEAR 970.3102-3, Cost of Money, which states that the cost of money is unallowable, would be deleted because DOE has decided to amend its policy and make such costs allowable under indirect and overhead cost allocations. This change should have little effect on DOE since most facilities are government-owned.

Regarding the M&O contract clauses in DEAR Subpart 970.52, several would be revised to add or update cross-references and/or to clarify language. However, the following clauses would be removed:

A proposed DEAR 970.5204-XX, Penalties for Unallowable Costs, would be added. It explains the penalty provisions associated with the submission of unallowable costs. It repeats part of DEAR 970.3101-7, Cost Submission, Certification, Penalties, and Waivers, which would be redesignated as DEAR 970.4207-2, Certificate of Costs.

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

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