[Federal Register Volume 59, Number 192 (Wednesday, October 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24649]


[[Page Unknown]]

[Federal Register: October 5, 1994]


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DEPARTMENT OF ENERGY

 

Office of Procurement and Assistance Management Award, Renewal, 
and Extension of Management and Operating Contracts

AGENCY: Department of Energy

ACTION: Notice of interim policy statement

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SUMMARY: The Department of Energy today publishes an interim 
Acquisition Letter for public comment that sets forth new interim 
policies regarding the competition and extension of the Department's 
management and operating contracts. The policies supersede Department 
of Energy Acquisition Regulation Subparts 917.605 and 970.0001, pending 
the issuance of a rule. Supporting deviations have been authorized by 
the Procurement Executive.

DATES: The effective dates are set forth in the interim Acquisition 
Letter. Comments are due on or before November 4, 1994.

ADDRESSES: Comments may be submitted to Richard Langston, Office of 
Procurement and Assistance Management (HR-521.1), U.S. Department of 
Energy, Washington, D.C. 20585.

FOR FURTHER INFORMATION CONTACT: Richard Langston, Office of 
Procurement and Assistance Management (HR-521.1), U.S. Department of 
Energy, Washington, D.C. 20585 (202) 586-8247.

SUPPLEMENTARY INFORMATION: The Department of Energy (Department), 
through its Contract Reform initiative, has concluded that the 
Department's policies and practices regarding the extension of its 
management and operating contracts need to be revamped. Existing 
policies favor indefinite extensions of incumbent contractors and, in 
practice, few competitions for management and operating contracts 
historically have been undertaken. Such policies and practices 
effectively preclude the introduction of new companies and best 
management practices into the Department's laboratory and weapons 
production complex.
    This new policy establishes competition for performance-based 
management contracts (a new form of management and operating contract) 
as the norm. Exceptions to competition will be made, on a case by case 
basis, only in exceptional circumstances and only when authorized by 
the Head of the Agency. The underlying intent of the new policy is to 
balance the benefits of a competitive environment with the recognition 
that long-term contractual relationships can facilitate superior 
performance. Accordingly, the policy permits contract terms of up to 
five years with an option to extend the term for an additional five 
years for competitively awarded performance-based management contracts. 
Contracts awarded on a noncompetitive basis, however, will require 
justification and approval by the Head of the Agency prior to any 
extension.
    In view of the foregoing, the Department has issued the Acquisition 
Letter set forth below as an interim policy, the effective dates of 
which are set forth below. It is essential that these interim policies 
and procedures be effected immediately so that the Department can 
initiate procurement actions for those contracts that will expire in 
the near term, but were not specifically addressed in the Secretary of 
Energy's July 5, 1994 Action Memorandum. A notice of proposed 
rulemaking is in the process of being developed.
    The Department is seeking public comment on the Acquisition Letter 
in order to give the public, including those persons who are affected 
by the policies, an opportunity to comment on the interim Letter before 
it is finalized.

    Issued in Washington, D.C., on September 28, 1994.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management
Acquisition Letter 94-14
September 28, 1994

Authority

    This Acquisition Letter is issued by the Procurement Executive 
pursuant to a delegation from the Secretary and under the authority of 
the Department of Energy Acquisition Regulation Subpart 901.301-70. 

                                Contents                                
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     Citation                               Title                       
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FAR 17.605........  Award, Renewal, and Extension.                      
DEAR 917.605......  Award, Renewal, and Extension.                      
DEAR 970.0001.....  Renewal of management and operating contracts.      
------------------------------------------------------------------------

I. Purpose

    The Department of Energy Contract Reform Team Report concluded that 
the Department's policies and practices regarding the extension of its 
management and operating contracts needed to be revamped. The Contract 
Reform Team found that existing policies favored indefinite extensions 
of incumbent contractors and that in practice, few competitions for 
management and operating contracts were undertaken.
    Such policies and practices effectively precluded the introduction 
of new companies and best management practices into the Department's 
laboratory and weapons production complex. The Report also recognized 
the need to balance the benefits of a competitive environment with the 
recognition that long contract terms of up to 10 years can facilitate 
superior performance.
    The purpose of this Acquisition Letter is to establish an interim 
policy that favors competition, yet preserves the benefits of long-term 
contract relationships. Under this new policy, competition will be the 
norm. Exceptions to competition will be made only in exceptional 
circumstances and only when authorized by the Head of the Agency.

II. Background

    Subpart 17.6 of the Federal Acquisition Regulation prescribes 
policies and procedures for award, renewal, and extension of management 
and operating contracts.

III. Guidance

    This Acquisition Letter is issued to revise and consolidate the 
policy and procedures regarding competing or extending performance-
based management contracts, a new form of management and operating 
contract. The attached interim procedures supersede all previous 
guidance regarding extend or compete decisions. They will be used until 
the rulemaking process is completed. A class deviation from Department 
of Energy Acquisition Regulation 917.605 and 970.0001 has been 
authorized to implement the attached procedures. In addition, a class 
deviation to subsection 17.605(b) of the Federal Acquisition Regulation 
has been authorized to permit a revision to the timing of the Agency 
Head authorization for the renewal and extension of performance-based 
management contracts at the five-year point in the performance period 
under certain circumstances specified in this Acquisition Letter.
    By Action Memorandum dated July 5, 1994, the Secretary of Energy 
has made determinations regarding certain management and operating 
contracts which will expire in the near term. The Secretary's 
determination mandates that certain contracts be competed and that 
others be extended to facilitate either competition or the immediate 
negotiation of key elements of contract reform into the existing 
contracts. Contracts awarded or extended pursuant to that determination 
are subject to this Acquisition Letter; however, no further action is 
required relating to the extension of those contracts until the time of 
the next extend or compete decision. Furthermore, contracts extended 
pursuant to the Secretary's determination shall not include an option 
to extend the contract for an additional five years.
    The term ``performance-based management contract'' denotes the new 
form of management and operating contract that will be used by the 
Department of Energy for the operation of its Government-owned, or 
controlled, laboratories and weapons production facilities. Its use 
reflects the Department's policy and intent to convert traditional 
management and operating contracts to the new form of contract called 
for in the Contract Reform Team Report.

IV. Effective Date

    This Acquisition Letter is effective upon the date of issue shown 
above.

V. Expiration Date

    The Department is seeking public comment on these policies. The 
Acquisition Letter will remain in effect on an interim basis until the 
Department takes further action after reviewing any public comments on 
these policies.

Award, Renewal and Extension of Management and Operating Contracts

I. Policy

    (a) It is the policy of the Department of Energy to use full and 
open competition in the award of performance-based management 
contracts, except in exceptional circumstances where it is determined 
that the use of competitive procedures is incompatible with the 
effective and efficient discharge of Departmental programs or is 
otherwise incompatible with the paramount interest of the United 
States, and the Head of the Agency authorizes the use of noncompetitive 
procedures to extend the term of an existing contract. Such 
authorizations shall be supported by a written justification which 
shall be certified by the Head of the Contracting Activity and the 
cognizant Assistant Secretary(s).
    (b) Performance-based management contracts shall normally be 
competed at inception and upon expiration of their contract term as set 
forth below.

II. Contract Term and Options to Extend

    (a) Effective work performance under performance-based management 
contracts is facilitated by the use of relatively long contract terms 
of up to 10 years. Accordingly, competitively awarded performance-based 
management contracts shall provide for a basic contract term not to 
exceed 5 years and may include an option to extend the term for a 
period not to exceed 5 years.
    (b) Contracts awarded prior to the effective date of this 
Acquisition Letter using competitive procedures may be modified to 
incorporate an option to extend the term of the contract for a period 
not to exceed 5 years where:
    (1) the total period of performance, including the continuation, 
will not exceed 10 years;
    (2) the contractor's past performance under the contract has been 
determined to be of high quality; and
    (3) the contractor has also agreed to a contract modification 
necessary to implement other performance-based management contract 
provisions.
    (c) Exercise of Options. 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 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 
Head of the Contracting Activity and the cognizant Assistant 
Secretary(s). In instances where a contract has been modified, pursuant 
to paragraph (b) above, to incorporate an option to extend, a 
justification for other than full and open competition shall be 
prepared and approved in accordance with FAR Part 6 and DOE Order 
4200.1C prior to the exercise of the option.

III. Procedures for Noncompetitive Extension

    Exceptional circumstances, as defined in I.(a) above, may exist 
that warrant the noncompetitive extension of a performance-based 
management contract beyond the basic and option periods. In such cases, 
a performance-based management contract may be extended for an 
additional period not to exceed 5 years when authorized by the Head of 
the Agency. Requests for extension shall be subject to the following 
procedures:
    (a) The Head of the Contracting Activity shall publicize the intent 
to recommend a contract extension in the Federal Register and invite 
comment thereon.
    (b) A recommendation to extend a performance-based management 
contract (other than through the exercise of an option to extend) may 
be submitted to the Head of the Agency through the Deputy Assistant 
Secretary for Procurement and Assistance Management at any time, but no 
later than 24 months prior to the expiration of the contract term. The 
recommendation shall be supported by:
    (1) a justification for other than full and open competition 
prepared in accordance with FAR Part 6 and DOE Order 4200.1C, including 
a certification by the Head of Contracting Activity and cognizant 
program Assistant Secretary(s) that the use of full and open 
competition is incompatible with the effective and efficient discharge 
of Departmental programs or otherwise incompatible with the paramount 
interest of the United States;
    (2) a detailed description of the incumbent's performance history 
in areas such as program accomplishment, safety, health, environment, 
energy conservation, financial and business management and socio-
economic programs, including measurable results against established 
performance measures and criteria;
    (3) an identification of significant projects or other objectives 
planned for assignment under the contract if extended;
    (4) an outline of principal issues and/or significant changes to be 
negotiated in the terms and conditions of the extended contract;
    (5) in the case of a Federally Funded Research and Development 
Center, a review of the use and continued need for FFRDC designation in 
accordance with FAR 35.0l7-4;
    (6) a determination that the performance-based management contract 
remains the appropriate form of contract; and
    (7) any other information pertinent to the decision.
    (c) Conditional Authorization. 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 approving authority 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.
    (d) Justification. FAR 6.302 identifies statutory authorities for 
the use of other than full and open competition. These authorities are 
permissive. Nothing in this Acquisition Letter is intended to impair 
the availability of these authorities for performance-based management 
contracts. However, it is intended that they be applied only when the 
use of competitive procedures is incompatible with the effective and 
efficient discharge of Departmental programs or is otherwise 
incompatible with the paramount interest of the United States .

IV. Renewal of the Performance-based Management Contract Form

    All performance-based management contracts shall be periodically 
reviewed to determine whether the performance-based management contract 
form remains the most appropriate contract form. In the case of 
competitively awarded contracts, the request to authorize the continued 
use of the performance-based management contract shall be submitted at 
least 6 months prior to the anticipated release date of the 
solicitation. The Head of the Contracting Activity shall submit a 
request to authorize the continued use of the performance-based 
management form of contract to the Head of the Agency through the 
cognizant Assistant Secretary(s) and the Deputy Assistant Secretary for 
Procurement and Assistance Management.
    For contracts that will be extended using noncompetitive 
procedures, the request to authorize the continued use of the 
performance-based management contract shall be submitted as part of the 
extension recommendation required by III.(b)(6).

[FR Doc. 94-24649 Filed 10-4-94; 8:45 am]
BILLING CODE 6450-01-P