[Federal Register Volume 59, Number 246 (Friday, December 23, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31496]


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[Federal Register: December 23, 1994]


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DEPARTMENT OF ENERGY

48 CFR Parts 909, 952, and 970

RIN 1990-AA95

 

Acquisition Regulation; Alteration of Organizational Conflicts of 
Interest Regulations

AGENCY: Department of Energy.

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) today amends the Department of 
Energy Acquisition Regulation (DEAR) to clarify certain aspects of 
DOE's organizational conflicts of interest (OCI) regulations. The 
amended regulations are intended to make the OCI regulations more 
easily understood and more easily followed by DOE procurement, program, 
and legal personnel, DOE contractors, and entities proposing to do work 
for DOE or its contractors.
EFFECTIVE DATE: January 23, 1995.

FOR FURTHER INFORMATION CONTACT:

Robert M. Webb, U.S. Department of Energy, Procurement Policy Division 
(HR-521.1), 1000 Independence Avenue, SW., Washington, DC 20585, (202) 
586-8264
Edgar Merson, U.S. Department of Energy, Office of the Assistant 
General Counsel for Procurement and Finance (GC-61), 1000 Independence 
Avenue, SW., Washington, DC 20585, (202) 586-6902

SUPPLEMENTARY INFORMATION:

I. Background
    A. Discussion
    B. Section-by-Section Analysis
II. Procedural Requirements
    A. Review under Executive Order 12291
    B. Review under the Regulatory Flexibility Act
    C. Review under the Paperwork Reduction Act
    D. Review under the National Environmental Policy Act
    E. Review under Executive Order 12612
    F. Review under Executive Order 12778

I. Background

A. Discussion

    DOE is one of only two Federal agencies, the other being the 
Nuclear Regulatory Commission, that have a statutorily based OCI 
system. DOE's system is founded on section 401 of Pub. L. 95-39, as 
that statute applied to the Energy Research and Development 
Administration (codified at 42 U.S.C. Sec. 5918) and section 10 of Pub. 
L. 95-70, as that statute applied to the Federal Energy Administration 
(codified at 15 U.S.C. 789). On October 1, 1977, those two agencies and 
others were joined to form the Department of Energy.
    The proposed rule soliciting comments on proposed changes leading 
to this final rule was published on July 16, 1993, at 58 FR 38340. As 
stated there, the proposed changes were intended to clarify the 
preexisting DOE OCI rule.

B. Section-by-Section Analysis

    Comments were received from nine commenters: four corporations, two 
professional societies, one individual, and two DOE procurement 
organizations.
1. Definitions.
    At 909.570-3, we proposed to delete the phrase ``the principal 
purpose of which'' from the definition of ``evaluation services'' and 
``technical consulting and management support services.'' We explained 
that DOE's organizational conflicts of interest system should apply to 
contracts even where these types of services are involved in contract 
performance but are not the principal purpose of the contract.
    Four of the commenters took exception to this change with respect 
to ``evaluation services,'' and two objected with respect to 
``technical consulting and management support services.'' One concern 
expressed was that there would be confusion on the part of the 
contractors as to whether ``a particular contract is for evaluation 
services or activities.'' The solicitation and contract will contain 
the appropriate organizational conflicts of interest provisions when 
DOE has determined that a specific requirement involves either or both 
of these types of covered services.
    The remaining commenters based their objections on a concern that 
the result would be that organizational conflicts of interest 
provisions would be applied when they were not appropriate. We 
disagree. It is clear that the ``principal purpose'' language was 
present to limit application of organizational conflicts of interest; 
however, it is apparent that contracts may have minor portions of the 
statement of work that deserve OCI attention. For example, a contract 
for guard services that would not be covered per se may contain 
provision for incidental services to develop a plan to enhance security 
at the facility. Clearly, the development of such a plan, were it 
procured under a separate contract, would on its own be considered 
either evaluation services or activities or technical consulting and 
management support services or both. The dangers of bias, depending 
upon a contractor's interests, and unfair competitive advantage are 
both present. In fact, the plan may serve as the basis for the 
procurement of security enhancements under a separate contract. Yet, 
because it is a comparatively small part of a larger contract under the 
definitions that were at 909.570-3, there would be no OCI coverage 
under the preexisting regulations. This result is untenable.
    The concern for misapplication is best answered by looking at 
whether the scope of the contract includes services that are properly 
described as ``evaluation services or activities'' or ``technical 
consulting and management support services.'' A contract would not be 
covered if there is no provision for assignment of such evaluative 
tasks within the scope of the contract. For example, if a security 
guard notices a security deficiency at the facility, he or she would be 
expected to bring it to the supervisor's attention in the normal course 
of business, and this would involve no OCI implication. The mere 
expression of an opinion or recommendation in the performance of a 
contract would not give rise to OCI coverage.
    In the definition of ``organizational conflicts of interest,'' the 
rule proposed to delete the phrase ``either directly or indirectly, 
through a client relationship'' and insert ``reasonably'' to guide any 
test of the existence of an organizational conflict of interest with 
regard to a specific offeror. Three commenters objected. One commenter 
was concerned that the remaining phrase describing the interests to be 
considered in determining the presence of an organizational conflict of 
interest may affect or be affected by ``approved technology transfer 
initiatives.'' The remaining phrase describing the interests to be 
taken into account is ``past, present, or currently planned interests 
that relate to work to be performed under a Department contract.'' All 
interests, including ``technology transfer initiatives'' meeting that 
test should be evaluated by the Contracting Officer in making the OCI 
determination. However, one must remember that the mere existence of an 
interest relating to the work to be performed under the specific 
contract does not mean that an organizational conflict of interest is 
present.
    A second commenter disagreed with the ``relate to'' language. The 
commenter was concerned that an offeror would be put in the position of 
``providing unlimited data which, as a threshold matter, may not be 
relevant to its capacity to give impartial advice or result in an 
unfair competitive advantage.'' We believe that the obligation to 
disclose interests that relate to the work to be performed under the 
proposed contract is clearer than the previous requirement which 
arguably was dependent upon whether the offeror considered the 
otherwise relevant interest to result in bias or an unfair competitive 
advantage. The analysis of the effect of the interest or interests is 
the responsibility of the contracting officer, and the proposer is not 
in the position of drawing an objective conclusion of the effect of an 
interest. More importantly, the contracting officer may determine the 
potential for bias or unfair competitive advantage, not from one 
interest, but from two or more interests, any of which alone would not 
be considered significant.
    The third commenter did not agree with the proposed insertion of 
``reasonably'' on the grounds that the ``safe course for a contracting 
officer to take when faced with this standard is to conclude that 
virtually all situations may reasonably give rise to an OCI.'' We have 
deleted ``reasonably,'' though its inclusion in the proposed rule was 
intended to help assure that consideration of interests would not be 
affected by remote relationships.
    As will be discussed in more detail later, the standard that the 
contracting officer is to apply in making the determination as to the 
presence of an organizational conflict of interest is whether there is 
``little or no likelihood'' of an organizational conflict. That test is 
taken from the underlying statutes and has formed the basis of the OCI 
determination since the promulgation of the implementing regulations.
2. Relationship of Interests
    Three commenters took exception to the proposed substitution of the 
standard for contractual requirements that merit particular attention 
at 909.570-4(a). Previously, this standard was those contractual 
requirements that ``call for the rendering of advice, or consultation 
or evaluation services, or similar activities that lay the direct 
groundwork for the Department's decisions * * *.'' The proposed rule 
substituted ``are expected to play a part in * * *.'' (emphasis added)
    All three comments were founded upon the same grounds, which are 
best represented by the comment of one of the three: ``As proposed, 
this revision will cause activities that are only very tangentially 
related to be considered to create an OCI and will remove any rule of 
reason in determining when an OCI exists.''
    We disagree and have included the change. This language is not 
intended to describe when the contracting officer should determine that 
an organizational conflict of interest exists. We believe that the 
commenters have been misled by the change in the heading of 909.570-4, 
``Criteria for recognizing organizational conflicts of interest.'' In 
that particular part of the regulation, the material is intended to aid 
the contracting officer in determining whether a particular statement 
of work is subject to organizational conflicts of interest concerns. In 
other words, this guidance goes to whether the contracting officer 
would require that the solicitation include the organizational 
conflicts of interest solicitation provision at 952.209-70 and whether 
the model and final contracts would contain the clause at 952.209-72.
    No comments were received about the other minor changes proposed to 
be made to 909.570-4(a) and 909.570-4(b)(4) and (b)(7).
    No comments were made about the proposed changes to 909.570-5(a). 
These changes are mirrored in proposed changes to the solicitation 
provision and will be discussed there.
    The rule proposed to create a new paragraph 909.570-5(b) from the 
content of the second half of paragraph (a). This new paragraph would 
modify the requirement for the submission of a new or updated 
disclosure for ``all modifications * * * except those issued under the 
Changes clause'' to those ``that exercise an option or otherwise 
meaningfully extend the period of performance or add work of the type 
noted above to the contract.'' One commenter objected, apparently not 
recognizing that the required frequency of new or updated disclosure 
would be reduced.
    In addition, the OCI clause contains a requirement for postaward 
disclosure. If the contractor has fulfilled that responsibility, this 
requirement would be little more than a formality.
3. Avoidance and Mitigation
    Five commenters disagreed with the proposed changes to 909.570-
5(c). We believe they have misinterpreted the proposed changes. The 
changes consisted of the proposed deletion of the words ``or 
mitigated'' from the last portion of the sentence that had previously 
been 909.570-5(b) and the insertion at 909.570-5(c) of the sentence 
that states, ``[a]n organizational conflict of interest has been 
avoided when the actions taken to remedy it result in there being 
little or no likelihood of an organizational conflict of interest.''
    The comments were based upon the belief that these changes deny the 
contracting officer the flexibility to mitigate a situation that has 
been determined to be an organizational conflict of interest. In fact, 
the applicable statute requires that an organizational conflict of 
interest, once identified, be avoided or award may not be made in the 
absence of a determination that award otherwise is in the best 
interests of the United States. The statute and implementing 
regulations have provided that ``little or no likelihood of an 
organizational conflict of interest'' is the standard or threshold for 
the decision as to whether a particular fact or facts amount to an 
organizational conflict of interest. Any greater likelihood amounts to 
an organizational conflict.
    Mitigation, on the other hand, describes the situation in which the 
actions taken to remedy an organizational conflict of interest taken 
have not reduced the conflict of interest to the required level of 
``little or no likelihood.'' That result is not enough to allow an 
award, absent the public interest determination described above.
    It was the intent of the added sentence to make it clear that the 
test for avoiding an organizational conflict was the same as the test 
for determining the existence of the organizational conflict initially, 
``little or no likelihood.'' In other words, there may be some remote 
possibility of an organizational conflict of interest, and the 
contracting officer may determine that an organizational conflict does 
not exist. If, on the other hand, having determined that an 
organizational conflict does exist, the contracting officer may 
determine that the steps taken to remedy the conflict reduce the 
concern to the level of ``little or no likelihood,'' which actions have 
thereby avoided the organizational conflict of interest.
    This change then does not interfere with the exercise of discretion 
by the contracting officer in avoiding an identified organizational 
conflict of interest. Rather, it makes clear that the test for 
determining whether an organizational conflict of interest exists is 
the same, i.e, ``little or no likelihood,'' whether it is applied in 
the original analysis or after having taken steps to remedy an 
organizational conflict of interest that was initially determined to 
exist.
4. Subsequent Bars
    With regard to any bar of the successful firm from subsequent 
competitions, five commenters requested that the sentence of 909.570-6 
requiring that ``[t]his is a variable; and in no event shall an 
exclusion be stated which is not related to a specific expiration date 
or an event certain'' be retained. We believe that this sentence is 
redundant in light of the two preceding sentences, i.e., ``[s]uch 
notice shall specify the proposed extent and duration of any special 
restrictions to be imposed with respect to participation in subsequent 
acquisitions. A fixed term of reasonable duration is measured by the 
time required to eliminate what would otherwise constitute an unfair 
competitive advantage.''
    Two of the commenters took exception to the proposed addition to 
the last sentence. That addition was intended to make clear that the 
absence of a bar in a previous contract will not prohibit the 
contracting officer from considering the relationship of the two 
requirements as a basis for finding an organizational conflict of 
interest in the award of the second requirement, based upon bias or 
unfair competitive advantage. We believe this conclusion is statutorily 
directed. However, until now, the statement has not been made, and DOE 
contracting personnel may have been misled. We have retained all the 
changes to 909.570-6.
    No comments were received to the proposed changes to 909.570-7.
5. Deletion of ``the General Clause''
    Two comments were received with regard to 909.570-8. One commenter 
objected to the proposed deletion of the provision for the general 
organizational conflicts of interest clause at 952.209-71. The 
commenter illustrated its position by referring to ``standard 
architect-engineer/construction services, where disclosures are 
routinely required (both for prime contracts and subcontracts) where 
there are no relevant facts which could give rise to an organizational 
conflict of interest and the contractor warrants that this is the 
case.'' We believe that generally a standard A-E contract, that is, a 
contract for design services, would not be subject to organizational 
conflicts of interest processing. Certainly, a requirement for 
technical consulting or management support services or evaluation 
services or activities involving an A-E firm would be covered, as it 
would for any entity. Were the requirement subject to OCI processing, 
the fact that the offeror represented that it had no relevant facts to 
disclose would have no bearing on which clause to use.
    We are deleting the clause formerly at 952.209-71. The clause was 
an abbreviated version of the special clause. It (1) did not extend to 
affiliated entities of the contractor, (2) did not contain the bars in 
paragraphs (b)(1) and (b)(2) of the special clause, and (3) did not 
contain the prohibition against award of OCI covered subcontracts 
without the determination by the DOE contracting officer as to the 
proposed subcontractor's organizational conflicts of interest. We 
believe these omissions to be meaningful in the administration of the 
clause, and, the omission was not appropriate for contracts that are 
subject to organizational conflicts of interest processing.
    The second commenter suggests the substitution of the word 
``duration'' for ``time period'' as it appears in the last sentence of 
909.570-8(b)(5) because ``duration'' may ``tie to a completion of an 
activity rather than a date.'' We agree and have made the change.
6. ``Little or no Likelihood''
    Five commenters have proposed changes to 909.570-9. The first 
suggests that the phrase ``or other means'' which was proposed to be 
added to subparagraph (a)(3) also be added to subparagraph (a)(2) for 
consistency's sake. We have made this change but differently than 
suggested. The phrase has been added to subparagraph (a)(2), and the 
phrase ``by an appropriate contract clause or other means'' has been 
deleted from subparagraph (a)(3).
    The other four commenters object to the proposed statement ``[i]f 
the contracting officer determines that there is more than little or no 
likelihood of an organizational conflict of interest, then an 
organizational conflict of interest exists with regard to that 
particular offeror.'' The commenters express the view that the term 
``more than little or no likelihood'' should be defined.
    First, the previous proposed sentence states that a basic concept 
of the Department's organizational conflicts of interest system is that 
an organizational conflict of interest does not exist if there is 
``little or no likelihood'' of an organizational conflict of interest 
in the performance of the contract by the particular offeror being 
evaluated. That test is taken from sec. 401 of Pub. L. 95-39 (42 U.S.C. 
5918(b)). The sentence preceding the sentence in question makes that 
point clear.
    The sentence that has been objected to then states the obverse, 
i.e., that, therefore, facts that indicate a larger likelihood of an 
organizational conflict than ``little or no likelihood'' then indicates 
the existence of an organizational conflict of interest with respect to 
the performance of the contract by the particular offeror being 
evaluated. These concepts are, like so many other legal and regulatory 
concepts, imprecise. The statute does not define the phrase ``little or 
no likelihood,'' nor do we believe that any attempt by ourselves or 
others would make it more precise. We believe that facts may exist with 
respect to the offeror that could indicate a possibility, i.e., 
``little likelihood,'' of an organizational conflict and yet the 
contracting officer not be bound to find one. In other words, the test 
does not require the absolute absence of possibility.
    With this background, the sentence objected to is merely stating 
the other side of the proposition, which has always been the case. If 
the contracting officer determines that there is more than a ``little 
likelihood'' of an organizational conflict of interest, then one exists 
for the purpose of the DOE system, with the result that award may not 
be made unless the risk is reduced to the level of ``little 
likelihood'' or ``no likelihood'' by some manner of mitigation or that 
the statutorily required determination is made that award is in the 
public interest and that determination is published in the Federal 
Register in accordance with 909.570-9(a)(3). We believe that no 
definition of the phrase ``more than little or no likelihood'' is 
necessary. It merely describes the situation in which the contracting 
officer cannot reasonably say that there is ``little or no likelihood'' 
of an organizational conflict of interest with respect to the statement 
of work by a particular offeror.
    One commenter did not agree with the proposed changes made at 
909.570-10, wanting to retain the current language. We believe the 
proposed changes are more accurate than the current language and will 
be of greater assistance to contracting officers in the consideration 
of OCI situations occurring after contract award. We have, therefore, 
adopted the proposed changes in the final rule.
7. Subcontracts
    Two commenters objected to the proposed change at 909.570-12 which 
deleted the phrase ``except that subcontractors shall not normally be 
required to submit the disclosure or representation if such subcontract 
is for supplies.'' The commenters believe that this deletion creates an 
uncertainty as to the intended meaning and that the deletion might 
suggest that the organizational conflicts of interest system might, in 
fact, apply to subcontracts for supplies.
    We disagree. The system applies per se to those prime contracts and 
subcontracts that involve the providing of evaluation services or 
activities or technical consulting and management support services. 
This point is made clear in the proposed rule at 909.570-12 following 
the deletion of the phrase noted above by the addition of the phrase 
``i.e., evaluation services or activities or technical consulting and 
management support services.'' A similar clarifying change has been 
made to paragraph (d)(1) of the clause at 952.909-72.
    We believe that the DOE OCI system would apply to prime contracts 
or subcontracts for supplies only in the rarest instance. We made this 
change because we believe that the former language of DEAR 909.570-11 
presented a greater danger of misapplication of the DOE OCI system to 
subcontracts for supplies than the revision resulting from this final 
rule.
8. Solicitation Provision
    Five commenters disagreed with the proposed altering of the 
disclosure requirement in paragraph (a)(1) of the solicitation 
provision at 952.209-70. The change that appears there would require 
the disclosure of ``all relevant facts * * * relating to the work 
described in the statement of work of this solicitation.'' In the 
proposed rule we deleted the phrase ``bearing on whether the offeror 
has a possible conflict of interest.'' The commenters were concerned 
that without the qualifying phrase, the disclosure obligation is less 
clear and more open-ended.
    We disagree. As explained in the preamble to the proposed rule, we 
believe the test of whether a relevant fact bears ``on whether the 
offeror has a possible conflict of interest'' adds a complicating and 
subjective test on top of a relatively simple identification of whether 
the offeror has an interest(s) that relates to the work to be performed 
under the statement of work. We do not agree that this change results 
in an open-ended obligation to provide data. In order to identify 
relevant facts that bear upon a possible conflict of interest, the 
offeror must first identify relevant facts and then determine whether 
any of those facts, in its mind, bear upon a possible conflict of 
interest. This change merely does away with the second step. Relevant 
facts intuitively are those that relate to the statement of work, e.g., 
investments involving the technology, licensing agreements involving 
the technology, client relationships involving work like the work to be 
performed.
    One commenter questioned the requirement for the offeror to provide 
a copy of the Securities and Exchange Commission's Form 10k, if it is 
required to file one. DOE's internal OCI procedures have called for 
contracting officers to acquire a copy of the Form 10k for over ten 
years. This comes under the statutory language ``information otherwise 
available.'' It, along with the annual report, or comparable 
information from privately held corporations, is used to confirm the 
disclosure or representation of the offeror.
    This change assures that the Form 10k will be forthcoming with the 
proposal, thereby saving time in acquiring the report. It is a report 
that is publicly available, for its intended purpose is to allow those 
who choose to avail themselves of it to make informed investment 
decisions. This is not a report that must be created in any way for 
submission to DOE. That commenter suggested that the contracting 
officer acquire the Form 10k from the Securities and Exchange 
Commission. We disagree. The offeror is in the best position to know 
whether it has the obligation to file it with the SEC and to provide 
it, if they have filed it with the SEC.
    We are, however, simplifying the requirement such that the offeror 
need supply only the form and a list of attachments, rather than filing 
the attachments themselves.
    One commenter noted that the exclusion of the clause at 952.209-71 
will result in the use in all cases of the clause at 952.209-72, with 
the latter subjecting ``all work to the bar.'' We agree, but each of 
the bars is conditional. If the qualifying condition does not occur 
then no bar is effective, even if the OCI clause is used.
    Two commenters questioned the substitution of ``meaningfully'' for 
``substantially'' in paragraph (g) of the clause at 952.209-72 with 
regard to the submission of a new or updated disclosure or 
representation if the period of performance is extended. We have used 
the current term and have deleted ``meaningfully'' from the rule. We 
have, however, added the phrase ``an option is to be exercised or the 
period of performance is otherwise significantly increased.'' This 
makes the provision consistent with the regulation at 909.570-5(b).
9. OCI Clause
    Five commenters disagreed with the proposed changes to paragraph 
(c)(1) of the clause at 952.209-72. In that paragraph the post award 
obligation to disclose was clarified and made consistent with the 
change that calls for the offeror to disclose relevant facts. The 
previous language in paragraph (c)(1) required the contractor to 
disclose conflicts of interest that it discovers after award. Under the 
current language, in order to discover a conflict of interest, the 
offeror will have had to identify the interest initially and then judge 
whether that change presents a conflict of interest.
    We believe that the proposed change simplifies this obligation. 
Only the change in facts, i.e., additional interests, changes in 
disclosed interests, will need to be identified by the contractor. The 
contracting officer will then be in a situation to evaluate the 
implications of the change in relevant facts on continued performance 
under the contract. To the extent that the contractor fulfills its 
obligations under this paragraph, the conditions for required 
disclosure under paragraph (g) will be dramatically reduced.
    The essence of the concerns expressed here parallel those discussed 
earlier with regard to the change to the disclosure requirement, i.e., 
that the requirement has been made vaguer. We disagree. The obligation 
to describe relevant interests alone is simpler and requires less 
judgment by the offeror or contractor than the additional judgment as 
to which, if any, of those relevant facts, bear upon a possible 
organizational conflict of interest.
    Three commenters then did not agree with the related changes 
proposed to be made to paragraph (c)(2), which states that a failure to 
report relevant interests known at the time of disclosure or 
representation may result in the termination of the contract for 
default. The current paragraph (c)(2) states that the termination for 
default may result where an organizational conflict of interest was 
known but not reported. We believe that the changed language presents 
the contractor with less risk than the current language. The 
determination of organizational conflict of interest is inherently more 
subjective than the mere identification of relevant interests.
    The final comment noted that the new title for the clause at 
970.5204-36 contained a typographical error with the inclusion of 
``of'' after ``University.'' We have made this correction.

II. Procedural Requirements

A. Review Under Executive Order 12866

    The Department of Energy has determined that today's regulatory 
action is not 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 12778

    Section 2 of Executive Order 12778 instructs each agency to adhere 
to certain requirements in promulgating new regulations and reviewing 
existing regulations. These requirements, set forth in sections 2(a) 
and (b)(2), include eliminating drafting errors and needless ambiguity, 
drafting the regulations to minimize litigation, providing clear and 
certain legal standards (whether they be engineering or performance 
standards), and promoting simplification and burden reduction. Agencies 
are also instructed to make every reasonable effort to ensure that the 
regulation: specifies clearly any preemptive effect, effect on existing 
Federal law or regulation, and retroactive effect; describes any 
administrative proceedings to be available prior to judicial review and 
any provisions for the exhaustion of such administrative proceedings; 
and defines key terms. This final rule will have no preemptive effect; 
will not have any effect on existing Federal laws; and will only 
clarify the existing regulations on this subject. The revised clauses 
will apply only to contracts which are awarded after the effective date 
of the final rule, and, thus, will have no retroactive effect. 
Therefore, DOE certifies that this final rule meets the requirements of 
sections 2(a) and (b) of Executive Order 12778.

C. Review Under the Regulatory Flexibility Act

    This final rule was reviewed under the Regulatory Flexibility Act 
of 1980, Pub. L. 96-354, 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. 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 collection or recordkeeping requirements are 
imposed by this rulemaking. Accordingly, no OMB clearance is required 
by the Paperwork Reduction Act of 1980 (44 U.S.C. 3501, et seq.).

E. 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, and in the 
distribution of power and responsibilities among various levels of 
government. If there are sufficient substantial direct effects, then 
the Executive Order requires preparation of a federalism assessment to 
be used in all decisions involved in promulgating and implementing a 
policy action.
    Today's final rule revises certain policy and procedural 
requirements. However, DOE has determined that none of the revisions 
will have a substantial direct effect on the institutional interests or 
traditional functions of States.

F. Review Under the National Environmental Policy Act (NEPA)

    DOE has concluded that this rule falls into a class of actions 
(categorical exclusion A5) that are categorically excluded from NEPA 
review because they would not individually or cumulatively have 
significant impact on the human environment, as determined by the 
Department's regulations (10 CFR Part 1021, Subpart D) implementing the 
National Environmental Policy Act of 1969 (42 U.S.C. 4321, 4331-4335, 
4341-4347 (1976)). Therefore, this rule does not require an 
environmental impact statement or an environmental assessment pursuant 
to NEPA.

List of Subjects in 48 CFR Parts 909, 952, 970

    Government procurement.

    For the reasons set out in the preamble, Chapter 9 of Title 48 of 
the Code of Federal Regulations is amended as set forth below.

    Issued in Washington, D.C., on December 12, 1994.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.

PART 909--CONTRACTOR QUALIFICATIONS

    1. The authority citation for Part 909 continues to read as 
follows:

    Authority: 42 U.S.C. 7254; 40 U.S.C. 486(c).

Subpart 909.5--Organizational Conflicts of Interest

    2. Section 909.500 is amended by adding the following as the second 
sentence:


Sec. 909.500  Scope of subpart.

* * * However, the coverage at FAR subpart 9.5 regarding marketing 
consultants does apply to DOE acquisitions.

    3. Section 909.570-3 is amended by revising the definitions for 
``Evaluation services or activities,'' ``Organizational conflicts of 
interest,'' and ``Technical consulting and management support 
services'' to read as follows:


Sec. 909.570-3  Definitions.

* * * * *
    Evaluation services or activities means any work or effort 
involving the independent study of technology, process, product, or 
policy.
* * * * *
    Organizational conflicts of interest means that a relationship or 
situation exists whereby an offeror or a contractor (including chief 
executives and directors, to the extent that they will or do become 
involved in the performance of the contract, and proposed consultants 
or subcontractors where they may be performing services similar to the 
services provided by the prime) has past, present, or currently planned 
interests that relate to the work to be performed under a Department 
contract and such interest or interests may reasonably (1) diminish an 
offeror's or contractor's capacity to give impartial, technically 
sound, objective assistance and advice, or (2) result in an offeror's 
or contractor's being given an unfair competitive advantage. It does 
not include the normal flow of benefits from the performance of the 
contract.
* * * * *
    Technical consulting and management support services means any work 
or effort to provide internal assistance to any program element or 
other organizational component of the Department in the formulation or 
administration of its programs, projects, or policies. Such services 
typically include assistance in the preparation of program plans; 
evaluation, monitoring, or review of other contractors' activities or 
proposals submitted by prospective contractors; preparation of 
preliminary designs, specifications, or statements of work; and may 
involve the contractor's being given access to data confidential to the 
Department or proprietary to others.
    4. Section 909.570-4 is amended by revising the last sentence of 
paragraph (a) and by revising paragraphs (b)(4) and (b)(7) to read as 
follows:


909.570-4  Criteria for recognizing organizational conflicts of 
interest.

    (a) * * * While it is difficult to identify, and to prescribe in 
advance, a specific method for avoiding all the various situations or 
relationships which might involve potential organizational conflicts of 
interest, Department personnel must pay particular attention to 
proposed contractual requirements which call for the rendering of 
advice, or consultation or evaluation services, or similar activities 
that are expected to play a part in the Department's decisions on 
future acquisitions; research, development, and demonstration programs; 
production activities; the formulation of departmental policy; and 
regulatory activities.
    (b) * * *
    (4) Contract performance involving access to information 
proprietary to third parties which cannot lawfully be used for purposes 
other than those authorized by those third parties.
* * * * *
    (7) Contract performance involving the preparation and furnishing 
of advice to the Department on a regulatory matter where the contractor 
would be regulated or is providing, or is currently planning to 
provide, assistance on the same or similar matter to any organization 
regulated by the Department.
* * * * *
    5. Section 909.570-5 is revised to read as follows:


909.570-5  Disclosure of organizational conflicts of interest.

    (a) When submitting solicited and unsolicited proposals for (1) 
evaluation services or activities; (2) technical consulting and 
management support services; (3) research and development conducted 
pursuant to the authority of the Federal Energy Administration Act of 
1974 (Pub. L. 93-275), as amended; and (4) other contractual situations 
where special organizational conflicts of interest provisions are noted 
in the solicitation and included in the resulting contract, offerors 
shall be required to identify and disclose information about contracts, 
investments, and all other interests relating to the work to be 
performed under the proposed contract or complete the representation in 
accordance with 909.570-7.
    (b) This requirement shall also apply to modifications of contracts 
of the types noted in paragraph (a) of this section that exercise an 
option or otherwise meaningfully extend the period of performance or 
add work, of the type noted in paragraph (a), to the contract. Where, 
however, a disclosure statement of the type required by the 
Organizational Conflicts of Interest Disclosure or Representation 
provision has previously been submitted with regard to the contract 
being modified, only an updating of such statement need be submitted. 
Information submitted by offerors pursuant to the disclosure 
requirement shall be treated by the Department, to the extent permitted 
by law, as confidential information to be used solely for OCI purposes.
    (c) When the Government finds that an organizational conflict of 
interest exists or may exist with respect to an offeror or contractor, 
no award of a contract or contract modification covered by 909.570-7 
shall be made until the organizational conflict of interest has been 
avoided, except as provided in 909.570-9. An organizational conflict of 
interest has been avoided when corrective actions taken to remedy it 
result in there being little or no likelihood of an organizational 
conflict of interest.
    6. Section 909.570-6 is revised to read as follows:


909.570-6   Notices and representations: Action required of contracting 
officers.

    The disclosure or representation required by 909.570-7 is designed 
to alert the contracting officer to situations or relationships which 
may constitute either present or anticipated organizational conflicts 
of interest with respect to a particular offeror or contractor. Another 
type of organizational conflict of interest may exist in that work to 
be performed will lead to a subsequent requirement with the result that 
the successful proposer on the current solicitation will be barred by 
operation of paragraph (b)(1)(i) of the clause at 952.209-72 from 
proposing on the later solicitation. Accordingly, whenever such 
potential conflicts are foreseeable by the Government, a special notice 
also shall be included in the solicitation informing the offerors (a) 
that such a potential conflict is foreseen and (b) of any special 
contract clause or provision designed to avoid or mitigate such 
conflict that will be included in any resultant contract as required by 
909.570-8(a). Such notice shall specify the proposed extent and 
duration of any special restrictions to be imposed with respect to 
participation in subsequent acquisitions. A fixed term of reasonable 
duration is measured by the time required to eliminate what would 
otherwise constitute an unfair competitive advantage. In the event a 
contractor, having performed on one contract, later seeks work that 
stems or may be deemed to stem directly (i.e., arising out of or 
relating to) from prior performance, such contractor shall not be 
precluded from proposing on follow-on work unless the prior contract 
contained an appropriate follow-on restriction. Nevertheless, this 
absence of restriction shall not preclude the contracting officer from 
finding that, in light of performance of the prior contract, an 
organizational conflict of interest would or may exist.
    7. Section 909.570-7 is revised to read as follows:


909.570-7  Disclosure or representation.

    The contracting officer shall include the provision at 952.209-70, 
Organizational Conflicts of Interest-Disclosure or Representation, in 
all solicitations, including those for scope modifications, and 
offerors shall accordingly disclose or represent in their proposals, 
including unsolicited proposals for (a) evaluation services or 
activities; (b) technical consulting and management support services; 
(c) research and development conducted pursuant to the authority of the 
Federal Energy Administration Act of 1974 (Pub. L. 93-275), as amended; 
and (d) other contractual situations where special organizational 
conflicts of interest issues are identified. Section 909.570-15 of this 
part contains a suggested outline for the disclosure submission.
    8. Section 909.570-8 is revised to read as follows:


909.570-8   Contract clauses.

    (a) Special contract clause. The contracting officer shall include 
the clause at 952.209-72, Organizational Conflicts of Interest, in all 
contracts for evaluation services or activities or technical consulting 
and management support services.
    (b) Specially drafted contract clauses and provisions. If it is 
determined from the nature of the proposed contract that a specifically 
identified, potential organizational conflict of interest may exist, 
the contracting officer may determine that such conflict can be avoided 
through the use of an appropriate specially drafted additional contract 
clause. Examples of the types of clauses which may be employed include, 
but are not limited to, the following:
    (1) Hardware exclusion clauses which prohibit the contractor's 
acceptance of production contracts following a related design contract 
previously performed by the contractor;
    (2) Software exclusion clauses;
    (3) Clauses which require the contractor (and/or certain of its key 
personnel) to avoid conduct deemed to cause an organizational conflict 
of interest;
    (4) Clauses which provide for the protection of the confidentiality 
of data and guard against its unauthorized use; and
    (5) Clauses that prohibit other segments or divisions of the 
contractor from becoming involved in the performance of the contract 
work or being in a position to influence such work. If deemed 
appropriate, the prospective contractor may be given the opportunity to 
negotiate the terms and conditions of the clause and its application 
including the extent and duration of any restrictions.
    9. Section 909.570-9 is amended by revising the introductory text 
of paragraph (a) to read as follows and adding the phrase ``or other 
means'' after ``by an appropriate contract clause'' in the first 
sentence of paragraph (a)(3):


909.570-9  Evaluations, findings, and contract award.

    (a) The contracting officer shall evaluate all relevant facts 
submitted by an offeror pursuant to the requirement of 909.570-6 and 
such other relevant information as may be available concerning possible 
organizational conflicts of interest. After evaluation of all such 
information in accordance with the criteria of 909.570-4, and prior to 
any award, the contracting officer shall make a finding as to whether a 
possible organizational conflict of interest may exist with respect to 
a particular offeror. If the contracting officer determines, in light 
of all relevant facts, that, with respect to a particular offeror, 
there is little or no likelihood of an organizational conflict of 
interest, then no organizational conflict of interest exists for 
purposes of making the contract award. Conversely, if the contracting 
officer determines, however, that there is more than little or no 
likelihood of an organizational conflict of interest, then an 
organizational conflict of interest exists with regard to that 
particular offeror. When formal Source Evaluation Board procedures are 
applicable, the finding shall be made by the Source Selection Official. 
If the finding indicates that such conflicts exist, then the 
contracting officer shall:
* * * * *
    10. Section 909.570-10 is revised to read as follows:


909.570-10  Action in lieu of termination.

    If, after award, changes in relevant facts with respect to the 
awardee, whether based upon information supplied by the awardee or 
gathered from other sources, cause the contracting officer to conclude 
that a organizational conflict of interest exists and that it would not 
be in the best interest of the Government to terminate the contract as 
provided in the clause at 952.209-72(e), the contracting officer shall 
take every reasonable action to avoid or mitigate the effects of the 
conflict.
    11. Section 909.570-12 is revised to read as follows:


909.570-12  Subcontractors and consultants.

    The contracting officer shall require offerors and contractors to 
obtain for the Department a disclosure or representation in accordance 
with 909.570-7 from subcontractors and consultants whose subcontract 
calls for the performance of services similar to those provided by the 
prime contractor, i.e., evaluation services or activities or technical 
consulting and management support services. Such disclosure or 
representation may be submitted by the subcontractors and consultants 
directly to the contracting officer, and their disclosure or 
representation shall be treated by the Department, to the extent 
permitted by law, as confidential information to be used solely for OCI 
purposes. The contract clause at 952.209-72, entitled Organizational 
Conflicts of Interest, requires that the contractor (and each 
succeeding lower tier subcontractor) include that clause in 
subcontracts or consultant agreements involving work covered by this 
subpart.
    12. Section 909.570-14 is amended by revising paragraphs (b)(4), 
(b)(5), (b)(7), (b)(8), and (b)(12); by adding the word ``not'' after 
``these companies may'' in the last sentence of paragraph (b)(6); by 
replacing ``suggests'' with ``produces'' and by replacing ``in 
requests'' with ``in a request'' in the second sentence of paragraph 
(b)(9); and by adding a comma after ``OCI'' and removing the word 
``plants'' in the fourth sentence of paragraph (b)(11). These 
amendments are set forth to read as follows:


909.570-14  Examples.

* * * * *
    (b) * * *
    (4) Company A prepares updated Government specifications for a 
standard refrigerator to be procured competitively. Guidance. Normally 
this would constitute an OCI. The contract should have contained the 
OCI clause barring Company A from competing for supply of a 
refrigerator based upon the specification it prepared.
    (5) Company A designs or develops new electronics equipment under a 
DOE contract and delivers descriptive specifications as part of the 
final report. DOE then issues a solicitation for procurement of that 
electronics equipment including a statement of work that reflects the 
descriptive specifications. Guidance. Normally this would not 
constitute an OCI. The contract should have contained the OCI clause 
barring the company from competing to supply the electronics equipment.
* * * * *
    (7) Prior to acquisition of Automatic Data Processing (ADP) 
Equipment, Company A is awarded a contract to develop software to 
automate a DOE function. Guidance. This situation will turn on whether 
the software that was developed might have limited the potential source 
for the equipment. If the answer were yes, the contract should have 
contained the OCI clause barring competition for the equipment. 
However, if the software were not so limited, this would not constitute 
an OCI, and Company A would not be barred from at least the initial ADP 
hardware acquisition necessary to accommodate the software developed 
under its development contract.
    (8) Company A receives a contract to define the detailed 
performance characteristics a Government agency will use in the 
purchase of rocket fuels. The company has not developed the particular 
fuels. At the time the contract is awarded, it is clear to both parties 
that the performance characteristics arrived at will be used by the 
Government agency to choose competitively a contractor to develop the 
fuels. Guidance. Normally this would constitute an OCI, and Company A 
shall not be permitted to bid on the acquisition to develop the fuels.
* * * * *
    (12) Firm A, because of its unique technical expertise, has been 
requested to assist the Department in the evaluation of proposals which 
will result from a competitive solicitation. Firm A also plans to 
submit a proposal in response to this same solicitation. Guidance. 
Normally this would constitute a conflict, and Firm A should be 
precluded from participating in the solicitation. In a particular case, 
it may be desirable (e.g., when the competitive field is limited) to 
allow a separate division or affiliate of Firm A to submit a proposal. 
In such a case, of course, Firm A must obtain a waiver from the 
Department of Energy contracting officer and would not be permitted to 
participate in the evaluation of this proposal. Such evaluation would 
be performed by DOE or another DOE contractor.


909.570-15  [Amended]

    13. Section 909.570-15 is amended by adding the phrase ``interests 
and'' after ``currently planned'' the second time that phrase appears 
in paragraph (a).

PART 952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    14. The authority citation for part 952 continues to read as 
follows:

    Authority: 42 U.S.C. 7254; 40 U.S.C. 486(c).

    15. Section 952.209-70 is revised to read as follows:


952.209-70  Organizational conflicts of interest--disclosure or 
representation.

    Contracting officers shall insert the following provision in 
solicitations in accordance with 909.570-7.

Organizational Conflicts of Interest--Disclosure or Representation 
(Dec. 1994)

    (a) It is Department of Energy policy to avoid situations which 
place an offeror in a position where its judgment may be biased due 
to any past, present, or currently planned interest, financial or 
otherwise, that the offeror may have which relates to the work to be 
performed pursuant to this solicitation, or where the offeror's 
performance of such work may provide it with an unfair competitive 
advantage. (As used herein, ``offeror'' means the proposer or any of 
its affiliates or proposed consultants or subcontractors of any 
tier.) Therefore:
    (1) As required by section 401 of Pub. L. 95-39 (42 U.S.C. 
5918(a)) and section 10 of Pub. L. 95-70 (15 U.S.C. 789(a)), the 
offeror shall provide a statement which describes, in a concise 
manner, all relevant facts concerning any past, present, or 
currently planned interest (financial, contractual, organizational, 
or otherwise) relating to the work described in the statement of 
work of this solicitation. The offeror may also provide relevant 
facts that show how its organizational structure and/or management 
systems limit its knowledge of affiliates or other divisions or 
sections of the proposing entity and how that structure or system 
would avoid or mitigate an organizational conflict of interest.
    (2) The proposing entity shall assure that any consultants and 
subcontractors, identified in its proposal, which will perform 
services similar to those to be performed by the proposer, i.e., 
evaluation services or activities or technical consulting and 
management support services submit the same information as required 
by paragraph (a)(1) of this clause, either as part of the proposing 
entity's proposal, or directly to DOE prior to the time and date set 
for receipt of proposals, with identification of the solicitation 
and the offeror's proposal to which it relates.
    (3) The proposing entity shall also assure that each of its 
chief officers or directors, if any, who will be directly involved 
in the actual performance of the contract, submit such information.
    (4) The proposing entity shall promptly provide to the DOE 
contracting officer information concerning any changes, including 
additions, in its relevant facts reported under paragraph (a)(1) of 
this clause, that occur between the submission of its proposal and 
the award of the contract or the time that the proposer is notified 
that it is no longer under consideration for award.
    (b) In the absence of any relevant interests referred to above, 
the offeror or others specified above, shall submit a statement 
certifying that to its best knowledge and belief no such facts exist 
relevant to the work to be performed.
    (c) If the proposing entity has submitted a Securities and 
Exchange Commission Form 10k to that agency, it shall include a copy 
of the form and a list of all attachments as part of its business 
management proposal (or cost proposal if no business management 
proposal is required).
    (d) The contracting officer will review the statement submitted 
and may require the submission of additional relevant information. 
All such information, and any other relevant information known to 
the Department, will be used to determine whether an award to the 
offeror may create an organizational conflict of interest with 
respect to the offeror's (1) being able to render impartial, 
technically sound, and objective assistance or advice, or (2) being 
given an unfair competitive advantage. If such a conflict is found 
to exist, the Department, at its sole discretion, may (1) impose 
appropriate conditions which avoid such conflict, (2) disqualify the 
offeror, or (3) determine that it is otherwise in the best interest 
of the United States to contract with the offeror in face of an 
organizational conflict after including appropriate conditions 
mitigating such conflict.
    (e) The refusal to provide the disclosure or representation and 
any additional information as required shall result in 
disqualification of the offeror for award. The nondisclosure or 
misrepresentation of any relevant interest may also result in the 
disqualification of the offeror for award, or if such nondisclosure 
or misrepresentation is discovered after award, the resulting 
contract may be terminated for default. The offeror may also be 
disqualified from subsequent related Department contracts, and be 
subject to such other remedial action as may be permitted or 
provided by law or in the resulting contract. The attention of the 
offeror in complying with this provision is directed to 18 U.S.C. 
1001.
    (f) Depending on the nature of the contract activities, the 
offeror may, because of possible organizational conflicts of 
interest, propose to exclude specific kinds of work from the 
statement of work, unless the solicitation specifically prohibits 
such exclusion. Any such proposed exclusion by an offeror shall be 
considered by the Department in the evaluation of proposals, and if 
the Department considers the proposed excluded work to be an 
essential or integral part of the required work, the proposal may be 
rejected as unacceptable.
    (g) No award shall be made until the disclosure or 
representation has been evaluated by the Government. Failure to 
provide the disclosure or representation will be deemed to be a 
minor informality, and the offeror shall be required to promptly 
correct the omission.


952.209-71  [Removed and reserved]

    16. Section 952.209-71 is removed and reserved.
    17. Section 952.209-72 is amended by revising the section heading 
to read as set forth below; by revising the prescription for use of the 
clause as set forth below; by revising the title of the clause as set 
forth below; by amending the subparagraph designators of paragraph 
(b)(2)(i) of the clause to read ``(A),'' ``(B),'' ``(C),'' and ``(D),'' 
respectively; by revising paragraphs (b)(2)(iii), (c), and (d)(1) of 
the clause to read as follows; and paragraph (g) is amended by 
replacing the word ``significantly'' with ``meaningfully'' and by 
adding the phrase ``in accordance with the instructions of the 
contracting officer'' at the end of the paragraph:


952.209-72  Organizational conflicts of interest.

    The contracting officer shall include the following clause in all 
contracts for evaluation services or activities, technical consulting 
and management support services, research and development under the 
authority of the Federal Energy Administration Act, and other 
appropriate situations in accordance with 909.570-8.

Organizational Conflicts of Interest (Dec. 1994)

* * * * *
    (b) * * *
    (2) * * *
    (iii) The contractor may use technical data it first produces 
under this contract for its private purposes consistent with 
subparagraphs (b)(2)(i) (A) and (D) of this clause and the patent, 
rights in data, and security provisions of this contract.
    (c) Disclosure after award. (1) The contractor agrees that, if 
changes, including additions, to the relevant facts disclosed by it 
prior to award of this contract, occur during the performance of 
this contract, it shall make an immediate and full disclosure of 
such changes in writing to the contracting officer. Such disclosure 
may include a description of any action which the contractor has 
taken or proposes to take to avoid or mitigate any resulting 
conflict of interest. The Department may, however, terminate the 
contract for convenience if it deems such termination to be in the 
best interest of the Government.
    (2) In the event that the contractor was aware of facts relevant 
to the performance of this contract and did not disclose such facts 
to the contracting officer, DOE may terminate this contract for 
default.
    (d) Subcontracts. (1) The contractor shall include this clause, 
including this paragraph, in contracts of any tier which involve 
performance of evaluation services or activities, or technical 
consulting and management support services as those terms are 
defined at 48 CFR (DEAR) 909.570-3. The terms `contract,' 
`contractor,' and `contracting officer' shall be appropriately 
modified to preserve the Government's rights.
* * * * *

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

    18. The authority citation for part 970 continues to read as 
follows:

    Authority: Sec. 161 of the Atomic Energy Act of 1954 (42 U.S.C. 
2201), sec. 644 of the Department of Energy Organization Act, Pub. 
L. 95-91 (42 U.S.C. 7254), sec. 201 of the Federal Civilian Employee 
and Contractor Travel Expenses Act of 1985 (41 U.S.C. 420) and sec. 
1534 of the Department of Defense Authorization Act, 1986, Pub. L. 
99-145 (42 U.S.C. 7256a), as amended.


970.5204-36  [Amended]

    19. Section 970.5204-36, Organizational conflicts of interest, is 
amended by revising the section heading to read ``Preventing conflicts 
of interest in university research'' and by revising the title of the 
clause contained therein to read ``Preventing Conflicts of Interest in 
University Research (DEC 1994).''

[FR Doc. 94-31496 Filed 12-22-94; 8:45 am]
BILLING CODE 6450-01-P