[Federal Register Volume 61, Number 122 (Monday, June 24, 1996)]
[Rules and Regulations]
[Pages 32584-32587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15366]




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_______________________________________________________________________

Part V





Department of Energy





_______________________________________________________________________



48 CFR Part 917, et al.



Management and Operating Contracts; Interim Final Rule and Proposed 
Rule

  Federal Register / Vol. 61, No. 122 / Monday, June 24, 1996 / Rules 
and Regulations  

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DEPARTMENT OF ENERGY

48 CFR Parts 917 and 970

[1991-AB-09]


Acquisition Regulation; Department of Energy Management and 
Operating Contracts

AGENCY: Department of Energy.

ACTION: Interim final rule with request for comment.

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SUMMARY: The Department of Energy (DOE) today publishes an interim 
rulemaking to set forth its policy regarding the competition and 
extension of the Department's management and operating contracts. Under 
its policy, the Department affirms its commitment to provide for full 
and open competition in the award of its management and operating 
contracts, except where the Department determines that competitive 
procedures should not be used pursuant to one of the circumstances 
authorized by the Competition in Contracting Act of 1984 (41 U.S.C. 
254), as implemented in Part 6 of the Federal Acquisition Regulation. 
This rulemaking implements one of the key recommendations of the 
Department's contract reform initiative to improve its acquisition 
system.

DATES: This interim rule is effective August 23, 1996. Written comments 
should be forwarded no later than August 23, 1996.

ADDRESSES: Comments should be submitted to Connie P. Fournier, Office 
of Policy (HR-51), Department of Energy, 1000 Independence Avenue, SW, 
Washington, D.C. 20585; (202) 586-0545 (facsimile); 
[email protected] (Internet).
    The administrative record regarding this rulemaking that is on file 
for public inspection is located in the Department's Freedom of 
Information Reading Room, Room 1E-190, 1000 Independence Avenue, SW, 
Washington, DC 20585.

FOR FURTHER INFORMATION CONTACT: Connie P. Fournier at (202) 586-8245.

SUPPLEMENTARY INFORMATION:
I. Background
II. Section-by-Section Analysis
III. Procedural Requirements
    A. Review Under Executive Order 12866
    B. Review Under Executive Order 12778
    C. Review Under the Regulatory Flexibility Act
    D. Review Under the Paperwork Reduction Act
    E. Review Under Executive Order 12612
    F. Review Under the National Environmental Policy Act
IV. Public Comments

I. Background

    The Department's contracts for the management and operation of its 
facilities have historically been subject to specialized rules 
pertaining to their periodic extension. Under these rules, contained at 
Department of Energy Acquisition Regulation (DEAR) 970.0001 and 917.6, 
existing policy favored non-competitive extensions of incumbent 
contractors. Competition was permitted only when it appeared likely 
that the Government's position might be meaningfully improved in terms 
of cost or performance and only then when it was determined that to 
change a contractor would not be contrary to the best interest of the 
Government. This resulted in noncompetition as the preferential norm.
    The Department's Contract Reform Report, Making Contracting Work 
Better and Cost Less (February 1994), in recommending a number of 
changes, called for a reversal of this policy. Accordingly, the 
Department published Acquisition Letter 94-14 in the Federal Register 
(59 FR 50733), October 5, 1994, as an interim policy setting forth 
guidelines for the competition or extension of the Department's 
management and operating contracts. The interim policy established 
competition as the preferential norm. Exceptions to competition were to 
be made on a case-by-case basis, only in exceptional circumstances, and 
only when authorized by the Head of the Agency. The intent was to 
balance the positive effects of a competitive environment with the 
recognition that long-term contractual relationships can facilitate 
superior contractor performance, especially given the highly complex 
and multi-faceted work performed under management and operating 
contracts. The Department has competed, or is competing, a number of 
management and operating contracts in accordance with this interim 
policy.
    After considering the comments received in response to the interim 
policy, as set forth in Acquisition Letter 94-14, and its experience 
under that policy, the Department has concluded that certain aspects of 
the Acquisition Letter are appropriate for regulation, as modified for 
consistency with applicable law. Other aspects of the Acquisition 
Letter will be incorporated into nonregulatory internal Department 
guidance. Under the rulemaking published today, the Department affirms 
its commitment to full and open competition as the norm for its 
management and operating contracts. Exceptions to the use of full and 
open competition will be made on a case-by-case basis: (1) only in 
accordance with the circumstances authorized by the Competition in 
Contracting Act of 1984 (CICA) and Part 6 of the Federal Acquisition 
Regulation (FAR), and (2) only when authorized by the Head of the 
Agency. Adherence to the existing statutory requirements of CICA, as 
implemented in FAR Part 6, preserves a preference for competition; 
conforms the Department's decisionmaking process to noncompetitively 
award contracts with Federal-wide standards found in statute and 
regulation; and eliminates unnecessary, agency-specific regulations. 
Today's interim rule supersedes both the Department's regulation that 
created a noncompetitive norm and Acquisition Letter 94-14.
    A notice of proposed rulemaking published elsewhere in this issue 
of the Federal Register discusses changes proposed to the Department of 
Energy Acquisition Regulation to implement other contract reform 
recommendations. A third rulemaking that discusses the Department's fee 
policies for profit making and nonprofit management and operating 
contractors will be promulgated as a separate proposal. Together, these 
three rulemakings constitute the Department's regulatory implementation 
of certain key contract reform initiatives in its acquisition 
regulation.

II. Section-by-Section Analysis

    A detailed list of changes in the interim rule follows.
    1. 917.602, Policy. This section is added to prescribe the 
Department's policy to provide for full and open competition and the 
use of competitive procedures in the award of management and operating 
contracts, except as authorized by law and the Head of the Agency.
    2. 917.605, Award, renewal, and extension. This section is amended 
to remove the existing coverage at 917.605(b) that prescribes the 
Department's internal processing and documentation requirements for 
extend/compete decisions. This nonregulatory subject matter will be 
reflected in internal Department guidance. A new section 917.605(d) is 
added to provide for the conditional approval of any noncompetitive 
extension (other than an extension accomplished by the exercise of an 
option) subject to the successful achievement of the Government's 
negotiation objectives. This section also permits adequate time to 
compete the contract in the event that the negotiations cannot be 
successfully concluded.
    3. 970.0001, Renewal of management and operating contracts. This 
section is

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amended to delete the Department's previous policy that competition 
generally would be used only when it appeared likely that the 
Government's position might be meaningfully improved in terms of cost 
or performance, unless it was determined that to change a contractor 
would be contrary to the best interest of the Government. This section 
is removed and reserved for future use.
    4. 970.17, Special Contracting Methods. This subpart is added to 
provide for coverage concerning contract term and options to extend 
management and operating contracts.
    5. 970.1702-1, Contract term and option to extend. This section is 
added to provide policy guidance on (1) the total period of performance 
permitted under a management and operating contract and (2) the 
requirements governing the exercise of an option to extend the term of 
an existing contract. Paragraph (a) of the section states that 
management and operating contracts may provide for a base period of up 
to 5 years and may include an option to extend the period of 
performance for up to an additional total of 5 years. The purpose of 
permitting the inclusion of an option to extend the term of the 
contract is to facilitate long-term contractual relationships where the 
mission of the Department is best served by such an extension and to 
reward contractors for superior performance under the contract.
    Regarding the exercise of options under paragraph (b), the 
contracting officer may exercise an option to extend a competitively 
awarded contract only after assessing certain factors, including the 
contractor's past performance. The decision of the contracting officer 
must be approved by the Head of the Contracting Activity and the 
cognizant Assistant Secretary(s).
    6. 970.1701-2, Solicitation provision and contract clause. This 
section is added to provide instruction to the contracting officer on 
the application of the solicitation provision and contract clause 
pertaining to the use of options in management and operating contracts.
    7. 970.5204-73, Notice regarding option. This section is added to 
subpart 970.52, Contract clauses for management and operating 
contracts, to provide a solicitation provision for options to extend 
the term of the contract.
    8. 970.5204-74, Option to extend the term of the contract. This 
section is added to subpart 970.52, Contract clauses for management and 
operating contracts, to provide a contract clause for options to extend 
the term of the contract.

III. Procedural Requirements

A. Review Under Executive Order 12866

    This regulatory action has been determined not to be 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 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following 
requirements: (1) eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. With regard to the review 
required by section 3(a), section 3(b) of Executive Order 12988 
specifically requires that Executive agencies make every reasonable 
effort to ensure that the regulation: (1) clearly specifies the 
preemptive effect , if any; (2) clearly specifies any effect on 
existing Federal law or regulation; (3) provides a clear legal standard 
for affected conduct while promoting simplification and burden 
reduction; (4) specifies the retroactive effect, if any; (5) adequately 
defines key terms; and (6) addresses other important issues affecting 
clarity and general draftsmanship under any guidelines issued by the 
Attorney General. Section 3(c) of Executive Order 12988 requires 
Executive agencies to review regulations in light of applicable 
standards in section 3(a) and section 3(b) to determine whether they 
are met or it is unreasonable to meet one or more of them. DOE has 
completed the required review and determined that, to the extent 
permitted by law, the interim final regulations meet the relevant 
standards of Executive Order 12988.

C. Review Under the Regulatory Flexibility Act

    This rule is not subject to review under the Regulatory Flexibility 
Act of 1980, 5 U.S.C. 601, et seq., because it is not subject to a 
legal requirement to publish a general notice of proposed rulemaking.

D. Review Under the Paperwork Reduction Act

    No new information collection or recordkeeping requirements are 
imposed by this rule. Accordingly, no Office of Management and Budget 
clearance is required under the Paperwork Reduction Act of 1980 (44 
U.S.C. 3501, et seq.).

E. Review Under Executive Order 12612

    Executive Order 12612, entitled ``Federalism,'' 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 Federal Government and the 
States, or 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. The Department has 
determined that this rule will not have a substantial direct effect on 
the institutional interests or traditional functions of States.

F. Review Under the National Environmental Policy Act

    Pursuant to the Council on Environmental Quality Regulations (40 
CFR 1500-1508), the Department has established guidelines for its 
compliance with the provisions of the National Environmental Policy Act 
(NEPA) of 1969 (42 U.S.C. 4321, et seq.). Pursuant to Appendix A of 
Subpart D of 10 CFR 1021, National Environmental Policy Act 
Implementing Procedures (Categorical Exclusion A6), the Department has 
determined that this rule is categorically excluded from the need to 
prepare an environmental impact statement or environmental assessment.

IV. Public Comments

A. Written Comments

    Although the interim regulations published in this rule are not 
substantive regulations with the kind of impact that warrants prior 
notice, the Department is nevertheless providing an opportunity for 
public comment. Interested persons are invited to participate by 
submitting data, views, or arguments with respect to the DEAR 
amendments set forth in this rule. Three copies of written comments 
should be submitted to the address indicated in the ADDRESSES section 
of this rule. In addition, it is requested that you provide a copy of 
your comments on a

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WordPerfect 6.1 or ASCII diskette. Comments may be sent to the Internet 
address in the ADDRESSES section of this rule instead of the written 
copies and diskette, provided they are transmitted in a WordPerfect 6.1 
compatible format and include the name, title, organization, postal 
address, and Internet address with the text of the comments. All 
comments received will be available for public inspection in the 
Department of Energy Reading Room, 1E-190, Forrestal Building, 1000 
Independence Avenue, SW., Washington, D.C. 20585, between the hours of 
9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. All 
written comments received on or before the date specified in the 
beginning of this rule and all other relevant information will be 
considered by the Department before taking final action. Comments 
received after that date will be considered to the extent that time 
allows. Any person submitting information which that person believes to 
be confidential and which may be exempt from public disclosure should 
submit one complete copy, as well as an additional copy from which the 
information claimed to be confidential has been deleted. The Department 
reserves the right to determine the confidential status of the 
information or data and to treat it according to its determination. The 
Department's generally applicable procedures for handling information 
which has been submitted in a document and may be exempt from public 
disclosure are set forth in 10 CFR 1004.11.

B. Public Hearing Determination

    The Department has concluded that this rule does not involve any 
significant issues of law or fact. Therefore, consistent with 5 U.S.C. 
553, the Department has not scheduled a public hearing. However, a 
public hearing will be held on the notice of proposed rulemaking 
published elsewhere in this issue of the Federal Register on other 
contract reform changes proposed to the Department of Energy 
Acquisition Regulation. Any person who has an interest in those 
proposed contract reform changes may request an opportunity to make an 
oral presentation in accordance with the procedures described in that 
rulemaking.

List of Subjects in 48 CFR Parts 917 and 970

    Government procurement.

    Issued in Washington, D.C., on June 7, 1996.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.

    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:

PART 917--SPECIAL CONTRACTING METHODS

    1. The authority citation for Part 917 continues to read as 
follows:

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

    2. Subpart 917.6, Management and Operating Contracts, is amended to 
add new section 917.602, Policy, to read as follows:


917.602   Policy.

    (a) It is the policy of the Department of Energy to provide for 
full and open competition in the award of management and operating 
contracts, including performance-based management contracts.
    (b) A management and operating contract may be awarded or extended 
at the completion of its term without providing for full and open 
competition only when such award or extension is justified under one of 
the statutory authorities identified in FAR 6.302 and only when 
authorized by the Head of the Agency. Documentation and processing 
requirements for justifications for the use of other that full and open 
competition shall be accomplished in accordance with internal agency 
procedures.
    3. Section 917.605 is revised to read as follows:


917.605   Award, renewal, and extension.

    Conditional Authorization of Non-competitive Extension Made 
Pursuant to Authority Under CICA. 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 Procurement Executive 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.

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

    4. 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, Public 
Law 95-91 (42 U.S.C. 7254).


970.0001   [Removed and reserved]

    5. Section 970.0001 is removed and reserved.
    6. Subpart 970.17, Special contracting methods, is added to read as 
follows:

970.17  Special contracting methods.
970.1702-1  Term of contract and option to extend.
970.1702-2  Solicitation provision and contract clause.


970.1702-1   Term of contract and option to extend.

    (a) Contract term. Effective work performance under a management 
and operating contract is facilitated by the use of a relatively long 
contract term of up to ten (10) years. Accordingly, management and 
operating contracts shall provide for a basic contract term not to 
exceed five (5) years and may include an option(s) to extend the term 
for additional periods; provided, that no one option period exceeds 
five (5) years in duration and the total term of the contract, 
including any options exercised, does not exceed ten (10) years. The 
specific term of the base period and of any options periods shall be 
determined at the time of the authorization to compete or extend the 
contract. The term ``option'' as used herein means a unilateral right 
in the contract by which the Government can extend the term of the 
contract. Accordingly, except as may be provided for through the 
inclusion of an option(s) in the contract to extend the term, any 
extension to continue the contract with the incumbent contractor beyond 
its term shall only occur when such extension can be justified under 
one of the statutory authorities identified in FAR 6.302 and when 
authorized by the Head of the Agency.
    (b) Exercise of option. 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 exercising 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 
Procurement Executive and the cognizant Assistant Secretary(s).

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970.1702-2   Solicitation provision and contract clause.

    (a) The contracting officer shall insert a provision substantially 
the same as the provision at 48 CFR (DEAR) 970.5204-73, Notice 
Regarding Options, in solicitations when the inclusion of an option to 
extend the term of the contract has been authorized.
    (b) The contracting officer shall insert the clause at 48 CFR 
(DEAR) 970.5204-74, Option to extend the term of the contract, when the 
inclusion of an option to extend the term of the contract has been 
authorized.
    7. Subpart 970.52 is amended by adding sections 970.5204-73, Notice 
regarding options, and 970.5204-74, Option to extend the term of the 
contract, to read as follows:


970.5204-73   Notice regarding options.

    As prescribed in 48 CFR (DEAR) 970.1702-2(a), insert the following 
provision:

Notice Regarding Options (June 1996)

    The contract resulting from this solicitation is expected to 
include one or more options to extend the term of the contract. 
Exercise of any option to extend the term of contract will be at the 
unilateral right of the Department of Energy. The contractor's 
performance under the basic contract, including any previously 
exercised options, will be among the significant considerations in 
the Department's decision to exercise any option.


970.5204-74   Option to extend the term of the contract.

    As prescribed in 48 CFR (DEAR) 970.1702-2(b), insert the following 
clause:

Option to Extend the Term of The Contract (June 1996)

    (a) The Department of Energy may unilaterally extend the term of 
this performance-based management contract by written notice to the 
contractor within [Insert the period of time in which the 
contracting officer has to exercise the option]; provided, that the 
Department of Energy shall give the contractor a preliminary written 
notice of its intent to extend at least twelve (12) months before 
the basic term of the contract expires. The preliminary notice does 
not commit the Department of Energy to an extension.
    (b) The option(s) to extend the contract is identified in 
[Specify section of contract and clause number and name] of the 
contract. The Department of Energy may exercise any, or all, of the 
options identified in the contract. The total duration of this 
contract, including the exercise of any option(s) under this clause, 
shall not exceed 120 months.

[FR Doc. 96-15366 Filed 6-21-96; 8:45 am]
BILLING CODE 6450-01-P