[Federal Register Volume 62, Number 107 (Wednesday, June 4, 1997)]
[Proposed Rules]
[Pages 30558-30563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14289]


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DEPARTMENT OF ENERGY

48 CFR Parts 932 and 970

RIN 1991-AB29


Acquisition Regulation: Contract Financing; Management and 
Operating Contracts

AGENCY: Department of Energy.

ACTION: Proposed rule.

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SUMMARY: The Department of Energy (DOE) proposes to amend its 
Acquisition Regulation to incorporate coverage required by the Federal 
Acquisition Streamlining Act of 1994. These amendments will clarify the 
allowability of costs reimbursed under Department of Energy contracts 
and establishes the responsibilities of the remedy coordination 
official within the Department.

DATES: Written comments must be submitted no later than August 4, 1997.

ADDRESSES: Comments should be addressed to: Terrence D. Sheppard, 
Office of Policy (HR-51), Office of Procurement and Assistance 
Management, Department of Energy, 1000 Independence Avenue S.W., 
Washington, D.C. 20585.

FOR FURTHER INFORMATION CONTACT: Terrence D. Sheppard (202) 586-8193.

SUPPLEMENTARY INFORMATION:

I. Background
II. Section by Section Analysis
III. Public Comments
IV. Procedural Requirements
A. Review Under Executive Order 12866
B. Review Under Executive Order 12988
C. Review Under the Regulatory Flexibility Act
D. Review Under the Paperwork Reduction Act
E. Review Under the National Environmental Policy Act
F. Review Under Executive Order 12612

I. Background

    This notice proposes to amend the Department of Energy Acquisition 
Regulation based on provisions in Sections 2051, 2151, and 2192 of the 
Federal Acquisition Streamlining Act of 1994 (the Act). These 
amendments establish: certification of cost submissions and assessment 
of penalties on unallowable costs; a remedy coordination official for 
payment requests suspected to be based on substantial evidence of 
fraud; parameters for resolution of questioned costs; guidance for 
application of cost principles; general prohibitions on severance 
payments to foreign nationals and compensation costs associated with a 
change in management control or ownership; clarification of employee 
morale, recreation, entertainment, executive branch lobbying, company 
furnished automobiles, and insurance costs which protect the contractor 
against defects in material or workmanship.
    This rulemaking is intended to make only these specific changes. 
Additional rulemakings will address other aspects of the Act. On June 
24, 1996, the Department of Energy published in the Federal Register 
(61 FR 32588) a notice of proposed rulemaking which also proposed 
changes to sections 970.3101-3, 970.5204-13, and 970.5204-14. Nothing 
in this proposed rulemaking conflicts with the proposed rulemaking of 
June 24, 1996.

II. Section by Section Analysis

    1. The authority for Part 932 is restated.
    2. Section 932.006-4, Procedures, is added which identifies the 
procedures the remedy coordination official within DOE shall follow.
    3. The authority for Part 970 is restated.
    4. Section 970.25 is added which provides the criteria under which 
the Head of the Contracting Activity (HCA) may waive the severance 
payment prohibitions at 970.3102-2(i)(2)(iv) and (v) and further 
directs the contracting officer to include a new solicitation provision 
970.5204-XX addressing waiver of the restrictions which apply to 
foreign nationals' severance payments.
    5. Section 970.3101-3 is amended by adding new paragraphs (b), (c), 
and (d). These new paragraphs establish requirements for the 
contracting officer to address the resolution of questioned costs; the 
documentation of questioned costs; and the attendance of the 
Department's auditor at negotiations, respectively.
    6. Section 970.3101-7 is added to state the requirements for 
contractor certification of submissions for settlement of costs, 
penalties associated therewith, waiver provisions, and the prescribed 
contract clause.
    7. Section 970.3102 is amended by designating the existing 
paragraph as (a) and adding a new paragraph (b) which provides guidance 
on applicability of the various cost principles.
    8. Section 970.3102-2 is amended in paragraphs (i)(2) by adding a 
sentence at the end of the existing text to refer to new paragraphs 
(2)(iv) and (v); new paragraphs (2)(iv) and (v) are added which address 
severance payment for foreign nationals; new paragraph (vi) is added 
which refers the reader to 970.25 for the waiver criteria; and new 
paragraph (p) is added which makes unallowable those compensation costs 
associated with a change in management control or ownership.
    9. Section 970.3102-5, Employee morale, health, welfare, food 
service, and dormitory costs, is amended in paragraph (a) to add 
wellness/fitness centers and delete the word ``recreation''; a new 
paragraph (b) is added which addresses the allowability of recreation 
costs; existing paragraphs (b), (c), (d), and (e) are relabeled as (c), 
(d), (e), and (f), respectively; and cross references are revised.
    10. 970.3102-7, Legislative lobbying costs, is retitled as 
Political activity costs. The existing paragraph is rewritten and a 
paragraph has been added to also make unallowable the costs associated 
with executive branch lobbying.
    11. 970.3102-17(b) is retitled as ``Government-owned, commercial 
rental, and company-furnished vehicles'' and a new paragraph (3) is 
added which reflects the addition of

[[Page 30559]]

coverage addressing the allowability of company-furnished automobiles.
    12. 970.3103 is amended in paragraph (b) to reflect the new title 
of 970.3102-7.
    13. Section 970.3272, Reduction or suspension of advance, partial, 
or progress payments, is added which prescribes the DOE policies and 
procedures to be followed upon finding substantial evidence of fraud.
    14. Section 970.5204-13 is amended as follows: paragraph (d)(8)(iv) 
is revised by adding ``wellness/fitness centers'' at the end of the 
sentence; paragraph (e)(11) is revised by removing the coverage on 
recreation costs which is moved to a new paragraph (38); paragraph 
(e)(31) is revised to reflect the addition of executive branch lobbying 
costs as unallowable; new paragraph (e)(37) is added which adds gifts 
to the list of unallowables and states that employee achievement and 
recognition costs are not gifts; and paragraph (e)(38) is added to 
address the allowability of recreation costs.
    15. Section 970.5204-14 is amended as follows: paragraph (d)(8)(iv) 
is revised by adding ``wellness/fitness centers'' at the end of the 
sentence; paragraph (e)(9) is revised by removing the coverage on 
recreation costs which is moved to a new paragraph (e)(36); paragraph 
(e)(29) is revised to make executive branch lobbying costs unallowable; 
new paragraph (e)(35) adds gifts to the list of unallowables and states 
that employee achievement and recognition costs are not gifts; and new 
paragraph (e)(36) is added to address the allowability of recreation 
costs.
    16. Section 970.5204-16 is amended to state the requirement for 
contractor certification of submissions for settlement of costs; NOTES 
3 and 4 are deleted; and the existing paragraph (e) is redesignated as 
(e)(i) for integrated management and operating contractors and a new 
(e)(ii) is created for nonintegrated contractors.
    17. Section 970.5204-17 is amended by retitling as Political 
activity costs. A new paragraph (6) is added which makes unallowable 
the costs associated with attempts to influence executive branch 
actions.
    18. A new solicitation provision and contract clause are added at 
970.5204-XX. The solicitation provision states that the HCA has waived 
the restrictions on foreign nationals' severance payments. The 
alternate 1, contract clause, states that the HCA will consider waiving 
the restrictions on foreign nationals' severance payments.
    19. A new clause 970.5204-YY, Reduction or suspension of advance, 
partial, or progress payments, is added which prescribes the DOE 
policies and procedures to be followed upon finding substantial 
evidence of fraud.

III. Public Comments

    Interested persons are invited to participate by submitting data, 
views, or arguments with respect to the proposed Department of Energy 
Acquisition Regulation amendments set forth in this notice. Three 
copies of written comments should be submitted to the address indicated 
in the ADDRESSES section of this notice. All comments received will be 
available for public inspection in the DOE Reading Room, Room lE-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 by the date 
indicated in the DATES section of this notice and all other relevant 
information in the record will be carefully assessed and fully 
considered prior to publication of the final rule. Any information 
considered to be confidential must be so identified and submitted in 
writing, one copy only. DOE reserves the right to determine the 
confidential status of the information and to treat it according to our 
determination (See 10 CFR 1004. 11).
    The Department has concluded that this proposed rule does not 
involve a substantial issue of fact or law and that the proposed rule 
should not have substantial impact on the nation's economy or a large 
number of individuals or businesses. Therefore, pursuant to Public Law 
95-91, the DOE Organization Act, and the Administrative Procedure Act 
(5 U.S.C. 553), the Department does not plan to hold a public hearing 
on this proposed rule.

IV. Procedural Requirements

A. Review Under Executive Order 12866

    Today's 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 draftmenship 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. The Department of Energy 
has completed the required review and determined that, to the extent 
permitted by law, the regulations meet the relevant standards of 
Executive Order 12988.

C. Review Under the Regulatory Flexibility Act

    This proposed 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 or recordkeeping requirements are imposed by 
this rulemaking. Accordingly, no OMB clearance is required under the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).

E. Review Under the National Environmental Policy Act

    DOE has concluded that promulgation of this rule falls into a class 
of actions which would not individually or cumulatively have 
significant impact on the human environment, as determined by DOE's 
regulations (10 CFR part 1021,

[[Page 30560]]

subpart D) implementing the National Environmental Policy Act of 1969 
(NEPA) (42 U.S.C. 4321 et seq.). Specifically, this rule is 
categorically excluded from NEPA review because the proposed amendments 
to the DEAR do not change the environmental effect of the rule being 
amended (categorical exclusion A5). Therefore, this rule does not 
require an environmental impact statement or environmental assessment 
pursuant to NEPA.

F. 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, or in the 
distribution of power and responsibilities among the various levels of 
Government. If there are sufficient substantial direct effects, then 
the Executive Order requires the preparation of a federalism assessment 
to be used in all decisions involved in promulgating and implementing a 
policy action. This proposed rule, when finalized, will revise certain 
policy and procedural requirements. States which contract with DOE will 
be subject to this rule. However, DOE has determined that this rule 
will not have a substantial direct effect on the institutional 
interests or traditional functions of the States.

List of Subjects in 48 CFR Parts 932 and 970

    Government procurement.

    Issued in Washington, D.C. on May 27, 1997.
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 proposed to be amended as set forth 
below.
    1. The authority citation for Part 932 continues to read as 
follows:

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

PART 932--CONTRACT FINANCING

    2. Section 932.006-4 is added before Subpart 932.1 to read as 
follows:


932.006-4  Procedures.

    (a) The remedy coordination official shall follow the procedures 
identified in FAR 32.006-4.
    (b) [Reserved]
    3. 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).

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

    4. Subpart 970.25 is added to read as follows:


970.25  Foreign acquisition.

Subpart 970.2501--Severance payments for foreign nationals.


970.2501  Severance payments for foreign nationals.

    (a) The Head of the Contracting Activity may waive the application 
of the provisions of 48 CFR 970.3102-2(i)(2) (iv) and (v) in accordance 
with 41 U.S.C. 256(e)(2) if:
    (1) The application of the provisions would adversely affect the 
continuation of a program, project, or activity that provides 
significant support services for Department of Energy employees posted 
outside the United States;
    (2) The contractor has taken, or plans to take, appropriate actions 
within its control to minimize the amount and number of incidents of 
payment of severance pay to employees under the contract who are 
foreign nationals; and
    (3) The payment of severance pay under the contract is necessary to 
comply with a law that is generally applicable to a significant number 
of businesses in the country in which the foreign national receiving 
the payment performed services or is necessary to comply with a 
collective bargaining agreement.
    (b) Solicitation provision and contract clause. The solicitation 
provision at 970.5204-XX, Waiver of Limitations on Severance Payments 
to Foreign Nationals, shall be included in solicitations and resulting 
contracts involving support services for Department of Energy 
operations outside of the United States expected to exceed $500,000, 
when, prior to the solicitation, the limitations on severance to 
foreign nationals has been waived. Use the Alternate 1 contract clause 
in solicitations and resulting contracts, when the Head of the 
Contracting Activity may waive the limitations on severance to foreign 
nationals after contract award.
    5. Section 970.3101-3 is amended by adding paragraphs (b), (c), and 
(d) to read as follows:


970.3101-3  General basis for reimbursement of costs.

* * * * *
    (b) A contracting officer shall not resolve any questioned costs 
until the contracting officer has obtained:
    (1) Adequate documentation with respect to such costs; and
    (2) The opinion of the Department of Energy's auditor on the 
allowability of such costs.
    (c) The contracting officer shall ensure that the documentation 
supporting the final settlement addresses the amount of the questioned 
costs and the subsequent disposition of such questioned costs.
    (d) The contracting officer shall ensure, to the maximum extent 
practicable, that the Department of Energy's auditor is afforded an 
opportunity to attend any negotiation or meeting with the contractor 
regarding a determination of allowability.
    6. Section 970.3101-7 is added to read as follows:


970.3101-7  Cost submission, certification, penalties, and waivers.

    (a) The contracting officer shall require that management and 
operating contractors provide a submission for settlement of costs 
incurred during the period stipulated on the submission and a 
certification that the costs included in the submission are allowable. 
The contracting officer shall assess a penalty if unallowable costs are 
included in the submission. Unallowable costs are either expressly 
unallowable or determined unallowable.
    (1) An expressly unallowable cost is a particular item or type of 
cost which, under the express provisions of an applicable law, 
regulation, or contract, is specifically named and stated to be 
unallowable.
    (2) A cost determined unallowable is one which, for that contractor
    (i) Was subject to a contracting officer's final decision and not 
appealed;
    (ii) The Department's Board of Contract Appeals or a court has 
previously ruled as unallowable; or
    (iii) Was mutually agreed to be unallowable.
    (b) If, during the review of the submission, the contracting 
officer determines that the submission contains an expressly 
unallowable cost or a cost determined to be unallowable prior to the 
submission, the contracting officer shall assess a penalty.
    (c) If the contracting officer determines that a cost submitted by 
the contractor in its submission for settlement is
    (1) Expressly unallowable, then the contracting officer shall 
assess a penalty in an amount equal to the disallowed cost allocated to 
the contract plus

[[Page 30561]]

interest on the paid portion of the disallowed cost. Interest shall be 
computed from the date of overpayment to the date of repayment using 
the interest rate specified by the Secretary of the Treasury pursuant 
to Pub. L. 92-41 (85 Stat. 97).
    (2) Determined unallowable, then the contracting officer shall 
assess a penalty in an amount equal to two times the amount of the 
disallowed cost allocated to this contract.
    (d) The contracting officer may waive the penalty provisions when
    (1) The contractor withdraws the submission before the formal 
initiation of an audit of the submission and submits a revised 
submission;
    (2) The amount of the unallowable costs allocated to covered 
contracts is $10,000 or less; or
    (3) The contractor demonstrates to the contracting officer's 
satisfaction that:
    (i) It has established appropriate policies, personnel training, 
and an internal control and review system that provides assurances that 
unallowable costs subject to penalties are precluded from the 
contractor's submission for settlement of costs; and
    (ii) The unallowable costs subject to the penalty were 
inadvertently incorporated into the submission.
    (e) The Head of the Contracting Activity may waive the 
certification when--
    (1) It is determined that it would be in the best interest to waive 
such certification; and
    (2) It states in writing the reasons for that determination and 
makes such determination available to the public.
    7. Section 970.3102 is amended by removing the last sentence of the 
existing paragraph, designating the existing paragraph as (a) and 
adding a new paragraph (b) to read as follows.


970.3102  Application of cost principles.

* * * * *
    (b) This section does not cover every element of cost. Failure to 
include any item of cost does not imply that it is either allowable or 
unallowable. The determination of allowability shall be based on the 
principles and standards in this subpart and the treatment of similar 
or related selected items. When more than one paragraph in this section 
is relevant to a contractor cost, the cost shall be apportioned among 
the applicable subsections, and the determination of allowability of 
each portion shall be based on the guidance contained in the applicable 
subsection. As an example, the cost of meals while in a travel status 
would normally be allowable if reasonable. However, the cost of 
alcoholic beverages associated with a meal would be unallowable. In no 
case shall costs made specifically unallowable under one cost principle 
be made allowable under another cost principle.
    8. Section 970.3102-2 is amended by adding a sentence at the end of 
paragraph (i)(2) introductory text and adding new paragraphs (i)(2) 
(iv), (v), (vi), and (p) to read as follows:


970.3102-2  Compensation for personal services.

* * * * *
    (i) * * *
    (2) * * * In addition, paragraphs (i)(2)(iv) and (v) of this 
section apply if the severance cost is for foreign nationals employed 
outside the United States.
* * * * *
    (iv) Notwithstanding the provision of paragraph (c) of this 
section, which references geographic area, under 41 U.S.C. 
256(e)(1)(M), the costs of severance payments to foreign nationals 
employed under a service contract performed outside the United States 
are unallowable to the extent that such payments exceed amounts 
typically paid to employees providing similar services in the same 
industry in the United States.
    (v) Further, under 41 U.S.C. 256(e)(1)(N), the costs of severance 
payments referred to in paragraph (i)(2)(iv) of this section are 
unallowable if the termination of employment is the result of the 
closing of, or curtailment of, activities at a United States facility 
in that country at the request of the government of that country.
    (vi) The Head of the Contracting Activity may waive the application 
of the provisions of (i)(2)(iv) and (v) of this section under the 
conditions specified in 48 CFR 970.25.
* * * * *
    (p) Special compensation. The following costs are unallowable:
    (1) Special compensation to employees pursuant to agreements which 
permit payments in excess of the contractor's normal severance pay 
practices, if their employment terminates following a change in the 
management control over, or ownership of, the contractor or a 
substantial portion of its assets.
    (2) Special compensation to employees pursuant to agreements which 
permit payments resulting from a change, whether actual or prospective, 
in the management control over, or ownership of, the contractor or a 
portion of its assets which is contingent upon the employee remaining 
with the contractor for a stated period of time.
    9. Section 970.3102-5 is revised to read as follows:


970.3102-5  Employee morale, health, welfare, food service, and 
dormitory costs.

    (a) Employee morale, health, and welfare activities are those 
services or benefits provided by the contractor to its employees to 
improve working conditions, employer-employee relations, employee 
morale, and employee performance. These activities include such items 
as house or employee publications, health or first-aid clinics, 
wellness/fitness centers, employee counseling services, awards for 
performance or awards made in recognition of employee achievements 
pursuant to an established contractor plan or policy, and, for the 
purpose of this section, food service and dormitory costs. However, 
these activities do not include, and should be differentiated from 
compensation for personal services as defined in 970.3102-2. Food and 
dormitory services include operating or furnishing facilities for 
cafeterias, dining rooms, canteens, lunch wagons, vending machines, 
living accommodations, or similar types of services for the 
contractor's employees at or near the contractor's facilities or site 
of the contract work.
    (b) Costs of recreation, registration fees of employees 
participating in competitive fitness promotions, team activities, and 
sporting events are unallowable, except for the costs of employees' 
participation in company sponsored intramural sports teams or employee' 
organizations designed to improve company loyalty, team work, or 
physical fitness.
    (c) Except as limited by paragraph (d) of this section, the 
aggregate of costs incurred on account of all activities mentioned in 
paragraph (a) of this section, less income generated by all such 
activities, is allowable to the extent that the net aggregate cost of 
all such activities, as well as the net cost of each individual 
activity, is reasonable and allocable to the contract work. 
Additionally, advance understandings with respect to the costs 
mentioned in paragraph (a) of this section are to be reached prior to 
the incurrence of these costs as required in 48 CFR 970.3101-6.
    (d) Losses from the operation of food or dormitory services may be 
included as costs incurred under paragraph (c) of this section only if 
the contractor's objective is to operate such services at least on a 
break-even basis. Losses sustained because food services or lodging 
accommodations are furnished without charge or at prices or rates which 
obviously would not be

[[Page 30562]]

conducive to accomplishment of this objective are not allowable, except 
in those instances where the contractor can demonstrate that unusual 
circumstances exist, such that, even with efficient management, 
operation of the services on a break-even basis would require charging 
inordinately high prices, or prices or rates higher than those charged 
by commercial establishments offering the same services in the same 
geographical areas. Typical examples of such unusual circumstances are:
    (1) Where the contractor must provide food or dormitory services at 
remote locations where adequate commercial facilities are not 
reasonably available, or
    (2) Where it is necessary to operate a facility at a lower volume 
than the facility could economically support. Cost of food and 
dormitory services shall include an allocable share of indirect 
expenses pertaining to these activities.
    (e) In those situations where the contractor has an arrangement 
authorizing an employee association to provide or operate a service 
such as vending machines in the contractor's plant, and retain the 
profits derived therefrom, such profits shall be treated in the same 
manner as if the contractor were providing the service, except as 
provided in paragraph (f) of this section.
    (f) Contributions by the contractor to an employee organization, 
including funds set over from vending machines receipts or similar 
sources, may be included as cost incurred under paragraph (c) of this 
section, only to the extent that the contractor demonstrates that an 
equivalent amount of the costs incurred by the employee organization 
would be allowable, if incurred by the contractor directly.
    10. Section 970.3102-7 is revised to read as follows:


970.3102-7  Political activity costs.

    The following costs are unallowable, except for costs associated 
with providing information pursuant to 970.5204-17, unless approved by 
the contracting officer: Contractor costs incurred to influence either 
directly or indirectly--
    (a) Legislative action on any matter pending before Congress, a 
State legislature, or a legislative body of a political subdivision of 
a State; or
    (b) Federal, State, or local executive branch action on regulatory 
and contract matters, including costs incurred in regard to contract 
proposals.
    11. Section 970.3102-17 Travel costs, is amended by revising the 
paragraph heading for (b) and by adding paragraph (b)(3) to read as 
follows:


970.3102-17  Travel costs.

* * * * *
    (b) Government-owned, commercial rental, and company-furnished 
vehicles.* * *
    (3) The costs of contractor-owned or -leased vehicles include the 
costs of lease, operation, maintenance, depreciation, insurance, and 
other similar costs. These costs are unallowable except as approved by 
the contracting officer. Except, no cost shall be allowed for the cost 
of company-furnished vehicles that are authorized for personal use by 
the employees.
* * * * *
    12. Section 970.3103 is amended by revising paragraph (b) to read 
as follows:


970.3103  Contract clauses.

* * * * *
    (b) The political activity cost prohibition clause at 48 CFR 
970.5204-17 shall be included in all M&O contracts.
* * * * *
    13. Section 970.3272 is added to subpart 970.32 to read as follows:


970.3272  Reduction or suspension of advance, partial, or progress 
payments.

    (a) The procedures prescribed at FAR 32.006 shall be followed.
    (b) The agency head has delegated their responsibilities under this 
section to the Senior Procurement Executive.
    (c) The remedy coordination official is responsible for receiving, 
assessing, and making recommendations to the Senior Procurement 
Executive.
    (d) The contracting officer shall insert the clause at 48 CFR 
970.5204-XX, Reduction or suspension of contract payments, in 
management and operating contracts.
    14. Section 970.5204-13, Allowable costs and fixed-fee (Management 
and Operating contracts), is amended by revising clause paragraphs 
(d)(8)(iv), (e)(11), (e)(31); and adding new paragraphs (e) (37) and 
(38) to read as follows:


970.5204-13  Allowable costs and fixed-fee (management and operating 
contracts).

* * * * *
    (d) * * *
    (8) * * *
    (iv) Employee relations, welfare, morale, etc.; programs 
including incentive or suggestion awards; employee counseling 
services, health or first-aid clinics; house or employee 
publications; and wellness/fitness centers;
* * * * *
    (e) * * *
    (11) Entertainment, including costs of amusement, diversion, 
social activities; and directly associated costs such as tickets to 
shows or sports events, meals, lodging, rentals, transportation, and 
gratuities; costs of membership in any social, dining or country 
club or organization.
* * * * *
    (31) Contractor costs incurred to influence either directly or 
indirectly--
    (i) Legislative action on any matter pending before Congress, a 
State legislature, or a legislative body of a political subdivision 
of a State; or
    (ii) Federal, State, or local executive branch action on 
regulatory and contract matters, including costs incurred in regard 
to contract proposals, as described in the ``Political Activity Cost 
Prohibition'' clause of this contract.
* * * * *
    (37) Costs of gifts; however, gifts do not include awards for 
performance or awards made in recognition of employee achievements 
pursuant to an established contractor plan or policy.
    (38) The costs of recreation, registration fees of employees 
participating in competitive fitness promotions, team activities, 
and sporting events except for the costs of employees' participation 
in company sponsored intramural sports teams or employee 
organizations designed to improve company loyalty, team work, or 
physical fitness.

    15. Section 970.5204-14 is amended by revising clause paragraphs 
(d)(8)(iv), (e)(9), (e)(29); and adding new paragraphs (e)(35) and 
(e)(36) to read as follows:


970.5204-14  Allowable costs and fixed-fee (support contracts).

* * * * *
    (d) * * *
    (8) * * *
    (iv) Employee relations, welfare, morale, etc.; programs 
including incentive or suggestion awards; employee counseling 
services, health or first-aid clinics; and house or employee 
publications; and wellness/fitness centers;
* * * * *
    (e) * * *
    (9) Entertainment, including costs of amusement, diversion, 
social activities; and directly associated costs such as tickets to 
shows or sports events, meals, lodging, rentals, transportation, and 
gratuities; costs of membership in any social, dining or country 
club or organization.
* * * * *
    (29) Contractor costs incurred to influence either directly or 
indirectly--
    (i) Legislative action on any matter pending before Congress, a 
State legislature, or a legislative body of a political subdivision 
of a State; or
    (ii) Federal, State, or local executive branch action on 
regulatory and contract matters, including costs incurred in regard 
to contract proposals are not allowable contract costs and shall not 
be reimbursed by DOE.
* * * * *
    (35) Costs of gifts; however, gifts do not include awards for 
performance or awards made in recognition of employee

[[Page 30563]]

achievements pursuant to an established contractor plan or policy.
    (36) The costs of recreation, registration fees of employees 
participating in competitive fitness promotions, team activities, 
and sporting events except for the costs of employees' participation 
in company sponsored intramural sports teams or employee 
organizations designed to improve company loyalty, team work, or 
physical fitness.

    16. Section 970.5204-16 is amended in the clause by removing Notes 
3 and 4 and revising paragraph (e) to read as follows:


970.5204-16  Payments and advances.

* * * * *
    (e)(i) Review and approval of costs incurred. The contractor 
shall prepare and submit annually as of September 30, a voucher for 
the total of net expenditures accrued (i.e., net costs incurred) for 
the period covered by the voucher. The contractor shall certify the 
voucher subject to the penalty provisions for unallowable costs as 
stated in sections 306(b) and (h) of the Federal Property and 
Administrative Services of 1949 (41 U.S.C. 256), as amended. DOE, 
after audit and appropriate adjustment, will approve such voucher. 
This approval by DOE will constitute an acknowledgment by DOE that 
the net costs incurred are allowable under the contract and that 
they have been recorded in the accounts maintained by the contractor 
in accordance with DOE accounting policies, but will not relieve the 
contractor of responsibility for DOE's assets in its care, for 
appropriate subsequent adjustments, or for errors later becoming 
known to DOE.
    (ii) Nonintegrated contractors shall prepare and submit a 
voucher for the total of net expenditures incurred for the period 
covered by the voucher. It is anticipated that this will be an 
annual submission unless otherwise agreed to by the contracting 
officer. The contractor shall certify the voucher subject to the 
penalty provisions for unallowable costs as stated in sections 306 
(b) and (h) of the Federal Property and Administrative Services of 
1949 (41 U.S.C. 256), as amended.
* * * * *
    17. Section 970.5204-17 is amended by revising the section heading 
and clause heading and adding clause paragraph (a)(6) to read as 
follows:


970.5204-17  Political activity cost prohibition.

* * * * *

Political Activity Cost Prohibition (XXX 199X)

    (a)* * *
    (6) Contractor costs incurred to influence (directly or 
indirectly) Federal, State, or local executive branch action on 
regulatory and contract matters, including costs incurred in regard 
to contract proposals.
* * * * *
    18. Section 970.5204-XX is added to read as follows:


970.5204-XX  Waiver of limitations on severance payments to foreign 
nationals.

    As prescribed in 48 CFR 970.25, insert the following solicitation 
provision, or its alternate 1, clause:

    Waiver of Limitations on Severance Payments to Foreign Nationals 
(XXXX 199X) Pursuant to Department of Energy Acquisition Regulation 
(DEAR) 48 CFR 970.25, the cost allowability limitations in (DEAR) 48 
CFR 970.3102-2(i), (iv) and (v) are waived for this contract.
    Alternate 1 (XXXX 199X). Substitute the following paragraph for 
the foregoing solicitation provision when the waiver of limitations 
to severance payments for foreign nationals has not been 
predetermined by the Department.
    Pursuant to Department of Energy Acquisition Regulation (DEAR) 
48 CFR 970.25, the Department will consider waiving the cost 
allowability limitations in (DEAR) 48 CFR 970.3102-2(i), (iv) and 
(v) for this contract.

    19. Section 970.5204-YY is added to read as follows:


970.5204-YY  Reduction or suspension of advance, partial, or progress 
payments upon finding of substantial evidence of fraud.

    As prescribed in 48 CFR 970.3272, insert the following clause:

Reduction or Suspension of Advance, Partial, or Progress Payments 
(XXXX-199X)

    (a) The contracting officer may reduce or suspend further 
advance, partial, or progress payments to the contractor upon a 
written determination by the Secretary that substantial evidence 
exists that the contractor's request for advance, partial, or 
progress payment is based on fraud.
    (b) The contractor shall be afforded a reasonable opportunity to 
respond in writing.

[End of Clause]

[FR Doc. 97-14289 Filed 6-3-97; 8:45 am]
BILLING CODE 6450-01-P