[Federal Register Volume 62, Number 124 (Friday, June 27, 1997)]
[Rules and Regulations]
[Pages 34872-34873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16636]


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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: Final rule.

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SUMMARY: The Department of Energy (DOE) is adopting as final an interim 
rule amending its Acquisition Regulation 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 final rule is effective June 27, 1997.

FOR FURTHER INFORMATION CONTACT: Connie P. Fournier, Office of Policy 
(HR-51), Department of Energy, 1000 Independence Avenue, SW, 
Washington, D.C. 20585; (202) 586-8245; (202) 586-0545 (facsimile); 
[email protected] (Internet).

SUPPLEMENTARY INFORMATION:

I. Background
II. Disposition of Comments
III. 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 Executive Order 12612
F. Review Under the National Environmental Policy Act

I. Background

    The Department of Energy published an interim final rule in the 
Federal Register on June 24, 1996 (61 FR 32584). The public comment 
period closed August 23, 1996. The Department received comments from 
three companies. Copies of all written comments are available for 
public inspection at the Department's Freedom of Information Reading 
Room, Room 1E-190, Forrestal Building, 1000 Independence Avenue, SW, 
Washington, DC 20585, (202) 586-6020.
    Today's final rule adopts as final the amendments in the interim 
final rulemaking.

II. Disposition of Comments

    The Department has considered and evaluated the comments received 
during the public comment period. The following discussion describes 
the comments received and provides the Department's responses to the 
comments.
    A. Comment: One commenter believes that the policy statement in 
917.602 is inconsistent with the remainder of DEAR 917 and FAR Part 17. 
The commenter believes that the concept of a noncompetitive 
``extension'' apparently synonymous with a contract ``option'' and 
concludes that our policy goes beyond intent of CICA and FAR. Specific 
inconsistency is between 970.1702-1(b) and FAR 17.605.(b).
    Response: As explained in the preamble of the interim rule, the 
Department's intent in adopting its new policy on competition for its 
management and operating contracts is to move away from past policies 
which established noncompetitive extensions as the preferential norm to 
a new policy which establishes competition as the preferential norm. 
The key component of this change in policy is to adopt the Government 
wide standards for competition as statutorily provided under the 
Competition in Contracting Act (CICA) and implemented in FAR Part 6. 
Accordingly, the Department will seek competition for its management 
and operating contracts unless a noncompetitive extension can be 
justified in accordance with one of the permissible authorities under 
CICA. The regulatory language of 917.602 and 970.1702 is consistent 
with both FAR Part 6 and Part 17.
    Regarding the distinction between an ``option to extend'' and an 
``noncompetitive extension'' under one of the seven authorities of 
CICA, DEAR 970.1702-1(a) provides clear language that distinguishes the 
two mechanisms. In addition, the clear language of this section directs 
that any extension, other than an option included in the basic 
contract, can only be accomplished when justified under CICA and when 
authorized by the Head of the Agency.
    B. Comment: Two commenters believe that the Department's adoption 
of a policy that mandates competition after a 10 year contract term 
detracts from the Department's flexibility in making management 
decisions regarding retaining an incumbent contractor particularly 
where the contractor's performance has been excellent or the contractor 
operates a Federally Funded Research and Development Center. One of the 
commenters recommends that DOE, instead, rely on annual performance 
appraisal results and criteria for ``options'' to determine whether 
competition should be sought.
    Response: The Department believes that the new policy provides 
adequate management flexibility in determining whether competing a 
management and operating contract is in the best interests of the 
Department. The Competition in Contracting Act provides 7 circumstances 
under which an agency may seek other than full and open competition in 
the award of a contract. The Department intends to rely on these 
Governmentwide authorities in cases where the Department intends to 
extend a contract with in incumbent contractor or otherwise intends to 
limit competition.
    A detailed list of changes in this final 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.

[[Page 34873]]

    3. 970.0001, Renewal of management and operating contracts. This 
section is 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 record keeping 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.

List of Subjects in 48 CFR Parts 917 and 970

    Government procurement.

    Issued in Washington, D.C., on June 13, 1997.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.

    Accordingly, the interim rule amending Chapter 9 of Title 48 of the 
Code of Federal Regulations which was published at 61 FR 32584 on June 
24, 1996, is adopted as a final rule without change.

[FR Doc. 97-16636 Filed 6-26-97; 8:45 am]
BILLING CODE 6450-01-P