[Federal Register Volume 63, Number 2 (Monday, January 5, 1998)]
[Proposed Rules]
[Pages 386-388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-81]


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DEPARTMENT OF ENERGY

48 CFR Parts 922, 952, and 970

RIN 1991-AB36


Acquisition regulation; Department of Energy Management and 
Operating Contracts

AGENCY: Department of Energy.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of Energy (DOE) proposes to amend the 
Department of Energy Acquisition Regulation (DEAR) to implement a 
recommendation of its Department-wide contract reform initiative 
concerning costs in whistleblower actions. The effect of the rule, when 
finalized, will be to clarify those costs that are allowable and those 
that are unallowable in processing whistleblower cases.

DATES: Written comments should be forwarded no later than March 6, 
1998.

ADDRESSES: Comments are to be submitted to P. Devers Weaver, Office of 
Policy (HR-51), U.S. Department of Energy, 1000 Independence Avenue, 
SW., Washington, DC 20585-0705, facsimile 202-586-0545.

FOR FURTHER INFORMATION CONTACT: P. Devers Weaver, Office of Policy 
(HR-51), U.S. Department of Energy, 1000 Independence Avenue, SW., 
Washington, DC 20585-0705, telephone 202-586-8250.

SUPPLEMENTARY INFORMATION:

I. Background
II. Section-by-Section Analysis
III. Procedural Requirements
    A. Review Under Executive Order 12612
    B. Review Under Executive Order 12866
    C. Review Under Executive Order 12988
    D. Review Under the National Environmental Policy Act
    E. Review Under the Paperwork Reduction Act
    F. Review Under the Regulatory Flexibility Act
    G. Review Under the Small Business Regulatory Enforcement 
Fairness Act of 1996
    H. Review Under the Unfunded Mandates Reform Act of 1995
IV. Opportunities for Public Comment
V. Opportunity for Public Hearing

I. Background

    An action item under the Department's Contract Reform Team Report 
was the development of an explicit policy concerning the allowability 
of defense costs in ``whistleblower'' cases. On October 17, 1994, the 
Secretary of Energy publicly released and solicited comments on a set 
of proposals concerning whistleblower reforms. These proposals were 
designed to strengthen the ability of the Department's federal and 
contractor employees to raise concerns relating to waste, fraud and 
abuse; environment, safety and health; and other matters. One of these 
proposals called for the development of provisions to limit the 
Department's reimbursement of contractor litigation costs in 
whistleblower cases. This rulemaking contains a new clause, Costs 
Associated with Whistleblower Actions, which is a proposal for 
implementation of the contractor employee whistleblower reform 
initiative in the Department's contracting activities.

II. Section-by-Section Analysis

    Section 922.7101 and subsection 952.222-70 are amended to add a new 
clause prescription.
    Section 970.3103, Contract clauses, is amended to add a new 
paragraph (e) to prescribe the use of the new clause.
    Section 970.5204-13, Allowable costs and fixed-fee (management and 
operating contracts), is amended to add a new paragraph (e)(3__).
    Section 970.5204-14, Allowable costs and fixed-fee (support 
contracts), is amended to add a new paragraph (e)(3__).
    Section 970.5204-XX, Costs Associated with Whistleblower Actions, 
is added.

III. Procedural Requirements

A. 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 proposed rule will not have a substantial direct 
effect on the institutional interests or traditional functions of 
States.

B. 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).

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

D. 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

[[Page 387]]

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 part 1021, National Environmental Policy Act 
Implementing Procedures (Categorical Exclusion A6), the Department has 
determined that this proposed rule is categorically excluded from the 
need to prepare an environmental impact statement or environmental 
assessment.

E. Review Under the Paperwork Reduction Act

    No new information collection or recordkeeping requirements are 
imposed by this proposed 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.).

F. Review Under the Regulatory Flexibility Act

    This proposed rule was reviewed under the Regulatory Flexibility 
Act of 1980, 5 U.S.C. 601, et seq., which requires preparation of a 
regulatory flexibility analysis for any rule that is likely to have a 
significant economic impact on a substantial number of small entities. 
This proposed rule is intended to provide policies for the Department 
of Energy's management and operating contractors, who generally have 
been large businesses. While this requirement will flowdown to 
subcontractors, it is anticipated that they generally will be cost-
reimbursement type subcontracts. Based on this review the Department 
certifies that this proposed rule will not have a significant economic 
impact on a substantial number of small entities and, therefore, no 
regulatory flexibility analysis has been prepared.

G. Review Under Small Business Regulatory Enforcement Fairness Act of 
1996

    As required by 5 U.S.C. 801, DOE will report to Congress 
promulgation of the rule prior to its effective date. 5 U.S.C. 801. The 
report will state that it has been determined that the rule is not a 
``major rule'' as defined by 5 U.S.C. 804(3).

H. Review Under the Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally 
requires a Federal agency to perform a detailed assessment of costs and 
benefits of any rule imposing a Federal Mandate with costs to State, 
local or tribal governments, or to the private sector, of $100 million 
or more. This rulemaking only affects private sector entities, and the 
impact is less than $100 million.

IV. Opportunities 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 proposed rule. Three copies of written comments should be 
submitted to the address indicated in the ADDRESSES section. In 
addition, it is requested that you provide a copy of your comments on a 
WordPerfect 6.1 or ASCII diskette. All comments received will be 
available for public inspection upon request. All written comments 
received on or before the date specified in the beginning of this 
proposed 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.

V. Opportunity for Public Hearing

    The Department has concluded that this rule does not involve any 
significant issues of law or fact. Therefore, consistent with 42 U.S.C. 
7191 and 5 U.S.C. 553, the Department has not scheduled a public 
hearing. However, upon the receipt of a written request received at the 
address in the ADDRESSES section near the beginning of this rule on or 
before January 20, 1998 a public hearing on the proposed rule will be 
scheduled in the Forrestal Building, Washington, DC. The date, time, 
and exact place of the hearing and procedures governing the conduct of 
the hearing will be published in advance in the Federal Register.

List of Subjects in 48 CFR Parts 922, 952, and 970

    Government procurement.

    Issued in Washington, D.C., on December 22, 1997.
Federico Pena,
Secretary of Energy.
    For the reasons set forth 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 Parts 922 and 952 continues to read 
as follows:

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

    2. 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 922--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITION


Sec. 922.7101  [Amended]

    3. The heading of Section 922.7101 is revised to read ``Clauses,'' 
the existing text is designated ``(a)'' and a paragraph (b) is added as 
follows:


922.7101  Clauses.

    (b) The contracting officer shall insert the clause at 970.5204-XX, 
Costs Associated with Whistleblower Actions, in cost reimbursement type 
contracts that involve work to be performed on-site at a DOE-owned or -
leased facility. The contracting officer may amend the clause by 
deleting references to clauses applicable only to management and 
operating contracts.

PART 952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


952.222-70  [Amended]

    4. Subsection 952.222-70 is amended by designating the existing 
text as ``(a)'' and adding a paragraph (b) as follows:


952.222-70  Whistleblower protection for contractor employees.

    (b) As prescribed in 922.7101, insert the clause at 970.5204-XX, 
Costs Associated with Whistleblower Actions, in cost reimbursement type 
contracts for work to be performed on-site at a DOE-owned or -leased 
facility. The contracting officer may amend the clause by deleting 
references to clauses applicable only to management and operating 
contracts.

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS


970.3103  [Amended]

    5. Section 970.3103, Contract clauses, is amended to add the 
following paragraph (e):


970.3103  Contract clauses.

* * * * *
    (e) The contracting officer shall insert the clause at 970.5204-XX, 
Costs Associated with Whistleblower Actions,

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in cost reimbursement type contracts for the management and operation 
of a DOE facility or for work to be performed on-site at a DOE-owned or 
-leased facility.


970.5204-13  [Amended]

    6. In subsection 970.5204-13, Allowable costs and fixed-fee 
(management and operating contracts), the parenthetical date following 
the clause title is revised and a paragraph (e)(3--) is added as 
follows:


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

* * * * *
ALLOWABLE COSTS AND FIXED-FEE (MANAGEMENT AND OPERATING CONTRACTS) (XXX 
and XXXX)
* * * * *
    (e) * * *
    (3__) Costs incurred in connection with any employee action, as 
provided in the clause entitled ``Costs Associated with Whistleblower 
Actions.''


970.5204-14  [Amended]

    7. In subsection 970.5204-14, Allowable costs and fixed-fee 
(support contracts), the parenthetical date following the clause title 
is revised and a paragraph (e)(3__) is added as follows:


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

* * * * *
ALLOWABLE COSTS AND FIXED-FEE (SUPPORT CONTRACTS) (XXX and XXXX)
* * * * *
    (e) * * *
    (3__) Costs incurred in connection with any employee action, as 
provided in the clause entitled ``Costs Associated with Whistleblower 
Actions.''


970.52  [Amended]

    8. 970.5204-XX, Costs Associated with Whistleblower Actions, is 
added to read as follows:


970.5204-XX  Costs Associated with Whistleblower Actions

    As prescribed in 970.3103(e), insert the following clause.

COSTS ASSOCIATED WITH WHISTLEBLOWER ACTIONS (XXX and XXXX)

    (a) Definitions.
    (1) ``Adverse determination'' means
    (i) A recommended decision under 29 CFR part 24 by an 
administrative law judge that the Contractor has violated the 
employee protection provisions of the statutes for which the 
Secretary of Labor has been assigned responsibility;
    (ii) An initial agency decision under 10 CFR 708.10 that the 
Contractor has engaged in conduct prohibited by 10 C.F.R. 708.5; or
    (iii) A decision against the Contractor by the Secretary under 
41 U.S.C. 265(c)(1).

    Note: In contracts with a non-standard paragraph (h) in the 
Insurance-Litigation and Claims clause, add the following 
subparagraph (iv):

    (iv) A judgment or other determination of liability against the 
Contractor and in favor of the employee in an action in a judicial 
forum.
    (2) ``Costs'' include any costs or expenses relating to an 
employee action, as defined below, including but not limited to back 
pay, damages or other award in the form of relief to the employee; 
administrative and clerical expenses; the cost of legal services, 
including litigation costs, whether provided by the Contractor or 
procured from outside sources; the costs of services of accountants, 
consultants or other experts retained by the Contractor; all 
elements of related compensation, costs and expenses of employees, 
officers and directors; and any similar costs incurred after the 
commencement of the employee action.
    (3) ``Employee action'' means an action brought by an employee 
of the Contractor under 29 CFR part 24, 10 CFR part 708, or 41 
U.S.C. 265, or an action filed in federal or state court for redress 
of discrimination or discriminatory action by a Contractor based on 
activities that would be actionable under 29 CFR part 24, 10 CFR 
part 708, or 41 U.S.C. 265.
    (4) ``Litigation costs'' include attorney, consultant and expert 
witness fees associated with the defense of an employee action, but 
exclude the costs of implementing a settlement, judgment, or 
Secretarial Order.
    (b) Segregation of costs. All litigation costs incurred in the 
investigation and defense of an employee action under this clause 
shall be differentiated and accounted for by the Contractor so as to 
be separately identifiable. If the contracting officer provisionally 
disallows such costs, then the contractor may not use funds advanced 
by DOE under the contract to finance the litigation.
    (c) Allowability of litigation and other costs. (1) Litigation 
costs, including the use of alternative dispute resolution, and 
settlement costs incurred in connection with an employee action 
under this clause are allowable if the employee action is resolved 
prior to an adverse determination, provided such costs are otherwise 
allowable under the clauses entitled ``Insurance-Litigation and 
Claims,'' ``Cost Prohibitions Related to Legal and Other 
Proceedings,'' and other relevant provisions of this contract.
    (2) In actions in which an adverse determination is issued, 
litigation, settlement, and judgment costs, as well as the cost of 
complying with any Secretarial Order, are not allowable, unless:
    (i) The Contractor prevails in a proceeding subsequent to the 
adverse determination at which a final decision is rendered in the 
action; or
    (ii) The Contracting Officer has, on the basis that it is in the 
best interest of the Government, approved the Contractor's request 
to proceed with defense of an action rather than entering into a 
settlement with the employee or accepting an adverse determination 
or other interim decision prior to a final decision.
    (3) Subsequent to an adverse determination, litigation costs, as 
well as costs associated with any interim relief granted, may not be 
paid from contract funds; provided, however, that the Contracting 
Officer may, in appropriate circumstances, provide for conditional 
payment from contract funds upon provision of adequate security, or 
other adequate assurance, and agreements by the Contractor to repay 
all litigation costs, plus interest, if they are subsequently 
determined to be unallowable.
    (4) Litigation costs incurred to defend an appeal by the 
employee from an interim or final decision in the Contractor's favor 
are allowable provided they are otherwise allowable under the 
clauses entitled ``Insurance Litigation and Claims'' and ``Cost 
Prohibitions Related to Legal and Other Proceedings,'' and other 
relevant provisions of the contract.
    (d) The provisions of this clause shall not apply to the defense 
of suits by employees or ex-employees of the Contractor under 
section 2 of the Major Fraud Act of 1988 as amended. (See the clause 
entitled ``Cost Prohibitions Related to Legal and Other 
Proceedings.'')

[FR Doc. 98-81 Filed 1-2-98; 8:45 am]
BILLING CODE 6450-01-P