[Federal Register Volume 63, Number 205 (Friday, October 23, 1998)]
[Rules and Regulations]
[Pages 56849-56867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28239]


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DEPARTMENT OF ENERGY

48 CFR Parts 903, 915, 916, 919, 935, and 970

RIN 1991-AB40


Acquisition Regulation; Technical and Administrative Amendments

AGENCY: Department of Energy (DOE).

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) is amending the Department of 
Energy Acquisition Regulation (DEAR) to make technical and 
administrative changes to the regulation. These changes include: adding 
definitions to identify those Department personnel subject to certain 
Procurement Integrity restrictions; renumbering and updating certain 
parts of the regulation to conform with recent Federal Acquisition 
Regulation (FAR) changes; correcting typographical errors; and, 
removing obsolete coverage. These changes are technical and 
administrative in nature and have no significant impact on non-agency 
persons such as contractors or offerors.

EFFECTIVE DATE: This final rule will be effective November 23, 1998.

FOR FURTHER INFORMATION CONTACT: Kevin M. Smith, Office of Procurement 
and Assistance Policy (HR-51), U.S. Department of Energy, 1000 
Independence Avenue, SW., Washington, DC 20585, telephone 202-586-8189.

SUPPLEMENTARY INFORMATION:

I. Explanation of Revisions
II. 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 Small Business Regulatory Enforcement 
Fairness Act of 1996
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Office of Federal Procurement Policy Act

I. Explanation of Revisions

    1. Definitions are added to subsection 903.104-3 to implement the 
Federal Acquisition Regulation (FAR) at section 3.104-1, which provides 
for the use of agency specific definitions to identify government 
individuals who occupy positions subject to the post-employment 
restrictions under the Procurement Integrity Act (41 U.S.C. 423). After 
the Procurement Integrity Act was revised in January 1997, the 
Department issued interim administrative guidance for identifying its 
personnel who were subject to the post-employment restrictions. Those 
definitions are now being incorporated into the acquisition regulation.
    Definitions are added for Departmental personnel who are Program 
Managers and Deputy Program Managers for certain systems acquired 
through the acquisition process. The definition for Deputy Program 
Manager makes a distinction between individuals who normally act for 
the Program Manager and individuals who occasionally act for the 
Program Manager (e.g., a Deputy Program Manager is the person who makes 
program decisions for the Program Manager on a regular basis during the 
Program Manager's absence. A person who is acting for the Program 
Manager or the Deputy Program Manager on an intermittent basis, and 
does not make program decisions, is not a Program Manager or Deputy 
Program Manager.) Each program will have only one Program Manager and 
one Deputy Program Manager.
    The Department is developing internal guidance to assist its 
personnel in determining whether they are covered by the definitions. 
That guidance will provide for specific identification for individuals 
who are affected, and for their notification. However, individuals who 
perform the functions described in this regulation are subject to the 
post-employment restrictions even if they do not receive

[[Page 56850]]

the specific notification. The notification supplements the 
constructive notice given by this regulation. In addition, the head of 
an organization may be deemed to be a Program Manager for programs 
under his or her purview in the event of failure to name an employee to 
fill a position which meets the definition of Program Manager.
    2. Part 915 and associated sections in Subpart 970.15 are revised 
to conform with the recent FAR Part 15 rewrite which addressed 
contracting by negotiation. The FAR rewrite simplified the acquisition 
process, made changes in pricing and unsolicited proposal policy, 
facilitated the acquisition of best value products and services, and 
revised the sequence in which the information was presented to 
facilitate use of the regulation. The following crosswalk reflects the 
DEAR numbering changes made within Part 915 and Subpart 970.15 to 
conform with the FAR revisions:

------------------------------------------------------------------------
             Former DEAR cite                       New DEAR cite
------------------------------------------------------------------------
915.4.....................................  915.2.
915.401...................................  915.200.
915.405-1.................................  915.201.
915.413...................................  deleted.
915.413-2.................................  deleted.
915.5.....................................  915.6.
915.502...................................  915.602.
915.503...................................  915.603.
915.505...................................  915.605.
915.506...................................  915.606.
915.507...................................  915.607.
915.509...................................  deleted.
915.8.....................................  915.4.
915.804-1.................................  deleted.
915.804-6.................................  deleted.
915.805-5.................................  915.404-2.
915.805-70................................  915.404-2-70.
915.806-2.................................  deleted.
915.9.....................................  915.404-4.
915.903...................................  915.404-4(c).
915.905...................................  915.404-4(d).
915.970...................................  915.404-4-70.
915.970-1.................................  915.404-4-70-1.
915.970-2.................................  915.404-4-70-2.
915.970-3.................................  915.404-4-70-3.
915.970-4.................................  915.404-4-70-4.
915.970-5.................................  915.404-4-70-5.
915.970-6.................................  915.404-4-70-6.
915.970-7.................................  915.404-4-70-7.
915.970-8.................................  915.404-4-70-8.
915.971...................................  915.404-4-71.
915.971-1.................................  915.404-4-71-1.
915.971-2.................................  915.404-4-71-2.
915.971-3.................................  915.404-4-71-3.
915.971-4.................................  915.404-4-71-4.
915.971-5.................................  915.404-4-71-5.
915.971-6.................................  915.404-4-71-6.
915.972...................................  915.404-4-72.
970.1507..................................  970.15407-2.
970.1507-1................................  970.15407-2-1.
970.1507-2................................  970.15407-2-2.
970.1507-3................................  970.15407-2-3.
970.1508..................................  970.15405.
970.1508-1................................  970.15406-2.
970.1509..................................  970.15404-4.
970.1509-1................................  970.15404-4-1.
970.1509-2................................  970.15404-4-2.
970.1509-3................................  970.15404-4-3.
970.1509-4................................  970.15404-4-4.
970.1509-5................................  970.15404-4-5.
970.1509-6................................  970.15404-4-6.
970.1509-7................................  970.15404-4-7.
970.1509-8................................  970.15404-4-8.
------------------------------------------------------------------------

    3. The heading, Indefinite-Delivery Contracts, which was previously 
omitted, is added to Subpart 916.5.
    4. Part 919 is amended to conform to a previous change made to the 
regulation that eliminated DEAR subpart 915.6, and to correct a 
typographical error in a Code of Federal Regulation citation.
    5. Section 935.016, Research opportunity announcements, is removed. 
This policy, which supplemented FAR coverage for broad agency 
announcements, is no longer used by the Department. The broad agency 
announcement policies and procedures of the FAR are being used by DOE.
    6. Other sections of Part 970 also are revised to conform to recent 
FAR numbering changes. In addition, section 970.5202, Deviations, is 
revised to conform to a previous change made to the regulation that 
eliminated DEAR Subpart 901.4.
    7. Subsection 970.5204-22 has been updated to conform bonding 
requirements to those at FAR 28.102-1.

II. 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. DOE has determined that 
this 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. DOE has 
completed the required review and determined that, to the extent 
permitted by law, the 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 
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), DOE has determined 
that this rule is categorically excluded from the need to prepare an 
environmental impact statement or environmental assessment.

[[Page 56851]]

E. Review Under the Paperwork Reduction Act

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

F. 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. 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).

G. 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.

H. Review Under the Office of Federal Procurement Policy Act

    The Office of Federal Procurement Policy Act authorizes publication 
of a final rule without prior opportunity for public comment if there 
are no significant impacts on non-agency persons such as contractors or 
offerors (41 U.S.C. 418b). This rule will not have significant impacts 
on non-agency persons, and accordingly DOE decided not to issue it as a 
proposal for public comment.

List of Subjects in 48 CFR Parts 903, 915, 916, 919, 935 and 970

    Government procurement.

    Issued in Washington, D.C., on October 14, 1998.
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.

    1. The authority citation for Parts 903, 916, 919, and 935 
continues to read as follows:

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

PART 903--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST [AMENDED]

    2. Subsection 903.104-3 is added as follows:


903.104-3  Definitions.

    As used in this section and for the purposes of the post-employment 
restrictions at 48 CFR (FAR) 3.104-4(d)--
    Deputy program manager means the individual within DOE who normally 
acts as the program manager in the absence of the program manager, and 
does not mean an individual who occasionally acts for the program 
manager or the deputy program manager.
    Program manager means the individual within DOE who:
    (1) Exercises authority on a day-to-day basis to manage an 
acquisition program--
    (i) For a system attained through the acquisition process; and
    (ii) With one or more contracts, at least one of which has a value 
exceeding $10,000,000; and
    (2) Is generally the person at the lowest organizational level who 
has authority to make technical and budgetary decisions on behalf of 
DOE.
    System means a combination of elements that function together to 
produce the capabilities required to fulfill a mission need, including, 
but not limited to hardware, equipment, software, or any combination 
thereof.

PART 915--CONTRACTING BY NEGOTIATION [REVISED]

    3. Part 915 is revised to read as follows:

PART 915--CONTRACTING BY NEGOTIATION

Subpart 915.2--Solicitation and Receipt of Proposals and Information

915.200  Scope of subpart.
915.201  Exchanges with industry before receipt of proposals.
915.207-70  Handling of proposals during evaluation.

Subpart 915.3--Source Selection

915.305  Proposal evaluation.

Subpart 915.4--Contract Pricing

915.404-2  Information to support proposal analysis.
915.404-2-70  Audit as an aid in proposal analysis.
915.404-4  Profit.
915.404-4-70  DOE structured profit and fee system.
915.404-4-70-1  General.
915.404-70-2  Weighted guidelines system.
915.404-4-70-3  Documentation.
915.404-4-70-4  Exceptions.
915.404-4-70-5  Special considerations--contracts with nonprofit 
organizations (other than educational institutions).
915.404-4-70-6  Contracts with educational institutions.
915.404-4-70-7  Alternative techniques.
915.404-4-70-8  Weighted guidelines application considerations.
915.404-4-71  Profit and fee-system for construction and 
construction management contracts.
915.404-4-71-1  General.
915.404-4-71-2  Limitations.
915.404-4-71-3  Factors for determining fees.
915.404-4-71-4  Considerations affecting fee amounts.
915.404-4-71-5  Fee schedules.
915.404-4-71-6  Fee base.
915.404-4-72  Special considerations for cost-plus-award-fee 
contracts.

Subpart 915.6--Unsolicited Proposals

915.602  Policy.
915.603  General.
915.605  Content of unsolicited proposals.
915.606  Agency procedures.
915.607  Criteria for acceptance of an unsolicited proposal.

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

Subpart 915.2--Solicitation and Receipt of Proposals and 
Information


915.200  Scope of subpart.

    FAR 15.2 is not applicable to Program Opportunity Notices (See 
48 CFR 917.72) or Program Research and Development Announcements 
(See 48 CFR 917.73).

915.201  Exchanges with industry before receipt of proposals. (DOE 
coverage-paragraph (e)).

    (e) Approval for the use of solicitations for information or 
planning purposes shall be obtained from the Head of the Contracting 
Activity.


915.207-70  Handling of proposals during evaluation

    (a) Proposals furnished to the Government are to be used for 
evaluation purposes only. Disclosure outside the Government for 
evaluation is permitted only to the extent authorized by, and in 
accordance with, the procedures in this subsection.
    (b) While the Government's limited use of proposals does not 
require that the proposal bear a restrictive notice, proposers should, 
if they desire to maximize protection of their trade secrets or 
confidential or privileged commercial and financial information 
contained in them, apply the restrictive notice prescribed in paragraph 
(e) of the provision at 48 CFR 52.215-1 to such information. In any 
event, information contained in proposals will be protected to the 
extent permitted by law, but the Government assumes no liability for 
the use or disclosure of information (data)

[[Page 56852]]

not made subject to such notice in accordance with paragraph (e) of the 
provision at 48 CFR 52.215-1.
    (c) If proposals are received with more restrictive conditions than 
those in paragraph (e) of the provision at 48 CFR 52.215-1, the 
contracting officer or coordinating officer shall inquire whether the 
submitter is willing to accept the conditions of paragraph (e). If the 
submitter does not, the contracting officer or coordinating officer 
shall, after consultation with counsel, either return the proposal or 
accept it as marked. Contracting officers shall not exclude from 
consideration any proposals merely because they contain an authorized 
or agreed to notice, nor shall they be prejudiced by such notice.
    (d) Release of proposal information (data) before decision as to 
the award of a contract, or the transfer of valuable and sensitive 
information between competing offerors during the competitive phase of 
the acquisition process, would seriously disrupt the Government's 
decision-making process and undermine the integrity of the competitive 
acquisition process, thus adversely affecting the Government's ability 
to solicit competitive proposals and award a contract which would best 
meet the Government's needs and serve the public interest. Therefore, 
to the extent permitted by law, none of the information (data) 
contained in proposals, except as authorized in this subsection, is to 
be disclosed outside the Government before the Government's decision as 
to the award of a contract. In the event an outside evaluation is to be 
obtained, it shall be only to the extent authorized by, and in 
accordance with the procedures of, this subsection.
    (e)(1) In order to maintain the integrity of the procurement 
process and to assure that the propriety of proposals will be 
respected, contracting officers shall assure that the following notice 
is affixed to each solicited proposal prior to distribution for 
evaluation:

Government Notice for Handling Proposals

    This proposal shall be used and disclosed for evaluation 
purposes only, and a copy of this Government notice shall be applied 
to any reproduction or abstract thereof. Any authorized restrictive 
notices which the submitter places on this proposal shall also be 
strictly complied with. Disclosure of this proposal outside the 
Government for evaluation purposes shall be made only to the extent 
authorized by, and in accordance with, the procedures in DEAR 
subsection 915.207-70.

(End of Notice)

    (2) The notice at FAR 15.609(d) for unsolicited proposals shall be 
affixed to a cover sheet attached to each such proposal upon receipt by 
DOE. Use of the notice neither alters any obligation of the Government, 
nor diminishes any rights in the Government to use or disclose data or 
information.
    (f)(1) Normally, evaluations of proposals shall be performed only 
by employees of the Department of Energy. As used in this section, 
``proposals'' includes the offers in response to requests for 
proposals, sealed bids, program opportunity announcements, program 
research and development announcements, or any other method of 
solicitation where the review of proposals or bids is to be performed 
by other than peer review. In certain cases, in order to gain necessary 
expertise, employees of other agencies may be used in instances in 
which they will be available and committed during the period of 
evaluation. Evaluators or advisors who are not Federal employees, 
including employees of DOE management and operating contractors, may be 
used where necessary. Where such non-Federal employees are used as 
evaluators, they may only participate as members of technical 
evaluation committees. They may not serve as members of the Source 
Evaluation Board or equivalent board or committee.
    (2)(i) Pursuant to section 6002 of Pub. L. 103-355, a determination 
is required for every competitive procurement as to whether sufficient 
DOE personnel with the necessary training and capabilities are 
available to evaluate the proposals that will be received. This 
determination, discussed at FAR 37.204, shall be made in the memorandum 
appointing the technical evaluation committee by the Source Selection 
Official, in the case of Source Evaluation Board procurements, or by 
the Contracting Officer in all other procurements.
    (ii) Where it is determined such qualified personnel are not 
available within DOE but are available from other Federal agencies, a 
determination to that effect shall be made by the same officials in the 
same memorandum. Should such qualified personnel not be available, a 
determination to use non-Federal evaluators or advisors must be made in 
accordance with paragraph (f)(3) of this subsection.
    (3) The decision to employ non-Federal evaluators or advisors, 
including employees of DOE management and operating contractors, in 
Source Evaluation Board procurements must be made by the Source 
Selection Official with the concurrence of the Head of the Contracting 
Activity. In all other procurements, the decision shall be made by the 
senior program official or designee with the concurrence of the Head of 
the Contracting Activity. In a case where multiple solicitations are 
part of a single program and would call for the same resources for 
evaluation, a class determination to use non-Federal evaluators may be 
made by the DOE Procurement Executive.
    (4) Where such non-Federal evaluators or advisors are to be used, 
the solicitation shall contain a provision informing prospective 
offerors that non-Federal personnel may be used in the evaluation of 
proposals.
    (5) The nondisclosure agreement as it appears in paragraph (f)(6) 
of this subsection shall be signed before DOE furnishes a copy of the 
proposal to non-Federal evaluators or advisors, and care should be 
taken that the required handling notice described in paragraph (e) of 
this subsection is affixed to a cover sheet attached to the proposal 
before it is disclosed to the evaluator or advisor. In all instances, 
such persons will be required to comply with nondisclosure of 
information requirements and requirements involving Procurement 
Integrity, see FAR 3.104; with requirements to prevent the potential 
for personal conflicts of interest; or, where a non-Federal evaluator 
or advisor is acquired under a contract with an entity other than the 
individual, with requirements to prevent the potential for 
organizational conflicts of interest.
    (6) Non-Federal evaluators or advisors shall be required to sign 
the following agreement prior to having access to any proposal:

Nondisclosure Agreement

    Whenever DOE furnishes a proposal for evaluation, I, the 
recipient, agree to use the information contained in the proposal 
only for DOE evaluation purposes and to treat the information 
obtained in confidence. This requirement for confidential treatment 
does not apply to information obtained from any source, including 
the proposer, without restriction. Any notice or restriction placed 
on the proposal by either DOE or the originator of the proposal 
shall be conspicuously affixed to any reproduction or abstract 
thereof and its provisions strictly complied with. Upon completion 
of the evaluation, it is agreed all copies of the proposal and 
abstracts, if any, shall be returned to the DOE office which 
initially furnished the proposal for evaluation. Unless authorized 
by the Contracting Officer, I agree that I shall not contact the 
originator of the proposal concerning any aspect of its elements.

Recipient:-------------------------------------------------------------

Date:------------------------------------------------------------------

(End of Agreement)

    (g) The submitter of any proposal shall be provided notice adequate 
to afford an opportunity to take

[[Page 56853]]

appropriate action before release of any information (data) contained 
therein pursuant to a request under the Freedom of Information Act (5 
U.S.C. 552); and, time permitting, the submitter should be consulted to 
obtain assistance in determining the eligibility of the information 
(data) in question as an exemption under the Act. (See also 48 CFR 
24.2, Freedom of Information Act.)

Subpart 915.3--Source Selection


915.305  Proposal evaluation. (DOE coverage--paragraph (d))

    (d) Personnel from DOE, other Government agencies, consultants, and 
contractors, including those who manage or operate Government-owned 
facilities, may be used in the evaluation process as evaluators or 
advisors when their services are necessary and available. When 
personnel outside the Government, including those of contractors who 
operate or manage Government-owned facilities, are to be used as 
evaluators or advisors, approval and nondisclosure procedures as 
required by 48 CFR (DEAR) 915.207-70 shall be followed and a notice of 
the use of non-Federal evaluators shall be included in the 
solicitation. In all instances, such personnel will be required to 
comply with DOE conflict of interest and nondisclosure requirements.

Subpart 915.4--Contract Pricing


915.404-2  Information to support proposal analysis. (DOE coverage--
paragraphs (a), (c) and (e))

    (a)(1) Field pricing assistance as discussed in FAR 15.404-2(a) is 
not required for the negotiation of DOE contract prices or 
modifications thereof. The term ``field pricing assistance'' refers to 
the Department of Defense (DOD) system for obtaining a price and/or 
cost analysis report from a cognizant DOD field level contract 
management office wherein requests for the review of a proposal 
submitted by an offeror are initiated and the recommendations made by 
the various specialists of the management office are consolidated into 
a single report that is forwarded to the office making the contract 
award for use in conducting negotiations. In the DOE, such review 
activities, except for reviews performed by professional auditors, are 
expected to be accomplished by pricing support personnel located in DOE 
Contracting Activities. The DOE contracting officer shall formally 
request the assistance of appropriate pricing support personnel, other 
than auditors, for the review of any proposal that exceeds $500,000, 
unless the contracting officer has sufficient data to determine the 
reasonableness of the proposed cost or price. Such pricing support may 
be requested for proposals below $500,000, if considered necessary for 
the establishment of a reasonable pricing arrangement. Contracting 
officers, however, are not precluded by this section from requesting 
pricing assistance from a cognizant DOD contract management office, 
provided an appropriate cross-servicing arrangement for pricing support 
services exists between the DOE and the servicing agency.
    (c)(1) When an audit is required pursuant to 48 CFR 915.404-2-70, 
``Audit as an aid in proposal analysis,'' the request for audit shall 
be sent directly to the Federal audit office assigned cognizance of the 
offeror or prospective contractor. When the cognizant agency is other 
than the Defense Contract Audit Agency or the Department of Health and 
Human Services, and an appropriate interagency agreement has not been 
established, the need for audit assistance shall be coordinated with 
the Office of Policy, within the Headquarters procurement organization.
    (2) The request for audit shall establish the due date for receipt 
of the auditor's report and in so doing shall allow as much time as 
possible for the auditor's review.
    (e)(6) Copies of technical analysis reports prepared by DOE 
technical or other pricing support personnel shall not normally be 
provided to the auditor. The contracting officer or the supporting 
price, cost, or financial analyst at the contracting activity shall 
determine the monetary impact of the technical findings.


915.404-2-70   Audit as an aid in proposal analysis.

    (a) When a contract price will be based on cost or pricing data 
submitted by the offerors, the DOE contracting officer or authorized 
representative shall request a review by the cognizant Federal audit 
activity prior to the negotiation of any contract or modification 
including modifications under advertised contracts in excess of:
    (1) $500,000 for a firm fixed-price contract or a fixed-price 
contract with economic price adjustment provisions; or adjustment 
provisions; or
    (2) $1,000,000 for all other contract types, including initial 
prices, estimated costs of cost-reimbursement contracts, interim and 
final price redeterminations, and target and settlement of incentive 
contracts.
    (b) The requirement for auditor reviews of proposals which exceed 
the thresholds specified in paragraph (a) of this section may be waived 
at a level above the contracting officer when the reasonableness of the 
negotiated contract price can be determined from information already 
available. The contract file shall be documented to reflect the reason 
for any such waiver, provided, however, that independent Government 
estimates of cost or price shall not be used as the sole justification 
for any such waiver.


Sec. 915.404-4  Profit. (DOE coverage--paragraphs (c) and (d))

    (c)(4)(i) Contracting officer responsibilities. The statutory 
limitations on profit and fees as set forth in FAR 15.404-4(c)(4)(i) 
shall be followed, except as exempted for DOE architect-engineer 
contracts covering Atomic Energy Commission (AEC) and Bonneville Power 
Administration (BPA) functions. Pursuant to section 602(d) (13) and 
(20) of the Federal Property and Administration Services Act of 1949, 
as amended, those former AEC functions, as well as those of the BPA, 
now being performed by DOE are exempt from the 6 percent of cost 
restriction on contracts for architect-engineer services. The estimated 
costs on which the maximum fee is computed shall include facilities 
capital cost of money when this cost is included in cost estimates.
    (c)(6) In cases where a change or modification calls for 
substantially different work than the basic contract, the contractor's 
effort may be radically changed and a detailed analysis of the profit 
factors would be a necessity. Also, if the dollar amount of the change 
or contract modification is very significant in comparison to the 
contract dollar amount, a detailed analysis should be made.
    (d) Profit-analysis factors. A profit/fee analysis technique 
designed for a systematic application of the profit factors in FAR 
15.404-4(d) provides contracting officers with an approach that will 
ensure consistent consideration of the relative value of the various 
factors in the establishment of a profit objective and the conduct of 
negotiations for a contract award. It also provides a basis for 
documentation of this objective, including an explanation of any 
significant departure from it in reaching a final agreement. The 
contracting officer's analysis of these prescribed factors is based on 
information available prior to negotiations. Such information is 
furnished in proposals, audit data, performance reports, preaward 
surveys and the like.

[[Page 56854]]

915.404-4-70  DOE structured profit and fee system.

    This section implements FAR 15.404-4(b) and (d).


915.404-4-70-1  General.

    (a) Objective. It is the intent of DOE to remunerate contractors 
for financial and other risks which they may assume, resources they 
use, and organization, performance and management capabilities they 
employ. Profit or fee shall be negotiated for this purpose; however, 
when profit or fee is determined as a separate element of the contract 
price, the aim of negotiation should be to fit it to the acquisition, 
giving due weight to effort, risk, facilities investment, and special 
factors as set forth in this subpart.
    (b) Commercial (profit) organization. Profit or fee prenegotiation 
objectives for contracts with commercial (profit) organizations shall 
be determined as provided in this subpart.
    (c) Nonprofit organizations. It is DOE's general policy to pay fees 
in contracts with nonprofit organizations other than educational 
institutions and governmental bodies; however, it is a matter of 
negotiation whether a fee will be paid in a given case. In making this 
decision, the DOE negotiating official should consider whether the 
contractor is ordinarily paid fees for the type of work involved. The 
profit objective should be reasonable in relation to the task to be 
performed and the requirements placed on the contractor.
    (d) Educational institutions. It is DOE policy not to pay fees 
under contracts with educational institutions.
    (e) State, local and Indian tribal governments. Profit or fee shall 
not be paid under contracts with State, local, and Indian tribal 
Governments.


915.404-70-2  Weighted guidelines system.

    (a) To properly reflect differences among contracts and the 
circumstances relating thereto and to select an appropriate relative 
profit/fee in consideration of these differences and circumstances, 
weightings have been developed for application by the contracting 
officer to standard measurement bases representative of the prescribed 
profit factors cited in FAR 15.404-4(d) and paragraph (d) of this 
section. This is a structured system, referred to as weighted 
guidelines. Each profit factor or subfactor, or component thereof, has 
been assigned weights relative to their value to the contract's overall 
effort. The range of weights to be applied to each profit factor is 
also set forth in paragraph (d) of this section. Guidance on how to 
apply the weighted guidelines is set forth in 48 CFR 915.404-4-70-8.
    (b) Except as set forth in 48 CFR 915.404-4-70-4, the weighted 
guidelines shall be used in establishing the profit objective for 
negotiation of contracts where cost analysis is performed.
    (c) The negotiation process does not contemplate or require 
agreement on either estimated cost elements or profit elements. 
Accordingly, although the details of analysis and evaluation may be 
discussed in the fact-finding phase of the negotiation process in order 
to develop a mutual understanding of the logic of the respective 
positions, specific agreement on the exact weights of values of the 
individual profit factors is not required and need not be attempted.
    (d) The factors set forth in the following table are to be used in 
determining DOE profit objectives. The factors and weight ranges for 
each factor shall be used in all instances where the weighted 
guidelines are applied.

------------------------------------------------------------------------
               Profit factors                  Weight ranges  (percent)
------------------------------------------------------------------------
I. Contractor Effort (Weights applied to
 cost):
    A. Material acquisitions:
        1. Purchased parts..................  1 to 3.
        2. Subcontracted items..............  1 to 4.
        3. Other materials..................  1 to 3.
    B. Labor skills:
        1. Technical and managerial:........
            a. Scientific...................  10 to 20.
            b. Project management/            8 to 20.
             administration.
            c. Engineering..................  8 to 14.
        2. Manufacturing....................  4 to 8.
        3. Support services.................  4 to 14.
    C. Overhead:
        1. Technical and managerial.........  5 to 8.
        2. Manufacturing....................  3 to 6.
        3. Support services.................  3 to 7.
    D. Other direct costs                     3 to 8.
    E. G&A (General Management) expenses      5 to 7.
II. Contract Risk (type of contract-weights   0 to 8.
 applied to total cost of items IA thru E).
III. Capital Investment (Weights applied to   5 to 20.
 the net book value of allocable facilities).
IV. Independent Research and Development:
    A. Investment in IR&D program (Weights    5 to 7.
     applied to allocable IR&D costs)
    B. Developed items employed (Weights      0 to 20.
     applied to total of profit $ for items
     IA thru E)
V. Special Program Participation (Weights     -5 to +5.
 applied to total of Profit $ for items IA
 thru E).
VI. Other Considerations (Weights applied to  -5 to +5.
 total of Profits $ for items 1A thru E).
VII. Productivity/Performance (special        (N/A).
 computation).
------------------------------------------------------------------------

915.404-4-70-3  Documentation.

    Determination of the profit or fee objective, in accordance with 
this subpart shall be fully documented. Since the profit objective is 
the contracting officer's pre-negotiation evaluation of a total profit 
allowance for the proposed contract, the amounts developed for each 
category of cost will probably change in the course of negotiation. 
Furthermore, the negotiated amounts will probably vary from the 
objective and from the pre-negotiation detailed application of the 
weighted guidelines technique to each element of the contractor's input 
to total performance. Since the profit objective is viewed as a whole 
rather than as its

[[Page 56855]]

component parts, insignificant variations from the pre-negotiation 
profit objective, as a result of changes to the contractor's input to 
total performance, need not be documented in detail. Conversely, 
significant deviations from the profit objective necessary to reach a 
final agreement on profit or fee shall be explained in the price 
negotiation memorandum prepared in accordance with FAR 15.406-3.


915.404-4-70-4  Exceptions.

    (a) For contracts not expected to exceed $500,000, the weighted 
guidelines need not be used; however, the contracting officer may use 
the weighted guidelines for contracts below this amount if he or she 
elects to do so.
    (b) For the following classes of contracts, the weighted guidelines 
shall not be used:
    (1) Commercialization and demonstration type contracts;
    (2) Management and operating contracts;
    (3) Construction contracts;
    (4) Construction management contracts;
    (5) Contracts primarily requiring delivery of material supplied by 
subcontractors;
    (6) Termination settlements; and
    (7) Contracts with educational institutions.
    (c) In addition to paragraphs (a) and (b) of this section, the 
contracting officer need not use the weighted guidelines in unusual 
pricing situations where the weighted guidelines method has been 
determined by the DOE negotiating official to be unsuitable. Such 
exceptions shall be justified in writing and shall be authorized by the 
Head of the Contracting Activity. The contract file shall include this 
documentation and any other information that may support the exception.
    (d) If the contracting officer makes a written determination that 
the pricing situation meets any of the circumstances set forth in this 
section, other methods for establishing the profit objective may be 
used. For contracts other than those subject to 48 CFR 917.6, the 
selected method shall be supported in a manner similar to that used in 
the weighted guidelines (profit factor breakdown and documentation of 
profit objectives); however, investment or other factors that would not 
be applicable to the contract shall be excluded from the profit 
objective determination. It is intended that the methods will result in 
profit objectives for noncapital intensive contracts that are below 
those generally developed for capital intensive contracts.


915.404-4-70-5  Special considerations-contracts with nonprofit 
organizations (other than educational institutions).

    (a) For purposes of identification, nonprofit organizations are 
defined as those business entities organized and operated exclusively 
for charitable, scientific, or educational purposes, of which no part 
of the net earnings inure to the benefit of any private shareholder or 
individual, of which no substantial part of the activities is 
attempting to influence legislation or participating in any political 
campaign on behalf of any candidate for public office, and which are 
exempt from Federal income taxation under section 501 of the Internal 
Revenue Code.
    (b) In computing the amount of profit or fee to be paid, the DOE 
negotiating official shall take into account the tax benefits received 
by a nonprofit organization. While it is difficult to establish the 
degree to which a remuneration under any given contract contributes to 
an organization's overall net profit, the DOE negotiating official 
should assume that there is an element of profit in any amount to be 
paid.
    (c) In order to assure consideration of the tax posture of 
nonprofit organizations during a profit or fee negotiation, the DOE 
negotiating official shall calculate the fee as for a contract with a 
commercial concern and then reduce it at least 25 percent. However, 
depending on the circumstances, the contracting officer may pay profit 
or fees somewhere between this amount and the appropriate profit or fee 
as if it were a commercial concern. When this is the case, the contract 
file shall be documented to specifically state the reason or reasons.
    (d) Where a contract with a nonprofit organization is for the 
operation of Government-owned facilities, the fee should be calculated 
using the procedures and schedules applicable to operating contracts as 
set forth in 48 CFR part 970.


915.404-4-70-6  Contracts with educational institutions.

    In certain situations the DOE may contract with a university to 
manage or operate Government-owned laboratories. These efforts are 
generally apart from, and not in conjunction with, their other 
activities, and the complexity and magnitude of the work are not 
normally found in standard university research or study contracts. Such 
operating contracts are subject to the applicable provisions set forth 
in 48 CFR part 970.


915.404-4-70-7  Alternative techniques.

    (a) Profit or fees to be paid on construction contracts and 
construction management contracts shall be determined in accordance 
with the applicable profit/fee technique for such contracts set forth 
in 48 CFR 915.404-4-71.
    (b) Profit and fee to be paid on contracts under $500,000, not 
using the weighted guidelines, shall be judgmentally developed by the 
contracting officer by assigning individual dollar amounts to the 
factors appropriate to DOE profit considerations discussed in 48 CFR 
915.404-4-70-2(d).
    (c) Contracts which require only delivery or furnishing of goods or 
services supplied by subcontractors shall include a fee or profit 
which, in the best judgment of the contracting officer, is appropriate. 
It would be expected that there would be a declining relationship of 
profit/fee dollars in relation to total costs. The higher the cost of 
subcontracts, for example, the lower the profit/fee ratio to these 
costs.
    (d) Profit/Fee considerations in termination settlements are often 
a question of equity. They are a matter of negotiation. They should 
not, however, exceed what would have otherwise been payable under 
weighted guidelines had the termination not occurred.


915.404-4-70-8  Weighted guidelines application considerations.

    The Department has developed internal procedures to aid the 
contracting officer in the application of weighted guidelines and to 
assure a reasonable degree of uniformity across the Department.


915.404-4-71  Profit and fee-system for construction and construction 
management contracts.


915.404-4-71-1  General.

    (a) Business concerns awarded a DOE construction or construction 
management contract shall be paid a profit or fee if requested or 
solicited. The profit or fee objective for a construction or 
construction management contract shall be an amount appropriate for the 
type of effort contained therein. It is the intent of DOE to
    (1) Reward contractors based on the complexity of work,
    (2) Reward contractors who demonstrate and establish excellent 
records of performance and
    (3) Reward contractors who contribute their own resources, 
including facilities and investment of capital.

[[Page 56856]]

    (b) Standard fees or across-the-board agreements will not be used 
or made. Profit or fee objectives are to be determined for each 
contract according to the effort or task contracted for thereunder.
    (c) Profit or fee payable on fixed-price and cost-reimbursable 
construction or construction management contracts shall be established 
in accordance with the appropriate procedures and schedules set forth 
in this subpart.


915.404-4-71-2  Limitations.

    Amounts payable under construction and construction management 
contracts shall not exceed amounts derived from the schedules 
established for this purpose. Requests to pay fees in excess of these 
levels shall be forwarded to the Procurement Executive for review and 
approval.


915.404-4-71-3  Factors for determining fees.

    (a) The profit policy stated in 48 CFR 915.404-4-71-1(a) reflects, 
in a broad sense, recognition that profit is compensation to 
contractors for the entrepreneurial function of organizing and managing 
resources (including capital resources), and the assumption of risk 
that all costs of performance (operating and capital) may not be 
reimbursable.
    (b) The best approach calls for a structure that allows judgmental 
evaluation and determination of fee dollars for prescribed factors 
which impact the need for, and the rewards associated with, fee or 
profit, as follows.
    (1) Management risk relating to performance, including the
    (i) Quality and diversity of principal work tasks required to do 
the job,
    (ii) Labor intensity of the job,
    (iii) Special control problems, and
    (iv) Advance planning, forecasting and other such requirements;
    (2) The presence or absence of financial risk, including the type 
and terms of the contract;
    (3) The relative difficulty of work, including consideration of 
technical and administrative knowledge, skill, experience and clarity 
of technical specifications;
    (4) Degree and amount of contract work required to be performed by 
and with the contractor's own resources, including the extent to which 
the contractor contributes plant, equipment, computers, or working 
capital (labor, etc.);
    (5) Duration of project;
    (6) Size of operation;
    (7) Benefits which may accrue to the contractor from gaining 
experience and know-how, from establishing or enhancing a reputation, 
or from being enabled to hold or expand a staff whose loyalties are 
primarily to the contractor; and
    (8) Other special considerations, including support of Government 
programs such as those relating to small, small disadvantaged, and 
women-owned small business in subcontracting, energy conservation, etc.
    (c) The total fee objective and amount for a particular negotiation 
is established by judgmental considerations of the factors in paragraph 
(b) of this section, assigning fee values as deemed appropriate for 
each factor and totaling the resulting amounts.
    (d) In recognition of the complexities of this process, and to 
assist in promoting a reasonable degree of consistency and uniformity 
in its application, fee schedules have been developed which set forth 
maximum fee amounts that contracting activities are allowed to 
negotiate for a particular transaction without obtaining prior approval 
of the Procurement Executive. In addition, the fee negotiation 
objective established in accordance with 48 CFR 915.404-4-71-3(a), (b), 
and (c) shall not exceed the applicable fee schedule amounts without 
prior approval of the Procurement Executive. To facilitate application 
to a contract, the fee amounts are related to the total cost base which 
is defined as total operating and capital costs.


915.404-4-71-4  Considerations affecting fee amounts.

    (a) In selecting final fee amounts for the various factors in 48 
CFR 915.404-4-71-3 of this section, the DOE negotiating official will 
have to make several judgments as discussed in this subsection.
    (b) Complexity of a construction project shall be considered by 
analysis of its major parts. For a project which includes items of work 
of different degrees of complexity, a single average classification 
should be considered, or the work should be divided into separate 
classifications. The following class identifications are appropriate 
for proper fee determinations.
    (1) Class A--Manufacturing plants involving operations requiring a 
high degree of design layout or process control; nuclear reactors; 
atomic particle accelerators; complex laboratories or industrial units 
especially designed for handling radioactive materials.
    (2) Class B--Normal manufacturing processes and assembly operations 
such as ore dressing, metal working plant and simple processing plants; 
power plants and accessory switching and transformer stations; water 
treatment plants; sewage disposal plants; hospitals; and ordinary 
laboratories.
    (3) Class C--Permanent administrative and general service 
buildings, permanent housing, roads, railroads, grading, sewers, storm 
drains, and water and power distribution systems.
    (4) Class D--Construction camps and facilities and other 
construction of a temporary nature.
    (c) Normal management elements of principal tasks relating to a 
construction contract cover several categories of tasks with differing 
rates of application throughout the construction period. The principal 
elements of management effort are outlined in this paragraph. Although 
each project has a total management value equal to 100% for all 
elements, the distribution of effort among the various elements will be 
different for each project due to differences in project character or 
size. The basic management elements and the normal range of efforts 
expected to apply for a normal sized project are as follows. When the 
normally expected effort will not be performed by a contractor, this 
fact should be considered in arriving at appropriate fee amounts.

------------------------------------------------------------------------
                                                        Effort range
                Management elements                ---------------------
                                                     Minimum    Maximum
------------------------------------------------------------------------
I. Broad project planning. Overall project
 planning and scheduling, establishment of key
 project organization and consultation with the A-
 E and DOE. Performed by highest level of
 contractor's officers, technical personnel and
 project manager..................................         15         25
II. Field planning. Mobilization and
 demobilization of top field organization from the
 contractor's existing organization and from other
 sources as necessary. Detailed project planning
 and scheduling for construction of facilities.
 Performed by the project manager and top field
 professional staff...............................         18         28

[[Page 56857]]

III. Labor supervision. Direct supervision of
 manual employees. Performed by contractor's
 subprofessional staff, such as superintendents
 and foremen (some salaried and some hourly rate).
 This includes the contractor's personnel to
 coordinate and expedite the work of
 Subcontractors...................................         12         16
IV. Acquisition and subcontracting. Acquisition of
 other than special equipment. Selection of
 subcontractors and execution and administration
 of subcontracts. Performed by contractor's staff
 under supervision and direction of elements I and
 II...............................................         12         16
V. Labor relations and recruit-ment (manual).
 Performed by the contractor's staff under
 supervision and direction of elements I, II and
 III. This includes demobilization of work forces.          7         11
VI. Recruitment of supervisory staff. Staffing
 required to supplement the organization under
 elements I and II, and demobilization during
 completion of the project. Performed by
 contractor's permanent staff and recruitment
 personnel under supervision and direction of
 management elements I and II.....................          4          6
VII. Expediting. Expediting contracting performed
 by contractor's staff and by subcontractors.
 Performed by contractor's staff under supervision
 and direction of elements I and II...............          4          6
VIII. Construction equipment operations. This
 includes mobilization and demobilization.
 Performed by contractor's staff under
 supervision, direction and coordination of
 elements I, II, and IV...........................          4          6
IX. Other services. Timekeeping, cost accounting,
 estimating, reporting, security, etc., by the
 contractor's staff under supervision and
 direction of elements I and II...................          4          6
------------------------------------------------------------------------

    (d) Fee considerations dealing with the duration of a project are 
usually provided by the consideration given to the degree of complexity 
and magnitude of the work. In only very unusual circumstances should it 
be necessary to separately weight, positively or negatively, for the 
period of services or length of time involved in the project when 
determining fee levels.
    (e) The size of the operation is to a considerable degree a 
continuation of the complexity factor, and the degree and amount of 
work required to be performed by and with the contractor's own 
resources. Generally, no separate weighting, positively or negatively, 
is required for consideration of those factors.
    (f) The degree and amount of work required to be performed by and 
with the contractor's own resources affect the level of fees. 
Reasonable fees should be based on expectations of complete 
construction services normally associated with a construction or 
construction management contract. In the case of a construction 
contract, reduced services can be in the form of excessive 
subcontracting or supporting acquisition actions and labor relations 
interfaces being made by the government. If an unusual amount of such 
work is performed by other than the contractor, it will be necessary to 
make downward adjustments in the fee levels to provide for the 
reduction in services required.
    (g) The type of contract to be negotiated and the anticipated 
contractor cost risk shall be considered in establishing the 
appropriate fee objective for the contract.
    (h) When a contract calls for the contractor to use its own 
resources, including facilities and equipment, and to make its own cost 
investment (i.e., when there is no letter-of-credit financing), a 
positive impact on the fee amount shall be reflected.


915.404-4-71-5  Fee schedules.

    (a) The schedules included in this paragraph, adjusted in 
accordance with provisions of this section and 48 CFR 915.404-4-71-6, 
provide maximum fee levels for construction and construction management 
contracts. The fees are related to the estimated cost (fee base) for 
the construction work and services to be performed. The schedule in 
paragraph (d) of this section sets forth the basic fee schedule for 
construction contracts. The schedule in paragraph (f) of this section 
sets forth the basic fee schedule for construction management 
contracts. A separate schedule in paragraph (h) of this section has 
been developed for determining the fee applicable to special equipment 
purchases and to reflect a differing level of fee consideration 
associated with the subcontractor effort under construction management 
contracts. (See 48 CFR 915.404-4-71-6(c) and 915.404-4-71-6(d)).
    (b) The schedules cited in paragraph (a) of this section provide 
the maximum fee amount for a CPFF contract arrangement. If a fixed-
price type contract is to be awarded, the fee amount set forth in the 
fee schedules shall be increased by an amount not to exceed 4 percent 
of the fee base.
    (c) The fee schedule shown in paragraphs (d) and (f) of this 
section assumes a letter of credit financing arrangement. If a contract 
provides for or requires the contractor to make their own cost 
investment for contract performance (i.e., when there is no letter-of-
credit financing), the fee amounts set forth in the fee schedules shall 
be increased by an amount equal to 5 percent of the fee amount as 
determined from the schedules.
    (d) The following schedule sets forth the base for construction 
contracts:

                     Construction Contracts Schedule
------------------------------------------------------------------------
                                       Fee          Fee         Incr.
       Fee base  (dollars)          (dollars)    (Percent)    (Percent)
------------------------------------------------------------------------
100,000..........................        5,400         5.40         5.30
300,000..........................       16,000         5.33         5.00
500,000..........................       26,000         5.20         4.80
1,000,000........................       50,000         5.00         3.55
3,000,000........................      121,000         4.03         3.00
5,000,000........................      181,000         3.62         2.62
10,000,000.......................      312,000         3.12         2.38
15,000,000.......................      431,000         2.87         2.01
25,000,000.......................      632,000         2.53         1.79
40,000,000.......................      900,000         2.25         1.58

[[Page 56858]]

60,000,000.......................    1,216,000         2.03         1.43
80,000,000.......................    1,502,000         1.88         1.29
100,000,000......................    1,759,000         1.76         1.15
150,000,000......................    2,333,000         1.56         0.99
200,000,000......................    2,829,000         1.41         0.73
300,000,000......................    3,563,000         1.19         0.63
400,000,000......................    4,188,000         1.05         0.52
500,000,000......................    4,706,000         0.94  ...........
Over $500 million................    4,706,000  ...........   \1\ 10.52
------------------------------------------------------------------------
\1\ 10.52% excess over $500 million.

    (e) When using the Construction Contracts Schedule for establishing 
maximum payable basic fees, the following adjustments shall be made to 
the Schedule fee amounts for complexity levels, excessive 
subcontracting, normal contractor services performed by the government 
or another contractor:
    (1) The target fee amounts, set forth in the fee schedule, shall 
not be adjusted for a Class A project, which is maximum complexity. A 
Class B project requires a 10 percent reduction in amounts. Class C and 
D projects require a 20 percent and 30 percent reduction, respectively. 
The various classes are defined in 48 CFR 915.404-4-71-4(b).
    (2) The target fee schedule provides for 45 percent of the contract 
work to be subcontracted for such things as electrical and other 
specialties. Excessive subcontracting results when such efforts exceed 
45 percent of the total contract work. To establish appropriate fee 
reductions for excessive subcontracting, the negotiating official 
should first determine the amount of subcontracting as a percentage of 
the total contract work. Next, the negotiating official should 
determine a percentage by which the prime contractor's normal 
requirement (based on a requirement for doing work with its own forces) 
is reduced due to the excessive subcontracting and, finally, multiply 
the two percentages to determine a fee reduction factor.
    (3) If acquisition or other services normally expected of the 
contractor (see 48 CFR 915.404-4-71-4(c)) are performed by the 
government, or another DOE prime or operating contractor, a fee 
reduction may also be required. The negotiating official should first 
determine what percentage of the total procurement or other required 
services is performed by others. Then the negotiating official should 
apply this percentage reduction to the normally assigned weightings for 
the management services or effort as discussed in 48 CFR 915.404-4-71-
4(c) to arrive at the appropriate reduction factor.
    (f) The following schedule sets forth the base for construction 
management contracts:

               Construction Management Contracts Schedule
------------------------------------------------------------------------
                                       Fee          Fee         Incr.
       Fee base  (dollars)          (dollars)    (percent)    (percent)
------------------------------------------------------------------------
100,000..........................        5,400         5.40         5.30
300,000..........................       16,000         5.33         5.00
500,000..........................       26,000         5.20         4.80
1,000,000........................       50,000         5.00         3.55
3,000,000........................      121,000         4.03         3.00
5,000,000........................      181,000         3.62         2.62
10,000,000.......................      312,000         3.12         2.38
15,000,000.......................      431,000         2.87         2.01
25,000,000.......................      632,000         2.53         1.79
40,000,000.......................      900,000         2.25         1.58
60,000,000.......................    1,216,000         2.03         1.43
80,000,000.......................    1,502,000         1.88         1.29
100,000,000......................    1,759,000         1.76  ...........
Over $100 million................    1,759,000  ...........    \1\ 1.29
------------------------------------------------------------------------
\1\ 1.29% excess over $100 million.

    (g) When applying the basic Construction Management Contracts 
Schedule for determining maximum payable fees, no adjustments are 
necessary to such payable fees for contractor Force account labor used 
for work which should otherwise be subcontracted until such Force 
account work exceeds, in the aggregate, 20 percent of the base. 
Excessive use of Force account work results when such effort exceeds 20 
percent of the fee base; and, when this occurs, appropriate fee 
reductions for such excessive Force account labor shall be computed as 
follows:
    (1) Determine the percentage amount of Force account work to total 
contractor effort.
    (2) Determine the percentage amount of subcontract work reduced due 
to the use of Force account work.
    (3) Multiply the two percentages to determine the fee reduction 
factor. It is not expected that reductions in the Construction 
Management Contracts Schedule fee amounts will be made for complexity, 
reduced requirements and similar adjustments as made for construction 
contracts.
    (h) The schedule of fees for consideration of special equipment 
purchases and for consideration of the

[[Page 56859]]

subcontract program under a construction management contract is as 
follows:

          Special Equipment Purchases/Subcontract Work Schedule
------------------------------------------------------------------------
                                       Fee          Fee         Incr.
       Fee base  (dollars)          (dollars)    (percent)    (percent)
------------------------------------------------------------------------
100,000..........................        1,500         1.50         1.50
200,000..........................        3,000         1.50         1.50
400,000..........................        6,000         1.50         1.50
600,000..........................        9,000         1.50         1.50
800,000..........................       12,000         1.50         1.50
1,000,000........................       15,000         1.50         1.00
2,000,000........................       25,000         1.25         0.85
4,000,000........................       42,000         1.05         0.70
6,000,000........................       56,000         0.93         0.65
8,000,000........................       69,000         0.86         0.60
10,000,000.......................       81,000         0.81         0.56
15,000,000.......................      109,000         0.73         0.48
25,000,000.......................      157,000         0.63         0.43
40,000,000.......................      222,000         0.56         0.40
60,000,000.......................      301,000         0.50         0.36
80,000,000.......................      372,000         0.47         0.34
100,000,000......................      439,000         0.44         0.25
150,000,000......................      566,000         0.38         0.21
200,000,000......................      670,000         0.34         0.12
300,000,000......................      793,000         0.26  ...........
Over $300 million................      793,000  ...........    \1\ 0.12
------------------------------------------------------------------------
 \1\ 0.12% excess over $300 million.

915.404-4-71-6  Fee base.

    (a) The fee base shown in the Construction Contracts Schedule and 
Construction Management Contracts Schedule represents that estimate of 
cost to which a percentage factor is applied to determine maximum fee 
allowances. The fee base is the estimated necessary allowable cost of 
the construction work or other services which are to be performed. It 
shall include the estimated cost for, but is not limited to, the 
following as they may apply in the case of a construction or 
construction management contract:
    (1) Site preparation and utilities.
    (2) Construction (labor-materials-supplies) of buildings and 
auxiliary facilities.
    (3) Construction (labor-materials-supplies) to complete/construct 
temporary buildings.
    (4) Design services to support the foregoing.
    (5) General management and job planning cost.
    (6) Labor supervision.
    (7) Procurement and acquisition administration.
    (8) Construction performed by subcontractors.
    (9) Installation of government furnished or contractor acquired 
special equipment and other equipment.
    (10) Equipment (other than special equipment) which is to become 
Government property (including a component of Government property).
    (b) The fee base for the basic fee determination for a construction 
contract and construction management contract shall include all 
necessary and allowable costs cited in paragraph (a) of this section as 
appropriate to the type of contract; except, any home office G&A 
expense paid as a contract cost per cost principle guidance and 
procedures shall be excluded from the fee base. The fee base shall 
exclude:
    (1) Cost of land.
    (2) Cost of engineering (A&E work).
    (3) Contingency estimate.
    (4) Equipment rentals or use charges. (See 48 CFR 936.70.)
    (5) Cost of government furnished equipment or materials.
    (6) Special equipment as defined in 48 CFR 936.7201.
    (c) A separate fee base shall be established for special equipment 
for use in applying the Special Equipment Purchases or Subcontract Work 
Schedule (see 48 CFR 915.404-4-71-5(h)). The fee base for determination 
of applicable fees on special equipment shall be based on the estimated 
purchase price of the equipment.
    (d) The fee base under the Construction Management Contracts 
Schedule for a maximum basic fee determination for a construction 
management contract shall be comprised of only the costs of the 
construction manager's own efforts. However, it is recognized that in 
the case of construction management contracts, the actual construction 
work will be performed by subcontractors. In most cases the subcontract 
awards for the construction work will be made by the construction 
management contractor. Occasionally the contract may involve management 
of construction performed under a contract awarded by the Department or 
by one of the Department's operating contractors. In these cases, the 
actual cost of the subcontracted construction work shall be excluded 
from the fee base used to determine the maximum basic fee (under the 
Construction Management Contracts Schedule) applicable to a 
construction management contract. A separate fee base for additional 
allowances (using the Special Equipment Purchases or Subcontract Work 
Schedule) shall be established, which shall be comprised of those 
subcontract construction costs, special equipment purchases, and other 
items' costs that are contracted for or purchased by the construction 
manager.


915.404-4-72  Special considerations for cost-plus-award-fee contracts.

    (a) When a contract is to be awarded on a cost-plus-award-fee basis 
in accordance with 48 CFR 916.404-2, several special considerations are 
appropriate. Fee objectives for management and operating contracts, 
including those using the Construction or Construction Management fee 
schedules from section 48 CFR 915.404-4-71-5, shall be developed 
pursuant to the procedures set forth in section 48

[[Page 56860]]

CFR 970.15404-4-8. Fee objectives for other cost-plus-award-fee 
contracts shall be developed as follows:
    (1) The base fee portion of the fee objective of an award fee 
contract may range from 0% up to the 50% level of the fee amount for a 
Cost-Plus-Fixed-Fee (CPFF) contract, arrived at by using the weighted 
guidelines or other techniques (such as those provided in 48 CFR 
915.404-4-71 for construction and construction management contracts). 
However, the base amount should not normally exceed 50% of the 
otherwise applicable fixed fee. In the event this 50% limit is 
exceeded, appropriate documentation shall be entered into the contract 
file. In no event shall the base fee exceed 60% of the fixed fee 
amount.
    (2) The base fee plus the amount included in the award fee pool 
should normally not exceed the fixed fee (as subjectively determined or 
as developed from the fee schedule) by more than 50%. However, in the 
event the base fee is to be less than 50% of the fixed fee, the maximum 
potential award fee may be increased proportionately with the decreases 
in base fee amounts.
    (3) The following maximum potential award fees shall apply in award 
fee contracts: (percent is stated as percent of fee schedule amounts).

------------------------------------------------------------------------
                                                               Maximum
               Base fee percent                  Award fee      total
                                                  percent     percentage
------------------------------------------------------------------------
50............................................          100          150
40............................................          120          160
30............................................          140          170
20............................................          160          180
10............................................          180          190
0.............................................          200          200
------------------------------------------------------------------------

    (b) Prior approval of the Procurement Executive, is required for 
total fee (base plus award fee pool) exceeding the guidelines in 48 CFR 
915.404-4-72(a)(3).

Subpart 915.6--Unsolicited Proposals


915.602  Policy.

    (a) Present and future needs demand the involvement of all 
resources in exploring alternative energy sources and technologies. To 
achieve this objective, it is DOE policy to encourage external sources 
of unique and innovative methods, approaches, and ideas by stressing 
submission of unsolicited proposals for government support. In 
furtherance of this policy and to ensure the integrity of the 
acquisition process through application of reasonable controls, the 
DOE:
    (1) Disseminates information on areas of broad technical concern 
whose solutions are considered relevant to the accomplishment of DOE's 
assigned mission areas;
    (2) Encourages potential proposers to consult with program 
personnel before expending resources in the development of written 
unsolicited proposals;
    (3) Endeavors to distribute unsolicited proposals to all interested 
organizations within DOE;
    (4) Processes unsolicited proposals in an expeditious manner and, 
where practicable, keeps proposers advised as discrete decisions are 
made;
    (5) Assures that each proposal is evaluated in a fair and objective 
manner; and, (6) Assures that each proposal will be used only for its 
intended purpose and the information, subject to applicable laws and 
regulations, contained therein will not be divulged without prior 
permission of the proposer.
    (b) Extensions of contract work resulting from unsolicited 
proposals shall be processed in accordance with the procedures at 48 
CFR 943.170.


915.603  General. (DOE coverage-paragraph (e)).

    (e) Unsolicited proposals for the performance of support services 
are, except as discussed in this paragraph, unacceptable as the 
performance of such services is unlikely to necessitate innovative and 
unique concepts. There may be rare instances in which an unsolicited 
proposal offers an innovative and unique approach to the accomplishment 
of a support service. If such a proposal offers a previously unknown or 
an alternative approach to generally recognized techniques for the 
accomplishment of a specific service(s) and such approach will provide 
significantly greater economy or enhanced quality, it may be considered 
for acceptance. Such acceptance shall, however, require approval of the 
acquisition of support services in accordance with applicable DOE 
Directives and be processed as a deviation to the prohibition in this 
paragraph.


915.605  Content of unsolicited proposals. (DOE coverage-paragraph 
(b)).

    (b)(5) Unsolicited proposals for nonnuclear energy demonstration 
activities not covered by existing formal competitive solicitations or 
program opportunity notices may include a request for federal 
assistance or participation, and shall be subject to the cost sharing 
provisions of 48 CFR 917.70.


915.606  Agency procedures. (DOE coverage-paragraph (b)).

    (b) Unless otherwise specified in a notice of program interest, all 
unsolicited proposals should be submitted to the Unsolicited Proposal 
Coordinator, Office of Procurement and Assistance, Washington, DC 
20585. If the proposer has ascertained the cognizant program office 
through preliminary contacts with program staff, the proposal may be 
submitted directly to that office. In such instances, the proposer 
should separately send a copy of the proposal cover letter to the 
unsolicited proposal coordinator to assure that the proposal is logged 
in the Department's automated tracking system for unsolicited 
proposals.


915.607  Criteria for acceptance of an unsolicited proposal. (DOE 
coverage--paragraph (c)).

    (c) DOE's cost participation policy, at 48 CFR 917.70, shall be 
followed in determining the extent to which the DOE will participate in 
the cost for the proposed effort.

PART 916--TYPES OF CONTRACTS [AMENDED]

    4. The Subpart heading, 916.5 Indefinite-Delivery Contracts, is 
added immediately preceding section 916.504.

PART 919--SMALL BUSINESS PROGRAMS [AMENDED]

    5. Subsection 919.602-1 is amended in paragraph (a)(2) by revising 
``Regional'' to read ``Area''.
    6. Subsection 919.805-2 is revised to read as follows:


919.805-2  Procedures.

    Acquisitions involving section 8(a) competition must comply with 
source selection procedures set forth in the FAR in accordance with 13 
CFR 124.311(e)(1).

PART 935--RESEARCH AND DEVELOPMENT CONTRACTING [AMENDED]


935.016  [Removed]

    7. Section 935.016, including subsections 935.016-1, 935.016-2 and 
935.016-8, is removed.

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS [AMENDED]

    8. 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).

    9. Subpart 970.15 is revised to read as follows:

[[Page 56861]]

Subpart 970.15--Contracting by Negotiation

970.15404-4  Fees for management and operating contracts.
970.15404-4-1  Fee policy.
970.15404-4-2  Special considerations--educational institutions.
970.15404-4-3  Special consideration--nonprofit organizations (other 
than educational institutions).
970.15404-4-4  Considerations and techniques for determining fees.
970.15404-4-5  Limitations.
970.15404-4-6  Fee base.
970.15404-4-7  Special equipment purchases.
970.15404-4-8  Special considerations--award fee.
970.15405  Price negotiation.
970.15406-2  Cost or pricing data.
970.15407-2  Make-or-buy plans.
970.15407-2-1  Policy.
970.15407-2-2  Requirements.
970.15407-2-3 Contract clause.

Subpart 970.15--Contracting by Negotiation


970.15404-4  Fees for management and operating contracts.


970.15404-4-1  Fee policy.

    (a) DOE management and operating contractors, except educational 
institutions, may be paid a fee. The fee for a management and operating 
contract shall be an amount commensurate with the difficulty of the 
work and the level of required skills, demonstrated excellence in 
performance, and where applicable, an amount which recognizes 
contractor contributions or utilizations of their own facilities or 
other investment capital.
    (b) Fee objectives and amounts are to be determined for each 
contract. Standard fees or across the board agreements will not be used 
or made. Due to the nature of funding management and operating 
contracts, it is anticipated that fees shall be established in 
accordance with the funding cycle; however, a longer period may be 
used, particularly for production efforts.
    (c) Fee amounts payable on contracts for administration, 
management, operation, and on-site support of Government-owned 
facilities shall be established in accordance with this part. Amounts 
payable shall not exceed maximum amounts derived from the appropriate 
fee schedule established for this purpose. Request to pay fees in 
excess of the maximum will be sent to the Procurement Executive, for 
review and approval.
    (d) Maximum fees for those management and operating contracts that 
provide support services shall be determined using the schedule(s) most 
closely related to the service(s) to be performed. This may be either 
the production and/or R&D schedules (in some cases this could be both 
schedules) or the maximum fee schedules for construction or 
construction management cited in 48 CFR 915.404-4-71. If architect-
engineer services are involved, the weighted guidelines, profit-fee 
technique cited in 48 CFR 915.404-4-70 shall be applied.
    (e) When a contract subject to this part requires a contractor to 
use its own facilities or equipment, or other resources to make its own 
cost investment for contract performance; e.g., when there is no 
letter-of-credit financing, consideration will be given to approval of 
fee amounts based on assigning weights to appropriate fee factors. The 
weighted guidelines factors developed in 48 CFR 915.404-4-70 may be 
applied for this purpose. However maximum fees as are discussed in 48 
CFR 970.15404-4-1(c) and (d) shall not be exceeded without the 
Procurement Executive's approval.


970.15404-4-2  Special considerations--educational institutions.

    (a) It is DOE policy to compensate educational institutions 
consistent with the level of financial and management risk they assume 
in connection with their work for the Department.
    (b) Notwithstanding paragraph (a) of this section it may be, under 
special circumstances, permissible to reimburse or pay a management 
allowance to any educational institution provided such allowance can be 
justified and has the approval of the Head of the Contracting Activity.


970.15404-4-3  Special consideration--nonprofit organizations (other 
than educational institutions).

    (a) Unless there is reason to do otherwise, it is the general 
policy of DOE to pay fees for a management and operating contract with 
a nonprofit organization; however, it is a matter of negotiation 
whether a fee will be paid in a given case.
    (b) In computing the amounts to be paid, the tax status of the 
nonprofit organization should be considered. It is difficult to 
establish the degree to which the fee contributes to an organization's 
overall net profit since the fee compensates for certain unallowable 
costs and certain general and administrative expenses. It should be 
assumed, however, there is an element of profit in the fees paid under 
management and operating contracts.
    (c) In order to assure consideration of the tax benefits of 
nonprofit organizations the maximum payable fixed fee cited in the fee 
schedules of this subpart should be reduced by at least 25%. However, 
depending upon the circumstances and with appropriate justification, 
fees may be paid between this reduced amount and the fee amount 
established by the fee schedule.


970.15404-4-4  Considerations and techniques for determining fees.

    (a) The intent of the fee policy stated in 48 CFR 970.15404-4-1 
reflects recognition that a fee is remuneration to contractors for the 
entrepreneurial function of organizing and managing resources, the use 
of contractor resources (including capital resources), and the 
assumption of risk that all incurred costs (operating and capital) may 
not be reimbursable.
    (b) Use of a purely cost-based structured approach for determining 
fee objectives and amounts for typical DOE management and operating 
contracts is inappropriate considering the limited level of contractor 
cost, capital goods, and operating capital outlays for performance of 
such contracts. Instead of being solely cost-based, the desirable 
approach calls for a structure that allows judgmental evaluation and 
consideration of such significant factors, as outlined in this 
paragraph, and the selection of and assignment of appropriate fee 
values therefor:
    (1) Management risk relating to performance, including:
    (i) The quality and diversity of principal work tasks required to 
do the job,
    (ii) The labor intensity of the job,
    (iii) The special control problems, and
    (iv) The advance planning, forecasting and other such requirements;
    (2) The presence or absence of financial risk, including the type 
and terms of the contract;
    (3) The relative difficulty of work, including consideration of 
technical and administrative knowledge, skill, experience and clarity 
of technical specifications;
    (4) Degree and amount of contract work required to be performed by 
and with the contractor's own resources, including the extent to which 
the contractor contributes plant, equipment, computers, or working 
capital (labor, etc.);
    (5) Duration of project;
    (6) Size and operation (number of locations, plants, differing 
operations, etc.);
    (7) Influence of alternative investment opportunities available to 
the contractor (i.e., the extent to which undertaking a task for the 
Government displaces a contractor's opportunity to make a profit

[[Page 56862]]

with the same staff and equipment in some other field of activity).
    (8) The relationship of a proposed fee to fees being paid for 
similar work;
    (9) The extent to which the activity contemplated is fundamentally 
a service being furnished to the Government or is an activity in which 
the contractor has substantial independent interest, a factor 
especially pertinent to research work which is closely allied to a 
contractor's own program and to operations which involve furnishing 
research facilities which would otherwise not be available because of 
their large cost;
    (10) Benefits which may accrue to the contractor from gaining 
experience and knowledge of how to do something, from establishing or 
enhancing a reputation, or from being enabled to hold or expand a staff 
whose loyalties are primarily to the contractor; and
    (11) Other special considerations, including support of Government 
programs such as those relating to small and minority business in 
subcontracting, energy conservation, etc.
    (c) The fee objective and amount for a particular negotiation is 
established by judgmental considerations of the factors in paragraph 
(6) of this subsection, assigning fee values as deemed appropriate for 
each factor, and totaling the resulting amounts.
    (d) In recognition of the complexities of this fee determination 
process, and to assist in promoting a reasonable degree of consistency 
and uniformity in its application, the fee schedules in 48 CFR 
970.1515404-4-5 set forth the maximum amounts of fee that contracting 
activities are allowed to award for a particular transaction without 
obtaining prior approval of the Procurement Executive. In addition the 
fee amount established in accordance with 48 CFR 970.15404-4-4 (a), (b) 
and (c) shall not be exceeded without prior approval of the Procurement 
Executive. To facilitate application of the schedules to a contract, 
the payable fee amounts thereunder are related to the total expected 
level of cost expenditures under the contract which is defined as the 
fee base.


970.15404-4-5  Limitations.

    (a) Fee schedules representing the maximum allowable fee to be paid 
under operating and management contracts have been established for the 
following management and operating contract tasks or efforts.

(1) Production/Manufacturing and
(2) Research and Development

    (b) The applicable schedules and maximum fees are:

                           Production Efforts
------------------------------------------------------------------------
                                       Fee          Fee         Incr.
        Fee base (dollars)          (dollars)    (percent)    (percent)
------------------------------------------------------------------------
Up to $1 Million.................  ...........  ...........         7.00
1,000,000........................       70,000         7.00         6.20
3,000,000........................      194,000         6.47         5.55
5,000,000........................      305,000         6.10         4.48
10,000,000.......................      529,000         5.29         3.88
15,000,000.......................      723,000         4.82         3.39
25,000,000.......................    1,062,000         4.25         3.06
40,000,000.......................    1,521,000         3.80         2.67
60,000,000.......................    2,054,000         3.42         2.35
80,000,000.......................    2,524,000         3.16         2.14
100,000,000......................    2,952,000         2.95         1.32
150,000,000......................    3,613,000         2.41         1.02
200,000,000......................    4,123,000         2.06         0.56
300,000,000......................    4,678,000         1.56         0.48
400,000,000......................    5,162,000         1.29         0.41
500,000,000......................    5,574,000         1.11  ...........
Over $500 million................    5,574,000  ...........     \1\ 0.41
------------------------------------------------------------------------
\1\ 0.41% excess over $500 million.


                    Research and Development Efforts
------------------------------------------------------------------------
                                       Fee          Fee         Incr.
       Fee base  (dollars)          (dollars)    (percent)    (percent)
------------------------------------------------------------------------
25,000...........................        2,500        10.00        10.00
50,000...........................        5,000        10.00        10.00
100,000..........................       10,000        10.00         8.00
200,000..........................       18,000         9.00         8.00
400,000..........................       34,000         8.50         7.50
600,000..........................       49,000         8.17         7.00
800,000..........................       63,000         7.88         7.00
1,000,000........................       77,000         7.70         6.40
3,000,000........................      205,000         6.83         6.25
5,000,000........................      330,000         6.60         5.68
10,000,000.......................      614,000         6.14         5.22
15,000,000.......................      875,000         5.83         4.43
25,000,000.......................    1,318,000         5.27         3.86
40,000,000.......................    1,897,000         4.74         3.38
60,000,000.......................    2,572,000         4.29         2.99
80,000,000.......................    3,170,000         3.96         2.46
100,000,000......................    3,662,000         3.66         1.54
150,000,000......................    4,434,000         2.96         1.04
200,000,000......................    4,955,000         2.48         0.61
300,000,000......................    5,561,000         1.85         0.53

[[Page 56863]]

400,000,000......................    6,095,000         1.52         0.46
500,000,000......................    6,556,000         1.31  ...........
Over $500 million................    6,556,000  ...........    \1\ 0.46
------------------------------------------------------------------------
\1\ 0.46% excess over $500 million.

970.15404-4-6  Fee base.

    (a) The fee base is an estimate of necessary allowable costs to 
which a fee factor has been applied to determine the maximum fee 
allowance. It represents the cost of the production or R&D work to be 
performed, exclusive of the cost of source and special nuclear 
materials; estimated costs of land, buildings and facilities whether to 
be leased, purchased or constructed; depreciation of Government 
facilities; and any estimate of effort for which a separate fee is to 
be negotiated.
    (b) The fee base, in addition to the adjustments in paragraph (a) 
of this subsection, shall exclude:
    (1) Any part of the following types of costs which are of such 
magnitude or nature as to distort the technical and management effort 
actually required of the contractor:
    (i) Estimated cost of capital equipment (other than special 
equipment) which the contractor procures by subcontract;
    (ii) Estimated cost or price of subcontracts and other major 
contractor procurements; and
    (iii) Other similar costs.
    (2) Special equipment as defined in 48 CFR 970.15404-4-7.
    (3) Estimated cost of Government-furnished materials, services and 
equipment;
    (4) All estimates of costs not directly incurred by or reimbursed 
to the operating contractor;
    (5) Estimates of home office or corporate general and 
administrative expenses that shall be reimbursed through the operating 
contract;
    (6) Estimates of any independent research and development cost or 
bid and proposal expenses that may be approved under the operating 
contract.
    (c) In calculating the fee base for application of the production 
schedule, the estimated cost of research and development work and of 
process development work which goes beyond normal technical support 
required to ensure continuity of operation shall be excluded. The 
maximum fee for such R&D and process development work is calculated 
separately, starting at the beginning of the R&D schedule.
    (d) The schedules in this part are not intended to reflect 
compensation for unusual architect-engineer or construction services 
provided by the management and operating contractor. Such services are 
normally covered by special agreements based on the policies applying 
to architect-engineer or construction contracts. Fees paid for such 
services shall be in addition to the operating fees and should be 
calculated using the provisions of 48 CFR 915.404-4 relating to 
architect-engineer or construction fees.
    (e) The fee schedules provide the maximum fees payable within the 
authority of the Head of the Contracting Activity. There may be times 
however, when the fee schedule does not reflect an adequate 
compensation to the contractor (such as the use of its own facilities 
and capital). Proposals to compensate a contractor in excess of the 
maximum fee schedules shall be submitted to the Procurement Executive. 
Requests should contain documentation and state specifically why the 
contractor is entitled to additional fees. (See also 48 CFR 970.15404-
4-1(c)).


970.15404-4-7  Special equipment purchases.

    (a) Special equipment is sometimes procured in conjunction with 
management and operating contracts. When a contractor procures special 
equipment, the DOE negotiating official shall determine separate fees 
for the equipment and use the schedule in 48 CFR 915.404-4-71-5(h).
    (b) In determining appropriate fees, factors such as complexity of 
equipment, ratio of procurement transactions to volume of equipment to 
be purchased and completeness of services should be considered. Where 
possible, the reasonableness of the fees should be checked by their 
relationship to actual costs of comparable procurement services.
    (c) The maximum allowable fee for such services shall not exceed 
the fee schedule set forth in 48 CFR 915.404-4-71-5(h) for such 
services as performed by construction contractors. The fee is based on 
the estimated price of the equipment being purchased.
    (d) For purposes of this part, special equipment is equipment for 
which the purchase price is of such a magnitude compared to the cost of 
installation as to distort the amount of technical direction and 
management effort required of the contractor. Generally, special 
equipment is considered to be a capital-asset-type of equipment 
(typically equipment costing more than $1,000 and having a service life 
of more than two years) for which the cost of installation and handling 
(including unloading, hauling and warehousing) is 5%, or less, of the 
purchase price of the equipment. However, the determination of specific 
items of equipment in this category requires application of judgment 
and careful study of the circumstances involved in each project. This 
category of equipment would generally include:
    (1) Major items of prefabricated process or research equipment.
    (2) Major items of preassembled equipment such as packaged boilers, 
generators, machine tools, and large electrical equipment. In some 
cases, it would also include special apparatus or devices such as 
reactor vessels and reactor charging machines.


970.15404-4-8  Special considerations--award fee.

    (a) When a management and operating contract is to be awarded on an 
award-fee basis, several special considerations are appropriate.
    (b) In management and operating contracts, the basic fee portion of 
the fee negotiation objective shall be established equal to what would 
otherwise have been the applicable fixed fee established in accordance 
with 48 CFR 970.15404-4-4. This basic fee includes a 50% base fee and a 
50% ``at risk fee.'' No variations from this objective are authorized 
without the prior approval of the Procurement Executive. The basic fee 
shall be paid in equal monthly installments, in accordance with the 
clause at 48 CFR 970.5204-16, Payments and Advances. However, in the 
event the contractor's performance is judged by the Fee Determination 
Official to fall into the performance categories of Marginal or 
Unsatisfactory, as those terms are

[[Page 56864]]

defined in subparagraph (c) of this section, the contractor shall be 
required to refund to the Government up to 50% of the basic fee paid 
for that evaluation period at a rate of 5% for each performance point 
below 76, as shown in the table in paragraph (c) of this section.
    (c) The award fee portion of the fee objective for a management and 
operating contract shall be established for each contract using the 
formula Basic Fee Amount X (multiplied by the) Applicable Award Fee 
Factor. The applicable award fee factor shall be established according 
to the following category placements: Defense Facility'A; Defense 
Facility'B; Enrichment Plant; Miscellaneous. Individual DOE facilities 
which are operated under award fee arrangements will be assigned to 
each category by the Procurement Executive, whose designee shall 
distribute a list of such assignments to all Heads of the Contracting 
Activities (HCAs). In assigning facilities to categories, the 
Procurement Executive will consider the factors listed in this 
paragraph below, to determine the risks'technical, management, and 
financial'which the contractor will assume in fulfilling the contract 
requirements. Contracts which involve higher levels of risks shall be 
placed in higher categories and be eligible for higher award fees. The 
Procurement Executive, or designee, shall review the category 
assignments on a regular basis or upon request by the HCA for a 
particular contract. Reassignments may be made based upon a change in 
contract requirements or changes in any of the following factors:
    (1) Placement of the facility on the EPA's National Priority List 
(NPL). Facilities which are listed on the NPL shall be considered to 
involve higher risks.
    (2) Nature of the contractor's work at the facility. Contracts 
involving the management of facilities listed on the NPL or requiring 
the environmental restoration of NPL sites, shall be considered to 
involve higher risks, whereas contracts involving unrelated work may be 
considered of lesser risk, regardless of NPL designations.
    (3) Size of the facility in relationship to the areas of risk. 
Management of a large facility with a minor site designated on the NPL 
would be considered a lesser risk than management of a small facility 
which includes several major sites listed on the NPL.
    (4) Quantity, complexity and type of Government property for which 
the contractor is responsible. Contracts requiring control over large 
quantities of sensitive Government property shall be considered of 
higher risk than those involving relatively small quantities.
    (5) Exposure to Third-Party Liability. Contract activities which 
expose the contractor to the risk of third-party liability will be 
considered, and such risk assessed accordingly.
    (6) The extent to which the work at the facility presents health 
and safety risks to the workers at the facility and the public.
    (7) In considering these factors, any risks which are indemnified 
by the Government (for example, by the Price-Anderson Act) will not be 
considered as risk to the contractor. Where a single contract involves 
multiple facilities falling into different categories, the basic fee 
amount shall be divided into amounts applicable to the operation of 
each facility before applying the award fee pool factor. The following 
potential award fees shall apply in each category (percent is stated as 
a percentage of the otherwise applicable maximum fixed fee amount) 
which is now the basic fee:

------------------------------------------------------------------------
                                                              Potential
                                    Basic fee    Potential     maximum
             Category               (percent)    award fee      total
                                                 (percent)    (percent)
------------------------------------------------------------------------
Defense Facility-A...............          100          200          300
Defense Facility-B...............          100          150          250
Enrichment Plant.................          100          150          250
Miscellaneous....................          100          100          200
------------------------------------------------------------------------

    (d) All management and operating contracts awarded on an award fee 
basis shall incorporate the following performance grading and fee 
conversion system into the contract, by including the system in the 
Performance Evaluation Plan required by the contract clause at 48 CFR 
970.5204-54. The performance grading and fee conversion system consists 
of a set of adjectival grades defined in a narrative form, in terms of 
performance points, and the percentage of available award fee earned as 
follows:

                          Fee Conversion Table
       [The contractor's performance shall be evaluated by the Fee
 Determination Official at the end of each evaluation period, and graded
              in accordance with the following scale below]
------------------------------------------------------------------------
                                                                Percent
                                                                of award
                      Performance score                           fee
                                                                 earned
------------------------------------------------------------------------
                         Outstanding
Any score in the Outstanding category will earn 100% of the
 available award fee:
96 and above.................................................      100.0
                             Good
95...........................................................       94.0
94...........................................................       88.0
93...........................................................       82.0
92...........................................................       75.0
91...........................................................       68.0
90...........................................................       60.0
89...........................................................       51.0
88...........................................................       43.0
87...........................................................       36.0
86...........................................................       30.0
                         Satisfactory
85...........................................................       25.0
84...........................................................       20.0
83...........................................................       15.0
82...........................................................       10.0
81...........................................................        5.0
80...........................................................        0.0
79...........................................................        0.0
78...........................................................        0.0
77...........................................................        0.0
76...........................................................        0.0
                           Marginal
(Percent of Basic Fee Refunded)
75...........................................................        5.0
74...........................................................       10.0
73...........................................................       15.0

[[Page 56865]]

72...........................................................       20.0
71...........................................................       25.0
70...........................................................       30.0
69...........................................................       35.0
68...........................................................       40.0
67...........................................................       45.0
66...........................................................       50.0
                        Unsatisfactory
Below 65.....................................................       50.0
------------------------------------------------------------------------
 Performance scores should be rounded to the nearest tenth of a point
  and the percent of award fee determined accordingly (e.g., a score of
  88.4 equals 46.2% of award fee earned).


             Narrative Description of Performance Adjectives
------------------------------------------------------------------------
             Adjective              Definition (performance description)
------------------------------------------------------------------------
Outstanding.......................  Performance substantially exceeds
                                     expected levels of performance.
                                     Several significant or notable
                                     achievements exist. No notable
                                     deficiencies in performance.
Good..............................  Performance exceeds expected levels
                                     and some notable achievements
                                     exist. Although some notable
                                     deficiencies may exist, no
                                     significant deficiencies exist.
Satisfactory......................  Performance meets expected levels.
                                     Minimum standards are exceeded and
                                     ``good practices'' are evident in
                                     contract operations. Notable
                                     achievements or notable
                                     deficiencies may or may not exist.
Marginal..........................  Performance is less than expected.
                                     No notable achievements exist;
                                     however, some notable deficiencies
                                     exist, or any notable achievements
                                     which exist are more than offset by
                                     significant or notable
                                     deficiencies.
Unsatisfactory....................  Performance is below minimum
                                     acceptable levels. Significant
                                     deficiencies causing severe impacts
                                     on mission capabilities exist.
                                     Performance at this level in any
                                     area mentioned in the Performance
                                     Evaluation Plan may result in a
                                     decision by the Fee Determination
                                     Official to withhold all award fees
                                     for the period.
------------------------------------------------------------------------
Definitions
 Significant: This term indicates a major event or sustained level of
  performance which, due to its importance, has a substantial positive
  or negative impact on the contractor's ability to carry out its
  mission.
 Notable: This term indicates an event or sustained level of performance
  which is of lesser importance than a ``significant'' event, but
  nonetheless deserves positive or negative recognition.

    (e) Prior approval of the Procurement Executive is required for 
total fee (basic plus award fee pool) exceeding the guidelines in 
paragraph (c) of this section. Additionally, in the event use of the 
award fee guidelines in paragraph (c) of this section result in total 
fees which exceed or are expected to exceed the statutory limitations 
imposed by 10 U.S.C. 2306(d) and 41 U.S.C. 254(b), prior approval of 
the Procurement Executive shall be obtained.
    (f) When a management and operating contract is to be awarded on an 
award-fee basis, the contract shall include the clause at 48 CFR 
970.5204-54.
    (g) Fee Determination Officials must be careful to ensure that all 
important areas of contract performance are mentioned in the 
Performance Evaluation Plan, even if such areas are not assigned 
specific weights or percentages of award fee.


970.15405  Price negotiation.

    (a) Management and operating contract prices (fee) and DOE 
obligations to support contract performance shall be governed by:
    (1) The level of activity authorized and the amount of funds 
appropriated for DOE approved programs by specific program legislation;
    (2) Congressional budget and reporting limitations;
    (3) The amount of funds apportioned to DOE;
    (4) The amount of obligational authority allotted to program 
officials and Approved Funding Program limitations; and
    (5) The amount of funds actually available to the DOE operating 
activity as determined in accordance with applicable financial 
regulations and directives.
    (b) Funds shall be obligated and made available by contract 
provision or modification after the funds become available for 
obligation for payment to support performance of DOE approved projects, 
tasks, work authorizations, or services.
    (c) Management and operating contracts shall contain appropriate 
provisions to limit contractor expenditures to the overall amount of 
funds available and obligated. The clause at 970.5204-15 shall be used 
for this purpose.


970.15406-2  Cost or pricing data.

    (a) The certification requirements of FAR 15.406-2 are not applied 
to DOE cost-reimbursement management and operating contracts.
    (b) The contracting officer shall ensure that management and 
operating contractors and their subcontractors obtain cost or pricing 
data prior to the award of a negotiated subcontract or modification of 
a subcontract in accordance with 48 CFR 15.406-2, and incorporate 
appropriate contract provisions similar to those set forth at 48 CFR 
52.215-10 and 48 CFR 52.215-11 that provide for the reduction of a 
negotiated subcontract price by any significant amount that the 
subcontract price was increased because of the submission of defective 
cost or pricing data by a subcontractor at any tier.
    (c) The clauses at 48 CFR 52.215-12 and 48 CFR 52.215-13 shall be 
included in management and operating contracts.

[[Page 56866]]

970.15407-2  Make-or-buy plans.


970.15407-2-1  Policy.

    (a) Contracting officers shall require management and operating 
contractors to develop and implement make-or-buy plans that establish a 
preference for providing supplies or services (including construction 
and construction management) on a least-cost basis, subject to program 
specific make-or-buy criteria. The emphasis of this make-or-buy 
structure is to eliminate bias for in-house performance where an 
activity may be performed at less cost or otherwise more efficiently 
through subcontracting.
    (b) A work activity, supply or service is provided at ``least 
cost'' when, after consideration of a variety of appropriate 
programmatic, business, and financial factors, it is concluded that 
performance by either ``in-house'' resources or by contracting out is 
likely to provide the property or service at the lowest overall cost. 
Programmatic factors include, but are not limited to, program specific 
make-or-buy criteria established by the Department of Energy, the 
impact of a ``make'' or a ``buy'' decision on mission accomplishment, 
and anticipated changes to the mission of the facility or site. 
Business factors pertain to such elements as market conditions, past 
experience in obtaining similar supplies or services, and overall 
operational efficiencies that might be available through either in-
house performance or contracting out. Among the financial factors that 
may be considered to determine a least-cost alternative in a make-or-
buy analysis are both recurring and one-time costs attributable to 
either retaining or contracting out a particular item, financial risk, 
and the anticipated contract price.
    (c) In developing and implementing its make-or-buy plan, a 
contractor shall be required to assess subcontracting opportunities and 
implement subcontracting decisions in accordance with the following:
    (1) The contractor shall conduct internal productivity improvement 
and cost-reduction programs so that in-house performance options can be 
made more efficient and cost-effective.
    (2) The contractor shall consider subcontracting opportunities with 
the maximum practicable regard for open communications with potentially 
affected employees and their representatives. Similarly, a contractor 
will communicate its plans, activities, cost-benefit analyses, and 
decisions with those stakeholders likely to be affected by such 
decisions, including representatives of the community and local 
businesses.


970.15407-2-2  Requirements.

    (a) Development of program-specific make-or-buy criteria. DOE 
program offices responsible for the work conducted at the facility or 
site shall develop program specific make-or-buy criteria. Program 
specific make-or-buy criteria are those factors that reflect specific 
mission or program objectives (including operational efficiency, 
contractor diversity, environment, safety and health, work force 
displacement and restructuring, and collective bargaining agreements) 
and that, upon their application to a specific work effort, would 
override a decision based on a purely economic rationale. These 
criteria are to be used to assess each work effort identified in a 
facility's or site's make-or-buy plan to determine the appropriateness 
of a contractor's make-or-buy decisions. Program specific make-or-buy 
criteria shall be provided to the contractor for use in developing a 
make-or-buy plan for the facility, site, or specific program, as 
appropriate.
    (b) Make-or-buy plan property and services. Supplies or services 
estimated to cost less than one (1) percent of the estimated total 
operating cost for a year or $1 million for the same year, whichever is 
less, need not be included in the contractor's make-or-buy plan. 
However, adjustments may be made to these thresholds where programmatic 
or cost considerations would indicate that a particular supply or 
service should be included in the make-or-buy plan.
    (c) Competitive solicitation requirements. (1) To the extent 
practicable, a competitive solicitation for the management and 
operation of a Department of Energy facility or site should:
    (i) Identify those programs, projects, work areas, functions or 
services that the Department intends for the successful offeror to 
include in any make-or-buy plan; and
    (ii) Require the submission of a preliminary make-or-buy plan for 
the period of performance of the contract from each offeror as part of 
its proposal submitted in response to the competitive solicitation.
    (2) If the requirement for each offeror to submit a preliminary 
make-or-buy plan as part of its proposal is impractical or otherwise 
incompatible with the acquisition strategy, consideration should be 
given to structuring the evaluation criteria for the competitive 
solicitation in such a manner as to permit the evaluation of an 
offeror's approach to conducting its make-or-buy program within the 
context of the contractual requirements.
    (3) The successful offeror's preliminary make-or-buy plan shall be 
submitted for final approval within 180 days after contract award, 
consistent with the requirements of 48 CFR 970.5204-76(c), Make-or-buy 
Plan.
    (d) Evaluation of the contractor's make-or-buy plan. In evaluating 
the contractor's make-or-buy plan, the contracting officer shall 
consider the following factors:
    (1) The program specific make-or-buy criteria (such as operational 
efficiency, contractor diversity, environment, safety and health, work 
force displacement and restructuring, and collective bargaining 
agreements) with particular attention to the effect of a ``buy'' 
decision on the contractor's ability to maintain core competencies 
needed to accomplish mission-related program and projects;
    (2) The impact of a ``make'' or ``buy'' decision on contract cost, 
schedule, and performance and financial risk;
    (3) The potential impact of a ``make'' or ``buy'' decision on known 
future mission or program activities at the facility or site;
    (4) Past experience at the facility or site regarding ``make-or-
buy'' decisions for the same, or similar, supplies or services;
    (5) Consistency with the contractor's approved subcontracting plan, 
as required by the clause entitled ``Small, Small Disadvantaged and 
Women-Owned Small Business Subcontracting Plan'' (FAR 52.219-9), of the 
contract and implementation of Section 3021 of the Energy Policy Act of 
1992.
    (6) Local market conditions, including contractor work force 
displacement and the availability of firms that can meet the work 
requirements with regard to quality, quantity, cost, and timeliness;
    (7) Where the construction of new or additional facilities is 
required, that the cost of such facilities is in the Government's best 
interest when compared to subcontracting or privatization alternatives; 
and
    (8) Whether all relevant requirements and costs of performing the 
work by the contractor and through subcontracting are considered and 
any different requirements for the same work are reconciled.
    (e) Approval. The contracting officer shall approve all plans and 
revisions thereto. Once approved, a make-or-buy plan shall remain 
effective for the term of the contract (up to a period of five years), 
unless circumstances warrant a change.
    (f) Administration. The contractor's performance against the 
approved make-or-buy plan shall be monitored to ensure that:
    (1) The contractor is complying with the plan;

[[Page 56867]]

    (2) Items identified for deferral decisions are addressed in a 
timely manner; and
    (3) The contractor periodically updates the make-or-buy plan based 
on changed circumstances or significant new work.


970.15407-2-3  Contract clause.

    The contracting officer shall insert the clause at 48 CFR (DEAR) 
970.5204-76, Make-or-Buy Plan, in management and operating contracts.


970.3102  Application of cost principles [Amended]

    10. Subsection 970.3102-1 is amended at paragraph (c) by: revising 
``970.1509-1'' to read ``970.15404-4-1''; revising ``970.1509-4'' to 
read ``970.15404-4-4''; and revising ``970.1509-5'' to read 
``970.15404-4-5''.
    11. Subsection 970.3102-15 is amended at paragraphs (b)(1) and 
(b)(2) by revising ``FAR 15.8'' to read ``48 CFR (FAR) Subpart 15.4''.
    12. Section 970.5202 is revised to read as follows:


970.5202  Deviations.

    Deviations from FAR and DEAR contract clauses and solicitation 
provisions shall be made only in accordance with the deviation 
procedures of 48 CFR (FAR) Subpart 1.4 and written internal 
Departmental procedures.


970.5204  [Amended].

    13. Subsection 970.5204-9 is amended in the NOTE following 
paragraph (a) by revising ``52.215-22'' to read ``52.215-11''.
    14. Subsection 970.5204-15 is amended in the prescriptive text by 
revising ``970.1508(c)'' to read ``970.15405(c)''.
    15. Subsection 970.5204-22 in the clause, paragraph (f)(1), is 
amended by revising the dollar amount ``$25,000'' to read ``$100,000'', 
revising (f)(2), redesignating (f)(3) as (f)(4), and adding new (f)(3) 
to read as follows:


970.5204-22  Contractor purchasing system.

* * * * *

Contractor Purchasing System (Oct 1995)

* * * * *
    (f) * * *
    (2) For fixed-price, unit-priced and cost reimbursement 
construction subcontracts in excess of $100,000 a payment bond shall 
be obtained on Standard Form 25A modified to name the contractor as 
well as the United States of America as obligees. The penal amounts 
shall be determined in accordance with 48 CFR (FAR) 28.102-2(b).
    (3) For fixed-price, unit-priced and cost-reimbursement 
construction subcontracts, greater than $25,000, but not greater 
than $100,000, the contractor shall select two or more of the 
payment protections at 48 CFR (FAR) 28.102-1(b), giving particular 
consideration to the inclusion of an irrevocable letter of credit as 
one of the selected alternatives.
* * * * *
    16. Subsection 970.5204-44 in the clause, is amended in paragraph 
(b)(5) by replacing ``970.1508-1'' with ``970.15406-2''; replacing 
``52.215-22'' with ``52.215-10''; and replacing ``52.215-23'' with 
``52.215-11''.
    17. Subsection 970.5204-54 is revised in the prescriptive text by 
replacing ``970.1509-8(d)'' with ``970.15404-4-8(d)''.
    18. Subsection 970.5204-76 is revised in the prescriptive text by 
replacing ``970.1507-3'' with ``970.15407-2-3''.

[FR Doc. 98-28239 Filed 10-22-98; 8:45 am]
BILLING CODE 6450-01-P