[Federal Register Volume 64, Number 168 (Tuesday, August 31, 1999)]
[Rules and Regulations]
[Pages 47409-47418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22048]


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ENVIRONMENTAL PROTECTION AGENCY

[FRL-6428-3]

48 CFR Parts 1503, 1515, and 1552


Acquisition Regulation: Contracting by Negotiation

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency (EPA) is issuing this rule 
to amend the EPA Acquisition Regulation (EPAAR) regarding contracting 
by negotiation so that it will conform to the Federal Acquisition 
Regulation, as revised by Federal Acquisition Circular (FAC) 97-02.

EFFECTIVE DATE: September 30, 1999.

FOR FURTHER INFORMATION CONTACT: Leigh Pomponio, U.S. Environmental 
Protection Agency, Office of Acquisition Management (3802R), 401 M 
Street, SW., Washington, DC 20460, (202) 564-4364.

SUPPLEMENTARY INFORMATION:

A. Background

    FAC 97-02, published in the Federal Register (62 FR 51224) on 
September 30, 1997, completely revised FAR Part 15, Contracting by 
Negotiation. The final rule allowed agencies to delay implementation 
until January 1, 1998. EPA began implementation of the revised Part 15 
as of December 19, 1997. The EPAAR was in substantive compliance with 
the revised FAR, but extensive redesignation of EPAAR subparts and 
sections was required for structural conformance. Accordingly, EPAAR 
Part 1515, Contracting by Negotiation, is revised in its entirety, and 
parts 1503, Improper Business Practices and Personal Conflicts of 
Interest, and 1552, Solicitation Provisions and Contract Clauses, are 
amended. No public comments were received.

B. Executive Order 12866

    This rule is not a significant regulatory action for the purposes 
of Executive Order 12866; therefore, no review is required by the 
Office of Information and Regulatory Affairs within the Office of 
Management and Budget (OMB).

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because this rule does 
not contain information collection requirements that require the 
approval of OMB under the Paperwork Reduction Act of 1980 (44 U.S.C. 
3501 et seq.)

D. Regulatory Flexibility Act

    The EPA certifies that this rule does not exert a significant 
economic impact on a substantial number of small entities. The 
requirements to contractors under the rule impose no reporting, record-
keeping, or any compliance costs.

E. Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess 
their regulatory actions on State, local, and tribal governments, and 
the private sector. This rule does not contain a Federal mandate that 
may result in expenditures of $100 million or more for State, local, 
and tribal governments, in the aggregate, or the private sector in one 
year. Any private sector costs for this action relate to paperwork 
requirements and associated expenditures that are far below the level 
established for UMRA applicability. Thus, the rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

F. Executive Order 13045

    Protection of Children from Environmental Health Risks and Safety 
Risks (6 FR 19885, April 23, 1997), applies to any rule that: (1) Is 
determined to be economically significant as defined under Executive 
Order 12866, and (2) concerns an environmental health or safety risk 
that EPA has reason to believe may have a disproportionate effect on 
children. If the regulatory action meets both criteria, the Agency must 
evaluate the environmental health or safety effects of the planned rule 
on children, and explain why the planned regulation is preferable to 
other potentially effective and reasonably feasible alternatives 
considered by the Agency.
    EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that are based on health or safety risks, such that 
the analysis required under section 5-501 of the Order has the 
potential to influence the regulation. This rule is not subject to 
Executive Order 13045 because it does not establish an environmental 
standard intended to mitigate health or safety risks.

G. Executive Order 12875

    Under Executive Order 12875, EPA may not issue a regulation that is 
not required by statute and creates a mandate upon a State, local or 
tribal government, unless the Federal government provides the funds 
necessary to pay the direct compliance costs incurred by those 
governments. If the mandate is unfunded, EPA must provide OMB a 
description of the extent of EPA's prior consultation with 
representatives of affected State, local and tribal governments, the 
nature of their concerns, copies of any written communications from the 
governments, and a statement supporting the need to issue the 
regulation. In addition, Executive Order 12875 requires EPA to develop 
an effective process permitting elected officials and other 
representatives of State, local and tribal governments ``to provide 
meaningful and timely input in the development of regulatory proposals 
containing significant unfunded mandates.''
    This rule does not create a mandate on State, local or tribal 
governments. The rule does not impose any enforceable duties on these 
entities. Accordingly, the requirements of

[[Page 47410]]

section 1(a) of Executive Order 12875 do not apply to this rule.

H. Executive Order 13084

    Under Executive Order 13084, EPA may not issue a regulation that is 
not required by statute, that significantly or uniquely affects the 
communities of Indian tribal governments, and that imposes substantial 
direct compliance costs on those communities, unless the Federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by the tribal governments. If the mandate is unfunded, 
EPA must provide to the OMB, in a separately identified section of the 
preamble to the rule, a description of the extent of EPA's prior 
consultation with representatives of affected tribal governments, a 
summary of the nature of their concerns, and a statement supporting the 
need to issue the regulation. In addition, Executive Order 13084 
requires EPA to develop an effective process permitting elected and 
other representatives of Indian tribal governments ``to provide 
meaningful and timely input in the development of regulatory policies 
on matters that significantly or uniquely affect their communities.''
    The rule does not significantly or uniquely affect the communities 
of Indian tribal governments. Accordingly, the requirements of section 
3(b) of Executive Order 13084 do not apply to this rule.

I. National Technology Transfer and Advancement Act of 1995

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C. 
272 note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    This rule does not involve technical standards. Therefore, EPA did 
not consider the use of any voluntary consensus standards.

J. Submission to Congress and the General Accounting Office

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of Congress and to the Comptroller General of the United 
States. EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. This action is not 
a ``major rule'' as defined by 5 U.S.C. 804(2). This rule will be 
effective September 30, 1999.

    Authority: The provisions of this regulation are issued under 5 
U.S.C. 301; section 205(c), 63 Stat. 390, as amended, 40 U.S.C. 
486(c).

List of Subjects in 48 CFR Parts 1503, 1515, and 1552

    Government procurement.

    Therefore, 48 CFR Chapter 15 is amended as set forth below:
    1. The authority citation for parts 1503, 1515, and 1552 continues 
to read as follows:

    Authority: Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 
486(c).

PART 1503--[AMENDED]

    2. Part 1503 is amended by revising subpart 1503.1 to read as 
follows:

Subpart 1503.1--Safeguards

Sec.
1503.101-370  Personal conflicts of interest.
1503.104-5  Disclosure, protection, and marking of contractor bid or 
proposal information and source selection information.

Subpart 1503.1--Safeguards


1503.101-370  Personal conflicts of interest.

    (a) Each EPA employee (including special employees) engaged in 
source evaluation and selection is required to be familiar with the 
provisions of 40 CFR part 3 regarding personal conflicts of interest. 
The employee shall inform the Source Selection Authority (SSA) in 
writing if his/her participation in the source evaluation and selection 
process could be interpreted as a possible or apparent conflict of 
interest. The SSA will consult with appropriate Agency officials prior 
to the SSA's determination. The SSA shall relieve any EPA employee who 
has a conflict of interest of further duties in connection with the 
evaluation and selection process.
    (b) Each EPA employee (including special employees, as defined by 
1503.600-71(b)) involved in source evaluation and selection is required 
to comply with the Office of Government Ethics ethics provisions at 5 
CFR part 2635.


1503.104-5  Disclosure, protection, and marking of contractor bid or 
proposal information and source selection information.

    (a)(1) The Chief of the Contracting Office (CCO) is the designated 
official to make the decision whether support contractors are used in 
proposal evaluation (as authorized at FAR 15.305(c) and as restricted 
at FAR 37.203(d)).
    (2) The following written certification and agreement shall be 
obtained from the non-Government evaluator prior to the release of any 
proposal to that evaluator:

``Certification on the Use and Disclosure of Proposals''

RFP #:-----------------------------------------------------------------
Offeror:---------------------------------------------------------------
    1. I hereby certify that to the best of my knowledge and belief, 
no conflict of interest exists that may diminish my capacity to 
perform an impartial, technically sound, objective review of this 
proposal(s) or otherwise result in a biased opinion or unfair 
competitive advantage.
    2. I agree to use any proposal information only for evaluation 
purposes. I agree not to copy any information from the proposal(s), 
to use my best effort to safeguard such information physically, and 
not to disclose the contents of nor release any information relating 
to the proposal(s) to anyone outside of the evaluation team 
assembled for this acquisition or individuals designated by the 
contracting officer.
    3. I agree to return to the Government all copies of proposals, 
as well as any abstracts, upon completion of the evaluation.

----------------------------------------------------------------------
(Name and Organization)

----------------------------------------------------------------------
(Date of Execution)

(End of Certificate)

    (b) Information contained in proposals will be protected and 
disclosed to the extent permitted by law, and in accordance with FAR 
3.104-5, 15.207, and Agency procedures at 40 CFR part 2.
    3. Part 1515 is revised to read as follows.

PART 1515--CONTRACTING BY NEGOTIATION

Sec.
1515.000  Scope of part.

[[Page 47411]]

Subpart 1515.2--Solicitation and Receipt of Proposals and Information

1515.209  Solicitation provisions and contract clauses.

Subpart 1515.3--Source Selection

1515.302  Applicability.
1515.303  Responsibilities.
1515.305  Proposal evaluation.
1515.305-70  Scoring plans.
1515.305-71  Documentation of proposal evaluation.
1515.305-72  Release of cost information.
1515.308-71  Documentation of source selection.

Subpart 1515.4--Contract Pricing

1515.404-4  Profit.
1515.404-470  Policy.
1515.404-471  EPA structured approach for developing profit or fee 
objectives.
1515.404-472  Other methods.
1515.404-473  Limitations.
1515.404-474  Waivers.
1515.404-475  Cost realism.
1515.408  Solicitation provisions and contract clauses.

Subpart 1515.6--Unsolicited proposals

1515.604  Agency points of contact.
1515.606-70  Contracting methods.


1515.000  Scope of part.

    This part implements and supplements FAR part 15. It prescribes the 
Environmental Protection Agency policies and procedures for contracting 
for supplies and services by negotiation.

Subpart 1515.2--Solicitation and Receipt of Proposals and 
Information


1515.209  Solicitation provisions and contract clauses.

    In addition to those provisions prescribed at FAR 15.209 and in 
accordance with FAR 15.203(a)(4), the contracting officer shall 
identify and include the evaluation factors that will be considered in 
making the source selection and their relative importance in each 
solicitation.
    (a) The contracting officer shall insert the provisions at 
1552.215-70, ``EPA Source Evaluation and Selection Procedures--
Negotiated Procurement'' and either: the provision at 1552.215-71, 
``Evaluation Factors for Award,'' where all evaluation factors other 
than cost or price when combined are significantly more important than 
cost or price; or the provision in Alternate I to 1552.215-71, where 
all evaluation factors other than cost or price when combined are 
significantly less important than cost or price; or the provision in 
Alternate II to 1552.215-71, where all evaluation factors other than 
cost or price when combined are approximately equal to cost or price; 
or Alternate III to 1552.215-71 where award will be made to the offeror 
with the lowest-evaluated cost or price whose proposal meets or exceeds 
the acceptability standards for non-cost factors.
    (b) Evaluation factors and significant subfactors should be 
prepared in accordance with FAR 15.305 and inserted into paragraph (b) 
of the provision at 1552.215-71, Alternate I, Alternate II, and if 
used, in Alternate III.

Subpart 1515.3--Source Selection


1515.302  Applicability.

    FAR subpart 15.3 and this subpart apply to the selection of source 
or sources in competitive negotiation acquisitions in excess of the 
simplified acquisition threshold, except architect-engineering services 
which are covered in 1536.6.


1515.303  Responsibilities.

    The Source Selection Authority (SSA) shall be established at the 
levels specified as follows:
    (a) Acquisitions having a potential value exceeding $25,000,000: 
CCO.
    (b) Acquisitions having a potential value exceeding $10,000,000 to 
$25,000,000: To be determined by the CCO, unless otherwise restricted 
in his/her delegation of procurement authority.
    (c) Acquisitions having a potential value of $10,000,000 or less: 
The contracting officer.


1515.305  Proposal evaluation.


1515.305-70  Scoring plans.

    When trade-offs are performed (in accordance with FAR 15.101-1), 
the evaluation of technical and past performance shall be accomplished 
using the following scoring plan or one specifically developed for the 
solicitation, e.g., other numeric, adjectival, color rating systems, 
etc.

                              Scoring Plan
------------------------------------------------------------------------
            Value                        Descriptive statement
------------------------------------------------------------------------
0............................  The factor is not addressed, or is
                                totally deficient and without merit.
1............................  The factor is addressed, but contains
                                deficiencies and/or weaknesses that can
                                be corrected only by major or
                                significant changes to relevant portions
                                of the proposal, or the factor is
                                addressed so minimally or vaguely that
                                there are widespread information gaps.
                                In addition, because of the
                                deficiencies, weaknesses, and/or
                                information gaps, serious concerns exist
                                on the part of the technical evaluation
                                team about the offeror's ability to
                                perform the required work.
2............................  Information related to the factor is
                                incomplete, unclear, or indicates an
                                inadequate approach to, or understanding
                                of the factor. The technical evaluation
                                team believes there is question as to
                                whether the offeror would be able to
                                perform satisfactorily.
3............................  The response to the factor is adequate.
                                Overall, it meets the specifications and
                                requirements, such that the technical
                                evaluation team believes that the
                                offeror could perform to meet the
                                Government's minimum requirements.
4............................  The response to the factor is good with
                                some superior features. Information
                                provided is generally clear, and the
                                demonstrated ability to accomplish the
                                technical requirements is acceptable
                                with the possibility of more than
                                adequate performance.
5............................  The response to the factor is superior in
                                most features.
------------------------------------------------------------------------

1515.305-71  Documentation of proposal evaluation.

    In addition to the information required by FAR 15.305(a)(3), the 
technical evaluation documentation shall include:
    (a) Score sheets prepared by each individual team member must be 
made available upon the contracting officer's request. For contracts 
valued at $10,000,000 or less, the technical evaluation may be recorded 
on the short form technical evaluation format (EPA Form 1900-61) or 
another form specifically developed for the solicitation; and
    (b) A statement that the respective team members are free from 
actual or potential personal conflicts of interest, and are in 
compliance with the Office of Government Ethics ethics provisions at 5 
CFR part 2635.
    (c) Any information which might reveal that an offeror has an 
actual or

[[Page 47412]]

potential organizational conflict of interest.
    (d) Any documentation related to exchanges with individual 
offerors.


1515.305-72  Release of cost information.

    (a) In accordance with FAR 15.305(a)(4), the contracting officer 
may release the cost/price proposals to those members of the evaluation 
team who are evaluating proposals at his/her discretion.
    (b) These individuals would then use this information to perform a 
cost realism analysis as described in FAR 15.404-1(d). Any 
inconsistencies between the proposals and the solicitation requirements 
and/or any inconsistencies between the cost/price and other than cost/
price proposals should be identified.


1515.308-71  Documentation of source selection.

    In addition to the information required by FAR 15.308, the source 
selection decision shall include:
    (a) When there is only one proposal received or only one proposal 
in the competitive range, the contracting officer shall examine the 
solicitation to determine if it was unduly restrictive or flawed. As 
part of the source selection decision, the contracting officer shall 
address at a minimum, the following five factors: whether the 
requirement could have been broken up into smaller components; whether 
the solicitation provided adequate response time; whether the 
requirement could have been satisfied with reduced staffing levels 
(discussion may be combined with the first factor); if applicable, 
whether the work required on-site could otherwise be performed at a 
contractor's facility, avoiding the cost and logistical implications of 
relocating employees; and whether the geographical area of 
consideration was either too narrow or too broad, so as to adversely 
impact competition. If the contracting officer determines that the 
solicitation requirements unduly restrict competition, the contracting 
officer shall consider making appropriate changes to the solicitation, 
canceling the solicitation, and reissuing the solicitation 
incorporating the appropriate changes. For 8(a) competitive or small 
business competitive set-asides, if the contracting officer in 
consultation with the Office of Small and Disadvantaged Business 
Utilization determines that the solicitation requirements unduly 
restrict competition, the contracting officer shall consider making 
appropriate changes to the solicitation, canceling the solicitation, 
and reissuing the solicitation incorporating the appropriate changes.
    (b) The contracting officer shall provide a copy of any source 
selection decision that includes an analysis of the five factors 
described in paragraph (a) of this section to the Competition Advocate 
after approval of the decision by the designated Source Selection 
Authority.

Subpart 1515.4--Contract Pricing


1515.404-4  Profit.

    This section implements FAR 15.404-4 and prescribes the EPA 
structured approach for establishing profit or fee prenegotiation 
objectives.


1515.404-470  Policy.

    (a) The Agency's policy is to utilize profit to attract contractors 
who possess talents and skills necessary to the accomplishment of the 
objectives of the Agency, and to stimulate efficient contract 
performance. In negotiating profit/fee, it is necessary that all 
relevant factors be considered, and that fair and reasonable amounts be 
negotiated which give the contractor a profit objective commensurate 
with the nature of the work to be performed, the contractor's input to 
the total performance, and the risks assumed by the contractor.
    (b) The purpose of EPA's structured approach is:
    (1) To provide a standard method of evaluation;
    (2) To ensure consideration of all relevant factors;
    (3) To provide a basis for documentation and explanation of the 
profit or fee negotiation objective; and
    (4) To allow contractors to earn profits commensurate with the 
assumption of risk.
    (c) The profit-analysis factors prescribed in the EPA structured 
approach for analyzing profit or fee include those prescribed by FAR 
15.404(d)(1), and additional factors authorized by FAR 15.404(d)(2) to 
foster achievement of program objectives. These profit or fee factors 
are prescribed in 1515.404-471.


1515.404-471  EPA structured approach for developing profit or fee 
objectives.

    (a) General. To properly reflect differences among contracts, and 
to select an appropriate relative profit/fee in consideration of these 
differences, 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(d) and EPAAR 1515.404-
471(b)(1). Each profit factor or subfactor, or its components, has been 
assigned weights relative to their value to the contract's overall 
effort, and the range of weights to be applied to each profit factor.
    (b)(1) Profit/fee factors. The factors set forth in this paragraph, 
and the weighted ranges listed after each factor, shall be used in all 
instances where the profit/fee is negotiated.

                 Contractor's Input to Total Performance
------------------------------------------------------------------------
                                               Weight Range  (Percent)
------------------------------------------------------------------------
Direct material............................  1 to 4.
Professional/technical labor...............  8 to 15.
Professional/technical overhead............  6 to 9.
General labor..............................  5 to 9.
General overhead...........................  4 to 7.
Subcontractors.............................  1 to 4.
Other direct costs.........................  1 to 3.
General and administrative expenses........  5 to 8.
Contractor's assumption of contract cost     0 to 6.
 risk.
------------------------------------------------------------------------

    (2) The contracting officer shall first measure the ``Contractor's 
Input to Total Performance'' by the assignment of a profit percentage 
within the designated weight ranges to each element of contract cost. 
Such costs are multiplied by the specific percentages to arrive at a 
specific dollar profit or fee.
    (3) The amount calculated for facilities capital cost of money 
(FCCM) shall not be included as part of the cost base for computation 
of profit or fee. The profit or fee objective shall be reduced by an 
amount equal to the amount of facilities capital cost of money allowed. 
A complete discussion of the determination of facilities capital cost 
of money and its application and administration is set forth in FAR 
31.205-10, and the Appendix to the FAR (see 48 CFR 9904.414).
    (4) After computing a total dollar profit or fee for the 
Contractor's Input to Total Performance, the contracting officer shall 
calculate the specific profit dollars assigned for cost risk and 
performance. This is accomplished by multiplying the total Government 
cost objective, exclusive of any FCCM, by the specific weight assigned 
to cost risk and performance. The contracting officer shall then 
determine the profit or fee objective by adding the total profit 
dollars for the Contractor's Input to Total Performance to the specific 
dollar profits assigned to cost risk and performance. The contracting 
officer shall use EPA Form 1900-2 in hardcopy or electronic copy 
equivalent to facilitate the calculation of the profit or fee 
objective.

[[Page 47413]]

    (5) The weight factors discussed in this section are designed for 
arriving at profit or fee objectives for other than nonprofit and not-
for-profit organizations. Nonprofit and not-for-profit organizations 
are addressed as follows:
    (i) Nonprofit and not-for-profit organizations are defined as those 
business entities organized and operated:
    (A) Exclusively for charitable, scientific, or or educational 
purposes;
    (B) Where no part of the net earnings inure to the benefit of any 
private shareholder or individual;
    (C) Where no substantial part of the activities is for propaganda 
or otherwise attempting to influence legislation or participating in 
any political campaign on behalf of any candidate for public office; 
and
    (D) Which are exempt from Federal income taxation under Section 51 
of the Internal Revenue Code. (26 U.S.C.)
    (ii) For contracts with nonprofit and not-for-profit organizations 
where fees are involved, special factor of -3 percent shall be assigned 
in all cases.
    (c) Assignment of values to specific factors--(1) General. In 
making a judgment on the value of each factor, the contracting officer 
should be governed by the definition, description, and purpose of the 
factors, together with considerations for evaluation set forth in this 
paragraph.
    (2) Contractor's input to total performance. This factor is a 
measure of how much the contractor is expected to contribute to the 
overall effort necessary to meet the contract performance requirements 
in an efficient manner. This factor, which is separate from the 
contractor's responsibility for contract performance, takes into 
account what resources are necessary, and the creativity and ingenuity 
needed for the contractor to perform the statement of work 
successfully. This is a recognition that within a given performance 
output, or within a given sales dollar figure, necessary efforts on the 
part of individual contractors can vary widely in both value, quantity, 
and quality, and that the profit or fee objective should reflect the 
extent and nature of the contractor's contribution to total 
performance. Greater profit opportunity should be provided under 
contracts requiring a high degree of professional and managerial skill 
and to prospective contractors whose skills, facilities, and technical 
assets can be expected to lead to efficient and economical contract 
performance. The evaluation of this factor requires an analysis of the 
cost content of the proposed contract as follows:
    (i) Direct material (purchased parts and other material). (A) 
Analysis of these cost items shall include an evaluation of the 
managerial and technical effort necessary to obtain the required 
material. This evaluation shall include consideration of the number of 
orders and suppliers, and whether established sources are available or 
new sources must be developed. The contracting officer shall also 
determine whether the contractor will, for example, obtain the 
materials by routine orders or readily available supplies (particularly 
those of substantial value in relation to the total contract costs), or 
by detailed subcontracts for which the prime contractor will be 
required to develop complex specifications involving creative design.
    (B) Consideration should be given to the managerial and technical 
efforts necessary for the prime contractor to administer subcontracts, 
and to select subcontractors, including efforts to break out 
subcontracts from sole sources, through the introduction of 
competition.
    (C) Recognized costs proposed as direct material costs such as 
scrap charges shall be treated as material for profit evaluation.
    (D) If intracompany transfers are accepted at price, in accordance 
with FAR 31.205-26(e), they should be excluded from the profit or fee 
computation. Other intracompany transfers shall be evaluated by 
individual components of cost, i.e., material, labor, and overhead.
    (ii) Professional/technical and general labor. Analysis of labor 
should include evaluation of the comparative quality and level of the 
talents and experience to be employed. In evaluating labor for the 
purpose of assigning profit dollars, consideration should be given to 
the amount of notable scientific talent or unusual or scarce talent 
needed, in contrast to journeyman effort or supporting personnel. The 
diversity, or lack thereof, of scientific and engineering specialties 
required for contract performance, and the corresponding need for 
supervision and coordination, should also be evaluated.
    (iii) Overhead and general and administrative expenses. (A) Where 
practicable, analysis of these overhead items of cost should include 
the evaluation of the individual elements of these expenses, and how 
much they contribute to contract performance. This analysis should 
include a determination of the amount of labor within these overhead 
pools, and how this labor would be treated if it were considered as 
direct labor under the contract. The allocable labor elements should be 
given the same profit consideration as if they were direct labor. The 
other elements of indirect cost pools should be evaluated to determine 
whether they are routine expenses such as utilities, depreciation, and 
maintenance, and therefore given less profit consideration.
    (B) The contractor's accounting system need not break down its 
overhead expenses within the classification of professional/technical 
overhead, general overhead and general and administrative expenses.
    (iv) Subcontractors. (A) Subcontract costs should be analyzed from 
the standpoint of the talents and skills of the subcontractors. The 
analysis should consider if the prime contractor normally should be 
expected to have people with comparable expertise employed as full-time 
staff, or if the contract requires skills not normally available in an 
employer-employee relationship. Where the prime contractor is using 
subcontractors to perform labor which would normally be expected to be 
done in-house, the rating factor should generally be at or near 1 
percent. Where exceptional expertise is retained, or the prime 
contractor is participating in the mentor-protege program, the assigned 
weight should be nearer to the high end of the range.
    (v) Other direct costs. The analysis of these costs should be 
similar to the analysis of direct material.
    (3) Contractor's assumption of contract cost risk. (i) The risk of 
contract costs should be shifted to the fullest extent practicable to 
contractors, and the Government should assign a rating that reflects 
the degree of risk assumption. Evaluation of this risk requires a 
determination of the degree of cost responsibility the contractor 
assumes, the reliability of the cost estimates in relation to the task 
assumed, and the chance of the contractor's success or failure. This 
factor is specifically limited to the risk of contract costs. Thus, 
such risks of losing potential profits in other fields are not within 
the scope of this factor.
    (ii) The first determination of the degree of cost responsibility 
assumed by the contractor is related to the sharing of total risk of 
contract cost by the Government and the contractor, depending on 
selection of contract type. The extremes are a cost-plus-fixed-fee 
contract requiring only that the contractor use its best efforts to 
perform a task, and a firm-fixed-price contract for a complex item. A 
cost-plus-fixed-fee contract would reflect a minimum assumption of cost 
responsibility by the contractor, whereas a firm-fixed-price contract 
would reflect a complete assumption of cost responsibility by the

[[Page 47414]]

contractor. Therefore, in the first step of determining the value given 
for the contractor's assumption of contract cost risk, a lower rating 
would be assigned to a proposed cost-plus-fixed-fee best efforts 
contract, and a higher rating would be assigned to a firm-fixed-price 
contract.
    (iii) The second determination is that of the reliability of the 
cost estimates. Sound price negotiation requires well-defined contract 
objectives and reliable cost estimates. An excessive cost estimate 
reduces the possibility that the cost of performance will exceed the 
contract price, thereby reducing the contractor's assumption of 
contract cost risk.
    (iv) The third determination is that of the difficulty of the 
contractor's task. The contractor's task may be difficult or easy, 
regardless of the type of contract.
    (v) Contractors are likely to assume greater cost risks only if the 
contracting officer objectively analyzes the risk incident to the 
proposed contract, and is willing to compensate contractors for it. 
Generally, a cost-plus-fixed-fee contract would not justify a reward 
for risk in excess of 1 percent, nor would a firm-fixed-price contract 
normally justify a reward of less than 4 percent. Where proper contract 
type selection has been made, the reward for risk by contract type 
would usually fall into the following percentage ranges:

------------------------------------------------------------------------
              Type of contract                    Percentage ranges
------------------------------------------------------------------------
Cost-plus-fixed-fee........................  0 to 1.
Prospective price determination............  4 to 5.
Firm-fixed-price...........................  4 to 6.
------------------------------------------------------------------------

    (A) These ranges may not be appropriate for all acquisitions. The 
contracting officer might determine that a basis exists for high 
confidence in the reasonableness of the estimate, and that little 
opportunity exists for cost reduction without extraordinary efforts. 
The contractor's willingness to accept ceilings on their burden rates 
should be considered as a risk factor for cost-plus-fixed-fee 
contracts.
    (B) In making a contract cost risk evaluation in an acquisition 
that involves definitization of a letter contract, consideration should 
be given to the effect on total contract cost risk as a result of 
partial performance under a letter contract. Under some circumstances, 
the total amount of cost risk may have been effectively reduced by the 
existence of a letter contract. Under other circumstances, it may be 
apparent that the contractor's cost risk remained substantially as 
great as though a letter contract had not been used. Where a contractor 
has begun work under an anticipatory cost letter, the risk assumed is 
greater than normal. To be equitable, the determination of a profit 
weight for application to the total of all recognized costs, both those 
incurred and those yet to be expended, must be made with consideration 
to all relevant circumstances, not just to the portion of costs 
incurred or percentage of work completed prior to definitization.


1515.404-472  Other methods.

    (a) Contracting officers may use methods other than those 
prescribed in 1515.404-470 for establishing profit or fee objectives 
under the following types of contracts and circumstances:
    (1) Architect-engineering contracts;
    (2) Personal service contracts;
    (3) Management contracts, e.g., for maintenance or operation of 
Government facilities;
    (4) Termination settlements;
    (5) Services under labor-hour and time and material contracts which 
provide for payment on an hourly, daily, or monthly basis, and where 
the contractor's contribution constitutes the furnishing of personnel.
    (6) Construction contracts; and
    (7) Cost-plus-award-fee contracts.
    (b) Generally, it is expected that such methods will:
    (1) Provide the contracting officer with a technique that will 
ensure consideration of the relative value of the appropriate profit 
factors described under ``Profit Factors,'' in FAR 15.404-4(d) and
    (2) Serve as a basis for documentation of the profit or fee 
objective.


1515.404-473  Limitations.

    (a) In addition to the limitations established by statute (see FAR 
15.404-4(b)(4)(i)), no administrative ceilings on profits or fees shall 
be established, except those identified in EPAAR (48 CFR) 1516.404-
273(b).
    (b) The contracting officer shall not consider any known 
subcontractor profit/fee as part of the basis for determining the 
contractor profit/fee.


1515.404-474  Waivers.

    Under unusual circumstances, the CCO may specifically waive the 
requirement for the use of the guidelines. Such exceptions shall be 
justified in writing, and authorized only in situations where the 
guidelines method is unsuitable.


1515.404-475  Cost realism.

    The EPA structured approach is not required when the contracting 
officer is evaluating cost realism in a competitive acquisition.


1515.408  Solicitation provisions and contract clauses.

    (a) In addition to those provisions and clauses prescribed in FAR 
15.408, when an exception to FAR 15.403-1 does not apply and no other 
means available can be used to ascertain whether a fair and reasonable 
price can be determined, the contracting officer may insert in 
negotiated solicitations the provisions at--
    (1) 1552.215-72 when requesting information other than cost or 
pricing data, for cost-reimbursable, level-of-effort-contracts. Use 
Alternate I for cost-reimbursable, level-of-effort contracts when the 
Government's requirement is for fully dedicated staff for a twelve 
month period(s) of performance and performance is on a Government 
facility; Alternate II for acquisitions for cost-reimbursable, level-
of-effort contracts when the Government's requirement is for fully 
dedicated staff for a twelve month period(s) of performance and 
performance is not on a Government facility; and Alternate III if the 
Government's requirement is for the acquisition of supplies or 
equipment. The contracting officer may make revisions, deletions, or 
additions to 1552.215-72 and its Alternates I-III as needed to fit an 
individual acquisition, and
    (2) 1552.215-73, General Financial and Organizational Information.
    (b) If uncompensated overtime is proposed, the resultant contract 
shall include the provisions at FAR 52.237-10 and include the provision 
at 1552.215-74. The contracting officer may use provisions 
substantially the same as 1552.215-74 without requesting a deviation to 
the EPAAR.

Subpart 1515.6--Unsolicited Proposals


1515.604  Agency points of contact.

    The Director, Grants Administration Division (3903R), EPA, 401 M 
Street, SW, Washington, D.C. 20460, is the Agency contact point 
established to coordinate the receipt and handling of unsolicited 
proposals.


1515.606-70  Contracting methods.

    The Department of Housing and Urban Development-Independent 
Agencies Appropriation Act contains a requirement that none of the 
funds provided in the Act may be used for payment through grants or 
contracts to recipients that do not share in the cost of conducting 
research resulting from proposals that are not specifically solicited 
by the Government. Accordingly, contracts for research which result 
from unsolicited proposals shall provide for the contractor to bear

[[Page 47415]]

a portion of the cost of performance for work subject to the Act. The 
extent of the cost sharing shall reflect the mutuality of interest of 
the contractor and the Government. Therefore, where there is no 
measurable gain to the performing organization, cost sharing is not 
required.
    4. In 1552.215-70, the section heading, the introductory text, and 
the provision heading are revised to read as follows:


1552.215-70  EPA Source Evaluation and Selection Procedures--Negotiated 
Procurements

    As prescribed in 1515.209(a), insert the following provision:

1552.215-70  EPA Source Evaluation and Selection Procedures--
Negotiated Procurements (Aug 1999)
* * * * *
    5. 1552.215-71 is revised to read as follows:


1552.215-71  Evaluation factors for award.

    As prescribed in 1515.209(a), insert one of the following 
provisions.

Evaluation Factors for Award (Aug 1999)

    (a) The Government will make award to the responsible offeror(s) 
whose offer conforms to the solicitation and is most advantageous to 
the Government cost or other factors considered. For this 
solicitation, all evaluation factors other than cost or price when 
combined are significantly more important than cost or price.
    (b) Evaluation factors and significant subfactors to determine 
quality of product or service:
----------------------------------------------------------------------
----------------------------------------------------------------------
[End of provision]

Evaluation Factors for Award (Aug 1999)--Alternate I (Aug 2000)

    (a) The Government will make award to the responsible offeror(s) 
whose offer conforms to the solicitation and is most advantageous to 
the Government cost or other factors considered. For this 
solicitation, all evaluation factors other than cost or price when 
combined are significantly less important than cost or price.
    (b) Evaluation factors and significant subfactors to determine 
quality of product or service:
----------------------------------------------------------------------
[End of provision]
----------------------------------------------------------------------

Evaluation Factors for Award, Aug 1999--Alternate II, Aug 2000

    (a) The Government will make award to the responsible offeror(s) 
whose offer conforms to the solicitation and is most advantageous to 
the Government cost or other factors considered. For this 
solicitation, all evaluation factors other than cost or price when 
combined are approximately equal to cost or price.
    (b) Evaluation factors and significant subfactors to determine 
the quality of product or service:
----------------------------------------------------------------------
----------------------------------------------------------------------
[End of provision]

Evaluation Factors for Award, Aug 1999--Alternate III, (Aug 2000)

    (a) The Government will make award to the offeror with the 
lowest-evaluated cost or price, whose proposal meets or exceeds the 
acceptability standards for non-cost factors. In the event that 
there are two or more technically acceptable, equal price (cost) 
offers, the Government will consider socioeconomic, environmental 
and other similar factors, as listed below in descending order of 
importance:
----------------------------------------------------------------------
----------------------------------------------------------------------
    (b) Factors and significant subfactors for technical 
acceptability evaluation:
----------------------------------------------------------------------
----------------------------------------------------------------------
    (c) Factors for past performance evaluation (optional):
----------------------------------------------------------------------
----------------------------------------------------------------------
[End of provision]

    6. 1552.215-73 is redesignated as 1552.215-72 and revised to read 
as follows:


1552.215-72  Instructions for the Preparation of Proposals

    As prescribed in 1515.408(a)(1) insert the following provision:

Instructions for the Preparation of Proposals, (Aug 1999)

    (a) Other than cost proposal instructions.
    (1) Submit proposal for than cost factors as a separate part of 
the total proposal package. Omit all cost or pricing details from 
this proposal.
    (2) Special proposal instructions:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
    (b) Cost or pricing proposal instructions. The offeror shall 
prepare and submit cost or pricing information data and supporting 
attachments in accordance with Table 15-2 of FAR 15.408. In addition 
to a hard copy of the information, to expedite review of the 
proposal, submit a 3.5'' high density IBM-compatible formatted 
computer disk containing the financial data required, if this 
information is available using a commercial spreadsheet program on a 
personal computer. Submit this information using LOTUS 1-2-3, if 
available. Identify which version of LOTUS used. If the offeror used 
another spreadsheet program, indicate the software program used to 
create this information. Offerors should include the formulas and 
factors used in calculating the financial data. Although submission 
of a computer disk will expedite review, failure to submit a disk 
will not affect consideration of the proposal.
    (1) General--Submit cost or pricing information prepared in 
accordance with FAR Table 15-2, Instructions for Submitting Cost/
Price Proposals When Cost or Pricing Information Are Required and 
the following:
    (i) Clearly identify separate cost or pricing information 
associated with any:
    (A) Options to extend the term of the contract;
    (B) Options for the Government to order incremental quantities; 
and/or
    (C) Major tasks, if required by the special instructions.
    (ii) If the contract schedule includes a ``Fixed Rate for 
Services'' clause, please provide in the cost proposal a schedule 
duplicating the format in the clause and include proposed fixed 
hourly rates per labor category for the base and any optional 
contract periods.
    (iii) If the contract includes the clause at EPAAR 1552.232-73 
``Payments--Fixed-Rate Services Contract,'' or the clause at FAR 
52.232-7, ``Payments Under Time and Materials and Labor-Hour 
Contracts,'' include in the cost proposal the estimated costs and 
burden rate to be applied to materials, other direct costs, or 
subcontracts. The Government will include these costs as part of its 
cost proposal evaluation.
    (iv) If other divisions, subsidiaries, a parent or affiliated 
companies will perform work, provide the name and location of such 
affiliate and offeror's intercompany pricing policy. Separately 
identify costs and supporting data for each entity proposed.
    (v) The realism of costs, including personnel compensation rates 
(including effective hourly rates due to uncompensated overtime) 
will be part of the proposal evaluation. Any reductions to proposed 
costs or differences between proposed and known EPA/DCAA recommended 
rates must be fully explained. If an offeror makes a reduction which 
makes its offer or portions of its offer below anticipated costs, 
the offeror shall identify where (i.e., which elements of costs) the 
proposed reductions will be made. Unsubstantiated rates may result 
in an upward or downward adjustment of the cost proposals to reflect 
more realistic costs. Based on this analysis, a projected cost for 
the offeror will be calculated to reflect the Government's estimate 
of the offeror's probable costs. Any inconsistency, whether real or 
apparent, between the promised performance and cost or price should 
be explained. The burden of proof for cost credibility rests with 
the offeror.
    (2) Direct Labor.
    (i) The direct technical labor hours (level-of-effort) appearing 
in the solicitation are for professional and technical labor only. 
These hours do not include management at a level higher than project 
management, e.g., corporate and day-to-day management, nor do they 
include clerical and support staff at a level lower than technician. 
If it is the offeror's normal practice to charge these types of 
costs as direct costs, include these costs along with an estimate of 
the directly chargeable labor-hours for these personnel. These 
direct charges are to be shown separately from the technical (level-
of-effort) effort. If this type of effort is normally included in 
the offeror's indirect cost allocations, no estimate is required. 
However, direct charging of these on any resulting contract will not 
be allowed. Additionally the direct technical labor hours are the 
workable hours required by the Government and do not include release 
time (i.e., holidays, vacation, etc.) Submit the proposal utilizing 
the labor categories and distribution of the level-of-effort 
specified in the

[[Page 47416]]

solicitation. These are approximate distribution levels and do not 
necessarily represent the actual levels which may be experienced 
during contract performance.
    (ii) Explain the basis of the proposed labor rates, including a 
complete justification for all judgmental factors used to develop 
weights applied to company's category or individual rates that 
comprise the rates for labor categories specified in the 
solicitation. This explanation should describe how technical 
approach coincides with the proposed costs. If the proposed direct 
labor rates are based on an average of the individuals proposed to 
work on the contract, provide a list of the individuals proposed and 
the hours associated with each individual in deriving the rates. If 
the proposed direct labor rates are based on an average of company 
category rates, identify and describe the labor categories and the 
percentages associated with each category in deriving the rates, 
explaining in detail the basis for the percentages assigned.
    (iii) Describe for each labor category proposed, the company's 
qualifications and experience requirements. If individual rates are 
used, provide the employee's name. If specific individuals are 
identified in the technical proposal, correlate these individuals 
with the labor categories specified in the solicitation.
    (iv) Provide a matrix summarizing the effort proposed, including 
the subcontracts, by professional and technical level specified in 
the solicitation.
    (v) Indicate whether current rates or escalated rates are used. 
If escalation is included, state the degree (percent) and 
methodology. The methodology shall include the effective date of the 
base rates and the policy on salary reviews (e.g. anniversary date 
of employee or salary reviews for all employees on a specific date).
    (vi) State whether any additional direct labor (new hire or 
temporary hires) will be required during the performance period of 
this acquisition. If so, state the number required, the professional 
or technical level and the methodology used to estimate proposed 
labor rates.
    (vii) With respect to educational institutions, include the 
following information for those professional staff members whose 
salary is expected to be covered by a stipulated salary support 
agreement pursuant to OMB Circular A-21.
    (A) Individual's name;
    (B) Annual salary and the period for which the salary is 
applicable;
    (C) List of other research Projects or proposals for which 
salaries are allocated, and the proportionate time charged to each; 
and
    (D) Other duties, such as teaching assignments, administrative 
assignments, and other institutional activities. Show the 
proportionate time charged to each. (Show proportionate time charges 
as a percentage of 100% of time for the entire academic year, 
exclusive of vacation or sabbatical leave.)
    (viii) Uncompensated overtime. The decision to propose 
uncompensated overtime is the offeror's decision. Should the 
offeror, however, elect to propose uncompensated overtime, the 
offeror must propose a methodology that is consistent with their 
cost accounting practices and company policy. If proposed, provide 
an estimate of any uncompensated overtime proposed for exempt 
personnel working at the offeror's facilities. This estimate should 
identify the number of uncompensated labor hours and the percentage 
of compensated labor. Uncompensated labor hours are defined as hours 
for exempt personnel in excess of regular hours for a pay period 
which are actually worked and recorded in accordance with company 
policy. Provide a copy of the company policy on uncompensated 
overtime. Provide historical percentages of uncompensated overtime 
for the past three years. If proposed for subcontractors, provide 
separately with subcontractor information.
    (ix) For labor rate contracts, for each fixed labor rate, 
offerors shall identify the basis for for the loaded fixed hourly 
rate for each contract period for example, the rate might consist of 
the following cost elements: raw wage or salary rate, plus fringe 
benefits (if applicable), plus overhead rate (if applicable), plus 
G&A expense rate (if applicable), plus profit.
    When determining the composite raw wage for a labor category, 
the offeror shall:
    (A) provide in narrative form the basis for the raw wage for 
each labor category. If actual wages of current employees are used, 
the basis for the projections should be explained.
    (B) If employees are subject to the Service Contract Act or 
Davis Bacon Act, they must be compensated at least at the minimum 
wage rate required by the applicable Wage Determination.
    (3) Indirect costs (fringe, overhead, general, and 
administrative expenses).
    (i) If the rates have been recently approved, include a copy of 
the rate agreement. If the agreement does not cover the projected 
performance period of the proposed effort, provide the rationale and 
any estimated rate calculations for the proposed performance period.
    (ii) Submit supporting documentation for rates which have not 
been approved or audited. Indicate whether computations are based 
upon historical or projected data.
    (iii) Provide actual pool expenses, base dollars, or hours (as 
applicable for the past five years). Include the actual indirect 
rates for the past five years including the indirect rates proposed, 
the actual indirect rates experienced and, if available, the final 
negotiated rate. Indicate the amount of unallowable costs included 
in the historical data.
    (iv) Offerors who propose indirect rates for new or 
substantially reorganized cost centers should consider offering to 
accept ceilings on the indirect rates at the proposed rates. 
Similarly, offerors whose subcontractors propose indirect rates for 
new or substantially reorganized cost centers should likewise 
consider offering to accept ceilings on the subcontractors' indirect 
rates at the proposed rates.

    Note to paragraph (b)(3)(iv): The Government reserves the right 
to adjust an offeror's or its subcontractor's estimated indirect 
costs for evaluation purposes based on the Agency's judgment of the 
most probable costs up to the amount of any stated ceiling.

    (v) If the employees are subject to the Service Contract Act or 
Davis Bacon Act, employees must receive the minimum level of 
benefits stated in the applicable Wage Determination.
    (4) Travel expense.
    (i) If the solicitation specifies the amount of travel costs, 
this amount is exclusive of any applicable indirect costs and fee.
    (ii) If the solicitation does not specify the amount of travel 
costs, attach a schedule illustrating how travel was computed. 
Include a breakdown indicating number of trips, number of travelers, 
destinations from and to, purpose and cost, e.g., mileage, 
transportation costs, subsistence rates.
    (5) Equipment, facilities and special equipment, including 
tooling.
    (i) If direct charges for use of existing contractor equipment 
are proposed, provide a description of these items, including 
estimated usage hours, rates, and total costs.
    (ii) If equipment purchases are proposed, provide a description 
of these items, and a justification as to why the Government should 
furnish the equipment or allow its purchase with contract funds. 
(Unless specified elsewhere in this solicitation, FAR 45.302-1 
requires contractors to furnish all facilities in performance of 
contracts with certain limited exceptions.)
    (iii) Identify Government-owned property in the possession of 
the offeror or proposed to be used in the performance of the 
contract, and the Government agency which has cognizance over the 
property.
    (iv) Submit proposed rates or use charges for equipment, along 
with documentation to support those rates.
    (v) If special purposes facilities or equipment are being 
proposed, provide a description of these items, details for the 
proposed costs including competitive prices, and justification as to 
why the Government should furnish the equipment or allow its 
purchase with contract funds.
    (vi) If fabrication by the prime contractor is contemplated, 
include details of material, labor, and overhead.
    (6) Other Direct Costs (ODC).
    (i) If the solicitation specifies the amount of other direct 
costs, this amount is exclusive of any applicable indirect cost and 
fee.
    (ii) If the amount is not specified in the solicitation, attach 
a schedule detailing how other direct costs were computed. Identify 
the major ODC items that under the accounting system would be a 
direct charge on any resulting contract.
    (iii) If any of the cost elements identified as part of the 
specified other direct costs are recovered as an indirect cost, in 
accordance with the offeror's accounting system, those costs should 
not be included as a direct cost. Complete explanation of this 
adjustment and the contractor's practice should be provided.
    (iv) Provide historical other direct costs dollars per level of 
effort hour on similar contracts or work assignments.
    (7) Team Subcontracts. When the cost of a subcontract is 
substantial (5 percent of the total estimated contract dollar value 
or $100,000, whichever is less), the offeror shall include the 
following subcontractor information:
    (i) Provide details of subcontract costs in the same format as 
the prime contractor's

[[Page 47417]]

costs. This detailed information may be provided separately to the 
EPA if the subcontractor does not wish to provide this data to the 
prime contractor. Cost data provided separately by a contractor must 
be received by the time, date and at the location specified for the 
receipt of proposals. The subcontractor's package should be clearly 
marked with the RFP number, the name of the prime offeror, and a 
statement that the package is subcontractor data relevant to the 
proposal from the prime offeror. If submitted with the prime 
contractor's proposal, identify the subcontractors. State the amount 
of service estimated to be required and the quoted daily or hourly 
rate. Offerors are encouraged to provide letters of intent, signed 
by subcontractors, agreeing to a specified rate for life of the 
contract. Include a cost or price analysis of the subcontractor cost 
showing the reasons why the costs are considered reasonable;
    (ii) Describe how the prospective team subcontractors were 
chosen as part of the offeror's proposed team; and rationale for 
selection;
    (iii) Describe the necessity for the subcontractor's effort as 
either a supplement or complement to the offeror's in-house 
expertise;
    (iv) Identify the areas of the scope of work and the level of 
effort the subcontractors are anticipated to perform. Provide a 
reconciliation summary of the proposed hours and ODCs for the prime 
contractor and proposed subcontractor(s).
    (v) Describe the prime contractor's management structure and 
internal controls to ensure efficient and quality performance of 
team subcontractors.
    (8) Facilities Capital Cost of Money (FCCM). When an offeror 
elects to claim FCCM as an allowable cost, the offeror must submit 
Form CASB-CNF and show calculation of the proposed amount. FCCM will 
be an allowable cost under the contemplated contract, if the 
criteria for allowability at FAR 31.205-10(a)(2) are met.

[End of Provision]

    Alternate I, Aug 1999. If the Government's requirement is a 
fully dedicated staff person for a twelve month period(s) for each 
specified position and performance is on a Government facility, add 
the following paragraph (b)(2)(x) to the basic provision:
    (x) The level of effort for each position is to be proposed in 
work years. A work year is considered to consist of 2080 hours 
inclusive of direct and indirect time (40 hours per week  x  52 
weeks per year=2080 hours). The proposal must identify proposed work 
years and clearly identify how many hours in each work year are 
direct (i.e., productive working hours) and how many are indirect 
(i.e., paid absences). If the company policy includes a different 
base work week, the total available hours would be different. For 
example, if the company's policy calls for a 37.5 hour work week, 
offeror would deduct paid absences from 1950 hour (37.5 hours/week 
x  52 weeks/year=1950 hours). Offeror should clearly identify the 
paid absences as to how many hours are for holiday and how many 
hours are for vacation and sick leave. The amount of indirect time 
(paid absences) identified in the proposal must be consistent with 
company policy and must allow for the ten Federal government 
holidays.
    Alternate II, Aug 1999. If the Government's requirement is a 
fully dedicated staff person for a twelve month period(s) for each 
specified position and performance is not on a Government facility; 
add the following paragraph (b)(2)(x) to the basic provision:
    (x) The level of effort for each position is to be proposed in 
work years. A work year is considered to consist of 2080 hours 
inclusive of direct and indirect time (40 hours per week  x  52 
weeks per year=2080 hours). The proposal must identify proposed work 
years and clearly identify how many hours in each work year are 
direct (i.e., productive working hours) and how many are indirect 
(i.e., paid absences). If the company policy includes a different 
base work week, the total available hours would be different. For 
example, if the company's policy calls for a 37.5 hour work week, 
offeror would deduct paid absences from 1950 hour (37.5 hours/week 
x  52 weeks/year=1950 hours). Offeror should clearly identify the 
paid absences as to how many hours are for holiday and how many 
hours are for vacation and sick leave.
    Alternate III, Aug 1999. If the requirement is for the 
acquisition of supplies or equipment, substitute the following 
paragraphs (a)(iv)--(viii) and add (a)(ix) and (b).
    (iv) Provide information as to how the proposed supplies or 
equipment meet the salient characteristics required by the contract 
line item;
    (v) Provide published brochures, catalogs, or other technical 
literature by contract line item;
    (vi) Meet any interface or compatibility requirements by 
contract line item;
    (vii) Describe warranty services and how delivered by contract 
line item;
    (viii) Assumptions, deviations and exceptions (as necessary); 
and
    (ix) Additional information.
    (b) Supplies--Provide unit pricing by contract line items for:
    (i) each line item;
    (ii) delivery;
    (iii) installation;
    (iv) sets of operating manuals;
    (v) training;
    (vi) warranty;
    (vii) maintenance; and
    (viii) volume discounts.

    7. 1552.215-74, is redesignated as 1552.215-73 and revised to read 
as follows:


1552.215-73 General Financial and Organizational Information.

    As prescribed in 1515.408(a)(2), insert the following provision:

General Financial and Organizational Informaiton: (Aug 1999)

    Offerors or quoters are requested to provide information 
regarding the following items in sufficient detail to allow a full 
and complete business evaluation. If the question indicated is not 
applicable or the answer is none, it should be annotated. If the 
offeror has previously submitted the information, it should certify 
the validity of that data currently on file at EPA and to whom and 
where it was submitted or update all outdated information on file.
  (a) Contractor's Name:-----------------------------------------------
    (b) Address (If financial records are maintained at some other 
location, show the address of the place where the records are kept):

----------------------------------------------------------------------
----------------------------------------------------------------------
  (c) Telephone Number:------------------------------------------------
  (d) Individual(s) to contact re. this proposal:----------------------
----------------------------------------------------------------------
    (e) Cognizant Government:

Audit Agency:----------------------------------------------------------
Address:---------------------------------------------------------------
Auditor:---------------------------------------------------------------
    (f)(1) Work Distribution for the Last Completed Fiscal 
Accounting Period:

Sales:
  Government cost-reimbursement type prime contracts           $________
   and subcontracts.................................
  Government fixed-price prime contracts and                   $________
   subcontracts.....................................
  Commercial Sales..................................           $________
    Total Sales.....................................           $________
  (2) Total Sales for first and second fiscal years
  immediately preceding last completed fiscal year.
 


Total Sales for First Preceding Fiscal Year.........           $________
Total Sales for Second Preceding Fiscal Year........           $________
(g) Is company a separate rate entity or division?..
Yes________
No________
 
 

    If a division or subsidiary corporation, name parent company:
----------------------------------------------------------------------

  (h) Date Company Organized:------------------------------------------

    (i) Manpower:

Total Employees:-------------------------------------------------------

Direct:----------------------------------------------------------------

Indirect:--------------------------------------------------------------

Standard Work Week (Hours):--------------------------------------------

  (j) Commercial Products:---------------------------------------------

    (k) Attach a current organizational chart of the company.
    (l) Description of Contractor's system of estimating and 
accumulating costs under Government contracts. (Check appropriate 
blocks.)

------------------------------------------------------------------------
                                                 Estimated/    Standard
                                                actual cost      cost
------------------------------------------------------------------------
Estimating System:
  Job Order...................................       ______       ______
  Process.....................................       ______       ______
 

[[Page 47418]]

 
Accumulating System:
  Job Order...................................       ______       ______
  Process.....................................       ______       ______
------------------------------------------------------------------------

    Has your cost estimating system been approved by any Government 
agency?
Yes ________ No ________

    If yes, give name, date or approval, and location of agency:

----------------------------------------------------------------------
----------------------------------------------------------------------

    Has your cost accumulation system been approved by any 
Government agency?
Yes ________ No ________
    If yes, give name, date of approval, and address of agency:
----------------------------------------------------------------------
----------------------------------------------------------------------

    (m) What is your fiscal year period? (Give month-to-month 
dates):

----------------------------------------------------------------------
----------------------------------------------------------------------
    What were the indirect cost rates for your last completed fiscal 
year?

------------------------------------------------------------------------
                                                   Indirect    Basis of
                   Fiscal year                     cost rate  allocation
------------------------------------------------------------------------
Fringe Benefits.................................      ______      ______
Overhead........................................      ______      ______
G&A Expense.....................................      ______      ______
Other...........................................      ______      ______
------------------------------------------------------------------------

    (n) Have the proposed indirect cost rate(s) been evaluated and 
accepted by any Government agency?
Yes ________ No ________
    If yes, give name, date of approval, and location of the 
Government agency:
----------------------------------------------------------------------

    Date of last preaward audit review by a Government agency:
----------------------------------------------------------------------

    If the answer is no, data supporting the proposed rates must 
accompany the cost or price proposal. A breakdown of the items 
comprising overhead and G&A must be furnished.
    (o) Cost estimating is performed by:

Accounting Department--------------------------------------------------
Contracting Department-------------------------------------------------
Other (describe)-------------------------------------------------------
    (p) Has system of control of Government property been approved 
by a Government agency?
Yes ________ No ________
    If yes, give name, date of approval, and location of the 
Government agency:

----------------------------------------------------------------------
----------------------------------------------------------------------

    (q) Purchasing System: FAR 44.302 requires EPA, where it is the 
cognizant Government agency, to conduct a Contractor Purchasing 
System Review for each contractor whose sales to the Government, 
using other than sealed bid procedures, are expected to exceed $25 
million (annual billings) during the next twelve months. The $25 
million sales threshold is comprised of prime contracts, 
subcontractors under Government prime contracts, and modifications 
(except when the negotiated price is based on established catalog or 
market prices or is set by law or regulation).
    Has your purchasing system been approved by a Government agency?
Yes ________ No ________

    If yes, name and location of the Government agency:
----------------------------------------------------------------------
Period of Approval:----------------------------------------------------

    If no, do you estimate that your negotiated sales to the 
Government during the next twelve months will meet the $25 million 
threshold? Yes ________ No ________
    If you responded yes to the $25 million threshold question, is 
EPA the cognizant agency for your organization based on the 
preponderance of Government contract dollars?
Yes ________ No ________
    If EPA is not your cognizant Government agency, provide the name 
and location of the cognizant agency ____________
----------------------------------------------------------------------
    Are your purchasing policies and procedures written?
Yes ________ No ________
    (r) Does your firm have an established written incentive 
compensation or bonus plan?
Yes ________ No ________
    (s) Additionally, offerors shall submit current financial 
statements, including a Balance Sheet, Statement of Income (Loss), 
and Cash Flow for the last two completed fiscal years. Specify 
resources available to perform the contract without assistance from 
any outside source. If sufficient resources are not available, 
indicate in proposal the amount required and the anticipated source 
(i.e., bank loans, letter or lines of credit, etc.).

(End of Provision)

    8. A new 1552. 215-74 is added to read as follows:


1552.215-74  Advanced Understanding--Uncompensated Time.

    As prescribed in 1515.408(b), insert the following provision or one 
substantially the same as the following provision:

Advanced Understanding--Uncompensated Time (Aug 1999)

    (a) The estimated cost of this contract is based upon the 
Contractor's proposal which specified that exempt personnel 
identified to work at the Contractor's facilities will provide 
uncompensated labor hours to the contract totaling ________ percent 
of compensated labor. (Note: the commitment for uncompensated time, 
and the formula elements in paragraph (b) below, apply only to 
exempt personnel working at the Contractor's facilities and does not 
include non-exempt personnel or exempt personnel working at other 
facilities.) Uncompensated labor hours are defined as hours of 
exempt personnel in excess of regular hours for a ________ pay 
period which are actually worked and recorded in accordance with the 
company policy, entitled, ________________.
    (b) Recognizing that the probable cost to the Government for the 
labor provided under this contract is calculated assuming a proposed 
level of uncompensated labor hours, it is hereby agreed that in the 
event the proposed level of uncompensated labor hours are not 
provided, an adjustment, calculated in accordance with the following 
formula will be made to the contract amount.
    Formula:
    Adjustment equals estimated value of uncompensated time hours 
not provided.
    Target uncompensated time percent minus ______ percent.
    Shortage of uncompensated time percent minus actual cost 
percent.
    Estimated value of uncompensated time hours not provided equals 
shortage of uncompensated time percent times total exempt applicable 
direct labor costs (including applicable indirect costs).
    (c) Within three weeks after the end of the contract, the 
Contractor shall submit a statement concerning the amount of 
uncompensated time hours delivered during the contract. In the event 
there is a shortage of uncompensated time hours provided, a 
calculation, utilizing the above formula will be made and this 
calculation will be the basis for an adjustment in the contract 
amount.
    (d) In the event adjustments are made to the contract, the 
adjusted amounts shall not be allowable as a direct or indirect cost 
to this or any other Government contract.

[End of clause]

    Dated: August 6, 1999.
Betty L. Bailey,
Director, Office of Acquisition Management.
[FR Doc. 99-22048 Filed 8-30-99; 8:45 am]
BILLING CODE 6560-50-P