[Federal Register Volume 79, Number 62 (Tuesday, April 1, 2014)]
[Proposed Rules]
[Pages 18416-18439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07086]



[[Page 18415]]

Vol. 79

Tuesday,

No. 62

April 1, 2014

Part II





Department of Energy





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48 CFR Parts 915, 934, 942, et al.





Acquisition Regulation: Contractor Business Systems--Definition and 
Administration; Proposed Rule

  Federal Register / Vol. 79 , No. 62 / Tuesday, April 1, 2014 / 
Proposed Rules  

[[Page 18416]]


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DEPARTMENT OF ENERGY

48 CFR Parts 915, 934, 942, 944, 945 and 952

RIN 1991-AC01


Acquisition Regulation: Contractor Business Systems--Definition 
and Administration

AGENCY: Department of Energy.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of Energy (DOE) is proposing to amend the 
Department of Energy Acquisition Regulation (DEAR) to define contractor 
business system as accounting system, estimating system, purchasing 
system, earned value management system (EVMS), and property management 
system. DOE is proposing to implement compliance enforcement mechanisms 
in the form of a contractor business system clause and related clauses 
that includes a provision that would allow contracting officers to 
withhold a percentage of payments, under certain conditions, when a 
contractor's business system contains significant deficiencies.

DATES: Written comments on the proposed rulemaking must be received on 
or before close of business June 2, 2014.

ADDRESSES: You may submit comments, identified by ``DEAR--Contractor 
Business Systems--Definition and Administration and RIN 1991-AC01,'' by 
any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email to: [email protected] mailto:. Include DEAR: 
Contractor Business Systems--Definition and Administration and RIN 
1991-AC01 in the subject line of the message.
     Mail to: U.S. Department of Energy, Office of Procurement 
and Assistance Management, MA-611, 1000 Independence Avenue SW., 
Washington, DC 20585. Comments by email are encouraged.

FOR FURTHER INFORMATION CONTACT: Barbara Binney, (202) 287-1340 or 
[email protected].

SUPPLEMENTARY INFORMATION: 
I. Background
II. Section-by-Section Analysis
III. Procedural Requirements:
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under Executive Order 12988
    C. Review Under the Regulatory Flexibility Act
    D. Review Under the Paperwork Reduction Act
    E. Review Under the National Environmental Policy Act
    F. Review Under Executive Order 13132
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 13211
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Approval by the Office of the Secretary of Energy

I. Background

    The purpose of this rulemaking is to define a contractor's business 
system as their accounting system, estimating system, purchasing 
system, earned value management system (EVMS), and property management 
system. DOE proposes to implement compliance enforcement mechanisms in 
the form of a business system clause and related clauses that allow 
contracting officers to withhold a percentage of payments, under 
certain conditions, when a contractor's business system contains 
significant deficiencies. DOE proposes, when the prime contract is 
awarded to a large business, to include a contractor teaming 
arrangement, and the total contract value exceeds $50 million, 
including options; or when the prime contract totaling $10 million or 
more including options (but less than $50 million) is awarded to a 
large business, to include a contractor teaming arrangement, and the 
contracting officer determines it to be in the best interest of the 
Government (e.g., significant estimating problems are believed to exist 
or the contractor's sales are predominantly Government) to prescribe 
these clauses for contracts in support of Capital Asset Projects (other 
than management and operating contracts), as prescribed in DOE Order 
(DOE O) 413.3B, Program and Project Management for the Acquisition of 
Capital Assets, or non-capital asset projects. Under the proposed rule, 
DOE could withhold a percentage of interim payments invoiced under--
cost reimbursement contracts; incentive type contracts; time-and-
materials contracts and; labor-hour contracts; as well as progress 
payments; and performance-based payments. The proposed changes affect 
DOE, which includes the National Nuclear Security Administration 
(NNSA), as well as DOE contractors, which include both DOE and NNSA 
contractors. The proposed changes do not affect Management & Operating 
(M&O) contracts. M&O contracts include M&O specific clauses that need 
to be considered and possibly revised to incorporate the clauses for 
the business system. For example, DOE authorizes the M&O contractor to 
finance contract performance by use of Special Financial Institution 
Accounts and requires the M&O contractor to maintain integrated 
accounting systems, under which the contractors budgeting and 
accounting follow DOE's Accounting Handbook. Because of these 
differences the business system clause and related clauses for the M&O 
contracts will be different from this rule; it is our intent to publish 
a separate proposed rule for M&O contracts at a later time.
    The proposed changes include policy revisions under DOE contracts. 
Contractor business systems and internal controls are the first line of 
defense against waste, fraud, and abuse. Weak control systems increase 
the risk of unallowable and unreasonable costs on Government contracts. 
To improve the effectiveness of DOE's oversight of contractor business 
systems, DOE is considering a rule to clarify the definition and 
administration of contractor business systems. It applies to designated 
fixed-price contracts awarded to a large business on the basis of 
adequate price competition without submission of cost or pricing data 
or covered contracts subject to the Cost Accounting Standards under 41 
U.S.C. chapter 15, as implemented in regulations found at 48 CFR 
9903.201-1(a) and not exempted at 9903.201-1(b)(1) through (14). DOE 
proposes to:
    1. Define contractor business system as estimating system, 
purchasing system, earned value management system (EVMS), accounting 
system and property management system.
    2. Implement compliance enforcement mechanisms in the form of a 
business system clause that allows contracting officers to withhold a 
percentage of payments, under certain conditions, when a contractor's 
business system contains significant deficiencies. Significant 
deficiency means a shortcoming in the system that materially affects 
the ability of officials of the Department of Energy to rely upon 
information produced by the system that is needed for management 
purposes. Under such circumstances, payments could be withheld on--
    [cir] Interim payments under--
      Cost reimbursement contracts;
      Incentive type contracts;
      Time-and-materials contracts; or
      Labor-hour contracts;
    [cir] Progress payments to include fixed-price contracts; and
    [cir] Performance-based payments to include fixed-price contracts.
    If the contracting officer issues the final determination with a 
notice to withhold payments for significant deficiencies in a 
contractor business system required under the contract, the contracting 
officer will withhold no more than five percent of amounts for

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one or more significant deficiencies in any single contractor business 
system and no more than ten percent of amounts for significant 
deficiencies in multiple contractor business system by directing the 
contractor, in writing, to withhold five percent or ten percent from 
its invoices until the contracting officer has determined that the 
contractor has corrected all significant deficiencies as directed by 
the contracting officer's final determination. When the contracting 
officer has determined that all significant deficiencies are corrected, 
the contracting officer will direct the contractor to discontinue the 
payment withholding from invoices and authorize the contractor to 
invoice for any monies previously withheld that are not also being 
withheld due to other significant deficiencies. This final 
determination is not a final decision within the meaning of the 
Contract Disputes Act of 1978 (41 U.S.C. 7101, et seq.).
    At the end of contract performance, if significant deficiencies 
remain in the disapproved system or systems and payment withholdings 
are in effect, the payment withholdings will be released during 
contract closeout. However, the release of the payment withholdings 
from one contract will not mean the system is approved. If there are 
other contracts where payment withholdings are in effect, the payment 
withholdings will continue on those contracts. These payment 
withholding are contract financing payments, and therefore are not 
subject to the interest penalty provisions of the Prompt Payment Act.
    When the Final Rule becomes effective, the clauses will be 
incorporated into solicitations that meet the established applicability 
requirements and will apply prospectively after being incorporated into 
affected contracts. Affected contracts are contracts awarded to large 
businesses, to include teaming arrangements, in support of Capital 
Asset Projects (other than management and operating contracts), as 
prescribed in DOE Order (DOE O) 413.3B, Program and Project Management 
for the Acquisition of Capital Assets, and non-capital asset projects 
when the total contract value exceeds $50 million, including options; 
or when the prime contract totaling $10 million or more, including 
options (but less than $50 million) is awarded to a large business, to 
include a contractor teaming arrangement, and the contracting officer 
determines it to be in the best interest of the Government (e.g., 
significant estimating problems are believed to exist or the 
contractor's sales a predominantly Government). After the effective 
date of the Final Rule, contracting officers will negotiate bilaterally 
with contractors who hold affected contracts to incorporate the changes 
of the Final Rule into their contracts within 60 days. Contracting 
officers must also incorporate the changes of the Final Rule into 
affected contracts before extending them or exercising options under 
them by negotiating bilaterally with the contractors.
    DOE notes that the Department of Defense (DoD) clauses were 
considered in drafting the proposed clauses. The system criteria in the 
clauses are based on the DoD clauses. Because the applicable DOE 
contracts are performed mostly at the DOE sites, each contractor will 
provide documentation to support the system criteria that they are 
using for that DOE contract. In circumstances where the contractor is 
using the same business system for a DoD contract and a DOE contract, 
the contractor would explain this circumstance and provide the results 
of DoD's review of their business system so that DOE can coordinate 
with DoD concerning use of the business system under the DOE contract.
    Today's proposed rule does not alter substantive rights or 
obligations under current law.
    DOE requests comments on all aspects of this proposed rule.

II. Section-by-Section Analysis

    1. Part 915 is amended to add new Sections 915.407 Special cost or 
pricing areas, 915.407-5 Estimating system, and 915.407-5-70 
Disclosure, maintenance, and review requirements. Section 915.407-5-70 
establishes the policy that DOE contractors have acceptable estimating 
systems. It adds definitions, describes applicability requirements, 
system criteria, and provides procedures for addressing significant 
deficiencies in estimating system.
    The applicable contract is subject to estimating system disclosure, 
maintenance, and review requirements for prime contractors (large 
business to include contractor teaming arrangement, as defined at 48 
CFR 9.601(1)) when the total contract value exceeds $50 million, 
including options; or when the prime contract totaling $10 million or 
more including options (but less than $50 million) is awarded to a 
large business, to include a contractor teaming arrangement and the 
contracting officer determines it to be in the best interest of the 
Government (e.g., significant estimating problems are believed to 
exist). Also, Subpart 952 is amended to add the related clause 952.215-
71 Cost Estimating System Requirements. A contractor's acceptable 
estimating system accurately describes the policies, procedures, and 
practices that the contractor currently uses in preparing cost proposal 
(budgeting planning controls, generating estimates of costs and other 
data included in proposals) with sufficient detail for the Government 
to reasonably make an informed judgment regarding the acceptability of 
the contractor's estimating practices.
    In the event any significant deficiencies are found in the 
estimating system, the contracting officer will provide to the 
contractor an initial determination of a significant deficiency and 
allow the contractor to respond within 30 days if the contractor 
disagrees. If the contracting officer does not receive a written 
response from the contractor within 30 days, the contractor will be 
deemed to agree with the initial determination. The contracting officer 
will evaluate the contractor's response or the contractor's lack of 
response and notify the contractor of a final determination concerning 
any remaining significant deficiencies, adequacy of any proposed or 
completed corrective action, and system disapproval if one or more 
significant deficiencies remain. If the contractor receives a final 
determination, the contractor shall, within 45 days, correct the 
significant deficiencies or submit an acceptable corrective action plan 
showing milestones and actions to eliminate the significant 
deficiencies. When the contracting officer makes a final determination 
to disapprove the contractor's estimating system, the contracting 
officer will withhold payments in accordance with the clause 952.242-
71, Contractor Business Systems.
    2. Section 915.408-70 is amended by revising the language to add 
instructions on when to use the cost estimating clause.
    3. Subchapter E is amended to add a new part 934--Major System 
Acquisition and Subpart 934.2--Earned Value Management System, and 
Sections 934.201-70 and 934.203. Subpart 952 is amended to add the 
related provision and clause, 952.234-70 Notice of Earned Value 
Management System, and 952.234-71 Earned Value Management System, 
respectively. The Subpart and Sections add DEAR text, a provision, and 
a clause addressing earned value management policy for DOE contracts. 
The rule supplements the final Federal Acquisition Regulation (FAR) 
rule published at 71 FR 38238 on July 5, 2006, and establishes DOE

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specific earned value management requirements, as permitted by the FAR. 
This section establishes policy that DOE contractors have an acceptable 
earned value management system (EVMS). It adds definitions, 
applicability requirements, system criteria, and provides procedures 
for addressing significant deficiencies in estimating systems.
    EVMS requirements apply to Capital Asset Projects on cost or 
incentive contracts and subcontracts based on dollar thresholds. For 
contracts valued at $20,000,000 or more, the contractor shall have an 
EVMS determined to be in compliance with the guidelines in the American 
National Standards Institute/Electronic Industries Alliance Standard 
748, EVMS (ANSI/EIA-748). In addition, for contracts valued at 
$20,000,000 but not exceeding $50,000,000, the contractor shall conduct 
self-certification review and periodic surveillance reviews.
    When the contractor has two or more contracts in support of capital 
asset projects at DOE and the total contract value for a contract is 
$20,000,000 or greater and the combined total contract values for these 
contracts is $50,000,000 or more, those contracts shall be subject to 
certification and surveillance reviews for contract values for 
$50,000,000 and above. For example, the contractor has 3 contracts in 
support of a DOE capital asset projects. Contract A is for $15,000,000. 
Contract B is for $21,000,000. Contract C is for $30,000,000. Contracts 
B and C are each by themselves $20,000,000 or greater. The combined 
total contract values for these two contracts (B at $21,000,000 and C 
at $30,000,000) is $50,000,000 or more. Therefore, DOE would conduct 
certification reviews and surveillance reviews for these 2 contracts.
    When the contract value is $50,000,000 but not exceeding 
$100,000,000, the applicable DOE Program Office will conduct 
certification reviews and periodic surveillance reviews to ensure 
continued compliance with ANSI/EIA-748.
    When the contract value is $100,000,000 or more, DOE Office of 
Acquisition and Project Management will conduct certification reviews 
and periodic surveillance reviews to ensure continued compliance with 
ANSI/EIA-748.
    Also for solicitations and contracts valued at $20,000,000 or more, 
DOE will use the provision 952.234-70, Notice of Earned Value 
Management System, instead of the provisions at FAR 52.234-2, Notice of 
Earned Value Management System--Pre-Award IBR, and FAR 52.234-3, Notice 
of Earned Value Management System--Post-Award IBR; and the clause at 
952.234-71, Earned Value Management System, instead of the clause at 
FAR 52.234-4, Earned Value Management System. For proposals in the 
amount of $50,000,000 or more, the provision 952.234-70, Notice of 
Earned Value Management System, requires the offeror to comply with the 
EVMS guidelines of the ANSI/EIA-748. If offeror proposes to use a 
system that has not been determined to be in compliance with ANSI/EIA-
748, the offeror shall submit a comprehensive plan for compliance with 
the guidelines in ANSI/EIA-748.
    For a contract valued at $50 million or more, the clause 952.234-
71, Earned Value Management System, requires the contractor to use an 
EVMS that has been determined to be acceptable by DOE. If, at the time 
of award, the contractor's EVMS has not been determined by DOE to be in 
compliance with the EVMS guidelines, the contractor shall apply its 
current system to the contract and shall take necessary actions to meet 
the milestones in the contractor's EVMS plan.
    In the event any significant deficiencies are found in the earned 
value management system, the contracting officer will provide to the 
contractor an initial determination of a significant deficiency and 
allow the contractor 30 days to respond if the contractor disagrees. If 
there is no written response from the contractor within 30 days, it 
will indicate that the contractor agrees with the initial 
determination. The contracting officer will evaluate the contractor's 
response or the contractor's lack of response and notify the contractor 
of a final determination concerning any remaining significant 
deficiencies; adequacy of any proposed or completed corrective action; 
system noncompliance when the EVMS fails to comply with ANSI/EIA-748 
guidelines; and system disapproval if EVMS validation is not 
successfully completed or that there is one or more significant 
deficiencies in guidelines.
    The contracting officer's final determination of the contractor's 
EVMS will indicate that the system is acceptable and approved with no 
significant deficiencies remaining, or that the system contains one or 
more significant deficiencies in high-risk guidelines in ANSI/EIA-748 
standards (guidelines 1, 3, 6, 7, 8, 9, 10, 12, 16, 21, 23, 26, 27, 28, 
30, or 32). When the contracting officer determines that the existing 
earned value management system contains one or more significant 
deficiencies in one or more of the remaining 16 guidelines in ANSI/EIA-
748 standards, the contracting officer shall use discretion to 
disapprove the system based on input received from functional 
specialists and the auditor.
    The contractor will have 45 days to either correct the significant 
deficiencies or submit an acceptable corrective action plan showing 
milestones and actions to eliminate the significant deficiencies. When 
the contracting officer makes a final determination to disapprove the 
contractor's system, the contracting officer will withhold payments in 
accordance with the clause 952.242-71, Contractor Business Systems.
    4. Part 942 is amended to add a new Subpart 942.70--Contractor 
Business System, Sections 942.7001 through 942.7005. Subpart 952 is 
amended to add the related clause 952.242-71, Contractor Business 
System. The proposed amendments will permit a contracting officer to 
withhold payment not to exceed five percent for one or more significant 
deficiencies in any single contractor business system and not to exceed 
ten percent for significant deficiencies in multiple contractor 
business systems after making a final determination to disapprove a 
contractor's business system for designated fixed-price contracts 
awarded to a large business on the basis of adequate price competition 
with or without submission of cost or pricing data; or for covered 
contract(s) subject to the Cost Accounting Standards under 41 U.S.C. 
chapter 15, as implemented in regulations found at 48 CFR 9903.201-1(a) 
and are not exempted at (b)(1) through (14).
    In solicitations and contracts in support of a Capital Asset 
Project (other than a management and operating contract), as prescribed 
in DOE Order 413.3B, or for a non-capital asset project, for prime 
contractors (large business to include contractor teaming 
arrangements), when the total contract value exceeds $50 million, 
including options; or when the prime contract totaling $10 million or 
more, including options, (but less than $50 million) is awarded to a 
large business, to include a contractor teaming arrangement and the 
contracting officer determines it to be in the best interest of the 
Government (e.g., significant estimating problems are believed to 
exist) use the clause 952.242-71, Contractor Business System. Also, the 
solicitation or contract will include any of the following clauses: 
952.215-71, Cost Estimating System Requirements; 952.234-71, Earned 
Value Management System; 952.242-72, Accounting System Administration; 
952.244-71, Contractor

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Purchasing System Administration; and 952.245-70, Contractor Property 
Management System Administration.
    The requirements of this subpart 942.70 will not apply to 
acquisitions for--
     Small business set-asides;
     Energy savings performance contracts as required by the 
Energy Policy Act of 1992;
     Services for--
     [cir] ``Advisory and assistance services'' as defined at 48 CFR 
2.101, unless otherwise designated as applicable by the Senior 
Procurement Executive or the Head of the Contracting Activity;
     [cir] Security Guards;
     [cir] Housekeeping;
     [cir] Education and training;
     [cir] National Environmental Policy Act of 1969 Support; or
     [cir] Utilities;
     Office of the Deputy Administrator for Naval Reactors;
     Interagency acquisitions in accordance with 48 CFR 17.5; 
or
     Orders against another Federal agency contract, e.g. 
Federal Supply Services (48 CFR 8.4).
    During contract performance, the contracting officer, or designee, 
shall evaluate the contractor's business system performance and 
compliance in accordance with 48 CFR 42.15 and DOE procedures. At the 
end of contract performance, if significant deficiencies remain in the 
disapproved system or systems and payment withholdings are in effect, 
the payment withholdings will be released during contract closeout. 
However, the release of the payment withholdings from one contract will 
not mean the system is approved. If there are other contracts where 
payment withholdings are in effect, the payment withholdings will 
continue on those contracts. These payment withholding are contract 
financing payments; therefore, these payments withholdings are not 
subject to the interest penalty provisions of the Prompt Payment Act.
    5. Part 942 is amended to add a new Subpart 942.71--Contractor 
Accounting System and Related Controls, Sections 942.7101, 942.7102 and 
942.7103. Subpart 952 is amended to add the related clause 952.242-72, 
Accounting System Administration. The proposed amendments will require 
DOE contractors to have acceptable accounting systems. It adds 
definitions, describes applicability requirements, system criteria, and 
provides procedures for addressing significant deficiencies in 
contractor accounting systems.
    In solicitations and contracts in support of a Capital Asset 
Project, (other than a management and operating contract), as 
prescribed in DOE Order 413.3B, or for a non-capital asset project, for 
prime contractors, (large business to include contractor teaming 
arrangements), when the total contract value exceeds $50 million, 
including options; or when the prime contract totaling $10 million or 
more, including options, (but less than $50 million) is awarded to a 
large business, to include a contractor teaming arrangement and the 
contracting officer determines it to be in the best interest of the 
Government (e.g., significant estimating problems are believed to 
exist) and the contract will be either a cost-reimbursement, incentive 
type, time-and-materials, or labor-hour contract; or a contractor with 
progress payments made on the basis of cost incurred by the contractor 
or on a percentage or stage of completion, or fixed-price contracts 
awarded on the basis of adequate price competition without submission 
of cost or pricing data with a large business, to include contractor 
teaming arrangement, use the clause 952.242-72, Accounting System 
Administration. The clause requires the contractor to establish and 
maintain an acceptable accounting system in accordance with the system 
criteria described in the clause.
    In the event any significant deficiencies are found in the 
accounting system, the contracting officer will provide to the 
contractor an initial determination of a significant deficiency and 
allows the contractor to respond within 30 days if the contractor 
disagrees. If there is no written response from the contractor within 
30 days, it will indicate that the contractor agrees with the initial 
determination. The contracting officer will evaluate the contractor's 
response or the contractor's lack of response and notify the contractor 
of a final determination concerning any remaining significant 
deficiencies, adequacy of any proposed or completed corrective action, 
and system disapproval if one or more significant deficiencies remain. 
If the contractor receives a final determination, the contractor shall 
within 45 days either correct the significant deficiencies or submit an 
acceptable corrective action plan showing milestones and actions to 
eliminate the significant deficiencies. When the contracting officer 
makes a final determination to disapprove the contractor's accounting 
system, the contracting officer will withhold payments in accordance 
with the clause 952.242-71, Contractor Business System.
    6. Subchapter G is amended to add a new Part 944--Subcontracting 
Policies and Procedures, Subpart 944.3--Contractors' Purchasing System 
Review, and Sections 944.301, 944.303, 944.305, 944.305-70 and 944.305-
71. Subpart 952 is amended to add the related clause 952.244-71, 
Contractor Purchasing System Administration. The proposed amendment 
requires that DOE contractors have acceptable purchasing system. The 
amendment add definitions, describe applicability requirements, define 
system criteria, and provide procedures for addressing significant 
deficiencies in contractor purchasing systems.
    In solicitations and contracts in support of a Capital Asset 
Project (other than a management and operating contract), as prescribed 
in DOE Order 413.3B, or for a non-capital asset project, for prime 
contractors (large business to include contractor teaming 
arrangements), when the total contract value exceeds $50 million, 
including options; or when the prime contract totaling $10 million or 
more, including options, (but less than $50 million) is awarded to a 
large business, to include a contractor teaming arrangement and the 
contracting officer determines it to be in the best interest of the 
Government (e.g., significant estimating problems are believed to 
exist) and the contract contains the clause at 48 CFR 52.244-2 
Subcontracts, use the clause 952.244-71, Contractor Purchasing System 
Administration. The clause requires the contractor to establish and 
maintain an acceptable purchasing system in accordance with the system 
criteria described in the clause.
    In the event any significant deficiencies are found in the 
purchasing system, the contracting officer will provide to the 
contractor an initial determination of a significant deficiency and 
allows the contractor to respond within 30 days if the contractor 
disagrees. If there is no written response from the contractor within 
30 days, it will indicate that the contractor agrees with the initial 
determination. The contracting officer will evaluate the contractor's 
response or the contractor's lack of response and notify the contractor 
of a final determination concerning any remaining significant 
deficiencies, adequacy of any proposed or completed corrective action, 
and system disapproval if one or more significant deficiencies remain. 
If the contractor receives a final determination, the contractor shall 
within 45 days either correct the significant deficiencies or submit an 
acceptable corrective action plan showing milestones and actions to 
eliminate the significant deficiencies. When the contracting officer 
makes a final determination to disapprove the

[[Page 18420]]

contractor's purchasing system, the contracting officer will withhold 
payments in accordance with the clause 952.242-71, Contractor Business 
System.
    7. Part 945 is amended to add new Sections 945.105, and 945.107. 
Subpart 952 is amended to add the related clause 952.245-70, Contractor 
Property Management System Administration. The proposed amendments 
requires that DOE contractors have acceptable property management 
systems. The amendments add definitions, describe applicability 
requirements, define system criteria, and provide procedures for 
addressing significant deficiencies in the contractor property 
management systems.
    In solicitations and contracts in support of a Capital Asset 
Project (other than a management and operating contract), as prescribed 
in DOE Order 413.3B, or for a non-capital asset project, for prime 
contractors (large business to include contractor teaming 
arrangements), when the total contract value exceeds $50 million, 
including options; or when the prime contract totaling $10 million or 
more, including options, (but less than $50 million) is awarded to a 
large business, to include a contractor teaming arrangement and the 
contracting officer determines it to be in the best interest of the 
Government (e.g., significant estimating problems are believed to exist 
and the contract contains the clause at 48 CFR 52.245-1, Government 
Property, use the clause 952.245-70, Contractor Property Management 
System. The clause requires the contractor to establish and maintain an 
acceptable property management system in accordance with the system 
criteria described in the clause.
    In the event any significant deficiencies are found in the property 
management system, the contracting officer will provide the contractor 
an initial determination of a significant deficiency and allow the 
contractor 30 days to respond within if the contractor disagrees. If 
there is no written response from the contractor within 30 days, it 
will indicate that the contractor agrees with the initial 
determination. The contracting officer will evaluate the contractor's 
response or the contractor's lack of response and notify the contractor 
of a final determination concerning any remaining significant 
deficiencies, adequacy of any proposed or completed corrective action, 
and system disapproval if one or more significant deficiencies remain. 
If the contractor receives a final determination, the contractor shall 
within 45 days either correct the significant deficiencies or submit an 
acceptable corrective action plan showing milestones and actions to 
eliminate the significant deficiencies. When the contracting officer 
makes a final determination to disapprove the contractor's property 
management system, the contracting officer will withhold payments in 
accordance with the clause 952.242-71, Contractor Business System.

III. Procedural Requirements

A. Review Under Executive Orders 12866 and 13563

    Today's regulatory action has been determined to be a ``significant 
regulatory action'' under Executive Order 12866, ``Regulatory Planning 
and Review,'' 58 FR 51735 (October 4, 1993). Accordingly, this proposed 
rule was reviewed under that Executive Order by the Office of 
Information and Regulatory Affairs (OIRA) of the Office of Management 
and Budget (OMB).
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, issued on January 18, 2011 (76 FR 3281 (Jan. 21, 2011)). 
Executive Order 13563 is supplemental to and explicitly reaffirms the 
principles, structures, and definitions governing regulatory review 
established in Executive Order 12866. To the extent permitted by law, 
agencies are required by Executive Order 13563 to: (1) Propose or adopt 
a regulation only upon a reasoned determination that its benefits 
justify its costs (recognizing that some benefits and costs are 
difficult to quantify); (2) tailor regulations to impose the least 
burden on society, consistent with obtaining regulatory objectives, 
taking into account, among other things, and to the extent practicable, 
the costs of cumulative regulations; (3) select, in choosing among 
alternative regulatory approaches, those approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages; distributive impacts; and equity); 
(4) to the extent feasible, specify performance objectives, rather than 
specifying the behavior or manner of compliance that regulated entities 
must adopt; and (5) identify and assess available alternatives to 
direct regulation, including providing economic incentives to encourage 
the desired behavior, such as user fees or marketable permits, or 
providing information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, the Office of Information and Regulatory Affairs has 
emphasized that such techniques may include identifying changing future 
compliance costs that might result from technological innovation or 
anticipated behavioral changes. DOE believes that today's NOPR is 
consistent with these principles, including the requirement that, to 
the extent permitted by law, agencies adopt a regulation only upon a 
reasoned determination that its benefits justify its costs and, in 
choosing among alternative regulatory approaches, those approaches 
maximize net benefits.

B. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction.
    With regard to the review required by section 3(a), section 3(b) of 
Executive Order 12988 specifically requires that Executive agencies 
make every reasonable effort to ensure that the regulation: (1) Clearly 
specifies the preemptive effect, if any; (2) clearly specifies any 
effect on existing Federal law or regulation; (3) provides a clear 
legal standard for affected conduct while promoting simplification and 
burden reduction; (4) specifies the retroactive effect, if any; (5) 
adequately defines key terms; and (6) addresses other important issues 
affecting clarity and general draftsmanship under any guidelines issued 
by the United States 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 if 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, this rule meets the relevant standards of 
Executive Order 12988.

C. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis for any rule 
that by law must be proposed for public comment, unless

[[Page 18421]]

the agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by Executive Order 13272, ``Proper Consideration of Small 
Entities in Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE 
published procedures and policies on February 19, 2003, to ensure that 
the potential impacts of its rules on small entities are properly 
considered during the rulemaking process (68 FR 7990). DOE has made its 
procedures and policies available on the Office of General Counsel's 
Web site at http://energy.gov/gc/guidance-opinions-0.
    Today's proposed rule establishes a definition for contractor 
business systems and implements compliance mechanisms to improve DOE 
oversight of those contractor business systems. The requirements of the 
rule will apply to solicitations and contracts that are subject to the 
Cost Accounting Standards (CAS) under 41 U.S.C. chapter 15, as 
implemented in regulations found at 48 CFR 9903.201- 1 (see the FAR 
Appendix), other than in contracts with educational institutions or 
Federally Funded Research and Development Centers (FFRDCs) operated by 
educational institutions, and include one or more of the defined 
contractor business systems. Contracts and subcontracts with small 
businesses are exempt from CAS requirements. This rule would not have a 
significant economic impact on small entities because it does not apply 
to small businesses. Consequently, this proposed rule is exempt from 
the requirements of the Regulatory Flexibility Act.

D. Review Under the Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies because 
the proposed rule contains information collection requirements. DOE 
invites comments on the following aspects of the proposed rule: (a) 
Whether the collection of information is necessary for the proper 
performance of the functions of DOE, including whether the information 
will have practical utility; (b) the accuracy of the estimate of the 
burden of the information collection; (c) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (d) ways 
to minimize the burden of the information collection on respondents, 
including the use of automated collection techniques or other forms of 
information technology.
    The following is a summary of the information collection 
requirement: The business systems clause in this proposed rule contains 
a requirement for contractors to respond to initial and final 
determinations of deficiencies. The information that contractors will 
be required to submit to respond to deficiencies in one of the five 
business systems defined in this rule has been approved by the Office 
of Management and Budget (OMB) is the Accounting Systems--OMB Clearance 
9000-0011 concerning preaward surveys. DOE estimates that there will be 
5 new contracts awarded per year, which will have these 5 clauses. DOE 
is also proposing a new information collection requirement as follows:
    Title: Department of Energy Acquisition Regulation (DEAR) Business 
Systems--Definition and Administration.
    Type of Request: New request.
    The information that contractors will be required to submit to 
respond to deficiencies in contractors' cost estimating system is 
estimated as follows:

    Number of Respondents: 5.
    Responses per Respondent: 2.
    Annual Responses: 10.
    Average Burden per Response: 1.2 hours.
    Annual Burden Hours: 12 hours.
    The information that contractors will be required to submit to 
respond to deficiencies in contractors' earned value management system 
(EVMS) is estimated as follows:

    Number of Respondents: 5.
    Responses per Respondent: 2.
    Annual Responses: 10.
    Burden per Response: 10.4 hours.
    Annual Burden Hours: 104 hours.
    The information that contractors will be required to submit to 
respond to deficiencies in contractors' accounting systems is estimated 
as follows:

    Number of Respondents: 5.
    Responses per Respondent: 2.
    Annual Responses: 10.
    Average Burden per Response: 1.2 hours.
    Annual Burden Hours: 12 hours.
    The information that contractors will be required to submit to 
respond to deficiencies in contractors' purchasing system is estimated 
as follows:

    Number of Respondents: 5.
    Responses per Respondent: 2.
    Annual Responses: 10.
    Average Burden per Response: 1.2 hours.
    Annual Burden Hours: 12 hours.
    The information that contractors will be required to submit to 
respond to deficiencies in contractors' property management system is 
estimated as follows:

    Number of Respondents: 5.
    Responses per Respondent: 2.
    Annual Responses: 10.
    Average Burden per Response: 1.2 hours.
    Annual Burden Hours: 12 hours.
    Needs and Uses: DOE needs the information required by the business 
system clause in this proposed rule to mitigate the risk of unallowable 
and unreasonable costs on Government contracts when a contractor has 
one or more deficiencies in a business system.
    Affected Public: The business system clause (952.242-71) will be 
used in solicitations and contracts that include any of the following 
clauses:
    (1) 952.215-71, Cost Estimating System Requirements;
    (2) 952.234-71, Earned Value Management System;
    (3) 952.242-72, Accounting System Administration;
    (4) 952.244-71, Contractor Purchasing System Administration; and
    (5) 952.245-70, Contractor Property Management System 
Administration.
    Frequency: On occasion.
    Written comments and recommendations on the proposed information 
collection should be sent to: DOE Desk Officer, Office of Information 
and Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10102, 735 17th Street NW., Washington, DC 20503.
    The Desk Officer may be telephoned at 202-395-4718 or contacted by 
email at [email protected].
    Please send a copy by mail to the U.S. Department of Energy, Office 
of Acquisition and Project Management, Attn: MA-611, Ms. Barbara 
Binney, 1000 Independence Avenue SW., Washington, DC 20585; or email 
to: [email protected]. Include DEAR: Contractor Business 
Systems--Proposed Information Collection RIN 1991-AC01 in the subject 
line of the message.
    Comments can be received from 60 days after the date of this 
notice, but comments to OMB will be most useful if received by OMB 
within 30 days after the date of this notice.
    To request more information on this proposed information collection 
or to obtain a copy of the proposal and associated collection 
instruments, please write to the U.S. Department of Energy, Office of 
Acquisition and Project Management, Attn: MA-611, Ms. Barbara Binney, 
1000 Independence Avenue SW., Washington, DC 20585; or email to 
[email protected]. Include DEAR: Contractor Business Systems--
Proposed Information Collection RIN 1991-AC01 in the subject line of 
the message.

[[Page 18422]]

E. Review Under the National Environmental Policy Act

    DOE has concluded that promulgation of this proposed rule falls 
into a class of actions which would not individually or cumulatively 
have significant impact on the human environment, as determined by 
DOE's regulations (10 CFR part 1021, subpart D) implementing the 
National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321 et 
seq.). Specifically, this proposed rule is categorically excluded from 
NEPA review because the amendments to the DEAR are strictly procedural 
(categorical exclusion A6). Therefore, this proposed rule does not 
require an environmental impact statement or environmental assessment 
pursuant to NEPA.

F. Review Under Executive Order 13132

    Executive Order 13132, 64 FR 43255 (August 4, 1999), imposes 
certain requirements on agencies formulating and implementing policies 
or regulations that preempt State law or that have federalism 
implications. Agencies are required to examine the constitutional and 
statutory authority supporting any action that would limit the 
policymaking discretion of the States and carefully assess the 
necessity for such actions. The Executive Order requires agencies to 
have an accountability process to ensure meaningful and timely input by 
state and local officials in the development of regulatory policies 
that have federalism implications.
    On March 14, 2000, DOE published a statement of policy describing 
the intergovernmental consultation process it will follow in the 
development of such regulations (65 FR 13735). DOE has examined the 
proposed rule and has determined that it does not preempt State law and 
does not have a substantial direct effect on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. No further action is required by Executive Order 13132.

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 written 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. Costs imposed by this proposed rule would be reimburse under 
the contract. This proposed rule does not impose any unfunded mandates.

H. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277), requires Federal agencies to issue a 
Family Policymaking Assessment for any rulemaking or policy that may 
affect family well-being. This rulemaking will have no impact on the 
autonomy or integrity of the family as an institution. Accordingly, DOE 
has concluded that it is not necessary to prepare a Family Policymaking 
Assessment.

I. Review Under Executive Order 13211

    Executive Order 13211, Actions Concerning Regulations that 
Significantly Affect Energy Supply, Distribution, or Use, 66 FR 28355 
(May 22, 2001), requires Federal agencies to prepare and submit to the 
Office of Information and Regulatory Affairs (OIRA), of the Office of 
Management and Budget (OMB), a Statement of Energy Effects for any 
proposed significant energy action. A ``significant energy action'' is 
defined as any action by an agency that promulgates or is expected to 
lead to promulgation of a final rule, and that: (1) Is a significant 
regulatory action under Executive Order 12866, or any successor order, 
(2) is likely to have a significant adverse effect on the supply, 
distribution, or use of energy, or (3) is designated by the 
Administrator of OIRA as a significant energy action. For any proposed 
significant energy action, the agency must give a detailed statement of 
any adverse effects on energy supply, distribution or use should the 
proposal be implemented, and of reasonable alternatives to the action 
and their expected benefits on energy supply, distribution and use. 
Today's proposed rule is not a significant energy action. Accordingly, 
DOE has not prepared a Statement of Energy Effects.

J. Review Under the Treasury and General Government Appropriations Act, 
2001

    The Treasury and General Government Appropriations Act, 2001 (44 
U.S.C. 3516, note) provides for agencies to review most disseminations 
of information to the public under guidelines established by each 
agency pursuant to general guidelines issued by OMB. OMB's guidelines 
were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines 
were published at 67 FR 62446 (October 7, 2002). DOE has reviewed the 
proposed rule under the OMB and DOE guidelines and has concluded that 
it is consistent with applicable policies in those guidelines.

K. Approval by the Office of the Secretary of Energy

    Issuance of this proposed rule has been approved by the Office of 
the Secretary of Energy.

List of Subjects in 48 CFR Parts 915, 934, 942, 944, 945 and 952

    Government procurement.

    Issued in Washington, DC, on March 24, 2014.
Paul Bosco,
Director, Office of Acquisition and Project Management, Department of 
Energy.
Joseph Waddell,
Deputy Associate Administrator, Acquisition and Project Management, 
National Nuclear Security Administration.

    For reasons set out in the preamble, the DOE is proposing to amend 
Chapter 9 of Title 48 of the Code of Federal Regulations as set forth 
below.

0
1. The authority citations for parts 915, 942, 945, and 952 continue to 
read as follows:

    Authority: 42 U.S.C. 7101 et seq. and 50 U.S.C. 2401 et seq.

PART 915--CONTRACTING BY NEGOTIATION

Subpart 915.4--Contract Pricing

0
2. Add sections 915.407, 915.407-5, and 915.407-5-70 to subpart 915.4 
to read as follows:


915.407  Special cost or pricing areas.


915.407-5  Estimating system.


915.407-5-70  Disclosure, maintenance, and review requirements.

    (a) Definitions. (1) Acceptable estimating system is defined in the 
clause at 952.215-71, Cost Estimating System Requirements.
    (2) Contractor means a business unit as defined in 48 CFR 2.101.
    (3) Estimating system is as defined in the clause at 952.215-71, 
Cost Estimating System Requirements.
    (4) Significant deficiency is defined in the clause at 952.215-71, 
Cost Estimating System Requirements.
    (b) Applicability. (1) DOE policy is that contractors have 
acceptable estimating systems that consistently produce well-supported 
proposals that are acceptable as a basis for negotiation of fair and 
reasonable prices.
    (2) The estimating system requirements apply when a large business 
contractor, to include a contractor teaming arrangement, as defined at 
48 CFR 9.601(1), performs a

[[Page 18423]]

contract in support of a Capital Asset Project, (other than a 
management and operating contract), as prescribed in DOE Order (DOE O) 
413.3B, or current version, or a non-capital asset project. See 
942.7003 for exceptions. The applicable contract is subject to 
estimating system disclosure, maintenance, and review requirements--
    (i) For a DOE prime contract totaling $50 million, including 
options; or
    (ii) For a DOE prime contract totaling $10 million or more 
including options (but less than $50 million) and the contracting 
officer determines it to be in the best interest of the Government 
(e.g., significant estimating problems are believed to exist).
    (c) Policy. (1) When the solicitation or contract includes the 
clause 952.242-71 Contractor Business System and related clauses, the 
contracting officer shall--
    (i) Through use of the clause at 952.215-71, Cost Estimating System 
Requirements, apply the disclosure, maintenance, and review 
requirements to large business contractors meeting the criteria in 
paragraph (b)(2)(i) or (ii) of this section;
    (ii) Ensure that contract, Part I--The Schedule, addresses in the 
business administration section, or similar section, that the 
contractor shall submit its cost estimating system for DOE review and 
acceptance with full implementation of the system to be in place no 
later than 60 days after contract award;
    (iii) Consider whether to apply the disclosure, maintenance, and 
review requirements to large business contractors under paragraph 
(b)(2)(ii) of this section; and
    (iv) Not apply the disclosure, maintenance, and review requirements 
to other than large business contractors.
    (2) The cognizant contracting officer, in consultation with the 
auditor, for contractors subject to paragraph (b)(2) of this section, 
shall--
    (i) Determine the acceptability of the disclosure and approve or 
disapprove the system; and
    (ii) Pursue correction of any deficiencies.
    (3) The auditor conducts estimating system reviews.
    (4) An acceptable system shall provide for the use of appropriate 
source data, utilize sound estimating techniques and good judgment, 
maintain a consistent approach, and adhere to established policies and 
procedures.
    (5) In evaluating the acceptability of a contractor's estimating 
system, the contracting officer, in consultation with the auditor, 
shall determine whether the contractor's estimating system complies 
with the system criteria for an acceptable estimating system as 
prescribed in the clause at 952.215-71, Cost Estimating System 
Requirements.
    (d) Disposition of findings--(1) Reporting of findings. The auditor 
shall document findings and recommendations in a report to the 
contracting officer. If the auditor identifies any significant 
deficiencies in the contractor's estimating system, the report shall 
describe the deficiencies in sufficient detail to allow the contracting 
officer to understand the deficiencies.
    (2) Initial determination. (i) The contracting officer shall review 
all findings and recommendations and, if there are no significant 
deficiencies, shall promptly notify the contractor, in writing, that 
the contractor's estimating system is acceptable and approved;


or

    (ii) If the contracting officer finds that there are one or more 
significant deficiencies (as defined in the clause at 952.215-71, Cost 
Estimating System Requirements) due to the contractor's failure to meet 
one or more of the estimating system criteria in the clause at 952.215-
71, the contracting officer shall--
    (A) Within 30 days of receiving the report, provide an initial 
determination of deficiencies in writing, describing each significant 
deficiency in sufficient detail to allow the contractor to understand 
the deficiency and provide a copy of the report to the contractor;
    (B) Request the contractor respond in writing to the initial 
determination within 30 days; and
    (C) Within 30 days of receiving the contractor's response or if the 
contractor does not submit a response, the date the response was due, 
in consultation with the auditor or cognizant functional specialist, 
evaluate the contractor's response or the contractor's lack of response 
and make a final determination.
    (3) Final determination. (i) The contracting officer shall make a 
final determination and notify the contractor in writing that--(A) The 
contractor's estimating system is acceptable and approved, and no 
significant deficiencies remain, or
    (B) Significant deficiencies remain. The notice shall identify any 
remaining significant deficiencies, and indicate the adequacy of any 
proposed or completed corrective action.
    The contracting officer shall--
    (1) Request that the contractor, within 45 days of receipt of the 
final determination, either correct the deficiencies or submit an 
acceptable corrective action plan showing milestones and actions to 
eliminate the deficiencies;
    (2) Disapprove the system in accordance with the clause at 952.215-
71, Cost estimating System Requirements; and
    (3) Withhold payments in accordance with the clause at 952.242-71, 
Contractor Business System, if the clause is included in the contract.
    (ii) Monitoring a contractor's corrective action and the correction 
of significant deficiencies.
    (A) Monitoring contractor's corrective action. The contracting 
officer or designee shall monitor the contractor's progress in 
correcting deficiencies. If the contractor fails to make adequate 
progress, the contracting officer shall take whatever action is 
necessary to ensure that the contractor corrects the deficiencies. 
Examples of actions the contracting officer can take include reducing 
or suspending progress payments (see 48 CFR 32.503-6), implementing the 
withholding in accordance with 952.242-71, Contractor Business System, 
if applicable, and recommending non-award of potential contracts.
    (B) Correction of significant deficiencies. (1) When the contractor 
notifies the contracting officer, in writing, that the contractor has 
corrected the significant deficiencies, the contracting officer shall 
request that the auditor review the correction to determine if the 
deficiencies have been resolved.
    (2) The contracting officer shall determine if the contractor has 
corrected the deficiencies.
    (3) If the contracting officer determines the contractor has 
corrected the deficiencies, the contracting officer's notification 
shall be sent to the auditor; invoice approving official; payment 
office; appropriate action officers responsible for reporting past 
performance; and the Department of Energy's or National Nuclear 
Security Administration's Heads of the Contracting Activities and 
Senior Procurement Executives.
    (e) System approval. The contracting officer shall promptly approve 
a previously disapproved estimating system and notify the contractor 
when the contracting officer determines that there are no remaining 
significant deficiencies.
    (f) Contracting officer notifications. The cognizant contracting 
officer shall promptly distribute copies of a determination to approve 
a system, disapprove a system and withhold payments, or approve a 
previously disapproved system and release

[[Page 18424]]

withheld payments, to the auditor, invoice approving official, payment 
office, affected DOE contracting offices, and the Department of 
Energy's or National Nuclear Security Administration's Heads of the 
Contracting Activities and Senior Procurement Executives.
0
3. Revise section 915.408-70 to read as follows:


915.408-70  Solicitation provisions and contract clauses.

    (a) The contracting officer (after deleting ``under the clause at 
970.5203-3, Contractor's Organization'' from paragraph (a) if not a 
management and operating contract) shall insert the clause at 952.215-
70, Key Personnel, in contracts under which performance is largely 
dependent on the expertise of specific key personnel.
    (b) Unless one of the exceptions at 942.7003 applies, use the 
clause at 952.215-71, Cost Estimating System Requirements, in all 
solicitations and contracts, in support of a Capital Asset Project 
(other than a management and operating contract), as prescribed in DOE 
O 413.3B, or current version, or for a non-capital asset project as 
described at 915.407-5-70(b)(2), for a prime contract, when the total 
contract value exceeds $50 million, including options, or when the 
total contract exceeds $10 million or more, including options, (but 
less than $50 million) and the contracting officer determines it to be 
in the best interest of the Government (e.g., significant estimating 
problems are believed to exist or the contractor's sales are 
predominantly Government).
0
4. Add part 934 to Subchapter F to read as follows:

PART 934--MAJOR SYSTEM ACQUISITION

Subpart 934.2--Earned Value Management System
Sec.
934.201-70 Policy.
934.203 Solicitation provisions and contract clause.

    Authority: 42 U.S.C. 7101 et seq. and 50 U.S.C. 2401 et seq.

Subpart 934.2--Earned Value Management System


934.201-70  Policy.

    (a) The Department of Energy (DOE) applies the earned value 
management system (EVMS) requirement as follows:
    (1) For cost or incentive contracts and subcontracts valued at 
$20,000,000 or more, the contractor in support of a Capital Asset 
Project, as prescribed in DOE Order (DOE O) 413.3B, or current version, 
shall have an EVMS that has been determined to be in compliance with 
the guidelines in the American National Standards Institute/Electronic 
Industries Alliance Standard 748, EVMS (ANSI/EIA-748) (current version 
at time of award) in accordance with the thresholds in paragraphs 
(a)(1)(i) through (iii) of this section.
    (i) For cost or incentive contracts and subcontracts valued at 
$20,000,000 but not exceeding $50,000,000, the contractor shall conduct 
a self-certification review by an entity independent of the contractor 
personnel assigned to programs and projects specified in the contract 
and provide self-certifying documentation of its EVMS compliance with 
ANSI/EIA-748. The contractor shall conduct periodic surveillance 
reviews and provide documentation of results to show continued 
compliance of contractor's EVMS with ANSI/EIA-748. When the contractor 
has two or more contracts in support of capital asset projects at DOE 
and the total contract values are $20,000,000 or greater per contract 
for total contract values of $50,000,000 or more, those contracts shall 
be subject to certification and surveillance reviews as described in 
paragraphs (a)(1)(ii) or (iii) of this section.
    (ii) For contracts valued at $50,000,000 but not exceeding 
$100,000,000, the contracting officer will receive a copy of the 
certification review which certifies that the contractor's EVMS is 
compliant with ANSI/EIA-748 from the cognizant DOE program office. The 
cognizant DOE Program Office shall conduct certification reviews and 
periodic surveillance reviews to ensure continued compliance of 
contractor's EVMS with ANSI/EIA-748, the contracting officer will 
receive a copy of these reviews from the cognizant DOE program office.
    (iii) For contracts valued at $100,000,000 or more, the contracting 
officer will receive a copy of the certification review which certifies 
that the contractor's EVMS is compliant with ANSI/EIA-748 from DOE's 
Office of Acquisition and Project Management (OAPM). OAPM shall conduct 
certification reviews and periodic surveillance reviews to ensure 
continued compliance of contractor's EVMS with ANSI/EIA-748, and the 
contracting officer shall receive a copy of these reviews from OAPM. 
Also, OAPM shall conduct certification reviews and surveillance reviews 
and certify the contractor's EVMS compliance with ANSI/EIA-748 for 
contracts of lesser value if requested by the contracting officer, the 
contractor or the DOE program office; or if the contractor or cognizant 
DOE program office does not complete its required actions in (a)(1)(i) 
and (ii) of this section within one year of contract award.
    (2) For cost or incentive contracts and subcontracts valued at less 
than $20,000,000--
    (i) The application of earned value management is optional and is a 
risk-based decision;
    (ii) A decision to apply earned value management shall be 
documented in the contract file; and
    (iii) When the DOE program manager decides to implement earned 
value management on contracts and subcontracts valued at less than 
$20,000,000, a cost-benefit analysis shall be conducted and the 
documented results provided to the contracting officer for the contract 
file.
    (3) For fixed-price contracts and subcontracts of any dollar value:
    (i) The application of earned value management is not required.
    (ii) In extraordinary cases where cost/schedule visibility is 
required and cannot be obtained using other means, the DOE program 
manager shall request a waiver for individual contracts from the 
applicable Acquisition Executive (AE), as defined in DOE Order 413.3B, 
or current version. In these cases, the program manager will conduct a 
business case analysis that includes rationale as to why a cost or 
fixed-price incentive contract was not an appropriate contracting 
vehicle.
    (b) Under the provision at 952.234-70, Notice of Earned Value 
Management System, when an offeror proposes a plan for compliance with 
the earned value management system guidelines in ANSI/EIA-748, the 
contracting officer shall obtain the assistance of the cognizant DOE 
program office or OAPM, as applicable, in determining the adequacy of 
an earned value management system plan. The Government will review and 
approve the offeror's EVMS plan to achieve compliance before contract 
award. Guidance and instructions for performing EVMS plan reviews can 
be found at DOE Order 413.3B, Program and Project Management for the 
Acquisition of Capital Assets, Appendix C, Section 5 and DOE Guide 
413.3-10A, Earned Value Management System.
    (c) For contracts of $50,000,000 or more, DOE is responsible for 
determining the contractor's earned value management system compliance. 
Furthermore, when the contractor has two or more contracts in support 
of capital asset projects at the same DOE-site and the total contract 
values are $20,000,000 or greater per contract for total contract 
values of $50,000,000 or

[[Page 18425]]

more, DOE is responsible for determining the contractor's earned value 
management system compliance.
    (d) The cognizant contracting officer, in consultation with the 
cognizant DOE program office or OAPM (both are herein referred to as 
functional specialist) or auditor, as applicable, shall--
    (1) Determine the acceptability of the contractor's earned value 
management system through certification reviews and periodic 
surveillance reviews conducted by the cognizant DOE program office or 
OAPM, as applicable, and approve or disapprove the system; and
    (2) Pursue correction of any deficiencies identified during 
certification reviews or surveillance reviews.
    (e) In evaluating the acceptability of a contractor's earned value 
management system, the contracting officer, in consultation with the 
cognizant functional specialist or auditor, as applicable, shall 
determine whether the contractor's earned value management system 
complies with the system criteria for an acceptable earned value 
management system as prescribed in the clause at 952.234-71, Earned 
Value Management System.
    (f) Disposition of findings--(1) Reporting of findings. The 
cognizant functional specialist or auditor shall document findings and 
recommendations in a report to the contracting officer. If the 
cognizant functional specialist or auditor identifies any significant 
deficiencies in the contractor's earned value management system, the 
report shall describe the deficiencies in sufficient detail to allow 
the contracting officer to understand the deficiencies.
    (2) Initial determination. (i) The contracting officer shall review 
all findings and recommendations and, if there are no significant 
deficiencies, shall promptly notify the contractor, in writing, that 
the contractor's earned value management system is acceptable and 
approved; or
    (ii) If the contracting officer finds that there are one or more 
significant deficiencies (as defined in the clause at 952.234-71, 
Earned Value Management System) due to the contractor's failure to meet 
one or more of the earned value management system criteria in the 
clause at 952.234-71, the contracting officer shall--
    (A) Within 30 days of receiving the report, provide an initial 
determination of deficiencies, in writing, describing each significant 
deficiency in sufficient detail to allow the contractor to understand 
the deficiencies and provide a copy of the report to the contractor;
    (B) Request the contractor to respond, in writing, to the initial 
determination within 30 days; and
    (C) Within 30 days of receiving the contractor's response or if the 
contractor does not submit a response, the date the response was due, 
in consultation with the auditor or cognizant functional specialist, 
evaluate the contractor's response and make a final determination.
    (3) Final determination. (i) The contracting officer, in 
consultation with the cognizant functional specialist or auditor, shall 
make a final determination and notify the contractor, in writing, 
that--
    (A) The contractor's earned value management system is acceptable 
and approved, and no significant deficiencies remain, or
    (B) Significant deficiencies remain. The notice shall identify any 
remaining significant deficiencies, and indicate the adequacy of any 
proposed or completed corrective action. The contracting officer 
shall--
    (1) Request that the contractor, within 45 days of receipt of the 
final determination, either correct the deficiencies or submit an 
acceptable corrective action plan showing milestones and actions to 
eliminate the deficiencies;
    (2) Disapprove the system in accordance with the clause at 952.234-
71, Earned Value Management System, when initial validation is not 
successfully completed within the timeframe approved by the contracting 
officer or the contracting officer determines that the existing earned 
value management system contains one or more significant deficiencies 
in the high-risk guidelines in ANSI/EIA 748 standards (guidelines 1, 3, 
6, 7, 8, 9, 10, 12, 16, 21, 23, 26, 27, 28, 30, or 32). When the 
contracting officer determines that the existing earned value 
management system contains one or more significant deficiencies in one 
or more of the remaining 16 guidelines in ANSI/EIA-748 standards, the 
contracting officer shall use discretion to disapprove the system based 
on input received from functional specialists and the auditor; and
    (3) Withhold payments in accordance with the clause at 952.242-71, 
Contractor Business System, if the clause is included in the contract.
    (ii) Monitoring contractor's corrective action and the correction 
of significant deficiencies.
    (A) Monitoring contractor's corrective action. The contracting 
officer or designee shall monitor the contractor's progress in 
correcting deficiencies. If the contractor fails to make adequate 
progress, the contracting officer shall take whatever action is 
necessary to ensure that the contractor corrects the deficiencies. 
Example of an action the contracting officer can take is to increase 
the withholding in accordance with 952.242-71, Contractor Business 
System.
    (B) Correction of significant deficiencies. (1) When the contractor 
notifies the contracting officer that the contractor has corrected the 
significant deficiencies, the contracting officer shall request the 
cognizant functional specialist or auditor to review the correction to 
determine if the deficiencies have been resolved.
    (2) The contracting officer shall determine if the contractor has 
corrected the deficiencies.
    (3) If the contracting officer determines the contractor has 
corrected the deficiencies, the contracting officer's notification 
shall be sent to the cognizant functional specialist, auditor, invoice 
approving official, payment office, DOE contracting offices having 
substantial business with the contractor, and the Department of 
Energy's or National Nuclear Security Administration's Heads of the 
Contracting Activities and Senior Procurement Executives.
    (g) System approval. The contracting officer shall promptly approve 
a previously disapproved earned value management system and notify the 
contractor when the contracting officer determines that there are no 
remaining significant deficiencies.
    (h) Contracting officer notifications. The cognizant contracting 
officer shall promptly distribute copies of a determination to approve 
a system, disapprove a system and withhold payments, or approve a 
previously disapproved system and release withheld payments to the 
auditor, invoice approving official, payment office, DOE contracting 
offices having substantial business with the contractor, and the 
Department of Energy's or National Nuclear Security Administration's 
Heads of the Contracting Activities and both Senior Procurement 
Executives.
    (i) Contract reporting. For a cost reimbursement contract requiring 
EVMS, the contract shall include instructions to the prime contractor 
to electronically upload earned value and schedule data into the 
Project Assessment and Reporting System (PARS II) (or current DOE 
project performance reporting system) in accordance with the 
``Contractor Project Performance Upload Requirements''

[[Page 18426]]

document maintained by the OAPM. Unless OAPM has granted a temporary 
exemption, all requested data shall be submitted timely and accurately. 
Data shall be loaded into PARS II no later than the last workday of 
every month. This data shall be current as of the close of the previous 
month's accounting period.


934.203  Solicitation provisions and contract clause.

    For cost or incentive contracts in support of a Capital Asset 
Project, as prescribed in DOE Order (DOE O) 413.3B, or current version, 
valued at $20,000,000 or more, and for other contracts for which EVMS 
will be applied in accordance with 934.201(a)(1)--
    (a) Use the provision at 952.234-70, Notice of Earned Value 
Management System, instead of the provisions at FAR 52.234-2, Notice of 
Earned Value Management System--Pre-Award IBR, and FAR 52.234-3, Notice 
of Earned Value Management System--Post-Award IBR, in the solicitation; 
and
    (b) Use the clause at 952.234-71, Earned Value Management System, 
instead of the clause at FAR 52.234-4, Earned Value Management System, 
in the solicitation and contract.

PART 942--CONTRACT ADMINISTRATION AND AUDIT SERVICES

0
5. Add subpart 942.70 to part 942 to read as follows:
Subpart 942.70--Contractor Business System
Sec.
942.7001 Scope of subpart.
942.7002 Definitions.
942.7003 Exceptions.
942.7004 Contractor business system deficiencies procedures.
942.7005 Contract clause.

Subpart 942.70--Contractor Business System


942.7001   Scope of subpart.

    This subpart prescribes procedures to implement contractor business 
system requirements in applicable contracts to include how to determine 
and withhold payments when the contractor business system has 
deficiencies.


942.7002  Definitions.

    Definitions. As used in this subpart--
    Acceptable contractor business system and contractor business 
system are defined in the clause at 952.242-71, Contractor Business 
System.
    Covered contract means a contract (other than a management and 
operating contract) that is subject to the Cost Accounting Standards 
under 41 U.S.C. chapter 15, as implemented in regulations found at 48 
CFR 9903.201-1(a) and are not exempted at 9903.201-1(b)(1) through (14) 
(see the 48 CFR Appendix).
    Significant deficiency is defined in the clause at 952.242-71, 
Contractor Business System.


942.7003  Exceptions.

    The requirements of this subpart do not apply to acquisitions for--
    (a) Small business set-asides;
    (b) Energy savings performance contracts as required by the Energy 
Policy Act of 1992;
    (c) Services for--
    (1) ``Advisory and assistance services'' as defined at 48 CFR 
2.101, unless otherwise designated as applicable by the Senior 
Procurement Executive or the Head of the Contracting Activity;
    (2) Security Guards;
    (3) Housekeeping;
    (4) Education and training;
    (5) National Environmental Policy Act of 1969 Support; or
    (6) Utilities;
    (d) Office of the Deputy Administrator for Naval Reactors;
    (e) Interagency acquisitions in accordance with 48 CFR 17.5; or
    (f) Orders against another Federal agency contract, e.g. Federal 
Supply Services (48 CFR 8.4).


942.7004  Contractor business system deficiencies procedures.

    (a) Determination to withhold payments. If the contracting officer 
makes a final determination to disapprove a contractor's business 
system in accordance with the clause at 952.242-71, Contractor Business 
System, the contracting officer shall--
    (1) Identify if within DOE there is one or more fixed-price 
contracts awarded on the basis of adequate price competition without 
submission of cost or pricing data with large businesses or covered 
contracts containing the clause at 952.242-71, Contractor Business 
System, from which payments will be withheld. When identifying the 
contracts from which to withhold payments, the contracting officer 
shall ensure that the total amount of payment withholding under the 
clause at 952.242-71, does not exceed 10 percent of progress payments, 
performance-based payments, and interim payments under cost-
reimbursement, labor-hour, and time-and-materials, contracts billed 
under each of the identified contracts. Similarly, the contracting 
officer shall ensure that the total amount of payment withholding under 
the clause at 952.242-71, Contractor Business System, for each business 
system does not exceed five percent of progress payments, performance-
based payments, and interim payments under cost-reimbursement, labor-
hour, and time-and-materials contracts billed under each of the 
identified covered contracts. The contracting officer has the sole 
discretion to identify the covered contracts from which to withhold 
payments.
    (2) Promptly notify the contractor, in writing, of the contracting 
officer's determination to implement payment withholding in accordance 
with the clause at 952.242-71, Contractor Business System. The notice 
of payment withholding shall be included in the contracting officer's 
written final determination for the contractor business system and 
shall inform the contractor that--
    (i) Payments shall be withheld from the contract or contracts 
identified in the written determination in accordance with the clause 
at 952.242-71, Contractor Business System, until the contracting 
officer determines that there are no remaining significant 
deficiencies; and
    (ii) The contracting officer reserves the right to take other 
actions within the terms and conditions of the contract.
    (3) Provide all contracting officers administering the selected 
contracts from which payments will be withheld, a copy of the 
determination. The contracting officer shall also provide a copy of the 
determination to the auditor, invoice approving official, and payment 
office.
    (b) Monitoring contractor's corrective action. The contracting 
officer, in consultation with the auditor, functional specialist, or 
designee, shall monitor the contractor's progress in correcting the 
deficiencies. The contracting officer shall notify the contractor of 
any decision to decrease or increase the amount of payment withholding 
in accordance with the clause at 952.242-71, Contractor Business 
System.
    (c) Correction of significant deficiencies. (1) If the contractor 
notifies the contracting officer that the contractor has corrected the 
significant deficiencies, the contracting officer shall request the 
auditor or functional specialist to review the correction to verify 
that the deficiencies have been corrected. If, after receipt of 
verification, the contracting officer determines that the contractor 
has corrected all significant deficiencies as directed by the 
contracting officer's final determination, the contracting officer 
shall discontinue the withholding of payments, release any payments

[[Page 18427]]

previously withheld, and approve the system, unless other significant 
deficiencies remain.
    (2) Prior to the receipt of verification, the contracting officer 
may discontinue withholding payments pending receipt of verification, 
and release any payments previously withheld, if the contractor submits 
evidence that the significant deficiencies have been corrected, and the 
contracting officer, in consultation with the auditor or functional 
specialist, determines that there is a reasonable expectation that the 
corrective actions have been implemented and are expected to correct 
the significant deficiencies.
    (3) Within 90 days of receipt of the contractor notification that 
the contractor has corrected the significant deficiencies, the 
contracting officer shall--
    (i) Make a determination that--
    (A) The contractor has corrected all significant deficiencies as 
directed by the contracting officer's final determination in accordance 
with paragraph (d)(1) of this section;
    (B) There is a reasonable expectation that the corrective actions 
have been implemented in accordance with paragraph (d)(2) of this 
section; or
    (C) The contractor has not corrected all significant deficiencies 
as directed by the contracting officer's final determination in 
accordance with paragraph (d)(1) of this section, or there is not a 
reasonable expectation that the corrective actions have been 
implemented in accordance with paragraph (d)(2) of this section; or
    (ii) Direct the contractor, in writing, to reduce the percentage 
withheld on invoices by at least 50 percent, until the contracting 
officer makes a determination in accordance with paragraph (d)(3)(i) of 
this section.
    (4) If, at any time, the contracting officer determines that the 
contractor has failed to correct the significant deficiencies 
identified in the contractor's notification, the contracting officer 
will continue, reinstate, or increase withholding and direct the 
contractor, in writing, to continue, reinstate, or increase the 
percentage withheld on invoices to the percentage initially withheld, 
until the contracting officer determines that the contractor has 
corrected all significant deficiencies as directed by the contracting 
officer's final determination.
    (d) Determinations regarding payment withholding. The contracting 
officer shall use the written notification format or similar format to 
document the contracting officer determinations to initiate payment 
withholding, reduce payment withholding, and discontinue payment 
withholding in accordance with the clause at 952.242-71, Contractor 
Business System. The final determination regarding payment withholding 
is not a final decision within the meaning of the Contract Disputes Act 
of 1978 (41 U.S.C. 7101, et seq.).
    (1) Final determination for payment withholding. Use the sample 
format or similar format for final determination for payment 
withholding in accordance with the clause 952.242-71, Contractor 
Business Systems. Tailor the notice in paragraph (4) to use the 
appropriate version to reflect invoice payments or advance payments 
under a special bank account (letter of credit).

[Begin notice]

Payment Withholding

    (1) The purpose of this final determination is to disapprove 
your [identify the contractor business system(s)] and implement 
payment withholding per the terms of the clause at 48 CFR 952.242-
71, Contractor Business System.
    (2) It is my final determination that XXX System(s) contains the 
following significant deficiencies:

--[list all significant deficiencies]

    (3) Effective immediately, five percent (or a lesser percentage 
if five percent will exceed the withhold limitations in the clause 
48 CFR 952.242-71) of each request for payment under the contracts 
in Attachment A will be withheld as described below for significant 
deficiencies in XXX system. Upon receipt of an acceptable corrective 
action plan and my determination that this corrective action plan is 
being effectively implemented, I will issue a notification with 
respect to reducing the percentage being withheld to two percent 
until I determine that all significant deficiencies, as identified 
in this final determination, have been corrected. Failure to follow 
the accepted corrective action plan will result in an increase in 
the percentage withheld against each payment under this contract to 
five percent (or a lesser percentage if five percent will exceed the 
withhold limitations in clause 48 CFR 952.242-71). [Repeat this 
paragraph, as necessary, if multiple withholds are being applied to 
multiple systems in accordance with 952.242-71(d)].
    (4) [For invoice payments use the following paragraph.] For 
invoice payments, the Contractor shall apply a five percent (or a 
lesser percentage if five percent will exceed the withhold 
limitations in 48 CFR 952.242-71) withhold to the amount requested. 
For invoices in Vendor Invoicing Payment Electronic Reporting System 
(VIPERS), the Contractor shall invoice for the net amount due after 
application of the withhold and show the amount withheld on the 
current billing, as well as the cumulative amount withheld to date 
on this contract in accordance with the clause 48 CFR 952.242-71, in 
the Description field of the VIPERS invoice or as supporting 
documentation attached to the voucher. When approving the invoice 
for payment in the Vendor Invoice Approval System (VIAS), the 
Contracting Officer or Invoice Approving Official will verify that 
the Contractor reduced the invoice the five percent (or a lesser 
percentage if five percent will exceed the withhold limitations in 
48 CFR 952.242-71). In the event the Contractor did not submit the 
invoice with the proper withholding, the Contracting Officer or 
Invoice Approving Official will reject the invoice and enter the 
reason for the rejection in the VIAS Comments field. When the 
Contractor reviews the Invoice Status Report in VIPERS, the reason 
for the reduced payment will be displayed in the Invoice Description 
field.
    [For advance payments under a special bank account (letter of 
credit) use the following paragraph.] For advance payments under a 
special bank account (letter of credit), the Contractor shall 
immediately be subject to the advance approval requirements by the 
Contracting Officer or Government countersigning agent for cash 
withdrawals against the letter of credit. Each Contractor request 
for cash withdrawal for the net amount due after the withhold shall 
contain the amount of expenditure, the amount withheld on the 
current request, as well as the cumulative amount withheld to date 
on this contract in accordance with the clause 48 CFR 952.242-71, 
and the net amount requested after application of the withhold. When 
approving the request for cash withdrawal, the Contracting Officer 
or Government countersigning agent will verify that the Contractor 
reduced the request by five percent (or a lesser percentage if five 
percent will exceed the withhold limitations in 48 CFR 952.242-71). 
In the event the Contractor did not submit the cash withdrawal 
request with the proper withholding, the Contracting Officer or 
Government countersigning agent will reject the request for cash 
withdrawal for non-compliance with the requirements of this clause 
in his/her response.

[End of notice]

    (2) Reduction of temporary payment withholding. Use the sample 
format or similar format for determination to reduce payment 
withholding in accordance with the clause 48 CFR 952.242-71, Contractor 
Business System. Tailor the notice in paragraph (3) to use the 
appropriate version to reflect invoice payments or advance payments 
under a special bank account (letter of credit).

[Begin notice]

Reduction of Temporary Payment Withholding

    (1) The purpose of this determination is to reduce the payment 
withholding percentage per the terms of the clause 48 CFR 952.242-
71, Contractor Business System, as a result of receiving an 
acceptable corrective action plan from the contractor, dated YYYY/
MM/DD, for resolving deficiencies in its XXX system(s) as identified 
in the Contracting Officer's determination, dated YYYY/MM/DD. This 
reduction is prospective and previous amounts withheld will not be 
reduced or released at this time.

[[Page 18428]]

    (2) Effective immediately, two percent of each request for 
payment under this contract will be withheld as described below. The 
two percent being withheld will remain in effect until the 
Contracting Officer determines that the Contractor has corrected all 
significant deficiencies as directed by the Contracting Officer's 
determination. Failure to follow the accepted corrective action plan 
will result in an increase in the percentage withheld against each 
payment under this contract to five percent (or a lesser percentage 
if five percent will exceed the withhold limitations in 48 CFR 
952.242-71).
    (3) [For invoice payments use the following paragraph.] For 
invoice payments, the Contractor shall apply a two percent withhold 
to the amount being requested. For invoices in Vendor Invoicing 
Payment Electronic Reporting System (VIPERS), the Contractor shall 
invoice for the net amount due after withholding and show the amount 
withheld on the current billing, as well as the cumulative amount 
withheld to date on this contract in accordance with the clause 48 
CFR 952.242-71, in the Description field of the VIPERS invoice or as 
supporting documentation attached to the invoice. When approving the 
invoice for payment in the Vendor Invoice Approval System (VIAS), 
the Contracting Officer or Invoice Approving Official will verify 
that the Contractor reduced the invoice the two percent. In the 
event the Contractor did not submit the invoice with the proper 
withholding, the Contracting Officer or Invoice Approving Official 
will reject the invoice and enter the reason for the rejection in 
the VIAS Comments field. When the Contractor reviews the Invoice 
Status Report in VIPERS, the reason for the reduced payment will be 
displayed in the Invoice Description field.
    [For advance payments under a special bank account (letter of 
credit) use the following paragraph.] For advance payments under a 
special bank account (letter of credit), the Contractor shall 
immediately be subject to the advance approval requirements by the 
Contracting Officer or Government countersigning agent for cash 
withdrawals against the letter of credit. Each Contractor request 
for cash withdrawal for the net amount due after the withhold shall 
contain the amount of expenditure, the amount withheld on the 
current request, as well as the cumulative amount withheld to date 
on this contract in accordance with the clause 48 CFR 952.242-71, 
and the net amount requested after application of the withhold. When 
approving the request for cash withdrawal, the Contracting Officer 
or Government countersigning agent will verify that the Contractor 
reduced the request by five percent (or a lesser percentage if two 
percent will exceed the withhold limitations in 48 CFR 952.242-71). 
In the event the Contractor did not submit the cash withdrawal 
request with the proper withholding, the Contracting Officer or 
Government countersigning agent will reject the request for cash 
withdrawal for non-compliance with the requirements of this clause 
in his/her response.

[End of notice]

    (3) Discontinuation of payment withholding pending verification. 
Use the sample format or similar format if payment withholding is 
discontinued after auditor or functional specialist verification and 
based on evidence that the Contractor has corrected all significant 
deficiencies, in accordance with clause 48 CFR 952.242-71, Contractor 
Business System. Tailor the notice in paragraph (3) to use the 
appropriate version to reflect invoice payments or advance payments 
under a special bank account (letter of credit).

[Begin notice]

Discontinuation of Payment Withholding Pending Verification

    (1) The purpose of this determination is to approve your 
[identify system(s)] pending verification, discontinue the payment 
withhold as identified in the Contracting Officer's determination 
dated YYYY/MM/DD, and release previous amounts withheld on the 
contracts in Attachment A, in accordance with clause 48 CFR 952.242-
71, Contractor Business System.
    (2) The discontinuation of the payment withhold is made pending 
receipt of verification and based on my review of the evidence 
submitted by the Contractor that all the Contractor's system(s) 
deficiencies identified in the Contracting Officer's determination 
dated YYYY/MM/DD have been corrected.
    (3) [For invoice payments use the following paragraph.] For 
invoice payments in Vendor Invoicing Payment Electronic Reporting 
system (VIPERS), the Contractor is authorized to submit an invoice 
in the amount of $XXXXXXXX. The billed amount should be submitted on 
the same type of invoice as the withhold was originally taken, as 
appropriate.
    [For advance payments under a special bank account (letter of 
credit) use the following paragraph.] For advance payments under a 
special bank account (letter of credit), the Contractor is 
authorized to submit a request for cash withdrawal for amount of 
$XXXXXXXX.

[End of notice]

    (4) Discontinuation of Payment Withholding. Use the sample format 
or similar format if payment withholding is discontinued after auditor 
or functional specialist verification that the Contractor has corrected 
all significant deficiencies, in accordance with clause 48 CFR 952.242-
71, Contractor Business System. Tailor the notice in paragraph (3) to 
use the appropriate version to reflect invoice payments or advance 
payments under a special bank account (letter of credit).

[Begin of notice]

Discontinuation of Payment Withholding

    (1) The purpose of this determination is to approve your 
[identify system(s)], discontinue the payment withhold as identified 
in the Contracting Officer's determination dated YYYY/MM/DD, and 
release previous amounts withheld on the contracts in Attachment A, 
in accordance with clause 48 CFR 952.242-71, Contractor Business 
System.
    (2) The discontinuation of the payment withhold is made based on 
verification that all the Contractor's system(s) deficiencies 
identified in the Contracting Officer's final determination dated 
YYYY/MM/DD have been corrected.
    (3) [For invoice payments use the following paragraph.] For 
invoice payments in Vendor Invoicing Payment Electronic Reporting 
system (VIPERS), the Contractor is authorized to submit an invoice 
in the amount of $XXXXXXXX. The billed amount should be submitted on 
the same type of invoice as the withhold was originally taken, as 
appropriate.
    [For advance payments under a special bank account (letter of 
credit) use the following paragraph.] For advance payments under a 
special bank account (letter of credit), the Contractor is 
authorized to submit a request for cash withdrawal for amount of 
$XXXXXXXX.

[End of notice]

    (e) Contractor performance information. The contracting officer, or 
designee, shall evaluate the contractor's business system performance 
and compliance in all evaluations in accordance with 48 CFR 42.15 and 
DOE procedures.
    (f) Contract closeout. At the end of contract performance, if 
significant deficiencies remain in the disapproved system or systems 
and payment withholdings are in effect, the payment withholdings will 
be released during contract closeout. However, the release of the 
payment withholdings from one contract will not mean the system is 
approved. If there are other contracts where payment withholdings are 
in effect, the payment withholdings will continue on those contracts. 
These payment withholding are contract financing payments; therefore, 
these payments withholdings are not subject to the interest penalty 
provisions of the Prompt Payment Act.


942.7005   Contract clause.

    Unless one of the exceptions at 942.7003 applies, use the clause at 
952.242-71, Contractor Business System, in solicitations and contracts 
in support of a Capital Asset Project (other than a management and 
operating contract), as prescribed in DOE O 413.3B, or current version, 
or for a non-capital asset project as described at 915.407-5-70(b)(2), 
for a prime contract, the total contract value exceeds $50 million, 
including options, or when the total contract value exceeds $10 million 
or more, including options, (but less than $50 million) and the 
contracting officer determines it to be in the best interest of the 
Government (e.g., significant estimating problems are

[[Page 18429]]

believed to exist or the contractor's sales are predominantly 
Government) when--
    (a) The resulting contract will be--
    (1) Fixed-price contract awarded to a large business to include 
contractor teaming arrangement on the basis of adequate price 
competition without submission of cost or pricing data; or
    (2) A covered contract as defined in 942.7001(a); and
    (b) The solicitation or contract includes any of the following 
clauses:
    (1) 952.215-71, Cost Estimating System Requirements.
    (2) 952.234-71, Earned Value Management System.
    (3) 952.242-72, Accounting System Administration.
    (4) 952.244-71, Contractor Purchasing System Administration.
    (5) 952.245-70, Contractor Property Management System 
Administration.
0
6. Add subpart 942.71 to part 942 to read as follows:
Subpart 942.71--Contractor Accounting System and Related Controls
Sec.
942.7101 Definitions.
942.7102 Policy.
942.7103 Contract clause.

Subpart 942.71--Contractor Accounting System and Related Controls


942.7101  Definitions.

    As used in this subpart--
    Acceptable accounting system and accounting system are defined in 
the clause at 952.242-72, Accounting System Administration.
    Significant deficiency is defined in the clause at 952.242-72, 
Accounting System Administration.


942.7102   Policy.

    (a) Contractors receiving cost-reimbursement, incentive type, time-
and-materials, fixed-price, or labor-hour contracts, or contracts which 
provide for progress payments based on costs or on a percentage or 
stage of completion, shall maintain an accounting system.
    (b) When the solicitation or contract includes the clause 952.242-
71 Contractor Business System and related clauses, the cognizant 
contracting officer, in consultation with the auditor or functional 
specialist, shall--
    (1) Ensure that contract, Part I--The Schedule, addresses in the 
business administration section, or similar section, that the 
contractor shall submit its accounting system for DOE review and 
acceptance with full implementation of the system to be in place no 
later than 60 days after contract award;
    (2) Determine the acceptability of a contractor's accounting system 
and approve or disapprove the system; and
    (3) Pursue correction of any deficiencies.
    (c) In evaluating the acceptability of a contractor's accounting 
system, the contracting officer, in consultation with the auditor or 
functional specialist, shall determine whether the contractor's 
accounting system complies with the system criteria for an acceptable 
accounting system as prescribed in the clause at 952.242-72, Accounting 
System Administration.
    (d) Disposition of findings--(1) Reporting of findings. The auditor 
shall document findings and recommendations in a report to the 
contracting officer. If the auditor identifies any significant 
accounting system deficiencies, the report shall describe the 
deficiencies in sufficient detail to allow the contracting officer to 
understand the deficiencies.
    (2) Initial determination. (i) The contracting officer shall review 
findings and recommendations and, if there are no significant 
deficiencies, shall promptly notify the contractor, in writing, that 
the contractor's accounting system is acceptable and approved; or
    (ii) If the contracting officer finds that there are one or more 
significant deficiencies (as defined in the clause at 952.242-72, 
Accounting System Administration) due to the contractor's failure to 
meet one or more of the accounting system criteria in the clause at 
952.242-72, the contracting officer shall--
    (A) Within 30 days of receiving the report, provide an initial 
determination of deficiencies in writing, describing each significant 
deficiency in sufficient detail to allow the contractor to understand 
the deficiency and provide a copy of the report to the contractor;
    (B) Request the contractor to respond, in writing, to the initial 
determination within 30 days; and
    (C) Within 30 days of receiving the contractor's response or if the 
contractor does not submit a response, the date the response was due, 
in consultation with the auditor or cognizant functional specialist, 
evaluate the contractor's response or the contractor's lack of response 
and make a final determination.
    (3) Final determination. (i) The contracting officer shall make a 
final determination and notify the contractor, in writing, that--
    (A) The contractor's accounting system is acceptable and approved, 
and no significant deficiencies remain, or
    (B) Significant deficiencies remain. The notice shall identify any 
remaining significant deficiencies, and indicate the adequacy of any 
proposed or completed corrective action. The contracting officer 
shall--
    (1) Request that the contractor, within 45 days of receipt of the 
final determination, either correct the deficiencies or submit an 
acceptable corrective action plan showing milestones and actions to 
eliminate the deficiencies;
    (2) Make a determination to disapprove the system in accordance 
with the clause at 952.242-72, Accounting System Administration; and
    (3) Withhold payments in accordance with the clause at 952.242-71, 
Contractor Business System, if the clause is included in the contract.
    (ii) Monitoring a contractor's corrective action and the correction 
of significant deficiencies.
    (A) Monitoring contractor's corrective action. The contracting 
officer or designee shall monitor the contractor's progress in 
correcting deficiencies. If the contractor fails to make adequate 
progress, the contracting officer shall take whatever action is 
necessary to ensure that the contractor corrects the deficiencies. 
Examples of actions the contracting officer can take include 
disapproving the system; implementing or increasing the withholding in 
accordance with 952.242-71, Contractor Business System, if applicable; 
and recommending non-award of potential contracts.
    (B) Correction of significant deficiencies. (1) When the contractor 
notifies the contracting officer that the contractor has corrected the 
significant deficiencies, the contracting officer shall request that 
the auditor review the correction to determine if the deficiencies have 
been resolved. (2) The contracting officer shall determine if the 
contractor has corrected the deficiencies.
    (3) If the contracting officer determines the contractor has 
corrected the deficiencies, the contracting officer's notification 
shall be sent to the auditor, invoice approving official, payment 
office, appropriate action officers responsible for reporting past 
performance, affected DOE contracting offices having substantial 
business with the contractor, and the Department of Energy's or 
National Nuclear Security Administration's Heads of the Contracting 
Activities and Senior Procurement Executives.
    (e) System approval. The contracting officer shall promptly approve 
a previously disapproved accounting system and notify the contractor 
when the contracting officer determines that

[[Page 18430]]

there are no remaining significant deficiencies.
    (f) Contracting officer notifications. The cognizant contracting 
officer shall promptly distribute copies of a determination to approve 
a system, disapprove a system and withhold payments, or approve a 
previously disapproved system and release withheld payments to the 
auditor, invoice approving official, payment office, and affected 
contracting offices.
    (g) Mitigating the risk of accounting system deficiencies on 
specific proposals. (1) The functional specialist or field pricing team 
shall discuss identified accounting system deficiencies and their 
impact in all reports on contractor proposals until the deficiencies 
are resolved.
    (2) The contracting officer responsible for negotiation of a 
proposal generated by an accounting system with an identified 
deficiency shall evaluate whether the deficiency impacts the 
negotiations. If it does not, the contracting officer should proceed 
with negotiations. If it does, the contracting officer should consider 
other alternatives, e.g.--
    (i) Allowing the contractor additional time to correct the 
accounting system deficiency and submit a corrected proposal;
    (ii) Considering another type of contract;
    (iii) Using additional cost analysis techniques to determine the 
reasonableness of the cost elements affected by the accounting system's 
deficiency;
    (iv) Reducing the negotiation objective for profit or fee; or
    (v) Including a contract (reopener) clause that provides for 
adjustment of the contract amount after award.
    (3) The contracting officer is responsible for negotiating price 
adjustments required by the clause. Any reopener clause necessitated by 
an accounting system deficiency should--
    (i) Clearly identify the amounts and items that are in question at 
the time of negotiation;
    (ii) Indicate a specific time or subsequent event by which the 
contractor will submit a supplemental proposal, including certified 
cost or pricing data, identifying the cost impact adjustment 
necessitated by the deficient accounting system;
    (iii) Provide for the contracting officer to adjust the contract 
price unilaterally if the contractor fails to submit the supplemental 
proposal; and
    (iv) Provide that failure of the Government and the contractor to 
agree to the price adjustment shall be a dispute under the Disputes 
clause.


942.7103  Contract clause.

    Unless one of the exceptions at 942.7003 applies, use the clause at 
952.242-72, Accounting System Administration, in solicitations and 
contracts when contemplating a contract in support of a Capital Asset 
Project (other than a management and operating contract), as prescribed 
in DOE O 413.3B, or current version, or for a non-capital asset project 
as described at 915.407-5-70(b)(2), for a prime contract, when the 
total contract value exceeds $50 million, including options, or when 
the prime contract totaling $10 million or more including options (but 
less than $50 million) and the contracting officer determines it to be 
in the best interest of the Government (e.g., significant estimating 
problems are believed to exist or the contractor's sales are 
predominantly Government and--
    (a) A cost-reimbursement, incentive type, time-and-materials, or 
labor-hour contract;
    (b) A contract with progress payments made on the basis of costs 
incurred by the contractor or on a percentage or stage of completion; 
or
    (c) A fixed-price contract that is not a small business set-aside.
0
7. Add part 944 to Subchapter G to read as follows:

PART 944--SUBCONTRACTING POLICIES AND PROCEDURES

Subpart 944.3--Contractors' Purchasing System Reviews
Sec.
944.301 Objective.
944.303 Extent of review.
944.305 Granting, withholding, or withdrawing approval.
944.305-70 Policy.
944.305-71 Contract clause.

    Authority: 42 U.S.C. 7101 et seq. and 50 U.S.C. 2401 et seq.

Subpart 944.3--Contractors' Purchasing System Reviews


944.301  Objective.

    The contracting officer is responsible for initiating reviews of 
the contractor's purchasing systems, but other organizations may 
request that the contracting officer initiate such reviews.


944.303  Extent of review.

    In addition to the review requirements of 48 CFR 44.303, the 
contracting officer shall review the adequacy of rationale documenting 
commercial item determinations to ensure compliance with the definition 
of ``commercial item'' in 48 CFR 2.101.


944.305  Granting, withholding, or withdrawing approval.


944.305-70  Policy.

    The contracting officer shall use the days in this subsection 
instead of the days in 48 CFR 44.305-2(c) and 44.305-3(b) to permit the 
contractor's response.
    (a) When the solicitation or contract includes the clause 952.242-
71 Contractor Business Systems and related clauses, the cognizant 
contracting officer, in consultation with the purchasing system analyst 
or auditor, shall--
    (1) Ensure that contract, Part I--The Schedule, addresses in the 
business administration section, or similar section, that the 
contractor shall submit its purchasing system for DOE review and 
acceptance with full implementation of the system to be in place no 
later than 60 days after contract award;
    (2) Determine the acceptability of the contractor's purchasing 
system and approve or disapprove the system; and
    (3) Pursue correction of any deficiencies.
    (b) In evaluating the acceptability of the contractor's purchasing 
system, the contracting officer, in consultation with the purchasing 
system analyst or auditor, shall determine whether the contractor's 
purchasing system complies with the system criteria for an acceptable 
purchasing system as described in the clause at 952.244-71, Contractor 
Purchasing System Administration.
    (c) Disposition of findings--(1) Reporting of findings. The 
purchasing system analyst or auditor shall document findings and 
recommendations in a report to the contracting officer. If the auditor 
or purchasing system analyst identifies any significant purchasing 
system deficiencies, the report shall describe the deficiencies in 
sufficient detail to allow the contracting officer to understand the 
deficiencies.
    (2) Initial determination. (i) The contracting officer shall review 
all findings and recommendations and, if there are no significant 
deficiencies, shall promptly notify the contractor that the 
contractor's purchasing system is acceptable and approved; or
    (ii) If the contracting officer finds that there are one or more 
significant deficiencies (as defined in the clause at 952.244-71, 
Contractor Purchasing System Administration) due to the contractor's 
failure to meet one or more of the purchasing system criteria in the 
clause at 952.244-71, the contracting officer shall--

[[Page 18431]]

    (A) Within 30 days of receiving the report, provide an initial 
determination of deficiencies in writing, describing each significant 
deficiency in sufficient detail to allow the contractor to understand 
the deficiency and provide a copy of the report to the contractor;
    (B) Request the contractor to respond, in writing, to the initial 
determination within 30 days; and
    (C) Within 30 days of receiving the contractor's response or if the 
contractor does not submit a response, the date the response was due, 
in consultation with the auditor or cognizant functional specialist, 
evaluate the contractor's response or the contractor's lack of response 
and make a final determination.
    (3) Final determination. (i) The contracting officer shall make a 
final determination and notify the contractor, in writing, that--
    (A) The contractor's purchasing system is acceptable and approved, 
and no significant deficiencies remain, or
    (B) Significant deficiencies remain. The notice shall identify any 
remaining significant deficiencies, and indicate the adequacy of any 
proposed or completed corrective action. The contracting officer 
shall--
    (1) Request that the contractor, within 45 days of receipt of the 
final determination, either correct the deficiencies or submit an 
acceptable corrective action plan showing milestones and actions to 
eliminate the deficiencies;
    (2) Disapprove the system in accordance with the clause at 952.244-
71, Contractor Purchasing System Administration; and
    (3) Withhold payments in accordance with the clause at 952.242-71, 
Contractor Business System, if the clause is included in the contract.
    (ii) Monitoring a contractor's corrective action and the correction 
of significant deficiencies.
    (A) Monitoring contractors' corrective action. The contracting 
officer and either the purchasing system analyst or auditor shall 
monitor the contractor's progress in correcting deficiencies. If the 
contractor fails to make adequate progress, the contracting officer 
shall take whatever action is necessary to ensure that the contractor 
corrects the deficiencies. Examples of actions the contracting officer 
can take include withdraw or withhold approval of the system or 
implementing or increasing the withholding in accordance with 952.242-
71, Contractor Business System, and recommending non-award of potential 
contracts.
    (B) Correction of significant deficiencies. (1) When the contractor 
notifies the contracting officer that the contractor has corrected the 
significant deficiencies, the contracting officer shall request the 
purchasing system analyst or auditor to review the correction to 
determine if the deficiencies have been resolved.
    (2) The contracting officer shall determine if the contractor has 
corrected the deficiencies.
    (3) If the contracting officer determines the contractor has 
corrected the deficiencies, the contracting officer's notification 
shall be sent to the purchasing system analyst, auditor, invoice 
approving official, payment office, appropriate action officers 
responsible for reporting past performance, and the Department of 
Energy's or National Nuclear Security Administration's Heads of the 
Contracting Activities and Senior Procurement Executives.
    (d) System approval. The contracting officer shall promptly approve 
a previously disapproved purchasing system and notify the contractor 
when the contracting officer determines that there are no remaining 
significant deficiencies.
    (e) Contracting officer notifications. The cognizant contracting 
officer shall promptly distribute copies of a determination to approve 
a system, disapprove a system and withhold payments, or approve a 
previously disapproved system and release withheld payments to the 
auditor, invoice approving official, payment office, and affected 
contracting offices.
    (f) Mitigating the risk of purchasing system deficiencies on 
specific proposals.
    (1) The functional specialist shall discuss identified purchasing 
system deficiencies and their impact in all reports on contractor 
proposals until the deficiencies are resolved.
    (2) The contracting officer responsible for negotiation of a 
proposal generated by a purchasing system with an identified deficiency 
shall evaluate whether the deficiency impacts the negotiations. If it 
does not, the contracting officer should proceed with negotiations. If 
it does, the contracting officer should consider other alternatives, 
e.g.--
    (i) Allowing the contractor additional time to correct the 
purchasing system deficiency and submit a corrected proposal;
    (ii) Considering another type of contract, e.g., a fixed-price 
incentive (firm target) contract instead of firm-fixed-price;
    (iii) Using additional cost analysis techniques to determine the 
reasonableness of the cost elements affected by the purchasing system's 
deficiency;
    (iv) Segregating the questionable areas as a cost-reimbursable line 
item;
    (v) Reducing the negotiation objective for profit or fee; or
    (vi) Including a contract (reopener) clause that provides for 
adjustment of the contract amount after award.
    (3) The contracting officer is responsible for negotiating price 
adjustments required by the clause. Any reopener clause necessitated by 
a purchasing system deficiency shall--
    (i) Clearly identify the amounts and items that are in question at 
the time of negotiation;
    (ii) Indicate a specific time or subsequent event by which the 
contractor will submit a supplemental proposal, including certified 
cost or pricing data, identifying the cost impact adjustment 
necessitated by the deficient purchasing system;
    (iii) Provide for the contracting officer to adjust the contract 
price unilaterally if the contractor fails to submit the supplemental 
proposal; and
    (iv) Provide that failure of the Government and the contractor to 
agree to the price adjustment shall be a dispute under the Disputes 
clause.


944.305-71   Contract clause.

    Unless one of the exceptions at 942.7003 applies, use the clause at 
952.244-71, Contractor Purchasing System Administration, in 
solicitations and contracts, in support of a Capital Asset Project 
(other than a management and operating contract), as prescribed in DOE 
O 413.3B, or current version, or for a non-capital asset project as 
described at 915.407-5-70(b)(2), for a prime contract, when the total 
contract value exceeds $50 million, including options, or when the 
prime contract totaling $10 million or more including options (but less 
than $50 million) and the contracting officer determines it to be in 
the best interest of the Government (significant purchasing problems 
are believed to exist or the contractor's sales are predominantly 
Government and containing the clause at 48 CFR 52.244-2, Subcontracts.

PART 945--GOVERNMENT PROPERTY

0
8. Add section 945.105 to read as follows:


945.105   Contractor's property management system compliance.

    (a) Definitions--
    (1) Acceptable property management system and property management 
system are defined in the clause at 952.245-70, Contractor Property 
Management System Administration.

[[Page 18432]]

    (2) Significant deficiency is defined in the clause at 952.245-70, 
Contractor Property Management System Administration.
    (b) Policy. When the solicitation or contract includes the clause 
952.242-71 Contractor Business System and related clauses, the 
cognizant contracting officer, in consultation with the property 
administrator, shall--
    (1) Ensure that contract, Part I--The Schedule, addresses in the 
business administration section, or similar section, that the 
contractor shall submit its property management system for DOE review 
and acceptance with full implementation of the system to be in place no 
later than 60 days after contract award;
    (2) Determine the acceptability of the system and approve or 
disapprove the system; and
    (3) Pursue correction of any deficiencies.
    (c) In evaluating the acceptability of a contractor's property 
management system, the contracting officer, in consultation with the 
property administrator, shall determine whether the contractor's 
property management system complies with the system criteria for an 
acceptable property management system as prescribed in the clause at 
952.245-70, Contractor Property Management System Administration.
    (d) Disposition of findings--(1) Reporting of findings. The 
property administrator shall document findings and recommendations in a 
report to the contracting officer. If the property administrator 
identifies any significant property system deficiencies, the report 
shall describe the deficiencies in sufficient detail to allow the 
contracting officer to understand the deficiencies.
    (2) Initial determination. (i) The contracting officer shall review 
findings and recommendations and, if there are no significant 
deficiencies, shall promptly notify the contractor, in writing, that 
the contractor's property management system is acceptable and approved; 
or
    (ii) If the contracting officer finds that there are one or more 
significant deficiencies (as defined in the clause at 952.245-70, 
Contractor Property Management System Administration) due to the 
contractor's failure to meet one or more of the property management 
system criteria in the clause at 952.245-70, the contracting officer 
shall--
    (A) Within 30 days of receiving the report, provide an initial 
determination of deficiencies in writing, describing each significant 
deficiency in sufficient detail to allow the contractor to understand 
the deficiency and provide a copy of the report to the contractor;
    (B) Request the contractor to respond, in writing, to the initial 
determination within 30 days; and
    (C) Within 30 days of receiving the contractor's response or if the 
contractor does not submit a response, the date the response was due, 
the contracting officer, in consultation with the auditor or cognizant 
functional specialist, should evaluate the contractor's response or the 
contractor's lack of response and make a final determination.
    (3) Final determination. (i) The contracting officer shall make a 
final determination and notify the contractor, in writing, that--
    (A) The contractor's property management system is acceptable and 
approved, and no significant deficiencies remain, or
    (B) Significant deficiencies remain. The notice shall identify any 
remaining significant deficiencies, and indicate the adequacy of any 
proposed or completed corrective action.
    The contracting officer shall--
    (1) Request that the contractor, within 45 days of receipt of the 
final determination, either correct the deficiencies or submit an 
acceptable corrective action plan showing milestones and actions to 
eliminate the deficiencies;
    (2) Disapprove the system in accordance with the clause at 952.245-
70, Contractor Property Management System Administration; and
    (3) Withhold payments in accordance with the clause at 952.242-71, 
Contractor Business System, if the clause is included in the contract.
    (ii)(A) Monitoring contractor's corrective action. The contracting 
officer and property administrator shall monitor the contractor's 
progress in correcting deficiencies. If the contractor fails to make 
adequate progress, the contracting officer shall take whatever action 
is necessary to ensure that the contractor corrects the deficiencies. 
Examples of actions the contracting officer can take include withdraw 
or withhold approval of the system; or implementing or increasing the 
withholding in accordance with the clause at 952.242.71, Contractor 
Business System, and recommending non-award of potential contracts.
    (B) Correction of significant deficiencies. (1) When the contractor 
notifies the contracting officer that the contractor has corrected the 
significant deficiencies, the contracting officer shall request the 
property administrator to review the correction to determine if the 
deficiencies have been resolved.
    (2) The contracting officer shall determine if the contractor has 
corrected the deficiencies.
    (3) If the contracting officer determines the contractor has 
corrected the deficiencies, the contracting officer's notification 
shall be sent to the property administrator, auditor, invoice approving 
official, payment office, appropriate action officers responsible for 
reporting past performance, and the Department of Energy's or National 
Nuclear Security Administration's Heads of the Contracting Activities 
and Senior Procurement Executives.
    (e) System approval. The contracting officer shall promptly approve 
a previously disapproved property management system and notify the 
contractor when the contracting officer determines, in consultation 
with the property administrator, that there are no remaining 
significant deficiencies.
    (f) Contracting officer notifications. The cognizant contracting 
officer shall promptly distribute copies of a determination to approve 
a system, disapprove a system and withhold payments, or approve a 
previously disapproved system and release withheld payments to the 
auditor, invoice approving official, payment office, and affected 
contracting offices.
0
9. Add section 945.107 to read as follows:


945.107   Contract clauses.

    (a) Unless one of the exceptions at 942.7003 applies, use the 
clause at 952.245-70, Contractor Property Management System 
Administration, in solicitations and contracts in support of a Capital 
Asset Project, (other than a management and operating contract as 
described at 917.6), as prescribed in DOE O 413.3B, or current version, 
or for a non-capital asset project as described at 915.407-5-70(b)(2), 
for a prime contract, when the total contract value exceeds $50 
million, including options, or when the prime contract totaling $10 
million or more including options (but less than $50 million) and the 
contracting officer determines it to be in the best interest of the 
Government (significant property problems are believed to exist or the 
contractor's sales are predominantly Government) and containing the 
clause at 48 CFR 52.245-1, Government Property. (b) For negotiated 
fixed-price contract, not subject to 48 CFR 942.7002, awarded on a 
basis other than submission of certified cost or pricing data for which 
Government property is provided, use the clause at 48 CFR 52.245-1, 
Government Property, without its Alternate I.

[[Page 18433]]

PART 952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
10. Revise section 952.215-70 introductory text to read as follows:


952.215-70   Key Personnel.

    As prescribed in 915.408-70(a), the contracting officer shall 
insert the following clause:
* * * * *
0
11. Add section 952.215.71 to read as follows:


952.215-71   Cost estimating system requirements.

    As prescribed in 915.408-70(b), use the following clause:

COST ESTIMATING SYSTEM REQUIREMENTS (xxx 201x)

    (a) Definitions.
    Acceptable estimating system means an estimating system that 
complies with the system criteria in paragraph (d) of this clause, 
and provides for a system that--
    (1) Is maintained, reliable, and consistently applied;
    (2) Produces verifiable, supportable, documented, and timely 
cost estimates that are an acceptable basis for negotiation of fair 
and reasonable prices;
    (3) Is consistent with and integrated with the Contractor's 
related management systems; and
    (4) Is subject to applicable financial control systems.
    Estimating system means the Contractor's policies, procedures, 
and practices for budgeting and planning controls, and generating 
estimates of costs and other data included in proposals submitted to 
customers in the expectation of receiving contract awards or 
contract modifications. Estimating system includes the 
Contractor's--
    (1) Organizational structure;
    (2) Established lines of authority, duties, and 
responsibilities;
    (3) Internal controls and managerial reviews;
    (4) Flow of work, coordination, and communication; and
    (5) Budgeting, planning, estimating methods, techniques, 
accumulation of historical costs, and other analyses used to 
generate cost estimates.
    Significant deficiency means a shortcoming in the system that 
materially affects the ability of officials of the Department of 
Energy to rely upon information produced by the system that is 
needed for management purposes.
    (b) General. The Contractor shall establish, maintain, and 
comply with an acceptable estimating system.
    (c) Applicability. Paragraphs (d) and (e) of this clause apply 
if the Contractor is a large business to include a contractor 
teaming arrangement, as defined at 48 CFR 9.601(1), performing a 
contract in support of a Capital Asset Project (other than a 
management and operating contract as described at 917.6), as 
prescribed in DOE Order (DOE O) 413.3B, or current version; or a 
non-capital asset project and either--
    (1) The total prime contract value exceeds $50 million, 
including options; or
    (2) The Contractor was notified, in writing, by the Contracting 
Officer that paragraphs (d) and (e) of this clause apply.
    (d) System requirements. (1) The Contractor shall disclose its 
estimating system to the Contracting Officer, in writing. If the 
Contractor wishes the Government to protect the information as 
privileged or confidential, the Contractor must mark the documents 
with the appropriate legends before submission. If the Contractor 
plans to adopt the existing system from the previous Contractor, the 
Contractor is responsible for the system and shall comply with the 
system requirements required in this clause.
    (2) An estimating system disclosure is acceptable when the 
Contractor has provided the Contracting Officer with documentation 
no later than 60 days after contract award that--
    (i) Accurately describes those policies, procedures, and 
practices that the Contractor currently uses in preparing cost 
proposals; and
    (ii) Provides sufficient detail for the Government to reasonably 
make an informed judgment regarding the acceptability of the 
Contractor's estimating practices.
    (3) The Contractor shall--
    (i) Comply with its disclosed estimating system; and
    (ii) Disclose significant changes to the cost estimating system 
to the Contracting Officer on a timely basis.
    (4) The Contractor's estimating system shall provide for the use 
of appropriate source data, utilize sound estimating techniques and 
good judgment, maintain a consistent approach, and adhere to 
established policies and procedures. An acceptable estimating system 
shall accomplish the following functions:
    (i) Establish clear responsibility for preparation, review, and 
approval of cost estimates and budgets.
    (ii) Provide a written description of the organization and 
duties of the personnel responsible for preparing, reviewing, and 
approving cost estimates and budgets.
    (iii) Ensure that relevant personnel have sufficient training, 
experience, and guidance to perform estimating and budgeting tasks 
in accordance with the Contractor's established procedures.
    (iv) Identify and document the sources of data and the 
estimating methods and rationale used in developing cost estimates 
and budgets.
    (v) Provide for adequate supervision throughout the estimating 
and budgeting process.
    (vi) Provide for consistent application of estimating and 
budgeting techniques.
    (vii) Provide for detection and timely correction of errors.
    (viii) Protect against cost duplication and omissions.
    (ix) Provide for the use of historical experience, including 
historical vendor pricing information, where appropriate.
    (x) Require use of appropriate analytical methods.
    (xi) Integrate information available from other management 
systems.
    (xii) Require management review, including verification of 
compliance with the company's estimating and budgeting policies, 
procedures, and practices.
    (xiii) Provide for internal review of, and accountability for, 
the acceptability of the estimating system, including the budgetary 
data supporting indirect cost estimates and comparisons of projected 
results to actual results, and an analysis of any differences.
    (xiv) Provide procedures to update cost estimates and notify the 
Contracting Officer in a timely manner.
    (xv) Provide procedures that ensure subcontract prices are 
reasonable based on a documented review and analysis provided with 
the prime proposal, when practicable.
    (xvi) Provide estimating and budgeting practices that 
consistently generate sound proposals that are compliant with the 
provisions of the solicitation and are adequate to serve as a basis 
to reach a fair and reasonable price.
    (xvii) Have an adequate system description, including policies, 
procedures, and estimating and budgeting practices, that comply with 
the Federal Acquisition Regulation (48 CFR chapter 1) and Department 
of Energy Acquisition Regulation (48 CFR chapter 9).
    (e) Significant deficiencies. (1) The Contracting Officer will 
provide an initial determination to the Contractor, in writing, of 
any significant deficiencies. The initial determination will 
describe the deficiency in sufficient detail to allow the Contractor 
to understand the deficiency.
    (2) The Contractor shall respond within 30 days to a written 
initial determination from the Contracting Officer that identifies 
significant deficiencies in the Contractor's estimating system. If 
the Contractor disagrees with the initial determination, the 
Contractor shall state, in writing, its rationale for disagreeing. 
In the event the Contractor did not respond in writing to the 
initial determination within the response time, this lack of 
response shall indicate that the Contractor agrees with the initial 
determination.
    (3) The Contracting Officer will evaluate the Contractor's 
response or the Contractor's lack of response and notify the 
Contractor, in writing, of the Contracting Officer's final 
determination concerning--
    (i) Remaining significant deficiencies;
    (ii) The adequacy of any proposed or completed corrective 
action; and
    (iii) System disapproval, if the Contracting Officer determines 
that one or more significant deficiencies remain.
    (f) If the Contractor receives the Contracting Officer's final 
determination of significant deficiencies, the Contractor shall, 
within 45 days of receipt of the final determination, either correct 
the significant deficiencies or submit an acceptable corrective 
action plan showing milestones and actions to eliminate the 
significant deficiencies.
    (g) Withholding payments. If the Contracting Officer makes a 
final determination to disapprove the Contractor's estimating 
system, and the contract includes

[[Page 18434]]

the clause at 952.242-71, Contractor Business System, the 
Contracting Officer will withhold payments in accordance with that 
clause.


(End of clause)

0
12. Add section 952.234.70 to read as follows:


952.234-70   Notice of earned value management system.

    As prescribed in 934.203(a), use the following provision:

NOTICE OF EARNED VALUE MANAGEMENT SYSTEM (xxx 201x)

    (a) If the offeror submits a proposal for a Department of Energy 
(DOE) Capital Asset Project--
    (1) In the amount of $50,000,000 or more; or
    (2) Where the offeror has a contract or other contracts in 
support of DOE Capital Asset Projects and the total contract values 
are $20,000,000 or greater per contract for a total contract values 
of $50,000,000 or more--
    (i) The offeror shall provide documentation that an authorized 
government representative has determined that the proposed Earned 
Value Management System (EVMS) complies with the EVMS guidelines in 
the American National Standards Institute/Electronic Industries 
Alliance Standard 748, Earned Value Management Systems (ANSI/EIA-
748) (current version at time of solicitation). The Government 
reserves the right to perform reviews of the EVMS when deemed 
necessary to verify compliance.
    (ii) If the offeror proposes to use a system that has not been 
determined to be in compliance with the requirements of paragraph 
(a)(1) of this provision, the offeror shall submit a comprehensive 
plan for compliance with the guidelines in ANSI/EIA-748.
    (A) The plan shall--
    (1) Describe the EVMS the offeror intends to use in performance 
of the contract, and how the proposed EVMS complies with the EVMS 
guidelines in ANSI/EIA-748;
    (2) Distinguish between the offeror's existing management system 
and modifications proposed to meet the EVMS guidelines;
    (3) Describe the management system and its application in terms 
of the EVMS guidelines;
    (4) Describe the proposed procedure for administration of the 
EVMS guidelines as applied to subcontractors; and
    (5) Describe the process the offeror will use to determine 
subcontractor compliance with ANSI/EIA-748.
    (B) The offeror shall provide information and assistance as 
required by the Contracting Officer to support review of the plan.
    (C) The offeror's EVMS plan must provide milestones that 
indicate when the offeror anticipates that the EVMS will be 
compliant with the guidelines in ANSI/EIA-748.
    (b) If the offeror submits a proposal in an amount less than 
$50,000,000 and does not meet the condition described at (a)(2) 
above--
    (1) The offeror shall submit a written description of the 
management procedures it will use and maintain in the performance of 
any resultant contract to comply with the requirements of the Earned 
Value Management System clause of the contract. The description 
shall include--
    (i) A matrix that correlates each guideline in ANSI/EIA-748 
(current version at time of solicitation) to the corresponding 
process in the offeror's written management procedures; and
    (ii) The process the offeror will use to determine subcontractor 
compliance with ANSI/EIA-748.
    (2) If the offeror proposes to use an EVMS that has been 
determined by the CFA to be in compliance with the EVMS guidelines 
in ANSI/EIA-748, the offeror may submit a copy of the documentation 
of such determination instead of the written description required by 
paragraph (b)(1) of this provision.
    (c) The offeror shall identify the subcontractors (or the 
subcontracted effort if subcontractors have not been selected) to 
whom the EVMS requirements will apply. The offeror and the 
Government shall agree to the contractors or the subcontracted 
effort selected for application of the EVMS requirements. The 
offeror shall be responsible for ensuring that the selected 
subcontractors comply with the requirements of the Earned Value 
Management System clause of the contract.


(End of provision)

0
13. Add section 952.234.71 to read as follows:


952.234-71   Earned value management system.

    As prescribed in 934.203(b), use the following clause:

EARNED VALUE MANAGEMENT SYSTEM (XXX 201X)

    (a) Definitions. As used in this clause--
    Acceptable earned value management system means an earned value 
management system that generally complies with system criteria in 
paragraph (b) of this clause.
    Earned value management system means an earned value management 
system that complies with the earned value management system 
guidelines in the ANSI/EIA-748.
    Over Target Baseline means an overrun to the Contract Budget 
Base (CBB) which is formally incorporated into the Performance 
Measurement Baseline (PMB) for management purposes.
    Over Target Schedule means the term used to describe a condition 
where a baseline schedule is time-phased beyond the contract 
completion date.
    Significant deficiency means a shortcoming in the system that 
materially affects the ability of officials of the Department of 
Energy to rely upon information produced by the system that is 
needed for management purposes.
    (b) System criteria. In the performance of this contract, the 
Contractor shall use--
    (1) An Earned Value Management System (EVMS) that complies with 
the EVMS guidelines in the American National Standards Institute/
Electronic Industries Alliance Standard 748, Earned Value Management 
Systems (ANSI/EIA-748) (current version at time of award; and
    (2) Management procedures. (i) Management procedures provide for 
generation of timely, reliable, and verifiable information for the 
Department of Energy (DOE) Integrated Program Management Report 
(IPMR) data item of this contract.
    (ii) The Contractor shall use Department of Energy's (DOE) 
modified version of Department of Defense's Data Item Description 
(DID) Integrated Program Management Report (IPMR), DI-MGMT-81861, 
(DOE version, current version at time of contract award) which 
contains data for measuring cost and schedule performance for this 
DOE contract. The Contractor shall submit the data electronically by 
uploading the data into the Project Assessment and Reporting System 
(PARS II) in accordance with the ``Contractor Project Performance 
Upload Requirements'' document maintained by the DOE Office of 
Acquisition and Project Management (OAPM). All requested data shall 
be submitted timely and accurately, and shall be current as of the 
close of the previous month's accounting period.
    (c) If the Contractor has one or more DOE contracts valued at 
$20,000,000 or greater per contract for a total contract value of 
$50,000,000 or more which support DOE Capital Asset Projects, the 
Contractor shall use an EVMS that has been determined to be 
acceptable by DOE. If, at the time of award, the Contractor's EVMS 
has not been determined by DOE to be in compliance with the EVMS 
guidelines as stated in paragraph (b)(1) of this clause, the 
Contractor shall apply its current system to the contract and shall 
take necessary actions to meet the milestones in the Contractor's 
EVMS plan.
    (d) If this contract has a total value of less than $50,000,000 
and does not meet the condition described at (c) above, the 
Government will not make a formal determination that the 
Contractor's EVMS complies with the EVMS guidelines in ANSI/EIA-748 
with respect to the contract. The use of the Contractor's EVMS for 
this contract does not imply a Government determination of the 
Contractor's compliance with the EVMS guidelines in ANSI/EIA-748 for 
application to future contracts.
    (e) The Contractor shall submit notification of all proposed 
changes to the EVMS procedures and the impact of those changes to 
DOE. If this contractor has one or more contracts in support of DOE 
Capital Asset Projects and the total contract values are $20,000,000 
or greater per contract for total contract values of $50,000,000 or 
more, unless a waiver is granted by DOE, any EVMS changes proposed 
by the Contractor require approval of DOE prior to implementation. 
DOE will advise the Contractor of the acceptability of such changes 
as soon as practicable (generally within 30 calendar days) after 
receipt of the Contractor's notice of proposed changes. If DOE 
waives the advance approval requirements, the Contractor shall 
disclose EVMS changes to DOE at least 14 calendar days prior to the 
effective date of implementation.
    (f) Integrated baseline reviews. (1) The purpose of the 
integrated baseline reviews

[[Page 18435]]

(IBR) is to verify the technical content and the realism of the 
related performance budgets, resources, and schedules. It should 
provide a mutual understanding of the inherent risks in the 
offerors'/contractors' performance plans and the underlying 
management control systems, and it should formulate a plan to handle 
these risks. DOE and the Contractor will use the IBR process 
described in the National Defense Industrial Association Program 
Management Systems Committee Integrated Baseline Review (NDIA PMSC 
IBR) Guide (current version at time of award).
    (2) The Government will schedule IBRs as early as practicable, 
and the review process will be conducted not later than 180 calendar 
days after--
    (i) Contract award;
    (ii) The exercise of significant contract options; and
    (iii) The incorporation of major modifications.
    During such reviews, the Government and the Contractor will 
jointly assess the Contractor's baseline to be used for performance 
measurement to ensure complete coverage of the statement of work, 
logical scheduling of the work activities, adequate resourcing, and 
identification of inherent risks.
    (g) The Contractor shall provide access to all pertinent records 
and data requested by the Contracting Officer or duly authorized 
representative as necessary to permit Government surveillance to 
ensure that the EVMS complies, and continues to comply, with the 
performance criteria referenced in paragraph (b) of this clause.
    (h) When indicated by contract performance, the Contractor shall 
submit a request for approval to initiate an over-target baseline or 
over-target schedule to the Contracting Officer. The request shall 
include a top-level projection of cost and/or schedule growth, a 
determination of whether or not performance variances will be 
retained, and a schedule of implementation for the rebaselining. The 
Government will acknowledge receipt of the request in a timely 
manner (generally within 30 calendar days).
    (i) Significant deficiencies. (1) The Contracting Officer will 
provide an initial determination to the Contractor, in writing, on 
any significant deficiencies. The initial determination will 
describe the deficiency in sufficient detail to allow the Contractor 
to understand the deficiency.
    (2) The Contractor shall respond within 30 days to a written 
initial determination from the Contracting Officer that identifies 
significant deficiencies in the Contractor's EVMS. If the Contractor 
disagrees with the initial determination, the Contractor shall 
state, in writing, its rationale for disagreeing. In the event the 
Contractor did not respond in writing to the initial determination 
within the response time, this lack of response shall indicate that 
the Contractor agrees with the initial determination.
    (3) The Contracting Officer will evaluate the Contractor's 
response or the Contractor's lack of response and notify the 
Contractor, in writing, of the Contracting Officer's final 
determination concerning--
    (i) Remaining significant deficiencies;
    (ii) The adequacy of any proposed or completed corrective 
action;
    (iii) System noncompliance, when the Contractor's existing EVMS 
fails to comply with the earned value management system guidelines 
in the ANSI/EIA-748; and
    (iv) System disapproval, if initial EVMS validation is not 
successfully completed within the timeframe approved by the 
Contracting Officer, or if the Contracting Officer determines that 
the Contractor's earned value management system contains one or more 
significant deficiencies in high-risk guidelines in ANSI/EIA-748 
standards (guidelines 1, 3, 6, 7, 8, 9, 10, 12, 16, 21, 23, 26, 27, 
28, 30, or 32). When the Contracting Officer determines that the 
existing earned value management system contains one or more 
significant deficiencies in one or more of the remaining 16 
guidelines in ANSI/EIA-748 standards, the contracting officer will 
use discretion to disapprove the system based on input received from 
the DOE Office of Acquisition and Project Management or the DOE 
Program Office, herein referred to as the functional specialists.
    (4) If the Contractor receives the Contracting Officer's final 
determination of significant deficiencies, the Contractor shall, 
within 45 days of receipt of the final determination, either correct 
the significant deficiencies or submit an acceptable corrective 
action plan showing milestones and actions to eliminate the 
significant deficiencies.
    (j) Withholding payments. If the Contracting Officer makes a 
final determination to disapprove the Contractor's EVMS, and the 
contract includes the clause at 952.242-71, Contractor Business 
System, the Contracting Officer will withhold payments in accordance 
with that clause.
    (k) With the exception of paragraphs (i) and (j) of this clause, 
for contracts valued at $20 million or more requiring EVMS, the 
contractor shall flow down appropriate EVMS requirements to its 
subcontractors in order for the contractor to meet all requirements 
of this clause.
    [Contracting Officer to insert names of subcontractors (or 
subcontracted effort if subcontractors have not been selected) 
designated for application of the EVMS requirements of this clause.]

    (l) Adopting previous Contractor's previously certified earned 
value management (EVM) process. If the Contractor plans to adopt the 
existing system from the previous Contractor or DOE-site, the 
Contractor is responsible for the system and shall comply with the 
system requirements required in this clause. The existing system 
shall utilize the same DOE approved EVM Process Description and the 
same EVM training as the previous system. The Contractor shall--
    (1) Identify the corporate entity which owns the certified EVM 
process and provide the certification documentation;
    (2) Obtain DOE prior approval or Advanced Agreement including 
DOE approval of process changes and joint surveillance;
    (3) Be responsible for compliance with the system criteria 
required in paragraph (b) of this clause; and
    (4) Be responsible for correcting any significant deficiencies 
previously identified to the previous Contractor by the Contracting 
Officer in accordance with paragraph (i) of this clause. Within 45 
days after receiving a copy of the previous contractor's final 
determination, the Contractor shall follow paragraph (i)(4) and 
either correct any significant deficiencies or submit an acceptable 
corrective action plan. The Contracting Officer or designee, will 
provide a copy of the previous contractor's final determination.


(End of clause)

0
14. Add section 952.242.71 to read as follows:


952.242-71  Contractor business system.

    As prescribed in 942.7002, use the following clause:

CONTRACTOR BUSINESS SYSTEM (xxx 201x)

    (a) This clause only applies to fixed-price contract awarded to 
a large business on the basis of adequate price competition with or 
without submission of cost or pricing data; or covered contract that 
is subject to the Cost Accounting Standards under 41 U.S.C. chapter 
15, as implemented in regulations found at 48 CFR 9903.201-1(a) and 
is not exempted at 9903.201-1(b)(1) through (14) (see the 48 CFR 
Appendix).
    (b) Definitions. As used in this clause--
    Acceptable contractor business system means contractor business 
system that comply with the terms and conditions of the applicable 
business system clauses listed in the definition of ``contractor 
business system'' in this clause.
    Contractor business system means--
    (1) Accounting system, if this contract includes the clause at 
48 CFR 952.242-72, Accounting System Administration;
    (2) Earned value management system, if this contract includes 
the clause at 48 CFR 952.234-70, Earned Value Management System;
    (3) Estimating system, if this contract includes the clause at 
48 CFR 952.215-71, Cost Estimating System Requirements;
    (4) Property management system, if this contract includes the 
clause at 48 CFR 952.245-70, Contractor Property Management System 
Administration; and
    (5) Purchasing system, if this contract includes the clause at 
48 CFR 952.244-71, Contractor Purchasing System Administration.
    Significant deficiency, in the case of a contractor business 
system, means a shortcoming in the system that materially affects 
the ability of officials of the Department of Energy to rely upon 
information produced by the system that is needed for management 
purposes.
    (c) General. The Contractor shall establish and maintain 
acceptable business systems in accordance with the terms and 
conditions of this contract. If the Contractor plans to adopt any 
existing business system from the previous Contractor, the 
Contractor is responsible for the system and shall comply with the 
system requirements and criteria required in that specific business 
system clause.

[[Page 18436]]

    (d) Significant deficiencies. (1) The Contractor shall respond, 
in writing, within 30 days to an initial determination that there 
are one or more significant deficiencies in one or more of the 
Contractor's business systems.
    (2) The Contracting Officer will evaluate the Contractor's 
response and notify the Contractor, in writing, of the final 
determination as to whether the Contractor's business system 
contains significant deficiencies. If the Contracting Officer 
determines that the Contractor's business system contains 
significant deficiencies, the final determination will include a 
notice to withhold payments.
    (e) Withholding payments. (1) If the Contracting Officer issues 
the final determination with a notice to withhold payments for 
significant deficiencies in a contractor business system required 
under this contract, the Contracting Officer will direct the 
Contractor, in writing, to withhold five percent from its invoices 
until the Contracting Officer has determined that the Contractor has 
corrected all significant deficiencies as directed by the 
Contracting Officer's final determination. The Contractor shall, 
within 45 days of receipt of the notice, either--
    (i) Correct the deficiencies; or
    (ii) Submit an acceptable corrective action plan showing 
milestones and actions to eliminate the deficiencies. The plan shall 
contain--
    (A) Root cause(s) identification of the problem(s);
    (B) The proposed corrective action(s) to address the root 
cause(s);
    (C) A schedule for implementation; and
    (D) The name of the person responsible for the implementation.
    (2) If the Contractor submits an acceptable corrective action 
plan within 45 days of receipt of a notice of the Contracting 
Officer's intent to withhold payments, and the Contracting Officer, 
in consultation with the auditor or functional specialist, 
determines that the Contractor is effectively implementing such 
plan, the Contracting Officer will direct the Contractor, in 
writing, to reduce the percentage withheld on invoices to two 
percent until the Contracting Officer determines the Contractor has 
corrected all significant deficiencies as directed by the 
Contracting Officer's final determination. However, if at any time, 
the Contracting Officer determines that the Contractor has failed to 
follow the accepted corrective action plan, the Contracting Officer 
will increase withholding and direct the Contractor, in writing, to 
increase the percentage withheld on invoices to the percentage 
initially withheld, until the Contracting Officer determines that 
the Contractor has corrected all significant deficiencies as 
directed by the Contracting Officer's final determination.
    (3) Payment withhold percentage limits.
    (i) The total percentage of payments withheld on amounts due on 
this contract shall not exceed--
    (A) Five percent for one or more significant deficiencies in any 
single contractor business system; and
    (B) Ten percent for significant deficiencies in multiple 
contractor business systems.
    (ii) If this contract contains pre-existing withholds, and the 
application of any subsequent payment withholds will cause 
withholding under this clause to exceed the payment withhold 
percentage limits in paragraph (e)(3)(i) of this clause, the 
Contracting Officer will reduce the payment withhold percentage in 
the final determination to an amount that will not exceed the 
payment withhold percentage limits.
    (4) For the purpose of this clause, payment means invoicing for 
any of the following payments authorized under this contract:
    (i) Interim payments under--
    (A) Cost-reimbursement contracts;
    (B) Incentive type contracts;
    (C) Time-and-materials contracts; or
    (D) Labor-hour contracts.
    (ii) Progress payments to include fixed-price contracts.
    (iii) Performance-based payments to include fixed-price 
contracts.
    (5) Payment withholding shall not apply to payments on fixed-
price line items where performance is complete and the items were 
accepted by the Government.
    (6) The withholding of any amount or subsequent payment to the 
Contractor shall not be construed as a waiver of any rights or 
remedies the Government has under this contract.
    (7) Notwithstanding the provisions of any clause in this 
contract providing for interim, partial, or other payment 
withholding on any basis, the Contracting Officer may withhold 
payment in accordance with the provisions of this clause.
    (8) The payment withholding authorized in this clause is not 
subject to the interest-penalty provisions of the Prompt Payment 
Act.
    (f) Correction of deficiencies. (1) The Contractor shall notify 
the Contracting Officer, in writing, when the Contractor has 
corrected the business system's deficiencies.
    (2) Once the Contractor has notified the Contracting Officer 
that all deficiencies have been corrected, the Contracting Officer 
will take one of the following actions:
    (i) If the Contracting Officer determines that the Contractor 
has corrected all significant deficiencies as directed by the 
Contracting Officer's final determination, the Contracting Officer 
will direct the Contractor, in writing, to discontinue the payment 
withholding from invoices under this contract associated with the 
Contracting Officer's final determination, and authorize the 
Contractor to bill for any monies previously withheld that are not 
also being withheld due to other significant deficiencies. Any 
payment withholding under this contract due to other significant 
deficiencies, will remain in effect until the Contracting Officer 
determines that those significant deficiencies are corrected.
    (ii) If the Contracting Officer determines that the Contractor 
still has significant deficiencies, the Contractor shall continue 
withholding amounts from its invoices in accordance with paragraph 
(e) of this clause, and not invoice for any monies previously 
withheld.
    (iii) If the Contracting Officer determines, based on the 
evidence submitted by the Contractor, that there is a reasonable 
expectation that the corrective actions have been implemented and 
are expected to correct the significant deficiencies, the 
Contracting Officer will discontinue withholding payments, and 
release any payments previously withheld directly related to the 
significant deficiencies identified in the Contractor notification, 
and direct the Contractor, in writing, to discontinue the payment 
withholding from invoices associated with the Contracting Officer's 
final determination, and authorize the Contractor to bill for any 
monies previously withheld.
    (iv) If, within 90 days of receipt of the Contractor 
notification that the Contractor has corrected the significant 
deficiencies, the Contracting Officer has not made a determination 
in accordance with paragraphs (f)(2)(i), (ii), or (iii) of this 
clause, the Contracting Officer will direct the Contractor, in 
writing, to reduce the payment withholding from invoices directly 
related to the significant deficiencies identified in the Contractor 
notification by a specified percentage that is at least 50 percent, 
but not authorize the Contractor to bill for any monies previously 
withheld until the Contracting Officer makes a determination in 
accordance with paragraphs (f)(2)(i), (ii), or (iii) of this clause.
    (v) At any time after the Contracting Officer directs the 
Contractor to reduce or discontinue the payment withholding from 
invoices under this contract, if the Contracting Officer determines 
that the Contractor has failed to correct the significant 
deficiencies identified in the Contractor's notification, the 
Contracting Officer will reinstate or increase withholding and 
direct the Contractor, in writing, to reinstate or increase the 
percentage withheld on invoices to the percentage initially 
withheld, until the Contracting Officer determines that the 
Contractor has corrected all significant deficiencies as directed by 
the Contracting Officer's final determination.


(End of clause)

0
15. Add section 952.242.72 to read as follows:


952.242-72  Accounting system administration.

    As prescribed in 942.7103, use the following clause:

ACCOUNTING SYSTEM ADMINISTRATION (XXX 201X)

    (a) Definitions. As used in this clause--
    (1) Acceptable accounting system means a system that complies 
with the system criteria in paragraph (c) of this clause to provide 
reasonable assurance that--
    (i) Applicable laws and regulations are complied with;
    (ii) The accounting system and cost data are reliable;
    (iii) Risk of misallocations and mischarges are minimized; and
    (iv) Contract allocations and charges are consistent with 
billing procedures.
    (2) Accounting system means the Contractor's system or systems 
for accounting methods, procedures, and controls

[[Page 18437]]

established to gather, record, classify, analyze, summarize, 
interpret, and present accurate and timely financial data for 
reporting in compliance with applicable laws, regulations, and 
management decisions, and may include subsystems for specific areas 
such as indirect and other direct costs, compensation, billing, 
labor, and general information technology.
    (3) Significant deficiency means a shortcoming in the system 
that materially affects the ability of officials of the Department 
of Energy to rely upon information produced by the system that is 
needed for management purposes.
    (b) General. The Contractor shall establish and maintain an 
acceptable accounting system. If the Contractor plans to adopt the 
existing system from the previous Contractor, the Contractor is 
responsible for the system and shall comply with the system criteria 
required in this clause. The Contractor shall provide in writing to 
the Contracting Officer documentation that its accounting system 
meets the system criteria in paragraph (c) of this clause no later 
than 60 days after contract award. Failure to maintain an acceptable 
accounting system, as defined in this clause, shall result in the 
withholding of payments if the contract includes the clause at 48 
CFR 952.242-71, Contractor Business System, and also may result in 
disapproval of the system.
    (c) System criteria. The Contractor's accounting system shall 
provide for--
    (1) A sound internal control environment, accounting framework, 
and organizational structure;
    (2) Proper segregation of direct costs from indirect costs;
    (3) Identification and accumulation of direct costs by contract;
    (4) A logical and consistent method for the accumulation and 
allocation of indirect costs to intermediate and final cost 
objectives;
    (5) Accumulation of costs under general ledger control;
    (6) Reconciliation of subsidiary cost ledgers and cost 
objectives to general ledger;
    (7) Approval and documentation of adjusting entries;
    (8) Management reviews or internal audits of the system to 
ensure compliance with the Contractor's established policies, 
procedures, and accounting practices;
    (9) A timekeeping system that identifies employees' labor by 
intermediate or final cost objectives;
    (10) A labor distribution system that charges direct and 
indirect labor to the appropriate cost objectives;
    (11) Interim (at least monthly) determination of costs charged 
to a contract through routine posting of books of account;
    (12) Exclusion from costs charged to Government contracts of 
amounts which are not allowable in terms of 48 CFR part 31, Contract 
Cost Principles and Procedures, and other contract provisions;
    (13) Identification of costs by contract line item and by units 
(as if each unit or line item were a separate contract), if required 
by the contract;
    (14) Segregation of preproduction costs from production costs, 
as applicable;
    (15) Cost accounting information, as required--
    (i) By contract clauses concerning limitation of cost (48 CFR 
52.232-20), limitation of funds (48 CFR 52.232-22), or allowable 
cost and payment (48 CFR 52.216-7); and
    (ii) To readily calculate indirect cost rates from the books of 
accounts;
    (16) Billings that can be reconciled to the cost accounts for 
both current and cumulative amounts claimed and comply with contract 
terms;
    (17) Adequate, reliable data for use in pricing follow-on 
acquisitions; and
    (18) Accounting practices in accordance with standards 
promulgated by the Cost Accounting Standards Board, if applicable, 
otherwise, Generally Accepted Accounting Principles.
    (d) Significant deficiencies. (1) The Contracting Officer will 
provide an initial determination to the Contractor, in writing, on 
any significant deficiencies. The initial determination will 
describe the deficiency in sufficient detail to allow the Contractor 
to understand the deficiency.
    (2) The Contractor shall respond within 30 days to a written 
initial determination from the Contracting Officer that identifies 
significant deficiencies in the Contractor's accounting system. If 
the Contractor disagrees with the initial determination, the 
Contractor shall state, in writing, its rationale for disagreeing. 
In the event the Contractor did not respond in writing to the 
initial determination within the response time, this lack of 
response shall indicate that the Contractor agrees with the initial 
determination.
    (3) The Contracting Officer will evaluate the Contractor's 
response or the Contractor's lack of response and notify the 
Contractor, in writing, of the Contracting Officer's final 
determination concerning--
    (i) Remaining significant deficiencies;
    (ii) The adequacy of any proposed or completed corrective 
action; and
    (iii) System disapproval, if the Contracting Officer determines 
that one or more significant deficiencies remain.
    (e) If the Contractor receives the Contracting Officer's final 
determination of significant deficiencies, the Contractor shall, 
within 45 days of receipt of the final determination, either correct 
the significant deficiencies or submit an acceptable corrective 
action plan showing milestones and actions to eliminate the 
significant deficiencies.
    (f) Withholding payments. If the Contracting Officer makes a 
final determination to disapprove the Contractor's accounting 
system, and the contract includes the clause 48 CFR 952.242-71, 
Contractor Business System, the Contracting Officer will withhold 
payments in accordance with that clause.


(End of clause)

0
16. Add section 952.244.71 to read as follows:


952.244-71  Contractor purchasing system administration.

    As prescribed in 944.305-71, insert the following clause:

CONTRACTOR PURCHASING SYSTEM ADMINISTRATION (XXX 201X)

    (a) Definitions. As used in this clause--
    Acceptable purchasing system means a purchasing system that 
complies with the system criteria in paragraph (c) of this clause.
    Purchasing system means the Contractor's system or systems for 
purchasing and subcontracting, including make-or-buy decisions, the 
selection of vendors, analysis of quoted prices, negotiation of 
prices with vendors, placing and administering of orders, and 
expediting delivery of materials.
    Significant deficiency means a shortcoming in the system that 
materially affects the ability of officials of the Department of 
Energy to rely upon information produced by the system that is 
needed for management purposes.
    (b) General. The Contractor shall establish and maintain an 
acceptable purchasing system. If the Contractor plans to adopt the 
existing system from the previous Contractor, the Contractor is 
responsible for the system and shall comply with the system criteria 
required in this clause. The Contractor shall provide in writing to 
the Contracting Officer documentation that its purchasing system 
meets the system criteria in paragraph (c) of this clause no later 
than 60 days after contract award. Failure to maintain an acceptable 
purchasing system, as defined in this clause, may result in 
disapproval of the system by the Contracting Officer and/or 
withholding of payments.
    (c) System criteria. The Contractor's purchasing system shall--
    (1) Have an adequate system description including policies, 
procedures, and purchasing practices that comply with the Federal 
Acquisition Regulation (FAR) (48 CFR Chapter 1) and the Department 
of Energy Acquisition Regulation (48 CFR Chapter 9);
    (2) Ensure that all applicable purchase orders and subcontracts 
contain all flowdown clauses, including terms and conditions and any 
other clauses needed to carry out the requirements of the prime 
contract;
    (3) Maintain an organization plan that establishes clear lines 
of authority and responsibility;
    (4) Ensure all purchase orders are based on authorized 
requisitions and include a complete and accurate history of purchase 
transactions to support vendor selected, price paid, and document 
the subcontract/purchase order files which are subject to Government 
review;
    (5) Establish and maintain adequate documentation to provide a 
complete and accurate history of purchase transactions to support 
vendors selected and prices paid;
    (6) Apply a consistent make-or-buy policy that is in the best 
interest of the Government;
    (7) Use competitive sourcing to the maximum extent practicable, 
and ensure debarred or suspended contractors are properly excluded 
from contract award;
    (8) Evaluate price, quality, delivery, technical capabilities, 
and financial capabilities of competing vendors to ensure fair and 
reasonable prices;
    (9) Require management level justification and adequate cost or 
price analysis, as applicable, for any sole or single source award;

[[Page 18438]]

    (10) Perform timely and adequate cost or price analysis and 
technical evaluation for each subcontractor and supplier proposal or 
quote to ensure fair and reasonable subcontract prices;
    (11) Document negotiations in accordance with 48 CFR 15.406-3;
    (12) Seek, take, and document economically feasible purchase 
discounts, including cash discounts, trade discounts, quantity 
discounts, rebates, freight allowances, and company-wide volume 
discounts;
    (13) Ensure proper type of contract selection and prohibit 
issuance of cost-plus-a-percentage-of-cost subcontracts;
    (14) Maintain subcontract surveillance to ensure timely delivery 
of an acceptable product and procedures to notify the Government of 
potential subcontract problems that may impact delivery, quantity, 
or price;
    (15) Document and justify reasons for subcontract changes that 
affect cost or price;
    (16) Notify the Government of the award of all subcontracts that 
contain the 48 CFR Chapter 1 and 48 CFR Chapter 9 flowdown clauses 
that allow for Government audit of those subcontracts, and ensure 
the performance of audits of those subcontracts;
    (17) Enforce adequate policies on conflict of interest, gifts, 
and gratuities, including the requirements of the 41 U.S.C. chapter 
87, Kickbacks;
    (18) Perform internal audits or management reviews, training, 
and maintain policies and procedures for the purchasing department 
to ensure the integrity of the purchasing system;
    (19) Establish and maintain policies and procedures to ensure 
purchase orders and subcontracts contain mandatory and applicable 
flowdown clauses, as required by the 48 CFR chapter 1, including 
terms and conditions required by the prime contract and any clauses 
required to carry out the requirements of the prime contract;
    (20) Provide for an organizational and administrative structure 
that ensures effective and efficient procurement of required quality 
materials and parts at the best value from responsible and reliable 
sources;
    (21) Establish and maintain selection processes to ensure the 
most responsive and responsible sources for furnishing required 
quality parts and materials and to promote competitive sourcing 
among dependable suppliers so that purchases are reasonably priced 
and from sources that meet contractor quality requirements;
    (22) Establish and maintain procedures to ensure performance of 
adequate price or cost analysis on purchasing actions;
    (23) Establish and maintain procedures to ensure that proper 
types of subcontracts are selected, and that there are controls over 
subcontracting, including oversight and surveillance of 
subcontracted effort; and
    (24) Establish and maintain procedures to timely notify the 
Contracting Officer, in writing, if--
    (i) The Contractor changes the amount of subcontract effort 
after award such that it exceeds 70 percent of the total cost of the 
work to be performed under the contract, task order, or delivery 
order. The notification shall identify the revised cost of the 
subcontract effort and shall include verification that the 
Contractor will provide added value; or
    (ii) Any subcontractor changes the amount of lower-tier 
subcontractor effort after award such that it exceeds 70 percent of 
the total cost of the work to be performed under its subcontract. 
The notification shall identify the revised cost of the subcontract 
effort and shall include verification that the subcontractor will 
provide added value as related to the work to be performed by the 
lower-tier subcontractor(s).
    (d) Significant deficiencies. (1) The Contracting Officer will 
provide notification of initial determination to the Contractor, in 
writing, of any significant deficiencies. The initial determination 
will describe the deficiency in sufficient detail to allow the 
Contractor to understand the deficiency.
    (2) The Contractor shall respond within 30 days to a written 
initial determination from the Contracting Officer that identifies 
significant deficiencies in the Contractor's purchasing system. If 
the Contractor disagrees with the initial determination, the 
Contractor shall state, in writing, its rationale for disagreeing. 
In the event the Contractor did not respond in writing to the 
initial determination within the response time, this lack of 
response shall indicate that the Contractor agrees with the initial 
determination.
    (3) The Contracting Officer will evaluate the Contractor's 
response or the Contractor's lack of response and notify the 
Contractor, in writing, of the Contracting Officer's final 
determination concerning--
    (i) Remaining significant deficiencies;
    (ii) The adequacy of any proposed or completed corrective 
action; and
    (iii) System disapproval, if the Contracting Officer determines 
that one or more significant deficiencies remain.
    (e) If the Contractor receives the Contracting Officer's final 
determination of significant deficiencies, the Contractor shall, 
within 45 days of receipt of the final determination, either correct 
the significant deficiencies or submit an acceptable corrective 
action plan showing milestones and actions to eliminate the 
deficiencies.
    (f) Withholding payments. If the Contracting Officer makes a 
final determination to disapprove the Contractor's purchasing 
system, and the contract includes the clause at 952.242-71, 
Contractor Business System, the Contracting Officer will withhold 
payments in accordance with that clause.


(End of clause)

0
17. Add section 952.245.70 to read as follows:


952.245-70  Contractor property management system administration.

    As prescribed in 945.107(a), insert the following clause:

CONTRACTOR PROPERTY MANAGEMENT SYSTEM ADMINISTRATION (xxx 201x)

    (a) Definitions. As used in this clause--
    Acceptable property management system means a property system 
that complies with the system criteria in paragraph (c) of this 
clause.
    Property management system means the Contractor's system or 
systems for managing and controlling Government property.
    Significant deficiency means a shortcoming in the system that 
materially affects the ability of officials of the Department of 
Energy to rely upon information produced by the system that is 
needed for management purposes.
    (b) General. The Contractor shall establish and maintain an 
acceptable property management system. If the Contractor plans to 
adopt the existing system from the previous Contractor, the 
Contractor is responsible for the system and shall comply with the 
system criteria required in this clause. The Contractor shall 
provide in writing to the Contracting Officer documentation that its 
property management system meets the system criteria in paragraph 
(c) of this clause no later than 60 days after contract award. 
Failure to maintain an acceptable property management system, as 
defined in this clause, may result in disapproval of the system by 
the Contracting Officer and/or withholding of payments.
    (c) System criteria. The Contractor's property management system 
shall be in accordance with paragraph (f) of the contract clause at 
48 CFR 52.245-1.
    (d) Significant deficiencies. (1) The Contracting Officer will 
provide an initial determination to the Contractor, in writing, of 
any significant deficiencies. The initial determination will 
describe the deficiency in sufficient detail to allow the Contractor 
to understand the deficiency.
    (2) The Contractor shall respond within 30 days to a written 
initial determination from the Contracting Officer that identifies 
significant deficiencies in the Contractor's property management 
system. If the Contractor disagrees with the initial determination, 
the Contractor shall state, in writing, its rationale for 
disagreeing. In the event the Contractor did not respond in writing 
to the initial determination within the response time, this lack of 
response shall indicate that the Contractor agrees with the initial 
determination.
    (3) The Contracting Officer will evaluate the Contractor's 
response or the Contractor's lack of response and notify the 
Contractor, in writing, of the Contracting Officer's final 
determination concerning--
    (i) Remaining significant deficiencies;
    (ii) The adequacy of any proposed or completed corrective 
action; and
    (iii) System disapproval, if the Contracting Officer determines 
that one or more significant deficiencies remain.
    (e) If the Contractor receives the Contracting Officer's final 
determination of significant deficiencies, the Contractor shall, 
within 45 days of receipt of the final determination, either correct 
the significant deficiencies or submit an acceptable corrective 
action plan showing milestones and actions to eliminate the 
significant deficiencies.
    (f) Withholding payments. If the Contracting Officer makes a 
final determination to disapprove the Contractor's property 
management system, and the

[[Page 18439]]

contract includes the clause at 952.242-71, Contractor Business 
System, the Contracting Officer will withhold payments in accordance 
with that clause.


(End of clause)

[FR Doc. 2014-07086 Filed 3-31-14; 8:45 am]
BILLING CODE 6450-01-P