[Federal Register Volume 59, Number 246 (Friday, December 23, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31496]
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[Federal Register: December 23, 1994]
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DEPARTMENT OF ENERGY
48 CFR Parts 909, 952, and 970
RIN 1990-AA95
Acquisition Regulation; Alteration of Organizational Conflicts of
Interest Regulations
AGENCY: Department of Energy.
ACTION: Final rule.
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SUMMARY: The Department of Energy (DOE) today amends the Department of
Energy Acquisition Regulation (DEAR) to clarify certain aspects of
DOE's organizational conflicts of interest (OCI) regulations. The
amended regulations are intended to make the OCI regulations more
easily understood and more easily followed by DOE procurement, program,
and legal personnel, DOE contractors, and entities proposing to do work
for DOE or its contractors.
EFFECTIVE DATE: January 23, 1995.
FOR FURTHER INFORMATION CONTACT:
Robert M. Webb, U.S. Department of Energy, Procurement Policy Division
(HR-521.1), 1000 Independence Avenue, SW., Washington, DC 20585, (202)
586-8264
Edgar Merson, U.S. Department of Energy, Office of the Assistant
General Counsel for Procurement and Finance (GC-61), 1000 Independence
Avenue, SW., Washington, DC 20585, (202) 586-6902
SUPPLEMENTARY INFORMATION:
I. Background
A. Discussion
B. Section-by-Section Analysis
II. Procedural Requirements
A. Review under Executive Order 12291
B. Review under the Regulatory Flexibility Act
C. Review under the Paperwork Reduction Act
D. Review under the National Environmental Policy Act
E. Review under Executive Order 12612
F. Review under Executive Order 12778
I. Background
A. Discussion
DOE is one of only two Federal agencies, the other being the
Nuclear Regulatory Commission, that have a statutorily based OCI
system. DOE's system is founded on section 401 of Pub. L. 95-39, as
that statute applied to the Energy Research and Development
Administration (codified at 42 U.S.C. Sec. 5918) and section 10 of Pub.
L. 95-70, as that statute applied to the Federal Energy Administration
(codified at 15 U.S.C. 789). On October 1, 1977, those two agencies and
others were joined to form the Department of Energy.
The proposed rule soliciting comments on proposed changes leading
to this final rule was published on July 16, 1993, at 58 FR 38340. As
stated there, the proposed changes were intended to clarify the
preexisting DOE OCI rule.
B. Section-by-Section Analysis
Comments were received from nine commenters: four corporations, two
professional societies, one individual, and two DOE procurement
organizations.
1. Definitions.
At 909.570-3, we proposed to delete the phrase ``the principal
purpose of which'' from the definition of ``evaluation services'' and
``technical consulting and management support services.'' We explained
that DOE's organizational conflicts of interest system should apply to
contracts even where these types of services are involved in contract
performance but are not the principal purpose of the contract.
Four of the commenters took exception to this change with respect
to ``evaluation services,'' and two objected with respect to
``technical consulting and management support services.'' One concern
expressed was that there would be confusion on the part of the
contractors as to whether ``a particular contract is for evaluation
services or activities.'' The solicitation and contract will contain
the appropriate organizational conflicts of interest provisions when
DOE has determined that a specific requirement involves either or both
of these types of covered services.
The remaining commenters based their objections on a concern that
the result would be that organizational conflicts of interest
provisions would be applied when they were not appropriate. We
disagree. It is clear that the ``principal purpose'' language was
present to limit application of organizational conflicts of interest;
however, it is apparent that contracts may have minor portions of the
statement of work that deserve OCI attention. For example, a contract
for guard services that would not be covered per se may contain
provision for incidental services to develop a plan to enhance security
at the facility. Clearly, the development of such a plan, were it
procured under a separate contract, would on its own be considered
either evaluation services or activities or technical consulting and
management support services or both. The dangers of bias, depending
upon a contractor's interests, and unfair competitive advantage are
both present. In fact, the plan may serve as the basis for the
procurement of security enhancements under a separate contract. Yet,
because it is a comparatively small part of a larger contract under the
definitions that were at 909.570-3, there would be no OCI coverage
under the preexisting regulations. This result is untenable.
The concern for misapplication is best answered by looking at
whether the scope of the contract includes services that are properly
described as ``evaluation services or activities'' or ``technical
consulting and management support services.'' A contract would not be
covered if there is no provision for assignment of such evaluative
tasks within the scope of the contract. For example, if a security
guard notices a security deficiency at the facility, he or she would be
expected to bring it to the supervisor's attention in the normal course
of business, and this would involve no OCI implication. The mere
expression of an opinion or recommendation in the performance of a
contract would not give rise to OCI coverage.
In the definition of ``organizational conflicts of interest,'' the
rule proposed to delete the phrase ``either directly or indirectly,
through a client relationship'' and insert ``reasonably'' to guide any
test of the existence of an organizational conflict of interest with
regard to a specific offeror. Three commenters objected. One commenter
was concerned that the remaining phrase describing the interests to be
considered in determining the presence of an organizational conflict of
interest may affect or be affected by ``approved technology transfer
initiatives.'' The remaining phrase describing the interests to be
taken into account is ``past, present, or currently planned interests
that relate to work to be performed under a Department contract.'' All
interests, including ``technology transfer initiatives'' meeting that
test should be evaluated by the Contracting Officer in making the OCI
determination. However, one must remember that the mere existence of an
interest relating to the work to be performed under the specific
contract does not mean that an organizational conflict of interest is
present.
A second commenter disagreed with the ``relate to'' language. The
commenter was concerned that an offeror would be put in the position of
``providing unlimited data which, as a threshold matter, may not be
relevant to its capacity to give impartial advice or result in an
unfair competitive advantage.'' We believe that the obligation to
disclose interests that relate to the work to be performed under the
proposed contract is clearer than the previous requirement which
arguably was dependent upon whether the offeror considered the
otherwise relevant interest to result in bias or an unfair competitive
advantage. The analysis of the effect of the interest or interests is
the responsibility of the contracting officer, and the proposer is not
in the position of drawing an objective conclusion of the effect of an
interest. More importantly, the contracting officer may determine the
potential for bias or unfair competitive advantage, not from one
interest, but from two or more interests, any of which alone would not
be considered significant.
The third commenter did not agree with the proposed insertion of
``reasonably'' on the grounds that the ``safe course for a contracting
officer to take when faced with this standard is to conclude that
virtually all situations may reasonably give rise to an OCI.'' We have
deleted ``reasonably,'' though its inclusion in the proposed rule was
intended to help assure that consideration of interests would not be
affected by remote relationships.
As will be discussed in more detail later, the standard that the
contracting officer is to apply in making the determination as to the
presence of an organizational conflict of interest is whether there is
``little or no likelihood'' of an organizational conflict. That test is
taken from the underlying statutes and has formed the basis of the OCI
determination since the promulgation of the implementing regulations.
2. Relationship of Interests
Three commenters took exception to the proposed substitution of the
standard for contractual requirements that merit particular attention
at 909.570-4(a). Previously, this standard was those contractual
requirements that ``call for the rendering of advice, or consultation
or evaluation services, or similar activities that lay the direct
groundwork for the Department's decisions * * *.'' The proposed rule
substituted ``are expected to play a part in * * *.'' (emphasis added)
All three comments were founded upon the same grounds, which are
best represented by the comment of one of the three: ``As proposed,
this revision will cause activities that are only very tangentially
related to be considered to create an OCI and will remove any rule of
reason in determining when an OCI exists.''
We disagree and have included the change. This language is not
intended to describe when the contracting officer should determine that
an organizational conflict of interest exists. We believe that the
commenters have been misled by the change in the heading of 909.570-4,
``Criteria for recognizing organizational conflicts of interest.'' In
that particular part of the regulation, the material is intended to aid
the contracting officer in determining whether a particular statement
of work is subject to organizational conflicts of interest concerns. In
other words, this guidance goes to whether the contracting officer
would require that the solicitation include the organizational
conflicts of interest solicitation provision at 952.209-70 and whether
the model and final contracts would contain the clause at 952.209-72.
No comments were received about the other minor changes proposed to
be made to 909.570-4(a) and 909.570-4(b)(4) and (b)(7).
No comments were made about the proposed changes to 909.570-5(a).
These changes are mirrored in proposed changes to the solicitation
provision and will be discussed there.
The rule proposed to create a new paragraph 909.570-5(b) from the
content of the second half of paragraph (a). This new paragraph would
modify the requirement for the submission of a new or updated
disclosure for ``all modifications * * * except those issued under the
Changes clause'' to those ``that exercise an option or otherwise
meaningfully extend the period of performance or add work of the type
noted above to the contract.'' One commenter objected, apparently not
recognizing that the required frequency of new or updated disclosure
would be reduced.
In addition, the OCI clause contains a requirement for postaward
disclosure. If the contractor has fulfilled that responsibility, this
requirement would be little more than a formality.
3. Avoidance and Mitigation
Five commenters disagreed with the proposed changes to 909.570-
5(c). We believe they have misinterpreted the proposed changes. The
changes consisted of the proposed deletion of the words ``or
mitigated'' from the last portion of the sentence that had previously
been 909.570-5(b) and the insertion at 909.570-5(c) of the sentence
that states, ``[a]n organizational conflict of interest has been
avoided when the actions taken to remedy it result in there being
little or no likelihood of an organizational conflict of interest.''
The comments were based upon the belief that these changes deny the
contracting officer the flexibility to mitigate a situation that has
been determined to be an organizational conflict of interest. In fact,
the applicable statute requires that an organizational conflict of
interest, once identified, be avoided or award may not be made in the
absence of a determination that award otherwise is in the best
interests of the United States. The statute and implementing
regulations have provided that ``little or no likelihood of an
organizational conflict of interest'' is the standard or threshold for
the decision as to whether a particular fact or facts amount to an
organizational conflict of interest. Any greater likelihood amounts to
an organizational conflict.
Mitigation, on the other hand, describes the situation in which the
actions taken to remedy an organizational conflict of interest taken
have not reduced the conflict of interest to the required level of
``little or no likelihood.'' That result is not enough to allow an
award, absent the public interest determination described above.
It was the intent of the added sentence to make it clear that the
test for avoiding an organizational conflict was the same as the test
for determining the existence of the organizational conflict initially,
``little or no likelihood.'' In other words, there may be some remote
possibility of an organizational conflict of interest, and the
contracting officer may determine that an organizational conflict does
not exist. If, on the other hand, having determined that an
organizational conflict does exist, the contracting officer may
determine that the steps taken to remedy the conflict reduce the
concern to the level of ``little or no likelihood,'' which actions have
thereby avoided the organizational conflict of interest.
This change then does not interfere with the exercise of discretion
by the contracting officer in avoiding an identified organizational
conflict of interest. Rather, it makes clear that the test for
determining whether an organizational conflict of interest exists is
the same, i.e, ``little or no likelihood,'' whether it is applied in
the original analysis or after having taken steps to remedy an
organizational conflict of interest that was initially determined to
exist.
4. Subsequent Bars
With regard to any bar of the successful firm from subsequent
competitions, five commenters requested that the sentence of 909.570-6
requiring that ``[t]his is a variable; and in no event shall an
exclusion be stated which is not related to a specific expiration date
or an event certain'' be retained. We believe that this sentence is
redundant in light of the two preceding sentences, i.e., ``[s]uch
notice shall specify the proposed extent and duration of any special
restrictions to be imposed with respect to participation in subsequent
acquisitions. A fixed term of reasonable duration is measured by the
time required to eliminate what would otherwise constitute an unfair
competitive advantage.''
Two of the commenters took exception to the proposed addition to
the last sentence. That addition was intended to make clear that the
absence of a bar in a previous contract will not prohibit the
contracting officer from considering the relationship of the two
requirements as a basis for finding an organizational conflict of
interest in the award of the second requirement, based upon bias or
unfair competitive advantage. We believe this conclusion is statutorily
directed. However, until now, the statement has not been made, and DOE
contracting personnel may have been misled. We have retained all the
changes to 909.570-6.
No comments were received to the proposed changes to 909.570-7.
5. Deletion of ``the General Clause''
Two comments were received with regard to 909.570-8. One commenter
objected to the proposed deletion of the provision for the general
organizational conflicts of interest clause at 952.209-71. The
commenter illustrated its position by referring to ``standard
architect-engineer/construction services, where disclosures are
routinely required (both for prime contracts and subcontracts) where
there are no relevant facts which could give rise to an organizational
conflict of interest and the contractor warrants that this is the
case.'' We believe that generally a standard A-E contract, that is, a
contract for design services, would not be subject to organizational
conflicts of interest processing. Certainly, a requirement for
technical consulting or management support services or evaluation
services or activities involving an A-E firm would be covered, as it
would for any entity. Were the requirement subject to OCI processing,
the fact that the offeror represented that it had no relevant facts to
disclose would have no bearing on which clause to use.
We are deleting the clause formerly at 952.209-71. The clause was
an abbreviated version of the special clause. It (1) did not extend to
affiliated entities of the contractor, (2) did not contain the bars in
paragraphs (b)(1) and (b)(2) of the special clause, and (3) did not
contain the prohibition against award of OCI covered subcontracts
without the determination by the DOE contracting officer as to the
proposed subcontractor's organizational conflicts of interest. We
believe these omissions to be meaningful in the administration of the
clause, and, the omission was not appropriate for contracts that are
subject to organizational conflicts of interest processing.
The second commenter suggests the substitution of the word
``duration'' for ``time period'' as it appears in the last sentence of
909.570-8(b)(5) because ``duration'' may ``tie to a completion of an
activity rather than a date.'' We agree and have made the change.
6. ``Little or no Likelihood''
Five commenters have proposed changes to 909.570-9. The first
suggests that the phrase ``or other means'' which was proposed to be
added to subparagraph (a)(3) also be added to subparagraph (a)(2) for
consistency's sake. We have made this change but differently than
suggested. The phrase has been added to subparagraph (a)(2), and the
phrase ``by an appropriate contract clause or other means'' has been
deleted from subparagraph (a)(3).
The other four commenters object to the proposed statement ``[i]f
the contracting officer determines that there is more than little or no
likelihood of an organizational conflict of interest, then an
organizational conflict of interest exists with regard to that
particular offeror.'' The commenters express the view that the term
``more than little or no likelihood'' should be defined.
First, the previous proposed sentence states that a basic concept
of the Department's organizational conflicts of interest system is that
an organizational conflict of interest does not exist if there is
``little or no likelihood'' of an organizational conflict of interest
in the performance of the contract by the particular offeror being
evaluated. That test is taken from sec. 401 of Pub. L. 95-39 (42 U.S.C.
5918(b)). The sentence preceding the sentence in question makes that
point clear.
The sentence that has been objected to then states the obverse,
i.e., that, therefore, facts that indicate a larger likelihood of an
organizational conflict than ``little or no likelihood'' then indicates
the existence of an organizational conflict of interest with respect to
the performance of the contract by the particular offeror being
evaluated. These concepts are, like so many other legal and regulatory
concepts, imprecise. The statute does not define the phrase ``little or
no likelihood,'' nor do we believe that any attempt by ourselves or
others would make it more precise. We believe that facts may exist with
respect to the offeror that could indicate a possibility, i.e.,
``little likelihood,'' of an organizational conflict and yet the
contracting officer not be bound to find one. In other words, the test
does not require the absolute absence of possibility.
With this background, the sentence objected to is merely stating
the other side of the proposition, which has always been the case. If
the contracting officer determines that there is more than a ``little
likelihood'' of an organizational conflict of interest, then one exists
for the purpose of the DOE system, with the result that award may not
be made unless the risk is reduced to the level of ``little
likelihood'' or ``no likelihood'' by some manner of mitigation or that
the statutorily required determination is made that award is in the
public interest and that determination is published in the Federal
Register in accordance with 909.570-9(a)(3). We believe that no
definition of the phrase ``more than little or no likelihood'' is
necessary. It merely describes the situation in which the contracting
officer cannot reasonably say that there is ``little or no likelihood''
of an organizational conflict of interest with respect to the statement
of work by a particular offeror.
One commenter did not agree with the proposed changes made at
909.570-10, wanting to retain the current language. We believe the
proposed changes are more accurate than the current language and will
be of greater assistance to contracting officers in the consideration
of OCI situations occurring after contract award. We have, therefore,
adopted the proposed changes in the final rule.
7. Subcontracts
Two commenters objected to the proposed change at 909.570-12 which
deleted the phrase ``except that subcontractors shall not normally be
required to submit the disclosure or representation if such subcontract
is for supplies.'' The commenters believe that this deletion creates an
uncertainty as to the intended meaning and that the deletion might
suggest that the organizational conflicts of interest system might, in
fact, apply to subcontracts for supplies.
We disagree. The system applies per se to those prime contracts and
subcontracts that involve the providing of evaluation services or
activities or technical consulting and management support services.
This point is made clear in the proposed rule at 909.570-12 following
the deletion of the phrase noted above by the addition of the phrase
``i.e., evaluation services or activities or technical consulting and
management support services.'' A similar clarifying change has been
made to paragraph (d)(1) of the clause at 952.909-72.
We believe that the DOE OCI system would apply to prime contracts
or subcontracts for supplies only in the rarest instance. We made this
change because we believe that the former language of DEAR 909.570-11
presented a greater danger of misapplication of the DOE OCI system to
subcontracts for supplies than the revision resulting from this final
rule.
8. Solicitation Provision
Five commenters disagreed with the proposed altering of the
disclosure requirement in paragraph (a)(1) of the solicitation
provision at 952.209-70. The change that appears there would require
the disclosure of ``all relevant facts * * * relating to the work
described in the statement of work of this solicitation.'' In the
proposed rule we deleted the phrase ``bearing on whether the offeror
has a possible conflict of interest.'' The commenters were concerned
that without the qualifying phrase, the disclosure obligation is less
clear and more open-ended.
We disagree. As explained in the preamble to the proposed rule, we
believe the test of whether a relevant fact bears ``on whether the
offeror has a possible conflict of interest'' adds a complicating and
subjective test on top of a relatively simple identification of whether
the offeror has an interest(s) that relates to the work to be performed
under the statement of work. We do not agree that this change results
in an open-ended obligation to provide data. In order to identify
relevant facts that bear upon a possible conflict of interest, the
offeror must first identify relevant facts and then determine whether
any of those facts, in its mind, bear upon a possible conflict of
interest. This change merely does away with the second step. Relevant
facts intuitively are those that relate to the statement of work, e.g.,
investments involving the technology, licensing agreements involving
the technology, client relationships involving work like the work to be
performed.
One commenter questioned the requirement for the offeror to provide
a copy of the Securities and Exchange Commission's Form 10k, if it is
required to file one. DOE's internal OCI procedures have called for
contracting officers to acquire a copy of the Form 10k for over ten
years. This comes under the statutory language ``information otherwise
available.'' It, along with the annual report, or comparable
information from privately held corporations, is used to confirm the
disclosure or representation of the offeror.
This change assures that the Form 10k will be forthcoming with the
proposal, thereby saving time in acquiring the report. It is a report
that is publicly available, for its intended purpose is to allow those
who choose to avail themselves of it to make informed investment
decisions. This is not a report that must be created in any way for
submission to DOE. That commenter suggested that the contracting
officer acquire the Form 10k from the Securities and Exchange
Commission. We disagree. The offeror is in the best position to know
whether it has the obligation to file it with the SEC and to provide
it, if they have filed it with the SEC.
We are, however, simplifying the requirement such that the offeror
need supply only the form and a list of attachments, rather than filing
the attachments themselves.
One commenter noted that the exclusion of the clause at 952.209-71
will result in the use in all cases of the clause at 952.209-72, with
the latter subjecting ``all work to the bar.'' We agree, but each of
the bars is conditional. If the qualifying condition does not occur
then no bar is effective, even if the OCI clause is used.
Two commenters questioned the substitution of ``meaningfully'' for
``substantially'' in paragraph (g) of the clause at 952.209-72 with
regard to the submission of a new or updated disclosure or
representation if the period of performance is extended. We have used
the current term and have deleted ``meaningfully'' from the rule. We
have, however, added the phrase ``an option is to be exercised or the
period of performance is otherwise significantly increased.'' This
makes the provision consistent with the regulation at 909.570-5(b).
9. OCI Clause
Five commenters disagreed with the proposed changes to paragraph
(c)(1) of the clause at 952.209-72. In that paragraph the post award
obligation to disclose was clarified and made consistent with the
change that calls for the offeror to disclose relevant facts. The
previous language in paragraph (c)(1) required the contractor to
disclose conflicts of interest that it discovers after award. Under the
current language, in order to discover a conflict of interest, the
offeror will have had to identify the interest initially and then judge
whether that change presents a conflict of interest.
We believe that the proposed change simplifies this obligation.
Only the change in facts, i.e., additional interests, changes in
disclosed interests, will need to be identified by the contractor. The
contracting officer will then be in a situation to evaluate the
implications of the change in relevant facts on continued performance
under the contract. To the extent that the contractor fulfills its
obligations under this paragraph, the conditions for required
disclosure under paragraph (g) will be dramatically reduced.
The essence of the concerns expressed here parallel those discussed
earlier with regard to the change to the disclosure requirement, i.e.,
that the requirement has been made vaguer. We disagree. The obligation
to describe relevant interests alone is simpler and requires less
judgment by the offeror or contractor than the additional judgment as
to which, if any, of those relevant facts, bear upon a possible
organizational conflict of interest.
Three commenters then did not agree with the related changes
proposed to be made to paragraph (c)(2), which states that a failure to
report relevant interests known at the time of disclosure or
representation may result in the termination of the contract for
default. The current paragraph (c)(2) states that the termination for
default may result where an organizational conflict of interest was
known but not reported. We believe that the changed language presents
the contractor with less risk than the current language. The
determination of organizational conflict of interest is inherently more
subjective than the mere identification of relevant interests.
The final comment noted that the new title for the clause at
970.5204-36 contained a typographical error with the inclusion of
``of'' after ``University.'' We have made this correction.
II. Procedural Requirements
A. Review Under Executive Order 12866
The Department of Energy has determined that today's regulatory
action is not a ``significant regulatory action'' under Executive Order
12866, ``Regulatory Planning and Review,'' (58 FR 51735, October 4,
1993). Accordingly, this action was not subject to review under that
executive order by the Office of Information and Regulatory Affairs of
the Office of Management and Budget (OMB).
B. Review Under Executive Order 12778
Section 2 of Executive Order 12778 instructs each agency to adhere
to certain requirements in promulgating new regulations and reviewing
existing regulations. These requirements, set forth in sections 2(a)
and (b)(2), include eliminating drafting errors and needless ambiguity,
drafting the regulations to minimize litigation, providing clear and
certain legal standards (whether they be engineering or performance
standards), and promoting simplification and burden reduction. Agencies
are also instructed to make every reasonable effort to ensure that the
regulation: specifies clearly any preemptive effect, effect on existing
Federal law or regulation, and retroactive effect; describes any
administrative proceedings to be available prior to judicial review and
any provisions for the exhaustion of such administrative proceedings;
and defines key terms. This final rule will have no preemptive effect;
will not have any effect on existing Federal laws; and will only
clarify the existing regulations on this subject. The revised clauses
will apply only to contracts which are awarded after the effective date
of the final rule, and, thus, will have no retroactive effect.
Therefore, DOE certifies that this final rule meets the requirements of
sections 2(a) and (b) of Executive Order 12778.
C. Review Under the Regulatory Flexibility Act
This final rule was reviewed under the Regulatory Flexibility Act
of 1980, Pub. L. 96-354, which requires preparation of a regulatory
flexibility analysis for any rule which is likely to have significant
economic impact on a substantial number of small entities. DOE
certifies that this rule will not have a significant economic impact on
a substantial number of small entities and, therefore, no regulatory
flexibility analysis has been prepared.
D. Review Under the Paperwork Reduction Act
No new information collection or recordkeeping requirements are
imposed by this rulemaking. Accordingly, no OMB clearance is required
by the Paperwork Reduction Act of 1980 (44 U.S.C. 3501, et seq.).
E. Review Under Executive Order 12612
Executive Order 12612, 52 FR 41685 (October 30, 1987), requires
that regulations, rules, legislation, and any other policy actions be
reviewed for any substantial direct effects on States, on the
relationship between the national government and the States, and in the
distribution of power and responsibilities among various levels of
government. If there are sufficient substantial direct effects, then
the Executive Order requires preparation of a federalism assessment to
be used in all decisions involved in promulgating and implementing a
policy action.
Today's final rule revises certain policy and procedural
requirements. However, DOE has determined that none of the revisions
will have a substantial direct effect on the institutional interests or
traditional functions of States.
F. Review Under the National Environmental Policy Act (NEPA)
DOE has concluded that this rule falls into a class of actions
(categorical exclusion A5) that are categorically excluded from NEPA
review because they would not individually or cumulatively have
significant impact on the human environment, as determined by the
Department's regulations (10 CFR Part 1021, Subpart D) implementing the
National Environmental Policy Act of 1969 (42 U.S.C. 4321, 4331-4335,
4341-4347 (1976)). Therefore, this rule does not require an
environmental impact statement or an environmental assessment pursuant
to NEPA.
List of Subjects in 48 CFR Parts 909, 952, 970
Government procurement.
For the reasons set out in the preamble, Chapter 9 of Title 48 of
the Code of Federal Regulations is amended as set forth below.
Issued in Washington, D.C., on December 12, 1994.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.
PART 909--CONTRACTOR QUALIFICATIONS
1. The authority citation for Part 909 continues to read as
follows:
Authority: 42 U.S.C. 7254; 40 U.S.C. 486(c).
Subpart 909.5--Organizational Conflicts of Interest
2. Section 909.500 is amended by adding the following as the second
sentence:
Sec. 909.500 Scope of subpart.
* * * However, the coverage at FAR subpart 9.5 regarding marketing
consultants does apply to DOE acquisitions.
3. Section 909.570-3 is amended by revising the definitions for
``Evaluation services or activities,'' ``Organizational conflicts of
interest,'' and ``Technical consulting and management support
services'' to read as follows:
Sec. 909.570-3 Definitions.
* * * * *
Evaluation services or activities means any work or effort
involving the independent study of technology, process, product, or
policy.
* * * * *
Organizational conflicts of interest means that a relationship or
situation exists whereby an offeror or a contractor (including chief
executives and directors, to the extent that they will or do become
involved in the performance of the contract, and proposed consultants
or subcontractors where they may be performing services similar to the
services provided by the prime) has past, present, or currently planned
interests that relate to the work to be performed under a Department
contract and such interest or interests may reasonably (1) diminish an
offeror's or contractor's capacity to give impartial, technically
sound, objective assistance and advice, or (2) result in an offeror's
or contractor's being given an unfair competitive advantage. It does
not include the normal flow of benefits from the performance of the
contract.
* * * * *
Technical consulting and management support services means any work
or effort to provide internal assistance to any program element or
other organizational component of the Department in the formulation or
administration of its programs, projects, or policies. Such services
typically include assistance in the preparation of program plans;
evaluation, monitoring, or review of other contractors' activities or
proposals submitted by prospective contractors; preparation of
preliminary designs, specifications, or statements of work; and may
involve the contractor's being given access to data confidential to the
Department or proprietary to others.
4. Section 909.570-4 is amended by revising the last sentence of
paragraph (a) and by revising paragraphs (b)(4) and (b)(7) to read as
follows:
909.570-4 Criteria for recognizing organizational conflicts of
interest.
(a) * * * While it is difficult to identify, and to prescribe in
advance, a specific method for avoiding all the various situations or
relationships which might involve potential organizational conflicts of
interest, Department personnel must pay particular attention to
proposed contractual requirements which call for the rendering of
advice, or consultation or evaluation services, or similar activities
that are expected to play a part in the Department's decisions on
future acquisitions; research, development, and demonstration programs;
production activities; the formulation of departmental policy; and
regulatory activities.
(b) * * *
(4) Contract performance involving access to information
proprietary to third parties which cannot lawfully be used for purposes
other than those authorized by those third parties.
* * * * *
(7) Contract performance involving the preparation and furnishing
of advice to the Department on a regulatory matter where the contractor
would be regulated or is providing, or is currently planning to
provide, assistance on the same or similar matter to any organization
regulated by the Department.
* * * * *
5. Section 909.570-5 is revised to read as follows:
909.570-5 Disclosure of organizational conflicts of interest.
(a) When submitting solicited and unsolicited proposals for (1)
evaluation services or activities; (2) technical consulting and
management support services; (3) research and development conducted
pursuant to the authority of the Federal Energy Administration Act of
1974 (Pub. L. 93-275), as amended; and (4) other contractual situations
where special organizational conflicts of interest provisions are noted
in the solicitation and included in the resulting contract, offerors
shall be required to identify and disclose information about contracts,
investments, and all other interests relating to the work to be
performed under the proposed contract or complete the representation in
accordance with 909.570-7.
(b) This requirement shall also apply to modifications of contracts
of the types noted in paragraph (a) of this section that exercise an
option or otherwise meaningfully extend the period of performance or
add work, of the type noted in paragraph (a), to the contract. Where,
however, a disclosure statement of the type required by the
Organizational Conflicts of Interest Disclosure or Representation
provision has previously been submitted with regard to the contract
being modified, only an updating of such statement need be submitted.
Information submitted by offerors pursuant to the disclosure
requirement shall be treated by the Department, to the extent permitted
by law, as confidential information to be used solely for OCI purposes.
(c) When the Government finds that an organizational conflict of
interest exists or may exist with respect to an offeror or contractor,
no award of a contract or contract modification covered by 909.570-7
shall be made until the organizational conflict of interest has been
avoided, except as provided in 909.570-9. An organizational conflict of
interest has been avoided when corrective actions taken to remedy it
result in there being little or no likelihood of an organizational
conflict of interest.
6. Section 909.570-6 is revised to read as follows:
909.570-6 Notices and representations: Action required of contracting
officers.
The disclosure or representation required by 909.570-7 is designed
to alert the contracting officer to situations or relationships which
may constitute either present or anticipated organizational conflicts
of interest with respect to a particular offeror or contractor. Another
type of organizational conflict of interest may exist in that work to
be performed will lead to a subsequent requirement with the result that
the successful proposer on the current solicitation will be barred by
operation of paragraph (b)(1)(i) of the clause at 952.209-72 from
proposing on the later solicitation. Accordingly, whenever such
potential conflicts are foreseeable by the Government, a special notice
also shall be included in the solicitation informing the offerors (a)
that such a potential conflict is foreseen and (b) of any special
contract clause or provision designed to avoid or mitigate such
conflict that will be included in any resultant contract as required by
909.570-8(a). Such notice shall specify the proposed extent and
duration of any special restrictions to be imposed with respect to
participation in subsequent acquisitions. A fixed term of reasonable
duration is measured by the time required to eliminate what would
otherwise constitute an unfair competitive advantage. In the event a
contractor, having performed on one contract, later seeks work that
stems or may be deemed to stem directly (i.e., arising out of or
relating to) from prior performance, such contractor shall not be
precluded from proposing on follow-on work unless the prior contract
contained an appropriate follow-on restriction. Nevertheless, this
absence of restriction shall not preclude the contracting officer from
finding that, in light of performance of the prior contract, an
organizational conflict of interest would or may exist.
7. Section 909.570-7 is revised to read as follows:
909.570-7 Disclosure or representation.
The contracting officer shall include the provision at 952.209-70,
Organizational Conflicts of Interest-Disclosure or Representation, in
all solicitations, including those for scope modifications, and
offerors shall accordingly disclose or represent in their proposals,
including unsolicited proposals for (a) evaluation services or
activities; (b) technical consulting and management support services;
(c) research and development conducted pursuant to the authority of the
Federal Energy Administration Act of 1974 (Pub. L. 93-275), as amended;
and (d) other contractual situations where special organizational
conflicts of interest issues are identified. Section 909.570-15 of this
part contains a suggested outline for the disclosure submission.
8. Section 909.570-8 is revised to read as follows:
909.570-8 Contract clauses.
(a) Special contract clause. The contracting officer shall include
the clause at 952.209-72, Organizational Conflicts of Interest, in all
contracts for evaluation services or activities or technical consulting
and management support services.
(b) Specially drafted contract clauses and provisions. If it is
determined from the nature of the proposed contract that a specifically
identified, potential organizational conflict of interest may exist,
the contracting officer may determine that such conflict can be avoided
through the use of an appropriate specially drafted additional contract
clause. Examples of the types of clauses which may be employed include,
but are not limited to, the following:
(1) Hardware exclusion clauses which prohibit the contractor's
acceptance of production contracts following a related design contract
previously performed by the contractor;
(2) Software exclusion clauses;
(3) Clauses which require the contractor (and/or certain of its key
personnel) to avoid conduct deemed to cause an organizational conflict
of interest;
(4) Clauses which provide for the protection of the confidentiality
of data and guard against its unauthorized use; and
(5) Clauses that prohibit other segments or divisions of the
contractor from becoming involved in the performance of the contract
work or being in a position to influence such work. If deemed
appropriate, the prospective contractor may be given the opportunity to
negotiate the terms and conditions of the clause and its application
including the extent and duration of any restrictions.
9. Section 909.570-9 is amended by revising the introductory text
of paragraph (a) to read as follows and adding the phrase ``or other
means'' after ``by an appropriate contract clause'' in the first
sentence of paragraph (a)(3):
909.570-9 Evaluations, findings, and contract award.
(a) The contracting officer shall evaluate all relevant facts
submitted by an offeror pursuant to the requirement of 909.570-6 and
such other relevant information as may be available concerning possible
organizational conflicts of interest. After evaluation of all such
information in accordance with the criteria of 909.570-4, and prior to
any award, the contracting officer shall make a finding as to whether a
possible organizational conflict of interest may exist with respect to
a particular offeror. If the contracting officer determines, in light
of all relevant facts, that, with respect to a particular offeror,
there is little or no likelihood of an organizational conflict of
interest, then no organizational conflict of interest exists for
purposes of making the contract award. Conversely, if the contracting
officer determines, however, that there is more than little or no
likelihood of an organizational conflict of interest, then an
organizational conflict of interest exists with regard to that
particular offeror. When formal Source Evaluation Board procedures are
applicable, the finding shall be made by the Source Selection Official.
If the finding indicates that such conflicts exist, then the
contracting officer shall:
* * * * *
10. Section 909.570-10 is revised to read as follows:
909.570-10 Action in lieu of termination.
If, after award, changes in relevant facts with respect to the
awardee, whether based upon information supplied by the awardee or
gathered from other sources, cause the contracting officer to conclude
that a organizational conflict of interest exists and that it would not
be in the best interest of the Government to terminate the contract as
provided in the clause at 952.209-72(e), the contracting officer shall
take every reasonable action to avoid or mitigate the effects of the
conflict.
11. Section 909.570-12 is revised to read as follows:
909.570-12 Subcontractors and consultants.
The contracting officer shall require offerors and contractors to
obtain for the Department a disclosure or representation in accordance
with 909.570-7 from subcontractors and consultants whose subcontract
calls for the performance of services similar to those provided by the
prime contractor, i.e., evaluation services or activities or technical
consulting and management support services. Such disclosure or
representation may be submitted by the subcontractors and consultants
directly to the contracting officer, and their disclosure or
representation shall be treated by the Department, to the extent
permitted by law, as confidential information to be used solely for OCI
purposes. The contract clause at 952.209-72, entitled Organizational
Conflicts of Interest, requires that the contractor (and each
succeeding lower tier subcontractor) include that clause in
subcontracts or consultant agreements involving work covered by this
subpart.
12. Section 909.570-14 is amended by revising paragraphs (b)(4),
(b)(5), (b)(7), (b)(8), and (b)(12); by adding the word ``not'' after
``these companies may'' in the last sentence of paragraph (b)(6); by
replacing ``suggests'' with ``produces'' and by replacing ``in
requests'' with ``in a request'' in the second sentence of paragraph
(b)(9); and by adding a comma after ``OCI'' and removing the word
``plants'' in the fourth sentence of paragraph (b)(11). These
amendments are set forth to read as follows:
909.570-14 Examples.
* * * * *
(b) * * *
(4) Company A prepares updated Government specifications for a
standard refrigerator to be procured competitively. Guidance. Normally
this would constitute an OCI. The contract should have contained the
OCI clause barring Company A from competing for supply of a
refrigerator based upon the specification it prepared.
(5) Company A designs or develops new electronics equipment under a
DOE contract and delivers descriptive specifications as part of the
final report. DOE then issues a solicitation for procurement of that
electronics equipment including a statement of work that reflects the
descriptive specifications. Guidance. Normally this would not
constitute an OCI. The contract should have contained the OCI clause
barring the company from competing to supply the electronics equipment.
* * * * *
(7) Prior to acquisition of Automatic Data Processing (ADP)
Equipment, Company A is awarded a contract to develop software to
automate a DOE function. Guidance. This situation will turn on whether
the software that was developed might have limited the potential source
for the equipment. If the answer were yes, the contract should have
contained the OCI clause barring competition for the equipment.
However, if the software were not so limited, this would not constitute
an OCI, and Company A would not be barred from at least the initial ADP
hardware acquisition necessary to accommodate the software developed
under its development contract.
(8) Company A receives a contract to define the detailed
performance characteristics a Government agency will use in the
purchase of rocket fuels. The company has not developed the particular
fuels. At the time the contract is awarded, it is clear to both parties
that the performance characteristics arrived at will be used by the
Government agency to choose competitively a contractor to develop the
fuels. Guidance. Normally this would constitute an OCI, and Company A
shall not be permitted to bid on the acquisition to develop the fuels.
* * * * *
(12) Firm A, because of its unique technical expertise, has been
requested to assist the Department in the evaluation of proposals which
will result from a competitive solicitation. Firm A also plans to
submit a proposal in response to this same solicitation. Guidance.
Normally this would constitute a conflict, and Firm A should be
precluded from participating in the solicitation. In a particular case,
it may be desirable (e.g., when the competitive field is limited) to
allow a separate division or affiliate of Firm A to submit a proposal.
In such a case, of course, Firm A must obtain a waiver from the
Department of Energy contracting officer and would not be permitted to
participate in the evaluation of this proposal. Such evaluation would
be performed by DOE or another DOE contractor.
909.570-15 [Amended]
13. Section 909.570-15 is amended by adding the phrase ``interests
and'' after ``currently planned'' the second time that phrase appears
in paragraph (a).
PART 952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
14. The authority citation for part 952 continues to read as
follows:
Authority: 42 U.S.C. 7254; 40 U.S.C. 486(c).
15. Section 952.209-70 is revised to read as follows:
952.209-70 Organizational conflicts of interest--disclosure or
representation.
Contracting officers shall insert the following provision in
solicitations in accordance with 909.570-7.
Organizational Conflicts of Interest--Disclosure or Representation
(Dec. 1994)
(a) It is Department of Energy policy to avoid situations which
place an offeror in a position where its judgment may be biased due
to any past, present, or currently planned interest, financial or
otherwise, that the offeror may have which relates to the work to be
performed pursuant to this solicitation, or where the offeror's
performance of such work may provide it with an unfair competitive
advantage. (As used herein, ``offeror'' means the proposer or any of
its affiliates or proposed consultants or subcontractors of any
tier.) Therefore:
(1) As required by section 401 of Pub. L. 95-39 (42 U.S.C.
5918(a)) and section 10 of Pub. L. 95-70 (15 U.S.C. 789(a)), the
offeror shall provide a statement which describes, in a concise
manner, all relevant facts concerning any past, present, or
currently planned interest (financial, contractual, organizational,
or otherwise) relating to the work described in the statement of
work of this solicitation. The offeror may also provide relevant
facts that show how its organizational structure and/or management
systems limit its knowledge of affiliates or other divisions or
sections of the proposing entity and how that structure or system
would avoid or mitigate an organizational conflict of interest.
(2) The proposing entity shall assure that any consultants and
subcontractors, identified in its proposal, which will perform
services similar to those to be performed by the proposer, i.e.,
evaluation services or activities or technical consulting and
management support services submit the same information as required
by paragraph (a)(1) of this clause, either as part of the proposing
entity's proposal, or directly to DOE prior to the time and date set
for receipt of proposals, with identification of the solicitation
and the offeror's proposal to which it relates.
(3) The proposing entity shall also assure that each of its
chief officers or directors, if any, who will be directly involved
in the actual performance of the contract, submit such information.
(4) The proposing entity shall promptly provide to the DOE
contracting officer information concerning any changes, including
additions, in its relevant facts reported under paragraph (a)(1) of
this clause, that occur between the submission of its proposal and
the award of the contract or the time that the proposer is notified
that it is no longer under consideration for award.
(b) In the absence of any relevant interests referred to above,
the offeror or others specified above, shall submit a statement
certifying that to its best knowledge and belief no such facts exist
relevant to the work to be performed.
(c) If the proposing entity has submitted a Securities and
Exchange Commission Form 10k to that agency, it shall include a copy
of the form and a list of all attachments as part of its business
management proposal (or cost proposal if no business management
proposal is required).
(d) The contracting officer will review the statement submitted
and may require the submission of additional relevant information.
All such information, and any other relevant information known to
the Department, will be used to determine whether an award to the
offeror may create an organizational conflict of interest with
respect to the offeror's (1) being able to render impartial,
technically sound, and objective assistance or advice, or (2) being
given an unfair competitive advantage. If such a conflict is found
to exist, the Department, at its sole discretion, may (1) impose
appropriate conditions which avoid such conflict, (2) disqualify the
offeror, or (3) determine that it is otherwise in the best interest
of the United States to contract with the offeror in face of an
organizational conflict after including appropriate conditions
mitigating such conflict.
(e) The refusal to provide the disclosure or representation and
any additional information as required shall result in
disqualification of the offeror for award. The nondisclosure or
misrepresentation of any relevant interest may also result in the
disqualification of the offeror for award, or if such nondisclosure
or misrepresentation is discovered after award, the resulting
contract may be terminated for default. The offeror may also be
disqualified from subsequent related Department contracts, and be
subject to such other remedial action as may be permitted or
provided by law or in the resulting contract. The attention of the
offeror in complying with this provision is directed to 18 U.S.C.
1001.
(f) Depending on the nature of the contract activities, the
offeror may, because of possible organizational conflicts of
interest, propose to exclude specific kinds of work from the
statement of work, unless the solicitation specifically prohibits
such exclusion. Any such proposed exclusion by an offeror shall be
considered by the Department in the evaluation of proposals, and if
the Department considers the proposed excluded work to be an
essential or integral part of the required work, the proposal may be
rejected as unacceptable.
(g) No award shall be made until the disclosure or
representation has been evaluated by the Government. Failure to
provide the disclosure or representation will be deemed to be a
minor informality, and the offeror shall be required to promptly
correct the omission.
952.209-71 [Removed and reserved]
16. Section 952.209-71 is removed and reserved.
17. Section 952.209-72 is amended by revising the section heading
to read as set forth below; by revising the prescription for use of the
clause as set forth below; by revising the title of the clause as set
forth below; by amending the subparagraph designators of paragraph
(b)(2)(i) of the clause to read ``(A),'' ``(B),'' ``(C),'' and ``(D),''
respectively; by revising paragraphs (b)(2)(iii), (c), and (d)(1) of
the clause to read as follows; and paragraph (g) is amended by
replacing the word ``significantly'' with ``meaningfully'' and by
adding the phrase ``in accordance with the instructions of the
contracting officer'' at the end of the paragraph:
952.209-72 Organizational conflicts of interest.
The contracting officer shall include the following clause in all
contracts for evaluation services or activities, technical consulting
and management support services, research and development under the
authority of the Federal Energy Administration Act, and other
appropriate situations in accordance with 909.570-8.
Organizational Conflicts of Interest (Dec. 1994)
* * * * *
(b) * * *
(2) * * *
(iii) The contractor may use technical data it first produces
under this contract for its private purposes consistent with
subparagraphs (b)(2)(i) (A) and (D) of this clause and the patent,
rights in data, and security provisions of this contract.
(c) Disclosure after award. (1) The contractor agrees that, if
changes, including additions, to the relevant facts disclosed by it
prior to award of this contract, occur during the performance of
this contract, it shall make an immediate and full disclosure of
such changes in writing to the contracting officer. Such disclosure
may include a description of any action which the contractor has
taken or proposes to take to avoid or mitigate any resulting
conflict of interest. The Department may, however, terminate the
contract for convenience if it deems such termination to be in the
best interest of the Government.
(2) In the event that the contractor was aware of facts relevant
to the performance of this contract and did not disclose such facts
to the contracting officer, DOE may terminate this contract for
default.
(d) Subcontracts. (1) The contractor shall include this clause,
including this paragraph, in contracts of any tier which involve
performance of evaluation services or activities, or technical
consulting and management support services as those terms are
defined at 48 CFR (DEAR) 909.570-3. The terms `contract,'
`contractor,' and `contracting officer' shall be appropriately
modified to preserve the Government's rights.
* * * * *
PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS
18. The authority citation for part 970 continues to read as
follows:
Authority: Sec. 161 of the Atomic Energy Act of 1954 (42 U.S.C.
2201), sec. 644 of the Department of Energy Organization Act, Pub.
L. 95-91 (42 U.S.C. 7254), sec. 201 of the Federal Civilian Employee
and Contractor Travel Expenses Act of 1985 (41 U.S.C. 420) and sec.
1534 of the Department of Defense Authorization Act, 1986, Pub. L.
99-145 (42 U.S.C. 7256a), as amended.
970.5204-36 [Amended]
19. Section 970.5204-36, Organizational conflicts of interest, is
amended by revising the section heading to read ``Preventing conflicts
of interest in university research'' and by revising the title of the
clause contained therein to read ``Preventing Conflicts of Interest in
University Research (DEC 1994).''
[FR Doc. 94-31496 Filed 12-22-94; 8:45 am]
BILLING CODE 6450-01-P
