[Federal Register Volume 63, Number 69 (Friday, April 10, 1998)]
[Proposed Rules]
[Pages 17800-17811]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9501]
[[Page 17800]]
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DEPARTMENT OF ENERGY
48 CFR Parts 915 and 970
RIN 1991-AB32
Acquisition Regulation; Department of Energy Management and
Operating Contracts and Other Designated Contracts
AGENCY: Department of Energy.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department proposes to amend the Department of Energy
Acquisition Regulation (DEAR) to revise its fee policies and related
procedures for management and operating contracts and other designated
contracts. The proposed rule focuses on the use of fees to ensure that
they: are reasonable and commensurate with performance, business and
cost risks; create and implement tailored incentives for performance
based management contracts; are structured to attract best business
partners; and afford flexibility to provide incentives to contractors
to perform better at less cost.
DATES: Comments must be received by 4:30 p.m. local time on or before
June 9, 1998. A workshop will be held on May 19, 1998, beginning at
9:30 a.m. local time at the address listed below. Requests to speak at
the workshop or comments you would like specifically addressed should
be received by 4:30 p.m. local time on May 11, 1998. Later requests
will be accommodated to the extent practicable.
ADDRESSES: All comments (three copies), as well as requests to speak at
the workshop or issues you would like addressed, should be submitted
to: Stephen Michelsen, Office of Contract and Resource Management (HR-
53), Department of Energy, 1000 Independence Avenue, SW, Washington,
D.C. 20585, (202) 586-1368, (202) 586-9356 (facsimile),
stephen.michelsen@hq.doe.gov (Internet).
The workshop will be held at Department of Energy, 1000
Independence Avenue, SW, Room 8E089, Washington, DC.
The administrative record regarding this rulemaking that is on file
for public inspection, including a copy of the transcript of the
workshop and any additional public comments received, is located in the
Department's Freedom of Information Public Reading Room, Room 1E-190,
1000 Independence Avenue, SW, Washington, DC 20585.
FOR FURTHER INFORMATION CONTACT: Stephen Michelsen, Office of Contract
and Resource Management (HR-53), Department of Energy, 1000
Independence Avenue, SW, Washington, D.C. 20585, (202) 586-1368; (202)
586-9356 (facsimile); stephen.michelsen@hq.doe.gov (Internet).
SUPPLEMENTARY INFORMATION:
I. Background and Analysis
II. Public Comments
III. Procedural Requirements
A. Review Under Executive Order 12866
B. Review Under Executive Order 12988
C. Review Under the Regulatory Flexibility Act
D. Review Under the Paperwork Reduction Act
E. Review Under Executive Order 12612
F. Review Under the National Environmental Policy Act
IV. Opportunities for Public Workshop
I. Background and Analysis
The proposed rule would amend DEAR Subpart 970.1509 to revise fee
policies and related procedures for management and operating contracts
and other designated contracts. Among other things, the proposed rule
complements the Department's June 27, 1997 (62 FR 34842) rulemaking
which implemented a number of recommendations to improve its management
and operating contracts. One of these recommendations involved the
adoption of performance-based contracting concepts. Since the
initiation of its contract reform initiatives, the Department has
tested a number of approaches to conform its use of fee to such
concepts. An additional element of contract reform was the adoption of
cost allowability and liability provisions which placed greater
financial risk on both for profit and nonprofit contractors. This
proposed rule also reflects these changes. The amendments to DEAR
proposed by this action are intended to ensure that fees are:
reasonable and commensurate with contract type and associated
performance and financial risks; structured to attract the best
organizations; and effectively used in conjunction with performance-
based management contract concepts as implemented by final rule dated
June 27, 1997 (62 FR 34842).
Proposed revisions to Subpart 970.1509 would: update fee schedules
based on the Bureau of Labor Statistics Producer Price Index for
Industrial Commodities to reflect the effects of inflation since 1991
(Sections 915.971-5 and 970.1509-5); add a new fee schedule for
environmental management work effort (Section 970.1509-5); redefine and
increase facility categories consistent with changes in work at major
facilities (Section 970.1509-8); eliminate management allowance for
educational institutions and place limitations on both fixed fee and
total available fee, including special limits on fee available to
nonprofit organizations (Section 970.1509-2); recognize and provide
guidance on the availability of various contract types (Section
970.1509-3); provide a preference for those contract types that
appropriately maximize the incentives for superior performance (Section
970.1509-3); define criteria for the use of multiple fee approaches
(Section 970.1509-3); correlate incentive-fee type arrangements to
Federal Acquisition Regulation guidance (Section 970.1509-3); require
that fee amounts tied to specific accomplishments or work activities
reflect the value of that work to the Department (Section 970.1509-4);
provide a preference for contract types under which all fee will be
based on performance (Section 970.1509-3); require the maximum
practical use of outcome oriented performance expectations consistent
with performance based management contract concepts (Section 970.1509-
3); eliminate references to fees for management and operating contracts
for support services; provide specialized policies for nonprofit
federally funded research and development centers, including those run
by educational institutions (Section 970.1509-2); restructure
considerations and techniques for determining fixed fees and total
available fee (Sections 970.1509-4 and 970.1509-8); delete a specified
contractor performance grading scale, Fee Conversion Table, and replace
it with a requirement for a site specific method of rating the
contractor's performance of the contract requirements and determining
fee earned (Section 970.1509-8); provide a new clause to establish a
threshold for the payment of any fee to ensure, among other things,
that performance in the critical area of environment, safety and health
is not compromised by any other performance objective (Section
970.5204-XX); and prescribe a new contract clause to address cost
reduction proposal programs based on guidance in DEAR 970.1509 (Section
970.5204-YY).
II. Public Comments
Interested persons are invited to participate by submitting data,
views, or arguments with respect to the DEAR amendments set forth in
this notice. Three copies of written comments should be submitted to
the address indicated in the ADDRESSES section of this notice. Comments
on the major items identified in the ``PUBLIC
[[Page 17801]]
WORKSHOP'' section should be identified on separate pages, with the
name of the item at the top of each page, e.g., comments regarding the
Department's fee policy as it applies to the use of multiple contract
types. In addition, it is requested that you provide a copy of your
comments on a WordPerfect 6.1 or ASCII diskette. Comments may be sent
to the Internet address in the ADDRESSES section of this notice instead
of the written copies and diskette, provided they are transmitted in a
WordPerfect 6.1 compatible format and include the name, title,
organization, postal address, and Internet address with the text of the
comments. All comments received will be available for public inspection
in the Department's Freedom of Information Public Reading Room, 1E-190,
Forrestal Building, 1000 Independence Avenue, SW., Washington, D.C.
20585, between the hours of 9 a.m. and 4 p.m., Monday through Friday,
except Federal holidays. All written comments received on or before the
date specified in the beginning of this notice and all other relevant
information will be considered by the Department before taking final
action. Comments received after that date will be considered to the
extent that time allows. Any person submitting information which that
person believes to be confidential and which may be exempt from public
disclosure should submit one complete copy, as well as an additional
copy from which the information claimed to be confidential has been
deleted. The Department reserves the right to determine the
confidential status of the information or data and to treat it
according to its determination. The Department's generally applicable
procedures for handling information which has been submitted in a
document and may be exempt from public disclosure are set forth in 10
CFR 1004.11.
III. Procedural Requirements
A. Review Under Executive Order 12866
This regulatory action has been determined not to be a
``significant regulatory action'' under Executive Order 12866,
``Regulatory Planning and Review,'' (58 FR 51735, October 4, 1993).
Accordingly, this action was not subject to review, under that
Executive Order, by the Office of Information and Regulatory Affairs of
the Office of Management and Budget (OMB).
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) and section 3(b) of Executive Order 12988
specifically requires that Executive agencies make every reasonable
effort to ensure that the regulation: (1) clearly specifies the
preemptive effect, if any; (2) clearly specifies any effect on existing
Federal law or regulation; (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction;
(4) specifies the retroactive effect, if any; (5) adequately defines
key terms; and (6) addresses other important issues affecting clarity
and general draftsmanship under any guidelines issued by the Attorney
General. Section 3(c) of Executive Order 12988 requires Executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to determine whether they are met or it
is unreasonable to meet one or more of them. DOE has completed the
required review and determined that, to the extent permitted by law,
the proposed regulations meet the relevant standards of Executive Order
12988.
C. Review Under the Regulatory Flexibility Act
This proposed 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 that is likely to have a significant
economic impact on a substantial number of small entities. Based on the
history of the Department and the requirements contained in its
management and operating contracts, the impact of the proposed rule
will be limited to large businesses not subject to the Regulatory
Flexibility Act, as small businesses generally do not have the
resources required to manage and operate the complex activities at the
Department's largest sites. Based on this review the Department
certifies that this proposed rule will not have a significant economic
impact on a substantial number of small entities and, therefore, no
regulatory flexibility analysis has been prepared.
D. Review Under the Paperwork Reduction Act
No new information collection or record keeping requirements are
imposed by this proposed rule. Accordingly, no Office of Management and
Budget clearance is required under the Paperwork Reduction Act of 1980
(44 U.S.C. 3501, et seq.).
E. Review Under Executive Order 12612
Executive Order 12612, entitled ``Federalism,'' (52 FR 41685,
October 30, 1987), requires that regulations, rules, legislation, and
any other policy actions be reviewed for any substantial direct effects
on States, on the relationship between the Federal Government and the
States, or in the distribution of power and responsibilities among
various levels of government. If there are sufficient substantial
direct effects, then the Executive Order requires preparation of a
federalism assessment to be used in all decisions involved in
promulgating and implementing a policy action. The Department has
determined that this proposed rule will not have a substantial direct
effect on the institutional interests or traditional functions of
States.
F. Review Under the National Environmental Policy Act
Pursuant to the Council on Environmental Quality Regulations (40
CFR 1500-1508), the Department has established guidelines for its
compliance with the provisions of the National Environmental Policy Act
(NEPA) of 1969 (42 U.S.C. 4321, et seq.). Pursuant to Appendix A of
Subpart D of 10 CFR 1021, National Environmental Policy Act
Implementing Procedures (Categorical Exclusion A6), the Department has
determined that this proposed rule is categorically excluded from the
need to prepare an environmental impact statement or environmental
assessment.
IV. Opportunities for Public Workshop
For significant proposals to revise procurement regulations, DOE
has a practice of providing an opportunity for affected contractors,
potential offerors, and other interested persons to be heard. In this
rulemaking, a public workshop will be conducted on the proposed
regulatory amendments rather than a standard public hearing. There are
issues involved in this rulemaking that are both significant and
complex. DOE believes that the resolution of these issues, as well as
the overall quality of the final rule, will be enhanced by an
interactive exchange of ideas conducted in a more informal conference
style setting. The agenda for the workshop will include, at a minimum,
the following topics:
1. The use of multiple contract types within the structure of a
cost-plus-
[[Page 17802]]
award-fee contract. The Department believes that management and
operating contracts may be more efficiently and effectively performed
if there is latitude to utilize multiple contract types within the
structure of a cost-plus-award-fee contract. Therefore, the revised
policy allows for management and operating contracts, or portions of
these contracts to be awarded on a cost-plus-incentive-fee (CPIF),
fixed-price incentive (FPI), or firm-fixed-price (FFP) basis or
combination thereof. Comments are specifically solicited regarding:
a. the appropriateness of requiring that the preconditions set
forth in FAR 16.1 be met, as appropriate, for the contract type
employed;
b. the appropriateness of employing several contract types,
(assuming the contractor has the ability to segregate and track costs
by task); and
c. the impact on fee of using several contract types.
2. The approach which places all fee at performance risk. The
Department believes that with the introduction of performance based
incentives into its award fee management and operating contracts, that
all fee should be tied to performance risk. Comments are specifically
solicited regarding: the risk posed to contractors by not having any
base (fixed) fee amount; and the type and magnitude of potential costs
which would be incurred by the contractor if no fee were earned.
3. The policy, as it applies to contracts with nonprofit
organizations including educational institutions. The Department, while
generally preferring to minimize the amount of fee available for the
operation of its laboratories, believes that fee considerations should
include the nature and extent of financial or other liability or risk
assumed under the contract and the utility of fee as a performance
incentive. Any fee exceeding that associated with liability risk should
be tied to the organizations's performance. Comments are specifically
solicited regarding:
a. the appropriateness of fee in contracts with nonprofit
organizations or educational institutions;
b. limiting the fixed fee or base fee to an amount that reflects
the cost risk associated with the liability assumed by the
organization;
c. the ability of an organization to identify and support the
potential cost risk associated with its assumption of liability; and
d. the appropriateness of tying fee to performance.
4. An alternative to the proposed policy as described in item 3
above. The alternative under consideration would establish a fee policy
for the operators of the Department's FFRDCs which would not
distinguish between the types of business organizations operating them.
Consideration is being given to limiting the fee to a minimum amount
which recognizes that organizations may incur costs and risks in doing
business with the government which are not reimbursed. Comments are
specifically solicited regarding:
a. establishing a section of the policy which applies solely to the
Department's FFRDCs in contrast to all of its other operations;
b. the principle of setting a maximum allowable fee that is the
same for any entity which would operate a FFRDC;
c. minimizing the fee to an amount which recognizes that
organizations may incur costs and risks in doing business with the
government which are not reimbursed; and
d. the implications of an organization's tax status on the
foregoing.
5. The amount of fee necessary to attract the most capable
contractors. The Department, with this revised fee policy, is
attempting to provide meaningful incentives for contractors to perform
better at less cost. In addition, the Department is hoping to enlarge
the pool of contractors who are available to help DOE accomplish its
important and challenging missions. For these reasons, the Department
has created a fee policy which is intended to offer contractors
reasonable levels of total available fee relative to the work to be
performed and the contractor resources brought to the work. Comments
are specifically solicited on the Department's approach to the
determination of fee objectives and amounts specifically with regard to
the following elements:
a. the use of fee schedules;
b. the use of significant factors and facility/task category
factors; and
c. the calculation of total available fee.
6. The application of the Conditional Payment of Fee or Incentives
clause. As a general rule, performance requirements that do not lend
themselves to a specific incentive fee, should be included in the award
fee. However, there are certain performance requirements that are so
fundamental to the accomplishment of the overall mission objectives
that meeting expected levels of performance should be a prerequisite to
earning fee. In such cases, it may be appropriate to condition the
payment of any earned fee on the contractor's satisfactory performance
of these requirements. The proposed clause allows any otherwise earned
fee to be adjusted downward based on a lack of or failure to comply
with an environmental, safety, and health plan, or the occurrence of a
catastrophic event, or poor technical performance or poor cost
performance. Comments are specifically solicited including those
specifically regarding:
a. the need for such a clause in a performance based contract;
b. the relationship between primarily objective performance
incentives and a clause which allows the subjective adjustment to fee
earned based on the occurrence of specified events; and
c. alternatives by which the Department can ensure acceptable
performance of work effort under its management and operating contracts
not specifically tied to an incentive.
DOE is interested in receiving at the workshop comments and views
of interested persons concerning: (1) The above-listed topics; (2) the
proposed approach contained in this proposed rulemaking; and (3)
possible alternatives to the approach contained in this proposed
rulemaking. DOE is also interested in receiving views concerning other
topics relevant to the proposed regulatory amendments that workshop
participants believe should be discussed.
Members of the public interested in participating actively in the
workshop are invited to submit requests to speak to the FOR FURTHER
INFORMATION CONTACT identified at the beginning of this notice. Those
who make such a request are invited to suggest topics for inclusion in
the workshop agenda. DOE requests that participants who wish to make
brief oral presentations provide a written version or summary of their
views for inclusion in the rulemaking record. As time permits, there
will be an opportunity to engage in a general discussion of the topics
raised during the workshop.
The meeting will be conducted conference-style by a DOE official. A
record will be made of the proceedings of the workshop. A copy of the
minutes will be placed in the record available for public inspection in
the DOE Freedom of Information Public Reading Room at the address
indicated in the ADDRESSES section. Since this proceeding is not a
formal negotiated rulemaking, DOE officials will not seek a consensus
of workshop participants on how to resolve issues in principle or on
the specific wording of changes to the proposed regulatory text.
Otherwise, DOE welcomes public participation in its policy making
process and hopes that the workshop will be well attended.
List of Subjects in 48 CFR Parts 915 and 970
Government procurement.
[[Page 17803]]
Issued in Washington, D.C., on April 3, 1998.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.
For the reasons set out in the preamble, Chapter 9 of Title 48 of
the Code of Federal Regulations is proposed to be amended as set forth
below.
PART 915--CONTRACTING BY NEGOTIATION
1. The authority citation for Part 915 continues to read as
follows:
Authority: 42 U.S.C. 7254; 40 U.S.C. 486(c).
2. Section 915.971-5 is amended by revising paragraphs (d), (f),
and (h) to read as follows:
915.971-5 Fee schedules.
* * * * *
(d) The following schedule sets forth the base for construction
contracts:
Construction Contracts Schedule
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Increase
Fee base (dollars) Fee (dollars) Fee (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Up to $1 Million................................................ .............. .............. 5.47
1,000,000....................................................... 54,700 5.47 3.88
3,000,000....................................................... 132,374 4.41 3.28
5,000,000....................................................... 198,014 3.96 2.87
10,000,000...................................................... 341,328 3.41 2.60
15,000,000...................................................... 471,514 3.14 2.20
25,000,000...................................................... 691,408 2.77 1.95
40,000,000...................................................... 984,600 2.46 1.73
60,000,000...................................................... 1,330,304 2.22 1.56
80,000,000...................................................... 1,643,188 2.05 1.41
100,000,000..................................................... 1,924,346 1.92 1.26
150,000,000..................................................... 2,552,302 1.70 1.09
200,000,000..................................................... 3,094,926 1.55 0.80
300,000,000..................................................... 3,897,922 1.30 0.68
400,000,000..................................................... 4,581,672 1.15 0.57
500,000,000..................................................... 5,148,364 1.03 ..............
Over $500 Million 5,148,364 .............. 0.57
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* * * * *
(f) The following schedule sets forth the base for construction
management contracts:
Construction Management Contracts Schedule
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Increase
Fee base (dollars) Fee (dollars) Fee (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Up to $1 Million................................................ .............. .............. 5.47
1,000,000....................................................... 54,700 5.47 3.88
3,000,000....................................................... 132,374 4.41 3.28
5,000,000....................................................... 198,014 3.96 2.87
10,000,000...................................................... 341,328 3.41 2.60
15,000,000...................................................... 471,514 3.14 2.20
25,000,000...................................................... 691,408 2.77 1.95
40,000,000...................................................... 984,600 2.46 1.73
60,000,000...................................................... 1,330,304 2.22 1.56
80,000,000...................................................... 1,643,188 2.05 1.41
100,000,000..................................................... 1,924,346 1.92 1.26
150,000,000..................................................... 2,552,302 1.70 1.09
200,000,000..................................................... 3,094,926 1.55 0.80
300,000,000..................................................... 3,897,922 1.30 0.68
400,000,000..................................................... 4,581,672 1.15 0.57
500,000,000..................................................... 5,148,364 1.03 ..............
Over $500 Million............................................... 5,148,364 .............. 0.57
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* * * * *
(h) The schedule of fees for consideration of special equipment
purchases and for consideration of the subcontract program under a
construction management contract is as follows:
Special Equipment Purchases/Subcontract Work Schedule
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Increase
Fee base (dollars) Fee (dollars) Fee (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Up to $1 Million................................................ .............. .............. 1.64
1,000,000....................................................... 16,410 1.64 1.09
[[Page 17804]]
2,000,000....................................................... 27,350 1.37 0.93
4,000,000....................................................... 45,948 1.15 0.77
6,000,000....................................................... 61,264 1.02 0.71
8,000,000....................................................... 75,486 0.94 0.66
10,000,000...................................................... 88,614 0.89 0.61
15,000,000...................................................... 119,246 0.79 0.53
25,000,000...................................................... 171,758 0.69 0.47
40,000,000...................................................... 242,868 0.61 0.43
60,000,000...................................................... 329,294 0.55 0.39
80,000,000...................................................... 406,968 0.51 0.37
100,000,000..................................................... 480,266 0.48 0.28
150,000,000..................................................... 619,204 0.41 0.23
200,000,000..................................................... 732,980 0.37 0.13
300,000,000..................................................... 867,542 0.29 ..............
Over $300 Million............................................... 867,542 .............. 0.13
----------------------------------------------------------------------------------------------------------------
Section 915.972 is amended by revising the introductory text of
paragraph (a) to read as follows:
915.972 Special considerations for cost-plus-award-fee contracts.
(a) When a contract is to be awarded on a cost-plus-award-fee basis
in accordance with 48 CFR 916.404-2, several special considerations are
appropriate. Fee objectives for management and operating contracts or
other site management contracts as determined by the Procurement
Executive, including those using the Construction, Construction
Management, or Special Equipment Purchases/Subcontract Work schedules
from 48 CFR 915.971-5, shall be developed pursuant to the procedures
set forth in 48 CFR 970.1509-8. Fee objectives for other cost-plus-
award-fee contracts shall be developed as follows:
* * * * *
PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS
4. The authority citation for Part 970 continues to read as
follows:
Authority: Sec. 161 of the Atomic Energy Act of 1954 (42 U.S.C.
2201), sec. 644 of the Department of Energy Organization Act, Public
Law 95-91 (42 U.S.C. 7254).
5. Section 970.1509, including subsections 970.1509-1 through
970.1509-8, is revised to read as follows:
970.1509 Fees for management and operating contracts.
970.1509-1 Fee policy.
970.1509-2 Special considerations: nonprofit organizations.
970.1509-3 Types of Contracts.
970.1509-4 General considerations and techniques for determining
fixed fees.
970.1509-5 Calculating fixed fee.
970.1509-6 Fee base.
970.1509-7 Special equipment purchases.
970.1509-8 Specific considerations: cost-plus-award-fee.
970.1509-9 Special considerations: fee limitations.
970.1509-10 Documentation.
970.1509-11 Solicitation provision and contract clauses.
970.1509 Fees for management and operating contracts.
This section sets forth the Department's policies on fees for
management and operating contracts and may be applied to other site
management contracts as determined by the Procurement Executive or
designee.
970.1509-1 Fee policy.
(a) DOE management and operating contractors may be paid a fee in
accordance with the requirements of this part.
(b) Fee objectives and amounts are to be determined for each
contract. Standard fees or across the board agreements will not be used
or made. Due to the nature of funding management and operating
contracts, it is anticipated that fee shall be established in
accordance with the funding cycle; however, with the prior approval of
the Procurement Executive or designee, a longer period may be used
where necessary to incentivize performance objectives that span funding
cycles or to optimize cost reduction efforts.
(c) Fee amounts payable shall be established in accordance with
this part. Amounts payable shall not exceed maximum amounts derived
from the appropriate fee schedule (and classification factor, if
applicable) unless approved in advance by the Procurement Executive or
designee. In no event shall any fee exceed statutory limits imposed by
41 U.S.C. 254(b).
(d) Prior to the issuance of a competitive solicitation or the
initiation of negotiations for an extension of an existing contract,
the HCA shall coordinate the maximum available fee as allowed by 48 CFR
part 970 and the fee amount targeted for negotiation, if less, with the
procurement executive. Solicitations shall identify maximum available
fee under the contract. Offerors are invited to propose fee less than
the maximum available.
(e) When a contract subject to this part requires a contractor to
use its own facilities or equipment, or other resources to make its own
cost investment for contract performance, (e.g., when there is no
letter-of-credit financing) consideration may be given subject to
approval by the Procurement Executive or designee, to increasing the
fee amount above that otherwise provided by this part.
(f) Multiple fee arrangements may be used in accordance with 48 CFR
970.1509-3.
970.1509-2 Special considerations: nonprofit organizations.
(a) A nonprofit organization is a business entity:
(1) Which operates exclusively for charitable, scientific, or
educational purposes;
(2) Whose earnings do not benefit any private shareholder or
individual;
(3) Whose activities do not involve influencing legislation or
political campaigning for any candidate for public office; and
(4) Which is exempted from Federal income taxation under section
501 of the Internal Revenue Code (title 26, United States Code).
(b) For nonprofit organizations, the contracting officer:
(1) Should consider whether any fee is appropriate. Considerations
should include:
[[Page 17805]]
(i) The nature and extent of financial or other liability or risk
assumed or to be assumed under the contract;
(ii) The proportion of retained earnings (as established under
generally accepted accounting methods) that relates to DOE contracted
effort;
(iii) Facilities capital or capital equipment acquisition plans;
(iv) Other funding needs, to include contingency funding, working
capital funding, and provision for funding unreimbursed costs deemed
ordinary and necessary; and
(v) The utility of fee as a performance incentive.
(2) In the event fee is considered appropriate, shall determine the
amount of fee in accordance with this part.
(i) Fee shall be limited to that amount necessary to reflect the
need for fee based on the applicable considerations in 48 CFR 1509-
2(b)(1).
(ii) If only a cost-plus-fixed-fee type contract is appropriate,
the fee shall not exceed the lesser of: the cost risk associated with
liabilities that the contractor assumes; or 75% of the fixed fee that
would be calculated per 48 CFR 970.1509-4. If a cost-plus-award-fee
type contract is appropriate, the total available fee shall not exceed
75% of the fee calculated per 48 CFR 970.1509-8, with any base fee not
exceeding the cost risk associated with liabilities that the contractor
assumes and all remaining fee associated with performance.
(iii) If the nonprofit organization is a federally funded research
and development center operated by an educational institution, the
contractor's use of fee may be restricted.
970.1509-3 Types of contracts.
(a) Contract types suitable for management and operating contracts
may include cost, cost-plus-fixed-fee, cost-plus-award-fee, and under a
multiple fee arrangement, cost-plus-incentive-fee, fixed-price
incentive, or firm-fixed-price. See FAR 16.1.
(b) Consistent with the concept of a performance based management
contract, those contract types which incentivize performance and cost
control are preferred over a cost-plus-fixed-fee arrangement.
Accordingly, a cost-plus-fixed-fee contract may only be used when
approved in advance by the Procurement Executive or designee.
(c) A cost-plus-award-fee contract is generally the appropriate
contract type for a management and operating contract.
(1) The attainment of acquisition objectives generally will be
enhanced by using a cost-plus-award-fee contract to effectively
motivate the contractor to exceptional performance and to provide the
Department with flexibility to evaluate actual performance and the
conditions under which it was achieved. Also, it may not be feasible to
devise effective predetermined objective incentive targets applicable
to cost, technical performance, or schedule for work activities under
other types of contracts.
(2) The construct of fee for a cost-plus-award-fee management and
operating contract is that total available fee will equal a base fee
amount and a performance fee amount. The base fee amount will typically
equal zero unless otherwise approved by the Procurement Executive or
designee. The performance fee amount will consist of an incentive fee
component for objective performance requirements, an award fee
component for subjective performance requirements, or both.
(3) In a cost-plus-award-fee type contract any base fee amount is
fixed at inception of the contract and the performance fee amount the
contractor may earn, in whole or in part during performance, is
established sufficient to motivate performance excellence. However,
consistent with concepts of performance based contracting, it is
Departmental policy to place all fee at risk based on performance.
Accordingly, a base fee amount will be available only where approved in
advance by the Procurement Executive or designee, except in the case of
a nonprofit organization, where a base amount reflecting financial risk
assumed under the contract may be used.
(d) Consistent with performance based contracting concepts,
performance objectives and criteria related to performance fee should
be as clearly defined as possible, and where feasible expressed in
terms of desired performance results or outcomes. Specific measures for
determining performance achievement may be used.
(e) Because the nature of the work performed under a management and
operating contract may be complex and varied, opportunities may exist
to utilize multiple contract types. The contracting officer should
apply that contract type most appropriate to the work component,
consistent with FAR 16.1. However, such multiple fee arrangements must
conform to the requirements of FAR part 16, and where appropriate to
the type, must be supported by negotiated costs subject to the
requirements of the Truth in Negotiations Act, and require a pre-
negotiation memorandum and a plan describing how each contract type
will be administered.
(f) A clause providing for cost reduction incentives which result
in quantifiable cost reductions for contractor proposed changes to a
design, process, or method that has an established baseline, is
defined, and is subject to a formal control procedure may be included
in management and operating contracts. Proposed changes must be
initiated by the contractor, must be innovative, applied to a specific
project or program, and not otherwise be included in an incentive under
the contract. Such cost reduction incentives do not constitute fee and
are not subject to statutory or regulatory fee limitations, however,
they shall be subject to all appropriate requirements set forth in this
section.
(g) Operations and field offices shall take the lead in developing
and implementing the most appropriate pricing arrangement or cost
reduction incentive for the requirements. Pricing arrangements which
provide incentives for performance and cost control are preferred over
those that do not. The operations and field offices are to ensure the
necessary resources and infrastructure exist within both the
contractor's and government's organizations to prepare, evaluate, and
administer the pricing arrangement or cost reduction incentive prior to
their implementation.
970.1509-4 General considerations and techniques for determining
fixed fees.
(a) The Department's fee policy recognizes that fee is remuneration
to contractors for the entrepreneurial function of organizing and
managing resources, the use of their resources (including capital
resources), and their assumption of the risk that all incurred costs
(operating and capital) may not be reimbursed.
(b) Use of a purely cost-based structured approach for determining
fee objectives and amounts for typical DOE management and operating
contracts is inappropriate considering the limited level of contractor
cost, capital goods, and operating capital outlays for performance of
such contracts. Instead of being solely cost-based, the desirable
approach calls for a structure that allows judgmental evaluation of
eight significant factors, as outlined in this paragraph (b) in order
of importance, and the assignment of appropriate fee values (subject to
the limitations on fixed fee in 48 CFR 970.1509-5):
(1) Management risk relating to performance, including:
(i) The composite risk and complexity of principal work tasks
required to do the job;
(ii) The labor intensity of the job;
[[Page 17806]]
(iii) The special control problems; and
(iv) The advance planning, forecasting and other such requirements;
(2) The presence or absence of financial risk, including the type
and terms of the contract;
(3) The relative difficulty of work, including specific performance
objectives, environmental, safety and health concerns, and the
technical and administrative knowledge, and skill necessary for work
accomplishment and experience;
(4) Degree and amount of contract work required to be performed by
and with the contractor's own resources, as compared to the nature and
degree of subcontracting and the relative complexity of subcontracted
efforts, subcontractor management and integration;
(5) Size and operation (number of locations, plants, differing
operations, etc.);
(6) Influence of alternative investment opportunities available to
the contractor (i.e., the extent to which undertaking a task for the
Government displaces a contractor's opportunity to make a profit with
the same staff and equipment in some other field of activity);
(7) Benefits which may accrue to the contractor from gaining
experience and knowledge of how to do something, from establishing or
enhancing a reputation, or from being enabled to hold or expand a staff
whose loyalties are primarily to the contractor; and
(8) Other special considerations, including support of Government
programs such as those relating to small and minority business
subcontracting, energy conservation, etc.
(c) The total fee objective for a particular fixed fee negotiation
is established by evaluating the factors in paragraph (b) of this
section, assigning fee values to them, and totaling the resulting
amounts (subject to limitations on total fixed fee in 48 CFR 970.1509-
5).
970.1509-5 Calculating fixed fee.
(a) In recognition of the complexities of the fee determination
process, and to assist in promoting a reasonable degree of consistency
and uniformity in its application, the following fee schedules set
forth the maximum amounts of fee that contracting activities are
allowed to award for a particular fixed fee transaction.
(b) Fee schedules representing the maximum allowable fixed fee
available under management and operating contracts have been
established for the following management and operating contract
efforts:
(1) Production;
(2) Research and Development; and
(3) Environmental Management.
(c) The schedules are:
Production Efforts
----------------------------------------------------------------------------------------------------------------
Increase
Fee base (dollars) Fee (dollars) Fee (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Up to $1 Million................................................ .............. .............. 7.66
1,000,000....................................................... 76,580 7.66 6.78
3,000,000....................................................... 212,236 7.07 6.07
5,000,000....................................................... 333,670 6.67 4.90
10,000,000...................................................... 578,726 5.79 4.24
15,000,000...................................................... 790,962 5.27 3.71
25,000,000...................................................... 1,161,828 4.65 3.35
40,000,000...................................................... 1,663,974 4.16 2.92
60,000,000...................................................... 2,247,076 3.75 2.57
80,000,000...................................................... 2,761,256 3.45 2.34
100,000,000..................................................... 3,229,488 3.23 1.45
150,000,000..................................................... 3,952,622 2.64 1.12
200,000,000..................................................... 4,510,562 2.26 0.61
300,000,000..................................................... 5,117,732 1.71 0.53
400,000,000..................................................... 5,647,228 1.41 0.45
500,000,000..................................................... 6,097,956 1.22 ..............
Over $500 Million............................................... 6,097,956 .............. 0.45
----------------------------------------------------------------------------------------------------------------
Research and Development Efforts
----------------------------------------------------------------------------------------------------------------
Increase
Fee base (dollars) Fee (dollars) Fee (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Up to $1 Million................................................ .............. .............. 8.42
1,000,000....................................................... 84,238 8.42 7.00
3,000,000....................................................... 224,270 7.48 6.84
5,000,000....................................................... 361,020 7.22 6.21
10,000,000...................................................... 671,716 6.72 5.71
15,000,000...................................................... 957,250 6.38 4.85
25,000,000...................................................... 1,441,892 5.77 4.22
40,000,000...................................................... 2,075,318 5.19 3.69
60,000,000...................................................... 2,813,768 4.69 3.27
80,000,000...................................................... 3,467,980 4.33 2.69
100,000,000..................................................... 4,006,228 4.01 1.69
150,000,000..................................................... 4,850,796 3.23 1.14
200,000,000..................................................... 5,420,770 2.71 0.66
300,000,000..................................................... 6,083,734 2.03 0.58
400,000,000..................................................... 6,667,930 1.67 0.50
500,000,000..................................................... 7,172,264 1.43 ..............
Over $500 Million............................................... 7,172,264 .............. 0.50
----------------------------------------------------------------------------------------------------------------
[[Page 17807]]
Environmental Management Efforts
----------------------------------------------------------------------------------------------------------------
Increase
Fee base (dollars) Fee (dollars) Fee (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Up to $1 Million................................................ .............. .............. 7.33
1,000,000....................................................... 73,298 7.33 6.49
3,000,000....................................................... 203,120 6.77 5.95
5,000,000....................................................... 322,118 6.44 5.40
10,000,000...................................................... 592,348 5.92 4.83
15,000,000...................................................... 833,654 5.56 4.03
25,000,000...................................................... 1,236,340 4.95 3.44
40,000,000...................................................... 1,752,960 4.38 3.29
60,000,000...................................................... 2,411,890 4.02 3.10
80,000,000...................................................... 3,032,844 3.79 2.49
100,000,000..................................................... 3,530,679 3.53 1.90
150,000,000..................................................... 4,479,366 2.99 1.48
200,000,000..................................................... 5,219,924 2.61 1.12
300,000,000..................................................... 6,337,250 2.11 0.88
400,000,000..................................................... 7,219,046 1.80 0.75
500,000,000..................................................... 7,972,396 1.59 0.58
750,000,000..................................................... 9,423,463 1.26 0.55
1,000,000,000................................................... 10,786,788 1.08 ..............
Over $1.0 Billion............................................... 10,786,788 .............. 0.55
----------------------------------------------------------------------------------------------------------------
970.1509-6 Fee base.
(a) The fee base is an estimate of necessary allowable costs, with
some exclusions. It is used in the fee schedules to determine the
maximum fee for a fixed fee contract. That portion of the fee base that
represents the cost of the Production, Research and Development, or
Environmental Management work to be performed, shall be exclusive of:
the cost of source and special nuclear materials; estimated costs of
land, buildings and facilities whether to be leased, purchased or
constructed; depreciation of Government facilities; and any estimate of
effort for which a separate fee is to be negotiated.
(b) Such portion of the fee base, in addition to the adjustments in
paragraph (a) of this section, shall exclude:
(1) Any part of the following types of costs which are of such
magnitude or nature as to distort the technical and management effort
actually required of the contractor:
(i) Estimated cost of capital equipment (other than special
equipment) which the contractor procures by subcontract;
(ii) Estimated cost or price of subcontracts and other major
contractor procurements, however, up to 80 percent of such costs may be
included if the contracting officer determines that there are unique
circumstances involving extraordinary management effort required to
manage subcontract activities; and
(iii) Other similar costs.
(2) Special equipment as defined in 48 CFR 970.1509-7;
(3) Estimated cost of Government-furnished property, services and
equipment;
(4) All estimates of costs not directly incurred by or reimbursed
to the operating contractor;
(5) Estimates of home office or corporate general and
administrative expenses that shall be reimbursed through the contract;
(6) Estimates of any independent research and development cost or
bid and proposal expenses that may be approved under the contract;
(7) Any cost of work funded with uncosted balances previously
included in a fee base of this or any other contract; and
(8) Cost of rework attributable to the contractor.
(c) In calculating the fee amounts associated with the Production,
Research and Development, or Environmental Management work to be
performed, the fee base is to be allocated to the category reflecting
the work to be performed and the appropriate fee schedule utilized.
(d) The portion of the fee base associated with the Production,
Research and Development, or Environmental Management work to be
performed and the associated schedules in this part are not intended to
reflect the portion of the fee base or related compensation for unusual
architect-engineer, construction services, or special equipment
provided by the management and operating contractor. Architect-engineer
and construction services are normally covered by special agreements
based on the policies applying to architect-engineer or construction
contracts. Fees paid for such services shall be calculated using the
provisions of 48 CFR 915.9 relating to architect-engineer or
construction fees. Fees paid for such purchases shall be in addition to
the operating fees calculated for the Production, Research and
Development, or Environmental Management work to be performed. Special
equipment purchases shall be addressed in accordance with the
provisions of 48 CFR 970.1509-7 relating to Special equipment.
970.1509-7 Special equipment purchases.
(a) Special equipment is sometimes procured in conjunction with
management and operating contracts. When a contractor procures special
equipment, the DOE negotiating official shall determine separate fees
for the equipment and use the schedule in 48 CFR 915.971-5(h).
(b) In determining appropriate fees, factors such as complexity of
equipment, ratio of procurement transactions to volume of equipment to
be purchased and completeness of services should be considered. Where
possible, the reasonableness of the fees should be checked by their
relationship to actual costs of comparable procurement services.
(c) The maximum allowable fee for such services shall not exceed
the fee schedule set forth in 48 CFR 915.971-5(h) for such services as
performed by construction contractors. The fee is based on the
estimated price of the equipment being purchased.
(d) For purposes of this part, special equipment is equipment for
which the purchase price is of such a magnitude compared to the cost of
installation as to distort the amount of technical direction and
management effort required of the contractor. Special
[[Page 17808]]
equipment is of a nature that requires less management attention. When
a contractor procures special equipment, the DOE negotiating official
shall determine separate fees for the equipment using the schedule in
48 CFR 915.971-5(h). The determination of specific items of equipment
in this category requires application of judgment and careful study of
the circumstances involved in each project. This category of equipment
would generally include:
(1) Major items of prefabricated process or research equipment; and
(2) Major items of preassembled equipment such as packaged boilers,
generators, machine tools, and large electrical equipment. In some
cases, it would also include special apparatus or devices such as
reactor vessels and reactor charging machines.
970.1509-8 Special considerations: cost-plus-award-fee.
(a) When a management and operating contract is to be awarded on a
cost-plus-award-fee basis, several special considerations are
appropriate.
(b) All performance incentives identified under these contracts are
funded from total available fee, which consists of a base fee amount
(which may be zero) and a performance fee amount (which may consist of
an incentive fee component for objective performance requirements, an
award fee component for subjective performance requirements, or both).
(c) The total available fee for the contract shall equal the
product of the fee(s) that would have been calculated for a fixed fee
contract and the classification factor(s) most appropriate for the
work. (The fixed fee(s) for nonprofit organizations is calculated per
48 CFR 970.1509-2. The fixed fee(s) for profit making organizations is
calculated per 48 CFR 970.1509-4) If more than one fee schedule is
applicable to the contract, the total available fee shall be the sum of
the available fees derived from: each fee schedule; consideration of
significant factors applicable to each fee schedule; and application of
a Classification Factor(s) most appropriate for the work.
(d) Classification factors applied to each Facility/Task Category
are:
------------------------------------------------------------------------
Classification
Facility/task category factor
------------------------------------------------------------------------
A.................................................... 3.00
B.................................................... 2.50
C.................................................... 2.00
D.................................................... 1.25
------------------------------------------------------------------------
(e) The contracting officer shall select the Facility/Task Category
after considering the following:
(1) Facility/Task Category A. The main focus of effort performed is
related to:
(i) The manufacture, assembly, retrieval, disassembly, or disposal
of nuclear weapons with explosive potential;
(ii) The physical cleanup, processing, or storage of nuclear
radioactive or toxic chemicals if the nature of the work is
significantly advancing state of the art technologies in cleanup,
processing or storage operations and/or the inherent difficulty or risk
of the work is significantly more demanding than that found in similar
industrial/DOE settings (i.e., nuclear energy, chemical processing,
industrial environmental cleanup); or
(iii) Research and development directly supporting paragraphs
(e)(1)(i) or (ii) of this section and not conducted in a laboratory, or
as designated by the Procurement Executive. (Classification factor 3.0)
(2) Facility/Task Category B. The main focus of effort performed is
related to:
(i) The safeguarding and maintenance of nuclear weapons or nuclear
material;
(ii) The manufacture or assembly of nuclear components;
(iii) The physical cleanup, processing, handling, or storage of
nuclear radioactive or toxic chemicals, or other substances which pose
a significant threat to the environment or the health and safety of
workers or the public, if the nature of the work is using state of the
art technologies or applications in such operations and/or the inherent
difficulty or risk of the work is more demanding than that found in
similar industrial/DOE settings (i.e., nuclear energy, chemical or
petroleum processing, industrial environmental cleanup);
(iv) The detailed planning necessary for the assembly/disassembly
of nuclear weapons/components; or
(v) Research and development directly supporting paragraphs
(e)(2)(i), (ii), (iii), or (iv) of this section and not conducted in a
laboratory, or as designated by the Procurement Executive.
(Classification factor 2.5)
(3) Facility/Task Category C. The main focus of effort performed is
related to:
(i) The physical cleanup, processing, or storage of nuclear
radioactive or toxic chemicals if the nature of the work is using
routine technologies in cleanup, processing or storage operations and/
or the inherent difficulty or risk of the work is similar to that found
in similar industrial/DOE settings (i.e., nuclear energy, chemical
processing, industrial environmental cleanup);
(ii) Plant and facility maintenance;
(iii) Plant and facility security (other than the safeguarding of
nuclear weapons and material); or
(iv) Research and development directly supporting paragraphs
(e)(3)(i), (ii) or (iii) of this section and not conducted in a
laboratory, or as designated by the Procurement Executive.
(Classification factor 2.0)
(4) Facility/Task Category D. The main focus of the effort
performed is research and development conducted at a laboratory.
(Classification factor 1.25)
(f) Where the Procurement Executive or designee has approved a base
fee, the Classification Factors shall be reduced, as approved by the
Procurement Executive or designee.
(g) Any risks which are indemnified by the Government (for example,
by the Price-Anderson Act) will not be considered as risk to the
contractor.
(h) All management and operating contracts awarded on a cost-plus-
award-fee basis shall set forth in the contract, or the Performance
Evaluation and Measurement Plan(s) required by the contract clause at
48 CFR 970.5204-54, a site specific method of rating the contractor's
performance of the contract requirements in relation to the required/
desired performance of the contract requirements, and a method of fee
determination tied to the method of rating.
(i) Prior approval of the Procurement Executive or designee, is
required for total available fee amount exceeding the guidelines in
paragraph (c) of this section.
(j) Fee Determination Officials must ensure that all important
areas of contract performance are specified in the contract or
Performance Evaluation and Measurement Plan(s), even if such areas are
not assigned specific weights or percentages of available fee.
970.1509-9 Special considerations: fee limitations.
In situations where the objective performance incentives are of
unusual difficulty or where the successful completion of the
performance incentives would provide extraordinary value to the
Government, fees in excess of those allowed under other provisions of
this fee policy may be allowed with the approval of the Procurement
Executive or designee. Requests to allow fees in excess of those
allowed under other provisions of the fee policy in this section must
be accompanied by a written justification with detailed supporting
rationale as to how the
[[Page 17809]]
specific circumstances satisfy the two criteria listed in this
subsection.
970.1509-10 Documentation.
The contracting officer shall tailor the documentation of the
determination of fee prenegotiation objective based on FAR 15.406-1,
Prenegotiation objectives, and the determination of the negotiated fee
in accordance with FAR 15.406-3, Documenting the negotiation. The
contracting officer shall include as part of the documentation: the
rationale for the allocation of cost and the assignment of facility/
task categories; a discussion of the calculations described in 48 CFR
970.1509-4; and discussion of any other relevant provision of this
section.
970.1509-11 Solicitation provision and contract clauses.
(a) The contracting officer shall insert the clause at 48 CFR
970.5204-54, Total Available Fee: Base Fee Amount and Performance Fee
Amount, in management and operating contracts, and other contracts
designated by the Procurement Executive or designee, that include cost-
plus-award-fee structures.
(b) Due to the various types of fee and incentive arrangements
which may be included in a contract and the need to ensure the overall
balanced performance of the contract, the contracting officer shall
insert the clause at 48 CFR 970.5204-XX, Conditional Payment of Fee or
Incentives, in management and operating contracts, and other contracts
designated by the Procurement Executive or designee, awarded on a cost-
plus-award-fee, multiple fee, or incentive basis.
(c) The contracting officer shall insert the clause at 48 CFR
970.5204-YY, Cost Reduction, in management and operating contracts, and
other contracts designated by the Procurement Executive or designee, if
cost savings programs are contemplated.
(d) The Contracting Officer shall insert the provision at 48 CFR
970.5204-ZZ, Limitation on Fee, in solicitations for management and
operating contracts, and other contracts designated by the Procurement
Executive or designee.
6. Section 970.5204-54 is revised to read as follows:
970.5204-54 Total available fee: base fee amount and performance fee
amount.
As prescribed in 48 CFR 970.1509-11(a), insert the following
clause. The clause should be tailored to reflect the contract's actual
inclusion of base fee amount and performance fee amount.
Total Available Fee: Base Fee Amount and Performance Fee Amount (Month
and Year TBE)
(a) Total available fee. Total available fee, consisting of a
base fee amount (if any) and a performance fee amount (consisting of
an incentive fee component for objective performance requirements,
an award fee component for subjective performance requirements, or
both) determined in accordance with the provisions of this clause,
is available for payment in accordance with the clause of this
contract entitled ``Payments and advances.''
(b) Fee Negotiations. Prior to the beginning of each fiscal year
under this contract, or other appropriate period as mutually agreed
upon, the Contracting Officer and Contractor shall enter into
negotiation of the evaluation areas and individual requirements
subject to incentives, the amount of fee, and the allocation of fee.
The Contracting Officer shall modify this contract at the conclusion
of each negotiation to reflect the negotiated evaluation areas and
individual requirements subject to incentives, the amount of fee,
and the allocation of fee. In the event the parties fail to agree on
the amount of fee, the Contracting Officer may make a unilateral
decision, subject to appeal under the clause of the contract
entitled Disputes. In the event the parties fail to agree on the
evaluation areas and individual requirements subject to incentives
or on the allocation of fee, a unilateral determination will be made
by the Contracting Officer. It is herein agreed the total available
fee amount shall be allocated to a twelve month cycle composed of
one or more evaluation periods, or such longer period as may be
approved by the Procurement Executive or designee.
(c) Determination of Total Available Fee Amount Earned.
(1) The Government shall, at the conclusion of each specified
evaluation period, evaluate the contractor's performance of all
requirements, including performance based incentives completed
during the period and determine the total available fee amount
earned. At the Contracting Officer's discretion, evaluation of
incentivized performance may occur at the scheduled completion of
the incentivized requirement.
(2) The Government Fee Determination Official (FDO) will be
(insert title of FDO). The contractor agrees that the determination
as to the total available fee earned is a unilateral determination
made by the Government FDO.
(3) The evaluation of contractor performance shall be in
accordance with the Performance Evaluation and Measurement Plan(s)
described in subparagraph (d), below, unless otherwise set forth in
the contract. The Contractor shall be promptly advised in writing of
the fee determination, and the reasons why the total available fee
amount was or was not earned. In the event that the contractor's
performance is considered to be less than the level of performance
set forth in the Statement of Work, as amended to include the
current Work Authorization Directive or similar document, for any
contract requirement, the FDO may at his/her discretion adjust the
fee determination to reflect such performance. Any such adjustment
shall be in accordance with the clause entitled ``Conditional
Payment of Fee or Incentives'' if contained in the contract.
(d) Performance Evaluation and Measurement Plan(s). To the
extent not set forth elsewhere in the contract:
(1) The Government shall establish a Performance Evaluation and
Measurement Plan(s) upon which the determination of the total
available fee amount earned shall be based. The Performance
Evaluation and Measurement Plan(s) will contain all important areas
of contract performance specified in the contract, even if such
areas are not assigned specific weights or percentages of available
fee; and evaluation areas and individual requirements that are
subject to incentives and the amount and allocation of fee to such
areas and requirements. A copy of the Plan(s) shall be provided to
the Contractor:
(i) prior to the start of an evaluation period if the evaluation
areas, individual requirements, amount of fee, and allocation of fee
to such evaluation areas and individual requirements have been
mutually agreed to by the parties; or
(ii) not later than thirty days prior to the scheduled start
date of the evaluation period, if the evaluation areas, individual
requirements, amount of fee, and allocation of fee to such
evaluation areas and requirements have been unilaterally established
by the Contracting Officer.
(2) The Performance Evaluation and Measurement Plan(s) will set
forth the criteria upon which the Contractor will be evaluated
relating to any technical, schedule, management, and/or cost
objectives selected for evaluation. Such criteria may be objective,
subjective, or both. The Plan(s) shall also set forth the method by
which the total available fee amount will be allocated and the
amount earned determined.
(3) The Performance Evaluation and Measurement Plan(s) may,
consistent with the contract statement of work, be revised during
the period of performance. The Contracting Officer shall notify the
contractor:
(i) of such unilateral changes at least ninety calendar days
prior to the end of the affected evaluation period and at least
thirty calendar days prior to the effective date of the change;
(ii) of such bilateral changes at least sixty calendar days
prior to the end of the affected evaluation period; or
(iii) if such change, whether unilateral or bilateral, is urgent
and high priority, at least thirty calendar days prior to the end of
the evaluation period.
(e) Schedule for total available fee amount earned
determinations. The FDO shall issue the final total available fee
amount earned determination in accordance with the schedule set
forth in the Performance Evaluation and Measurement Plan(s).
However, a determination must be made within sixty calendar days
after the receipt by the Contracting Officer of the Contractor's
self-assessment, if one is required or permitted per paragraph (f)
of this clause, or seventy calendar days after the end of the
evaluation period, whichever is later. If the Contracting Officer
evaluates the Contractor's performance of specific requirements on
their
[[Page 17810]]
completion, the payment of any earned fee amount must be made within
seventy calendar days (or such other time period as mutually agreed
to between the Contracting Officer and the Contractor) after such
completion. If the determination is delayed beyond that date, the
Contractor shall be entitled to interest on the determined total
available fee amount earned at the rate established by the Secretary
of the Treasury under section 12 of the Contract Disputes Act of
1978 (41 U.S.C. 611) that is in effect on the payment date. This
rate is referred to as the ``Renegotiation Board Interest Rate,''
and is published in the Federal Register semiannually on or about
January 1 and July 1. The interest on any late total available fee
amount earned determination will accrue daily and be compounded in
30-day increments inclusive from the first day after the schedule
determination date through the actual date the determination is
issued. That is, interest accrued at the end of any 30-day period
will be added to the determined amount of fee earned and be subject
to interest if not paid in the succeeding 30-day period.
Alternate I: When the award fee cycle consists of two or more
evaluation periods, add the following as paragraph (c)(4): At the
sole discretion of the Government, unearned total available fee
amounts may be carried over from one evaluation period to the next,
so long as the periods are within the same award fee cycle.
Alternate II: When the award fee cycle consists of one
evaluation period, add the following as paragraph (c)(4): Award fee
not earned during the evaluation period shall not be allocated to
future evaluation periods.
Alternate III: When the FDO requires the contractor to submit a
self-assessment, add the following text as paragraph (f): Contractor
self-assessment. Following each evaluation period, the Contractor
shall submit a self-assessment within (Insert Number) calendar days
after the end of the period. This self-assessment shall address both
the strengths and weaknesses of the Contractor's performance during
the evaluation period. Where deficiencies in performance are noted,
the Contractor shall describe the actions planned or taken to
correct such deficiencies and avoid their recurrence. The FDO will
review the Contractor's self-assessment, if submitted, as part of
the evaluation of the contractor's management during the period. The
self-assessment, if any, itself will not be the basis for the award
fee determination.
Alternate IV: When the FDO permits the contractor to submit a
self-assessment at the contractor's option, add the following text
as paragraph (f): Contractor self-assessment. Following each
evaluation period, the Contractor may submit a self-assessment,
provided such assessment is submitted within (Insert Number)
calendar days after the end of the period. This self-assessment
shall address both the strengths and weaknesses of the Contractor's
performance during the evaluation period. Where deficiencies in
performance are noted, the Contractor shall describe the actions
planned or taken to correct such deficiencies and avoid their
recurrence. The FDO will review the Contractor's self-assessment, if
submitted, as part of the evaluation of the Contractor's management
during the period. The self-assessment, if any, itself will not be
the basis for the award fee determination.
7. Section 970.5204-XX, Conditional Payment of Fee or Incentives;
970.5204-YY, Cost Reduction; and 970.5204-ZZ, Limitation on Fee, are
added to read as follows:
970.5204-XX Conditional payment of fee or incentives.
As prescribed in 48 CFR 970.1509-11(b), insert the following
clause:
Conditional Payment of Fee or Incentives (Month and Year TBE)
In order for the Contractor to receive all otherwise earned fee,
profit, or share of cost savings under the contract in an evaluation
period, the Contractor must meet the minimum requirements in
paragraphs (a) through (d) of this clause. If the Contractor does
not meet the minimum requirements, the DOE Operations Office Manager
or his/her designee may make a unilateral determination to reduce
the evaluation period's otherwise earned fee, profit or share of
cost savings as described in paragraphs (a) through (d) of this
clause. This clause does not apply to any Base Fee included in the
contract.
(a) Minimum requirements for Environment, Safety & Health (ES&H)
Program. The Contractor shall develop, obtain DOE approval of, and
implement a Safety Management System in accordance with the
provisions of the clause entitled, ``Integration of Environment,
Safety and Health into Work Planning and Execution,'' if included in
the contract, or as otherwise agreed to with the Contracting
Officer. The minimal performance requirements of the system will be
set forth in the approved Safety Management System, or similar
document. If the Contractor fails to obtain approval of the Safety
Management System or fails to achieve the minimum performance
requirements of the system during the evaluation period, the DOE
Operations Office Manager or his/her designee, at his/her sole
discretion, may reduce, any otherwise earned fees, profit or share
of cost savings, for the evaluation period by an amount up to the
amount earned.
(b) Minimum requirements for catastrophic event. If, in the
performance of this contract, there is a catastrophic event (such as
a fatality, or a serious workplace related injury or illness to one
or more employees, loss of control over classified or special
nuclear material, or significant damage to the environment), the DOE
Operations Office Manager or his/her designee, may reduce any
otherwise earned fee for the evaluation period by an amount up to
the fees earned. In determining any diminution of fee resulting from
a catastrophic event, the DOE Operations Office Manager or his/her
designee will consider whether willful misconduct and/or negligence
contributed to the occurrence and will take into consideration any
mitigating circumstances presented by the contractor or other
sources. This clause is in addition to any other remedies available
to the Government that may be contained in this contract.
(c) Minimum requirements for specified level of performance.
(1) At a minimum the Contractor must perform the following:
(i) the requirements with specific incentives at the level of
performance set forth in the Statement of Work, Work Authorization
Directive, or similar document;
(ii) all of the performance requirements directly related to the
incentive requirements at a level of performance such that the
overall performance of these requirements is at an acceptable level;
and
(iii) all other requirements at a level of performance such that
the total performance of the contract is not jeopardized.
(2) The evaluation of the Contractor's achievement of the level
of performance shall be unilaterally determined by the Contracting
Officer. To the extent that the Contractor fails to achieve the
minimum performance levels specified in the Statement of Work, Work
Authorization Directive, or similar document, during the evaluation
period, the DOE Operations Office Manager or his/her designee, may
reduce any otherwise earned fee, profit, or shared net savings for
the evaluation period, by an amount up to the amount earned.
(d) Minimum requirements for cost performance.
(1) Requirements incentivized by other than cost incentives must
be performed within their specified cost and must not adversely
impact the costs of performing unrelated activities.
(2) The performance of requirements with a specific cost
incentive must not adversely impact the costs of performing
unrelated requirements.
(3) The Contractor's performance within the stipulated cost
performance levels for the evaluation period shall be determined by
the Contracting Officer. To the extent the Contractor fails to
achieve the stipulated cost performance levels, the DOE Operations
Office Manager or his/her designee, at his/her sole discretion, may
reduce in whole or in part any otherwise earned fee, profit, or
shared net savings for the evaluation period by an amount up to the
amount earned.
970.5204-YY Cost Reduction.
As prescribed in 48 CFR 970.1509-11(c), insert the following
clause:
Cost Reduction (Month and Year TBE)
(a) General. It is the Department of Energy's (DOE's) intent to
have its facilities and laboratories operated in an efficient and
effective manner. To this end the Contractor shall assess its
operations and identify areas where cost reductions would bring cost
efficiency to operations without adversely affecting the level of
performance required by the contract. The Contractor, to the maximum
extent practical, shall identify areas where cost reductions may be
effected and develop and submit Cost Reduction Proposals (CRPs) to
the Contracting Officer. If accepted, the Contractor may share in
any shared net savings from accepted CRPs in accordance with
paragraph (g).
[[Page 17811]]
(b) Definitions.
Administrative cost is the contractor cost of developing and
administering the CRP.
DOE cost is the Government cost incurred in implementing and
validating the CRP.
Design, process, or method change is a change to a design,
process, or method which has an established baseline, is defined,
and is subject to a formal control procedure. Such a change must be
innovative, initiated by the contractor, and applied to a specific
project or program.
Development cost is the contractor cost of up front planning,
engineering, prototyping, and testing of a design, process, or
method.
Implementation cost is the contractor cost of tooling,
facilities, documentation, etc., required to effect a design,
process, or method change once it has been tested and approved.
Net Savings means a reduction in the total amount (to include
all related costs and fee) of performing the effort where the
savings revert to the DOE control and may be available for
deobligation. Such savings may result from a specific cost reduction
effort which is negotiated on a cost-plus-incentive-fee, fixed-price
incentive, or firm-fixed-price basis, or may result directly from a
design, process, or method change. They may also be savings
resulting from formal or informal direction given by DOE or from
changes in the mission, work scope, or routine reorganization of the
Contractor due to changes in the budget.
Shared Net Savings are those net savings which result from:
(1) a specific cost reduction effort which is negotiated on a
cost-plus-incentive-fee or fixed-price incentive basis and are the
difference between the negotiated target cost of performing an
effort as negotiated and the actual allowable cost of performing
that effort or
(2) which result directly from a design, process, or method
change, occur in the fiscal year in which the change is accepted and
the subsequent fiscal year and are the difference between the
estimated cost of performing an effort as originally planned and the
actual allowable cost of performing that same effort utilizing a
revised plan intended to reduce costs along with any Contractor
development costs, implementation costs, administrative costs, and
DOE costs associated with the revised plan. Administrative costs and
DOE costs are only included at the discretion of the Contracting
Officer. Savings resulting from formal or informal direction given
by the DOE or changes in the mission, work scope, or routine
reorganization of the Contractor due to changes in the budget are
not to be considered as shared net savings for purposes of this
clause and do not qualify for incentive sharing.
(c) Procedure for submission of CRPs.
(1) CRPs for the establishment of cost-plus-incentive-fee,
fixed-price incentive, or firm-fixed-price efforts or for design,
process, or methods changes submitted by the Contractor shall
contain, at a minimum, the following:
(i) Current Method (Baseline)--A verifiable description of the
current scope of work, cost, and schedule to be impacted by the
initiative; and supporting documentation.
(ii) New Method (Baseline)--A verifiable description of the new
scope of work, cost, and schedule, how the initiative will be
accomplished; and supporting documentation.
(iii) Feasibility Assessment--A description and evaluation of
the proposed initiative and benefits, risks, and impacts of
implementation. This evaluation shall include an assessment of the
difference between the current method (baseline) and proposed new
method including all related costs.
(2) In addition, CRPs for the establishment of cost-plus-
incentive-fee, fixed-price incentive, or firm-fixed-price efforts
shall contain, at a minimum, the following:
(i) the proposed contractual arrangement and the justification
for its use; and
(ii) a detailed cost/price estimate and supporting rationale. If
the approach is proposed on an incentive basis, minimum and maximum
cost estimates should be included along with any proposed sharing
arrangements.
(d) Evaluation and Decision. All CRPs must be submitted to and
approved by the Contracting Officer. Included in the information
provided by the CRP must be the following regarding the extent the
proposed cost reduction effort may:
(1) pose a risk to the health and safety of workers, the
community, or to the environment;
(2) result in a waiver or deviation from DOE requirements, such
as DOE Orders and joint oversight agreements;
(3) require a change in other contractual agreements;
(4) result in significant organizational and personnel impacts;
(5) create a negative impact on the cost, schedule, or scope of
work in another area;
(6) pose a potential negative impact on the credibility of the
Contractor or the DOE; and
(7) impact successful and timely completion of any of the work
in the baseline.
(e) Acceptance or Rejection of CRPs. Acceptance or rejection of
a CRP is a unilateral determination made by the Contracting Officer.
The Contracting Officer will notify the Contractor that a CRP has
been accepted, rejected, or deferred within (Insert Number) days of
receipt. The only CRPs that will be considered for acceptance are
those which the Contractor can demonstrate, at a minimum, will:
(1) result in net savings (in the sharing period if a design,
process, or method change);
(2) not reappear as costs in subsequent periods; and
(3) not result in any impairment of essential functions. The
failure of the Contracting Officer to notify the Contractor of the
acceptance, rejection, or deferral of a CRP within the specified
time shall not be construed as approval.
(f) Adjustment to Original Estimated Cost and Fee. If a CRP is
established on a cost-plus-incentive-fee, fixed-price incentive or
firm-fixed-price basis, the originally estimated cost and fee for
the total effort from which the CRP effort was removed shall be
adjusted to remove the estimated cost and fee amount associated with
the CRP effort.
(g) Sharing Arrangement. If a CRP is accepted, the Contractor
may share in the shared net savings. For a CRP negotiated on a cost-
plus-incentive-fee or fixed-price incentive basis, with the specific
incentive arrangement (negotiated target costs, target fees, share
lines, ceilings, profit, etc.) set forth in the contractual document
authorizing the effort, the Contractor's share shall be the actual
fee or profit resulting from such an arrangement. For a CRP
negotiated as a cost savings incentive resulting from a design,
process, or method change, the Contractor's share shall be a
percentage no greater than 25 percent of the shared net savings. The
specific percentage and sharing period shall be set forth in the
contractual document.
(h) Validation of Shared Net Savings. The Contracting Officer
shall validate actual shared net savings. If actual shared net
savings can not be validated, the contractor will not be entitled to
a share of the net shared savings.
(i) Relationship to Other Incentives. Only those benefits of an
accepted CRP not rewardable under other clauses of this contract
shall be rewarded under this clause.
(j) Subcontracts. The Contractor may include a clause similar to
this clause in any subcontract. In calculating any estimated shared
net savings in a CRP under this contract, the Contractor's
administration, development, and implementation costs shall include
any Subcontractor's allowable costs, and any CRP incentive payments
to a Subcontractor resulting from the acceptance of such CRP. The
Contractor may choose any arrangement for Subcontractor CRP
incentive payments, provided that the payments not reduce the DOE's
share of shared net savings.
970.5204-ZZ Limitation on Fee.
As prescribed in 48 CFR 970.1509-11(d), insert the following
provision:
Limitation of Fee (Month and Year TBE)
For the purpose of this solicitation fee amounts shall not
exceed the total available fee allowed by the fee policy. The
Government reserves the unilateral right, in the event an offeror's
proposal is selected for award, to limit: fixed fee to not exceed an
amount established pursuant to 48 CFR 970.1509-4; and total
available fee to not exceed an amount established pursuant to 48 CFR
970.1509-8.
[FR Doc. 98-9501 Filed 4-9-98; 8:45 am]
BILLING CODE 6450-01-P
