[Federal Register Volume 60, Number 186 (Tuesday, September 26, 1995)]
[Rules and Regulations]
[Pages 49512-49518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23739]
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DEPARTMENT OF ENERGY
48 CFR Parts 933 and 970
RIN 1991-AB20
Acquisition Regulation; Department of Energy Management and
Operating Contracts
AGENCY: Department of Energy.
ACTION: Final rule.
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SUMMARY: The Department of Energy (DOE) amends the Department of Energy
Acquisition Regulation (DEAR) to modify certain requirements for
management and operating contractor subcontracting. This rule
incorporates a revised clause and a new clause which minimizes
obligations placed upon contractor purchasing systems and streamlines
flowdown requirements for subcontracts awarded by management and
operating contractors.
EFFECTIVE DATE: October 26, 1995.
FOR FURTHER INFORMATION CONTACT: James J. Cavanagh, Office of
Contractor Management and Administration (HR-55), U.S. Department of
Energy, 1000 Independence Avenue, SW., Washington, D.C. 20585;
telephone 202-586-8257.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background.
II. Disposition of Comments.
III. Procedural Requirements.
A. Review Under Executive Order 12866.
B. Review Under the National Environmental Policy Act.
C. Review Under the Paperwork Reduction Act.
D. Review Under the Regulatory Flexibility Act.
E. Review Under Executive Order 12612.
F. Review Under Executive Order 12778.
I. Background
On March 2, 1995, DOE published in the Federal Register (60 FR
11646) a notice of proposed rulemaking (NOPR). That notice proposed to
amend the DEAR to identify certain purchasing system objectives and
standards, eliminate the application of the ``Federal norm,'' place
greater reliance on commercial practices, and remove the provisions
concerning General Accounting Office protest jurisdiction over
management and operating contractor subcontract awards. The March 2,
1995 notice also reserved for further analysis the removal of DEAR
Section 970.7104 and advised that an amendment to the rulemaking would
be issued in the event portions of DEAR Section 970.7104 were to be
retained and redesignated. Except for the
[[Page 49513]]
resolution of the analysis of DEAR Section 970.7104, the March 2, 1995
NOPR was finalized on June 2, 1995 (60 FR 28737).
On April 27, 1995, DOE published in the Federal Register (60 FR
20663) a notice amending the March 2, 1995 NOPR. Based on the
Department's analysis, it was proposed to delete some items contained
in DEAR Section 970.7104 and reorganize the remaining items, which were
proposed to be retained in two subsections: a revised clause at
970.5204-22 and a new clause 970.5204-44. This final rule completes the
process for revising DEAR Part 970.71 which had been initiated with the
March 2, 1995 NOPR.
It is the intention of the Department to incorporate the revised
and new clauses provided in today's final rule into existing management
and operating contracts as soon as practicable after the effective date
for today's rule.
II. Disposition of Comments
Comments on the April 27, 1995, amendment to the notice of proposed
rulemaking were received from a total of seven entities: one is a DOE
contracting activity, four are organizations awarded management and
operating contracts, and two are entities which did not identify any
affiliation with the Department. Some comments received are not
discussed in the disposition of comments because they were
nonsubstantive or editorial, offered no recommendations for
consideration, or made recommendations outside the scope of this
rulemaking. In addition, certain comments offered on the March 2, 1995
proposed rulemaking are discussed here because they address the
disposition of comments which were related to Section 970.7104. It
should be noted that the citations referenced in the disposition of
comments are those reflected in the Federal Register publication dated
April 27, 1995 (60 FR 20663). As a result of revisions incorporated in
the final rule, some of the citations have changed.
Five commenters expressed opinions about the deletion of Section
970.7104 and the relocation of requirements on many of its subjects to
the two clauses, the existing clause at 970.5204-22 and a new clause
970.5204-44. Two of the commenters stated that they support the goal of
this rulemaking in making it easier for DOE's management and operating
contractors to subcontract. However, because most of the requirements
in Section 970.7104 have been redesignated and not eliminated, these
two commenters believe that Section 970.7104 should be left intact. Two
commenters believe that the added portions of the clause at 970.5204-22
should be retained but the new clause at 970.5204-44 should be deleted.
A fourth commenter believes that DOE should require that subcontracts
include the FAR subcontracts clause at 52.244-2 only, and the final
commenter believes that, ``Those mandatory clauses laden the `new
commercial contracts' with far too many bureaucratic hurdles and far
too many miles of red tape'' and should therefore be deleted.
Regarding the comments cited above, the purposes of the rulemakings
should be revisited. The first objective was to eliminate the
overarching ``Federal norm'' process requirements from the preaward
stages of the management and operating contractor's purchasing system,
which were located in DEAR subparagraph 970.7103(c)(3). The portion of
Subpart 970.71 containing the ``Federal norm'' requirement was deleted
by the final rule published on June 2, 1995 (60 FR 28737) and replaced
with purchasing system objectives which, inter alia, place greater
reliance on commercial practices. The second purpose of the rulemaking
dealt with reassessing the need for and organization of certain
specific requirements placed upon the purchasing systems of the
Department's management and operating contractors.
The Department has performed a detailed review of each of the
requirements of Section 970.7104 as it stood before this rulemaking.
Unnecessary provisions were deleted, both in the context of entire
subparagraphs and portions of subparagraphs. However, those provisions
that have been retained in the clauses represent either statutory or
regulatory flowdown requirements or a policy decision that the
provision should be applied to the Department's M&O contracts or
subcontracts. For example, the Department has retained the controls on
the contractors' purchase and lease of real property as a matter of
policy, respecting 41 USC 14 which requires agencies to have specific
statutory authority for the purchase of real property. The Department
believes that most of the provisions previously cited at Section
970.7104 are contractual obligations which are, therefore, more
appropriately suited for a contract clause. To implement the changes
made in this rulemaking, the process-oriented requirements applicable
to contractors' purchasing systems are retained in a revised clause at
970.5204-22, and the flowdown requirements for subcontracts awarded by
management and operating contractors are listed in the new clause at
970.5204-44.
Another commenter suggested the substitution of ``may'' for
``will'' and ``if any'' after ``clauses'' in the third sentence of
paragraph (a) of the clause at 970.5204-22. The commenter believed that
the proposed changes would allow inclusion of the clause in management
and operating contracts with nonprofit organizations as well as profit-
making firms, with the assumption that only profit-making contracts
will have performance criteria and measures. That assumption is not
correct. We expect all management and operating contracts to have
performance criteria and measures and have not made the change.
One commenter asserts that paragraph (c), Acquisition of Real
Property, of the clause at 970.5204-22 is unnecessary except as it may
modify the clause at 952.217-70, Acquisition of Real Property. The
clause at 952.217-70 does not provide sufficient guidance for DOE's
management and operating contractors to properly treat the process of
determining whether to purchase or lease real property. We have not
made any changes.
Two commenters questioned the necessity of retaining any provision
for notice of subcontract awards as is reflected in paragraph (d) of
the revised clause at 970.5204-22. The requirement for notice arises in
Section 304(b) of the Federal Property and Administrative Services Act
of 1949 (``Act''), 41 U.S.C. 254(b). DOE has used certain statutory
authorities available to it (Section 602(d)(13) of the Act (40 U.S.C.
474(d)(13)) to limit the application of the advance notice requirement
to the specific instances listed at DEAR Section 970.7109. Those
instances are important and are being retained. We have made no change.
A commenter recommends that paragraph (e), Audits of
Subcontractors, of the proposed clause at 970.5204-22 be deleted as
unnecessary if the contractor includes FAR 15.215-2 in ``appropriate
subcontracts.'' We believe the commenter intended to refer to FAR
52.215-2, the Audit Negotiation clause. We find little similarity
between the two provisions. Paragraph (e) provides for pre-award
audits; authorization of management and operating contractors to use
DCAA for audits; and directs the applicable cost principles. The FAR
provides the contracting officer the right to examine and audit the
contractors books and records. We have made no change.
Another commenter recommends the deletion of the second sentence of
paragraph (e)(4) of the clause 970.5204-22 relating to allowable costs
regarding the purchase or transfer from contractor-
[[Page 49514]]
affiliated sources. These regulatory controls prevent the conflict of
interest inherent in a management and operating contractor's purchasing
goods and services in support of the DOE facility from affiliated
organizations. The Department has reviewed this matter and has chosen
to make no change.
A commenter suggests deleting paragraph (f), Bonds and Insurance,
of clause 970.5204-22 and adding it instead to the clause 970.5204-32,
Required bond and insurance--exclusive of Government property. The
commenter explains the logic of the suggestion is ``to help bring the
M&O Contractor's acquisition function into the mainstream of activity,
rather than being considered a stepchild.'' It is unclear how this
proposed change will accomplish the intended purpose. The clause at
970.5204-32 is designed to be included into the prime contract, and it
controls the acquisition of bonds and insurance by the prime
contractor. The provision listed in paragraph (f) establishes
responsibilities and authorities in requiring bonds and insurance from
subcontractors. We have made no change.
The same commenter recommends the deletion of paragraph (g), Buy
American, of clause 970.5204-22 in the belief that the clause in the
prime contract is sufficient. We disagree. The additional guidance on
the treatment of the responsibilities of the Buy American Act is
necessary. The FAR clause is drafted to deal with situations in which a
Government contractor supplies goods to a Federal agency. DOE M&O
contractors do not perform that function; instead, they purchase goods
in the management and operation of the specific DOE facility. The
Department, however, has made two changes to paragraph (g) of the
clause 970.5204-22: (1) To include a statement on determinations of
nonavailability which had previously been cited at Subsection 970.7104-
22 and (2) to include reference to the DEAR clause at 970.5204-3 for
construction materials.
The same commenter makes a series of comments that share the same
theme. The commenter suggests that paragraphs (b), Acquisition of
Utility Services; (h), Construction and Architect Engineer Contracts;
(m), Leasing of Motor Vehicles; (n), Management, Acquisition, and Use
of Information Resources; (p), Purchase of Special Items; (q), Purchase
vs. Lease Determinations; (s), Set-Off and Assigned Subcontractor
Proceeds; and (w), Unclassified Controlled Nuclear Information, be
deleted from the clause 970.5204-22 and remain in Section 970.7104. We
have made no change since the Department has chosen to eliminate
Section 970.7104.
The same commenter objects to the treatment of Contractor-
Affiliated Sources in paragraph (i) of the clause 970.5204-22 as
continuing ``the apparent bias against large multi-segmented
contractors.'' There is no bias in these provisions, apparent or
otherwise. This area is of significance in maintaining credible
oversight of $8 billion of subcontractor purchases by DOE's M&O
contractors. This provision is a reference to the authority for, and
limits of, such purchases stated at Section 970.7105. We have made no
change.
The same commenter recommends the deletion of paragraph (j),
Contractor-Subcontractor Relationship, of the clause 970.5204-22, as
unnecessary. The Department believes that this paragraph provides
clarity regarding the obligations of, and commitments made by, the
prime contractor. We have made no change.
The same commenter suggests the deletion of paragraphs (k),
Government Property; (o), Priorities, Allocations, and Allotments; (r),
Quality Assurance; (u), Suspended, Debarred, or Ineligible Contractors;
and (v), Termination, of the clause 970.5204-22. This commenter
believes that each of these is unnecessary or redundant or both. We
disagree, believing the guidance on most subjects to be necessary in
the context of the award of individual subcontracts by a DOE M&O
contractor. We have not made the changes recommended, except that
paragraph (u) relating to Suspended, Debarred, or Ineligible
Contractors has been deleted. To accomplish the intended purpose, a
reference to the FAR counterpart (FAR 52.209-6) has been inserted at
Section 970.5204-7.
The same commenter recommends the deletion of paragraph (t),
Strategic and Critical Materials, of the clause 970.5204-22 because its
application ``is not limited to subcontracting procedures.'' The
Department disagrees. This provision sets forth authority for access to
strategic and critical materials in the fulfillment of needs in the
performance of the prime contract. We have made no change.
The same commenter questions the language of paragraph (l),
Indemnification, of the clause 970.5204-22. We agree that, as proposed,
the meaning of the provision was not clear. We have made editorial
changes to assure it conveys its intended meaning that, other than the
statutory Price-Anderson indemnity, M&O contractors may not offer
subcontractors any indemnification without the required authorization.
Two commenters recommend that Section 970.7110, Nuclear Material
Transfers, be incorporated into the clause at 970.5204-22. We agree
that this choice is reasonable, but believe the subject to be
sufficiently critical and special to warrant the coverage as it exists.
We have made no change.
Three commenters oppose the creation of the new clause 970.5204-44,
believing the identification of the flowdown provisions should be left
to the contractors. The Department disagrees. A list of the flowdown
provisions and reference to the regulations controlling their
application simplifies the subcontracting process, clarifies the
contractors' obligations in the award of subcontracts, and provides a
meeting of the minds between DOE and the M&O contractor about the
treatment of the subjects covered in the clause 970.5204-44 in the
award of subcontracts.
Another commenter recommends the deletion of the following seven
paragraphs in the new clause 970.5204-44 in order to better establish
commercial acquisition systems: (4), Contract Work Hours and Safety
Standards Act; (5), Cost or Pricing Data; (8), Davis Bacon Labor
Standards for Construction; (11) Equal Employment Opportunity; (16),
Organizational Conflicts of Interest; (22) Service Contract Act; and
(23), Small Business and Small Disadvantaged Business Concerns. Each of
these provisions either require treatment of the subject in recognition
that the clauses themselves may not apply to the DOE M&O contractor,
but do apply to subcontracts awarded by the M&O contractor, e.g., Davis
Bacon provisions; or are statutory flowdown requirements applicable to
subcontractors. We have made no change.
One commenter asks where the material originally at paragraph
970.7104-28(f) is to be relocated. That material is incorporated at
paragraph (h) of the clause at 970.5204-22. The same commenter has
recommended that the subject of differing site conditions be covered.
The Department disagrees, believing it is more appropriate to leave
such a matter to the discretion of the M&O contractor.
In reviewing the April 27, 1995 amendment to the NOPR, it was noted
that certain references had not been revised, information had
inadvertently been omitted, or technical changes were required.
Therefore, the following additional revisions are being made in this
final rule:
[[Page 49515]]
(1) Part 933 is amended to conform section 933.104 with changes
finalized in the June 2, 1995, final rule.
(2) The material proposed to be relocated to 970.1901 has been
deleted. The two paragraphs were intended as communication to DOE
contracting officers and we have decided to communicate this
information internally by other means.
(3) The prescription for Subsection 970.5203-1, Covenant against
contingent fees, is amended to delete a flowdown requirement.
(4) The introductory text for the clauses at 970.5204-21, 970.5204-
24, 970.5204-45 and 970.5204-50 which referenced Section 970.7104 is
removed.
(5) The clause 970.5204-22 is amended at paragraphs (a) and (d);
requirements previously cited at paragraph (d), Advance notice of
proposed subcontract awards, relating to file documentation is
relocated to paragraph (a).
(6) The clause 970.5204-22 is amended at paragraphs (e)(3) and
(e)(4). The last sentence of paragraph (e)(4), beginning with ``In no
case, however, * * *'' is moved to the end of paragraph (e)(3). The
change corrected an error in the Amendment to the NOPR published on
April 27, 1995.
(7) Clause 970.5204-22 is amended at paragraph (f), Bonds and
Insurance, to include a discussion on performance bonds which had
inadvertently been deleted. The paragraph on corporate sureties has
been rewritten to simplify the language.
(8) Paragraph (g) of the clause at 970.5204-22 has been changed to
allow the Head of Contracting Activity rather than the Procurement
Executive to approve management and operating contractor determinations
of nonavailability. The threshold for referral to the HCA has been
increased from $25,000 to $100,000.
(9) Clause 970.5204-22 is amended at paragraph (n) to retain the
discussion of make-or-buy plans that had been set forth at now deleted
paragraph 970.7104-8(b).
(10) Paragraph (v), Suspended, Debarred or Ineligible Contractors,
is deleted from clause 970.5204-22 and a new clause is inserted at
970.5204-7 to provide instructions for the inclusion of FAR clause
52.209-6, Protecting the Government's Interest when Subcontracting with
Contractors Debarred, Suspended, or Proposed for Debarment, in the
management and operating contractor prime contract. This change is made
to provide for consistency with FAR requirements.
(11) Subparagraph (b)(15), Officials Not to Benefit, of clause
970.5204-44 is removed as proposed in the Amendment to the NOPR
published on April 27, 1995.
(12) Subparagraph (b)(24), Taxes, is amended to provide
requirements for both cost-reimbursement and fixed-price subcontracts.
In addition, the Department streamlined the wording of the
requirements listed in paragraphs (b) through (w) of the clause
970.5204-22. These revisions have not resulted in substantive changes
to the requirements as stated in the April 27, 1995 Amendment to the
NOPR.
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 the Executive
Order by the Office of Information and Regulatory Affairs.
B. Review Under the National Environmental Policy Act
Pursuant to the Council on Environmental Quality Regulations (40
CFR Parts 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 Part 1021, National Environmental Policy Act
Implementing Procedures (Categorical Exclusion A6), the Department of
Energy has determined that this final rule is categorically excluded
from the need to prepare an environmental impact statement or
environmental assessment.
C. Review Under the Paperwork Reduction Act
To the extent that new information collection or record keeping
requirements are imposed by this rulemaking, they are provided for
under Office of Management and Budget paperwork clearance package No.
1910-0300. No new information collection is proposed by this rule.
D. Review Under the Regulatory Flexibility Act
This 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
concluded that the rule will have no impact on interest rates, tax
policies or liabilities, the cost of goods or services, or other direct
economic factors. It will also not have any indirect economic
consequences, such as changed construction rates. Accordingly, DOE
certified 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. DOE did not receive any
comments on this certification.
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 of Energy
has determined that this final rule will not have a substantial direct
effect on the institutional interests or traditional functions of
States.
F. 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 for affected legal conduct, 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. DOE certifies that this rule meets the requirements of sections
2(a) and 2(b) of Executive Order 12778.
List of Subjects in 48 CFR Parts 933 and 970
Government procurement.
[[Page 49516]]
Issued in Washington, D.C. on September 20, 1995.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.
For the reasons set forth in the preamble, Chapter 9 of Title 48 of
the Code of Federal Regulations is amended as set forth below.
PART 933--PROTESTS, DISPUTES, AND APPEALS
1. The authority citation for Part 933 continues to read as
follows:
Authority: 42 U.S.C. 7254; 40 U.S.C. 486(c).
Sec. 933.104 [Amended]
2. Section 933.104, Protests to GAO, is amended in paragraph
(b)(1), by removing from the first sentence the phrase ``Except in the
case of a subcontract level protest,'' and by removing the last
sentence of the paragraph, and paragraph (c), Protests after award,
remove paragraph (c)(1) and remove the paragraph designation (c)(2).
PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS
3. 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. 970.5203-1 [Amended]
4. In Section 970.5203-1, Covenant against contingent fees, the
phrase ``with the addition of the following paragraph,'' is removed and
clause paragraph (c) is removed.
5. Section 970.5204-7, is added to read as follows:
Sec. 970.5204-7 Protecting the Government's interest when
subcontracting with contractors debarred, suspended, or proposed for
debarment.
Include the clause at FAR 52.209-6 as prescribed in FAR 9.409(b).
Sec. 970.5204-21 [Amended]
6. Section 970.5204-21, Property, the phrase ``As prescribed in
970.7104-43,'' is removed from the introductory text.
7. Section 970.5204-22, is revised to read as follows:
Sec. 970.5204-22 Contractor purchasing system.
Insert the following clause.
Contractor Purchasing System (Oct 1995)
(a) General. The contractor shall develop, implement, and
maintain formal policies, practices, and procedures to be used in
the award of subcontracts consistent with this clause, 48 CFR (DEAR)
970.5204-44, and 48 CFR (DEAR) 970.71. The contractor's purchasing
system and methods shall be fully documented, consistently applied,
and acceptable to DOE in accordance with 48 CFR (DEAR) 970.7102. The
contractor shall maintain file documentation which is appropriate to
the value of the purchase and is adequate to establish the propriety
of the transaction and the price paid. The contractor's purchasing
performance will be evaluated against such performance criteria and
measures as may be set forth elsewhere in this contract. DOE
reserves the right at any time to require that the contractor submit
for approval any or all purchases under this contract. The
contractor shall not purchase any item or service the purchase of
which is expressly prohibited by the written direction of DOE and
shall use such special and directed sources as may be expressly
required by the DOE contracting officer. The contractor's approved
purchasing system and methods shall include the requirements set
forth in paragraphs (b) through (w) of this clause.
(b) Acquisition of Utility Services. Utility services shall be
acquired in accordance with the requirements of 48 CFR (DEAR)
970.0803.
(c) Acquisition of Real Property. Real property shall be
acquired in accordance with 48 CFR (DEAR) Subpart 917.74.
(d) Advance Notice of Proposed Subcontract Awards. Advance
notice shall be provided in accordance with 48 CFR (DEAR) 970.7109.
(e) Audit of Subcontractors.
(1) The contractor shall provide for:
(i) periodic post-award audit of cost-reimbursement
subcontractors at all tiers, and
(ii) audits, where necessary, to provide a valid basis for pre-
award or cost or price analysis.
(2) Responsibility for determining the costs allowable under
each cost-reimbursement subcontract remains with the contractor or
next higher-tier subcontractor. The contractor shall provide, in
appropriate cases, for the timely involvement of the contractor and
the DOE contracting officer in resolution of subcontract cost
allowability.
(3) Where audits of subcontractors at any tier are required,
arrangements may be made to have the cognizant Federal agency
perform the audit of the subcontract. These arrangements shall be
made administratively between DOE and the other agency involved and
shall provide for the cognizant agency to audit in an appropriate
manner in light of the magnitude and nature of the subcontract. In
no case, however, shall these arrangements preclude determination by
the DOE contracting officer of the allowability or unallowability of
subcontractor costs claimed for reimbursement by the contractor.
(4) Allowable costs for cost reimbursable subcontracts are to be
determined in accordance with the cost principles of FAR Part 31,
appropriate for the type of organization to which the subcontract is
to be awarded, as supplemented by 48 CFR (DEAR) Part 931. Allowable
costs in the purchase or transfer from contractor-affiliated sources
shall be determined in accordance with 48 CFR (DEAR) 970.7105 and 48
CFR (DEAR) 970.3102-15(b).
(f) Bonds and Insurance.
(1) The contractor shall require performance bonds in penal
amounts as set forth in FAR 28.102-2(a) for all fixed priced and
unit-priced construction subcontracts in excess of $25,000. The
contractor shall consider the use of performance bonds in fixed
price nonconstruction subcontracts, where appropriate.
(2) A payment bond shall be obtained on Standard Form 25A,
modified to name the contractor as well as the United States of
America as obligees, for all fixed price, unit-price and cost-
reimbursement construction subcontractors in excess of $25,000. The
penal amounts shall be determined as set forth in FAR 28.102-2(b).
(3) A subcontractor may have more than one acceptable surety in
both construction and other subcontracts, provided that in no case
will the liability of any one surety exceed the maximum penal sum
for which it is qualified for any one obligation. For subcontracts
other than construction, a co-surety (two or more sureties together)
may reinsure amounts in excess of their individual capacity, with
each surety having the required underwriting capacity that appears
on the list of acceptable corporate sureties.
(g) Buy American. The contractor shall comply with the
provisions of the Buy American Act as reflected in 48 CFR (DEAR)
970.5203-3 and 48 CFR (DEAR) 970.5204-3. The contractor shall
forward determinations of nonavailability of individual items to the
DOE contracting officer for approval. Items in excess of $100,000
require the prior concurrence of the Head of Contracting Activity.
If, however, the contractor has an approved purchasing system, the
Head of the Contracting Activity may authorize the contractor to
make determinations of nonavailability for individual items valued
at $100,000 or less.
(h) Construction and Architect-Engineer Subcontracts.
(1) Independent Estimates. A detailed, independent estimate of
costs shall be prepared for all construction work to be
subcontracted.
(2) Specifications. Specifications for construction shall be
prepared in accordance with the DOE publication entitled ``General
Design Criteria Manual.''
(3) Prevention of Conflict of Interest.
(i) The contractor shall not award a subcontract for
construction to the architect-engineer firm or an affiliate that
prepared the design. This prohibition does not preclude the award of
a ``turnkey'' subcontract so long as the subcontractor assumes all
liability for defects in design and construction and consequential
damages.
(ii) The contractor shall not award both a cost-reimbursement
subcontract and a fixed-price subcontract for construction or
architect-engineer services or any combination thereof to the same
firm where those subcontracts will be performed at the same site.
(iii) The contractor shall not employ the construction
subcontractor or an affiliate to inspect the firm's work. The
contractor shall assure that the working relationships of the
construction subcontractor and the
[[Page 49517]]
subcontractor inspecting its work and the authority of the inspector
are clearly defined.
(i) Contractor-Affiliated Sources. Equipment, materials,
supplies, or services from a contractor-affiliated source shall be
purchased or transferred in accordance with 48 CFR (DEAR) 970.7105.
(j) Contractor-Subcontractor Relationship. The obligations of
the contractor under paragraph (a) of this clause, including the
development of the purchasing system and methods, and purchases made
pursuant thereto, shall not relieve the contractor of any obligation
under this contract (including, among other things, the obligation
to properly supervise, administer, and coordinate the work of
subcontractors). Subcontracts shall be in the name of the
contractor, and shall not bind or purport to bind the Government.
(k) Government Property. Identification, inspection,
maintenance, protection, and disposition of Government property
shall conform with the policies and principles of FAR Part 45, 48
CFR (DEAR) 945, the Federal Property Management Regulations 41 CFR
101, the DOE Property Management Regulations 41 CFR 109, and their
contracts.
(l) Indemnification. Except for Price-Anderson Nuclear Hazards
Indemnity, no subcontractor may be indemnified except with the prior
approval of the Procurement Executive.
(m) Leasing of Motor Vehicles. Contractors shall comply with FAR
8.11 and 48 CFR (DEAR) 908.11.
(n) Make-or-Buy Plans. Acquisition of property and services
shall be obtained on a least-cost basis, consistent with the
requirements of the Make-or-Buy Plan clause of this contract and the
contractor's approved make-or-buy plan.
(o) Management, Acquisition and Use of Information Resources.
Requirements for automatic data processing resources and
telecommunications facilities, services, and equipment, shall be
reviewed and approved in accordance with applicable DOE Orders and
regulations regarding information resources.
(p) Priorities, Allocations and Allotments. Priorities,
allocations and allotments shall be extended to appropriate
subcontracts in accordance with the clause or clauses of this
contract dealing with priorities and allocations.
(q) Purchase of Special Items. Purchase of the following items
shall be in accordance with the following provisions of 48 CFR
(DEAR) 908.71 and the Federal Property Management Regulations, 41
CFR 101:
(1) Motor vehicles--48 CFR 908.7101
(2) Aircraft--48 CFR 908.7102
(3) Security Cabinets--48 CFR 908.7106
(4) Alcohol--48 CFR 908.7107
(5) Helium--48 CFR 908.7108
(6) Fuels and packaged petroleum products--48 CFR 908.7109
(7) Coal--48 CFR 908.7110
(8) Arms and Ammunition--48 CFR 908.7111
(9) Heavy Water--48 CFR 908.7121(a)
(10) Precious Metals--48 CFR 908.7121(b)
(11) Lithium--48 CFR 908.7121(c)
(12) Products and services of the blind and severely handicapped--41
CFR 101-26.701
(13) Products made in Federal penal and correctional institutions--
41 CFR 101-26.702
(r) Purchase vs. Lease Determinations. Contractors shall
determine whether required equipment and property should be
purchased or leased, and establish appropriate thresholds for
application of lease vs. purchase determinations. Such
determinations shall be made:
(1) at time of original acquisition;
(2) when lease renewals are being considered; and
(3) at other times as circumstances warrant.
(s) Quality Assurance. Contractors shall provide no less
protection for the Government in its subcontracts than is provided
in the prime contract.
(t) Setoff of Assigned Subcontractor Proceeds. Where a
subcontractor has been permitted to assign payments to a financial
institution, the assignment shall treat any right of setoff in
accordance with 48 CFR (DEAR) 932.803.
(u) Strategic and Critical Materials. The contractor may use
strategic and critical materials in the National Defense Stockpile.
(v) Termination. When subcontracts are terminated as a result of
the termination of all or a portion of this contract, the contractor
shall settle with subcontractors in conformity with the policies and
principles relating to settlement of prime contracts in FAR subparts
49.1, 49.2 and 49.3. When subcontracts are terminated for reasons
other than termination of this contract, the contractor shall settle
such subcontracts in general conformity with the policies and
principles in FAR subparts 49.1, 49.2, 49.3 and 49.4. Each such
termination shall be documented and consistent with the terms of
this contract. Terminations which require approval by the Government
shall be supported by accounting data and other information as may
be directed by the contracting officer.
(w) Unclassified Controlled Nuclear Information. Subcontracts
involving unclassified uncontrolled nuclear information shall be
treated in accordance with 10 CFR Part 1017.
Sec. 970.5204-24 [Amended]
9. Section 970.5204-24, Subcontractor cost or pricing data, the
phrase ``As prescribed in 970.7104-11,'' is removed from the
introductory text.
10. Add new Section 970.5204-44, Flowdown of contract requirements
to subcontracts, to read as set forth below:
Sec. 970.5204-44 Flowdown of contract requirements to subcontracts.
Insert the following clause.
Flowdown of Contract Requirements to Subcontracts (Oct 1995)
(a) The contractor shall include the clauses in paragraph (b) of
this clause in appropriate subcontracts.
(1) To the extent that the clause is included in this prime
contract, the contractor shall comply with that portion of the
clause that directs application to subcontracts.
(2) To the extent that the clause is not included in this prime
contract, or where it is included but there is no instruction for
treatment in subcontracts, the contractor shall include the clause
in accordance with applicable regulatory guidance which would apply
if the subcontract were a prime contract with the Federal
government.
(3) In all cases, where a regulation is cited, the contractor
shall comply with the regulation in administration of the related
clause.
(b) Clauses and related regulations.
(1) Air Transportation by U.S.-Flag Carriers. Clause at FAR
52.247-63.
(2) Anti-Kickback Act of 1986. Clause at FAR 52.203-7.
(3) Clean Air and Water. Clause at FAR 52.223-2, and follow the
requirements of FAR 23.1.
(4) Contract Work Hours and Safety Standards Act. Clause at FAR
52.222-4, and follow the requirements of FAR 22.3.
(5) Cost or Pricing Data. Clause at 48 CFR (DEAR) 970.5204-24.
(6) Cost and Schedule Control Systems. Clause at 48 CFR (DEAR)
970.5204-50.
(7) Cost Accounting Standards. Clause at FAR 52.230-2, as
prescribed in 48 CFR (DEAR) 970.30.
(8) Davis-Bacon Act. Clauses as directed at FAR 22.407, and
follow the requirements of FAR 22.4 to the same extent that they
would apply if the subcontract had been directly awarded by DOE. 48
CFR (DEAR) Subpart 922.4 and 48 CFR (DEAR) 970.2273 provide guidance
to assist in determining the applicability of these regulations.
(9) Employment of the Handicapped. Clause at FAR 52.222-36, and
follow the requirements of FAR 22.14.
(10) Environmental and Occupational Safety and Health. Clauses
as prescribed in 48 CFR (DEAR) 970.2303-2.
(11) Equal Employment Opportunity. Clauses as prescribed in FAR
22.810, as applicable, and follow the requirements of FAR 22.8, 48
CFR (DEAR) 922.8, E.O. 11246 and 40 CFR Part 60.
(12) Examination of Records by Comptroller General. Clause at
FAR 52.215-1.
(13) Foreign Travel. Clause at 48 CFR (DEAR) 970.5204-52.
(14) Nuclear Hazards Indemnity. Clause at 48 CFR (DEAR)
970.2870.
(15) Organizational Conflicts of Interest. Clause at 48 CFR
(DEAR) 952.209-72.
(16) Patent, Data and Copyrights. Appropriate clauses as
required by 48 CFR (DEAR) Parts 927 and 970.
(17) Printing. Clause at 48 CFR (DEAR) 970.5204-19.
(18) Privacy Act. Clauses at FAR 52.224-1 and FAR 52.224-2, and
follow the requirements of FAR 24.1.
(19) Record Retention. Clause at 48 CFR (DEAR) 970.5204-9.
(20) Safeguarding Classified Information. Appropriate clauses as
prescribed at 48 CFR (DEAR) 970.0404.
(21) Service Contract Act. Clauses at FAR 52.222-40 and FAR
52.222-41.
(22) Small Business and Small Disadvantaged Business Concerns.
Clause at FAR 52.219-9.
(23) Special Disabled and Vietnam Era Veterans. Clause at FAR
52.222-35, and
[[Page 49518]]
follow the requirements of FAR Subpart 22.13.
(24) Taxes. Clause similar to 48 CFR (DEAR) 970.5204-23 cost-
reimbursement. An appropriate tax clause covering tax matters should
also be included in fixed-price subcontracts.
(25) Termination. Appropriate clause or clauses as set forth at
FAR 52.249-1 through 52.249-14.
(c) Other. Omission from the foregoing list of contract flowdown
provisions shall not be construed as waiving a requirement for the
contractor to comply with a flowdown requirement for subcontracts
appearing elsewhere in this contract.
Sec. 970.5204-45 [Amended]
11. Section 970.5204-45, Termination, the phrase ``As prescribed in
970.7104-30,'' is removed from the introductory text.
Sec. 970.5204-50 [Amended]
12. At 970.5204-50, Cost and schedule control systems, remove the
phrase ``As prescribed in 970.7104-40,'' from the introductory text.
Sec. 970.7104 [Removed and Reserved]
13. Section 970.7104, Conditions of purchasing by management and
operating contractors, including 970.7104-1 through 970.7104-47, is
removed and reserved.
[FR Doc. 95-23739 Filed 9-25-95; 8:45 am]
BILLING CODE 6450-01-P
