[Federal Register Volume 66, Number 22 (Thursday, February 1, 2001)]
[Proposed Rules]
[Pages 8560-8567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1330]
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DEPARTMENT OF ENERGY
48 CFR Parts 904, 952 and 970
RIN 1991-AB54
Acquisition Regulations; Conditional Payment of Fee, Profit, and
Other Incentives
AGENCY: Department of Energy, (DOE).
ACTION: Notice of proposed rulemaking and opportunity for public
comment.
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SUMMARY: The Department of Energy (DOE) proposes to amend its
Acquisition Regulation to: Implement, in part, the requirements of
Section 3147 of the National Defense Authorization Act for Fiscal Year
2000 relating to the safeguarding of classified information; establish
more objective standards and procedures for considering and applying
reductions of fee or other amounts payable for contractor performance
failures relating to environment, safety, and health (ES&H); and make
related technical and conforming amendments.
DATES: Written comments must be received on or before the close of
business March 5, 2001.
ADDRESSES: Comments (3 copies) should be addressed to: Michael L.
Righi, U.S. Department of Energy, Office of Procurement and Assistance
Management, MA-51, 1000 Independence Avenue, SW., Washington, DC 20585.
FOR FURTHER INFORMATION CONTACT: Michael L. Righi at
[email protected] or (202) 586-8175.
SUPPLEMENTARY INFORMATION:
I. Background
II. Section by Section Analysis
III. Public Comments
IV. 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 the National Environmental Policy Act
F. Review Under Executive Order 13132
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act of 1999
I. Background
In addition to other performance requirements specified in their
contracts, the Department's management and operating contractors and
other designated contractors are subject to minimum performance
requirements relating to environment, safety, and health (ES&H), and to
safeguarding Restricted Data and other classified information. As a
general rule, such performance requirements are so fundamental to the
accomplishment of the Department's overall mission objectives that
meeting expected levels of performance is considered a prerequisite for
the payment of fee, profit, or a share of cost savings under DOE
contracts which are subject to such requirements.
In March 1999, the Department amended its Acquisition Regulation to
revise its fee policies and related procedures for management and
operating contracts and other designated contracts. The objectives of
the Department's fee policy are to ensure that fees: 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. The rule prescribed the use of a clause entitled,
``Conditional Payment of Fee, Profit, or Incentives.'' The clause at 48
CFR 970.5204-86 establishes the portion of total available fee, profit,
or incentives that is subject to recovery by DOE due to a contractor's
failure to meet minimum requirements for a specified level of
performance, including cost performance, with an emphasis on
requirements relating to ES&H, and the prevention of catastrophic
performance failures.
Section 3147 of the National Defense Authorization Act for Fiscal
Year 2000 (42 U.S.C. 2282b) requires, in part, that DOE contracts
include a clause which provides for an appropriate reduction in the
fees or amounts paid to the contractor under the contract in the event
of a violation by the contractor or contractor employee of any rule,
regulation, or order relating to the safeguarding or security of
Restricted Data or other classified or sensitive information. The
statute also prescribes that the clause must specify various degrees of
violations and the amount of the reduction attributable to each degree
of violation. It is noted that since there is currently no rule,
regulation or order which defines the term ``sensitive information,''
as used in the Act, this category of information is not addressed in
this proposed regulation.
In May 2000, the Secretary of Energy announced an initiative to
improve contractor performance management by requiring greater
responsibility and accountability from both the Department's senior
managers and its
[[Page 8561]]
contractors. Due to the potentially serious consequences which can
result from performance failures relating to the Department's ES&H and
safeguards and security programs, a major provision of the Secretary's
initiative is to better define objective standards and procedures for
considering and applying fee reductions for contractor performance
failures relating to ES&H and the safeguarding of Restricted Data and
classified information.
In consideration of the foregoing, the Department proposes to amend
its Acquisition Regulation to implement the aforementioned statutory
requirements relating to the safeguarding of Restricted Data and other
classified information and the Secretary's initiative for improving
contractor performance management relating to ES&H. The proposed
amendments to the Acquisition Regulation would apply to all DOE
contracts and would be accomplished by use of one of two clauses.
This proposed rule would add a clause entitled, ``Conditional
Payment of Fee or Profit--Safeguarding Restricted Data and Other
Classified Information.'' This clause would be prescribed for use in
all DOE contracts which involve or are likely to involve classified
information, except for DOE management and operating contracts and
other contracts designated by the Procurement Executive, or designee.
The clause would provide for reductions of earned fee or profit that is
otherwise payable under applicable contracts for contractor violations
of laws, regulations, or directives relating to the safeguarding of
Restricted Data and other classified information. As proposed, the
clause sets forth the conditions which may precipitate a reduction of
fee or profit, percentage reduction ranges which correlate to three
degrees of violations relating to the safeguarding of Restricted Data
or other classified information, and the methodology to be used in
determining the amount of earned fee or profit that will be subject to
reduction under the clause.
For DOE management and operating contracts and other contracts
designated by the Procurement Executive, or designee, the clause at 48
CFR 970.5204-86, would be renamed ``Conditional Payment of Fee, Profit,
or Other Incentives--Facility Management Contracts'', and would be
amended to provide for reductions of earned fee, fixed fee, profit, or
share of cost savings which may otherwise be payable under the
contract: for performance failures relating to ES&H; and, for contracts
that involve or are likely to involve classified information, for
contractor violations of laws, regulations, or DOE directives relating
to the safeguarding of Restricted Data and other classified
information. As proposed, the clause sets forth: the conditions that
may precipitate a reduction of earned or fixed fee, profit, or share of
cost savings under the contract; percentage fee, profit, or share of
cost savings reduction ranges which correlate to three degrees of
performance failures relating to ES&H and to the safeguarding of
Restricted Data and other classified information; and the methodology
to be used in determining the amount of earned or fixed fee, profit, or
share of cost savings that will be subject to reduction under the
clause.
II. Section-by-Section Analysis
1. Section 904.402 would be amended to prescribe the Department's
implementation of Section 3147 of the National Defense Authorization
Act for Fiscal Year 2000 for DOE contracts which involve or are likely
to involve the use of classified information, except DOE management and
operating contracts and other contracts designated by the Procurement
Executive, or designee. The section is also proposed to be amended to
prescribe related coordination and approval requirements.
2. Section 904.404 would be amended to add a prescription for the
use of the new contract clause entitled, ``Conditional Payment of Fee
or Profit--Safeguarding Restricted Data and Other Classified
Information.''
3. Section 952.204-XX would be added to incorporate the text of the
new contract clause entitled, ``Conditional Payment of Fee or Profit--
Safeguarding Restricted Data and Other Classified Information.''
4. Section 970.0404-2 would be amended to prescribe the
Department's implementation of Section 3147 of the National Defense
Authorization Act for Fiscal Year 2000 for DOE management and operating
contracts and other contracts designated by the Procurement Executive,
or designee.
5. Section 970.15404-4-1 would be amended to prescribe the
Department's policy pertaining to the payment of earned fee, fixed fee,
profit, or share of cost savings under applicable DOE contracts for
achieving minimum performance requirements relating to ES&H and to the
safeguarding of Restricted Data and other classified information.
6. Section 970.15404-4-11 would be amended to revise the
prescription for use of the clause at 48 CFR 970.5204-86.
7. Section 970.5204-86 would be amended to revise the title of the
clause, and to provide for contractual implementation of the
Department's policy prescribed at amended 970.15404-4-1 (see paragraph
5.).
8. Technical and conforming amendments would be made to various
sections as a result of the amendments described in paragraphs 1.
through 7.
III. Public Comments
Interested persons are invited to participate by submitting data,
views or arguments with respect to the new regulation proposed in this
notice. Three copies of written comments should be submitted to the
address indicated in the ADDRESSES section of this notice. All comments
received will be available for public inspection as part of the
administrative record on file for this rulemaking in the Department of
Energy Reading Room, Room 1E-090, Forrestal Building, 1000 Independence
Avenue, SW., Washington, DC 20585, (202) 586-3142, between the hours 9
a.m. and 4 p.m., Monday through Friday, except Federal holidays. All
written comments received by the date indicated in the DATES section of
this notice of proposed rulemaking and all other relevant information
in the record will be carefully assessed and fully considered prior to
the publication of the final rule. Any information or data considered
to be exempt from public disclosure by law must be so identified and
submitted in writing, one copy, as well as one complete copy from which
the information believed to be exempt from disclosure is deleted. The
Department will determine if the information or data is exempt from
disclosure.
IV. Procedural Requirements
A. Review Under Executive Order 12866
Today's 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
[[Page 8562]]
errors and ambiguity; (2) write regulations to minimize litigation; (3)
provide a clear legal standard for affected conduct rather than a
general standard; and (4) promote simplification and burden reduction.
With regard to the review required by section 3(a), section 3(b) of
Executive Order 12988 specifically requires that Executive agencies
make every reasonable effort to ensure that the regulation: (1) Clearly
specifies the preemptive effect, if any; (2) clearly specifies any
effect on existing Federal law or regulation; (3) provides a clear
legal standard for affected conduct while promoting simplification and
burden reduction; (4) specifies the retroactive effect, if any; (5)
adequately defines key terms; and (6) addresses other important issues
affecting clarity and general draftsmanship under any guidelines issued
by the 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. The
Department has completed the required review and determined that, to
the extent permitted by law, the regulations meet the relevant
standards of Executive Order 12988.
C. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires
that a Federal agency prepare a regulatory flexibility analysis for any
rule for which the agency is required to publish a general notice of
proposed rulemaking. Such an analysis is not required, however, if the
agency certifies that the rule would not, if promulgated, have a
significant economic impact on a substantial number of small entities
(5 U.S.C. 605(b)).
The Department certifies that today's proposal will not have a
significant economic impact on a substantial number of small entities.
This rule, which implements, in part, the requirements of Section 3147
of the National Defense Authorization Act for Fiscal Year 2000, applies
predominantly to DOE's management and operating contractors which are
not small entities. The rule will not directly regulate small entities,
diminish any preference accorded to small businesses in Federal or DOE
procurement programs, or impose requirements which may result in
increased administrative costs to contractors.
D. Review Under the Paperwork Reduction Act
This proposed rule does not contain information collection
requirements that require approval by the Office of Management and
Budget under the Paperwork Reduction Act (44 U.S.C. 3507 et seq.).
E. Review Under the National Environmental Policy Act
The Department has concluded that promulgation of this proposed
rule falls into a class of actions which would not individually or
cumulatively have significant impact on the human environment, as
determined by Department of Energy regulations (10 CFR part 1021,
subpart D) implementing the National Environmental Policy Act (NEPA) of
1969 (42 U.S.C. 4321 et seq.). Specifically, this proposed rule is
categorically excluded from NEPA review because the amendments to the
DEAR would be strictly procedural (categorical exclusion A6).
Therefore, this proposed rule does not require an environmental impact
statement or environmental assessment pursuant to NEPA.
F. Review Under Executive Order 13132
Executive Order 13132 (64 FR 43255, August 10, 1999) requires
agencies to develop an accountable process to ensure meaningful and
timely input by State and local officials in the development of
regulatory policies that have ``federalism implications.'' As defined
in the Executive Order, policies that have federalism implications
include regulations that have substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. The Department has examined this proposed rule
and has determined that it would not have a substantial direct effect
on the States, on the relationship between the national government and
the States, or on the distribution of power and responsibilities among
the various levels of government. No further action is required by
Executive Order 13132.
G. Review Under the Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally
requires a Federal agency to perform a detailed assessment of costs and
benefits of any rule imposing a Federal Mandate with costs to State,
local or tribal governments, or to the private sector, of $100 million
or more. This rulemaking affects private sector entities, and the
impact is less than $100 million.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any proposed rule or policy that may affect
family well-being. Today's rule does not impact on the autonomy or
integrity of the family institution. Accordingly, the Department has
concluded that it is not necessary to prepare a Family Policymaking
Statement.
List of Subjects in 48 CFR Parts 904, 952, and 970
Government procurement.
Issued in Washington, DC on January 10, 2001.
T.J. Glauthier,
Deputy Secretary, Department of Energy.
For the reasons set out in the preamble, DOE proposes to amend
Chapter 9 of Title 48 of the Code of Federal Regulations as set forth
below.
1. The authority citation for parts 904 and 952 is revised to read
as follows:
Authority: 42 U.S.C. 7101 et seq.; 41 U.S.C. 418b; 50 U.S.C.
2401 et seq.
PART 904--ADMINISTRATIVE MATTERS
2. Section 904.402 is amended by adding a new paragraph (c) to read
as follows:
904.402 General.
* * * * *
(c)(1) Section 3147 of the National Defense Authorization Act for
Fiscal Year 2000 (42 U.S.C. 2282b) requires that applicable DOE
contracts include a clause which provides for an appropriate reduction
in the fees or amounts paid to the contractor under the contract in the
event of a violation by the contractor or any contractor employee of
any rule, regulation, or order relating to the safeguarding or security
of Restricted Data or other classified information. The clause is
required to specify various degrees of violations and the amount of the
reduction attributable to each degree of violation. The clause
prescribed in 48 CFR 904.404(d)(5) shall be used for this purpose
unless the clause prescribed at 48 CFR 970.15404-4-11(b) is used.
(2) The clause entitled ``Conditional Payment of Fee or Profit--
Safeguarding Restricted Data and Other Classified Information''
provides for reductions of fee or profit that is earned by the
[[Page 8563]]
contractor and that may otherwise be payable under the contract
depending upon the severity of the contractor's failure to comply with
contract terms or conditions relating to the safeguarding of Restricted
Data or other classified information. However, when reviewing
performance failures that occur during the performance of the contract
that would otherwise warrant a potential reduction of earned fee, the
contracting officer may consider mitigating factors that may warrant a
reduction below the applicable range specified in the clause, including
a determination that no reduction should be made. Such factors may
include situations in which a contractor self-identifies a problem
requiring corrective action, and is actively working to correct the
problem.
(3) The contracting officer must obtain the concurrence of the Head
of the Contracting Activity--
(i) Prior to effecting any reduction of fee or amounts otherwise
payable to the contractor in accordance with the terms and conditions
of the clause entitled, ``Conditional Payment of Fee or Profit--
Safeguarding Restricted Data and Other Classified Information;'' and
(ii) For determinations that no reduction of fee is warranted for a
particular performance failure(s) that would otherwise be subject to a
reduction.
3. Section 904.404 is amended by adding a new paragraph (d)(5) to
read as follows:
904.404 Contract clause.
(d) * * *
(5) Except as prescribed in 48 CFR 970.15404-4-11(b), the clause at
48 CFR 952.204-XX, Conditional Payment of Fee or Profit--Safeguarding
Restricted Data and Other Classified Information, shall be inserted in
all contracts which contain the clause at 48 CFR 952.204-2, Security.
PART 952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
4. Section 952.204-XX is added in Subchapter H to read as follows:
952.204-XX Conditional Payment of Fee or Profit--Safeguarding
Restricted Data and Other Classified Information.
As prescribed in 48 CFR (DEAR) 904.404(d)(5) insert the following
clause.
Conditional Payment of Fee or Profit--Safeguarding Restricted Data and
Other Classified Information (Month and Year TBD)
(a) General. (1) The payment of fee or profit (i.e., award fee,
fixed fee, and incentive fee or profit) under this contract is
dependent upon the contractor's compliance with the terms and
conditions of this contract relating to the safeguarding of
Restricted Data and other classified information (i.e., Formerly
Restricted Data and National Security Information) including
compliance with applicable law, regulation, and DOE directives. The
term ``contractor'' as used in this clause to address failure to
comply shall mean ``contractor or contractor employee.''
(2) In addition to other remedies available to the Federal
Government, if the contractor fails to comply with the terms and
conditions of this contract relating to the safeguarding of
Restricted Data and other classified information, the contracting
officer may unilaterally reduce the amount of earned fee, fixed fee,
or profit which is otherwise payable to the contractor in accordance
with the terms and conditions of this clause.
(3) Any reduction in the amount of fee or profit earned by the
contractor will be determined by the severity of the contractor's
failure to comply with contract terms and conditions relating to the
safeguarding of Restricted data or other classified information
pursuant to the degrees specified in paragraph (c) of this clause.
(b) Reduction Amount. (1) If it is found that the contractor has
failed to comply with contract terms and conditions relating to the
safeguarding of Restricted Data or other classified information, the
contractor's earned or fixed fee, or profit may be reduced. Such
reduction shall not be less than 51% nor greater than 100% of the
total fee or profit earned for a first degree performance failure,
not less than 26% nor greater than 50% for a second degree
performance failure, and up to 25% for a third degree performance
failure. The contracting officer may consider mitigating factors
that may warrant a reduction below the specified range, including a
determination that no reduction should be made (see 48 CFR
904.402(c)).
(2)(i) For purposes of this clause, the contracting officer will
at the time of contract award allocate the total amount of fee or
profit that is available under this contract to equal periods of
[insert 6 or 12] months to run sequentially for the entire term of
the contract (i.e., from the effective date of the contract to the
expiration date of the contract, including all options). The amount
of fee or profit to be allocated to each period shall be equal to
the average monthly fee or profit that is available or otherwise
payable during the entire term of the contract, multiplied by the
number of months established above for each period.
(ii) The total amount of fee or profit that is subject to
reduction under this clause, in combination with any reduction made
under any other clause in the contract that provides for a reduction
to the fee or profit, shall not exceed the amount of fee or profit
that is earned by the contractor in the period established pursuant
to paragraph (b)(2)(i) of this clause in which a performance failure
warranting a reduction occurs.
(3) For performance-based firm-fixed-price contracts, the
contracting officer will at the time of contract award include
negative monetary incentives in the contract for contractor
violations relating to the safeguarding of Restricted Data and other
classified information.
(c) Safeguarding Restricted Data and Other Classified
Information. The degrees of performance failures relating to the
contractor's obligations under this contract for safeguarding of
Restricted Data and other classified information are as follows:
(1) First Degree: Performance failures that have been
determined, in accordance with applicable DOE regulation or
directive, to have resulted in, or that can reasonably be expected
to result in, exceptionally grave damage to the national security.
The following performance failures or performance failures of
similar import will be considered first degree:
(i) Non-compliance with applicable laws, regulations, and DOE
directives actually resulting in, or creating a risk of, loss,
compromise, or unauthorized disclosure of Restricted Data or other
classified information classified as Top Secret.
(ii) Contractor actions that result in a breakdown of the
safeguards and security management system that can reasonably be
expected to result in the loss, compromise, or unauthorized
disclosure of Restricted Data, or other classified information which
is classified as Top Secret.
(iii) Failure to implement corrective actions stemming from the
loss, compromise, or unauthorized disclosure of Restricted Data or
other classified information classified as Top Secret.
(2) Second Degree: Performance failures that have been
determined, in accordance with applicable DOE regulation or
directive, to have actually resulted in, or that can reasonably be
expected to result in, serious damage to the national security. The
following performance failures or performance failures of similar
import will be considered second degree:
(i) Non-compliance with applicable laws, regulations, and DOE
directives actually resulting in, or creating risk of, loss,
compromise, or unauthorized disclosure of Restricted Data or other
classified information which is classified as Secret.
(ii) Contractor actions that result in a breakdown of the
safeguards and security management system that can reasonably be
expected to result in the loss, compromise, or unauthorized
disclosure of Restricted Data, or other classified information which
is classified as Secret.
(iii) Failure to promptly report the loss, compromise, or
unauthorized disclosure of Restricted Data or other classified
information regardless of classification.
(iv) Failure to implement corrective actions stemming from the
loss, compromise, or unauthorized disclosure of Restricted Data or
other classified information classified as Secret.
(3) Third Degree: Performance failures that have been
determined, in accordance with applicable DOE regulation or
directive, to have actually resulted in, or that can reasonably be
expected to result in, undue risk to the common defense and
security. In addition, this category includes performance failures
that result from a lack of contractor management and/or employee
attention to the proper safeguarding of Restricted Data and other
classified information. These performance failures may be indicators
of
[[Page 8564]]
future, more severe performance failures and/or conditions, and if
identified and corrected early would prevent serious incidents. The
following performance failures or performance failures of similar
import will be considered third degree:
(i) Non-compliance with applicable laws, regulations, and DOE
directives actually resulting in, or creating risk of, loss,
compromise, or unauthorized disclosure of Restricted Data or other
classified information which is classified as Confidential.
(ii) Failure to promptly report alleged or suspected violations
of laws, regulations, or directives pertaining to the safeguarding
of Restricted Data or other classified information.
(iii) Failure to identify or execute corrective actions to
mitigate or eliminate identified vulnerabilities and reduce residual
risk relating to the protection of Restricted Data or other
classified information in accordance with the contractor's
Safeguards and Security Plan or other security plan, as applicable.
(iv) Contractor actions that result in performance failures
which unto themselves pose minor risk, but when viewed in the
aggregate indicate degradation in the integrity of the contractor's
safeguards and security management system relating to the protection
of Restricted Data and other classified information.
(End of Clause)
PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS
5. The authority citation for Part 970 continues to read as
follows:
Authority: 42 U.S.C. 2201; 42 U.S.C. 7101 et seq.; 50 U.S.C.
2401 et seq.
6. Section 970.0404-2 is amended by adding paragraph (f) to read as
follows:
970.0404-2 General.
* * * * *
(f) For DOE management and operating contracts and other contracts
designated by the Procurement Executive, or designee, the clause
entitled, ``Conditional Payment of Fee, Profit, and Other Incentives--
Facility Management Contracts,'' implements the requirements of Section
3147 of the National Defense Authorization Act for Fiscal Year 2000
(see 48 CFR 904.402(c)(1)) for the use of a contract clause which
provides for an appropriate reduction in the fee or amount paid to the
contractor under the contract in the event of a violation by the
contractor or any contractor employee of any rule, regulation, or order
relating to the safeguarding or security of Restricted Data or other
classified information. The clause, in part, provides for reductions in
the amount of fee, profit, or share of cost savings that is otherwise
earned by the contractor for performance failures relating to the
safeguarding of Restricted Data and other classified information.
7. Section 970.1504-1-2 is amended by adding new paragraph (i) to
read as follows:
970.1504-1-2 Fee policy.
* * * * *
(i)(1) In addition to other performance requirements specified in
the contract, DOE management and operating contractors and other
contracts designated by the Procurement Executive, or designee, are
subject to minimum performance requirements relating to environment,
safety, and health (ES&H), and to the safeguarding of Restricted Data
and other classified information. Minimum performance requirements
relating to ES&H will be set forth in a DOE approved Integrated Safety
Management System (ISMS), or similar document, as required by the terms
and conditions of the contract. As applicable, requirements relating to
the safeguarding of Restricted Data and other classified information
will be set forth in the clauses of the contract entitled ``Security''
and ``Laws, Regulations, and DOE Directives,'' and in other terms and
conditions that may be included in the contract which prescribe
requirements for the safeguarding of Restricted Data and other
classified information.
(2) If the contractor fails to obtain DOE approval of the ISMS,
fails to achieve the minimum performance requirements of the contract
relating to ES&H, or violates any law, regulation, or directive
relating to the safeguarding of Restricted Data and other classified
information, otherwise earned fee, fixed fee, profit, or share of cost
savings may be unilaterally reduced by the DOE Operations Office/Field
Manager, or designee, in accordance with the terms and conditions of
the clause entitled ``Conditional Payment of Fee, Profit, and Other
Incentives--Facility Management Contracts.''
(3) The clause entitled ``Conditional Payment of Fee, Profit, and
Other Incentives--Facility Management Contracts,'' provides for
reductions of earned fee, fixed fee, profit, or share of cost savings
under the contract depending upon the severity of a contractor
performance failure relating to ES&H requirements and, if applicable,
for the safeguarding of Restricted Data and other classified
information. However, when reviewing performance failures that occur
during the performance of the contract that would otherwise warrant a
potential reduction of earned fee, fixed fee, profit, or share of cost
savings, the DOE Operations Office/Field Manager, or designee, may
consider mitigating factors that may warrant a reduction below the
applicable range specified in the clause, including a determination
that no reduction should be made. Such factors may include situations
in which a contractor self-identifies a problem requiring corrective
action, and is actively working to correct the problem.
(4) The DOE Operations Office/Field Manager, or designee, must
obtain the concurrence of the Cognizant Secretarial Officer--
(i) Prior to effecting any reduction of fee or profit in accordance
with the terms and conditions of the clause entitled, ``Conditional
Payment of Fee, Profit, and Other Incentives--Facility Management
Contracts;'' and
(ii) For determinations that no reduction of fee or profit is
warranted for a particular performance failure(s) that would otherwise
be subject to a reduction.
970.1504-1-3 [Amended]
8. Section 970.1504-1-3 is amended in paragraph (c)(1) by revising
``Conditional Payment of Fee, Profit, or Incentives'' to read
``Conditional Payment of Fee, Profit, and Other Incentives--Facility
Management Contracts.''
9. Section 970.1504-5 is amended by revising paragraph (b) to read
as follows:
970.1504-5 Solicitation provision contract clauses.
* * * * *
(b) (1) The contracting officer shall insert the clause at 48 CFR
970.5204-86, Conditional Payment of Fee, Profit, and Other Incentives--
Facility Management Contracts, in all DOE management and operating
contracts and other contracts determined by the Procurement Executive,
or designee.
(2) The contracting officer shall include the clause with its
Alternate I in contracts which do not contain the clause at 48 CFR
952.204-2, Security.
(3) The contracting officer shall include the clause with its
Alternate II in contracts which are awarded on a cost-plus-award-fee,
incentive fee, or multiple fee basis.
* * * * *
970.5215-1 [Amended]
10. Section 970.5215-1 is amended in paragraph (c)(3) by revising
``Conditional Payment of Fee, Profit, or Incentives'' to read
``Conditional Payment of Fee, Profit, and Other Incentives--Facility
Management Contracts.''
11. Section 970.5215-3 is revised to read as follows:
[[Page 8565]]
970.5215-3 Conditional payment of fee, profit, and other incentives--
facility management contracts.
As prescribed in 48 CFR 970.15404-4-11(b)(1), insert the following
clause:
970.5204.86 Conditional Payment of Fee, Profit, and Other Incentives--
Facility Management Contracts (Month and Year TBD)
(a) General. (1) The payment of earned fee, fixed fee, profit,
or share of cost savings under this contract is dependent upon the
contractor's development of, and performance under, an approved
Integrated Safety Management System (ISMS), and the contractor's or
contractor employee's compliance with the terms and conditions of
this contract relating to the safeguarding of Restricted Data and
other classified information.
(2) The minimum performance requirements of this contract
relating to environment, safety, and health (ES&H) will be set forth
in an approved ISMS, or similar document, as required by the terms
and conditions of this contract. These minimum requirements are: (i)
implementation of the DOE-approved ISMS; (ii) compliance with
applicable laws, regulations, and DOE directives; (iii)
accomplishment of annual performance commitments relating to ES&H
and (iv) prevention of catastrophic performance failures (e.g.,
fatality; serious workplace-related injury or illness to one or more
federal, contractor, or subcontractor employees or the general
public; significant damage to the environment).
(3) Requirements of this contract relating to the safeguarding
of Restricted Data and other classified information will be set
forth in the clauses of this contract entitled, ``Security'' and
``Laws, Regulations, and DOE Directives,'' as well as other terms
and conditions that may be prescribed elsewhere in this contract.
(4) If the contractor fails to obtain approval of the ISMS, or
otherwise fails to achieve the minimum performance requirements of
this contract relating to ES&H or to the safeguarding of Restricted
Data and other classified information during any performance
evaluation period established under the contract pursuant to the
clause of this contract entitled, ``Total Available Fee: Base Fee
Amount and Performance Fee Amount,'' otherwise earned fee, fixed
fee, profit or share of cost savings may be unilaterally reduced by
the DOE Operations Office/Field Manager, or designee.
(b) Reduction Amount. (1) The amount of earned fee, fixed fee,
profit, or share of cost savings that is subject to reduction will
be determined by the severity of the performance failure relating to
ES&H or to the safeguarding of Restricted Data and other classified
information pursuant to the degrees specified in paragraphs (c) and
(d) of this clause.
(2) If it is found that the facts and circumstances warrant a
reduction of earned fee, fixed fee, profit, or share of cost
savings, such reduction shall not be less than 51% nor greater than
100% of the amount of earned fee, fixed fee, profit, or the
contractor's share of cost savings for a first degree performance
failure, not less than 26% nor greater than 50% for a second degree
performance failure, and up to 25% for a third degree performance
failure. The DOE Operations Office/Field Manager, or designee, may
consider mitigating factors that may warrant a reduction below the
applicable range, including a determination that no reduction should
be made (see 48 CFR 970.15404-4-1(h)).
(3)(i) The amount of fee, fixed fee, profit, or share of cost
savings that is otherwise earned by a contractor during an
evaluation period may be reduced in accordance with this clause if
it is determined that a performance failure warranting a reduction
under this clause occurs within the evaluation period.
(ii) The amount of reduction under this clause, in combination
with any reduction made under any other clause in the contract,
shall not exceed the amount of fee, fixed fee, profit, or the
contractor's share of cost savings that is otherwise earned during
the evaluation period.
(iii) For the purposes of this clause, earned fee, fixed fee,
profit, or share of cost savings shall mean the amount determined by
the contracting officer or fee determining official as otherwise
payable based on the contractor's performance during an evaluation
period. Where the contract provides for one or more financial
incentives which extend beyond a single evaluation period, this
amount shall also include any provisional incentive amounts
determined otherwise payable, or if provisional payments are not
provided for, the allocable amount of any incentive determined
otherwise payable at the conclusion of a subsequent evaluation
period. The allocable amount shall be the total amount of the earned
incentive divided by the number of evaluation periods over which it
is earned.
(iv) The Government will effect the reduction at the end of the
evaluation period in which the performance failure occurs (unless
the Government is not aware of the failure; in this case the
Government will effect the reduction as soon as practical), except
for that portion of the reduction requiring an allocation. The
Government will effect this portion of the reduction at the end of
the evaluation period in which it determines the total amount earned
under the incentive. If at any time a reduction causes the sum of
the payments the contractor has received for fee, fixed fee, profit,
or share of cost savings to exceed the sum of fee, fixed fee,
profit, or share of cost savings the contractor has earned
(provisionally or otherwise), the contractor shall immediately
return the excess to the Government. (What the contractor ``has
earned'' reflects any reduction made under this or any other clause
of the contract.)
(v) At the end of the contract:
(A) The Government will pay the contractor the amount by which
the sum of fee, fixed fee, profit, or share of cost savings the
contractor has earned exceeds the sum of the payments the contractor
has received; or
(B) The contractor shall return to the Government the amount by
which sum of the payments the contractor has received exceed the sum
of fee, fixed fee, profit, or share of cost savings the contractor
has earned. (What the contractor ``has earned'' reflects any
reduction made under this or any other clause of the contract.)
(c) Environment, Safety and Health (ES&H). The degrees of ES&H
performance failures under which reductions of earned or fixed fee,
profit, or share of cost savings will be determined are as follows:
(1) First Degree: Performance failures that are considered
catastrophic or could threaten the successful completion of a
program or project. The following performance failures or
performance failures of similar import will be considered first
degree:
(i) Failure to develop and obtain required DOE approval of a
Safety Management System.
(ii) Failure to comply with an approved Safety Management System
which results in any of the following performance failures:
(A) Fatality.
(B) Serious workplace-related injury or illness to one or more
Federal, contractor, or subcontractor workers or member(s) of the
public.
(C) Significant damage to the environment.
(D) Contractor actions leading to a Type A accident
investigation (reference DOE O 225.1A, ``Accident
Investigations.'').
(E) Breakdown of the safety management system creating risk of a
Type A performance failure.
(F) Non-compliance with applicable environmental, safety, and
health laws, regulations, and DOE directives posing a Type A risk.
(G) Failure to notify DOE of an imminent danger situation after
discovery.
(H) Failure to report performance failures that could warrant
consideration of a Type A or Type B investigation.
(iii) Failure to implement corrective action(s) in response to
the occurrence of any first degree performance failure.
(2) Second Degree: Performance failures that are significantly
adverse to safety or could result in significant additional cost to
the Federal Government. The following performance failures or
performance failures of similar import will be considered second
degree:
(i) Contractor actions leading to a Type B accident
investigation (reference DOE O 225.1A, ``Accident Investigations'').
(ii) Breakdown of the safety management system creating the risk
of a Type B performance failure.
(iii) Non-compliance with applicable environmental, safety, and
health law, regulation, or DOE directive creating risk of a Type B
performance failure.
(iv) Failure to execute DOE approved implementation plans in
response to Defense Nuclear Facilities Safety Board recommendations.
(v) Failure to meet key program milestones designed to
substantially reduce risk to workers, the public, and the
environment.
(vi) Failure to implement corrective action(s) in response to
the occurrence of any second degree performance failure.
(3) Third Degree: Performance failures that result from lack of
management and/or worker attention to safety. These performance
failures may be indicators of
[[Page 8566]]
future, more severe performance failures and/or conditions, and if
identified and corrected early can prevent serious accidents. The
following performance failures or performance failures of similar
import will be considered third degree:
(i) Failure to implement corrective actions resulting from
oversight evaluations, assessments, and inspections.
(ii) Failure to implement actions designed to integrate lessons-
learned into work planning and execution.
(iii) Failure to implement corrective actions resulting from
self-assessments.
(iv) Contractor actions that result in a lapse in Safety
Management System implementation posing less than a Type B risk.
(v) Non-compliance with applicable environmental, safety, and
health laws, regulations, and DOE directives posing less than a Type
B risk.
(vi) Contractor actions that result in performance failures
which unto themselves pose minor risk, but when viewed in the
aggregate indicate degradation in the integrity of the safety
management system.
(vii) Failure to implement corrective action(s) in response to
the occurrence of any third degree performance failure.
(d) Safeguarding Restricted Data and Other Classified
Information. The degrees of performance failures relating to the
contractor's and contractor employee's obligations under this
contract for the safeguarding of Restricted Data and other
classified information under which reductions of fee, profit, or
share of cost savings will be determined are as follows:
(1) First Degree: Performance failures that have been
determined, in accordance with applicable DOE regulation or
directive, to have resulted in, or that can reasonably be expected
to result in, exceptionally grave damage to the national security.
The following performance failures or performance failures of
similar import will be considered first degree:
(i) Non-compliance with applicable laws, regulations, and DOE
directives actually resulting in, or creating a risk of, loss,
compromise, or unauthorized disclosure of Restricted Data or other
classified information classified as Top Secret.
(ii) Contractor actions that result in a breakdown of the
safeguards and security management system that can reasonably be
expected to result in the loss, compromise, or unauthorized
disclosure of Restricted Data, or other classified information which
is classified as Top Secret.
(iii) Failure to implement corrective actions stemming from the
loss, compromise, or unauthorized disclosure of Restricted Data or
other classified information classified as Top Secret.
(2) Second Degree: Performance failures that have been
determined, in accordance with applicable DOE regulation or
directive, to have actually resulted in, or that can reasonably be
expected to result in, serious damage to the national security. The
following performance failures or performance failures of similar
import will be considered second degree:
(i) Non-compliance with applicable laws, regulations, and DOE
directives actually resulting in, or creating risk of, loss,
compromise, or unauthorized disclosure of Restricted Data or other
classified information which is classified as Secret.
(ii) Contractor actions that result in a breakdown of the
safeguards and security management system that can reasonably be
expected to result in the loss, compromise, or unauthorized
disclosure of Restricted Data, or other classified information which
is classified as Secret.
(iii) Failure to promptly report the loss, compromise, or
unauthorized disclosure of Restricted Data or other classified
information regardless of classification.
(iv) Failure to implement corrective actions stemming from the
loss, compromise, or unauthorized disclosure of Restricted Data or
other classified information classified as Secret.
(3) Third Degree: Performance failures that have been
determined, in accordance with applicable DOE regulation or
directive, to have actually resulted in, or that can reasonably be
expected to result in, undue risk to the common defense and
security. In addition, this category includes performance failures
that result from a lack of contractor management and/or employee
attention to the proper safeguarding of Restricted Data and other
classified information. These performance failures may be indicators
of future, more severe performance failures and/or conditions, and
if identified and corrected early would prevent serious incidents.
The following performance failures or performance failures of
similar import will be considered third degree:
(i) Non-compliance with applicable laws, regulations, and DOE
directives actually resulting in, or creating risk of, loss,
compromise, or unauthorized disclosure of Restricted Data or other
classified information which is classified as Confidential.
(ii) Failure to promptly report alleged or suspected violations
of laws, regulations, or directives pertaining to the safeguarding
of Restricted Data or other classified information.
(iii) Failure to identify or execute corrective actions to
mitigate or eliminate identified vulnerabilities and reduce residual
risk relating to the protection of Restricted Data or other
classified information in accordance with the contractor's
Safeguards and Security Plan or other security plan, as applicable.
(iv) Contractor actions that result in performance failures
which unto themselves pose minor risk, but when viewed in the
aggregate indicate degradation in the integrity of the contractor's
safeguards and security management system relating to the protection
of Restricted Data and other classified information.
(End of Clause)
Alternate I (Month and Year TBD). As prescribed in 48 CFR
970.15404-4-11(b)(2), replace paragraphs (a) and (b)(1) of the basic
clause with the following paragraphs (a) and (b)(1), and delete
paragraph (d).
(a) General. (1) The payment of earned fee, fixed fee, profit,
or share of cost savings under this contract is dependent upon the
contractor's development of, and performance under, an approved
Integrated Safety Management System (ISMS).
(2) The minimum performance requirements of this contract
relating to environment, safety, and health (ES&H) will be set forth
in an approved ISMS, or similar document, as required by the terms
and conditions of this contract. These minimum requirements are: (i)
implementation of the DOE-approved ISMS; (ii) compliance with
applicable laws, regulations, and DOE directives; (iii)
accomplishment of annual performance commitments relating to ES&H;
and (iv) prevention of catastrophic performance failures (e.g.,
fatality; serious workplace-related injury or illness to one or more
federal, contractor, or subcontractor employees or the general
public; significant damage to the environment).
(3) If the contractor fails to obtain approval of the ISMS, or
otherwise fails to achieve the minimum performance requirements of
this contract relating to ES&H during the performance evaluation
period, otherwise earned fee, fixed fee, profit or share of cost
savings may be unilaterally reduced by the DOE Operations Office/
Field Manager, or designee.
(b) Reduction Amount. (1) The amount of earned fee, fixed fee,
profit, or share of cost savings that is subject to reduction will
be determined by the severity of the performance failure relating to
ES&H pursuant to the degrees specified in paragraphs (c) of this
clause.
Alternate II (Month and Year TBD). As prescribed in 48 CFR
970.15404-4-11(b)(3), insert the following as paragraphs (e) and (f)
in contracts awarded on a cost-plus-award fee, incentive fee or
multiple fee basis (if Alternate I is also used, redesignate the
following as paragraphs (d) and (e)).
(e) Minimum requirements for specified level of performance. (1)
At a minimum the contractor must perform the following:
(i) The requirements with specific incentives which do not
require the achievement of cost efficiencies in order to be
performed at the level of performance set forth in the Statement of
Work, Work Authorization Directive, or similar document unless an
otherwise minimal level of performance has been established in the
specific incentive;
(ii) All of the performance requirements directly related to
requirements specifically incentivized which do not require the
achievement of cost efficiencies in order to be performed at a level
of performance such that the overall performance of these related
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 Government.
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 performance
evaluation period, the DOE Operations/Field Office Manager, or
designee, may reduce any otherwise earned fee, fixed fee, profit, or
shared net savings for the performance
[[Page 8567]]
evaluation period. Such reduction shall not result in the total of
earned fee, fixed fee, profit, or shared net savings being less than
25% of the total available fee amount. Such 25% shall include base
fee, if any.
(f) Minimum requirements for cost performance. (1) Requirements
incentivized by other than cost incentives must be performed within
their specified cost constraint 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 performance evaluation period shall be
determined by the Government. To the extent the contractor fails to
achieve the stipulated cost performance levels, the DOE Operations/
Field Office Manager, or designee, may reduce in whole or in part
any otherwise earned fee, fixed fee, profit, or shared net savings
for the performance evaluation period. Such reduction shall not
result in the total of earned fee, fixed fee, profit or shared net
savings being less than 25% of the total available fee amount. Such
25% shall include base fee, if any.
[FR Doc. 01-1330 Filed 1-31-01; 8:45 am]
BILLING CODE 6450-01-P