Acquisition Regulation; Department of Energy Management and Operating Contracts

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