Acquisition Regulation; Department of Energy Management and Operating Contracts

DEPARTMENT OF ENERGY

48 CFR Parts 917 and 970

[1991-AB-09]

Acquisition Regulation; Department of Energy Management and

Operating Contracts

AGENCY: Department of Energy.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Energy (DOE) is adopting as final an interim

rule amending its Acquisition Regulation to set forth its policy

regarding the competition and extension of the Department's management

and operating contracts. Under its policy, the Department affirms its

commitment to provide for full and open competition in the award of its

management and operating contracts, except where the Department

determines that competitive procedures should not be used pursuant to

one of the circumstances authorized by the Competition in Contracting

Act of 1984 (41 U.S.C. 254), as implemented in Part 6 of the Federal

Acquisition Regulation. This rulemaking implements one of the key

recommendations of the Department's contract reform initiative to

improve its acquisition system.

DATES: This final rule is effective June 27, 1997.

FOR FURTHER INFORMATION CONTACT: Connie P. Fournier, Office of Policy

(HR-51), Department of Energy, 1000 Independence Avenue, SW,

Washington, D.C. 20585; (202) 586-8245; (202) 586-0545 (facsimile);

[email protected] (Internet).

SUPPLEMENTARY INFORMATION:

I. Background

II. Disposition of Comments

III. Procedural Requirements

A. Review Under Executive Order 12866

B. Review Under Executive Order 12988

C. Review Under the Regulatory Flexibility Act

D. Review Under the Paperwork Reduction Act

E. Review Under Executive Order 12612

F. Review Under the National Environmental Policy Act

I. Background

The Department of Energy published an interim final rule in the

Federal Register on June 24, 1996 (61 FR 32584). The public comment

period closed August 23, 1996. The Department received comments from

three companies. Copies of all written comments are available for

public inspection at the Department's Freedom of Information Reading

Room, Room 1E-190, Forrestal Building, 1000 Independence Avenue, SW,

Washington, DC 20585, (202) 586-6020.

Today's final rule adopts as final the amendments in the interim

final rulemaking.

II. Disposition of Comments

The Department has considered and evaluated the comments received

during the public comment period. The following discussion describes

the comments received and provides the Department's responses to the

comments.

A. Comment: One commenter believes that the policy statement in

917.602 is inconsistent with the remainder of DEAR 917 and FAR Part 17.

The commenter believes that the concept of a noncompetitive

``extension'' apparently synonymous with a contract ``option'' and

concludes that our policy goes beyond intent of CICA and FAR. Specific

inconsistency is between 970.1702-1(b) and FAR 17.605.(b).

Response: As explained in the preamble of the interim rule, the

Department's intent in adopting its new policy on competition for its

management and operating contracts is to move away from past policies

which established noncompetitive extensions as the preferential norm to

a new policy which establishes competition as the preferential norm.

The key component of this change in policy is to adopt the Government

wide standards for competition as statutorily provided under the

Competition in Contracting Act (CICA) and implemented in FAR Part 6.

Accordingly, the Department will seek competition for its management

and operating contracts unless a noncompetitive extension can be

justified in accordance with one of the permissible authorities under

CICA. The regulatory language of 917.602 and 970.1702 is consistent

with both FAR Part 6 and Part 17.

Regarding the distinction between an ``option to extend'' and an

``noncompetitive extension'' under one of the seven authorities of

CICA, DEAR 970.1702-1(a) provides clear language that distinguishes the

two mechanisms. In addition, the clear language of this section directs

that any extension, other than an option included in the basic

contract, can only be accomplished when justified under CICA and when

authorized by the Head of the Agency.

B. Comment: Two commenters believe that the Department's adoption

of a policy that mandates competition after a 10 year contract term

detracts from the Department's flexibility in making management

decisions regarding retaining an incumbent contractor particularly

where the contractor's performance has been excellent or the contractor

operates a Federally Funded Research and Development Center. One of the

commenters recommends that DOE, instead, rely on annual performance

appraisal results and criteria for ``options'' to determine whether

competition should be sought.

Response: The Department believes that the new policy provides

adequate management flexibility in determining whether competing a

management and operating contract is in the best interests of the

Department. The Competition in Contracting Act provides 7 circumstances

under which an agency may seek other than full and open competition in

the award of a contract. The Department intends to rely on these

Governmentwide authorities in cases where the Department intends to

extend a contract with in incumbent contractor or otherwise intends to

limit competition.

A detailed list of changes in this final rule follows.

1. 917.602, Policy. This section is added to prescribe the

Department's policy to provide for full and open competition and the

use of competitive procedures in the award of management and operating

contracts, except as authorized by law and the Head of the Agency.

2. 917.605, Award, renewal, and extension. This section is amended

to remove the existing coverage at 917.605(b) that prescribes the

Department's internal processing and documentation requirements for

extend/compete decisions. This nonregulatory subject matter will be

reflected in internal Department guidance. A new section 917.605(d) is

added to provide for the conditional approval of any noncompetitive

extension (other than an extension accomplished by the exercise of an

option) subject to the successful achievement of the Government's

negotiation objectives. This section also permits adequate time to

compete the contract in the event that the negotiations cannot be

successfully concluded.

[[Page 34873]]

3. 970.0001, Renewal of management and operating contracts. This

section is amended to delete the Department's previous policy that

competition generally would be used only when it appeared likely that

the Government's position might be meaningfully improved in terms of

cost or performance, unless it was determined that to change a

contractor would be contrary to the best interest of the Government.

This section is removed and reserved for future use.

4. 970.17, Special Contracting Methods. This subpart is added to

provide for coverage concerning contract term and options to extend

management and operating contracts.

5. 970.1702-1, Contract term and option to extend. This section is

added to provide policy guidance on (1) the total period of performance

permitted under a management and operating contract and (2) the

requirements governing the exercise of an option to extend the term of

an existing contract. Paragraph (a) of the section states that

management and operating contracts may provide for a base period of up

to 5 years and may include an option to extend the period of

performance for up to an additional total of 5 years. The purpose of

permitting the inclusion of an option to extend the term of the

contract is to facilitate long-term contractual relationships where the

mission of the Department is best served by such an extension and to

reward contractors for superior performance under the contract.

Regarding the exercise of options under paragraph (b), the

contracting officer may exercise an option to extend a competitively

awarded contract only after assessing certain factors, including the

contractor's past performance. The decision of the contracting officer

must be approved by the Head of the Contracting Activity and the

cognizant Assistant Secretary(s).

6. 970.1701-2, Solicitation provision and contract clause. This

section is added to provide instruction to the contracting officer on

the application of the solicitation provision and contract clause

pertaining to the use of options in management and operating contracts.

7. 970.5204-73, Notice regarding option. This section is added to

subpart 970.52, Contract clauses for management and operating

contracts, to provide a solicitation provision for options to extend

the term of the contract.

8. 970.5204-74, Option to extend the term of the contract. This

section is added to subpart 970.52, Contract clauses for management and

operating contracts, to provide a contract clause for options to extend

the term of the contract.

III. Procedural Requirements

A. Review Under Executive Order 12866

This regulatory action has been determined not to be a

``significant regulatory action'' under Executive Order 12866,

``Regulatory Planning and Review,'' (58 FR 51735, October 4, 1993).

Accordingly, this action was not subject to review, under that

Executive Order, by the Office of Information and Regulatory Affairs of

the Office of Management and Budget (OMB).

B. Review Under Executive Order 12988

With respect to the review of existing regulations and the

promulgation of new regulations, section 3(a) of Executive Order 12988,

``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on

Executive agencies the general duty to adhere to the following

requirements: (1) eliminate drafting errors and ambiguity; (2) write

regulations to minimize litigation; and (3) provide a clear legal

standard for affected conduct rather than a general standard and

promote simplification and burden reduction. With regard to the review

required by section 3(a), section 3(b) of Executive Order 12988

specifically requires that Executive agencies make every reasonable

effort to ensure that the regulation: (1) clearly specifies the

preemptive effect, if any; (2) clearly specifies any effect on existing

Federal law or regulation; (3) provides a clear legal standard for

affected conduct while promoting simplification and burden reduction;

(4) specifies the retroactive effect, if any; (5) adequately defines

key terms; and (6) addresses other important issues affecting clarity

and general draftsmanship under any guidelines issued by the Attorney

General. Section 3(c) of Executive Order 12988 requires Executive

agencies to review regulations in light of applicable standards in

section 3(a) and section 3(b) to determine whether they are met or it

is unreasonable to meet one or more of them. DOE has completed the

required review and determined that, to the extent permitted by law,

the interim final regulations meet the relevant standards of Executive

Order 12988.

C. Review Under the Regulatory Flexibility Act

This rule is not subject to review under the Regulatory Flexibility

Act of 1980, 5 U.S.C. 601, et seq., because it is not subject to a

legal requirement to publish a general notice of proposed rulemaking.

D. Review Under the Paperwork Reduction Act

No new information collection or record keeping requirements are

imposed by this rule. Accordingly, no Office of Management and Budget

clearance is required under the Paperwork Reduction Act of 1980 (44

U.S.C. 3501, et seq.).

E. Review Under Executive Order 12612

Executive Order 12612, entitled ``Federalism,'' 52 FR 41685

(October 30, 1987), requires that regulations, rules, legislation, and

any other policy actions be reviewed for any substantial direct effects

on States, on the relationship between the Federal Government and the

States, or in the distribution of power and responsibilities among

various levels of government. If there are sufficient substantial

direct effects, then the Executive Order requires preparation of a

federalism assessment to be used in all decisions involved in

promulgating and implementing a policy action. The Department has

determined that this rule will not have a substantial direct effect on

the institutional interests or traditional functions of States.

F. Review Under the National Environmental Policy Act

Pursuant to the Council on Environmental Quality Regulations (40

CFR 1500-1508), the Department has established guidelines for its

compliance with the provisions of the National Environmental Policy Act

(NEPA) of 1969 (42 U.S.C. 4321, et seq.). Pursuant to Appendix A of

Subpart D of 10 CFR 1021, National Environmental Policy Act

Implementing Procedures (Categorical Exclusion A6), the Department has

determined that this rule is categorically excluded from the need to

prepare an environmental impact statement or environmental assessment.

List of Subjects in 48 CFR Parts 917 and 970

Government procurement.

Issued in Washington, D.C., on June 13, 1997.

Richard H. Hopf,

Deputy Assistant Secretary for Procurement and Assistance Management.

Accordingly, the interim rule amending Chapter 9 of Title 48 of the

Code of Federal Regulations which was published at 61 FR 32584 on June

24, 1996, is adopted as a final rule without change.

[FR Doc. 97-16636 Filed 6-26-97; 8:45 am]

BILLING CODE 6450-01-P