[Federal Register Volume 64, Number 56 (Wednesday, March 24, 1999)]
[Proposed Rules]
[Pages 14206-14207]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7065]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
48 CFR Part 970
RIN 1991-AB36
Acquisition Regulation: Costs Associated With Whistleblower
Actions
AGENCY: Department of Energy.
ACTION: Supplemental proposed rule; notice of limited reopening of
comment period.
-----------------------------------------------------------------------
SUMMARY: On January 5, 1998, the Department of Energy (DOE or
Department) published a notice of proposed rulemaking (NOPR) to amend
the Department of Energy Acquisition Regulations (DEAR) to incorporate
a contract reform initiative concerning costs associated with defense
of whistleblower actions. DOE has issued this document to invite public
comments on alternate regulatory text that DOE is considering. The
alternate text would implement a cost principle instead of a contract
clause approach, and it would expand the coverage of the proposed DEAR
revision to include allowability of labor settlement costs generally.
DATES: Written comments must be submitted no later than April 23, 1999.
ADDRESSES: Comments should be addressed to: Terrence D. Sheppard,
Office of Procurement and Assistance Policy (MA-51), Department of
Energy, 1000 Independence Avenue, SW., Washington, D.C. 20585-0705.
FOR FURTHER INFORMATION CONTACT: Terrence D. Sheppard (202) 586-8193;
fax (202) 586-0545; e-mail [email protected].
[[Page 14207]]
SUPPLEMENTARY INFORMATION:
I. Background
II. Public Comment
I. Background
On January 5, 1998 the Department published a NOPR to amend the
DEAR to incorporate a contract reform initiative concerning costs
associated with defense of whistleblower actions (63 FR 386). On the
same day, the Department also published proposed revisions to its
whistleblower protection program (10 CFR Part 708). (63 FR 374).
This document invites public comment on an alternate approach to
the cost clause that DOE proposed in the January 1998 NOPR. The
alternative that DOE is considering would add a new cost principle in
DEAR subpart 970.31. The cost principle would address the allowability
of costs relating to labor disputes generally, including whistleblower
actions. The cost principle would be less prescriptive than the
proposed contract clause, and would give contracting officers greater
discretion to review the circumstances of each case in making a
determination of allowability.
DOE developed this cost principle approach after considering
written comments from two entities that were critical of the contract
clause proposed in the January 1998 NOPR. One commenter objected to the
proposed contract clause provision that would generally disallow the
costs of defending a whistleblower action if an adverse determination
had been issued against the contractor. See proposed 970.5204-XX(c)(2).
The commenter argued that it would be unfair to treat all adverse
decisions in the same manner, regardless of the circumstances
surrounding the decision. The commenter further pointed out that some
cases may represent situations where two reasonable minds could
disagree and the reviewer rules in favor of the employee; such close
cases would not represent bad faith by the contractor.
In reformulating the whistleblower cost clause as a cost principle,
contracting officers would have greater latitude and discretion to
review the facts of each case in determining the allowability of
defense costs. In some situations, the contracting officer could also
determine settlement costs to be unallowable when the facts warrant
that determination. Both commenters on the January 1998 NOPR stated
that the proposed cost clause, by disallowing costs if there has been
an adverse determination against the contractor, would have the
practical effect of encouraging contractors to enter into settlements
with alleged whistleblowers, regardless of the merit of the claim and
whether the contractor's defense of its action was a prudent business
decision. In their view, a liberal settlement policy would encourage
meritless or questionable claims.
DOE thinks the cost principle that follows this paragraph would
provide greater leeway in allowability determinations for situations
where a contractor's prudent business judgment determines the need to
defend against claims of undetermined merit or claims that may
adversely impact industrial relations and employee morale. The cost
principle also would bring the Department into greater conformity with
the rest of the federal government, particularly as reflected in the
decisions of the various Boards of Contract Appeals.
As an alternate to the proposed rule published on January 5, 1998
at 63 FR 386, DOE proposes to add a new section to part 970 to read as
follows:
970.3102-XX Labor disputes and whistleblower actions.
(a) Labor settlement costs (awards) can arise from judicial orders,
negotiated agreements, arbitration, or an order from a Federal agency
or board. The awards generally involve a violation in one of the
following areas:
(1) Equal Employment Opportunity (EEO) laws,
(2) Union agreements,
(3) Federal labor laws, and
(4) Whistleblower protection laws.
(b) An award or settlement can cover compensatory damages, or
underpayment for work performed. Reimbursement for a complainant
employee's legal counsel may also be covered by an award or settlement.
(c) The allowability of these costs should be determined on a case-
by-case basis after considering the relevant terms of the contract and
the surrounding circumstances; i.e., looking behind the settlement and
considering the causes. If the dispute resulted from actions that would
be taken by a prudent business person (FAR 31.201-3 and 48 CFR (DEAR)
970.3101-3), the costs would be allowable. However, if the dispute was
occasioned by contractor actions which are unreasonable or were found
by the agency or board ruling on the dispute to be caused by unlawful,
negligent or other malicious conduct, the costs would be unallowable.
(d) The allocability of these costs must also be reviewed (FAR
31.201-4 and 48 CFR (DEAR) 970.3101-3). In some circumstances an award
may not impact direct costs, but may be determined to be an allowable
indirect cost.
(e) Litigation costs incurred as part of labor settlements shall be
differentiated and accounted for so as to be separately identifiable.
If a contracting officer provisionally disallows such costs, the
contractor may not use funds advanced by DOE to finance litigation
costs connected with the defense of a labor dispute or whistleblower
action.
(f) Settlement and litigation costs associated with actions
resolved prior to an adverse determination or finding against a
contractor through judicial action or an agency board will, depending
on the circumstances and facts of each case, generally be allowable, if
consistent with paragraph (c) of this section. Litigation costs
associated with an adverse determination against the contractor require
a higher level of scrutiny before a determination of allowability can
be made.
II. Public Comment
DOE invites public comment on this cost principle, as well as
general comment on the relative merits of the contract clause and cost
principle approaches. DOE also invites public comment on the suggested
expansion of coverage to include labor settlement costs generally. DOE
will finally decide these issues after considering public comments it
receives.
Issued in Washington, D.C. on March 17, 1999.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.
[FR Doc. 99-7065 Filed 3-23-99; 8:45 am]
BILLING CODE 6450-01-P