[Federal Register Volume 63, Number 222 (Wednesday, November 18, 1998)]
[Proposed Rules]
[Pages 64024-64031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30386]
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DEPARTMENT OF ENERGY
48 CFR Part 970
RIN 1991-AB02
Acquisition Regulation: Financial Management Clauses for
Management and Operating (M&O) Contracts
AGENCY: Department of Energy.
ACTION: Proposed rule.
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SUMMARY: The Department of Energy (DOE) proposes to amend its
Acquisition Regulation to designate certain Department of Energy
Acquisition Regulation (DEAR) M&O contract clauses and Federal
Acquisition Regulation (FAR) clauses as Standard Financial Management
Clauses to be included in M&O contracts unless the Chief Financial
Officer (CFO) concurs in a deviation. Additionally, this proposed rule
will revise selected existing financial management clauses and add
financial management related clauses.
DATES: Written comments must be submitted no later than January 19,
1999.
ADDRESSES: Comments should be addressed to: Michael L. Righi, Office of
Policy (HR-51), Department of Energy, 1000 Independence Avenue, SW.,
Washington, D.C. 20585.
FOR FURTHER INFORMATION CONTACT: Michael L. Righi (202-586-8175) at the
address above.
SUPPLEMENTARY INFORMATION:
I. Background
II. Detailed List of Changes
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 Executive Order 12612
F. Review Under the National Environmental Policy Act
G. Review Under Small Business Regulation Enforcement Fairness
Act of 1996
[[Page 64025]]
I. Background
On November 15, 1990, Congress enacted the Chief Financial Officers
Act of 1990 (the Act), Pub. L. 101-576. The Act requires that each
Federal agency implement improvements in its systems of accounting,
financial management, and internal controls. DOE has since developed
and tested various policies, practices, and procedures in its efforts
to implement the mandates contained in the Act. These efforts have
included a review of the Department's financial relationship with, and
data received from, its M&O contractors. Today's proposed rule would
include new policies and changes to existing policy in the Department's
acquisition regulations.
II. Detailed List of Changes
1. The authority citation for Part 970 would be restated.
2. Section 970.3201 would be revised by replacing the word ``bank''
in the first sentence with the words ``financial institution.'' This
would permit DOE to utilize a financial institution, other than a bank,
to provide services with regard to a special account. The second
sentence would be deleted and its requirements incorporated into
Section 970.3202.
3. Section 970.3202 would be amended by revising paragraphs (b) and
(c). Paragraph (b) would be revised by replacing the word ``bank'' with
the words ``financial institution'' and adding the words ``or, at the
option of the Government, by direct payment or other payment mechanism
to the contractor'' at the end of the sentence. Also, the term
``letter-of-credit'' would be changed to ``payments cleared financing
arrangement'' in order to implement the Automatic Standard Application
for Payment (ASAP) that has replaced letter-of-credit. These changes
would be consistent with similar changes to Section 970.5204-16 with
regard to a special financial institution account, payments cleared
financing arrangement, and the use of other payment mechanisms.
Paragraph (c) would be revised by replacing the word ``bank'' with
the words ``financial institution'' throughout the paragraph to be
consistent with similar revisions as previously stated. In the second
sentence the word ``revenues'' would be replaced with the word
``collections'' to include any type of collection. Also, a provision
would be added to require that the agreement among DOE, the contractor,
and the financial institution incorporate all applicable requirements,
as determined by the Office of CFO.
4. Section 970.3270 would be revised by establishing a section
entitled Standard Financial Management Clauses, which requires that
certain clauses be included in all M&O contracts, and requires that
deviations have the approval of the Head of the Contracting Activity
and the written concurrence of the Department's CFO.
5. Section 970.3271 would be removed and these requirements would
be incorporated into Section 970.3202.
6. Section 970.5204-9 would be revised. Specifically, paragraph (a)
would be revised by replacing the word ``revenues'' in the first
sentence with the words ``collections accruing to the contractor in
connection with the work under this contract'' to require accounting
for any type of collection accruing to the contractor under the
contract, and by deleting the word ``fixed.''
Paragraph (b) would be revised by adding language to allow for
inspection and audit of accounts and records by DOE's designees, in
accordance with provisions of the clause, Access to and ownership of
records.
Paragraph (d) would be revised by identifying other types of
information as property of the Government. In addition, the word
``revenues'' would be replaced with the words ``collections accruing to
the contractor in connection with the work under this contract'' and
the words ``and fee accruals'' would be added. Also, a reference to the
Access to and ownership of records clause would be added for clarity.
Paragraph (f) would be revised by making a minor editorial change,
adding the word ``and'' between the words ``time'' and ``in.''
7. Section 970.5204-13 would be amended by revising paragraph
(d)(15) by replacing the word ``bank'' in the first sentence with the
words ``financial institution'' to be consistent with similar changes
to other sections regarding a financial institution account and by
adding in the second sentence the words ``to employees'' to clarify
that payments as described in this sentence are to employees.
8. Section 970.5204-15 would be revised. Specifically, paragraph
(a) would be revised by replacing the words ``revenues and receipts''
with the word ``collections'' to include any type of collection. The
fourth sentence would be revised to require that collections are
processed and accounted for in accordance with applicable requirements
imposed by the contracting officer pursuant to the Laws, regulations,
and DOE directives clause of the contract.
Paragraph (b) would be revised by deleting the word ``fixed'' in
the first sentence to include any type of fee. In the second sentence
the words ``revenues and receipts'' would be replaced with the words
``collections accruing to the contractor in connection with the work
under this contract * * *'' to include any type of collection. The
second sentence would also be revised to require the processing of and
accounting for such collections in accordance with applicable
requirements imposed by the contracting officer pursuant to the Laws,
regulations, and DOE directives clause of the contract.
Paragraph (c) would be revised by replacing the words ``revenues
and receipts'' with the word ``collections'' to include any type of
collection and by deleting the word ``fixed'' to include any type of
fee. The word ``commitments'' would be replaced with the word
``encumbrances'' throughout the paragraph because appropriations are
encumbered rather than committed at the contractor level. Also, the
word ``available'' would be added throughout the paragraph where
reference is made to ``funds'' and ``collections'' for clarity and
consistency with the first sentence of the paragraph. In the second
sentence the words ``either'' and ``or is equal to zero'' would be
deleted to clarify when notice should be given to DOE in regard to the
requirements of this paragraph. Additionally, for consistency with
other references to the clause entitled ``Termination,'' the word
``article'' in the last sentence would be replaced with the word
``clause.''
Paragraph (d) would be revised by replacing the word
``commitment(s)'' with the word ``encumbrance(s)'' throughout the
paragraph. The words ``such as Approved Funding Programs'' would be
added in the first sentence between the words ``plans'' and ``or'' to
reflect the current terminology used for financial plans. In the second
sentence the word ``instruction'' would be replaced with the word
``directives'' for consistency with the first sentence. In the third
sentence the words ``to use its best efforts'' would be deleted to
require contractor compliance with other requirements of such plans and
directives. Also, the words ``the authorized financial levels of''
would be replaced with the words ``that any limitation on'' to state
more clearly that such financial plans contain cost and encumbrance
limitations. A typographical error would be corrected and a minor
editorial change would be made in the third sentence. The word
``directives'' would replace the word ``directive'' and the word
``promptly''
[[Page 64026]]
would be deleted between the words ``to'' and ``notify'' and inserted
between the words ``DOE'' and ``in.'' A typographical error would also
be corrected in the note to paragraph (d) by replacing the word
``provided'' with the word ``provide.'' Also, in the note the word
``article'' would be replaced with the word ``clause'' for consistency
with other revised paragraphs of this section.
Paragraph (e) would be revised by replacing the word ``article''
with the word ``clause'' for consistency with other references to the
clause entitled ``Termination.''
9. Section 970.5204-16 would be revised. Specifically, paragraph
(a) would be revised by changing the language to require payment of the
fixed-fee in accordance with a schedule determined by the contracting
officer. The term ``letter-of-credit'' would be changed to ``payments
cleared financing arrangement'' in order to implement the ASAP that has
replaced letter-of-credit. In paragraph (a) of Note 2 the term
``letter-of-credit'' also would be changed to ``payments cleared
financing arrangement.''
Paragraph (c) would be revised by replacing the words ``special
bank account'' with the words ``special financial institution account''
throughout the paragraph. This change would permit DOE to utilize a
financial institution, other than a bank, to provide services with
regard to a special account. In the first sentence, the term ``letter-
of-credit'' would be replaced with ``payments cleared financing
arrangement prescribed by DOE'' as described in paragraph (a) above and
the language would be revised to allow payment of funds, at the option
of the Government, by direct payment or other payment mechanism to the
contractor. Since collections are processed and accounted for in
accordance with applicable requirements imposed by the contracting
officer pursuant to the Laws, regulations, and DOE directives clause of
the contract, the second sentence of this paragraph would be deleted.
In the third sentence the words ``and, if applicable, fees earned''
would be inserted between the words ``allowable'' and ``under'' since
payment of fees earned may or may not be made from the special
financial institution account. Also, an editorial correction would be
made in the third sentence by replacing the word ``mingled'' with the
word ``commingled.'' Additionally, a typographical error would be
corrected in the fourth sentence by replacing the word ``on'' with the
word ``of.''
Paragraph (d) would be revised by replacing the words ``special
bank account'' with the words ``special financial institution account''
throughout the paragraph to be consistent with similar revisions as
previously stated.
Paragraph (e) would be revised to include penalty provisions for
unallowable costs as stated in sections 306 (b) and (i) of the Federal
Property and Administrative Services Act of 1949 (41 U.S.C. 256), as
amended. Also, the word ``voucher'' would be replaced with ``Statement
of Costs Incurred and Claimed.'' Note 4 would be revised to require the
inclusion of an alternative paragraph (e) in contracts with
nonintegrated contractors which also includes such penalty provisions.
Paragraph (f) would be revised by deleting the word ``fixed'' in
the first sentence. The requirement for an assignment of the
contractor's rights to any ``collections accruing to the contractor in
connection with the work under this contract'' would be added with
regard to the payment by the Government to the contractor of the unpaid
balance of allowable costs and fee. Under exception (B), minor changes
would be made to the last sentence--``should'' would change to
``shall,'' the clause title referenced would be updated, and the last
word, ``and,'' would be deleted. Exception (D), ``Claims recognizable
under the clause entitled, Nuclear Hazards Indemnity Agreement,'' would
be added to the exceptions to the requirement that contractors provide
a release discharging the Government, its officers, agents, and
employees from all liabilities, obligations, and claims arising out of
or under the contract. In addition, in the last sentence of paragraph
(f) the words ``financial institution'' would replace the word ``bank''
to be consistent with similar revisions as previously stated.
Paragraph (i) would be revised by replacing the word ``revenues''
with the word ``collections'' in the title as well as the text of the
paragraph. Also, the language would be changed to require collections,
exclusive of the contractor's fee and other specified collections, not
the property of the Government, to be processed and accounted for in
accordance with applicable requirements imposed by the contracting
officer pursuant to the Laws, regulations, and DOE directives clause of
the contract and, to the extent consistent with those requirements, to
be deposited in the special financial institution account or otherwise
made available for payment of allowable costs under the contract,
unless otherwise directed by the contracting officer. In addition, the
words ``financial institution'' would replace the word ``bank'' to be
consistent with similar revisions as previously stated.
10. Section 970.5204-20 would be amended by revising the
introductory statement and paragraph (a). In the second sentence the
words ``theft'' and ``fraud'' would be deleted and the words ``loss,''
``mismanagement,'' and ``misappropriation'' would be added. Also, in
the fourth and fifth sentences of paragraph (a) the word ``internal''
would be deleted before the word ``controls.'' These changes would be
incorporated for consistency. Also, in the second sentence the word
``obligations'' would be replaced with the word ``encumbrances'' and
the words ``and fees that are earned'' would be added. The contractor
cannot obligate Federal funds. It can only encumber such funds.
Therefore, contractor management controls should be adopted that
reasonably ensure that all encumbrances and costs incurred and fees
earned under the contract are in compliance with applicable clauses,
and other current terms, conditions, and intended purposes. In the
second sentence the word ``revenues'' would be replaced with the words
``collections accruing to the contractor in connection with the work
under this contract'' to ensure all collections are properly recorded,
managed, and reported. Additionally, an editorial correction would be
made by replacing the word ``system'' with the word ``systems'' in the
last sentence of the paragraph.
11. Section 970.5204-XX, ``Financial Management System,'' would be
added: to require compliance with DOE policies for maintaining and
administering a financial management system; to require the contractor
to submit to DOE for written approval an annual plan for new financial
management systems and/or subsystems and major enhancements and/or
upgrades to the currently existing financial systems and/or subsystems;
to require the contractor to notify DOE thirty (30) days in advance of
any planned implementation of any substantial deviation from the
approved plan; and, as requested by the contracting officer, to require
the contractor to submit any such deviation to DOE for written
approval.
12. Section 970.5204-XX, ``Integrated Accounting,'' would be added
to require compliance with DOE procedures if an integrated accounting
system is used.
13. Section 970.5402-XX, ``Liability with respect to Cost
Accounting Standards,'' would be added to address M&O contractor
liability for increased costs resulting from noncompliance with
provisions set forth in FAR 52.230-2, ``Cost Accounting Standards,''
[[Page 64027]]
and FAR 52.230-6, ``Administration of Cost Accounting Standards.''
14. Section 970.5204-XX, ``Work for others funding authorization,''
would be added to ensure that the Government is not liable for costs
incurred by a contractor performing work for others utilizing its own
funding.
III. Public Comments
Interested persons are invited to participate by submitting data,
views, or arguments with respect to the DEAR amendments set forth in
this proposed rule. 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
in the DOE Reading Room, 1E-190, Forrestal Building, 1000 Independence
Avenue, SW., Washington, DC 20585, between the hours of 9 a.m. and 4
p.m., Monday through Friday, except Federal holidays. All written
comments received on or before the date specified in the beginning of
this notice and all other relevant information will be considered by
DOE before taking final action. Comments received after that date will
be considered to the extent that time allows. Any person submitting
information which that person believes to be confidential and which may
be exempt from public disclosure should submit one complete copy, as
well as an additional copy from which the information claimed to be
confidential has been deleted. DOE reserves the right to determine the
confidential status of the information or data and to treat it
according to its determination. The Department's generally applicable
procedures for handling information which has been submitted in a
document and may be exempt from public disclosure are set forth in 10
CFR 1004.11.
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, today's action was not subject to review under the
Executive Order by the Office of Information and Regulatory Affairs.
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 draftmenship 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 proposed regulations meet the relevant standards of Executive Order
12988.
C. 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 a significant
economic impact on a substantial number of small entities. This
proposed rule would only apply to M&O contractors, which are all large
entities. DOE certifies that this proposed rule will not have a
significant economic impact on a substantial number of small entities
and, therefore, no regulatory flexibility analysis has been prepared.
D. Review Under the Paperwork Reduction Act
No new information collection requirements subject to the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq., are imposed by today's
regulatory action.
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. This proposed rule will
not affect States.
F. Review Under the National Environmental Policy Act
Pursuant to the Council on Environmental Quality Regulations (40
CFR Parts 1500-1508), the Department of Energy 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 (57 FR 15122, 15152,
April 24, 1992) (Categorical Exclusion A6), the Department of Energy
has determined that this rule is categorically excluded from the need
to prepare an environmental impact statement or environmental
assessment.
G. Review Under Small Business Regulatory Enforcement Fairness Act of
1996
As required by 5 U.S.C. 801, the Department of Energy will report
to Congress promulgation of the rule prior to its effective date. The
report will state that it has been determined that the rule is not a
``major rule'' as defined by 5 U.S.C. 804(3).
List of Subjects in 48 CFR Part 970
Government procurement.
Issued in Washington, DC on November 9, 1998.
Richard H. Hopf,
Director of Procurement and Assistance Management.
For the reasons set out in the preamble, Chapter 9 of Title 48 of
the Code of Federal Regulations is proposed to be amended as set forth
below.
PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS
1. 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).
2. Section 970.3201 is revised to read as follows:
[[Page 64028]]
970.3201 General.
It is the policy of the DOE to finance management and operating
contracts through advance payments and the use of special financial
institution accounts.
3. Section 970.3202 is amended by revising paragraphs (b) and (c)
to read as follows:
970.3202 Advance payments.
* * * * *
(b) Advance payments shall be made under a payments cleared
financing arrangement for deposit in a special financial institution
account or, at the option of the Government, by direct payment or other
payment mechanism to the contractor.
(c) Prior to providing any advance payments, the contracting
officer shall enter into an agreement with the contractor and a
financial institution regarding a special financial institution account
where the advanced funds will be deposited by the Government. Such
agreement shall:
(1) Provide that DOE shall retain title to the unexpended balance
of funds in the special financial institution account including
collections, if any, deposited by the contractor;
(2) Provide that the title in paragraph (c)(1) of this section
shall be superior to any claim or lien of the financial institution of
deposit or others; and
(3) Incorporate all applicable requirements, as determined by the
Office of Chief Financial Officer.
* * * * *
4. Section 970.3270 is revised to read as follows:
970.3270 Standard financial management clauses.
(a) The following DEAR and FAR clauses are standard financial
management clauses that shall be included in both integrated and
nonintegrated management and operating contracts: DEAR 970.5204-9,
Accounts, records, and inspection; DEAR 970.5204-15, Obligation of
funds; DEAR 970.5204-16, Payments and advances; DEAR 970.5204-20,
Management controls; DEAR 970.5204-XX, Liability with respect to Cost
Accounting Standards; DEAR 970.5204-XX, Work for others funding
authorization; FAR 52.230-2, Cost Accounting Standards; and FAR 52.230-
6, Administration of Cost Accounting Standards.
(b) The following clauses are standard financial management clauses
that shall be included in integrated management and operating
contracts: DEAR 970.5204-XX, Financial management system; and DEAR
970.5204-XX, Integrated accounting.
(c) Any deviations from the standard financial management clauses
specified in paragraphs (a) and (b) of this section require the
approval of the Head of the Contracting Activity and the written
concurrence of the Department's Chief Financial Officer.
5. Section 970.3271 is removed.
6. In section 970.5204-9 revise the introductory paragraph; clause
title; and paragraphs (a) (including the note), (b), (d), and (f) to
read as follows:
970.5204-9 Accounts, records, and inspection.
As prescribed in 970.0407 and 970.3270, insert the following
clause.
Accounts, Records, and Inspection (Month and Year TBE)
(a) Accounts. The contractor shall maintain a separate and
distinct set of accounts, records, documents, and other evidence
showing and supporting: all allowable costs incurred; collections
accruing to the contractor in connection with the work under this
contract, other applicable credits, and fee accruals under this
contract; and the receipt, use, and disposition of all Government
property coming into the possession of the contractor under this
contract. The system of accounts employed by the contractor shall be
satisfactory to DOE and in accordance with generally accepted
accounting principles consistently applied.
Note: If the contract includes the clause for ``Price Reduction
for Defective Cost or Pricing Data'' set forth at FAR 52.215-22,
paragraph (a) above should be modified by adding the words ``or
anticipated to be incurred'' after the words ``allowable costs
incurred.''
(b) Inspection and audit of accounts and records. All books of
account and records relating to this contract shall be subject to
inspection and audit by DOE or its designees in accordance with the
provisions of Clause ____, Access to and ownership of records, at
all reasonable times, before and during the period of retention
provided for in paragraph (d) of this clause, and the contractor
shall afford DOE proper facilities for such inspection and audit.
* * * * *
(d) Disposition of records. Except as agreed upon by the
Government and the contractor, all financial and cost reports, books
of account and supporting documents, system files, data bases, and
other data evidencing costs allowable, collections accruing to the
contractor in connection with the work under this contract, other
applicable credits, and fee accruals under this contract, shall be
the property of the Government, and shall be delivered to the
Government or otherwise disposed of by the contractor either as the
contracting officer may from time to time direct during the progress
of the work or, in any event, as the contracting officer shall
direct upon completion or termination of this contract and final
audit of accounts hereunder. Except as otherwise provided in this
contract, including provisions of Clause ____, Access to and
ownership of records, all other records in the possession of the
contractor relating to this contract shall be preserved by the
contractor for a period of three years after final payment under
this contract or otherwise disposed of in such manner as may be
agreed upon by the Government and the contractor.
* * * * *
(f) Inspections. The DOE shall have the right to inspect the
work and activities of the contractor under this contract at such
time and in such manner as it shall deem appropriate.
* * * * *
7. Section 970.5204-13 is amended by revising paragraph (d)(15) to
read as follows (note following paragraph (d)(15) remains unchanged):
970.5204-13 Allowable costs and fixed-fee (management and operating
contracts).
* * * * *
Allowable Costs and Fixed-Fee (Management and Operating Contracts)
(June 1997)
* * * * *
(d) * * *
(15) Establishment and maintenance of financial institution
accounts in connection with the work hereunder, including, but not
limited to, service charges, the cost of disbursing cash, necessary
guards, cashiers, and paymasters. If payments to employees are made
by check, facilities and arrangements for cashing checks may be
provided without expense to the employees, subject to the approval
of the contracting officer.
* * * * *
8. Section 970.5204-15 is revised to read as follows:
970.5204-15 Obligation of funds.
As prescribed in 970.1508(c), insert the following clause.
Obligation of Funds (Month and Year TBE)
(a) Obligation of funds. The amount presently obligated by the
Government with respect to this contract is ______ dollars
($______). Such amount may be increased unilaterally by DOE by
written notice to the contractor and may be increased or decreased
by written agreement of the parties (whether or not by formal
modification of this contract). Estimated collections from others
for work and services to be performed under this contract are not
included in the amount presently obligated. Such collections, to the
extent actually received by the contractor, shall be processed and
accounted for in accordance with applicable requirements imposed by
the contracting officer pursuant to the Laws, regulations, and DOE
directives clause of this contract. Nothing in this paragraph (a) is
to be construed as authorizing the contractor to exceed limitations
stated in financial plans established by DOE and furnished to the
contractor from time to time under this contract.
(b) Limitation on payment by the Government. Except as otherwise
provided in this contract and except for costs which may be incurred
by the contractor pursuant to the clause entitled ``Termination,''
or costs of
[[Page 64029]]
claims allowable under the contract occurring after completion or
termination and not released by the contractor at the time of
financial settlement of the contract in accordance with the clause
entitled ``Payments and Advances,'' payment by the Government under
this contract on account of allowable costs shall not, in the
aggregate, exceed the amount obligated with respect to this
contract, less the contractor's fee. Unless expressly negated in
this contract, payment on account of those costs excepted in the
preceding sentence which are in excess of the amount obligated with
respect to this contract shall be subject to the availability of
(1) Collections accruing to the contractor in connection with
the work under this contract and processed and accounted for in
accordance with applicable requirements imposed by the contracting
officer pursuant to the Laws, regulations, and DOE directives clause
of this contract, and
(2) Other funds which DOE may legally use for such purpose,
provided DOE will use its best efforts to obtain the appropriation
of funds for this purpose if not otherwise available.
(c) Notices--Contractor excused from further performance. The
contractor shall notify DOE in writing whenever the unexpended
balance of available funds (including collections available under
paragraph (a) of this clause, plus the contractor's best estimate of
collections to be received and available during the ____ day period
hereinafter specified, is in the contractor's best judgment
sufficient to continue contract operations at the programmed rate
for only ______ days and to cover the contractor's unpaid fee, and
outstanding encumbrances and liabilities on account of costs
allowable under the contract at the end of such period. Whenever the
unexpended balance of available funds (including collections
available under paragraph (a) of this clause, less the amount of the
contractor's fee then earned but not paid, is in the contractor's
best judgment sufficient only to liquidate outstanding encumbrances
and liabilities on account of costs allowable under this contract,
the contractor shall immediately notify DOE and shall make no
further encumbrances or expenditures (except to liquidate existing
encumbrances and liabilities), and, unless the parties otherwise
agree, the contractor shall be excused from further performance
(except such performance as may become necessary in connection with
termination by the Government) and the performance of all work
hereunder will be deemed to have been terminated for the convenience
of the Government in accordance with the provisions of the clause
entitled ``Termination.''
(d) Financial plans; cost and encumbrance limitations. In
addition to the limitations provided for elsewhere in this contract,
DOE may, through financial plans, such as Approved Funding Programs,
or other directives issued to the contractor, establish controls on
the costs to be incurred and encumbrances to be made in the
performance of the contract work. Such plans and directives may be
amended or supplemented from time to time by DOE. The contractor
hereby agrees
(1) To comply with the specific limitations (ceilings) on costs
and encumbrances set forth in such plans and directives,
(2) To comply with other requirements of such plans and
directives, and
(3) To notify DOE promptly, in writing, whenever it has reason
to believe that any limitation on costs and encumbrances will be
exceeded or substantially underrun.
Note: This paragraph (d) may be omitted in contracts which
expressly or otherwise provide a contractual basis for equivalent
controls in a separate clause.
(e) Government's right to terminate not affected. The giving of
any notice under this clause shall not be construed to waive or
impair any right of the Government to terminate the contract under
the provisions of the clause entitled ``Termination.''
9. Section 970.5204-16 is amended by: revising the introductory
paragraph; clause title; clause paragraphs (a) (notes remain
unchanged); last sentence of alternate paragraph (a); (c); (d)
(including note 3); (e) (including note 4); adding alternate paragraph
(e); revising paragraphs (f), and (i) to read as follows:
970.5204-16 Payments and advances.
As prescribed in 970.3270, insert the following clause.
Payments and Advances (Month and Year TBE)
(a) Installments of fixed-fee. The fixed-fee payable under this
contract shall become due and payable in periodic installments in
accordance with a schedule determined by the contracting officer.
Fixed-fee payments shall be made by direct payment or withdrawn from
funds advanced or available under this contract, as determined by
the contracting officer. The contracting officer may offset against
any such fee payment the amounts owed to the Government by the
contractor, including any amounts owed for disallowed costs under
this contract. No fixed-fee payment may be withdrawn against the
payments cleared financing arrangement without prior written
approval of the contracting officer.
* * * * *
(a) * * * No base fee or award fee pool amount earned payment
may be withdrawn against the payments cleared financing arrangement
without prior written approval of the contracting officer.
* * * * *
(c) Special financial institution account--use. All advances of
Government funds shall be withdrawn pursuant to a payments cleared
financing arrangement prescribed by DOE in favor of the financial
institution or, at the option of the Government, shall be made by
direct payment or other payment mechanism to the contractor, and
shall be deposited only in the special financial institution account
referred to in the Special Financial Institution Account Agreement,
which is incorporated into this contract as Appendix ____. No part
of the funds in the special financial institution account shall be
commingled with any funds of the contractor or used for a purpose
other than that of making payments for costs allowable and, if
applicable, fees earned under this contract or payments for other
items specifically approved in writing by the contracting officer.
If the contracting officer determines that the balance of such
special financial institution account exceeds the contractor's
current needs, the contractor shall promptly make such disposition
of the excess as the contracting officer may direct.
(d) Title to funds advanced. Title to the unexpended balance of
any funds advanced and of any special financial institution account
established pursuant to this clause shall remain in the Government
and be superior to any claim or lien of the financial institution of
deposit or others. It is understood that an advance to the
contractor hereunder is not a loan to the contractor, and will not
require the payment of interest by the contractor, and that the
contractor acquires no right, title or interest in or to such
advance other than the right to make expenditures therefrom, as
provided in this clause.
Note 3: The following paragraph (e) shall be included in
management and operating contracts with integrated contractors.
(e) Review and approval of costs incurred. The contractor shall
prepare and submit annually as of September 30, a ``Statement of
Costs Incurred and Claimed'' (Cost Statement) for the total of net
expenditures accrued (i.e., net costs incurred) for the period
covered by the Cost Statement. The contractor shall certify the Cost
Statement subject to the penalty provisions for unallowable costs as
stated in sections 306(b) and (i) of the Federal Property and
Administrative Services Act of 1949 (41 U.S.C. 256), as amended.
DOE, after audit and appropriate adjustment, will approve such Cost
Statement. This approval by DOE will constitute an acknowledgment by
DOE that the net costs incurred are allowable under the contract and
that they have been recorded in the accounts maintained by the
contractor in accordance with DOE accounting policies, but will not
relieve the contractor of responsibility for DOE's assets in its
care, for appropriate subsequent adjustments, or for errors later
becoming known to DOE.
Note 4: The following paragraph (e) shall be included in
management and operating contracts with nonintegrated contractors.
(e) Certification and penalties. The contractor shall prepare
and submit a ``Statement of Costs Incurred and Claimed'' (Cost
Statement) for the total of net expenditures incurred for the period
covered by the Cost Statement. It is anticipated that this will be
an annual submission unless otherwise agreed to by the contracting
officer. The contractor shall certify the Cost Statement subject to
the penalty provisions for unallowable costs as stated in sections
306(b) and (i) of the Federal Property and Administrative Services
Act of 1949 (41 U.S.C. 256), as amended.
(f) Financial settlement. The Government shall promptly pay to
the contractor the unpaid balance of allowable costs and fee upon
termination of the work, expiration of
[[Page 64030]]
the term of the contract, or completion of the work and its
acceptance by the Government after:
(1) Compliance by the contractor with DOE's patent clearance
requirements, and
(2) The furnishing by the contractor of:
(i) An assignment of the contractor's rights to any refunds,
rebates, allowances, accounts receivable, collections accruing to
the contractor in connection with the work under this contract, or
other credits applicable to allowable costs under the contract;
(ii) A closing financial statement;
(iii) The accounting for Government-owned property required by
the clause entitled ``Property''; and
(iv) A release discharging the Government, its officers, agents,
and employees from all liabilities, obligations, and claims arising
out of or under this contract subject only to the following
exceptions:
(A) Specified claims in stated amounts or in estimated amounts
where the amounts are not susceptible to exact statement by the
contractor;
(B) Claims, together with reasonable expenses incidental
thereto, based upon liabilities of the contractor to third parties
arising out of the performance of this contract; provided that such
claims are not known to the contractor on the date of the execution
of the release; and provided further that the contractor gives
notice of such claims in writing to the contracting officer
promptly, but not more than one (1) year after the contractor's
right of action first accrues. In addition, the contractor shall
provide prompt notice to the contracting officer of all potential
claims under this clause, whether in litigation or not (see also
Contract Clause ____, DEAR 970.5204-31, ``Insurance--Litigation and
Claims'');
(C) Claims for reimbursement of costs (other than expenses of
the contractor by reason of any indemnification of the Government
against patent liability), including reasonable expenses incidental
thereto, incurred by the contractor under the provisions of this
contract relating to patents; and
(D) Claims recognizable under the clause entitled, Nuclear
Hazards Indemnity Agreement.
(3) In arriving at the amount due the contractor under this
clause, there shall be deducted, (i) any claim which the Government
may have against the contractor in connection with this contract,
and (ii) deductions due under the terms of this contract, and not
otherwise recovered by or credited to the Government. The
unliquidated balance of the special financial institution account
may be applied to the amount due and any balance shall be returned
to the Government forthwith.
* * * * *
(i) Collections. All collections accruing to the contractor in
connection with the work under this contract, except for the
contractor's fee and royalties or other income accruing to the
contractor from technology transfer activities in accordance with
this contract, shall be Government property and shall be processed
and accounted for in accordance with applicable requirements imposed
by the contracting officer pursuant to the Laws, regulations, and
DOE directives clause of this contract and, to the extent consistent
with those requirements, shall be deposited in the special financial
institution account or otherwise made available for payment of
allowable costs under this contract, unless otherwise directed by
the contracting officer.
* * * * *
10. Section 970.5204-20 is amended by revising the introductory
statement and paragraph (a) to read as follows:
970.5204-20 Management controls.
In accordance with 970.0901 and as prescribed in 970.3270, the
following clause shall be used in management and operating contracts:
Management Controls (Month and Year TBE)
(a) The contractor shall be responsible for maintaining, as an
integral part of its organization, effective systems of management
controls for both administrative and programmatic functions.
Management controls comprise the plan of organization, methods, and
procedures adopted by management to reasonably ensure that: the
mission and functions assigned to the contractor are properly
executed; efficient and effective operations are promoted; resources
are safeguarded against waste, loss, mismanagement, unauthorized
use, or misappropriation; all encumbrances and costs that are
incurred under the contract and fees that are earned are in
compliance with applicable clauses and other current terms,
conditions, and intended purposes; all collections accruing to the
contractor in connection with the work under this contract,
expenditures, and all other transactions and assets are properly
recorded, managed, and reported; and financial, statistical, and
other reports necessary to maintain accountability and managerial
control are accurate, reliable, and timely. The systems of controls
employed by the contractor shall be documented and satisfactory to
DOE. Such systems shall be an integral part of the contractor's
management functions, including defining specific roles and
responsibilities for each level of management, and holding employees
accountable for the adequacy of the management systems and controls
in their areas of assigned responsibility. The contractor shall, as
part of the internal audit program required elsewhere in this
contract, periodically review the management systems and controls
employed in programs and administrative areas to ensure that they
are adequate to provide reasonable assurance that the objectives of
the systems are being accomplished and that these systems and
controls are working effectively.
* * * * *
11. Section 970.5204-XX is added to read as follows:
970.5204-XX Financial management system.
As prescribed in 970.3270, insert the following clause.
Financial Management System (Month and Year TBE)
The contractor shall maintain and administer a financial
management system that includes the currently existing integrated
accounting system and is suitable to provide proper accounting in
accordance with DOE requirements for assets, liabilities,
collections accruing to the contractor in connection with the work
under this contract, expenditures, costs, and encumbrances; permits
the preparation of accounts and accurate, reliable financial and
statistical reports; and assures that accountability for the assets
can be maintained. The contractor shall submit to DOE for written
approval an annual plan for new financial management systems and/or
subsystems and major enhancements and/or upgrades to the currently
existing financial systems and/or subsystems. The contractor shall
notify DOE thirty (30) days in advance of any planned implementation
of any substantial deviation from this plan and, as requested by the
contracting officer, shall submit any such deviation to DOE for
written approval before implementation.
12. Section 970.5204-XX is added to read as follows:
970.5204-XX Integrated accounting.
As prescribed in 970.3270, insert the following clause.
Integrated Accounting (Month and Year TBE)
Integrated accounting procedures are required for use under this
contract. The contractor's financial management system shall include
an integrated accounting system that is linked to DOE's accounts
through the use of reciprocal accounts and that has electronic
capability to transmit monthly and year-end self-balancing trial
balances to the Department's Primary Accounting System for reporting
financial activity under this contract in accordance with
requirements imposed by the contracting officer pursuant to the
Laws, regulations, and DOE directives clause of this contract.
13. Section 970.5204-XX is added to read as follows:
970.5204-XX Liability with respect to Cost Accounting Standards.
As prescribed in 970.3270, insert the following clause.
Liability With Respect to Cost Accounting Standards (Month and Year
TBE)
(a) The contractor is not liable to the Government for increased
costs or interest resulting from its failure to comply with the
clauses of this contract entitled, ``Cost Accounting Standards,''
and ``Administration of Cost Accounting Standards,'' if its failure
to comply with the clauses is caused by the contractor's compliance
with published DOE financial management policies and procedures or
other requirements established by the Department's Chief Financial
Officer or Procurement Executive.
(b) The contractor is not liable to the Government for increased
costs or interest resulting from its subcontractors' failure to
comply with the clauses at FAR 52.230-2,
[[Page 64031]]
``Cost Accounting Standards,'' and FAR 52.230-6, ``Administration of
Cost Accounting Standards,'' if the contractor includes in each
covered subcontract a clause making the subcontractor liable to the
Government for increased costs or interest resulting from the
subcontractor's failure to comply with the clauses; and the
contractor seeks the subcontract price adjustment and cooperates
with the Government in the Government's attempts to recover from the
subcontractor.
14. Section 970.5204-XX is added to read as follows:
970.5204-XX Work for others funding authorization.
As prescribed in 970.3270, insert the following clause.
Work for Others Funding Authorization (Month and Year TBE)
Any uncollectible receivables resulting from the contractor
utilizing contractor corporate funding for reimbursable work shall
be the responsibility of the contractor, and the United States
Government shall have no liability to the contractor therefor. The
contractor is permitted to provide advance payment utilizing
contractor corporate funds for reimbursable work to be performed by
the contractor for a non-Federal entity in instances where advance
payment from that entity is required under the Laws, regulations,
and DOE directives clause of this contract and such advance cannot
be obtained. The contractor is also permitted to provide advance
payment utilizing contractor corporate funds to continue
reimbursable work to be performed by the contractor for a Federal
entity when the term or the funds on a Federal interagency agreement
required under the Laws, regulations, and DOE directives clause of
this contract have elapsed. The contractor's utilization of
contractor corporate funds does not relieve the contractor of its
responsibility to comply with all requirements for Work for Others
applicable to this contract.
[FR Doc. 98-30386 Filed 11-17-98; 8:45 am]
BILLING CODE 6450-01-P