[Code of Federal Regulations]
[Title 48, Volume 5]
[Revised as of October 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR970.1504-1-2]

[Page 431-433]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                     CHAPTER 9--DEPARTMENT OF ENERGY
 
Sec. 970.1504-1-2  Fee policy.

    (a) DOE management and operating contractors may be paid a fee in 
accordance with the requirements of this subsection.
    (b) There are three basic principles underlying the Department's fee 
policy:
    (1) The amount of available fee should reflect the financial risk 
assumed by the contractor.
    (2) It is the policy of the Department, when work elements cannot be 
fixed price, incentive fees (including award fees) tied to objective 
measures should be used to the maximum extent appropriate.
    (3) When work elements cannot be fixed price and award fees are 
employed, they should be tied to either objective or subjective 
measures. Each

[[Page 432]]

measure should, to the maximum extent appropriate, be directly tied to a 
specific portion of the fee pool.
    (c) Fee objectives and amounts are to be determined for each 
contract. Standard fees or across-the-board fee agreements will not be 
used or made. Due to the nature of funding management and operating 
contracts, it is anticipated that fee shall be established in accordance 
with the annual funding cycle; however, with the prior approval of the 
Procurement Executive, or designee, a longer period may be used where 
necessary to incentivize performance objectives that span funding cycles 
or to optimize cost reduction efforts.
    (d) Annual fee amounts shall be established in accordance with this 
subsection. Annual amounts shall not exceed maximum amounts derived from 
the appropriate fee schedule (and Classification Factor, if applicable) 
unless approved in advance by the Procurement Executive, or designee. In 
no event shall any fee exceed statutory limits imposed by 41 U.S.C. 
254(b).
    (e)(1) Contracting Officers shall include negative fee incentives in 
contracts when appropriate. A negative fee incentive is one in which the 
contractor will not be paid the full target fee amount when the actual 
performance level falls below the target level established in the 
contract.
    (2) Negative fee incentives may only be used when:
    (i) A target level of performance can be established, which the 
contractor can reasonably be expected to reach;
    (ii) The value of the negative incentive is commensurate with the 
lower level of performance and any additional administrative costs;
    (iii) Factors likely to prevent attainment of the target level of 
performance are clearly within the control of the contractor; and
    (iv) The contract indicates clearly a level below which performance 
is not acceptable.
    (f) Prior to the issuance of a competitive solicitation or the 
initiation of negotiations for an extension of an existing contract, the 
HCA shall coordinate the maximum available fee, as allowed by 48 CFR 
970.1504-1-1, and the fee amount targeted for negotiation, if less, with 
the Procurement Executive, or designee. Solicitations shall identify 
maximum available fee under the contract and may invite offerors to 
propose fee less than the maximum available.
    (g) When a contract subject to this subsection requires a contractor 
to use its own facilities or equipment, or other resources to make its 
own cost investment for contract performance, (e.g., when there is no 
letter-of-credit financing) consideration may be given, subject to 
approval by the Procurement Executive, or designee, to increasing the 
total available fee amount above that otherwise provided by this 
subsection.
    (h) Multiple fee arrangements should be used in accordance with 48 
CFR 970.1504-1-4.
    (i)(1) In addition to other performance requirements specified in 
the contract, DOE management and operating contractors and other 
contractors designated by the Procurement Executive, or designee, are 
subject to performance requirements relating to: environment, safety, 
and health (ES&H), including worker safety and health (WS&H); and 
safeguarding of Restricted Data and other classified information. 
Performance requirements relating to ES&H will be set forth in the 
contract's ES&H terms and conditions, including a DOE approved 
Integrated Safety Management System (ISMS), or similar document. As 
applicable, performance requirements relating to the safeguarding of 
Restricted Data and other classified information will be set forth in 
the clauses of the contract entitled ``Security'' and ``Laws, 
Regulations, and DOE Directives,'' as well as in other terms and 
conditions that prescribe requirements for the safeguarding of 
Restricted Data and other classified information.
    (2) If the contractor does not meet the performance requirements of 
the contract relating to ES&H or to the safeguarding of Restricted Data 
and other classified information, otherwise earned fee, fixed fee, 
profit, or share of cost savings may be unilaterally reduced by the 
contracting officer in accordance with the clause entitled ``Conditional 
Payment of Fee, Profit,

[[Page 433]]

and Other Incentives--Facility Management Contracts.''
    (3) The clause entitled ``Conditional Payment of Fee, Profit, and 
Other Incentives--Facility Management Contracts,'' provides for 
reductions of earned fee, fixed fee, profit, or share of cost savings 
under the contract depending upon the severity of the contractor's 
performance failure relating to ES&H requirements and, if applicable, 
relating to the safeguarding of Restricted Data and other classified 
information. When reviewing performance failures that would otherwise 
warrant a potential reduction of earned fee, fixed fee, profit, or share 
of cost savings, the contracting officer must consider mitigating 
factors that may warrant a reduction below the applicable range 
specified in the clause. Some of the mitigating factors that must be 
considered are included in the clause.
    (4) The contracting officer must obtain the concurrence of the 
cognizant Program Secretarial Officer
    (i) Prior to effecting any reduction of fee or profit in accordance 
with the terms and conditions of the clause entitled, ``Conditional 
Payment of Fee, Profit, and Other Incentives--Facility Management 
Contracts;'' and
    (ii) For determinations that no reduction of fee or profit is 
warranted for a particular performance failure(s) that would otherwise 
be subject to a reduction.

[65 FR 81009, Dec. 22, 2000, as amended at 68 FR 68781, Dec. 10, 2003]