visors to contracting officers on contractor accounting and cost matters.

(b) Audit as an aid in the negotiation of price or cost arrangements in DOE contract awards shall be utilized as provided by this subsection.

(c) Preaward audit services include: (1) The submission of an auditor's report which sets forth the results of the review and analysis of cost data submitted by offerors as part of their pricing proposals, reviews of contractor's accounting systems, recorded contract costs, and financial condition or other related matters; and

(2) Personal consultation and advice regarding the use of the auditor's report in the negotiation and award of a contractual instrument.

(d) When a contract price will be based on cost or pricing data (FAR 15.804) submitted by the offerors, the DOE contracting officer or authorized representative shall request a review by the cognizant Federal audit activity prior to the negotiation of any contract or modification including modifications under advertised contracts in excess of:

(1) $500,000 for a firm fixed-price contract or a fixed-price contract with economic price adjustment provisions;

or

(2) $1,000,000 for all other contract types, including initial prices, estimated costs of cost-reimbursement contracts, interim and final price redeterminations, and target and settlement of incentive contracts.

(e) The requirement for auditor reviews of proposals which exceed the thresholds specified in paragraph (d) above may be waived at a level above the contracting officer when the reasonableness of the negotiated contract price can be determined from information already available. The contract file shall be documented to reflect the reason for any such waiver, provided, however, that independent Government estimates of cost or price shall not be used as the sole justification for any such waiver.

(f) Ordinarily, preaward reviews by an auditor should not be requested for actions below the thresholds specified in paragraph (d) of this section. Before requesting such audits, the contracting officer should consider

using recent audit reports, price negotiation memorandums, or other pertinent information regarding the offeror to establish the reasonableness of proposed price. However, auditor reviews should be considered for proposals below the specified thresholds when the contracting officer determines that:

(1) The available data is inadequate for determining the reasonableness of the contractor's cost proposal;

(2) The contractor's estimating, accounting, or purchasing methods are not reliable; or

(3) The best interest of the Government will be served by an audit review, after giving consideration to the cost of the audit, type of audit and value of the proposed contract amount.

[49 FR 11955, Mar. 28, 1984; 49 FR 38950, Oct. 2, 1984]

915.807 Prenegotiation objectives.

(d) The Head of the Contracting Activity shall assure that all prenegotiation objectives and proposed actions are documented in accordance with the requirements of FAR 15.807 and the following requirements of this section. The degree of documentation should be commensurate with the complexity and dollar value of the procurement. For those procurement actions of $250,000 and above the contracting officer shall prepare a written prenegotiation plan which shall include prenegotiation objectives for price and other contract requirements, as appropriate. The prenegotiation plan required by this section shall be included as section I of the price negotiation memorandum at 915.808. The prenegotiation plan should include, to the extent applicable, the information cited below.

(1) General.

PRENEGOTIATION PLAN

(a) Procurement request number, solicitation, and contract number.

(b) Offeror(s) involved in the negotiation. Include address and location where effort is to be performed.

(c) Brief description of the work to be performed (reference to statement of work is not sufficient).

(d) Type of solicitation (RFP, PON, PRDA, etc.) and type of contract being awarded.

(e) Period of performance/delivery schedule.

(f) Proposed funding schedule for term of contract.

(2) Prior procurement history.

Names of previous contractors, if previous awards made for same or similar work to be performed. Contract number(s) and performance period(s).

(3) Solicitation data.

(a) Summary of selection process used, including number of firms solicited, proposals received, competitive range, name of selection official if SEB was used. (b) If noncompetitive, basis for approval and name and title of person approving the justification.

(c) Discuss what considerations were given to socio-economic requirements.

(4) Advisory reports.

Identify, by title and date, the advisory reports received in support of the negotiations, i.e., audit reports, technical evaluation reports, cost or price analysis reports, and any other advisory report used in preparing the prenegotiation objectives.

(5) Pricing objectives.

(a) A schedule showing the elements of the proposer's cost proposal, recommended adjustments (auditor, technical evaluation, etc.), and the negotiator's pricing objectives in columnar form. (b) Discussion of how previous procurements impact the pricing objectives of the instant procurement.

(c) Appropriate comments justifying the negotiation objective for each element of cost. In discussing DOE's objectives indicate the position taken in advisory reports, if requested, and the proposed treatment of such advice/comments. (d) The extent of subcontracting and justification for subcontract price(s) provided by the prime contractor and the justification as viewed by the DOE negotiator.

(e) Discussion of whether, and to what extent, negotiation will be based on actual costs expended.

(f) Discussion of any special pricing techniques and the rationale for their use. (g) Discussion of how DOE's objective for fee and profit was established, including a copy of the weighted guideline analysis, if used. For construction contracts and construction management contracts, discuss how the profit or fee objective was established in accordance with the requirements of 915.971.

(h) Discussion of incentive arrangements, cost or technical, if applicable, (i.e., share ratios, ceiling price, minimum/ maxium fees.)

(i) Discussion of the treatment given to facilities capital cost of money, if applicable, in establishing the fee/profit objective.

(j) A summary statement regarding the reasonableness of the total price objective and appropriate discussion of the considerations used to determine the reasonableness of price.

(6) Other issues and factors.

(a) Discuss any proposed special provisions.

(b) Identify any anticipated deviations to regulations and the required approvals. (c) Identify any unusual features of the Statement of Work.

(d) If applicable, identify any solicitation provisions which have been challenged by the offeror.

(e) Indicate if the Consolidated List of Debarred, Suspended, and Ineligible Contractors has been reviewed.

(f) Discuss whether the contractor has an approved purchasing and accounting system.

(g) Discuss any unique or peculiar features of the contract; e.g., cost sharing, facility ownership, options, etc.

(h) Discuss any deviations to regulations or exceptions suggested by the offeror and discuss proposed disposition.

(i) Discuss any results of pre-award surveys of the offeror's financial, accounting and other management systems. [52 FR 38423, Oct. 16, 1987]

915.808 Price negotiation memorandum.

(a) The Head of the Contracting Activity shall assure that all contract actions are adequately documented and shall establish internal review requirements therefor. While documentation may be simplified for lesser dollar value acquisitions, documentation of prenegotiation objectives and negotiation summaries shall be maintained in order to promote the discipline of adequate preparation for negotiations and to assist in supervisory review. For acquisitions of $250,000 and above, the price negotiation memorandum (PNM) shall be divided into two major sections: Section I, the prenegotiation plan and Section II, the post-negotiation summary. The prenegotiation plan prepared in accordance with 915.807 shall document the negotiation objectives established prior to the start of formal negotiations. The postnegotiation summary shall discuss the results of the negotiations leading to a final agreement, and, in a general

sense, provide the results of the negotiation in terms of the extent to which prenegotiation objectives were met. In addition to the items listed at FAR 15.807 the following shall also be addressed in the PNM.

(11) Date and location of negotiations.

(12) Discussion of any issues raised during negotiations that were not addressed in the prenegotiation position.

(13) In the event that pricing or other contract terms cannot be justified to the satisfaction of the contracting officer but award is recommended because of compelling programmatic considerations, the PNM must fully document the efforts to obtain a more satisfactory agreement, including the extent to which the matter was escalated within DOE and the contractor's organization. The file must also show what consideration was given to alternate sources or other short or longterm alternatives (See FAR 15.803(d)).

(14) Indicate the date on which agreement was reached on the price, and the date the certificate of current cost or pricing data was signed, if applicable.

(15) Explain why the total price or estimated cost and fee are considered fair and reasonable if there was significant departure from the prenegotiation objectives.

(b) Whenever an audit review was requested and a report was obtained, the contracting officer shall inform the cognizant audit activity of the disposition of each audit finding and recommendation by either forwarding a copy of the price negotiation memorandum to the auditor; or by advising the auditor, in writing, if an award was cancelled or not made to the audited entity; whichever is applicable.

[49 FR 11955, Mar. 28, 1984, as amended at 52 FR 38423, Oct. 16, 1987]

Subpart 915.9-Profit

915.903 Contracting officer responsibilities.

(d)(1)(ii) The statutory limitations on profit and fees as set forth in FAR 15.903(d)(1) (i), (ii) and (iii) shall be followed, except as exempted for DOE architect-engineer contracts covering Atomic Energy Commission (AEC) and

Bonneville Power Administration (BPA) functions. Pursuant to section 602(d) (13) and (20) of the Federal Property and Administration Services Act of 1949, as amended, those former AEC functions, as well as those of the BPA, now being performed by DOE are exempt from the 10 and 6 per centum cost and fee restrictions on contracts for architect-engineer services.

(d)(2) Waivers to apply the maximum cost-plus-award-fee percentage in 915.972(a)(3) in those situations that shall result in potential fees exceeding the limitations cited in FAR 15.903(d)(1) (i), (ii), and (iii) shall be forwarded to the Procurement Executive.

(f) In cases where a change or modification calls for substantially different work than the basic contract, the contractor's effort may be radically changed and a detailed analysis of the profit factors would be a necessity. Also, if the dollar amount of the change or contract modification is very significant in comparision to the contract dollar amount, a detailed analysis should be made.

(g) The estimated costs on which the maximum fee is computed pursuant to the statutory limitations set forth in FAR 15.903(d)(1) shall include facilities capital cost of money when this cost is included in cost estimates.

915.905 Profit-analysis factors.

A profit/fee analysis technique designed for a systematic application of the profit factors in FAR 15.905-1 provides contracting officers with an approach that will ensure consistent consideration of the relative value of the various factors in the establishment of a profit objective and the conduct of negotiations for a contract award. It also provides a basis for documentation of this objective, including an explanation of any significant departure from it in reaching a final agreement. The contracting officer's analysis of these prescribed factors is based on information available prior to negotiations. Such information is furnished in proposals, audit data, performance reports, preaward surveys and the like.

30-185 0-90-12

915.970 DOE structured profit and fee system.

This section implements FAR 15.902 and 15.905.

915.970-1 General.

(a) Objective. It is the intent of DOE to remunerate contractors for financial and other risks which they may assume, resources they use, and organization, performance and management capabilities they employ. Profit or fee shall be negotiated for this purpose; however, when profit or fee is determined as a separate element of the contract price, the aim of negotiation should be to fit it to the acquisition, giving due weight to effort, risk, facilities investment, and special factors as set forth in this subpart.

(b) Commercial (profit) organization. Profit or fee prenegotiation objectives for contracts with commercial (profit) organizations shall be determined as provided in this subpart.

(c) Nonprofit organizations. It is DOE's general policy to pay fees in contracts with nonprofit organizations other than educational institutions and governmental bodies; however, it is a matter of negotiation whether a fee will be paid in a given case. In making this decision, the DOE negotiating official should consider whether the contractor is ordinarily paid fees for the type of work involved. The profit objective should be reasonable in relation to the task to be performed and the requirements placed on the contractor.

(d) Educational institutions. It is DOE policy not to pay fees under contracts with educational institutions.

(e) State, local and Indian tribal governments. Profit or fee shall not be paid under contracts with State, local, and Indian tribal Governments.

915.970-2 Weighted guidelines system.

(a) To properly reflect differences among contracts and the circumstances relating thereto and to select an appropriate relative profit/fee in consideration of these differences and circumstances, weightings have been developed for application by the contracting officer to standard measurement bases representative of the prescribed profit factors cited in FAR

15.905 and paragraph (d) of this section. This is a structured system, referred to as weighted guidelines. Each profit factor or subfactor, or component thereof, has been assigned weights relative to their value to the contract's overall effort. The range of weights to be applied to each profit factor is also set forth in paragraph (d) of this section. Guidance on how to apply the weighted guidelines is set forth in 915.970-8.

(b) Except as set forth in 915.970-4, the weighted guidelines shall be used in establishing the profit objective for negotiation of contracts where cost analysis is performed.

(c) The negotiation process does not contemplate or require agreement on either estimated cost elements or profit elements. Accordingly, although the details of analysis and evaluation may be discussed in the fact-finding phase of the negotiation process in order to develop a mutual understanding of the logic of the respective positions, specific agreement on the exact weights of values of the individual profit factors is not required and need not be attempted.

(d) The factors set forth below are to be used in determining DOE profit objectives. The factors and weight ranges for each factor shall be used in all instances where the weighted guidelines are applied.

915.970-3 Documentation.

Determination of the profit or fee objective, in accordance with this subpart shall be fully documented. A worksheet, DOE Form F 4220.23 has been developed to assist the contracting officer in this effort. Since the profit objective is the contracting officer's pre-negotiation evaluation of a total profit allowance for the proposed contract, the amounts developed for each category of cost will probably change in the course of negotiation. Furthermore, the negotiated amounts will probably vary from the objective and from the pre-negotiation detailed application of the weighted guidelines technique to each element of the contractor's input to total performance. Since the profit objective is viewed as a whole rather than as its component parts, insignificant variations from the pre-negotiation profit objective, as a result of changes to the contractor's input to total performance, need not be documented in detail. Conversely, significant deviations from the profit objective necessary to reach a final agreement on profit or fee shall be explained in the price negotiation memorandum prepared in accordance with FAR 15.808.

915.970-4 Exceptions.

(a) For contracts not expected to exceed $500,000, the weighted guidelines need not be used; however, the contracting officer may use the weighted guidelines for contracts below this amount if he or she elects to do so.

(b) For the following classes of contracts, the weighted guidelines shall not be used:

(1) Commercialization and demonstration type contracts;

(2) Management and operating contracts;

(3) Construction contracts;

(4) Construction management contracts;

(5) Contracts primarily requiring delivery of material supplied by subcontractors;

(6) Termination settlements; and

(7) Contracts with educational institutions.

(c) In addition to paragraphs (a) and (b) of this section, the contracting officer need not use the weighted guidelines in unusual pricing situations where the weighted guidelines method has been determined by the DOE negotiating official to be unsuitable. Such exceptions shall be justified in writing and shall be authorized by the Head of the Contracting Activity. The contract file shall include this doucmentation and any other information that may support the exception.

(d) If the contracting officer makes a written determination that the pricing situation meets any of the circumstances set forth above, other methods for establishing the profit objective may be used. For contracts other than those subject to Subpart 917.6, the selected method shall be supported in a manner similar to that used in the weighted guidelines (profit factor breakdown and documentation of profit objectives); however, investment or other factors that would not be applicable to the contract shall be excluded from the profit objective determination. It is intended that the methods will result in profit objectives for noncapital intensive contracts that are below those generally developed for capital intensive contracts.

915.970-5 Special considerations-con

tracts with nonprofit organizations (other than educational institutions).

(a) For purposes of identification, nonprofit organizations are defined as those business entities organized and operated exclusively for charitable, scientific, or educational purposes, of