(1) Recruiting personnel required for contract performance;

(2) Acquiring scarce items for contract performance;

(3) Disposing of scrap or surplus materials acquired for contract performance;

(4) The transfer of federally owned or originated technology to State and local governments and to the private sector; or

(5) Obtaining supplies and services including contract-required equipment, leases, banking services, etc. Costs of this nature are allowable to the extent that they are determined by the Contracting Officer to be reasonable, necessary, and incident to contract performance.

(e) Allowable public relations costs include the following:

(1) Costs specifically required by contract, or approved in advance by the Contracting Officer.

(2) Costs of

(i) Responding to inquiries on company policies and activities.

(ii) Communicating with the public, press, stockholders creditors, local communities, and customers, including responses to inquiries from and initiation of press releases and other communications with the news media.

(iii) Conducting general liaison with news media and government public relations officers, to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern such as notice of contract awards, plant closings or openings, employee layoffs or rehires, financial information environmental impact of plant operations, etc.

(3) Costs of participation in community service activities (e.g., blood bank drives, charity drives, savings bond drives, disaster assistance, outreach programs, etc.), exclusive of contractor cash contributions and donations which are unallowable. The contractor's cost of services or contractorowned property provided to support community service activities (e.g., the contractor's cost of making payroll deductions for employee contributions to a charity, cost of employee services provided to community organizations,

or other similar, nominal in-kind participation) is allowable.

(4) Costs of plant tours, visitors centers, and open houses (but see paragraph (f)(5) of this section).

(f) Unallowable public relations and advertising costs include the following activities except when the principal purpose of the activity or event is to disseminate technical information or stimulate production in accordance with contract requirements:

(1) All advertising costs other than those specified in paragraph (d) of this section.

(2) Costs of air shows and other special events, such as conventions and trade shows including:

(i) Costs of displays, demonstrations and exhibits;

(ii) Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and

(iii) Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings.

(3) Costs of sponsoring meetings, symposia, seminars, and other special events.

(4) Costs of ceremonies such as corporate celebrations and new product

announcements.

(5) Costs of promotional material, motion pictures, videotapes, brochures, handouts, magazines, and other media that are designed to benefit the contractor's organization by calling favorable public attention to contractor activities.

(g) Unallowable public relations and advertising costs include the following:

(1) Costs of souvenirs, models, imprinted clothing, buttons, and other mementos provided to customers or the public.

(2) Cost of memberships in civic and community organizations.

(3) All advertising and public relations costs, other than as specified in paragraphs (d), (e) and (f) of this section, whose primary purpose is to benefit the contractor's organization by promoting the sale of products or services by stimulating interest in a product or product line or by disseminating messages calling favorable attention to the contractor for purposes of enhanc

ing the company image to sell the company's products or services unless such sales activities are required under the management and operating contract to support the DOE mission. Nothing in this paragraph (g)(3) modifies the express unallowability of costs listed in paragraphs (f), (g)(1) and (g)(2) of this section. The purpose of this paragraph is to provide criteria for determining whether advertising and public relations costs not specifically identified should be unallowable. [52 FR 1608, Jan. 14, 1987]

970.3102-20 Defense of fraud proceedings. (a) Definitions.

(1) "Costs," as used in this section, include, but are not limited to, administrative and clerical expenses; the cost of legal services, whether performed by in-house or private counsel; the costs of the services of accountants, consultants, or others retained by the contractor to assist it; the salaries and wages of employees, officers, and directors; and any of the foregoing costs incurred before commencing the formal judicial or administrative proceedings which bear a direct relationship to the proceedings.

(2) "Fraud," as used in this section, means (i) acts of fraud or corruption or attempts to defraud the Government or to corrupt its agents, (ii) acts specified under 10 CFR 1035.5(a)(1) which constitute a cause for debarment or suspension (see 10 CFR 1035.5 (a) and (b)) and (iii) acts which violate the False Claims Act, 31 U.S.C. sections 3729-3731, or the Anti-Kickback Act, 41 U.S.C., sections 51 and 54.

(b) Costs incurred in connection with defense of any (1) criminal or civil investigation, grand jury proceeding, or prosecution, (2) civil litigation, or (3) administrative proceedings such as debarment or suspension proceedings for acts specified under 10 CFR 1035.5(a)(1), or any combination of the foregoing, brought by the Government against a contractor, its agents or employees, are unallowable when the charges, which are the subject of the investigation, proceedings, or prosecution, involve fraud or similar offenses (including filing of a false certification) on the part of the contractor, its agents or employees, and result in

conviction (including conviction entered on a plea of nolo contendere), judgment against the contractor, its agents or employees, or decision to debar or suspend, or are resolved by consent or compromise.

(c) In circumstances where the charges of fraud are resolved by consent or compromise, the parties may agree as to the extent of allowability of such costs as a part of such resolution.

(d) Costs which may be unallowable under this section, including directly associated costs, shall be differentiated and accounted for by the contractor so as to be separately identifiable. During the pendency of any proceeding or investigation covered by paragraph (b) of this section, the Contracting Officer should generally withhold payment of such costs. However, the Contracting Officer may, in appropriate circumstances, provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreements by the contractor to repay all unallowable costs, plus interest, if a conviction or judgment is rendered against it.

[52 FR 1609, Jan. 14, 1987]

970.3102-21 Fines and penalties.

It is DOE policy to reimburse management and operating contractors for fines and penalties that are incurred in the performance of their contracts. Any such reimbursement for fines and penalties incurred under the contract will be made as long as such fines and penalties are not the result of the willful misconduct or lack of good faith on the the part of the contractor's corporate officers, directors or supervising representatives.

[52 FR 1610, Jan. 14, 1987]

970.3103 Contract clauses.

(a) The appropriate cost principles clause at 970.5204-13 or 970.5204-14 shall be included in a management and operating contract.

(b) The legislative lobbying cost prohibition clause at 970.5204-17 shall be included in all M&O contracts.

970.3202 Advance payments.

(a) The Head of the Contracting Activity, shall authorize advance payments without interest; and approve the findings, determinations and the contract terms and conditions concerning advance payments in accordance with the procedures set forth in FAR Subpart 32.4, Advance Payments, as amended by Subpart 932.4.

(b) Advance payments shall be made under a letter-of-credit arrangement for deposit in a special bank account.

(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 bank account where the advanced funds are to be deposited by the Government. Such agreement shall (1) provide that DOE shall retain title to the unexpended balance of funds in the special bank account including revenues if any, deposited by the contractor; and that such title shall be superior to any claim or lien of the bank of deposit and (2) incorporate as necessary or appropriate, additional financial provisions required by Treasury or Departmental financial regulations.

(d) Deviations from these specified requirements cited in paragraph (c) above shall be considered a deviation requiring approval of the Head of the Contracting Activity.

970.3270 Clauses.

The clauses at 970.5204-16 shall be included in management and operating contracts when advances of funds are to be placed in a special bank account. They may be appropriately modified to incorporate any additional provisions that may be required by governing financial regulations of the Treasury Department or the Department.

970.3271 Special bank account agreement.

NOTE: The following agreement shall be used with special bank accounts in accordance with 970.3202(c).

Agreement entered into this day of 19 between the United States of America (hereinafter called the Government) represented herein by the Department of Energy (hereinafter called the "DOE"), and (hereinafter called the "Contractor," a corporation under the laws of the State of (hereinafter called the "Bank,") a banking corporation under the laws of located at

and

RECITALS

(a) On the date of 19 - DOE and the Contractor entered into Contract(s) No. or a supplemental agreement thereto, providing for the making of advances of Government funds to the contractor a copy of such advance provisions has been furnished to the Bank.

(b) DOE requires that amounts advanced to the Contractor under said contract or supplemental agreement be deposited in a Special Bank Account or accounts with a bank designated by the Treasury Department as depositary and financial agent of the Government (Section 10 of the Act of June 11, 1942, 56 Stat. 356; 12 U.S.C. 265), separate from any of the Contractor's general or other funds; and, the Bank being such a bank, the parties are agreeable to so depositing said amounts with the Bank. (c) This Special Bank Account shall be designated (Name of Contractor), (Contract Number), Department of Energy Special Bank Account."

COVENANTS

In consideration of the foregoing, and for other good and valuable considerations, it is agreed that,

(1) The Government shall have title to the credit balance in said account to secure the return of all advances made to the contractor, which title shall be superior to any lien or claim of the Bank or others with respect to such account.

(2) The Bank will be bound by the provisions of said contract or contracts relating to the deposit and withdrawal of funds in the above Special Bank Account, but shall not be responsible for the application of funds properly withdrawn from said account. After receipt by the Bank of written directions from the Contracting Officer, or from the duly authorized representative of the Contracting Officer, the Bank shall act thereon and shall be under no liability to any party hereto for any action taken in accordance with the said written directions.

(3) The Government, or its authorized representatives, shall have access to the books and records maintained by the Bank with respect to such Special Bank Account at all reasonable times and for all reasonable purposes, including, without limitation, the inspection or copying of such books and records and any and all memoranda, checks, correspondence, or documents pertaining thereto. Except as agreed upon by the Government and the Bank, all books and records pertaining to the Special Bank Account in the possession of the Bank relating to the Special Bank Account agreement shall be preserved by the Bank for a period of three (3) years after final payment under the contract to which the Special Bank Account agreement pertains or otherwise disposed of in such manners as may be agreed upon by the Government and the Bank.

(4) In the event of the services of any writ of attachment, levy of execution, or commencement of garnishment proceedings with respect to the Special Bank Account, the Bank will promptly notify the Head of Contracting Activity, DOE.

In witness whereof the parties hereto have caused this Agreement to be executed, as of the day and year first above written. (Signatures and Official Titles)

Subpart 970.36-Construction and AE Contracts

970.3601 Special construction clause for operating contracts.

The clause in 970.5204-38 shall be used in management and operating contracts when the contractor will not perform covered work with its own forces but may procure construction by subcontract.

[49 FR 12063, Mar. 28, 1984. Redesignated at 53 FR 24231, June 27, 1988]

Subpart 970.49—Termination of Contracts

970.4901 General.

All management and operating contracts, regardless of whether they are for production, research and development, or services, shall contain appropriate termination provisions.

[49 FR 12063, Mar. 28, 1984, as amended at 53 FR 24231, June 27, 1988]

970.4902 Termination clause.

The clause at 970.5204-45 shall be inserted into management and operating contracts.

Subpart 970.51-Use of Government Sources by Contractors

970.5101 Use of Government supply

sources.

(a) Management and operating contractors should meet their acquisition from requirements Government sources of supply, when these sources are made available to them and if it is economically advantageous or otherwise in the best interest of the Government.

(b) Contracting officers may authorize management and operating contractors and their subcontractors with cost-reimbursement type subcontracts, where all higher-tier subcontracts are cost-reimbursement types, to acquire materials and services directly from such Government sources of supply in accordance with the requirements of this subpart or the consent of agencies involved.

(c) Materials, supplies, and equipment procured from Government sources of supply under the procedures described herein must be used exclusively in connection with management and operating contract work, except as otherwise authorized by Heads of Contracting Activities.

(d) Many supply facilities and contracts of the Department of Defense are made available to DOE and its management and operating contractors. Accordingly:

(1) Requisitions or purchase orders shall be submitted directly to these sources, unless otherwise specified.

Field offices will be notified by the Procurement Executive, or designee, when such contracts and facilities are made available. Inquiries in connection with these sources may be directed to the Procurement Executive.

(2) Contractor requisitions submitted to Defense Logistics Centers should include the following statement. "The consignee of the supplies and materials requisitioned herein is acting in behalf of and as agent for the Department of Energy with respect to the expenditure of Government funds." Orders submitted directly to DOD contractors shall be accompanied by an authorization substantially similar to that in FAR 51.103.

(e) Contracting officers, when reviewing the procurement systems and methods of contractors that have been authorized to use Government sources of supply, shall assure that provision is made for documenting the justification of procurements from commercial sources of items available from Government sources of supply.

(f) Direct procurement by DOE, rather than by a management and operating contractor, shall be required where deemed necessary by the Head of the Contracting Activity in order to carry out special requirements of appropriation acts or other applicable laws relating to particular items.

(g) The Procurement Executive shall be informed of instances in which Government sources of supply are not used because of the quality of the items available or when a Federal Supply Schedule contractor refuses to honor an order.

[49 FR 12063, Mar. 28, 1984; 49 FR 38953, Oct. 2, 1984]

970.5102 Use of interagency motor pool vehicles and related services.

The provisions of FAR subpart 51.2, FPMR 41 CFR 101-39, and DOE-PMR 41 CFR 109-39 apply.

Subpart 970.52-Contract Clauses for
Operating

Management and
Contracts

970.5201 General policy.

Many of the clauses set forth in subparts of FAR Part 52 and Part 952 of

this chapter apply to management and operating contracts. The clauses in this subpart are to be used in addition to or in place of the FAR or the DEAR counterpart contract clauses where appropriate. Further modifications and notes to certain FAR clauses are also prescribed, in addition to those set forth in Part 952.

970.5202 Deviations.

Deviations from the standard contract clauses and modifications to FAR clauses set forth herein, as well as from the standard contract clauses prescribed in FAR Part 52 and Part 952 of this Chapter, shall be made only in accordance with the deviation procedures of Subpart 901.4. Minor changes in wording which may become necessary in the course of negotiations are not considered deviations, provided Counsel determines that the change is not prohibited by statue, executive order, or administrative regulation and does not alter the meaning, intent, or basic principles expressed in these clauses.

970.5203 Modifications and notes to FAR clauses.

970.5203-1 Covenant against contingent fees.

See FAR 52.203-5.

NOTE: Modify this clause by adding the following paragraph:

(c) Subcontracts and purchase orders. Unless otherwise authorized by the Contracting Officer in writing, the contractor shall cause provisions similar to the foregoing to be inserted in all subcontracts and purchase orders entered into under this contract.

970.5203-2 Examination of records by Comptroller General.

See FAR 52.215-1.

NOTE: The following paragraph (e) should be included in management and operating contracts when the clause at FAR 52.215-1 is required. It may be omitted only with the approval of the Procurement Executive, upon a specific determination, based on consultation with the Office of the Controller and the Office of the General Counsel, that nothing in the contract purports to preclude an audit by the General Accounting Office of any transaction thereunder.