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