ML23157A254

PR-048 C 20 - 57FR37140 - Acquisition Regulation (Nrcar): Organizational Conflicts of Interest

ML23157A254
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Issue date:	08/18/1992
From:	Norry P Office of Administration
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PR-048 C 20, 57FR37140
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ADAMS Template: SECY-067 DOCUMENT DATE: 08/18/1992 TITLE: PR-048 C 20 - 57FR37140 - ACQUISITION REGULATION (NRCAR): ORGANIZATIONAL CONFLICTS OF INTEREST CASE

REFERENCE:

PR-048 C 20 57FR37140 KEYWORD: RULEMAKING COMMENTS Document Sensitivity: Non-sensitive - SUNSI Review Complete

STATUS OF RULEMAKING PROPOSED RULE: PR-48 C 20 OPEN ITEM (Y/N) N RULE NAME: ACQUISITION REGULATION (NRCAR): ORGANIZATIONAL CONFLICTS OF INTEREST PROPOSED RULE FED REG CITE: 57FR37140 PROPOSED RULE PUBLICATION DATE: 08/18/92 NUMBER OF COMMENTS: 1 ORIGINAL DATE FOR COMMENTS: 09/17/92 EXTENSION DATE: I I FINAL RULE FED. REG. CITE: 57FR61152 FINAL RULE PUBLICATION DATE: 12/23/92 NOTES ON SEE ALSO PR-MISC NOTICE (48 C 20) PUBLISHED ON 10/2/89 AT 54 FR 40 ATOS 420 AND FINAL RULE ON DEBARMENT PUBLISHED ON 7/1/92 AT 57 FR 29220 ROLE

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TO FIND THE STAFF CONTACT OR VIEW THE RULEMAKING HISTORY PRESS PAGE DOWN KEY HISTORY OF THE RULE PART AFFECTED: PR-48 C 20 RULE TITLE: ACQUISITION REGULATION (NRCAR): ORGANIZATIONAL CONFLICTS OF INTEREST loPoSED RULE PROPOSED RULE DATE PROPOSED RULE SECY PAPER: SRM DATE: I I SIGNED BY SECRETARY: 08/06/92 FINAL RULE FINAL RULE DATE FINAL RULE SECY PAPER: 92-344 SRM DATE: 11/09/92 SIGNED BY SECRETARY: 12/09/92 STAFF CONTACTS ON THE RULE CONTACTl: EDWARD L. HALMAN MAIL STOP: P-1114 PHONE: 492-4347 CONTACT2: WILLIAM (CHIP) FOSTER MAIL STOP: P-118 PHONE: 492-7348

DOCKET NO. PR-48 C 20 (57FR37140)

In the Matter of ACQUISITION REGULATION (NRCAR): ORGANIZATIONAL CONFLICTS OF INTEREST DATE DATE OF TITLE OR DOCKETED DOCUMENT DESCRIPTION OF DOCUMENT

- 08/ 13/92 08/06/92 FEDERAL REGISTER NOTICE - PROPOSED RULE 09/18/92 09/17/92 COMMENT OF SAIC (THOMAS J. RODEHAU, MANAGER) ( 1)

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Science Applications International Corporation An Employee-Owned Company *92 SEP 18 p3 :57 September 17, 1992 92*~TJ'R*,. 616 Mr. Samuel J. Chilk The Honorable Secretary of the Commission U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Attention: Docketing and Service Branch

Subject:

Proposed Amendment of the NRC Acquisition Regulation {NRCAR)

Concerning Organizational Conflicts of Interest

Reference:

{a) Federal Register Vol. 57, No. 160 dated August 18, 1992 (b) SAIC Letter dated April 14, 1992, Serial TT-92 -25 (c) SAIC Letter dated March 6, 1992, Serial TT-92-16

Dear Mr. Chilk:

Science Applications International Corporation (SAIC) appreciates the consideration the Commission has given to comments received from our corporation and other NRC contractors concerning proposed changes to the NRC' s organ i zat i ona l conflicts of interest (COi) regulation. We are pleased and we support the NRC's amendment of this regulation, and in particular the work for others language contained therein. SAIC wishes to express our favorable review of this proposed rule, and at the same time provide the NRC with additional comments on the proposed constructive changes to this COi regulation, which we request be favorably considered prior to the issuance of a final decision on the proposed amendment.

Through our participation in the NRC's public meeting on organizational conflicts of interest and subsequent correspondence, the NRC has been provided with our concerns and recommendations on this important regulation. Of the utmost concern to SAIC has been the NRC's prior stated interpretation of the work for others restrictions contained in the current COi regulation. Presently, these restrictions, as interpreted by the NRC, prohibit a contractor who performs work for the NRC at a licensee or applicant site from soliciting or conducting work of any type for that particular licensee or applicant in any capacity. even if such work poses no conflict of interest with the work performed for the NRC.

Since this provision prohibits the solicitation or conduct of work even when there is no actual conflict of interest, we have been unable to accept this COi contract provision. As you are aware, SAIC had to necessarily decline the acceptance of a large contract from the NRC for which SAIC was selected to receive, on a competitive basis, solely based on the impact of these restrictions, which had the effect of prohibiting totally unrelated business activities. Apart from SAIC's loss, this unfortunate situation deprived the NRC from obtaining the services of the contractor judged to be the most qualified to perform this particular contract.

11251 Roger Bacon Drive, Reston, Virginia 22090 * (703) 318-4500 Other SA IC O ffices: Albuquerque, Boston, Colorado Springs, Dayton, Huntsville, Las Vegas, Los Angeles, McLean, Oak Ridge, Orlando, Palo Alto, Seattle, Tucson

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Mr. Samuel J. Chilk/U.S. Nuclear Regulatory Commission An Employee-Owned Company Serial No. 92-TJR.616 September 17, 1992 Page Two We are very pleased that the NRC has considered our concerns on this matter and has carefully evaluated the comments provided by other interested parties on these restrictive provisions. In addition, we believe the NRC has recognized the public policy benefits that stem from having flexibility in the regulation, which allows for certain exceptions to these restrictions in situations where other work exists that poses no potential for a conflict of interest with work being performed for the NRC.

Accordingly, based on our understandings of the proposed changes to this COI regulation, which are discussed below, we agree with the NRC's proposition to modify the work for others restrictions for the purpose of permitting, in appropriate cases, exceptions to the blanket restrictions, provided that the following conditions are met:

(1) The work is not in the same technical area as the work performed for the NRC, and (2) The Contracting Officer determines that the specific situation will not pose a potential for technical bias or unfair competitive advantage.

Our support for the expansion of the work for others language in the manner proposed by the NRC is, however, based on the assumption that this provision will permit a contractor to discuss and negotiate in good faith an advance agreement with the cognizant Contracting Officer on the scope of these restrictions. In addition, it is our understanding that pursuant to paragraph (4)(iii) of the proposed work for others provisions, the Contracting Officer wi 11, at the successful conclusion of these negotiations, provide the contractor with an appropriate written authorization permitting the contractor to solicit and perform certain types of activities for NRC licensees or applicants, the nature of which the NRC has determined will not place the contractor in a conflict of interest situation.

With the adoption of this proposed rule, we believe it is of vital importance that Contracting Officers be encouraged to adopt fair and reasonable exceptions to the work for others limitations and for contractors to be afforded the opportunity to periodically discuss and negotiate in a timely manner exceptions to these restrictions in good faith with the NRC. We al so recognize that determinations made by Contracting Officers on exceptions to these restrictions are to be based on good judgments, considering the factors below:

(a) the relative value of the work for the NRC, (b) whether there has been an on -going contractual or financial relationship between the contractor and the NRC licensee,

Mr. Samuel J. Chilk/U.S. Nuclear Regulatory Commission An Employee-Owned Company Serial No. 92-TJR.616 September 17, 1992 Page Three (c) whether the contractor gained information about the availability of work for the NRC licensee as a result of contractor access to the site under the NRC contract, (d) the relative amount of time spent at the site by the contractor's personnel.

(e) whether the work for the NRC at the site is specific or is a part of a generic task or contract, and (f) any other factors that may indicate financial ties or competitive advantage.

We believe that in making determinations on any requested exceptions to these restrictions, the assessment of the significance of financial ties between the contractor and a particular licensee must at all times be put in a proper perspective. In our judgment, care must be taken to properly evaluate the true significance of any financial relationship between a contractor and a licensee by not only considering the monetary value of the work but by also comparing these financial ties against the contractor's total corporate income.

Furthermore, we believe it is also important for the Contracting Officer to assess the nature of the work that the contractor is required to perform for the NRC and determine if there is a direct or indirect relationship between this work and the activities that the contractor is interested in pursuing with a licensee or applicant. In instances where the contractor expresses an interest in pursuing totally unrelated activities, it is our expectation that a favorable determination on an exception to the work for others restrictions wi 11 be a timely and routine matter.

SAIC also wishes to take this opportunity to acknowledge the due consideration given by the NRC to comments received from interested parties on the disclosure-after-award requirement and the special recognition given to difficulties that have been experienced by highly diversified firms in making good faith efforts to disclose all proposed new and conceivably related work at least 15 days in advance of undertaking these initiatives. Groups within SAIC who perform work for the NRC have and continue to make their very best effort to monitor the activities of others segments of our corporation to remain in full and complete compliance with this particular requirement. As we have stated repeatedly, it is extremely difficult for a large company with many remote business offices to be knowledgeable of the work throughout all organizational elements and to disclose relevant activities to the NRC within such a narrow period of time.

Mr. Samuel J. Chilk/U.S. Nuclear Regulatory Commission ~

An Employee-Owned Company Serial No. 92-TJR.616 September 17, 1992 Page Four The proposed expansion of the disclosure-after-award requirement permitting a Contracting Officer to approve relief from this rather stringent requirement is considered to be fair and reasonable and considers the occasional difficulty that might be experienced by a contractor in complying with these reporting requirements. Based on our review of this portion of the proposed ru 1e, we support the authorization of a somewhat less stringent reporting requirement in situations of urgency or others compelling reasons.

SAIC appreciates having had the opportunity to provide the NRC with the foregoing comments on the proposed amendment of this COi regulation. We encourage the NRC to consider our comments on this proposed rule as part of the final rule making process and we look forward to the adoption of the proposed amendments to the work for others provisions and disclosure-after-award requirement as part of this COi regulation.

Should there be any questions with regard to any of these comments, please refer them to the attention of the undersigned at (703) 318-4720.

Very truly yours, SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

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Thomas J. odehau Deputy Contracts Manager Energy Systems Group TJR:jmb cc: Office of the Executive Director for Operations/James M. Taylor Office of Administration/Patricia G. Norry Division of Contracts and Property Management/Edward L. Halman Policy Branch/William H. Foster Office of General Counsel/William C. Parler Office of Nuclear Regulatory Research/Eric S. Beckjord Office of Nuclear Reactor Regulation/Thomas E. Murley Office of Nuclear Materials Safety &Safeguards/Robert M. Bernero Office of Analysis & Evaluation of Operational Data/Edward L. Jordan

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48 CFR Chapter 20 RIN 3150-AE34 Acquisition Regulation {NRCAR): Organizational Conflicts of Interest AGENCY: Nuclear Regulatory Commission.

ACTION: Proposed rule.

SUMMARY

The Nuclear Regulatory Commission {NRC) is proposing an amendment to its proposed Nuclear Regulatory Commission Acquisition Regulation {NRCAR) concerning organizational conflicts of interest. The proposed NRCAR, published for public comment on October 2, 1989 (54 FR 40420), addresses a full range of agency acquisition matters. A portion of the proposed NRCAR, relati ng to debarment, suspension and ineligibility procedures, has been

- adopted as a final agency regulation {57 FR 29220; July 1, 1992). The remainder of the proposed NRCAR is in preparation for publication as a final rule. One aspect of the NRCAR relates to the agency's organizational conflicts of interest rules. The amendment proposed by this notice modifies a section of the con flicts of interest rules relating to work for others during the period work is being performed for NRC. If the NRCAR is issued as a final rule before the Commission decides on the amendment proposed by the this notice, the proposed amendment will be considered for amendment of the NRCAR.

Otherwise, the proposed amendment will be considered for incorporation into the NRCAR when published as a final rule.

-q*[,1 f qz DATE: The comment period expires (30 days after publication in the Federal Register). Connnents received after this date will be considered if it is practical to do so, but assurance of consideration cannot be given except as to comments received on or before this date.

ADDRESSEES: Submit written comments to: The Secretary of the Commission; U.S. Nuclear Regulatory Conunission; Attention: Docketing and Service Branch, Washington, DC 20555. Copies of comments received may be examined or obtained for a fee at the NRC Public Document Room, 2120 L Street, NW (lower Level),

Washington, DC (telephone (202) 634-3273).

FOR FURTHER INFORMATION CONTACT: Edward L. Halman, Director, Division of Contracts and Property Management, Nuclear Regulatory Commission, Washington, DC 20555. Telephone: (301) 492-4347 SUPPLEMENTARY INFORMATION:

Background

On August 15, 1991, the Commission approved a revision to its proposed NRCAR published October 2, 1989 (54 FR 40420) concerning organizational conflicts of interest (COI). The thrust of this revision limited COI restrictions to the relatively narrow scope and shorter duration of individual task orders rather than to the entire scope and term of the basic contract.

While the NRC staff believed that the revi.sed policy would increase competition for NRC technical assistance and research work, additional restrictions ~ere added to (a) avoid the potential for unfair competitive advantage that could result if NRC contractors were permitted to market their 2

services while working for NRC at a licensee site; and (b} ensure that NRC contractors do not have divided financial interests while working at a licensee site.

Two of NRC's major technical assistance and research contractors commented that the COi provision, approved on August 15, 1991, was overly restrictive and would impede rather than enhance NRC's ability to increase.

competition in the technical assistance marketplace. Therefore, the NRC held a public meeting on March 26, 1992, in order that all interested parties could provide further comnents on the proposed revision of the Commission's COi regulation or provide alternat1ves that would achieve an equivalent level of COi protection (57 FR 4652; February 6, 1992}.

Statement of Considerations The nature of the conments received in connection with the March 26, 1992, meeting varied with respect to how the commenters viewed the restrictiveness of the policy. While a number of conmenters found the existing COi language adequate, others stated the policy was overly restrictive and lacking in flexibility.

The Co11111ission has considered the convnents concerning the substantial restrictions against performing any work at an NRC licensee site where the contractor performs on-site work for NRC, coupled with the lack of flexibility in applying this restriction, and agrees that exceptions to the blanket restriction may be pennitted in appropriate cases. Thus, the Convnission has modified the restriction to authorize the NRC contractor to perfonn work for NRC licensees at the site of work perfonned for NRC if:

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(a) The work is not in the same technical area as the work performed for NRC; and (b) The contracting officer determines that the specific situation will not pose a potential for technical bias or unfair competitive advantage.

In making the determination, the contracting officer will consider factors such as: the relative value of the work for*NRC; whether there has been an on-going contractual or financial relationship between the NRC contractor and the NRC licensee that predates the NRC contract; whether the NRC contractor gained information about the availability of work for the NRC licensee as a result of contractor access to the site under the NRC contract; the relative amount of time spent at the site by the NRC contractor's personnel; whether the work for NRG at the site is specific or is a part of a generic task or contract; and any other factors that may indicate financial ties or competitive advantage.

Another section of this clause on which the Commission received objections related to the requirement to disclose all other work proposed to be done by the contractor for others that may give rise to a COI situation.

The specific objection related to the requirement that the NRC be informed of the work at least 15 days in advance of undertaking the work. Some companies complained that it is difficult for diversified firms to ensure that the division perfonning the work for NRC would be aware of the work by other divisions 15 days in advance in all cases. Giving due consideration to these comments, the Corrmission has modified the provision to require that the contractor use due diligence to identify and obtain information about work for others that would fall within the scope of the NRC contract, and report the information to NRC 15 days in advance of undertaking the work. The 4

Convnission has also added a corresponding provision which indicates that the contracting officer may approve reporting not in accordance with this provision in cases where the contractor justifies the deviation on the grounds of urgency or by showing that despite the exercise of due diligence, the contractor's officials responsible for the NRC contract were not aware of the work for others falling within this provision.

Administrative Procedure Act Section 553 of the Administrative Procedure Act (5 U.S.C. 551 et seq) exempts rules relating to public contracts from the prior notice and comment procedure normally required for rulemaking. However, the Office of Federal Procurement Policy (OFPP), Office of Management and Budget, ha~ established procedures to be used by all Federal agencies in the promulgation of procurement regulations. The Commission published the proposed NRCAR, including proposed COi regulations, on October 2, 1989 (54 FR 40420).

Nonetheless, this proposal provides a further opportunity for public comment on a proposed amendment to the conflict of interest provisions presented in the October 2, 1989, proposed rule.

Environmental Impact: Categorical Exclusion The NRC has determined that this regulation is the type of action described in the categorical exclusion set forth in 10 CFR 51.22 (c)(5) and (6). Therefore, neither an environmental impact statement nor an environmental assessment has been prepared for this proposed rule.

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Paperwork Reduction Act Statement This proposed rule amends information collection requirements that are subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq). This rule has been submitted to the Office of Management and Budget for review and approval of the paperwork requirements.

The public reporting burden for this collection of information is estimated to average one hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Information and Records Management Branch (MNBB-7714), U.S. Nuclear Regulatory Commission, Washington, DC 20555, and to the Desk Officer, Office of Information and Regulatory Affairs, NEOB-3019, (3150- ), Office of Management and Budget, Washington, DC 20503.

Regulatory Analysis This proposed rule establishes the policy, procedures, and requirements necessary to comply with 42 U.S.C. Sec. 2221, Sec. 170 A of the Atomic Energy Act of 1954, as amended, as it addresses COI. This provision will not have an additional adverse economic impact on any contractor or potential contractor because it merely implements the statute which governs COI in the award of NRC's contracts.

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Regu1atory Flexibility Certification As required by the Regulatory Flexibility Act of 1980, 5 U.S.C. 605(b),

the Commission certifies that this rule does not have a significant economic impact on a substantial number of small entities. The proposed rule establishes the agency's COI policy and procedures to comply with 42 U.S.C.

Sec. 221, Section -170 A of the Atomic Energy act of 1954; as amended. Because the proposed rule establishes procedures applicable only in certain instances, these provisions do not have a significant economic impact on any contractor,

• including small entities .

Backfit Analysis The NRC has determined that the backfit rule, 10 CFR 50.109, does not apply to this proposed rule. Therefore, a backfit analysis is not required because the rule does not involve any provision which would impose backfits as defined in 10 CFR Part_ 50.109(a)(l).

List of Subjects in 48 CFR Chapter 20 Government procurement, Nuclear Regulatory Connnission Acquisition Regulations, Reporting and recordkeeping requirements.

For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974, as amended, 5 U.S.C. 553, and FAR Subpart 1.3, the NRC is proposing to adopt_

the following amendments to the provisions of paragraphs (c) and (d) of proposed §2052.209-74, *contractor organizational conflicts of interestn, which was contained in the proposed rule published in the Federal Register on October 2, 1989 (54 FR 40420).

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PART 2052 - SOLICITATION PROVISIONS AND CONTRACT CLAUSES

1. The authority citation for Part 2052, as proposed to be added at 54 FR 40435; October 2, 1989, continues to read as follows:

AUTHORITY: Sec. 161, 68 Stat. 948, as amended (42 U.S.C. 2201); Sec. 201, 88 Stat. 1242, as amended (42 U.S.C. 5841); Pub. [. 93-400~ 88 Stat. 796, as amended by Pub. L. 96-83, 93 Stat. 648, Pub. L.98-577, 98 Stat. 3074 (41 U.S.C. 401 et seq.).

2. Section 2052.209-74, as proposed to be added at 54 FR 40437; October 2, 1989, is proposed to be further amended by revising paragraphs (c) and (d) to read as follows:

§ 2052.209-74 Contractor organizational conflicts of interest.

(c) Work for others.

(1) Notwithstanding any other provision of this contract, during the term of this contract, the contractor agrees to forego entering into consulting or other contractual arrangements with any firm or organization, the result of which may give rise to a conflict of interest with respect to the work being performed under this contract. The contractor shall ensure that all employees under this contract abide by the provision of this clause.

If the contractor has reason to believe, with respect to itself or any employee, that any proposed consultant or other contractual arrangement with any firm or organization may involve a potential conflict of interest, the 8

contractor shall obtain the written approval of the contracting officer before the execution of such contractual arrang~ment.

(2) The contractor may not represent, assist, or otherwise support an NRC licensee or applicant undergoing an NRC audit, inspection, or review where the activities that are the subject of the audit, inspection, or review are the same as or substantially similar to the services within the scope of this contract (or task order as appropriate), except where the NRC

• licensee or applicant requires the contractor's support to explain or defend the contractor's prior work for the utility or other entity which NRC questions.

(3) When the contractor performs work for the NRC under this contract at any NRC licensee or applicant site, the contractor shall neither solicit nor perform work in the same or similar technical area for that licensee or applicant organization for a period connnencing with the award of the task order or beginning of work on the site (if not a task order contract) and ending one year after completion of all work under the associated task order, or last time at the site (if not a task order contract).

(4) When the contractor performs work for the NRC under this contract at any NRC licensee or applicant site, (i) The contractor may not solicit work at that site for that licensee or applicant during the period of performance of the task order or the contract, as appropriate.

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(ii) The contractor may not perfonn work at that site for that licensee or applicant during the period of perfonnance of the task order or the contract, as appropriate, and for one year thereafter.

(iii) Notwithstanding the foregoing, the contracting officer may authorize the contractor to sol1cft or perform-this type of work if the contracting officer determines that the situation will not pose a potential for technical bias or unfair competitive advantage *

• (d) Disclosure after award.

(1) .

The contractor warrants that to the best of its knowledge and belief, and except as otherwise set forth in this contract, it does not have any organizational conflicts of interest as defined in 48 CFR 2009.570-2.

(2) The contractor agrees that, if after award, it discovers

• organizational conflicts of interest with respect to this contract, it shall make an i1T111ediate and full disclosure in writing to the contracting officer.

This statement must include a description of the action which the contractor has taken or proposes to take to avoid or mitigate such conflicts. The NRC may, however, tenninate the contract if termination is in the best interest of the government.

(3) It is recognized that the scope of work of a task-order-type contract necessarily encompasses a broad spectrum of activities.

Consequently, if this is a task-order-type contract, the contractor agrees 10

that it will disclose all proposed new work involving NRC licensees or applicants which comes within the scope of work of the underlying contract.

Further, if this contract involves work at a licensee or applicant site, the

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contractor agrees to exercise diligence to discover and disclose any new work at that licensee or applicant site. This disclosure must be made before th~

submission of a -bid or proposal to the*-utility or- other regulated enttty and must be received by the NRC at least 15 days before the proposed award date in any event, unless a written justification demonstrating urgency and due 9 diligence to discover and disclose is provided by the contractor and approved by the contracting officer. The disclosure must include the statement of work, the dollar value of the proposed contract, and any other documents that are needed to fully describe the proposed work for the regulated utility or other regulated entity. NRC may deny approval of the disclosed work only when the NRC has issued a task order which includes the technical area and, if site-specific, the site, or has plans to issue a task order which includes the technical area and, if site-specific, the site, or when the work violates paragraphs (c)(2), (c)(3) or (c)(4) of this section.

• *Maryland Dated at Bethesda, * * *t h i s ~ day of August, 1992.

For the Nuclear Regulatory Commission.

~ / G.2 atr:ia 1Director Norry, Office of Administration.

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