Department of Energy Proposes to Revise its Acquisition Regulation

Among the more substantive proposals are two revisions related to facility security clearances that may impact contractors. The notice of proposed rulemaking proposes revising 952.204-73 would allow for award of a contract requiring access to classified information before a contractor has obtained a full facility clearance and before key management personnel have obtained interim access authorizations. Meanwhile, the proposed revision to 952.204–2, Security Requirements, clarifies that a facility clearance may be granted before or after awarding a subcontract. These revisions should enable more companies to compete for contracts involving classified work.

In addition, the DOE proposes to add new regulatory coverage at clause 970.5217–2 that provides authorization for M&O contractors to conduct third-party sponsored research at the M&O contractor’s risk under Agreements for Commercializing Technology (ACT). The ACT contracting mechanism allows M&O contractors to negotiate and accept financial and performance risks, as well as terms and conditions more consistent with industry practice that are not permitted under Cooperative Research and Development Agreements (CRADAs) and Strategic Partnership Project (SPP) agreements. Currently, the requirements and policy for ACT are contained in DOE guidance and in special provisions included in certain contracts. The DOE anticipates that this proposed change will allow M&O contractors to engage with industry more flexibly on both research and technology transfer projects in order to advance the commercialization of different technologies.

Several proposed revisions address the fee policy related to M&O contractors. Of note, the DOE proposes to delete the policy describing special considerations for determining the fee for laboratory M&O contracts, while proposing to increase the Classification Factor for research and development at a laboratory. M&O contractors will likely want to pay particular attention to these proposed revisions and evaluate potential impacts.

Several proposed revisions also address intellectual property. For example, the revisions would define “background patents” and clarify the limited circumstances under which licenses to these patents can be required. Meanwhile, the DOE would adopt the use of a modified version of 37 CFR 401.14 for contracts with domestic small business firms or nonprofit organizations instead of the 952.227–11 clause “because DOE has not modified 48 CFR 48.952.227–11 to keep up with changes in the standard patent clause for these entities” while also revising 48 CFR 48.952.227–11 to contain alternate clauses implementing agency procedures related to the Determination of Exceptional Circumstance for Domestic Manufacture of DOE Science and Energy Technologies. Under the Bayh-Dole Act, any licensee of a Bayh-Dole patent with an exclusive right to use or sell a covered invention in the United States must agree that the invention will be manufactured substantially in the United States unless domestic manufacture is infeasible. In June 2021, the DOE issued a Determination of Exceptional Circumstances authorizing the inclusion of a “U.S. Competitiveness Provision” in future DOE funding agreements. This provision extends the U.S. manufacturing requirement to cover non-exclusive licenses as well as the manufacture of covered inventions sold or used outside the United States, thereby limiting the ability of companies to draft around the competitiveness requirements when issuing licenses. The notice of proposed rulemaking codifies this more stringent domestic requirement.

Another noteworthy change involves the applicability of DOE directives to specific contracts. The proposed revisions would add 904.7401, which prescribes the use of a new DOE Directives clause, 952.204–78. This new clause provides for contracting officers to append a list of applicable DOE Directives and can reduce disagreements about which agency directives apply to a particular contract.

Many of the other proposed DEAR revisions aim to correct inconsistencies, remove provisions that are unnecessarily duplicative, delete outdated information, renumber DEAR provisions to align with the Federal Acquisition Regulation (FAR) numbering, ensure compliance with current statutes, update references to various DOE Orders, as well as FAR clauses and provisions, and incorporate class deviations and contracting policies that are commonly incorporated into the current DOE contracts. Such proposed changes will not substantially change the existing DEAR or how the DOE and DOE contractors interact. For example, some of the proposed revisions codify the use of an enhanced U.S. competitiveness provision that the DOE has included in recent contracts pursuant to the Determination of Exceptional Circumstances under the Bayh-Dole Act to Further Promote Domestic Manufacture of DOE Science and Energy Technologies executed by the DOE on June 7, 2021. Additionally, the DOE proposes removing Subpart 932.70, addressing the DOE Loan Guarantee Authority, in its entirety. This revision would not, however, affect the underlying DOE Loan Guarantee Authority because this authority is regulated at 10 CFR part 609 and the DEAR’s provisions are duplicative. Likewise, proposed revisions to 952.250–70, Nuclear Hazards Indemnity Agreement, would remove the note to this clause that excluded certain identified nonprofit institutions from liability. Because Public Law 109–58, sec. 610(b), already amended Atomic Energy Act (AEA) section 234A(d) to eliminate this exclusion from civil penalties, the effect of the revision may be minimal. In another non-material change, the DOE proposes adding a new clause, 952.203-1, that would codify the common contractual requirement that contractors and their employees identify themselves as contractors in all DOE internal and external communications so that their status as contractors is known. Because this is already a typical requirement in DOE contracts, the new clause is unlikely to have a significant impact on contractor operations.

Contractors are encouraged to review the proposed rules, assess the impact and begin preparations to implement the new requirements. Comments are due by December 26, 2023.