[Federal Register: June 13, 2000 (Volume 65, Number 114)]
[Rules and Regulations]               
[Page 37057-37061]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jn00-28]                         

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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1807, 1811, 1812, 1815, 1816, 1823, 1842, 1846, and 
1852

 
Risk Management

AGENCY: National Aeronautics and Space Administration (NASA).

ACTION: Interim rule and request for comments.

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SUMMARY: This interim rule changes the NASA FAR Supplement (NFS) to 
emphasize considerations of risk management, including safety, security 
(including information technology security), health, export control, 
and damage to the environment, within the acquisition process. The 
interim rule addresses risk management within the context of 
acquisition planning, selecting sources, choosing contract type, 
structuring award fee incentives, administering contracts, and 
conducting contractor surveillance. Also, this interim rule provides 
that contractors not be paid award fee for any evaluation period in 
which there is a major breach of safety or security.

DATES: Effective Date: This rule is effective July 13, 2000.
    Applicability Date: This rule applies to solicitations issued on or 
after July 13, 2000.
    Comment Date: Comments should be submitted to NASA at the address 
below on or before August 14, 2000.

ADDRESSES: Interested parties should submit written comments to James 
H. Dolvin, NASA Headquarters Office of Procurement, Contract Management 
Division (Code HK), Washington, DC 20546. Comments may also be 
submitted by e-mail to jdolvin1@mail.hq.nasa.gov.

FOR FURTHER INFORMATION CONTACT: James H. Dolvin, (202) 358-1279.

SUPPLEMENTARY INFORMATION:

A. Background

    It is critically important for NASA to achieve mission success 
without

[[Page 37058]]

compromising safety. However, given that many of NASA's activities 
involve advanced research, aeronautics, and space flight, NASA cannot 
completely avoid risk. Therefore, risk must be managed, i.e., 
comprehensively identified, analyzed, planned, tracked, controlled, 
communicated, and documented. While risk management is not a new 
acquisition concept, NASA has initiated a risk-based acquisition 
management initiative to re-focus on risk as a core acquisition 
concern. That initiative will be implemented by providing training to 
NASA and contractor personnel, consultation to NASA projects and 
programs, and updated policy and guidance through revisions to several 
of NASA's internal processes and guidelines. This interim rule 
implements that part of the initiative pertaining directly to the 
procurement process. Since NASA's activities often include contractor 
efforts, NASA's focus on safety and mission success must be conveyed in 
NASA contracts.
    A proposed rule was published in the Federal Register at 64 FR 
38880-84 on June 20, 1999. Comments were received from the Council of 
Defense and Space Industry Associations, the United Space Alliance, and 
the Jet Propulsion Laboratory. All comments were considered in the 
development of the interim rule. After reviewing the public comments, 
revisions were made to sections 1807.105, 1812.301, 1815.203-72, 
1815.304.70, 1815.305, 1816.405-274, 1823.7001, 1852.223-73, and 
1852.223-76. Proposed section 1852.223-75 was deleted. The most 
important of these revisions were (1) changes in requirements for 
written acquisition plans, (2) elimination of the requirement for a 
separate risk management plan in proposals, (3) changes in award fee 
evaluation factors, and (4) revisions to requirements for the Safety 
and Health Plan.

B. Regulatory Flexibility Act

    NASA certifies that this regulation will not have a significant 
economic impact on a substantial number of small business entities 
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) because 
this rule simply focuses attention on risk management, an existing 
business practice, and does not impose any significant new requirements 
which might have an economic impact.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the NFS do not impose recordkeeping or information collection 
requirements, or collection of information from offerors, contractors, 
or members of the public which require the approval of the Office of 
Management and Budget under 41 U.S.C. 3501, et seq.

D. Determination To Issue an Interim Rule

    In accordance with 41 U.S.C. 418(d), NASA has determined that 
urgent and compelling reasons exist to promulgate this interim rule. 
The basis of this determination is that many ongoing NASA activities 
involve significant risk factors, and that immediate implementation of 
the procedures described in this interim rule is necessary for 
identification and management of these risks. Also, the substance of 
this material was previously published for public comment in the 
Federal Register (64 FR 38880-84) on June 29, 1999. Public comments 
received in response to this interim rule will be considered in the 
formation of the final rule.

List of Subjects in 48 CFR Parts 1807, 1811, 1812, 1815, 1816, 
1823, 1842, 1846, and 1852

    Government procurement.

Tom Luedtke,
Associate Administrator for Procurement.

    Accordingly, 48 CFR Parts 1807, 1811, 1812, 1815, 1816, 1823, 1842, 
1846, and 1852 are amended as follows:
    1. The authority citation for 48 CFR Parts 1807, 1811, 1812, 1815, 
1816, 1823, 1842, 1846, and 1852 continues to read as follows:

    Authority: 42 U.S.C. 2473(c)(1).

PART 1807--ACQUISITION PLANNING

    2. Add section 1807.104 to read as follows:


1807.104  General procedures. (NASA supplements paragraph (a)).

    (a) The acquisition planning team shall obtain input from the 
center offices responsible for matters of safety and mission assurance, 
occupational health, environmental protection, information technology, 
export control, and security. Their presence on the team shall help to 
ensure that all NASA acquisitions are structured in accordance with 
NASA safety, occupational health, environmental, export control, and 
security policy. As part of this process, the team shall recommend any 
appropriate solicitation or contract requirements for implementation of 
safety, occupational health, environmental, information technology, 
export control, and security concerns (See NPG 8715.3, NASA Safety 
Manual; NPG 7120.5, NASA Program and Project Management Processes and 
Requirements; NPG 2810.1, Security of Information Technology, and NPG 
1620.1, Security Procedures and Guidelines, all available at 
www.nodis.hq.nasa.gov).

    3. In section 1807.105, add paragraph (a)(7) to read as follows:


1807.105  Contents of written acquisition plans.

* * * * *
    (a) * * *
    (7) Discuss project/program risks (see NPG 7120.5, NASA Program and 
Project Management Processes and Requirements). In addition to 
technical, schedule, and cost risks, the discussion shall include such 
considerations as: safety and security (including personnel, 
information technology, and facilities/property); the need to involve 
foreign sources (contractor and/or governmental), and risks of 
unauthorized technology transfer (see NPG 2190, NASA Export Control 
Program); and resource risk, including the necessary level and 
expertise of NASA personnel resources available to manage the project/
program. For each area of risk identified, the discussion shall include 
a quantification of the relative magnitude (e.g., high, medium, low) 
together with the specific actions taken to structure the acquisition 
approach to manage the risks throughout the acquisition process. For 
example, this discussion would identify those areas that have safety 
risk, discuss how safety is addressed in contract requirements and 
evaluated in the source selection, and how it will be managed and 
incentivized during contract performance. Decisions to accept, 
mitigate, track, and/or research risk factors shall be identified and 
documented as part of acquisition planning.
* * * * *

PART 1811--DESCRIBING AGENCY NEEDS

    4. Add section 1811.101 to read as follows:


1811.101  Order of precedence for requirements documents. (NASA 
supplements paragraph (b))

    (b) When establishing product descriptions in either a solicitation 
or contract, contracting officers shall include safeguards, as 
applicable, to ensure safety, security, and environmental protection.

PART 1812--ACQUISITION OF COMMERCIAL ITEMS

    5. In section 1812.301, redesignate paragraph (f)(i)(F) as (G); 
redesignate paragraphs (f)(i)(G) through (J) as (f)(i)(J) through (M), 
add new paragraphs (f)(i)(F), (H), and (I), and redesignate paragraph 
(f)(i)(F) as (G) to read as follows:

[[Page 37059]]

1812.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f)(i) * * *
    (F) 1852.223-70, Safety and Health.
* * * * *
    (H) 1852.223-73, Safety and Health Plan.
    (I) 1852.223-75, Major Breach of Safety and Security.
* * * * *

PART 1815--CONTRACTING BY NEGOTIATION

    6. In section 1815.201, amend paragraph (c)(6)(A) by adding the 
following sentence immediately before the last sentence to read as 
follows:


1815.201  Exchanges with industry before receipt of proposals.

    (c)(6)(A) * * * Comments should also be requested on any perceived 
safety, occupational health, security (including information technology 
security), environmental, export control, and/or other programmatic 
risk issues associated with performance of the work. * * *
* * * * *

    7. Add section 1815.203-72 to read as follows:


1815.203-72  Risk Management.

    In all RFPs for supplies or services for which a technical proposal 
is required, proposal instructions shall require offerors to identify 
and discuss risk factors and issues throughout the proposal where they 
are relevant, and describe their approach to managing these risks.

    8. In section 1815.304-70, paragraphs (b)(4) and (d)(4) are added 
to read as follows:


1815.304-70  NASA evaluation factors.

* * * * *
    (b) * * *
    (4) If the solicitation requires the submission of a Safety and 
Health Plan (see 1823.7001(c) and NPG 8715.3, NASA Safety Manual, 
Appendix H), safety and health must be a consideration in the 
evaluation. For acquisitions valued at $10 million or more, or $25 
million or more for commercial items, then the Mission Suitability 
factor, if used, shall include a subfactor for safety and health. 
Otherwise, use of that subfactor is optional.
* * * * *
    (d) * * *
    (4) The contracting officer shall evaluate the offeror's past 
performance in occupational health, security, safety, and mission 
success (e.g., mishap rates and problems in delivered hardware and 
software that resulted in mishaps or failures) when these areas are 
germane to the requirement.

    9. In section 1815.305, revise paragraph (a)(vi) to read as 
follows:


1815.305  Proposal evaluation.

    (a) * * *
    (vi) Any programmatic risk to mission success, e.g., technical, 
schedule, cost, safety, occupational health, security, export control, 
or environmental. Risks may result from the offeror's technical 
approach, manufacturing plan, selection of materials, processes, 
equipment, or as a result of the cost, schedule, and performance 
impacts associated with its approach. Risk evaluations must consider 
the probability of the risk occurring, the impact and severity of the 
risk, the timeframe when the risk should be addressed, and the 
alternatives available to meet the requirements. Risk assessments shall 
be considered in determining Mission Suitability strengths, weaknesses, 
deficiencies, and numerical or adjectival ratings. Identified risks and 
the potential for cost impact shall be considered in the cost or price 
evaluation.
* * * * *

    10. In section 1815.406-170, delete the ``and'' at the end of 
paragraph (c)(5); remove the period at the end of paragraph (c)(6) and 
add ``; and'' in its place; and add paragraph (c)(7) to read as 
follows:


1815.406-170  Content of the prenegotiation position memorandum.

* * * * *
    (c) * * *
    (7) Any risk management issues, e.g., mission success, safety, 
occupational health, information technology, export control, security, 
and environmental risks.
* * * * *

PART 1816--TYPES OF CONTRACTS

    11. In section 1816.405-274, paragraphs (c) through (h) are 
redesignated as paragraphs (d) through (i), and a new paragraph (c) is 
added to read as follows:


1816.405-274  Award fee evaluation factors.

* * * * *
    (c)(1) The technical factor, if used, must include consideration of 
risk management (including mission success, safety, security, health, 
export control, and damage to the environment, as appropriate) unless 
waived at a level above the contracting officer, with the concurrence 
of the project manager. The rationale for any waiver shall be 
documented in the contract file. When safety, export control, or 
security are considered under the technical factor, the award fee plan 
shall allow the following fee determinations, regardless of contractor 
performance in other evaluation factors, when there is a major breach 
of safety or security.
    (i) For evaluation of service contracts under 1816.405-273(a), an 
overall fee determination of zero for any evaluation period in which 
there is a major breach of safety or security.
    (ii) For evaluation of end item contracts under 1816.405-273(b), an 
overall fee determination of zero for any interim evaluation period in 
which there is a major breach of safety or security. To ensure that the 
final award fee evaluation at contract completion reflects any major 
breach of safety or security, in an interim period, the overall award 
fee pool shall be reduced by the amount of the fee available for the 
period in which the major breach occurred if a zero fee determination 
was made because of a major breach of safety or security.
    (2) A major breach of safety consists of an accident, incident, or 
exposure resulting in a fatality or mission failure; or in damage to 
equipment or property equal to or greater than $1 million; or in any 
``willful'' or ``repeat'' violation cited by the Occupational Health 
and Safety Administration (OSHA) or by a state agency operating under 
an OSHA approved plan.
    (3) Security is the condition of safeguarding against espionage, 
sabotage, crime (including computer crime), or attack. A major breach 
of security may arise from any of the following: compromise of 
classified information; illegal technology transfer; workplace violence 
resulting in criminal conviction; sabotage; compromise or denial of 
information technology services; damage or loss greater than $250,000 
to the Government; or theft.
* * * * *

PART 1823--ENVIRONMENT, CONSERVATION, OCCUPATIONAL SAFETY, AND 
DRUG-FREE WORKPLACE

    12. Revise section 1823.7001 to read as follows:


1823.7001  NASA solicitation provisions and contract clauses.

    (a) Except as provided in paragraph (b) of this section, the clause 
at 1852.223-70, Safety and Health, shall be included in all 
solicitations and contracts for--

[[Page 37060]]

    (1) Negotiated acquisitions of $1,000,000 or more;
    (2) Construction, repair, or alteration in excess of the simplified 
acquisition threshold;
    (3) Acquisitions having, within their total requirement, 
construction, repair, or alteration tasks in excess of the simplified 
acquisition threshold; and
    (4) Acquisitions regardless of dollar amount when--
    (i) Any deliverable contract end item is of a hazardous nature; or
    (ii) It can reasonably be expected that hazards will be generated 
and controlled within the operational environment during the life of 
the contract and the contracting officer determines that they warrant 
inclusion of the clause.
    (b) The clause prescribed in paragraph (a) of this section may be 
excluded--
    (1) From any contract subject to the Walsh-Healey Public Contracts 
Act (see FAR subpart 22.6) or the Service Contract Act of 1965 (see FAR 
Subpart 22.10) in which the application of either act and its 
implementing regulations constitute adequate safety and occupational 
health protection; or
    (2) When the contracting officer, with the concurrence of the 
installation official(s) responsible for matters of safety and 
occupational health, makes a written determination that the clause is 
not necessary under the circumstances of the acquisition.
    (c) The contracting officer shall insert the provision at 1852.223-
73, Safety and Health Plan, in solicitations containing the clause at 
1852.223-70. This clause may be modified to identify specific 
information that is to be included in the plan. After receiving the 
concurrence of the center safety and occupational health official(s), 
the contracting officer shall include the plan in any resulting 
contract.
    (d) The contracting officer shall insert the clause at 1852.223-75, 
Major Breach of Safety or Security, in all solicitations and contracts 
with estimated values of $500,000 or more, unless waived at a level 
above the contracting officer with the concurrence of the project 
manager and the installation official(s) responsible for matters of 
security, export control, safety, and occupational health. For other 
contracts, use of the clause is optional.

PART 1842--CONTRACT ADMINISTRATION AND AUDIT SERVICES

    13. In section 1842.503, revise paragraph (1)(iv) to read as 
follows:


1842.503  Postaward conferences.

    (1) * * *
    (iv) Complex contract management issues are expected, particularly 
risk management areas identified during program and acquisition 
planning, e.g., significant or unusual mission success, technical, 
cost, schedule, safety, security, occupational health, environmental 
protection, and export control risks.
* * * * *

PART 1846--QUALITY ASSURANCE

    14. Add section 1846.000 to read as follows:


1846.000  Scope of part.

    The Government has a duty to assure that appropriated funds are 
spent wisely. That duty is fulfilled in part through surveillance. 
Surveillance may be conducted through ``insight'' (i.e., monitoring of 
selected metrics and/or milestones) or ``oversight'' (i.e., Government 
review and concurrence with contractor decisions). The decision to use 
insight or oversight is based on an assessment of the risk inherent in 
the activity being surveilled. Surveillance must be conducted whether 
or not the contract effort has been structured as performance-based.

    15. Add section 1846.401 to read as follows:


1846.401  General. (NASA supplements paragraph (a))

    (a) The quality assurance surveillance plan (QASP) which the 
project office prepares in conjunction with the statement of work is 
preliminary. It reflects the Government's surveillance approach 
relative to the perceived programmatic risk, and is written at a 
general rather than specific level because the risks will not be 
completely identified at that time. After contract award, contracting 
officers shall ensure that the QASP is revised to reflect the risks 
associated with the successful proposal. This final QASP shall not be 
included in the contract, but should be periodically reviewed to ensure 
its currency.

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    16. The clause in section 1852.223-70 is revised to read as 
follows:


1852.223-70  Safety and Health.

* * * * *

Safety and Health (July 2000)

    (a) The Contractor shall take all reasonable safety and 
occupational health measures in performing this contract. The 
Contractor shall comply with all Federal, State, and local laws 
applicable to safety and occupational health and with the safety and 
occupational health standards, specifications, reporting 
requirements, and any other relevant requirements of this contract.
    (b) The Contractor shall take, or cause to be taken, any other 
safety, and occupational health measures the Contracting Officer may 
reasonably direct. To the extent that the Contractor may be entitled 
to an equitable adjustment for those measures under the terms and 
conditions of this contract, the equitable adjustment shall be 
determined pursuant to the procedures of the changes clause of this 
contract; provided, that no adjustment shall be made under this 
Safety and Health clause for any change for which an equitable 
adjustment is expressly provided under any other clause of the 
contract.
    (c) The Contractor shall immediately notify and promptly report 
to the Contracting Officer or a designee any accident, incident, or 
exposure resulting in fatality, lost-time occupational injury, 
occupational disease, contamination of property beyond any stated 
acceptable limits set forth in the contract Schedule; or property 
loss of $25,000 or more, or Close Call (a situation or occurrence 
with no injury, no damage, or only minor damage (less than $1,000) 
but possesses the potential to cause any category of mishap, or any 
injury, damage, or negative mission impact) that may be of immediate 
interest to NASA, arising out of work performed under this contract. 
The Contractor is not required to include in any report an 
expression of opinion as to the fault or negligence of any employee. 
In addition, service contractors (excluding construction contracts) 
shall provide quarterly reports specifying lost-time frequency rate, 
number of lost-time injuries, exposure, and accident/incident dollar 
losses as specified in the contract Schedule.
    (d) The Contractor shall investigate all work-related incidents, 
accidents, and Close Calls, to the extent necessary to determine 
their causes and furnish the Contracting Officer a report, in such 
form as the Contracting Officer may require, of the investigative 
findings and proposed or completed corrective actions.
    (e)(1) The Contracting Officer may notify the Contractor in 
writing of any noncompliance with this clause and specify corrective 
actions to be taken. The Contractor shall promptly take and report 
any necessary corrective action.
    (2) If the Contractor fails or refuses to institute prompt 
corrective action in accordance with subparagraph (e)(1) of this 
clause, the Contracting Officer may invoke the stop-work order 
clause in this contract or any other remedy available to the 
Government in the event of such failure or refusal.
    (f) The Contractor (or subcontractor or supplier) shall insert 
the substance of this clause, including this paragraph (f) and any 
applicable Schedule provisions, with appropriate changes of 
designations of the parties, in subcontracts of every tier that--
    (1) Amount to $1,000,000 or more (unless the Contracting Officer 
makes a written determination, after consultation with installation 
safety and health representatives, that this is not required);

[[Page 37061]]

    (2) Require construction, repair, or alteration in excess of 
$25,000; or
    (3) Regardless of dollar amount, involve the use of hazardous 
materials or operations.
    (g) Authorized Government representatives of the Contracting 
Officer shall have access to and the right to examine the sites or 
areas where work under this contract is being performed in order to 
determine the adequacy of the Contractor's safety and occupational 
health measures under this clause.
    (h) The contractor shall continually update the safety and 
health plan when necessary. In particular, the Contractor shall 
furnish a list of all hazardous operations to be performed, and a 
list of other major or key operations required or planned in the 
performance of the contract, even though not deemed hazardous by the 
Contractor. NASA and the Contractor shall jointly decide which 
operations are to be considered hazardous, with NASA as the final 
authority. Before hazardous operations commence, the Contractor 
shall submit for NASA concurrence--
    (1) Written hazardous operating procedures for all hazardous 
operations; and/or
    (2) Qualification standards for personnel involved in hazardous 
operations.

(End of clause)


    17. In section 1852.223-73, remove Alternate I and revise the 
clause to read as follows:


1852.223-73  Safety and health plan.

* * * * *

Safety and Health Plan (July 2000)

    The offeror shall submit a detailed safety and occupational 
health plan as part of its proposal (see NPG 8715.3, NASA Safety 
Manual, Appendix H). The plan must include a detailed discussion of 
the policies, procedures, and techniques that will be used to ensure 
the safety and occupational health of contractor employees and to 
ensure the safety of all working conditions throughout the 
performance of the contract. The plan must similarly address safety 
and occupational health for subcontractor employees for any proposed 
subcontract whose value is expected to exceed $500,000, including 
commercial services and services provided in support of a commercial 
item. Also, when applicable, the plan must address the policies, 
procedures, and techniques that will be used to ensure the safety 
and occupational health of NASA employees and the public. This plan, 
as approved by the Contracting Officer, will be included in any 
resulting contract.

(End of provision)


    18. Add section 1852.223-75 to read as follows:


1852.223-75  Major breach of safety or security.

    As prescribed in 1823.7001(d), insert the following clause:

Major Breach of Safety or Security (July 2000)

    (a) Safety is the freedom from those conditions that can cause 
death, injury, occupational illness, damage to or loss of equipment 
or property, or damage to the environment. Safety is essential to 
NASA and is a material part of this contract. A major breach of 
safety may constitute a breach of contract that entitles the 
Government to exercise any of its rights and remedies applicable to 
material parts of this contract, including termination for default. 
A major breach of safety must be related directly to the work on the 
contract. A major breach of safety is an act or omission of the 
contractor that consists of an accident, incident, or exposure 
resulting in a fatality; or in damage to equipment or property equal 
to or greater than $1 million; or in any ``willful'' or ``repeat'' 
violation cited by the Occupational Health and Safety Administration 
(OSHA) or by a state agency operating under an OSHA approved plan.
    (b) Security is the condition of safeguarding against espionage, 
sabotage, crime (including computer crime), or attack. A major 
breach of security may constitute a breach of contract that entitles 
the Government to exercise any of its rights and remedies applicable 
to material parts of this contract, including termination for 
default. A major breach of security may occur on or off Government 
installations, but must be related directly to the work on the 
contract. A major breach of security may arise from any of the 
following: compromise of classified information; illegal technology 
transfer; workplace violence resulting in criminal conviction; 
sabotage; compromise or denial of information technology services; 
damage or loss greater than $250,000 to the Government; or theft.
    (c) In the event of a major breach of safety or security, the 
Contractor shall report the breach to the Contracting Officer. If 
directed by the Contracting Officer, the Contractor shall conduct 
its own investigation and report the results to the Government. The 
Contractor shall cooperate with the Government investigation, if 
conducted.

(End of clause)

[FR Doc. 00-14752 Filed 6-12-00; 8:45 am]
BILLING CODE 7501-01-P