Acquisition Regulation: Implementation of DOE's Cooperative Audit Strategy for Its Management and Operating Contracts, 29077-29081 [E7-10037]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 72, Number 100 (Thursday, May 24, 2007)]
[Rules and Regulations]
[Pages 29077-29081]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-10037]


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DEPARTMENT OF ENERGY

48 CFR Part 970

RIN 1991-AB67


Acquisition Regulation: Implementation of DOE's Cooperative Audit 
Strategy for Its Management and Operating Contracts

AGENCY: Department of Energy.

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) is amending its Acquisition 
Regulation (DEAR) by making minor amendments to existing contractor 
internal audit requirements, through the use of the Cooperative Audit 
Strategy.

DATES: Effective Date: June 25, 2007.

FOR FURTHER INFORMATION CONTACT: Helen Oxberger, U.S. Department of 
Energy, MA-61, 1000 Independence Avenue, SW., Washington, DC 20585, 
telephone (202) 287-1332 or submit electronically to 
helen.oxberger@hq.doe.gov.

SUPPLEMENTARY INFORMATION:
I. Background
II. Discussion of Public Comments
III. Section-by-Section Analysis
IV. Procedural Requirements
    A. Review Under Executive Order 12866
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under the Treasury and General Government 
Appropriations Act, 2001
    J. Review Under Executive Order 13211
    K. Review Under the Small Business Regulatory Enforcement 
Fairness Act of 1996
    L. Approval by the Office of the Secretary

I. Background

    The Department contracts for the management and operation of its 
Government-owned or -controlled research, development, special 
production, or testing facilities through the use of management and 
operating (M&O) contracts. The Department historically expends 
approximately 73 percent of its annual appropriations through these M&O 
prime contracts. Thus, it is imperative for the Department to develop 
approaches which permit oversight of M&O contractor expenditures in 
order for the Department to satisfy its oversight responsibility and to 
ensure that DOE funds are expended on allowable costs.
    The creation and maintenance of rigorous business, financial, and 
accounting systems by contractors are crucial to assuring the integrity 
and reliability of the cost data used by the DOE's Chief Financial 
Officer (CFO), the Inspector General (IG), and contracting officers 
(COs). To ensure the reliability of these systems, DOE requires some of 
its contractors to maintain an internal

[[Page 29078]]

audit activity, that is, an internal audit organization that is 
responsible for: (i) Performing operational and financial audits 
including incurred cost audits, and (ii) assessing the adequacy of 
management control systems.
    The Cooperative Audit Strategy is a program that the IG, partnering 
with contractors' internal audit groups, the CFO, and the Office of DOE 
Procurement and Assistance Management, developed and implemented in 
October 1992 to maximize the overall audit coverage of M&O contractors' 
operations and to fulfill the IG's responsibility for auditing the 
costs incurred by major facilities contractors. The Cooperative Audit 
Strategy enhances DOE's efficient use of available audit resources by 
allowing the IG to rely on the work of contractors' internal audit 
organizations. The IG has adopted the Cooperative Audit Strategy at 
most major DOE facilities operated by contractors.
    The success of the Cooperative Audit Strategy depends on the IG and 
contractor internal audit groups working closely with DOE. The 
contractor internal audit groups are committed to a continuing 
evaluation of the Cooperative Audit Strategy process and have 
established the Steering Committee for Quality Auditing to address 
current issues and implement on-going improvements.
    DOE published a Notice of Proposed Rulemaking (NOPR) in the Federal 
Register on May 8, 2006 (71 FR 26723). The NOPR proposed to amend two 
Department of Energy Acquisition Regulation (DEAR) clauses to more 
effectively implement DOE's Cooperative Audit Strategy. The proposed 
changes would eliminate Alternate II of DEAR clause 970.5232-3, and 
revise and expand the contract clause to require the use of the DOE's 
Cooperative Audit Strategy in all M&O contracts. Currently, the 
Cooperative Audit Strategy is implemented under an alternate clause 
(Alternate II) in the Accounts, records, and inspection contract clause 
at 970.5232-3. Because Alternate II is being deleted, DOE has deleted 
the alternate prescription for the alternate at 970.3270 (a)(2)(ii).
    In addition, the Department proposed to amend the DEAR clause 
970.5203-1 entitled Management Controls by adding a sentence requiring 
the contractor to submit audit reports.
    Four commenters responded to our May 8, 2006 NOPR. All the comments 
were directed toward the proposed Section 970.5232-3, paragraph (i) 
Internal Audit and paragraph (j) Remedies. Section II of this preamble 
presents a summary of the comments by subject, and the responses to the 
comments.

II. Discussion of Public Comments

Comments on Internal Audit Requirements

    Comment: Four commenters made remarks on paragraph (i) of proposed 
Section 970.5232-3. One commenter stated that it believes paragraph (i) 
requirements of the DEAR clause 970.5232-3 for submittal of three 
reports related to the contractor's internal audit function amount to 
DOE's significant involvement in the contractor's day-to-day internal 
audit function operations.
    That commenter believes that proposed paragraphs (i) (1), (i) (2), 
and (i) (3) contradict the Cooperative Audit Strategy objectives and 
may actually, per paragraph (i) (4), create a structure where the 
contractors' internal audit function may appear to report to the DOE 
contracting officer. The commenter argues that the proposed sections 
would permit the contracting officer to make unilateral decisions on 
the new requirements, the design plan for internal audits, the annual 
report, and the annual internal audits, thereby making it difficult for 
the contractor to manage and control the contractor's own assurance 
system.
    One commenter believes that the proposed paragraph (i) requirements 
contradict an already existing clause in its contract with DOE, which 
states that the National Nuclear Security Administration (NNSA) will 
provide direction as to what NNSA wants and empowers the contractor to 
determine how the program is executed with the contractor accountable 
for its performance.
    One commenter fully supports DOE's Cooperative Audit Strategy and 
the Department's efforts to continue an effective and efficient 
independent audit function at the M&O contractor facilities to ensure 
that internal audits are conducted reliably.
    Response: As stated in the proposed rule, this rule will be used 
only in DOE's M&O contracts, involving annual reconciliation of 
expenditures using the DOE's Statement of Cost Incurred and Claimed 
(SCIC) process. The SCIC process is used in contracts involving well 
over $1 billion dollars in annual expenditures by the covered 
contractor. Those same contractors maintain a special bank account, for 
reasons of benefit to DOE and the U.S. Treasury, under which those 
contractors pay contractual obligations directly with DOE funds. The 
SCIC process would be meaningless without a systematic process to 
assess the adequacy of the contractor's system of financial controls. 
It is imperative for DOE to maintain processes which permit oversight 
of M&O contractor expenditures in order for DOE to accomplish its 
oversight responsibilities and to require the contractor to have an 
independent audit function capable of auditing the contractor's system 
of the financial controls needed to assure the proper use of the funds.
    The purpose of the reports prescribed in paragraph (i) of the 
clause is to provide DOE's CFO, IG, and COs with confidence in the 
contractor's system of financial controls. DOE currently receives 
annual reports and annual plans from the DOE M&O contractor for two of 
the three required crucial reports. The third report, specified by the 
final rule as a requirement of the Internal Audit Implementation Plan, 
is critical to the Government's assurance and confidence in the M&O 
contractor's financial controls system. By providing the Internal Audit 
Implementation Plan, the M&O contractor will provide DOE with 
information about the operation of the contractor's internal audit 
function, which is important in establishing DOE's ability to rely on 
the contractor's internal audit organization to perform operational and 
financial audits, including incurred cost audits, and assessing the 
adequacy of the contractor's management control systems.
    Current policy already exists for contracting officers to be 
empowered and operate under statutory mandates permitting them to make 
unilateral decisions, such as a reasonableness determination that is a 
common practice in Federal contract administration. The contracting 
officers must have the flexibility, as compelled by their authority, to 
make prudent decisions that are fair, reasonable and supportable.
    DOE believes that this rule provides the necessary framework for a 
systematic process for use by its M&O contractors in the organization 
and operation of their internal audit function. The Government needs 
reasonable assurance that the contractor has an effective internal 
control structure for accountability and control over its funds. The 
Government also needs reasonable assurance that the contractor is 
complying with Federal laws and regulations and the terms and 
conditions of the contract related to the use of funds. The changes 
made by this final rule will maximize the overall audit coverage of the 
contractor's operations and fulfill the IG's responsibility for 
auditing the costs

[[Page 29079]]

incurred by all M&O contractors. The changes made by the final rule 
will better ensure DOE's efficient use of available audit resources by 
allowing the IG to rely on the work of the M&O contractor's internal 
audit organization.
    One commenter separately made a comment relating to contract 
provisions it specifically negotiated and Chapter 70.4 of the 
Acquisition Guide, respectively. This comment is outside the scope of 
this rule.

Comments on Remedies Requirements

    Comment: Three commenters made comments opposing the stated 
remedies of paragraph (j) of proposed Sec.  970.5232-3. That paragraph 
would allow the DOE contracting officer unilaterally to suspend or 
revoke, in whole or in part, access to the Special Banking Financial 
Institution Accounts. The commenters asserted that the affected 
contractors would be subjected to greater risk, without any 
commensurate increase in associated fee, under such a contract. The 
commenters also stated that if the M&O contractor's use of the special 
financial institution account is revoked, there are no criteria for 
providing alternative compensation to the contractor for use of its 
working capital. Finally, the commenters contend there is no 
requirement for the use of this special financial institution account 
to be restored without undue delay.
    One commenter stated that paragraph (j) of the proposed Sec.  
970.5232-3 is not consistent with Federal acquisition policy, as 
expressed in the Federal Acquisition Regulation (FAR) 31.201-2 
Determining allowability.
    Response: DOE disagrees and has not altered the final rule in 
response to the comments relating to paragraph (j). As explained in the 
preamble of the proposed rule (71 FR at 26724), DOE is amending two 
DEAR clauses to more effectively implement DOE's Cooperative Audit 
Strategy. These changes provide DOE insight into the use of the M&O 
contractor's SCIC for reconciliation of allowable costs, thus enhancing 
DOE's confidence in the integrity of its financial control systems. DOE 
proposed paragraph (j) to expressly include risk mitigation of the 
special financial institution accounts. The existing system of payment 
to the DOE's M&O contractor under the Cooperative Audit Strategy relies 
heavily on the contractor's internal audit function and system of 
financial controls. That reliance introduces risks. DOE believes that 
if a DOE contracting officer reasonably loses confidence in an M&O 
contractor's financial system of controls, he or she must be able to 
react immediately to prevent additional expenditures under the special 
bank account. This authority would be used only as a last resort. The 
contracting officer's authority to stop payment of funds is not new and 
he or she must have the ability to restrict access to the funds as a 
prescribed remedy in dealing with a failure of financial controls. This 
is a contract financial control issue, not a cost allowability issue. 
We believe the express statement of these remedies in paragraph (j) 
will enhance DOE's fulfillment of its fiduciary responsibility by 
minimizing risk to the Government as a result of a failure of the 
contractor's financial control system that could impact the SCIC and 
special bank accounts.

Revisions Incorporated Into This Final Rule

    Comment: One commenter agrees with the proposal to use outside 
auditors to perform peer reviews of the work of a contractor's internal 
audit organization. The commenter stated that it would solicit the 
``concurrence of the DOE Contracting Officer before engaging any 
outside audit firm.'' The commenter believes that a review performed by 
such a third party would be no less effective, and perhaps more 
independent, than a review conducted by another M&O contractor's 
internal audit organization. The commenter fully supports the 
Cooperative Audit Strategy but suggests revising the language in 
paragraph (i) (viii) of proposed section 970.5232-3, regarding the 
Internal Audit Implementation Design, to permit the use of an 
independent audit organization approved by DOE.
    Response: We have adopted the comment and expanded the language to 
read:
    ``The schedule for peer review of internal audits by other 
contractor internal audit organizations, or other independent third 
party audit entities approved by the DOE Contracting Officer.''

III. Section-by-Section Analysis

    DOE is amending the DEAR as follows:
    1. Section 970.3270, Standard financial management clause, is 
amended by deleting the designator ``i'' from paragraph (a)(2)(i) and 
deleting paragraph (a)(2)(ii).
    2. Section 970.5203-1, Management controls, paragraph (a)(4) is 
amended by adding a sentence which requires the contractor to annually, 
or at other times as directed by the contracting officer, provide 
copies of reports on the status of audit recommendations.
    3. Section 970.5232-3, Accounts, records, and inspection, is 
amended by deleting Alternate II and by adding new paragraphs (i) and 
(j).

IV. Procedural Requirements

A. Review Under Executive Order 12866

    This regulatory action has been determined not to be a significant 
regulatory action under Executive Order 12866, Regulatory Planning and 
Review (58 FR 51735, October 4, 1993). Accordingly, this action is not 
subject to review under the Executive Order by the Office of 
Information and Regulatory Affairs (OIRA) within the Office of 
Management and Budget.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. As required 
by Executive Order 13272, ``Proper Consideration of Small Entities in 
Agency Rulemaking'' (67 FR 53461, August 16, 2002), DOE published 
procedures and policies to ensure that the potential impacts of its 
draft rules on small entities are properly considered during the 
rulemaking process (68 FR 7990, February 19, 2003), and has made them 
available on the Office of General Counsel's Web site: https://
www.gc.doe.gov. DOE has reviewed today's final rule under the 
provisions of the Regulatory Flexibility Act and the procedures and 
policies published on February 19, 2003. The final rule would amend 
procurement policies that apply only to DOE M&O contracts and would 
impact only DOE's M&O contractors, none of whom are small entities. 
This rule would not have a significant economic impact on small 
entities. On the basis of the foregoing, DOE certifies that the final 
rule, if promulgated, would not have a significant economic impact on a 
substantial number of small entities. Accordingly, DOE has not prepared 
a regulatory flexibility analysis for this rulemaking.

C. Review Under the Paperwork Reduction Act

    Existing burdens associated with the collection of certain 
contractor audit data have been previously cleared under OMB control 
number 1910-4100, which expires on April 30, 2008. The Department has 
concluded that the additional information collection burden resulting 
from this regulatory

[[Page 29080]]

action would apply to less than ten persons in any 12-month period and 
therefore is less than the threshold for submission to the Office of 
Management and Budget (OMB) under 5 CFR 1320.3(c). Therefore, DOE has 
not submitted this action to OMB.

D. Review Under the National Environmental Policy Act

    DOE has concluded that promulgation of this final rule falls into a 
class of actions that would not individually or cumulatively have a 
significant impact on the human environment, as determined by DOE's 
regulations implementing the National Environmental Policy Act of 1969 
(42 U.S.C. 4321 et seq.). Specifically, this final rule deals only with 
agency procedures, and therefore, is covered under the Categorical 
Exclusion in paragraph A6 of Appendix A to Subpart D, 10 CFR part 1021. 
Accordingly, neither an environmental assessment nor an environmental 
impact statement is required.

E. Review Under Executive Order 13132

    Executive Order 13132, ``Federalism'' (64 FR 43255, August 4, 1999) 
imposes certain requirements on agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. Agencies are required to examine the constitutional and 
statutory authority supporting any action that would limit the 
policymaking discretion of the States and carefully assess the 
necessity for such actions. The Executive Order also requires agencies 
to have an accountability process to ensure meaningful and timely input 
by State and local officials in the development of regulatory policies 
that have federalism implications. On March 14, 2000, DOE published a 
statement of policy describing the intergovernmental consultation 
process it will follow in the development of such regulations (65 FR 
13735). DOE has examined today's rule and has determined that it does 
not preempt State law and does not have a substantial direct effect on 
the States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. No further action is required by 
Executive Order 13132.

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform'' (61 FR 4729, February 7, 1996), imposes on 
Federal agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. Section 3(b) of Executive 
Order 12988 specifically requires that Executive agencies make every 
reasonable effort to ensure that the regulation: (1) Clearly specifies 
the preemptive effect, if any; (2) clearly specifies any effect on 
existing Federal law or regulation; (3) provides a clear legal standard 
for affected conduct while promoting simplification and burden 
reduction; (4) specifies the retroactive effect, if any; (5) adequately 
defines key terms; and (6) addresses other important issues affecting 
clarity and general draftsmanship under any guidelines issued by the 
Attorney General. Section 3(c) of Executive Order 12988 requires 
Executive agencies to review regulations in light of applicable 
standards in section 3(a) and section 3(b) to determine whether they 
are met or it is unreasonable to meet one or more of them. DOE has 
completed the required review and determined that, to the extent 
permitted by law, this final rule meets the relevant standards of 
Executive Order 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to assess the effects of a Federal 
regulatory action on State, local, and tribal governments, and the 
private sector. The Department has determined that today's regulatory 
action does not impose a Federal mandate on State, local or tribal 
governments or on the private sector.

H. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any rule that may affect family well-being. 
This final rule would not have any impact on the autonomy or integrity 
of the family as an institution. Accordingly, DOE has concluded that it 
is not necessary to prepare a Family Policymaking Assessment.

I. Review Under the Treasury and General Government Appropriations Act, 
2001

    The Treasury and General Government Appropriations Act, 2001 (44 
U.S.C. 3516, note) provides for agencies to review most disseminations 
of information to the public under guidelines established by each 
agency pursuant to general guideline issued by OMB. OMB's guidelines 
were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines 
were published at 67 FR 62446 (October 7, 2002). DOE has reviewed 
today's notice under the OMB and DOE guidelines and has concluded that 
it is consistent with applicable policies in those guidelines.

J. Review Under Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 
28355, May 22, 2001), requires Federal agencies to prepare and submit 
to the Office of Information and Regulatory Affairs (OIRA), Office of 
Management and Budget, a Statement of Energy Effects for any proposed 
significant energy action. A ``significant energy action'' is defined 
as any action by an agency that promulgated or is expected to lead to 
promulgation of a final rule, and that: (1) Is a significant regulatory 
action under Executive Order 12866, or any successor order; and (2) is 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy, or (3) is designated by the 
Administrator of OIRA as a significant energy action. For any 
significant energy action, the agency must give a detailed statement of 
any adverse effects on energy supply, distribution, or use should the 
proposal be implemented, and of reasonable alternatives to the action 
and their expected benefits on energy supply, distribution, and use. 
Today's regulatory action is not a significant energy action. 
Accordingly, DOE has not prepared a Statement of Energy Effects.

K. Review Under the Small Business Regulatory Enforcement Fairness Act 
of 1996

    As required by 5 U.S.C. 801, DOE will report to Congress 
promulgation of this rule prior to its effective date. The report will 
state that it has been determined that the rule is not a ``major rule'' 
as defined by 5 U.S.C. 804(2).

L. Approval by the Office of the Secretary

    The Office of the Secretary of Energy has approved issuance of this 
rule.

List of Subjects in 48 CFR Part 970

    Government procurement.


[[Page 29081]]


    Issued in Washington, DC, on May 17, 2007.
Edward R. Simpson,
 Director, Office of Procurement and Assistance Management, Department 
of Energy.
David O. Boyd,
Director, Office of Acquisition and Supply Management, National Nuclear 
Security Administration.

0
For the reasons stated in the preamble, chapter 9 of title 48 of the 
Code of Federal Regulations is amended as set forth below:

PART 970--DOE MANAGEMENT AND OPERATING CONTRACTS

0
1. The authority citation for part 970 continues to read as follows:

    Authority: 42 U.S.C. 2201, 2282a, 2282b, 2282c; 42 U.S.C. 7101 
et seq.; 41 U.S.C. 418b; 50 U.S.C. 2401 et seq.


970.3270  [Amended]

0
2. Section 970.3270 is amended by removing the paragragh designation 
``(i)'' from paragraph (a)(2)(i) and removing paragraph (a)(2)(ii).

0
3. Section 970.5203-1 is amended by adding a sentence to the end of 
paragraph (a)(4).


970.5203-1  Management controls.

* * * * *
    (a) * * *
    (4) * * * Annually, or at other intervals directed by the 
contracting officer, the contractor shall supply to the contracting 
officer copies of the reports reflecting the status of recommendations 
resulting from management audits performed by its internal audit 
activity and any other audit organization. This requirement may be 
satisfied in part by the reports required under paragraph (i) of 
970.5232-3, Accounts, records, and inspection.
* * * * *

0
4. Section 970.5232-3 is amended by:
0
a. Revising the date of the clause;
0
b. Adding new paragraph (i) and (j) before the ``(End of clause)''; and
0
c. Removing Alternate II (including paragraph (i)).
    The additions and revisions, read as follows:


970.5232-3  Accounts, records, and inspection.

    * * *

Accounts, Records, and Inspection (JUNE 2007)

* * * * *
    (i) Internal audit. The contractor agrees to design and maintain an 
internal audit plan and an internal audit organization.
    (1) Upon contract award, the exercise of any contract option, or 
the extension of the contract, the contractor must submit to the 
contracting officer for approval an Internal Audit Implementation 
Design to include the overall strategy for internal audits. The Audit 
Implementation Design must describe:
    (i) The internal audit organization's placement within the 
contractor's organization and its reporting requirements;
    (ii) The audit organization's size and the experience and 
educational standards of its staff;
    (iii) The audit organization's relationship to the corporate 
entities of the contractor;
    (iv) The standards to be used in conducting the internal audits;
    (v) The overall internal audit strategy of this contract, 
considering particularly the method of auditing costs incurred in the 
performance of the contract;
    (vi) The intended use of external audit resources;
    (vii) The plan for audit of subcontracts, both pre-award and post-
award; and
    (viii) The schedule for peer review of internal audits by other 
contractor internal audit organizations, or other independent third 
party audit entities approved by the DOE contracting officer.
    (2) By each January 31 of the contract performance period, the 
contractor must submit an annual audit report, providing a summary of 
the audit activities undertaken during the previous fiscal year. That 
report shall reflect the results of the internal audits during the 
previous fiscal year and the actions to be taken to resolve weaknesses 
identified in the contractor's system of business, financial, or 
management controls.
    (3) By each June 30 of the contract performance period, the 
contractor must submit to the contracting officer an annual audit plan 
for the activities to be undertaken by the internal audit organization 
during the next fiscal year that is designed to test the costs incurred 
and contractor management systems described in the internal audit 
design.
    (4) The contracting officer may require revisions to documents 
submitted under paragraphs (i)(1), (i)(2), and (i)(3) of this clause, 
including the design plan for the internal audits, the annual report, 
and the annual internal audits.
    (j) Remedies. If at any time during contract performance, the 
contracting officer determines that unallowable costs were claimed by 
the contractor to the extent of making the contractor's management 
controls suspect, or the contractor's management systems that validate 
costs incurred and claimed suspect, the contracting officer may, in his 
or her sole discretion, require the contractor to cease using the 
special financial institution account in whole or with regard to 
specified accounts, requiring reimbursable costs to be claimed by 
periodic vouchering. In addition, the contracting officer, where he or 
she deems it appropriate, may: Impose a penalty under 970.5242-1, 
Penalties for unallowable costs; require a refund; reduce the 
contractor's otherwise earned fee; and take such other action as 
authorized in law, regulation, or this contract.
(End of Clause)
    * * *

 [FR Doc. E7-10037 Filed 5-23-07; 8:45 am]
BILLING CODE 6450-01-P