General

It is DOE’s intent to have its facilities and laboratories operated in the most efficient and effective manner possible. To this end, the Contractor shall, in the performance of this contract, assess its operations and identify areas where efficiencies would bring cost reductions and savings to operations without adversely affecting the level of performance required by the contract.

The Contractor, to the maximum extent possible, will identify areas where efficiencies/streamlined work processes may result in cost reductions/savings. The Contractor will develop and submit Cost Savings Proposals (CSP) addressing such to the Contracting Officer for review. If accepted, the Contractor shall share in any net (Measurable, Near-Term) savings realized from accepted CSPs in accordance with the incentive sharing arrangement in paragraph G. below. Any CSP submitted pursuant to this clause shall be subject to cost and pricing data (reference contract clauses, “Price Reduction for Defective Cost or Pricing Data;” and “Subcontractor Cost or Pricing Data” of this contract.)

Definitions

“Measurable, Near-Term Savings” as used in this clause, mean cost savings that revert to DOE control and may be available for deobligation in the immediate fiscal year or that will become available for deobligation in the following fiscal year. Such savings may result from a specific cost reduction/savings effort which is broken out from other efforts and negotiated on a Cost Plus Incentive Fee (CPIF)/Fixed Price Incentive (FPI)/Firm Fixed Price (FFP) basis or may result directly from innovative new or changed designs, processes and/or methods initiated by the Contractor and applied to a specific project or program. Such new or changed designs, processes, and/or methods must demonstrate achievement of cost effectiveness in excess of that anticipated by the “expected performance” level set forth in the Statement of Work (Work Authorization Directive, Multi-Year Program Plan, or similar document). Measurable, Near-Term Savings are the net savings that result from the difference in the estimated cost of performing an effort/project as originally planned and the actual cost of performing that same effort/project using a revised plan intended to reduce costs, along with any Contractor’s Development, Contractor’s Implementation and administrative costs (Optional) + DOE costs (Optional) associated with the revised plan. Such savings must result in funding being returned to the direct control of DOE in a separate management reserve account. Savings resulting from formal or informal direction given by DOE will not be considered as Measurable, Near-Term savings for purposes of this clause and will not qualify for incentive sharing. Savings resulting from changes in the mission or routine reorganization of the Contractor due to changes in the budget will not be considered as Measurable, Near-Term Savings for the purposes of this clause and will not qualify for incentive sharing. Measurable, Near-Term Savings shall be limited, for purposes of the sharing rate(s) set forth in paragraph G. below, to a period not to exceed the current fiscal year in which they were initiated and the next fiscal year. In order to qualify for sharing, the savings must be susceptible to deobligation from the instant contract, whether or not such deobligation takes place.

“Contractor’s Development Cost,” as used here, includes, but is not necessarily limited to, the cost of up front planning, engineering, prototyping, and testing of a design, process or method.

“Contractor’s Implementation Cost,” as used here, includes, but is not necessarily limited to, the cost of tooling, facilities, documentation, etc. required to effect a design, process or method change once it has been tested and approved.

“DOE costs,” as used in this clause, refer to those DOE costs that result directly from implementing the CSP, such as any net increases in the cost of testing, operations, maintenance, and logistics support. The term does not include the normal administrative costs of processing the CSP.

“Administrative Cost,” as used here, includes, but is not necessarily limited to, the cost of developing the CSP (or similar cost reductions/savings proposal) and administering cost savings programs.

“Cost reduction” means the amount of the decrease in cost of performance, without deducting any Contractor’s development or implementation costs, resulting from using the CRP on this contract.

Procedure for Submission of CSPs

CSPs for Value Engineering (design/process/methods) type changes submitted by the Contractor should contain, at a minimum, the following:

Current Method (Baseline). A verifiable description of the current scope of work, cost, and schedule to be impacted by the initiative and supporting documentation.

New Method (Baseline). A verifiable description of the new cost, work scope, and schedule; how the initiative will be accomplished and supporting documentation.

Feasibility Assessment. A description and evaluation of the proposed initiative and benefits, risks, and impacts of implementation. This evaluation should include an assessment of the difference between the current baseline and proposed new method less implementation costs.

CSPs for the establishment of stand alone CPIF/FPI/FFP programs not specifically related to Value Engineering (design/process/methods) type changes should contain, at a minimum, the following:

Baseline Description. A verifiable description of the current scope of work, cost, and schedule to be impacted by the initiative (must be discretely identifiable in the MYPPs).

Proposed Contractual Arrangement. A proposed contractual arrangement and the justification therefor.

Estimated Cost and Supporting data. A detailed cost estimate and supporting rationale. If the effort is proposed on an incentive basis, then minimum and maximum cost estimates must be included for any proposed sharing arrangements.

Evaluation and Decision

The Contractor shall perform a preliminary evaluation of each proposed cost reduction initiative and submit it for DOE approval. The Contractor may share in savings realized as a result of cost reduction initiatives implemented without prior DOE approval; however, any such sharing of savings shall be a unilateral decision by DOE and not subject to the contract clause of this contract entitled “Disputes - Alternate I” or otherwise subject to litigation under the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613).

Calculation of Cost Savings

Estimated net savings shall be calculated by subtracting the total costs of the proposed CSP (New Method Costs + Contractor’s Development Cost + Contractor’s Implementation Costs + Administrative Costs [Optional] + DOE Costs [Optional]) from the total costs of the existing requirements.

Acceptance or Rejection of CSPs

The DOE Contracting Officer will notify the Contractor that a CSP will be accepted or rejected (or deferred) within 60 days of receipt.

The only CSPs that will be considered for acceptance are those that the Contractor can demonstrate will (1) result in a reduction in the total agreed upon estimated cost for authorized work in the sharing period, (2) not reappear as costs in subsequent periods, and (3) not result in any impairment of essential functions. Acceptance or rejection of the CSP is at the discretion of the Contracting Officer. The Contracting Officer’s decision is not subject to the contract clause entitled “Disputes - Alternate I” or otherwise subject to litigation under the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613).

Sharing Rate

In general, if a CSP is accepted, the Contractor’s share in net Measurable, Near-Term Savings shall not exceed 15% of the Measurable, Near-Term Savings realized by DOE during the defined sharing period. The Contractor agrees that not less than 15% of the Contractor’s share of Measurable, Near Term savings shall be retained at the site to be distributed to those employees involved in identifying and/or achieving the cost reduction/savings. The specific share arrangement (targets, share lines, ceilings, etc.) for effort negotiated on an incentive basis will be set forth in the contractual document authorizing the effort.

Validation of Actual Savings

The DOE shall have the right to validate the actual costs of an accepted CSP, to determine the extent of actual Measurable, Near-Term Savings. If, in the opinion of the Contracting Officer, the actual Measurable, Near-Term Savings are significantly more or less than the estimated savings of the CSP or in the reduction of the estimated cost for the sharing period, the amount awarded under the CSP shall be adjusted. The Contracting Officer’s decision on the significance of the actual savings and the adjusted fee amount are not subject to the contract clause entitled “Disputes - Alternate I” or otherwise subject to litigation under the Contract Disputes Act of 1978 (41 U.S.C. 601-613).

Relationship to Other Incentives

Only those benefits of an accepted CSP not rewardable under other clauses of this contract shall be rewarded under this clause.

Subcontracts

The Contractor may include an appropriate clause similar to this clause in any subcontract. In calculating any estimated net Measurable, Near-Term savings in a CSP under this contract, the Contractor’s preparation, submission, testing, development, and implementation costs shall include any subcontractor’s allowable costs, and any CSP incentive payments to a subcontractor clearly resulting from the acceptance of such CSP. The Contractor may choose any arrangement for subcontractor CSP incentive payments, provided that the payments shall not reduce the DOE’s share of contract net Measurable, Near-Term Savings.

Termination

In the event of contract termination, this clause shall not apply. Termination settlements shall be in accordance with the contract clause entitled “Termination (Cost-Reimbursement).”

Conditional Payment of Fee or Incentives

In order for the Contractor to receive a fee or profit payment or share of cost savings, in whole or in part, the following minimum requirements must be met and must have been performed at a satisfactory level. If the following conditions are not met and performed at a satisfactory level, the RL Manager may reduce the fee or profit payment or share of cost savings, in whole or in part, which has otherwise been determined to have been earned under the terms and conditions of this contract. Any determination under this clause is not subject to the contract clause entitled “Disputes - Alternate I” or otherwise subject to litigation under the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613). This clause does not apply to any Base Fee included in the contract.

Minimum Requirements

Cost Performance

Definition

For purposes of this clause, the word “fee” shall mean performance fee, award fee, base fee, or cost savings share.

If interim payments of fee are paid before the final determination of fee, those payments shall be provisional pending that final determination. Such provisional payments may be made at the discretion of the Contracting Officer on a monthly basis up to a maximum amount for the fiscal year not-to-exceed 70 percent of the performance fee pool.

DOE agrees to pay to the Contractor, at the discretion of the Contracting Officer, on a provisional basis an amount up to 10% of the annual performance fee pool in each of the first two calendar months of each Fiscal Year and 5 % in each calendar month thereafter.

The final fee determination will be made by the Contracting Officer or RL Manager, as appropriate, in accordance with the fee clauses of this contract. In the event that overpayment results from the payment of fee on a provisional basis, the Contractor shall reimburse such overpayment to the Government upon demand, payable with interest in accordance with the contract clause entitled “Interest”.

The Contractor shall procure, at no cost to the DOE, a Contractor Controlled Insurance program (CCIP), as set forth in the Contractor’s proposal dated March 25, 1996, to the extent available on a commercially reasonable basis.

The Contractor support the DOE’s efforts to improve their insurance program by the collection of insurance claim statistics and information. They will assist the DOE by complying with the insurance reporting requirements as defined by DOE Order 350.1 change 1.

(No changes to the unredacted text)

This clause does not apply to liabilities covered by the Nuclear Hazards Indemnity Agreement.

Transition and Transfer: WHC, ICF KH, BCSR, and PHMC

Purpose. Effective as of 12:01 a.m. on October 1, 1996, Contractor will accept the assignment of certain obligations, rights, title and interest from WHC, ICF KH and BCSR, all as specifically set forth in the Transfer Agreement executed by the DOE, FH, WHC and ICF KH on September 30, 1996. The purpose of this contract clause H.55A is to set forth certain understandings with respect to transfer and close-out activities.

Definitions. For purposes of this contract clause H.55A and contract clause H.56A, the following definitions shall apply:

Other terms used in this contract clause H.55A and in contract clause H.56A, which are initially capitalized, shall have the meanings defined in the Transfer Agreement.

Responsibilities. In a manner so as to not interfere with the performance of this PHMC contract, FH shall provide the following assistance in closing out the M&O contract, the ICF KH subcontract and the BCSR subcontract:

FH shall provide necessary indirect support including, but not limited to, emergency services, access and use of the Hanford Site integrated voice-data telecommunication system, access and use of the Hanford Local Area Network, and other Hanford Site resources

FH shall provide necessary government-owned property including, but not limited to, computers, photocopiers, office furniture, fax machines, office supplies and equipment and similar items.

FH shall make arrangements with other Hanford Site Contractors, including the Hanford Environmental Health Foundation, necessary for close-out activities.

FH shall provide, with the DOE Contracting Officer’s approval, necessary clerical and secretarial support to support close-out activities.

Subject to any DOE restrictions, for purposes of all close-out activities, including litigation, claims, and administrative hearings arising under the M&O contract, the ICF KH subcontract and the BCSR subcontract, FH shall provide WHC, ICF KH and BCSR on a non-interference basis:

In the event a requested access is denied, FH shall immediately notify the DOE providing the reasons for such denial. Final decision on denied access will be made the Manager RL and is not subject to the disputes clause of this PHMC contract.

FH shall cooperate with WHC in the collection of any balance that may be due and owing on any corporate travel and telephone credit card held by a former WHC employee who becomes employed by FH or its subcontractors.

Consistent with the WHC College Educational Reimbursement Program, FH shall assume and accept all of WHC’s current liabilities and obligations for educational expenses for those WHC employees who become employees of FH or its subcontractors as identified on Attachment 7.L. to the Transfer Agreement, provided however such program(s) may be modified in the future.

With respect to certain WHC, ICF KH and BCSR employees who are on domestic assignment at midnight September 30, 1996, FH agrees to continue the reimbursement of such assignments as set forth in the individual assignment agreement until such time as the employee is returned to the Hanford Site or the assignment is otherwise changed.

FH shall complete all reasonable administrative and other actions necessary to effect the transfers as set forth in the Transfer Agreement.

Transition and Transfer: FH and LMHC

Purpose. Effective as of 12:01 a.m. on October 1, 1999, Contractor will transfer and assign certain obligations, rights, title and interest to Lockheed Martin Hanford Corporation (LMHC), all as specifically set forth in the Transfer Agreement executed by the DOE, FH, and LMHC on September 30, 1999. The purpose of this contract clause H.55B is to set forth certain understandings with respect to transfer and continuing service activities.

Definitions. For purposes of this contract clause H.55B and contract clause H.56B, the following definitions shall apply:

Other terms used in this contract clause H.55B and in contract clause H.56B, which are initially capitalized, shall have the meanings defined in the LMHC Transfer Agreement.

Responsibilities. In accordance with the LMHC Transfer Agreement, and in a manner so as to not interfere with the performance of both the PHMC and the LMHC subcontract, FH shall provide the following assistance:

FH shall provide necessary indirect support including, but not limited to, emergency services, access and use of the Hanford Site integrated voice-data telecommunication system, access and use of the Hanford Local Area Network, and other Hanford Site resources.

FH shall transfer accountability for necessary government-owned property including, but not limited to, real property, waste sites, computers, photocopiers, office furniture, fax machines, office supplies and equipment and similar items.

FH shall make arrangements with other Hanford Site Contractors and subcontractors, including the Hanford Environmental Health Foundation, necessary to facilitate transition, assignment, and transfer.

FH shall transfer necessary bargaining unit and professional personnel and staff to support transferred activities.

Subject to any DOE restrictions and for purposes of all transfer activities, FH shall provide LMHC, on a not-to-interfere basis, reasonable access to all data, documents, and records that are necessary to assign activities, including defense or prosecution of litigation, claims or hearings. Access shall be reasonable considering the urgency of the matter, but whenever possible, FH shall receive at least one (1) day’s advance notice of the need to review records together with a description of the type, nature, and location (if known) of the records requested for review. In addition, FH shall provide reasonable access to LMHC, considering the urgency of the matter, to relevant PHMC employees, including employees of FH, who possess, control, or have knowledge of where the records may be located or can provide background information on the records. FH shall not be required to release documents generated by FH or its subcontractors that are protected from release by the attorney-client, or work product privilege or without the consent of individuals who hold a legally recognized privacy interest in the record. Should FH require access to LMHC records or employees for any of the above stated matters, FH shall provide LMHC with at least one (1) day’s advance notice, subject to the urgency of the matter.

FH shall cooperate with LMHC in the collection of any balance that may be due and owing on any corporate travel and telephone credit card held by a former PHMC employees who become employed by LMHC.

Consistent with the FH College Educational Reimbursement Program, FH shall transfer to LMHC all of FH’s current liabilities and obligations for educational expenses for those PHMC employees who become employees of LMHC.

With respect to certain PHMC employees who are on domestic assignment at midnight September 30, 1999, FH agrees to continue the reimbursement of such assignments as set forth in the individual assignment agreement until such time as the employee is returned to the Hanford Site or the assignment is otherwise changed.

FH shall complete all reasonable administrative and other actions necessary to effect the assignments and transfers as set forth in the LMHC Transfer Agreement.

FH shall provide services to LMHC as defined in Attachment G to the LMHC Transfer Agreement.

Transition and Transfer: WHC, ICF KH, BCSR, and PHMC

Purpose. The purpose of this contract clause H.56A is to set forth certain terms and conditions that apply to the transition and transfer activities as set forth in the Transfer Agreement executed by the DOE, Contractor, WHC and ICF KH effective as of 12:01 a.m. on October 1, 1996.

Assignment of Agreements, Obligations, Rights, Title and Interest. WHC, ICF KH, and BCSR had certain obligations, rights, title and interest prior to the Transfer Date which were assigned to FH and its subcontractors pursuant to the provisions of the Transfer Agreement. The DOE and Contractor recognize that the terms, circumstances, regimes, requirements, conditions, and commitments contained in or relating to:

Purchase orders, subcontracts, agreements and leases for real property, the Cooperative Research and Development Agreements, the Uranium Sales Request Proposal and the other agreements referred to in Sections 2.A, 2.B, 2.C, 2.D and 2.E of the Transfer Agreement (hereinafter collectively referred to as the “Assigned Agreements”); and

Intellectual property, software licenses and confidentiality or non-disclosure agreements referred to in Sections 3.A, 3.B and 3.C of the Transfer Agreement (hereinafter collectively referred to as the “Assigned Intellectual Property Agreements”); and

Financial and administrative commitments referred to in Section 7 of the Transfer Agreement (hereinafter collectively referred to as the “Financial Commitments”); and

Labor grievances, arbitrations and litigation, and other matters referred to in Sections 8.B., 8.C., 8.D., 8.E., 8.F., and 8.G. of the Transfer Agreement (hereinafter referred to as “Matters”); and

Environmental or other permits referred to in Section 9 of the Transfer Agreement (hereinafter referred to as the “Environmental Permits”); and

Hanford Site Workforce Restructuring Plan referred to in Section 10.A. and 10.B. of the Transfer Agreement (hereinafter referred to as the “Restructuring Plan”); and

Enhanced Retirement and Special Voluntary Reduction of Force Programs referred to in Section 10.C. of the Transfer Agreement (hereinafter collectively referred to as the “VRF Programs”); and

Pension, savings and benefits plans referred to in Section 11 of the Transfer Agreement (hereinafter collectively referred to as the “Plans”); and

The actions and activities referred to in paragraphs D, F and G of this contract clause H.56 (hereinafter collectively referred to as “paragraphs D, F and G”); were entered into in connection with, and/or resulted from the M&O contract, and may not be consistent with the terms and conditions of this PHMC contract. The DOE agrees that Contractor and its subcontractors can administer and act with respect to the above documents, agreements and activities under the terms of the assigned document or agreement and is not required to make modifications thereto in order to achieve conformance with the terms and conditions of this PHMC contract. Contractor and its subcontractors, however, may as they deem appropriate make such conforming modifications to said documents and agreement without further approval from the DOE.

Costs. The DOE and Contractor agree that all costs of administering the items set forth in paragraph A.2 above and including those incurred by reason of any claim, cost (including attorney’s fees, mediation, arbitration or resolution and defense costs), demand, charge, expense, fine, penalty, liability, settlement, damages, including, but not limited to, investigation and remediation of hazardous materials, bodily injury to or death of any person, or damage to or destruction of any real or personal property, benefit plan funding, consequential, incidental, special or indirect damages, including without limitation, loss of profits, interest, product or business interruption, increased costs of operations and maintenance or staffing needs, remedy of employment or reinstatement, costs associated with decisions regarding disputed interpretations, however the same may be caused, and whether discovered before or after the Transfer Date, or similar payment (“Payments”) made or due in accordance or in connection with the terms and conditions of or arising out of circumstances relating to the Assigned Agreements, Assigned Intellectual Property Agreements, Financial Commitments, Matters, Environmental Permits, Restructuring Plan, VRF Programs, Plans, or paragraphs D, F, and G, shall be allowable and reimbursed by the DOE to Contractor notwithstanding the terms and conditions of this PHMC contract, and any restrictions or limitations herein, whether or not such Payments relate to events arising before or after the Transfer Date, and howsoever arising; provided, however, that Payments shall not be reimbursed, except as considered appropriate by the Contracting Officer, if they are caused solely as a result of the lack of good faith or the willful misconduct of Contractor’s key managerial personnel or are unallowable by federal statute or regulation.

Agreements and Leases for Certain Real Property. The DOE has directed that Contractor or its subcontractor, DynCorp Tri-Cities Services, Inc., accept the assignment of the leases of the following three parcels of real property from WHC: (1) 712 Swift, Suite 4, Richland, Washington, (2) 3090 George Washington Way, Richland, Washington, and (3) 3070 George Washington Way, Richland, Washington, as set forth in Section 2.B. of the Transfer Agreement. As the third-party tenants of the three parcels referred to above, will not be under the control of, or in contractual privity with, Contractor or its subcontractor, DynCorp Tri-Cities Services, Inc., the DOE shall defend, indemnify and hold Contractor and its subcontractor, DynCorp Tri-Cities Services, Inc., harmless from and against any and all claims, costs, suits and damages, including attorney’s fees, arising out of, or in connection with, said third-party tenants’ occupancy of said parcels, and howsoever arising.

Transfer of Government-Owned Real and Personal Property. Notwithstanding the transfer of the care, custody and control of the government-owned real and personal property referred to in Sections 13.A. and 13.B. of the Transfer Agreement, for the one (1) year period following the Transfer Date, Contractor and its Major Subcontractors shall be entitled to conduct an inventory, survey and assessment of said government-owned real and personal property. Should Contractor or its Major Subcontractors discover any differences between WHC’s representations and the actual circumstances with respect to said government-owned real and personal property, said differences shall be considered pre-existing conditions in accordance with the terms of this PHMC contract. Contractor shall not be liable under this PHMC contract for any government-owned real and personal property transferred to Contractor or its Major Subcontractors which is subsequently determined by reconciliations and condition surveys to have been lost, stolen, damaged or otherwise unaccounted for as of the Transfer Date.

Personnel. The DOE and Contractor agree that actions taken under this contract clause H.56 and the Transfer Agreement relating to the employment of personnel, the transfer of benefit plans and other employment related plans and obligations, and the displacement of employees are being accomplished at and in accordance with the directions of the DOE.

Mapping. During the period from August 6, 1996 to September 30, 1996, employees of WHC, ICF KH and BCSR were mapped to FH and its Subcontractors. The DOE and Contractor agree that during the period from October 1, 1996 through December 31, 1996, some of the former employees of WHC, ICF KH and BCSR who were mapped by FH or its subcontractors on October 1, 1996, may be remapped among FH or its subcontractors. For purposes of compliance with contract clause H.2, employees who are remapped pursuant to this Clause H.56 will be treated, with respect to salary and other related provisions, as if such employees had been mapped directly from the incumbent to the final employing subcontractor.

Accuracy of Information. Contractor and its subcontractors will rely upon information supplied by WHC, ICF KH and BCSR or others in performing the work pursuant to the terms of this PHMC contract. The DOE and Contractor agree that the accuracy of such information is not within Contractor’s and it subcontractors’ control, and that Contractor and its subcontractors shall not be liable for its accuracy, nor for its verification.

Drug-Free Workplace. The DOE and Contractor agree that no drug testing will be required for the former employees of WHC, ICF KH or BCSR who become employed by Contractor or its subcontractors on October 1, 1996. At all other times, Contractor and its subcontractors will follow the drug testing requirements set forth in the program(s) in place pursuant to the provisions of clause I of this PHMC contract.

Transition and Transfer: FH and LMHC

Purpose. The purpose of this contract clause H.56B is to set forth certain terms and conditions that apply to the transition and transfer activities as set forth in the LMHC Transfer Agreement executed by the DOE, Contractor, and LMHC effective as of 12:01 a.m. on October 1, 1996.

Assignment of Agreements, Obligations, Rights, Title and Interest. FH had certain obligations, rights, title and interest prior to the LMHC Transfer Date that were assigned to LMHC pursuant to the provisions of the LMHC Transfer Agreement. The DOE and Contractor recognize that the terms, circumstances, regimes, requirements, conditions, and commitments contained in or relating to:

Financial and administrative commitments referred to in Section 4 of the LMHC Transfer Agreement (hereinafter collectively referred to as the “Financial Commitments”); and

Labor grievances, arbitrations and litigation, and other matters referred to in Sections 5.B of the LMHC Transfer Agreement (hereinafter referred to as “Matters”); and

Environmental or other permits referred to in Section 10.A, 10.B, and 10.C of the LMHC Transfer Agreement (hereinafter referred to as the “Environmental Permits”); and

The actions and activities referred to in Section 17 of the LMHC Transfer Agreement relating to the provision of services between Contractor and its subcontractors and LMHC (hereinafter referred to as the “Services”); and

The actions and activities referred to in paragraphs B(4), B(5), and B(6) of this contract clause H.56 (hereinafter collectively referred to as “paragraphs B(4), B(5), and B(6)”); were entered into in connection with, and/or resulted from the LMHC subcontract being assigned to the DOE, and may not be consistent with the terms and conditions of the PHMC. The DOE agrees that Contractor and its subcontractors can administer and act with respect to the above documents, agreements and activities under the terms of the assigned document or agreement and the Contractor is not required to make modifications thereto in order to achieve conformance with the terms and conditions of the PHMC. Contractor and its subcontractors, however, as they deem appropriate, may make such conforming modifications to said documents and agreement without further approval from the DOE.

Costs. The DOE and Contractor agree that all costs of administering the items set forth in this paragraph B are allowable in accordance with the clause in this contract entitled, “Payments and Advances,” as well as federal statute and regulations, and that actions by third parties are allowable in accordance with the clause entitled, “Insurance – Litigation and Claims”.

Transfer of Accountability for Government-Owned Real and Personal Property. Contractor and its Major Subcontractors shall not be liable under the PHMC for any government-owned real, waste, and personal property transferred for accountability purposes to LMHC that is subsequently determined by reconciliations and condition surveys to have been lost, stolen, damaged or otherwise unaccounted for as of or noticed as a pre-existing condition before the LMHC Transfer Date unless damage or loss was caused or exacerbated by Contractor or its subcontractors.

Assignments. During the period from September 17, 1999, to September 30, 1999, bargaining unit employees of Contractor were assigned to LMHC. The DOE and Contractor agree that during the period from October 1, 1999, through December 31, 1999, some of the former employees of the Contractor and its subcontractors may be reassigned. For purposes of compliance with contract clause H.2, employees who are reassigned pursuant to this Clause H.56B will be treated, with respect to salary and other related provisions, as if such employees had been reassigned directly from the incumbent to the final employing party.

Drug-Free Workplace. The DOE and Contractor agree that no drug testing will be required for the former PHMC employees who become employed by LMHC on October 1, 1999. At all other times, Contractor and its subcontractors will follow the drug testing requirements set forth in the program(s) in place pursuant to the provisions of the clause entitled “Workplace Substance Abuse Programs at DOE Sites” of this contract.

Reasonable costs incurred by Contractor as a result of PNNL’s operations at the 324 Facility shall be allowable.

Reasonable costs incurred to modify the standards for compliance with 10 CFR 835 and 10 CFR 830.120 from the PNNL Radiation Protection Plan and Quality Assurance Implementation Plan to the FH compliance documents shall be allowable.

Clauses, “Transition and Transfer - Workscope” and “Transitions and Transfers - Costs and Funding,” shall be applied to this transfer as appropriate.

DOE’s reimbursement obligation contained in Subsection A. of the clause in this contract entitled “Pre Existing Conditions,” shall be extended as follows to the 324 and 327 Facilities:

The Contractor shall plan, acquire and dispose of DOE assets in a cost-effective manner to meet the DOE mission. The Contractor shall use industry standards, and a graded approach, in applying these requirements. FH major site projects may define policies and procedures for implementing this clause within their project or program area. Major site projects are defined as the River Protection Project (formerly the Tank Waste Remediation System), Facility Stabilization, Waste Management, Spent Nuclear Fuels, Infrastructure, HAMMER, and Advanced Reactor Transition. Future major projects may be subject to life cycle asset management, as directed by the RL Contracting Officer or RL Contracting Officer Representative.

The Contractor shall use a process based on a graded approach for physical asset acquisition that is an integrated, systematic approach that shall ensure, but shall not be limited to, the following:

Use of a process tool, such as value engineering, to improve efficiency and cost-effectiveness when analyzing physical asset acquisition.

Specification of the appropriate state, regional, or national building codes to which physical assets shall be designed and constructed.

Consideration of maintainability, operability, disposition, life-cycle costs, and configuration integrity in designs and acquisitions.

A project management system based on effective management practices that is sufficiently flexible to allow for the size and complexity of the project. For line item projects, the following requirements are considered minimal:

The requirements in this paragraph C., in part, supplement the Contractor’s obligations to manage maintenance programs in accordance with the applicable chapters of DOE Order 4330.4B. The Contractor shall use a process based on a graded approach for the operation and maintenance of physical assets that shall ensure, as a minimum, the following:

The identification, inventory, and periodic assessment such as Condition Assessment Surveys or an equivalent assessment program, of the condition of physical assets in the maintenance program.

The establishment of requirements, budgets, and a work management system to maintain physical assets in a condition suitable for their intended use.

The preventive, predictive, and corrective maintenance to ensure physical asset availability for planning use and/or proper disposition.

A configuration management process to ensure the integrity of physical assets and system.

The efficient and effective management and use of energy and utilities.

A method for the prioritization of infrastructure requirements.

The management of backlogs associated with maintenance, repair, and capital improvements.

A method to ensure that prior to the completion of mission activities (e.g., production, research, etc.) actions are implemented to place the facility, systems and materials in safe and stable conditions and to ensure hazards are identified and known pending transfer or disposition. For facilities that have already completed mission activities and are awaiting transfer or disposition, ensure that actions are taken to eliminate or mitigate hazards and provide adequate protection to workers, the public and the environment. In both cases, actions shall be based on an assessment of the remaining hazards at the time when mission activities are completed or prior to transfer or disposition for facilities that have already completed mission activities. The actions shall include but not be limited to:

The Contractor shall use a process based on a graded approach for the disposition of physical assets that shall ensure, as a minimum, the following:

Application, as appropriate, of guidelines contained or referenced in DOE-STD-1120–98, INTEGRATION OF ENVIRONMENT, SAFETY AND HEALTH INTO FACILITY DISPOSITION ACTIVITIES.

For execution of contaminated facility disposition, as a minimum the following apply:

In the acquisition, operation, maintenance, leasing and disposition of physical assets, the Contractor shall ensure that all applicable Federal, state, and local laws, regulations, and negotiated agreements are followed, and that applicable safeguards and security as well as integrated safety management requirements and policies are followed.

Start of Fuel Removal

FHI agrees that its retention of any fee paid in excess of $1 million for fiscal year (FY) 1999 Spent Nuclear Fuel Performance Agreements and any fee paid in excess of $1 million for FY 2000 Spent Nuclear Fuels Performance Agreements will be contingent upon the successful start of fuel removal from the K Basins by December 7, 2000. In addition, if fuel removal is not successfully started by December 7, 2000, then any fee allocated, in FY 2001, for the start of fuel removal cannot be earned.

As set forth in the Tri-Party Agreement (TPA) Milestone P-34-16 (as of December 2, 1998) and for purposes of this clause, the start of spent nuclear fuel removal is defined as “The Cold Vacuum Drying (CVD) Facility and Canister Storage Building (CSB) shall be ready to receive spent nuclear fuel. The spent nuclear fuel transport system shall be operable. The K West Basin spent nuclear fuel retrieval system shall begin retrieving, cleaning, and packaging spent nuclear fuel, and the First Multi-Canister Over Pack of spent nuclear fuel will be loaded and transported to the Cold Vacuum Drying Facility for processing.”

If FHI fails to achieve a successful start of fuel removal from the K Basins by December 7, 2000, and therefore FHI fails the condition subsequent to retain the contingent portion of fee paid on Spent Nuclear Fuels Performance Agreements in FY 1999 and FY 2000, then the contingent fee paid will be offset against any FHI fee earned in FY 2001 in accordance with the Schedule below. Furthermore, notwithstanding any other provision in this Contract, including but not limited to, “Performance, Objectives, Measures, Expectations and Fee Distribution,” if FHI’s total earned fee in FY 2001 is insufficient to offset all of the Spent Nuclear Fuel contingent fee paid in FY 1999 and FY 2000, FHI shall reimburse any remaining amount to RL.

OFFSET SCHEDULE

Changes, and Termination

Identification of Budget and/or Schedule Impacts

FHI shall treat any DOE direction or action that causes an increase or decrease to the Spent Nuclear Fuel Project budget and/or schedule in accordance with the clause entitled, “Changes—Cost Reimbursement.”

Termination

In the event FH is terminated for default, any fee that is contingent at that time shall be forfeited

For contractor travel expenses incurred on or after October 1, 1999, a ceiling limitation of $1,620,000 shall apply to all reimbursements made for contractor travel expenses, funded by DOE under the FY 2000 Energy & Water Development Appropriations Act, under this contract. Expended funds which exceed the established ceiling will be unallowable unless otherwise authorized by the contracting officer. Travel costs generally include lodging, meals, incidental expenses, airfare, rental cars and other miscellaneous expenses. Costs associated with certain types of travel are excluded from the ceiling limitation under this clause. Examples of excluded travel types are listed below:

1. Travel performed under work for others agreements if funded by other than Energy & Water Appropriations;
2. Travel of subcontractors (but major PHMC subcontractors are included);
3. Travel of non-DOE users to participate in experiments at DOE user facilities;
4. Travel costs funded by other appropriations;
5. Travel costs of travel management centers;
6. Relocation costs;
7. Costs of workshops/seminars (other than travel costs), such as, rental of meeting rooms, public address equipment, speakers’ fees; and
8. Registration costs of training classes.

Notwithstanding any other provisions of the contract, the contractor further agrees that none of the funds obligated under the contract may be used to reimburse employee travel costs incurred on or after October 1, 1999 and before October 1, 2000 which exceed the rate and amounts that apply to federal employees under subchapter I of Chapter 57 of Title 5, United States Code. To the extent that this contract provides elsewhere for the reimbursement of employee travel costs which exceed the rates and amounts that apply to federal employees under subchapter I of Chapter 57 of Title 5, United States Code, the preceding limitation on reimbursement of employee travel costs applies to costs incurred on or after April 15, 2000 and before October 1, 2000. Costs, which exceed these rates and amount, will be unallowable. This restriction is in addition to those prescribed elsewhere in statute or regulation.

Costs incurred for lodging, meals, and incidental expenses are considered reasonable and allowable to the extent that they do not exceed the maximum per diem rates in effect at the time of travel as set forth in:

Subparagraph (c) doe not incorporate the regulations cited above in their entirety. Only the coverages in the referenced regulations addressing the maximum per diem rates, the definitions of lodging, meals, and incidental expenses, and special or unusual situations are applicable to contractor travel.

Airfare costs in excess of the lowest customary standard, coach, or equivalent airfare offered during normal business hours are allowable except when such accommodations require circuitous routing, require travel during unreasonable hours, excessively prolong travel, result in increased cost that would offset transportation savings, are not reasonably adequate for the physical or medical needs of the traveler, or are not reasonably available to meet mission requirements. However, in order for airfare costs in excess of the above standard airfare to be allowable, the applicable condition(s) set forth above must be documented and justified.

For contractor travel expenses incurred on or after October 1, 1999, a ceiling limitation of $1,620,000 shall apply to all reimbursements made for contractor travel expenses, funded by DOE under the FY 2000 Energy & Water Development Appropriations Act, under this contract. Expended funds which exceed the established ceiling will be unallowable unless otherwise authorized by the contracting officer. Travel costs generally include lodging, meals, incidental expenses, airfare, rental cars and other miscellaneous expenses. Costs associated with certain types of travel are excluded from the ceiling limitation under this clause. Examples of excluded travel types are listed below:

1. Travel performed under work for others agreements if funded by other than Energy & Water Appropriations;
2. Travel of subcontractors (but major PHMC subcontractors are included);
3. Travel of non-DOE users to participate in experiments at DOE user facilities;
4. Travel costs funded by other appropriations;
5. Travel costs of travel management centers;
6. Relocation costs;
7. Costs of workshops/seminars (other than travel costs), such as, rental of meeting rooms, public address equipment, speakers’ fees; and
8. Registration costs of training classes.

Notwithstanding any other provisions of the contract, the contractor further agrees that none of the funds obligated under the contract may be used to reimburse employee travel costs incurred on or after October 1, 1999 and before October 1, 2000 which exceed the rate and amounts that apply to federal employees under subchapter I of Chapter 57 of Title 5, United States Code. To the extent that this contract provides elsewhere for the reimbursement of employee travel costs which exceed the rates and amounts that apply to federal employees under subchapter I of Chapter 57 of Title 5, United States Code, the preceding limitation on reimbursement of employee travel costs applies to costs incurred on or after April 15, 2000 and before October 1, 2000. Costs, which exceed these rates and amount, will be unallowable. This restriction is in addition to those prescribed elsewhere in statute or regulation.

Costs incurred for lodging, meals, and incidental expenses are considered reasonable and allowable to the extent that they do not exceed the maximum per diem rates in effect at the time of travel as set forth in:

Subparagraph (c) doe not incorporate the regulations cited above in their entirety. Only the coverages in the referenced regulations addressing the maximum per diem rates, the definitions of lodging, meals, and incidental expenses, and special or unusual situations are applicable to contractor travel.

Airfare costs in excess of the lowest customary standard, coach, or equivalent airfare offered during normal business hours are allowable except when such accommodations require circuitous routing, require travel during unreasonable hours, excessively prolong travel, result in increased cost that would offset transportation savings, are not reasonably adequate for the physical or medical needs of the traveler, or are not reasonably available to meet mission requirements. However, in order for airfare costs in excess of the above standard airfare to be allowable, the applicable condition(s) set forth above must be documented and justified.

In the acquisition, operation, maintenance, leasing and disposition of physical assets, the Contractor shall ensure that all applicable Federal, state, and local laws, regulations, and negotiated agreements are followed, and that applicable safeguards and security as well as integrated safety management requirements and policies are followed.

Start of Fuel Removal

FHI agrees that its retention of any fee paid in excess of $1 million for fiscal year (FY) 1999 Spent Nuclear Fuel Performance Agreements and any fee paid in excess of $1 million for FY 2000 Spent Nuclear Fuels Performance Agreements will be contingent upon the successful start of fuel removal from the K Basins by December 7, 2000. In addition, if fuel removal is not successfully started by December 7, 2000, then any fee allocated, in FY 2001, for the start of fuel removal cannot be earned.

As set forth in the Tri-Party Agreement (TPA) Milestone P-34-16 (as of December 2, 1998) and for purposes of this clause, the start of spent nuclear fuel removal is defined as “The Cold Vacuum Drying (CVD) Facility and Canister Storage Building (CSB) shall be ready to receive spent nuclear fuel. The spent nuclear fuel transport system shall be operable. The K West Basin spent nuclear fuel retrieval system shall begin retrieving, cleaning, and packaging spent nuclear fuel, and the First Multi-Canister Over Pack of spent nuclear fuel will be loaded and transported to the Cold Vacuum Drying Facility for processing.”

If FHI fails to achieve a successful start of fuel removal from the K Basins by December 7, 2000, and therefore FHI fails the condition subsequent to retain the contingent portion of fee paid on Spent Nuclear Fuels Performance Agreements in FY 1999 and FY 2000, then the contingent fee paid will be offset against any FHI fee earned in FY 2001 in accordance with the Schedule below. Furthermore, notwithstanding any other provision in this Contract, including but not limited to, “Performance, Objectives, Measures, Expectations and Fee Distribution,” if FHI’s total earned fee in FY 2001 is insufficient to offset all of the Spent Nuclear Fuel contingent fee paid in FY 1999 and FY 2000, FHI shall reimburse any remaining amount to RL.

OFFSET SCHEDULE

Changes, and Termination