Overview
FAR Subpart 17.6 outlines the policies and procedures for Management and Operating (M&O) contracts, which are specialized agreements for the operation, maintenance, or support of Government-owned or -controlled facilities. These contracts are typically used by the Department of Energy (DOE) or other agencies with specific statutory authority to manage high-stakes research, development, and production establishments.
Key Rules
- Authorization Requirements: A management and operating contract can only be entered into or renewed if authorized in writing by the Head of the Agency. This specific authority cannot be delegated.
- Contract Identification: Every M&O contract must explicitly state its authorization on its face.
- Prohibited Functions: M&O contracts cannot be used for:
- Direct supervision or control of Government personnel.
- Exercise of police or regulatory powers.
- Determining basic Government policies.
- Day-to-day staff or management functions of the agency itself.
- Facility Requirements: The work must utilize Government-owned or -controlled facilities and be substantially separate from the contractor’s other commercial business.
- Review Cycle: The Contracting Officer must review each M&O contract at least once every five years to determine if meaningful improvements in performance or cost can be achieved through competition or modification.
Responsibilities
- Head of Agency: Responsible for providing the non-delegable written authorization to enter into or renew an M&O contract.
- Contracting Officer (CO):
- Must verify the contractor’s technical and managerial capacity before award.
- Must ensure Organizational Conflicts of Interest (OCI) are adequately addressed.
- Must ensure the contract grants the Government broad rights to involve itself in technical and managerial decision-making.
- Conducts formal performance reviews at least every five years.
- Agencies: Required to review contractual arrangements periodically to identify and modify contracts that qualify (or no longer qualify) as M&O.
Practical Implications
M&O contracts create a "special, close relationship" that goes far beyond a standard buyer-seller arrangement. In practice, this subpart is the regulatory foundation for the management of National Laboratories (like Los Alamos or Oak Ridge) and nuclear production sites.
Because these contracts involve unique, long-term programs and high levels of expertise, the Government often faces a "locked-in" scenario where replacing an incumbent is difficult and risky. Consequently, the FAR mandates "extraordinary steps" during the acquisition process to ensure the contractor is capable and that the Government maintains sufficient oversight. For contractors, winning an M&O contract signifies a massive, long-term partnership with the Government, but it also carries heavy burdens regarding safety, security, and open-book cost accounting.