Department of the Interior, Minerals Management Service, Procurement Operations Branch, MS2500, 381 Elden Street, Herndon, Virginia 20170-4817

B -- STUDY TO DETERMINE APPROPRIATE COST ALLOCATIONS FOR ROYALTY MANAGEMENT PROGRAM (RMP) FUNCTIONS PERFORMED BY MINERALS MANAGEMENT SERVICE (MMS) SOL SOL 30867 POC Wm. C. Mallonee, Contracting Officer, (703) 787-1363 This notice is a combined synopsis/solicitation for commercial items prepared in accordance with the format in Federal Acquisition Regulation Subpart 12.6, as supplemented with additional information included in this notice. This announce constitutes the only solicitation; offers are being requested and a written solicitation will not be issued. Contract period is from date of award for not longer than 5 months, a shorter period of performance is desired. The MMS has a requirement for an independent study to determine the appropriate methodology for determining direct and indirect costs for the RMP performed by MMS. Specifically, the Contractor is to determine: (1) the costs expended operating the RMP; (2) the appropriate allocation of existing RMP and State audit resources; and (3) what effect delegation to states would have on costs for certain RMP functions. The Royalty Simplification and Fairness Act (RSFA) of 1996, provides states having Federal leases within their state boundaries, the opportunity to petition the Department of the Interior (DOI) to perform five broad categories of functions, currently being performed by the Federal Government, such as: (1) conducting audits and investigations; (2) receiving and processing production and royalty reports; (3) correcting erroneous report data; (4) performing automated verification; and (5) issuing demands, subpoenas, orders to perform restructured accounting, and related tolling agreements and notices to lessees or their designees. However, the Act requires that compensation to a state for one or more delegable functions may not exceed the DOI Secretary's reasonable anticipated expenditure for performing delegated activities. Since 1991, MMS has developed and refined a process for allocating 25 per cent of its costs to states through Net Revenue Receipt Sharing (NRS). A portion of the costs associated with the management of onshore minerals has been allocated to the states by reducing their monthly minerals revenues. If, under RSFA several states petition for all available delegable functions, they most likely would want all the costs used for NRS to be available to them to perform those functions. If that were done, MMS would still incur significant indirect costs such as computer data center costs. In the last few years, MMS has had limited experience in auditing onshore leases since 10 states have had delegated audit agreements and MMS onshore audit costs have essentially consisted of what we have reimbursed the states through delegated functions. Thus, MMS has not calculated what it would reasonably expect to spend to perform onshore audits. The recommendations will then be used as criteria for allocating appropriate existing MMS resources to a given audit universe. Also, the same criteria will be used to determine the resources required by each state to audit its respective lease universe. The proposed contract will provide the necessary expertise and deliverables to meet those goals. Primary study products will in clude the following 5 tasks and subtasks. Task 1a -- Baseline Costs -- Direct and Indirect. The Contractor shall develop a baseline of direct and indirect costs expended to operate and support the RMP. The Contractor's review shall identify the most recent annual costs associated with performing RMP functions. The Contractor shall review and utilize prevous reviews on this subject. The direct costs should be at a detailed level to identify the associated costs of each aspect of the program; that is, each segment of the program that could be affected by proposals for delegation. Subcategories of program costs would include: -Delegable and nondelegable funds -Land category type (OCS, OCS 8(g), Federal, Indian) -State, Tribe, Allottee goup -Product (oil, gas, others) -Organization. Task 1b Indirect Costs The Contractor shall review the allocation of indirect costs as determind in Task 1a to identify which of those costs will continue to be incurred by MMS even after delegation of functions to states. The indirect cost structure withing MMS consists of both variable and fixed costs. Some of those costs incurred do not increase or decrease proportionally with changes in the workload, but are essentials costs, nevertheless. The purpose of this task is to identify such costs, which by their nature, will be unavoidable even if the function is transferred through the delegation process. Task 2 -- Audit Level of Effort/Coverage The Contractor shall review the audit universe, audit sampling techniques, and develop a methodology for achieving maximum audit coverage of the Federal lease universe through an effective allocation of available audit resources. The audit universe consists of various type of leases geographically disperse which generate revenues of varying amounts. The allocation methodology should take into consideration sampling techniques that would provide the most efficient utilization of resources. Factors, such as sample size, should be taken into consideration in developing the apropriate audit coverage. Federal and state audit managers should be interviewed for their perspective on adequate audit coverage. Travel for interviews is not expected. Also, the MMS statistician consultant should be interviewed for his perspective on audit sampling techniques. The recommended methodology may be used to allocate Federal and state audit resources. Task 3 -- Progress Reports Written progress reports are required monthly. They shall include a summary of work performed, identification of the progress made toward providing the deliverables required by this contract, and identification of issues or support needed from MMS. Task 4 -- Draft and Final Report A draft final report shall be submitted for MMS' review and comments, to be incorporated into the final report. The Contractor shall deliver a briefing and final written report to MMS to include detailed recommendation for determining direct and indirect costs for royalty functions and methodology for allocating strategic audit resources to provide the most effective coverage of the Federal lease universe. MMS will be responsible for releasing the report to the public. Task 5 -- Management Briefings (Optional) If a management briefing(s) is requested by MMS, the Contractor shall provide it in Lakewood, CO. The Contractor shall provide a separate price for this optional service, which will be funded by separte purchase order(s). HOW TO RESPOND: In order to compete for this contract interest parties MUST attend a preproposal conference to be held at 9:00am on July 21, in Building 85, the Auditorium Room, of the Denver Federal Office Center, Lakewood, CO, to receive additional information and to have questions answered. (Enter through main gate on Kipling Street, south of 6th Avenue.) Since seating may be limited, please limit your attendees to those who would be actually doing the work, and let the MMS point of contact know the number attending prior to COB July 18. The next step is to demonstrate that your organization is qualified to perform the work by providing a Capabilities Statement detailing: (1) your key personnel (those who would have primary responsibility for performing and/or managing the study) with their qualifications and specific experience; (2) your organizational experience and facilities; and (3) specific references (including contract number & project description, period of performance, dollar amount client indentification with point of contact & telephone number) for previous work of this or similar nature that your key personnel or organization have performed within the last two years. (References will be checked.) CAPABILITIES STATEMENTS ARE DUE IN OUR LAKEWOOD, CO OFFICE BY COB JULY 30. Following review of all Capabilities Statements those having the past experience, organizational capabilities and key personnel to perform the work will be invited to give an oral technical presentation and written cost/business proposal. The oral presentation will be a one hour discussion of the offerors' methodology for performing the work, including a question and answer session afterward, where the government will query the offeror on its proposed methodology and capabilities. Further details of proposal requirements and logistical considerations will be provided at the preposal conference. Your Capabilities Statement will be evaluated based on: (1) your key persons' skills, abilities and experience; (2) your organization's experience and (3) past performance (including number, size and complexity of similar projects, adherence to schedules and budgets, effectiveness of program management, willingness to cooperate when difficulties arise, general compliance with the terms of contracts, and acceptability of delivered products). Other evaluated factors include: (4) gas and oil industry audit/accounting experience; and (5) cost and managerial accounting experience. The following provisions/clauses are incorporated by reference: FAR 52.212-1, Instructions to Offerors-Commercial Items (Oct 95), FAR 52.212-2, Evaluation-Commercial Items (Oct 95), FAR 52.212-3, Offeror Representations and Certifications-Commercial Items (Jun 96), FAR 52.212-4, Contract Terms and Conditions-Commercial Items (May 97), and FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders-Commercial Items (Aug 96). These documents are current to FAC 90-46 (Mar 97). Offerors may request a copy of provisions and clauses by calling Andrea Marsh on 708/787-1365, o9r by sending a fax request on 703/787-1009. Questions should be baxed or Emailed as soon as possible to fax number 703/787-1009 or Email "william.mallonee@mms.gov". Please include with your question(s) your full name, RFP number & title, your organization, complete address, and telephone and fax numbers. Whitle telephone questions are strongly dsicouraged, written inquiries are encouraged. (0191)

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