FAR 17.6—Subpart 17.6

Scope of subpart.

FAR 17.600 is the scope statement for Subpart 17.6, which addresses management and operating contracts. It tells readers that the subpart’s policies and procedures apply to management and operating contracts for the Department of Energy and for any other agency that has the necessary statutory authority to use this contracting approach. In practical terms, this section does not itself set detailed contract administration rules; instead, it defines the reach of the subpart and signals that special requirements for these contracts are limited to agencies legally authorized to use them. The section matters because management and operating contracts are a specialized contracting vehicle often used for complex, long-term operations, so agencies and contracting officers must first confirm they have authority before applying the subpart. Contractors also need to understand that these contracts are not generally available across the Government; they are tied to specific statutory authority and agency use. This scope provision therefore serves as the gateway to the rest of Subpart 17.6 and helps prevent unauthorized use of a specialized procurement method.

Definition.

FAR 17.601 provides the definition of a "management and operating contract" (often called an M&O contract). This section identifies the type of arrangement in which the Government hires a contractor to operate, maintain, or support, on the Government’s behalf, a Government-owned or Government-controlled establishment that is devoted primarily to major agency programs. The definition covers four key elements: the work must be operation, maintenance, or support; it must be performed on behalf of the Government; the facility must be Government-owned or Government-controlled; and the establishment must be a research, development, special production, or testing site wholly or principally devoted to one or more major programs of the contracting agency. In practice, this definition matters because it distinguishes M&O contracts from ordinary service contracts, facility support contracts, and other forms of federal contracting, and it signals a special contracting environment often involving long-term performance, close Government oversight, and mission-critical operations. Understanding whether an arrangement fits this definition affects acquisition planning, contract structure, oversight expectations, and how agencies describe and manage the work.

Policy.

FAR 17.602 sets the policy framework for management and operating (M&O) contracts and explains when agencies may authorize them, who must approve them, and how those authorizations must be documented. It covers three main topics: the requirement for written authorization by the head of the agency with statutory authority, the rule that this authority cannot be delegated and must appear on the face of the contract, and the requirement that agencies use M&O contracts only when consistent with the subpart and the situations described in FAR 17.604. It also imposes a one-time agency review obligation to examine existing contractual arrangements, identify and authorize qualifying M&O contracts, and modify or terminate arrangements that do not fit the policy, subject to an exception for contracts with less than four years remaining at the effective date unless they are renewed or substantially renegotiated. In practice, this section is about controlling the use of a special contract type that can involve broad contractor responsibility for operating government facilities or programs, while ensuring that agencies do not use that vehicle without proper legal authority, internal review, and clear documentation. For contracting officers and agencies, the section is a gatekeeping rule: it limits who can approve these contracts, requires a formal paper trail, and forces agencies to reconcile existing contracts with current policy.

Limitations.

FAR 17.603 sets the limits on when a management and operating (M&O) contract may be used. It identifies five categories of functions that may not be authorized under an M&O arrangement: directing, supervising, or controlling Government personnel (except incidental training supervision); exercising police or regulatory powers in the Government’s name (other than guard or plant protection services); determining basic Government policy; performing day-to-day staff or management functions of the agency or its elements; and functions that should instead be handled under FAR subpart 45.3 on authorizing the use and rental of Government property. The section also explains that if an authorization has already been issued under FAR 17.602(a), that authorization is treated as sufficient proof that these limitations were satisfied, and paragraph (a) does not undermine the validity or legality of that authorization. Finally, it points readers to FAR subpart 22.5 for project labor agreements. In practice, this section is a guardrail: it helps agencies avoid using M&O contracts for inherently governmental or internal management functions, while preserving the legal effect of properly issued authorizations and directing users to the correct labor-relations rules when project labor agreements are involved.

Identifying management and operating contracts.

FAR 17.604 explains how to identify a management and operating (M&O) contract by looking at both the contract’s purpose and the special relationship it creates between the Government and the contractor. This section focuses on the practical criteria used to recognize M&O contracts: use of Government-owned or Government-controlled facilities, the need for a close Government-contractor relationship in areas such as safety, security, cost control, and site conditions, the extent to which the work is separate from the contractor’s other business, and whether the work is closely tied to the agency’s mission and expected to continue long term. It also highlights the need for continuity of operations and special protections to manage an orderly transition if contractors change. In practice, this section helps contracting personnel determine when a contract should be treated as an M&O arrangement rather than a more ordinary service or operations contract, which matters because M&O contracts often require special oversight, administration, and transition planning.

Award, renewal, and extension.

FAR 17.605 addresses how agencies should award, renew, and extend management and operating contracts, which are a special category of contracts where continuity, expertise, and close Government involvement are especially important. This section explains why these contracts are different from ordinary procurements: the Government may have limited ability to compete the work or replace the contractor, and the work may be unusual or unique. It requires contracting officers to take extraordinary steps before award to verify the prospective contractor’s technical and managerial capability, ensure organizational conflicts of interest are properly addressed, and secure broad Government rights to participate in technical and managerial decisionmaking if needed. It also requires periodic review of each management and operating contract, at least every five years and in accordance with agency procedures, to determine whether better performance or lower cost could reasonably be achieved through renewal, extension, or replacement. Finally, it sets a higher-level approval requirement for any extension or renewal and directs contracting officers to consider incumbent performance, mission impacts, and the likelihood of competition when deciding whether to replace the incumbent contractor.